Saturday, July 31, 2010

ITR VOL 325 PART 4 / ITR (TRIB) VOL 4 PART 5

INCOME TAX REPORTS (ITR)

Volume 325 : Part 4 (Issue dated 2-8-2010)

SUBJECT INDEX TO CASES REPORTED IN THIS PART

SUPREME COURT

Deduction of tax at source --Indian company engaged in sale and export of sea food--Entering into agreement with non-resident for chartering fishing vessels--Indian company bringing catch at high seas to Indian port where value of catch was assessed and local taxes paid--Indian company carrying fish to destination chosen by non-resident--Income of non-resident chargeable in India--Indian company liable to deduct tax at source--Income-tax Act, 1961, ss. 5(2), 195, 201(1)-- Kanchanganga Sea Foods Ltd. v. CIT . . . 540

HIGH COURTS

Advance tax --Interest payable by assessee on shortfall--Scope of section 234B--Interest can be levied for first time in reassessment proceedings--Loss shown and accepted in original return--Reassessment resulting in positive income--Interest not levied under section 234B(3)--Revision of reassessment--Interest could be levied on such revision--Income-tax Act, 1961, s. 234B(3)-- South Indian Bank Ltd. v. CIT (Ker) . . . 517

Appeal to Appellate Tribunal --Income or capital--Non-competing fees--Commissioner (Appeals) directing Assessing Officer to determine year of receipt and confirming assessment--Assessing Officer in meantime passing an order pursuant to direction of Commissioner (Appeals) assessing amount as capital gains--Commissioner (Appeals) deleting addition relying on order of Tribunal--Tribunal dismissing appeal from order of Commissioner (Appeals)--Chargeability of amount not properly analysed and considered--Matter remanded--Income-tax Act, 1961-- CIT v. United Breweries Ltd . (Karn) . . . 485

Assessment --Reference to Valuation Officer--Addition on basis of valuation by District Valuation Officer--Addition deleted on ground report not reliable--Finding of fact not challenged before Tribunal--No interference--Income-tax Act, 1961, s. 142A-- CIT v. N. S. Bakshi (P&H) . . . 607

----Trust--Trust deed providing for operation of trust till beneficiary attains 21 years--Beneficiary on attaining majority revoking trust and carrying on business as proprietor--No assessment on trust permissible thereafter--Department cannot insist trust will operate till beneficiary attains 21 years--Indian Trusts Act, 1882, s. 78(a)-- CIT v. Nelson Trust (Ker) . . . 456

Business expenditure --Deduction only on actual payment--Gratuity--Contribution to gratuity fund--Deductible if made before filing of return--Matter remanded--Income-tax Act, 1961, s. 43B(b)-- CIT v. Popular Vehicles and Services Ltd. (Ker) . . . 523

----Disallowance--Deduction of tax at source--Amount paid to non-resident without deducting tax at source--Demurrage paid by Indian company to foreign company--Section 172 not applicable--Demurrage paid without deducting tax at source--Disallowance under section 40(a)(i) justified--Income-tax Act, 1961, ss. 40(a)(i), 172-- CIT v. Orient (Goa) P. Ltd . (Bom) . . . 554

----Gratuity--Effect of section 40A(7)--Insurance against liability under Payment of Gratuity Act--Conditions laid down in section 40A(7)(a) not fulfilled--Amount not deductible--Income-tax Act, 1961, s. 40A(7)(a)-- CIT v. Pradeshiya Industrial and Investment Corpn. of U. P. Ltd. (All) . . . 583

Business income --Remission or cessation of trading liability--Credits outstanding for six years and acknowledged by creditors--No evidence of deduction in earlier years--Credits not assessable under section 41--Income-tax Act, 1961, s. 41(1)-- CIT v. Smt. Sita Devi Juneja (P&H) . . . 593

Capital gains --Capital asset--Definition--Agricultural land --Report of Tehsildar that land was beyond eight kilometres from municipal limit--Gains arising from transfer not assessable--Income-tax Act, 1961, ss. 45, 54B-- CIT v. Lal Singh (P&H) . . . 588

----Short-term capital loss--Renunciation of right to subscribe to rights shares--Renunciation in favour of general public--Transaction did not amount to transfer--Loss notional--Not deductible--Income-tax Act, 1961-- CIT v. United Breweries Ltd. (Karn) . . . 485

Capital loss --Dividends--Transactions in securities--Dividend stripping--Loss on sale of units set off against profits on sale of units--Sale beyond statutory period of three months--Section 94(7) not attracted--Income-tax Act, 1961, s. 94(7)-- CIT v. Shambhu Mercantile Ltd . (Delhi) . . . 535

----Sale of units--Sale taking place after expiry of three months from record date--Section 94(7) does not apply--Income-tax Act, 1961, s. 94(7)-- CIT v. Smt. Alka Bhosle (Bom) . . . 550

Company --Book profit--Computation--Depreciation not charged to profit and loss account but disclosed in note to accounts--Deductible--Income-tax Act, 1961, s. 115J--Companies Act, 1956, Sch. VI, Parts II, III-- CIT v. Sain Processing and Weaving Mills P. Ltd. (Delhi) . . . 565

Deduction of tax at source --Salary--Employees of Japanese company working for assessee--Assessee not liable to deduct tax at source on salary received by employees from their Japanese employer--Penalty cannot be levied on assessee for non-deduction of tax on such salary--Income-tax Act, 1961, ss. 192, 271(1)(c)-- CIT v. Indo Nissin Foods Ltd. (Karn) . . . 451

Doctrine of merger --Reassessment--Merger of original order in reassessment order only to extent of issues considered in original order--Income-tax Act, 1961, s. 147-- Ashoka Buildcon Ltd . v. Asst. CIT (Bom) . . . 574

Donation for charitable purposes --Special deduction--Assessee carrying on charitable works--Entitled to benefit under section 80G--Income-tax Act, 1961, s. 80G(5)(vi)-- CIT v. Sewa Bharti Haryana Pradesh (P&H) . . . 599

Gift-tax --Gift--Revocable gift not void for purposes of gift-tax--Bonus shares after revocation continue to be property of donee--Gift-tax Act, 1958, s. 6(2)-- CGT v. Sh. Om Parkash Munjal (P&H) . . . 605

Income --Business income--Bottle deposits received from customers--Finding that deposits not sale proceeds--Amount not assessable--Income-tax Act, 1961-- CIT v. United Breweries Ltd . (Karn) . . . 485

----Sale of beer--Bottle deposit shown as liability--Addition on ground that liability not proved--Addition justified--Income-tax Act, 1961-- CIT v. United Breweries Ltd . (Karn) . . . 485

Intercorporate dividends --Special deduction--Computation--Financial institution--Deduction allowable on gross amount of dividend without deducting proportionate deduction available under section 36(1)(viii)--Income-tax Act, 1961, ss. 36(1)(viii), 80M-- Deputy CIT v. G.I.I.C. Limited (Guj) . . . 597

Interest on borrowed capital --Expenditure in relation to income not forming part of total income--Funds diverted to sister concern of which assessee was a partner--Share income from firm not taxable--Interest not deductible--Income-tax Act, 1961 ss. 10(2A), 14A(1), 36(1)(iii)-- CIT v. Popular Vehicles and Services Ltd. (Ker) . . . 523

Precedent --Effect of decisions in Shree Sajjan Mills Ltd. v. CIT [1985] 156 ITR 585 (SC) and Kumson Motor Owners Union Ltd. v. CIT [1993] 201 ITR 601 (All)-- CIT v. Pradeshiya Industrial and Investment Corpn. of U. P. Ltd . (All) . . . 583

Reassessment --Condition precedent--Reason to believe that income had escaped assessment--Assessee carrying on life insurance business--Method of accounting accepted in original assessment--Subsequent reassessment proceedings on ground that method of accounting was incorrect--Not valid--Income-tax Act, 1961, ss. 147, 148-- ICICI Prudential Life Insurance Co. Ltd . v. Asst. CIT (Bom) . . . 471

----Condition precedent--Reason to believe that income has escaped assessment--Information available with Assessing Officer at time of original assessment--Cannot be a ground for reopening assessment--Audit objection--Not a "reason to believe income escaped assessment"--Income-tax Act, 1961, ss. 80-IB, 148-- Purity Techtextile Private Limited v. Asst. CIT (Bom) . . . 459

----Industrial undertaking--Special deduction--Eligibility--Assessee running unit on licence from purchaser of unit from MFSC--Unit not formed by splitting up or reconstruction of existing business--Deed of conveyance executed by MSFC only in respect of land and building--Plant and machinery installed by assessee not used in another business--That factory plan approved twelve years ago not material--Reassessment to withdraw deduction--Not permissible--Income-tax Act, 1961, ss. 80-IB, 148-- Purity Techtextile Private Limited v. Asst. CIT (Bom) . . . 459

----Notice--Notice in the name of dead person--Notice not served on legal representatives--Notice not valid--Income-tax Act, 1961, s. 148-- CIT v. Suresh Chandra Jaiswal (All) . . . 563

----Reassessment after four years--Industrial undertaking--Special deduction--That factory plan approved twelve years ago disclosed at time of assessment in audit report--No failure to disclose material facts--Reassessment after four years not permissible--Income-tax Act, 1961, ss. 80-IB, 148-- Purity Techtextile Private Limited v. Asst. CIT (Bom) . . . 459

----Reassessment beyond four years--Condition precedent--Failure to disclose material facts necessary for assessment--Assessee carrying on life insurance business--Accounts maintained in accordance with statutory provisions--Change in statutory provisions and consequent change in accounting method--Facts disclosed to Assessing Officer--Reassessment proceedings after four years on ground that accounting procedure was incorrect--Not valid--Income-tax Act, 1961, ss. 147, 148-- ICICI Prudential Life Insurance Co. Ltd . v. Asst. CIT (Bom) . . . 471

Reference --Question not raised earlier--Oral prayer for question--Question could not be referred--Gift-tax Act, 1958-- CGT v. Sh. Om Parkash Munjal (P&H) . . . 605

Refund --Self-assessment--Tax paid on self-assessment cannot be refunded--Voluntary returns and tax paid for assessment years 1979-80 to 1984-85--Reassessments annulled--Self-assessments not annulled--Assessee not entitled to any refund--Income-tax Act, 1961, s. 240, prov. (b)-- Varkey Jacob v. Deputy CIT (Asstt.) (Ker) . . . 507

Revision --Assessment order set aside by Commissioner--Tribunal setting aside order of Commissioner--No occasion for Assessing Officer to pass fresh assessment--Order setting aside order of Assessing Officer pursuant to revision--Justified--Income-tax Act, 1961, s. 263-- CIT v. Sir Shadi Lal Enterprises Ltd .(All) . . . 561

----Commissioner--Limitation--Assessment under section 143(3)--Reassessment--Notice issued on issues unrelated to grounds on which original assessment reopened and reassessed--Limitation starts from original assessment--Income-tax Act, 1961, s. 263-- Ashoka Buildcon Ltd . v. Asst. CIT (Bom) . . . 574

Search and seizure --Block assessment--Undisclosed income--Document seized considered in assessment of third person--Notice could not be issued on assessee under section 158BD--Income-tax Act, 1961, s. 158BD-- Superhouse Overseas Ltd. v. Deputy CIT (All) . . . 448

Wealth-tax --Asset--Definition--Law applicable--Effect of amendment w.e.f. 1-4-1995--Exclusion--Urban land on which commercial building constructed within two years of acquisition--Commencement of construction within two years and completion of construction subsequent to two years--Wealth-tax could not be charged on such land--Wealth-tax Act, 1957, s. 2(ea)(vi), Expln. 1(b)-- Apollo Tyres Ltd. v. Asst. CIT (Ker) . . . 528

----Net wealth--Asset--Urban land--Exclusion--Land on which construction not permitted--Not urban land--Value of land not includible in net wealth--Wealth-tax Act, 1957, s. 2(ea), Expln. 1(b)-- CWT v. Lt. Genl. (Retd.) R. K. Mehra (P&H) . . . 601

 

SECTIONWISE INDEX TO CASES REPORTED IN THIS PART

Companies Act, 1956 :

Sch. VI, Parts II, III --Company--Book profit--Computation--Depreciation not charged to profit and loss account but disclosed in note to accounts--Deductible-- CIT v. Sain Processing and Weaving Mills P. Ltd.

(Delhi) . . . 565

Gift-tax Act, 1958 :

S. 6(2) --Gift-tax--Gift--Revocable gift not void for purposes of gift-tax--Bonus shares after revocation continue to be property of donee-- CGT v. Sh. Om Parkash Munjal (P&H) . . . 605

Income-tax Act, 1961 :

S. 5(2) --Deduction of tax at source--Indian company engaged in sale and export of sea food--Entering into agreement with non-resident for chartering fishing vessels--Indian company bringing catch at high seas to Indian port where value of catch was assessed and local taxes paid--Indian company carrying fish to destination chosen by non-resident--Income of non-resident chargeable in India--Indian company liable to deduct tax at source-- Kanchanganga Sea Foods Ltd. v. CIT (SC) . . . 540

S. 10(2A) --Interest on borrowed capital--Expenditure in relation to income not forming part of total income--Funds diverted to sister concern of which assessee was a partner--Share income from firm not taxable--Interest not deductible-- CIT v. Popular Vehicles and Services Ltd. (Ker) . . . 523

S. 14A(1) --Interest on borrowed capital--Expenditure in relation to income not forming part of total income--Funds diverted to sister concern of which assessee was a partner--Share income from firm not taxable--Interest not deductible-- CIT v. Popular Vehicles and Services Ltd. (Ker) . . . 523

S. 36(1)(iii) --Interest on borrowed capital--Expenditure in relation to income not forming part of total income--Funds diverted to sister concern of which assessee was a partner--Share income from firm not taxable--Interest not deductible-- CIT v. Popular Vehicles and Services Ltd. (Ker) . . . 523

S. 36(1)(viii) --Intercorporate dividends--Special deduction--Computation--Financial institution--Deduction allowable on gross amount of dividend without deducting proportionate deduction available under section 36(1)(viii)-- Deputy CIT v. G.I.I.C. Limited (Guj) . . . 597

S. 40(a)(i) --Business expenditure--Disallowance--Deduction of tax at source--Amount paid to non-resident without deducting tax at source--Demurrage paid by Indian company to foreign company--Section 172 not applicable--Demurrage paid without deducting tax at source--Disallowance under section 40(a)(i) justified-- CIT v. Orient (Goa) P. Ltd . (Bom) . . . 554

S. 40A(7)(a) --Business expenditure--Gratuity--Effect of section 40A(7)--Insurance against liability under Payment of Gratuity Act--Conditions laid down in section 40A(7)(a) not fulfilled--Amount not deductible-- CIT v. Pradeshiya Industrial and Investment Corpn. of U. P. Ltd. (All) . . . 583

S. 41(1) --Business income--Remission or cessation of trading liability--Credits outstanding for six years and acknowledged by creditors--No evidence of deduction in earlier years--Credits not assessable under section 41-- CIT v. Smt. Sita Devi Juneja (P&H) . . . 593

S. 43B(b) --Business expenditure--Deduction only on actual payment--Gratuity--Contribution to gratuity fund--Deductible if made before filing of return--Matter remanded-- CIT v. Popular Vehicles and Services Ltd. (Ker) . . . 523

S. 45 --Capital gains--Capital asset--Definition--Agricultural land--Report of Tehsildar that land was beyond eight kilometres from municipal limit--Gains arising from transfer not assessable-- CIT v. Lal Singh (P&H) . . . 588

S. 54B --Capital gains--Capital asset--Definition--Agricultural land --Report of Tehsildar that land was beyond eight kilometres from municipal limit--Gains arising from transfer not assessable-- CIT v. Lal Singh (P&H) . . . 588

S. 80G(5)(vi) --Donation for charitable purposes--Special deduction--Assessee carrying on charitable works--Entitled to benefit under section 80G-- CIT v. Sewa Bharti Haryana Pradesh (P&H) . . . 599

S. 80-IB --Reassessment--Condition precedent--Reason to believe that income has escaped assessment--Information available with Assessing Officer at time of original assessment--Cannot be a ground for reopening assessment--Audit objection--Not a "reason to believe income escaped assessment"-- Purity Techtextile Private Limited v. Asst. CIT (Bom) . . . 459

S. 80-IB --Reassessment--Industrial undertaking--Special deduction--Eligibility--Assessee running unit on licence from purchaser of unit from MFSC--Unit not formed by splitting up or reconstruction of existing business--Deed of conveyance executed by MSFC only in respect of land and building--Plant and machinery installed by assessee not used in another business--That factory plan approved twelve years ago not material--Reassessment to withdraw deduction--Not permissible-- Purity Techtextile Private Limited v. Asst. CIT (Bom) . . . 459

----Reassessment--Reassessment after four years--Industrial undertaking--Special deduction--That factory plan approved twelve years ago disclosed at time of assessment in audit report--No failure to disclose material facts--Reassessment after four years not permissible-- Purity Techtextile Private Limited v. Asst. CIT (Bom) . . . 459

S. 80M --Intercorporate dividends--Special deduction--Computation--Financial institution--Deduction allowable on gross amount of dividend without deducting proportionate deduction available under section 36(1)(viii)-- Deputy CIT v. G.I.I.C. Limited (Guj) . . . 597

S. 94(7) --Capital loss--Dividends--Transactions in securities--Dividend stripping--Loss on sale of units set off against profits on sale of units--Sale beyond statutory period of three months--Section 94(7) not attracted-- CIT v. Shambhu Mercantile Ltd . (Delhi) . . . 535

----Capital loss--Sale of units--Sale taking place after expiry of three months from record date--Section 94(7) does not apply-- CIT v. Smt. Alka Bhosle (Bom) . . . 550

S. 115J --Company--Book profit--Computation--Depreciation not charged to profit and loss account but disclosed in note to accounts--Deductible-- CIT v. Sain Processing and Weaving Mills P. Ltd. (Delhi) . . . 565

ITR'S TRIBUNAL TAX REPORTS (ITR (TRIB))

Volume 4 : Part 5 (Issue dated : 2-8-2010)

SUBJECT INDEX TO CASES REPORTED IN THIS PART

Appeal to Appellate Tribunal --Admission of additional grounds--Ground relating to validity of assessment order of non-existent company--Legal ground not requiring further investigation of facts--Considered--Confirmation of rectification order without providing opportunity of hearing to assessee--Violation of principles of natural justice--Matter remanded--Income-tax Act, 1961-- Asst. CIT v. Precot Meridian Ltd. (Chennai) . . . 495

Business expenditure --Disallowance--Conveyance expenses, telephone and postage expenses--Expenses recorded in books of account on day-to-day basis and assessee furnished complete details--Partial ad hoc disallowance not proper--Income-tax Act, 1961, s. 37-- Ayushakti Ayurved P. Ltd. v. Asst. CIT (Mumbai) . . . 537

----Disallowance--Foreign travel expenses incurred for business purposes--Not unreasonable--Brokerage expenses--Practice in business to pay 2 per cent. brokerage--No reasons specified for disallowance--Remuneration of director--Supported by resolution of board--Increase in turnover of company due to effort of director--Allowable--Income-tax Act, 1961, s. 37-- G. L. Gems Ltd. v. Asst. CIT (Jaipur) . . . 525

----Disallowance--Professional fees and contract payments--Deduction of tax at source made in last month of accounting year, paid before filing of return under section 139(1)--Not to be disallowed--Income-tax Act, 1961, s. 40(a)(ia)-- Ayushakti Ayurved P. Ltd. v. Asst. CIT (Mumbai) . . . 537

Business income --Engineering, procuring and commissioning contract between assessee and Dutch entity for development of wind farm and erection work to be done by joint venture--Project qualifying for grant of Dutch Government--Grant inalienable--Assessee surrendering rights under contract but continuing to be shown as owner of turbines--Disclosure of profit from surrender of rights--No cogent material to substantiate that assessee received extra consideration--No document on record indicating receipt of offset credits--Electricity charges paid for consumption of electricity for business purposes--Income-tax Act, 1961, s. 28(iv)-- Asst. CIT v. Tube Investments of India Ltd . (Chennai) . . . 477

----Sale of power to sister concern at concessional rate--Instant payment by sister concern without credit period--Sale at concessional rate not disputed and in business interest--Assessing Officer cannot adopt rate contrary to actual rate agreed between parties--Income-tax Act, 1961, s. 143(3)-- Asst. CIT v. Precot Meridian Ltd. (Chennai) . . . 495

Business Loss --Bad debts--Share broking business--Sums owed to assessee by clients on whose behalf transactions undertaken--Amount written off not shown as income in earlier year--Can be allowed as business loss--Income-tax Act, 1961, ss. 28, 36(1)(vii)-- Jalpradeep Securities Ltd . v. Deputy CIT (Delhi) . . . 491

Capital gains --Capital loss--Long-term capital loss--Loss on sale of shares of unlisted company--No primary evidence as regards genuineness of transaction, identity of purchasers, basis of valuation of shares and fixation of sale price--No capital loss--Income-tax Act, 1961-- Asst. CIT v. Precot Meridian Ltd. (Chennai) . . . 495

Charitable purposes --Registration of trust--Donation to charitable institution--Special deduction--No charitable activity carried out in first year of creation of trust--No doubt regarding charitable nature of trust--No opportunity granted to trust--Direction to grant registration and verify application for approval on fulfilment of conditions--Income-tax Act, 1961, ss. 12AA, 80G(5)(vi)-- Jasoda Devi Charitable Trust v. CIT (Jaipur) . . . 547

Co-operative society --Special deduction--Co-operative society providing credit facilities to members for housing projects--Interest on fixed deposits and savings accounts with commercial banks--Proximate connection between interest earned and business--Interest on funds attributable to business of society--Co-operative society entitled to deduction thereon--Income-tax Act, 1961, s. 80P(2)(a)(i)-- Punjab State Co-operative Federation of Housing Building Societies Ltd. v. Asst. CIT (Chandigarh) . . . 507

Depreciation --Intangible assets--Renewal of leave and licence agreement--Payment for continuous use of premises for official purposes--Is deposit for acquiring use of leasehold property--Payments not for acquiring intangible asset--Premises having no nexus with know-how, patents, copyrights, trade marks, etc.--Payments refundable on termination of leave and licence agreement--Assessee not entitled to depreciation--Income-tax Act, 1961, s. 32(1)(ii), Expln. 3-- Asst. CIT v. Malayala Manorama Co. Ltd. (Cochin) . . . 513

Interpretation of taxing statutes --Principle of ejusdem generis-- Asst. CIT v. Malayala Manorama Co. Ltd. (Cochin) . . . 513

Minimum alternate tax --Book profits--Computation--Exclusions--Only items enumerated in section--Long-term capital gains on sale of shares to hundred per cent. subsidiary--Included in computing profits presented before shareholders--To be included in computing book profits under section 115JB--Exemption under normal provisions not applicable--Income-tax Act, 1961, ss. 47(iv), 115JB--Companies Act, 1956, Sch. VI, Parts II, III-- Rain Commodities Ltd. v. Deputy CIT [SB] (Hyderabad) . . . 551

Penalty --Concealment of income--Assessee offering additional income during survey and in return--Penalty proceedings drop on ground co-operation extended by assessee--Co-operation extended by assessee apparent--Revision of order dropping penalty proceedings--Not justified--Income-tax Act, 1961, ss. 263, 271(1)(c)-- C. N. Narasimha Reddy v. CIT (Bangalore) . . . 530

----Concealment of income--Penalty where loss merely reduced--Treatment of business loss as speculative loss--Not concealment of income--Penalty cancelled--Income-tax Act, 1961, s. 271(1)(c), Expln. 4-- Asst. CIT v. Sudarshan Fiscal Services P. Ltd. (Mumbai) . . . 532

Scientific research expenditure --Expenditure related to research and development--To be allowed--Income-tax Act, 1961-- Ayushakti Ayurved P. Ltd. v. Asst. CIT (Mumbai) . . . 537

Words and phrases --"Attributable to"--"Derived from"-- Punjab State Co-operative Federation of Housing Building Societies Ltd. v. Asst. CIT (Chandigarh) . . . 507

----"Licences, business or commercial rights"-- Asst. CIT v. Malayala Manorama Co. Ltd. (Cochin) . . . 513

----"Subsidy"-- Asst. CIT v. Tube Investments of India Ltd. (Chennai) . . . 477

 

SECTIONWISE INDEX TO CASES REPORTED IN THIS PART

Companies Act, 1956 :

Sch. VI, Parts II, III --Minimum alternate tax--Book profits--Computation--Exclusions--Only items enumerated in section--Long-term capital gains on sale of shares to hundred per cent. subsidiary--Included in computing profits presented before shareholders--To be included in computing book profits under section 115JB--Exemption under normal provisions not applicable-- Rain Commodities Ltd. v. Deputy CIT [SB] (Hyderabad) . . . 551

Income-tax Act, 1961 :

S. 12AA --Charitable purposes--Registration of trust--Donation to charitable institution--Special deduction--No charitable activity carried out in first year of creation of trust--No doubt regarding charitable nature of trust--No opportunity granted to trust--Direction to grant registration and verify application for approval on fulfilment of conditions-- Jasoda Devi Charitable Trust v. CIT (Jaipur) . . . 547

S. 28 --Business Loss--Bad debts--Share broking business--Sums owed to assessee by clients on whose behalf transactions undertaken--Amount written off not shown as income in earlier year--Can be allowed as business loss-- Jalpradeep Securities Ltd . v. Deputy CIT (Delhi) . . . 491

S. 28(iv) --Business income--Engineering, procuring and commissioning contract between assessee and Dutch entity for development of wind farm and erection work to be done by joint venture--Project qualifying for grant of Dutch Government--Grant inalienable--Assessee surrendering rights under contract but continuing to be shown as owner of turbines--Disclosure of profit from surrender of rights--No cogent material to substantiate that assessee received extra consideration--No document on record indicating receipt of offset credits--Electricity charges paid for consumption of electricity for business purposes-- Asst. CIT v. Tube Investments of India Ltd . (Chennai) . . . 477

S. 32(1)(ii), Expln. 3 --Depreciation--Intangible assets--Renewal of leave and licence agreement--Payment for continuous use of premises for official purposes--Is deposit for acquiring use of leasehold property--Payments not for acquiring intangible asset--Premises having no nexus with know-how, patents, copyrights, trade marks, etc.--Payments refundable on termination of leave and licence agreement--Assessee not entitled to depreciation-- Asst. CIT v. Malayala Manorama Co. Ltd. (Cochin) . . . 513

S. 36(1)(vii) --Business Loss--Bad debts--Share broking business--Sums owed to assessee by clients on whose behalf transactions undertaken--Amount written off not shown as income in earlier year--Can be allowed as business loss-- Jalpradeep Securities Ltd . v. Deputy CIT (Delhi) . . . 491

S. 37 --Business expenditure--Disallowance--Conveyance expenses, telephone and postage expenses--Expenses recorded in books of account on day-to-day basis and assessee furnished complete details--Partial ad hoc disallowance not proper-- Ayushakti Ayurved P. Ltd. v. Asst. CIT (Mumbai) . . . 537

----Business expenditure--Disallowance--Foreign travel expenses incurred for business purposes--Not unreasonable--Brokerage expenses--Practice in business to pay 2 per cent. brokerage--No reasons specified for disallowance--Remuneration of director--Supported by resolution of board--Increase in turnover of company due to effort of director--Allowable-- G. L. Gems Ltd. v. Asst. CIT (Jaipur) . . . 525

S. 40(a)(ia) --Business expenditure--Disallowance--Professional fees and contract payments--Deduction of tax at source made in last month of accounting year, paid before filing of return under section 139(1)--Not to be disallowed-- Ayushakti Ayurved P. Ltd. v. Asst. CIT (Mumbai) . . . 537

S. 47(iv) --Minimum alternate tax--Book profits--Computation--Exclusions--Only items enumerated in section--Long-term capital gains on sale of shares to hundred per cent. subsidiary--Included in computing profits presented before shareholders--To be included in computing book profits under section 115JB--Exemption under normal provisions not applicable-- Rain Commodities Ltd. v. Deputy CIT [SB] (Hyderabad) . . . 551

S. 80G(5)(vi) --Charitable purposes--Registration of trust--Donation to charitable institution--Special deduction--No charitable activity carried out in first year of creation of trust--No doubt regarding charitable nature of trust--No opportunity granted to trust--Direction to grant registration and verify application for approval on fulfilment of conditions-- Jasoda Devi Charitable Trust v. CIT (Jaipur) . . . 547

S. 80P(2)(a)(i) --Co-operative society--Special deduction--Co-operative society providing credit facilities to members for housing projects--Interest on fixed deposits and savings accounts with commercial banks--Proximate connection between interest earned and business--Interest on funds attributable to business of society--Co-operative society entitled to deduction thereon-- Punjab State Co-operative Federation of Housing Building Societies Ltd. v. Asst. CIT (Chandigarh) . . . 507

S. 115JB --Minimum alternate tax--Book profits--Computation--Exclusions--Only items enumerated in section--Long-term capital gains on sale of shares to hundred per cent. subsidiary--Included in computing profits presented before shareholders--To be included in computing book profits under section 115JB--Exemption under normal provisions not applicable-- Rain Commodities Ltd. v. Deputy CIT [SB] (Hyderabad) . . . 551

S. 143(3) --Business income--Sale of power to sister concern at concessional rate--Instant payment by sister concern without credit period--Sale at concessional rate not disputed and in business interest--Assessing Officer cannot adopt rate contrary to actual rate agreed between parties-- Asst. CIT v. Precot Meridian Ltd. (Chennai) . . . 495

S. 263 --Penalty--Concealment of income--Assessee offering additional income during survey and in return--Penalty proceedings drop on ground co-operation extended by assessee--Co-operation extended by assessee apparent--Revision of order dropping penalty proceedings--Not justified-- C. N. Narasimha Reddy v. CIT (Bangalore) . . . 530

S. 271(1)(c) --Penalty--Concealment of income--Assessee offering additional income during survey and in return--Penalty proceedings drop on ground co-operation extended by assessee--Co-operation extended by assessee apparent--Revision of order dropping penalty proceedings--Not justified-- C. N. Narasimha Reddy v. CIT (Bangalore) . . . 530

S. 271(1)(c), Expln. 4 --Penalty--Concealment of income--Penalty where loss merely reduced--Treatment of business loss as speculative loss--Not concealment of income--Penalty cancelled-- Asst. CIT v. Sudarshan Fiscal Services P. Ltd. (Mumbai) . . . 532






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Tuesday, July 27, 2010

HC (MUM):- ‘Overdraft facility can’t be attached for tax recovery’

The taxman does not have claim over the bank overdraft facility of a defaulter since the lender does not owe money, but has promised a loan for business, the Bombay High Court has ruled. By taking an overdraft facility, a taxpayer becomes a debtor to the bank and hence, no authority has the right to attach overdraft facility for recovering tax dues, the court said in an order dated July 8.

The court ruling came in a case between Navi Mumbai Municipal Corporation and Sargam Foods over outstanding municipal cess. The court said that Navi Mumbai Municipal Corporation did not have the right to attach the overdraft account of the Thane-based Sargam Foods to recover dues from the company. The overdraft facility was from the Dombivli Nagari Sahakari Bank.

To recover dues from defaulters, authorities issue notices to those who owe money to the defaulter, like in bankruptcy proceedings. While the assets of the defaulter could be sold to recover dues, contracted loans could not be treated as assets. There were precedents to such rulings.

"Where the banker lends money on an overdraft and the customer is always in debit, there is no stage at which the banker is debtor to the customer nor at any point of time he holds any money of the customer or the latter's account," the Madras High court had held. A similar judgement was delivered by the Karnataka High Court in 1999 in a case between Karnataka Bank and the Commissioner of Commercial Tax.

Sargam lawyer Jitendra Jain said such notices for recovery could be sent to "any person from whom money is due or may become due to the assessee or any person who holds or subsequently holds money for or on account of the assessee."

The division bench comprising justice RG Ketkar and justice PB Majmudar agreed with the verdict of Madras and Karnataka High Courts and set aside the order of NMMC. This does not stop the municipal corporation from recovering the money in any other manner.





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Monday, July 26, 2010

RTI case : - Dr.Lal Bahadur vs Supreme Court Of India on 12 July, 2010

Dr.Lal Bahadur vs Supreme Court Of India on 12 July, 2010

The Right To Information Act, 2005

Section 19 in The Right To Information Act, 2005

Section 20 in The Right To Information Act, 2005



CENTRAL INFORMATION COMMISSION

Appeal No. CIC/WB/A/2009/000378 dated 26.3.2009 Right to Information Act 2005 Section 19

Appellant - Dr. Lal Bahadur

Respondent - Supreme Court of India Heard & Decision announced: 12.7.2010

Facts:

By an application of 6.5.08 Dr. Lal Bahadur of Khajuri, Malipur Distt. Ambedkar Nagar (UP) applied to the Chief Justice of India with an application with the following heading:

"RTI Application under Sec. 6(1) of the Right to Information Act 2005 seeking detail information from the Hon'ble Supreme Court of India with reference to the Assets acquired Return / filed by the Hon'ble the Chief Justice of India and 25 Associate Justices of the Hon'ble Supreme Court of India."

However, in the footnote of this application, Dr. Lal Bahadur listed the information sought, as below:

"Give a certified copies of a return (Income Tax) filed by the all 26 (1+25) the Hon'ble Judges of Hon'ble Supreme Court of India in following manner-

a) Date and amount of returns filed by the Hon'ble Judges at the time of elevation as High Court Judge.

b) Date and amount of returns filed by the Hon'ble Judge at the time elevation as a Supreme Court Judge."

This application was, by an order of 15.8.08, transferred by CPIO Shri Ashok Kumar, Additional Registrar, Supreme Court of India to the CPIO Shri K. Gurtu, Director (Justice), Department of Justice, Ministry of Law & Justice. By his letter of 29.5.08, however, CPIO Shri K. Gurtu declined to accept the transfer of the RTI application pleading that, "Perhaps Supreme Court of India could be in a better position to furnish the information, as sought for by the RTI application. As such the Original application is enclosed herewith for your further necessary action."

1

Upon this, the CPIO has informed Dr. Lal Bahadur on the very day i.e. 29.5.08, as follows:

"With reference to your application dated 6.5.08, I write to inform you that the information on the subject cited above is neither maintained nor available in the Registry. Your request under the Right to Information Act, 2005 cannot be acceded to."

In his first appeal of 7.7.'08 before Shri M. P. Bhadran, Registrar, Supreme Court of India, appellant Dr. Lal Bahadur has prayed as follows: "a) Issue a direction for furnishing of all relevant information sought by RTI application dated 6.5.08 as well as make available the information from a public Authority i.e. Supreme Court of India.

c) Decide the First Appeal in accordance with a law laid down in Section 19 & 20 of RTI Act, 2005."

Upon this, Shri M. P. Bhadran, Registrar SCI has found as follows: "The appellant has got a case that the impugned order dated 29.5.08 was received by him only on 7.6.08. The appellant submitted that it was dispatched from the Supreme Court of India only on 4.6.2008. Shri Gurtu sent a letter dated 29.5.08 to CPIO Supreme Court of India wherein he has declined to accept the transfer of RTI application and the original application was returned to the CPIO for further necessary action. The appellant has furnished a copy of the above letter along with the appeal memorandum.

The appellant made a request to furnish the information as stated in his application dated 6.5.2008. Now the question to be considered is whether the request of the appellant can be accepted. I find no reason to disagree with the stand taken by the CPIO that the information sought by the appellant is not held by the CPIO. I find that there is no information held by the CPIO to be supplied to the appellant as requested by him."

Dr. Lal Bahadur has then moved his second appeal before us with the following prayer:

"a) Issue order or direction for furnishing of all relevant information sought by RTI application dated 6.5.08 as

2

well as make available the information from a public Authority i.e. Supreme Court of India.

b) Decide the second appeal in accordance with law laid down in Sec. 19 & 20 of RTI Act, 2005."

This prayer is grounded on the following contention: "CPIO / Respondent as well as First Appellate Authority ought to have transferred the RTI application dated 6.5.08 till 11.5.08 to another Public Authority in accordance with law laid down in Sec. 6(3) of the RTI Act, wherein it has been mentioned that RTI application may be transferred to another Public Authority within 5 days from the date of RTI application. The delay erroneously transfer of RTI Application against the provision of law laid down in Sec. 6(3) of RTI Act, for which CPIO / Respondent is liable to be penalized as per provisions of Sec. 20 of RTI Act 2005."

The appeal was heard on 12.7.2010. The following are present: Respondents

Ms. Asha Ahuja, Br. Officer, SCI

Mr. Devadatt Kamat, Advocate for SCI

Mr. Nishanth Patil, Advocate

Although arrangement had been made to hear the appeal through video conference with NIC Studio, Ambedkar Nagar and appellant Dr. Lal Bahadur had been informed by Notice dated 17.6.2010 regarding the hearing, he has opted not to be present, even though attempts were made to contact him on all three Cell Numbers provided by him, which went unanswered.

DECISION NOTICE

In this case, the CPIO Supreme Court of India has made it clear that the Supreme Court does not hold the information sought by Dr. Lal Bahadur. In view of this, appellant's prayer before us that the Supreme Court be directed to provide "all relevant information sought by RTI application dated 6.5.08" can hardly be entertained. The only issue here is that when the information was not held by the Registry of the Supreme Court of India why the matter had not been transferred to the concerned Department u/s 6(3). Appellant's own application

3

has referred to sec. 6(1) in the very subject of his application, as quoted above. Sec. 6(1) is explicit in that it directs as follows: "Sec. 6

(1) A person, who desires to obtain any information under this Act, shall make a request in writing or through electronic means in English or Hindi or in the official language of the area in which the application is being made, accompanying such fee as may be prescribed, to

(a) The Central Public Information Officer or State Public Information Officer, as the case may be, of the concerned public authority;1

(b) the Central Assistant Public Information Officer or State Assistant Public Information Officer, as the case may be, specifying the particulars of the information sought by him or her:

Provided that where such request cannot be made in writing, the Central Public Information Officer or State Public Information Officer, as the case may be, shall render all reasonable assistance to the person making the request orally to reduce the same in writing."

It should be clear that it is not the Supreme Court that would hold information on the Income Tax returns of High Court Judges even at the time of their elevation as Supreme Court Judges, coming as they are, from different States in the country. Application will then have to be made to the Department of Revenue, Ministry of Finance, that administers Income Tax for all. For this purpose the Head Office of the Department can then transfer the applications u/s 6(3) to the Income Tax Departments located in the States where the income tax returns are filed. Insofar as the Supreme Court is concerned, its administrative Ministry is the Ministry of Law & Justice. The Ministry of Law & Justice has, therefore, erred in returning the application transferred to it by the Addl. Registrar, SCI to the CPIO, SCI and should have instead transferred this u/s 6(3) (1) to the Deptt. of Revenue. The Registry of SCI thus cannot be faulted for having transferred the application that seeks information held by Govt. to its own administrative Ministry in Government, since the SCI is not a Department /

1

Underlined by us for emphasis

4

Organization under the control of the Government and is not expected to hold the information on which Department of government deals with which subject. Besides, as clarified by Ld. Counsel for respondents Shri Devadatt Kamat, in the hearing, the RTI application of appellant Dr. Lal Bahadur dated 6.5.08 was received in the SCI on 10.5.08 and transferred on 15.5.08. Thus the transfer is within the time mandated by sec. 6(3) of the RTI Act. For the above reasons, the present appeal is without merit and is hereby dismissed.

Announced in the hearing. Notice of this decision be given free of cost to the parties, including the CPIO Ministry of Law, Justice & Company Affairs.

(Wajahat Habibullah)

Chief Information Commissioner

12.7.2010

Authenticated true copy. Additional copies of orders shall be supplied against application and payment of the charges, prescribed under the Act, to the CPIO of this Commission.

(Pankaj K.P. Shreyaskar)

Joint Registrar

12.7.2010

5





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Tuesday, July 13, 2010

SC: deduction can not claimed other way than revised return

Can deduction claimed other way than revised return?

The answer is in negative  by Supreme Court in Goetze (India ) Ltd. vs. CIT [2006] 284 ITR 323 (SC) which held  that if assessee did not claim the deduction or exemption in return, the claim can not be made to A.O without filing revised return. The decision of the Apex Court was as  under

The question raised in this appeal relates to whether the appellant assessee could make a claim for deduction other than by filing a revised return. The assessment year in question was 1995-96. The return was filed on November 30, 1995, by the appellant for the assessment year in question. On January 12, 1998, the appellant sought to claim a deduction by way of a letter before the Assessing Officer. The deduction was disallowed by the Assessing Officer on the ground that there was no provision under the Income-tax Act to make amendment in the return of income by modifying an application at the assessment stage without revising the return.

This appellant's appeal before the Commissioner of Income-tax (Appeals) was allowed. However, the order of the further appeal of the Department before the Income-tax Appellate Tribunal was allowed. The appellant has approached this court and has submitted that the Tribunal was wrong in upholding the Assessing Officer's order. He has relied upon the decision of this court in National Thermal Power Company Ltd. v. CIT [1998] 229 ITR 383, to contend that it was open to the assessee to raise the points of law even before the Appellate Tribunal.

The decision in question is that the power of the Tribunal under section 254 of the Income-tax Act, 1961, is to entertain for the first time a point of law provided the fact on the basis of which the issue of law can be raised before the Tribunal. The decision does not in any way relate to the power of the Assessing Officer to entertain a claim for deduction otherwise than by filing a revised return.

In the circumstances of the case, we dismiss the civil appeal. However, we make it clear that the issue in this case is limited to the power of the assessing authority and does not impinge on the power of the Income-tax Appellate Tribunal under section 254 of the Income-tax Act, 1961. There shall be no order as to costs.

 



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