Thursday, December 30, 2010

ITR (TRIB) Volume 7 Part 1 dated 03.01.2010

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

Volume 7 : Part 1 (Issue dated : 3-1-2011)

SUBJECT INDEX TO CASES REPORTED IN THIS PART

Appeal to Appellate Tribunal --Powers of Tribunal--Rectification of mistake--Tribunal holding that assessee cannot be permitted to claim benefit of closing stock by changing method of valuation in assessment proceedings under section 153A--Not a mistake apparent from record--Application under section 254(2) not maintainable--No power to review its order--Income-tax Act, 1961, ss. 153A, 254(2)-- Charchit Agarwal v. Asst. CIT (Delhi) . . . 35

Best judgment assessment --Estimation of income--Accounting--Rejection of accounts--No estoppel against acceptance of net profit rate by assessee--Assessing Officer applying net profit rate without considering past history where lower net profit rate approved--Direction of Commissioner (Appeals) to apply net profit rate at 8 per cent. considering past history reasonable--Income-tax Act, 1961, ss. 144, 145(3)-- Asst. CIT v. Kanhiya Lal Choudhary (Jaipur) . . . 61

Business expenditure --Disallowance--Payments in cash exceeding prescribed limit --Payments by distributor to service provider--No expenditure incurred since no purchases of goods or services on acceptance of delivery of SIM cards or service products--Transaction of principal to agent--Section 40A(3) not applicable--Income-tax Act, 1961, s. 40A(3)-- S. Rahumathulla v. Asst. CIT (Cochin) . . . 41

----Disallowance--Payments liable to deduction of tax at source--Small fraction of total expenditure representing labour charges--Not a contract for services or labour--Disallowance deleted--Income-tax Act, 1961, ss. 40(a)(ia), 194C-- S. T. Reddiar and Sons v. Deputy CIT (Cochin) . . . 1

----Disallowance--Securities transaction tax--Rebate--Securities transaction tax paid and share trading income assessed under profits and gains of business--Disallowance under section 40(a)(ib)--Not bar to allow rebate under section 88E--Evidence of payment furnished during assessment not rebutted by Department--Sufficient compliance with provision--Direction to allow rebate proper--Income-tax Act, 1961, s. 88E-- ITO v. Chunilal T. Mehta (Kolkata) . . . 50

----Sales commission--Evidence regarding receipt of commission by assessee--Commission retained by assessee offered for taxation--No evidence regarding retention of money involved in payment of commission to sub-agent--Failure on part of Department to prove payments to sub-agents against public policy--Disallowance not justified --Income-tax Act, 1961, s. 37-- Deputy CIT v. Satya Prakash Arora (Delhi) . . . 95

Capital gains --Exemption--Sale of property--Capital Gains Deposit Scheme--Sale consideration deposited in scheme--Purchase of house property by availing of loan against deposit scheme--Sale consideration deposited in specified account before date for furnishing return--House property purchased within time-limit--Assessee entitled to exemption--Income-tax Act, 1961, ss. 54F(4), 139-- P. Thirumoorthy v. ITO (Chennai) . . . 10

Deduction of tax at source --Commission--Payments to concessionaires for sale of milk products--Transaction between assessee and concessionaires principal to principal --Payments not commission--Tax not to be deducted at source--Income-tax Act, 1961, s. 194H-- ITO v. Mother Dairy Food Processing Ltd. (Delhi) . . . 16

----Payment made for purchase of printed packing material to suppliers--No work involving skill or secrecy--Sale--Section 194C not attracted--Income-tax Act, 1961, s. 194C-- ITO v. Mother Dairy Food Processing Ltd. (Delhi) . . . 16

Depreciation --Higher depreciation--Computers--Specialised machines manufactured by specialists used in printing activity--Not "computers"--Assessee not entitled to higher depreciation --Income-tax Act, 1961, ss. 32, 36(1)(xi), Expln . -- S. T. Reddiar and Sons v. Deputy CIT (Cochin) . . . 1

Double taxation avoidance --Capital gains--Long-term capital gains on sale of shares in Indian company--Assessee claiming to be Mauritius based company--Whether effective place of management of assessee in Mauritius--Authenticity and relevance of documents relating to board meetings in Mauritius to be examined--Evidence to be brought on record--Matter remanded--Double Taxation Avoidance Agreement between India and Mauritius, arts. 4, 13--Income-tax Act, 1961-- SMR Investments Ltd. v. Deputy Director of Income-tax (Delhi) . . . 23

Industrial undertaking --Special deduction under section 80-IB--Determination of initial assessment year for purposes of section 80-IB--Period of ten years to be reckoned from date of approval by prescribed authority--Income-tax Act, 1961, s. 80-IB(8A), (14)(c)--Circular No. 794, dated August 9, 2000-- Asst. CIT v. S. K. Dynamics Pvt. Ltd. (Delhi) . . . 80

----Special deduction--Assessee engaged in business of scientific research and development--Approved by Government of India for benefit of deduction under section 80-IB(8A)--Conditions under section 80-IB(2) need not be fulfilled--Assessee entitled to deduction of income derived from transfer of technology developed by itself--Income-tax Act, 1961, s. 80-IB(8A)--Income-tax Rules, 1962, r. 18DA(1)(e)-- Asst. CIT v. S. K. Dynamics Pvt. Ltd. (Delhi) . . . 80

----Special deduction--Computation of --Royalty and lease rent to be excluded from profits of business --Only balance net interest income to be excluded from profits of business if nexus between interest income on deposits and interest expenditure on borrowings established--Matter remanded--Income-tax Act, 1961, s. 80-IB-- Videotex International P. Ltd. v. Asst. CIT (Chandigarh) . . . 32

Penalty --Acceptance of loans or deposits in cash exceeding prescribed limit--Assessee facing acute financial difficulties and in exceptional and unavoidable circumstances forced to accept cash deposits--All entries either trade entries or general voucher entry for squaring off accounts of trade and not a loan or deposit--Section 269SS not attracted --Penalty cannot be imposed--Income-tax Act, 1961, ss. 269SS, 271D-- Asst. CIT v. Western India Ceramics P. Ltd. (Ahmedabad) . . . 69

----Cash loans exceeding prescribed limit--Cash loans for purpose of disbursing salary to employees--No material by Department to prove contrary--Deletion of penalty justified--Income-tax Act, 1961, ss. 269SS, 271D-- Deputy CIT v. Rupen Das (Kolkata) . . . 55

Words and phrases --"Computer system"-- S. T. Reddiar and Sons v. Deputy CIT (Cochin) . . . 1

SECTIONWISE INDEX TO CASES REPORTED IN THIS PART
Double Taxation Avoidance Agreement between India and Mauritius :

Arts. 4, 13 --Double taxation avoidance--Capital gains--Long-term capital gains on sale of shares in Indian company--Assessee claiming to be Mauritius based company--Whether effective place of management of assessee in Mauritius--Authenticity and relevance of documents relating to board meetings in Mauritius to be examined--Evidence to be brought on record--Matter remanded-- SMR Investments Ltd. v. Deputy Director of Income-tax (Delhi) . . . 23

Income-tax Act, 1961 :

S. 32 --Depreciation--Higher depreciation--Computers--Specialised machines manufactured by specialists used in printing activity--Not "computers"--Assessee not entitled to higher depreciation -- S. T. Reddiar and Sons v. Deputy CIT (Cochin) . . . 1

S. 36(1)(xi), Expln. --Depreciation--Higher depreciation--Computers--Specialised machines manufactured by specialists used in printing activity--Not "computers"--Assessee not entitled to higher depreciation -- S. T. Reddiar and Sons v. Deputy CIT (Cochin) . . . 1

S. 37 --Business expenditure--Sales commission--Evidence regarding receipt of commission by assessee--Commission retained by assessee offered for taxation--No evidence regarding retention of money involved in payment of commission to sub-agent--Failure on part of Department to prove payments to sub-agents against public policy--Disallowance not justified-- Deputy CIT v. Satya Prakash Arora (Delhi) . . . 95

S. 40(a)(ia) --Business expenditure--Disallowance--Payments liable to deduction of tax at source--Small fraction of total expenditure representing labour charges--Not a contract for services or labour--Disallowance deleted-- S. T. Reddiar and Sons v. Deputy CIT (Cochin) . . . 1

S. 40A(3) --Business expenditure--Disallowance--Payments in cash exceeding prescribed limit--Payments by distributor to service provider--No expenditure incurred since no purchases of goods or services on acceptance of delivery of SIM cards or service products--Transaction of principal to agent--Section 40A(3) not applicable-- S. Rahumathulla v. Asst. CIT (Cochin) . . . 41

S. 54F(4) --Capital gains--Exemption--Sale of property--Capital Gains Deposit Scheme--Sale consideration deposited in scheme--Purchase of house property by availing of loan against deposit scheme--Sale consideration deposited in specified account before date for furnishing return--House property purchased within time-limit--Assessee entitled to exemption-- P. Thirumoorthy v. ITO (Chennai) . . . 10

S. 80-IB --Industrial undertaking--Special deduction--Computation of--Royalty and lease rent to be excluded from profits of business--Only balance net interest income to be excluded from profits of business if nexus between interest income on deposits and interest expenditure on borrowings established--Matter remanded-- Videotex International P. Ltd. v. Asst. CIT (Chandigarh) . . . 32

S. 80-IB(8A) --Industrial undertaking--Special deduction--Assessee engaged in business of scientific research and development--Approved by Government of India for benefit of deduction under section 80-IB(8A)--Conditions under section 80-IB(2) need not be fulfilled--Assessee entitled to deduction of income derived from transfer of technology developed by itself-- Asst. CIT v. S. K. Dynamics Pvt. Ltd. (Delhi) . . . 80

----Industrial undertaking--Special deduction under section 80-IB--Determination of initial assessment year for purposes of section 80-IB--Period of ten years to be reckoned from date of approval by prescribed authority--Circular No. 794, dated August 9, 2000-- Asst. CIT v. S. K. Dynamics Pvt. Ltd. (Delhi) . . . 80

S. 80-IB(14)(c) --Industrial undertaking--Special deduction under section 80-IB--Determination of initial assessment year for purposes of section 80-IB--Period of ten years to be reckoned from date of approval by prescribed authority--Circular No. 794, dated August 9, 2000-- Asst. CIT v. S. K. Dynamics Pvt. Ltd. (Delhi) . . . 80

S. 88E --Business expenditure--Disallowance--Securities transaction tax--Rebate--Securities transaction tax paid and share trading income assessed under profits and gains of business--Disallowance under section 40(a)(ib)--Not bar to allow rebate under section 88E--Evidence of payment furnished during assessment not rebutted by Department--Sufficient compliance with provision--Direction to allow rebate proper-- ITO v. Chunilal T. Mehta (Kolkata) . . . 50

S. 139 --Capital gains--Exemption--Sale of property--Capital Gains Deposit Scheme --Sale consideration deposited in scheme--Purchase of house property by availing of loan against deposit scheme--Sale consideration deposited in specified account before date for furnishing return--House property purchased within time-limit--Assessee entitled to exemption-- P. Thirumoorthy v. ITO (Chennai) . . . 10

S. 144 --Best judgment assessment--Estimation of income--Accounting--Rejection of accounts--No estoppel against acceptance of net profit rate by assessee--Assessing Officer applying net profit rate without considering past history where lower net profit rate approved--Direction of Commissioner (Appeals) to apply net profit rate at 8 per cent. considering past history reasonable-- Asst. CIT v. Kanhiya Lal Choudhary (Jaipur) . . . 61

S. 145(3) --Best judgment assessment--Estimation of income--Accounting--Rejection of accounts--No estoppel against acceptance of net profit rate by assessee--Assessing Officer applying net profit rate without considering past history where lower net profit rate approved--Direction of Commissioner (Appeals) to apply net profit rate at 8 per cent. considering past history reasonable-- Asst. CIT v. Kanhiya Lal Choudhary (Jaipur) . . . 61

S. 153A --Appeal to Appellate Tribunal--Powers of Tribunal--Rectification of mistake--Tribunal holding that assessee cannot be permitted to claim benefit of closing stock by changing method of valuation in assessment proceedings under section 153A--Not a mistake apparent from record--Application under section 254(2) not maintainable--No power to review its order-- Charchit Agarwal v. Asst. CIT (Delhi) . . . 35

S. 194C --Business expenditure--Disallowance--Payments liable to deduction of tax at source--Small fraction of total expenditure representing labour charges--Not a contract for services or labour--Disallowance deleted-- S. T. Reddiar and Sons v. Deputy CIT (Cochin) . . . 1

----Deduction of tax at source--Payment made for purchase of printed packing material to suppliers--No work involving skill or secrecy--Sale--Section 194C not attracted-- ITO v. Mother Dairy Food Processing Ltd. (Delhi) . . . 16

S. 194H --Deduction of tax at source--Commission--Payments to concessionaires for sale of milk products--Transaction between assessee and concessionaires principal to principal--Payments not commission--Tax not to be deducted at source-- ITO v. Mother Dairy Food Processing Ltd. (Delhi) . . . 16

S. 254(2) --Appeal to Appellate Tribunal--Powers of Tribunal--Rectification of mistake--Tribunal holding that assessee cannot be permitted to claim benefit of closing stock by changing method of valuation in assessment proceedings under section 153A--Not a mistake apparent from record--Application under section 254(2) not maintainable--No power to review its order-- Charchit Agarwal v. Asst. CIT (Delhi) . . . 35

S. 269SS --Penalty--Acceptance of loans or deposits in cash exceeding prescribed limit--Assessee facing acute financial difficulties and in exceptional and unavoidable circumstances forced to accept cash deposits--All entries either trade entries or general voucher entry for squaring off accounts of trade and not a loan or deposit--Section 269SS not attracted--Penalty cannot be imposed-- Asst. CIT v. Western India Ceramics P. Ltd. (Ahmedabad) . . . 69

----Penalty--Cash loans exceeding prescribed limit--Cash loans for purpose of disbursing salary to employees--No material by Department to prove contrary--Deletion of penalty justified-- Deputy CIT v. Rupen Das (Kolkata) . . . 55

S. 271D --Penalty--Acceptance of loans or deposits in cash exceeding prescribed limit--Assessee facing acute financial difficulties and in exceptional and unavoidable circumstances forced to accept cash deposits--All entries either trade entries or general voucher entry for squaring off accounts of trade and not a loan or deposit--Section 269SS not attracted--Penalty cannot be imposed-- Asst. CIT v. Western India Ceramics P. Ltd. (Ahmedabad) . . . 69

----Penalty--Cash loans exceeding prescribed limit--Cash loans for purpose of disbursing salary to employees--No material by Department to prove contrary--Deletion of penalty justified-- Deputy CIT v. Rupen Das (Kolkata) . . . 55

Income-tax Rules, 1962 :

R. 18DA(1)(e) --Industrial undertaking--Special deduction--Assessee engaged in business of scientific research and development--Approved by Government of India for benefit of deduction under section 80-IB(8A)--Conditions under section 80-IB(2) need not be fulfilled--Assessee entitled to deduction of income derived from transfer of technology developed by itself-- Asst. CIT v. S. K. Dynamics Pvt. Ltd. (Delhi) . . . 80--
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