ITR (TRIB) Volume 45 : Part 6 (Issue dated : 8-2-2016)

 

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

ONLINE EDITION

SUBJECT INDEX TO CASES REPORTED

Income --Computation of income--Disallowance of expenditure relating to exempt income--Rule 8D applicable from assessment year 2008-09--No power in appellate authorities to estimate expenditure on reasonable basis--No requirement for Assessing Officer to record satisfaction as to correctness of assessee's voluntary disallowance--Whether on certain investments no exempt income arise--Order of Commissioner (Appeals) remanding matter back to Assessing Officer to recompute disallowance--Proper--Assessing Officer to point out why voluntary disallowance made by assessee unreasonable and unsatisfactory--Income-tax Act, 1961, s. 14A--Income-tax Rules, 1962, r. 8D-- Munjal Sales Corporation v . Asst. CIT (Chandigarh) . . . 69

 

PRINT EDITION

Volume 45 : Part 6 (Issue dated : 8-2-2016)

SUBJECT INDEX TO CASES REPORTED IN THIS PART

Capital gains --Exemption--Purchase or construction of residential house--Property booked with Housing Board by assessee's mother-in-law, payments made and possession of house taken by her--Assessee later applying to Housing Board to add her name--All payments made 17 months prior to date of sale of flat--Purchase of constructed house in a self-financing scheme from authority treated as construction not purchase of residential house--Assessee not entitled to exemption under section 54F--Income-tax Act, 1961, s. 54F--Seema Singh Beniwal v. Deputy CIT
(Jaipur) . . . 664

----Exemption--Purchase or construction of residential house--Purchase of plot out of sum deposited in capital gains account and investment in construction of garage unit--Construction habitable as servant quarters--Construction within three years from date of sale--Assessee entitled to deduction under section 54F--Income-tax Act, 1961, s. 54F--Seema Singh Beniwal v. Deputy CIT (Jaipur) . . . 664

----Immovable property--Fair market value--Reference to Departmental Valuation Officer--Assessee challenging valuation--Primary duty of Assessing Officer to refer matter to Departmental Valuation Officer for valuation--Failure by Assessing Officer to discharge his duty--Assessing Officer to refer matter to Departmental Valuation Officer to decide afresh--Matter remanded--Income-tax Act, 1961, s. 50C-- S. D. Vimalchand Jain v. ITO (Chennai) . . . 628

Cash credits --Burden of proof--Share application money--Share applicants confirming investment in assessee--Burden on assessee discharged--Moneys cannot be brought to tax as unexplained cash credits--Income-tax Act, 1961, s. 68-- A. P. Refinery P. Ltd. v. Addl. CIT(Chandigarh) . . . 724

Charitable purpose --Definition--Change of law--Advancement of object of general public utility--Profits from business activity incidental to attainment of objectives of trust--Exempt--Insertion of provisos in 2008 and 2009--Effect--No disqualification as long as object of general public utility not merely mask to hide true purpose of rendering of service in relation to trade, commerce or business and such services rendered incidental to or subservient to main object of "general public utility"--Amendment in 2015 signifying substantive conceptual change--Prospective in nature--Income-tax Act, 1961, ss. 2(15), provisos, 11-- Hoshiarpur Improvement Trust v. ITO
(Amritsar) . . . 682

----Definition--Profit motive--Profit on sale does not necessarily imply profit motive--Income-tax Act, 1961, s. 2(15)-- Hoshiarpur Improvement Trust v. ITO
(Amritsar) . . . 682

----Object of general public utility--Does not necessarily require activities or beneficiaries must be funded or subsidised by State--Trusts formed by State Government under statute for planned development of cities and towns--Planned development of cities and towns an object of general public utility--Formation of trusts not mask or device to hide true purpose of business--Presence of profit element in conservancy changes and unforeseen charges does not vitiate charitable character of activities--Auction does not make functioning of trusts a commercial venture--Trusts not implementing poverty alleviation programs--Object of general public utility does not necessarily involve direct acts of charity driven by compassion and benevolence--Trusts entitled to exemption--Income-tax Act, 1961, s. 2(15), provisos--Hoshiarpur Improvement Trust v. ITO
(Amritsar) . . . 682

Income --Principle of mutuality--Conditions for application--Beneficiaries of assessee-trust general public--Contributors of assessee have no role in administration--Principle of mutuality not applicable--Income-tax Act, 1961-- Sri Sai Padhuga Trust v. ITO (Exemptions) (Chennai) . . . 633

Reassessment --Jurisdiction--Reassessment not permissible on mere change of opinion--Report of Investigation Wing revealing assessee accepting accommodation entries part of record before Assessing Officer at stage of original assessment--Assessment order stated to have been passed on basis of material relating to investments in assessee--Reassessment to bring to tax share application moneys as undisclosed income of assessee--Not permissible--Income-tax Act, 1961, ss. 68, 69C, 148-- A. P. Refinery P. Ltd. v. Addl. CIT(Chandigarh) . . . 724

Search and seizure --Undisclosed income--Director put under coercion to surrender additional income--Disclosure not voluntary--Assessee contending that surrender in connection with alleged excess stock pointed out by search officials--No incriminating material supporting offer other than diary containing trade transactions--Additional income offered only in connection with alleged excess stock--Income-tax Act, 1961, s. 132, 132(4)--Tribhovandas Bhimji Zaveri (Delhi) P. Ltd. v. Asst. CIT
(Mumbai) . . . 636

----Unexplained investment--Pocket diary seized during search--Presumption that belonged to assessee--Transactions noted down in diary tallying with jewellery items dealt with by assessee--Transactions in diary can only be trade transactions--Gross profit declared by assessee to be assessed in respect of transactions noted down in diary--Addition to be restricted at rate of gross profit--Income-tax Act, 1961, s. 69-- Tribhovandas Bhimji Zaveri (Delhi) P. Ltd. v. Asst. CIT (Mumbai) . . . 636

Unexplained money --Reconciliation statement by assessee that some items to be included in physical stock and some items received on sale or return basis from its suppliers to be excluded from book stock--Commissioner (Appeals) enhancing addition accepting inclusion of physical stock and rejecting exclusion of return from book stock--Pick and choose basis adopted by Commissioner (Appeals) not permissible--Commissioner (Appeals) not providing opportunity to assessee before enhancing addition--Violation of section 251(2)--No merit in decision of Commissioner (Appeals)--Income-tax Act, 1961, s. 69A-- Tribhovandas Bhimji Zaveri (Delhi) P. Ltd. v. Asst. CIT
(Mumbai) . . . 636

 

SECTIONWISE INDEX TO CASES REPORTED IN THIS PART

Income-tax Act, 1961

S. 2(15) --Charitable purpose--Definition--Profit motive--Profit on sale does not necessarily imply profit motive-- Hoshiarpur Improvement Trust v. ITO
(Amritsar) . . . 682

S. 2(15), provisos --Charitable purpose--Definition--Change of law--Advancement of object of general public utility--Profits from business activity incidental to attainment of objectives of trust--Exempt--Insertion of provisos in 2008 and 2009--Effect--No disqualification as long as object of general public utility not merely mask to hide true purpose of rendering of service in relation to trade, commerce or business and such services rendered incidental to or subservient to main object of "general public utility"--Amendment in 2015 signifying substantive conceptual change--Prospective in nature-- Hoshiarpur Improvement Trust v. ITO (Amritsar) . . . 682

----Charitable purpose--Object of general public utility--Does not necessarily require activities or beneficiaries must be funded or subsidised by State--Trusts formed by State Government under statute for planned development of cities and towns--Planned development of cities and towns an object of general public utility--Formation of trusts not mask or device to hide true purpose of business--Presence of profit element in conservancy changes and unforeseen charges does not vitiate charitable character of activities--Auction does not make functioning of trusts a commercial venture--Trusts not implementing poverty alleviation programs--Object of general public utility does not necessarily involve direct acts of charity driven by compassion and benevolence--Trusts entitled to exemption-- Hoshiarpur Improvement Trust v. ITO
(Amritsar) . . . 682

S. 11 --Charitable purpose--Definition--Change of law--Advancement of object of general public utility--Profits from business activity incidental to attainment of objectives of trust--Exempt--Insertion of provisos in 2008 and 2009--Effect--No disqualification as long as object of general public utility not merely mask to hide true purpose of rendering of service in relation to trade, commerce or business and such services rendered incidental to or subservient to main object of "general public utility"--Amendment in 2015 signifying substantive conceptual change--Prospective in nature-- Hoshiarpur Improvement Trust v. ITO (Amritsar) . . . 682

S. 50C --Capital gains--Immovable property--Fair market value--Reference to Departmental Valuation Officer--Assessee challenging valuation--Primary duty of Assessing Officer to refer matter to Departmental Valuation Officer for valuation--Failure by Assessing Officer to discharge his duty--Assessing Officer to refer matter to Departmental Valuation Officer to decide afresh--Matter remanded-- S. D. Vimalchand Jain v. ITO (Chennai) . . . 628

S. 54F --Capital gains--Exemption--Purchase or construction of residential house--Property booked with Housing Board by assessee's mother-in-law, payments made and possession of house taken by her--Assessee later applying to Housing Board to add her name--All payments made 17 months prior to date of sale of flat--Purchase of constructed house in a self-financing scheme from authority treated as construction not purchase of residential house--Assessee not entitled to exemption under section 54F-- Seema Singh Beniwal v. Deputy CIT (Jaipur) . . . 664

----Capital gains--Exemption--Purchase or construction of residential house--Purchase of plot out of sum deposited in capital gains account and investment in construction of garage unit--Construction habitable as servant quarters--Construction within three years from date of sale--Assessee entitled to deduction under section 54F-- Seema Singh Beniwal v. Deputy CIT (Jaipur) . . . 664

S. 68 --Cash credits--Burden of proof--Share application money--Share applicants confirming investment in assessee--Burden on assessee discharged--Moneys cannot be brought to tax as unexplained cash credits-- A. P. Refinery P. Ltd. v. Addl. CIT
(Chandigarh) . . . 724

----Reassessment--Jurisdiction--Reassessment not permissible on mere change of opinion--Report of Investigation Wing revealing assessee accepting accommodation entries part of record before Assessing Officer at stage of original assessment--Assessment order stated to have been passed on basis of material relating to investments in assessee--Reassessment to bring to tax share application moneys as undisclosed income of assessee--Not permissible-- A. P. Refinery P. Ltd. v. Addl. CIT
(Chandigarh) . . . 724

S. 69 --Search and seizure--Unexplained investment--Pocket diary seized during search--Presumption that belonged to assessee--Transactions noted down in diary tallying with jewellery items dealt with by assessee--Transactions in diary can only be trade transactions--Gross profit declared by assessee to be assessed in respect of transactions noted down in diary--Addition to be restricted at rate of gross profit-- Tribhovandas Bhimji Zaveri (Delhi) P. Ltd. v. Asst. CIT (Mumbai) . . . 636

S. 69A --Unexplained money--Reconciliation statement by assessee that some items to be included in physical stock and some items received on sale or return basis from its suppliers to be excluded from book stock--Commissioner (Appeals) enhancing addition accepting inclusion of physical stock and rejecting exclusion of return from book stock--Pick and choose basis adopted by Commissioner (Appeals) not permissible--Commissioner (Appeals) not providing opportunity to assessee before enhancing addition--Violation of section 251(2)--No merit in decision of Commissioner (Appeals)-- Tribhovandas Bhimji Zaveri (Delhi) P. Ltd. v. Asst. CIT (Mumbai) . . . 636

S. 69C --Reassessment--Jurisdiction--Reassessment not permissible on mere change of opinion--Report of Investigation Wing revealing assessee accepting accommodation entries part of record before Assessing Officer at stage of original assessment--Assessment order stated to have been passed on basis of material relating to investments in assessee--Reassessment to bring to tax share application moneys as undisclosed income of assessee--Not permissible-- A. P. Refinery P. Ltd. v. Addl. CIT
(Chandigarh) . . . 724

S. 132 --Search and seizure--Undisclosed income--Director put under coercion to surrender additional income--Disclosure not voluntary--Assessee contending that surrender in connection with alleged excess stock pointed out by search officials--No incriminating material supporting offer other than diary containing trade transactions--Additional income offered only in connection with alleged excess stock-- Tribhovandas Bhimji Zaveri (Delhi) P. Ltd. v. Asst. CIT (Mumbai) . . . 636

S. 132(4) --Search and seizure--Undisclosed income--Director put under coercion to surrender additional income--Disclosure not voluntary--Assessee contending that surrender in connection with alleged excess stock pointed out by search officials--No incriminating material supporting offer other than diary containing trade transactions--Additional income offered only in connection with alleged excess stock-- Tribhovandas Bhimji Zaveri (Delhi) P. Ltd. v. Asst. CIT (Mumbai) . . . 636

S. 148 --Reassessment--Jurisdiction--Reassessment not permissible on mere change of opinion--Report of Investigation Wing revealing assessee accepting accommodation entries part of record before Assessing Officer at stage of original assessment--Assessment order stated to have been passed on basis of material relating to investments in assessee--Reassessment to bring to tax share application moneys as undisclosed income of assessee--Not permissible-- A. P. Refinery P. Ltd. v. Addl. CIT
(Chandigarh) . . . 724

 

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Posted by: CA RAJU SHAH <shahmars@hotmail.com>

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ITR (TRIB) Volume 45 : Part 6 (Issue dated : 8-2-2016)

 

 

 

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

ONLINE EDITION

SUBJECT INDEX TO CASES REPORTED

Income --Computation of income--Disallowance of expenditure relating to exempt income--Rule 8D applicable from assessment year 2008-09--No power in appellate authorities to estimate expenditure on reasonable basis--No requirement for Assessing Officer to record satisfaction as to correctness of assessee's voluntary disallowance--Whether on certain investments no exempt income arise--Order of Commissioner (Appeals) remanding matter back to Assessing Officer to recompute disallowance--Proper--Assessing Officer to point out why voluntary disallowance made by assessee unreasonable and unsatisfactory--Income-tax Act, 1961, s. 14A--Income-tax Rules, 1962, r. 8D-- Munjal Sales Corporation v . Asst. CIT (Chandigarh) . . . 69

 

PRINT EDITION

Volume 45 : Part 6 (Issue dated : 8-2-2016)

SUBJECT INDEX TO CASES REPORTED IN THIS PART

Capital gains --Exemption--Purchase or construction of residential house--Property booked with Housing Board by assessee's mother-in-law, payments made and possession of house taken by her--Assessee later applying to Housing Board to add her name--All payments made 17 months prior to date of sale of flat--Purchase of constructed house in a self-financing scheme from authority treated as construction not purchase of residential house--Assessee not entitled to exemption under section 54F--Income-tax Act, 1961, s. 54F--Seema Singh Beniwal v. Deputy CIT
(Jaipur) . . . 664

----Exemption--Purchase or construction of residential house--Purchase of plot out of sum deposited in capital gains account and investment in construction of garage unit--Construction habitable as servant quarters--Construction within three years from date of sale--Assessee entitled to deduction under section 54F--Income-tax Act, 1961, s. 54F--Seema Singh Beniwal v. Deputy CIT (Jaipur) . . . 664

----Immovable property--Fair market value--Reference to Departmental Valuation Officer--Assessee challenging valuation--Primary duty of Assessing Officer to refer matter to Departmental Valuation Officer for valuation--Failure by Assessing Officer to discharge his duty--Assessing Officer to refer matter to Departmental Valuation Officer to decide afresh--Matter remanded--Income-tax Act, 1961, s. 50C-- S. D. Vimalchand Jain v. ITO (Chennai) . . . 628

Cash credits --Burden of proof--Share application money--Share applicants confirming investment in assessee--Burden on assessee discharged--Moneys cannot be brought to tax as unexplained cash credits--Income-tax Act, 1961, s. 68-- A. P. Refinery P. Ltd. v. Addl. CIT(Chandigarh) . . . 724

Charitable purpose --Definition--Change of law--Advancement of object of general public utility--Profits from business activity incidental to attainment of objectives of trust--Exempt--Insertion of provisos in 2008 and 2009--Effect--No disqualification as long as object of general public utility not merely mask to hide true purpose of rendering of service in relation to trade, commerce or business and such services rendered incidental to or subservient to main object of "general public utility"--Amendment in 2015 signifying substantive conceptual change--Prospective in nature--Income-tax Act, 1961, ss. 2(15), provisos, 11-- Hoshiarpur Improvement Trust v. ITO
(Amritsar) . . . 682

----Definition--Profit motive--Profit on sale does not necessarily imply profit motive--Income-tax Act, 1961, s. 2(15)-- Hoshiarpur Improvement Trust v. ITO
(Amritsar) . . . 682

----Object of general public utility--Does not necessarily require activities or beneficiaries must be funded or subsidised by State--Trusts formed by State Government under statute for planned development of cities and towns--Planned development of cities and towns an object of general public utility--Formation of trusts not mask or device to hide true purpose of business--Presence of profit element in conservancy changes and unforeseen charges does not vitiate charitable character of activities--Auction does not make functioning of trusts a commercial venture--Trusts not implementing poverty alleviation programs--Object of general public utility does not necessarily involve direct acts of charity driven by compassion and benevolence--Trusts entitled to exemption--Income-tax Act, 1961, s. 2(15), provisos--Hoshiarpur Improvement Trust v. ITO
(Amritsar) . . . 682

Income --Principle of mutuality--Conditions for application--Beneficiaries of assessee-trust general public--Contributors of assessee have no role in administration--Principle of mutuality not applicable--Income-tax Act, 1961-- Sri Sai Padhuga Trust v. ITO (Exemptions) (Chennai) . . . 633

Reassessment --Jurisdiction--Reassessment not permissible on mere change of opinion--Report of Investigation Wing revealing assessee accepting accommodation entries part of record before Assessing Officer at stage of original assessment--Assessment order stated to have been passed on basis of material relating to investments in assessee--Reassessment to bring to tax share application moneys as undisclosed income of assessee--Not permissible--Income-tax Act, 1961, ss. 68, 69C, 148-- A. P. Refinery P. Ltd. v. Addl. CIT(Chandigarh) . . . 724

Search and seizure --Undisclosed income--Director put under coercion to surrender additional income--Disclosure not voluntary--Assessee contending that surrender in connection with alleged excess stock pointed out by search officials--No incriminating material supporting offer other than diary containing trade transactions--Additional income offered only in connection with alleged excess stock--Income-tax Act, 1961, s. 132, 132(4)--Tribhovandas Bhimji Zaveri (Delhi) P. Ltd. v. Asst. CIT
(Mumbai) . . . 636

----Unexplained investment--Pocket diary seized during search--Presumption that belonged to assessee--Transactions noted down in diary tallying with jewellery items dealt with by assessee--Transactions in diary can only be trade transactions--Gross profit declared by assessee to be assessed in respect of transactions noted down in diary--Addition to be restricted at rate of gross profit--Income-tax Act, 1961, s. 69-- Tribhovandas Bhimji Zaveri (Delhi) P. Ltd. v. Asst. CIT (Mumbai) . . . 636

Unexplained money --Reconciliation statement by assessee that some items to be included in physical stock and some items received on sale or return basis from its suppliers to be excluded from book stock--Commissioner (Appeals) enhancing addition accepting inclusion of physical stock and rejecting exclusion of return from book stock--Pick and choose basis adopted by Commissioner (Appeals) not permissible--Commissioner (Appeals) not providing opportunity to assessee before enhancing addition--Violation of section 251(2)--No merit in decision of Commissioner (Appeals)--Income-tax Act, 1961, s. 69A-- Tribhovandas Bhimji Zaveri (Delhi) P. Ltd. v. Asst. CIT
(Mumbai) . . . 636

 

SECTIONWISE INDEX TO CASES REPORTED IN THIS PART

Income-tax Act, 1961

S. 2(15) --Charitable purpose--Definition--Profit motive--Profit on sale does not necessarily imply profit motive-- Hoshiarpur Improvement Trust v. ITO
(Amritsar) . . . 682

S. 2(15), provisos --Charitable purpose--Definition--Change of law--Advancement of object of general public utility--Profits from business activity incidental to attainment of objectives of trust--Exempt--Insertion of provisos in 2008 and 2009--Effect--No disqualification as long as object of general public utility not merely mask to hide true purpose of rendering of service in relation to trade, commerce or business and such services rendered incidental to or subservient to main object of "general public utility"--Amendment in 2015 signifying substantive conceptual change--Prospective in nature-- Hoshiarpur Improvement Trust v. ITO (Amritsar) . . . 682

----Charitable purpose--Object of general public utility--Does not necessarily require activities or beneficiaries must be funded or subsidised by State--Trusts formed by State Government under statute for planned development of cities and towns--Planned development of cities and towns an object of general public utility--Formation of trusts not mask or device to hide true purpose of business--Presence of profit element in conservancy changes and unforeseen charges does not vitiate charitable character of activities--Auction does not make functioning of trusts a commercial venture--Trusts not implementing poverty alleviation programs--Object of general public utility does not necessarily involve direct acts of charity driven by compassion and benevolence--Trusts entitled to exemption-- Hoshiarpur Improvement Trust v. ITO
(Amritsar) . . . 682

S. 11 --Charitable purpose--Definition--Change of law--Advancement of object of general public utility--Profits from business activity incidental to attainment of objectives of trust--Exempt--Insertion of provisos in 2008 and 2009--Effect--No disqualification as long as object of general public utility not merely mask to hide true purpose of rendering of service in relation to trade, commerce or business and such services rendered incidental to or subservient to main object of "general public utility"--Amendment in 2015 signifying substantive conceptual change--Prospective in nature-- Hoshiarpur Improvement Trust v. ITO (Amritsar) . . . 682

S. 50C --Capital gains--Immovable property--Fair market value--Reference to Departmental Valuation Officer--Assessee challenging valuation--Primary duty of Assessing Officer to refer matter to Departmental Valuation Officer for valuation--Failure by Assessing Officer to discharge his duty--Assessing Officer to refer matter to Departmental Valuation Officer to decide afresh--Matter remanded-- S. D. Vimalchand Jain v. ITO (Chennai) . . . 628

S. 54F --Capital gains--Exemption--Purchase or construction of residential house--Property booked with Housing Board by assessee's mother-in-law, payments made and possession of house taken by her--Assessee later applying to Housing Board to add her name--All payments made 17 months prior to date of sale of flat--Purchase of constructed house in a self-financing scheme from authority treated as construction not purchase of residential house--Assessee not entitled to exemption under section 54F-- Seema Singh Beniwal v. Deputy CIT (Jaipur) . . . 664

----Capital gains--Exemption--Purchase or construction of residential house--Purchase of plot out of sum deposited in capital gains account and investment in construction of garage unit--Construction habitable as servant quarters--Construction within three years from date of sale--Assessee entitled to deduction under section 54F-- Seema Singh Beniwal v. Deputy CIT (Jaipur) . . . 664

S. 68 --Cash credits--Burden of proof--Share application money--Share applicants confirming investment in assessee--Burden on assessee discharged--Moneys cannot be brought to tax as unexplained cash credits-- A. P. Refinery P. Ltd. v. Addl. CIT
(Chandigarh) . . . 724

----Reassessment--Jurisdiction--Reassessment not permissible on mere change of opinion--Report of Investigation Wing revealing assessee accepting accommodation entries part of record before Assessing Officer at stage of original assessment--Assessment order stated to have been passed on basis of material relating to investments in assessee--Reassessment to bring to tax share application moneys as undisclosed income of assessee--Not permissible-- A. P. Refinery P. Ltd. v. Addl. CIT
(Chandigarh) . . . 724

S. 69 --Search and seizure--Unexplained investment--Pocket diary seized during search--Presumption that belonged to assessee--Transactions noted down in diary tallying with jewellery items dealt with by assessee--Transactions in diary can only be trade transactions--Gross profit declared by assessee to be assessed in respect of transactions noted down in diary--Addition to be restricted at rate of gross profit-- Tribhovandas Bhimji Zaveri (Delhi) P. Ltd. v. Asst. CIT (Mumbai) . . . 636

S. 69A --Unexplained money--Reconciliation statement by assessee that some items to be included in physical stock and some items received on sale or return basis from its suppliers to be excluded from book stock--Commissioner (Appeals) enhancing addition accepting inclusion of physical stock and rejecting exclusion of return from book stock--Pick and choose basis adopted by Commissioner (Appeals) not permissible--Commissioner (Appeals) not providing opportunity to assessee before enhancing addition--Violation of section 251(2)--No merit in decision of Commissioner (Appeals)-- Tribhovandas Bhimji Zaveri (Delhi) P. Ltd. v. Asst. CIT (Mumbai) . . . 636

S. 69C --Reassessment--Jurisdiction--Reassessment not permissible on mere change of opinion--Report of Investigation Wing revealing assessee accepting accommodation entries part of record before Assessing Officer at stage of original assessment--Assessment order stated to have been passed on basis of material relating to investments in assessee--Reassessment to bring to tax share application moneys as undisclosed income of assessee--Not permissible-- A. P. Refinery P. Ltd. v. Addl. CIT
(Chandigarh) . . . 724

S. 132 --Search and seizure--Undisclosed income--Director put under coercion to surrender additional income--Disclosure not voluntary--Assessee contending that surrender in connection with alleged excess stock pointed out by search officials--No incriminating material supporting offer other than diary containing trade transactions--Additional income offered only in connection with alleged excess stock-- Tribhovandas Bhimji Zaveri (Delhi) P. Ltd. v. Asst. CIT (Mumbai) . . . 636

S. 132(4) --Search and seizure--Undisclosed income--Director put under coercion to surrender additional income--Disclosure not voluntary--Assessee contending that surrender in connection with alleged excess stock pointed out by search officials--No incriminating material supporting offer other than diary containing trade transactions--Additional income offered only in connection with alleged excess stock-- Tribhovandas Bhimji Zaveri (Delhi) P. Ltd. v. Asst. CIT (Mumbai) . . . 636

S. 148 --Reassessment--Jurisdiction--Reassessment not permissible on mere change of opinion--Report of Investigation Wing revealing assessee accepting accommodation entries part of record before Assessing Officer at stage of original assessment--Assessment order stated to have been passed on basis of material relating to investments in assessee--Reassessment to bring to tax share application moneys as undisclosed income of assessee--Not permissible-- A. P. Refinery P. Ltd. v. Addl. CIT
(Chandigarh) . . . 724

 

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Posted by: CA RAJU SHAH <shahmars@hotmail.com>

---

ITR Volume 380 : Part 5 (Issue dated : 1-2-2016)

 

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

ONLINE EDITION

SUBJECT INDEX TO CASES REPORTED

HIGH COURTS

Company --Computation of book profits under section 115JA--Effect of amendment with retrospective effect by Finance (No. 2) Act, 2009--Provision for bad debts--Not deductible from book profits--Income-tax Act, 1961, s. 115JA-- CIT v. Shriram Investment Ltd. (Mad) . . . 53

----Computation of book profits under section 115JA--Overdue charges not includible in book profits--Income-tax Act, 1961, s. 115JA-- CIT v. Shriram Investment Ltd. (Mad) . . . 53

Non-resident --Taxability in India--Damages on account of fraud--Authority for Advance Rulings rendering its ruling based on wrong premise that receipts were in nature of revenue receipts--Authority to examine afresh whether receipts capital or revenue receipts and to determine whether those receipts chargeable to income tax in India in light of section 195--Matter remanded--Income-tax Act, 1961, s. 195-- Bernstein Litowitz Berger and Grossmann LLP v. Union of India (Delhi) . . . 49

 

PRINT EDITION

ITR Volume 380 : Part 5 (Issue dated : 1-2-2016)

SUBJECT INDEX TO CASES REPORTED

HIGH COURTS

Income --Disallowance of expenditure relating to exempt income--Burden of proof--Onus on Assessing Officer to record satisfaction that interest bearing funds used for investment to earn tax-free income--No tangible material on record that could have enabled Assessing Officer to record satisfaction in terms of section 14A--No disallowance--Income-tax Act, 1961, s. 14A--Income-tax Rules, 1962, r. 8D-- CIT v. Abhishek Industries Ltd. (P&H) . . . 652

Loss --Carry forward and set off of losses--Condition precedent--Shares carrying fifty-one per cent. of voting power at close of financial year in which loss suffered should be held by same persons on last day of previous year in which loss to be set off--Change of hundred per cent. shareholding and beneficial ownership of shares in assessee--No question of piercing veil at instance of assessee to show ultimate beneficial ownership with parent company arises--Income-tax Act, 1961, s. 79-- Yum Restaurants (India) P. Ltd. v. ITO(Delhi) . . . 637

Reassessment --Notice after four years--Conditions precedent--Assessing Officer in original assessment proceedings considering each and every document and explanation given by assessee on seized documents--Tribunal finding categorically that assessee disclosed all material facts necessary for making assessment and no failure on his part--Notice after four years not valid--Income-tax Act, 1961, ss. 147, 148-- CIT v. Hemkunt Timbers Ltd. (All) . . . 658

----Notice after four years--Limitation--Provision at relevant time was ten years--Notice could be issued on or before 31-5-2001--Notice issued on 11-4-2001--Not barred by limitation--Income-tax Act, 1961, s. 149-- CIT v. Hemkunt Timbers Ltd. (All) . . . 658

Search and seizure --Assessment in search cases--Share application money--No incriminating evidence related to share capital issued found during course of search--Deletion of addition under section 68--Justified--Income-tax Act, 1961, ss. 68, 153A--Principal CIT v. Kurele Paper Mills P. Ltd. (Delhi) . . . 571

----Assessment of third person--Condition precedent--Discovery of incriminating material showing undisclosed income of third person--Documents seized--Affidavits of person in respect of whom search conducted that documents belonged to him--No other evidence of undisclosed income--Proceedings under section 153C not valid--Income-tax Act, 1961, s. 153C-- CIT v. RRJ Securities Ltd. (Delhi) . . . 612

----Assessment of third person--Condition precedent--No satisfaction recorded by Assessing Officer that assets, documents seized belong to some other person--No incriminating material attributable to assessee seized during course of search at premises searched--Assessing Officer cannot assume jurisdiction and transmit items to another file concerning that person without recording satisfaction--Income-tax Act, 1961, ss. 153A, 158BD-- CIT v. Mechmen (MP) . . . 591

----Assessment of third person--Condition precedent--Recording of satisfaction by Assessing Officer having jurisdiction over person in respect of whom search conducted that money or assets discovered during search belong to third person--Recording of satisfaction necessary even if Assessing Officer of both persons same--Income-tax Act, 1961, s. 153A-- CIT v. Mechmen (MP) . . . 591

----Assessment of third person--Condition precedent--Satisfaction of Assessing Officer that undisclosed income found during search belongs to third person--No satisfaction recorded before initiating proceedings under section 153C--Assessment not valid--Income-tax Act, 1961, s. 153C-- CIT v. Nirmala Keshwani (Smt.) (All) . . . 566

----Assessment of third person--Limitation--Limitation starts from date on which assets or documents received by Assessing Officer of third person--Assessing Officer of third person also assessee of person in respect of whom search conducted--Limitation will start on date of recording of satisfaction that incriminating material belonged to third person--Satisfaction recorded on 8-9-2010--Assessments for assessment years 2003-04 and 2004-05 barred by limitation--Income-tax Act, 1961, s. 153C-- CIT v. RRJ Securities Ltd. (Delhi) . . . 612

----Block assessment--Undisclosed income--General principles--Assessments completed on date of search--No incriminating materials found during search--Block assessment not valid--Income-tax Act, 1961, ss. 132, 153A-- CIT v. Kabul Chawla (Delhi) . . . 573

----Procedure for assessment of third person--Special procedure of assessment of search cases--No dissimilarity--Power of Assessing Officer having jurisdiction in both cases identical--Income-tax Act, 1961, ss. 153C, 158BD-- CIT v. Mechmen (MP) . . . 591

Transfer pricing --International transactions--Arm’s length price--Advertising, marketing and promotion expenses--Bright line method not legally permissible method--Need for detailed examination of operating agreement between assessee and its associated enterprise and franchisees to ascertain if any part of expenses was for purpose of creating marketing intangibles for associated enterprise of assessee--Determination of arm’s length price only thereafter--Matter remanded--Income-tax Act, 1961, s. 92B-- Yum Restaurants (India) P. Ltd. v. ITO (Delhi) . . . 637

 

AUTHORITY FOR ADVANCE RULINGS

Non-resident --Taxability in India--Capital gains--Capital asset--Non-resident acquiring shares in Indian company between September, 1995 and January, 2005--Proposing to transfer them in favour of group entity in Singapore as part of group re-organisation--Non-resident not having permanent establishment in India--Transaction not for avoidance of tax--Shares to be treated as capital asset not stock-in-trade--Profits not business income but capital gains--Not taxable in India--Even if treated as business income not taxable in absence of permanent establishment--Provisions relating to minimum alternate tax, transfer pricing and deduction of tax at source not applicable--Non-resident not bound to file return in India--Income-tax Act, 1961, ss. 2(14), 92 to 92F, 115JB, 139, 195--Double Taxation Avoidance Agreement between India and Mauritius, arts. 5, 13-- Dow AgroSciences Agricultural Products Ltd. , In re . . . 668

 

SECTIONWISE INDEX TO CASES REPORTED

Double Taxation Avoidance Agreement between India and Mauritius :

Art. 5 --Non-resident--Taxability in India--Capital gains--Capital asset--Non-resident acquiring shares in Indian company between September, 1995 and January, 2005--Proposing to transfer them in favour of group entity in Singapore as part of group re-organisation--Non-resident not having permanent establishment in India--Transaction not for avoidance of tax--Shares to be treated as capital asset not stock-in-trade--Profits not business income but capital gains--Not taxable in India--Even if treated as business income not taxable in absence of permanent establishment--Provisions relating to minimum alternate tax, transfer pricing and deduction of tax at source not applicable--Non-resident not bound to file return in India-- Dow AgroSciences Agricultural Products Ltd. , In re . . . 668

Art. 13 --Non-resident--Taxability in India--Capital gains--Capital asset--Non-resident acquiring shares in Indian company between September, 1995 and January, 2005--Proposing to transfer them in favour of group entity in Singapore as part of group re-organisation--Non-resident not having permanent establishment in India--Transaction not for avoidance of tax--Shares to be treated as capital asset not stock-in-trade--Profits not business income but capital gains--Not taxable in India--Even if treated as business income not taxable in absence of permanent establishment--Provisions relating to minimum alternate tax, transfer pricing and deduction of tax at source not applicable--Non-resident not bound to file return in India-- Dow AgroSciences Agricultural Products Ltd. , In re . . . 668

Income-tax Act, 1961 :

S. 2(14) --Non-resident--Taxability in India--Capital gains--Capital asset--Non-resident acquiring shares in Indian company between September, 1995 and January, 2005--Proposing to transfer them in favour of group entity in Singapore as part of group re-organisation--Non-resident not having permanent establishment in India--Transaction not for avoidance of tax--Shares to be treated as capital asset not stock-in-trade--Profits not business income but capital gains--Not taxable in India--Even if treated as business income not taxable in absence of permanent establishment--Provisions relating to minimum alternate tax, transfer pricing and deduction of tax at source not applicable--Non-resident not bound to file return in India-- Dow AgroSciences Agricultural Products Ltd. , In re . . . 668

S. 14A --Income--Disallowance of expenditure relating to exempt income--Burden of proof--Onus on Assessing Officer to record satisfaction that interest bearing funds used for investment to earn tax-free income--No tangible material on record that could have enabled Assessing Officer to record satisfaction in terms of section 14A--No disallowance-- CIT v.Abhishek Industries Ltd. (P&H) . . . 652

S. 68 --Search and seizure--Assessment in search cases--Share application money--No incriminating evidence related to share capital issued found during course of search--Deletion of addition under section 68--Justified-- Principal CIT v. Kurele Paper Mills P. Ltd.(Delhi) . . . 571

S. 79 --Loss--Carry forward and set off of losses--Condition precedent--Shares carrying fifty-one per cent. of voting power at close of financial year in which loss suffered should be held by same persons on last day of previous year in which loss to be set off--Change of hundred per cent. shareholding and beneficial ownership of shares in assessee--No question of piercing veil at instance of assessee to show ultimate beneficial ownership with parent company arises-- Yum Restaurants (India) P. Ltd. v. ITO (Delhi) . . . 637

S. 92 to 92F --Non-resident--Taxability in India--Capital gains--Capital asset--Non-resident acquiring shares in Indian company between September, 1995 and January, 2005--Proposing to transfer them in favour of group entity in Singapore as part of group re-organisation--Non-resident not having permanent establishment in India--Transaction not for avoidance of tax--Shares to be treated as capital asset not stock-in-trade--Profits not business income but capital gains--Not taxable in India--Even if treated as business income not taxable in absence of permanent establishment--Provisions relating to minimum alternate tax, transfer pricing and deduction of tax at source not applicable--Non-resident not bound to file return in India-- Dow AgroSciences Agricultural Products Ltd. , In re . . . 668

S. 92B --Transfer pricing--International transactions--Arm’s length price--Advertising, marketing and promotion expenses--Bright line method not legally permissible method--Need for detailed examination of operating agreement between assessee and its associated enterprise and franchisees to ascertain if any part of expenses was for purpose of creating marketing intangibles for associated enterprise of assessee--Determination of arm’s length price only thereafter--Matter remanded-- Yum Restaurants (India) P. Ltd. v. ITO(Delhi) . . . 637

S. 115JB --Non-resident--Taxability in India--Capital gains--Capital asset--Non-resident acquiring shares in Indian company between September, 1995 and January, 2005--Proposing to transfer them in favour of group entity in Singapore as part of group re-organisation--Non-resident not having permanent establishment in India--Transaction not for avoidance of tax--Shares to be treated as capital asset not stock-in-trade--Profits not business income but capital gains--Not taxable in India--Even if treated as business income not taxable in absence of permanent establishment--Provisions relating to minimum alternate tax, transfer pricing and deduction of tax at source not applicable--Non-resident not bound to file return in India-- Dow AgroSciences Agricultural Products Ltd. , In re . . . 668

S. 132 --Search and seizure--Block assessment--Undisclosed income--General principles--Assessments completed on date of search--No incriminating materials found during search--Block assessment not valid-- CIT v. Kabul Chawla (Delhi) . . . 573

S. 139 --Non-resident--Taxability in India--Capital gains--Capital asset--Non-resident acquiring shares in Indian company between September, 1995 and January, 2005--Proposing to transfer them in favour of group entity in Singapore as part of group re-organisation--Non-resident not having permanent establishment in India--Transaction not for avoidance of tax--Shares to be treated as capital asset not stock-in-trade--Profits not business income but capital gains--Not taxable in India--Even if treated as business income not taxable in absence of permanent establishment--Provisions relating to minimum alternate tax, transfer pricing and deduction of tax at source not applicable--Non-resident not bound to file return in India-- Dow AgroSciences Agricultural Products Ltd. , In re . . . 668

S. 147 --Reassessment--Notice after four years--Conditions precedent--Assessing Officer in original assessment proceedings considering each and every document and explanation given by assessee on seized documents--Tribunal finding categorically that assessee disclosed all material facts necessary for making assessment and no failure on his part--Notice after four years not valid-- CIT v. Hemkunt Timbers Ltd. (All) . . . 658

S. 148 --Reassessment--Notice after four years--Conditions precedent--Assessing Officer in original assessment proceedings considering each and every document and explanation given by assessee on seized documents--Tribunal finding categorically that assessee disclosed all material facts necessary for making assessment and no failure on his part--Notice after four years not valid-- CIT v. Hemkunt Timbers Ltd. (All) . . . 658

S. 149 --Reassessment--Notice after four years--Limitation--Provision at relevant time was ten years--Notice could be issued on or before 31-5-2001--Notice issued on 11-4-2001--Not barred by limitation-- CIT v. Hemkunt Timbers Ltd. (All) . . . 658

S. 153A --Search and seizure--Assessment in search cases--Share application money--No incriminating evidence related to share capital issued found during course of search--Deletion of addition under section 68--Justified-- Principal CIT v. Kurele Paper Mills P. Ltd.(Delhi) . . . 571

----Search and seizure--Assessment of third person--Condition precedent--No satisfaction recorded by Assessing Officer that assets, documents seized belong to some other person--No incriminating material attributable to assessee seized during course of search at premises searched--Assessing Officer cannot assume jurisdiction and transmit items to another file concerning that person without recording satisfaction-- CIT v. Mechmen (MP) . . . 591

----Search and seizure--Assessment of third person--Condition precedent--Recording of satisfaction by Assessing Officer having jurisdiction over person in respect of whom search conducted that money or assets discovered during search belong to third person--Recording of satisfaction necessary even if Assessing Officer of both persons same-- CIT v.Mechmen (MP) . . . 591

----Search and seizure--Block assessment--Undisclosed income--General principles--Assessments completed on date of search--No incriminating materials found during search--Block assessment not valid-- CIT v. Kabul Chawla (Delhi) . . . 573

S. 153C --Search and seizure--Assessment of third person--Condition precedent--Discovery of incriminating material showing undisclosed income of third person--Documents seized--Affidavits of person in respect of whom search conducted that documents belonged to him--No other evidence of undisclosed income--Proceedings under section 153C not valid-- CIT v.RRJ Securities Ltd. (Delhi) . . . 612

----Search and seizure--Assessment of third person--Condition precedent--Satisfaction of Assessing Officer that undisclosed income found during search belongs to third person--No satisfaction recorded before initiating proceedings under section 153C--Assessment not valid-- CIT v. Nirmala Keshwani (Smt.) (All) . . . 566

----Search and seizure--Assessment of third person--Limitation--Limitation starts from date on which assets or documents received by Assessing Officer of third person--Assessing Officer of third person also assessee of person in respect of whom search conducted--Limitation will start on date of recording of satisfaction that incriminating material belonged to third person--Satisfaction recorded on 8-9-2010--Assessments for assessment years 2003-04 and 2004-05 barred by limitation-- CIT v. RRJ Securities Ltd. (Delhi) . . . 612

----Search and seizure--Procedure for assessment of third person--Special procedure of assessment of search cases--No dissimilarity--Power of Assessing Officer having jurisdiction in both cases identical-- CIT v. Mechmen (MP) . . . 591

S. 158BD --Search and seizure--Assessment of third person--Condition precedent--No satisfaction recorded by Assessing Officer that assets, documents seized belong to some other person--No incriminating material attributable to assessee seized during course of search at premises searched--Assessing Officer cannot assume jurisdiction and transmit items to another file concerning that person without recording satisfaction-- CIT v. Mechmen(MP) . . . 591

----Search and seizure--Procedure for assessment of third person--Special procedure of assessment of search cases--No dissimilarity--Power of Assessing Officer having jurisdiction in both cases identical-- CIT v. Mechmen (MP) . . . 591

S. 195 --Non-resident--Taxability in India--Capital gains--Capital asset--Non-resident acquiring shares in Indian company between September, 1995 and January, 2005--Proposing to transfer them in favour of group entity in Singapore as part of group re-organisation--Non-resident not having permanent establishment in India--Transaction not for avoidance of tax--Shares to be treated as capital asset not stock-in-trade--Profits not business income but capital gains--Not taxable in India--Even if treated as business income not taxable in absence of permanent establishment--Provisions relating to minimum alternate tax, transfer pricing and deduction of tax at source not applicable--Non-resident not bound to file return in India-- Dow AgroSciences Agricultural Products Ltd. , In re . . . 668

Income-tax Rules, 1962 :

R. 8D --Income--Disallowance of expenditure relating to exempt income--Burden of proof--Onus on Assessing Officer to record satisfaction that interest bearing funds used for investment to earn tax-free income--No tangible material on record that could have enabled Assessing Officer to record satisfaction in terms of section 14A--No disallowance-- CIT v.Abhishek Industries Ltd. (P&H) . . . 652

 

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Posted by: CA RAJU SHAH <shahmars@hotmail.com>

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ITR (TRIB) Volume 45 : Part 5 (Issue dated : 1-2-2016)

 

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

ONLINE EDITION

SUBJECT INDEX TO CASES REPORTED

Business expenditure--Deduction only on actual payment--Failure by assessee to deposit value added tax into Government account before close of year or before date of audit report--Whether amount deposited before due date of filing return of income as prescribed under section 139(1)--Matter remanded for verification--Income-tax Act, 1961, ss. 43B, 145A--Munaf Ibrahim Memon v. ITO (Pune) . . . 47

Capital gains--Long-term capital gains--Failure by assessee to produce document regarding transfer of property in his favour and document in support of cost of acquisition--Assessee himself admitting encroachment upon adjacent plot meant for primary school--Assessee not having title to property--Capital gains accrue only through sale or transfer of capital asset--Income cannot be taxed as long-term capital gains--Income-tax Act, 1961, ss. 2(14), 45-- ITO v. Bhagwan T. Fatnani (Mumbai) . . . 56

Words and phrases--"Any kind"--"Held"--Meanings of-- ITO v. Bhagwan T. Fatnani (Mumbai) . . . 56

 

PRINT EDITION

Volume 45 : Part 5 (Issue dated : 1-2-2016)

SUBJECT INDEX TO CASES REPORTED IN THIS PART

Accounting --Method of accounting--Assessee following cash basis of accounting for income arising from profession and mercantile system of accounting for income arising from business consistently--Not hybrid method of accounting--Two method of accounting allowable for two sources of income--Income-tax Act, 1961, s. 145-- Vishwanath Acharya v. Asst. CIT (Mumbai) . . . 554

Appeal to Appellate Tribunal --Additional evidence--Admission and consideration of ledger account as additional evidence--Assessee placing copy of ledger account during first appellate proceedings and assessment proceedings--No dispute regarding outstanding amount in ledger account--Ledger account not additional evidence in case of assessee--No requirement of invoking provisions of rule 29--Income-tax Act, 1961--Income-tax (Appellate Tribunal) Rules, 1963, r. 29-- Vipin Malik v. Asst. CIT
(Delhi) . . . 589

Appeal to Commissioner (Appeals) --Powers of Commissioner (Appeals)--Power to enhance assessment and travel beyond subject matter of appeal--Income-tax Act, 1961, s. 251(2)-- Sundaram Medical Foundation v. Deputy DIT (Exemptions) I
(Chennai) . . . 500

Business expenditure --Employees' stock option plan--Discount--Excess of public issue price over price charged to employees would qualify as discount--Difference allowable as discount--Income-tax Act, 1961, s. 37-- HDFC Bank Ltd. v. Deputy CIT
(Mumbai) . . . 529

Cash credits --Share transactions--No direct or material evidence against assessee to hold share transactions not genuine--General statement of director of another company before investigation wing--Assessee not provided opportunity to confront director in relation to transactions related to assessee--Additions under section 68 not warranted--Income-tax Act, 1961, s. 68-- Yamuna Estate P. Ltd. v. ITO (Mumbai) . . . 517

Charitable purpose --Computation of income--Carry forward of excess application of funds to subsequent years--Not permissible--Loss on transfer of assets--Purchase cost of assets allowed as application of funds in year of purchase--Loss on sale thereof not to be treated as application of funds again--Sale proceeds income of assessee to be applied for objects of trust--Depreciation on assets full cost of which allowed as application of funds--Not allowable--Bad debts--Mercantile system of accounting--If receivables on which claim made earlier treated as income of trust to be allowed as application of funds when they become bad and are written off in books of account--Income-tax Act, 1961, s. 11-- Sundaram Medical Foundation v. Deputy DIT (Exemptions) I
(Chennai) . . . 500

----Exemption--Definition--Provision of medical relief--Is charitable activity--Generation of surplus does not disqualify assessee--Corpus donations not to be treated as income--Income-tax Act, 1961, ss. 2(15), 11-- Sundaram Medical Foundation v. Deputy DIT (Exemptions) I (Chennai) . . . 500

Income --Accrual--Assessee receiving professional advances from its clients to meet expenses for and on behalf of its clients--Assessee keeping advance receipts in separate ledger account in name of client where all expenses deposited from time to time including professional bills--Assessee transferring professional fees to profit and loss account and carry forward credit balance in advance account to next year as sundry creditors--Professional advance received not income in hands of assessee--Income-tax Act, 1961--Vipin Malik v. Asst. CIT (Delhi) . . . 589

----Disallowance of expenditure in relation to exempt income--Dividend--Assessee maintaining same books of account for every activity--Dividend earned incidental to normal business activities of assessee--Disallowance under section 14A should not exceed quantum of exempt income--Income-tax Act, 1961, s. 14A--Income-tax Rules, 1962, r. 8D-- K. Ratanchand and Co. v. ITO (Ahd) . . . 608

----Disallowance of expenditure relating to exempt income--General principles--That assessee utilised its own funds in making investments not relevant to whether assessee incurred expenditure in relation to earning exempt income--Investment in securities made out of common pool of funds--Tax-free investments acquired over the years in the course of its business--Failure by assessee to establish exact funding of tax-free investments with reference to accounts--No case on facts or finding that securities formed part of assessee's stock-in-trade--Disallowance proper--Income-tax Act, 1961, s. 14A--Income-tax Rules, 1962, r. 8D-- HDFC Bank Ltd. v. Deputy CIT
(Mumbai) . . . 529

----Expenditure in relation to income not includible in taxable income--Dividend--Assessee not making suo motu disallowance--To be presumed that assessee claiming no expenditure incurred by him in relation to income not forming part of total income-- Disallowance of dividend proper--Income-tax Act, 1961, s. 14A--Income-tax Rules, 1962, r. 8D-- Vipin Malik v. Asst. CIT (Delhi) . . . 589

Income from house property --Annual letting value--Assessing Officer computing annual letting value based on notional rent on cost of properties--Failure by Department to consider additional evidence produced by assessee vitiating principles of natural justice--Assessing Officer to determine afresh income from house properties in accordance with provisions of sections 22 and 23 and to follow principles laid down by court--Matter remanded--Income-tax Act, 1961, ss. 22, 23-- Vishwanath Acharya v. Asst. CIT
(Mumbai) . . . 554

Penalty --Concealment of income or furnishing inaccurate particulars of income--Assessee computing taxable income on book profits and giving full and complete details of short-term loss accrued and dividend earned--Failure to give effect to section 94(7) has no bearing on payment of tax to be paid--No evasion of tax liability--Penalty under section 271(1)(c) not leviable since income assessed under section 115JB--Income-tax Act, 1961, ss. 94(7), 115JB, 271(1)(c)-- Compucom Software Ltd. v. Deputy CIT
(Jaipur) . . . 619

Precedent --Authority only for what it actually decides not what may remotely or even logically follow from it-- HDFC Bank Ltd. v. Deputy CIT (Mumbai) . . . 529

Reassessment --Income escaping assessment--Search operations in premises of third person--Documents found belonging to persons in respect of whom search conducted and not to assessee--Reopening on basis of loose papers containing name of assessee as person to whom accommodation entries provided--Condition precedent for issuance of notice under section 153C not satisfied--Reopening of assessment rightly done under section 147--Income-tax Act, 1961, ss. 147, 153C-- Yamuna Estate P. Ltd. v. ITO (Mumbai) . . . 517

Unexplained cash credit --Advance received against sale of accommodations in name of close family members of assessee--Accommodations stated to be acquired out of undisclosed income of assessee and brought to tax as undisclosed income in hands of assessee--Capital gains arising on sale of accommodations to be charged in hands of assessee--Assessing Officer to compute capital gains arising out of accommodations--Matter remanded--Income-tax Act, 1961, s. 68-- Vishwanath Acharya v. Asst. CIT
(Mumbai) . . . 554

----Cash deposits--Failure by assessee to substantiate deposits with evidence before Assessing Officer--Assessee not well versed with terms of accountancy, tax and other laws and regulations--Assessee's accountant leaving employment without handing over charge of books of account and assessee travelling while assessment proceedings going on--Sufficient cause shown for non-production of evidence--Assessing Officer to admit additional evidence and decide issue afresh on merits--Matter remanded--Income-tax Act, 1961, s. 68-- Vishwanath Acharya v. Asst. CIT (Mumbai) . . . 554

 

SECTIONWISE INDEX TO CASES REPORTED IN THIS PART

Income-tax Act, 1961

S. 2(15) --Charitable purpose--Exemption--Definition--Provision of medical relief--Is charitable activity--Generation of surplus does not disqualify assessee--Corpus donations not to be treated as income-- Sundaram Medical Foundation v. Deputy DIT (Exemptions) I (Chennai) . . . 500

S. 11 --Charitable purpose--Computation of income--Carry forward of excess application of funds to subsequent years--Not permissible--Loss on transfer of assets--Purchase cost of assets allowed as application of funds in year of purchase--Loss on sale thereof not to be treated as application of funds again--Sale proceeds income of assessee to be applied for objects of trust--Depreciation on assets full cost of which allowed as application of funds--Not allowable--Bad debts--Mercantile system of accounting--If receivables on which claim made earlier treated as income of trust to be allowed as application of funds when they become bad and are written off in books of account-- Sundaram Medical Foundation v. Deputy DIT (Exemptions) I (Chennai) . . . 500

----Charitable purpose--Exemption--Definition--Provision of medical relief--Is charitable activity--Generation of surplus does not disqualify assessee--Corpus donations not to be treated as income-- Sundaram Medical Foundation v. Deputy DIT (Exemptions) I (Chennai) . . . 500

S. 14A --Income--Disallowance of expenditure in relation to exempt income--Dividend--Assessee maintaining same books of account for every activity--Dividend earned incidental to normal business activities of assessee--Disallowance under section 14A should not exceed quantum of exempt income-- K. Ratanchand and Co. v. ITO
(Ahd) . . . 608

----Income--Disallowance of expenditure relating to exempt income--General principles--That assessee utilised its own funds in making investments not relevant to whether assessee incurred expenditure in relation to earning exempt income--Investment in securities made out of common pool of funds--Tax-free investments acquired over the years in the course of its business--Failure by assessee to establish exact funding of tax-free investments with reference to accounts--No case on facts or finding that securities formed part of assessee's stock-in-trade--Disallowance proper-- HDFC Bank Ltd. v. Deputy CIT (Mumbai) . . . 529

----Income--Expenditure in relation to income not includible in taxable income--Dividend--Assessee not making suo motu disallowance--To be presumed that assessee claiming no expenditure incurred by him in relation to income not forming part of total income-- Disallowance of dividend proper-- Vipin Malik v. Asst. CIT
(Delhi) . . . 589

S. 22 --Income from house property--Annual letting value--Assessing Officer computing annual letting value based on notional rent on cost of properties--Failure by Department to consider additional evidence produced by assessee vitiating principles of natural justice--Assessing Officer to determine afresh income from house properties in accordance with provisions of sections 22 and 23 and to follow principles laid down by court--Matter remanded-- Vishwanath Acharya v. Asst. CIT (Mumbai) . . . 554

S. 23 --Income from house property--Annual letting value--Assessing Officer computing annual letting value based on notional rent on cost of properties--Failure by Department to consider additional evidence produced by assessee vitiating principles of natural justice--Assessing Officer to determine afresh income from house properties in accordance with provisions of sections 22 and 23 and to follow principles laid down by court--Matter remanded-- Vishwanath Acharya v. Asst. CIT (Mumbai) . . . 554

S. 37 --Business expenditure--Employees' stock option plan--Discount--Excess of public issue price over price charged to employees would qualify as discount--Difference allowable as discount-- HDFC Bank Ltd. v. Deputy CIT (Mumbai) . . . 529

S. 68 --Cash credits--Share transactions--No direct or material evidence against assessee to hold share transactions not genuine--General statement of director of another company before investigation wing--Assessee not provided opportunity to confront director in relation to transactions related to assessee--Additions under section 68 not warranted-- Yamuna Estate P. Ltd. v. ITO (Mumbai) . . . 517

----Unexplained cash credit--Advance received against sale of accommodations in name of close family members of assessee--Accommodations stated to be acquired out of undisclosed income of assessee and brought to tax as undisclosed income in hands of assessee--Capital gains arising on sale of accommodations to be charged in hands of assessee--Assessing Officer to compute capital gains arising out of accommodations--Matter remanded-- Vishwanath Acharya v. Asst. CIT (Mumbai) . . . 554

----Unexplained cash credit--Cash deposits--Failure by assessee to substantiate deposits with evidence before Assessing Officer--Assessee not well versed with terms of accountancy, tax and other laws and regulations--Assessee's accountant leaving employment without handing over charge of books of account and assessee travelling while assessment proceedings going on--Sufficient cause shown for non-production of evidence--Assessing Officer to admit additional evidence and decide issue afresh on merits--Matter remanded-- Vishwanath Acharya v. Asst. CIT (Mumbai) . . . 554

S. 94(7) --Penalty--Concealment of income or furnishing inaccurate particulars of income--Assessee computing taxable income on book profits and giving full and complete details of short-term loss accrued and dividend earned--Failure to give effect to section 94(7) has no bearing on payment of tax to be paid--No evasion of tax liability--Penalty under section 271(1)(c) not leviable since income assessed under section 115JB-- Compucom Software Ltd. v. Deputy CIT (Jaipur) . . . 619

S. 115JB --Penalty--Concealment of income or furnishing inaccurate particulars of income--Assessee computing taxable income on book profits and giving full and complete details of short-term loss accrued and dividend earned--Failure to give effect to section 94(7) has no bearing on payment of tax to be paid--No evasion of tax liability--Penalty under section 271(1)(c) not leviable since income assessed under section 115JB-- Compucom Software Ltd. v. Deputy CIT (Jaipur) . . . 619

S. 145 --Accounting--Method of accounting--Assessee following cash basis of accounting for income arising from profession and mercantile system of accounting for income arising from business consistently--Not hybrid method of accounting--Two method of accounting allowable for two sources of income-- Vishwanath Acharya v. Asst. CIT (Mumbai) . . . 554

S. 147 --Reassessment--Income escaping assessment--Search operations in premises of third person--Documents found belonging to persons in respect of whom search conducted and not to assessee--Reopening on basis of loose papers containing name of assessee as person to whom accommodation entries provided--Condition precedent for issuance of notice under section 153C not satisfied--Reopening of assessment rightly done under section 147-- Yamuna Estate P. Ltd. v. ITO (Mumbai) . . . 517

S. 153C --Reassessment--Income escaping assessment--Search operations in premises of third person--Documents found belonging to persons in respect of whom search conducted and not to assessee--Reopening on basis of loose papers containing name of assessee as person to whom accommodation entries provided--Condition precedent for issuance of notice under section 153C not satisfied--Reopening of assessment rightly done under section 147-- Yamuna Estate P. Ltd. v. ITO (Mumbai) . . . 517

S. 251(2) --Appeal to Commissioner (Appeals)--Powers of Commissioner (Appeals)--Power to enhance assessment and travel beyond subject matter of appeal-- Sundaram Medical Foundation v. Dy. DIT (Exemptions) I (Chennai) . . . 500

S. 271(1)(c) --Penalty--Concealment of income or furnishing inaccurate particulars of income--Assessee computing taxable income on book profits and giving full and complete details of short-term loss accrued and dividend earned--Failure to give effect to section 94(7) has no bearing on payment of tax to be paid--No evasion of tax liability--Penalty under section 271(1)(c) not leviable since income assessed under section 115JB-- Compucom Software Ltd. v. Deputy CIT (Jaipur) . . . 619

Income-tax (Appellate Tribunal) Rules, 1963

R. 29 --Appeal to Appellate Tribunal--Additional evidence--Admission and consideration of ledger account as additional evidence--Assessee placing copy of ledger account during first appellate proceedings and assessment proceedings--No dispute regarding outstanding amount in ledger account--Ledger account not additional evidence in case of assessee--No requirement of invoking provisions of rule 29-- Vipin Malik v. Asst. CIT (Delhi) . . . 589

Income-tax Rules, 1962

R. 8D --Income--Disallowance of expenditure in relation to exempt income--Dividend--Assessee maintaining same books of account for every activity--Dividend earned incidental to normal business activities of assessee--Disallowance under section 14A should not exceed quantum of exempt income-- K. Ratanchand and Co. v. ITO
(Ahd) . . . 608

----Income--Disallowance of expenditure relating to exempt income--General principles--That assessee utilised its own funds in making investments not relevant to whether assessee incurred expenditure in relation to earning exempt income--Investment in securities made out of common pool of funds--Tax-free investments acquired over the years in the course of its business--Failure by assessee to establish exact funding of tax-free investments with reference to accounts--No case on facts or finding that securities formed part of assessee's stock-in-trade--Disallowance proper-- HDFC Bank Ltd. v. Deputy CIT (Mumbai) . . . 529

----Income--Expenditure in relation to income not includible in taxable income--Dividend--Assessee not making suo motu disallowance--To be presumed that assessee claiming no expenditure incurred by him in relation to income not forming part of total income--Disallowance of dividend proper-- Vipin Malik v. Asst. CIT
(Delhi) . . . 589

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Posted by: CA RAJU SHAH <shahmars@hotmail.com>

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