INCOME TAX REPORTS (ITR) HIGHLIGHTS

ISSUE DATED 13-6-2011

Volume 334 Part 3

SUPREME COURT JUDGMENTS

-->  Business loss : Loss allowed for earlier and subsequent years : Matter remanded : Perfetti Van Melle India P. Ltd. v. CIT p. 259

-->  Assessment order passed without granting opportunity to cross-examine : High Court ought only to direct AO to grant cross-examine : ITO v. M. Pirai Choodi p. 262

-->  Huge stakes involved : Delay of department in appealing : High Court to decide case on merits and not to dismiss appeal on ground of delay : CIT v. West Bengal Infrastructure Development Finance Corporation Ltd. p. 269

HIGH COURT JUDGMENTS

-->  Tribunal finding no error in unabsorbed depreciation allowed to be set of in assessment year in question while passing original assessment order : S. 154 cannot be invoked : CIT v. Eli Lilly and Co. India P. Ltd. (Delhi) p. 186

-->  Income from sale of shares held as investment : Assessable as capital gains : CIT v. Amit Modi (P&H) p. 192

-->  Construction business : Assessee regularly following completed contract method and not giving scope for any complaint in any earlier year : Unnecessary for AO to invoke s. 145(3) : CIT v. SAS Hotels and Enterprises Ltd. (Mad) p. 194

-->  Unexplained investment : No evidence that admission by assessee was untrue : Assessment based on admission valid : Hukum Chand Jain v. ITO (Raj) p. 197

-->  Power of Commissioner (Appeals) to admit additional evidence : Commissioner (Appeals) justified in obtaining revised report of DVO and deleting additions : CIT v. Om Overseas (P&H) p. 202

-->  Settlement of cases : Notice u/s. 245D alleging fraud could not be quashed : Chandragiri Construction Co. v. ITSC (Mad) p. 211

-->  Tribunal disallowing expenses on foreign travel on ground no evidence that visit was for business purpose : No question of law : Vithal Overseas v. CIT (P&H) p. 229

-->  Transfer of cases : Reasons recorded in a separate sheet and not communicated to assessee : Requirement u/s 127 not satisfied : Deep Malhotra v. Chief CIT ( P&H) p. 232

-->  Interest earned from fixed deposits taxable : Madras Cricket Club v. ITO (Mad) p. 238

-->  Additional Director (Investigation) does not have power to issue warrant : CIT v. Pawan Kumar Garg (Delhi) p. 240

-->  Assessment : Co-owners : Assessment to be made on co-owners as individuals and not in the status of AOP : CIT v. Smt. Sunita Rani Aggarwal (All) p. 252

-->  Gas supplied to assessee by ONGC : Dispute regarding price settled subsequently : Liability to pay accrued during the years in which gas was received : CIT v. Mahendra Mills Ltd. (Guj) p. 254

-->  Effect of s. 36 wef 1-4-1989 : Writing of debt as irrecoverable sufficient : CIT v. Sirpur Paper Mills Ltd. (AP) p. 256

-->  Tribunal finding interest earned on unutilised portion of amount borrowed for business purposes : Interest constituted business income : CIT v. Varun Shipping Co. Ltd. (Bom) p. 263

-->  Conviction and sentence of detention : Subsequent application for compounding of offence not maintainable : Anil Tools and Forgings v. Chief CIT ( P&H) p. 265

-->  Provision for non-performing assets : Assessee not entitled to deduction : Indbank Merchant Banking Services Ltd. v. Asst. CIT (Mad) p. 271

-->  No new industrial unit established nor existing industrial undertaking expanded : Disallowance of preliminary expenses justified : Indbank Merchant Banking Services Ltd. v. Asst. CIT (Mad) p. 271

STATUTES AND NOTIFICATIONS

-->  Rules :

Income-tax (Third Amendment) Rules, 2011 (Contd.)

-->  Notifications :

Income-tax Act, 1961 : Notification under rule 6(b) of Part A of the Fourth Schedule : Recognised provided fund : Rate of interest notified p. 295

Income-tax Act, 1961 : Notification under section 90 : Agreement between the Government of the Republic of India and the Government of the Commonwealth of the Bahamas for the Exchange of Information with respect to taxes p. 296

NEWS-BRIEF

-->  India and Ethiopia sign Double Taxation Avoidance Agreement

India signed a Double Taxation Avoidance Agreement (DTAA) with the Federal Democratic Republic of Ethiopia for the avoidance of double taxation and for the prevention of fiscal evasion with respect to taxes on income on May 25, 2011 at Addis Ababa.

The DTAA provides that business profits will be taxable in the source State if the activities of an enterprise constitute a permanent establishment in the source State. Examples of permanent establishment include a branch, factory, etc. Profits of a construction, assembly or installation projects will be taxed in the State of source if the project continues in that State for more than 183 days.

Profits derived by an enterprise from the operation of ships or aircrafts in international traffic shall be taxable in the country of residence of the enterprise. Dividends, interest, royalties and fees for technical services income will be taxed both in the country of residence and in the country of source. However, the maximum rate of tax to be charged in the country of source will not exceed 7.5% in the case of dividends and 10% in the case of interest, royalties and fees for technical services. Capital gains from the sale of shares will be taxable in the country of source.

The Agreement further incorporates provisions for effective exchange of information and assistance in collection of taxes between tax authorities of the two countries in line with internationally accepted standards including exchange of banking information and incorporates anti-abuse provisions to ensure that the benefits of the Agreement are availed only by the genuine residents of the two countries.

The Agreement will provide tax stability to the residents of India and Ethiopia and facilitate mutual economic co-operation as well as stimulate the flow of investment, technology and services between India and Ethiopia. [Source : www.pib.nic.in dated May 27, 2011]