INCOME TAX REPORTS (ITR) HIGHLIGHTS
F High Court has no power to condone delay beyond period prescribed under I. T. Act : Sukhvinder Singh v. CIT (P&H) p. 339
F Finance commission allowed as deduction in prior years : Deduction could not be denied in relevant assessment year : CIT v. Heeralal Kataria (Raj) p. 342
F Trucks entitled to depreciation at 30 per cent. : CIT v. Bimalchand Jain (Raj) p. 346
F Estimate based on comparable cases valid : Salem Steel Co. v. CIT (Mad) p. 349
F Son participating in income-tax proceedings not a ground to fasten liability for commission of any offence under I. T. Act : Roshan Lal v. Special Chief Judicial Magistrate (All) p. 353
F Estimation of profits based on facts justified : Sri Vaddanahal Rajanna (HUF) v. Asst. CIT (Karn) p. 356
F Tribunal can correct factual error in order : CIT v. ITAT (Bom) p. 359
F Failure to consider assessee's statement made subsequent to retracted statement documentary evidence on record : Matter remanded : CIT v. Omprakash K. Jain (Bom) p. 362
F Seed money received for commencement of business : Parting of part of profit by assessee instead of paying interest : Transaction not a colourable device : CIT v. V. G. Siddartha (Karn) p. 365
F Reassessment proceedings on same grounds not valid : Berger Paints India Ltd. v. Asst. CIT (Cal) p. 369
F Passport cannot be impounded under the I. T. Act : Avinash Bhosale v. UOI (Bom) p. 381
F Rectification to withdraw deduction on export incentive, duty drawback : Matter debatable : Rectification not permissible : CIT v. TTK Prestige Ltd. (Karn) p. 390
F Books of account available with AO would indicate capacity of party to advance loan : No need to prove on assessee to prove capacity : CIT v. Tania Investments P. Ltd. (Bom) p. 394
F Copies of seized material not provided to assessee nor assessee given opportunity to cross-examination of person on whose statement AO relied upon : Fatal to proceedings : CIT v. Ashwani Gupta (Delhi) p. 396
F Tribunal confirming deletion of addition made by AO without verifying whether creditor paid tax on amount added as cash credit : Matter remanded : CIT v. Vinod Swarupchandra Mehta (Guj) p. 399
F Amount paid by builder as regularisation fee for violating building by-laws not deductible u/s 37 : Millennia Developers P. Ltd. v. Deputy CIT (Karn) p. 401
F Interest on refund of income-tax entitled to deduction u/s 80P : CIT v. Haryana State Co-operative Apex Bank Ltd. (P&H) p. 404
F Assessee seeking proper opportunity to make effective submissions before Tribunal : Matter remanded : Anand Flori Farms India P. Ltd. v. ITO (Delhi) p. 406
F Provision for bad doubtful debts : CIT (Appeals) deleting addition and Tribunal upholding order : Finding of fact : CIT v. Mysore Paper Mills Ltd. (Karn) p. 428
F Gross amount of interest to be taken into account for computation of deduction u/s 80HHC : CIT v. Devraj Nensee and Co. (Mad) p. 430
F Estimate of income can be made on rational basis : Prakash Automobiles v. CIT (Ker) p. 435
F Trial court has power to decide whether particular SC decision is applicable : P. Kuknhappa Nair and Co. v. Deputy CIT (Ker) p. 437
F Interest not leviable while computing income u/s 115J : Deputy CIT (Assessment) v. Madhusudan Industries Ltd. (Guj) p. 438
F Conviction of women : Release under Probation of Offenders Act justified : Union of India v. Smt. Mamta Sethi (MP) p. 440
F ITNS 150 accompanying order of assessment specifying provision of law and amount of interest charged : Order valid : Hari Narain Soni v. ITO (Raj) p. 444
F Voluntary offer of income for taxation to avoid probe and assessment of such income u/s 68 valid : T. P. Indrakumar v. ITO (Karn) p. 454
F Voluntary offer of income for taxation to avoid probe : Interest not chargeable u/ss 234A and 234B : T. P. Indrakumar v. ITO (Karn) p. 454
F Higher rate of depreciation applicable to motor lorries used in transportation business : CIT v. S. C. Thakur and Bros. (Bom) p. 463
F Export inspection charges and interest on export packing credit loans not entitled to weighted deduction : KEC International Ltd. v. CIT (Bom) p. 465
F Revised rates of depreciation with effect from April 2, 1983, not applicable for AY 1980-81 : KEC International Ltd. v. CIT (Bom) p. 465
F Mere remark that prices were rising not sufficient for pre-emptive purchase : Cigeo Construction Co. P. Ltd. v. Appropriate Authority (Bom) p. 474
F Object of constructing dam and effect of expenditure is to facilitate assessee's trade operation and enable assessee to conduct business more efficiently : Revenue expenditure : CIT v. Hindustan Zinc Ltd. (Raj) p. 478
F Guest house expenditure not allowable : CIT v. Hindustan Zinc Ltd. (Raj) p. 478
F Off-shore contract for design, engineering, manufacture, etc., testing of supplier's works and dispatching to port of disembarkation in India : Amount received by non-resident not taxable in India : Joint Stock Company Foreign Economic Association "Technopromexport", In re p. 409
F Rules :
Income-tax (First Amendment) Rules, 2010 : Corrigendum p. 24
F Notifications :
Income-tax Act, 1961 : Notification under section 10(6C) : Exemption of income of Sinclair Knight Merz Pty Limited, Australia for providing services in or outside India in projects connected with the security of India p. 24
Income-tax Act, 1961 : Notification under section 35AC(1) Expln., clause (b) : Eligible projects or schemes p. 17
F CIT v. Samsung Electronic Co. Ltd. 320 ITR 209 is not based on current law-V. Prabhakar, Advocate p. 11
F Whether preventive detention of a person under section 132 and seizure of explained cash with him is legal ?-Supreme Court's view-T. N. Pandey, Retd. Chairman, CBDT p. 29
F I-T Department is acting perfunctorily
The Bombay High Court, in its March 25 order on an insurance company's petition, came down heavily on the Income-tax Department, saying the Department acted perfunctorily for recovering tax dues before the end of the fiscal.
A Division Bench comprising Justice DY Chandrachud and Justice JP Deodhar, quoting an earlier Bombay High Court order, observed : "In a large number of matters, this court has been observing that orders are passed perfunctorily by the department only with an idea of effecting recovery before March 31, though such orders could have been passed in detail and after recording proper reasons."
The complaint to the court was that the Commissioner (TDS) did not give any reason for not staying the demand for 2010-11, except saying that the plea of the assessee is not acceptable and the demands have to be realised for the current year.
The Division Bench believes the Commissioner should have given a proper reasoning before rejecting the petition for staying the I-T demand.
The High Court in an earlier decision had recommended to the I-T Department to give orders explaining in detail the reasons. Some of these parameters are: Order on stay applications should contain a summary of the assessee's case.
And if the taxpayer is not looking for unconditional stay, the I-T authorities can ask for part depositing the I-T demand for which reasons should be given in the order. Besides, the I-T authorities should also give an indication to the financial soundness of the taxpayer. [Source : www.economictimes.com dated April 1, 2010]
F Landmark ruling as infrastructure companies, seek only to execute a project
The Authority for Advance Ruling's (AAR) order, which many tax experts termed as landmark, would effectively mean that in most cases foreign entities in such partnerships would pay much less tax than what they would have paid as "association of persons", which is how a consortium is defined in the tax law. The firms bidding for contracts in India, depending on the character of income (royalty, fee from technical services and the like in addition to normal business income), as tax could now be levied at comparatively low rates of 10-20%.
The ruling came in the case of a consortium bidding for a Delhi Metro Rail Corporation (DMRC) project. The AAR said the firms in the consortium would be taxed as separate taxable entities. The tax rate could vary for each partner, depending on the character of its income. Certain kinds of income could even be exempt. So, effectively, getting taxed as an independent taxable entity would mean a lower tax liability in many cases, besides clarity on taxation for firms coming together to take up a project in India.
The AAR, while stating that companies would have to be taxed independently, pointed out, "the first and foremost thing is that the nature of work undertaken and capable of being executed by each party is very much different and the scope of work assigned to one party cannot be undertaken or relocated to another."
Earlier, taxed as an association of persons was a hassle for companies, especially when profit-sharing ratios were not determined. The authority said, "it is ruled that a Consortium cannot be treated as association of persons for the purposes of assessment under the Income-tax Act, 1961 and the applicants can only be subjected to taxation on the basis that they are separate taxable entities." [Source : www.financialexpress.com dated April 6, 2010]
F Litigation between I-T and insurers may prolong through the year
The year 2010 may well see the beginning of litigation between life insurance industry and the Income-tax Department. The I-T Department is raising demands on companies with large accumulated losses which the life insurance industry is determined to appeal.
The early disputes relate to the Department's decision to impose tax on funds transferred from shareholders' account to policyholders accounts. Secondly, insurers are also worried that the proposed Minimum Alternate Tax (MAT) would be much higher than the regular rate of taxation. The insurance industry also wants to be treated distinctly compared to other companies when it comes to income recognition.
Unlike other companies, life insurers bring out two sets of accounts. One is in respect of the policyholder's funds and the second is in respect of shareholders' funds. Even among the policyholder funds, there are two sets of accounting norms. One applies to the traditional life business and the second to the unit-linked business.
Funds collected under traditional business-the endowment policies where returns are in the form of bonus declared year after year-are all combined in a life fund. Every investor earns identical returns under the life fund. The surplus generated under the fund is distributed among shareholders and policyholders in the ratio of 10:90. Companies can declare a bonus only when the fund is in surplus. To ensure that early customers do not suffer, private life companies have been transferring funds from the shareholders' account to the policyholders' account in the hope that they can get back the funds when it turns into surplus. That they will be able to do so is now uncertain.
In case of unit-linked insurance plan, there is no such issue as any appreciation in the value of the investment is clearly assigned to the investor in the form of a higher net asset value. [Source : www.economictimes.com dated March 31, 2010]
F Sweeping Direct tax collections to exceed budget estimate
The Government said direct tax collection has surpassed the budget estimate of Rs 3.70 lakh crore for the 2010 fiscal.
Direct tax realisation, however, is likely to fall short of the enhanced target of Rs. 3.87 lakh crore, mentioned in the revised estimate for 2009-10. Direct taxes include, corporate tax, personal income-tax and wealth-tax.
During the 11-month period of the 2010 fiscal, direct tax collection was Rs. 2.78 lakh crore, nearly Rs. 1 lakh crore short of the budget estimate.
In February, direct tax collection grew by a robust 27.54 per cent. on a year-to-year basis. Tax collection stood at Rs. 14,675 crore against Rs. 11,506 crore in February 2009. This was against a negative growth of 19.84 per cent. in January.
In February, corporate tax collection grew by a healthy 16.87 per cent., while personal income-tax mop up jumped by a robust 37.58 per cent.
With more and more people investing in the stock markets, the securities transaction tax (STT) fetched a handsome Rs. 5,975 crore during the first 11 months of the just-concluded fiscal, which is a smart 17.65 per cent. over the year-ago period.
The Government, in the current fiscal (2010-11) expects to mop up Rs. 4.30 lakh crore from direct taxes, higher by over 10 per cent. from what it is likely to collect the 2010 fiscal. This is despite the widening of income tax slabs and reduction in surcharge on corporate taxes to 7.5 per cent. from 10 per cent. The minimum alternate tax (MAT) will, however, has been increased from 15 to 18 per cent. on book profit of companies which do not fall under the tax net due to various exemptions. [Source : www.economictimes.com dated April 2, 2010]
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