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1. Accounts Investment or
stock-in-trade S. 145
The Assessee holding shares
both as investment and stock in trade. As per the A.O., the assessee who
belong to the promoter group of Premier Automobiles, would be holding the
shares with sole motive of retaining the control and hence cannot be
recognised as stock in trade. Held that method of valuation of stock was one
consistently followed and accepted.
ACIT vs. Pal Enterprises Pvt.
Ltd., ITA Nos. 1994/Mum/2005, Bench H, A. Y. 01 02, dt. 20-10-2008
BCAJ p. 518, Vol. 40-B, Part 4, January 2009.
2. Accounts Method of
accounting S. 145
The Assessee is having more
than one source of income under the head Business income. Held that the
Assessee has option to follow different methods of accounting in respect of
each of different sources of income under the head.
ACIT vs. Mehul J. Somaiya,
ITA No. 7118/Mum/2007, Bench B, A.Y. 2002 03, dt. 10-12-2008 BCAJ p.
670, Vol. 40-B, Part 5, February 2009.
3. Amortisation of Expenses
S. 35D
Fees paid to Registrar of
Companies for increasing share capital falls within the ambit of S. 35D and
allowable as deduction.
ACIT vs. Fascel Ltd. (2009)
120 TTJ 289 (Delhi)
4. Appelate Tribunal Right
of Respondent Rule 27 of ITAT Rules
The respondent can support
his argument against the appeal filed by the Appellant on the points which has
been rejected by the CIT (A).
Dy. CIT vs. Hind Industries
Ltd. (2009) 120 TTJ 505 (Delhi)
5. Best Judgment Assessment
S. 144
Held, that Best Judgment
Assessment on basis of conclusion based on suspicion and false notions and
assumption, as per Assessing Officers own whims and yardsticks, is not
justified.
Further it was observed that
:
i) Best Judgment Assessment
has to be fair, reasonable and based on material, wherein some guess work
cannot be ruled out.
ii) Once books of account is rejected, then reliance on some entries in
those books to make separate addition is not justified.
ACIT vs. Smt. Renu Mukerjee
177 Taxman 58 (Delhi)
6. Block Assessment
Satisfaction S. 158BD
In view of the fact that
there was a delay of more than 19 months in issuance of notice u/s 158BD of
the Act after the completion of the assessment order in the case of the person
searched and also because the satisfaction required u/s 158BD of the Act was
not recorded by the Assessing Officer of the person searched, the proceedings
are vitiated and need to be declared as null and void.
Bharat Bhushan Jain vs. ACIT,
IT(SS)A No.13/Del/2007, Bench A, A.Y. 1991-92 to A.Y. 01-02, Dt. 7-11-2008 -
BCAJ pg. 794, Vol. 40-B, Part 6, March 2009.
7. Business Expenditure
Development of website S. 37(1)
Business expenses incurred
for development of website to promote business activities, and display
information and products is allowable as Revenue Expenditure Polyplex Corp.
Ltd. vs. ITO 176 Taxman 57 (Delhi)
8. Business Expenditure
Donation S. 37
Deduction in respect of
donation to a charitable trust with a specific direction that the amount
should be treated as corpus and it should be invested in a manner that
interest earned on the investment would be utilized for purpose of purchase of
books and magazines and to provide other library facilities to practising
advocates.
But it was, on the facts and
circumstances, held that such expenditure could not be allowed for the reasons
that, the assessee could not bring any evidence or material on record to prove
as to what business purpose was served in the business by making such donation
and no commercial expediency was established.
A. N. Mathur vs. Dy. CIT
(2009) 117 ITD 274 (Indore).
9. Business Expenditure
Interest prior period Ss. 37 (1), 145
Assessee company engaged in
business of land development paid interest as per resolution Dt. 8-9-2002 in
the year of non-materialisation of terms of Agreement Dt. 13-6-1997. Held
Assessing Officers action denying deduction of interest as prior period
expenses was not justified, and Assessees claim was admissible u/s 145, as
the claim of deduction of Interest had actually accrued / capitalised and
ascertained in the year under consideration on non-materialisation of terms
viz. approval being rejected.
Urban Improvement Co. (P) Ltd. vs. ITO (2009) 177 Taxman 104 (Delhi)
10. Business Expenditure
Luxury Tax S. 37
Payments made towards luxary
tax and not penalty, is allowable as deduction.
RDB Industries Ltd. vs. Dy.
CIT (2009) 120 TTJ 107 (Kol.)
11. Business Expenditure
Prior period expenses S. 145
During the year the Assessee
cancelled the MOU and refunded the amounts received under MOU along with
interest as per the terms of the MOU. The Assessing Officer disallowed the
interest paid for the period covering earlier years on the ground that it was
prior period expense. Held that the liability to pay interest had accrued in
the year under consideration when the resolution was passed and not prior to
that. The liability under consideration was contractual liability and was
crystallised and ascertained only when the decision to refund the earnest
money along with interest was taken and hence the deduction is allowable.
Urban Improvement Co. (P)
Ltd. vs. ITO, ITA No. 3246/Mum/2006, Bench D, A.Y. 200304, dt. 5-9-2008
BCAJ p. 667, Vol. 40-B, Part 5, February 2009.
12. Business Expenditure
Provision for pay S. 37(1)
Provision for pay revision
based on negotiations with trade unions, as per directions by State Government
is allowable as deduction, as liability for pay revision arose, at that point
of time though the actual quantification was after approval of MOU by
Government of Kerala.
DCIT vs. Travancore Titanium
Products Ltd. 176 Taxman 124 (Cochi)
13. Business expenditure
Violation of Rules & Regulations of National Stock Exchange S. 37
Violation of Rules &
Regulations of National Stock Exchange by its members could not be termed as
an offence or as an act prohibited by law. Amount paid as fine by a member of
National Stock Exchange to NSE cannot be disallowed u/s Explanation to section
37(1).
Goldcrest Capital Markets
Ltd. vs. ITO, ITA Nos. 1240 & 1241/Mum/2006, Bench B, A.Y. 200304, Dt.
21-1-2009, BCAJ p. 795, Vol. 40-B, Part 6, March 2009.
14. Business income Family
Settlement S. 28(iv)
In terms of family settlement
certain shares held by the assessee were to be transferred to Walchand & Co.
Pvt. Ltd. However due to certain reasons, the same could not be transferred,
by the physical possession of share certificates were handed over to the
solicitors. The dividend received during intervening period was shown as
liability. The A.O. treated the same as benefit or perquisite chargeable to
tax u/s 28(iv). Held that section 28(iv) could be applied only in case where
benefit or perquisite was received in kind or when the assessee had credited
such amount in P & L A/c. Sec. 28(iv) could be applied only in case where an
actual income was received by the assessee in garb of some benefits which were
not shown as chargeable to tax.
ACIT vs. Pal Enterprises Pvt.
Ltd., ITA No. 1994/Mum/2005, Bench H, A. Y. 01 02, dt. 20-10-2008 BCAJ
p. 518, Vol. 40-B, Part 4, January 2009.
15. Business of Exploration
Mineral S. 44 BB
Reimbursement of expenditure
relating to supply of raw material is taxable, and cannot be excluded from
receipts while determining profit and gains u/s 44 BB, as same is on account
of provision of services and facilities.
Whereas reimbursement of
expenditure relating to custom duty is not taxable u/s 44BB.
ACIT vs. Transocean Offshore
Deep Water Drilling Inc. 176 Taxman 123 (Delhi)
16. Capital gain FSI
transfer Ss. 45, 48, 55(2)
The Assessee, a co-operative
housing society, owned a land and building. Upon the enactment of Development
Control Regulations, 1991 (DCR), it became entitled to additional FSI of
around 11,000 sq. ft. which was transferred for the consideration of Rs.
48,96,225/-. Held that right transferred was not covered by any of the items
mentioned u/s 55(2) of the Act. Since the right transferred emanated from
amendment to DCR and is not covered by any of the items of Sec. 55(2) and does
not have any cost of acquisition no capital gain can be charged on transfer of
additional FSI.
New Shailaja CHS Ltd. vs.
ITO, ITA No. 512/Del/2007, Bench B, A.Y. 2003 04, dt. 2-12-2008 BCAJ pg.
669, Vol. 40-B, Part 5, February 2009.
17. Capital Loss or Business
Loss S. 50 vis-ΰ-vis S. 32(1)(iii)
On transfer of depreciable
asset the excess shall be deemed to be short-term capital gain u/s. 50 whereas
loss arising of out of such transfer is allowable as deduction u/s.
32(1)(iii), provided such loss/deficiency is actually written-off in the books
of account of the assessee.
Mukund Global Finance Ltd.
vs. Dy. CIT
(2009) 309 ITR 294 (AT)
(Mum.) / (2009) 117 ITD 20 (Mum)
18. Capital or Revenue New
Technology S. 37(1)
Expenditure incurred in
acquiring new technology to replace existing technology is allowable as
revenue expenditure Unidyne Energy Env System Pvt. Ltd. vs. ITO, ITA No.
4007/Mum/2005, Bench G, A.Y. 2001-02, dt. 10-9-2008, BCAJ p. 796, Vol. 40-B,
Part 6,
March 2009.
19. Capital or Revenue
Non-compete fee Capital S. 37
Payment towards non-compete
fee is not revenue expenditure.
ACIT vs. Real Image Tech.
Pvt. Ltd. (2009) 120 TTJ 983 (Chennai)
20. Deduction Service
rendered outside India S. 80 RRA
While calculating deduction
u/s 80RRA, only expenditure directly connected with earning of foreign
exchange is to be deducted to arrive at income from foreign exchange earnings.
Action of Assessing Officer reducing portion of indirect expenses in addition
to direct expenses deleted.
CIT vs. Nishit M. Desai
(Mumbai) 177 Taxman 61
21. Depreciation Non
Compete S. 32
Amounts paid by way of
non-compete fees claimed as revenue expenditure, was treated as capital
expenditure. Assessees alternate plea to treat same as an intangible asset
u/s 32, and consequent grant of depreciation thereon was upheld.
ACIT vs Real Image Tech (P)
Ltd. 177 Taxman 80 (Chennai)
22. Depreciation Goodwill
S. 32(1)(ii)
Goodwill acquired does not
come under the expression any othet business or commercial rights of similar
nature to know-how, patents, copyrights, trade mark, licences, franchises u/s.
32(1)(ii) and therefore, no depreciation is allowable on Goodwill.
R. G. Keswani vs. ACIT (2009)
308 ITR 271 (AT) (Mum.)
23. Disallowance S. 40A(3)
Once the payments are covered
by Clauses (f) & (I) of Rule 6DD, then it cannot be disallowed under section
40A(3).
Dy. CIT vs. Hind Industries
Ltd. (2009) 120 TTJ 505 (Delhi)
24. Disallowance Shares
Income from firm S. 14A
It is not possible to hold
the view that share income in the hands of partner of a partnership firm is
altogether tax free. It is held that share of profit in the hands of a partner
is income which has suffered tax in the hands of the firm and found that the
share of profit from the firm is exempt from tax u/s 10(2A) not in absolute
sense but with a view to avoid double taxation. Accordingly, section 14A is
not applicable to the facts of the case.
Hitesh D. Gajaria vs. ACIT,
ITA No. 993/Mum/2007, Bench H, A.Y. 2003 2004, dt. 14-11-2008 BCAJ p.
519, Vol. 40-B, Part 4, January 2009.
25. Disallowance interest
on borrowed capital S. 14A
Interest on borrowed fund
could be disallowed u/s. 14A only when it is used for the purpose of
investment in shares which are held as investment or as capital asset by the
assessee.
Mukund Global Finance Ltd.
vs. Dy. CIT (2009) 309 ITR 294 (AT) (Mum.) / (2009) 117 ITD 20 (Mum)
26. Exemption Option to
claim S. 10 B
The procedure laid down to
avail / or not to avail concession provided u/s 10B are just directory and not
mandatory. Held, that letter filed for withdrawing the claim during assessment
proceeding cannot be rejected while framing assessment u/s 143(3). Also held
that Assessing Officer cannot thrust exemption u/s 10 B.
Techtran Polylenses Ltd. vs.
ITO 177 Taxman 28 (Hyd.)
27. Expenses of Payments to
relatives S. 40A(2)(b)
A bare reading of the
provisions reveals that such provision could be invoked only where an
expenditure was incurred in respect to which, payment was to be made to sister
concern. In case of discount on sales, no payment was made by the assessee as
it only reduced the sale price. Therefore relying on the case of CIT vs.
Udhoji Shrikrishnadas 139 ITR 827 (MP) held that assessee was not covered u/s
40A(2)(b).
DCIT vs. Orgo Chem Guj. Pvt.
Ltd., ITA No.7872/Mum/2004, Bench H, A.Y. 2001-02, dt. 17-8-2007 BCAJ p.
520, Vol. 40-B, Part 4, January 2009.
28. Export Counter Sale
Deduction S. 80HHC
No deduction is available on
Counter Sales to foreign tourists in convertible foreign exchange because they
did not give any undertaking to take the goods out of India and there was no
evidence regarding clearances of transactions through any customs stations in
India.
Tribhowandas Bhimji Zaveri
(Delhi) P. Ltd. (2009) 308 ITR 18 (AT) (Mum.)
29. Export DEPB Excess
Provision Deduction Ss. 80 HHC, 41(1)
a) Held, that Assessee is
entitled for deduction in respect of DEPB credits utilized by the Assessee
itself as per first proviso below sub-section (3) of section 80 HHC.
b) Excess provision written
back, and considered as business profits u/s 41(1) cannot be considered as in
the nature of any other receipt of similar nature as provided in clause (baa)
of explanation to section 80 HHC, so as to exclude 90% of such amount for
purpose of computing deduction u/s 80 HHC.
Polyplex Corp. Ltd. vs. ITO
(Delhi) 176 Taxman 57
30. Income Accountant
DEPB S. 2(24)
The Assessee notionally
computed the value of advance licences/DEPB and credited to the Profit and
Loss account. In its return of income filed, the said amount was excluded from
its income. The A.O. added the same to the income of the assessee. Held that
merely because book entries were passed when there was no real income accrued,
there was no justification to support the addition. The addition was deleted.
National Leather Mfg. Co. vs.
JCIT, ITA No. 8294/Mum/2003, Bench E, A.Y. 2000-01, dt. 13-6-2008, BCAJ p.
796, Vol. 40-B, Part 6, March 2009.
31. Interest S. 234B
Once the Assessee was liable
to pay Advance Tax from initial stage, the charging of interest u/s 234B on
basis of assessed tax is also mandatory.
Flexfit Industries vs. ACIT (Chandigarh)
176 Taxman 59
32. Interest on Borrowed
Capital S. 36(1)(iii)
Interest on amount borrowed
for expansion of business though capitalised in the books of account is
allowable as deduction.
ACIT vs. Ashima Syntex Ltd.
(2009) 120 TTJ 721 (Ahd.)(SB)
33. Interest on borrowed
capital S. 36(1)(iii)
Interest on Capital borrowed
for business of investment in shares has to be allowed as deduction.
Peninsular Investment Ltd.
vs. Dy. CIT (2009) 120 TTJ 96 (Hyd.)
34. Interest on borrowed
capital S. 36(1)
Interest on funds borrowed
for investment in land for business purposes is allowable business
expenditure.
Sarnath Infrastructure (P)
Ltd. vs. ACIT (2009) 120 TTJ 216 (Lucknow)
35. New Industrial
Undertaking Free Trade Zone S. 10A
New Industrial Undertaking
established by substantial investment in plant and machinery and manufacturing
same article would not amount to splitting or reconstruction of the old unit
and therefore, it would be entitled to the benefit u/s. 10A.
ITO vs. Servion Global
Solutions Ltd. (2009) 308 ITR 375 (AT) (Chennai) / (2009) 116 ITD 133
(Chennai)
36. Notice deemed for valid
in certain circumstances S. 292BB
Provisions of section 292BB
have been inserted w.e.f. 1-4-2008 and therefore, it is applicable from A.Y.
2008-09 and it is not retrospective.
Kuber Tobacco Products P.
Ltd. vs. Dy. CIT (2009) 310 ITR 300 (AT) (Del.) (SB) / (2009) 117 ITD 273 (Del.)(SB)
37. Notice Reassessment
S. 143(2)
Held that an order of
reassessment passed u/s 147 r.w.s. 143(3) without issue of a valid notice u/s
143(2) of the Act is null and void. The amendment to Sec. 148 by the Finance
Act, 2006 does not save the reassessment done without issue of notice u/s
143(2). Further the provisions of Sec. 292BB are prospective and not
retrospective.
Chandra R. Gandhi vs. ITO,
ITA No. 6006/Mum/2007, Bench K, A.Y. 2000 01, Dt. 23-12-2008 - BCAJ pg.
793, Vol. 40-B, Part 6, March 2009.
38. Penalty Concealment
S. 271(1)(c)
No penalty can be levied in a
case where rental income is assessed under the head Income from house
property as against Income from Business
ACIT vs. Vazir Glass Works
Ltd., ITA No.332/Mum/2007, Bench F, A.Y. 2001-02, dt. 24-11-2008 BCAJ p.
671, Vol. 40-B, Part 5, February 2009.
39. Penalty Limitation
S. 271B
Since the penalty order has
been passed after the expiry of six months from the end of June, 2005, it was
barred by the period of limitation.
Motilal Vishwakarma HUF vs.
ITO, ITA No.7055/Mum/2007, Bench B, A.Y. 2003-04, dt. 27-08-2007 BCAJ p.
520, Vol. 40-B, Part 4, January 2009.
40. Reassessment Service
of notice S. 148 r.w.s. 143(2)
On the facts and
circumstances, the Reassessment was held to be invalid as no Notice u/s.
143(2) was issued.
ITO vs. R. K. Gupta (2009)
308 ITR 49 (AT) (Del.)
41. Return Defective
return S. 139(9)
The Assessee filed return of
loss based on un-audited accounts which was considered as defective. The A.O.
asked to file audited accounts within 15 days and rectify the defect. The
Assessee requested for two months time and filed the accounts within the time
requested for. The Assessing Officer without rejecting the Assessees request,
treated the original return as defective return and the revised return filed
as belated return and rejected the loss. Held that the Assessees request for
extension of time was if rejected, the order of rejection was never intimated
to the Assessee. Thus the original return was treated as valid return and
revised return also valid.
ITO vs. PIC (Gujarat) Ltd.,
ITA No. 3058/Ahd/2002, Bench B, A. Y. 1990-91, dt. 4-1-2008 BCAJ p. 519,
Vol. 40-B, Part 4, January 2009.
42. Tax Deduction at Source
Fees for profession or technical services S. 194J
Payments for bandwidth and
network services cannot be said to be Technical services liable to TDS u/s
194J
Pacific Internet (India) Pvt.
Ltd. vs. ITO(TDS), ITA Nos. 1607 to 1609/Mum/2006, Bench D, A.Y. 2003-04 to
A.Y. 2005-06 , BCAJ p. 795, Vol. 40-B, Part 6, March 2009.
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