Thursday, March 24, 2011

ITR Vol 8 Part 4 dated 28-03-2011

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

Volume 8 : Part 4 (Issue dated : 28-3-2011)

SUBJECT INDEX TO CASES REPORTED IN THIS PART

Appeal to Appellate Tribunal --Powers of Tribunal--Power to rectify mistakes in its order--Mistake must be apparent from record--Addition of undisclosed income in block assessment--Addition after considering document discovered during search--Addition not on basis of presumption under section 132(4)--Subsequent decision of Supreme Court in P. R. Metrani's case [2006] 287 ITR 209 not applicable--No mistake in original order--Addition could not be deleted in proceedings under section 254(2)--Income-tax Act, 1961, ss. 132, 254(2)-- Kailashnath Malhotra v. Joint CIT (Mumbai) . . . 457

----Rectification of mistakes--Application for rectification dismissed--Second application not maintainable--Income-tax Act, 1961, s. 254(2)-- Kailashnath Malhotra v. Joint CIT (Mumbai) . . . 457

Business expenditure --Disallowance--Consultancy charges paid to director--No evidence that payment was excessive or unreasonable--Disallowance of part of payment--Not justified--Income-tax Act, 1961, s. 40A(2)-- Tally Solutions P. Ltd. v. Deputy CIT (Bangalore) . . . 434

Business income --Benefit arising out of business--Assessee managing director of company--Pledge of shares held by company in another group company to assessee as security for loan from assessee--Shares in dematerialised form--Assessee shown as beneficial owner in account of depository participant--Not conclusive that transaction was sale--No material to show sale--Allegation that pledge was camouflage to avoid tax implications of sale and that acquisition of shares intended to acquire control of group company--Not substantiated--Loan repaid and company again shown as beneficial owner--Difference between loan amount and market price of shares not to be taxed as benefit arising out of business in assessee's hands--Income-tax Act, 1961, s. 2(24)(iv)--Companies Act, 1956, ss. 2(46), 82, 83, 187C--Depositories Act, 1996, ss. 10, 12, 25, 28--Sale of Goods Act, 1930, ss. 2(7), 19--Contract Act, 1872, ss. 148, 172--Securities and Exchange Board of India (Depositories and Participants) Regulations, 1996-- Joint CIT v. Mukesh D. Ambani (Mumbai) . . . 353

Cash credits --Return of assessee-company processed under section 143(1) accepting return--Balance-sheet showing increase in paid-up share capital and reserves--Enquiry--Directors of assessee attending from time to time and submitting list of shareholders--Letters sent to shareholders returned unserved in majority of cases--Assessee not filing any reply to show-cause notice--Sum added as unexplained cash credit--Appeal--Assessee denying filing of return and repudiating balance-sheet--Not permissible--Additional evidence cannot be admitted--Addition of cash credits proper--Income-tax Act, 1961, s. 68--Income-tax Rules, 1962, r. 46A-- Vishwanath Clorinate and Chemicals P. Ltd. v. ITO (Ahmedabad) . . . 387

Income --Remission of liability--Purchase of deep freezers for storage and supply of ice creams to dealers against deposits for deep freezers--Deposits not transferred to profit and loss account--Section 41 not applicable--Deep freezer deposits not income--Addition deleted--Income-tax Act, 1961, s. 41-- P. I. C. (Gujarat) Ltd. v. Deputy CIT (Ahmedabad) . . . 417

Penalty --Concealment of income and furnishing inaccurate particulars of income--Distinction--Amendment of section 271(1B) with retrospective effect from April 1, 1989--Distinction not maintained--Satisfaction arrived at for filing inaccurate particulars but penalty levied for concealment--Cancellation of penalty justified--Income-tax Act, 1961, ss. 271(1)(c), 271(1B)-- ITO v. Chhail Behari (Agra) . . . 383

Rectification of mistake --Assessing Officer allowing deduction under section 80HHC and later by an order under section 154 reducing deduction--Power under section 154 not to cover each and every decided issue which may result in possible loss of revenue--Order of rectification to be set aside--Income-tax Act, 1961, ss. 80HHC, 154-- Satish Kumar Aggarwal v. Deputy CIT (Delhi) . . . 424

Revision --Commissioner--Jurisdiction--Questionnaire issued by Assessing Officer covering all points raised by Commissioner in notice--Assessee replying to all points with supporting material--No ground for exercise of power of revision--Even if in opinion of Commissioner inquiry by Assessing Officer inadequate--Income-tax Act, 1961, s. 263-- Ramakant Singh v. CIT (Patna) . . . 403

----Commissioner--Set-off of unabsorbed depreciation allowed as accumulated book loss higher than unabsorbed depreciation--Revision to recompute book profit by taking into account adjustment made in earlier year--Concession in previous year not binding on assessee in other years--Order not erroneous--Income-tax Act, 1961, s. 263 -- Aircel Cellular Ltd. v. Asst. CIT (Chennai) . . . 446

Scientific research --Capital expenditure on scientific research--Deductible--Income-tax Act, 1961, s. 35(1)(iv)-- Tally Solutions P. Ltd. v. Deputy CIT (Bangalore) . . . 434

Shares --Pledge--General principles--Depositories Act--Effect of, on share transactions--Companies Act, 1956, ss. 2(46), 82, 83, 187C--Depositories Act, 1996, ss. 10, 12, 25, 28--Sale of Goods Act, 1930, ss. 2(7), 19--Contract Act, 1872, ss. 148, 172-- Joint CIT v. Mukesh D. Ambani (Mumbai) . . . 353

 

SECTIONWISE INDEX TO CASES REPORTED IN THIS PART

Companies Act, 1956 :

Ss. 2(46), 82, 83, 187C --Business income--Benefit arising out of business--Assessee managing director of company--Pledge of shares held by company in another group company to assessee as security for loan from assessee--Shares in dematerialised form--Assessee shown as beneficial owner in account of depository participant--Not conclusive that transaction was sale--No material to show sale--Allegation that pledge was camouflage to avoid tax implications of sale and that acquisition of shares intended to acquire control of group company--Not substantiated--Loan repaid and company again shown as beneficial owner--Difference between loan amount and market price of shares not to be taxed as benefit arising out of business in assessee's hands-- Joint CIT v. Mukesh D. Ambani (Mumbai) . . . 353

----Shares--Pledge--General principles--Depositories Act--Effect of, on share transactions-- Joint CIT v. Mukesh D. Ambani (Mumbai) . . . 353

Contract Act, 1872 :

Ss. 148, 172 --Business income--Benefit arising out of business--Assessee managing director of company--Pledge of shares held by company in another group company to assessee as security for loan from assessee--Shares in dematerialised form--Assessee shown as beneficial owner in account of depository participant--Not conclusive that transaction was sale--No material to show sale--Allegation that pledge was camouflage to avoid tax implications of sale and that acquisition of shares intended to acquire control of group company--Not substantiated--Loan repaid and company again shown as beneficial owner--Difference between loan amount and market price of shares not to be taxed as benefit arising out of business in assessee's hands-- Joint CIT v. Mukesh D. Ambani (Mumbai) . . . 353

----Shares--Pledge--General principles--Depositories Act--Effect of, on share transactions-- Joint CIT v. Mukesh D. Ambani (Mumbai) . . . 353

Depositories Act, 1996 :

Ss. 10, 12, 25, 28 --Business income--Benefit arising out of business--Assessee managing director of company--Pledge of shares held by company in another group company to assessee as security for loan from assessee--Shares in dematerialised form--Assessee shown as beneficial owner in account of depository participant--Not conclusive that transaction was sale--No material to show sale--Allegation that pledge was camouflage to avoid tax implications of sale and that acquisition of shares intended to acquire control of group company--Not substantiated--Loan repaid and company again shown as beneficial owner--Difference between loan amount and market price of shares not to be taxed as benefit arising out of business in assessee's hands-- Joint CIT v. Mukesh D. Ambani (Mumbai) . . . 353

----Shares--Pledge--General principles--Depositories Act--Effect of, on share transactions-- Joint CIT v. Mukesh D. Ambani (Mumbai) . . . 353

Income-tax Act, 1961 :

S. 2(24)(iv) --Business income--Benefit arising out of business--Assessee managing director of company--Pledge of shares held by company in another group company to assessee as security for loan from assessee--Shares in dematerialised form--Assessee shown as beneficial owner in account of depository participant--Not conclusive that transaction was sale--No material to show sale--Allegation that pledge was camouflage to avoid tax implications of sale and that acquisition of shares intended to acquire control of group company--Not substantiated--Loan repaid and company again shown as beneficial owner--Difference between loan amount and market price of shares not to be taxed as benefit arising out of business in assessee's hands-- Joint CIT v. Mukesh D. Ambani (Mumbai) . . . 353

S. 35(1)(iv) --Scientific research--Capital expenditure on scientific research--Deductible-- Tally Solutions P. Ltd. v. Deputy CIT (Bangalore) . . . 434

S. 40A(2) --Business expenditure--Disallowance--Consultancy charges paid to director--No evidence that payment was excessive or unreasonable--Disallowance of part of payment--Not justified-- Tally Solutions P. Ltd. v. Deputy CIT (Bangalore) . . . 434

S. 41 --Income--Remission of liability--Purchase of deep freezers for storage and supply of ice creams to dealers against deposits for deep freezers--Deposits not transferred to profit and loss account--Section 41 not applicable--Deep freezer deposits not income--Addition deleted-- P. I. C. (Gujarat) Ltd. v. Deputy CIT (Ahmedabad) . . . 417

S. 68 --Cash credits--Return of assessee-company processed under section 143(1) accepting return--Balance-sheet showing increase in paid-up share capital and reserves--Enquiry--Directors of assessee attending from time to time and submitting list of shareholders--Letters sent to shareholders returned unserved in majority of cases--Assessee not filing any reply to show-cause notice--Sum added as unexplained cash credit--Appeal--Assessee denying filing of return and repudiating balance-sheet--Not permissible--Additional evidence cannot be admitted--Addition of cash credits proper -- Vishwanath Clorinate and Chemicals P. Ltd. v. ITO (Ahmedabad) . . . 387

S. 80HHC --Rectification of mistake--Assessing Officer allowing deduction under section 80HHC and later by an order under section 154 reducing deduction--Power under section 154 not to cover each and every decided issue which may result in possible loss of revenue--Order of rectification to be set aside-- Satish Kumar Aggarwal v. Deputy CIT (Delhi) . . . 424

S. 132 --Appeal to Appellate Tribunal--Powers of Tribunal--Power to rectify mistakes in its order--Mistake must be apparent from record--Addition of undisclosed income in block assessment--Addition after considering document discovered during search--Addition not on basis of presumption under section 132(4)--Subsequent decision of Supreme Court in P. R. Metrani's case [2006] 287 ITR 209 not applicable--No mistake in original order--Addition could not be deleted in proceedings under section 254(2)-- Kailashnath Malhotra v. Joint CIT (Mumbai) . . . 457

S. 154 --Rectification of mistake--Assessing Officer allowing deduction under section 80HHC and later by an order under section 154 reducing deduction--Power under section 154 not to cover each and every decided issue which may result in possible loss of revenue--Order of rectification to be set aside-- Satish Kumar Aggarwal v. Deputy CIT (Delhi) . . . 424

S. 254(2) --Appeal to Appellate Tribunal--Powers of Tribunal--Power to rectify mistakes in its order--Mistake must be apparent from record--Addition of undisclosed income in block assessment--Addition after considering document discovered during search--Addition not on basis of presumption under section 132(4)--Subsequent decision of Supreme Court in P. R. Metrani's case [2006] 287 ITR 209 not applicable--No mistake in original order--Addition could not be deleted in proceedings under section 254(2)-- Kailashnath Malhotra v. Joint CIT (Mumbai) . . . 457

----Appeal to Appellate Tribunal--Rectification of mistakes--Application for rectification dismissed--Second application not maintainable-- Kailashnath Malhotra v. Joint CIT (Mumbai) . . . 457

S. 263 --Revision--Commissioner--Set-off of unabsorbed depreciation allowed as accumulated book loss higher than unabsorbed depreciation--Revision to recompute book profit by taking into account adjustment made in earlier year--Concession in previous year not binding on assessee in other years--Order not erroneous-- Aircel Cellular Ltd. v. Asst. CIT (Chennai) . . . 446

----Revision--Commissioner--Jurisdiction--Questionnaire issued by Assessing Officer covering all points raised by Commissioner in notice--Assessee replying to all points with supporting material--No ground for exercise of power of revision--Even if in opinion of Commissioner inquiry by Assessing Officer inadequate-- Ramakant Singh v. CIT (Patna) . . . 403

S. 271(1)(c) --Penalty--Concealment of income and furnishing inaccurate particulars of income--Distinction--Amendment of section 271(1B) with retrospective effect from April 1, 1989--Distinction not maintained--Satisfaction arrived at for filing inaccurate particulars but penalty levied for concealment--Cancellation of penalty justified-- ITO v. Chhail Behari (Agra) . . . 383

S. 271(1B) --Penalty--Concealment of income and furnishing inaccurate particulars of income--Distinction--Amendment of section 271(1B) with retrospective effect from April 1, 1989--Distinction not maintained--Satisfaction arrived at for filing inaccurate particulars but penalty levied for concealment--Cancellation of penalty justified-- ITO v. Chhail Behari (Agra) . . . 383

Income-tax Rules, 1962 :

R. 46A --Cash credits--Return of assessee-company processed under section 143(1) accepting return--Balance-sheet showing increase in paid-up share capital and reserves --Enquiry--Directors of assessee attending from time to time and submitting list of shareholders--Letters sent to shareholders returned unserved in majority of cases--Assessee not filing any reply to show-cause notice--Sum added as unexplained cash credit--Appeal--Assessee denying filing of return and repudiating balance-sheet--Not permissible--Additional evidence cannot be admitted--Addition of cash credits proper -- Vishwanath Clorinate and Chemicals P. Ltd. v. ITO (Ahmedabad) . . . 387

Sale of Goods Act, 1930 :

Ss. 2(7), 19 --Business income--Benefit arising out of business--Assessee managing director of company--Pledge of shares held by company in another group company to assessee as security for loan from assessee--Shares in dematerialised form--Assessee shown as beneficial owner in account of depository participant--Not conclusive that transaction was sale--No material to show sale--Allegation that pledge was camouflage to avoid tax implications of sale and that acquisition of shares intended to acquire control of group company--Not substantiated--Loan repaid and company again shown as beneficial owner--Difference between loan amount and market price of shares not to be taxed as benefit arising out of business in assessee's hands-- Joint CIT v. Mukesh D. Ambani (Mumbai) . . . 353

----Shares--Pledge--General principles--Depositories Act--Effect of, on share transactions-- Joint CIT v. Mukesh D. Ambani (Mumbai) . . . 353



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