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Nut Crackers |
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Questions & Answers Direct Taxes N. P. Jain, Advocate |
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Q.1 Can a survey be carried out in the office of a Chartered Accountant or lawyer or tax practitioner if the person in whose premises survey is being carried on says that his books of accounts are lying with his Chartered Accountant or lawyer or tax practitioner? Ans. Recently, the Orissa High Court in the case of U. K. Mahapatra and Co. vs. ITO [2009] 308 ITR 133 (Orissa) has held that the precondition for conducting survey under Section 133A in the premises of the CA / lawyer / tax practitioner is that the client must state in the course of survey that his books of accounts / documents and records are kept in the office of his CA / lawyer / tax practitioner. Unless this pre condition is fulfilled, the income tax authority cannot assume any power to enter the business premises / office of a CA / lawyer / tax practitioner. Since in this case, the assessee has categorically said that his books of accounts and other documents are lying with his CA/ lawyer/ tax practitioner, the survey u/s 133A can be carried out in the premises of the CA/ lawyer/ tax practitioner. Q.2 In the course of survey can books of accounts, which have not been inspected by the survey team, be impounded? Ans. The Orissa High Court in the case of U. K. Mahapatra and Co. vs. ITO [2009] 308 ITR 133 (Orissa) has held that section 133A(3)(ia) authorises an income tax authority to impound only those books of account which are inspected by him. “Inspection” involves intelligent application of mind. Recording of reasons again involves intelligent application of mind. Thus inspection and recording of reasons are cumulative pre-conditions for impounding books of accounts or other documents under Section 133(A)(3)(ia). As such, books of accounts, which have not been inspected by the survey team, cannot be impounded. Q.3 Is the activity of conversion of jumbo rolls of photographic films into small flats and rolls in desired sizes a production activity? Ans. Reversing the decision of the Madras High Court in the cases of India Cine Agencies vs. CIT [2003] 261 ITR 491 (Mad) and CIT vs. Computer Graphics Ltd. [2006] 285 ITR 84 (Mad), the Apex Court in the cases of India Cine Agencies vs. CIT [2009] 308 ITR 98 (SC) and Computer Graphics Ltd. vs. CIT [2009] 308 ITR 98 (SC) held that conversion of jumbo rolls of photographic films into small flats and rolls in desired sizes was held to be production for claiming deduction under various sections. While arriving to this conclusion, the Apex Court reviewed various case laws on the subject and the guidelines available from the Supreme Court itself in Ujagar Prints vs. Union of India [1989] 179 ITR 317. It was pointed out by the Supreme Court, that though what is involved is processing, each step towards such production would be processing in relation to manufacture. It was further pointed out that where any particular process is so integrally connected with the ultimate production of goods, it would be treated as manufacture as held in Collector of Central Excise vs. Rajasthan State Chemical Works [1991] 4 SCC 473. Manufacture is a “transformation of an article, which is commercially different from the one, which is converted for the purpose of making it marketable” as held in Empire Industries Ltd. vs. Union of India [1986] 162 ITR 846. The Supreme Court also referred to the decision in Kores India Ltd. vs. Commissioner of Central Excise [2005] 1 SCC 385 in a Central excise case and the decision in CIT vs. Sesa Goa Ltd. [2004] 271 ITR 331 (SC) in an income-tax case. Q.4 Where the income received / receivable by the assessee is subject to deduction of tax at source and after such deduction, no tax would be payable by the assessee, if the deductor fails to deduct TDS, can interest u/s 234B and 234C be levied on the assessee? Similar facts came before the Uttarakhand High Court in the case of CIT vs. Tide Water Marine International Inc. wherein it has been held that assessee was justified in assuming that requisite TDS will be deducted by the payer of the income and if after deduction no liability for advance tax exists, the assessee cannot be treated guilty for non payment of advance tax. As such, no interest u/s 234B and 234C can be imposed. Q.5 Can provision for bad debt
be added as provision for unascertained liability for the purpose of computing
book profit u/s 115JB? The Apex court has affirmed the above view in the case of CIT vs. HCL Comnet Systems and Services Ltd. 305 ITR 409 (SC) and set at rest the controversy on the issue. [Source: Brains’ Trust
questions & Answers printed in Souvenir of Two Day National Tax Conference held
on 7th and 8th March, 2009 at Varanasi.] |