Friday, February 5, 2010



Volume 1 : Part 6


F On failure of assessee to prove genuineness of transaction, amount received by way of share capital, added as cash credit : Dhingra Global Credence P.Ltd. v. ITO (Delhi) p.529

F Transfer of assets on conversion of proprietary concern into firm, revalued amount deemed to be full value of consideration, no deemd gift : Dharamshibhai B.Shah v. ITO/GTO (Ahd.) p.536

F Where no finding that consideration on sale of stock-in-trade above stated consideration, addition based on fair market value not justified : Asst.CIT v. Excellent Land Developers P. Ltd. (Delhi) p. 563

F Where surrender of income found during survey not connected with levy of penalty u/s 271E for violation of s.269T : Ajay Goel v.Addl. CIT (Delhi) p.569

F Receipt of sum by assessee in lieu of forgoing its right to use premises is not revenue receipt : Assessee holding premises on lease from Municipal Corporation, right as lessee is capital asset : Asst. CIT v. United Motors (I) Ltd. (Mumbai) 578

F Receipt of one-time fee for forgoing right to use property assessable as capital gains : Asst. CIT v. United Motors (I) Ltd. (Mumbai) 578

F Where financial capacity of donors and genuineness of gifts not established, addition justified : ITO v.Smt.Usha Aggarwal (Delhi) 593

F Assessee under duty to pay TDS on behalf of other persons to credit of Govt.: Assessee treated as assessee in default on failure to pay TDS : T.H.E. Makers P. Ltd. v. ITO (TDS) (Delhi) 611

F Where contracts are not interconnected, various sites cannot be considered together in computing minimum period for permanent establishment under art.5(2)(i) of DTAA (Germany) : Joint DIT v. Krupp Uhde GmbH (Mumbai) p. 614

F Where income subject to TDS, interest u/s 234B cannot be charged : Joint DIT v. Krupp Uhde GmbH (Mumbai) p. 614

F Where reimbursement of expenses incurred on travel not involving element of income, not taxable under art.12 of DTAA (Germany) : Joint DIT v. Krupp Uhde GmbH (Mumbai) p. 614


F Supreme Court defines "manufacturing" for Finance Ministry

The Supreme Court has asked the revenue department to take into account the process applicable to the product and not dictionary meaning of "manufacture" to decide the issue of benefits under the provisions of Income-tax Act, Excise Act and Customs Act. The apex court expressed its displeasure over Revenue's failure in such cases, saying the Department was not following its recommendations over the years.

"Repeatedly this court (Supreme Court) has recommended to the Department, be it under Excise Act, Customs Act or the Income-tax Act, to examine the process applicable to the product in question and not to go only by dictionary meanings (of manufacture). This recommendation is not being followed over the years", said a bench comprising Justice SH Kapadia and Justice HL Dattu.

The court dismissed a bunch of appeals filed by the Income-tax Department. In such appeals, the issue was whether twisting and texturising of partially oriented yarn amounts to "manufacture" for the purpose of extending benefits to the assessees in accordance with section 80-IA of the Income-tax Act, 1961.

Ruling in favour of the assessees, the court, however, clarified, "at the outset, we wish to clarify that our judgment should not be understood to mean that per se twisting and texturising would constitute 'manufacture' in every case. In each case, one has to examine the process undertaken by the assessee" .

The structure, the character, the use and the name of the product are distinguishing markings to be taken into account while deciding the question whether the process is a manufacture or not, said court in its order.

The apex court perused its earlier order on the issue. In that order, the court had said, "the term 'manufacture' implies a change, but, every change is not a manufacture, despite the fact that every change in an article is the result of a treatment of labour and manipulation. If an operation/process renders a commodity or article fit for use for which it is otherwise not fit, the operation/process falls within the meaning of the word 'manufacture' ".

The Revenue, however, has amended the Income-tax Act in 2009 to define the word "manufacture". According to it, "manufacture" shall mean a change bringing into existence a new and distinct object or article or thing with a different chemical composition or integral structure.

Then the Department had filed appeals in the apex court in 2010. Dismissing the appeals, the court said, partially oriented yarn is not fit for being used in the manufacture of a fabric. [Source : dated January 25, 2010]

F Date for filing ITR-V form extended

The Central Board of Direct Taxes has decided to extend the time limit for filing ITR-V form relating to income-tax returns filed electronically (without digital signature) on or after April 1, 2009, up to March 31, 2010 or within a period of 120 days from the date of uploading of the electronic return data, whichever is later. The ITR-V form should continue to be sent by ordinary post to Post Bag No. 1, Electronic City Post Office, Bengaluru-560100 (Karnataka). However, in cases where e-mail acknowledgement for ITR-V form is not received by the taxpayer from the CPC Bengaluru, the taxpayer may send another duly signed ITR-V form by speed post to Centralized Processing Centre, Electronic City Post Office, Bengaluru, Karnataka-560100.

This has been done in relaxation of the stipulation in Circular No. 3/2009 dated May 21, 2009 which allows taxpayers who file their income-tax returns in electronic form without digital signature to submit their ITR-V form duly verified and signed, within a period of 30 days thereafter to Post Bag No. 1, Electronic City Post Office, Bengaluru, Karnataka-560100, by ordinary post.

The relaxation has been made following requests from taxpayers that, as a one-time measure, the time limit for filing of ITR-V form may be extended to March 31, 2010 and that alternative modes of submission of ITR-V form may also be provided in cases where an ITR-V form has not been received at CPC, Bengaluru by ordinary post. [Source : dated January 27, 2010]

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