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43. Addition Rejection of
Books S. 143 r.w.s. 145
Additions made for under
statement of sales, by comparing sale prices of sales made to co-operative
societies, which was merely 5% of total sales, with that of sales to other
individuals, on inference that they were at a lower price, without bringing
any material on record or examining the individuals was held to be
unjustified, and additions made on account of suppressed sales was deleted.
ITO vs. Rabindranath Seal
(2009) 180 Taxman 104 (Kolkatta) (A.Y. 2001-02)
44. Appellable Order before
the Appellate Tribunal - S. 253 vis-ΰ-vis S. 251 r.w.s. 254H
(i) Assessee appealed before
the Appellate Tribunal against dismissal of appeal by the CIT(A) on the ground
that the appeal had become infructuous and non est before him as the issues
were placed before the Settlement Commission. In otherwords, the CIT(A) loses
his jurisdiction to decide the appeals in such situation. So, order passed by
the CIT(A), dismissing the appeal, is only a technical order for statistical
purposes and such order is not appealable order before the Appellate Tribunal.
(ii) Where the matter is
abated before the Settlement Commission then the erstwhile jurisdiction of the
CIT (Appeals) gets revived. In that case the CIT(A) has to suo motu revive the
appeal and proceed to decide the appeal in accordance with the law thereafter
or the assessee has to move a restoration petition before the CIT(A) to
proceed further in the matter and therefore, unless and until the CIT(A)
passes order on the issues under appeal after restoration or revival the
Tribunal does not get any jurisdiction to decide any appeal on merits.
J. C. Augustine vs. ACIT
(2009) 312 ITR (AT) 60 (Cochin)
45. Appeal Tribunal
Additional Ground Admissibility S. 254(1)
Ground challenging the
jurisdiction to make block assessment can be urged before any authority for
the first time. Bar of estoppel or res judicata does not apply when the
validity of assessment is questioned for want of jurisdiction.
ACIT vs. Bijay Shankar Gupta
(2009) 21 DTR 254 (Jd) (Trib.) (Block Period: 1992-93 to 2001-02)
46. Assessment Service of
Notice S. 143(2) r.w.s. 143(3)
Assessment made under section
143(3) without proving the service of statutory notice within the prescribed
time, was held to be invalid and required to be quashed.
Smt. Amarjeet Kaur vs. ACIT
(2009) 180 Taxman 26 (Delhi) (A. Y. 2003-04)
47. Business expenditure
Contribution towards Provident Fund S. 36(1)(va)
Employers contribution
towards provident fund though paid beyond the due date but before the end of
the relevant financial year is allowable deduction.
Polyplex Corporation Ltd. vs.
ITO (2009) 122 TTJ 949 (Del.)
48. Business Expenditure
Expenditure on computer Software S. 37(1)
Expenditure on computer
software is capital expenditure.
Avaya Global Connect Ltd. vs.
ACIT (2009) 122 TTJ 300 (Mum.)
49. Business Expenditure
Expenditure on development of website S. 37(1)
Expenditure on development of
website is allowable as business expenditure.
Polyplex Corporation Ltd. vs.
ITO (2009) 122 TTJ 949 (Del.)
50. Business expenditure
Payments towards tender fee and consultancy charges S. 37(1)
Where assessee is already in
business, payments made for tender fee and consultancy charges for
establishing captive power plant are allowable revenue expenditure.
Polyplex Corporation Ltd. vs.
ITO (2009) 122 TTJ 949 (Del.)
51. Business Expenditure
Royalty
S. 37(1)
Royalty paid for getting
non-assignable license, right and privilege to manufacture on the licensed
mark, and distribute the licensed product in India and use expression
Benetton, without becoming owner or acquiring any right in licensed trade
mark, was held to be a revenue expenditure.
Dy. CIT vs. DCM Benetton
India Ltd. (2009) 178 Taxman 52 (Delhi) (A. Y. 2002-03 & 2003-04)
52. Business income
vis-ΰ-vis income from House Property Income from Warehousing Ss. 22 & 28(i)
Assessee was not merely
letting out its premises for warehousing but also under obligation to provide
adequate security to the material stored apart from receiving and delivering
stock, maintaining record of incoming and outgoing stock in the register,
taking physical inventory at regular intervals, to do loading and unloading
and stock taking in addition to ensuring proper spray of pesticides in the
godown, without obtaining any security deposit. It was held that assessee was
thus doing a complex commercial activity, hence receipts were taxable as
business income and not income from house property. More so when receipts were
assessed as business income in the past and there was no change in factual or
legal position.
ITO vs. Rasikllal & Co. (P)
Ltd. (2009) 23 DTR 134 (Mumbai) (Trib.) (A.Y.: 1999-2000)
53. Business Loss Loss in
respect of loan given to subsidiary Ss. 2(47), 28(i), 37(1) & 45
Assessee is in the business
of manufacturing and real estate. Action on the part of the assessee to
advance loan to its subsidiary for purchase of shares is not in line with
normal business activities of the assessee. Assessee is also not in the
business of acquisition of shares. Thus, the loan given to D Ltd. was not
connected with the business of the assessee company. When the amount advanced
is not in line with the business, the same cannot be treated as having been
advanced in the course of normal business activities of the assessee.
Moreover, a single transaction of loan cannot be termed as business activity.
Since, the loan was advanced for acquisition of shares, it was in respect of
fixed capital. Therefore, the loss cannot be allowed as a business loss under
section 28 r.w.s. 37(1). As regards the alternative plea of the assessee,
although the definition of transfer in section 2(47) includes
extinguishment, that extinguishment does not refer to the extinguishment of
the asset itself. It refers to the extinguishment of the holders right to the
assets. When an assessee finds a loan valueless merely for the inability of
the debtor to pay a part of such loan, the asset in the form of loan
disappears. That being the case, no transfer is involved. Thus, the loss
suffered by the assessee cannot be treated even as a capital loss under
section 45.
DCM Ltd. vs. Dy. CIT (2009)
23 DTR 163 (Delhi) (Trib.) (A. Y.: 2002-03)
54. Capital Gain Transfer
Chargeable in the year of tranfer S. 45(1)
As per the provisions of
section 45(1) of the Act, for charging capital gains tax, the previous year in
which the transfer takes place is most crucial. As in the present case the
transfer had taken place in the A.Y. 1995-96 and not in the A.Y. 1998-99, the
capital gains would be chargeable in the A.Y. 1995-96.
Vemanna Reddy (HUF) vs. ITO
(2009) 30 SOT 11 (Bang.) (URO) (Asst Year: 1998-99)
55. Capital Gains Capital
Gain or Business Income S. 50C
Section 50C cannot be applied
for determining the income under other heads, it is applicable only for the
purpose of determining the sale consideration for computation of capital
gains, only.
Inderlok Hotels (P) Ltd. vs.
ITO (2009) 122 TTJ 145 (Mum.)
56. Capital Gains vis-ΰ-vis
Business Income Sale of agricultural land as residential sits S. 2(13),
28(i) 45 & 54EC
Assessee had purchased a
small piece of agricultural land and carried on agricultural operations on it.
Assessee held the said land for more than 40 years which showed that they did
not intend to trade in the land. It was held that mere fact that the assessee
obtained permission from the authorities for developing residential sites
cannot lead to the conclusion that this was an adventure in the nature of
trade.
ITO vs. D. N. Krishnappa
(2009) 21 DTR 11 (Bang.) (Trib.) (A. Y.: 2005-06)
57. Capital Receipt
Compensation for termination of agency agreement S. 4
Termination of an agency
agreement which has no major effect on profit earning apparatus, the
compensation received is taxable as revenue receipt but the part of the
compensation which is attributable to restrictive covenant is capital receipt
and not chargeable to tax.
Chemet vs. Addl. CIT (2009)
122 TTJ 766 (Mum.)
58. Deduction Interest on
delayed payment of purchase price S. 80HH
The assessee is entitled to
deduction under section 80HH on interest on delayed payment of purchase price.
ACIT vs. Biotech Medicals (P)
Ltd. (2009) 121 TTJ 858 (Hyd.)
59. Deduction Profits of
company owning industrial undertaking S. 80IA
The assessee company is not
entitled for deduction under section 80IA on the profits because the trading
activities carried on by the assessee are of the assessee company and not of
the industrial undertaking.
Emerson Network Power India
(P) Ltd. vs. ACIT (2009) 122 TTJ 67 (Mum.)
60. Deemed Dividend
Commercial Profits Depreciation To be reduced from commercial profits S.
2(22)(e)
It has been held that for the
purpose of section 2(22)(e) of the Income-tax Act (Act), accumulated profits
would mean commercial profits. In determining this commercial profit,
depreciation, which has been recognized as a charge towards profit both under
the Companies Act, 1956 as well as the Act has to be reduced from the
commercial profit for the purpose of Section 2(22)(e) of the Act.
ACIT vs. Yasin Hotels (P) Ltd. (2009) 30 SOT 47(Chennai) (URO) (A. Y.:
2004-05).
61. Deemed Dividend Loan
to Director S. 2(22)(e)
Assessee procured loan from a
company in which he was a Director and was holding 50% equity shares. The said
company was in business of lending of money, and on amount given as loan to
assessee it charged Interest. Held, that section 2(22)(e) can not be attracted
as it was a business transaction of the company.
Bharat C. Gandhi vs. ACIT
(2009) 178 Taxman 83 (Mumbai) (A. Y. 2002-03)
62. Depreciation
Non-compete fee Business / commercial right Intangible Asset S. 32(1)(ii)
Right acquired by payment of
non-compete fee was in the nature of a business or commercial right similar to
know-how, patents, copyrights, trademarks, licenses and franchises Observed
that capability to have market value, assignability, transferability,
diminution in value, are no more the touch stones on which admissibility for
depreciation under section 32 of the Act has to be tested. Therefore the
non-compete right acquired by the assessee by paying the fee was eligible
for depreciation under clause (ii) of Section 32(1) of the Act.
ITO vs. Medicorp Technologies
India Limited (Chennai) (2009) 30 SOT 506 (A. Y.: 2002-03)
63. Disallowance Interest
on Borrowed Capital S. 36(1)(iii)
Interest paid on borrowed
funds were disallowed on the ground that the amounts have been transferred to
sister concerns. It was held that as the funds advanced were for purchases /
service charges, and thus had the direct nexus with the business, and as also
most of the amounts were transferred by journal entries and there was no
actual transfer of cash, the proportionate disallowance can not be sustained.
Accelerated Freeze Drying Co.
Ltd. vs. Dy. CIT (2009) 180 Taxman 68 (Cochin) (A. Y. 2003-04)
64. Disallowance
contribution towards ESI
S. 43B
Payment made to ESI fund
before due date for filing return is not hit by the rigour of S. 43B.
ACIT vs. Indwel Linings (P)
Ltd. (2009) 122 TTJ 137 (Chennai)
65. Exemption Export of
manufactured and traded goods S. 10A
Assessee is entitled to
relief under section 10A on export of both manufactured goods as well as
purchased goods.
T. Two International (P) Ltd.
vs. ITO (2009) 122 TTJ 957 (Mum.)
66. Exemption Free Trade
Zone (STPI)
S. 10A
Assessee companys unit at
Chennai was approved as Software Technology Park of India (STPI), and
subsequently after the approval obtained from respective authorities,
operations were transferred to Kochi, and carried under same registration
number. Held, assessee is entitled to exemption under section 10A as it was
merely a case of shifting of business from one place to another and not a new
business, and there is no violation of sub clause (ii) & (iii) of section
10A(2), its only a seeking of continuation of exemption under section 10A.
Paradigm IT (P) Ltd. vs. Dy.
CIT (2009) 180 Taxman 24 (Chennai) (A. Y. 2002-03)
67. Exemption Ownership of
Plant & Machinery S. 10B
It is not the requirement of
the section that the assessee should itself own plant and machinery for
manufacture even if the assessee gets it manufactured by others under its
direct supervision, the assessee is entitled to exemption under section 10B.
ITO vs. Techdrive (I) (P)
Ltd. (2009) 122 TTJ 264 (Del.)
68. Export Deduction
Eligible profits S. 80HHC
Assessee is entitled to
deduction under section 80HHC on the eligible profits
without reducing the
deduction given under section 80IB.
ACIT vs. Sreeja Hosieries
(2009) 122 TTJ 849 (Chennai) However, please see Hindustan Mints case by
special Bench of ITAT (Delhi)
69. Export Total Turnover
for computation of exemption / deduction S. 10B / 80HHC / 80HHE / 80HHF
Expenses on freight,
telecommunication charges or insurance incurred outside India or expenses
incurred in foreign exchange for providing technical services outside India
are required to be excluded from Export Turnover as defined in Explanation 2
below section 10B and similarly, in view of the principle of parity such
expenses have to be excluded for the purpose of computing Total Turnover
while applying the provisions of section 10B(4) of the Act. In this regard the
ratio laid down by the Supreme Court in case of Laxmi Machine Works [290 ITR
667] was considered and applied.
ITO vs. Advent Development
Centre (India) & Others (2009) 313 ITR (AT) 353 (Chennai)
70. Income Accrual
Retention Money
S. 5
Amount retained by clients
under agreement to the extent of 5 to 10 per cent of the bill value which was
released to the assessee only after satisfactory completion of the work could
not be added to the income of assessee even following mercantile system of
accounting. It was held that when the assessee had no right to receive the
money by virtue of the contract between the parties and the assessee also had
no right to enforce payment, it could not be said that the right to receive
payment of the remaining 10 per cent of the value of job had accrued.
Dy. CIT vs. East Coast
Constructions & Industries Ltd. (2009) 23 DTR 225 (Chennai) (Trib.) (A. Y.:
2003-04)
71. Income deemed to accrue
or arise in India Business Connection S. 9(1)(i), Expln. 1(b)
Assessee, having its main
office in USA having opened a liaison office in India solely for the purpose
of helping its affiliates located at different parts of the world to buy goods
etc. for trading operations, acting through liaison office as purchasing
agent, placing orders with local manufacturers specifying the quantity, price,
the affiliate with address on whom the bill is to be raised and the
destination and not in any way communicating with the manufacturers other than
supervising the manufacturing operations to ensure quality as per approved
samples and specifications, the same amounts to purchase in the course of
export and Expln. 1(b) to section 9(1)(i) is attracted, hence no income is
deemed to accrue or arise to assessee in India.
Nike Inc. vs. ACIT (2009) 21
DTR 107 (Bang.) (Trib.) (A. Y.: 1999-2000 to 2002-03)
72. Interest Waiver S.
201(A)
Interest under section
201(1A) not being penal in nature, the question of waiver of Interest on
grounds such as reasonable cause, bonafide belief, unintentional are
irrelevant.
G. M. Punjab Roadways vs. ITO
(2009) 178 Taxman 112 (Chandigarh) (SMC) (Asst. Year 2000 01 to 2005 06)
73. Notice Pendency of
assessment proceedings S. 148
Where the return was filed in
response to notice under section 148 and the assessment is pending, the second
notice under section 148 is invalid.
ITO vs. Tarsem Singh (2009)
122 TTJ 861
(Asr.)
74. Penalty Concealment
Addition deleted S. 271(1)(c)
Where the addition was
deleted by the Tribunal in quantum appeal, the very foundation for levy of the
penalty ceased to exist.
ACIT vs. VIP Industries
(2009) 122 TTJ 289 (Mum.) (2009) 21 DTR 153 (Mum.)
75. Penalty Concealment
S. 271(1)(c)
Held that penalty cannot be
levied on additions sustained by estimating the yield, based on % of yield of
preceding year, when there is no evidence on record to prove that there were
sales outside the books. Further the fact that additions made in assessment
proceedings is a material fact, can not be considered as conclusive and
concrete to prove the concealment.
Sangrur Vanaspati Mills Ltd.
vs. ACIT (2009) 179 Taxman 27 (Chandigarh) (A. Y. 1992-93 & 1993 -94)
76. Penalty Concealment
Finding in Assessment S. 271(1)(c)
In penalty proceedings there
has to be re-appraisal of material available at time of Assessment, as well as
any additional material produced by assessee be examined, to ascertain the
concealment or furnishing of inaccurate particulars. Levy of penalty merely
relying upon finding in his assessment proceedings is not justified.
Vijay Power Generators Ltd.
vs. ITO (2009) 180 Taxman 102 (Delhi) (A.Y. 1997-98)
77. Penalty Failure to
Deduct Tax at Source Interest accruing on deposits S. 271C
The penalty imposed on the
assessee, a non-banking company carrying on the business of mobilization of
deposits, for non deduction of TDS on accrual basis of interest was dropped as
it was held that the assessee was prohibited by reasonable cause for not
deducting the TDS, when there was no default on the part of the assessee.
Sahara India Financial
Corporation Ltd vs. Addl. CIT (2009) 30 SOT 149 (Delhi) (A. Y.: 1996-97 to
1999-2000)
78. Penalty Non payment of
Interest S. 221(1)
Penalty under section 221(1)
can be imposed only for failure to pay tax and not for failure to pay interest
under sections 234B & 234C.
Great Value Foods vs. ACIT (2009) 122 TTJ 682 (Asr.), (2009) 178 Taxman 114 (Amritsar)
79. Penalty Not leviable
Particulars furnished by the assessee Simple mistake on part of assessee S.
271(1)(c)
If the assessee had a made a
simple mistake while claiming deduction under Section 80-IA and thereafter
filed a revised return, the same could not be a case of furnishing inaccurate
particulars of income or concealment attracting the levy of penalty under S.
271(1)(c) of the Act.
Niton Valve Industries (P)
Ltd. vs. ACIT (2009) 30 SOT 236 (Mum.) (A. Y.: 1998-99)
80. Precedent Binding
nature S. 254
Tribunal is duty bound to
follow the decision of a High Court, if there is no contrary decision
available from any other High Court.
Maharashtra State Warehousing
Corp. Ltd. vs. Dy. CIT (2009) 122 TTJ 865 (Pune)
81. Presumptive Taxation
Civil Construction Business S. 44AD
Held, that provisions of
Section 44 AD can not be invoked to apply 8% rate of Net Profit, when the
Turnover of Assessee company was more than Rs. 40 lacs, and proper books of
account were maintained and duly audited.
Allied Engineers vs. CIT
(2009) 180 Taxman 70 (Delhi) (A.Y. 2005-06)
82. Reassessment - Proviso
to S. 14A inserted w.e.f 11-5-2001 Not valid Cases prior to Assessment Year
on or before 1-4-2001 S. 14A
It has been held that the
Assessing officer, in view of the statutory embargo placed on his jurisdiction
by virtue of the proviso to S.14A of the Act, to make reassessment, in respect
of specified assessment years has acted without jurisdiction in re-opening the
assessments for the A.Y. 1998-1999 to bring to tax income described under
substantive provisions of S.14A.
Jt. CIT vs. Bombay Dyeing
Mfg. Co. Ltd. (2009) 30 SOT 461 (Mum). (A. Y.: 1998-99)
83. Rectification S. 154
Rectification sought beyond
four years from the date of original order on the issue or matter which was
not part of or dealt with in any of the intervening rectification orders
passed by Assessing Officer, is void ab initio and invalid.
ACIT vs. Precott Mills Ltd.
(2009) 178 Taxman 15 (Chennai) (A. Y. 1996-97)
84. Rejection of Accounts
Method of Accounting S. 145
Additions made by rejecting
the Books of Accounts, by alleging imagined manipulation without proving the
same or without verifying the material available through field enquiry, and
only based on own judgment, was held to be not justified.
ACIT vs. Ram Manohar Singh
(2009) 178 Taxman 47 (Jabalpur) (A. Y. 2004-05)
85. Revision S. 263
Order passed by Assessing
Officer in accordance with law, judicial pronouncements and after considering
relevant replies duly supported by evidence can not be branded as erroneous,
merely because commissioner is of other view or in his opinion order passed is
weak and not a detailed order.
Section 263 empowers the
commissioner to have a supervisory jurisdiction and does not visualize a case
of substitution of his judgement for that of Assessing Officer.
Allied Engineers vs. CIT
(2009) 180 Taxman 70 (Delhi) (Asst. Year 2005 06)
86. Tax Deduction at Source
Interest
S. 194A
Assessee a department of
State Government, is liable to deduct TDS on interest paid, alongwith
compensation to victims as per the order of courts / motor accident claims
Tribunal.
G. M. Punjab Roadways vs. ITO
(2009) 178 Taxman 112 (Chandigarh) (SMC) (A. Y. 2000-01 to 2005-06)
87. Tax Deduction at Source
Works Contract or mere sale of goods
S. 194C
Agreements entered with third
parties for manufacturing goods as per specifications of the manufacturers and
all other relevant decisions being taken by the manufacturers, in such
circumstances the said agreements were construed as contract for sale of goods
and not as works contract. The provisions of Section 194C were thus not
applicable.
Glenmark Pharmaceuticals Ltd.
vs. ITO (2009) 30 SOT 19 (Mum.) (A. Y.: 2006-07)
88. Time limit for passing
order Tax Deduction at Source S 201(1)
(i) Where no time limit is
prescribed then in that case order must be passed within a reasonable time.
(ii) Sub-section (1) of sec.
201(1) or (1A) do not prescribe any time limit for initiation of proceedings
or passing of order under section 201(1) or (1A). Under the statute time limit
is provided for issuing notice for completion of assessment under section
143(2) and similarly time for issuing notice of reassessment has been set in
section 149. As such, time limit for completion of assessment and reassessment
has been provided under section 153 and similarly time limit has been provided
for rectification order and for revision order under section 154 and under
section 263 respectively.
But, it was held that order
passed under section 195 r.w.s. 201(1) or 201(A) of the Act cannot be held as
barred by limitation in law, if it not passed within four years from end of
the relevant financial year.
(ii) Adverting to the facts
of the assessee, that
(a) no assessment had been
made in the hands of payee i. r. o. the sum received from the assessee in
respect of the Euro issues,
(b) similarly, no proceedings had been taken against it till date for
assessing such income, and
(c) finding that time limit for issuing notice under section 148 had come to
an end for the A.Y. 1998-99
held that no lawful order can be passed against the assessee either under
section 201(1) or 201(1A) of the Act. Hence, it was held that that the order
passed in the case of the assessee was invalid.
Mahindra and Mahindra Ltd.
vs. Dy. CIT (2009) 313 ITR (AT) 263 (Mum)
89. Unexplained investment
S. 69
Assessing Officer reopened
the assessment of A.Y. 1997-98 on the basis of finding that the assessee had
not paid tax on the income declared under VDIS, 97 and made the addition of
income declared year-wise under VDIS as unexplained investment. It was held
that the addition was not justified as the alleged investments were not made
in the immediate preceding financial year to the assessment year under
consideration.
Shanker R. Mhatre vs. ACIT
(2009) 117 ITD 241 (Mumbai)
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