130. Amount not deductible – Constitutional Validity – S. 40(a)(ia)

Whether discriminatory and violation of Article 14 of the Constitution of India – The impugned section excludes the right to seek permissible deduction in the event of failure to deduct or to deposit deducted tax, is not violative of Article 14. It rather relaxes the rigour if tax is deducted in subse-quent year, the benefit of deduction is allowable.

Rakesh Kumar & Co. vs. UOI (2009) 224 CTR 510 (P&H)

131. Appeal – Condonation of delay

– S. 260A

Revenue failed to explain the inordinate delay in filing appeals – High Court has no power to extend the time-limit prescribed u/s. 260A which is absolute and even unextendable u/s. 5 of Limitation Act.

CIT vs. Reliance Capital Ltd. & Ors (2009) 225 CTR 275 (Bom.)

ACIT vs. Mahavir Prasad Verma & Ors. (2009) 225 CTR 305 (Chhatisgarh), 20 DTR 105 (Chattisgarh)

CIT vs. Grasim Industries Ltd. (2009) 27 DTR 130 (Bom.)

132. Appeal – Mandatory Limit – S. 260A

Circular No. 5 of 2008 dated 15-5-2008, which provides that in case of an assessee where the disputed issue arises in more than one assessment year, appeal by the Revenue shall be filed in respect of such assessment year or years in which the tax effect in respect of the disputed issue exceeds the monetary limits provided in the circular. This was held to be applicable to all the cases pending before the High Court either for admission or final hearing and it is binding on the Revenue authorities.

CIT vs. Madhukar K. Inamdar (HUF) (2009) 27 DTR 132 (Bom.)

133. Appeal – Tribunal – Tribunal’s duty to pass speaking Order – S. 254

Merely confirming CIT(A)’s Order without recording reasons, ITAT’s Order to be set aside and has to be remanded back.

The Order of the Tribunal does not satisfy even the bare necessities of an Order of a quasi-judicial body, and hence, to be set aside.
CIT vs. India Carbon Limited (2009) 315 ITR 315 (Gau.)

134. Appeal – Fees – S. 253

Where the income assessed by the Assessing Officer is a loss, Tribunal appeal fees payable would be Rs. 500 as per clause (d) of sub section (6) of section 253 of the Act.

Gilbs Computer Ltd. vs. CIT (2009) 27 DTR 163 (Bom.)

135. Appeal – Substantial Question of Law

– S. 260 A

Where the finding of facts recorded by the Tribunal is perverse or contrary to the material on record, the High Court while exercising powers under section 260 A of the Act is competent to interfere with such a perverse finding of facts.

Gauri Kanta Barkataky vs. CIT (2009) 25 DTR 75 (Gau.)

136. Avoidance of repetitive appeals

– S. 158A

The Tribunal dismissed the appeals of the assessee following its order for earlier years against which appeal was pending before the High Court. The appeals were dismissed by the Tribunal even though the assessee had made a declaration under section 158A of the Act for keeping the issue pending till it was decided by the High Court. On these facts the High Court set aside the order passed by the Tribunal with a direction to the Tribunal to admit the claim of the assessee as made in the declaration under section 158A and proceed further as per section 158A(5) of the Act after the appeal of the assessee for earlier year is adjudicated by the High Court.

Titanor Components Ltd. vs. CIT (2009) 26 DTR 43 (Bom)

137. Bad Debts – 36(1)(vii)

Assessee would be entitled to deduction under section 36 (1) (vii) of the Act of the amount of any bad debts which has been written of as irrecoverable in the accounts during the previous year.

Lawlys Enterprises (P) Ltd. vs. CIT (2009) 28 DTR 150 (Pat.)

138. Block Assessment – Definition of the words ‘other person’ – S. 153C, 158BD

Under section 153C of the Act, the Income Tax Dept. cannot demand unrestricted access to information on those persons who have no relation to the person who has been subjected to search u/s. 132. In this case, the Dept. seized the laptops of two employees of the petitioner (the petitioner is a renowned firm of auditors) and demanded password for getting access to files of all the clients of the petitioner- even of those persons who had no relation to the person (client of the petitioner) searched. The words ‘a person’ appearing in section 153C and ‘other person’ appearing in section 158BD, can only mean such person having dealings or transactions with the person searched.

S. R. Batliboi & Co. vs. Department of Income-Tax (2009) 181 Taxman 9 (Del.)

139. Block Assessment – Issuance of notice – Mandatory – S. 143(2), 158BC

Where the Assessing Officer is not inclined to accept the return filed by the assessee, and an assessment u/s. 158 BC is made without issuing notice u/s. 143 (2), then it would not be an irregularity but would be invalid.

CIT vs. Pawan Gupta (2009) 181 Taxman 299 (Del.)

140. Block Assessment – S. 158 BB

Where no material was recovered in the course of search, addition cannot be made by the assessing officer while framing block assessment, merely on the statement of a third party independent of the search.

CIT vs. Concorde Capital Management Co. Ltd. (2009) 25 DTR 97 (Del.)

141. Block Assessment – Satisfaction

– S. 158BD

Where the status of the assessee was incorrectly mentioned in the notice issued under section 158BD of the Act and also there was no subjective and independent satisfaction recorded by the Assessing Officer the notice issued under section 158BD of the Act cannot be sustained and is liable to be quashed.

Subhas Chandra Bhaniramka vs. ACIT (2009) 25 DTR 226 (Cal.)

142. Block Assessment – Undisclosed Income – S. 158BB

Where no incriminating documents found depicting sale or purchase outside the books during the search and no defect found in the books of accounts maintained by the assessee in regular course of business, no addition to the income of the assessee as undisclosed income could be made merely on the basis of discrepancy worked out on estimation of stock.

CIT vs. Utkal Alloys Ltd. (2009) 26 DTR 259 (Ori.)

143. Book Profit – S. 115J

Where the revised accounts of the assessee – company were audited by a chartered accountant, the assessing officer has no option but to proceed to determine the book profit under section 115 J of the Act without disturbing the said accounts in any manner. The court further held that the Assessing Officer was not right in holding that for the purpose of computing book profit under section 115J, only that book profit which is approved at the annual general meeting of the shareholders of the company had to be considered.

Dy. CIT vs. Arvind Mills Ltd. (2009) 25 DTR 104 (Guj)

144. Book Profit – S. 115 J

Interest under section 234B and 234C is not chargeable when the income of the assessee is taxed under the provisions of section 115J of the Act.

CIT vs. Nilgiri Tea Estate Ltd. (2009) 26 DTR 164 (Ker.)

145. Business Expenditure – Explanation

– S. 37(1)

Where the assessee instead of distributing free sample of liquor for promoting its sale to the defence establishment used to reimburse the payment made by the defence establishment to the CSD stores for the purchase of liquor, the amount of such reimbursement was held to be a deductible expenditure as the same was neither against the public policy nor prohibited under the law.

Brihan Maharashtra Sugar Syndicate Ltd. vs. DCIT (2009) 28 DTR 265 (Bom.), (2009) 182 Taxman 236 (Bom.)

146. Business Expenditure – Interest

– S. 36(1)(iii)

Interest payable by the assessee on borrowed funds for purchasing shares both by way of investment as well as stock in trade is allowable as deduction under section 36 (1) (iii) of the Act. The Court also held that for the purpose of claiming deduction under section 36 (1) (iii) of the Act the object of the loan is irrelevant.

CIT vs. Srishti Securities (P) Ltd. (2009) 28 DTR 172 (Bom.), (2009) 183 Taxman 159 (Bom)

147. Business Expenditure – Repairs – Rented premises – S. 37(1)

Repair expenses incurred by the assessee on the rented premises is allowable under section 37(1) of the Act.

CIT vs. Alkem Laboratories (P) Ltd. (2009) 28 DTR 11 (Pat.) Contrary stand in/after year, not permissible

148. Business Expenditure – S. 37(1)

The assessee’s claim of deduction of certain expenses was allowed by the Tribunal in earlier years and the revenue authorities accepted the order of the Tribunal. In subsequent year where the Tribunal allowed the claim of the assessee on identical facts, it is not open for the Revenue authorities to take a contrary stand in the year under consideration.

Dipti Textile Industries vs. CIT (2009) 25 DTR 46 (Bom.)

149. Business Expenditure – Market survey – S. 37, 35D

Expenditure on study of organizational set-up, Report on reorganization of core business and for improving profitability/market share. Expenditure is not covered by section 35D as no technical know-how is obtained. Expenditure is deductible u/s. 37. It is not covered under subsection (2)(a)(iii) of 35D since the said subsection covers only those expenses which are for conducting market survey or any other survey necessary for the business of the assessee.

CIT vs. Majestic Auto Ltd. (2009) 212 Taxation 97 (P & H)

150. Business Expenditure – Fair market value – S. 40A(2)

Where the service rendered by the related concern was specific and specialized in nature and the Assessing Officer was not able to establish that the payment was excessive or unreasonable having regard to the fair market value of the service, no disallowance under section 40 A (2) of the Act was called for.

CIT vs. Forbes Tea Brokers (2009) 27 DTR 113 (Mad.)

151. Business Expenditure – Trade discount – S. 40A(2)

Trade discount provided to a sister concern is not an expenditure and therefore, no disallowance under section 40 A (2) of the Act can be made.

United Exports vs. CIT (2009) 28 DTR 315 (Del.)

152. Business Income – Income from other sources – S. 28(i), 56

Where the prominent object of the assessee company was, ‘to deal in properties’ and the rental income derived by the assessee from such business was assessed as business income in earlier years, the same cannot be treated as income from other sources in absence of any new facts / evidence brought on by the revenue authorities.

CIT vs. D.S. Promoters & Developers (P) Ltd. (2009) 25 DTR 8 (Del.)

153. Business Income – Income from Other sources – S. 28(1), 56

Builder/assessee collecting advance from prospective purchasers of flats and keeping the funds temporarily in fixed deposit. Interest on such deposit is chargeable as ‘Business Income’ and not as ‘Other Sources’.

CIT vs. Lok Holdings (2009) 212 Taxation 159 (Bom)

154. Capital Receipt – Interest earned by parking surplus funds in bank – S. 4

Prior to commencement of business interest earned byparking surplus funds in bank, constitutes a capital receipt and hence is eligible for being set-off against pre-operative expenses.

CIT vs. Indian Oil Panipat Power Consortium Ltd. (2009) 181 Taxman 249 (Del.)

155. Cash Credits – Gift – S. 68

The assessee and his family members received huge gifts from a person who was residing abroad. The said gifts were made out of natural love and affection towards the assessee and his family members. The said gifts were made through Bank accounts of the donor who had sufficient cash balance on the date of the gifts. In spite of this, the learned Assessing Officer made the addition under section 68 of the I. T. Act.

On Appeal, CIT(A) deleted the said addition. The ITAT also affirmed the finding of the CIT(A).

On further appeal to High Court by the Department, it was held that there was no legal basis to assume that to recognize the gift to be genuine, there should be any blood relationships, or any close relationship between the donor and the donee. The assessee had also produced the copies of gift deeds and the affidavits of the donors. The Department did not have any evidence to show that the act of the assessee in claiming gift was an act by way of money laundering .Simply because he happened to receive gifts, it could not be said that they had to be added in his income. Hence, appeal was dismissed.

CIT vs. Pam Singh Chouhan (2009) 315 ITR 433 (Raj.)

156. Cash Credits – Gift – S. 68

Where claim of gift is made by the assessee, onus lies on him not only to establish identity of the donor but also his capacity to make a gift and that it has actually been received as a gift from donor. It is NOT sufficient to simply identify the donor and show the movement of gift amount through banking channels.

Yash Pal Goel vs. CIT (2009) 181 Taxman 175 (P & H)

157. Cash Credit – Share Capital – S. 68

Where the assessee had furnished complete details of shareholders name, addresses, Permanent Account Number (P.A.N.), bank details and confirmations of subscribers to its shares before the Assessing Officer, action of treating the share capital as unexplained cash credit under section 68 cannot be sustained.

CIT vs. TDI Marketing (P) Ltd. (2009) 26 DTR 358 (Del.)

158. Charitable purpose – Educational activities – Sections – 2(15), 12A, 12AA(3)

Provision of teaching to students in preparation after admission to professional institutions. No evidence to show registration obtained by fraud or forgery. Cancellation of registration on ground of profit motive not permissible.

Oxford Academy for Career Development vs. CCIT (2009) 315 ITR 382 (Cal.)

159. Charitable Purpose – S. 11

The High Court held that for the purpose of carrying out the objectives of the trust, the trust borrowed fund from the Bank for augmenting Income in order to carry out the objectives of the trust as envisaged and for that purpose, has to incur expenditure, which is capital in nature by raising loan. The capital asset built with borrowed fund, under no circumstances, could be regarded to be outside the scope of its objectives. If raising of loan does not stand in the way of its charitable activities the repayment thereafter must be treated as application of its income. Hence, trust was eligible for exemption under section 11 of the I.T. Act, 1961.

Director of Income Tax (Exemption) vs. Govindu Naicker Estate (2009) 315 ITR 237 (Mad.)

160. Charitable Trust – Registration – S. 12A

Where the main object of the trust is imparting education, it has to be accepted that the assessee trust was established for a charitable purpose and therefore the trust was entitled for registration under section 12A of the Act. The aspect of application of funds by the trust and the allowability of exemption under section 11 of the Act are to be examined by the Assessing Officer at the time of assessment and not the Director General of Income Tax (Exemption) while granting registration under section 12A of the Act

DIT (Exemption) vs. Garden City Educational Trust (2009) 28 DTR 139 (Kar.)

161. Appeal – High Court – COD Approval – S. 260A, 268A

The High Court had dismissed the writ petition of Delhi Development Authority on the ground that the COD approval has not been taken. The Supreme Court held that since the issue appears to be covered by the decision of the Supreme Court, the High Court should decide the issue on the merits.

Delhi Development Authority vs. CIT (2009) 314 ITR 342 (SC)

162. Deduction – Interest – Income dividend

–S. 80 HH

Interest received from the customers on delay in making payments for the goods purchased from the assessee is an income derived from the industrial undertaking for the purpose of calculating deduction under section 80 HH of the Act.

CIT vs. Fal Industries Ltd. (2009) 27 DTR 157 (Mad.) transport and forwarding income divident

163. Deduction – S. 80HH

The amount of transport and forwarding expenses recovered by the assessee from its dealers is said to be made in the process of manufacturing activity undertaken by the assessee and therefore eligible for deduction under section 80HH of the Act.

CIT vs. Fal Industries Ltd. (2009) 27 DTR 157 (Mad.)

164. Deduction – Rectification charges – Income dividend – S. 80HH

Rectification charges received by the assessee from its customers / purchasers is covered by the expression ‘income derived from industrial undertaking’ for the purpose of deduction under section 80HH of the Act.

CIT vs. Fal Industries Ltd. (2009) 27 DTR 157 (Mad.) (A.Y.: 1991–92 & 92 – 93)

165. Deduction – Insurance claim – Income dividend – S. 80HH

Insurance claim received on damage of imported component in transit is not an income derived from industrial undertaking for the purpose of deduction under section 80 HH of the Act.

CIT vs. Fal Industries Ltd. (2009) 27 DTR 157 (Mad.)

166. Deduction – Insurance claim – Income dividend – S. 80IA

Amount received from an insurance company for loss of goods is an income derived from the business of industrial undertaking and therefore, the same is eligible for deduction under section 80 IA of the Act.

CIT vs. Sportking India Ltd. (2009) 27 DTR 187 (Del.)

167. Deduction – Rental Income Co-op. Bank – S. 80P

Rental income earned by a co-operative bank from house property cannot be income attributable nor derived from the business of banking as such the same does not qualify for deduction under section 80P(2)(a)(i) of the Act.

Similarly, interest earned on investment of employee’s provident fund being interest not earned from the money in stock-in-trade or circulating capital also cannot be an income attributable nor derived from the business of banking as such the same does not qualify for deduction under section 80 P (2) (a) (i) of the Act.

Bihar Rajya Sahkari Bhoomi Vikas Co-operative Bank Ltd. vs. CIT (2009) 26 DTR 296 (Pat.)

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

Interest income earned on surplus funds available with the society which are not immediately required by the assessee for its day to day banking business invested in KVP / IVP would be income from banking business eligible for deduction under section 80P(2)(a)(i) of the Act.

CIT vs. Solapur Nagari Audyogic Sahakari Bank Ltd. & Ors. (2009) 26 DTR 67 (Bom.)

169. Deducting tax at source – S. 201(1A)

A person liable to deduct tax at source (Deductor) cannot be asked to pay tax where the deductee has already paid tax on the income received by him. Further, interest under section 201 (1A) of the Act could be charged to the deductor only upto the date on which the return of income declaring such income is filed by the deductee.

CIT vs. Trans Bharat Aviation (P) Ltd. (2009) 27 DTR 151 (Del.)

170. Deemed Dividend – Advance

– S. 2(22)(e)

The word ‘advance’ is used in company of the word ‘loan’ and hence has to be read in conjunction and the word ‘loan’ by applying the rule of ‘noscitur a sociis’. Therefore the word ‘advance’ can only mean such advance which carries with it an obligation of repayment. Therefore trade advance for the purpose commercial transaction is out of the purview of the word ‘advance’ as appearing in section 2(22)e.

CIT vs. Raj Kumar (2009) 181 Taxman 155 (Raj.)

171. Depreciation – Leasing – S. 32

Where the assessee is engaged in the business of leasing out motor trucks and lorries, is entitled to claim depreciation at the rate of 40 per cent on such leased out vehicles.

Agarwal Finance Co. (P) Ltd. vs. CIT (2009) 28 DTR 102 (Cal.) (A.Y. 1996 – 97)

172. Depreciation – Mandatory – S.32,S. 80IA

For the purpose of deduction under Chapter VIA, the gross total income has to be computed inter alia by deducting the deductions allowable u/s. 30 to 43D of the Act, including depreciation allowable u/s. 32 of the act, even though the assessee has computed the total income under chapter IV by disclaiming the current depreciation.

Plastiblend vs. ACIT, ITA No. 1282 of 2007, A.Y. 1997-98 (Bombay High Court). Source: www.itatonline.org.

173. Depreciation – Stock Exchange Card

– S. 32

Stock Exchange Membership Card – As depreciation allowed is restricted to a class of tangible / intangible assets, all intangible assets specifically enumerated in Sec. 32(1)(ii) (except license) is covered under the category of Intellectual Property. Further, as the expression “licenses” has to be construed restrictively, depreciation is not allowable on the Bombay Stock Exchange Membership Card since it does not fall in any of the category of rights as specified in Sec. 32(1)(ii).

CIT vs. Techno Shares & Stocks Ltd. & Ors. (2009) 225 CTR 337 (Bom.) (2009) 28 DTR 201 (Bom.)

174. Directors – Liability – Private company

– S. 179

Recovery from directors of tax dues of assessee company u/s. 179- Revenue has to first of all show that the directors were responsible for the conduct of business during the concerned previous year. The Revenue has to establish that it has taken effective steps to recover the outstanding liabilities from the company. The words “cannot be recovered” requires the Revenue to establish that recovery could not be made from the company.

Amit Suresh Bhatnagar (2009) 183 Taxman 287 (Guj.)

175. Disallowance – S. 14A

Where the Assessing Officer had not invoked the provision of section 14 A of the Act to disallow the expenditure incurred by the assessee in relation to the earning of exempt income, the High Court held that tribunal was not justified in remanding the matter back to the file of the Assessing Officer with a direction to consider the applicability of section 14 A.

Topstar Mercantile (P) Ltd. vs. ACIT (2009) 28 DTR 215 (Bom.)

176. Exemption – S. 10(23)(vi)

Upto A.Y. 2001 – 02 the prescribed authority for granting approval under section 10 (23) (vi) was the Central Board of Direct Taxes (CBDT), thus approval granted by the CBDT for assessment year upto 2001-02 cannot be cancelled/ rescinded by the Director General of Income Tax as the same was beyond his jurisdiction.

Maharashtra Academy of Engineering & Educational Research vs. DIT (Inv) & Anr. (2009) 28 DTR 143 (Bom.)

177. Exemption – S. 10(23C)(vi)

Where the assessee is an educational institute, imparting education in a systematic manner, and the institution is recognised as a ‘deemed university’, by the University Grant Commission (U.G.C.), exemption under section 10 (23C) (vi) of the Act cannot be denied to such society.

Jaypee Institute of Information Technology Society vs. DIT (Exemption) (2009) 28 DTR 242 (Del.)

178. Exemption – S. 10(23C)(vi)

Where the assessee is a Company registered under section 25 of the Companies Act, 1956 created for imparting, spreading and promoting knowledge in the field of accountancy, it will fall under the category of institutions which are for research and charitable purpose, eligible for exemption under section 10 (23C) (vi) of the Act. Merely because such institution is charging fees and remuneration for research projects undertaken by it does not make it commercial activity.

ICAI Accounting Research Foundation & Anr. vs. DIT (Exemption) & Ors. (2009) 28 DTR 220 (Del.)

179. Income – Accrual – S. 5

Assessee had offered interest income accrued to it though not actually received by it on the loans, recovery of which was doubtful. Thereafter, assessee entered into a settlement with the debtor and also assigned the entire debt to a third party. Amount received by it on such assignment, which was lower than the amount of interest on which the assessee had already paid tax, addition/cannot be made on account of accrued interest.

CIT vs. Eicher Ltd. (2009) 26 DTR 310 (Del.)

180. Income – Accrual of Income – Mercantile system of accounting – S. 145

The Assessing Officer rejected the claim of the assessee for exclusion of interest on the ground that though the interest had accrued in earlier year, it was received during the current year. The Assessing Officer also considered the income on the principle of accrual and confirmed the assessment. The CIT(A) confirmed the same. However, the ITAT disagreed without Assessing Officer and CIT(A). On Appeal, to the High Court by the Department, it was held that ITAT rightly decided that the term, accrued but not due showed that the right to receive the interest had not arisen to the assessee and that the interest was receivable only from April, 1st of the next year. Thus, the interest income could not be included in the taxable income of the assessee.

CIT vs. Lucas Indian Services Ltd. (2009) 315 ITR 273 (Mad.)

181. Income – Accrual of Income – S. 5

Where the assessee was in a transport franchisee business and the franchisee agreement was rescinded and there was no evidence that the assessee conducted the said business thereafter, addition of notional income from such business cannot be brought to tax on a notional basis under the Act.

CIT vs. Jaipur Golden Transport Co. (Regd.) (2009) 25 DTR 236 (Del.)

182. Income deemed to accrue in business in India – newly inserted Explanation to Section 9 by Finance Act, 2007 – S. 9

The deductor of TDS (i.e. the payer) is entitled to question the imposition of tax liability on the payee. In order to impose liability on a non-resident assessee for income from services rendered to an Indian party, u/s. 9 of the Act, it is imperative that services are rendered in India and are also utilised in India- the twin conditions have to be satisfied. To this extent, the newly inserted Explanation to section 9 does not disturb the ratio of the Supreme Court’s decision in IsshikawaJima Harima.

Jindal Thermal Power Co. (2009) 182 Taxman 252 (Kar.)

183. Income from other sources – Business income – S. 56(2)(iii)

Hospital building was given on lease with equipment and machinery. Lease rental income to be treated as income from other sources and not from business.

The assessee company constructed hospital building and ran the same from A.Yrs. 1991-92 to 1997-98.

As the assessee company suffered a heavy loss in running the same, it leased the hospital building alongwith equipment and machinery to A on a monthly lease.

The learned Assessing Officer treated the said lease rental income as income from other sources instead of income from business as claimed by assessee. On Appeal to CIT(A), the CIT(A) reversed Assessing Officer’s Order but the ITAT upheld Assessing Officer’s Order.

On Appeal to High Court, the Hon’ble High Court dismissed the said Appeal by holding that the income derived out of the lease of the property and furniture as in the present case could not be treated as income from business. The finding given by the Tribunal that the income was income from other sources was correct.

Orient Hospital Ltd. vs. Dy. CIT (2009) 315 ITR 422 (Mad.)

184. Income-tax Act, 1961 – S. 171(3)

Where the assessment had been made by the Revenue authorities of a person in the status of Hindu Undivided Family (‘HUF’) and the same had become final, assessment shall be continued as such as long as there is no partition in terms of section 171(3) of the Act. Any change introduced by the State legislation on the jointness of HUF will have no bearing on these deeming provisions of the Income–tax Act, 1961

Gauri Kanta Barkataky vs. CIT (2009) 25 DTR 75 (Gau.) (A.Y.: 1983 – 84 to 85 – 86 & 88 – 89)

185. Industrial Undertakings – Infrastructure Development – Deduction – S. 80 IA

Fire Insurance Claim, received from the insurance company, forms part of the eligible profits u/s. 80-IA. Raghuvanshi Mills Ltd. (1952) 22 ITR 484 (SC) relied upon.

CIT vs. Sportking India Ltd. (2009) 183 Taxman 312 (Del.)

186. Interest – S. 234C

Even though the assessee had not paid advance tax on the capital gain on sale of property on 19-6-1995 by 15-9-1995 in accordance with the proviso to section 234 C (1) (b) (ii) of the Act, levy of interest under section 234 C of the Act in the intimation under section 143 (1) (a) of the Act was not permissible.

CIT vs. Hindustan Hotels Ltd. & Anr. (2009) 27 DTR 127 (Bom.)

187. Interest Tax Act – S. 2(7)

Transaction of financing of motor vehicles by credit institution though termed as hire–purchase agreement, is a loan transaction and the finance charges recovered by the institution is held to be chargeable interest under section 2(7) of the Interest tax Act, 1974.

CIT vs. Kallur Chit Funds & Finance (P) Ltd. (2009) 25 DTR 44 (Ker.)

188. International Taxation – DTAA between India and Sweden – Article III of DTAA – Management charges

Whether income relating to business management or technical management, are not to be treated as commercial profits and they would be outside the scope of exemption under Article III and hence taxable in India.

CIT vs. Swedish Telecoms International AB (2009) 181 Taxman 148 (Bom.)

189. International Taxation – Permanent Establishment under DTAA – Article 5(c)(e) of Indo-UAE Treaty

Liaison offices do not constitute a P.E. since liaison offices perform auxiliary functions and are thus covered under Art 5 (c) (e) of the Indo-UAE Treaty. The Authority fell in error of law in holding that liaison offices would constitute P.E. since without the acts performed by the liaison offices the non-resident assessee would not have been able to fulfill it’s part of the contract- this is because, going by this reasoning, every other activity would be required to be performed to enable the non-resident assessee to fulfill it’s part of the contract. That does not mean that even liaison offices performing auxiliary services would constitute a P.E.

U.A.E. Exchange Centre Ltd. vs. Advance Ruling Authority (2009) 183 Taxman 495 (Del.)

190. Manufacture – Deduction – S. 80IB

Activity of making transformer cone from cold rolled Grain oriented / cold; rolled non-grain oriented coils invoking series of processes amounts to manufacture for the purpose of allowability of claim u/s. 80IB.

CIT vs. Alfa Lamination (2009) 225 CTR 212 (Guj.)

191. Mineral oils – Business – S. 44BB

Mobilisation / demobilization charges paid to non-resident assessee for transporting plant & machinery is to be included in the gross receipts under section 44BB for calculating the deemed profit of ten per cent, whether the same is paid for transporting within the territorial waters of India or from a place outside India.

CIT vs. R & B Falcon Drilling Co. (2009) 181 Taxman 62 (Uttarakhand)

192. Mineral oils – S. 44BB

Catering charges reimbursed to the non-resident assessee is includible in the gross receipts u/s. 44 BB, for calculating the deemed profit of ten per cent. This is because catering charges form part of ‘services and facilities’ in connection with extraction or production of mineral oil.

CIT vs. Ensco Maritime Ltd. (2009) 181 Taxman 46 (Uttarakhand)

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

Where the assessee had disclosed the entire facts and not concealed any particulars of his income a mere disallowance of a bona fide claim made by the assessee of deduction under section 10(29) of the Act does not amount to concealment so as to attract penalty under section 271(1)(c) the Act.

CIT vs. Haryana Warehousing Corporation (2009) 25 DTR 194 (P&H)

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

Disclosure in Form No. 34 A, to Appropriate Authority for obtaining clearance certificate with respect to the agreement to sell cannot be equated to the disclosure in return and therefore, assessee was liable for penalty u/s. 271 (1) (c) of the Act.

Smt. Ram Piari vs. CIT (2009) 27 DTR 22 (P&H) A.Y. 1997 – 98

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

Where the assessee declared a higher income after receiving a notice u/s. 148 of the Act, disclosure made by the assessee was held to be not a voluntary surrender of income by the assessee and the penalty was rightly imposed by the Assessing Officer.

Prempal Gandhi vs. CIT (2009) 27 DTR 35 (P&H) A.Y: 1999-2000

196. Power of Income tax Authorities – Impounding of Books etc. – S. 131

Section 131 of the Act provides that any books, documents, etc impounded by the Assessing Officer can be retained beyond fifteen days only with the prior approval of superior authorities. This power of extending retention period of books, documents, etc indefinitely or during the pendency of appeal would defeat the very object of impounding with an outer limit of fifteen days. Thus the extension of such retention period can only be a one time exercise and supplementing the outer limit of fifteen days for some more days depending upon the circumstances of a case. The extension of the period should be counted only in days and not in months or years as outer limit is indicated in days.

Subha & Prabha Builders (P.) Ltd. vs. I.T.O. & Anr. (2009) 26 DTR 197 (Karn.)

197. Reassessment – ‘Reasons to believe’

– S. 147

Re-opening is not permissible on borrowed satisfaction of another Assessing Officer.

CIT vs. Shree Rajasthan Syntex Ltd. (2009) 212 Taxation 275 (Raj.)

198. Reassessment – Block Assessment

– S. 147

Re-opening of assessement of a particular assessment year which was included in the block period- Block assessment held to be invalid being barred by limitation. Merely because block assessment is time barred, the Department cannot have ‘reasons to believe’ that income has escaped assessment. And assessement for a particular year cannot be re-opened on that ground.

Smt Mira Ananta Naik (2009) 183 Taxman 40 (Bom.)

199. Reassessment – Direction – Limitation

– S. 148, 150(1)

One of the Directors of the assessee company filed an appeal against the Block Assessment whereupon certain additions / disallowance were made by the Assessing Officer. The same were deleted by the CIT(A), on the condition that the same has to be considered in the hands of the assessee company. These were investments made in the names of the shareholders.

In pursuance of these directions, notices under section 148 were issued to reopen assessment proceedings. The assessee company objected to the validity of initiation of the proceedings inter alia on the ground of limitation.

The said objection were rejected inter alia, on the ground that as per provisions of Section 150(1) of the Act, the reopening proceedings had been validly initiated to give effect to the CIT(A)’s Order.

The assessee company filed Writ Petitions by contending that the observations of CIT(A) could not be treated as directions.

High Court dismissed the said Writ Petitions by holding the provisions of Section 150(1) would clearly cover the case against the assessee company and it was open to the authorities to reopen the concluded assessment proceedings.

Maurya Realtors P. Ltd. vs. Union of India & Others (2009) 315 ITR 393 (Patna) (A. Y. 2000-07)

200. Reassessment – Notice – S. 147, 148

Points not decided while passing assessment Order under section 143(3) not a case of change of opinion – Assessment reopened validly.

Yuvraj vs. Union of India (Bombay) (2009) 315 ITR 84.

201. Rectification – S. 154

Issue regarding unabsorbed depreciation and losses while computing deduction under section 80 HHC of the Act is a debatable issue and therefore the Assessing Officer has no jurisdiction to pass order under section 154 of the Act to recompute deduction under section 80 HHC of the Act.

Royal Cushion Vinyal vs. CIT (2009) 28 DTR 22 (Bom.)

202. Refunds – S. 244A

Where the assessee had wrongly deducted tax at source without any statutory liability to make such deduction, subsequently when such amount is refunded to it the assessee is not entitled to interest under section 244A of the Act on such refund.

Universal Cables Ltd. vs. CIT (2009) 26 DTR 98 (MP)

203. Return – S. 139(9)

A return of income of a Company which is signed by the secretary of the company and not by the managing director as required under section 140 of the Act can be cured by virtue of section 139 (9) read with section 292B of the Act. Thus, once the defect is removed by the assessee the return should be considered as a valid return under the scheme of the Act. The Court further, held that once the defect is removed by the assessee it will relate back to the original date of filing return.

Prime Securities Ltd. vs. Varinder Mehta, Asstt. CIT & Anr. (2009) 28 DTR 119 (Bom.)

204. Revision – Merger of Assessment order

– S. 263

Assessing Officer allowing partial deduction u/s. 80-I. CIT(A) allowing deduction in full. Commissioner invoking powers u/s. 263 and contending that eligibility of deduction u/s. 80-I (2) was never subject-matter before the Appellate Authority and that deduction had been granted by considering provisions of section 80-I(1) only. Held that the entire eligibility of deduction u/s. 80-I was before the Appellate Authority and hence the A.O.’s order had merged with that of the CIT(A). The prohibition of Explanation (c) to 263 was applicable and thus the Commissioner was not justified in invoking section 263. Deduction u/s. 80-I(1) cannot be independent of section 80-I(2)

CIT vs. Nirma Chemical Works Pvt. Ltd. (2009) 182 Taxman 183 (Guj.)

205. Service of notice – S. 282

There is no presumption in law that any notice sent by speed post must have been served upon the assessee within 24 hours.

Nulon India (2009) 183 Taxman 229 (Del.)

206. Settlement Commission – S. 245C

Once the income disclosed by the assessee under section 245C of the Act is not accepted as a full and true disclosure, the application under section 245C of the Act filed by the assessee is not maintainable at all and, therefore, Settlement Commission has no jurisdiction to enhance the income of the assessee.

Canara Jewellers & Ors. vs. Settlement Commission & Anr. (2009) 28 DTR 270 (Mad.)

207. Settlement of Cases – S. 245 C, 245 F

Jurisdiction of commission to consider application for settlement and not to reassess income.

During the pendency of the appeals, the assessee preferred applications under section 245C of the I.T. Act, 1961. Therein, the assessee had shown revised income and submitted that the income so shown was a full and true disclosure income of the assessee.
On processing of the said application by the settlement commission, it was accepted by the settlement commission that the appellant made a full and true disclosure, the revised income as shown by the appellant was enhanced and thereby, it was ordered to be assessed on the basis of the enhanced income as fixed by the settlement commission.

The said Order was challenged before High Court by way of a Writ Petition. It was contended that the income shown was a full and true disclosure, then there was no occasion to fix some higher income.

Alternatively, it was contended that if the settlement commission did not want to accept the income disclosed by the assessee under section 245C of the I. T. Act, then in that case, the Petition under section 245C was not maintainable and, therefore, the Settlement Commission was not bound to pass any Orders thereon.

The Hon’ble High Court set aside the Order passed by the Settlement Commission.

Canara Jewellers vs. Settlement Commission & Another (2009) 315 ITR 328 (Mad.)

208. Stay – 220 r.w.s. 251

The High Court while deprecating the act of the CIT (A) in not passing any order on the stay petition of the assessee filed along with the appeal, directed the CIT (A) to dispose of the stay petition of the assessee filed before him within fifteen days.

Smita Agrawal (HUF) vs. CIT (2009) 26 DTR 333 (All)

209. Succession of business – 100% sale of shares – S. 170.

A limited liability company is a distinct legal entity separate from its shareholders. Change in the shareholders of the company does not change the legal identity of the company. A limited liability company is thus different from a partnership firm because while a company is distinct from its shareholders and directors, a partnership firm is not different from its partners and it is not a distinct legal entity. Since the assessee is a limited liability company change in the ownership of its share will have no legal effect on the legal identity of the company.

CIT vs. Panchratna Hotels (HP High Court) ITA No. 13 of 2004 A.Y. 1992-93. Source : www.itatonline.org

210. Transaction in Securities – S. 94 (7)

For the purpose of invoking the provisions of section 94(7) of the Act and to disallow the loss on sale of units, condition laid down in clauses (a), (b) and (c) of section 94(7) are to be cumulatively satisfied. Thus, while the units of mutual funds were purchased by the assessee within the statutory period of three months, the sale of said units which is made beyond the statutory period of three months from the record date the provisions of section 94(7) are not attracted and the loss on sale of such units cannot be disallowed.

CIT vs. Shambhu Mercantile Ltd. (2009) 25 DTR 164 (Del.)

211. Transfer of Cases – S. 127

Order under section 127 of the Act transferring the assessee’s case without considering the written objections raised by the assessee to such transfer of its case was liable to be quashed.

Maritime Merchants (P) Ltd. & Anr. vs. CIT (2009) 25 DTR 139 (Cal.)

212. Transfer of Cases – S. 127

Order under section 127 of the Act transferring the assessee’s case without affording him opportunity of being heard and also without giving any reason for transfer of case except for stating that the transfer was for administrative convenience, in such case the requirements of section 127 of the Act were held to be not fulfilled and the order transferring the case was liable to be quashed.

Anand Kumar Arya & Anr. vs. CIT (2009) 26 DTR 12 (Cal.)

213. Unexplained investments – Presumption – S. 69, 292C

Income from undisclosed sources – presumption u/s.292C is a rebuttable presumption wherein Assessee could rebut the claim of the Department on the strength of documents seized from his premises. Assessee having failed to rebut the presumption and thus failed to discharge the burden cast on him, the addition made by the revenue is justified.

Surendra M. Khandhar vs. ACIT & Ors. (2009) 224 CTR 409 (Bom.)

214. Unexplained investments – VDIS – S. 69

Income from undisclosed source – VDIS declaration valid certificate issued – subsequent sale of VDIS declared jewellery cannot be held as ingenuine on the face of verifiable evidences.

CIT vs. Uttamchand Jain (2009) 224 CTR 473 (Bom.) (2009) 26 DTR 23 (Bom.)

215. Writ – Alternative remedy – Art. 226

Where the final order of the Tribunal under section 254 (1) of the Act is recalled and fixed for hearing afresh, Writ petition challenging the action of Tribunal recalling its order under 254 (1) of the Act, on the ground that the order was passed without jurisdiction, cannot be dismissed on the ground that the petitioner has an alternative remedy in form of appeal under section 260 A of the Act.

Apex Metchem (P) Ltd. vs. I.T.A.T. & Ors. (2009) 26 DTR 1(Raj.)

216. Writ – Maintainability – Art. 226

A Public Sector undertaking cannot file a writ petition praying for direction to the Revenue authorities to modify the assessment, in absence of clearance from Committee on Disputes (CoD).

Kolkata Port Trust vs. ACIT (2009) 26 DTR 33 (Cal.)