31. Accounts – Valuation of Stock – S. 145

Closing stock of the earlier year has to form the opening stock of the next accounting year.

V.K.J. Builders and Contractors P. Ltd. vs. CIT (2009) 318 ITR 204 (SC)

32. Alternate Dispute Mechanism – S. 144C

Parties are advised to resort to Alternate Dispute Resolution Mechanism suggested in section 144C; competent authority is directed not to reject the application herein made by the assessee on the ground that the proposal has come before the
cut-off date and to decide the matter notwithstanding the pendency of the appeal before the CIT (A).

Addl. CIT vs. HCL Technologies (2009) 225 CTR 356 (SC)

33. Block assessment – Limitation – S. 158BE

Last valid panchnama has been drawn on August 7, 1996, the date on which seizure was made and therefore, the assessment proceedings ought to have been completed before August 30, 1997. The Tribunal held that the last Panchanama dt. 10th October, 1996, drawn after conclusion of search was not valid as no seizure was made on that date. [ITA No 904 of 2007
dt. 1-7-2008 (Kar.)]

CIT vs. Children’s Education Society. (2009) 319 ITR 2 (St).

Editorial Note:- See (a) S. K. Katyal (2008) 16 DTR 285 (Del.) / (b) CIT vs. Plastika Enterprises (2009) 23 DTR 333 (Bom.) / (c) Nandlal M. Gandhi vs. ACIT (2008) 115 ITD 1 (Mum.) (TM)

34. Business expenditure – Contribution to provident fund -Deduction on actual payment - S. 43B

Contribution to provident fund, made before due date of filing of return allowable as deduction. The deletion of the second proviso to section 43B, and the amendment to the first proviso, by the Finance Act, 2003 was to overcome implementation problems. Consequently, the amendments, though made applicable by Parliament only with effect from 1-4-2004, were curative in nature and would apply retrospectively w.e.f. 1-4-1988.

CIT vs. Alom Extrusions Ltd. (2009) 319 ITR 306 (SC) / (2009) 185 Taxman 416 (SC)

Editorial Note:- Pamvi Tissues 313 ITR 137 (Bom.), impliedly overruled.

35. Capital Gain – Right to subscribe for shares arises only when offer is made by the company – S. 48

Right to subscribe for additional shares/debentures is a distinct, independent and separate right, capable of being transferred independently of the existing shareholding, on the strength of which such Rights are offered.

Navin Jindal vs. ACIT (Supreme Court) Source: www.itatonline.org (2010) 320 ITR 708 (SC)

36. Cash Credits – Gifts – S. 68

Assessee had filed, confirmation, of the person from whom the gift was given. Genuineness of the transaction of gift and the capacity of the donor stood established. Addition can not be made under section 68. (ITA No. 1108 of 2008 dt. 26-9-2008)

CIT vs. Asha Hampannavar (2009) 319 ITR (St.) 5 (SC)

37. Citizen tax – Japanese Law

The Supreme Court remitted the matter to the Tribunal to decide whether the citizen tax as per Citizens Individual Inhabitant Tax Act in Japan was an overriding charge on the salary paid by the assessee to its employees.

CIT vs. NHK Japan Broadcasting Corporation (2009) 28 DTR 106 (SC)

38. Deduction – Cutting & Polishing marbles block –‘Production’ Manufacturer – S. 80IA

The activity of polishing and conversion of blocks into polished slabs and tiles amounts to “manufacture” or “production” because the conversion of blocks into polished slabs and tiles results in emergence of a new and distinct commodity. There is accordingly “manufacture or production” for section 80-IA

ITO vs. Arihant Tiles & Marbles www.itatonline.org (2009) 227 CTR 513 (SC) (2010) 320 ITR 79 (SC)

39. Deduction – Industrial Undertaking – S. 80 HH

In the absence of details of outsourcing of activities to sister concerns, location of sister concern in backward state, etc., the assessee was not entitled to deduction under section 80HH for its profits from the cashew processing business.

CIT vs. R. Prathap (2009) 227 CTR 632 (SC)

40. Deduction – Provision for NPA – S. 36(1)(vii)

The “Provision for NPA” made in terms of the RBI Directions does not constitute expense for purposes of section 36(1)(vii). The said Provision is for presentation purposes and in that sense it is notional. Hence, deduction not allowable.

Southern Technologies Ltd vs. JCIT (Supreme Court) Source: www.itatonline.org (2010) DTR

41. Deduction at source – Leave Travel concession – S. 10(5), 192

An employer is under no statutory obligation to collect evidence to show that its employee has actually utilized amount paid towards leave travel concession /conveyance allowance for purpose of TDS under section 192.

CIT vs. ITI Ltd. (2009) 183 Taxman 219 (SC)

42. Deduction of tax at source – Ad-interim – Stay recovery granted – S. 195

The Karnataka High Court in CIT vs. Samsung Electronics Co. Ltd. (2009) 185 Taxman 313 (Kar.), the Court held that liability cannot be avoided on ground of non taxability of recipient. In a SLP filed against the judgment, the Supreme Court, by an ad-interim order dated 18-12-2009 directed issue of notice to the Respondents and also directed “Stay of recovery till further orders”.

G. E. India Technology vs. CIT (SC) Source: www.itatonline.org

43. Estate Duty – Refunds – Property

Refunds which became due after the death of Mr. V.G. Saraf cannot be considered to be a property available at the time of the death. [Bombay High Court in the case if Estate of Late General Sir Shankar S.S.J.B. Rana vs. CED (1990) 186 ITR 578 approved]

CED vs. Nalini V. Saraf (2009) 227 CTR 437 (SC); 319 ITR 303 (SC)

44. Exemption – Educational institution – S. 10(22)

Exemption under section 10(22) was denied on the ground that, since the assessee had income exclusively from publication and selling of text books to the students, it did not exist solely for educational purposes. The Supreme Court took into account the prior history of the corporation particularly the context in which it was incorporated. It also noted that a similar issue was decided by the Rajasthan and Orissa High Courts. It noted that the High Court in the impugned order had omitted to take into account several factors. Therefore, the matter was set aside to the AO to consider the issue de novo in the light
of the judgment of the Rajasthan and Orissa High Courts.

Assam State Text Book Production & Publication Corporation Ltd. vs. CIT (2009) 227 CTR 105 (SC); 319 ITR 317 (SC)

45. Export – Profits of Business – Processing / fabrication charges received from other exporters – S. 80HHC

Assessee having allowed deduction under section 80HHC in respect of the processing / fabrication charges on the goods which were ultimately exported by other exporters for whom processing was undertaken by the assessee, following the earlier decision of the High Court against which no appeal was field special leave petition is liable to be dismissed.

Southern Sea Food Ltd. vs. Jt. CIT (2009) 28 DTR 108 (SC)

46. Income – Remission or cessation of trading liability – one time settlement of loan by bank – S. 41(1)

Assessee had not got any deduction on account of acquisition of capital assets as it had been reflected in the balance sheet and not in the profit and loss account and the remission of the principal amount of loan obtained from the bank and financial institution had not been claimed as expenditure or trading liability in any earlier year, section 41(1) was not applicable. [followed Mahindra & Mahindra Ltd vs. CIT (2003) 261 ITR 501(Bom.)]

CIT vs. Tosha International (2009) 319 ITR (St) 7 (SC)

47. Interest tax – Interest on bonds and debentures – S. 2(5), 2(7)

Interest earned on bonds & debentures by way of investment cannot be taxed under Interest Tax Act, 1974.

CIT vs. Sahara India Savings & Investment Corpn. Ltd. (2009) 32 DTR 57 (SC) (2009) 227 CTR 425 (SC)

48. Reassessment – Change of Opinion – Not aground for reassessment – S. 147, 148

Assessing Officer deemed to have applied his mind if facts are on record and reopening under section 147 on change of opinion is not permissible even within 4 years.

CIT vs. Kelvinator of India (Supreme Court) Source: www.itatonline.org (2010) 320 ITR 561 (SC)

49. Rectification of Mistakes – Subsequent Supreme Court Judgement – S. 154

Commissioner originally holding that, power subsidy received by assessee was not taxable on the ground that it was a capital receipt. Subsequent, rectification on ground that Supreme Court had decided that subsidy received after commencement of production was revenue receipt. Rectification made on basis of change of opinion, not permissible.

Mepco Industries Ltd. vs. CIT (2009) 319 ITR 208 (SC) (Full Bench)

50. Search and Seizure – Powers of seizure – S. 132(1)(ii)(b)

It is open to the department to copy the data relating to the specified three entities of the assessee group from the two laptops which were seized from the possession of auditor of firm.

DI (Inv) vs. Batliboi & Co. (2009) 31 DTR 187 (SC)

Editorial Note:- Delhi High Court Order: S. R. Batliboi & Co. vs. Department of Income Tax (2009) 181 Taxman 9 (Del.)

51. Writ – Jurisdiction – Search and Seizure – Art. 226. S 132A

Genesis for the entire episode of search seizure and detention having taken place at Hyderabad airport, cause of action arose at Hyderabad and therefore writ petition was maintainable at Andhra Pradesh High Court.

Rajendraan Chingaravelue vs. R. K. Mishra Addl. CIT (2009) 32 DTR 129 (SC) (2009) 227 CTR 520 (SC)