ITR Volume 336 : Part 3 Issue dated 22-8-2011

INCOME TAX REPORTS (ITR)

Volume 336 : Part 3 (Issue dated 22-8-2011)

SUBJECT INDEX TO CASES REPORTED IN THIS PART

HIGH COURTS

Appeal to High Court --CBDT instruction prohibiting appeals where tax effect is below Rs. 4 lakhs--CBDT instruction that notional tax effect could be taken in loss cases--Does not apply to appeals filed prior thereto--Appeal not maintainable--CBDT Instruction No. 5, dated 24-10-2005 and O. M. dated 15-5-2008--Income-tax Act, 1961, s. 260A-- CIT v. Continental Construction Ltd. (Delhi) . . . 394

Association of persons --Member--Exemption--Exclusion of company, co-operative society or registered society--Refers to association of persons not member--Private company member of association of person entitled to exemption--Income-tax Act, 1961, ss. 40(ba), 67A, 86-- CIT v. Ideal Entertainment P. Ltd. (Mad) . . . 357

Best judgment assessment --Assessment should be on rational basis--Profit margin disclosed by assessee cannot be rejected arbitrarily--Income-tax Act, 1961-- CIT v. Aero Club (Delhi) . . . 400

Business expenditure --Accounting--Company following completed contract method of accounting--Method accepted by Assessing Officer--Provision for anticipated losses--Deductible --Income-tax Act, 1961-- CIT v. Triveni Engineering and Industries Ltd. (Delhi) . . . 374

----Assessee writing off 80 per cent. of cost of dies and tools--Finding that tools and dies once used had no resale value--Writing off regularly done by assessee--Amount written off deductible--Design and consultancy charges on tools and dies--Deductible--Income-tax Act, 1961-- CIT v. Metalman Auto P. Ltd. (P&H) . . . 434

----Deduction only on actual payment--Sales tax--State Government allowing deferred payment--Effect of Circular No. 674 dated 29-12-1993--Amount cannot be disallowed--Income-tax Act, 1961, s. 43B--CBDT Circular No. 674, dated 29-12-1993-- CIT v. Bihar Foundry and Castings Ltd. (Jharkhand) . . . 387

----Disallowance--Entertainment expenditure--Exclusion from disallowance--Expenditure on food or beverages provided to employees in office or other place of work--Meaning of other place of work--Amount spent on sales dealers conference, press conference and hotel--Part of amount spent on employees--Deductible--Income-tax Act, 1961, s. 37-- CIT v. Indian Rayon and Industries Ltd. (Bom) . . . 479

----Roll over charges for repayment of principal amount of foreign exchange loans for capital investment--Not deductible--Expenditure on gift and presentation articles--Expenditure on school for children of staff and workers--Pro rata/proportionate premium on redemption of non-convertible debentures issued during assessment year 1988-89--Deductible--Income-tax Act, 1961, s. 37-- CIT v. Indian Rayon and Industries Ltd .(Bom) . . . 479

Charitable purposes --Charitable trust--Registration of trust--Commissioner has power to cancel registration--Notice of cancellation must give reasons--Search operations against assessee--No assessment based on search--Order cancelling registration set aside by Tribunal--Notice again for cancellation of registration--Not valid--Income-tax Act, 1961, s. 12AA-- Kalinga Institute of Industrial Technology v. CIT (Orissa) . . . 389

Collection of tax at source --Liquor trade--State Government--Immunity from Union taxation--State Government doing wholesale business in liquor--State Government bound to collect tax at source from retailers--Failure to collect tax--Recovery proceedings against State Government justified--Not a case of taxation of State but of collection of tax in respect of income of retailers--Recovery not barred by article 289--Income-tax Act, 1961, ss. 44AC, 206C, 226--Constitution of India, art. 289-- State of Bihar v. CBDT (Patna) . . . 506

Co-operative society --Special deduction--Interest received on advances provided to member co-operative societies--Special deduction allowable after deducting expenditure incurred in earning the income--Income-tax Act, 1961, ss. 14A, 80P(2)(d)-- Punjab State Co-operative Milk Producers Federation Ltd . v. CIT (No. 1 ) (P&H) . . . 495

----Special deduction under section 80P--Apex co-operative society--Member societies engaged in marketing milk and milk products--Credit facilities provided by assessee for working capital of members--Interest not entitled to special deduction under section 80P--Income-tax Act, 1961, s. 80P-- Punjab State Co-operative Milk Producers Federation Ltd. v. CIT (No. 2 ) (P&H) . . . 501

Deduction of tax at source --Commission--Agreement for distribution of products manufactured by assessee--Distributor purchasing products at pre-determined price for sale within specified area--Assessee and distributor collecting and paying sales tax separately--Payment of incentive to distributor--Not commission--Tax not deductible at source on such payment--Income-tax Act, 1961, s. 194H-- CIT v. Jai Drinks P. Ltd. (Delhi) . . . 383

Depreciation --Air-conditioner purchased in name of managing director and his wife but used for purposes of business--Entitled to depreciation--Depreciation allowable on electrical installations--Income-tax Act, 1961, s. 32-- CIT v. Metalman Auto P. Ltd .(P&H) . . . 434

Exemption --Dividend--Omission to claim exemption for dividend--Not relevant--Assessee entitled to exemption--Disallowance under section 14A--Disallowance cannot be made on basis of presumption--No evidence that expenditure incurred in earning dividend--No disallowance permissible under section 14A--Income-tax Act, 1961, ss. 10(33), 14A-- CIT v. Metalman Auto P. Ltd . (P&H) . . . 434

Income --Assessability--Assessee shareholder in company having right to use particular trade mark--One-time payment for affirmative vote in resolution for transfer of trade mark--Not a revenue receipt--Income-tax Act, 1961, s. 2(24)-- CIT v. David Lopes Menezes (Late) (Bom) . . . 337

----Unclaimed credit balance unilaterally written back and credited in profit and loss account--Not assessable--Income-tax Act, 1961-- CIT v. Indian Rayon and Industries Ltd. (Bom) . . . 479

Income from house property --Annual letting value--Interest-free security deposit taken by assessee hugely disproportionate to monthly rent charged--Device to circumvent liability to income-tax--Notional interest on security deposit to be treated as income from house property--Income-tax Act, 1961, s. 23-- CIT v. K. Streetlite Electric Corporation (P&H) . . . 348

Industrial company --Concessional rate of tax--Assessee receiving income from shares in an industrial company--Assessee cannot be considered an industrial company--Finance Act, 1984, s. 2(8)(c)--Income-tax Act, 1961-- CIT v. Bhagyoday Investment (P) Ltd. (P&H) . . . 490

Industrial undertaking --Special deduction--Manufacturer of steel forging--Scrap sale charges and job works/labour charges--Finding that job works/labour charges derived from industrial undertakings--Receipts of sale of scrap part and parcel of activity--Assessee entitled to deduction--Income-tax Act, 1961, s. 80-IB-- CIT v. Sadhu Forging Ltd. (Delhi) . . . 444

----Special deduction under section 80-IB--Assessee doing job work qualifying as eligible business under section 80-IB--Entitled to special deduction under section 80-IB--Miscellaneous receipts incidental to profits from eligible business--Entitled to special deduction under section 80-IB--Income-tax Act, 1961, s. 80-IB-- CIT v. Metalman Auto P. Ltd. (P&H) . . . 434

Investment allowance --Computer system installed in assessment year 1990-91 but put to use in assessment year 1991-92--Entitled to investment allowance--Income-tax Act, 1961, s. 32A-- CIT v. Indian Rayon and Industries Ltd. (Bom) . . . 479

Reassessment --Notice--Limitation--Income-tax Act, 1961, s. 148-- GVK Gautami Power Ltd . v. Asst. CIT (OSD) (AP) . . . 451

----Notice--Validity--Educational institution granted exemption under section 11--Deposit in chit fund not disclosed--Subsequent decision by Tribunal in another case that deposit in chit fund contravenes section 11(5)--Notice of reassessment--Valid--Income-tax Act, 1961, s. 148-- Little Angels Educational Society v. ITO (AP) . . . 413

----Notice after four years--No failure to disclose material facts necessary for assessment--Notice not valid--Income-tax Act, 1961, s. 148--S ayaji Industries Ltd. v. Joint CIT (Asstt.) (Guj) . . . 360

----Writ--Notices of reassessment on sixty seven companies based on confession following scam--Fifty-eight writ petitions against reassessment dismissed--Notices on remaining nine companies dismissed on ground of availability of effective alternative remedy--Income-tax Act, 1961, ss. 147, 148-- GVK Gautami Power Ltd. v. Asst. CIT (OSD) (AP) . . . 451

----Writ--Writ will issue only if there is no prima facie reason for notice--Income-tax Act, 1961, s. 148--Constitution of India, art. 226-- Little Angels Educational Society v. ITO (AP) . . . 413

Revision --Powers of Commissioner--Law applicable--Amendment of section 263 w.e.f. 1-10-1984--Amendment not retrospective--Order passed by IAC in 1982--Order of revision in February 1984--Not valid--Income-tax Act, 1961, s. 263-- CIT v. Triveni Engineering Works Ltd. (Delhi) . . . 366

Transfer of case --Notice on ground that principal business of assessee at New Delhi--Objection that principal business at Kolkata--Order stating transfer for co-ordinated investigation and meaningful assessment--Not proper--Order set aside--Income-tax Act, 1961, s. 127-- Dhoot Developers P. Ltd. v. CIT (Cal) . . . 487

Voluntary disclosure --Secrecy of declaration, scope of--Declaration filed for other years can be referred to to make best judgment assessment--Finance Act, 1997, s. 72-- CIT v. Aero Club (Delhi) . . . 400

SECTIONWISE INDEX TO CASES REPORTED IN THIS PART

Constitution of India :

Art. 226 --Reassessment--Writ--Writ will issue only if there is no prima facie reason for notice-- Little Angels Educational Society v. ITO (AP) . . . 413

Art. 289 --Collection of tax at source--Liquor trade--State Government--Immunity from Union taxation--State Government doing wholesale business in liquor--State Government bound to collect tax at source from retailers--Failure to collect tax--Recovery proceedings against State Government justified--Not a case of taxation of State but of collection of tax in respect of income of retailers--Recovery not barred by article 289-- State of Bihar v. CBDT (Patna) . . . 506

Finance Act, 1984 :

S. 2(8)(c) -- Industrial company--Concessional rate of tax--Assessee receiving income from shares in an industrial company--Assessee cannot be considered an industrial company-- CIT v. Bhagyoday Investment (P) Ltd . (P&H) . . . 490

Finance Act, 1997 :

S. 72 --Voluntary disclosure--Secrecy of declaration, scope of--Declaration filed for other years can be referred to to make best judgment assessment-- CIT v. Aero Club (Delhi) . . . 400

Income-tax Act, 1961 :

S. 2(24) --Income--Assessability--Assessee shareholder in company having right to use particular trade mark--One-time payment for affirmative vote in resolution for transfer of trade mark--Not a revenue receipt-- CIT v. David Lopes Menezes (Late)  (Bom) . . . 337

S. 10(33) --Exemption--Dividend--Omission to claim exemption for dividend--Not relevant--Assessee entitled to exemption--Disallowance under section 14A--Disallowance cannot be made on basis of presumption--No evidence that expenditure incurred in earning dividend--No disallowance permissible under section 14A-- CIT v. Metalman Auto P. Ltd . (P&H) . . . 434

S. 12AA --Charitable purposes--Charitable trust--Registration of trust--Commissioner has power to cancel registration--Notice of cancellation must give reasons--Search operations against assessee--No assessment based on search--Order cancelling registration set aside by Tribunal--Notice again for cancellation of registration--Not valid-- Kalinga Institute of Industrial Technology v. CIT (Orissa) . . . 389

S. 14A --Co-operative society--Special deduction--Interest received on advances provided to member co-operative societies--Special deduction allowable after deducting expenditure incurred in earning the income-- Punjab State Co-operative Milk Producers Federation Ltd . v. CIT (No. 1 ) (P&H) . . . 495

----Exemption--Dividend--Omission to claim exemption for dividend--Not relevant--Assessee entitled to exemption--Disallowance under section 14A--Disallowance cannot be made on basis of presumption--No evidence that expenditure incurred in earning dividend--No disallowance permissible under section 14A-- CIT v. Metalman Auto P. Ltd . (P&H) . . . 434

S. 23 --Income from house property--Annual letting value--Interest-free security deposit taken by assessee hugely disproportionate to monthly rent charged--Device to circumvent liability to income-tax--Notional interest on security deposit to be treated as income from house property-- CIT v. K. Streetlite Electric Corporation (P&H) . . . 348

S. 32 --Depreciation--Air-conditioner purchased in name of managing director and his wife but used for purposes of business--Entitled to depreciation--Depreciation allowable on electrical installations-- CIT v. Metalman Auto P. Ltd .  (P&H) . . . 434

S. 32A --Investment allowance--Computer system installed in assessment year 1990-91 but put to use in assessment year 1991-92--Entitled to investment allowance-- CIT v. Indian Rayon and Industries Ltd. (Bom) . . . 479

S. 37 --Business expenditure--Disallowance--Entertainment expenditure--Exclusion from disallowance--Expenditure on food or beverages provided to employees in office or other place of work--Meaning of other place of work--Amount spent on sales dealers conference, press conference and hotel--Part of amount spent on employees--Deductible-- CIT v. Indian Rayon and Industries Ltd. (Bom) . . . 479

----Business expenditure--Roll over charges for repayment of principal amount of foreign exchange loans for capital investment--Not deductible--Expenditure on gift and presentation articles--Expenditure on school for children of staff and workers--Pro rata/proportionate premium on redemption of non-convertible debentures issued during assessment year 1988-89--Deductible-- CIT v. Indian Rayon and Industries Ltd .  (Bom) . . . 479

S. 40(ba) --Association of persons--Member--Exemption--Exclusion of company, co-operative society or registered society--Refers to association of persons not member--Private company member of association of person entitled to exemption-- CIT v. Ideal Entertainment P. Ltd. (Mad) . . . 357

S. 43B --Business expenditure--Deduction only on actual payment--Sales tax--State Government allowing deferred payment--Effect of Circular No. 674 dated 29-12-1993--Amount cannot be disallowed--CBDT Circular No. 674, dated 29-12-1993-- CIT v. Bihar Foundry and Castings Ltd. (Jharkhand) . . . 387

S. 44AC --Collection of tax at source--Liquor trade--State Government--Immunity from Union taxation--State Government doing wholesale business in liquor--State Government bound to collect tax at source from retailers--Failure to collect tax--Recovery proceedings against State Government justified--Not a case of taxation of State but of collection of tax in respect of income of retailers--Recovery not barred by article 289-- State of Bihar v. CBDT (Patna) . . . 506

S. 67A --Association of persons--Member--Exemption--Exclusion of company, co-operative society or registered society--Refers to association of persons not member--Private company member of association of person entitled to exemption-- CIT v. Ideal Entertainment P. Ltd. (Mad) . . . 357

S. 80-IB --Industrial undertaking--Special deduction--Manufacturer of steel forging--Scrap sale charges and job works/labour charges--Finding that job works/labour charges derived from industrial undertakings--Receipts of sale of scrap part and parcel of activity--Assessee entitled to deduction-- CIT v. Sadhu Forging Ltd.  (Delhi) . . . 444

----Industrial undertaking--Special deduction under section 80-IB--Assessee doing job work qualifying as eligible business under section 80-IB--Entitled to special deduction under section 80-IB--Miscellaneous receipts incidental to profits from eligible business--Entitled to special deduction under section 80-IB-- CIT v. Metalman Auto P. Ltd. (P&H) . . . 434

S. 80P --Co-operative society--Special deduction under section 80P--Apex co-operative society--Member societies engaged in marketing milk and milk products--Credit facilities provided by assessee for working capital of members--Interest not entitled to special deduction under section 80P-- Punjab State Co-operative Milk Producers Federation Ltd. v. CIT (No. 2 ) (P&H) . . . 501

S. 80P(2)(d) --Co-operative society--Special deduction--Interest received on advances provided to member co-operative societies--Special deduction allowable after deducting expenditure incurred in earning the income-- Punjab State Co-operative Milk Producers Federation Ltd . v. CIT (No. 1 ) (P&H) . . . 495

S. 86 --Association of persons--Member--Exemption--Exclusion of company, co-operative society or registered society--Refers to association of persons not member--Private company member of association of person entitled to exemption-- CIT v. Ideal Entertainment P. Ltd. (Mad) . . . 357

S. 127 --Transfer of case--Notice on ground that principal business of assessee at New Delhi--Objection that principal business at Kolkata--Order stating transfer for co-ordinated investigation and meaningful assessment--Not proper--Order set aside-- Dhoot Developers P. Ltd. v. CIT (Cal) . . . 487

S. 147 --Reassessment--Writ--Notices of reassessment on sixty seven companies based on confession following scam--Fifty-eight writ petitions against reassessment dismissed--Notices on remaining nine companies dismissed on ground of availability of effective alternative remedy-- GVK Gautami Power Ltd. v. Asst. CIT (OSD)  (AP) . . . 451

S. 148 --Reassessment--Notice--Limitation-- GVK Gautami Power Ltd . v. Asst. CIT (OSD) (AP) . . . 451

----Reassessment--Notice--Validity--Educational institution granted exemption under section 11--Deposit in chit fund not disclosed--Subsequent decision by Tribunal in another case that deposit in chit fund contravenes section 11(5)--Notice of reassessment--Valid-- Little Angels Educational Society v. ITO (AP) . . . 413

----Reassessment--Notice after four years--No failure to disclose material facts necessary for assessment--Notice not valid--S ayaji Industries Ltd. v. Joint CIT (Asstt.)  (Guj) . . . 360

----Reassessment--Writ--Notices of reassessment on sixty seven companies based on confession following scam--Fifty-eight writ petitions against reassessment dismissed--Notices on remaining nine companies dismissed on ground of availability of effective alternative remedy-- GVK Gautami Power Ltd. v. Asst. CIT (OSD)  (AP) . . . 451

----Reassessment--Writ--Writ will issue only if there is no prima facie reason for notice-- Little Angels Educational Society v. ITO (AP) . . . 413

S. 194H --Deduction of tax at source--Commission--Agreement for distribution of products manufactured by assessee--Distributor purchasing products at pre-determined price for sale within specified area--Assessee and distributor collecting and paying sales tax separately--Payment of incentive to distributor--Not commission--Tax not deductible at source on such payment-- CIT v. Jai Drinks P. Ltd. (Delhi) . . . 383

S. 206C --Collection of tax at source--Liquor trade--State Government--Immunity from Union taxation--State Government doing wholesale business in liquor--State Government bound to collect tax at source from retailers--Failure to collect tax--Recovery proceedings against State Government justified--Not a case of taxation of State but of collection of tax in respect of income of retailers--Recovery not barred by article 289-- State of Bihar v. CBDT (Patna) . . . 506

S. 226 --Collection of tax at source--Liquor trade--State Government--Immunity from Union taxation--State Government doing wholesale business in liquor--State Government bound to collect tax at source from retailers--Failure to collect tax--Recovery proceedings against State Government justified--Not a case of taxation of State but of collection of tax in respect of income of retailers--Recovery not barred by article 289-- State of Bihar v. CBDT (Patna) . . . 506

S. 260A --Appeal to High Court--CBDT instruction prohibiting appeals where tax effect is below Rs. 4 lakhs--CBDT instruction that notional tax effect could be taken in loss cases--Does not apply to appeals filed prior thereto--Appeal not maintainable--CBDT Instruction No. 5, dated 24-10-2005 and O. M. dated 15-5-2008-- CIT v. Continental Construction Ltd. (Delhi) . . . 394

S. 263 --Revision--Powers of Commissioner--Law applicable--Amendment of section 263 w.e.f. 1-10-1984--Amendment not retrospective--Order passed by IAC in 1982--Order of revision in February 1984--Not valid-- CIT v. Triveni Engineering Works Ltd. (Delhi) . . . 366.......

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