High Court Lays Down Important Law On Taxability Of Equipment Rental As Royalty

 

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Poompuhar Shipping Corporation Ltd vs. ITO (Madras High Court)

S. 9(1)(vi)/ Article 12: Equipment rental is taxable as "royalty" even if payer does not have control. The retrospective insertion of Explanation 5 to s. 9(1)(vi) is purely clarificatory

The High Court had to consider the following issues in the context of a bare-boat charter of a shipping vessel from a foreign party, the income whereof was held assessable as "royalty" u/s 9(1)(vi) & Article 12 in the hands of the foreign party: (i) whether the expression 'use or right to use' in clause (iva) of Explanation 2 to s. 9(1)(vi) & Article 12 of the DTAA requires that there should be a "transfer of effective control for use" in favour of the lessee?, (ii) what is the impact of the retrospective insertion of Explanation 5 to s. 9(1)(vi) on the taxability of equipment royalty?, (ii) whether a ship can be regarded as "equipment"?, (iii) whether if the ship is used for plying between coastal waters, it can be said to be used for "international traffic"?, (iv) whether the two berths reserved for the ships chartered by the assessee can be said to be a "permanent establishment" of the foreign owner? & (v) whether a person who is treated as an "agent" u/s 163 can also be proceeded against u/s 201 for failure to deduct TDS? HELD by the High Court:

(i) The assessee's argument that in a case where physical possession is not with the transferee or the lessee or the hirer, the payment made for the use of or right to use of equipment would not constitute 'royalty' is not acceptable. Under clause (iva) of Explanation 2 to s. 9(1)(vi) 'royalty' means the consideration paid for "the use or right to use". Irrespective of whether there is any transfer or not, the consideration paid for use or right to use simpliciter is sufficient for the consideration being called as 'royalty'. The presence or absence of possession, effective/general control and custody with the assessee, even though may be matters of agreement, are not of any relevance to decide the character of payment. The same result applies under Article 12 of the DTAA (Gosalia Shipping 113 ITR 307 (SC), OECD Commentary referred);

(ii) Explanation 5, inserted by Finance Act, 2012, w.r.e.f. 01.06.1976 clarifies that irrespective of control or possession or use or location in India such right, property or information with the payer; the payment is taxable as royalty. The Revenue does not need the assistance of Explanation 5 because even if the possession of the ship is with the owner, he has parted with the "right to use" the ship and the consideration thereof constitutes "royalty" even without Explanation 5;

(iii) The assessee's argument that ship is not an "equipment" for purposes of s. 9(1)(vi) is not acceptable. The word 'any' preceding an equipment clearly points out the need for construing 'equipment' widely so as to embrace every article employed by the employer for the purposes of his business. A ship is "plant" u/s 43(3). "Plant" includes 'all equipment' used by a business man for carrying on his business. As a ship is used to carry on business, it is "equipment";

(iv) The argument that a ship used for plying between coastal lines on the Indian shore is used in "international traffic" is not acceptable in view of the OECD Commentary;

(v) On the question of permanent establishment, a moving ship is a place of business in the place where the ship is docked. The fact that the ship moved from one point to another is the result of the nature of business contract and the movement is an integrated one having business and geographical coherence. Accordingly, the foreign enterprise has a permanent establishment in India when its ships are in India and the berths are reserved for it. However, the royalties paid are not "effectively connected" or attributable to such permanent establishment. Accordingly, the payment falls for consideration only under Article 12 and not under Article 7;

(vi) The assessee's argument that a person who is treated as an "agent" u/s 163 cannot be proceeded against u/s 201 for failure to deduct TDS is not correct because the two provisions operate in different spheres. S. 195 casts an obligation on TDS on any person responsible for paying, whereas s. 163 is for assessment purposes. Proceedings u/s 201 has nothing to do with the status of the assessee as an agent u/s 160 and 163 which would assume significance only for assessment purposes (Premier Tyres 134 ITR 17 (Bom) noted)

Note: Consider the impact of this verdict on Kotak Mahindra Primus 105 TTJ (Mum) 578, Standard Chartered Bank 47 SOT 191, Yahoo India 140 TTJ 195 (Mum) & Right Florists 143 ITD 445 (Kol)

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CBEC VCES Clarification Circular No.174/9/2013

ITAT Irked By Lackluster Attempt Of Counsels

 

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Paresh S. Shah vs. ITO (ITAT Mumbai)

Failure to comply with the criterion necessary to represent the matter before the Tribunal, in time, renders appeal liable for dismissal

The assessee filed an appeal before the Tribunal but repeatedly sought adjournments. He also did not file a letter of authority authorizing his CAs to appear in the appeal. The Tribunal dismissed the appeal on the ground that the assessee is not interested in pursuing the appeal. Thereafter, the assessee filed a Miscellaneous Application seeking restoration of the appeal. The Tribunal restored the appeal even though no power of attorney was filed even at this stage. Even after recalling the appeals the assessee continued to seek adjournments on one pretext or the other. The Tribunal dismissed the appeals and also awarded costs. The assessee again filed a Miscellaneous Application seeking restoration of the appeal. At the hearing of the MA, the power of attorney of the Counsel was not filed. HELD by the Tribunal dismissing the MA:

(i) It deserves to be noticed here that in Mumbai, despite repeatedly pointing out in each and every case, learned counsels rarely follow the practice of filing the power of attorney and many Members of the Tribunal, who do not believe it be their obligation to verify the availability of power of attorney, may not point out the same to the counsels and it results in counsels appearing without filing a power of attorney. There are equal number of occasions where several other Members, including Members of this Bench, have had occasion to point out that there was no power of attorney and counsels filed xerox copies or take further time to file power of attorney. In fact some would go to the extent of stating that they assumed that the power of attorney is on record and when we verify the file (though it is their duty to file power of attorney) and inform the counsel that there is no power of attorney then fresh power of attorney is filed. Particularly in the bench which is presided over by the Vice President, the registry notes on the file that the power of attorney of a person, who is representing the matter, is not on record and then the power of attorney is filed, notwithstanding the fact that before filing the power of attorney the same counsel or Chartered Accountant must have already taken adjournments on several occasions.

(ii) On facts, there is no sufficient cause for restoration of the appeal under the proviso to Rule 24. The power of attorney has not been filed. The appeals were dismissed twice as adjournments were sought on spurious grounds. The assessee and his counsels have done lackluster attempt to represent the matters by not fulfilling all the criterion necessary to represent the matter before the Tribunal, in time.

Note: All practitioners are requested to strictly follow the Practical Guide To Appearing Before The Income-tax Appellate Tribunal to avoid a similar fate as the assessee herein

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S. 144C: CBDT Circular On Applicability Of DRP Law w.e.f. 1.10.2009

ITR (TRIB) VOL 28 PART 1

 

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

 

ONLINE EDITION

SUBJECT INDEX TO CASES REPORTED

Charitable purpose --Registration of trusts--Cancellation of registration--Activities of trust contrary to objects of trust--Collection of excess fee not accounted in books of account--Commissioner has power to cancel registration--Order of Commissioner justified--Income-tax Act, 1961, ss. 12A, 12AA(3)-- Joginpally BR Educational Society v. CIT (Central) (Hyderabad) . . . 639

Penalty --Acceptance or repayment of loans or deposits in cash exceeding specified limit--Assessee, a “shroff†, doing cheque-discounting business--Farmers selling their produce to traders, who made payment by way of post-dated crossed cheques--Agriculturists getting cheques discounted for cash by assessee--Transactions not loan or deposit in hands of assessee--Penalty not leviable--Income-tax Act, 1961, ss. 269SS, 269T, 271D, 271E-- ITO v. Dineshchandra Shantilal Shah (HUF) (Ahmedabad) . . . 647

PRINT EDITION

Volume 28 : Part 1 (Issue dated : 25-11-2013)

SUBJECT INDEX TO CASES REPORTED

Business expenditure --Accrued or contingent liability--Provision for service warranty--Allowable-- Assistant CIT v. L. G. Electronics India P. Ltd. (Delhi) . . . 1

----Disallowance--Expenditure on maintaining and running of branch--Similar issue decided in favour of assessee in assessment year 2006-07--To be allowed--Income-tax Act, 1961-- Emkay Share and Stock Brokers P. Ltd. v. Deputy CIT (No. 2) (Mumbai) . . . 64

----Disallowance--Payments liable to tax deduction at source--Assessee deposited tax deducted amount before due date for filing return--No disallowance under section 40(a)(ia)--Income-tax Act, 1961, s. 40(a)(ia)-- Madineni Mohan v. Income-tax Officer (Hyderabad) . . . 157

----Expenditure incurred on commission and foreign travel--Failure of assessee to demonstrate nature and extent of service rendered by agent--No full details with regard to foreign travel--Failure of assessee to produce proper evidence--Burden of proof on assessee not discharged--Disallowance of expenditure proper--Income-tax Act, 1961, s. 37-- Kanu Kitchen Kulture P. Ltd. v. Deputy CIT (Delhi) . . . 49

----Expenditure on acquisition of distribution rights of feature films--No income generated out of acquisition of film rights--Disallowance of expenditure justified--Income-tax Rules, 1962, r. 9B(4)-- Malayala Manorama Co. Ltd. v. Assistant CIT (Cochin) . . . 144

Capital gains --Computation of capital gains--Fair market value--Reference to Valuation Officer--Assessment adopting value according to stamp valuation authorities under section 50C--Report of Valuation Officer disclosing enhanced value received after completion of assessment--Assessing Officer cannot invoke section 155(15) to modify order in accordance with report of Departmental Valuation Officer--Departmental Valuation Officer’s value outside scope of section 155(15)--Income-tax Act, 1961, ss. 50C, 55A, 155(15)-- Additional CIT v. Rajkumar L. Daryanani (Mumbai) . . . 72

Capital or revenue expenditure --Expenditure incurred for consultancy charges for developing new line of business--Revenue expenditure--Income-tax Act, 1961-- Agrani Telecom Ltd. v. Assistant CIT (Mumbai) . . . 58

Debentures --Whether security or loan or deposit-- Deputy CIT v. Sahara India Commercial Corporation Ltd. (Delhi) . . . 108

Depreciation --Additional depreciation--Allowable only for assets used for purpose of manufacture--Assets for use in business of broadcasting--Not manufacture--Additional depreciation not allowable--Income-tax Act, 1961, s. 32(1)(iia)-- Malayala Manorama Co. Ltd. v. Assistant CIT (Cochin) . . . 144

----Condition precedent for allowance--User of asset for purpose of business--Purchase of equipment to start business of FM broadcasting--Licence obtained only in following year--Business not commenced in year in question--No material to show preparation of programmes--Depreciation not allowable in year in question--Income-tax Act, 1961, s. 32(1)-- Malayala Manorama Co. Ltd. v. Assistant CIT (Cochin) . . . 144

Exemption --Export--Expenditure incurred on communication charges--Excludible from export turnover and total turnover--Income-tax Act, 1961, s. 10A-- Cognizant Technology Services P. Ltd. v. Assistant CIT (Hyderabad) . . . 125

International transactions --Arm’s length price--Determination--Contribution towards global sponsorship of World Cup cricket tournament shared between assessee and parent company in ratio 40 : 60--Proper--Reimbursement of advertisement expenses of assessee by associated enterprises--Matter remanded for readjudication in light of Special Bench order--Remand would not change basis of adjustment made by Transfer Pricing Officer--Income-tax Act, 1961, s. 92CA-- Assistant CIT v. L. G. Electronics India P. Ltd. (Delhi) . . . 1

----Transfer pricing--Arm’s length price--Selection of comparables--Functionally different and super normal profit companies cannot be treated as comparables--Company with Rs. 200 crores turnover can be accepted as comparable when assessee’s turnover is above Rs. 151 crores--Direction to Assessing Officer to verify facts related to some comparables and to provide opportunity of being heard to assessee--Income-tax Act, 1961-- Cognizant Technology Services P. Ltd. v. Assistant CIT (Hyderabad) . . . 125

Non-resident --Income deemed to accrue or arise in India--Deduction of tax at source--Fees for technical services--Definition--Assessee making use of assistance rendered by foreign company in decision making process of management--Foreign company also giving training to assessee’s employees--Service falls under definition of technical services--Assessee liable to deduct tax at source on payment therefor--Income-tax Act, 1961, ss. 9(1)(vii), 40(a)(ia), 195--Double Taxation Avoidance Agreement between India and the U. S. A., art. 12(4)(b)-- US Technology Resources P. Ltd. v. Assistant CIT (Cochin) . . . 26

Penalty --Acceptance of deposits otherwise than by crossed cheque--Optionally fully convertible debentures issued by company--Are security not loan or deposit--Section 269SS not applicable--Penalty not attracted--Income-tax Act, 1961, ss. 269SS, 271D-- Deputy CIT v. Sahara India Commercial Corporation Ltd. (Delhi) . . . 108

----Concealment of income--Disclosure and surrender of cash during search--Due date of filing of return not expired on date of surrender--Failure to declare sum in return but revised return filed and tax paid with interest--Inadvertent mistake--Assessee entitled to benefit of Explanation 5(2) to section 271(1)(c)--Income-tax Act, 1961, ss. 132, 271(1)(c), Expln. 5 -- Joint CIT (OSD) v. Bhagwan Dass Garg (Chandigarh) . . . 77

----Concealment of income--Sale of plot of land--No evidence to show payment of higher sale consideration than disclosed in sale deed--Enhancement of rates for making estimated addition--No penalty leviable for estimated addition--Income-tax Act, 1961, ss. 145(3), 271(1)(c)-- Joint CIT (OSD) v. Bhagwan Dass Garg (Chandigarh) . . . 77

Recovery of tax --Notice of demand--Levy of interest--Direction to Assessing Officer to verify whether interest has been charged under demand notice or original assessment--Matter remanded--Income-tax Act, 1961, s. 220(2)-- Emkay Share and Stock Brokers P. Ltd. v. Deputy CIT (No. 2) (Mumbai) . . . 64

Unexplained investment --Appeal to Commissioner (Appeals)--Additional evidence--Closing stock shown in audited balance-sheet on March 31 less than stock statement submitted to bank on March 30--Sales booked on March 31 and reconciliation statement produced before Commissioner (Appeals)--Either closing stock or additional evidence of sales should be accepted--No cogent reason for rejecting reconciliation statement--Income-tax Act, 1961, s. 69--Income-tax Rules, 1962, r. 46A-- Munish Kumar Bansal v. Joint CIT (Amritsar) . . . 89

Words and phrases --“Decision making†--Meaning of-- US Technology Resources P. Ltd. v. Assistant CIT (Cochin) . . . 26

SECTIONWISE INDEX TO CASES REPORTED IN THIS PART

Double Taxation Avoidance Agreement between India and the U. S. A.

Art. 12(4)(b) ----Income deemed to accrue or arise in India--Deduction of tax at source--Fees for technical services--Definition--Assessee making use of assistance rendered by foreign company in decision making process of management--Foreign company also giving training to assessee’s employees--Service falls under definition of technical services--Assessee liable to deduct tax at source on payment therefor-- US Technology Resources P. Ltd. v. Assistant CIT (Cochin) . . . 26

Income-tax Act, 1961

S. 9(1)(vii) --Non-resident--Income deemed to accrue or arise in India--Deduction of tax at source--Fees for technical services--Definition--Assessee making use of assistance rendered by foreign company in decision making process of management--Foreign company also giving training to assessee’s employees--Service falls under definition of technical services--Assessee liable to deduct tax at source on payment therefor-- US Technology Resources P. Ltd. v. Assistant CIT (Cochin) . . . 26

S. 10A --Exemption--Export--Expenditure incurred on communication charges--Excludible from export turnover and total turnover-- Cognizant Technology Services P. Ltd. v. Assistant CIT (Hyderabad) . . . 125

S. 32(1) --Depreciation--Condition precedent for allowance--User of asset for purpose of business--Purchase of equipment to start business of FM broadcasting--Licence obtained only in following year--Business not commenced in year in question--No material to show preparation of programmes--Depreciation not allowable in year in question-- Malayala Manorama Co. Ltd. v. Assistant CIT (Cochin) . . . 144

S. 32(1)(iia) --Depreciation--Additional depreciation--Allowable only for assets used for purpose of manufacture--Assets for use in business of broadcasting--Not manufacture--Additional depreciation not allowable-- Malayala Manorama Co. Ltd. v. Assistant CIT (Cochin) . . . 144

S. 37 --Business expenditure--Expenditure incurred on commission and foreign travel--Failure of assessee to demonstrate nature and extent of service rendered by agent--No full details with regard to foreign travel--Failure of assessee to produce proper evidence--Burden of proof on assessee not discharged--Disallowance of expenditure proper-- Kanu Kitchen Kulture P. Ltd. v. Deputy CIT (Delhi) . . . 49

S. 40(a)(ia) --Business expenditure--Disallowance--Payments liable to tax deduction at source--Assessee deposited tax deducted amount before due date for filing return--No disallowance under section 40(a)(ia)-- Madineni Mohan v. Income-tax Officer (Hyderabad) . . . 157

----Non-resident--Income deemed to accrue or arise in India--Deduction of tax at source--Fees for technical services--Definition--Assessee making use of assistance rendered by foreign company in decision making process of management--Foreign company also giving training to assessee’s employees--Service falls under definition of technical services--Assessee liable to deduct tax at source on payment therefor-- US Technology Resources P. Ltd. v. Assistant CIT (Cochin) . . . 26

S. 50C --Capital gains--Computation of capital gains--Fair market value--Reference to Valuation Officer--Assessment adopting value according to stamp valuation authorities under section 50C--Report of Valuation Officer disclosing enhanced value received after completion of assessment--Assessing Officer cannot invoke section 155(15) to modify order in accordance with report of Departmental Valuation Officer--Departmental Valuation Officer’s value outside scope of section 155(15)-- Additional CIT v. Rajkumar L. Daryanani (Mumbai) . . . 72

S. 55A --Capital gains--Computation of capital gains--Fair market value--Reference to Valuation Officer--Assessment adopting value according to stamp valuation authorities under section 50C--Report of Valuation Officer disclosing enhanced value received after completion of assessment--Assessing Officer cannot invoke section 155(15) to modify order in accordance with report of Departmental Valuation Officer--Departmental Valuation Officer’s value outside scope of section 155(15)-- Additional CIT v. Rajkumar L. Daryanani (Mumbai) . . . 72

S. 69 --Unexplained investment--Appeal to Commissioner (Appeals)--Additional evidence--Closing stock shown in audited balance-sheet on March 31 less than stock statement submitted to bank on March 30--Sales booked on March 31 and reconciliation statement produced before Commissioner (Appeals)--Either closing stock or additional evidence of sales should be accepted--No cogent reason for rejecting reconciliation statement-- Munish Kumar Bansal v. Joint CIT (Amritsar) . . . 89

S. 92CA --International transactions--Arm’s length price--Determination--Contribution towards global sponsorship of World Cup cricket tournament shared between assessee and parent company in ratio 40 : 60--Proper--Reimbursement of advertisement expenses of assessee by associated enterprises--Matter remanded for readjudication in light of Special Bench order--Remand would not change basis of adjustment made by Transfer Pricing Officer-- Assistant CIT v. L. G. Electronics India P. Ltd. (Delhi) . . . 1

S. 132 --Penalty--Concealment of income--Disclosure and surrender of cash during search--Due date of filing of return not expired on date of surrender--Failure to declare sum in return but revised return filed and tax paid with interest--Inadvertent mistake--Assessee entitled to benefit of Explanation 5(2) to section 271(1)(c)-- Joint CIT (OSD) v. Bhagwan Dass Garg (Chandigarh) . . . 77

S. 145(3) --Penalty--Concealment of income--Sale of plot of land--No evidence to show payment of higher sale consideration than disclosed in sale deed--Enhancement of rates for making estimated addition--No penalty leviable for estimated addition-- Joint CIT (OSD) v. Bhagwan Dass Garg (Chandigarh) . . . 77

S. 155(15) --Capital gains--Computation of capital gains--Fair market value--Reference to Valuation Officer--Assessment adopting value according to stamp valuation authorities under section 50C--Report of Valuation Officer disclosing enhanced value received after completion of assessment--Assessing Officer cannot invoke section 155(15) to modify order in accordance with report of Departmental Valuation Officer--Departmental Valuation Officer’s value outside scope of section 155(15)-- Additional CIT v. Rajkumar L. Daryanani (Mumbai) . . . 72

S. 195 --Non-resident--Income deemed to accrue or arise in India--Deduction of tax at source--Fees for technical services--Definition--Assessee making use of assistance rendered by foreign company in decision making process of management--Foreign company also giving training to assessee’s employees--Service falls under definition of technical services--Assessee liable to deduct tax at source on payment therefor)-- US Technology Resources P. Ltd. v. Assistant CIT (Cochin) . . . 26

S. 220(2) --Recovery of tax--Notice of demand--Levy of interest--Direction to Assessing Officer to verify whether interest has been charged under demand notice or original assessment--Matter remanded-- Emkay Share and Stock Brokers P. Ltd. v. Deputy CIT (No. 2) (Mumbai) . . . 64

S. 269SS --Penalty--Acceptance of deposits otherwise than by crossed cheque--Optionally fully convertible debentures issued by company--Are security not loan or deposit--Section 269SS not applicable--Penalty not attracted-- Deputy CIT v. Sahara India Commercial Corporation Ltd. (Delhi) . . . 108

S. 271(1)(c) --Penalty--Concealment of income--Sale of plot of land--No evidence to show payment of higher sale consideration than disclosed in sale deed--Enhancement of rates for making estimated addition--No penalty leviable for estimated addition-- Joint CIT (OSD) v. Bhagwan Dass Garg (Chandigarh) . . . 77

S. 271(1)(c), Expln. 5 --Penalty--Concealment of income--Disclosure and surrender of cash during search--Due date of filing of return not expired on date of surrender--Failure to declare sum in return but revised return filed and tax paid with interest--Inadvertent mistake--Assessee entitled to benefit of Explanation 5(2) to section 271(1)(c)-- Joint CIT (OSD) v. Bhagwan Dass Garg (Chandigarh) . . . 77

S. 271D --Penalty--Acceptance of deposits otherwise than by crossed cheque--Optionally fully convertible debentures issued by company--Are security not loan or deposit--Section 269SS not applicable--Penalty not attracted-- Deputy CIT v. Sahara India Commercial Corporation Ltd. (Delhi) . . . 108

Income-tax Rules, 1962

R. 9B(4) --Business expenditure--Expenditure on acquisition of distribution rights of feature films--No income generated out of acquisition of film rights--Disallowance of expenditure justified-- Malayala Manorama Co. Ltd. v. Assistant CIT (Cochin) . . . 144

R. 46A --Unexplained investment--Appeal to Commissioner (Appeals)--Additional evidence--Closing stock shown in audited balance-sheet on March 31 less than stock statement submitted to bank on March 30--Sales booked on March 31 and reconciliation statement produced before Commissioner (Appeals)--Either closing stock or additional evidence of sales should be accepted--No cogent reason for rejecting reconciliation statement-- Munish Kumar Bansal v. Joint CIT (Amritsar) . . . 89

 

ITR VOL 358 PART 4

 

INCOME TAX REPORTS (ITR)--PRINT AND ONLINE EDITION

ONLINE EDITION

SUBJECT INDEX TO CASES REPORTED

HIGH COURTS

Business expenditure --Disallowance--Advertisement expenses--Assessee procuring usage rights for brand name--Expenditure incurred on advertisement of products manufactured by it under such brand name--No part of expenditure expended for any purpose other than for assessee’s business--That other persons incidentally benefited from advertisements issued by assessee--Not a ground for disallowance of expenditure--Income-tax Act, 1961, s. 37(2B)-- CIT v. Khambhatta Family Trust (Guj) . . . 485

Company --Book profit--Disallowance of expenditure in relation to exempted income--Addition to book profit of proportionate expenditure attributable to exempted income--Justified--Income-tax Act, 1961, s. 115JA-- CIT v. State Bank of Travancore (Ker) . . . 484

Search and seizure --Block assessment--Undisclosed income--Assessment of third person--Limitation--Assessment completed within two years from end of month in which notice issued under section 158BD--Not barred by limitation--Income-tax Act, 1961, ss. 158BD, 158BE(2)(b)-- CIT v. Bimbis Creams and Bakes (Ker) . . . 466

----Block assessment--Undisclosed income--Assessment of third person--Notice--Person against whom search conducted and third person assessed by same Assessing Officer--No question of transfer of file from one officer to another--Assessing Officer need not record satisfaction before issuing notice to assessee (third person)--Block assessment of assessee valid--Income-tax Act, 1961, ss. 158BC, 158BD-- CIT v. Bimbis Creams and Bakes (Ker) . . . 466

----Block assessment--Undisclosed income--Benami purchase of property--Possession of document is a relevant and important piece of evidence--Documents seized in residence of assessee including general power of attorney and agreement to sell signed by seller--No explanation from assessee relating to documents--Books of account of assessee not disclosing investment--Name of buyer not mentioned in documents--Presumption that property represented undisclosed income of assessee--Justified--Income-tax Act, 1961, s. 158BC-- CIT v. Jai Pal Aggarwal (Delhi) . . . 472

----Block assessment--Undisclosed income--Documents merely showing a figure without any details but details of fixed deposits made with bank given interest rate--Tribunal deleting addition on account of fixed deposits and treating it as dumb documents--Finding not perverse--Income-tax Act, 1961, s. 158BC-- CIT v. Jai Pal Aggarwal (Delhi) . . . 472

----Block assessment--Undisclosed income--Investment in business--Document seized from assessee’s nephew containing date-wise receipts of amounts from assessee--Assessee’s nephew employed some time with assessee and no business of his own prior to search--Tribunal without going into facts ought not to have deleted addition on investment in business--Income-tax Act, 1961, s. 158BC-- CIT v. Jai Pal Aggarwal (Delhi) . . . 472

----Block assessment--Undisclosed income--No explanation for cash deposit in assessee’s bank account--Tribunal relying on annexure containing explanation of assessee--Annexure not part of record--Whether addition sustainable--Matter remanded to Assessing Officer--Income-tax Act, 1961, s. 158BC-- CIT v. Jai Pal Aggarwal (Delhi) . . . 472

 

PRINT EDITION

ITR Volume 358 : Part 4 (Issue dated : 18-11-2013)

SUBJECT INDEX TO CASES REPORTED IN THIS PART

SUPREME COURT

Penalty --Concealment of income--General principles--Voluntary surrender of income--No automatic immunity from penalty--Surrender “subject to non-initiation of penalty proceedings and prosecution†--Does not absolve assessee from liability to penalty--Whether assessee has offered an explanation for concealment or furnishing of inaccurate particulars of income to be seen--Surrender of income pursuant to notice calling for information in respect of documents found during survey of sister concern--Not voluntary--No intention to declare true income--Penalty proceedings justified--Income-tax Act, 1961, s. 271(1)(c), Expln. 1 -- MAK Data P. Ltd. v. CIT . . .593

----Concealment of income--Satisfaction of Assessing Officer--Need not be recorded in particular manner--Income-tax Act, 1961, s. 271(1)(c)-- MAK Data P. Ltd. v. CIT . . .593

HIGH COURTS

Appeal to Appellate Tribunal --Cash credits--Disallowance of gifts under section 68--Difference of opinion between Members of Tribunal whether addition to be under section 68 or section 69--Genuineness of gifts not considered on the merits--Reference to Third Member--Appeal of assessee dismissed as a result of opinion of Third Member--Not proper--Matter to be decided on the merits in the light of majority opinion--Income-tax Act, 1961, ss. 68, 69, 255(4)-- Smt. Renu Aggarwal v. ITO (All) . . . 483

----Difference of opinion between Members of two-Member Bench--Reference to Third Member--Decision of Tribunal not a decision of three-Member Bench--Amenable to rectification under section 254(2)--Income-tax Act, 1961, ss. 254(2), 255(4)-- Smt. Renu Aggarwal v. ITO (All) . . . 483

----Rectification of mistakes--Mistake apparent from record--Matter referred to Third Member on question of law with respect to addition made under section 68--Conscious omission to consider issue of genuineness of gifts on the merits--Not a mistake for rectification--Income-tax Act, 1961, ss. 68, 254(2)-- Smt. Renu Aggarwal v. ITO (All) . . . 483

Appeal to High Court --Powers of High Court--High Court has inherent power to review its decision--Income-tax Act, 1961, s. 260A-- Meghalaya Steels Ltd. v. CIT (Gauhati) . . . 551

----Procedure laid down in section 260A must be followed strictly--Failure to formulate substantial question of law--Error to be rectified--Income-tax Act, 1961, s. 260A-- Meghalaya Steels Ltd. v. CIT (Gauhati) . . . 551

Appeal to Supreme Court --Application for review to High Court--Subsequent condonation of delay and admission of special leave petition--High Court has jurisdiction to review its decision--Income-tax Act, 1961-- Meghalaya Steels Ltd. v. CIT (Gauhati) . . . 551

Business expenditure --Disallowance--Firm--Remuneration paid to partners--Ceiling on--Assessee engaged in seasonal business of ginning cotton--Income generated from spare funds invested in fixed deposits--Interest declared as part of business income and assessed as such--To be taken into account for purpose of ceiling on remuneration of partners--Whether only business income and no other income to be taken into account for this purpose not considered--Income-tax Act, 1961, s. 40(b)-- CIT v. J. J. Industries (Guj) . . . 531

Capital gains --Short-term or long-term capital gains--Conversion of leasehold rights into freehold rights--Conversion by way of improvement of title--No effect on the taxability of profits--Income-tax Act, 1961, s. 2(42B)-- CIT v. Smt. Rama Rani Kalia (All) . . . 499

Capital or revenue expenditure --Company--Expenditure on increase of share capital to augment working capital--Purpose of public issue not achieved on account of non-clearance from SEBI--Capital expenditure--Income-tax Act, 1961-- Mascon Technical Services Ltd. v. CIT (Mad) . . . 545

----Share issue expenses--Despatch and out of pocket expenses--Registration fees--Listing fees--Stationery expenses--Travelling and meeting expenses--Bank charges and commission--Prof. certificate--Revenue expenditure--Income-tax Act, 1961-- CIT v. Kreon Financial Services Ltd. (Mad) . . . 542

Charitable purpose --Charitable trust--Computation of income of trust--Depreciation on fixed assets of which cost had already been claimed as application of income--Allowable--Income-tax Act, 1961-- CIT v. Devi Sakuntala Tharal Charitable Foundation (MP) . . . 452

Depreciation --Intangible assets--Software development--Assessee developing software with special application and getting it registered as trade mark--Details of expenditure thereon produced--Assessee entitled to depreciation--Income-tax Act, 1961, s. 32-- CIT v. Net 4 Nuts Ltd. (Guj) . . . 535

----Investment allowance--Carry forward and set off--Unabsorbed depreciation and investment allowance could be set off against capital gains in assessment year 1992-93--Income-tax Act, 1961, ss. 32, 263-- CIT v. Kisan Engineering Works Ltd. (All) . . . 510

Export of computer software --Exemption--Registration under Software Technology Parks of India obtained after commencement of manufacture--Power of Software Technology Parks of India to convert domestic tariff area unit into Software Technology Parks of India unit--No export made prior to date of registration--Unit entitled to exemption--Income-tax Act, 1961, s. 10A--CBDT Circular No. 1 of 2005, dated 6-1-2005-- CIT v. Expert Outsource P. Ltd. (Karn) . . . 518

----Exemption--Unit existing from 1994 but obtaining registration as 100 per cent. export oriented unit for computer software in 2002--Entitled to deduction--Cannot be denied deduction on ground of transfer of plant and machinery previously used to export unit--Income-tax Act, 1961, s. 10A-- Nagesh Chundur v. CIT (Mad) . . . 521

Firm --Registration--Condition precedent--Division of profits not governed by statutory provision--Mistake in partnership deed regarding division of profits--Mistake rectified--Firm entitled to registration--Income-tax Act, 1961, ss. 184, 185--Indian Partnership Act, 1932-- CIT v. Alison Singh and Co. (All) . . . 458

Precedent --Effect of decisions of Supreme Court in M. Janardhana Rao v. Joint CIT [2005] 273 ITR 50 (SC) and Kunhayammed v. State of Kerala [2000] 245 ITR 360 (SC)-- Meghalaya Steels Ltd. v. CIT (Gauhati) . . . 551

----High Court--Pendency of appeal from order relied on by Tribunal--Not material-- CIT v. Net 4 Nuts Ltd. (Guj) . . . 535

Reassessment --Notice--Notice not to be issued on hypothesis or contingency which may emerge in future--†Has escaped assessment†indicating an event which has taken place--Notice issued on alternative basis for taxing income--Not valid--Income-tax Act, 1961, ss. 147, 148-- DHFL Venture Capital Fund v. ITO (Bom) . . . 471

Refund --Effect of section 245--Adjustment of refund against sums due from assessee--Adjustment cannot be made without prior intimation--Income-tax Act, 1961, s. 245-- Jeans Knit P. Ltd. v. Deputy CIT (Karn) . . . 505

Search and seizure --Block assessment--Undisclosed income of third person--Notice under section 153C--Condition precedent--Satisfaction that undisclosed income belonged to third person--Satisfaction should be reasonable but need not be conclusive--Income-tax Act, 1961, ss. 132, 153C-- CIT v. Classic Enterprises (All) . . . 465

Writ --High Court--Alternate remedy--International transactions--Transfer pricing--Arm’s length price--Final assessment following determination of arm’s length price by Dispute Resolution Panel--Remedy of appeal against order of assessment before Tribunal--Writ petition not maintainable--Income-tax Act, 1961, ss. 92CA, 144C(5)-- Lionbridge Technologies Pvt. Ltd. v. Deputy CIT (Bom). . .599

 

SECTIONWISE INDEX TO CASES REPORTED IN THIS PART

Income-tax Act, 1961 :

S. 2(42B) --Capital gains--Short-term or long-term capital gains--Conversion of leasehold rights into freehold rights--Conversion by way of improvement of title--No effect on the taxability of profits-- CIT v. Smt. Rama Rani Kalia (All) . . . 499

S. 10A --Export of computer software--Exemption--Registration under Software Technology Parks of India obtained after commencement of manufacture--Power of Software Technology Parks of India to convert domestic tariff area unit into Software Technology Parks of India unit--No export made prior to date of registration--Unit entitled to exemption-- CIT v. Expert Outsource P. Ltd. (Karn) . . . 518

----Export of computer software--Exemption--Unit existing from 1994 but obtaining registration as 100 per cent. export oriented unit for computer software in 2002--Entitled to deduction--Cannot be denied deduction on ground of transfer of plant and machinery previously used to export unit-- Nagesh Chundur v. CIT (Mad) . . . 521

S. 32 --Depreciation--Intangible assets--Software development--Assessee developing software with special application and getting it registered as trade mark--Details of expenditure thereon produced--Assessee entitled to depreciation-- CIT v. Net 4 Nuts Ltd. (Guj) . . . 535

----Depreciation--Investment allowance--Carry forward and set off--Unabsorbed depreciation and investment allowance could be set off against capital gains in assessment year 1992-93-- CIT v. Kisan Engineering Works Ltd. (All) . . . 510

S. 40(b) --Business expenditure--Disallowance--Firm--Remuneration paid to partners--Ceiling on--Assessee engaged in seasonal business of ginning cotton--Income generated from spare funds invested in fixed deposits--Interest declared as part of business income and assessed as such--To be taken into account for purpose of ceiling on remuneration of partners--Whether only business income and no other income to be taken into account for this purpose not considered-- CIT v. J. J. Industries (Guj) . . . 531

S. 68 --Appeal to Appellate Tribunal--Cash credits--Disallowance of gifts under section 68--Difference of opinion between Members of Tribunal whether addition to be under section 68 or section 69--Genuineness of gifts not considered on the merits--Reference to Third Member--Appeal of assessee dismissed as a result of opinion of Third Member--Not proper--Matter to be decided on the merits in the light of majority opinion-- Smt. Renu Aggarwal v. ITO (All) . . . 483

----Appeal to Appellate Tribunal--Rectification of mistakes--Mistake apparent from record--Matter referred to Third Member on question of law with respect to addition made under section 68--Conscious omission to consider issue of genuineness of gifts on the merits--Not a mistake for rectification-- Smt. Renu Aggarwal v. ITO (All) . . . 483

S. 69 --Appeal to Appellate Tribunal--Cash credits--Disallowance of gifts under section 68--Difference of opinion between Members of Tribunal whether addition to be under section 68 or section 69--Genuineness of gifts not considered on the merits--Reference to Third Member--Appeal of assessee dismissed as a result of opinion of Third Member--Not proper--Matter to be decided on the merits in the light of majority opinion-- Smt. Renu Aggarwal v. ITO (All) . . . 483

S. 92CA --Writ--High Court--Alternate remedy--International transactions--Transfer pricing--Arm’s length price--Final assessment following determination of arm’s length price by Dispute Resolution Panel--Remedy of appeal against order of assessment before Tribunal--Writ petition not maintainable-- Lionbridge Technologies Pvt. Ltd. v. Deputy CIT (Bom). . .599

S. 132 --Search and seizure--Block assessment--Undisclosed income of third person--Notice under section 153C--Condition precedent--Satisfaction that undisclosed income belonged to third person--Satisfaction should be reasonable but need not be conclusive-- CIT v. Classic Enterprises (All) . . . 465

S. 144C(5) --Writ--High Court--Alternate remedy--International transactions--Transfer pricing--Arm’s length price--Final assessment following determination of arm’s length price by Dispute Resolution Panel--Remedy of appeal against order of assessment before Tribunal--Writ petition not maintainable-- Lionbridge Technologies Pvt. Ltd. v. Deputy CIT (Bom). . .599

S. 147 --Reassessment--Notice--Notice not to be issued on hypothesis or contingency which may emerge in future--†Has escaped assessment†indicating an event which has taken place--Notice issued on alternative basis for taxing income--Not valid-- DHFL Venture Capital Fund v. ITO (Bom) . . . 471

S. 148 --Reassessment--Notice--Notice not to be issued on hypothesis or contingency which may emerge in future--†Has escaped assessment†indicating an event which has taken place--Notice issued on alternative basis for taxing income--Not valid-- DHFL Venture Capital Fund v. ITO (Bom) . . . 471

S. 153C --Search and seizure--Block assessment--Undisclosed income of third person--Notice under section 153C--Condition precedent--Satisfaction that undisclosed income belonged to third person--Satisfaction should be reasonable but need not be conclusive-- CIT v. Classic Enterprises (All) . . . 465

S. 184 --Firm--Registration--Condition precedent--Division of profits not governed by statutory provision--Mistake in partnership deed regarding division of profits--Mistake rectified--Firm entitled to registration-- CIT v. Alison Singh and Co. (All) . . . 458

S. 185 --Firm--Registration--Condition precedent--Division of profits not governed by statutory provision--Mistake in partnership deed regarding division of profits--Mistake rectified--Firm entitled to registration-- CIT v. Alison Singh and Co. (All) . . . 458

S. 245 --Refund--Effect of section 245--Adjustment of refund against sums due from assessee--Adjustment cannot be made without prior intimation-- Jeans Knit P. Ltd. v. Deputy CIT (Karn) . . . 505

S. 254(2) --Appeal to Appellate Tribunal--Difference of opinion between Members of two-Member Bench--Reference to Third Member--Decision of Tribunal not a decision of three-Member Bench--Amenable to rectification under section 254(2)-- Smt. Renu Aggarwal v. ITO (All) . . . 483

----Appeal to Appellate Tribunal--Rectification of mistakes--Mistake apparent from record--Matter referred to Third Member on question of law with respect to addition made under section 68--Conscious omission to consider issue of genuineness of gifts on the merits--Not a mistake for rectification-- Smt. Renu Aggarwal v. ITO (All) . . . 483

S. 255(4) --Appeal to Appellate Tribunal--Cash credits--Disallowance of gifts under section 68--Difference of opinion between Members of Tribunal whether addition to be under section 68 or section 69--Genuineness of gifts not considered on the merits--Reference to Third Member--Appeal of assessee dismissed as a result of opinion of Third Member--Not proper--Matter to be decided on the merits in the light of majority opinion-- Smt. Renu Aggarwal v. ITO (All) . . . 483

----Appeal to Appellate Tribunal--Difference of opinion between Members of two-Member Bench--Reference to Third Member--Decision of Tribunal not a decision of three-Member Bench--Amenable to rectification under section 254(2)-- Smt. Renu Aggarwal v. ITO (All) . . . 483

S. 260A --Appeal to High Court--Powers of High Court--High Court has inherent power to review its decision-- Meghalaya Steels Ltd. v. CIT (Gauhati) . . . 551

----Appeal to High Court--Procedure laid down in section 260A must be followed strictly--Failure to formulate substantial question of law--Error to be rectified-- Meghalaya Steels Ltd. v. CIT (Gauhati) . . . 551

S. 263 --Depreciation--Investment allowance--Carry forward and set off--Unabsorbed depreciation and investment allowance could be set off against capital gains in assessment year 1992-93-- CIT v. Kisan Engineering Works Ltd. (All) . . . 510

S. 271(1)(c) --Penalty--Concealment of income--Satisfaction of Assessing Officer--Need not be recorded in particular manner-- MAK Data P. Ltd. v. CIT (SC). . .593

S. 271(1)(c), Expln. 1 --Penalty--Concealment of income--General principles--Voluntary surrender of income--No automatic immunity from penalty--Surrender “subject to non-initiation of penalty proceedings and prosecution†--Does not absolve assessee from liability to penalty--Whether assessee has offered an explanation for concealment or furnishing of inaccurate particulars of income to be seen--Surrender of income pursuant to notice calling for information in respect of documents found during survey of sister concern--Not voluntary--No intention to declare true income--Penalty proceedings justified-- MAK Data P. Ltd. v. CIT (SC). . .593

ITR (TRIB) VOL 27 PART 6

 

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

 

ONLINE EDITION

SUBJECT INDEX TO CASES REPORTED

Business expenditure --Accrued or contingent liability--Liability in respect of wages payable to contract labourers pursuant to order of Industrial Tribunal in 2003--Expenditure not provided for in books of account--Orders passed by Industrial Tribunal challenged before High Court--Not established that liability had crystallised during assessment year 2004-05--No direction can be given on basis of memorandum of understanding dated February 22, 2010 as assessment year 2010-11 not before Tribunal--Income-tax Act, 1961, s. 37-- Gujarat State Fertilizers and Chemicals Ltd. v. Assistant CIT (Ahmedabad) . . . 540

----Disallowance of “take or pay lease rental charges to GCPTCL†consequent to reversal of liability in assessment year 2006-07 and relief given in that year--Proper-- Gujarat State Fertilizers and Chemicals Ltd. v. Assistant CIT (Ahmedabad) . . . 540

----Year in which allowable--“Prior period expenses†disallowed on finding that assessee failed to establish that liability crystallised during year--Direction by Commissioner (Appeals) to Assessing Officer to allow expenditure in year to which it pertained--No allowance for year in question-- Gujarat State Fertilizers and Chemicals Ltd. v. Assistant CIT (Ahmedabad) . . . 540

Capital gains --Long-term capital loss--Conversion of US 64 units of Unit Trust of India into 6.75 per cent. tax free bonds--Income from transfer of units of US 64 Scheme specifically exempted under section 10(33)--Loss in respect of conversion not allowable--Income-tax Act, 1961, s. 10(33)-- Gujarat State Fertilizers and Chemicals Ltd. v. Assistant CIT (Ahmedabad) . . . 540

Capital or revenue expenditure --Corporate debt restructuring expenses on payment to financial consultants in connection with waiver of loans--Allowance by spreading over period of 6 years--Proper-- Gujarat State Fertilizers and Chemicals Ltd. v. Assistant CIT (Ahmedabad) . . . 540

----Expenditure on acquiring fire fighting equipment and on safety measures--Expenses necessary for complying with Government regulations and not resulting in creation of asset--Revenue expenditure-- Gujarat State Fertilizers and Chemicals Ltd. v. Assistant CIT (Ahmedabad) . . . 540

----Release of water and discharge of effluent and pollution control--Expenditure not resulting in creation of any specific asset--Revenue expenditure-- Gujarat State Fertilizers and Chemicals Ltd. v. Assistant CIT (Ahmedabad) . . . 540

----Restructuring of loan in which part of principal waived--Exclusion of sum representing principal waived--Proper-- Gujarat State Fertilizers and Chemicals Ltd. v. Assistant CIT (Ahmedabad) . . . 540

Company --Book profits--Estimated gratuity provision made on basis of actuarial valuation and provision for superannuation expenditure--Not includible--Provision for bad debts--To be added back in book profit--Income-tax Act, 1961, s. 115JB-- Gujarat State Fertilizers and Chemicals Ltd. v. Assistant CIT (Ahmedabad) . . . 540

----Book profits--Excess provision for doubtful advances made in earlier assessment year--Observation by Assessing Officer that this amount not disallowed in earlier assessment year--Assessee contending provision written back in 2004-05--Matter remanded to examine whether or not addition made in book profit for assessment year 2003-04--Income-tax Act, 1961, s. 115JB-- Gujarat State Fertilizers and Chemicals Ltd. v. Assistant CIT (Ahmedabad) . . . 540

----Book profits--Expenditure relating to income not includible in total income--Disallowance of Rs. 5 lakhs in respect of administrative expenses upheld--For purpose of computing book profits under section 115JB also, addition of Rs. 5 lakhs confirmed--Income-tax Act, 1961, s. 115JB-- Gujarat State Fertilizers and Chemicals Ltd. v. Assistant CIT (Ahmedabad) . . . 540

----Book profits--Export--Special deduction--To be worked out in accordance with book profit--Income-tax Act, 1961, ss. 80HHC, 115JB-- Gujarat State Fertilizers and Chemicals Ltd. v. Assistant CIT (Ahmedabad) . . . 540

----Book profits--Provision for “take or pay†lease rental charges--Provision for wage revision--Provision written back in assessment year 2006-07 and reduction allowed in minimum alternate tax computation in that year--No interference--Income-tax Act, 1961, s. 115JB-- Gujarat State Fertilizers and Chemicals Ltd. v. Assistant CIT (Ahmedabad) . . . 540

Deduction --Expenditure incurred in relation to income not includible in total income--Dividend--Assessee'™s own funds much higher than investment--Interest-bearing borrowed funds not used for making investments in shares--No disallowance required in respect of interest expenditure--For other expenses, disallowance of Rs. 5 lakhs to be made--Income-tax Act, 1961, s. 14A-- Gujarat State Fertilizers and Chemicals Ltd. v. Assistant CIT (Ahmedabad) . . . 540

Penalty --Concealment of income--Disallowance of long-term capital loss and depreciation on co-generation power unit--Assessed income of assessee under regular provisions nil even after making addition for excess depreciation on co-generation, etc., and tax payable by assessee only on book profits under section 115JB--No addition made on account of two disallowances in question--Cancellation of penalty proper--Income-tax Act, 1961, ss. 115JB, 271(1)(c)-- Gujarat State Fertilizers and Chemicals Ltd. v. Assistant CIT (Ahmedabad) . . . 540

Refund --Interest on excess refund--Provision brought with effect from June 1, 2003--Not applicable for years prior thereto--Income-tax Act, 1961, s. 234D--Deputy DIT v. Delta Air Lines Inc (Mumbai) . . . 538

PRINT EDITION

Volume 27 : Part 6 (Issue dated : 11-11-2013)

SUBJECT INDEX TO CASES REPORTED

Appeal to Appellate Tribunal --Rectification of mistakes--Penalty--Concealment of income--Penalty confirmed by Tribunal on finding of concealment by assessee--Appeal from Tribunal dismissed in limine on ground no question of law arose--Effect--Confirmation of finding of fact--Application thereafter to Tribunal for rectification of its order raising new pleas without disclosing order of High Court--Tribunal reversing finding of fact and cancelling penalty--Order obtained by fraud--Non est--Order of High Court available with Department at time of assessee'™s application to Tribunal--Authorities also to some extent responsible--Income-tax Act, 1961, ss. 254(2), 271(1)(c)-- ITO v. Bhagwan Agarwal (Agra) . . . 704

Business expenditure--Amount received from subsidiary company--Interest already charged on outstanding balance--Not chargeable--Income-tax Act, 1961-- Assistant CIT v. B. G. R. Energy Systems Ltd. (Hyderabad) . . . 791

----Contracts for execution of work--Completion guarantee clause providing for liquidated damages to be discharged in event of delay in completion of work--Provision made by assessee in accordance with agreement--Assessee entitled to deduction--Income-tax Act, 1961-- Assistant CIT v. B. G. R. Energy Systems Ltd. (Hyderabad) . . . 791

----Expenditure related to income not includible in total income--Interest on borrowed capital--Investment of monies in mutual funds from funds borrowed from bank--No evidence that assessee earned income claimed as exempt--Matter remanded--Income-tax Act, 1961, ss. 10(33), 14A-- Kalpana Nursing Home P. Ltd. v. Deputy CIT (Jodhpur) . . . 773

----Salary--Increase in salary of two doctors from earlier year--Area of working and function increased--Salary not excessive comparing with salary of visiting doctors--Salary not to be disallowed-- Kalpana Nursing Home P. Ltd. v. Deputy CIT (Jodhpur) . . . 773

----Warranty--Warranty merely a provision not expenditure--Assessee not entitled to deduction for warranty provision--Income-tax Act, 1961-- Assistant CIT v. B. G. R. Energy Systems Ltd. (Hyderabad) . . . 791

Capital or revenue expenditure --Repayment of principal in respect of assets taken on finance lease--Capital expenditure--Income-tax Act, 1961-- Assistant CIT v. B. G. R. Energy Systems Ltd. (Hyderabad) . . . 791

Depreciation --Payment towards technical know-how--Conditions of ownership and user of asset satisfied--Assessee entitled for grant of depreciation--Income-tax Act, 1961, s. 32(1)(iii)-- Assistant CIT v. B. G. R. Energy Systems Ltd. (Hyderabad) . . . 791

Export --Exemption--Expenditure excluded from export turnover to be excluded from total turnover--Direction to Assessing Officer to reduce expenses incurred for travelling and internet connection--Income-tax Act, 1961, s. 10A-- Symphony Marketing Solutions India P. Ltd. v. ITO (Bangalore) . . . 753

Income --Accrual of income--Works contract--Retention money for which bills submitted but payment not made--Retention money to be brought to tax in year in which received--Income-tax Act, 1961-- Assistant CIT v. B. G. R. Energy Systems Ltd. (Hyderabad) . . . 791

International transactions --Transfer pricing--Arm’s length price--Selection of comparables--Difference in nature of work, mode of work and types of employees--Subsidiary of reputed company--No adjustment to arm’s length price called for--Addition to be deleted--Income-tax Act, 1961, s. 92C-- Symphony Marketing Solutions India P. Ltd. v. ITO (Bangalore) . . . 753

Penalty --Concealment of income--Imposition of penalty during pendency of appeal against assessment--Deletion of additions by Tribunal except one--Assessing Officer must pass order giving effect to order of Tribunal--Only thereafter issue of imposition of penalty can be considered--Deletion of penalty in respect of all additions by Commissioner (Appeals)--Order set aside and matter remanded--Income-tax Act, 1961, ss. 271(1)(c), 275(1A)-- Deputy CIT v. Swarnandhra IJMII Integrated Township Development Co. P. Ltd . (Hyderabad) . . . 747

Reassessment --Income escaping assessment--Assessing Officer cannot reassess income without assessing income stated in reasons recorded to have escaped assessment--Reasons recorded for reopening of assessment should have nexus with income assessed--Income-tax Act, 1961, s. 147-- Swarnadhara IJMII Integrated Township Development Company v. Deputy CIT (Hyderabad) . . . 736

SECTIONWISE INDEX TO CASES REPORTED IN THIS PART

Income-tax Act, 1961 :

S. 10(33) --Business expenditure--Expenditure related to income not includible in total income--Interest on borrowed capital--Investment of monies in mutual funds from funds borrowed from bank--No evidence that assessee earned income claimed as exempt--Matter remanded-- Kalpana Nursing Home P. Ltd. v. Deputy CIT (Jodhpur) . . . 773

S. 10A --Export--Exemption--Expenditure excluded from export turnover to be excluded from total turnover--Direction to Assessing Officer to reduce expenses incurred for travelling and internet connection-- Symphony Marketing Solutions India P. Ltd. v. ITO (Bangalore) . . . 753

S. 14A --Business expenditure--Expenditure related to income not includible in total income--Interest on borrowed capital--Investment of monies in mutual funds from funds borrowed from bank--No evidence that assessee earned income claimed as exempt--Matter remanded-- Kalpana Nursing Home P. Ltd. v. Deputy CIT (Jodhpur) . . . 773

S. 32(1)(iii) --Depreciation--Payment towards technical know-how--Conditions of ownership and user of asset satisfied--Assessee entitled for grant of depreciation-- Assistant CIT v. B. G. R. Energy Systems Ltd. (Hyderabad) . . . 791

S. 92C --International transactions--Transfer pricing--Arm’s length price--Selection of comparables--Difference in nature of work, mode of work and types of employees--Subsidiary of reputed company--No adjustment to arm’s length price called for-- Addition to be deleted--Symphony Marketing Solutions India P. Ltd. v. ITO (Bangalore) . . . 753

S. 147 --Reassessment--Income escaping assessment--Assessing Officer cannot reassess income without assessing income stated in reasons recorded to have escaped assessment--Reasons recorded for reopening of assessment should have nexus with income assessed-- Swarnadhara IJMII Integrated Township Development Company v. Deputy CIT (Hyderabad) . . . 736

S. 254(2) --Appeal to Appellate Tribunal--Rectification of mistakes--Penalty--Concealment of income--Penalty confirmed by Tribunal on finding of concealment by assessee--Appeal from Tribunal dismissed in limine on ground no question of law arose--Effect--Confirmation of finding of fact--Application thereafter to Tribunal for rectification of its order raising new pleas without disclosing order of High Court--Tribunal reversing finding of fact and cancelling penalty--Order obtained by fraud--Non est--Order of High Court available with Department at time of assessee'™s application to Tribunal--Authorities also to some extent responsible-- ITO v. Bhagwan Agarwal (Agra) . . . 704

S. 271(1)(c) --Appeal to Appellate Tribunal--Rectification of mistakes--Penalty--Concealment of income--Penalty confirmed by Tribunal on finding of concealment by assessee--Appeal from Tribunal dismissed in limine on ground no question of law arose--Effect--Confirmation of finding of fact--Application thereafter to Tribunal for rectification of its order raising new pleas without disclosing order of High Court--Tribunal reversing finding of fact and cancelling penalty--Order obtained by fraud--Non est--Order of High Court available with Department at time of assessee'™s application to Tribunal--Authorities also to some extent responsible-- ITO v. Bhagwan Agarwal (Agra) . . . 704

----Penalty--Concealment of income--Imposition of penalty during pendency of appeal against assessment--Deletion of additions by Tribunal except one--Assessing Officer must pass order giving effect to order of Tribunal--Only thereafter issue of imposition of penalty can be considered--Deletion of penalty in respect of all additions by Commissioner (Appeals)--Order set aside and matter remanded-- Deputy CIT v. Swarnandhra IJMII Integrated Township Development Co. P. Ltd. (Hyderabad) . . . 747

S. 275(1A) --Penalty--Concealment of income--Imposition of penalty during pendency of appeal against assessment--Deletion of additions by Tribunal except one--Assessing Officer must pass order giving effect to order of Tribunal--Only thereafter issue of imposition of penalty can be considered--Deletion of penalty in respect of all additions by Commissioner (Appeals)--Order set aside and matter remanded-- Deputy CIT v. Swarnandhra IJMII Integrated Township Development Co. P. Ltd. (Hyderabad) . . . 747