ITR (TRIB) Volume 46 : Part 4 (Issue dated : 14-3-2016)

 

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

ONLINE EDITION

SUBJECT INDEX TO CASES REPORTED

Accounting --Rejection of books of account--Books of account produced before Assessing Officer--Duty of Assessing Officer to check them--Rejection of books without analysing details and explanation filed by assessee--Not justified--Income-tax Act, 1961, s. 145-- ITO v. Krishna Cotton and Ginning Mills (Chandigarh) . . . 209

Appeal to Commissioner (Appeals) --Condonation of delay--Delay of seventeen months in filing appeal--Assessee pursuing rectification bona fide unsuccessfully--Reasonable cause for delay--No mala fide intention or ulterior motive--Delay condoned--Income-tax Act, 1961--Asst. CIT v. Carmelite Charitable Society 
(Amritsar) . . . 193

Charitable purposes --Charitable trust--Exemption--Assessee incurring expenses out of income of current year--No case of accumulation or setting apart of income--Erroneous invocation of section 11(3)(d)--Expenses towards education of fathers serving in schools of assessee--Payment not for a religious purpose but charitable--Assessee entitled to exemption--Income-tax Act, 1961, ss. 11, 11(3)(d), 12A-- Asst. CIT v. Carmelite Charitable Society (Amritsar) . . . 193

Deduction of tax at source --Fee for defaults in furnishing statements--Cannot be levied in course of processing of statement under section 200A--Income-tax Act, 1961, ss. 200A, 234E-- Tanish Industries P. Ltd. v. Deputy CIT (Ahd) . . . 217

 

PRINT EDITION

Volume 46 : Part 4 (Issue dated : 14-3-2016)

SUBJECT INDEX TO CASES REPORTED IN THIS PART

Appeal to Appellate Tribunal --Appealable orders--Appeal against order of assessment read with revisional order--Not maintainable--Commissioner (Appeals) is competent to adjudicate--Income-tax Act, 1961, ss. 246A, 253(1)-- Crompton Greaves Ltd. v. CIT (Mumbai) . . . 465

Business expenditure --Disallowance--Payments for unlawful purpose--Bribe for awarding of contract--Sum deleted in case of recipient and deletion affirmed by High Court--No disallowance--Income-tax Act, 1961, s. 37-- Today Homes and Infrastructure Pvt. Ltd. v. Deputy CIT (Delhi) . . . 586

----Expenditure on purchase of software--Not used by assessee but sold to customers--Expenditure on purchase allowable--Income-tax Act, 1961, s. 37-- Deputy CIT v. E-enable Technologies P. Ltd. (Delhi) . . . 546

----Prior period expenses--Assessing Officer directed to re-examine issue and adjudicate after granting proper opportunity to assessee--Income-tax Act, 1961, s. 37-- J. P. Morgan Services P. Ltd. v. Deputy CIT (OSD) (Mumbai) . . . 561

----Provision for sale and maintenance of software--Annual maintenance contract--Mercantile system of accounting--Part of receipt pertaining to current financial year--Accounting standard consistently followed by assessee--No disallowance--Income-tax Act, 1961, s. 37-- Deputy CIT v. E-enable Technologies P. Ltd. (Delhi) . . . 546

----Real estate development--Commission and brokerage--Properties held as business assets--Factum of incurring of expenditure as well as rendering of services by agents not disputed--Quantum of expenses cannot be examined by Assessing Officer--Allowable--Income-tax Act, 1961, s. 37-- Today Homes and Infrastructure Pvt. Ltd. v. Deputy CIT (Delhi) . . . 586

Business loss --Dealing in land--Advance in course of business--Non-refund of advance business loss incidental to business--Allowable--Income-tax Act, 1961, s. 28-- Today Homes and Infrastructure Pvt. Ltd. v. Deputy CIT (Delhi) . . . 586

Capital gains --Business income--Short-term capital gains--Long-term capital gains--Assessee consistently dealing in shares for several years--Classification of transactions--Gains arising from sale of shares up to one month--Business income--Gains arising from sale of shares held for more than one month and up to twelve months--Short-term capital gains--Income-tax Act, 1961-- Asha Ashar v. ITO
(Mumbai) . . . 492

----Computation--Hindu undivided family--Partition--Family settlement--Assessee acquiring land on distribution of assets in family settlement pursuant to partition--Not transfer--Assessee holding property as beneficial owner since 1963--Period of holding of assets in hands of assessee to be reckoned from 1963--Market value to be adopted on 1-4-1981--Indexation benefit also from that date--Income-tax Act, 1961, ss. 2(42A), 45-- ITO v. P. M. Rungta (HUF) (Mumbai) . . . 579

Cash credit --Accommodation entries--Assessee one of conduit companies of entry provider--Settlement Commission in the case entry provider holding cash deposited in bank account of various companies cannot be treated as unexplained cash credit in the hands of conduit companies--Order of Commission attaining finality--Order binding on Department--Refusal to follow order of Commission on ground all facts might not have been produced before Commission--Incorrect--No evidence that specific facts not placed before Commission--No addition could be made in hands of assessee on account of unexplained cash credit--Income-tax Act, 1961, s. 68-- Omni Farms Pvt. Ltd. v. Deputy CIT (Delhi) . . . 505

----Ongoing negotiation regarding acquisition of property--Memorandum of understanding--Cash returned to assessee and entry in books and surrendered as part of total surrender--No dispute in facts--Credit cannot be treated as unexplained--Income-tax Act, 1961, s. 68--Today Homes and Infrastructure Pvt. Ltd. v. Deputy CIT
(Delhi) . . . 586

Collection of tax at source --Scrap--Definition--Sale of cotton waste, maize husk and de-oiled cake--By-products not scrap or waste--No liability on seller to collect tax at source on sale thereof--Income-tax Act, 1961, s. 206C-- Deputy CIT v. Gujarat Ambuja Exports Ltd.(Ahd) . . . 519

Company --Book profits--Computation--Income of unit in special economic zone--Excludible--Income-tax Act, 1961, s. 115JB-- Deputy CIT v. Gebbs Healthcare Solutions P. Ltd.(Mumbai) . . . 551

----Book profits--Computation according to Schedule VII to Companies Act and not under provisions of Income-tax Act--Companies Act, 1956, Sch. VII--Income-tax Act, 1961, s. 115JB-- J. P. Morgan Services P. Ltd. v. Deputy CIT (OSD)
(Mumbai) . . . 561

Deduction of tax at source --Payments to contractors--Port charges to clearing and forwarding agents--Independent contractors--Port charges not professional charges--Tax deductible at source under section 194C and not under section 194J--Income-tax Act, 1961, ss. 194C, 194J-- Deputy CIT v. Gujarat Ambuja Exports Ltd.
(Ahd) . . . 519

Dividend --Deemed dividend--Common shareholders in both companies not ground to treat amount as deemed dividend--No evidence to show assessee a beneficial shareholder or even a shareholder of company from which assessee received advance--Amount not deemed dividend--Income-tax Act, 1961, s. 2(22)(e)-- Deputy CIT v. Gebbs Healthcare Solutions P. Ltd. (Mumbai) . . . 551

Exemption --Export of computer software--Computation of profits--Interest on deposits--Part of business income--Includible for determining amount of total turnover--Income-tax Act, 1961, s. 10A-- J. P. Morgan Services P. Ltd. v. Deputy CIT (OSD) (Mumbai) . . . 561

----Export of computer software--Information technology enabled services--Computation of profits--Deduction allowable before setting of brought forward unabsorbed depreciation--Income-tax Act, 1961, s. 10A-- J. P. Morgan Services P. Ltd. v. Deputy CIT (OSD) (Mumbai) . . . 561

Export oriented undertaking --Exemption--Business process outsourcing--Assessee allowed deduction in earlier years--Facts materially identical in assessment year in question--Assessee entitled to exemption--Income-tax Act, 1961, s. 10B-- Deputy CIT v. Gebbs Healthcare Solutions P. Ltd. (Mumbai) . . . 551

Income from house property --Society maintenance charges--Assessee stating it is obligation of lessee and including charges in rent received--Entitled to deduction apart from standard deduction--Matter remanded to verify claim of deduction--Income-tax Act, 1961, ss. 23, 24(a)-- Asha Ashar v. ITO (Mumbai) . . . 492

Revision --Commissioner--Amalgamation of companies--Effect--Amalgamating company ceases to exist--Order of revision on amalgamating company--Not valid--Provision curing defect not applicable to revision proceedings--Income-tax Act, 1961, ss. 263, 292BB--Emerald Co. Ltd. v. ITO (Kolkata) . . . 619

----Commissioner--Powers-- Explanation 2 that order passed by Assessing Officer without enquiry or verification shall be considered erroneous and prejudicial to interests of Revenue--Declaratory in nature--Provision for warranty, sales tax, excise and liquidated damages--Assessing Officer failing to make relevant and meaningful enquiry whether liability had crystallised to extent deduction claimed in return--Audited account showing amount reflected under head "provisions and contingent liabilities"--Revision valid--Income-tax Act, 1961, s. 263-- Crompton Greaves Ltd. v. CIT
(Mumbai) . . . 465

Transfer pricing --International transactions--Arm's length price--Mutual agreement procedure--Transactions with associated enterprise--Margin determined for ninety-six per cent. of transactions under mutual agreement procedure--No distinction in facts or nature of transactions between these transactions and remaining transactions--Same margin should be adopted for remaining four per cent. of transactions--Double Taxation Avoidance Agreement between India and the U. S. A., art. 27--Income-tax Act, 1961, s. 92C-- J. P. Morgan Services P. Ltd. v. Deputy CIT (OSD)
(Mumbai) . . . 561

 

SECTIONWISE INDEX TO CASES REPORTED IN THIS PART

Companies Act, 1956

Sch. VII --Company--Book profits--Computation according to Schedule VII to Companies Act and not under provisions of Income-tax Act-- J. P. Morgan Services P. Ltd. v . Deputy CIT (OSD) (Mumbai) . . . 561

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

Art. 27 --Transfer pricing--International transactions--Arm's length price--Mutual agreement procedure--Transactions with associated enterprise--Margin determined for ninety-six per cent. of transactions under mutual agreement procedure--No distinction in facts or nature of transactions between these transactions and remaining transactions--Same margin should be adopted for remaining four per cent. of transactions-- J. P. Morgan Services P. Ltd. v. Deputy CIT (OSD) (Mumbai) . . . 561

Income-tax Act, 1961

S. 2(22)(e) --Dividend--Deemed dividend--Common shareholders in both companies not ground to treat amount as deemed dividend--No evidence to show assessee a beneficial shareholder or even a shareholder of company from which assessee received advance--Amount not deemed dividend-- Deputy CIT v. Gebbs Healthcare Solutions P. Ltd. (Mumbai) . . . 551

S. 2(42A) --Capital gains--Computation--Hindu undivided family--Partition--Family settlement--Assessee acquiring land on distribution of assets in family settlement pursuant to partition--Not transfer--Assessee holding property as beneficial owner since 1963--Period of holding of assets in hands of assessee to be reckoned from 1963--Market value to be adopted on 1-4-1981--Indexation benefit also from that date-- ITO v. P. M. Rungta (HUF) (Mumbai) . . . 579

S. 10A --Exemption--Export of computer software--Computation of profits--Interest on deposits--Part of business income--Includible for determining amount of total turnover-- J. P. Morgan Services P. Ltd. v. Deputy CIT (OSD)
(Mumbai) . . . 561

----Exemption--Export of computer software--Information technology enabled services--Computation of profits--Deduction allowable before setting of brought forward unabsorbed depreciation-- J. P. Morgan Services P. Ltd. v. Deputy CIT (OSD)
(Mumbai) . . . 561

S. 10B --Export oriented undertaking--Exemption--Business process outsourcing--Assessee allowed deduction in earlier years--Facts materially identical in assessment year in question--Assessee entitled to exemption-- Deputy CIT v. Gebbs Healthcare Solutions P. Ltd.(Mumbai) . . . 551

S. 23 --Income from house property--Society maintenance charges--Assessee stating it is obligation of lessee and including charges in rent received--Entitled to deduction apart from standard deduction--Matter remanded to verify claim of deduction-- Asha Ashar v. ITO(Mumbai) . . . 492

S. 24(a) --Income from house property--Society maintenance charges--Assessee stating it is obligation of lessee and including charges in rent received--Entitled to deduction apart from standard deduction--Matter remanded to verify claim of deduction-- Asha Ashar v. ITO(Mumbai) . . . 492

S. 28 --Business loss--Dealing in land--Advance in course of business--Non-refund of advance business loss incidental to business--Allowable-- Today Homes and Infrastructure Pvt. Ltd. v. Deputy CIT (Delhi) . . . 586

S. 37 --Business expenditure--Disallowance--Payments for unlawful purpose--Bribe for awarding of contract--Sum deleted in case of recipient and deletion affirmed by High Court--No disallowance-- Today Homes and Infrastructure Pvt. Ltd. v. Deputy CIT (Delhi) . . . 586

----Business expenditure--Expenditure on purchase of software--Not used by assessee but sold to customers--Expenditure on purchase allowable-- Deputy CIT v. E-enable Technologies P. Ltd. (Delhi) . . . 546

----Business expenditure--Prior period expenses--Assessing Officer directed to re-examine issue and adjudicate after granting proper opportunity to assessee-- J. P. Morgan Services P. Ltd. v. Deputy CIT (OSD) (Mumbai) . . . 561

----Business expenditure--Provision for sale and maintenance of software--Annual maintenance contract--Mercantile system of accounting--Part of receipt pertaining to current financial year--Accounting standard consistently followed by assessee--No disallowance--Deputy CIT v. E-enable Technologies P. Ltd. (Delhi) . . . 546

----Business expenditure--Real estate development--Commission and brokerage--Properties held as business assets--Factum of incurring of expenditure as well as rendering of services by agents not disputed--Quantum of expenses cannot be examined by Assessing Officer--Allowable-- Today Homes and Infrastructure Pvt. Ltd. v. Deputy CIT (Delhi) . . . 586

S. 45 --Capital gains--Computation--Hindu undivided family--Partition--Family settlement--Assessee acquiring land on distribution of assets in family settlement pursuant to partition--Not transfer--Assessee holding property as beneficial owner since 1963--Period of holding of assets in hands of assessee to be reckoned from 1963--Market value to be adopted on 1-4-1981--Indexation benefit also from that date-- ITO v. P. M. Rungta (HUF) (Mumbai) . . . 579

S. 68 --Cash credit--Accommodation entries--Assessee one of conduit companies of entry provider--Settlement Commission in the case entry provider holding cash deposited in bank account of various companies cannot be treated as unexplained cash credit in the hands of conduit companies--Order of Commission attaining finality--Order binding on Department--Refusal to follow order of Commission on ground all facts might not have been produced before Commission--Incorrect--No evidence that specific facts not placed before Commission--No addition could be made in hands of assessee on account of unexplained cash credit-- Omni Farms Pvt. Ltd. v. Deputy CIT
(Delhi) . . . 505

----Cash credit--Ongoing negotiation regarding acquisition of property--Memorandum of understanding--Cash returned to assessee and entry in books and surrendered as part of total surrender--No dispute in facts--Credit cannot be treated as unexplained-- Today Homes and Infrastructure Pvt. Ltd. v. Deputy CIT
(Delhi) . . . 586

S. 92C --Transfer pricing--International transactions--Arm's length price--Mutual agreement procedure--Transactions with associated enterprise--Margin determined for ninety-six per cent. of transactions under mutual agreement procedure--No distinction in facts or nature of transactions between these transactions and remaining transactions--Same margin should be adopted for remaining four per cent. of transactions-- J. P. Morgan Services P. Ltd. v. Deputy CIT (OSD) (Mumbai) . . . 561

S. 115JB --Company--Book profits--Computation--Income of unit in special economic zone--Excludible-- Deputy CIT v. Gebbs Healthcare Solutions P. Ltd.
(Mumbai) . . . 551

----Company--Book profits--Computation according to Schedule VII to Companies Act and not under provisions of Income-tax Act-- J. P. Morgan Services P. Ltd. v. Deputy CIT (OSD)(Mumbai) . . . 561

S. 194C --Deduction of tax at source--Payments to contractors--Port charges to clearing and forwarding agents--Independent contractors--Port charges not professional charges--Tax deductible at source under section 194C and not under section 194J-- Deputy CIT v. Gujarat Ambuja Exports Ltd. (Ahd) . . . 519

S. 194J --Deduction of tax at source--Payments to contractors--Port charges to clearing and forwarding agents--Independent contractors--Port charges not professional charges--Tax deductible at source under section 194C and not under section 194J-- Deputy CIT v. Gujarat Ambuja Exports Ltd. (Ahd) . . . 519

S. 206C --Collection of tax at source--Scrap--Definition--Sale of cotton waste, maize husk and de-oiled cake--By-products not scrap or waste--No liability on seller to collect tax at source on sale thereof-- Deputy CIT v. Gujarat Ambuja Exports Ltd.
(Ahd) . . . 519

S. 246A --Appeal to Appellate Tribunal--Appealable orders--Appeal against order of assessment read with revisional order--Not maintainable--Commissioner (Appeals) is competent to adjudicate-- Crompton Greaves Ltd. v. CIT (Mumbai) . . . 465

S. 253(1) --Appeal to Appellate Tribunal--Appealable orders--Appeal against order of assessment read with revisional order--Not maintainable--Commissioner (Appeals) is competent to adjudicate-- Crompton Greaves Ltd. v. CIT (Mumbai) . . . 465

S. 263 --Revision--Commissioner--Amalgamation of companies--Effect--Amalgamating company ceases to exist--Order of revision on amalgamating company--Not valid--Provision curing defect not applicable to revision proceedings-- Emerald Co. Ltd. v. ITO (Kolkata) . . . 619

----Revision--Commissioner--Powers-- Explanation 2 that order passed by Assessing Officer without enquiry or verification shall be considered erroneous and prejudicial to interests of Revenue--Declaratory in nature--Provision for warranty, sales tax, excise and liquidated damages--Assessing Officer failing to make relevant and meaningful enquiry whether liability had crystallised to extent deduction claimed in return--Audited account showing amount reflected under head "provisions and contingent liabilities"--Revision valid--Crompton Greaves Ltd. v. CIT (Mumbai) . . . 465

S. 292BB --Revision--Commissioner--Amalgamation of companies--Effect--Amalgamating company ceases to exist--Order of revision on amalgamating company--Not valid--Provision curing defect not applicable to revision proceedings-- Emerald Co. Ltd. v. ITO (Kolkata) . . . 619

 

__._,_.___

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With a view to provide an opportunity to the candidates to correct such errors made by them while submitting their examination application forms, it has been decided to put in place an online facility to view and correct errors if any, committed by them while submitting the examination application form, in the fields of Centre, Group or Medium.

 

The on-line window for seeking change of Centre/Group/Medium will made available from today, at icaiexam.icai.org.

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-Regards
CA. C. V. PAWAR

ITR Volume 381 : Part 3 (Issue dated : 29-2-2016)

 

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

PRINT EDITION

ITR Volume 381 : Part 3 (Issue dated : 29-2-2016)

SUBJECT INDEX TO CASES REPORTED IN THIS PART

SUPREME COURT

Business expenditure --Disallowance--Excessive and unreasonable payments--Service charges paid to firm having common partners with assessee--Failure by assessee to produce proof of service rendered during year in question--Findings recorded in assessment proceedings for preceding year not relevant--Disallowance proper--Income-tax Act, 1961, s. 40A(2)-- Ganapathy and Co. v. CIT . . . 363

Business loss --Finding that entire transaction of investment and showing loss was sham and calculated to avoid tax liability--Disallowance proper-- Ganapathy and Co. v. CIT . . . 363

Documents --Interpretation of documents--Question of law-- Unitech Ltd. v. Union of India . . . 456

Interest-tax --Reassessment--Not permissible where no assessment made in first instance--Interest-tax Act, 1974, s. 10-- Standard Chartered Finance Ltd. v. CIT . . . 453

Purchase of immovable property by Central Government --General principles--No onus on Department to establish undervaluation with view to evade tax--Undervaluation greater than 15 per cent. below fair market value raises rebuttable presumption of attempt to evade taxes--Income-tax Act, 1961, s. 269UD-- Unitech Ltd. v. Union of India . . . 456

----Transfer--Definition--Land held under lease from Municipality--Collaboration agreement under which land holder agreeing to allow developer to construct commercial project on land at its cost--Developer to retain 78 per cent. of total constructed area and transfer 22 per cent. to land holder--Not a case of sale, lease or exchange--Agreement enabling developer to enjoy property of land holder for purpose of construction--Falls within definition--Consideration stated in agreement for land cannot be taken as consideration for available floor space index--Comparable instance of sale taken of property in adjoining locality and not commercial property--Order for pre-emptive purchase vitiated--Income-tax Act, 1961, ss. 269UA, 269UD-- Unitech Ltd. v. Union of India . . . 456

Reference --High Court--Scope of powers--Finality of findings of fact of Tribunal--High Court taking into account certain additional facts already on record but not taken note of by Tribunal--Permissible--High Court construing facts without departure therefrom--Differing emphasis on undisputed facts--Within jurisdiction of High Court--Income-tax Act, 1961, s. 256-- Ganapathy and Co. v. CIT . . . 363

Scientific research expenditure --Condition precedent for grant of deduction--Certificate showing that donee had complied with conditions subject to which registration granted to it--Donation by assessee to ashram--Failure by assessee to produce certificate--Denial of deduction proper--Income-tax Act, 1961, s. 35(2A)-- Ganapathy and Co. v. CIT . . . 363

 

HIGH COURTS

Business expenditure --Difference between ascertained and contingent liability--Premises taken under licence agreement--Agreement for ten years with provision for renewal subject to enhancement of fees to be settled in future--Dispute regarding enhancement of fees and protracted litigation--Assessee continuing to use premises--Liability to pay licence fees was ascertained liability--Deduction of licence fees and interest on arrears of licence fees allowed in some assessment years and partly disallowed in some assessment years not justified--Entire licence fees and interest on arrears of licence fees deductible in assessment years 1987-88 to 1992-93, 1995-96, 1997-98 to 2001-02 and 2003-04--Income-tax Act, 1961, s. 37-- Aggarwal and Modi Enterprises (Cinema Project) Co. Pvt. Ltd. v. CIT (Delhi) . . . 469

----Royalty--Assessee acting like original equipment manufacturer--Cannot be treated as job worker or contractor--Payment of royalty allowable--Income-tax Act, 1961-- CIT v. Keihin Panalfa Ltd. (Delhi) . . . 407

Capital or revenue receipt --Amount received by way of compensation against employment contract as goodwill and one time settlement for non-commencement of proposed employment--Capital receipt not "profits in lieu of salary"--Assessee entitled to refund of tax deducted at source--Income-tax Act, 1961, s. 17(3)(iii)-- CIT v. Pritam Das Narang (Delhi) . . . 416

Exemption --Export--Computation of deduction--Exchange fluctuation loss to be reduced from total turnover--Income-tax Act, 1961, s. 10A-- CIT v. Kshema Technologies Ltd. (Karn) . . . 435

----Export--Computation of deduction--Services relating to development of computer software--Deemed to be part of export turnover of computer software outside India--Expenses incurred in foreign currency for providing software development services outside India cannot be excluded from export turnover--Income-tax Act, 1961, s. 10A-- CIT v.Kshema Technologies Ltd. (Karn) . . . 435

Income-tax --General principles--Principle of consistency in income-tax proceedings--Aggarwal and Modi Enterprises (Cinema Project) Co. Pvt. Ltd. v. CIT (Delhi) . . . 469

International transactions --Transfer pricing--Arm's length price--Adjustment only in respect of transactions with its associated enterprises--Income-tax Act, 1961, ss. 92A, 92B-- CIT v.Tara Jewels Exports P. Ltd. (Bom) . . . 404

----Transfer pricing--Arm's length price--Determination only with respect to assessee's international transactions with associated enterprises--Not in respect of transactions entered into by assessee with independent unrelated third parties--Income-tax Act, 1961, Chap. X--CIT v. Thyssen Krupp Industries India P. Ltd. (Bom) . . . 413

----Transfer pricing--Arm's length price--Determination--Transfer pricing adjustment to be made only for transactions attributed to international transactions and not to entire expenses--Income-tax Act, 1961, s. 92CA-- CIT v. Keihin Panalfa Ltd. (Delhi) . . . 407

Kar Vivad Samadhan Scheme --Instructions issued by Ministry of Finance cannot modify Scheme having statutory character--Instructions regarding applicability of marginal rate to unpaid tax for determining disputed income--Not applicable to taxable income arising from capital gains for which uniform rate applies--Assessing Officer to determine disputed income in relation to unpaid tax by applying rate of 33.6 per cent. and to calculate tax at 35 per cent. of disputed income--Income-tax Act, 1961--Kar Vivad Samadhan Scheme, 1998--Finance (No. 2) Act, 1998, ss. 88, 89-- B. P. Jain and Associates v. CIT (Delhi) . . . 423

Reassessment --Condition precedent--Belief that income had escaped assessment--Belief must be that of Assessing Officer--CBDT instruction directing remedial acti0n in case of audit objections--Instructions of CBDT cannot override provisions of section 147--Notice based solely on such instruction--Not valid--Income-tax Act, 1961, ss. 147, 148--CBDT Instruction No. 9 of 2006-- Sun Pharmaceutical Industries Ltd. v. Deputy CIT (Delhi) . . . 387

----Notice--Jurisdiction--Officer who has passed assessment order alone entitled to reopen assessment--Notice and reasons recorded for reopening by officer not Assessing Officer of assessee--Reopening of assessment vitiated--Subsequent notice issued for reopening of assessment by Assessing Officer beyond limitation period--Notice not valid--Income-tax Act, 1961, ss. 147, 148, 149(1)(b)-- Dushyant Kumar Jain v. Deputy CIT (Delhi) . . . 428

----Notice after four years--Validity--Failure to disclose material facts necessary for assessment--Assessment after scrutiny under section 143(3)--Presumption that Assessing Officer had passed order after application of mind--Claim rendered inadmissible due to subsequent change in law--No failure to disclose fact--No allegation that material facts had not been disclosed--Notice not valid--Income-tax Act, 1961, ss. 147, 148-- Sun Pharmaceutical Industries Ltd. v. Deputy CIT (Delhi) . . . 387

Reference --Monetary limits for applications by Revenue--Effect of CBDT Circular No. 21 of 2015 dated 10-12-2015 laying down threshold limit of tax effect Rs. 20 lakhs--Applicable even to pending references--Reference by Tribunal where tax effect less than Rs. 20 lakhs returned unanswered--Income-tax Act, 1961, s. 256--CBDT Circular No. 21 of 2015 dated 10-12-2015-- CIT v. Sunny Sounds P. Ltd. (Bom) . . . 443

----Monetary limits prescribed for litigation by Revenue--Effect of CBDT Instruction No. 5 of 2014--Instruction applicable to pending references--Tax effect less than monetary limit prescribed by instruction--Nothing to indicate that issue falls within exclusion clause of instruction nor that issue has cascading effect--Reference returned unanswered--Income-tax Act, 1961, s. 256(1)--CBDT Instruction No. 5 of 2014, dated 10-7-2014-- CIT v. Computer Point (I) Ltd. (Bom) . . . 441

 

AUTHORITY FOR ADVANCE RULINGS

Non-resident --Taxability in India--Exploration of mineral oils--Special provisions for computation of income--Contract for provision of floating production storage and offloading facility used in offshore oil exploration--Change order executed providing for amendments in original contract--Entire consideration received under original contract offered to tax by assessee without distinction based on where work was done or distance travelled outside India or in India as business profits taxable in India under section 44BB--Receipts under change order cannot have different character--Cannot be split--Contentions that receipts were capital or that work not done in India--Not tenable--Compensation for loss of lease rentals received as result of insurance policy obtained and signed outside India--Received outside India and not taxable in India--Income-tax Act, 1961, s. 44BB-- Aker Contracting FP ASA , In re . . . 489

 

SECTIONWISE INDEX TO CASES REPORTED IN THIS PART

Finance (No. 2) Act, 1998 :

S. 88 --Kar Vivad Samadhan Scheme--Instructions issued by Ministry of Finance cannot modify Scheme having statutory character--Instructions regarding applicability of marginal rate to unpaid tax for determining disputed income--Not applicable to taxable income arising from capital gains for which uniform rate applies--Assessing Officer to determine disputed income in relation to unpaid tax by applying rate of 33.6 per cent. and to calculate tax at 35 per cent. of disputed income-- B. P. Jain and Associates v. CIT (Delhi) . . . 423

S. 89 --Kar Vivad Samadhan Scheme--Instructions issued by Ministry of Finance cannot modify Scheme having statutory character--Instructions regarding applicability of marginal rate to unpaid tax for determining disputed income--Not applicable to taxable income arising from capital gains for which uniform rate applies--Assessing Officer to determine disputed income in relation to unpaid tax by applying rate of 33.6 per cent. and to calculate tax at 35 per cent. of disputed income-- B. P. Jain and Associates v. CIT (Delhi) . . . 423

 

Income-tax Act, 1961 :

S. 10A --Exemption--Export--Computation of deduction--Exchange fluctuation loss to be reduced from total turnover-- CIT v. Kshema Technologies Ltd. (Karn) . . . 435

----Exemption--Export--Computation of deduction--Services relating to development of computer software--Deemed to be part of export turnover of computer software outside India--Expenses incurred in foreign currency for providing software development services outside India cannot be excluded from export turnover-- CIT v. Kshema Technologies Ltd.(Karn) . . . 435

S. 17(3)(iii) --Capital or revenue receipt--Amount received by way of compensation against employment contract as goodwill and one time settlement for non-commencement of proposed employment--Capital receipt not "profits in lieu of salary"--Assessee entitled to refund of tax deducted at source-- CIT v. Pritam Das Narang (Delhi) . . . 416

S. 35(2A) --Scientific research expenditure--Condition precedent for grant of deduction--Certificate showing that donee had complied with conditions subject to which registration granted to it--Donation by assessee to ashram--Failure by assessee to produce certificate--Denial of deduction proper-- Ganapathy and Co. v. CIT (SC) . . . 363

S. 37 --Business expenditure--Difference between ascertained and contingent liability--Premises taken under licence agreement--Agreement for ten years with provision for renewal subject to enhancement of fees to be settled in future--Dispute regarding enhancement of fees and protracted litigation--Assessee continuing to use premises--Liability to pay licence fees was ascertained liability--Deduction of licence fees and interest on arrears of licence fees allowed in some assessment years and partly disallowed in some assessment years not justified--Entire licence fees and interest on arrears of licence fees deductible in assessment years 1987-88 to 1992-93, 1995-96, 1997-98 to 2001-02 and 2003-04-- Aggarwal and Modi Enterprises (Cinema Project) Co. Pvt. Ltd. v. CIT (Delhi) . . . 469

S. 40A(2) --Business expenditure--Disallowance--Excessive and unreasonable payments--Service charges paid to firm having common partners with assessee--Failure by assessee to produce proof of service rendered during year in question--Findings recorded in assessment proceedings for preceding year not relevant--Disallowance proper-- Ganapathy and Co. v. CIT (SC) . . . 363

S. 44BB --Non-resident--Taxability in India--Exploration of mineral oils--Special provisions for computation of income--Contract for provision of floating production storage and offloading facility used in offshore oil exploration--Change order executed providing for amendments in original contract--Entire consideration received under original contract offered to tax by assessee without distinction based on where work was done or distance travelled outside India or in India as business profits taxable in India under section 44BB--Receipts under change order cannot have different character--Cannot be split--Contentions that receipts were capital or that work not done in India--Not tenable--Compensation for loss of lease rentals received as result of insurance policy obtained and signed outside India--Received outside India and not taxable in India-- Aker Contracting FP ASA , In re (AAR) . . . 489

S. 92A --International transactions--Transfer pricing--Arm's length price--Adjustment only in respect of transactions with its associated enterprises-- CIT v. Tara Jewels Exports P. Ltd.(Bom) . . . 404

S. 92B --International transactions--Transfer pricing--Arm's length price--Adjustment only in respect of transactions with its associated enterprises-- CIT v. Tara Jewels Exports P. Ltd.(Bom) . . . 404

S. 92CA --International transactions--Transfer pricing--Arm's length price--Determination--Transfer pricing adjustment to be made only for transactions attributed to international transactions and not to entire expenses-- CIT v. Keihin Panalfa Ltd. (Delhi) . . . 407

Chap. X --International transactions--Transfer pricing--Arm's length price--Determination only with respect to assessee's international transactions with associated enterprises--Not in respect of transactions entered into by assessee with independent unrelated third parties--CIT v. Thyssen Krupp Industries India P. Ltd. (Bom) . . . 413

S. 147 --Reassessment--Condition precedent--Belief that income had escaped assessment--Belief must be that of Assessing Officer--CBDT instruction directing remedial acti0n in case of audit objections--Instructions of CBDT cannot override provisions of section 147--Notice based solely on such instruction--Not valid-- Sun Pharmaceutical Industries Ltd. v. Deputy CIT (Delhi) . . . 387

----Reassessment--Notice--Jurisdiction--Officer who has passed assessment order alone entitled to reopen assessment--Notice and reasons recorded for reopening by officer not Assessing Officer of assessee--Reopening of assessment vitiated--Subsequent notice issued for reopening of assessment by Assessing Officer beyond limitation period--Notice not valid-- Dushyant Kumar Jain v. Deputy CIT (Delhi) . . . 428

----Reassessment--Notice after four years--Validity--Failure to disclose material facts necessary for assessment--Assessment after scrutiny under section 143(3)--Presumption that Assessing Officer had passed order after application of mind--Claim rendered inadmissible due to subsequent change in law--No failure to disclose fact--No allegation that material facts had not been disclosed--Notice not valid-- Sun Pharmaceutical Industries Ltd.v. Deputy CIT (Delhi) . . . 387

S. 148 --Reassessment--Condition precedent--Belief that income had escaped assessment--Belief must be that of Assessing Officer--CBDT instruction directing remedial acti0n in case of audit objections--Instructions of CBDT cannot override provisions of section 147--Notice based solely on such instruction--Not valid-- Sun Pharmaceutical Industries Ltd. v. Deputy CIT (Delhi) . . . 387

----Reassessment--Notice--Jurisdiction--Officer who has passed assessment order alone entitled to reopen assessment--Notice and reasons recorded for reopening by officer not Assessing Officer of assessee--Reopening of assessment vitiated--Subsequent notice issued for reopening of assessment by Assessing Officer beyond limitation period--Notice not valid-- Dushyant Kumar Jain v. Deputy CIT (Delhi) . . . 428

----Reassessment--Notice after four years--Validity--Failure to disclose material facts necessary for assessment--Assessment after scrutiny under section 143(3)--Presumption that Assessing Officer had passed order after application of mind--Claim rendered inadmissible due to subsequent change in law--No failure to disclose fact--No allegation that material facts had not been disclosed--Notice not valid-- Sun Pharmaceutical Industries Ltd.v. Deputy CIT (Delhi) . . . 387

S. 149(1)(b) --Reassessment--Notice--Jurisdiction--Officer who has passed assessment order alone entitled to reopen assessment--Notice and reasons recorded for reopening by officer not Assessing Officer of assessee--Reopening of assessment vitiated--Subsequent notice issued for reopening of assessment by Assessing Officer beyond limitation period--Notice not valid-- Dushyant Kumar Jain v. Deputy CIT (Delhi) . . . 428

S. 256 --Reference--High Court--Scope of powers--Finality of findings of fact of Tribunal--High Court taking into account certain additional facts already on record but not taken note of by Tribunal--Permissible--High Court construing facts without departure therefrom--Differing emphasis on undisputed facts--Within jurisdiction of High Court-- Ganapathy and Co. v. CIT(SC) . . . 363

----Reference--Monetary limits for applications by Revenue--Effect of CBDT Circular No. 21 of 2015 dated 10-12-2015 laying down threshold limit of tax effect Rs. 20 lakhs--Applicable even to pending references--Reference by Tribunal where tax effect less than Rs. 20 lakhs returned unanswered-- CIT v. Sunny Sounds P. Ltd. (Bom) . . . 443

S. 256(1) --Reference--Monetary limits prescribed for litigation by Revenue--Effect of CBDT Instruction No. 5 of 2014--Instruction applicable to pending references--Tax effect less than monetary limit prescribed by instruction--Nothing to indicate that issue falls within exclusion clause of instruction nor that issue has cascading effect--Reference returned unanswered--CIT v. Computer Point (I) Ltd. (Bom) . . . 441

S. 269UA --Purchase of immovable property by Central Government--Transfer--Definition--Land held under lease from Municipality--Collaboration agreement under which land holder agreeing to allow developer to construct commercial project on land at its cost--Developer to retain 78 per cent. of total constructed area and transfer 22 per cent. to land holder--Not a case of sale, lease or exchange--Agreement enabling developer to enjoy property of land holder for purpose of construction--Falls within definition--Consideration stated in agreement for land cannot be taken as consideration for available floor space index--Comparable instance of sale taken of property in adjoining locality and not commercial property--Order for pre-emptive purchase vitiated-- Unitech Ltd. v. Union of India (SC) . . . 456

S. 269UD --Purchase of immovable property by Central Government--General principles--No onus on Department to establish undervaluation with view to evade tax--Undervaluation greater than 15 per cent. below fair market value raises rebuttable presumption of attempt to evade taxes-- Unitech Ltd. v. Union of India (SC) . . . 456

----Purchase of immovable property by Central Government--Transfer--Definition--Land held under lease from Municipality--Collaboration agreement under which land holder agreeing to allow developer to construct commercial project on land at its cost--Developer to retain 78 per cent. of total constructed area and transfer 22 per cent. to land holder--Not a case of sale, lease or exchange--Agreement enabling developer to enjoy property of land holder for purpose of construction--Falls within definition--Consideration stated in agreement for land cannot be taken as consideration for available floor space index--Comparable instance of sale taken of property in adjoining locality and not commercial property--Order for pre-emptive purchase vitiated-- Unitech Ltd. v. Union of India (SC) . . . 456

Interest-tax Act, 1974 :

S. 10 --Interest-tax--Reassessment--Not permissible where no assessment made in first instance-- Standard Chartered Finance Ltd. v. CIT (SC) . . . 453

 

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

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ITR (TRIB) Volume 46 : Part 2 (Issue dated : 29-2-2016)

 

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

ONLINE EDITION

SUBJECT INDEX TO CASES REPORTED

Business expenditure --Disallowance--Cash expenses--Not supported by proper vouchers--Expenses incurred for non-business purpose--Disallowance of five per cent. out of balance expenses--Justified--Income-tax Act, 1961, s. 37-- Saigal Sea Trade v. Asst. CIT (Mumbai) . . . 131

Capital gains --Short-term capital gains--Computation--Purchase and sale of shares--Fees paid under portfolio management scheme--No cost of acq uisition or of improvement--No direct nexus with purchase and sale of shares--Not deductible--Income-tax Act, 1961, s. 48(1)-- Saigal Sea Trade v. Asst. CIT 
(Mumbai) . . . 131

----Short-term capital gains--Purchase of flats disclosed in balance-sheets--No opportunity given to assessee to gather and produce evidence in view of time-limit for assessment--Admission of additional evidence by Commissioner (Appeals) justified--Agreement value and annual information report tallying--No undisclosed capital gains--Income-tax Act, 1961--Income-tax Rules, 1962, r. 46A-- Saigal Sea Trade v. Asst. CIT
(Mumbai) . . . 131

Capital or revenue expenditure --Assessee operating certain stores and in process of opening more stores--Nature of business activities of all identical--Expansion of business activities--Expenditure revenue in nature--Treatment given in books of account not relevant--Income-tax Act, 1961, s. 37(1)-- Reliance Wellness Ltd. v. Deputy CIT
(Mumbai) . . . 151

Depreciation --Residential building--Residential premises for employees--Absence of details of names of employees to whom premises allotted and in whose hands perquisite offered--Matter remanded for affording reasonable opportunity to assessee to produce details--Income-tax Act, 1961, s. 32-- Saigal Sea Trade v. Asst. CIT 
(Mumbai) . . . 131

Income --Mode and method of computing disallowance of expenditure for earning exempt income--No satisfaction recorded by Assessing Officer that working of disallowance made by assessee against income exempt from tax incorrect--Disallowance not justified--Income-tax Act, 1961, s. 14A-- Saigal Sea Trade v. Asst. CIT 
(Mumbai) . . . 131

 

PRINT EDITION

Volume 46 : Part 2 (Issue dated : 29-2-2016)

SUBJECT INDEX TO CASES REPORTED IN THIS PART

Business expenditure --Amortisation of preliminary expenses--Assessee a banking company--Deduction under section 35D not allowable--Income-tax Act, 1961, s. 35D-- Yes Bank Ltd. v. Addl. CIT (Mumbai) . . . 317

----Deduction only on actual payment--Accounting--Method of accounting--Provision mandating inclusive method of accounting to follow tax, duties, cess or levy--Assessee ought to follow inclusive method in respect of modvat--Income-tax Act, 1961 s. 145A--Mazagaon Dock Ltd. v. ITO (Mumbai) . . . 162

----Deduction only on actual payment--Service tax--Deduction allowed on payment basis in immediately preceding assessment year--Assessee precluded from claiming amount again in next assessment year--Income-tax Act, 1961, s. 43B-- Mazagaon Dock Ltd. v. ITO (Mumbai) . . . 162

----Disallowance--Advertisement expenses--Ledger and bills produced before authorities--No discrepancy pointed out by them--Disallowance in earlier years--No estoppel--No disallowance--Income-tax Act, 1961, s. 37-- Sahil Study Circle P. Ltd. v. Deputy CIT (Delhi) . . . 182

----Disallowance--Payments liable to deduction of tax at source--Expenditure incurred towards promotion, advertisement and legal fee--Provisions of section 9(1)(v) or (vi) or (vii) not applicable--Disallowance under section 40(a)(i) not proper--Income-tax Act, 1961, ss. 9(1), 40(a)(i)-- Brakes India Ltd. v. Deputy CIT
(Chennai) . . . 212

----Disallowance--Payments liable to deduction of tax at source--Interest paid to banks in India for amount borrowed from foreign banks and payment not made in foreign currency--Payments exempted from tax deduction at source--Disallowance under section 40(a)(i) not warranted--Income-tax Act, 1961, s. 40(a)(i)-- Brakes India Ltd. v. Deputy CIT (Chennai) . . . 212

----Prior period income--Prior period expenses--Disallowing of entire amount of prior period expenses while assessing entire amount of prior period income--Not justified--Disallowance by netting off prior period income against prior period expenditure--Justified--Income-tax Act, 1961, s. 37-- Mazagaon Dock Ltd. v. ITO
(Mumbai) . . . 162

Capital gains --Exemption--Sale of property and investment of consideration in purchase or construction of residential property--Assessee utilising entire capital gains within period of one year--Construction of house not completed due to circumstances beyond assessee's control--Assessee entitled to exemption--Income-tax Act, 1961, s. 54-- ITO v. Narayana Rao(Hyd) . . . 178

Cash credit --Unexplained cash credit--Assessing Officer making addition on amount of share capital relying on statement of director of one of investing companies--Shareholding company confirming on inquiries--Assessing Officer disregarding all evidence collected directly from shareholder company and filed by assessee--Failure by Assessing Officer to provide opportunity of cross-examination of assessee's witness--Addition made by Assessing Officer not sustainable--Income-tax Act, 1961, s. 68-- Vitrag Metal P. Ltd. v. ITO(Mumbai) . . . 201

----Gift--Foreign gifts--Genuineness--Assessee receiving foreign gift from his son's friend--Failure by assessee to prove any love and affection with donor--Failure to prove execution of valid gift--Gift amount treated as unexplained cash credits--Income-tax Act, 1961, s. 68--Deputy CIT v. Bhanuprasad O. Trivedi (Ahd) . . . 307

Charitable purposes --Charitable trust--Registration--Cancellation--Grounds on which cancellation permissible--No satisfaction that activities of assessee either not genuine or not carried out in accordance with objects of trust--Object of general public utility--Disqualification--Activities such as holding conferences, seminars, publishing journals for its members not in nature of business, trade or commerce--No violation--Cancellation not justified--Income-tax Act, 1961, ss. 2(15), 12A, 12AA(3)-- Builders Association of India v. Deputy CIT (Exemption) (Mumbai) . . . 295

Company --Book profits--Income--Disallowance of expenditure on earning non-taxable income--Disallowance made cannot be added back to compute book profits--Income-tax Act, 1961 ss. 14A, 115JB--Income-tax Rules, 1962, r. 8D-- Brakes India Ltd. v. Deputy CIT(Chennai) . . . 212

Deduction of tax at source --Short deduction of tax--Assessee in default--Interest--Recipients disclosing amount received from assessee in returns filed by them for relevant assessment year--Assessee not assessee in default--Assessing Officer directed to verify whether taxes paid by recipients--Assessee liable to pay interest till date of payment of taxes by recipients on income received from assessee--Income-tax Act, 1961, s. 201(1), (1A)-- Wockhardt Hospitals Ltd. v. Asst. CIT (TDS) (Mumbai) . . . 259

Depreciation --Additional depreciation--Additions made to plant and machinery during second half of preceding year and fifty per cent. of additional depreciation allowed--No carry forward of residual additional depreciation permissible--Income-tax Act, 1961, s. 32(1)(iia)--Brakes India Ltd. v. Deputy CIT (Chennai) . . . 212

Donations to charitable institutions --Special deduction--Approval of institution--Disqualification of religious trusts--Conditions for disqualification--Not only must trust be proved to be religious in nature it must also be expressed to be for benefit of particular religious community or caste--Trust registered as religious trust--But not expressed in objects clause to be for benefit of particular religious community or caste--Trust not spending any amount for religious purposes or activities--Trust not disqualified--Entitled to registration--Income-tax Act, 1961, s. 80G(5), (5B)-- Yamunaji Mandir Trust v. CIT (Rajkot) . . . 283

Export oriented undertaking --Exemption--Weighted deduction--Expenditure on research and development--Failure by assessee to prove substantively that no part of knowledge gained out of research and development activity useful to section 10B units--Matter remanded to Assessing Officer to find out tangible benefits which section 10B units derived from research and development activities and to decide disallowance--Income-tax Act, 1961, s. 10B-- Brakes India Ltd. v. Deputy CIT
(Chennai) . . . 212

Export --Exemption--Condition precedent for grant of exemption--Return of income must be filed within time prescribed under section 139(1)--Return filed within extended period under section 139(4)--Assessee not eligible to claim exemption--Whether assessee filed return of income within time--Matter remanded--Income-tax Act, 1961, ss. 10A, 139(1)-- Deputy CIT v. Helios and Matheson Information Technology Ltd.
(Chennai) . . . 172

----Exemption--Foreign currency expenses excluded in export turnover to be excluded from total turnover too--Income-tax Act, 1961, s. 10A-- Deputy CIT v. Helios and Matheson Information Technology Ltd. (Chennai) . . . 172

Income --Computation of income--Disallowance of expenditure on earning non-taxable income--No exempt income received during previous year--No disallowance--Some portion of expenses spent for purpose of purchase, maintenance and sale of investments--Portion of administrative expenses to be disallowed--Securities held as stock-in-trade--Rule 8D(2)(iii) cannot be applied--Assessing Officer to restrict disallowance--Income-tax Act, 1961, s. 14A--Income-tax Rules, 1962, r. 8D(2)(iii)-- Yes Bank Ltd. v. Addl. CIT (Mumbai) . . . 317

----Computation of income--Disallowance of expenditure on earning non-taxable income--Non-interest bearing funds available with assessee more than amount of investment which generated tax free income--No disallowance--Assessing Officer to examine fund position of assessee and decide accordingly--Matter remanded--Income-tax Act, 1961, s. 14A--Income-tax Rules, 1962, r. 8D(2)(i), (ii)-- Yes Bank Ltd. v. Addl. CIT (Mumbai) . . . 317

----Disallowance of expenditure in relation to tax exempted income--Investment originally made in year 1992-93 and earlier years--No change in investment portfolio during years 2004-05 to 2007-08 either by purchase of new shares or by disposal of existing shares--Shares in only one company and dividend received from one company only--Provision for computing disallowance not applicable--Disallowance of 0.5 per cent. justified--Income-tax Act, 1961, s. 14A-- Mazagaon Dock Ltd. v. ITO
(Mumbai) . . . 162

----Disallowance of expenditure relating to exempt income--Investment made in 100 per cent. foreign subsidiary companies in form of equity--Intention not to earn exempt income but commercial expediency--Section 14A read with rule 8D not applicable for assessment years 2006-07 and 2008-09--Income-tax Act, 1961, s. 14A--Income-tax Rules, 1962, r. 8D-- Deputy CIT v. Helios and Matheson Information Technology Ltd. (Chennai) . . . 172

----Disallowance of expenditure relating to exempt income--Rule 8D not applicable to years prior to 2008-09--Disallowance not proper--Disallowance not to exceed exempt income--Income-tax Act, 1961, s. 14A--Income-tax Rules, 1962, r. 8D-- Brakes India Ltd. v. Deputy CIT (Chennai) . . . 212

Income-tax survey --Undisclosed investment--Managing director of assessee surrendering amount during survey--Retraction statement reconciling receipts found during survey--Veracity of explanation given by assessee not gone into--Addition solely on basis of admission given during survey--Not justified--Income-tax Act, 1961, ss. 69A, 133A-- Sahil Study Circle P. Ltd. v. Deputy CIT (Delhi) . . . 182

Reassessment --Notice after four years--Payment of commission and professional charges available at original assessment--Reassessment on ground tax not deducted at source on certain payments towards expenditure incurred in foreign currency--Not justified--Income-tax Act, 1961, ss. 147, 148-- Brakes India Ltd. v. Deputy CIT
(Chennai) . . . 212

----Notice--Validity--Gift--No information about any bogus gift--No tangible material to justify income chargeable to tax had escaped assessment--Reassessment invalid--Income-tax Act, 1961, ss. 147, 148-- Smt. Sarika Jain v. ITO
(Chandigarh) . . . 246

Search and seizure --Assessment in search cases--Undisclosed income--Commodity transactions--Client code modifications negligible in number compared to total quantum of trades carried out by assessee--Difference of profits indicated in books of account and as worked out by reversing effect of client code modifications--Not undisclosed income--Income-tax Act, 1961, s. 153A-- Asst. CIT v. Amar Mukesh Shah
(Ahd) . . . 234

----Assessment of third person--Condition precedent--Recording of satisfaction by Assessing Officer of person in respect of whom search conducted--No satisfaction recorded by Assessing Officer of person in respect of whom search conducted or by Assessing Officer of assessee prior to issuing notice--Notice invalid--Assessment against assessee not valid--Income-tax Act, 1961, ss. 153A, 153C-- Parshwa Corporation v. Deputy CIT (Ahd) . . . 266

----Notice under section 153C--Effect of section 292B--Failure by Assessing Officer of person in respect of whom search conducted to record satisfaction--Not a curable defect--Notice invalid--Income-tax Act, 1961, ss. 153C, 292B-- Parshwa Corporation v. Deputy CIT(Ahd) . . . 266

Valuation of stock --Loss arising on revaluation of securities--Allowable--Income-tax Act, 1961-- Yes Bank Ltd. v. Addl. CIT (Mumbai) . . . 317

 

SECTIONWISE INDEX TO CASES REPORTED IN THIS PART

Income-tax Act, 1961

S. 2(15) --Charitable purposes--Charitable trust--Registration--Cancellation--Grounds on which cancellation permissible--No satisfaction that activities of assessee either not genuine or not carried out in accordance with objects of trust--Object of general public utility--Disqualification--Activities such as holding conferences, seminars, publishing journals for its members not in nature of business, trade or commerce--No violation--Cancellation not justified-- Builders Association of India v. Deputy CIT (Exemption) (Mumbai) . . . 295

S. 9(1) --Business expenditure--Disallowance--Payments liable to deduction of tax at source--Expenditure incurred towards promotion, advertisement and legal fee--Provisions of section 9(1)(v) or (vi) or (vii) not applicable--Disallowance under section 40(a)(i) not proper-- Brakes India Ltd. v. Deputy CIT (Chennai) . . . 212

S. 10A --Export--Exemption--Condition precedent for grant of exemption--Return of income must be filed within time prescribed under section 139(1)--Return filed within extended period under section 139(4)--Assessee not eligible to claim exemption--Whether assessee filed return of income within time--Matter remanded-- Deputy CIT v. Helios and Matheson Information Technology Ltd. (Chennai) . . . 172

----Export--Exemption--Foreign currency expenses excluded in export turnover to be excluded from total turnover too-- Deputy CIT v. Helios and Matheson Information Technology Ltd. (Chennai) . . . 172

S. 10B --Export oriented undertaking--Exemption--Weighted deduction--Expenditure on research and development--Failure by assessee to prove substantively that no part of knowledge gained out of research and development activity useful to section 10B units--Matter remanded to Assessing Officer to find out tangible benefits which section 10B units derived from research and development activities and to decide disallowance-- Brakes India Ltd. v. Deputy CIT (Chennai) . . . 212

S. 12A --Charitable purposes--Charitable trust--Registration--Cancellation--Grounds on which cancellation permissible--No satisfaction that activities of assessee either not genuine or not carried out in accordance with objects of trust--Object of general public utility--Disqualification--Activities such as holding conferences, seminars, publishing journals for its members not in nature of business, trade or commerce--No violation--Cancellation not justified-- Builders Association of India v. Deputy CIT (Exemption) (Mumbai) . . . 295

S. 12AA(3) --Charitable purposes--Charitable trust--Registration--Cancellation--Grounds on which cancellation permissible--No satisfaction that activities of assessee either not genuine or not carried out in accordance with objects of trust--Object of general public utility--Disqualification--Activities such as holding conferences, seminars, publishing journals for its members not in nature of business, trade or commerce--No violation--Cancellation not justified-- Builders Association of India v. Deputy CIT (Exemption) (Mumbai) . . . 295

S. 14A --Company--Book profits--Income--Disallowance of expenditure on earning non-taxable income--Disallowance made cannot be added back to compute book profits-- Brakes India Ltd. v. Deputy CIT (Chennai) . . . 212

----Income--Computation of income--Disallowance of expenditure on earning non-taxable income--No exempt income received during previous year--No disallowance--Some portion of expenses spent for purpose of purchase, maintenance and sale of investments--Portion of administrative expenses to be disallowed--Securities held as stock-in-trade--Rule 8D(2)(iii) cannot be applied--Assessing Officer to restrict disallowance-- Yes Bank Ltd. v. Addl. CIT(Mumbai) . . . 317

----Income--Computation of income--Disallowance of expenditure on earning non-taxable income--Non-interest bearing funds available with assessee more than amount of investment which generated tax free income--No disallowance--Assessing Officer to examine fund position of assessee and decide accordingly--Matter remanded-- Yes Bank Ltd. v. Addl. CIT(Mumbai) . . . 317

----Income--Disallowance of expenditure in relation to tax exempted income--Investment originally made in year 1992-93 and earlier years--No change in investment portfolio during years 2004-05 to 2007-08 either by purchase of new shares or by disposal of existing shares--Shares in only one company and dividend received from one company only--Provision for computing disallowance not applicable--Disallowance of 0.5 per cent. justified--Mazagaon Dock Ltd. v. ITO (Mumbai) . . . 162

----Income--Disallowance of expenditure relating to exempt income--Investment made in 100 per cent. foreign subsidiary companies in form of equity--Intention not to earn exempt income but commercial expediency--Section 14A read with rule 8D not applicable for assessment years 2006-07 and 2008-09-- Deputy CIT v. Helios and Matheson Information Technology Ltd. (Chennai) . . . 172

----Income--Disallowance of expenditure relating to exempt income--Rule 8D not applicable to years prior to 2008-09--Disallowance not proper--Disallowance not to exceed exempt income-- Brakes India Ltd. v. Deputy CIT (Chennai) . . . 212

S. 32(1)(iia) --Depreciation--Additional depreciation--Additions made to plant and machinery during second half of preceding year and fifty per cent. of additional depreciation allowed--No carry forward of residual additional depreciation permissible-- Brakes India Ltd. v. Deputy CIT (Chennai) . . . 212

S. 35D --Business expenditure--Amortisation of preliminary expenses--Assessee a banking company--Deduction under section 35D not allowable-- Yes Bank Ltd. v. Addl. CIT (Mumbai) . . . 317

S. 37 --Business expenditure--Disallowance--Advertisement expenses--Ledger and bills produced before authorities--No discrepancy pointed out by them--Disallowance in earlier years--No estoppel--No disallowance-- Sahil Study Circle P. Ltd. v. Deputy CIT (Delhi) . . . 182

----Business expenditure--Prior period income--Prior period expenses--Disallowing of entire amount of prior period expenses while assessing entire amount of prior period income--Not justified--Disallowance by netting off prior period income against prior period expenditure--Justified-- Mazagaon Dock Ltd. v. ITO
(Mumbai) . . . 162

S. 40(a)(i) --Business expenditure--Disallowance--Payments liable to deduction of tax at source--Expenditure incurred towards promotion, advertisement and legal fee--Provisions of section 9(1)(v) or (vi) or (vii) not applicable--Disallowance under section 40(a)(i) not proper--Brakes India Ltd. v. Deputy CIT (Chennai) . . . 212

----Business expenditure--Disallowance--Payments liable to deduction of tax at source--Interest paid to banks in India for amount borrowed from foreign banks and payment not made in foreign currency--Payments exempted from tax deduction at source--Disallowance under section 40(a)(i) not warranted-- Brakes India Ltd. v. Deputy CIT (Chennai) . . . 212

S. 43B --Business expenditure--Deduction only on actual payment--Service tax--Deduction allowed on payment basis in immediately preceding assessment year--Assessee precluded from claiming amount again in next assessment year-- Mazagaon Dock Ltd. v. ITO (Mumbai) . . . 162

S. 54 --Capital gains--Exemption--Sale of property and investment of consideration in purchase or construction of residential property--Assessee utilising entire capital gains within period of one year--Construction of house not completed due to circumstances beyond assessee's control--Assessee entitled to exemption-- ITO v. Narayana Rao
(Hyd) . . . 178

S. 68 --Cash credit--Unexplained cash credit--Assessing Officer making addition on amount of share capital relying on statement of director of one of investing companies--Shareholding company confirming on inquiries--Assessing Officer disregarding all evidence collected directly from shareholder company and filed by assessee--Failure by Assessing Officer to provide opportunity of cross-examination of assessee's witness--Addition made by Assessing Officer not sustainable-- Vitrag Metal P. Ltd. v. ITO
(Mumbai) . . . 201

----Cash credits--Gift--Foreign gifts--Genuineness--Assessee receiving foreign gift from his son's friend--Failure by assessee to prove any love and affection with donor--Failure to prove execution of valid gift--Gift amount treated as unexplained cash credits-- Deputy CIT v. Bhanuprasad O. Trivedi (Ahd) . . . 307

S. 69A --Income-tax survey--Undisclosed investment--Managing director of assessee surrendering amount during survey--Retraction statement reconciling receipts found during survey--Veracity of explanation given by assessee not gone into--Addition solely on basis of admission given during survey--Not justified-- Sahil Study Circle P. Ltd. v. Deputy CIT (Delhi) . . . 182

S. 80G(5), (5B) --Donations to charitable institutions--Special deduction--Approval of institution--Disqualification of religious trusts--Conditions for disqualification--Not only must trust be proved to be religious in nature it must also be expressed to be for benefit of particular religious community or caste--Trust registered as religious trust--But not expressed in objects clause to be for benefit of particular religious community or caste--Trust not spending any amount for religious purposes or activities--Trust not disqualified--Entitled to registration-- Yamunaji Mandir Trust v. CIT
(Rajkot) . . . 283

S. 115JB --Company--Book profits--Income--Disallowance of expenditure on earning non-taxable income--Disallowance made cannot be added back to compute book profits-- Brakes India Ltd. v. Deputy CIT (Chennai) . . . 212

S. 133A --Income-tax survey--Undisclosed investment--Managing director of assessee surrendering amount during survey--Retraction statement reconciling receipts found during survey--Veracity of explanation given by assessee not gone into--Addition solely on basis of admission given during survey--Not justified-- Sahil Study Circle P. Ltd. v. Deputy CIT (Delhi) . . . 182

S. 139(1) --Export--Exemption--Condition precedent for grant of exemption--Return of income must be filed within time prescribed under section 139(1)--Return filed within extended period under section 139(4)--Assessee not eligible to claim exemption--Whether assessee filed return of income within time--Matter remanded-- Deputy CIT v. Helios and Matheson Information Technology Ltd.
(Chennai) . . . 172

S. 145A --Business expenditure--Deduction only on actual payment--Accounting--Method of accounting--Provision mandating inclusive method of accounting to follow tax, duties, cess or levy--Assessee ought to follow inclusive method in respect of modvat-- Mazagaon Dock Ltd. v. ITO (Mumbai) . . . 162

S. 147 --Reassessment--Notice--Validity--Gift--No information about any bogus gift--No tangible material to justify income chargeable to tax had escaped assessment--Reassessment invalid-- Smt. Sarika Jain v. ITO (Chandigarh) . . . 246

----Reassessment--Notice after four years--Payment of commission and professional charges available at original assessment--Reassessment on ground tax not deducted at source on certain payments towards expenditure incurred in foreign currency--Not justified--Brakes India Ltd. v. Deputy CIT (Chennai) . . . 212

S. 148 --Reassessment--Notice--Validity--Gift--No information about any bogus gift--No tangible material to justify income chargeable to tax had escaped assessment--Reassessment invalid-- Smt. Sarika Jain v. ITO (Chandigarh) . . . 246

----Reassessment--Notice after four years--Payment of commission and professional charges available at original assessment--Reassessment on ground tax not deducted at source on certain payments towards expenditure incurred in foreign currency--Not justified--Brakes India Ltd. v. Deputy CIT (Chennai) . . . 212

S. 153A --Search and seizure--Assessment in search cases--Undisclosed income--Commodity transactions--Client code modifications negligible in number compared to total quantum of trades carried out by assessee--Difference of profits indicated in books of account and as worked out by reversing effect of client code modifications--Not undisclosed income-- Asst. CIT v. Amar Mukesh Shah (Ahd) . . . 234

----Search and seizure--Assessment of third person--Condition precedent--Recording of satisfaction by Assessing Officer of person in respect of whom search conducted--No satisfaction recorded by Assessing Officer of person in respect of whom search conducted or by Assessing Officer of assessee prior to issuing notice--Notice invalid--Assessment against assessee not valid-- Parshwa Corporation v. Deputy CIT (Ahd) . . . 266

S. 153C --Search and seizure--Assessment of third person--Condition precedent--Recording of satisfaction by Assessing Officer of person in respect of whom search conducted--No satisfaction recorded by Assessing Officer of person in respect of whom search conducted or by Assessing Officer of assessee prior to issuing notice--Notice invalid--Assessment against assessee not valid-- Parshwa Corporation v. Deputy CIT (Ahd) . . . 266

----Search and seizure--Notice under section 153C--Effect of section 292B--Failure by Assessing Officer of person in respect of whom search conducted to record satisfaction--Not a curable defect--Notice invalid-- Parshwa Corporation v. Deputy CIT
(Ahd) . . . 266

S. 201(1), (1A) --Deduction of tax at source--Short deduction of tax--Assessee in default--Interest--Recipients disclosing amount received from assessee in returns filed by them for relevant assessment year--Assessee not assessee in default--Assessing Officer directed to verify whether taxes paid by recipients--Assessee liable to pay interest till date of payment of taxes by recipients on income received from assessee-- Wockhardt Hospitals Ltd. v. Asst. CIT (TDS) (Mumbai) . . . 259

S. 292B --Search and seizure--Notice under section 153C--Effect of section 292B--Failure by Assessing Officer of person in respect of whom search conducted to record satisfaction--Not a curable defect--Notice invalid-- Parshwa Corporation v. Deputy CIT (Ahd) . . . 266

Income-tax Rules, 1962

R. 8D --Company--Book profits--Income--Disallowance of expenditure on earning non-taxable income--Disallowance made cannot be added back to compute book profits-- Brakes India Ltd. v. Deputy CIT (Chennai) . . . 212

----Income--Disallowance of expenditure relating to exempt income--Investment made in 100 per cent. foreign subsidiary companies in form of equity--Intention not to earn exempt income but commercial expediency--Section 14A read with rule 8D not applicable for assessment years 2006-07 and 2008-09-- Deputy CIT v. Helios and Matheson Information Technology Ltd. (Chennai) . . . 172

----Income--Disallowance of expenditure relating to exempt income--Rule 8D not applicable to years prior to 2008-09--Disallowance not proper--Disallowance not to exceed exempt income-- Brakes India Ltd. v. Deputy CIT (Chennai) . . . 212

R. 8D(2)(i), (ii) --Income--Computation of income--Disallowance of expenditure on earning non-taxable income--Non-interest bearing funds available with assessee more than amount of investment which generated tax free income--No disallowance--Assessing Officer to examine fund position of assessee and decide accordingly--Matter remanded-- Yes Bank Ltd. v. Addl. CIT (Mumbai) . . . 317

R. 8D(2)(iii) --Income--Computation of income--Disallowance of expenditure on earning non-taxable income--No exempt income received during previous year--No disallowance--Some portion of expenses spent for purpose of purchase, maintenance and sale of investments--Portion of administrative expenses to be disallowed--Securities held as stock-in-trade--Rule 8D(2)(iii) cannot be applied--Assessing Officer to restrict disallowance-- Yes Bank Ltd. v. Addl. CIT (Mumbai) . . . 317

 

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

Here is the analysis of Union budget 2016-17 by Zawar Associates, Aurangabad:

Dear Friends,
               Here is the analysis of Union budget 2016-17 by Zawar Associates, Aurangabad:

Tax Proposals:
Changes in Direct Taxes

2. Limit for Tax Audit for Professionals is Rs. 50 lakh
3. Professionals deemed profit will be 50%.
4. 80JJAA will be available to all Tax Audit assesses.
5. Accelerated depr will be limited to max 40%
6. New mfg co. to be taxed at 25% + surcharge and cess (effective 29 %)
7. 100% deduction of profits for 3 yrs for startups. MAT will apply in such cases.
8. No tax for profits to housing project for flats upto 30 sq. mtrs in 4 metro cities; and 60 sq. mtrs in other cities.
9. Surcharge @ 15% on income > Rs. 1 crore.
10. TCS @ 1 % on purchase of luxury cars > Rs. 10 lakh.
11. TCS 1% on  purchase of goods and services in cash > Rs. 2 lakh.
12. STT on 'Options' will be 0.05%. (Existing 0.017%)
13. Interest on IT refund @ 9% p.a against present rate of 6% p.a
14. No need to deduct TDS @ 20% of assessee having no PAN if other specified documents are provided.
15. Tax exemption limit increased to Rs 300000 for persons having taxable income < Rs. 500000.
16. Limit of deduction U/s 80 GG is increased from Rs. 24000/- to Rs. 60000/-.
17. No Capital Gain tax if the capital gain amount is invested in start up.
18. House purchased for < Rs. 50 lacs,  loan < Rs.35 lacs, 1st time purchase, Additional deduction of Rs. 50000/- in housing loan interest.
19. Voluntary Declaration Scheme - Undisclosed income can be disclosed by paying tax @ 45% (No scrutiny or enquires will be held for the same).
20. Corporate tax reduced to 29% for small business having turnover less than Rs. 5 Crores.
21. Concealment penalty @ 50% for under reporting of Income and 200% for Misreporting of Facts.
22. Tax on Dividend @ 10% if dividend received > Rs. 10 lakhs.
23. No CG tax on realization of Sovereign Gold Bond issued by RBI.
24. No CG tax on transfer of units in merger or consolidation of plans of a mutual fund.
25. No CG tax on realization of Deposit issued under Gold Monetization Scheme, 2015.

Changes in Indirect Taxes
1. No GST brought in this session.
2. Basic custom and excise duty on refrigerated containers reduced to 5% and 6%.
3. Increase in Excise duty for Tobacco Products (except Beedi) 10-15%.
4. Excise duty @ 1%   (If input credit not taken) and @ 12.5% (if credit taken) on artificial jewellery, diamond jewellery, and all kind of designer jewellery.
5. 11 new benches will be set-up at CESTAT i.e. Customs, Excise and Service Tax Appellate Tribunal for faster Tax assessments.
6. Krishi Kalyan Cess will be charged on all types of taxable services @ 0.5%. Hence effective rate of Service Tax would be 15%.
7. No Service Tax will be charged for houses built in less than 60 sq. Meter.
8. Service tax exemptions to Rural Electrification Plans.
9. No service tax will be levied on General Insurance Service in case of Nirbhaya Health Insurance.

-Regards
CA. C. V. PAWAR