1. Advance Tax – Ss. 209, 234B

Held, once the entire income received was by way of salary, and same being liable to TDS, assessee is not required to pay Advance Tax as per provisions of section 209 (1) (d), and therefore levy of Interest u/s 234B is not justified, on account of shortfall or due to non-deduction.

DCIT vs. Western Geco International Ltd. (2008) 172 Taxman 41 (Delhi)

2. Appellate Tribunal – Right of respondent – S. 254

Where the issue has been considered by CIT(A), the assessee can raise the issue before the Tribunal for the first time as respondent as the issue does not involve investigation into facts.

ACIT vs. M. P. Exports Comp. Ltd. (2008) 117 TTJ 417 (Indore)

3. Assessment – S. 143(1)

When initial assessment is made under section 143(1) then the notice under section 148 cannot be questioned.

Sella Synergy (I) Ltd. vs. ACIT (2008) 117 TTJ 110 (Chennai)

4. Block Assessment – S. 158BD rws 158BC

(i) For initiating action, first and foremost requirement as per the provisions of section 158BD, the Assessing Officer who has to make block assessment in case of person searched, has to be satisfied that undisclosed income detected belongs to some person other than person searched. However, in other words, the section itself contemplates satisfaction is mandatory and imperative on part of Assessing Officer making assessment in case of person searched to record satisfaction before assumption of jurisdiction under section 158BD.

(ii) Note of satisfaction must contain a positive finding by the A.O. who is making assessment under section 158BC which indicate therein undisclosed income found as a result of his examination of seized material and person to whom such income belongs.

(iii) As envisaged in section 158BC(a)(i) a clear time of fifteen days is required to be given in the notice for furnishing return in the prescribed form otherwise the notice will be rendered invalid and, hence, assumption of jurisdiction under section 158BD by issue of such notice and all further proceedings of block assessment pursuant to such notice will be invalid and void. The time-limit as set out in the section 158BE automatically applies for invoking provisions of section 158BD. For this reason the Parliament did not find it necessary to specify a separate time-limit for same as enactment itself shows that both sections 158BC and 158BD are inter-linked, interlaced and intertwined and both form part and parcel of the same Chapter.

Manoj Aggarwal vs. Dy. CIT [113 ITD 377 (DELHI) (SB)]

5. Block Assessment – S. 158BE rws 132

(i) Commencement of limitation as prescribed in Explanation 2 to section 158BE shall be only on conclusion of search.

(ii) By law the date on which search gets concluded is taken according to recording made in last panchnama.

(iii) It could be said that passing of a prohibitory order under sub-section (3) of section 132 is in all cases only to extend period of limitation for making assessments, without any facts and circumstances or evidence justifying said conclusion and in a bona fide case, where there is no such attempt and prohibitory order is passed in normal course and for bona fide reasons, search cannot be deemed to have been concluded on day on which said order was passed.

Smt. Krishna Verma vs. Asstt. CIT [113 ITD 655 (Delhi)(SB)]

6. Block Assessment – S.158BD

Initiation of proceedings u/s 158 BD without any positive material and without making necessary investigation in support of conclusion was held to be invalid. Further, held in the instant case that as material available with Assessing Officer upto the date of issuing of notice also does not justify an inference of existence of undisclosed income, it can not be held that satisfaction was based on positive material, so as to show existence of impugned undisclosed income.

DCIT vs. S. Hakam Singh (2008) 173 Taxman 23 (Chandigarh)

7. Business Disallowance – S. 40A(2)

Interest paid on borrowed funds to persons covered u/s 40 A(2)(b) at 21%, was considered as excessive, and same was allowed at 18% and balance amount of Interest was disallowed.

In view of decision of Amritsar bench in case of ALM Forgings vs. ACIT [IT Appeal No. 44 (ASR) of 2005], the entire amount of Interest paid was allowed as deduction.

Section 68 r.w. rule 46 A(3) – Cash Credits/ Additional Evidence.

Order of Comm. (Appeals) relying on additional evidence admitted, without referring to Assessing Officer under rule 46A(3), being contrary to the provisions, and rules of natural justice, was set aside and restored back.

ACIT vs. Alfa Rubber Industries (2008) 172 Taxman 32 (Amritsar)

8. Business expenditure – S. 37(1)

Replacement cost of old manual cone winders with auto cone winders, debited as revenue expenditure under the head “Modernization & Replacement” was held to be allowable. It was observed that nature of expenditure has to be determined in an individual case depending upon surrounding circumstances, after considering developments in business and scientific field.

ACIT vs. Prabhu Spinning Mills (P) Ltd. (2008) 172 Taxman 136 (Chennai)

9. Business Income – S. 28(iv)

Voluntary gifts received from followers as a mark of regard and respect could not be charged to tax as benefit or perquisite under section 28(iv).

Nirmala P. Athavale vs. ITO (2008) 117 TTJ 353 (Mum.)

10. Business Income / Loss – S. 28

Provision for obsolete inventory can be claimed only in the year in which the items were sold and disposed of.

Deepak Fertilisers & Petrochemicals Corp. Ltd. vs. DCIT (2008) 117 TTJ 752 (Mum.)

11. Capital Gain – TDR – Sd. 2(14), 45

Amount received by a member of the housing society from a developer holding TDR, who constructed additional floors in a building owned by the housing society. The A.O. was not justified in levying the capital gains tax from the member of the housing Society.

Deepak S. Shah vs. ITO. ITA NO 1483/M/2001 Bench ‘D’ Asst. Year 1995-96 dt. 16-6-2008 (2008) 40 A BCAJ 559 (August 2008).

12. Capital Receipt – Forfeiture application – S. 4

Forfeiture of application money received against partly convertible debentures is capital receipt and not chargeable to tax.

Deepak Fertilisers & Petrochemicals Corp. Ltd. vs. DCIT (2008) 117 TTJ 752 (Mum.)

13. Cash Credit – Burden of proof – S. 68

It was held that burden of proof is confined to establish identity of creditor, its credit worthiness and genuineness of transaction and not to explain entire background. Once the assessee had discharged the burden, the extraneous material on which reliance is placed by Assessing Officer for doubting the genuineness of transactions is not relevant. Further, when there are no adverse material or tangible evidence against evidence produced by the assessee, the impugned addition can not be sustained. In the instant case share application money treated as undisclosed Income u/s 68 was deleted.

Monnet Ispat & Energy Ltd. vs. DCIT (2008) 171 Taxman 27 (Delhi)

14. Claim of Deduction – S. 250, 80HHC

Rejection of Request for admission of an additional ground of appeal to allow claim of deduction u/s 80 HHC, on ground that no details were furnished with Return of Income, was held to be not justified, and held that same be admitted in interest of justice, and Assessing Officer was directed to consider the claim in accordance with law.

ITO vs. World Wide Stones RIICO Indl. Area (2008) 172 Taxman 83 (Jaipur)

15. Deduction – Actual payment – Interest on customs duty – S. 43 B

Interest on customs duty can not fall under the ambit of section 43B.

Royal Cushion Vinyl Products Ltd. vs. ACIT. ITAT Mumbai Bench F, ITA No. 2824/M/2006 Asst. Year 2002-2003 dt. 31-7-2008 (2008) 40 BCAJ 25 (October 2008).

16. Deduction – S. 80-IB r.w. S. 133A

Assessee company claimed deduction u/s 80 IB, on profits including the amount surrendered under survey u/s 133 A. Held, that when the surrendered amount has not been substantiated with documentary evidence as earned from industrial undertaking deduction u/s 80 IB could not be allowed.

ACIT vs. Arora Fabrics (P) Ltd. (2008) 171 Taxman 113 (Chandigarh)

17. Deduction – S. 80RR

Held, Assessee, a well-known presenter, commentator and program compeare is not covered as an ‘Artist’ under provision of section 80 RR.

Also the term ‘Artist’ and ‘Artiste’ are distinguishable, and assessee can not be artist as appearing in section 80 RR, and hence not entitled to deduction.

Harsha Achyut Bhogle vs. ITO (2008) 171 Taxman 109 (Mumbai)

18. Deduction – Ss. 80I, 80IA

New units were independent undertaking, though manufacturing the existing product and they are entitled to deduction under sections 80I & 80IA.

Jt. CIT vs. Associated Capsules (P) Ltd. (2008) 117 TTJ 399 (Mum.)

19. Depreciation – S. 32

Held that provision of section 32 (2) as existed in the statute as on 1-4-2003, would be applicable for A.Y. 2003-04 to decide the treatment to be given to unabsorbed depreciation relating to A.Y. 1999 – 2000, as it is well settled that, law applicable to any assessment is the law that prevails as on the first day of April of the relevant assessment year, and it is the duty of Assessing Officer to apply the said law.

Jain Ushin Ltd. vs. DCIT (2008) 171 Taxman 111 (Delhi)

20. Disallowance – Excessive or unreasonable – Ss. 40A(2), 40(b), 36(i)(ii)

Assessee firm paid Interest to Partners and their family members at 12% / 18% p.a., as against Interest earned on FDR at average rate of 9% p.a. Assessing Officer worked Interest paid, in excess of interest received and disallowed same u/s 40 A(2).

It was held that :

1. If condition provided in section 36(i)(iii) that money must be borrowed for business, is satisfied then no disallowance be made except as per provisions of section 40(b).

2. Section 40(b) only restricts the allowance up to the limit prescribed in the section.

3. That provisions of section 40(b), being special provision, would prevail over general provisions of section 40A.

Based on above, in the instant case, as 40 A(2) had no application, impugned disallowance of Interest being excessive was deleted.

Syntholab Chemicals & Research vs. ACIT (2008) 172 Taxman 38 (Mumbai)

21. Double taxation relief – S. 90

(i) Merely because India has entered into a DTAA with a foreign country, assessee cannot be denied taxability under scheme of Income-tax Act and scheme of DTAA cannot, therefore, be thrust upon assessee.

(ii) Even when assessee had incurred loss in foreign country [Permanent Establishment (PE) State], it would be eligible to claim taxation in India on basis of its worldwide income, in disregard of scheme of taxability under DTAA and, in effect, can claim deduction of loss incurred by such PE while computing its total income liable to tax in India.

Dy. CIT vs. Patni Computer Systems Ltd. [114 ITD 159 (PUNE)]

22. Export – Deduction – S. 80HHC

Deduction under section 80HHC in the case of MAT assessment is to be worked out on the basis of adjusted book profit under section 115JB.

ITO vs. Amalgamated Bean Coffee Trading Co. (P) Ltd. (2008) 117 TTJ 424 (Bang.)

23. Free Trade Zone – Deduction – S. 10A

Expenditure incurred in foreign currency is to be excluded from Export turnover and from total turnover to grant relief under section 10A.

ITO vs. Servion Global Solutions Ltd. (2008) 117 TTJ 380 (Chennai)

24. Free Trade Zone – S. 10A

Held, that while computing deduction u/s 10A, if a certain expenditure is excluded from export turnover, same should be excluded from its total turnover also.

ACIT vs. Infosys Technologies Ltd. (2008) 172 Taxman 134 (Bangalore)

25. Housing Project – S. 80-IB(10)(a)

The expenses incurred for change of land use and administrative/other land development expenses incurred prior to statutory approvals can not result into commencement of the project. On the facts the land was purchased in the year 1996. Wall was constructed. WIP of this project on 31-3-1998 was stated to be Rs. 10,17,615/-. Original plan was expired after validity period of one year. Revised plan was approved and commencement certificate was issued on 30-9-2000, user of land for non-agricultural purposes was permitted on 28-6-2001. The Tribunal held that the A.O. was not justified in denying the deduction u/s. 80IB(10)(a) viz. commencement of the construction after 1-10-1998.

ITO vs. Shri Vimal Chand Dhokia, ITAT, Mumbai Bench ‘A’ ITA No. 5520/M/2005 Asst. Year 2002-2003 dt. 19-5-2008. (2008) 40 BCAJ 23 (October 2008)

26. Interest – Refund – S. 234D

Provisions of section 234D, i.e. brought on statute from 1-6-2003, are substantive and they cannot be applied retrospectively and therefore, it can not be applied to the earlier years even though the regular assessments for those years were framed after the date -1-6-2003 or refund was granted for those years after said date

ITO vs. Ekta Promoters (P.) Ltd. [113 ITD 719 (DELHI)(SB)]

27. Interest on borrowed capital – S. 36(1)(iii)

Proportionate interest can be disallowed where there is no business benefit by giving interest free loan to sister concern.

Mahindra Holdings & Finance Ltd. vs. ITO (2008) 117 TTJ 721 (Mum.)]

28. Mistake apparent on record – Rectification – S. 254(2)

Omission to consider order of co-ordinate bench which was cited by the assessee, is mistake apparent rectifiable under section 2454(2).

Paliwal Overseas Ltd. vs. Dy. CIT (2008) 117 TTJ 427 (Del.)

29. Non-est return – S. 139

Return filed with Assessing Officer having no jurisdiction over assessee on date of filing of the Return, could not be treated as valid, and same can not be acted upon by Assessing Officer nor he can frame assessment thereupon.

Paint Trade Linkers vs. ACIT (2008) 171 Taxman 31 (Lucknow)

30. Penalty – S. 221

Held, that penalty u/s 221 is not attracted in respect of delay in payment of Interest, when assessee had made payment of entire taxes raised as per demand created u/s 143 (1).

ACIT vs. Avdesh Kumar Parvinder S. Kochar (2008) 173 Taxman 91 (Delhi)

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

Concealment penalty u/s 271 (1)(c) was levied on ground of claiming excessive deductions u/s 80I and 80IA.
Held, as all facts relating to claim u/s 80IA was furnished in Return and in accounts submitted with Return, there was no attempt on part of Assessee to conceal its income, and hence no penalty u/s 271 (1)(c).

As regards claim of deduction u/s 80I, since at time of filing of Return legal position was not settled and issue was quite debatable, it was held that assessee could not be said to have concealed its income.

ACIT vs. Carrier Aircon Ltd. (2008) 172 Taxman 173 (Delhi)

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

Gift received by an Assessee from a non-resident through a cheque from NRE A/c was treated as Income of the Assessee. In Appeal before CIT (A), the addition became final, as assessee did not press his appeal. Penalty levied u/s 271 (1)(c) was deleted in absence of evidence or proof that the money belonged to the assessee, and that the compensatory payment had flowed from the assessee to the donor. Further, held that mere surrender of amount as Income do not mean that amount of Gift was income of the Assessee.

ACIT vs. Vishan Narayan Khanna (2008) 171 Taxman 136 (Delhi)

Order levying penalty without specific mention as to whether assessee had concealed particulars of income or furnished inaccurate particulars thereof, was held to be invalid, inspite of fact that Assessing Officer had validly initiated penalty proceedings for furnishing inaccurate particulars of Income.

Poonam Industries vs. ITO (2008) 172 Taxman 87 (Amritsar)

33. Reassessment – Assessment – S. 147

The whole proceedings would start afresh where the assessment is reopened and the previous assessment is set aside.
Sella Synergy (I) Ltd. vs.

ACIT (2008) 117 TTJ 110 (Chennai)

34. Reassessment – Only favour of the revenue – S. 147

Re-opening is only to favour the revenue and cannot be used to favour the assessee.

Sella Synergy (I) Ltd. vs. ACIT (2008) 117 TTJ 110 (Chennai)

35. Reassessment – S. 147 r.w.s. 153

Proviso to section 147 does not have effect of curtailing limitation period for passing order under section 147 as prescribed under section 153(2).

Gujarat Credit Corpn. Ltd. v. Asstt. CIT [2008] 113 ITD 133 (AHD.)(SB)]

36. Re-opening – S. 147

Jurisdiction to re-open the assessment is totally based on the information which should be relevant and material. Reason to suspect is not reason to believe. In the instant case when Return was filed in wrong jurisdiction and when there was no material information which could lead to believe that income had escaped assessment, re-opening can not be upheld.

Paint Trade Linkers vs. ACIT (2008) 171 Taxman 31 (Lucknow)

Re-opening of Assessment in Assessee’s case, who was engaged in construction activities, relying on the report of DVO, determining cost of construction at a higher value than that declared by assessee, without pointing out any defect or discrepancy nor pointing out any material defect in the books of account, was held to be invalid.

Vrindaban Real Estate (P) Ltd. vs. ACIT (2008) 173 Taxman 21 (Agra)

37. Re-opening – Ss. 147, 132

The material gathered during search u/s 132, can not be a reason to re-open the concluded assessment.

Smt. R. Rajeswari vs. ITO (2008) 172 Taxman 40 (Chennai)

38. Reopening – Ss. 147, 148

Re-opening of Assessment completed after 4 years from end of relevant Assessment Year was bad in law and invalid, as it was not established that failure or omission was on part of assessee to disclose fully and truly all material facts..

It was further held that it was merely change of opinion on same set of facts available at time of original assessment.
Non specification of amount of income escaped, nor disclosure of reasons to reassess is material and would vitiate the notice issued u/s 148.

ACIT vs. Bhagat Industrial Corp. Ltd. (2008) 173 Taxman 55 (Amritsar)

39. TDS – S. 194H

Distribution incentive, early payment discount and bond expenses do not constitute commission so as to attract TDS under section 194H.

Foster’s India (P) Ltd. vs. ITO (2008) 117 TTJ 346 (Pune)

40. TDS on salary – S. 192