ITR (TRIB) VOL 20 PART 1

 

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

Volume 20 : Part 1 (Issue dated : 19-11-2012)

SUBJECT INDEX TO CASES REPORTED IN THIS PART

Assessment --Gross profit rate--Low gross profit rate not ground to make additions--Assessing Officer not making comparative studies with similar business--Assessee furnishing all details required--Details not proved to be defective--Deletion of addition proper--Income-tax Act, 1961, s. 145-- ITO v. Sai International(Delhi) . . .1

Book profits --Computation--Claim for bad debts--Law applicable--Effect of retrospective amendment to section 115JB by Finance (No. 2) Act, 2009--Bad debts to be rejected--Income-tax Act, 1961, s. 115JB--Assistant CIT v. GE Plastics India Ltd. (Ahmedabad) . . . 58

Business expenditure --Current repairs--Manufacture of tread rubber--Chamber assembly integral part of intermix machine and incapable of performing independent function--Expenditure for replacing chamber assembly “current repair†and allowable--Income-tax Act, 1961, s. 31(i)-- Midas Rubber P. Ltd. v.Assistant CIT (Cochin) . . . 6

----Deduction on actual payment--Contribution to provident fund--Only contribution paid before due date for filing of return to be allowed--Matter remanded--Income-tax Act, 1961, s. 43B-- Fenner (India) Ltd. v.Additional CIT (Chennai) . . . 48

Capital gains --Long-term capital gains--Exemption--Investment of gains in residential property--No requirement that property should be in India--Assessee investing gains in house property in the United States of America--Entitled to exemption--Income-tax Act, 1961, s. 54F-- Vinay Mishra v. Assistant CIT(Bangalore) . . . 129

----Revaluation of assets on conversion of firm into company--Not to be taxed as capital gains--Income-tax Act, 1961, ss. 45(4), 47(xiii)-- ITO v. Alta Inter-Chem Industries (Ahmedabad) . . . 103

Capital or revenue expenditure --Non-compete fee--Not revenue expenditure--Income-tax Act, 1961--Assistant CIT v. GE Plastics India Ltd. (Ahmedabad) . . . 58

----Royalty for use of trade mark--25 per cent. of royalty considered capital expenditure and 75 per cent. towards revenue expenditure--Income-tax Act, 1961-- Fenner (India) Ltd. v. Additional CIT (Chennai) . . . 48

Capital gains or business income --Profits from purchase and sale of shares--Voluminous share transactions, repetition and continuity of transactions--Purchase of shares not for earning dividend but with dominant intention of resale in order to earn profits--Profit not mere enhancement of value of shares but profit in business--Profits taxable as business income--Income-tax Act, 1961, ss. 2(14)(i), 28, 45-- Assistant CIT v.Manoj Kumar Samdaria (Delhi) . . . 13

Charitable trust --Registration--Denial of registration on ground that object religious in nature--Finding that amendment in objects clause--Law applicable--Effect of section 13(1)(b)-- Denial of registration not valid--Income-tax Act, 1961, ss. 12AA, 13(1)(b)-- Radhika Seva Sansthan v. CIT (Jaipur) . . . 31

Company --Book profits--Minimum alternate tax--Computation of profits under section 115JB--Export--Special deduction allowable on basis of book profits under section 80HHC--Income-tax Act, 1961, ss. 80HHC, 115JB-- Assistant CIT v. GE Plastics India Ltd. (Ahmedabad) . . . 58

Depreciation --Non-compete fee--Is intangible asset--Eligible for depreciation--Income-tax Act, 1961, s. 32(1)(ii)-- Assistant CIT v. GE Plastics India Ltd. (Ahmedabad) . . . 58

----Whether or not newly acquired extrusion business commenced in present year for allowing depreciation--Matter remanded--Income-tax Act, 1961-- Assistant CIT v. GE Plastics India Ltd. (Ahmedabad) . . . 58

Donation to charitable institution --Special deduction--Denial of approval under section 80G(5)(vi)--Objects clause not indicating that expenditure on religious objects limited to 5 per cent. of total income for particular year--Approval to be denied--Income-tax Act, 1961, s. 80G(5)(vi)-- Radhika Seva Sansthan v. CIT (Jaipur) . . . 31

Export --Deduction--Computation--Communication expenses attributable to delivery of computer software--Adjustments to export turnover also to be made in total turnover--Income-tax Act, 1961, s. 10A-- Centillium India Ltd. v. Deputy CIT (Bangalore) . . . 69

----Special deduction--Computation--Sales tax to be excluded from total turnover for computing deduction--Income-tax Act, 1961, s. 80HHC-- Assistant CIT v. GE Plastics India Ltd. (Ahmedabad) . . . 58

----Special deduction--Insurance--Insurance receipts constitute “operational income†--Scrap--Scarp from manufacturing activity and packing activity--Receipts on account of scarps to be segregated and re-determined--Matter remanded--Technology transfer fees--Is “operational income†if comparable to receipts on account of development work--Matter remanded--Income-tax Act, 1961, s. 80HHC-- CIPLA Ltd.v. Deputy CIT (Mumbai) . . . 98

Export business --Special deduction--Set-off of unabsorbed depreciation of earlier years against total income--Justified--Income-tax Act, 1961, s. 80HHC-- Assistant CIT v . GE Plastics India Ltd. (Ahmedabad) . . . 58

Income --Computation of income--Disallowance of expenditure incurred in earning income not forming part of total income--Law applicable--Rule 8D applicable from assessment year 2008-09--Disallowance for earlier periods to be determined on reasonable basis--Income-tax Act, 1961, s. 14A--Income-tax Rules, 1962, r. 8D--Fenner (India) Ltd. v. Additional CIT (Chennai) . . . 48

International transactions --Arm’s length price--Determination--Transactions with associated enterprises alone to be considered--Selection of comparables--Standard deduction of 5 per cent. under provisos to section 92C(2) granted--Matter remanded--Income-tax Act, 1961, s. 92C(2)-- Centillium India Ltd. v. Deputy CIT (Bangalore) . . . 69

----Arm’s length price--Transfer pricing study--Transactional net margin method--Profit level indicator--Comparables--Working capital relevant factor for determining profit margin--Mere low profit or loss would not make a functional comparable company uncomparable--Entity can be taken as uncontrolled, if its related party transaction does not exceed 25 per cent. of total revenue--Function, assets and risk analysis--Comparable cannot be rejected just because it is operating in same sector in different line--No prejudice shown in inclusion of comparables which had incurred more than 5 per cent. of sales as expenses towards advertisement and marketing--Company showing fluctuation in profits and losses to be excluded--Large companies having turnover of more than Rs. 260 crores not comparable--Current year’s data to be used--Income-tax Act, 1961, ss. 92C, 92D--Income-tax Rules, 1962, rr. 10B, 10D-- Actis Advisers P. Ltd. v. Deputy CIT (Delhi) . . . 138

Non-resident --Permanent establishment--Liaison office in India--Not a permanent establishment--Non-resident not assessable in India--Income-tax Act, 1961, s. 9-- Deputy Director of Income-tax (International Taxation) v. M. Fabricant and Sons Inc. (Mumbai) . . . 118

Penalty --Compulsory maintenance of accounts--Assessee running poultry farm in remote village--Books of account not maintained--Reasonable cause--Assessee entitled to benefit under section 273B--Penalty not leviable--Income-tax Act, 1961, ss. 44AA, 271A, 273B-- C. T. Chacko v. ITO (Cochin) . . . 125

----Concealment of income--Assessee not filing return in response to notice under section 148--Difference between assessed income and returned income to be considered as concealed income--Penalty to be levied--Income-tax Act, 1961, ss. 148, 271(1)(c)-- C. T. Chacko v. ITO (Cochin) . . . 125

----Deduction of tax at source--Failure to furnish PAN number of one of the deductees--Penalty exigible under section 272B--Income-tax Act, 1961, s. 272B-- Tej Pal Gupta v. ITO (TDS) (Chandigarh) . . . 46

Revision --Condition precedent--Order should be erroneous and prejudicial to Revenue--Assessing Officer following High Court decisions and deducting premium on keyman insurance--Order not erroneous--Withdrawal of deduction in revision proceedings--Not valid--Income-tax Act, 1961, s. 263-- Laj Exports v.Deputy CIT (Chandigarh) . . . 111

Search and seizure --Block assessment--Income disclosed in regular return cannot be treated as undisclosed income in block assessment--Income disclosed prior to search cannot be assessed under sections 158BC and 158BD--Income-tax Act, 1961, ss. 158BC, 158BD-- Assistant CIT v. Smt. Sula Jayakumar (Cochin) . . . 37

 

SECTIONWISE INDEX TO CASES REPORTED IN THIS PART

Income-tax Act, 1961 :

S. 2(14)(i) --Capital gains or business income--Profits from purchase and sale of shares--Voluminous share transactions, repetition and continuity of transactions--Purchase of shares not for earning dividend but with dominant intention of resale in order to earn profits--Profit not mere enhancement of value of shares but profit in business--Profits taxable as business income-- Assistant CIT v. Manoj Kumar Samdaria (Delhi) . . . 13

S. 9 --Non-resident--Permanent establishment--Liaison office in India--Not a permanent establishment--Non-resident not assessable in India-- Deputy Director of Income-tax (International Taxation) v. M. Fabricant and Sons Inc. (Mumbai) . . . 118

S. 10A --Export--Deduction--Computation--Communication expenses attributable to delivery of computer software--Adjustments to export turnover also to be made in total turnover-- Centillium India Ltd. v. Deputy CIT (Bangalore) . . . 69

S. 12AA --Charitable trust--Registration--Denial of registration on ground that object religious in nature--Finding that amendment in objects clause--Law applicable--Effect of section 13(1)(b)-- Denial of registration not valid-- Radhika Seva Sansthan v. CIT (Jaipur) . . . 31

S. 13(1)(b) --Charitable trust--Registration--Denial of registration on ground that object religious in nature--Finding that amendment in objects clause--Law applicable--Effect of section 13(1)(b)-- Denial of registration not valid-- Radhika Seva Sansthan v. CIT (Jaipur) . . . 31

S. 14A --Income--Computation of income--Disallowance of expenditure incurred in earning income not forming part of total income--Law applicable--Rule 8D applicable from assessment year 2008-09--Disallowance for earlier periods to be determined on reasonable basis-- Fenner (India) Ltd. v. Additional CIT(Chennai) . . . 48

S. 28 --Capital gains or business income--Profits from purchase and sale of shares--Voluminous share transactions, repetition and continuity of transactions--Purchase of shares not for earning dividend but with dominant intention of resale in order to earn profits--Profit not mere enhancement of value of shares but profit in business--Profits taxable as business income-- Assistant CIT v. Manoj Kumar Samdaria (Delhi) . . . 13

S. 31(i) --Business expenditure--Current repairs--Manufacture of tread rubber--Chamber assembly integral part of intermix machine and incapable of performing independent function--Expenditure for replacing chamber assembly “current repair†and allowable-- Midas Rubber P. Ltd. v. Assistant CIT (Cochin) . . . 6

S. 32(1)(ii) --Depreciation--Non-compete fee--Is intangible asset--Eligible for depreciation-- Assistant CIT v.GE Plastics India Ltd. (Ahmedabad) . . . 58

S. 43B --Business expenditure--Deduction on actual payment--Contribution to provident fund--Only contribution paid before due date for filing of return to be allowed--Matter remanded-- Fenner (India) Ltd. v.Additional CIT (Chennai) . . . 48

S. 44AA --Penalty--Compulsory maintenance of accounts--Assessee running poultry farm in remote village--Books of account not maintained--Reasonable cause--Assessee entitled to benefit under section 273B--Penalty not leviable-- C. T. Chacko v. ITO (Cochin) . . . 125

S. 45 --Capital gains or business income--Profits from purchase and sale of shares--Voluminous share transactions, repetition and continuity of transactions--Purchase of shares not for earning dividend but with dominant intention of resale in order to earn profits--Profit not mere enhancement of value of shares but profit in business--Profits taxable as business income-- Assistant CIT v. Manoj Kumar Samdaria (Delhi) . . . 13

S. 45(4) --Capital gains--Revaluation of assets on conversion of firm into company--Not to be taxed as capital gains-- ITO v. Alta Inter-Chem Industries (Ahmedabad) . . . 103

S. 47(xiii) --Capital gains--Revaluation of assets on conversion of firm into company--Not to be taxed as capital gains-- ITO v. Alta Inter-Chem Industries (Ahmedabad) . . . 103

S. 54F --Capital gains--Long-term capital gains--Exemption--Investment of gains in residential property--No requirement that property should be in India--Assessee investing gains in house property in the United States of America--Entitled to exemption--Income-tax Act, 1961, Vinay Mishra v. Assistant CIT (Bangalore) . . . 129

S. 80G(5)(vi) --Donation to charitable institution--Special deduction--Denial of approval under section 80G(5)(vi)--Objects clause not indicating that expenditure on religious objects limited to 5 per cent. of total income for particular year--Approval to be denied-- Radhika Seva Sansthan v. CIT (Jaipur) . . . 31

S. 80HHC --Company--Book profits--Minimum alternate tax--Computation of profits under section 115JB--Export--Special deduction allowable on basis of book profits under section 80HHC-- Assistant CIT v. GE Plastics India Ltd. (Ahmedabad) . . . 58

----Export--Special deduction--Computation--Sales tax to be excluded from total turnover for computing deduction-- Assistant CIT v. GE Plastics India Ltd. (Ahmedabad) . . . 58

----Export--Special deduction--Insurance--Insurance receipts constitute “operational income†--Scrap--Scarp from manufacturing activity and packing activity--Receipts on account of scarps to be segregated and re-determined--Matter remanded--Technology transfer fees--Is “operational income†if comparable to receipts on account of development work--Matter remanded-- CIPLA Ltd. v. Deputy CIT (Mumbai) . . . 98

----Export business--Special deduction--Set-off of unabsorbed depreciation of earlier years against total income--Justified-- Assistant CIT v . GE Plastics India Ltd. (Ahmedabad) . . . 58

S. 92C --International transactions--Arm’s length price--Transfer pricing study--Transactional net margin method--Profit level indicator--Comparables--Working capital relevant factor for determining profit margin--Mere low profit or loss would not make a functional comparable company uncomparable--Entity can be taken as uncontrolled, if its related party transaction does not exceed 25 per cent. of total revenue--Function, assets and risk analysis--Comparable cannot be rejected just because it is operating in same sector in different line--No prejudice shown in inclusion of comparables which had incurred more than 5 per cent. of sales as expenses towards advertisement and marketing--Company showing fluctuation in profits and losses to be excluded--Large companies having turnover of more than Rs. 260 crores not comparable--Current year’s data to be used-- Actis Advisers P. Ltd. v. Deputy CIT (Delhi) . . . 138

S. 92C(2) --International transactions--Arm’s length price--Determination--Transactions with associated enterprises alone to be considered--Selection of comparables--Standard deduction of 5 per cent. under provisos to section 92C(2) granted--Matter remanded-- Centillium India Ltd. v. Deputy CIT (Bangalore) . . . 69

S. 92D --International transactions--Arm’s length price--Transfer pricing study--Transactional net margin method--Profit level indicator--Comparables--Working capital relevant factor for determining profit margin--Mere low profit or loss would not make a functional comparable company uncomparable--Entity can be taken as uncontrolled, if its related party transaction does not exceed 25 per cent. of total revenue--Function, assets and risk analysis--Comparable cannot be rejected just because it is operating in same sector in different line--No prejudice shown in inclusion of comparables which had incurred more than 5 per cent. of sales as expenses towards advertisement and marketing--Company showing fluctuation in profits and losses to be excluded--Large companies having turnover of more than Rs. 260 crores not comparable--Current year’s data to be used-- Actis Advisers P. Ltd. v. Deputy CIT (Delhi) . . . 138

S. 115JB --Book profits--Computation--Claim for bad debts--Law applicable--Effect of retrospective amendment to section 115JB by Finance (No. 2) Act, 2009--Bad debts to be rejected-- Assistant CIT v. GE Plastics India Ltd. (Ahmedabad) . . . 58

----Company--Book profits--Minimum alternate tax--Computation of profits under section 115JB--Export--Special deduction allowable on basis of book profits under section 80HHC-- Assistant CIT v. GE Plastics India Ltd. (Ahmedabad) . . . 58

S. 145 --Assessment--Gross profit rate--Low gross profit rate not ground to make additions--Assessing Officer not making comparative studies with similar business--Assessee furnishing all details required--Details not proved to be defective--Deletion of addition proper-- ITO v. Sai International (Delhi) . . .1

S. 148 --Penalty--Concealment of income--Assessee not filing return in response to notice under section 148--Difference between assessed income and returned income to be considered as concealed income--Penalty to be levied-- C. T. Chacko v. ITO (Cochin) . . . 125

S. 158BC --Search and seizure--Block assessment--Income disclosed in regular return cannot be treated as undisclosed income in block assessment--Income disclosed prior to search cannot be assessed under sections 158BC and 158BD-- Assistant CIT v. Smt. Sula Jayakumar (Cochin) . . . 37

S. 158BD --Search and seizure--Block assessment--Income disclosed in regular return cannot be treated as undisclosed income in block assessment--Income disclosed prior to search cannot be assessed under sections 158BC and 158BD-- Assistant CIT v. Smt. Sula Jayakumar (Cochin) . . . 37

S. 263 --Revision--Condition precedent--Order should be erroneous and prejudicial to Revenue--Assessing Officer following High Court decisions and deducting premium on keyman insurance--Order not erroneous--Withdrawal of deduction in revision proceedings--Not valid-- Laj Exports v. Deputy CIT (Chandigarh) . . . 111

S. 271(1)(c) --Penalty--Concealment of income--Assessee not filing return in response to notice under section 148--Difference between assessed income and returned income to be considered as concealed income--Penalty to be levied-- C. T. Chacko v. ITO (Cochin) . . . 125

S. 271A --Penalty--Compulsory maintenance of accounts--Assessee running poultry farm in remote village--Books of account not maintained--Reasonable cause--Assessee entitled to benefit under section 273B--Penalty not leviable-- C. T. Chacko v. ITO (Cochin) . . . 125

S. 272B --Penalty--Deduction of tax at source--Failure to furnish PAN number of one of the deductees--Penalty exigible under section 272B-- Tej Pal Gupta v. ITO (TDS) (Chandigarh) . . . 46

S. 273B --Penalty--Compulsory maintenance of accounts--Assessee running poultry farm in remote village--Books of account not maintained--Reasonable cause--Assessee entitled to benefit under section 273B--Penalty not leviable-- C. T. Chacko v. ITO (Cochin) . . . 125

Income-tax Rules, 1962 :

R. 8D --Income--Computation of income--Disallowance of expenditure incurred in earning income not forming part of total income--Law applicable--Rule 8D applicable from assessment year 2008-09--Disallowance for earlier periods to be determined on reasonable basis-- Fenner (India) Ltd. v. Additional CIT(Chennai) . . . 48

R. 10B --International transactions--Arm’s length price--Transfer pricing study--Transactional net margin method--Profit level indicator--Comparables--Working capital relevant factor for determining profit margin--Mere low profit or loss would not make a functional comparable company uncomparable--Entity can be taken as uncontrolled, if its related party transaction does not exceed 25 per cent. of total revenue--Function, assets and risk analysis--Comparable cannot be rejected just because it is operating in same sector in different line--No prejudice shown in inclusion of comparables which had incurred more than 5 per cent. of sales as expenses towards advertisement and marketing--Company showing fluctuation in profits and losses to be excluded--Large companies having turnover of more than Rs. 260 crores not comparable--Current year’s data to be used-- Actis Advisers P. Ltd. v. Deputy CIT (Delhi) . . . 138

R. 10D --International transactions--Arm’s length price--Transfer pricing study--Transactional net margin method--Profit level indicator--Comparables--Working capital relevant factor for determining profit margin--Mere low profit or loss would not make a functional comparable company uncomparable--Entity can be taken as uncontrolled, if its related party transaction does not exceed 25 per cent. of total revenue--Function, assets and risk analysis--Comparable cannot be rejected just because it is operating in same sector in different line--No prejudice shown in inclusion of comparables which had incurred more than 5 per cent. of sales as expenses towards advertisement and marketing--Company showing fluctuation in profits and losses to be excluded--Large companies having turnover of more than Rs. 260 crores not comparable--Current year’s data to be used-- Actis Advisers P. Ltd. v. Deputy CIT (Delhi) . . . 138

 

 

Fwd: Maharashtra State Co-op Bank Tender

---------- Forwarded message ----------
From: DAYARAM PALIWAL <dayaramca@gmail.com>
Date: Fri, Nov 16, 2012 at 12:33 PM
Subject: Maharashtra State Co-op Bank Tender
To:


Dear Sir/ Madam,

Please find attached file of Maharashtra State Co-op Bank Tender.

Click here:

https://docs.google.com/open?id=1RpLu2W5d0X5x3ICy6QM5ffwHR1C72UbZUP8DtpvNahV-0DUeH8dwOxmfEmRV

Thanking You.

Your's Faithfully,

ITR (TRIB) VIK 19 PART 6

 

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

Volume 19 : Part 6 (Issue dated : 05-11-2012)

SUBJECT INDEX TO CASES REPORTED IN THIS PART

Accounting --Valuation of closing stock--Provision for excise duty on closing stock of finished goods paid before clearance of goods prior to date of tax audit report and difference between opening provision of excise duty on stock and excise duty on closing stock debited in profit and loss account--Amount debited in the profit and loss account paid before due date of filing of return--No disallowance of debit in profit and loss account-- Deputy CIT (LTU) v. Hyundai Motor India Ltd. (Chennai) . . . 778

Assessment --Income computed in hands of another person taxed in hands of assessee on protective basis--Income taxed substantively in hands of that person--Issue pending before Commissioner (Appeals)--Commissioner (Appeals) to decide in whose hands addition to be made-- Mali Florex Ltd. v. Deputy CIT (Hyderabad) . . . 791

Business expenditure --Mercantile system of accounting--Project expenditure incurred prior to commencement of business --Not allowable as business expenditure--Income-tax Act, 1961, s. 37-- Mali Florex Ltd. v. Deputy CIT (Hyderabad) . . . 791

----Payments totalling Rs. 30 lakhs made by account payee cheque--Disallowance of only part of payments on ground deleted in hands of recipients--Payments arising out of same transaction--Expenditure incurred on account of business and commercial exigencies--Deletion in hands of recipients by itself not ground for disallowance in hands of assessee--Income-tax Act, 1961, s. 37-- Mali Florex Ltd. v. Deputy CIT (Hyderabad) . . . 791

----Real estate business--Site-levelling expenses--Architect fee subjected to tax deduction at source--Incurring of expenditure not doubted--Expenditure wholly and exclusively for purpose of business--Not to be disallowed merely because not stipulated in memorandum of understanding--Fees paid to sub-agents on which tax deducted at source on payments and receipts issued by recipients--Payments made by cheque and not doubted--Expenditure wholly and exclusively for purpose of business--Claim to be allowed--Technical expenditure--No proof of expenditure--Expenditure relating to earlier year--Disallowance proper--Video surveillance charges--If expenditure incurred for purpose of business in assessment year under consideration to be allowed though entire property not sold in year under consideration--Income-tax Act, 1961, s. 37-- Mali Florex Ltd. v. Deputy CIT (Hyderabad) . . . 791

Capital gains --Transfer--Definition--Agreement to sell land --Meagre portion of total consideration received and possession not parted with--Not a case of relinquishment of right over property amounting to transfer--Income-tax Act, 1961, s. 2(47)--Transfer of Property Act, 1882, s. 53A-- Mali Florex Ltd. v. Deputy CIT (Hyderabad) . . . 791

Capital or revenue expenditure --Furniture--Capital asset--Expenses incurred for procuring furniture not allowable--Income-tax Act, 1961-- Mahindra Holidays and Resorts India Ltd. v. Deputy CIT (Chennai) . . . 811

----Market research expenses for launching new holiday concept which was later abandoned--Expenses related to setting up of new business--Capital in nature--Income-tax Act, 1961-- Mahindra Holidays and Resorts India Ltd. v. Deputy CIT (Chennai) . . . 811

----Payment of fee for licence to use software for three years--Software did not become asset of assessee--Payment is revenue expenditure--Income-tax Act, 1961-- Mahindra Holidays and Resorts India Ltd. v. Deputy CIT (Chennai) . . . 811

Charitable purposes --Depreciation--Investment in asset treated as application of income to objects of trust--Depreciation on assets allowable--Income-tax Act, 1961, ss. 11, 32-- Assistant CIT v. Shri Adichunchanagiri Shikshana Trust (Bangalore) . . . 828

Export --Special deduction--Computation of profits--Supporting manufacturer--Service charges relating to exports not supported by disclaimer certificates--Not eligible for deduction--Income-tax Act, 1961, s. 80HHC, Expln. (baa) -- Abad Fisheries v. ITO (Cochin) . . . 753

----Special deduction--Exports made through export houses--Whether or not sale proceeds received in foreign exchange and whether assessee received drawback benefits, etc., not available on record--Matter remanded--Income-tax Act, 1961, s. 80HHC-- Abad Fisheries v. ITO (Cochin) . . . 753

Income --Accrual of income--Assessee running holiday homes on time share basis--Membership fees collected from members in year of admission--60 per cent. offered as income of year in which collected and balance treated as deferred income spread pro rata over remaining period of holiday share--Proper--Income-tax Act, 1961-- Mahindra Holidays and Resorts India Ltd. v. Deputy CIT (Chennai) . . . 811

----Computation--Disallowance of expenditure in earning exempt income--To be restricted at one per cent.--Income-tax Act, 1961, s. 14A-- Estee Exports P. Ltd. v. ITO
(Kolkata) . . . 724

----Computation--Suppression of stock--Failure to explain discrepancy--Addition justified--Income-tax Act, 1961-- Estee Exports P. Ltd. v. ITO (Kolkata) . . . 724

Method of accounting --Power of Assessing Officer to reject books of account--Condition precedent--Satisfaction of Assessing Officer books not complete and correct--Surmise that profits sought to be reduced by sale of products to sister-concern at lower price--Not sufficient ground to conclude that books not complete and correct--No instance of falsity or incompleteness of books of account--Rejection of books not justified--Income-tax Act, 1961, s. 145-- Deputy CIT v. Sphoorti Machine Tools P. Ltd. (Bangalore) . . . 736

Penalty --Concealment of income--Furnishing of inaccurate particulars--Disclosure of sum in year of receipt--Commissioner (Appeals) holding sum taxable in following year--Revised return filed thereafter for following year with profit and loss account--Not a case of concealment--Every addition not concealment of income--Penalty not leviable--Income-tax Act, 1961, s. 271(1)(c)-- ITO v. Jain Associates (Mumbai) . . . 824

Reassessment --Income escaping assessment--Failure by Assessing Officer to consider information called for during assessment--Not a case of income escaping assessment--Income-tax Act, 1961, s. 147-- Deputy CIT (LTU) v. Hyundai Motor India Ltd. (Chennai) . . . 778

----Notice--Validity--Assessing Officer rejecting assessee’s working of section 10B exemption and section 80HHC deduction in earlier years--Notice issued on presumption that workings for this year would result in escapement of income--Valid--Income-tax Act, 1961, s. 148-- Abad Fisheries v. ITO (Cochin) . . . 753

Revision --Commissioner--Expenditure on creation of new brand--Finding that expenditure not creating any enduring benefit of asset--Order of Assessing Officer not erroneous or prejudicial to interests of Revenue--Revision to treat expenditure as capital expenditure not sustainable--Income-tax Act, 1961, s. 263-- Fine Jewellery (India) Ltd. v. Assistant CIT (Mumbai) . . . 746

----Jurisdiction--Doctrine of merger--Erroneous and prejudicial to Revenue--Housing projects--Special deduction--Assessing Officer analysing issue and allowing deduction excluding profits derived from undivided share of lands--Revision to disallow deduction in toto on ground assessee only developer and not eligible--Matter decided by Commissioner (Appeals) in first appeal--Assessing Officer taking one of two possible views--Revision not permissible--Income-tax Act, 1961, ss. 80-IB, 263-- Sobha Developers Ltd. v. CIT (LTU) (Bangalore) . . . 764

 

SECTIONWISE INDEX TO CASES REPORTED IN THIS PART

Income-tax Act, 1961 :

S. 2(47) --Capital gains--Transfer--Definition--Agreement to sell land --Meagre portion of total consideration received and possession not parted with--Not a case of relinquishment of right over property amounting to transfer-- Mali Florex Ltd. v. Deputy CIT (Hyderabad) . . . 791

S. 11 --Charitable purposes--Depreciation--Investment in asset treated as application of income to objects of trust--Depreciation on assets allowable-- Assistant CIT v. Shri Adichunchanagiri Shikshana Trust (Bangalore) . . . 828

S. 14A --Income--Computation--Disallowance of expenditure in earning exempt income--To be restricted at one per cent.-- Estee Exports P. Ltd. v. ITO (Kolkata) . . . 724

S. 32 --Charitable purposes--Depreciation--Investment in asset treated as application of income to objects of trust--Depreciation on assets allowable-- Assistant CIT v. Shri Adichunchanagiri Shikshana Trust (Bangalore) . . . 828

S. 37 --Business expenditure--Mercantile system of accounting--Project expenditure incurred prior to commencement of business --Not allowable as business expenditure-- Mali Florex Ltd. v. Deputy CIT (Hyderabad) . . . 791

----Business expenditure--Payments totalling Rs. 30 lakhs made by account payee cheque--Disallowance of only part of payments on ground deleted in hands of recipients--Payments arising out of same transaction--Expenditure incurred on account of business and commercial exigencies--Deletion in hands of recipients by itself not ground for disallowance in hands of assessee-- Mali Florex Ltd. v. Deputy CIT (Hyderabad) . . . 791

----Business expenditure--Real estate business--Site-levelling expenses--Architect fee subjected to tax deduction at source--Incurring of expenditure not doubted--Expenditure wholly and exclusively for purpose of business--Not to be disallowed merely because not stipulated in memorandum of understanding--Fees paid to sub-agents on which tax deducted at source on payments and receipts issued by recipients--Payments made by cheque and not doubted--Expenditure wholly and exclusively for purpose of business--Claim to be allowed--Technical expenditure--No proof of expenditure--Expenditure relating to earlier year--Disallowance proper--Video surveillance charges--If expenditure incurred for purpose of business in assessment year under consideration to be allowed though entire property not sold in year under consideration-- Mali Florex Ltd. v. Deputy CIT (Hyderabad) . . . 791

S. 80HHC --Export--Special deduction--Exports made through export houses--Whether or not sale proceeds received in foreign exchange and whether assessee received drawback benefits, etc., not available on record--Matter remanded-- Abad Fisheries v. ITO (Cochin) . . . 753

S. 80HHC, Expln. (baa) --Export--Special deduction--Computation of profits--Supporting manufacturer--Service charges relating to exports not supported by disclaimer certificates--Not eligible for deduction-- Abad Fisheries v. ITO (Cochin) . . . 753

S. 80-IB --Revision--Jurisdiction--Doctrine of merger--Erroneous and prejudicial to Revenue--Housing projects--Special deduction--Assessing Officer analysing issue and allowing deduction excluding profits derived from undivided share of lands--Revision to disallow deduction in toto on ground assessee only developer and not eligible--Matter decided by Commissioner (Appeals) in first appeal--Assessing Officer taking one of two possible views--Revision not permissible-- Sobha Developers Ltd. v. CIT (LTU) (Bangalore) . . . 764

S. 145 --Method of accounting--Power of Assessing Officer to reject books of account--Condition precedent--Satisfaction of Assessing Officer books not complete and correct--Surmise that profits sought to be reduced by sale of products to sister-concern at lower price--Not sufficient ground to conclude that books not complete and correct--No instance of falsity or incompleteness of books of account--Rejection of books not justified-- Deputy CIT v. Sphoorti Machine Tools P. Ltd. (Bangalore) . . . 736

S. 147 --Reassessment--Income escaping assessment--Failure by Assessing Officer to consider information called for during assessment--Not a case of income escaping assessment-- Deputy CIT (LTU) v. Hyundai Motor India Ltd. (Chennai) . . . 778

S. 148 --Reassessment--Notice--Validity--Assessing Officer rejecting assessee’s working of section 10B exemption and section 80HHC deduction in earlier years--Notice issued on presumption that workings for this year would result in escapement of income--Valid-- Abad Fisheries v. ITO (Cochin) . . . 753

S. 263 --Revision--Commissioner--Expenditure on creation of new brand--Finding that expenditure not creating any enduring benefit of asset--Order of Assessing Officer not erroneous or prejudicial to interests of Revenue--Revision to treat expenditure as capital expenditure not sustainable-- Fine Jewellery (India) Ltd. v. Assistant CIT (Mumbai) . . . 746

----Revision--Jurisdiction--Doctrine of merger--Erroneous and prejudicial to Revenue--Housing projects--Special deduction--Assessing Officer analysing issue and allowing deduction excluding profits derived from undivided share of lands--Revision to disallow deduction in toto on ground assessee only developer and not eligible--Matter decided by Commissioner (Appeals) in first appeal--Assessing Officer taking one of two possible views--Revision not permissible-- Sobha Developers Ltd. v. CIT (LTU) (Bangalore) . . . 764

S. 271(1)(c) --Penalty--Concealment of income--Furnishing of inaccurate particulars--Disclosure of sum in year of receipt--Commissioner (Appeals) holding sum taxable in following year--Revised return filed thereafter for following year with profit and loss account--Not a case of concealment--Every addition not concealment of income--Penalty not leviable-- ITO v. Jain Associates (Mumbai) . . . 824

Transfer of Property Act, 1882 :

S. 53A --Capital gains--Transfer--Definition--Agreement to sell land--Meagre portion of total consideration received and possession not parted with--Not a case of relinquishment of right over property amounting to transfer-- Mali Florex Ltd. v. Deputy CIT (Hyderabad) . . . 791

 

 

Section 115JB: SEZ units continue to be exempt from MAT: ITAT Mumbai

 

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The following important judgement is available for download at itatonline.org.

Genesys International Corpn. Ltd vs. ACIT (ITAT Mumbai)

S. 115JB: SEZ units continue to be exempt from MAT

 

The assessee had two undertakings, one of which was a SEZ unit and the other which was a STPI unit. Both units were eligible for deduction u/s 10A. By the Special Economic Zone Act, 2005, s. 10AA was inserted w.e.f. 10.2.2006 to provide deduction in respect of units established in SEZs. By the same Act, sub-sec (6) was inserted in s. 115JB to provide that the profits of an SEZ unit would not be liable to MAT. By the Finance Act, 2007, clause (f) to explanation (1) to s. 115JB (2) was amended w.e.f. 1.4.2008 so as to delete the words "sections 10A or 10B" though sub-sec (6) of s. 115JB was retained. The AO & CIT(A) held that the effect of the deletion of the reference to s. 10A & 10B in s. 115JB meant that the units which were eligible for s. 10A & 10B deduction were no longer exempt from s. 115JB and only units which were eligible for s. 10AA deduction would be exempt from s. 115JB. On appeal by the assessee, HELD allowing the appeal:

 

S. 115JB (6) does not refer to either s. 10A or s. 10AA but simply provides that the MAT provisions shall not apply to income arising from any business carried on in an unit located in a SEZ. Consequently, despite the fact that an amendment was made in clause (f) of Explanation (1) to s. 115JB(2) to provide that MAT shall apply to units eligible for s. 10A or 10B, a unit which is situated in a SEZ will continue to be exempt from MAT by virtue of s. 115JB(6).

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Gagan Trading Co. Ltd vs. ACIT (ITAT Mumbai)

S. 23(1)(a): Notional interest on deposit not includible in Annual Letting Value

Section 23(1)(a): Notional interest on deposit not includible in Annual Letting Value: ITAT Mumbai

 

Dear Subscriber,

 

The following important judgement is available for download at itatonline.org.

Gagan Trading Co. Ltd vs. ACIT (ITAT Mumbai)

S. 23(1)(a): Notional interest on deposit not includible in Annual Letting Value

 

The assessee let out its property on a monthly rent of Rs. 1 per sq. ft. It also received Rs.78 crores as an interest-free deposit. The assessee claimed that as the municipal ratable value of the said Property was higher than the actual rent received the said municipal ratable value had to be taken as the ALV. The AO held that notional interest at the rate of 18% p.a. on the said deposits had to be added to the actual rent received so as to determine the ALV. The CIT(A) held that while the AO was wrong in adding the notional interest on the security deposit, the assessee was also wrong in insisting on the municipal rateable value to be the ALV. He held that the ALV had to be decided as per the rent fetched by similar properties located in the same vicinity. On cross appeals by both parties, HELD by the Tribunal:

 

As per Circular No.204 dated 24.7.1976 issued by the CBDT the expression "the sum for which the property might reasonably be expected to let from year to year" used in s. 23(1)(a) means the municipal valuation of the property. In Reclamation Reality, the Tribunal held, after considering the entire law on the subject, including the said Circular & M.V. Sonavala 177 ITR 246 (Bom) that the ALV had to be determined on the basis of either the Municipal rateable value (23(1)(a)) or the actual rent received (23(1)(b)), whichever is the higher. There is no scope for adding the notional interest on the security deposit to the ALV. Judicial propriety and judicial discipline require that this view be followed (CIT vs. Moni Kumar Subba 333 ITR 38 (Del) (FB) noted).

 

Note: The contra view in Baker Technical Services 126 TTJ (Mum) (TM) was not followed in Reclamation Realty & Monisha Jaising 51 SOT 182 (Mum) as being contrary to M. V. Sonavala 177 ITR 246 (Bom)

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High Court Fumes At CIT's "Disgraceful & Deplorable Conduct" In Circumventing Law

 

Dear Subscriber,

 

The following important judgement is available for download at itatonline.org.

Fiat India Automobiles Ltd vs. ACIT (Bombay High Court)

"Disgraceful & Deplorable Conduct" of ACIT & CIT in seeking to circumvent the law strongly condemned

Pursuant to the assessee's request, the CIT passed an order dated 22.11.2011 u/s 127(2) transferring the assessee's case from Mumbai to Pune. Despite the said transfer, the ACIT, Mumbai, issued a s. 148 notice seeking to reopen the assessee's case. The assessee filed a Writ Petition to challenge the reopening on the ground that the ACIT, Mumbai, had no jurisdiction. Before the Court, the department revealed that the ACIT had written a letter to the CIT requesting that the transfer of the case be cancelled "to circumvent any jurisdictional issue" and that the CIT had passed a "corrigendum order" stating that the transfer order was "temporarily withdrawn for the sake of administrative convenience". The said "corrigendum order" was passed without hearing the assessee and even a copy thereof was not served on the assessee. HELD by the Court allowing the Petition:

 

The conduct of the ACIT & CIT is highly deplorable. Once the jurisdiction to assess the assessee was transferred from Mumbai to Pune, it was totally improper on the part of ACIT Mumbai to request the CIT to pass a corrigendum order with a view to circumvent the jurisdictional issue. Making this request was in gross abuse of the process of law. If there was any time barring issue, the ACIT Mumbai ought to have asked his counterpart at Pune to whom the jurisdiction was transferred to take appropriate steps in the matter instead of taking steps to circumvent the jurisdictional issue. It does not befit the ACIT Mumbai to indulge in circumventing the provisions of law and his conduct has to be strongly condemned. Instead of bringing to book persons who circumvent the provisions of law, the ACIT has himself indulged in circumventing the provisions of law which is totally disgraceful. The CIT ought not to have succumbed to the unjust demands of the ACIT and ought to have admonished the ACIT for making such an unjust request. The CIT ought to have known that there is no provision under the Act which empowers the CIT to temporarily withdraw the order passed by him u/s 127(2) for the sake of administrative convenience or otherwise. If the CIT was honestly of the opinion that the order passed u/s 127(2) was required to be recalled for any valid reason, he ought to have issued notice to that effect to the assessee and passed an order after hearing it. Further, though the CCIT agrees that the actions of the CIT and ACIT are patently unjustified and not as per law, he has expressed his helplessness in the matter. It is expected that the CCIT shall take immediate remedial steps to ensure that no such incidents occur in the future. The department shall pay costs of Rs. 10,000 which may be recovered from the CIT & ACIT.

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Latest:

Genesys International Corpn. Ltd vs. ACIT (ITAT Mumbai)

S. 115JB: SEZ units continue to be exempt from MAT