217. Accounting – Change of method – S. 5, 145

There being genuine difficulties compelling assessee to change over from mercantile to cash system of accounting as regards to interest income, the change was bonafide, hence, the CIT(A) and the Tribunal were justified in setting aside the order of Assessing Officer rejecting the change.

ACIT vs. Coromandal Investment (P) Ltd. (2009) 225 CTR 313 (Guj.)

218. Accrual of income – Interest – S. 5

Interest received on account of enhanced compensation accrues on year to year basis, and same cannot be taxed in the year of receipt alone.

ITO vs. Sanjay Kumar Malik (2009) 184 Taxman 139 (Delhi)

219. Accrual of income – Sales Tax Refund – S. 4, 41(1)

Once an order of refund of sales tax has been passed, the same has to be treated as income notwithstanding pendency of appeal against refund order.

CIT vs. Beirsdorf (India) Ltd. & Anr. (2009) 28 DTR 188 (Bom.) / (2009) 183 Taxman 178 (Bom.)

220. Additional Evidence – Power of Tribunal – S. 254(1), Rule 46A

Tribunal confirming the order of CIT(A) without considering the additional evidence which was crucial. The High Court held that the additional evidence goes very root of the matter and a reasonable approach is needed and not the hyper technical approach adopted by the Tribunal, hence, the matter remanded to the Tribunal.

Daljieet Kaur vs. ITO (2009) 212 Taxation 46 (MP)

Editorial Note:- See Smt. Prabhavati Shah vs. CIT (1998) 231 ITR 1 (Bom.)

221. Agent – Non-resident – S. 163

The foreign company was in receipt of some income from the assessee, on account of sale of shares. The Act uses the words “from or through”, instead of the word ‘thorough’ in section 163(1)(c). Any person in India from or through whom the non-resident is in receipt of any income directly or indirectly can be treated as agent of the non-resident.

Utkal Investments Ltd vs. Asstt. DIT (2009) 120 TTJ 67 (Mum.)

222. Appeal – Appellate Tribunal – Power – Rectification – S. 254(2)

Power conferred upon the Tribunal under section 254(2) of the Act is limited to correct the mistake apparent on the face of record and the power cannot be exercised to rectify an error by long drawn process of reasoning.

CIT vs. Pearl Woollen Mills (2009) 31 DTR 349 (P&H)

223. Appeal – Approval of COD – S. 253

State Governments and PSUs do not need COD approval for filing an appeals in the Income tax matters.  

Shivshahi Punarvasan Prakalp vs. UOI (Bombay High Court) Source: www.itatonline.org

224. Appeal – Commissioner (Appeals) – Power of Stay – S. 251

While considering stay application, authority concerned should exercise his power judiciously and should pass order after applying his mind to various aspects of matter, but that would not confer jurisdiction upon authority concerned to sit tight and choose not to pass any order whatsoever on stay application. Court directed the Commissioner (Appeals) to hear stay application and dispose of same within a period of 15 days from date of
order.

Smita Agarwal (Ind.) vs. CIT (2009) 184 Taxman 59 (All)

225. Appeal – Condonation of delay – S. 260A

While preferring appeal to High Court, Section 260A does not confer any power on High Court to condone delay in case appeal is filed beyond prescribed period.

ACIT vs. Shubhash Traders (2009) 226 CTR 372 (MP)

226. Appeal – High Court – Condonation of delay – S. 260A

Period of limitation prescribed for filing an appeal under section 260A(2) of the Income Tax Act, 1961, is not subject to the provisions contained in section 4 to 24 of the Limitation Act , 1963 as provided under section 29(2) of the Limitation Act, therefore, High Court has no power to condone the delay in filing the appeal.

CIT vs. Mohd. Farooq (2009) 29 DTR 241 (All)(FB) / (2009) 226 CTR 360 (All) (FB)

Editorial Note:- See Bombay High Court CIT vs. M/s. Grasim Industries Ltd. (2009) 319 ITR 154 (Bom)

227. Appeal – High Court – S. 254(2), 260A, Art. 226

Appeal under section 260A is not maintainable against order of Tribunal under section 254(2) and therefore, writ petition
against order under section 254(2) cannot be rejected on the ground of availability of alter native remedy.
Visvas Promoteras (P.) Ltd. vs. ITAT (2009) 30 DTR 65 (Mad.)

Editorial Note:- See Bombay High Court Chem Amit vs. ACIT (2005) 272 ITR 397 (Bom.)

228. Appeal – Maintainability – S. 253(1)

Appeal against the order of the Commissioner of Income tax refusing to grant the approval to the assessee trust under section 80G of the Act was not maintainable before the Tribunal.

CIT vs. Shri Digamber Jain Mindir Chaksu (2009) 29 DTR 65 (Raj.)

229. Appeal – Tribunal – Additional ground – Interest – S. 234B, 254(1)

Plea against charging of interest under section 234B, could be allowed to be raised by the assessee in appeal before the Tribunal notwithstanding the fact that it was not raised by it before lower authorities.

S. Kumars Tyre Manufacturing Company Ltd vs. CIT (2009) 227 CTR 181 (MP.)

230. Appeal – Tribunal – Power of rectification – S. 254(2)

Time limit of four years to make rectification under section 254(2) applies to both suo motu action of Tribunal as well as action taken on request of parties. Section 254(2) does not provide for any condonation of delay and moreover, provisions of section 5 of Limitation Act, 1963 are not applicable.

Rahul Jee & Co (P.) Ltd. vs. ACIT (2009) 120 ITD 481 (Delhi)

231. Appeal – Tribunal – Power to dismiss – Excise Act – S. 35C

Every Court or Tribunal has an inherent power to dismiss a proceeding for non prosecution when the petitioner / appellant before it does not wish to prosecute the proceeding.

M/s. Chemipol vs. UOI (Bom.) Source : www.itatonline.org

32. Appeal – Tribunal – S. 249(4), 253

Against the dismissal of appeal by the CIT(A) for non payment of tax as per returned income, appeal to Tribunal is not maintainable.

Sushil Thomas Abraham vs. ACIT (2009) 212 Taxation 214 (Ker.)

233. Appeal High Court – Rectification – S. 254(2), 260A

Appeal before High Court is not maintainable against Order under section 254(2) and therefore, Writ Petition against Order under section 254(2) cannot be rejected on the ground of availability of alternative remedy.

Visvas Promoters (P) Ltd. vs. ITAT & Anr. (2009) 226 CTR 638 (Mad.)

234. Appellate Tribunal – Additional Ground – S. 254(1)

The issue with respect to the assessing officer’s action charging interest under section 234B of the Act being a legal ground can be taken for the first time before the Tribunal even though the same was not taken before the lower authorities.

S. Kumats Tyre Manufacturing Co. Ltd. vs. CIT (2009) 30 DTR 233 (MP)

235. Assessment – Additions – Retraction of Statement – S. 132(4)

Where additions made on the basis of statement recorded under section 132(4), which was subsequently retracted; order of Tribunal set aside.

CIT vs. Om Prakash K. Jain (2009) 213 Taxation 708 (Bom.)

Editorial Note:- Vinod Solanki vs. UOI (2009) 233 E.L.T. 157(SC) Source : www.itatonline.org

236. Assessment – Admission in return – S. 139, 143

Admission by an assessee, in the return, of disallowance does not debar him from contending that the disallowance is not called for. Assessee can contend that a particular amount is deductible notwithstanding the fact that the assessee himself / itself has not claimed the same in the return.

Ester Industries vs. CIT (2009) 185 Taxman 266 (Del.)

237. Assessment – Dead person – S. 143

Notice of assessment or reassessment issued and the consequent assessment order passed by the assessing officer on a dead person without bringing all the legal heirs on record was held to be illegal on the well settled legal principle that the case cannot be decided in absence of the affected party.

Kesar Devi (Smt.) vs. CIT (2009) 31 DTR 241 (Raj.)

238. Assessment – Notice – Block Assessment – S. 143(2), 158BC, 260A

Notice under section 143(2) not having been issued within one year of filing the return by assessee, block assessment was invalid. No substantial question of law arises.

CIT vs. Ms. Mudra G. Nanawati (2009) 30 DTR 108 (Bom.)

239. Assessment – Notice – defection return – S. 139, 143

On removal of defects, the return takes effect from the original date of filing and not from date of removal of defects, therefore, limitation for issuing notice under section 143(2) starts from date of original filing of return.

Nishmukh Investments & Trading P. Ltd. vs. Dy. CIT (2009) 213 Taxation 221 (Bom.)

240. Assessment – Notice served after office hours – S. 143(2), 153C

Notice under section 143(2), served after office hours on last date, no authorised person was present at the premises to receive, notice was affixed. Notice affixture not valid, though the assessee appeared in person not relevant. Assessment not valid.

CIT vs. Vishnu and Co. P. Ltd. (2009) 319 ITR 151 (Delhi)

241. Assessment – Return – Duty of Assessing Officer – S. 10(23C)

Assessee filing return for A.Y. 2001-02 and claiming exemption under section 10(23C), assessee had earlier made an application for exemption and was under the impression that it was so entitled. But later came to know that it was not so entitled and hence filed revised return, along with audit report, claiming exemption under section 11 since it was registered under section 12A. Assessing Officer treated the second return as non est and made addition of Rs.67.28 Lakhs. Held Assessing Officer cannot deny benefit of section 11 because of assessee’s mistake.

CIT vs. Lucknow Public Education School (2009) 183 Taxmann 62 (All)

242. Assessment Notice – Failure to issue notice – S. 143(2)

Failure to issue notice under section 143(2) would result into a void and invalid assessment.

CIT vs. Cebon (I) Ltd. (2009) 184 Taxman 290 (P&H)

243. Bad Debt – Burden lies on assessee to prove – S. 36(1)(vii)

Writing off of the bad debt in the books of accounts is not conclusive and the Assessing Officer is not precluded from making inquiries as to whether the entries are genuine and not imaginary or fanciful. The Assessing Officer has the power under section 143(2) to see that the entries are not mere paper work or fake and at the same time, the wisdom of the assessee cannot be questioned and no demonstrative or infallible proof of bad debt having become bad should be required. Commercial expediency is to be seen from the point of view of assessee depending on nature of transaction, capacity of debtor etc.

CIT vs. Kohli Brothers Color Lab (All.) Source: www.itatonline.org

244. Bad Debt – Deductible – S. 14A, 36(1)(vii), 80HHC

Under section 80HHC and section 14A, the expenditure incurred from the export income could not be held to be for earning income which did not form part of the total income, which concept was dealt with under section 10 of the Act. Section 80HHC deals with deduction of the element of profit from export from taxable income. Therefore, the claim of bad debt could not be disallowed.

CIT vs. Kings Exports (2009) 318 ITR 100 (P&H)

245. Bad debt – Sale consideration received partly – S.36(2)

Profit on sale of various companies shares have been shown under the head “other income”. When assessee received part of sale consideration balance wrote off as irrecoverable bad debt, the condition of section 36(1), read with 36(2) satisfied hence amount written off allowable as bad debts.

CIT vs. Dalmia (Bros.) (P.) Ltd. (2009) 184 Taxman 240 (Delhi)

246. Bad Debts – Money Lending Business – S. 36(1)(vii)

Where the assessee’s claim for bad debts was found to be genuine by the assessing officer, merely because the assessee had discontinued the money lending business during the relevant assessment year, its claim of bad debt cannot be disallowed.

CIT vs. Rajini Investment P. Ltd. (2009) 30 DTR 257 (Mad)

247. Bad Debts – S. 36(1)(vii)

Where the assessee had written off the debts in its books as bad and irrecoverable, the assessee claim of bad debts cannot be disallowed merely because the assessee had continued its efforts to recover the debts and obtained the decree, which could not be executed in the subsequent year.

CIT vs. Punjab Tractors Ltd. (2009) 31 DTR 245 (P&H)

248. Bad Debts – Share Broker – S. 36(1)(vii)

Where the assessee (a share broker) purchased share on behalf of its sub-broker and received only a part payment against the full consideration, the unrealised amount was to be treated as debt and was allowable as bad debt under section 36(1)(vii) of the Act. However, the Hon’ble High Court remanded the matter back to the Tribunal to consider the aspect, that as the share remained with the assessee the sale proceeds realized on sale of shares in the market should be adjusted against the balance due from the defaulting broker and only the net irrecoverable balance is to be allowed a bad debt.

CIT vs. D.B. (India) Securities Ltd. (2009) 29 DTR 277 (Del.)

249. Bad Debts – Share broker – S. 36(1)(vii)

Amount received by the share broker from its clients against the purchase of shares by the assessee (share broker) on their behalf, is to be treated as a debt and non-realization of the amount from its client is allowable as bad debt under section 36(1)(vii) of the Act.

CIT vs. Bonanza Portfolio Ltd. (2009) 29 DTR 280 (Del.)

250. Bad debts – Unilateral writing off sufficient after change of law S. 36(1)(vii), 36(2)

Departmental SLP rejected against the Bombay High Court where by the High Court dismissed the departmental appeal in ITA No. 383 and 437 of 2008.

CIT vs. Nelco Ltd. (2009) 317 ITR 6 (ST)

251. Block Assessment – Authorisation in joint name – Search – S. 158BC

Where the search is carried out in pursuance to a warrant of authorisation issued jointly in names of assessee and her husband, then, the assessing officer cannot assess the assessee in her individual capacity by invoking the provisions of section 158BC of the Act on the basis of seized documents during the search. In such circumstances, both the assessees can be assessed jointly as an Association of Persons (AOP) or Body of Individuals (B.O.I.).

CIT vs. Smt. Vandana Verma (2009) 31 DTR 214 (All) (Block Period: 1-4-1995 and 17-10-2001)

252. Block Assessment – Limitation – S. 158BE(2)(b), 158BD

Assessee posting proof of receipt of Notice – Department’s contention that Notice served subsequently, for which no evidence was produced amount held to be time barred.

CIT vs. Jagdamba Marbles Ltd. (2009) 318 ITR 154 (Delhi) (Block Period: 1-4-1990 to 30-10-2000) (2009) 29 DTR 301 (Del.)

253. Block assessment – Search and Seizure – S. 158BB

In the absence of any defect found out in the books of account, maintained in regular course of business, no addition can be made to the income disclosed by the assessee in its return of income on the basis of discrepancy worked out on estimation of its stock.

CIT vs. K. P. Chandradasan (2009) 226 CTR 403 (Ker.) (2009) 29 DTR 236 (Ker.)

254. Block Assessment – Search and Seizure – S. 158BD, 32

For invoking section 158BD for the assessment of any person satisfaction must be recorded by the Assessing Officer and Books of accounts, documents or assets seized or requisitioned to be handed over to the assessing officer having jurisdiction over such person.

CIT vs. Dawn View Farms (P) Ltd. (2009) 212 Taxation 199 (Del.)

255. Block assessment – Undisclosed Income – due date of filing of return – S. 158BB

Mere fact that time for filing return has not expired is not enough to hold that income disclosed after search can not be treated as undisclosed.

Rajesh Sayal vs. CIT (2009) 185 Taxman 369 (P & H)

256. Book Profit – Diminution in the value of asset – S. 115JB

The amount set aside as provision for diminution in the value of asset is to be added back while computing the book profit under section 115JB of the Act, in view of the clause (i) in Explanation 1 to section 115JB of the Act inserted by Finance Act (No 2), 2009 with retrospective effect from 1-4-1998.

CIT & Anr. vs. Mysore Breweries Ltd. (2009) 29 DTR 289 (Kar)

257. Book Profit – Interest – S. 115JA

Interest under section 234B is to be charged even though the income of the assessee is computed under the provisions of section 115JA of the Act.

Dissented from, Snowcem India Ltd. vs. CIT (2009) 313 ITR 170 (Bom.)

CIT vs. Brindavan Beverages Ltd. (2009) 32 DTR 257 (Kar.)

258. Business Disallowance – Actual payment – S. 43B

Under Explanation 3C, conversion of interest amount in to loan would not be deemed to be regarded as “actually paid” amount within the meaning of section 43B.

Eicher Motors Limited vs. CIT (2009) 315 ITR 312 (MP)

259. Business Expenditure – Advertisement Expenses – S. 37

Expenses on advertisement for promotion films, slides. Expenditure being with respect to an ongoing business, involving no enduring benefit is a revenue expenditure.

CIT vs. Geoffrey Manners & Co. Ltd. (2009) 212 Taxation 300 (Bom.)

260. Business expenditure – Capital or Revenue – Advance Lease Rent – S. 37(1)

Assessee acquiring land on lease for a period of 99 years, making payment of advance rent in the sum of Rs. 48 crores, and paying monthly rent of Rs. 40 per month, advance rent paid was allowable revenue expenditure.

Dy. CIT vs. Sun Pharmaceutical Ind. Ltd. (2009) 227 CTR 206 (Guj.)

Editorial Note:- See Jt. CIT vs. Mukund Ltd. (2007) 291 ITR (AT) 249 (Mum.) (SB) Lump sum paid as premium for securing lease hold right held as capital expenditure.

261. Business Expenditure – Constitutional Validity – Disallowance – S. 40(a)(ia)

It cannot be said that for the test of constitutional validity, the provision of Section 40(a)(ia) is very stringent and violative of Article 14 of the Constitution. If similar provision under section 40(a)(i) is working well for more than two decades in respect of non-resident, there is similarly no reason why similar provision for resident should be held arbitrary, unreasonable and anti-constitutional.

Tube Investments of India Ltd. vs. ACIT (2009) 226 CTR 313 (Mad.)

262. Business Expenditure – Contingent Liability – S. 37(1)

Where the assessee had challenged the order of the High Court directing the assessee to refund the excess levy of price of sugar along with interest before the Supreme Court, the amount was held to be not allowable under the provisions of the Act as the assessee was hopeful in succeeding in the Special leave Petition filed before the Apex Court. As such the same was contingent in nature.

Triveni Engineering & Industries Ltd. vs. CIT (2009) 29 DTR 309 (Del.)

263. Business Expenditure – Convertible debentures – S. 37(1)

Expenditure incurred on issue of convertible debentures is to be treated as revenue expenditure, even though the debentures issued were later on converted in to shares.

CIT & Anr. vs. ITC Hotels Ltd. (2009) 32 DTR 215 (Kar.)

264. Business Expenditure – Disallowance – S. 40A(3) r.w.r. 6DD(f)(ii)

Payments in cash to producers of hides and skins – genuineness of transactions not doubted or disputed by the department – disallowance not justified.

CIT vs. CPL Tannery (2009) 318 ITR 179 (Cal.)

265. Business Expenditure – Exempted Income – S. 14A

Where it is found that assessee had not incurred any expenditure for earning exempt income, no part of the expenditure can be disallowed under the provisions of section 14 A of the Act.

CIT vs. Hero Cycles Ltd. (2009) 31 DTR 301 (P&H)

266. Business Expenditure – Exempted Income – Disallowance – S. 14A r.w.s. 10(33)

In absence of correlation of any expenditure incurred in earning exempt income, there cannot be disallowance under section 14A.

Indo German International (P) Ltd. vs. Dy. CIT (2009) 185 Taxman 103 (Delhi)

267. Business expenditure – Expenses on issue of debentures – S. 37

Expenditure incurred on issue of debentures, whether convertible or non convertible is allowable as revenue expenditure.
S.L.P. CC No. 10548/2009 dt. 11-08-2009 filed by the department was rejected.

[CIT vs. Secure Meters Ltd. (2009) 221 CTR 405 (Raj.)]

268. Business Expenditure – Feasibility report of new project – S. 37(1)

If expenditure incurred for preparation of feasibility report of a new project, is in respect of same business which is already carried on by assessee, even if it is foe expansion of business, namely to start a new unit which is same as earlier business, and there is unity of control and a common fund such expenditure is to be treated as revenue expenditure.

CIT vs. Priya Viilage Road Shows Ltd. (2009) 185 Taxman 44 (Delhi)

269. Business Expenditure – Interest on Borrowed Capital – S. 36(i)(iii)

Interest paid on borrowed capital cannot be disallowed on the ground that the amount was advanced as interest free advance to its 100 percent subsidiary company.

CIT vs. Dalmia Cement Bharat Ltd. (2009) 183 Taxmann 422 (Delhi)

270. Business Expenditure – Payment of demurrage – S. 40(a)(i)

Tax having not been deducted at source from payment of demurrage charges to foreign shipping company, section 40(a)(i) was clearly attracted; assessee being a resident company, there was no question of invoking section 172

CIT vs. Orient (Goa) (P) Ltd. (2009) 30 DTR 129 (Bom.)

271. Business Expenditure – Puja expenses – S. 37(1)

Expenditure incurred on Vishwakarma Puja by a company cannot be treated as expenditure wholly and exclusively for the purposes of business of the company, and it cannot be allowed any deduction under section 37(1) towards such expenditure.

Hira Ferro Alloys Ltd. vs. Dy. CIT (2009) 31 DTR 20 (Chhattisgarh)

272. Business Expenditure – Royalty – S. 37(1)

Royalty paid by the assessee to its foreign collaborator at a specified percentage of its production / sale for using such technology provided by the foreign collaborator under the technical collaboration agreement is allowable as revenue expenditure.

CIT vs. Sharda Motor Industrial Ltd. (2009) 30 DTR 260 (Del.)

Climate System India Ltd. vs. CIT (2009) 30 DTR 263 (Del.)

273. Business Expenditure – Setting up of business – Software company – S. 37(1)

Where a software company started its business activities by pursuing companies to get orders, all activities carried out by the assessee to procure the orders being incidental to the business activities, would be regarded as for the purpose of business and not for setting up of the business. Therefore, substantial expenditure incurred against the minimal revenue earned by the assessee during the year could not be capitalized as pre – operative expenses.

CIT vs. Aspentech India (P) Ltd. (2009) 32 DTR 173 (Del.)

274. Business Income – Speculation loss – Shares in Stock in Trade – S. 28(1), 73

Even shares-in-stock on valuation at the close of accounting year resulting in profit or loss, such profit & loss under section 28(1) is speculation profit or loss by virtue of proviso to section 73.

Prasad Agents (P) Ltd. vs. ITO (2009) 213 Taxation 571 (Bom.) (2009) 226 CTR 13 (Bom.)

275. Capital Gain – Business Income – Investment in Shares – S. 28, 48

Shares activity treated as investment in earlier years cannot be treated as business in subsequent years if facts are the same.

CIT vs. Gopal Purohit (Bombay High Court) Source: www.itatonline.org (2010) 34 DTR 52 (Bom.)

Editorial Note:- Gopal Purohit (2009) 20 DTR 99, (2009) 122 TTJ 87, 29 SOT 117 Affirmed.

276. Capital Gain – Transfer – Not liable to capital gain – S. 2(47), 45

The amount received for not competing with the purchaser company in future in the suburbs could not be made taxable under the heading “capital gains”.

CIT vs. Amol Narendra Dalal (2009) 318 ITR 429 (Bom.)

277. Capital Gain – Transfer of capital assets – S. 2(47), 45(3), 45(4) & 47(ii)

When all the old partners retired from the firm on introduction of two new partners and new partners continued the business of firm, there was transfer of capital assets within the meaning of section 2(47) attracting section 45(4).

CIT & Anr. vs. Gurunath Talkies (2009) 226 CTR 474 (Kar.)

278. Capital gains – Agricultural land – S. 2(14)(iii), 54B

Reports of the Tehsildar having certified that the assesse’s land was 8 kms away from the municipal limits, the land constituted agricultural land, entitled to exemption under section 54B.

Satish Kumar Mittal & Mehinder Singh & Ors. (2009) 32 DTR 345 (P&H)

279. Capital gains – Investment in residential tour income – S. 54

Assessee purchasing property in the name of son, Held assessee not entitled to exemption under section 54F.

Prakash vs. ITO (2009) 213 Taxation 212 (Del.)

280. Capital gains – short-term or long-term – dissolution – period of holdings – S. 2(42A), 49(1)(iii)(b)

On dissolution the property was taken over by the partner. Partner sold the property within three days of acquiring it. Sale has to be treated as short term. The benefit of section 49(1)(iii)(b) is not available.

P. P. Menon vs. CIT (2009) 31 DTR 159 (Ker.) (2009) 183 Taxman 242 (Ker.); (2009) 227 CTR 573 (Kar.)

281. Capital gains – Slump Sale – S. 48, 50. 50A

Sale proceeds received by the from sale of a going concern of one division of assessee, which was slump sale and not a sale of block of assets, section 50 was not applicable.

CIT vs. MaxIndia Ltd. (2009) 319 ITR 68 (P&H)

282. Capital or Expenditure – Feasibility report – S. 37

Expenditure incurred for feasibility report with respect to the same business which the assessee is carrying on, is a revenue expenditure even if it is for the expansion of the business i.e. to start a new unit and there is unity of control.

CIT vs. Priya Village Roadshows Ltd. (2009) 185 Taxman 44 (Del.)

283. Capital or revenue – Compensation for termination of agreement – S. 4

Compensation received by assessee from the other party for termination of the agreement for transfer of property to be treated as capital receipt and not as revenue receipt.

S. Zoraster & Co. vs. CIT (2009) 31 DTR 107 (Raj.)

284. Capital or revenue expenditure – Convertible debenture – S. 37

Even if the debenture has to be converted in to a share at a latter date, the expenditure incurred in connection with issue of debentures has to be treated as revenue expenditure.

CIT vs. ITC Hotels Ltd. (2009) 32 DTR 215 (Kar.)

285. Capital or Revenue Expenditure – Royalty – S. 37

Payment made to an American company (holder of patent) for use of royalty by the assessee, as a percentage of domestic / export sales, is a revenue expenditure.

Climate Systems India Ltd. vs. CIT (2009) 185 Taxman 139 (Del.)

286. Capital or revenue expenditure – S. 37

Payment of royalty at rate calculated, per piece of production is revenue expenditure.

CIT vs. Sharada Motor Industries Ltd. (2009) 319 ITR 109 (Delhi)

287. Capital or Revenue receipt – Foreign Exchange fluctuations – S. 4

Gains on account of foreign exchange fluctuations in respect of share capital collected in foreign exchange is capital receipt.
CIT vs. Jagatjit Industries Ltd. (2009) 32 DTR 168 (Del.)

288. Capital Receipt – Interest and Rent – S. 4

Interest and rent receipt from its employees and oustees in dam area had a nature of capital receipt as the construction process was still on and business activity not started.

[Followed CIT vs. Bokoro Steel Ltd. (1999) 236 ITR 315 (SC)]

CIT vs. Tehri Hydro Development Corporation (2009) T.L.R. 456 (Uttarkhand) / (2009) 183 Taxman 246 (Uttarkhand)

289. Charitable Institution – Registration – S. 12A

The institution of religious nature as well as for charitable purpose can claim registration under section 12A of the Act.

Exemption under section 11, 12 or section 80G of the Act, would come only when such exemptions are claimed by the assessee at the time when it is assessed to tax. Thus, if the assessee trust seeking registration under section 12A of the Act makes out a case for registration the same cannot be denied if the trust is not approved under section 80G of the Act.

CIT vs. Shri Digamber Jain Mindir Chaksu (2009) 29 DTR 65 (Raj.)

290. Charitable Trust – Registration under Section 12A – S. 2(15), 12A & 12AA

Imparting education with the primary purpose of earning profits cannot be said to be a charitable activity for the purpose of Registration under section 12AA.

CIT vs. National Institute of Aeronautical Engineering Educational Society. (2009) 226 CTR 582 (Uttarakhand)

291. Charitable Trust – S. 11

Where the activity of the trust / institution was held to be charitable since inception by the assessing authorities and the activity carried out by the institution remained the same during the current year. The action of the assessing officer treating the same as not a charitable activity was held to be not justified.

Dy. CIT vs. M.P. Madhyam (2009) 31 DTR 15 (MP)

292. Concession of law – Admission – Binding effect – S. 143(3)

Admission or concession by a counsel made inadvertently or under a mistaken impression of law will not only bind on his client, but also same can not ensure to the benefit of other party. Party can resile from such concession.

Dy. CIT vs. K. S. Suresh (2009) 319 ITR 1 (Mad.)

293. Deduction – Audit report – Export – Ss. 10A, 10B(5), 80HHB(3)(ia), 80-1A(7), 80J(6A)

Benefit of Section 10A would be available to the petitioner even though it did not file Audit Report alongwith the return but filed before the framing of the assessment.

CIT vs. WEB Commerce (India) P. Ltd. (2009) 318 ITR 135 (Delhi)

294. Deduction – Disallowance of expenditure in relation to exempted income – S. 14A

Assessee acquired the shares using its own funds, no interest expenditure incurred, disallowance under section 14A can not be made.

CIT vs. Winsome Textile Industries Ltd. (2009) 319 ITR 204 (P&H)

295. Deduction – Disallowance of expenditure in relation to exempted income – S. 14A

Interest could be disallowed only to the extent of loan invested in shares.

CIT vs. Sushma Kapoor (Mrs.) (2009) 32 DTR 212 (Del.)

296. Deduction – Export – S. 80HHC

Money brought in during extended period based on proposed reduction in export price by buyer – Reduction in invoice amount approved by RBI – Modified price alone to be included as part of export Turnover – CBDT Circular No. 5 dated 15.5.2008 considered.

The assessee, an export unit, brought in money during the extended period in terms of approval granted by RBI to the extent of 30% based on the proposed deduction in the export price by the buyer. The Tribunal held that once the RBI had agreed to reduction in the invoice amount the original sale price stood rectified and such rectified price to be taken as actual export value. Such adjusted export value alone was to be included in the export turnover and the total turnover.

CIT vs. Polycott Corpn. (2009) 318 ITR 144 (Bom.)

297. Deduction – Government Securities – S. 80P

Deduction under section 80P(2)(i) of the Act was allowable with respect to proportionate interest income derived on investment in Government securities in excess of SLR requirement.

CIT vs. Goa Urban Co-operative Bank Ltd. (2009) 29 DTR 158 (Bom.)

298. Deduction – Industrial Undertaking – Freight subsidy – S. 80IA

Freight subsidy received by the assessee to encourage it to set up of industries in remote areas is not income derived from the business of industrial undertaking and not eligible for deduction under section 80IA of the Act.

CIT vs. Kiran Enterprises (2009) 32 DTR 111 (HP)

299. Deduction – Industrial Undertaking – Interest Subsidy – S. 80IB

Interest subsidy received by the assessee from State Government to encourage it to set up industries in remote areas is not income derived from the business of industrial undertaking and not eligible for deduction under section 80IB of
the Act.

CIT vs. Gheria Oil Gramudyog Workers Welfare Association (2009) 32 DTR 105 (HP)

300. Deduction – Industrial Undertaking – S. 80I

Gross total income is to be computed in accordance with the scheme of the Act as such the profits of eligible units is to be adjusted against the other units losses and if there is any positive income remaining after such adjustment deduction under section 80 I is to be allowed on the net positive income.

CIT vs. Shree Synthetics Ltd. (2009) 30 DTR 30 (MP)

301. Deduction – Industrial Undertaking – S. 80IB

Additional income offered by the assessee during the assessment proceedings which was added to the business income of the assessee, in absence of any finding by the lower authority that the undisclosed income offered by the assessee was derived from the industrial undertaking the income cannot be considered while computing deduction under section 80IB of the Act.

CIT vs. Allied Industries Ltd. (2009) 31 DTR 323 (HP)

302. Deduction – Industrial Undertaking – Transport subsidy – S. 80IA

Transport subsidy received by the assessee to encourage it to set up of industries in remote areas where rail facilities are not available is not income derived from the business of industrial undertaking and not eligible for deduction under section 80 IA of the Act.

Janak Raj Bansal vs. CIT (2009) 32 DTR 119 (HP)

303. Deduction – Industrial Undertakings – S. 80IB, 80HHC

The assessee is not entitled to simultaneous deduction of both sections 80HHC and 80IB while computing deduction under section 80HHC, in view of specific exclusion under section 80IB(13) hence, deduction granted under section 80IB has to be excluded.

Olam Exports India Ltd vs. CIT (2009) 184 Taxman 373 (Ker.)

304. Deduction – Interest – Export – S. 80HHC

Interest income received by the assessee on the fixed deposits placed by it as margin money or security for bank guarantee, etc which is taxed under the head income from other source, such interest could not be included while computing deduction under section 80HHC of the Act.

CIT vs. Mereena Creations (2009) 32 DTR 97 (Del.)

305. Deduction – Interest – S. 80P(2)(a)(i)

Interest income earned by the assessee a co-operative society engaged in banking business from the funds invested by it, including on the non – SLR funds was held to be attributable to the assessee’s banking business and eligible for deduction under section 80P(2)(a)(i) of the Act.

CIT vs. H.P. State Co-operative Bank Ltd. (2009) 31 DTR 210 (HP)

306. Deduction – Manufacture – Chickens – S. 80HHA, 80 I

Process of dressing, rearing, defeathering deboning, etc. undertaken by the assessee to produce boneless chickens, etc., in the course of its poultry business does not amount to production of article or thing within the meaning of section 80HHA and 80I of the Act.

CIT vs. J.D. Farms (2009) 31 DTR 342 (Del)

307. Deduction – Manufacture – S. 80HH, 80I

Activity of laying railway line does not amount to ‘manufacture’ or ‘produce’ for the purpose of allowing deduction under section 80HHC and 80I.

CIT vs. Indian Railway Construction Co. Ltd. (2009) 226 CTR 49 (Del.)

308. Deduction – Public Provident fund – Limit of one lakh – S. 80C

Where, amount deposited in PPF Account exceeded Rs. 70,000/- prescribed under PPF Scheme, it was held that in view of fact that Act was amended by Finance Act, 2005, permitting an individual to deposit maximum of rupees one lakh in any specified scheme, concerned authorities were to be directed to amend paragraph 3 of PPF Scheme, 1968 in terms of section 80C and increase maximum limit of subscription to PPF as per Finance Act, 2005.

M. S. Padmarajaiah vs. Secretary Department of Finance, Government of Karnataka. (2009) 183 Taxman 209 (Kar)

309. Deduction – S. 80HH, 80I

Compensation received by the assessee from its foreign collaboration upon termination of technical know-how agreement cannot be said to be income derived from the industrial activity. As such the same is not eligible for deduction under section 80HH and 80I of the Act.

S. Kumats Tyre Manufacturing Co. Ltd. vs. CIT (2009) 30 DTR 233 (MP)

310. Deduction at source – Interest on delayed payment – S. 194A, 194lA

Interest on delayed payment of enhanced compensation in respect of acquisition of immovable property is revenue receipt exigible to tax under section 4 and therefore, is liable to deduction of tax at source under section 194A.

Interest accrued on delayed payment of amount of enhanced compensation in respect of acquisition of agricultural land would not partake character of compensation for “agricultural land” which is excluded from operation of section 194LA.

Karnail Singh vs. State of Haryana (2009) 184 Taxmann 257 (P & H)

311. Deduction at Source – Non-resident – S. 195(1)

Resident paying to non-resident Company for purchase of software. There is an obligation under TDS provision to deduct tax while making payment to a non-resident if the impugned payment is in the character of income payment.

CIT vs. Samsung Electronics Co. Ltd. (2009) 227 CTR 335 (Kar.)

312. Deduction at source – Upfront fees – Liability to deduct tax vis-à-vis year of assessment of year – S. 194I

A person who is responsible for paying to a resident any income by way of rent us required to deduct tax at source under section 194I at the time of credit of such income to the account of the payee even if it is not the income of the payee previous year in which it is paid; upfront fee paid by assessee to the lessor which is adjustable against 50% of the annual license fee payable to the lessor was rent and therefore, assessee was required to deduct tax at source under section 194I at the time of the credit of such amount.

Tax Recovery Officer vs. Bharat Hotels Ltd. (2009) 28 DTR 337 (Bang.) (Trib.)

313. Deduction of Tax at Source – Commission – S. 194H

Deductibility of TDS on tickets issued by assessee-airlines to agents – Issue of tickets at concessional rates does not amount to commission within the meaning to section 194H and hence there is no liability to deduct TDS.

CIT vs. Singapore Airlines Ltd. (2009) 213 Taxation 441 (Del.)

314. Deduction of tax at source – Franchisee – S. 194I

Payments made by the assessee to its franchisee would not bear the character of rent in the absence of any lessor–lessee
relationship.

CIT vs. NIIT Ltd. (2009) 184 Taxman 472 (Delhi) / (2009) 30 DTR 49 (Delhi) (2009) 318 ITR 289 (Delhi)

315. Deduction of Tax at Source – Interest – Rent – Co-owner – S. 194A, 194I

Interest on TDS / STDR paid to non-resident being exempt under section 10(15)(iv)(fa). It is not required to deduct tax at source under section 194A. Further, there is also no need for TDS under section 194I if in a case where share of rental income from a co-owned property is chargeable in the hands of co-owners respectively and if the share of each co-owner is below Rs. 1,20,000/-

CIT vs. Manager SBI (2009) 226 CTR 310 (Raj.)

316. Deduction of Tax at Source – Meaning of Work – S. 194C

Meaning of the word ‘work’ in section 194C. Service provided by a hotel to its customers does not amount to work within the meaning of ‘work’ for the purpose of section 194C. The word ‘work’ in section 194C can only mean such work which results into any product or results into some desired objective.

East India Hotels vs. CBDT (2009) 212 Taxation 311 (Bom.) (2010) 320 ITR 526 (Bom)

317. Deduction of Tax at source – Payment by society to its members – S. 194C

Payments made by assessee society to the truck owners who are its members after receiving the payments from the companies for transporting their goods are not subject to TDS under section 194C(2), as there is no sub contracts with the said companies on behalf of its members.

CIT vs. Ambuja Darla Kashlog Mangu Transport co-op. Society (2009) 31 DTR 49 (HP)

318. Deduction of Tax at Source – Purchase of Plant – S. 195 r.w.s 9(1)(vi)

The assessee had purchased plant from a foreign country which were, technical documents viz, designs, drawings, sketches, etc. The title to these documents was transferred to the assessee by the foreign company (vendor). The payment made by the assessee to foreign vendor was held to be for the purchase of plant and not as royalty under the provisions of section 9(1)(vi) of the Act. As such, the assessee was not liable to deduct tax at source from the payment made to foreign party.

CIT vs. Maggronic Devices (P) Ltd. (2009) 31 DTR 65 (HP)

319. Deduction of tax at source-Fess for professional or technical services – S. 194J

Third party Administrator (TPA), who is responsible for making payment to hospitals for rendering medical services to policy holders under various health insurance policies issued by several insurers, is obliged to deduct tax at source under section 194J from payments made to hospitals.

Medi. Assist India TPA (P) Ltd. vs. Dy. CIT (TDS) (2009) 184 Taxman 359 (Kar.)

320. Deemed Dividend – Loans for business advantages – S. 2(22)(e)

The amount advanced for business transaction would not fall within the definition of “deemed dividend”.

CIT vs. Creative Dying & Printing (P) Ltd. (2009) 184 Taxman 483 (Delhi) (2009) 30 DTR 143 (Del.)

321. Depreciation – Audit Report in revised return – S. 32(1)(iia)

Assessee’s claim for additional depreciation cannot be disallowed on the ground that the audit report in Form No. 3AA for claiming additional depreciation was not furnished along with the original return but the same was filed along with the revised return which was filed within time.

CIT vs. Sharda Motor Industrial Ltd. (2009) 30 DTR 260 (Del.)

322. Depreciation – Block of asset – Capital gains – S. 2(11), 32(1)(iii), 50

Building owned by the assessee, as also deemed to be owned by assessee as per Expln. 1 to section 32(1) in respect of which same rate of depreciation is prescribed have to be taken for determining WDV of block of assets, no loss on account of any shortfall between the individual WDV of building of deemed ownership and any amount realised in respect thereof can be allowed as a capital loss under section 50.

Anand and Anand vs. ACIT (2009) 29 DTR 489 (Del.)

323. Depreciation – Block of Assets – Individual User – S. 32

As per section 32(1) the asset is to be owned and “used” for the purpose of business or profession, the expression “used for the purpose of business” when applied to block asset would mean use of block asset and not any specific items in the said block as individual assets have lost their identity after becoming inseparable part of the block asset.

CIT vs. Bharat Aluminium (Delhi High Court) Source: www.itatonline.org

324. Depreciation – Lease of machinery – User of asset – S. 32

Lease of machinery before end of accounting year, Lessee installing machinery after end of accounting year is not relevant. The assessee is entitled to depreciation.

CIT vs. Kotak Mahindra Finance Ltd. (2009) 317 ITR 236 (Bom.)

325. Depreciation – Notional Depreciation – S. 32 r.w.s 43(6)

Where certain assets were used by the assessee for its agricultural activities on which no deprecation was claimed or allowed to the assessee in earlier years, written down value of the assets is to be taken as original value of the assets without reducing notional depreciation deemed to be allowed in earlier years.

CIT vs. Hybird Rice International P. Ltd. (2009) 30 DTR 217 (Del)

326. Depreciation – Sale and lease back transaction vis-à-vis tax avoidance – S. 32(1)(ii)

Assessee having sold the machinery and then acquired the same on lease and lease rental was also paid, it could not be said that transaction was sham or a device, and therefore depreciation was allowable.

CIT vs. Punjab State Electricity Board (2009) 30 DTR 153 (P&H)

327. Depreciation – Workers quarters – S. 32(1)(iv)

Workers quarters which were leased out by the assessee along with the plant, and the income from lease of plant was assessed as business income, the assessee was entitled to deprecation at the rate of forty percent (40%) on the workers quarters leased out by the assessee along with the plant.

CIT vs. Rieta Biscuit Co. P. Ltd. (2009) 31 DTR 89 (P&H)

328. Depreciation allowable even if asset not used at all for entire year – S. 32

The assessee, engaged in shipping business, owned a barge which was included in the block of assets. The barge met with an accident and sank on 6.3.2000 (A.Y. 2000-01). As efforts to retrieve the barge were uneconomical, the barge was sold on as-is-where-is in May 2001 (A.Y. 2002-03). As the barge was non-operational and not used for business at all in A.Y. 2001-02, the Assessing Officer denied depreciation.

On appeal by the assessee, the Tribunal took the view that after the insertion of the concept of “block of assets” by the T.L. (A) Act, 1988 w.e.f. 1.4.1988 individual assets had lost their identity and only the “block of assets” had to be considered. It was held that the test of “user” had to be applied upon the block of assets as a whole and not on individual assets. On appeal by the Revenue, the High Court dismissed the appeal holding that the issue was squarely covered in favour of the assessee by its earlier judgements in Whittle Anderson 79 ITR 613 and G. N. Agrawal 217 ITR 250.

CIT vs. G. R. Shipping (Bombay High Court), ITA No. 598 of 2009, dt. 28th July, 2009 Source: www.itatonline.org

329. Educational Institution – S. 10 (23C)(vi)

Merely because the object of the petitioner society were also to serve the church and the Nation that would not mean that the educational institution was not existing solely for educational purpose. Therefore, the order passed by CCIT could not be sustained and was set aside. The CCIT was directed to pass a fresh order.

Ewing Christian College Society vs. CCIT (2009) 318 ITR 160 (All)

330. Exemption – Manufacturing – Processing Stone – S. 10B

Activity of processing stone, marble, etc. was held to be manufacturing activity eligible for deduction under section 10B of the Act.

CIT vs. Ramsons Organics Ltd. (2009) 31 DTR 83 (Del.)

331. Export – Oriented undertaking – S. 10B(KS)

Language of section 10B, provides for exemption with respect to any “profits and gains” of business and profession and same is not confined to “profits and gains” of business provided under section 14(D), hence, interest income received by assessee from its sister concern would fall within expression “profits and gains” and assessee would be entitled to exemption under section 10B in respect of such interest income.

CIT vs. Hycron India Ltd. (2009) 185 Taxman 70 (Raj.)

332. Income – Capital or revenue receipt – Non-compete fee – S. 4

Non-compete fee received by assessee for refraining from manufacturing and selling time pieces for a period of ten years after the sale of its units while it was continuing with its other business activities constituted revenue receipt.

CIT vs. Tata Coffee Ltd. (2009) 29 DTR 336 (Kar.)

333. Income – Mutuality – Interest income not exempted – S. 4

Investment of surplus funds by the assessee club with member banks and institutions not with a definite idea of using the same in any specific projects for the further development of the infrastructural facilities of the club did not satisfy the concept of mutuality and therefore benefit of exemption cannot be extended to the interest income.

Madras Gymkhana Club vs. Dy. CIT (2009) 226 CTR 176 (Mad.)

334. Income – Mutuality – Transfer fee – non occupancy charges – S. 4

Transfer fee and non occupancy charges received from the members are not taxable on the principle of mutuality.

Mittal Court Premises Co-operative Society Ltd. vs. ITO (2009) 184 Taxman 292 (Bom.) (2010) 320 ITR 414 (Bom.)

335. Income from House property – Lift Charges – S. 22

Charges received for providing lift service were to be assessed as “income from house property”, if uniform service charges are to be collected from every tenant, whether he be in the first floor or top floor. Mere separate agreement for such collection would not make any difference.

CIT vs. Mohan’s Enterprises (2009) 182 Taxman 24 (Ker.)

336. Income from other sources – deduction – S. 56, 57

Assessee Government of India enterprise doing construction activities and not business activities of earning interest on deposit with banks deduction of 2.5% towards administrative cost on the interest income on short term deposit is proper.

CIT vs. Tehri Hydro Development Corporation (2009) T.L.R. 456 (Uttarkand)

337. Income from undisclosed sources – addition – S. 69C, 142A

There is no mention of section 69C in section 142, and therefore, Assessing Officer could not refer matter regarding cost of construction of project to DVO under section 142A and addition can not be made under section 69C.

CIT vs. Aar Pee Apartments (P) Ltd. (2009) 32 DTR 92 (Del.)

338. Income from Undisclosed Sources - Loose sheets – S. 69

Loose sheets by them self may not be enough to justify addition on estimated basis even though the explanation of the assessee is found unbelievable and circumstances may be pointing other wise.

CIT vs. Atam Valves (P) Ltd. (2009) 184 Taxmann 6 (P&H)

339. Interest – Additional Income disclosed – S. 234B

Where the assessee had offered a certain amount as its additional income only to buy peace of mind and the same was accepted by the assessing officer without any further inquiry the assessee cannot be said to have defaulted in payment of instalments of advance tax on the additional income declared by the assessee so as to make him liable to pay interest under section 234B of the Act.

T. P. Indrakumar vs. ITO (2009) 29 DTR 311 (Kar.)

340. Interest – Book profit – S. 115JA, 234B

Interest under section 234B is chargeable though computation of income is made under section 115JA.

CIT vs. Brindavan Beverages Ltd. (2009) 32 DTR 257 (Kar.)

341. Interest – employers – S. 234B, 234C

Where the employer company had discharged the tax liability along with the interest under section 201(1A) of the Act due to default in deduction of tax at source under section 192 of the Act, no interest under section 234B and 234C of the Act could be charged from the employees.

CIT vs. Emilio Ruiz Berdejo & Ors. (2009) 32 DTR 27 (Bom.)

342. Interest – Failure to deduct tax – S. 234B

Liability of interest under section 234B cannot be levied upon the assessee, where the deductor fails to deduct.

Director of Income Tax (International Taxation) vs. NGC Network Asia LLC (2009) 213 Taxation 517 (Bom.)

343. Interest – Waiver – S. 220(2)

Where the CIT has not addressed to the conditions contemplated in section 220(2A) of the Act, while refusing the assessee’s request for waiver of interest under section 220 of the Act, matter was remanded back to the CIT for considering the request of the assessee afresh.

Polyfex (India) P. Ltd. vs. Director General of Income tax (Inv.) & Anr. (2009) 30 DTR 54 (Kar.)

344. Interest – Waiver or reduction – S. 234A, 234B, 234C

Assessee filing returns voluntarily and paying taxes due to his over busy schedule during the relevant assessment years constituted as ‘unavoidable circumstances’ within the meaning of clause 2(e) of CBDT Notification No.400/234/1995-IT(B) and entitle him for waiver of interest under section 234A, 234B, 234C levied upon by him for failure to file returns within the time allowed under section 139(1)/(4).

S. Nagoor Babu @ Mano vs. CCIT & Anr. (2009) 227 CTR 287 (Mad.)

345. Interest Waiver – S. 234B, 234C

Assessee having paid tax voluntarily and having pleaded a good and reasonable reason for not filing the return on time and therefore, interest under Section 234B and 234C was liable to be waived.

V. Akilandeswari vs. CCIT (2009) 227 CTR 582 (Mad.)

346. Investment Allowance – Leasing of machinery – S. 32A

Investment allowance under section 32A of the Act was allowable on the machinery leased out by the assessee, when the income from leasing out of machinery was assessed as business income by the assessing officer.

CIT vs. Rieta Biscuit Co. P. Ltd. (2009) 31 DTR 89 (P&H)

347. Notice – S. 282, 292BB

Notice was not served within stipulated time. Mere giving of dispatch number will not render the said finding to be perverse. In the absence of notice being served, the Assessing Officer had no jurisdiction to make assessment. Absence of notice can not be held to be curable under section 292BB of the Income tax Act.

CIT vs. Cebon India Ltd. (2009)184 Taxman 290 (P&H)

348. Penalty – Advances from customers – S. 271D

Provisions of section 269 SS are applicable only in case of loans and deposits received by the assessee in contravention of the provision. Thus, when the assessee receives advance from his customers for supply of goods in cash exceeding the limits prescribed in section 269SS, penalty under section 271D was held to be not leviable.

CIT & Anr. vs. Kailash Chandra Deepak Kumar (2009) 32 DTR 336 (All)

349. Penalty – Concealment – S. 271(1)(c)

Where assessee had declared income by filing revised return after the Investigating authority found that the agricultural income declared by the assessee was bogus, penalty under section 271(1)(c) of the Act was held to be correctly leviable as there was a deliberate attempt on the part of the assessee to conceal its particulars of income by filing false return.

CIT vs. Dass Trading & Holding P. Ltd. (2009) 29 DTR 77 (Del)

350. Penalty – Concealment – S. 271(1)(c)

The assessee claimed the entire expenditure incurred by it being payment of lump sum compensation under section 18 of the Industrial Dispute Act, as deductible under section 37 of the Act. However, the assessing officer allowed only one fifth (1/5) of the expenditure under section 35 DDA of the Act. On these facts the Hon’ble High Court held that the action of the assessee claming deduction under section 37 of the Act was a bona fide action, as two views were possible on allowability of the compensation paid to the worker. As such, there was no concealment or furnishing of inaccurate particulars so as to attract penal provisions under section 271(1)(c) of the Act.

CIT vs. Dalmia Agencies P. Ltd. (2009) 29 DTR 332 (Del)

351. Penalty – set aside – S. 271(1)(c), 271(1B)

Assessment order having been made after 1st April, 1989 they are covered by the newly inserted sub-section (1B) of section 271. Impugned order passed by the Tribunal is set aside and the appeals are remitted to the Tribunal for hearing on merits.

CIT vs. India Crafts & Ors. (2009) 226 CTR 308 (Del.)

352. Penalty Concealment – Satisfaction of the Assessing Officer – S. 271(1B), 274, 275

i. Section 271(1B) is not violative of Article 14 of the Constitution.

ii. The position of law both, pre and post amendment is similar, as regards initiation of penalty proceedings.

iii. Prima facie satisfaction of the Assessing Officer is a must.

iv. Satisfaction need not be in respect of each and every disallowances.

v. Due compliance would be required to be made in respect of the provisions of section 274 and 275 of the Act.

vi. The proceedings for initiation of penalty cannot be set aside only on the ground that the assessment order states that ‘penalty proceedings are initiated separately’ if otherwise, it conforms to the parameters.

Ms. Madhushree Gupta vs. UOI (2009) 183 Taxman 100 (Delhi)

353. Precedent – Binding nature – S. 254(1)

Decision of High Court of different jurisdiction is not binding on Tribunal.

Visvas Promoters (P.) Ltd. vs. ITO (2009) 30 DTR 65 (Mad.) / (2009) 226 CTR 638 (Mad.)

354. Prosecution – Penalty deleted – S. 276C

Where the penalty levied under section 271(1)(c) of the Act have been cancelled by the High Court, criminal complaint launched on the basis of the penalty order is also liable to be quashed.

Harkawat & Co. & Ors. vs. UOI (2009) 29 DTR 324 (MP)

355. Purchase of Immovable property by Central Government – S. 269UD, 269UL

Since the sale instances cited by the Petitioners had not been taken into account in a proper perspective, it means that the authority failed to arrive at a fair market value. Moreso, considering the fair market value arrived at by the authority, the transactions fell within the prescribed limit of 15 per cent and hence the orders were not sustainable. The authority was required to issue the necessary certificate under section 269 UL of the Income-tax Act, 1961.

Harish Kanayalal Thawani & Others vs. SCP & Others (2009) 318 ITR 137 (Bom.)

356. Reassessment – After four years – S. 147

Where the assessing officer while passing order under section 143(3) of the Act allowed the assessee claim of deduction under section 80IA of the Act after considering the reply of the assessee on the issue of 80IA, the action of the assessing officer reopening the assessment after the expiry of four (4) years from the end of the assessment year was held to be not justified, as it was a mere change of opinion on the part of the assessing officer, and there was no failure on the part of the assessee to disclose the material particulars.

Northern Strips Ltd. vs. ITO (2009) 31 DTR 225 (Del.)

357. Reassessment – Audit – Export – S. 147

Reopening on the basis of the Revenue Audit report that the deduction under section 80HHC was not correctly allowed was held to be a mere change of opinion as no fresh or new material was available for reopening the assessment with the assessing officer.

Carlton Overseas P. Ltd. vs. ITO & Ors. (2009) 29 DTR 262 (Del.)

358. Reassessment – change of opinion – S. 143(1), 147, 148

When original return was accepted under section 143(1) in a summary manner, it cannot be said that the Assessing Authority has formed any opinion relating to assessment. Therefore, there is no informity in the reassessment proceeding.

Desh Raj Udyog vs. ITO (2009) 227 CTR 636 (All)

359. Reassessment – Change of opinion – S. 148

Where the assessment order does not contain any discussion on a particular issue, the same may be rendered without application of mind, and in that case, there is no question of change of opinion, in such cases mere production of books of account is also no sufficient as per section 147, Explanation 1 and therefore, reopening would be valid.

Ema India Ltd. vs. ACIT (2009) 30 DTR 82 (All)

360. Reassessment – Information Investigation Wing – S. 147

Where the assessing officer initiated the reassessment proceeding on the basis of the information received from the investigation wing that the payments made by the assessee to a company were bogus. This information was found to be factually incorrect as the payments made to the said company were duly taxed by the department, the Tribunal was held to be justified in quashing the reassessment proceedings.

CIT vs. Rainee Singh (2009) 30 DTR 105 (Del.)

361. Reassessment – S. 143(2)

Proceedings under section 147 could not be held to be vitiated merely because the Assessing Officer had right to proceed under section 143(2).

CIT vs. Smt. Shakuntala Devi (2009) 227 CTR 618 (P & H)

362. Rebate – Interest Credited in PPF Account – S. 88

Interest credited in PPF account which is not chargeable to tax under the Act is not eligible for rebate under section 88 of the Act.

Shiv Kumar vs. CIT & Anr. (2009) 30 DTR 191 (Chhattisgarh)

363. Rectification – Notice u/s. 143(2), S. 154

Rectification of an order passed under section 143(1) is not permissible after issuing of notice under section 143(2).

CIT vs. Manjit Singh Sachdeva (2009) 213 Taxation 105 (Kar.)

364. Rectification of mistake – Appellate Tribunal – Merger – S. 254(2)

Order under section 254(2) merges with original order. Second application for rectification not maintainable.

Dr. S. Panneerselvam vs. ACIT (2009) 319 ITR 135 (Mad).

365. Rectification of mistake – Service of notice – S. 154

Failure to serve notice before passing order of rectification violates the requirement of section 154(3), hence order is bad in law.

Mintri Tea Company P. Ltd. vs. CIT (2009) 319 ITR 264 (Cal.)

366. Rectification of mistake, Merger – Limitation – S. 154(7)

Once appeal is decided the order of Assessing mergers with the order of Appellate authority. Limitation under section 154(7), would be calculated with reference to date of appeal effect order.

CIT vs. Tony Electronics Ltd. (2009) 185 Taxman 121 (Del.) / (2009) 32 DTR 348 (Del.)

367. Rectification of Mistakes – Debatable issue – S. 154

Question whether export incentive would qualify for deduction under section 80-IA is a highly debatable matter as there are contrary judgements on this issue and therefore it does not come within the purview of section 154.

CIT & Anr. vs. TTK Prestige Ltd. (2009) 227 CTR 565 (Kar.)

368. Refunds – Interest on Interest – S. 244A

When excess amount of tax is refunded but interest is not refunded therewith, interest on interest would also became payable.

Motor & General Finance Ltd. vs. CIT (2009) 185 Taxman 167 (Delhi)

69. Revision – Application of mind – S. 263

Where the assessee had given explanation with respect to the creditors and share application money received by it to the assessing officer during the assessment proceedings, to which the assessing officer applied his mind did not make any addition to the income of the assessee while passing order under section 143(3) of the Act. The Commissioner exercising jurisdiction under section 263 of the Act on the ground that the order of the Assessing Officer was prejudicial to the interest of revenue on the ground that the assessee failed to produce the share holders and the creditors before the Assessing Officer was held to be not justified.

CIT vs. Unique Autofelts P. Ltd. (2009) 30 DTR 231 (P&H)

370. Revision – Lack of enquiry – S. 263

Assessing Officer having made enquiries, elicited replies and thereafter allowed the expenditure on tools and dyes as revenue expenditure, it can not said that it was “lack of enquiry” and therefore, the assessment order passed by the Assessing Officer can not be revised under section 263.

CIT vs. Sunbeam Auto Ltd. (2009) 31 DTR 1 (Del.) / (2009) 227 CTR 133 (Del.)

371. Revision – Two views – S. 263

Where two views were possible on the issue, and one view is taken by the assessing officer while passing order under section 143(3) of the Act, which was also a plausible view, merely because the view benefited the assessee, the action of the assessing officer cannot be held to be erroneous by the Commissioner for assuming jurisdiction under section 263 of the Act.

CIT vs. DLF Power Ltd. (2009) 31 DTR 93 (Del.)

372. Right to Practise law – Eligibility – Foreign Law Firms – RBI Act, FERA Act – S. 29

Foreign Law Firms are not eligible to open liaison offices or to practice law in India. Even giving an opinion on a legal matter amounts to “practise of law”. Non-Advocates cannot practise law.

Lawyers Collective vs. Bar Council (Bom.) Source: www.itatonline.org

373. Succession to business otherwise than on death – S. 170

The term “succession” in section 170 has a somewhat artificial meaning. The tests of change of ownership, integrity, identity and continuity of a business have to be satisfied before it can be said that a person “succeeded” to the business of another;

Even if it is accepted that by a transfer of shares under section 2(47), there is a transfer in the right to use the capital assets of the company, still section 170 is not attracted because there is no “transfer of business”. A company is a juristic person and owns the business. The share holders are not the owners of the company. By a transfer of the shares, there is no transfer so far as the company is concerned.

CIT vs. Panchratan Hotels (HP High Court)

ITA No. 13 of 2004 dt. 26-08-2009 Source: www.itatonline.org (2009) 29 DTR 73 (HP).

374. Tax audit – Business Income – S. 44AB

In case of an individual carrying on business as a sole proprietor, it is necessary to comply with provisions of section 44AB, only in respect of his business income and not in respect of other income.

Ghai Construction vs. State of Maharastra (2009) 184 Taxman 52 (Bom.)

375. Wealth tax – Asset – S. 2(ea)

Where the erection, re-erection, addition or alteration of any building on the land by the owner was prohibited by law, the land cannot be regarded as urban land under the provisions of section 2(ea) of the Wealth Tax Act, 1957.

Amrit Lal Jindal & Sons (HUF) vs. W.T.O. (2009) 29 DTR 33 (P&H)

376. Wealth tax – Reassessment – S. 17

Recorded reasons not furished no evidence for reason to believe that Wealth had escaped assessment. Notice under section 17 issued for reopening held invalid.

Rohini Cedric Santos vs. WTO (2009) 318 ITR 158 (Bom.)