Thursday, July 7, 2011

ITR Vol 335 Part 2 dated 11-07-2011

INCOME TAX REPORTS (ITR)

Volume 335 : Part 2 (Issue dated 11-7-2011)

SUBJECT INDEX TO CASES REPORTED IN THIS PART

HIGH COURTS

Appeal to Appellate Tribunal --Powers of Tribunal--Business expenditure--Commission paid to direct selling agents for services in sourcing hirers--Tribunal remanding matter to Assessing Officer as no sufficient material to give a finding as to allowability of entire brokerage--No infirmity--Income-tax Act, 1961-- Citi Financial Consumer Finance India Ltd . v. CIT (Delhi) . . . 209

Assessee --Person--Sports association is an assessee--Income-tax Act, 1961, s. 2(17), (31)-- PILCOM v. CIT (Cal) . . . 147

Assessment --Special audit--Order under section 142(2A) directing special audit--Condition precedent--Assessing Officer should be satisfied that accounts were complex and special audit was necessary--Reasons for special audit not mentioned--Order under section 142(2A)--Not valid--Income-tax Act, 1961, s. 142(2A)-- Hind Samachar Ltd . v. Asst. CIT (P&H) . . . 277

Business expenditure --Expenditure on advertisement and sales promotion--To be allowed--Income-tax Act, 1961, s. 37-- CIT v. Casio India Ltd . (Delhi) . . . 196

----General principles--Travel expenses--Resolution of company authorising foreign travel of managing director and his wife for business purposes--Travel expenses deductible--No resolution authorising foreign travel of wife of deputy managing director--Travel expenses of wife of deputy managing director--Not deductible--Income-tax Act, 1961, s. 37-- J. K. Industries Ltd . v. CIT (Cal) . . . . 170

----Manufacturer of soft beverages--Loss on bottle breakage--Deductible--Cost of repairs to wooden crates--Deductible--Income-tax Act, 1961, s. 37-- CIT v. Brindavan Beverages P. Ltd . (Karn) . . . 163

Capital gains --Capital asset--Definition--Exception--Personal effects--Sale of household items--Whether falling under section 2(14)--Matter remanded--Income-tax Act, 1961, s. 2(14)-- CIT v. Faiz Murtaza Ali (Delhi) . . . 272

Depreciation --Rate of depreciation--100 per cent. depreciation for machinery and plant used in mineral oil concerns--Wireline logging and perforation equipment used for oil companies--Entitled to 100 per cent. depreciation--Income-tax Act, 1961, s. 32--Income-tax Rules, 1962, r. 5-- CIT v. HLS India Ltd . (Delhi) . . . 292

Income from undisclosed sources --Manufacturer of soft beverages--Security deposit from distributors towards wooden crates and bottles--No evidence that amounts not received--Amount cannot be treated as income of assessee merely because distributors were related to assessee or employees of assessee--Income-tax Act, 1961-- CIT v. Brindavan Beverages P. Ltd. (Karn) . . . 163

Industrial undertaking --Investment allowance--Special deduction under sections 80-IA and 80-IB--Meaning of industrial undertaking--Manufacture or production of article or thing--Assessee providing wireline logging and perforation services to oil companies--Assessee is an industrial undertaking for purposes of section 32A and section 80-IA/80-IB--Income-tax Act, 1961, ss. 32A, 80-IA, 80-IB-- CIT v. HLS India Ltd .(Delhi) . . . 292

Interest on borrowed capital --Exemption--Claim to deduction of interest paid on borrowed capital--Borrowing for purpose of investment in partnership--Claim not established--Interest not allowable--Income-tax Act, 1961, ss. 10(2A), 36(1)(iii)-- CIT v. K. L. Srihari (Karn) . . . 215

Interpretation of taxing statutes --Interpretation should not lead to anomaly-- CIT v. Mridula, Prop. Dhruv Fabrics (P&H) . . . 266

Non-banking financial company --Income--Mercantile system of accounting--Interest on loans given--Loans became non-performing assets--Interest not received and possibility of recovery nil--Interest not to be treated to be accrued in favour of assessee--Income-tax Act, 1961, s. 5-- Director of Income-tax v. Brahamputra Capital Financial Services Ltd. (Delhi) . . . 182

Penalty --Concealment of income--Commissioner (Appeals) setting aside penalty, without going into merits--Matter to be heard with quantum appeal filed by assessee--Income-tax Act, 1961, s. 271(1)(c)-- CIT v. Rajesh Rana (P&H) . . . 207

----Concealment of income--Discrepancy in stocks found during search--Voluntary surrender of income by assessee during assessment proceedings to buy peace--Not by itself ground to impose penalty--Assessee placing evidence with corroborating proof explaining discrepancy in stocks--Deletion of penalty in identical circumstances in case of firm of which assessee partner becoming final--Penalty not imposable on assessee--Income-tax Act, 1961, s. 271(1)(c)-- CIT v. Harsh Talwar (Delhi) . . . 200

----Concealment of income--Survey--Assessing Officer initiating penalty on ground of discrepancies found during survey--Assessee disclosing particulars of income and surrendering entire amount in return duly filed--Penalty cannot be imposed --Income-tax Act, 1961, s. 271(1)(c)-- CIT v. SAS Pharmaceuticals (Delhi) . . . 259

Precedent --Effect of decision of Supreme Court in CIT v. Walchand and Co. P. Ltd. [1967] 65 ITR 381--J . K. Industries Ltd . v. CIT (Cal) . . . . 170

Reassessment --Notice after four years--Failure to disclose material facts necessary for assessment--Original assessment allowing deduction for housing project after examining facts--Notice after four years alleging that assessee was a works contractor and not a developer--No failure to disclose material facts necessary for assessment--Notice not valid--Income-tax Act, 1961, ss. 80-IB(10), 147, 148-- Aayojan Developers v. ITO (Guj) . . . 234

----Notice--Condition precedent--Recording of reasons--Effect of affidavit--Affidavit can explain reasons but cannot validate notice--Income-tax Act, 1961, s. 148-- Aayojan Developers v. ITO (Guj) . . . 234

----Notice--Validity--Notice for rectification issued beyond period of limitation--Rectification proceedings not pending--Notice of reassessment can be issued--Income-tax Act, 1961, ss. 148, 154-- CIT v. S. M. Overseas P. Ltd . (P&H) . . . 281

----Notice--Validity--Payment of usance interest on purchase of ship without deducting tax at source for assessment year 1994-95--Amendment of section 10(15) with retrospective effect from 1-4-1962 exempting usance interest--Notice not valid--Income-tax Act, 1961, ss. 10(15)(iv)(c), 40(a)(i), 148-- Trivenu Ship Breakers v. Harsh Prakash (Guj) . . . 284

Rectification of mistakes --Application for rectification--Effect of sub-section (8) of section 154--Order on application to be made within six months of receipt of application--Failure to pass order--Application again made to new incumbent upon restructuring of Department--Application cannot be rejected on the ground of limitation--Income-tax Act, 1961, s. 154(8)-- State Bank of India v. CIT (TDS) (Patna) . . . 287

Return --Delay in filing return--Interest--Assessing Officer holding assessee not eligible for benefit of loss to be carried forward for failure to file return within due date and levying interest--Tribunal following identical issue in the case of a family member allowing assessee's claim--That assessee, a partner of firm in whose case due date for filing return was later--Whether assessee also partner--Matter remanded--Income-tax Act, 1961, ss. 139, 234A-- CIT v. Sashi Prakash Khemka (Delhi) . . . 176

Search and seizure --Block assessment--Assessment of third person--Scope of section 158BD--Action under section 158BD must be taken before completion of assessment of searched person--Block assessment under section 158BC completed on 30-3-2005--Satisfaction under section 158BD recorded on 15-7-2005--Proceedings not valid--Income-tax Act, 1961, ss. 158BC, 158BD-- CIT v. Mridula, Prop. Dhruv Fabrics (P&H) . . . 266

----Block assessment--Delay in filing returns--Interest payable--Income-tax Act, 1961, s. 158BFA-- CIT v. K. L. Srihari (Karn) . . . 215

----Block assessment--Surcharge to be paid--Income-tax Act, 1961, s. 113-- CIT v. K. L. Srihari (Karn) . . . 215

----Requisitioning of assets--Warrant of authorisation under section 132A--Cash and silver seized by Railway police--Report of Director of Income-tax that assets would not be disclosed to Revenue--Warrant of authorisation under section 132A--Valid--Income-tax Act, 1961, s. 132A-- Smt. Suman Singhai v. Director of Income-tax (Investigation) (MP) . . . 188

Sports association --Deduction of tax at source--Effect of sections 115BBA and 194E--Sports association in England granting permission to Indian sports association to conduct matches in India--Amount paid by Indian sports association to non-resident sports association--Tax to be deducted on such payments--Income-tax Act, 1961, ss. 115BBA, 194E-- PILCOM v. CIT (Cal) . . . 147

SECTIONWISE INDEX TO CASES REPORTED IN THIS PART

Income-tax Act, 1961 :

S. 2(14) --Capital gains--Capital asset--Definition--Exception--Personal effects--Sale of household items--Whether falling under section 2(14)--Matter remanded-- CIT v. Faiz Murtaza Ali (Delhi) . . . 272

S. 2(17) --Assessee--Person--Sports association is an assessee-- PILCOM v. CIT (Cal) . . . 147

S. 2(31) --Assessee--Person--Sports association is an assessee-- PILCOM v. CIT (Cal) . . . 147

S. 5 --Non-banking financial company--Income--Mercantile system of accounting--Interest on loans given--Loans became non-performing assets--Interest not received and possibility of recovery nil--Interest not to be treated to be accrued in favour of assessee-- Director of Income-tax v. Brahamputra Capital Financial Services Ltd. (Delhi) . . . 182

S. 10(2A) --Interest on borrowed capital--Exemption--Claim to deduction of interest paid on borrowed capital--Borrowing for purpose of investment in partnership--Claim not established--Interest not allowable-- CIT v. K. L. Srihari (Karn) . . . 215

S. 10(15)(iv)(c) --Reassessment--Notice--Validity--Payment of usance interest on purchase of ship without deducting tax at source for assessment year 1994-95--Amendment of section 10(15) with retrospective effect from 1-4-1962 exempting usance interest--Notice not valid-- Trivenu Ship Breakers v. Harsh Prakash (Guj) . . . 284

S. 32 --Depreciation--Rate of depreciation--100 per cent. depreciation for machinery and plant used in mineral oil concerns--Wireline logging and perforation equipment used for oil companies--Entitled to 100 per cent. depreciation-- CIT v. HLS India Ltd .(Delhi) . . . 292

S. 32A --Industrial undertaking--Investment allowance--Special deduction under sections 80-IA and 80-IB--Meaning of industrial undertaking--Manufacture or production of article or thing--Assessee providing wireline logging and perforation services to oil companies--Assessee is an industrial undertaking for purposes of section 32A and section 80-IA/80-IB-- CIT v. HLS India Ltd . (Delhi) . . . 292

S. 36(1)(iii) --Interest on borrowed capital--Exemption--Claim to deduction of interest paid on borrowed capital--Borrowing for purpose of investment in partnership--Claim not established--Interest not allowable-- CIT v. K. L. Srihari (Karn) . . . 215

S. 37 --Business expenditure--Expenditure on advertisement and sales promotion--To be allowed-- CIT v. Casio India Ltd . (Delhi) . . . 196

Business expenditure--General principles--Travel expenses--Resolution of company authorising foreign travel of managing director and his wife for business purposes--Travel expenses deductible--No resolution authorising foreign travel of wife of deputy managing director--Travel expenses of wife of deputy managing director--Not deductible-- J. K. Industries Ltd . v. CIT (Cal) . . . 170

Business expenditure--Manufacturer of soft beverages--Loss on bottle breakage--Deductible--Cost of repairs to wooden crates--Deductible-- CIT v. Brindavan Beverages P. Ltd . (Karn) . . . 163

S. 40(a)(i) --Reassessment--Notice--Validity--Payment of usance interest on purchase of ship without deducting tax at source for assessment year 1994-95--Amendment of section 10(15) with retrospective effect from 1-4-1962 exempting usance interest--Notice not valid-- Trivenu Ship Breakers v. Harsh Prakash (Guj) . . . 284

S. 80-IA --Industrial undertaking--Investment allowance--Special deduction under sections 80-IA and 80-IB--Meaning of industrial undertaking--Manufacture or production of article or thing--Assessee providing wireline logging and perforation services to oil companies--Assessee is an industrial undertaking for purposes of section 32A and section 80-IA/80-IB-- CIT v. HLS India Ltd . (Delhi) . . . 292

S. 80-IB --Industrial undertaking--Investment allowance--Special deduction under sections 80-IA and 80-IB--Meaning of industrial undertaking--Manufacture or production of article or thing--Assessee providing wireline logging and perforation services to oil companies--Assessee is an industrial undertaking for purposes of section 32A and section 80-IA/80-IB-- CIT v. HLS India Ltd . (Delhi) . . . 292

S. 80-IB(10) --Reassessment--Notice after four years--Failure to disclose material facts necessary for assessment--Original assessment allowing deduction for housing project after examining facts--Notice after four years alleging that assessee was a works contractor and not a developer--No failure to disclose material facts necessary for assessment--Notice not valid-- Aayojan Developers v. ITO (Guj) . . . 234

S. 113 --Search and seizure--Block assessment--Surcharge to be paid-- CIT v. K. L. Srihari (Karn) . . . 215

S. 115BBA --Sports association--Deduction of tax at source--Effect of sections 115BBA and 194E--Sports association in England granting permission to Indian sports association to conduct matches in India--Amount paid by Indian sports association to non-resident sports association--Tax to be deducted on such payments-- PILCOM v. CIT (Cal) . . . 147

S. 132A --Search and seizure--Requisitioning of assets--Warrant of authorisation under section 132A--Cash and silver seized by Railway police--Report of Director of Income-tax that assets would not be disclosed to Revenue--Warrant of authorisation under section 132A--Valid-- Smt. Suman Singhai v. Director of Income-tax (Investigation) (MP) . . . 188

S. 139 --Return--Delay in filing return--Interest--Assessing Officer holding assessee not eligible for benefit of loss to be carried forward for failure to file return within due date and levying interest--Tribunal following identical issue in the case of a family member allowing assessee's claim--That assessee, a partner of firm in whose case due date for filing return was later--Whether assessee also partner--Matter remanded-- CIT v. Sashi Prakash Khemka (Delhi) . . . 176

S. 142(2A) --Assessment--Special audit--Order under section 142(2A) directing special audit--Condition precedent--Assessing Officer should be satisfied that accounts were complex and special audit was necessary--Reasons for special audit not mentioned--Order under section 142(2A)--Not valid-- Hind Samachar Ltd . v. Asst. CIT (P&H) . . . 277

S. 147 --Reassessment--Notice after four years--Failure to disclose material facts necessary for assessment--Original assessment allowing deduction for housing project after examining facts--Notice after four years alleging that assessee was a works contractor and not a developer--No failure to disclose material facts necessary for assessment--Notice not valid-- Aayojan Developers v. ITO (Guj) . . . 234

S. 148 --Reassessment--Notice--Condition precedent--Recording of reasons--Effect of affidavit--Affidavit can explain reasons but cannot validate notice-- Aayojan Developers v. ITO (Guj) . . . 234

Reassessment--Notice--Validity--Notice for rectification issued beyond period of limitation--Rectification proceedings not pending--Notice of reassessment can be issued-- CIT v. S. M. Overseas P. Ltd . (P&H) . . . 281

Reassessment--Notice--Validity--Payment of usance interest on purchase of ship without deducting tax at source for assessment year 1994-95--Amendment of section 10(15) with retrospective effect from 1-4-1962 exempting usance interest--Notice not valid-- Trivenu Ship Breakers v. Harsh Prakash (Guj) . . . 284

Reassessment--Notice after four years--Failure to disclose material facts necessary for assessment--Original assessment allowing deduction for housing project after examining facts--Notice after four years alleging that assessee was a works contractor and not a developer--No failure to disclose material facts necessary for assessment--Notice not valid-- Aayojan Developers v. ITO (Guj) . . . 234

S. 154 --Reassessment--Notice--Validity--Notice for rectification issued beyond period of limitation--Rectification proceedings not pending--Notice of reassessment can be issued-- CIT v. S. M. Overseas P. Ltd . (P&H) . . . 281

S. 154(8) --Rectification of mistakes--Application for rectification--Effect of sub-section (8) of section 154--Order on application to be made within six months of receipt of application--Failure to pass order--Application again made to new incumbent upon restructuring of Department--Application cannot be rejected on the ground of limitation-- State Bank of India v. CIT (TDS) (Patna) . . . 287

S. 158BC --Search and seizure--Block assessment--Assessment of third person--Scope of section 158BD--Action under section 158BD must be taken before completion of assessment of searched person--Block assessment under section 158BC completed on 30-3-2005--Satisfaction under section 158BD recorded on 15-7-2005--Proceedings not valid-- CIT v. Mridula, Prop. Dhruv Fabrics (P&H) . . . 266

S. 158BD --Search and seizure--Block assessment--Assessment of third person--Scope of section 158BD--Action under section 158BD must be taken before completion of assessment of searched person--Block assessment under section 158BC completed on 30-3-2005--Satisfaction under section 158BD recorded on 15-7-2005--Proceedings not valid-- CIT v. Mridula, Prop. Dhruv Fabrics (P&H) . . . 266

S. 158BFA --Search and seizure--Block assessment--Delay in filing returns--Interest payable-- CIT v. K. L. Srihari (Karn) . . . 215

S. 194E --Sports association--Deduction of tax at source--Effect of sections 115BBA and 194E--Sports association in England granting permission to Indian sports association to conduct matches in India--Amount paid by Indian sports association to non-resident sports association--Tax to be deducted on such payments-- PILCOM v. CIT (Cal) . . . 147

S. 234A --Return--Delay in filing return--Interest--Assessing Officer holding assessee not eligible for benefit of loss to be carried forward for failure to file return within due date and levying interest--Tribunal following identical issue in the case of a family member allowing assessee's claim--That assessee, a partner of firm in whose case due date for filing return was later--Whether assessee also partner--Matter remanded-- CIT v. Sashi Prakash Khemka (Delhi) . . . 176

S. 271(1)(c) --Penalty--Concealment of income--Commissioner (Appeals) setting aside penalty, without going into merits--Matter to be heard with quantum appeal filed by assessee-- CIT v. Rajesh Rana (P&H) . . . 207

Penalty--Concealment of income--Discrepancy in stocks found during search--Voluntary surrender of income by assessee during assessment proceedings to buy peace--Not by itself ground to impose penalty--Assessee placing evidence with corroborating proof explaining discrepancy in stocks--Deletion of penalty in identical circumstances in case of firm of which assessee partner becoming final--Penalty not imposable on assessee-- CIT v. Harsh Talwar (Delhi) . . . 200

Penalty--Concealment of income--Survey--Assessing Officer initiating penalty on ground of discrepancies found during survey--Assessee disclosing particulars of income and surrendering entire amount in return duly filed--Penalty cannot be imposed -- CIT v. SAS Pharmaceuticals (Delhi) . . . 259

Income-tax Rules, 1962 :

r. 5 --Depreciation--Rate of depreciation--100 per cent. depreciation for machinery and plant used in mineral oil concerns--Wireline logging and perforation equipment used for oil companies--Entitled to 100 per cent. depreciation-- CIT v. HLS India Ltd .(Delhi) . . . 292

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