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Wednesday, December 9, 2015

Judgments and Information [4 Attachments]

Pr. CIT vs. ITAT, Jindal Steel & Power (P&H High Court)

COURT:
CORAM: ,
SECTION(S):
GENRE:
CATCH WORDS: , ,
COUNSEL: ,
DATE: October 31, 2015 (Date of pronouncement)
DATE: November 29, 2015 (Date of publication)
AY: -
FILE: Click here to download the file in pdf format
CITATION:
S. 254(1): The ITAT has no jurisdiction to grant a stay of prosecution proceedings as such proceedings are not directly & substantially flowing from the orders impugned before it
The High Court had to consider the following two questions:
(a) Whether Section 254 of the Income Tax Act, 1961 empowers the Income Tax Appellate Tribunal to interfere in prosecution proceedings either at the stage of show cause notice or at any other stage?
(b) Whether pendency of quantum appeals by the assessee and the revenue, appeals against penalty and appeals challenging orders passed consequent to an order passed under Section 263 of the Income Tax Act, would confer power/jurisdiction upon the Tribunal to stay a show cause notice calling upon the assessee to show cause why prosecution be not launched?"
HELD by the High Court:
(i) Section 254(1) confers the power to decide an appeal and "pass such orders thereon as it thinks fit" and when read along with the proviso includes the power to pass interim orders, "in any proceeding relating to an appeal", thereby indicating that the stay order so passed must relate to proceedings in the appeal pending before the Tribunal. The aforesaid expressions confine the power of a Tribunal, to pass an interim order in relation to matters pending before the Tribunal and at best to matters that are so intrinsically linked to the lis pending before the Tribunal, as to be inseparable. The exercise of power must be confined to matters that are directly and substantially in issue or matters that flow directly and substantially from the order impugned before the Tribunal but cannot be extended to matters in which the Tribunal has no jurisdiction even, though, these matters may be incidentally affected by the outcome of the appeal.
(ii) This apart once it is accepted that proceedings for prosecution are independent of assessment and penalty, and the Tribunal is neither the appellate nor the revisional authority in a case where prosecution is launched, the mere fact that the decision in the appeal may have an impact on the prosecution, in our considered opinion, cannot be used to read into the expressions "pass such orders thereon as it thinks fit" or "any proceedings relating to an appeal", a power in the Tribunal to direct that prosecution or a show cause notice shall be kept in abeyance. There is another aspect of the case, namely, if such a power, as has been canvassed by the assessee, were available to the Tribunal, prosecution would have to await the final outcome of proceedings up to the Supreme Court.
(iii) We are unable to discern any legislative intent or power as would confer upon the Tribunal power to stay consideration of a show cause notice proposing to initiate prosecution, by reading into Section 254, the power to stay independent proceedings merely because they may be affected by the decision of a pending appeal. The legislature having conferred power to grant stay in terms, used in Section 254 (1) and the first proviso, we cannot add to or subtract from the words and expressions used in Section 254(1) or by a process of interpretation confer jurisdiction which legislature did not intend to confer. A prosecution being a consequence of infractions by an assessee cannot be said to be act of harassment or mischief so as to confer power upon the Tribunal, to order that prosecution shall be kept in abeyance.
(The Commissioner of Income Tax (Central-II) v. Income Tax
Appellate Tribunal and others, Gulab Chand Sharma v. H. P. Sharma etc., (1974) ILR 1 (Delhi), 190; P.Jayappan v. S.K.Perumal, First Income Tax Officer, Tuticorin, 1984 (149) ITR, 692(Mad); P.Jayappan v. S.K.Perumal, First Income Tax Officer, Tuticorin,, 1984 (149) ITR 696(SC); Ashok Buscuit Works and Ors v. Income Tax Officer, Hyderabad, 1988 (171) ITR 300 (AP): Rinkoo Steels and others v. K.P.Ganguli, Income Tax Officer and another, 1989 (179) ITR 482 (Delhi); Sant Parkash and Ors. V. Commissioner of Income tax and Ors., 1991 (188) ITR 732 (P&H): Universal Supply Corporation and Ors. v. State of Rajasthan and another, 1994 (206) ITR 222; Commissioner of Income Tax v. Bhupen Champak Lal Dalal and Anr. Etc., 2001 (248) ITR, 830 (SC), The Assistant
Commissioner, Assessment-II, Bangalore and ors v. Velliappa
Textiles Ltd. and Ors., 2003(263) ITR, 550 (SC) Madras Bar Association v. Union of India, 2014 (10) SCC 1 referred)

Related Judgements

  1. CIT vs. ITAT (Delhi High Court) 
    Where the jurisdiction of an authority is challenged, neither the question of res judicata nor the rule of estoppel can be invoked so as to restrain the challenge. Neither consent nor waiver can confer jurisdiction upon the AO/ CIT where it does not exist and so no importance can…
  2. CIT vs. Jindal Polyester & Steel Ltd (Allahabad High Court) 
    No s. 271(1)(c) penalty for concealment under normal provisions if s. 115JB book profits assessed
    No doubt, there was concealment but that had its repercussions only when the assessment was done under the normal procedure. The assessment as per the normal procedure was, however, not acted upon. On…
  3. Employees' Provident Fund Organization vs. ACIT (ITAT Delhi) 
    The term 'order' has not been defined under the Act. It is judicially understood that the word 'order' is a noun and has been held equivalent to or synonymous with the word 'decision'. Therefore, having held that the CIT(A) has passed the order u/s 250 of the Act, in…
  4. Jindal Thermal Power vs. DCIT (Karnataka High Court) 
    In Ishikawakima-Harima it was held that fees for technical services was not assessable to tax u/s 9(1)(vii) if the twin conditions of it being rendered in India and utilized in India were not satified. The amendment to s. 9 (1) suggests that the criterion of residence, place of business…
  5. Bharat Petroleum Corporation Ltd vs. ITAT (Bombay High Court) 
    Tribunal has no power to dismiss appeal for non-appearance of appellant. It has to deal with the merits. An application for recall of an ex-parte dismissal order is under s. 254(2) & must be filed within 4 years from the date of the order. The Tribunal must permit "mentioning"…

Pr. CIT vs. ITAT, Jindal Steel & Power (P&H High Court)

S. 254(1): The ITAT has no jurisdiction to grant a stay of prosecution proceedings as such proceedings are not directly & substantially flowing from the orders impugned before it
once it is accepted that proceedings for prosecution are independent of assessment and penalty, and the Tribunal is neither the appellate nor the revisional authority in a case where prosecution is launched, the mere fact that the decision in the appeal may have an impact on the prosecution, in our considered opinion, cannot be used to read into the expressions "pass such orders thereon as it thinks fit" or "any proceedings relating to an appeal", a power in the Tribunal to direct that prosecution or a show cause notice shall be kept in abeyance. There is another aspect of the case, namely, if such a power, as has been canvassed by the assessee, were available to the Tribunal, prosecution would have to await the final outcome of proceedings up to the Supreme Court

CIT vs. Five Vision Promoters Pvt. Ltd (Delhi High Court)

Posted on November 29, 2015
COURT:
CORAM: ,
SECTION(S):
GENRE:
CATCH WORDS: , ,
COUNSEL:
DATE: November 27, 2015 (Date of pronouncement)
DATE: November 29, 2015 (Date of publication)
AY: 2007-08, 2008-09
FILE: Click here to download the file in pdf format
CITATION:
S. 68 (share capital): (i) It is a fallacy to assume that a company which has not commenced business has unaccounted money, (ii) Fact that investors have a common address is not relevant, (iii) Fact that shares were subsequently sold at reduced rate is not relevant
(i) There is a basic fallacy in the submission of the Revenue about the precise role of the Assessee, Five Vision. The broad sweeping allegation made is that "the Assessee being a developer is charging on money which is taken in cash". This, however, does not apply to the Assessee which appears to be involved in the construction of a shopping mall. In fact for the AYs in question, the Assessee had not commenced any business. The construction of the mall was not yet complete during the AYs in question. The profit and loss account of the Assessee for all the three AYs, which has been placed on record, shows that only revenue received was interest on the deposits with the bank. Assessee is, therefore, right in the contention that the basic presumption of the Revenue as far as the Assessee is concerned has no legs to stand. Correspondingly, the further allegation that such 'on money' was routed back to the mainstream in the form of capital has also to fail.
(ii) The other submission that the Assessee was itself being used as a conduit for routing the 'on money' or that the investment in the Assessee was also for routing such 'on money' has not even prima facie been able to be established by the Revenue. On the one hand there is an attempt to treat the cash credit found in the Assessee's books of accounts to be 'undisclosed income of the Assessee' by showing the investors to be 'paper companies'. On the other hand, the attempt is to show that this money in fact belongs to certain other entities whose source has not been explained by the Assessee.
(iii) Coming to the core issue concerning the identity, creditworthiness and genuineness of the investor companies, it is seen that as far as the Table I investors were concerned, only 9 were searched and in their cases, the ITAT on a very detailed examination was satisfied that they not only existed, but that the Assessee had discharged the primary onus of proving their creditworthiness and genuineness. They had responded to the summons issued to them. Directors of 14 of these companies appeared before the AO and produced their books of accounts.
(iv) The mere fact that some of the investors have a common address is not a valid basis to doubt their identity or genuineness.
(v) Also, the fact that the shares of the Assessee were subsequently sold at a reduced price is indeed not germane to the question of the genuineness of the investment in the share capital of the Assessee. The question of avoidance of tax thereby may have to be examined in the hands of the person purchasing the shares.
(M/s. Nova Promoters and Finlease (P) Ltd. 342 ITR 169 (Del), CIT v. Winstral-Petrochemicals Pvt. Ltd. 330 ITR 603 (Del), CIT v. Lovely Exports (P) Ltd. 216 CTR 195 (SC), CIT v. Divine Leasing and Finance Ltd. (decision dated 21st January 2008 of the Supreme Court in Special Leave to Appeal (Civil) (CC) 375 of 2008) and decision dated 17th September 2012 of the Supreme Court in CIT v. Kamdhenu Steel & Alloys Limited [SLP (Civil) CC 15640 of 2012)], CIT v. Divine Leasing and Finance Ltd. 299 ITR 268, CIT v. Sophia Finance Ltd. (1994)205 ITR 98 (FB) (Del) referred).

Related Judgements

  1. CIT vs. Oasis Hospitalities Pvt Ltd (Delhi High Court) 
    S. 68 provides that if the assessee is not able to give satisfactory explanation as to the "nature and source" of a sum found credited in his books, the sum may be treated as the "undisclosed income" of the assessee. The initial burden is on the assessee to explain…
  2. CIT vs. M/s D&M Components Ltd (Delhi High Court) 
    Not keeping separate books together with frequent transactions means that gains from shares has to be assessed as business profits instead of as STCG
    The AO and CIT(A) held that separate books were not used. Amounts were freely transferred from the profits gained to business and vice-versa. However, perhaps…
  3. Xander Advisors India Pvt. Ltd vs. ACIT (ITAT Delhi) 
    (i) A merchant bank, apart from helping businessmen in raising finance, also renders consultancy services. It helps its clients in raising finance through issue of shares, debentures, bank loans, etc., from the domestic and international market. The term "Merchant Banker'…Read more ›
  4. CIT vs. Sairang Developers and Promoters Pvt.Ltd (Bombay High Court) 
    High Court imposes costs of Rs. 50,000 on AO for filing frivolous appeal & wasting public money & judicial time
    Though the Bench clearly indicated to the department's counsel that the appeal had no merit and gave the department an opportunity to withdraw, the department did not do so….
  5. AT&T Communication Services India (P) Ltd vs. CIT (Delhi High Court) 
    S. 142(2A): AO need not examine books of account before directing special audit. Q whether accounts are "complex" has to decided by AO & Court can interfere sparingly
    (ii) The question whether the accounts and the related documents and records available with the A.O. present complexity is essentially to…

CIT vs. Five Vision Promoters Pvt. Ltd (Delhi High Court)

S. 68 (share capital): (i) It is a fallacy to assume that a company which has not commenced business has unaccounted money, (ii) Fact that investors have a common address is not relevant, (iii) Fact that shares were subsequently sold at reduced rate is not relevant
There is a basic fallacy in the submission of the Revenue about the precise role of the Assessee, Five Vision. The broad sweeping allegation made is that "the Assessee being a developer is charging on money which is taken in cash". This, however, does not apply to the Assessee which appears to be involved in the construction of a shopping mall. In fact for the AYs in question, the Assessee had not commenced any business. The construction of the mall was not yet complete during the AYs in question. The profit and loss account of the Assessee for all the three AYs, which has been placed on record, shows that only revenue received was interest on the deposits with the bank. Assessee is, therefore, right in the contention that the basic presumption of the Revenue as far as the Assessee is concerned has no legs to stand. Correspondingly, the further allegation that such 'on money' was routed back to the mainstream in the form of capital has also to fail

Shamsher Singh Verma vs. State of Haryana (Supreme Court)

COURT:
CORAM: ,
SECTION(S):
GENRE:
CATCH WORDS: , , ,
COUNSEL:
DATE: November 24, 2015 (Date of pronouncement)
DATE: November 29, 2015 (Date of publication)
AY: -
FILE: Click here to download the file in pdf format
CITATION:
S. 3 of Indian Evidence Act: A "Compact Disc" (CD) is a "document" and is admissible as evidence
(1) Word "document" is defined in Section 3 of the Indian Evidence Act, 1872, as under: – 'Document' means any matter expressed or described upon any substance by means of letters, figures or marks, or by more than one of those means, intended to be used, or which may be used, for the purpose of recording that matter.
(ii) In R.M. Malkani vs. State of Maharashtra (1973) 1 SCC 471: 1973 (2) SCR 417, this Court has observed that tape recorded conversation is admissible provided first the conversation is relevant to the matters in issue; secondly, there is identification of the voice; and, thirdly, the accuracy of the tape recorded conversation is proved by eliminating the possibility of erasing the tape record.
(iii) In Ziyauddin Barhanuddin Bukhari vs. Brijmohan Ramdass Mehra and others (1976) 2 SCC 17: 1975 (Supp) SCR 281, it was held by this Court that tape-records of speeches were "documents", as defined by Section 3 of the Evidence Act, which stood on no different footing than photographs, and that they were admissible in evidence on satisfying certain conditions.
(iv) In view of the definition of 'document' in Evidence Act, and the law laid down by this Court, as discussed above, we hold that the compact disc is also a document. It is not necessary for the court to obtain admission or denial on a document under sub-section (1) to Section 294 CrPC personally from the accused or complainant or the witness. The endorsement of admission or denial made by the counsel for defence, on the document filed by the prosecution or on the application/report with which same is filed, is sufficient compliance of Section 294 CrPC. Similarly on a document filed by the defence, endorsement of admission or denial by the public prosecutor is sufficient and defence will have to prove the document if not admitted by the prosecution. In case it is admitted, it need not be formally proved, and can be read in evidence. In a complaint case such an endorsement can be made by the counsel for the complainant in respect of document filed by the defence.

Related Judgements

  1. Himalayan Cooperative Group Housing Society Vs. Balwan Singh (Supreme Court) 
    Generally, admissions of fact made by a counsel is binding upon their principals as long as they are unequivocal; where, however, doubt exists as to a purported admission, the Court should be wary to accept such admissions until and unless the counsel or the advocate is authorised by his…
  2. State of H.P. vs. Sardara Singh (Supreme Court) 
    Where the High Court summarily dismissed an application without giving any reasons HELD that this manner of dealing left a lot to be desired. It was imperative to record reasons and the failure to do so rendered the order unsustainable. The emphasis on recording reasons is that if the…
  3. Improvement Trust vs. Ujagar Singh (Supreme Court) 
    Unless malafides are writ large on the conduct of the party, generally as a normal rule, delay should be condoned. In the legal arena, an attempt should always be made to allow the matter to be contested on merits rather than to throw it on such technicalities. Apart from…
  4. Ajit Kumar vs. State of Jharkhand (Supreme Court) 
    On facts, the allegation against the Judge was that he did not prepare judgments on his own but got it prepared through some body else. The view of the High Court that it is not possible to hold an enquiry and that holding of such enquiry should be dispensed…
  5. CIT vs. Punjab State Electricity Board (Punjab & Haryana High Court) 
    Sale & Lease back transactions are not a "sham" The assessee, a State Electricity Board, sold energy saving devices on which 100% depreciation was permitted and took the same assets on lease and claimed a deduction for the lease rent.…Read more ›

Shamsher Singh Verma vs. State of Haryana (Supreme Court)

S. 3 of Indian Evidence Act: A "Compact Disc" (CD) is a "document" and is admissible as evidence
In view of the definition of 'document' in Evidence Act, and the law laid down by this Court, as discussed above, we hold that the compact disc is also a document. It is not necessary for the court to obtain admission or denial on a document under sub-section (1) to Section 294 CrPC personally from the accused or complainant or the witness. The endorsement of admission or denial made by the counsel for defence, on the document filed by the prosecution or on the application/report with which same is filed, is sufficient compliance of Section 294 CrPC

Case Studies: Client Accounting Services

5 firms share their experiences with outsourced accounting services

November 30, 2015


Firm: KBL
Of all the professional developments made possible by the Internet, the ability to interact with your clients and their systems in real time, no matter where you are, has to offer some of the greatest opportunities for accountants.
This power has led to new forms of outsourced CFO and client accounting services, with firms leveraging the speed and constant integration of cloud-based accounting platforms to help clients run their businesses better. We spoke to five firms that are exploring this new type of relationship to see how it's working for them and their clients.
Keeping the wheels on
Size: 15 staff, 3 partners
Product: GrowthForce
Commencement date: 2014
On record: Partner Richard Levychin
Challenge/objective: Providing CFO support and controller-level services to rapid-growth companies that need growth management beyond pure accounting.
Process: KBL has been offering outsourced accounting services for roughly three years, but using GrowthForce for online CFO-level services for about 18 months. While KBL currently serves as the front office, offering advisory and client-facing work, "what we're looking to do is front office and back office, outsourcing GrowthForce on a white label," said Levychin.
Currently, "We're getting companies that are growing rapidly. ... Their accounting and finance platform was not managing their growth and the wheels were going to come off — they were going to grow themselves out of business," he explained.
KBL's first step in meeting with prospects is conducting a technical assessment engagement outlining the problems they observe in their accounting processes. "What that does is create a written roadmap that serves as a starting point for issues that are in the company's finance or accounting department," Levychin explained. "We usually capture a minimum of 70 percent of the issues … . While working through the engagement another 30 percent come flushing out."
If the client chooses to engage after the assessment, KBL gets to work "re-engineering the company," Levychin said. The firm offers different models based on client needs, ranging from bringing in another CPA to handle QuickBooks integrations (as that isn't KBL's specialty) to hiring the client's auditors and then managing the entire audit process. On the outsourcing front, the firm provides GrowthForce for CFO support services and Insperity for outsourced HR.
KBL currently has eight clients on GrowthForce, with most using the full platform to fulfill their CFO and controller-level needs.
Results: KBL has been happy with the success of the current model. Though the firm is exploring offering back-office services through a white-label solution with GrowthForce, "You should always position yourself as the front office," Levychin said. "When it's just the front office, it's a more high-profile and a profitable area. You can identify issues and billable projects at a higher rate."
Labor constraints also cut into margins, he added. "The thing is, we're in New York City — we're not going to get the same labor rates GrowthForce is getting in Texas."
KBL has been able to scale up its services dramatically with the outsourced model. "We, as a firm, are 15 people. ... We can't do CFO services and controller services as economically and as well as GrowthForce can."
Next steps: KBL is in the process of mapping out what a white-label CFO and controller platform would look like with GrowthForce. "The client doesn't care if you're giving a part of it away to someone else, as long as you're telling them how to use it," Levychin said.

Scaling for success
Firm: Habif Arogeti & Wynne
Size: 14 staff in the BPO practice
Product: NetSuite
Commencement date: May 2015
On record: Director of client accounting services William Estes and CEO and managing partner Richard Kopelman
Challenge/objective: To provide premium outsourced services for businesses.
Process: After months of market research and analysis, the firm began drawing up the business plan at the end of January to establish its vision: packaging outsourced services with technology to create scalable solutions empowering businesses to thrive.
"That was key: Making sure it was actually scalable," Estes explained. "With the research I did for a couple of months, the one constant in most failures was that it wasn't scalable, and that has a lot to do with the technology. That's why we went toward NetSuite."
On NetSuite's platform, HA&W created the outsourced accounting model for its existing practice expertise, which ranges from startups to multi-subsidiary international companies. All the clients the firm has onboarded so far were existing HA&W clients who have "been wonderful early adopters," Estes reported. Though the practice is still very new to the firm, those clients are "seeing improved efficiencies in the way they process [days sales outstanding] for [accounts receivable]."
Still, BPO is "something that's not easy to enter into," Kopelman cautioned. "We did market research and interviews with over 50 companies over months. It's a very difficult thing to figure out how to get it right and we continue to tweak it every day. It's a long process, so you have to make sure you've planned appropriately."
Results: HA&W surpassed its entire (admittedly modest) 2015 goal in 60 days, making the new practice a "tremendous success story" according to Estes.
Implementation included large initial workloads as they brought accounting processes — and all their attendant inefficiencies — in-house, "transitioning to a more efficient model and leveraging NetSuite technology [to convert] an entire business processing operation for a business established for decades in a matter of days or weeks. The volumes in workload are the biggest learning curve we've had. But it smooths out in a relatively short period of time."
The firm has a dedicated BPO partner manager at NetSuite that helps with day-to-day operations, overall relationships, and assisting in closing deals and evaluating whether the prospect is a good fit. NetSuite also provides a "very good" BPO partner program, according to Estes.
"Probably the most important advice is learning when to say no," he added. "We've said 'No' to more than have said 'No' to us, because we really want to make sure it's a long-term relationship and continues to be a long-term commitment to one another. A tremendous amount of work goes into this on both sides. It's a disservice to be engaging if it's not a good fit."
Next steps: HA&W will continue growing the business and plans to double the BPO team, Estes said: "The challenge when launching something like this is firm culture, and partner buy-in is pretty critical, and extremely challenging in public accounting—getting broad firm partner buy-in."
Beyond the shoebox
Firm: Anders CPAs & Advisors
Size: Two staff
Product: QuickBooks Online
Commencement date: 2013
On record: Director of outsourced CFO/accounting Scott Hoffmann
Challenge/objective: Provide outsourced CFO and accounting services, ranging from an entire accounting department or CFO role to portions of those services, like accounts payable or payroll.
Process: Anders' outsourcing practice is still in its infancy, currently serving under 50 clients, with the firm really only ramping up these services over the last year.
The firm, which Hoffmann said has always had the traditional "shoebox approach," faces a cultural shift with the new practice: "What we're doing is technology-based, with 24/7 real-time accounting, so closing the books, the old proverbial 'at month end' is somewhat meaningless to us — that's the goal."
While right now that "us" is Hoffmann and one staff accountant, "That's what's so cool about this technology — you can leverage the daylights out of it, keep bringing on these clients, and you don't have to build a lot of staff."
The firm is using QuickBooks Desktop and Online, but the goal is to convert most clients over to QBO, he said. "While desktop can do some things QuickBooks Online can't from an efficiency standpoint, QBO allows us a lot more advantages in hooking up the apps."
Results: Hoffmann has found major benefits in those app integrations and the expanding QBO ecosystem, flipping him from a skeptical QBO user a year ago to one of its biggest proponents today: "If I want to find an application specific to an industry, I can probably find one, and chances are it's going to hook up to QBO."
Clients' most-requested apps align with those most popular in the QBO ecosystem, with payments processor Bill.com and expense report solution Tallie among the most integrated at Anders.
"On occasion, I've taken on clients on other accounting platforms, which has made it difficult to be efficient and leverage," Hoffmann shared. "With those clients, it takes probably twice as long to do the same work."
As someone who began in public accounting and then served as a CFO for private and public companies, Hoffmann observed, "Most companies still have no idea this world exists, and they're relying on accountants to help them with that … . My goal is to expose those shoebox clients to this technology. Some will always like to have their shoebox, and that's O.K. — there's a place for them." But, he added, "I'm sold on it."
"If I knew about this technology four years ago, as the CFO of a food management company, the things I could've done, the money I could've saved," he said. "We were putting together a seven-figure ERP program for 80-plus locations. With the technology today, I could spend less than $50,000 and have something so much better and so much more seamless than what we had back then."
Next steps: Hoffmann's practice will continue selling the value proposition to clients, often through gradual progression. "With most clients, unless they're in technology or a startup or progressive, they're probably not as willing to bite off the entire apple, so we tend to do things in steps," he said.
Moving forward, Hoffmann will be communicating these advantages through greater use of social media messaging and marketing.
Starting up with startups
Firm: Upsourced Accounting
Size: Five staff
Product: Xero
Commencement date: 2011
On record: Co-owner Ryan Baker
Challenge/objective: Provide real-time accounting collaboration with clients with no geographic restrictions.
Process: Virtual accounting firm Upsourced Accounting has been a cloud-based, Xero-only shop since its inception. With clients in 13 to 14 different states, collaboration comes via Xero's discussion box, periodic Skype meetings, and the recent adoption of chat messaging app Slack.
The firm's primary service is outsourced accounting, though it also provides bookkeeping, financial statement preparation, and payroll setup assistance. Upsourced can assist with the budgeting and forecasting needs of its main verticals. The firm's Columbus, Ohio, location also helps attract startups with its vicinity to growing startup hub Cincinnati. The firm grows with those companies until they're large enough to need a CFO.
When the firm first takes clients on, the process varies based on their previous accounting system. Once clients are converted to Xero and their transactions pulled into the system, Upsourced "gives them as much visibility as possible to their transactions." Upsourced familiarizes themselves with how clients spend and deposit money and what their invoices look like, meeting (usually virtually) with them a month later to offer more detailed advice.
Results: Xero supports Upsourced's mission to centralize clients' financials for key collaboration, while customizing the experience via specific integrations and add-ons. "They have built a pretty good central accounting engine that doesn't do specific things great but has specific add-ons we can use with Xero's add-on marketplace," Baker said. "It's almost a kind of build-your-own accounting system."
Xero is also an ideal fit for Upsourced's client base, for "which we're talking hundreds of transactions, not thousands."
Next steps: Upsourced will continue targeting that client sweet spot. "Over the last couple years, we've narrowed down into the kind of business owners that benefit most [from Xero] and find more of those."
While the firm has served "a little bit of everything," including e-commerce and manufacturing, "I think we're going to focus on two verticals: professional service markets and recently funded startups," Baker said. "We have to figure out how to market and grow. We've found that even though we are a virtual firm, we have a presence [in Columbus] that does result in leads coming through. The best way for us to grow is traditional marketing in our current community."
Inside and out
Firm: Cordia Partners
Size: 50 staff and a number of independent contractors
Product: Intacct
Commencement date: 2012
On record: Partner Mitchell Weintraub
Challenge/objective: Leveraging the people-processes-technology model to deliver outsourced accounting.
Process: Cordia has two lines of business with Intacct, serving as an outsourced accounting partner and, more recently, becoming a value-added reseller. Cordia's outsourced accounting clients are primarily not-for-profits, government contractors and technology companies.
Cordia's outsourced accounting practice began when the firm did in 2006, but they partnered with Intacct three years ago based on the software provider's endorsement from the American Institute of CPAs, its "unbelievable reporting tools," and their training resources, Weintraub said.
Cordia typically brings on clients who have had problems in the three areas of people, processes and technology — high turnover in their accounting departments, using "old or small technology," and having trouble producing financial statements.
The implementation process begins with Cordia learning the client's business before setting up the chart of accounts and Intacct's system to meet their specific needs. "We go into the situation, implement Intacct, and help them re-engineer their business processes," Weintraub said.
Results: Weintraub touts Intacct's flexibility, reporting capabilities, cloud heritage and support. That agility includes the software's full integration with Bill.com and ability to link to other popular apps like Tallie, Concur and Nexonia.
The Intacct partnership also provides some internal benefits. "In my business, my challenge as an MP is to get and keep great people," Weintraub added. "Our folks are eager to learn Intacct — 25 people have gone through Intacct training and many have gone through the sales and implementation training."
Next steps: Cordia will continue onboarding clients, a process Weintraub said is aided by the AICPA seal of approval: "When CPA.com and the AICPA endorse it, it's very easy when speaking to a prospect or client and they ask you why you chose Intacct."
More specifically, Cordia will focus on growing partner connections and going to market with an integrated Salesforce CRM and Intacct solution. "We want to be able to further build out our processes and our workflow around the Intacct/Salesforce model and expand and build out our relationship with their application partners," Weintraub said.
The firm also plans to expand to other verticals. "There are a few other industries that we're targeting, where we know Intacct has great depth," he added. "Another reason we chose Intacct was the solid industry clusters they support."
The first of those on Cordia's radar are the technology and family office sectors

Ground Rules for Corporate Gift Giving to Avoid Breaking the Law



November 25, 2015

Deloitte is advising corporate clients to be careful about their holiday gift giving so they don't run afoul of laws like the Foreign Corrupt Practices Act.
In a recent poll, Deloitte found that 20.4 percent of companies don't assess their employee gift-giving corruption risk, even though 43.4 percent of the survey respondents expect anti-corruption enforcement to rise next year. Of all the organizations that indicated they do monitor compliance, only 8.4 percent use visualization and data analytics tools to support their anti-corruption efforts.
"The awareness for multinational companies has continued to increase," said Deloitte Advisory partner Bill Pollard. "I'd say five years ago the awareness was starting to really pick up as the government focused on this particular topic and you saw an increase in enforcement actions. Over the ensuing five years plus, many multinationals got their act together and started putting in programs, policies and procedures to address the risk. What we're actually seeing now is a whole new wave of companies that maybe previously were not global—or their operations are now expanding more globally—having a renewed interest in this area. The government's attention hasn't really waned, but will probably increase going forward."

Bill Pollard
Deloitte's poll results indicate that anti-corruption policies for giving gifts to non-U.S. government officials vary widely. While 18.2 percent of the survey respondents said their company maintains a no-gift policy and provides no gifts to customers, 16.4 percent give only small company logo items, 15.7 percent restrict the gift value, and 6.1 percent use separate policies for non-U.S. government officials as opposed to other customers and third parties.
"The practice of giving gifts in general is changing," said Pollard. "In certain cultures, either as a way of introduction or as a courtesy or a show of good faith in building a relationship, gift giving is still a common practice. Multinational companies are attempting to do a better job of understanding the risk associated with those common cultural practices and then identifying ways to mitigate that risk. Some companies are making the decision not to give gifts at all, whereas others just want to understand the risk and then, based on their understanding of the risk, make sure that there are the right kinds of controls and policy and procedure in place to address the risk."
Pollard pointed out there is already some official guidance available for what companies can give, and he believes accountants can help their companies and clients comply.
"The SEC and DOJ came out with a document in 2012 providing guidance to companies in a number of areas, including gift giving," he said. "Where accountants are the most effective is in a few different areas—helping companies put in the proper controls to address the risks, making sure there's enough visibility into who is and isn't a government official, what types of gifts are being given, how those gifts are being recorded in the books and records, and tracking and monitoring type mechanisms around gift giving, assuming companies choose to do that. That's on the front end, and then on the back end there's the ability to test and monitor those policies and procedures, going in and actually mining transaction data and looking to see if what's reflected in the expense reports of a salesperson is consistent with the policy or the procedure that they are expected to comply with. Those are the types of activities that are well suited for accountants to play a role in."
Some leading practices recommended by Deloitte to prevent and detect corruption in gift giving include:
• Set ground rules clearly: Describe the nature and type of acceptable gifts, payments, travel and entertainment. Escalate all gifts for government officials to compliance for review. Create an approval process with aggregate dollar limits. Define disciplinary process for non-compliance.
• Act globally: Ensure rules are consistent not only with U.S. laws but local laws and customs.  Translate that guidance into all appropriate languages in which your organization operates. 
• Keep gifts corporate: Give gifts with company logos, reflect the organization's products and ensure they are intended for official—not personal—use (such as a business card holder).
• Make gifting inclusive: Give gifts publicly and transparently, and involve teams as opposed to individuals (such as specialty baked goods for a team to share).
• Prohibit cash gifts as well as gift cards.
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Riviera Home Furnishing vs. ACIT (Delhi High Court)

COURT:Delhi High Court
CORAM:S. Muralidhar J, Vibhu Bakhru J
SECTION(S):10A, 10B
GENRE:Domestic Tax
CATCH WORDS:derived from the undertaking
COUNSEL:Ved Jain
DATE:November 19, 2015 (Date of pronouncement)
DATE:November 29, 2015 (Date of publication)
AY:2008-09
FILE:Click here to download the file in pdf format
CITATION:
S. 10B: Deemed Export Drawback, Customer claims, Freight subsidy & Interest on fixed deposit receipts (under lien for LC & bank guarantee) are all derived from the undertaking & are eligible for deduction
(i) The submissions made on behalf of the Revenue proceed on the basic misconception regarding the true purport of the provisions of Chapter VIA of the Act and on an incorrect understanding of Section 80A (4) of the Act. The opening words of Section 80A (4) read "Notwithstanding anything to the contrary contained in section 10A or section 10AA or section 10B or section 10BA or in any provisions of this Chapter…..". What is sought to be underscored, therefore, is that Section 80A, and the other provisions in Chapter VIA, are independent of Sections 10A and 10B of the Act. It appears that the object of Section 80A (4) was to ensure that a unit which has availed of the benefit under Section 10B will not be allowed to further claim relief under Section 80IA or 80IB read with Section 80A (4). The intention does not appear to be to deny relief under Section 10B (1) read with Section 10B (4) or to whittle down the ambit of those provisions. Also, the revenue is not right in contending that the decisions of the High Courts referred to above have not noticed the decision of the Supreme Court in Liberty India v. Commissioner of Income Tax (2009) 317 ITR 218. The Karnataka High Court in CIT v. Motorola India Electronics Pvt. Ltd (2014) 46 Taxmann.com 167 (Kar) makes a reference to the said decision. That decision of the Karnataka High Court has been cited with approval by this Court in Hritnik Exports (decision dated 13th November 2014 in ITA Nos. 219 and 239 of 2014) and Universal Precision Screws decision dated 6th October 2015 in ITA NO 392 of 2015. In Hritnik Exports (supra) the Court quoted with approval the observations of the Special Bench of the ITAT in Maral Overseas Ltd. (supra) that "Section 10A/10B of the Act is a complete code providing the mechanism for computing the 'profits of the business' eligible for deduction u/s 10B of the Act. Once an income forms part of the business of the income of the eligible undertaking of the assessee, the same cannot be excluded from the eligible profits for the purpose of computing deduction u/s 10B of the Act."
(ii) As regards the decision of the ITAT in not accepting the Assessee's plea in regard to 'customer claims' 'freight subsidy' and 'interest on fixed deposit receipts' even while it accepted the Assessee's case as regards 'deemed export drawback', the contention of the Assessee as regards customer claims was that it had received the claim of Rs. 28,27,224 from a customer for cancelling the export order. Later on the cancelled order was completed and goods were exported to another customer. The sum received as claim from the customer was non-severable from the income of the business of the undertaking. The Court fails to appreciate as to how the ITAT could have held that this transaction did not arise from the business of the export of goods. Even as regards freight subsidy, the Assessee's contention was that it had received the subsidy in respect of the business carried on and the said subsidy was part of the profit of the business of the undertaking. If the ITAT was prepared to consider the deemed export draw back as eligible for deduction then there was no justification for excluding the freight subsidy. Even as regards the interest on FDR, the Court has been shown a note of the balance sheet of the Assessee [which was placed before the AO] which clearly states that "fixed deposit receipts (including accrued interest) valuing Rs.15,05,875 are under lien with Bank of India for facilitating the letter of credit and bank guarantee facilities." In terms of the ratio of the decisions of this Court both in Hritnik Exports (supra) and Universal Precision Screws (supra), the interest earned on such FDR ought to qualify for deduction under Section 10B of the Act.

ICAI Objects To Proposal Of Income-tax Dept To Exclude CAs From Practice Of Taxation Law

The ICAI has addressed a letter dated 27.11.2015 to the Principal Commissioner of Income-tax, Chandigarh, raising objections to the alleged proposal of the department not to allow Chartered Accountants and non-Advocates to "practice law" in the course of proceedings before the tax authorities. The ICAI has pointed out that taxation is one of the "core-competence" areas of Chartered Accountants and that they have expertise in accounting, auditing and taxation. It is also pointed out that these subjects are dealt with in great depth in the CA curriculum and that the ICAI has dedicated committees on taxation. It is emphasized that a chartered accountant, on passing his final examination and completing his articled training, is an expert in taxation, accountancy, auditing, company law and other laws etc., and he is fully qualified to practice in these fields. The ICAI has also drawn attention to several legislation and judicial pronouncements to support its contention that CAs are qualified to practice taxation law and cannot be barred from the same.
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Attachment(s) from Dipak Shah djshah1944@yahoo.com [SolapurCAs] | View attachments on the web
4 of 4 File(s)

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Imp Verdicts On S. 271(1)(c) Penalty + Transfer Pricing + Bogus Share Capital + Imp Updates From CBDT


 

Dear Subscriber,

Suvaprasanna Bhattacharya vs. ACIT (ITAT Kolkata)

S. 271(1)(c): A penalty notice u/s 274 which does not strike out the irrelevant portion & which does not specify whether the penalty is for "concealment" or for "furnishing inaccurate particulars" renders the penalty order void

The next argument that the show cause notice u/s.274 of the Act which is in a printed form does not strike out as to whether the penalty is sought to be levied on the for "furnishing inaccurate particulars of income" or "concealing particulars of such income". On this aspect we find that in the show cause notice u/s.274 of the Act the AO has not struck out the irrelevant part. It is therefore not spelt out as to whether the penalty proceedings are sought to be levied for "furnishing inaccurate particulars of income" or "concealing particulars of such income"


Micro Ink Limited vs. ACIT (ITAT Ahmedabad)

Entire law on transfer pricing implications of (i) allowing excess credit to AE's on account of sale of goods and (ii) issue of corporate guarantee to AEs (after insertion of Explanation i(c) to s. 92B by FA 2012) explained

If the international transaction of exports of goods which has been benchmarked on TNMM basis is duly accepted by the TPO, making an adjustment for interest on excess credit allowed on sales to AEs will vitiate the picture, inasmuch as what has already been factored in the TNMM analysis, by taking operating profit figure which incorporate financial impact of the excess credit period allowed, will be adjusted again separately as well because the interest levy for late realization of debtors is inextricably connected with the sales and is also part of operating income. When such an interest is includible in operating income and the operating income itself has been accepted as reasonable under the TNMM, there cannot be an occasion to make adjustment for notional interest on delayed realization of debtors


ITO vs. Superline Construction P. Ltd (ITAT Mumbai)

S. 68 (bogus share capital): Despite statement of Mukesh C. Choksi & Jayesh Sampat admitting bogus share capital, addition cannot be made in assessee-company's hands

If the share application money is received by the assessee company from alleged bogus share holders who's name are given to the AO then the department is free to proceed to reopen their individual assessments in accordance with law but it cannot be regarded as undisclosed income of assessee company


Chidu, Eminent Lawyer & Former Finance Minister, Alleges "Malicious Onslaught" By CBDT; CBDT Defends Itself

P Chidambaram, eminent senior advocate and former Finance Minister, has alleged that the raids conducted by the Income-tax department on Advantage Strategic Consulting Pvt Ltd and Vasan Eye Care, companies said to be connected to his son, Karti Chidamabaram, is a "malicious onslaught" by the Government on him. In reply to the allegations, the CBDT has issued a press release dated 01.12.2015 stating that the search action was based on "credible information of tax evasion and large scale financial irregularities" committed by the group. It is also claimed that "certain incriminating evidence indicative of tax evasion and financial irregularities have been recovered during the on-going investigation". The CBDT has also clarified that there is no collateral purpose behind the search action and that no political person or his family member have been targeted


CBDT Appoints Former Chairperson As "Adviser on Tax Reforms"

The CBDT has announced that Ms. Anita Kapur, former Chairperson, Central Board of Direct Taxes, who retired from government service on 30.11.2015, has been appointed 'Adviser on Tax Reforms' on contract basis with effect from 01.12.2015 for a period of six months or earlier, as may be decided by the Government. Her terms of reference are set out


CBDT Simplifies Procedure For Issue Of Form Nos. 15H And 15G For TDS Exemption

The CBDT has issued Notification No. 4 /2015 dated 1st of December 2015 by which it has simplified the procedure for Form No.15G & 15H under Section 197A of the Income-tax Act read with Rule 29C of the Income tax Rules


Regards,

 

Editor,

 

itatonline.org

---------------------

Latest:

ICAI Objects To Proposal Of Income-tax Dept To Exclude CAs From Practice Of Taxation Law


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Digest Of Important Judgements On Transfer Pricing, International Tax And Domestic Tax (Aug to Oct 2015)

 

Dear Subscriber,

Digest Of Important Judgements On Transfer Pricing, International Tax And Domestic Tax (Aug to Oct 2015)

Shri. Sunil Moti Lala, Advocate, has prepared a compilation of important judgements on transfer pricing, international tax and domestic tax reported in the period from August to October 2015. The author has meticulously and systematically classified the judgements into various categories to enable ease of reference. A pdf copy of the digest is available for download. The digest will prove invaluable to all practitioners of taxation law


Regards,

 

Editor,

 

itatonline.org

---------------------

Latest:

Micro Ink Limited vs. ACIT (ITAT Ahmedabad)

Entire law on transfer pricing implications of (i) allowing excess credit to AE's on account of sale of goods and (ii) issue of corporate guarantee to AEs (after insertion of Explanation i(c) to s. 92B by FA 2012) explained

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Tuesday, December 1, 2015

ITR (TRIB) Volume 44 : Part 2 (Issue dated : 30-11-2015)

 

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

ONLINE EDITION

SUBJECT INDEX TO CASES REPORTED

Appeal to Appellate Tribunal --Limitation--Condonation of delay--Delay of 567 days--No proper explanation for delay--Delay cannot be condoned solely on ground of fairness--Income-tax Act, 1961, s. 263-- Forbes and Co. (Tea Brokers) v . Asst. CIT
(Chennai) . . . 280

Business expenditure --Deduction only on actual payment--Provision for leave encashment--Appeal pending adjudication before Supreme Court on similar issue--Department not to recover penalty and interest accruing till decision of Supreme Court--Assessing Officer to adjudicate afresh in terms of decision of Supreme Court--Matter remanded--Income-tax Act, 1961, s. 43B(f)-- Birla Sun Life Asset Management Company Ltd. v . Deputy CIT (Mumbai) . . . 325

----Payment to third party vendors--Assessing Officer adding unverified payment to three vendors as deemed income--Failure by Assessing Officer to give reasonable time to vendor to furnish details--Failure by Assessing Officer to confront assessee to take present address of vendor or call for requisite information after return of notice with postal remarks--Failure by Assessing Officer to verify genuineness and correctness of transactions between assessee and vendor before reaching conclusion of difference of amount in accounts--Assessing Officer to decide matter afresh--Matter remanded--Income-tax Act, 1961-- Cheil India P. Ltd. v . Deputy CIT (Delhi) . . . 285

Capital or revenue receipt --Assessee receiving amount towards clean development mechanism on sale of carbon credits--Capital receipt--Not liable to tax--Income-tax Act, 1961-- VMD Mills P. Ltd. v . Asst. CIT (Chennai) . . . 312

Charitable purpose --Exemption--Donation for charitable purposes--Special deduction--Approval of institution--Assessee's aims and objects to provide medical relief, informal education and communication of health and nutritional issues to urban slum and rural communities--Assessee entitled to exemption and continuance of approval under section 80G(5)(vi)--Income-tax Act, 1961, ss. 2(15), 11, 12AA, 80G(5)(vi)-- Praxis Institute of Participatory Practices v . DIT (Exemption)
(Delhi) . . . 295

Income from house property --Annual value--Determination--Assessing Officer should conduct proper enquiry and take necessary steps to find out prevailing fair market rent--Addition on account of notional interest on interest-free deposit received by assessee not allowable--Income-tax Act, 1961, s. 23(1)-- Asst. CIT v . Mrs. Bharati Anirudh Kilachand(Mumbai) . . . 317

International transactions --Delay in receiving payments from associated enterprises--Interest for delay--Dispute Resolution Panel allowing 30 days for payment of receivables and charging interest for period beyond it in accordance with Safe Harbour Rule--Failure by assessee to show interest not charged for similar delays--Direction of Dispute Resolution Panel proper--Income-tax Act, 1961, ss. 92B, Expln. (i)(c) , 92F-- Cheil India P. Ltd. v . Deputy CIT (Delhi) . . . 285

Special deduction --Royalty--Royalty received for book on cookery--Failure by assessee to show special qualification in field of cookery and professional activity--Assessee not entitled to claim deduction--Income-tax Act, 1961, s. 80QQB-- Mrs. Pratibha A. Kothavale v . Deputy CIT (Mumbai) . . . 309

 

PRINT EDITION

Volume 44 : Part 2 (Issue dated : 30-11-2015)

SUBJECT INDEX TO CASES REPORTED IN THIS PART

Bad debts --Amounts actually written off in books of account as irrecoverable sufficient--Assessing Officer to allow amount--Income-tax Act, 1961, s. 36(1)(vii)-- Online Media Solutions Ltd. v . Deputy CIT (Hyd) . . . 154

Business expenditure --Current repairs--Capital or revenue expenditure--Waterproofing expenses--Not luxury repairs--Allowable--Income-tax Act, 1961, s. 30(a)(ii)-- Eco RRB Infra P. Ltd. v. Deputy CIT (Delhi) . . . 116

----Depreciation--Expenditure on land for installation of plant and machinery for wind energy generation--No material to demonstrate how land depreciated--Disallowance of depreciation proper--Income-tax Act, 1961-- Eco RRB Infra P. Ltd. v. Deputy CIT (Delhi) . . . 116

----Disallowance--Excessive or unreasonable payments--Payment of incentives to directors--Legitimate need for assessee to employ qualified and experienced persons to carry out its business operations fulfilled by directors--Whether payments made to directors excessive or unreasonable to be examined every year--Financial and operational results justifying payments made to directors--Tax suffered by directors for incentive equivalent to tax rate applicable to assessee--No attempt to evade tax--Disallowance to be deleted--Income-tax Act, 1961, s. 40A(2)-- Edwise Consultants P. Ltd. v. Deputy CIT (Mumbai) . . . 236

----Foreign travel expenses--Senior executive of assessee representing it in shareholders' meet of joint venture--Failure by assessee to demonstrate business purpose of foreign travel--Assessee to demonstrate all matters regarding foreign travel--Assessing Officer to adjudicate issue afresh--Matter remanded--Income-tax Act, 1961, s. 37-- Godavari Corporation P. Ltd. v. ITO (Mumbai) . . . 182

Business income --Remission or cessation of liability--Liabilities of assessee outstanding for many years--Failure by assessee to produce evidence regarding existence of creditor--Inference that liability no longer exists--Assessee claiming liability for previous year--Assessee precluded from contending liability not existing in previous year--Remission or cessation in previous year--Income-tax Act, 1961, s. 41(1)-- Natural Gas Company P. Ltd. v. Deputy CIT (Mumbai) . . . 208

Business loss --Trade advances written off--Assessee re-starting business and in position to furnish details--Assessing Officer to examine whether amounts can be allowed as write off in accordance with provisions of Act--Matter remanded--Income-tax Act, 1961-- Online Media Solutions Ltd. v. Deputy CIT (Hyd) . . . 154

Capital or revenue expenditure --Interest on borrowed capital--Assessee investing borrowed capital in shares--Process of acquisition complete on purchase of shares by assessee--Cost of improvement not applicable in case of shares--Interest on borrowing for period after purchase of shares not cost of improvement--Cannot be treated as cost of acquisition--That dividend income rendered tax exempt from particular year does not alter its character from revenue to capital--Income-tax Act, 1961-- Natural Gas Company P. Ltd. v. Deputy CIT (Mumbai) . . . 208

Cash credits --Unsecured loan--Failure by assessee to furnish confirmations towards increase in unsecured loans--Unsecured loans can be due to fresh credits or due to increase in interest on existing loans--Assessing Officer to examine nature of credit and treat in accordance with provisions of law--Matter remanded--Income-tax Act, 1961, s. 68--Online Media Solutions Ltd. v. Deputy CIT (Hyd) . . . 154

Charitable purpose --Depreciation--Amount spent on asset treated as application of income--Depreciation on asset allowable--Income-tax Act, 1961-- Deputy DIT v. PHD Chamber of Commerce and Industry (Delhi) . . . 219

----Exemption--Activities of assessee held to be charitable in earlier assessment years--Failure by Assessing Officer to bring evidence of changes in activities and profit motive of assessee--Expression “charitable purpose†to be read in context of section 10(23C)(iv)--Assessee's activities driven by charitable motive according to its objects in memorandum of association--Provisions of section 11(4) not attracted--Assessee entitled to exemption--Income-tax Act, 1961, ss. 2(15), 10(23C)(iv), 11(4), 12A-- Deputy DIT v. PHD Chamber of Commerce and Industry (Delhi) . . . 219

Charitable trust --Registration--Denial of registration on ground that objects religious in nature--Maintenance of temple--No prohibition under section 12A from having mixed objects of charitable and religious nature--Maintenance of temple cannot be regarded as religious purpose but for benefit of general public--Registration to be granted--Income-tax Act, 1961, s. 12AA-- Raghunath Das Damodardas Lohia Charitable Trust v. DIT (Exemptions) (Hyd) . . . 161

Deduction of tax at source --Rent--Failure by assessee to deduct tax at source while making lease payment--Lease agreement not available--Tribunal unable to appreciate exact nature of transaction--Assessing Officer to reconsider issue afresh in light of lease deed--No need to recover tax at source from assessee if recipient made payment of taxes--Matter remanded--Income-tax Act, 1961, s. 194-I-- TRIL Infopark Ltd. v. ITO (TDS) (Chennai) . . . 139

----Time limit for passing order--Assessee revising its statement by way of correction--Correction date to be taken as date of filing of statement for all practical purposes--Order passed by Assessing Officer within time limit provided under section 201(3)--Income-tax Act, 1961, s. 201(3)-- TRIL Infopark Ltd. v. ITO (TDS)
(Chennai) . . . 139

Depreciation --Assessee claiming loss incurred in business not depreciation--No question of disallowance of depreciation--Income-tax Act, 1961-- Online Media Solutions Ltd. v. Deputy CIT (Hyd) . . . 154

----Carry forward and set-off--Assessee governed by principle of mutuality and not carrying on any business activity--Carry forward of depreciation not allowable--Income-tax Act, 1961-- ITO v. Nav Shanti Nagar CHS Ltd. (Mumbai) . . . 148

----Vehicles purchased in names of directors--Vehicles used for purpose of business of assessee--Funds for purchase of vehicles provided by assessee and vehicles shown as its assets--Assessee owner of vehicles for all practical purposes--Depreciation allowable--Income-tax Act, 1961-- Edwise Consultants P. Ltd. v. Deputy CIT
(Mumbai) . . . 236

Exemption --Charitable purpose--Educational institution--Denial of exemption for charging capitation fee over and above prescribed fee--Failure by authorities to inquire whether any fee prescribed by any body to which assessee affiliated--Matter remanded for fresh examination--Income-tax Act, 1961, ss. 10(23C), 11, 12A-- International School of Hyderabad v. Deputy DIT (Exemptions)-II (Hyd) . . . 256

Housing project --Special deduction--Additional income detected consequent to search part of sale proceeds of flats project--Assessee entitled to claim deduction under section 80-IB(10)--Income-tax Act, 1961, s. 80-IB(10)-- Madhav Corporation v. Asst. CIT (Ahd) . . . 193

----Special deduction--Assessee working as developer in building project--Entitled to deduction--That part of work contracted out to persons not eligible for deduction not to affect assessee's claim--Income-tax Act, 1961, s. 80-IB(10)-- Madhav Corporation v. Asst. CIT(Ahd) . . . 193

----Special deduction--Condition precedent--Land owner selling undivided co-ownership right in property to various individuals and they in turn entering into construction agreement with assessee--Assessee performing work as contractor and not as developer in designing and selling project--Not eligible for deduction under section 80-IB(10)--Income-tax Act, 1961, s. 80-IB(10)-- Prime Developers v. ITO
(Chennai) . . . 120

Income --Principle of mutuality--Co-operative housing society--Finding that voluntary contributions towards special repair funds made by outgoing members had no element of trading or commerciality and hence covered by principle of mutuality--Failure by Department to contradict findings of Commissioner (Appeals)--Order of Commissioner (Appeals) called for no interference--Income-tax Act, 1961-- ITO v. Nav Shanti Nagar CHS Ltd. (Mumbai) . . . 148

Income from undisclosed sources --Cash deposited in bank--Cash withdrawals by assessee on various dates--No finding that cash available with assessee utilised for other purpose--Cash deposit cannot be treated as income from undisclosed sources--Income-tax Act, 1961-- Sudhirbhai Pravinkant Thaker v. ITO (Ahd) . . . 135

Industrial undertaking --Special deduction--Tribunal setting aside order of Assessing Officer and directing him to apply decision of Special Bench--Assessing Officer defying direction of Tribunal and repeating addition without giving opportunity to assessee--Assessing Officer should follow specific direction by Tribunal and cannot take advantage of order of Tribunal for repeating addition--Assessee entitled to deduction under section 80-IB(10)--Income-tax Act, 1961, s. 80-IB(10)-- Deputy CIT v. Prescon Builders P. Ltd. (Mumbai) . . . 175

Reassessment --Validity--Reason to believe income has escaped assessment--Cannot be on mere whim but based on real material--Statement made at time of survey does not have evidentiary value and cannot be basis for reopening case--Reassessment invalid--Income-tax Act, 1961, ss. 147, 148-- Alfa Radiological Centre P. Ltd. v. ITO (Chandigarh) . . . 184

Transfer pricing --International transactions--Arm's length price--Assessee operating on a mark-up of 15 per cent. of operational costs--Conservative--No transfer pricing adjustment required--Income-tax Act, 1961, s. 92C-- GAP International Sourcing (India) P. Ltd. v. Deputy CIT (Delhi) . . . 168

 

SECTIONWISE INDEX TO CASES REPORTED IN THIS PART

Income-tax Act, 1961

S. 2(15) --Charitable purpose--Exemption--Activities of assessee held to be charitable in earlier assessment years--Failure by Assessing Officer to bring evidence of changes in activities and profit motive of assessee--Expression “charitable purpose†to be read in context of section 10(23C)(iv)--Assessee's activities driven by charitable motive according to its objects in memorandum of association--Provisions of section 11(4) not attracted--Assessee entitled to exemption-- Deputy DIT v. PHD Chamber of Commerce and Industry(Delhi) . . . 219

S. 10(23C) --Exemption--Charitable purpose--Educational institution--Denial of exemption for charging capitation fee over and above prescribed fee--Failure by authorities to inquire whether any fee prescribed by any body to which assessee affiliated--Matter remanded for fresh examination-- International School of Hyderabad v. Deputy DIT (Exemptions)-II (Hyd) . . . 256

S. 10(23C)(iv) --Charitable purpose--Exemption--Activities of assessee held to be charitable in earlier assessment years--Failure by Assessing Officer to bring evidence of changes in activities and profit motive of assessee--Expression “charitable purpose†to be read in context of section 10(23C)(iv)--Assessee's activities driven by charitable motive according to its objects in memorandum of association--Provisions of section 11(4) not attracted--Assessee entitled to exemption-- Deputy DIT v. PHD Chamber of Commerce and Industry(Delhi) . . . 219

S. 11 --Exemption--Charitable purpose--Educational institution--Denial of exemption for charging capitation fee over and above prescribed fee--Failure by authorities to inquire whether any fee prescribed by any body to which assessee affiliated--Matter remanded for fresh examination-- International School of Hyderabad v. Deputy DIT (Exemptions)-II (Hyd) . . . 256

S. 11(4) --Charitable purpose--Exemption--Activities of assessee held to be charitable in earlier assessment years--Failure by Assessing Officer to bring evidence of changes in activities and profit motive of assessee--Expression “charitable purpose†to be read in context of section 10(23C)(iv)--Assessee's activities driven by charitable motive according to its objects in memorandum of association--Provisions of section 11(4) not attracted--Assessee entitled to exemption-- Deputy DIT v. PHD Chamber of Commerce and Industry(Delhi) . . . 219

S. 12A --Charitable purpose--Exemption--Activities of assessee held to be charitable in earlier assessment years--Failure by Assessing Officer to bring evidence of changes in activities and profit motive of assessee--Expression “charitable purpose†to be read in context of section 10(23C)(iv)--Assessee's activities driven by charitable motive according to its objects in memorandum of association--Provisions of section 11(4) not attracted--Assessee entitled to exemption-- Deputy DIT v. PHD Chamber of Commerce and Industry(Delhi) . . . 219

----Exemption--Charitable purpose--Educational institution--Denial of exemption for charging capitation fee over and above prescribed fee--Failure by authorities to inquire whether any fee prescribed by any body to which assessee affiliated--Matter remanded for fresh examination-- International School of Hyderabad v. Deputy DIT (Exemptions)-II (Hyd) . . . 256

S. 12AA --Charitable trust--Registration--Denial of registration on ground that objects religious in nature--Maintenance of temple--No prohibition under section 12A from having mixed objects of charitable and religious nature--Maintenance of temple cannot be regarded as religious purpose but for benefit of general public--Registration to be granted-- Raghunath Das Damodardas Lohia Charitable Trust v. DIT (Exemptions) (Hyd) . . . 161

S. 30(a)(ii) --Business expenditure--Current repairs--Capital or revenue expenditure--Waterproofing expenses--Not luxury repairs--Allowable-- Eco RRB Infra P. Ltd. v. Deputy CIT (Delhi) . . . 116

S. 36(1)(vii) --Bad debts--Amounts actually written off in books of account as irrecoverable sufficient--Assessing Officer to allow amount-- Online Media Solutions Ltd. v . Deputy CIT(Hyd) . . . 154

S. 37 --Business expenditure--Foreign travel expenses--Senior executive of assessee representing it in shareholders' meet of joint venture--Failure by assessee to demonstrate business purpose of foreign travel--Assessee to demonstrate all matters regarding foreign travel--Assessing Officer to adjudicate issue afresh--Matter remanded-- Godavari Corporation P. Ltd. v. ITO (Mumbai) . . . 182

S. 40A(2) --Business expenditure--Disallowance--Excessive or unreasonable payments--Payment of incentives to directors--Legitimate need for assessee to employ qualified and experienced persons to carry out its business operations fulfilled by directors--Whether payments made to directors excessive or unreasonable to be examined every year--Financial and operational results justifying payments made to directors--Tax suffered by directors for incentive equivalent to tax rate applicable to assessee--No attempt to evade tax--Disallowance to be deleted-- Edwise Consultants P. Ltd. v. Deputy CIT (Mumbai) . . . 236

S. 41(1) --Business income--Remission or cessation of liability--Liabilities of assessee outstanding for many years--Failure by assessee to produce evidence regarding existence of creditor--Inference that liability no longer exists--Assessee claiming liability for previous year--Assessee precluded from contending liability not existing in previous year--Remission or cessation in previous year-- Natural Gas Company P. Ltd. v. Deputy CIT (Mumbai) . . . 208

S. 68 --Cash credits--Unsecured loan--Failure by assessee to furnish confirmations towards increase in unsecured loans--Unsecured loans can be due to fresh credits or due to increase in interest on existing loans--Assessing Officer to examine nature of credit and treat in accordance with provisions of law--Matter remanded-- Online Media Solutions Ltd. v. Deputy CIT (Hyd) . . . 154

S. 80-IB(10) --Housing project--Special deduction--Additional income detected consequent to search part of sale proceeds of flats project--Assessee entitled to claim deduction under section 80-IB(10)-- Madhav Corporation v. Asst. CIT
(Ahd) . . . 193

----Housing project--Special deduction--Assessee working as developer in building project--Entitled to deduction--That part of work contracted out to persons not eligible for deduction not to affect assessee's claim-- Madhav Corporation v. Asst. CIT
(Ahd) . . . 193

----Housing project--Special deduction--Condition precedent--Land owner selling undivided co-ownership right in property to various individuals and they in turn entering into construction agreement with assessee--Assessee performing work as contractor and not as developer in designing and selling project--Not eligible for deduction under section 80-IB(10)-- Prime Developers v. ITO (Chennai) . . . 120

----Industrial undertaking--Special deduction--Tribunal setting aside order of Assessing Officer and directing him to apply decision of Special Bench--Assessing Officer defying direction of Tribunal and repeating addition without giving opportunity to assessee--Assessing Officer should follow specific direction by Tribunal and cannot take advantage of order of Tribunal for repeating addition--Assessee entitled to deduction under section 80-IB(10)-- Deputy CIT v. Prescon Builders P. Ltd.
(Mumbai) . . . 175

S. 92C --Transfer pricing--International transactions--Arm's length price--Assessee operating on a mark-up of 15 per cent. of operational costs--Conservative--No transfer pricing adjustment required-- GAP International Sourcing (India) P. Ltd. v. Deputy CIT (Delhi) . . . 168

S. 147 --Reassessment--Validity--Reason to believe income has escaped assessment--Cannot be on mere whim but based on real material--Statement made at time of survey does not have evidentiary value and cannot be basis for reopening case--Reassessment invalid--Alfa Radiological Centre P. Ltd. v. ITO
(Chandigarh) . . . 184

S. 148 --Reassessment--Validity--Reason to believe income has escaped assessment--Cannot be on mere whim but based on real material--Statement made at time of survey does not have evidentiary value and cannot be basis for reopening case--Reassessment invalid--Alfa Radiological Centre P. Ltd. v. ITO
(Chandigarh) . . . 184

S. 194-I --Deduction of tax at source--Rent--Failure by assessee to deduct tax at source while making lease payment--Lease agreement not available--Tribunal unable to appreciate exact nature of transaction--Assessing Officer to reconsider issue afresh in light of lease deed--No need to recover tax at source from assessee if recipient made payment of taxes--Matter remanded-- TRIL Infopark Ltd. v. ITO (TDS)
(Chennai) . . . 139

S. 201(3) --Deduction of tax at source--Time limit for passing order--Assessee revising its statement by way of correction--Correction date to be taken as date of filing of statement for all practical purposes--Order passed by Assessing Officer within time limit provided under section 201(3)-- TRIL Infopark Ltd. v. ITO (TDS)
(Chennai) . . . 139

 

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ITR Volume 379 : Part 1 (Issue dated : 30-11-2015)

 

 

 

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

ONLINE EDITION

STATUTES AND NOTIFICATIONS

C. B. D. T. Circulars :

C. B. D. T. Circulars/CISO Instructions :

Circular/CISO Instruction No. 1, dated 10th July, 2015--Information Security Guidelines . . . 300

 

PRINT EDITION

ITR Volume 379 : Part 1 (Issue dated : 30-11-2015)

SUBJECT INDEX TO CASES REPORTED IN THIS PART

HIGH COURTS

Accounting --Hybrid accounts--Law applicable--Prior to 1997 assessee could follow two systems of accounting--Income-tax Act, 1961, s. 145-- CIT v. Kerala Kaumudi P. Ltd. (Ker) . . . 132

Actual cost --Written down value--Computation--Provision for exclusion of portion of cost met by Government--Prospective--Subsidy--Construction of building and installation of machinery in 1993-94 and assets forming part of block of assets--Subsidy received in 2000-01--Provision requiring exclusion of subsidy from cost not in force at time of computation of actual cost--Subsidy received much after determination of actual cost--Reduction of subsidy from written down value not permissible--Income-tax Act, 1961, s. 43(1), Expln. 10 , (6)(c)--Banco Products (India) Ltd. v. Deputy CIT (Guj) . . . 1

Advance tax --Interest--Book profit--Inclusion of amounts in terms of Explanation 1(h) to section 115JB with retrospective effect from 1-4-2001--Liability to tax although credited retrospectively--Interest with retrospective effect could not be levied--Income-tax Act, 1961, s. 234B-- CIT v. JSW Energy Ltd. (Bom) . . . 36

Appeal to High Court --Powers of High Court--High Court can ignore circulars fixing monetary limits for appeal and consider question of law which raises important issue--Income-tax Act, 1961, s. 260A-- CIT v. South Travancore Distilleries and Allied Products(Ker) . . . 56

Assessment --Assessment under section 143(3)--Condition precedent--Issue of valid notice under section 143(2)--Difference between issue and service of notice--Deeming fiction--Section 292BB not applicable to non-issue of notice--Income-tax Act, 1961, ss. 143, 148, 292BB-- Asst. CIT v. Greater Noida Industrial Development Authority (All) . . . 14

Business expenditure --Commission--Commission paid to agent for selling Indian made foreign liquor to statutory corporation--Whether deductible--Matter remanded--Income-tax Act, 1961-- CIT v. South Travancore Distilleries and Allied Products (Ker) . . . 56

----Disallowance--Amounts liable to deduction of tax at source--Securities transaction tax--Broker collecting tax from its clients--Nature of transaction or relationship not in dispute--Section 40(a)(ib) not applicable--Income-tax Act, 1961, s. 40(a)(ib)-- CIT v. HSBC Securities and Capital Markets (India) P. Ltd. (Bom) . . . 146

----Disallowance--Failure to deduct tax at source on payment--Transaction charges paid to stock exchange--Amount to fees for technical services--Tax not deductible at source--Income-tax Act, 1961, s. 40(a)(ia)-- CIT v. HSBC Securities and Capital Markets (India) P. Ltd. (Bom) . . . 146

Business loss --Non-consideration of claim of error trade--Matter remanded to Assessing Officer for fresh examination--No question of law--Income-tax Act, 1961-- CIT v. HSBC Securities and Capital Markets (India) P. Ltd. (Bom) . . . 146

Deduction of tax at source --Payment to sub-contractor--Sub-contractor filing Form 15-I--Assessee not liable to deduct tax at source on payment--Income-tax Act, 1961, ss. 40, 194C-- CIT v. Sri Marikamba Transport Company (Karn) . . . 129

Exemption --Educational institution--Condition precedent for claiming exemption--Application for exemption with copies of audited accounts and balance-sheets for the past three years--Accounts not submitted in spite of grant of opportunity --Undisclosed income of Rs. 4 crores disclosed to Settlement Commission--Rejection of application for exemption--Justified--Income-tax Rules, 1962, Form 66--Income-tax Act, 1961, s. 10(23C)(vi)-- Bhupesh Kumar Sikshan Evam Vikas Sansthan v. Director General of Income-tax (Investigation) (Patna) . . . 45

Export --Special deduction--Computation--Interest and miscellaneous income--Matter remanded to Assessing Officer to work out deduction in light of Supreme Court decision--Income-tax Act, 1961, s. 80HHC-- Banco Products (India) Ltd. v. Deputy CIT (Guj) . . . 1

Housing projects --Special deduction--Completion certificate--Conditions precedent--Housing projects approved by local authority before 1-4-2004 must be completed before 31-3-2008--Housing project approved on or after 1-4-2004 but before 31-3-2007 should be completed within four years from end of financial year in which housing project approved by local authority--Date of completion of construction of housing project shall be reckoned on basis of date on which completion certificate issued by local authority--Provision is in nature of limiting benefit of deduction to specified housing projects--Stipulation for obtaining completion certificate from local authority before cut-off date--Mandatory--Income-tax Act, 1961, s. 80-IB(10)(a)-- CIT v. Global Reality (MP) . . . 107

----Special deduction--Completion certificate--Stipulation for obtaining completion certificate from local authority before cut-off date--Not unreasonable, harsh, absurd or incapable of compliance--Issuance of completion certificate, after cut-off date by local authority but, mentioning date of completion of project before cut-off date--Not entitled to exemption--Income-tax Act, 1961, s. 80-IB(10)(a)-- CIT v. Global Reality (MP) . . . 107

Income --Accrual of income--Co-operative banks governed by Reserve Bank of India--Prudential norms issued by Reserve Bank of India equally applicable to co-operative banks--Interest on sticky advances--Not taxable--Income-tax Act, 1961, s. 43D-- CIT v. Deogiri Nagari Sahakari Bank Ltd. (Bom) . . . 24

----Computation of income--Disallowance of expenditure incurred in earning income not forming part of total income--Dividend--Tribunal remanding issue to Assessing Officer for adjudication de novo on basis of decision of jurisdictional High Court--No substantial question of law--Income-tax Act, 1961, s. 14A-- CIT v. JSW Energy Ltd. (Bom) . . . 36

----Computation of income--Disallowance of expenditure incurred in earning income not forming part of total income--Tribunal directing Assessing Officer to disallow expenses relating to earning of exempt income--No question of law--Income-tax Act, 1961, s. 14A--CIT v. HSBC Securities and Capital Markets (India) P. Ltd. (Bom) . . . 146

Income-tax --General principles--Principle of consistency--Methods of accounting accepted for several years--No new facts--Methods could not be rejected in a particular year-- CIT v.Kerala Kaumudi P. Ltd. (Ker) . . . 132

Interpretation of taxing statutes --Time frame within which housing project expected to be completed--Provision not directory but mandatory-- CIT v. Global Reality (MP) . . . 107

Penalty --Acceptance of loan or deposit otherwise than by account payee cheque or account payee bank draft--Limitation for imposing penalty--Competent authority to impose penalty is Joint Commissioner--Limitation to be computed from date of initiation of proceedings by Joint Commissioner--Income-tax Act, 1961, ss. 271D, 271E, 275(1)(c)-- Grihalakshmi Vision v. Addl. CIT (Ker) . . . 100

----Acceptance or repayment of loan or deposit exceeding prescribed limit except by account payee cheque or account payee bank draft--Penalty not imposable if there is a reasonable explanation for transgression of the provision--Finding by all three income-tax authorities that explanation was not reasonable--Penalty had to be imposed--Income-tax Act, 1961, ss. 269SS, 269T, 271D, 271E, 273B, 275-- Grihalakshmi Vision v. Addl. CIT (Ker) . . . 100

----Concealment of income or furnishing inaccurate particulars thereof--Meaning of--Allowability of deduction pending consideration by High Court on appeal--Admission of appeal makes it clear that additions debatable--No concealment of income or furnishing inaccurate particulars thereof--Penalty could not be imposed--Income-tax Act, 1961, s. 271(1)(c)-- CIT v. Ankita Electronics Pvt. Ltd. (Karn) . . . 50

Precedent --Effect of decision of Supreme Court in CIT v. Reliance Petroproducts (P.) Ltd.[2010] 322 ITR 158-- CIT v. Ankita Electronics Pvt. Ltd. (Karn) . . . 50

---- Sahakari Khand Udyog Mandal Ltd. v. Asst. CIT [2015] 370 ITR 107 (Guj) explained--Pushpak Bullion Pvt. Ltd. v. Deputy CIT (Guj) . . . 81

Reassessment --Notice--Objections to notice--Rejection of objections solely on ground that return in response to notice under section 148 not filed within thirty days--Order of rejection not valid--Income-tax Act, 1961, s. 148-- Pushpak Bullion Pvt. Ltd. v. Deputy CIT (Guj) . . . 81

----Notice--Validity--Notice based solely on audit objection--Not valid--Income-tax Act, 1961, s. 148-- P. C. Patel and Co. v. Deputy CIT (Guj) . . . 151

----Notice after four years--Condition precedent--Failure to disclose material facts necessary for assessment--Exemption under section 10A granted from assessment years 2001-02 onwards--Agreement on basis of which claim made submitted in accounting year relevant to assessment year 2003-04--Notice after four years to withdraw exemption for assessment years 2004-05, 2005-06 and 2006-07--No failure to disclose material facts necessary for assessment--Notice not valid--Income-tax Act, 1961, ss. 10A, 147, 148-- IBS Software Services P. Ltd. v. Union of India (Ker) . . . 66

Return --Delay in filing--Return of income not uploaded in electronic form on to server of Income-tax Department before due date but hard copy filed on last date--Return uploaded on next day, i. e., one day later than due date--Delay of one day in filing return--To be condoned--Income-tax Act, 1961, ss. 119(2)(b), 139(4), 239(1)-- Cosme Matias Menezes P. Ltd. v. CIT (Bom) . . . 31

Search and seizure --Block assessment--Undisclosed income--Assessee admitting receipt of on money with regard to sale of textile machinery--No evidence to prove that expenditure claimed as deduction in fact incurred by assessee--Primary requirement of satisfaction of section 37(1) not met by assessee--No evidence of suppliers of scrap and their addresses--Additions sustainable--Income-tax Act, 1961, ss. 158B(b), 158BC-- Harish Textile Engineers Ltd. v. Deputy CIT (Bom) . . . 160

Transfer of case --Writ--Order of transfer of case--Order of assessment passed by Assessing Officer having jurisdiction in place to which case was transferred--Delay in filing writ petition against order of transfer--Writ petition redundant--Order passed in interests of equity remanding matter to Assessing Officer--Income-tax Act, 1961, s. 127-- ITO v.Madeeha Enterprises (Karn) . . . 93

Writ --Jurisdiction of High Court--Facts cannot be considered--Constitution of India, art. 226--Bhupesh Kumar Sikshan Evam Vikas Sansthan v. Director General of Income-tax (Investigation) (Patna) . . . 45

----Reassessment--Proceedings found to be invalid--Notice could be quashed in writ proceedings--Income-tax Act, 1961, s. 148--Constitution of India, art. 226-- P. C. Patel and Co. v. Deputy CIT (Guj) . . . 151

 

SECTIONWISE INDEX TO CASES REPORTED IN THIS PART

Constitution of India :

Art. 226 --Writ--Jurisdiction of High Court--Facts cannot be considered-- Bhupesh Kumar Sikshan Evam Vikas Sansthan v. Director General of Income-tax (Investigation) (Patna) . . . 45

----Writ--Reassessment--Proceedings found to be invalid--Notice could be quashed in writ proceedings-- P. C. Patel and Co. v. Deputy CIT (Guj) . . . 151

Income-tax Act, 1961 :

S. 10(23C)(vi) --Exemption--Educational institution--Condition precedent for claiming exemption--Application for exemption with copies of audited accounts and balance-sheets for the past three years--Accounts not submitted in spite of grant of opportunity --Undisclosed income of Rs. 4 crores disclosed to Settlement Commission--Rejection of application for exemption--Justified-- Bhupesh Kumar Sikshan Evam Vikas Sansthan v.Director General of Income-tax (Investigation) (Patna) . . . 45

S. 10A --Reassessment--Notice after four years--Condition precedent--Failure to disclose material facts necessary for assessment--Exemption under section 10A granted from assessment years 2001-02 onwards--Agreement on basis of which claim made submitted in accounting year relevant to assessment year 2003-04--Notice after four years to withdraw exemption for assessment years 2004-05, 2005-06 and 2006-07--No failure to disclose material facts necessary for assessment--Notice not valid-- IBS Software Services P. Ltd. v.Union of India (Ker) . . . 66

S. 14A --Income--Computation of income--Disallowance of expenditure incurred in earning income not forming part of total income--Dividend--Tribunal remanding issue to Assessing Officer for adjudication de novo on basis of decision of jurisdictional High Court--No substantial question of law-- CIT v. JSW Energy Ltd. (Bom) . . . 36

----Income--Computation of income--Disallowance of expenditure incurred in earning income not forming part of total income--Tribunal directing Assessing Officer to disallow expenses relating to earning of exempt income--No question of law-- CIT v. HSBC Securities and Capital Markets (India) P. Ltd. (Bom) . . . 146

S. 40 --Deduction of tax at source--Payment to sub-contractor--Sub-contractor filing Form 15-I--Assessee not liable to deduct tax at source on payment-- CIT v. Sri Marikamba Transport Company (Karn) . . . 129

S. 40(a)(ia) --Business expenditure--Disallowance--Failure to deduct tax at source on payment--Transaction charges paid to stock exchange--Amount to fees for technical services--Tax not deductible at source-- CIT v. HSBC Securities and Capital Markets (India) P. Ltd. (Bom) . . . 146

S. 40(a)(ib) --Business expenditure--Disallowance--Amounts liable to deduction of tax at source--Securities transaction tax--Broker collecting tax from its clients--Nature of transaction or relationship not in dispute--Section 40(a)(ib) not applicable-- CIT v. HSBC Securities and Capital Markets (India) P. Ltd. (Bom) . . . 146

S. 43(1), Expln. 10 --Actual cost--Written down value--Computation--Provision for exclusion of portion of cost met by Government--Prospective--Subsidy--Construction of building and installation of machinery in 1993-94 and assets forming part of block of assets--Subsidy received in 2000-01--Provision requiring exclusion of subsidy from cost not in force at time of computation of actual cost--Subsidy received much after determination of actual cost--Reduction of subsidy from written down value not permissible-- Banco Products (India) Ltd.v. Deputy CIT (Guj) . . . 1

S. 43(6)(c) --Actual cost--Written down value--Computation--Provision for exclusion of portion of cost met by Government--Prospective--Subsidy--Construction of building and installation of machinery in 1993-94 and assets forming part of block of assets--Subsidy received in 2000-01--Provision requiring exclusion of subsidy from cost not in force at time of computation of actual cost--Subsidy received much after determination of actual cost--Reduction of subsidy from written down value not permissible-- Banco Products (India) Ltd.v. Deputy CIT (Guj) . . . 1

S. 43D --Income--Accrual of income--Co-operative banks governed by Reserve Bank of India--Prudential norms issued by Reserve Bank of India equally applicable to co-operative banks--Interest on sticky advances--Not taxable-- CIT v. Deogiri Nagari Sahakari Bank Ltd.(Bom) . . . 24

S. 80HHC --Export--Special deduction--Computation--Interest and miscellaneous income--Matter remanded to Assessing Officer to work out deduction in light of Supreme Court decision-- Banco Products (India) Ltd. v. Deputy CIT (Guj) . . . 1

S. 80-IB(10)(a) --Housing projects--Special deduction--Completion certificate--Conditions precedent--Housing projects approved by local authority before 1-4-2004 must be completed before 31-3-2008--Housing project approved on or after 1-4-2004 but before 31-3-2007 should be completed within four years from end of financial year in which housing project approved by local authority--Date of completion of construction of housing project shall be reckoned on basis of date on which completion certificate issued by local authority--Provision is in nature of limiting benefit of deduction to specified housing projects--Stipulation for obtaining completion certificate from local authority before cut-off date--Mandatory-- CITv. Global Reality (MP) . . . 107

----Housing projects--Special deduction--Completion certificate--Stipulation for obtaining completion certificate from local authority before cut-off date--Not unreasonable, harsh, absurd or incapable of compliance--Issuance of completion certificate, after cut-off date by local authority but, mentioning date of completion of project before cut-off date--Not entitled to exemption-- CIT v. Global Reality (MP) . . . 107

S. 119(2)(b) --Return--Delay in filing--Return of income not uploaded in electronic form on to server of Income-tax Department before due date but hard copy filed on last date--Return uploaded on next day, i. e., one day later than due date--Delay of one day in filing return--To be condoned-- Cosme Matias Menezes P. Ltd. v. CIT (Bom) . . . 31

S. 127 --Transfer of case--Writ--Order of transfer of case--Order of assessment passed by Assessing Officer having jurisdiction in place to which case was transferred--Delay in filing writ petition against order of transfer--Writ petition redundant--Order passed in interests of equity remanding matter to Assessing Officer-- ITO v. Madeeha Enterprises (Karn) . . . 93

S. 139(4) --Return--Delay in filing--Return of income not uploaded in electronic form on to server of Income-tax Department before due date but hard copy filed on last date--Return uploaded on next day, i. e., one day later than due date--Delay of one day in filing return--To be condoned-- Cosme Matias Menezes P. Ltd. v. CIT (Bom) . . . 31

S. 143 --Assessment--Assessment under section 143(3)--Condition precedent--Issue of valid notice under section 143(2)--Difference between issue and service of notice--Deeming fiction--Section 292BB not applicable to non-issue of notice-- Asst. CIT v. Greater Noida Industrial Development Authority (All) . . . 14

S. 145 --Accounting--Hybrid accounts--Law applicable--Prior to 1997 assessee could follow two systems of accounting-- CIT v. Kerala Kaumudi P. Ltd. (Ker) . . . 132

S. 147 --Reassessment--Notice after four years--Condition precedent--Failure to disclose material facts necessary for assessment--Exemption under section 10A granted from assessment years 2001-02 onwards--Agreement on basis of which claim made submitted in accounting year relevant to assessment year 2003-04--Notice after four years to withdraw exemption for assessment years 2004-05, 2005-06 and 2006-07--No failure to disclose material facts necessary for assessment--Notice not valid-- IBS Software Services P. Ltd. v.Union of India (Ker) . . . 66

S. 148 --Assessment--Assessment under section 143(3)--Condition precedent--Issue of valid notice under section 143(2)--Difference between issue and service of notice--Deeming fiction--Section 292BB not applicable to non-issue of notice-- Asst. CIT v. Greater Noida Industrial Development Authority (All) . . . 14

----Reassessment--Notice--Objections to notice--Rejection of objections solely on ground that return in response to notice under section 148 not filed within thirty days--Order of rejection not valid-- Pushpak Bullion Pvt. Ltd. v. Deputy CIT (Guj) . . . 81

----Reassessment--Notice--Validity--Notice based solely on audit objection--Not valid-- P. C. Patel and Co. v. Deputy CIT (Guj) . . . 151

----Reassessment--Notice after four years--Condition precedent--Failure to disclose material facts necessary for assessment--Exemption under section 10A granted from assessment years 2001-02 onwards--Agreement on basis of which claim made submitted in accounting year relevant to assessment year 2003-04--Notice after four years to withdraw exemption for assessment years 2004-05, 2005-06 and 2006-07--No failure to disclose material facts necessary for assessment--Notice not valid-- IBS Software Services P. Ltd. v. Union of India(Ker) . . . 66

----Writ--Reassessment--Proceedings found to be invalid--Notice could be quashed in writ proceedings-- P. C. Patel and Co. v. Deputy CIT (Guj) . . . 151

S. 158B(b) --Search and seizure--Block assessment--Undisclosed income--Assessee admitting receipt of on money with regard to sale of textile machinery--No evidence to prove that expenditure claimed as deduction in fact incurred by assessee--Primary requirement of satisfaction of section 37(1) not met by assessee--No evidence of suppliers of scrap and their addresses--Additions sustainable-- Harish Textile Engineers Ltd. v. Deputy CIT (Bom) . . . 160

S. 158BC --Search and seizure--Block assessment--Undisclosed income--Assessee admitting receipt of on money with regard to sale of textile machinery--No evidence to prove that expenditure claimed as deduction in fact incurred by assessee--Primary requirement of satisfaction of section 37(1) not met by assessee--No evidence of suppliers of scrap and their addresses--Additions sustainable-- Harish Textile Engineers Ltd. v. Deputy CIT (Bom) . . . 160

S. 194C --Deduction of tax at source--Payment to sub-contractor--Sub-contractor filing Form 15-I--Assessee not liable to deduct tax at source on payment-- CIT v. Sri Marikamba Transport Company (Karn) . . . 129

S. 234B --Advance tax--Interest--Book profit--Inclusion of amounts in terms of Explanation 1(h) to section 115JB with retrospective effect from 1-4-2001--Liability to tax although credited retrospectively--Interest with retrospective effect could not be levied-- CIT v. JSW Energy Ltd. (Bom) . . . 36

S. 239(1) --Return--Delay in filing--Return of income not uploaded in electronic form on to server of Income-tax Department before due date but hard copy filed on last date--Return uploaded on next day, i. e., one day later than due date--Delay of one day in filing return--To be condoned-- Cosme Matias Menezes P. Ltd. v. CIT (Bom) . . . 31

S. 260A --Appeal to High Court--Powers of High Court--High Court can ignore circulars fixing monetary limits for appeal and consider question of law which raises important issue-- CIT v.South Travancore Distilleries and Allied Products (Ker) . . . 56

S. 269SS --Penalty--Acceptance or repayment of loan or deposit exceeding prescribed limit except by account payee cheque or account payee bank draft--Penalty not imposable if there is a reasonable explanation for transgression of the provision--Finding by all three income-tax authorities that explanation was not reasonable--Penalty had to be imposed--Grihalakshmi Vision v. Addl. CIT (Ker) . . . 100

S. 269T --Penalty--Acceptance or repayment of loan or deposit exceeding prescribed limit except by account payee cheque or account payee bank draft--Penalty not imposable if there is a reasonable explanation for transgression of the provision--Finding by all three income-tax authorities that explanation was not reasonable--Penalty had to be imposed--Grihalakshmi Vision v. Addl. CIT (Ker) . . . 100

S. 271(1)(c) --Penalty--Concealment of income or furnishing inaccurate particulars thereof--Meaning of--Allowability of deduction pending consideration by High Court on appeal--Admission of appeal makes it clear that additions debatable--No concealment of income or furnishing inaccurate particulars thereof--Penalty could not be imposed-- CIT v. Ankita Electronics Pvt. Ltd. (Karn) . . . 50

S. 271D --Penalty--Acceptance of loan or deposit otherwise than by account payee cheque or account payee bank draft--Limitation for imposing penalty--Competent authority to impose penalty is Joint Commissioner--Limitation to be computed from date of initiation of proceedings by Joint Commissioner-- Grihalakshmi Vision v. Addl. CIT (Ker) . . . 100

----Penalty--Acceptance or repayment of loan or deposit exceeding prescribed limit except by account payee cheque or account payee bank draft--Penalty not imposable if there is a reasonable explanation for transgression of the provision--Finding by all three income-tax authorities that explanation was not reasonable--Penalty had to be imposed-- Grihalakshmi Vision v. Addl. CIT (Ker) . . . 100

S. 271E --Penalty--Acceptance of loan or deposit otherwise than by account payee cheque or account payee bank draft--Limitation for imposing penalty--Competent authority to impose penalty is Joint Commissioner--Limitation to be computed from date of initiation of proceedings by Joint Commissioner-- Grihalakshmi Vision v. Addl. CIT (Ker) . . . 100

----Penalty--Acceptance or repayment of loan or deposit exceeding prescribed limit except by account payee cheque or account payee bank draft--Penalty not imposable if there is a reasonable explanation for transgression of the provision--Finding by all three income-tax authorities that explanation was not reasonable--Penalty had to be imposed-- Grihalakshmi Vision v. Addl. CIT (Ker) . . . 100

S. 273B --Penalty--Acceptance or repayment of loan or deposit exceeding prescribed limit except by account payee cheque or account payee bank draft--Penalty not imposable if there is a reasonable explanation for transgression of the provision--Finding by all three income-tax authorities that explanation was not reasonable--Penalty had to be imposed--Grihalakshmi Vision v. Addl. CIT (Ker) . . . 100

S. 275 --Penalty--Acceptance or repayment of loan or deposit exceeding prescribed limit except by account payee cheque or account payee bank draft--Penalty not imposable if there is a reasonable explanation for transgression of the provision--Finding by all three income-tax authorities that explanation was not reasonable--Penalty had to be imposed--Grihalakshmi Vision v. Addl. CIT (Ker) . . . 100

S. 275(1)(c) --Penalty--Acceptance of loan or deposit otherwise than by account payee cheque or account payee bank draft--Limitation for imposing penalty--Competent authority to impose penalty is Joint Commissioner--Limitation to be computed from date of initiation of proceedings by Joint Commissioner-- Grihalakshmi Vision v. Addl. CIT (Ker) . . . 100

S. 292BB --Assessment--Assessment under section 143(3)--Condition precedent--Issue of valid notice under section 143(2)--Difference between issue and service of notice--Deeming fiction--Section 292BB not applicable to non-issue of notice-- Asst. CIT v. Greater Noida Industrial Development Authority (All) . . . 14

 

Income-tax Rules, 1962 :

Form 66 --Exemption--Educational institution--Condition precedent for claiming exemption--Application for exemption with copies of audited accounts and balance-sheets for the past three years--Accounts not submitted in spite of grant of opportunity --Undisclosed income of Rs. 4 crores disclosed to Settlement Commission--Rejection of application for exemption--Justified-- Bhupesh Kumar Sikshan Evam Vikas Sansthan v. Director General of Income-tax (Investigation) (Patna) . . . 45

 

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