Sunday, April 24, 2011

ITR V 333 P 1 dt 25.04.11

INCOME TAX REPORTS (ITR)

Volume 333 : Part 1 (Issue dated 25-4-2011)

SUBJECT INDEX TO CASES REPORTED IN THIS PART

SUPREME COURT

Foreign exchange --Contravention of provisions of Act--Liable to prosecution as well as penalty by adjudicating officer--Proceeding before adjudicating officer for acts considered offence--Exoneration in adjudication proceedings--No case for criminal proceedings thereafter on same facts--Foreign Exchange Regulation Act, 1973, ss. 8, 9, 50, 51, 56-- Radheshyam Kejriwal v. State of West Bengal . . . 58

HIGH COURTS

Appeal to Appellate Tribunal --Stay--Pendency of an identical issue before Special Bench--Whether Tribunal has no power to extend stay beyond a period of 365 days--Not decided--Direction for pending matter to be disposed of within four months--Income-tax Act, 1961, s. 254(2A)-- Jethmal Faujimal Soni v. ITAT (Bom) . . . 96

Appellate Tribunal --Powers--Change of law--Tribunal has power to extend period of stay beyond three hundred and sixty-five days--Income-tax Act, 1961, s. 254(2A), third proviso-- CIT v. Ronuk Industries Ltd. (Bom) . . . 99

Business expenditure --Capital or revenue expenditure--Amount spent for expansion of business--Expansion plans abandoned--Amount spent revenue expenditure--Amount paid to consultants for increasing efficiency and profitability--Assignment terminated before work was completed--Amount spent constituted revenue expenditure--Income-tax Act, 1961, s. 37-- Indo Rama Synthetics India Ltd . v. CIT (Delhi) . . . 18

Cash credits --Appeal to Appellate Tribunal--Appeal by Department against order of Commissioner (Appeals) deleting additions--Department seeking adjournment to file paper book --Tribunal allowing appeal without paper book--Assessee to be given opportunity to submit papers--Order of Tribunal to be set aside--Matter remanded--Income-tax Act, 1961, s. 68-- Krishan Kumar Sethi v. CIT (Delhi) . . . 16

----Share application money--Relevant material details and particulars of share applicants available on record--Assessing Officer to make proper investigation and reach shareholders--Addition cannot be made in assessee's hands--Income-tax Act, 1961-- CIT v. Creative World Telefilms Ltd. (Bom) . . . 100

----Share application money received by assessee- company--Assessee identifying shareholders--Creditworthiness of intending shareholders--Burden of proof--Not on assessee--Department to enquire with investors--Income-tax Act, 1961, s. 68-- CIT v. Arunananda Textiles P. Ltd. (Karn) . . . 116

----Share application money--Assessee producing PAN number, bank account, copies of income-tax returns of share applicants--Primary onus of assessee discharged--Addition not sustainable--Income-tax Act, 1961, s. 68-- CIT v. Oasis Hospitalities P. Ltd . (Delhi) . . . 119

----Share application money--Finding that identity and creditworthiness of share applicants not proved--Addition justified--Income-tax Act, 1961, s. 68-- CITv. Oasis Hospitalities P. Ltd. (Delhi) . . . 119

Income from house property --Annual letting value--Determination--"Amount for which property could reasonably be expected to be let"--Determination of fair rent--Principles--Assessee taking inordinately large sum as interest-free deposit compared to agreed monthly rent--Addition of notional interest thereon--Not proper--Fair rent must be determined--Income-tax Act, 1961, s. 23(1)(a), (b)-- CIT v. Moni Kumar Subba [FB] (Delhi) . . . 38

Industrial undertaking --Special deduction under section 80-IB--Condition precedent--Manufacture or production of article--Conversion of corrugated sheets into boxes amounts to manufacture--Assessee entitled to special deduction under section 80-IB--Income-tax Act, 1961, s. 80-IB-- CIT v. Zainab Trading P. Ltd. (Mad) . . . 144

Local authority --Meaning of--Agency constituted by State Government for agricultural and rural development--Not a local authority--Not entitled to reduction of rate of tax--Income-tax Act, 1961, ss. 10(20), 197--General Clauses Act, 1897, s. 3-- Sone Command Area Development Agency v. Union of India(Patna) . . . 102

Penalty --Concealment of income--Share application money--Identity and creditworthiness of share applicants not proved on account of passage of substantial period--Not a case of concealment of income--Tribunal rightly deleting penalty--Income-tax Act, 1961, s. 271(1)(c)-- CIT v. Oasis Hospitalities P. Ltd. (Delhi) . . . 119

Precedent --Effect of decision of Supreme Court in Union of India v. R. C. Jain [1981] AIR 1981 SC 951-- Sone Command Area Development Agency v.Union of India (Patna) . . . 102

Rectification of mistakes --Cash credit--No satisfactory explanation regarding credit--Addition to total income of assessee--No mistake on record--Addition could not be deleted in rectification proceedings--Income-tax Act, 1961, s. 154-- Goel Die Cast Ltd. v. CIT (P&H) . . . 141

Revision --Deduction of tax at source--Certificate of no deduction--Order under section 197--Writ--High Court--Proper remedy is revision under section 264(2)--Writ petition not maintainable--Income-tax Act, 1961, ss. 197, 264(2)--Constitution of India, art. 226-- SIS Live v. ITO (Delhi) . . . 13

Undisclosed income --Excess unexplained cash--Unexplained trade advances--Tribunal deleting additions without any legal and valid reasons--Matter remanded--Income-tax Act, 1961-- CIT v. ASK Brothers Ltd . (Karn) . . . 111

Unexplained investment --Share application money--Proposed shareholders admitting payment of amounts for shares to be allotted--No investigation with regard to persons who submitted share applications--Amounts not undisclosed income of assessee--Income-tax Act, 1961-- CIT v. ASK Brothers Ltd.(Karn) . . . 111

AUTHORITY FOR ADVANCE RULINGS

Double taxation avoidance agreement --Rule that nationals of one contracting State should not be subjected to taxation more burdensome than that of the other--Capital gains--Arising from the sale of shares--Long-term capital gains--Denial to non-resident of benefit given to resident--Does not amount to discrimination--Income-tax Act, 1961, s. 48, second proviso--Double Taxation Avoidance Agreement between India and Canada, art. 24(1)-- Transworld Garnet Co. Ltd. , In re . . . 1

Non-resident --Double taxation avoidance--Capital gains--Resident of Mauritius--Capital gains arising from sale of shares in Indian company to another Mauritian company--Not taxable in India--Income-tax Act, 1961--Double Taxation Avoidance Agreement between India and Mauritius, art. 13(4)-- D. B. Zwirn Mauritius Trading No. 3 Ltd ., In re . . . 32

 

SECTIONWISE INDEX TO CASES REPORTED IN THIS PART

Constitution of India :

Art. 226 --Revision--Deduction of tax at source--Certificate of no deduction--Order under section 197--Writ--High Court--Proper remedy is revision under section 264(2)--Writ petition not maintainable-- SIS Live v. ITO (Delhi) . . . 13

Double Taxation Avoidance Agreement between India and Canada :

Art. 24(1) --Double taxation avoidance agreement--Rule that nationals of one contracting State should not be subjected to taxation more burdensome than that of the other--Capital gains--Arising from the sale of shares--Long-term capital gains--Denial to non-resident of benefit given to resident--Does not amount to discrimination-- Transworld Garnet Co. Ltd. , In re (AAR) . . . 1

Double Taxation Avoidance Agreement between India and Mauritius :

Art. 13(4) --Non-resident--Double taxation avoidance--Capital gains--Resident of Mauritius--Capital gains arising from sale of shares in Indian company to another Mauritian company--Not taxable in India-- D. B. Zwirn Mauritius Trading No. 3 Ltd ., In re (AAR) . . . 32

Foreign Exchange Regulation Act, 1973 :

Ss. 8, 9, 50, 51, 56 --Foreign exchange--Contravention of provisions of Act--Liable to prosecution as well as penalty by adjudicating officer--Proceeding before adjudicating officer for acts considered offence--Exoneration in adjudication proceedings--No case for criminal proceedings thereafter on same facts-- Radheshyam Kejriwal v. State of West Bengal (SC) . . . 58

General Clauses Act, 1897 :

S. 3 --Local authority--Meaning of--Agency constituted by State Government for agricultural and rural development--Not a local authority--Not entitled to reduction of rate of tax-- Sone Command Area Development Agency v. Union of India (Patna) . . . 102

Income-tax Act, 1961 :

S. 10(20) --Local authority--Meaning of--Agency constituted by State Government for agricultural and rural development--Not a local authority--Not entitled to reduction of rate of tax-- Sone Command Area Development Agency v. Union of India (Patna) . . . 102

S. 23(1)(a), (b) --Income from house property--Annual letting value--Determination--"Amount for which property could reasonably be expected to be let"--Determination of fair rent--Principles--Assessee taking inordinately large sum as interest-free deposit compared to agreed monthly rent--Addition of notional interest thereon--Not proper--Fair rent must be determined-- CIT v. Moni Kumar Subba [FB] (Delhi) . . . 38

S. 37 --Business expenditure--Capital or revenue expenditure--Amount spent for expansion of business--Expansion plans abandoned--Amount spent revenue expenditure--Amount paid to consultants for increasing efficiency and profitability--Assignment terminated before work was completed--Amount spent constituted revenue expenditure-- Indo Rama Synthetics India Ltd . v. CIT (Delhi) . . . 18

S. 48, second proviso --Double taxation avoidance agreement--Rule that nationals of one contracting State should not be subjected to taxation more burdensome than that of the other--Capital gains--Arising from the sale of shares--Long-term capital gains--Denial to non-resident of benefit given to resident--Does not amount to discrimination-- Transworld Garnet Co. Ltd. , In re (AAR) . . . 1

S. 68 --Cash credits--Appeal to Appellate Tribunal--Appeal by Department against order of Commissioner (Appeals) deleting additions--Department seeking adjournment to file paper book --Tribunal allowing appeal without paper book--Assessee to be given opportunity to submit papers--Order of Tribunal to be set aside--Matter remanded-- Krishan Kumar Sethi v. CIT (Delhi) . . . 16

----Cash credits--Share application money received by assessee- company--Assessee identifying shareholders--Creditworthiness of intending shareholders--Burden of proof--Not on assessee--Department to enquire with investors-- CIT v. Arunananda Textiles P. Ltd. (Karn) . . . 116

----Cash credits--Share application money--Assessee producing PAN number, bank account, copies of income-tax returns of share applicants--Primary onus of assessee discharged--Addition not sustainable-- CIT v. Oasis Hospitalities P. Ltd (Delhi) . . . 119

----Cash credits--Share application money--Finding that identity and creditworthiness of share applicants not proved--Addition justified-- CIT v. Oasis Hospitalities P. Ltd. (Delhi) . . . 119

S. 80-IB --Industrial undertaking--Special deduction under section 80-IB--Condition precedent--Manufacture or production of article--Conversion of corrugated sheets into boxes amounts to manufacture--Assessee entitled to special deduction under section 80-IB-- CIT v. Zainab Trading P. Ltd. (Mad) . . . 144

S. 154 --Rectification of mistakes--Cash credit--No satisfactory explanation regarding credit--Addition to total income of assessee--No mistake on record--Addition could not be deleted in rectification proceedings-- Goel Die Cast Ltd. v. CIT (P&H) . . . 141

S. 197 --Local authority--Meaning of--Agency constituted by State Government for agricultural and rural development--Not a local authority--Not entitled to reduction of rate of tax-- Sone Command Area Development Agency v. Union of India (Patna) . . . 102

----Revision--Deduction of tax at source--Certificate of no deduction--Order under section 197--Writ--High Court--Proper remedy is revision under section 264(2)--Writ petition not maintainable-- SIS Live v. ITO (Delhi) . . . 13

S. 254(2A) --Appeal to Appellate Tribunal--Stay--Pendency of an identical issue before Special Bench--Whether Tribunal has no power to extend stay beyond a period of 365 days--Not decided--Direction for pending matter to be disposed of within four months-- Jethmal Faujimal Soni v. ITAT (Bom) . . . 96

S. 254(2A), third proviso --Appellate Tribunal--Powers--Change of law--Tribunal has power to extend period of stay beyond three hundred and sixty-five days-- CIT v. Ronuk Industries Ltd. (Bom) . . . 99

S. 264(2) --Revision--Deduction of tax at source--Certificate of no deduction--Order under section 197--Writ--High Court--Proper remedy is revision under section 264(2)--Writ petition not maintainable-- SIS Live v. ITO (Delhi) . . . 13

S. 271(1)(c) --Penalty--Concealment of income--Share application money--Identity and creditworthiness of share applicants not proved on account of passage of substantial period--Not a case of concealment of income--Tribunal rightly deleting penalty-- CIT v. Oasis Hospitalities P. Ltd. (Delhi) . . . 119

 

 

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