1. Accrual of Income – S. 5

Where in the case of assessee, pension was first credited in assessee’s account in Malaysia and then the same was remitted to him in India. The High Court held that the salary did not accrue to the assessee in India under the provisions of sections 5(1) (a) & 5(1) (c) read with article 18(3) of the DTAA between Indian and Malaysia which states as follows, “Any person paid by the Government of the contracting states to any individual may be taxed in that contracting state”. As such the pension so received by the assessee was not taxable in India.

CIT vs. Shri M.P. Philip [(2008) 203 Taxation 217 (Ker)]

2. Acquisition of Immovable Property – S. 269UD

When there is no finding that the consideration received is allegedly less than the fair market value and the sale instances relied upon found to be not comparable, the impugned order was liable to be quashed and set aside.

Gobardhandas Odhavji Dhakan & Anr. vs. Appropriate Authority (2008) 214 CTR (Bom) 114

3. Appeal – Power of CIT(A) – S. 251

CIT (A) has no power to give direction to AO to reopen the assessment of another year.

CIT vs. T. A. Krishnaswamy (2008) 2 DTR 143 (Mad.)

4. Appellate Tribunal – Adjournment – Rejection not valid – S. 254(1)

Tribunal was not justified in refusing prayer of assessee’s counsel for 10-12 days adjournment on the ground that he being busy before the High Court, without giving any valid reason and in proceeding ex parte and deciding the appeal.

Babulal Jain vs. ITO (2008) 3 DTR 232 (MP)

5. Appellate Tribunal – Jurisdiction – Single Member – S. 255

Single member of the Tribunal has jurisdiction to decide an appeal in case where income assessed by the AO is below Rs. 5 lakhs even though the income is enhanced in appeal by CIT(A).

CIT vs. Mahakuteshwar Oil Industries (2008) 3 DTR 131 (Kar.)

6. Assessee in default – Recovery of tax – Penalty – S. 221

No penalty can be imposed before disposing of stay applications of assessee in default.

CIT vs. DLF Universal Ltd. (2008) 297 ITR 342 (Del.)

7. Bad Debts – Bona write off of debt as bad has to be accepted – S. 36(1)(vii)

No prudent businessman would write off a debt which he has a hope of recovering. Thus, where assessee has written off debt as irrecoverable in relevant previous year, it must be presumed, unless contrary was shown, to be bad debt.

CIT vs. DCM [2008] 167 Taxman 160 [Delhi]

8. Bad Debts – S. 36(1)(viii)

From A.Y. 1989-90, if the amount is written off in the books of account by the assessee as bad debts it is enough for the assessee to claim deduction and the assessee is not required to prove that the debt has actually become bad.

CIT vs. IFCI Venture Capital Funds Ltd. [(2008) 208 Taxation 329 (Del)]

9. Business Expenditure – Actual payment – Contribution towards Provident Fund – S. 43B

Contributions made towards provident fund and Employees State Insurance within two to four days after the grace period provided u/s. 43B of the I.T. Act 1961 but before filing the return are entitled to the benefit provided u/s. 43B.

CIT vs. Dharmendra Sharma (2008) 297 ITR 320 (Del.)

10. Business Expenditure – Actual payment – Contribution to provident fund before the due date u/s. 139(1): Deductible: Ss. 2(24)(x), 36(1)(va), 43B

Contributions to provident fund and Employees State Insurance beyond period stipulated in sec. 36(1)(va) read with sec. 2(24) (x) and sec. 43B but paid on or before due date for furnishing return under sec. 139(1) are deductible.

CIT vs. Sabari Enterprises (2008) 298 ITR 141 (Karn.)

11. Business Expenditure – Disallowance – Constitutional validity – S. 40(a)(ia)

Section 40(a)(ia), disallowing the expenditure for failure of assessee to deduct tax at source where it was required to do so is not ultra vires either on the ground of legislative incompetence or violation of any provision of constitution including fundamental rights.

Dey Medial (U.P) (P) Ltd. vs. Union of India (2008) 4 DTR 235 (All)

12. Business Expenditure – Disallowance – Constitutional validity – S. 40(a)(ia)

Petition admitted, stay of operation of said clause (ia) is declined pending the decision on writ petition. Petitioners are directed to submit return for Asst. Year 2007-08 by taking in to account the amount for which tax has been deducted at source and to pay tax on self assessment income and the respondents are directed to accept the return.

Southern Agro Engine (P) Ltd. vs. Union of India (2008) 4 DTR 253 (Mad.)

13. Business Expenditure – Penalty or Fine – S. 37

Damages for breach of contract – payment made for failure to honour the contract by virtue of arbitration award – Not a liability incurred for contravention of any law – Allowable as business expenditure.

Jamna Auto Industries vs. CIT (2008) 214 CTR (P&H –FB) 649

14. Business Expenditure – Premium on Redemption – S. 37

That the premium payable on redemption of debentures in future years was to be spread over and part of it allowed as a deduction in this year.

CIT vs. Ashok Leyland Ltd. (2008) 297 ITR 107 (Mad.)

16. Business Income – Income from fixed deposit – Ss. 28, 56

The investment of amount in fixed deposits by the assessee was only to secure a bank guarantee to be offered to M/s. KPTCL in order to acquire a contract work. It was held that it cannot be treated as an income from other sources and interest accrued on such fixed deposits has to be treated as business income only.

CIT vs. Chinna Machimuthu Constructions (2008) 297 ITR 70 (Karn.)

16. Capital Gains – Coupons – Non-convertible debentures – Cost of acquisition – Ss. 45, 48, 55 (2)(aa)(ii)(iii)(aa)

Coupons received along with non–convertible debentures having no cost of acquisition were not chargeable to capital gains. Assessee is entitled to adopt cost of acquisition as on 1st April, 1981, for purpose of computing capital gains even though the shares were held as stock-in-trade as on that date and were converted into capital asset on 6th November, 1987.

CIT vs. Jannhavi Investments (P) Ltd. (2008) 1 DTR 374 (Bom.)

17. Capital Gains – Exemption Registration – S. 54F

Assessee is entitled to exemption in respect of investment in new house. Possession of new house is relevant. Registration is no relevant.

CIT vs. Ajitsingh Khajanchi (2008) 297 ITR 95 (MP.)

18. Capital Gains – Transfer – Family Arrangement – S. 45

Rearrangement of shareholdings in the company to avoid possible litigation among family member is a prudent arrangement and the transfer of shares is not exigible to capital gains tax.

CIT vs. Kay APP Enterprises & Ors (2008) 3 DTR 205 (Mad.)

19. Capital Gains: Exemption – S. 54F

Capital Gains arising on-sale of residential house and its investment in new house shall not be exempt if assessee owned another house on date of transfer.

CIT vs. Ajitsingh Khajanchi (2008) 297 ITR 95 (MP.)

20. Capital or Revenue – Ss. 31, 37

Expenditure on replacement of turbine rotor is revenue expenditure.

CIT vs. Renu Sagar Power Co. Ltd. (2008) 298 ITR 94 (All)

21. Capital on Revenue Receipt – Ss. 4, 28(va), 55(2)(a) & 260A

Non-compete fee – Neither taxable as revenue receipt nor as capital gains, as sec. 28(va) and sec. 55(2)(a) did not apply to the year in question; the receipt, therefore, being capital receipt was not chargeable to tax.

CIT vs. Narendra D. Desai (2008) 214 CTR (Bom) 190; (2008) 1 DTR 106 (Bom)

22. Capital or revenue – Replacement of machinery – Ss. 31, 37

Expenditure on replacement of machinery revenue expenditure

CIT vs. Sambandham Spinning Mills Ltd. (2008) 298 ITR 306 (Mad.)

23. Cash Credit – Books of account – S. 68

In the present case the assessee firm had not maintained books of account. However, the firm had prepared a Profit and Loss Account. The A.O. during the assessment proceeding added the amount invested by the partners as unexplained cash credit u/s. 68 of the Act. On appeal the High Court held that as there were no books of account maintained by the assessee there could be no credit in the books of the assessee so as to attract the provisions of section 68 of the Act in the assesses case.

CIT vs. Taj Borewells [(2008) 202 Taxation 413 (Mad)]

24. Cash Credit – Consideration on sale of shares cannot be added where the transaction through registered stock broker – S. 68

Assessing Officer held that long-term capital gain declared by assessee was false and transaction was not genuine and considered same as unexplained credit. Assessee had taken shares from market, shares were listed and transaction took place through a registered broker of stock exchange. Therefore there was no material before Assessing Officer which could have led to a conclusion that transaction was simpliciter a device to camouflage activities, to defraud revenue.

CIT vs. Anupam Kapoor [2008] 166 Taxman 178 [Punj. & Har.]

25. Cash Credit – S. 68

Genuineness of gift received from maternal uncle through cheque from NRE A/c – Held, it is not non-genuine gift when NRE A/c was found to be genuine and identity of donor was established. No addition u/s 68 is called for.

CIT vs. Kulwant Industries (2008) 214 CTR (P&H) 223

26. Cash Credit – Section 68 is not applicable to share capital

No addition u/s. 68 can be made in respect of investment made by different persons in share capital of assessee–company, limited by shares, whether public or private.

Jaya Securities Ltd. vs. CIT [2008] 166 Taxman 7 [All.]

27. Charitable purpose Trust – Ss. 2(24), 11, 12 & 13

Where huge sums of money is advanced to company having substantial interest in trust and interest is charged nor adequate security is taken, neither there was a clear violation of sections 13(1) (c) and (2)(a) of the Act.

Kanhayalal Punj Charitable Trust vs. CIT (2008) 297 ITR 66 (Del.)

28. Cross examination – Order passed without providing cross examination is in breach of principle of natural justice

With a view to ascertain percentage of silver used by assessee in its product, Assessing Officer sent samples of products to a research institute. On basis of report of such institute, total consumption of silver by assessee was estimated. Assessee filed objections to said report and sought permission to cross-examine analyst. However, Assessing Officer paid no heed to such request and proceeded with assessment order. Whether since correctness or otherwise of report, on basis of which assessment order was passed against assessee, was itself under challenge, said report could not be automatically accepted and Assessing Officer committed violation of principles of natural justice in not permitting cross-examination of analyst and relying upon his report to detriment of assessee.

CIT vs. Dharam Pal Prem Chand Ltd. [2008] 167 Taxman 168 [Delhi]

29. Deduction – S. 80P

Interest income derived from HDFC Bank was treated as income from other sources and the assessee was denied the deduction u/s. 80P(2)(a)(i) of the Act by the A.O. On appeal High Court following the decision of Apex Court in the case of Mehsana Distt. Central Co-op. Bank Ltd. vs ITO [(2001) 251 ITR 522] held that the income earned from HDFC bank was eligible for deduction u/s. 80P(2)(a)(i).

CIT vs. Punjab State Co-operative Bank Ltd. [(2008) 202 Taxation 432 ( P & H)]

30. Depreciation – Decoders given to cable operator on loan eligible for depreciation – S. 32

The decoders given on loan to the cable operators forming a part of business of the assessee in distribution of satellite channels and signals relating to satellite channels. Hence, provisions of section 32 are applicable.

CIT vs. Turner International India (P) Ltd. [2008] 166 Taxman 22 [Del.]; (2008) 297 ITR 373 (Del.)

31. Depreciation – S. 32

Depreciation being a statutory deduction should be allowed as deduction even if the net profit rate was applied in assessee’s case by the A.O.

CIT vs. Pran Nath Gupta [(2008) 202 Taxation 439 (P & H)]

32. Export – Export of master copies of film songs and music eligible of deduction under section 80hhc – S. 80HHC

The export of master copies of film songs and music along with rights to make copies and sell cassettes outside India is a sale of goods or merchandise for the purpose of deduction u/s. 80HHC.

CIT vs. Giza Impese (P.) Ltd. [2008] 166 Taxman 30 [Mad.]

33. Export – Unabsorbed Losses – S. 32, 72A, 80HHC

That the unabsorbed losses had to be deducted to arrive at the profits for purposes of calculating the special deduction u/s. 80HHC.

CIT vs. Ashok Leyland Ltd. (2008) 297 ITR 107 (Mad.)

34. Export Total Turnover – Excise Duty – Scrap Sales – Lease Rentals – S. 80HHC

i. That excise duty would not form part of the total turnover for the purpose of calculation of deduction u/s. 80HHC.

ii. That the scrap sales would not be included in the total turnover for the purpose of calculation of deduction u/s. 80HHC.

iii. That the Tribunal was right in ordering exclusion of the recovery of return made from the salaries of managerial personnel from total turnover for the purpose of calculating relief under sec. 80HHC.

CIT vs. Ashok Leyland Ltd. (2008) 297 ITR 107 (Mad.)

35, Hundi Loans – S. 69D

Where the A.O. made an addition u/s. 69D treating certain photocopies of paper seized as ‘Hundi’. The High Court after analyzing the attributes of a ‘Hundi’ held that the seized paper cannot be a ‘Hundi’ as there are always three parties in a ‘Hundi’ transaction that is the drawer, drawee and payee. The drawer cannot himself be the drawee. The Court further held that a ‘Hundi’ is normally written in the oriental language as per mercantile custom and the seized paper was written in English language.

CIT vs. Capital Flour Mills P. Ltd. [(2008) 202 Taxation 306 (Del)]

36. Income from House Property – Annual Value – S. 22

Computation of annual value on basis of rent paid by other tenants in premises is not proper. Where fair rent not determined by Rent Controller A.O. to determine annual value and expected rent following guidelines under Rent Control Act.

CIT vs. Shrimati Bhagwani Devi (2008) 298 ITR 413 (Jharkhand)

37. Income from Undisclosed source – Addition – Disclosure in the course of survey – Ss. 69, 133

Addition on the basis of surrender during survey held to be not justified.

CIT vs. Gianchand Bhajan Lal (2008) 3 DTR 269 (P&H)

38. Industrial Undertaking – Duty draw back – S. 80IB

Customs duty drawback is profit derived from business of industrial undertaking, hence, eligible for deduction under section 80IB.

CIT vs. Eltek SGS (P) Ltd. (2008) 3 DTR 241 (Del.)

39. Interest on Refund: From date of original assessment order – S. 132(4)(a) & S. 244A

Where there is refund of excess amounts seized as a result of appellate order –interest is payable from date of original assessment order – Assessee also entitled to compensation / damages in addition to interest.

Ajay Gupta vs. CIT (2008) 297 ITR 125 (Del.)

40. Investment Allowance – S. 32A

Construction of building, bridges or quarters does not amount to manufacturing or production of any article or thing and investment allowance u/s. 32A of the Act is not allowable to the company engaged in business of construction.

CIT vs. Hans Builders Contractors Engineers (P) Ltd. [(2008) 202 Taxation 327 (Del)]

41. Interest after asset is first put to use cannot be included in action cost – Not entitled to investment allowance – S. 43(1) and 32A

Interest paid by the assessee under deferred payment scheme for acquisition of machinery which is relatable to the period after the asset is first put to use should not be included in the actual cost of the asset under Explanation 8 to section 43(1) of the Act. Accordingly, investment allowance u/s. 32A of the Act was also not available to the assessee on such deferred interest.

CIT vs. Tractors & Farm Equipment Ltd. [(2008) 202 Taxation 639 (Mad)]

42. New Industrial Undertaking – Ss. 80hh, 80-J

Allowability claims made through Revised Return which had not been claimed in original return – Filing of Audit Report not necessary with the return itself and the claim for deduction is permissible even if Audit Report is filed at a later stage.

CIT vs. Jagish Ram Krishan Chand (2008) 214 CTR (HP) 327

43. Penalty – Concealment – Disclosure – Explanation 5 – S. 132 (4), 271(1)(c)(5)

Immunity under Explanation 5 of section 271(1)(c), is not taken away for the reason that income disclosed by assessee in his statement under section 132(4) for a particular year was spread over in the returns of several years, more so, when AO had also made assessment as per the returns filed by assessee, though after making some quantum reshuffling.

CIT vs. Kanhaiyalal (2008) 2 DTR 10 (Raj.)

44. Penalty – Concealment – Disclosure – Manner of Income – Explanation – Ss. 132(4), 271(1)(c)(5)

Assessee having declared the value of diamonds in his statement, and paid tax thereon, entitled to immunity from penalty, even though the statement did not specify the manner in which the income representing value of diamonds was derived.

CIT vs. Mahendra C. Shah (2008) 3 DTR 1 (Guj.)

45. Penalty – Concealment – Revised Return – Detection – S. 271(1)(c)

Assessee having filed revised returns surrendering the amounts reflected in various bank accounts in the names of family members as his own income before completion of process of detection of concealed income, penalty under section 271(1)(c) was not leviable.

CIT vs. Shankerlal Nebhumal Uttamchandni (2008) 4 DTR 238 (Guj.)

46. Penalty – S. 272A(2)(g)

Where the business activities of the assessee were hampered due to losses incurred year after year, labour unrests and there was no experienced staff left with the assessee company to look after the affairs of the company, the High Court held that in such circumstances the assessee was prevented by reasonable and sufficient cause from issuing T.D.S. certificate within stipulated time and the penalty was not leviable in such case.

General Engineering Works vs. CIT (TDS) [(2008) 202 Taxation 488 (Del)]

47. Precedent – Dismissal of special leave petition – Article 141 – Business Expenditure – PP, EPF, and ESI – S. 43B

Dismissal of the Special Leave Petition in CIT vs. Vinay Cement Ltd (2007) 213 CTR 268 (SC), cannot be said to be law decided.

For assessment years prior to Asst. Year 2004-05, employees contribution to PF, EPF and ESI not paid with in due date was disallowable under section 43B.

CIT vs. Pamwi Tissues Ltd (2008) 3 DTR 66 (Bom.)

48. Prosecution – No requirement of notice to accused – No time limit for launching prosecution – Ss. 276B, 278B, Code of Criminal Procedure, 1973 S. 468

There is no provision in law which requires notice to be given to the accused before launching prosecution under the I.T. Act. Where the punishment prescribed under the Act is beyond three years, the provisions of sec. 468 of the Code of Criminal Procedure, 1973, would not apply, and there is no time limit for launching prosecution. Where prosecution is launched u/s. 276B of the I.T. Act, 1961, the punishment prescribed is imprisonment up to seven years.

Union of India vs. Gupta Builders P. Ltd. & Anr (2008) 297 ITR 310 (Bom.)

49. Reassessment – Full and True Disclosure – S. 147

Even if it was a case of deemed escapement of income within meaning of Explanation 2(c)(ii) of section 147, there being no fault on the part of assessee in making full and true disclosure, reopening of assessment after expiry of four years was barred by limitation under proviso to section 147.

CIT vs. Saipem SPA (2008) 1 DTR 21 (Uttarakhand)

50. Reassessment – Limitation – Notice – S. 143(2)

When notice u/s 148 was issued and the return was filed in response thereto, notice u/s 143(3) issued beyond 12 months from the date of filing of return but before expiry of time limit for making assessment, the reassessment or re-computation u/s 153(2) shall not be invalid – matter remanded for reconsideration.

CIT vs. Mrs. C. Malathy (2008) 114 CTR (Mad) 173

51. Reassessment – Notice – Ss. 147, 148

Where the assessee was not served with the notice u/s. 147 and 148 of the I.T. Act 1961, the proceedings for the Asst. Year 1996-97 were void.

CIT vs. Harish J Punjabi (2008) 297 ITR 424 (Del.)

52. Reassessment – S. 147

The A.O. initiated reassessment proceeding u/s. 147 on the ground that while framing original assessment the A.O. was not right is allowing deduction u/s. 80HHC of the Act in relation to the income of service charges and commission. On appeal High Court held that the earlier assessment was made u/s. 143(3) of the Act and there was nothing to show or even suggest that assessee had failed to fully and truly disclose all material necessary for the assessment. If the A.O. chooses not to investigate the facts then, it would amount to giving a premium to an authority exercising quasi judicial function to take benefit of its own wrong.

CIT vs. M/s. Indian Sugar & General Ind. Ex. [(2008) 202 Taxation 324 (Del)].

53. Reassessment – S. 148

Reason to believe or Change of Opinion – Issue of notice on varied interpretation of same provisions by the later Assessing Officer in the subsequent years assessments or relying on the decision of Tribunal amounts to mere change of opinion and not “reason to believe” in order to justify the re-opening.

Seimens Information Systems Ltd. vs. Asst. CIT (2008) 214 CTR (Bom) 16

54. Recovery – Attachment – S. 222 & Sch. 11 Rule 53

Assessee purchasing land in the name of his minor son in the year 1974 and the land and house thereon standing in the name of assessee’s son at least from Asst. Year 1979-80, such land and house could not be attached and sold for recovery of tax arrears of assessee for block periods 1986-87 to 1995-96 by recourse to explanation to section 222(1).

Samson Johan vs. Tax Recovery Officer & Ors (2008) 3 DTR 124 (Bom.)

55. Recovery – Powers of It Authorities – S. 281

Authorities having no power to declare a transfer null and void – Appropriate remedy is to file suit u/s 11(6) of Schedule II.

Shamin Bano G. Rathi & Anr. vs. OBC Ltd. 214 CTR (Bom) 110

56. Reopening – Change of opinion – S. 148

That the reasons recorded by the A.O. for reopening the assessment showed that neither was the explanation given by the assessee and accepted by the AO found to be erroneous nor was there any other material/information on the basis of which a prima facie opinion was formed to the effect that by not increasing the book profit with the amount of the provision for deferred taxation, income chargeable to tax had escaped assessment. Thus, the reopening of the assessment was not based on any material but merely on change of opinion without any basis. The notice u/s. 148 was not valid and was liable to be quashed.

M. J. Pharmaceuticals Ltd. vs. CIT (2008) 297 ITR 119 (Bom.)

57. Revision – Assessment computed u/s. 143(1) – Ss. 263, 143(1)

That the circular issued by the Board is binding upon the authorities and, therefore, the Commissioner of Income tax was not justified in initiating proceedings u/s. 263 of the Act in respect of the assessments completed under sec. 143(1).

CIT vs. Mahendra Kumar Bansal (2008) 297 ITR 99 (All.)

58. Search and Seizure – Block Assessment – Presumptions – S. 132(4A)

Both assessee and alleged payees having denied to have advanced or received any amount as shown to have changed hands as per the MOU found during search, no addition could be made in block assessment in the absence of any further corroborative facts, the presumptions under section 132 (4A) being a rebateable one. No question of law arose out of the order of the tribunal deleting the addition.

CIT vs. Ved Prakash Choudhary (2008) 4 DTR 286 (Del.)

59. Search and Seizure – Tribunal has power to examine validity of Search – S. 132(1)

Tribunal had jurisdiction to go into the question as to whether the search was conducted consequent upon valid authorisation.

CIT vs. Chandra Devi Soni (2008) 1 DTR 98 (Raj)

60. Unexplained Expenditure – S. 69C

During the search certain slips containing some jotting were found. It was explained by the assessee that jotting were just rough noting and not actual expenditure incurred by the assessee. During the assessment A.O. treated the amount jotted by the assessee as unexplained expenditure incurred by the assessee u/s. 69C of the Act, without making any inquiry as to actual incurring of expenses by assessee. On appeal High Court dismissing the appeal of the revenue held that as there was nothing on record to show that the expenditure was actually incurred by the assessee nor did the A.O. made any efforts to find out whether expenditure were actually incurred by the assessee.

CIT vs. Lubtec India Ltd. [(2008) 202 Taxation in 484 (Del)]

61. Valuation of Stock – Addition to opening stock – S. 145A

Section 145A begins with a non obstante clause and therefore to give effect to sec. 145A, if there is a change in the opening stock as on March 31, 1999, there must necessarily be a corresponding adjustment made in the opening stock as on April 1, 1998.

CIT vs. Mahavir Aluminium Ltd. (2008) 297 ITR 77 (Del.)