Section 45(4): Full Bench High Court Explains Law On Taxability Of Capital Gains In Hands Of Firm

 

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CIT vs. M/s Dynamic Enterprises (Karnataka High Court – Full Bench)

S. 45(4) does not apply if the retiring partner takes only money
towards the value of his share and there is no distribution of capital assets among the partners

The assessee partnership firm was constituted on 09.01.1985 with Anurag Jain and Nirmal Kumar Dugar as its partners. On 13.04.1987, Nirmal Kumar Dugar retired from partnership and L.P. Jain entered the partnership and contributed capital for purchase of land to construct a housing complex. The assessee-firm purchased land for a consideration of Rs.2.5 lakhs. Another reconstitution took place on 1.7.1991 by which L.P. Jain retired from the firm and Pushpa Jain and Shree Jain were inducted as partners. Later, on 28.04.1993, five partners belonging to the Khemka Group were inducted. Prior to the induction of the Khemka Group, the assets of the firm were revalued. The three old partners retired through deed of retirement dated 01.04.1994 and received the enhanced value of the property in FY 1994-95. The AO held that the introduction of the Khemka Group and the retirement of the old partners was a device adopted to transfer the immovable property and to evade capital gains tax and stamp duty. He assessed the firm on capital gains. This was upheld by the CIT(A) though reversed the Tribunal. The Tribunal held that as the land continued to remain with the assessee-firm, there was no transfer u/s 2(47) and that the retiring partners had merely withdrawn the amounts standing to their credit in the capital account. On appeal by the department to the High Court, it was felt that there was a conflict between Mangalore Ganesh Beedi Works 265 ITR 658 and Gurunath Talkies 328 ITR 59 and the issue was referred to the Full Bench. HELD by the Full Bench:

(i) S. 45(4) deals with a distribution of capital assets on the dissolution of a firm or other AOP or BOI or otherwise and provides that if in the course of such distribution of capital asset there is a transfer of a capital asset by the firm, the firm shall be chargeable to tax on capital gains. In order to attract s. 45(4), the conditions precedent are (1) there should be a distribution of capital assets of a firm; (2) such distribution should result in transfer of a capital asset by firm in favour of the partner; (3) on account of the transfer there should be a profit or gain derived by the firm and (4) such distribution should be on dissolution of the firm or otherwise. In other words, the capital asset of the firm should be transferred in favour of a partner, resulting in firm ceasing to have any interest in the capital asset transferred and the partners should acquire exclusive interest in the capital asset. On facts, the partnership firm purchased the property and it was not in the name of any partner. No partner brought that capital asset as capital contribution into the firm. Also, there was no dissolution of the firm because the firm continued to exist even after the retirement of some partners. What was given to the retiring partners is cash representing the value of their share in the partnership. No capital asset was transferred on the date of retirement. In the absence of distribution of a capital asset and in the absence of transfer of capital asset in favour of the retiring partners, no profit or gain arose in the hands of the partnership firm and so the question of the firm being assessed u/s 45(4) would not arise;

(ii) The department's argument that the transaction by which the five incoming partners brought money into the firm and the three erstwhile partners retired by taking money (leaving the capital asset in the firm) is a device adopted to evade payment of profits or gains is not acceptable because it proceeds on the premise that the immovable property belongs to the erstwhile partners and that after the retirement the erstwhile partners have taken cash and given the property to the incoming partners. The property belongs to the partnership firm and not to the partners. The partners only had a share in the partnership asset when they retired and took their share in cash, they were not relinquishing their interest in the immovable property. What they relinquished is their share in the partnership.Therefore, there is no transfer of a capital asset and no capital gains or profit arises (Ganesh Beedi Works 265 ITR 658 approved; Gurunath Talkies 328 ITR 59 reversed; Narayanappa vs. Bhaskara Krishnappa AIR 1966 SC 1300, Malbar Fisheries Co 120 ITR 49 (SC), Sunil Siddharthbhai 156 ITR 509 (SC), A.N. Naik Associate 265 ITR 346 (Bom) referred)

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CBDT Issues SOP For Handling E-filed Returns With Unpaid S. A. Tax

CBDT Issues SOP For Handling E-filed Returns With Unpaid S. A. Tax

 

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CBDT Issues SOP For Handling E-filed Returns With Unpaid S. A. Tax

Further to the letter dated 22.10.2013 regarding the processing of 1.46 lakh defective returns submitted for AY 2013-14 where the self-assessment tax is unpaid, the Directorate of Income-tax (Systems) has issued a letter dated 13.11.2013 setting out a detailed Standard Operating Procedure (SOP) for handling such E-filed Returns where self assessment tax is not paid.

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DIT vs. Alcatel Lucent USA Inc (Delhi High Court)

S. 234B: A non-resident assessee which does not admit income chargeable to tax must be inferred to have induced the Indian payer not to deduct TDS and so it is liable for advance-tax interest

Section 234B: High Court Partly Reverses Law On Foreign Co’s Interest Liability

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From: editor@itatonline.org <itatonline.org@gmail.com>
Date: Thu, Nov 14, 2013 at 9:16 AM

Dear Subscriber,

 

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

DIT vs. Alcatel Lucent USA Inc (Delhi High Court)

S. 234B: A non-resident assessee which does not admit income chargeable to tax must be inferred to have induced the Indian payer not to deduct TDS and so it is liable for advance-tax interest

The assessee, a USA company, supplied telecom equipments to customers in India. It claimed that it did not have a PE in India and that the income was not chargeable to tax. The AO rejected the claim and attributed 2.5% of the sale proceeds of the hardware as profit attributable to the PE in India. He also levied interest u/s 234B for failure to pay advance-tax. Before the CIT(A), the assessee accepted that the income was chargeable to tax but argued, relying on Jacabs Civil Incorporated 330 ITR 578 (Del), that as it was a foreign company and the income was liable for TDS, it was not liable to pay advance-tax. The CIT(A) and Tribunal accepted the assessee's contention. On appeal by the department to the High Court, HELD allowing the appeal:

(i) There is a distinction between a case where the assessee admits that it has income chargeable to tax in India but does not pay advance tax on the basis that the Indian payer ought to have deducted tax at source u/s 195. In such a case (as was the fact situation in Jacabs), the assessee is entitled to take credit for the tax which was "deductible" by the Indian payer while computing its advance tax liability even though no tax was in fact deducted. However, in a case where the assessee does not admit any income in the return, this benefit is not available. An inference or presumption can be drawn that the assessee had represented to its Indian telecom dealers not to deduct tax from the remittances made to it even though there is no positive or direct evidence to that effect;

(ii) The argument that the Indian parties should have discharged their TDS obligations u/s 195 despite the presumed request of the assessee is one of convenience or despair and not acceptable because in a practical view of the matter, the Indian payers could not have resisted the assessee's request given future business prospects and the need to keep the assessee in good humour;

(iii) Also, having denied its tax liability and leading the Indian payers to believe that no tax was deductible it is inequitable & unfair on the assessee's part to shift the responsibility to the Indian payers & expect them to deduct tax from the remittances. The assessee must take responsibility for its volte face. Once liability to tax is accepted, all consequences follow; they cannot be avoided;

(iv) Also, applying equitable principles, as the assessee deprived the revenue of the advance tax, it must pay compensation by way of interest.

(Clarified that Mitsubishi Corporation, which was decided along with Jacabs, was also a case like that of the assessee and that it was mistakenly given relief)

Consider the impact of this verdict on Daimler Benz A.G 108 ITR 961 (Bom)(FB), Sedco Forex 264 ITR 320 (Utt), NGC Network 313 ITR 186 (Bom) & Madras Fertilisers 149 ITR 703 (Mad) where non-residents were held not liable to pay s. 234B interest on the basis that tax is "deductible" at source u/s 195 without any qualification

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Kathiroor Service Cooperative Bank Ltd vs. CIT (Supreme Court)

S. 133(6): AO empowered to launch fishing and roving enquiry with a view to detect tax evasion

Article- Consideration?

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From: Madhukar Hiregange <mhiregange@gmail.com>
Date: Wed, Nov 13, 2013 at 8:53 AM

Understanding of "Economic Activity" and "Consideration" in Service Tax- Random Thoughts

The concept of negative list regime is that there should be an economic activity [ as differentiated from personal activity] whether carried out free of charge or as hobby or recreation. It is clear under the negative list that where there is no "service" or no "consideration" as defined there would be no liability.

Therefore transactions such as those related to religious activities, awards for excellence and transactions out of pure love affection or moral duty would not be covered as "service".

Also transaction in the nature of statutory fines or penalties would normally not be related to the activity and would not be covered as "service". 

Accidental damages due to unforeseen action may not be related and therefore not a consideration at all. Past consideration may not be a consideration.

However demurrage [ charge for delayed lifting of good from transporter], late payment fee for delayed credit card payments though not directly related to the service could be bought to tax.

Transactions which may require examination whether in the nature of a punishment or a compensation could be amounts paid for breach of contract, forfeiture of property without compensation, cancellation due to either party not keeping up ones commitment. Maybe the sum itself could be significant whether far in excess of the cost of money involved/ more than the recompense/ damage. The intention of the parties to the contract also could be important.

 The provision for levy - Section 66B specifies that the value of services provided or agreed to be provided in taxable territory for consideration would be liable. The definition of "service" states that any activity for a consideration from one person to another…

The dictionary meaning of consideration – compensation, payment or reward.

Legal dictionaries expand it to include some right, interest, profit, benefit or advantage accruing to one party or some forbearance, detriment, loss, responsibility or disadvantage given, suffered or undertaken by another.

Section 67(4) explanation defines "consideration" as including any amount payable for taxable services provided or to be provided. [ agreed word seems to have been missed]It further covers the value of service if not wholly in money terms as value in money and if not determinable as to be valued as prescribed.

Rule 5 (1) expands the definition to include all expenses and costs incurred in the course of providing the service as consideration.  However if incurred as a pure agent then the same is not liable to be included.

This note seeks to start a deeper enquiry/ study on what could be an activity which is not a service as also what is that which is not a "consideration" as both could lead to the liability under service tax not coming up. Host queries on pdicia.org

Warm Regards
Madhukar N Hiregange
Partner

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CBDT Revises Procedure For Dealing With Revenue Audit Objections

Dear Subscriber,

CBDT Revises Procedure For Dealing With Revenue Audit Objections

The CBDT has issued Instruction No. 16/ 2013 dated 31.10.2013 in which it has noted that despite a comprehensive procedure prescribed earlier for action at different stages of Revenue Audit objections, settlement track record is unsatisfactory and remedial action is delayed. It is also pointed out that there is a need to provide that Internal Audit should normally precede Revenue Audit. The CBDT has, therefore, decided to fine tune the procedure and strengthen the role of supervisory authorities so that quick and effective remedial action can be taken to prevent loss of revenue.

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Prakash Vasantbhai Golwala vs. ACIT (ITAT Ahmedabad)

Law of jurisdictional High Court is not binding if there is a later contrary judgement of non-jurisdictional High Court. S. 22: Property used by firm in which assessee-owner is partner is not used for assessee's business & not entitled for exemption

Section 9(1)(vii)/ 40(a)(i): ITAT Explains Entire Law On Taxability And Disallowance Of FTS

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Metro & Metro vs. ACIT (ITAT Agra)

Law on taxation of fees for technical services u/s 9(1)(vii) & Article 12 and disallowance u/s 40(a)(i) for failure to deduct TDS explained

The assessee paid Rs 52 lakhs towards "leather testing charges" to TUV Product Und Umwelt GmbH, a tax resident of Germany, without deduction of tax at source. The AO & CIT(A) disallowed the expenditure u/s 40(a)(i) on the ground that the assessee had failed to deduct tax at source. Before the Tribunal, the assessee argued that (a) as Article 12 of the India-Germany DTAA does not provide that India "shall" tax fees and royalties, the same cannot be taxed in India; (b) as the services were not rendered by the foreign company in India, the income was not chargeable to tax in India u/s 9(1)(vii); (c) as the services were rendered by an automated process and there was no human intervention, it did not constitute "fees for technical services" as defined in s. 9(1)(vii); (d) as the services were used for a 100% EOU whose products were sold outside India, the "source" of the income was outside India and so the exception in s. 9(1)(vii) (b) applied; (e) disallowance u/s 40(a)(i) was confined to amounts "payable" as at the end of the year as held by the jurisdictional High Court in Vector Shipping in the context of s. 40(a)(ia) and (f) as the taxability of the services was brought in by a retrospective amendment, the disallowance u/s 40(a)(i) could not be made. HELD by the Tribunal:

(a) The argument that as Article 12(1) of the India-German DTAA provides that the source State ("India") "may" (and not "shall") tax 'fees for technical services', the income is not chargeable to tax in India is not acceptable because the DTAA does not provide for taxation of any income. It allocates the right to tax income amongst the Contracting States. Once it enables the Contracting State to levy tax (by the use of the word "may"), the domestic law of the State come into play. Article 12 of the DTAA permits India to levy tax on fees for technical services and royalty though the rate of tax cannot exceed 10% (Pooja Bhatt 2008 TIOL 558 ITAT Mum referred);

(b) the argument that as the services have been rendered outside India, the fees thereof cannot be assessed u/s 9(1)(vii) is not acceptable in view of the retrospective amendment to s. 9(1) by the Finance Act 2010 (Ashapura Minichem 131 TTJ 291, GVK Industries 332 ITR 130 & Clifford Chance 154 TTJ 537 (Mum) (SB) referred;

(c) the argument that s. 9(1)(vii) does not apply because the entire testing process is automated and does not involve human skills and interplay is not acceptable. While in principle it is correct that if there is no human intervention in a technical service, it cannot be treated as a technical service u/s 9(1)(vii), there is nothing on record to demonstrate the precise process of leather testing adopted by the German company. Further, the wider observations in Siemens (ITAT Mum) that if there is not much human involvement, it cannot be termed as rendering of technical services is not correct. It is a question of presence of or absence of human involvement and not a question of more of, or less of, human involvement (Right Florists 154 TTJ 142, Siemens Ltd, Bharti Cellular 319 ITR 139 (Del) & 330 ITR 239 (SC) referred);

(d) the argument that as the assessee is a 100% EOU, the fees should be considered to have been used for a source of income outside India and therefore not taxable u/s 9(1)(vii)(b) is not acceptable because even though the business is a 100% EOU, it is still a business carried on in India. Even if the entire products are sold outside India, the fact of such export sales by itself does not make the business having been carried outside India. A customer is not the source of income. But if the manufacturing facilities are outside India and the customers are also outside India, the source will be outside India and the exception in s. 9(1)(vii)(b) will apply;

(e) the argument that s. 40(a)(i) applies only to amounts "payable" as at the end of the year and not to amounts already "paid" as held in Merlyin Shipping 136 ITD SB 23 (Vizag) as approved (by the jurisdictional High Court) in Vector Shipping Services is not acceptable because that was in the context of s. 40(a)(ia) and not s. 40(a)(i). S. 40(a)(i) cannot be interpreted in such a manner so as to restrict the scope of section to only amounts remaining payable at the end of the year;

(f) However, the argument that disallowance u/s 40(a)(i) cannot be made as the amount has been made taxable by the retrospective amendment to s. 9 is acceptable. An assessee cannot be penalized for not performing the impossible task of deducting TDS in accordance with the law which was brought in subsequently (Channel Guide 139 ITD 49 & Sterling Abrasives (Ahd) followed).

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Transfer + Cancellation Of Transfer Of Hon'ble Members Of The ITAT (Oct 2013)

ITR VOL 358 PART 2

 

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

PRINT EDITION

ITR Volume 358 : Part 2 (Issue dated : 4-11-2013)

SUBJECT INDEX TO CASES REPORTED IN THIS PART

SUPREME COURT

Appeal to High Court --Substantial questions of law framed for consideration by court--Power of court to consider questions other than those framed not affected--Income-tax Act, 1961, s. 260A(4)-- CIT v. Mastek Ltd. . . . 252

Assessing Officer --Duty to take pragmatic view rather than pedantic approach-- CIT v. Excel Industries Ltd. . . . 295

Business income --Accrual of income--Export business--Entitlement to make duty free imports of raw materials obtained through advance licences and duty entitlement pass book issued against export obligations--Income accrues in year of duty free import of raw material and not in year of export--Income-tax Act, 1961, s. 28(iv)-- CIT v. Excel Industries Ltd. . . . 295

Income --Accrual of income--Tests--Whether income accrued to assessee is real or hypothetical, whether there is corresponding liability of other party to pay and probability of realisation by assessee seen from practical point of view-- CIT v. Excel Industries Ltd. . . . 295

Income-tax Department --Not to indulge in fruitless litigation where no loss of revenue involved-- CIT v. Excel Industries Ltd. . . . 295

Refund --Advance tax--Deduction of tax at source--Aggregate of instalments of advance tax or tax deduction at source exceeding assessed tax--Interest on refund--Only as provided for in statute-- Sandvik Asia’s case explained--Income-tax Act, 1961, ss. 214, 244A-- CIT v. Gujarat Fluoro Chemicals . . . 291

Res judicata --Consistent view taken in favour of assessee on questions--Court will not take different view without very convincing reasons-- CIT v. Excel Industries Ltd. . . . 295

HIGH COURTS

Bonus --Bonus paid to director--Amount paid as per board resolution--Bonus not related to shareholding--Directors rendering valuable services to company--Bonus deductible--Income-tax Act, 1961, s. 36(1)(ii)-- CIT v. Career Launcher India Ltd. (Delhi) . . . 179

Business expenditure --Firm--Commission--Disallowance of part of commission--Commission paid to son of partner--Claim that young man of twenty one had expertise in mixing tobacco--No evidence to support claim--Agreement for payment of commission stating that it was for looking after labour, production and despatch--Disallowance of part of commission--Justified--Income-tax Act, 1961, s. 40A-- S. M. Haq v. CIT (All) . . . 246

----Non-compete fees paid for a limited time--Deductible--Income-tax Act, 1961, s. 37-- CIT v. Career Launcher India Ltd. (Delhi) . . . 179

Deduction of tax at source --Commission--Assessee undertaking procurement and marketing of milk and milk products through concessionaires--Concessionaires making purchases of milk outright--Not a case of agency--That concessionaires operated out of booths or with equipment provided by assessee or that assessee had right of inspection not material--Difference between maximum retail price fixed by assessee and price concessionaire paid to assessee not commission--Assessee not bound to deduct tax at source therefrom--Income-tax Act, 1961, s. 194H-- CIT v. Mother Dairy India Ltd. (Delhi) . . . 218

----Contract--Assessee running coaching classes for competitive exams--Agreement with franchisees--Not a works contract--Tax not deductible at source on payments to franchisees--Income-tax Act, 1961-- CIT v. Career Launcher India Ltd. (Delhi) . . . 179

----Rent--Meaning of rent in section 194-I--Payment for use of land under lease or any agreement with reference to use of land--Agreement for landing and parking of aircraft--Not in the nature of lease--Payment under agreement not rent within meaning of section 194-I--Tax not deductible at source on such payment--Income-tax Act, 1961, s. 194-I-- CIT v. Singapore Airlines Ltd. (Mad) . . . 237

Export --Special deduction--Tribunal finding exports genuine on facts and deleting addition--Finding of fact--Tribunal justified in cancelling penalty--Income-tax Act, 1961, ss. 80HHC, 271(1)(c)-- CIT v. M. S. International Ltd. (Delhi) . . . 203

Industrial undertaking --Special deduction under section 80-I--Condition precedent--Profits must be derived from industrial undertaking--Ownership of industrial undertaking is not a condition precedent--Assessee owner of ammonia plant--Plant manufacturing heavy water owned by Government of India utilising ammonia--Plant operated by assessee--Service charges received by assessee--Entitled to special deduction under section 80-I--Income-tax Act, 1961, s. 80-I-- Krishak Bharti Co-operative Ltd. v. Deputy CIT (Delhi) . . . 168

Interest on borrowed capital --Business expenditure--Assessee allotted land by statutory authority--Price payable in instalments along with interest--No borrowed capital--Interest not deductible under section 36--Interest not deductible under section 37 as it was capital expenditure--Income-tax Act, 1961, ss. 36(1)(iii), 37-- CIT v. Career Launcher India Ltd. (Delhi) . . . 179

Interpretation of taxing statutes --Principle of ejusdem generis-- CIT v. Singapore Airlines Ltd. (Mad) . . . 237

----Provision granting incentives for growth and development--Liberal interpretation-- Krishak Bharti Co-operative Ltd. v. Deputy CIT (Delhi) . . . 168

Non-resident --Permanent establishment--Business connection--Agreements between Finnish company and Indian companies for supply of telecom equipment--Finnish company having liaison office in India and subsequently establishing subsidiary in India--Equipment sold outside India on principal to principal basis--Installation activities by Indian subsidiary under independent contracts--Finnish company did not have a permanent establishment in India--No business connection through liaison office--Royalty--Definition, under DTAA--Copyrighted article not included--Income-tax Act, 1961, s. 9(1)(vi)--Double Taxation Avoidance Agreement between Finland and India, arts. 5, 13-- Director of Income-tax v. Nokia Networks OY (Delhi) . . . 259

Offences and prosecution --Seizure of cash by police--Trial court ordering part of seized amount to be handed over to accused, as interim custody, with a stringent condition--Order not prejudicial to Income-tax Department--Income-tax Act, 1961-- Assistant Director of Income-tax (Investigation) v. A. Khader Mohideen (Mad) . . . 163

Recovery of tax --Notice of demand--Reduction of period for payment of amount demanded--Conditions precedent--Reason to believe full period would be detrimental to Revenue--Prior approval of Joint Commissioner--Plan to collect particular amount of revenue in a specified period--Not a ground for reduction of period--Income-tax Act, 1961, s. 220-- Gujarat State Energy Generation Ltd. v. Assistant CIT (Guj) . . . 254

Rectification of mistakes --Mistake must be apparent from record--Dispute regarding period for which interest on refund was payable--Part of interest cannot be withdrawn in rectification proceedings--Income-tax Act, 1961, s. 154-- CIT v. Nathpa Jhakri Joint Venture (Bom) . . . 233

Revision --Validity--No disallowance of expenditure under section 14A--Order erroneous and prejudicial to Revenue--Revision of order valid--Income-tax Act, 1961, ss. 14A, 263-- CIT v. RKBK Fiscal Services P. Ltd. (Cal) . . . 228

 

SECTIONWISE INDEX TO CASES REPORTED IN THIS PART

Double Taxation Avoidance Agreement between Finland and India :

Art. 5 --Non-resident--Permanent establishment--Business connection--Agreements between Finnish company and Indian companies for supply of telecom equipment--Finnish company having liaison office in India and subsequently establishing subsidiary in India--Equipment sold outside India on principal to principal basis--Installation activities by Indian subsidiary under independent contracts--Finnish company did not have a permanent establishment in India--No business connection through liaison office--Royalty--Definition, under DTAA--Copyrighted article not included-- Director of Income-tax v. Nokia Networks OY (Delhi) . . . 259

Art. 13 --Non-resident--Permanent establishment--Business connection--Agreements between Finnish company and Indian companies for supply of telecom equipment--Finnish company having liaison office in India and subsequently establishing subsidiary in India--Equipment sold outside India on principal to principal basis--Installation activities by Indian subsidiary under independent contracts--Finnish company did not have a permanent establishment in India--No business connection through liaison office--Royalty--Definition, under DTAA--Copyrighted article not included-- Director of Income-tax v. Nokia Networks OY (Delhi) . . . 259

Income-tax Act, 1961 :

S. 9(1)(vi) --Non-resident--Permanent establishment--Business connection--Agreements between Finnish company and Indian companies for supply of telecom equipment--Finnish company having liaison office in India and subsequently establishing subsidiary in India--Equipment sold outside India on principal to principal basis--Installation activities by Indian subsidiary under independent contracts--Finnish company did not have a permanent establishment in India--No business connection through liaison office--Royalty--Definition, under DTAA--Copyrighted article not included-- Director of Income-tax v. Nokia Networks OY (Delhi) . . . 259

S. 14A --Revision--Validity--No disallowance of expenditure under section 14A--Order erroneous and prejudicial to Revenue--Revision of order valid-- CIT v. RKBK Fiscal Services P. Ltd. (Cal) . . . 228

S. 28(iv) --Business income--Accrual of income--Export business--Entitlement to make duty free imports of raw materials obtained through advance licences and duty entitlement pass book issued against export obligations--Income accrues in year of duty free import of raw material and not in year of export-- CIT v. Excel Industries Ltd. (SC) . . . 295

S. 36(1)(ii) --Bonus--Bonus paid to director--Amount paid as per board resolution--Bonus not related to shareholding--Directors rendering valuable services to company--Bonus deductible-- CIT v. Career Launcher India Ltd. (Delhi) . . . 179

S. 36(1)(iii) --Interest on borrowed capital--Business expenditure--Assessee allotted land by statutory authority--Price payable in instalments along with interest--No borrowed capital--Interest not deductible under section 36--Interest not deductible under section 37 as it was capital expenditure-- CIT v. Career Launcher India Ltd. (Delhi) . . . 179

S. 37 --Business expenditure--Non-compete fees paid for a limited time--Deductible-- CIT v. Career Launcher India Ltd. (Delhi) . . . 179

----Interest on borrowed capital--Business expenditure--Assessee allotted land by statutory authority--Price payable in instalments along with interest--No borrowed capital--Interest not deductible under section 36--Interest not deductible under section 37 as it was capital expenditure-- CIT v. Career Launcher India Ltd. (Delhi) . . . 179

S. 40A --Business expenditure--Firm--Commission--Disallowance of part of commission--Commission paid to son of partner--Claim that young man of twenty one had expertise in mixing tobacco--No evidence to support claim--Agreement for payment of commission stating that it was for looking after labour, production and despatch--Disallowance of part of commission--Justified-- S. M. Haq v. CIT (All) . . . 246

S. 80HHC --Export--Special deduction--Tribunal finding exports genuine on facts and deleting addition--Finding of fact--Tribunal justified in cancelling penalty-- CIT v. M. S. International Ltd. (Delhi) . . . 203

S. 80-I --Industrial undertaking--Special deduction under section 80-I--Condition precedent--Profits must be derived from industrial undertaking--Ownership of industrial undertaking is not a condition precedent--Assessee owner of ammonia plant--Plant manufacturing heavy water owned by Government of India utilising ammonia--Plant operated by assessee--Service charges received by assessee--Entitled to special deduction under section 80-I-- Krishak Bharti Co-operative Ltd. v. Deputy CIT (Delhi) . . . 168

S. 154 --Rectification of mistakes--Mistake must be apparent from record--Dispute regarding period for which interest on refund was payable--Part of interest cannot be withdrawn in rectification proceedings-- CIT v. Nathpa Jhakri Joint Venture (Bom) . . . 233

S. 194H --Deduction of tax at source--Commission--Assessee undertaking procurement and marketing of milk and milk products through concessionaires--Concessionaires making purchases of milk outright--Not a case of agency--That concessionaires operated out of booths or with equipment provided by assessee or that assessee had right of inspection not material--Difference between maximum retail price fixed by assessee and price concessionaire paid to assessee not commission--Assessee not bound to deduct tax at source therefrom-- CIT v. Mother Dairy India Ltd. (Delhi) . . . 218

S. 194-I --Deduction of tax at source--Rent--Meaning of rent in section 194-I--Payment for use of land under lease or any agreement with reference to use of land--Agreement for landing and parking of aircraft--Not in the nature of lease--Payment under agreement not rent within meaning of section 194-I--Tax not deductible at source on such payment-- CIT v. Singapore Airlines Ltd. (Mad) . . . 237

S. 214 --Refund--Advance tax--Deduction of tax at source--Aggregate of instalments of advance tax or tax deduction at source exceeding assessed tax--Interest on refund--Only as provided for in statute-- Sandvik Asia’s case explained-- CIT v. Gujarat Fluoro Chemicals (SC) . . . 291

S. 220 --Recovery of tax--Notice of demand--Reduction of period for payment of amount demanded--Conditions precedent--Reason to believe full period would be detrimental to Revenue--Prior approval of Joint Commissioner--Plan to collect particular amount of revenue in a specified period--Not a ground for reduction of period-- Gujarat State Energy Generation Ltd. v. Assistant CIT (Guj) . . . 254

S. 244A --Refund--Advance tax--Deduction of tax at source--Aggregate of instalments of advance tax or tax deduction at source exceeding assessed tax--Interest on refund--Only as provided for in statute-- Sandvik Asia’s case explained-- CIT v. Gujarat Fluoro Chemicals (SC) . . . 291

S. 260A(4) --Appeal to High Court--Substantial questions of law framed for consideration by court--Power of court to consider questions other than those framed not affected-- CIT v. Mastek Ltd. (SC) . . . 252

S. 263 --Revision--Validity--No disallowance of expenditure under section 14A--Order erroneous and prejudicial to Revenue--Revision of order valid-- CIT v. RKBK Fiscal Services P. Ltd. (Cal) . . . 228

S. 271(1)(c) --Export--Special deduction--Tribunal finding exports genuine on facts and deleting addition--Finding of fact--Tribunal justified in cancelling penalty-- CIT v. M. S. International Ltd. (Delhi) . . . 203