ITR Digest

S.2(14): Capital asset–Agricultural land-Municipality–Local authority Hyderabad

Airport Development Authority- Sale of land beyond 8 Kms of Municipality limits is not liable to capital gain tax. [S.10 (20), Constitution of India –Art 243 P(e), 243R, General Clauses Act. S.3(21)g]
The assessee sold the agricultural land. The assessee claimed that the capital gain tax is not leviable. The Assessing Officer held that the land is within the limits of HADA which is Government notified local authority and was a municipality within the meaning of section 2(14)(iii)(a),therefore ,the land sold by the assessee was non-agricultural land. The Government of Andhra Pradesh issued a land acquisition notification dated 16-5-2007   for the acquisition of the above land of the assessee to develop in to an integrated township. On appeal the Tribunal held that the Hyderabad Airport Development Authority had been constituted under provisions of Andhra Pradesh Urban Areas (Development) Act, 1975 as a Special Area Development Authority by State Government, it cannot be treated as a municipality for purposes of provisions of  section 2(14) of the Act. In the revenue records the land is classified as agricultural land and has not been changed from agricultural land to non agricultural land at the time when the land was sold by the assessee. The land in question is brought in special Zone cannot be a determining factor by itself to say that the land was converted in to use for non-agricultural purposes.  As the agricultural land of assessee is outside the municipality and also 8 kms away from the outer limits of the Municipality,  assessee’s  land does not come within the purview of section 2 (14)(iii) either under clause (a) or (b) , hence cannot be considered as ‘capital asset’ within the meaning section , hence capital gain tax cannot be charged on sale of the said land. (A.Y. 2008-09)
 T. Urmila(Smt) v. ITO (2013) 57 SOT 90(URO) (Hyd.)(Trib.)

S.2(15): Charitable purpose–Object of general public utility–Control of game of cricket is business activities –Cancellation of registration was justified. [S. 12AA]
Since the assessee was carrying on revenue earning exercise by arranging international matches, IPL matches, etc. in such a way that maximum advertisement revenue was derived from any type of match, its activities did not come within conceptual framework of charity vis-à-vis activity of general public utility envisaged in s. 2(15).Cancellation of registration was justified. (A.Y.2009-10)
Tamil Nadu Cricket Association v. DIT (2013) 57 SOT 439 (Chennai)(Trib.)

S.2(22)(e): Dividend-Deemed dividend-Advance to Director for purchase of land on behalf of company-Provision does not attract.
Advance granted to the director to purchase land in the name of the director but in which the company would be having beneficial interest does not attract section 2(22)(e).(A.Y.2006-07) (ITA no 447 dt.26-12-2012)
ACIT v. C.V. Reddy (2013) –TIOL-168 (Bang.)(Trib.)

S.4: Charge of income-tax-Income-Subsidy-Deferred sales tax scheme-Capital receipt.[S.2(24)]
To determine the character of subsidy in hands of recipient, whether revenue or capital, the purpose of the subsidy is to be considered and the source of fund and mechanism of giving subsidy are immaterial. Incentive, in form of sales tax waiver/deferment was not meant to give any benefit on day-to-day functioning of business or to make it more profitable; but was principally aimed to cover capital outlay of assessee for undertaking modernization of existing industry, it was capital in nature, and thus, not taxable. (A.Y.1992-93)
CIT v. Birla VXL Ltd. (2013) 215 Taxman 117 (Guj.)(HC)

S.5: Scope of total income–Retention money–Accrual.
In view of decision of Gujarat High Court in case of Anup Engineering Ltd. v. CIT [2001] 247 ITR 457/114 Taxman 584 retention money could not be said to have accrued to assessee and therefore, this amount did not represent assessee’s accrued income. (A.Y. 2002-03)
DIT v. Ballast Nedam International (2013) 215 Taxman 254 (Guj) (HC)

S.9(1)(i): Income deemed to accrue or arise in India–Set off of branch losses – Taxability-DTAA-India-Sweden .[ Art.7]
The assessee set off its loss from Sweden branch against its other business income taxable in India. Revenue’s case was that as per Article 7, profits attributable to Sweden branch was taxable in Sweden and, therefore, losses incurred by Sweden branch could not be set off against other income. Following its decision rendered in earlier assessment years with respect to India-Japan DTAA, the Tribunal allowed the claim of the assessee. Since nothing had been brought on record to show that clauses of DTAA between India-Sweden were different from that in DTAA between India-Japan in respect of present issue, the Tribunal’s order was justified. (A.Y. 2002-03)
CIT v. Patni Computer Systems Ltd. (2013) 215 Taxman 108 (Bom.) (HC)
Editorial: Arising out of order in Patni Computer Systems Ltd v. Dy.CIT (2012) 135 ITD 398(Pune)(Trib.)

S.9(1)(i): Income deemed to accrue or arise in India-Short term capital gain-Forward exchange contract/hedging mechanism-DTAA- India-Spain-Additional evidence-Matter set aside. [Art. 14, 23]
The assessee-company was a resident of Spain and registered as FII with SEBI. It claimed the profit on foreign exchange transactions as short-term capital gain and hence exempt under India-Spain DTAA. Since the assessee filed additional evidence before the Tribunal, the matter was to be restored to the Assessing Officer for fresh decision. (A.Y. 2005-06)
Merrill Lynch Capital Markets Espana SA v. DCIT (2013) 57 SOT 435 (Mum.)(Trib.)

S.9(1)(i): Income deemed to accrue or arise in India–Capital gains–DTAA-India-UAE. [Art.4, 13]
The assessee is held to be not entitled to the benefit of India-UAE DTAA and income from capital gains was charged to tax, on the ground that individuals are not taxable in UAE. The Tribunal in assessee’s own case in immediately preceding year held that assessee was entitled to benefits of DTAA thereby granting exemption from capital gain. Since the facts of the instant appeal were similar to those of immediately preceding year, the benefit of the DTAA was to be granted.(A.Y. 2008-09)
ITO v. Chandersen Jatwani (2013) 57 SOT 437 (Mum.)(Trib.)

S.9(1)(i): Income deemed to accrue or arise in India–Interest– Income-tax refund-DTAA-India-Denmark [Art.9(4), 12(6)]
Interest on income-tax refund was taxable in India as per Article 12(6) of DTAA between India and Denmark. Interest cannot be considered as business income. (A.Y. 2005-06)
A.P. Moller Maersk v. DCIT (2013) 57 SOT 267 (Mum.)(Trib.)

S.9(1)(vi): Income deemed to accrue or arise in India–Royalty-Fees for technical services-Shipping business-DTAA-India-Denmark. [S.9(1)(vii), Art. 9, 13 ]
Amounts received by shipping company on account of shared cost of global tracking system was linked to shipping income as per Article 9(1) of DTAA between India and Denmark and was not taxable in India. (A.Y. 2005-06)
A.P. Moller Maersk v. DCIT (2013) 57 SOT 267 (Mum)( Trib.)

S.10(38): Exempt income – Long term capital gains from equities - Scheme of sale of land through sale of shares of shell company is valid.
The assessee held 98.73% shares in Bhoruka Financial Services Limited (BFSL). In AY 2005-06 BFSL purchased a plot of land from a group sick company called Bhoruka Steels Ltd for Rs.3.75 crores which was accepted to be the prevailing market price u/s 50C. BFSL was a shell company with no assets other than the said land. In AY 2006-07 the assessee sold its shareholding in BFSL to DLF Commercial Developers Ltd for a net consideration of Rs. 20 crore. As the sale of shares was executed through the Magadh Stock Exchange and STT was paid, the assessee claimed that the gain on sale of shares was exempt u/s 10 (38). The AO, CIT(A) and Tribunal rejected the assessee’s claim on the basis that the assessee, BFSL and Bhoruka Steels were all controlled by common shareholders and that the scheme to first sell the land to BFSL and then to sell the shares of BFSL was devised with the sole purpose of avoiding tax on the capital gains which would have arisen if the land had been sold directly. It was held that the formalities of the transaction and the legal nature of the corporate bodies had to be ignored by lifting the corporate veil and the transaction had to be taxed as a sale of the land. On appeal by the assessee to the High Court, HELD allowing the appeal:
Though BFSL was a shell company with no asset other than the land and by buying the shares of BFSL, DLF in effect purchased the land, the transaction cannot be said to a sham or an unreal one. In coming to the conclusion that the transaction is a colourable device, the authorities have been carried away by the fact that the assessee was able to avoid payment of income tax. The assessee did resort to tax planning and took advantage of the law/ loopholes in the law. After seeing how the loophole was exploited within the four corners of the law, it is open to Parliament to amend the law plugging the loophole. However it cannot be done by judicial interpretation. S.10(38) of the Act is unambiguous. If the share holder chooses to transfer the lands through a transfer of the shares of the company owning the land, it would be a valid legal transaction in law and cannot be said to be a colourable devise or a sham merely because tax is avoided thereby (McDowell & Co. v. CIT (1985) 154 ITR 148 (SC), UOI & Anr. v Azadi Bachao Andolan & Anr. (2003) 263 ITR 706 (SC) & Vodafone International Holding B.V. v. UOI& Anr. (2012) 341 ITR 1 (SC) referred)( ITA No. 120 of 2011, dt. 09/04/2013)
Bhoruka Engineering Inds. Ltd. v. Dy. CIT (Karn.)(HC) www.itatonline.org

S.10A: Free trade zone–Software developed transmitted to foreign countries through internet cannot treated as bogus transaction.
The assessee started new venture of software development and claimed profit of software division under section 10A. The Assessing Officer was not convinced from contemporaneous record that software was developed by assessee or that same was transmitted to foreign countries through internet and rejected the claim of the assessee treating the said transaction as bogus and sham. The Commissioner (Appeals) and the Tribunal, taking into consideration report of audit, agreement with STPI, certificate in respect of custom, boarding arrangement of assessee and payment received from various parties through channel of banks, concluded that transaction was genuine, allowed the assessee’s claim. Held, since the order passed by the appellate authorities was based on appreciation of material on record, no substantial question of law arose there from.(A.Y. 2003-04)
CIT v. Nova Petrochemicals Ltd. (2013) 215 Taxman 82(Mag.)  (Guj.)(HC)

S.10A: Free trade zone-New unit- Approval letter issued by authority of Software Technology Park.
The assessee established three units and claimed deduction u/s 10A. The Revenue denied the deduction on basis of approval letter issued by authority of Software Technology Park stating that, these units were to be considered as part of existing units. On other hand, Tribunal found that all three units had fulfilled conditions u/s.10A, and therefore, allowed deduction holding those units as separate and independent production units, and not as mere expansion of existing unit. Since the decision of the Tribunal was based on finding of fact, no interference was required. (A.Y. 2002-03)
CIT v. Patni Computer Systems Ltd. (2013) 215 Taxman 108 (Bom.)(HC)
Editorial: Arising out of order in Patni Computer Systems Ltd v. Dy.CIT (2012) 135 ITD 398(Pune)(Trib.)

S.10A: Free trade zone-Consistency-Computation-Export turnover-Expenditure do not pertain to delivery of goods out of India are not deductible from export turnover.
Where the assessee followed head count method of accounting for computing deduction u/s 10A, which had been accepted by revenue in earlier years, it could not be disallowed in relevant assessment year. The expenditure towards insurance, freight and communication incurred in foreign exchange, which do not pertain to delivery of goods out of India and satellite link charges and technical service fee are not deductible from export turnover. (A.Y. 2007-08)
Willis Processing Services (I) (P) Ltd. DY. CIT (2013) 57 SOT 339 (Mum.)(Trib.)

S.10A: Free trade zone-Newly established undertakings-Deemed export is not eligible for exemption. 
The assessee software company carried out deemed exports by raising bills on local parties and received sale proceeds in convertible foreign exchange thereby claimed deduction on same under section 10A. On ground that deemed exports are exports as per EXIM policy. On appeal Tribunal held that that deduction under section 10A is to be allowed only when foreign exchange is received on export of software and EXIM policy cannot overrule Income-tax Act which is a separate code in itself. In view of same claim of assessee could not be allowed. (A.Y. 2005-06)
Wipro Ltd. v. Dy.CIT (2013) 143 ITD 1 (Bang.)(Trib.)

S.10A: Free Trade Zone-Newly established undertakings-Export turnover-Total turnover-Foreign tax (VAT/GST) collected from customers is to be excluded.
Assessing Officer excluded foreign tax (VAT/GST) collected from customers from export turnover as well as from total turnover, thereby, granting lower deduction under section 10A to assessee a STP unit, on ground that tax collected was subsequently remitted to government. the Tribunal held that once this sum is not included in export turnover then the same cannot be included in the total turnover. (A.Y.2005 -06)
Wipro Ltd. v. Dy.CIT (2013) 143 ITD 1 (Bang.)(Trib.)

S.10A: Free trade zone-Computation-Export turnover-Total turnover- Parity between numerator and denominator.
Expenses reduced from export turnover were also to be reduced from total turnover to maintain parity between numerator and denominator while calculating deduction u/s 10A. (A.Y. 2007-08)
Bearing Point Business Consulting (P.) Ltd. v. DCIT (2013) 57 SOT 244 (Bang.)(Trib.)

S.10B: Exempt income-Export oriented undertaking-Initial year- Assessee has to prove its eligibility in initial year of production only and not in every year of claim.
The Assessing Officer rejected the assessee’s claim holding that the assessee had employed used machinery value of which exceeded 20% of total value of machinery employed by assessee. It was noted from records that the claim u/s 10B was allowed in the past and the year under consideration was found to be 5th year of claim. There was no evidence on record establishing that assessee had purchased used machinery during relevant assessment year. Held in order to claim exemption u/s 10B, assessee has to prove its eligibility in initial year of production only and not in every year of claim. (A.Y. 2003-04 to 2004-05)
DCIT v. Tyco Valves & Control India (P.) Ltd. (2013) 57 SOT 138(URO)(Ahd.)(Trib.)

S.12AA: Procedure for registration–Period of six months–Directory.
There is no automatic or deemed registration if the application filed under section 12AA is not disposed of within the stipulated period of six months as the time frame fixed under the provision is only directory. Matter remitted to the Commissioner for consideration of the matter a fresh.
CIT v. Sheela Christian Charitable Trust (2013) 354 ITR 478 (Mad.)(HC)

S.12AA: Procedure for registration–Order lodging the application–Not sustainable-Deemed registration-Time to be reckoned from the end of month in which the application was filed-Matter remanded to Commissioner.
The assessee filed an application before the Commissioner on 28th January, 2009 for seeking registration under section 12AA and for grant of approval under section 80G. The Commissioner held that the activities of the assessee could not be called charitable. Accordingly he lodged the application of assessee. On appeal Tribunal held that since the application was filed by the assessee on 28th January, 2009 and the Commissioner passed the order on July 31, 2009, by virtue of section 12AA, the six month period has expired and therefore application should be deemed to have been granted recognizing the  status of assessee as ‘Charitable Trust’. Tribunal also held that sale of books, hiring of utensils and rental income would not make the activities of the assessee a commercial venture. On appeal the court held that the application was dated January 28, 2009 and calculating the six months’ period from the end of the said month, it could not be said that the six months’ period would expire by July 31, 2009. Therefore, the order passed by the Commissioner   on July 31, 2009, could not be held to have been passed in violation of section 12AA. The conclusion of the Tribunal that the registration was deemed to have been granted, could not be sustained, inasmuch it was found that the order of the Director of Income-tax was passed within a period of six months stipulated in section 12AA(2). However, it was held that the Commissioner   should have either granted or rejected the application and was not expected to merely lodge the application, which would only leave the assessee in a suspended animation. There could not be any order in between like lodging the application. Thus, the matter was remitted to the Commissioner for fresh disposal on the merits.
DIT (Exemption) v. Anjuman-e-Khyrkhah-e-Aam (2013) 354 ITR 474 (Mad.)(HC)

S.12AA: Procedure for registration-Religious purpose-Denial of exemption was held to be not justified. [S.13(1)(b)]
The Commissioner rejected assessee’s application on the ground that the object clause of trust deed included an object of religious nature. The only prohibition in this regard was contained in S.13(1)(b), which excludes a trust or institution created or established for benefit of any particular religious community or caste. Since the aforesaid prohibition did not apply to assessee’s case, impugned order denying registration to assessee-trust was to be set aside.
Radhika Seva Sansthan v. CIT (2013) 57 SOT 121(URO) (Jaipur) (Trib.)

S.12AA: Procedure for registration-Trust or institution-Promotion of sports- Charitable purpose-Registration is entitled. [S.2(15)]
The Assessee-society is registered under the Society Registration Act, 1860. The founder-members of the society were professional golfers. The assessee filed an application seeking registration under section 12AA. The Commissioner   rejected  the application of registration. The Tribunal held that Society’s Object are charitable in nature, all the object and aims of the assessee are contained in clause (3) of its Memorandum of Association, Promotion of sports and games has to be considered as ‘charitable purpose’ within meaning of section 2(15). Assessee society formed to promote interest in game of   golf in general and  professional  golfers in particular was entitled to registration under section 12AA of the Act. 
Professional Golf Tour of India v. CIT (2013) 143 ITD 165/155 TTJ 17(UO)(Chandigarh)(Trib.)

S.14A: Disallowance of expenditure–Exempt income-Sufficient interest free funds–Presumption.
Where the assessee had sufficient interest free funds to meet its tax free investments yielding exempt income, it could be presumed that such investments were made from interest free funds and not loaned funds and, thus no disallowance u/s.14A being warranted. Ratio in case of CIT v. Reliance Utilities & Power Ltd (2009) 313 ITR 340 (Bom.)(HC) is followed. (A.Y. 2003-04)
CIT v. UTI Bank Ltd. (2013) 215 Taxman 8(Mag.) (Guj.)(HC)

S.14A: Disallowance of expenditure–Exempt income- Dividend from foreign subsidiaries–Interest free funds.
Where investment was made by the assessee in foreign subsidiaries, disallowance of interest expenditure under section 14A was not justified since dividend income from foreign subsidiaries, is taxable in India. Also, where the assessee had own interest free funds many times over the investment made in Indian subsidiaries and further, there was no direct nexus between interest bearing borrowed funds and such investment, no disallowance of interest expenditure could be made under section 14A.
CIT v. Suzlon Energy Ltd. (2013) 215 Taxman 272 (Guj.) (HC)

S.14A: Disallowance of expenditure-Exempt income-Disallowance under section 14A cannot be made if satisfaction not recorded with reference to A/cs. Under Rule 8D(2)(ii) loans for specific business purposes cannot be included. Under Rule 8D(2)(ii) & (iii) investments which have not yielded income cannot be included. [Income–tax Rules, 1962, Rule 8D]
In AY 2008-09, the assessee invested Rs.103 crores in shares on which it earned tax-free dividends of Rs. 1.3 lakhs. The assessee claimed that though its borrowings had increased by Rs. 122 crores, the said investments were funded out of own funds like capital and profits. It claimed that no expenditure had been incurred to earn the dividends and no disallowance u/s 14A could be made. The Assessing Officer  applied Rule 8D and computed the disallowance at Rs. 4 crore. On appeal by the assessee, the Commissioner (Appeals) reduced the disallowance to Rs. 26 lakh. On cross appeals, HELD by the Tribunal:

(i) When the Assessing Officer does not accept the assessee’s claim regarding the non-applicability/ quantum of disallowance u/s 14A, he has to record satisfaction on that issue. This satisfaction cannot be a plain satisfaction or a simple note. It has is to be done with regard to the accounts of the assessee. On facts, as there is no satisfaction by the Assessing Officer, no disallowance u/s 14A can be made [Balarampur Chini Mills Ltd. v. Dy. CIT (2011)  140 TTJ 73(Kol.)(Trib.)] followed;

(ii) Rule 8D(2)(ii) is a computation provision in respect of expenditure incurred by way of interest which is not directly attributable to any particular income or receipt. This clearly means that interest expenditure which is directly relatable to any particular income or receipt is not to be considered under rule 8D(2)(ii). The AO has to show that the interest is not directly attributable to any particular income or receipt. In the assessee’s case, the interest has been paid on loans taken from banks for business purpose. There is no allegation that the loan funds have been diverted for making investment in shares or for non-business purposes. The loans are for specific business purposes and no bank would permit the loan given for one purpose to be used for making any investment in shares. Also, the assessee has substantial capital & reserves. Accordingly, the interest on the loans cannot be included in Rule 8D(2)(ii);

(iii) Further, in Rule 8D(2)(ii), the words used in numerator B are “the average value of the investment, income from which does not form or shall not form part of the total income as appearing in the balance-sheet as on the first day and in the last day of the previous year“. The Assessing Officer was wrong in taking taken into consideration the investment of Rs.103 crores made during the year which has not earned any dividend or exempt income. It is only the average of the value of the investment from which the income has been earned which is not falling within the part of the total income that is to be considered. Thus, it is not the total investment at the beginning of the year and at the end of the year, which is to be considered but it is the average of the value of investments which has given rise to the income which does not form part of the total income which is to be considered. The term “average of the value of investment” is used to take care of cases where there is the issue of dividend striping;

(iv) Under Rule 8D(2)(iii), what is disallowable is an amount equal to ½ percentage of the average value of investment the income from which does not or shall not form part of the total income. Thus, under sub-clause (iii), what is disallowed is ½ percentage of the numerator B in rule 8D(2)(ii). This has to be calculated on the same lines as mentioned earlier in respect of Numerator B in rule 8D(2)(ii). Thus, not all investments become the subject-matter of consideration when computing disallowance u/s 14A read with rule 8D. The disallowance u/s 14A read with rule 8D is to be in relation to the income which does not form part of the total income and this can be done only by taking into consideration the investment which has given rise to this income which does not form part of the total income. (A. Y. 2008-09) ( ITA No. 1331/Kol/2011, dt. 29/07/2011)
REI Agro Ltd v. DCIT (Kol.)(Trib.).www.itatonline.org

S.14A: Disallowance of expenditure–Exempt income-Reasonable basis.
For periods prior to AY 2008-09, disallowance of expenses relating to exempt income, u/s 14A, is to be computed on a reasonable basis and not as per rule 8D.(A.Y. 2004-05)
Forever Diamonds (P.) Ltd. v. DCIT (2013) 57 SOT 113 (URO)(Mum.)(Trib.)

S.14A: Disallowance of expenditure-Exempt income-Rule 8D does not apply to short-term investments, gains from which is taxable. [Income-tax Rules,1962-Rule 8D]
Some of the investments made by the assessee are short term. Since assessee is paying capital gains tax on short term investments, Rule 8D will not apply on them and the Assessing Officer  is directed to re compute disallowance u/s 14A read with Rule 8D after excluding short term investments ( A. Y. 2008-09, ITA No. 1774/Mds/2012, dt.19 July,2013)
Sundaram Asset Management Co. Ltd v. DCIT (Chennai)(Trib.) www.itatonline.org

S.14A: Disallowance of expenditure – Exempt income-Interest on loans for specified purposes to be excluded [Income-tax Rules, 1962-Rule 8D]
The assessee contended that in computing the disallowance to be made under section 14A and rule 8D(2)(ii) ,the interest on bank loans taken for specific taxable purposes had to be excluded .The Assessing Officer rejected the claim. On appeal Commissioner (Appeals) accepted the claim of assessee. On appeal by revenue the Tribunal held that rule 8D(2)(ii) refers to expenditure by way of interest which is not attributable to any particular income or receipt. If loans have been sanctioned for specified projects /expansion and have been utilized towards the same ,then obvious they could not have been utilized for making any investments having tax-free incomes and have to excluded from the calculation to determine the disallowance under Rule 8D(2)(ii).(Champion Commercial Co. Ltd.) (Kol)(Trib.)(ITA no 644 /Kol/2012 dt 21-09-2012) is followed.(A.Y.2009-10)(ITA No.1603/Mds/2012 dt.16-07-2012)
ACIT v. Best & Cromton Engineering Ltd. (Chennai)(Trib.) www.itatonline.org. 

S.14A: Disallowance of expenditure-Exempt income-Onus on assessee to prove that he had not incurred any expenses relating to income not forming part of total income.  [Income-tax Rules, 1962, Rule 8D]
Assessing Officer had disallowed a sum of Rs.3,05,423/- by applying provisions of section 14A read with rule 8D. On Appeal the Commissioner (Appeals) reduced the disallowance to Rs 1 lakh  on the ground that there is no precise finding given by the Assessing Officer .On appeal Tribunal held that onus lay on assessee to prove that he had not incurred any expenses relating to income not forming part of total income. Since assessee did not file any details of expenditure incurred by him, the order of Commissioner (Appeals) was set aside and that of Assessing Officer restored. (A.Y.2009-10)
ACIT v. Joe Marcelinho Mathias(2013) 143 ITD 132 (Panji)(Trib.)

S.22: Income from house property-Business income-Un sold flat-Rental income from unsold flat is assessable as income from house property. [S.28(i)]
The Court held that rental income from unsold flats in the hands of builder/developer, which are shown as ‘business assets’ should be assessed under the head Income from house property and not as business income. (ITA Nos. 238, 238 & 240 of 2013 dt.17-05-2013)
New Delhi Hotels Ltd. v. ACIT (2013) The Chamber’s Journal –July-P.114 (Delhi)(HC)

S.28(i): Business income–Grant in aid for research activities is capital receipt. [S.41, 263]
The grant in aid for a specific purpose of conducting research in the field of telecommunications, so that the benefit thereof would benefit the Nation and for carrying on day to day business of the assessee was a capital receipt. Order under section 263 was held to be bad in law. The question referred to High Court was on merit. High Court confirmed the order of Tribunal. (A.Y. 1989-90)
CIT v. India Telephone Industries Ltd. (2013) 215 Taxman 82 (Karn.)(HC)

S.28(i): Business loss–In the name of firm-Foreign currency transactions-Not allowable in the assessment of partner. [Partnership Act, 1932 S.13]
The Appellant entered into foreign currency transactions on behalf of firm from its account. Both the assessee–partner and firm claimed such loss as deduction in their respective income. The Tribunal disallowed the claim on the both. On separate order High Court admitted appeal of the partnership firm. In appeal it was contended that the transactions were entered in to without the knowledge of other partners and therefore should be treated as his personal loss. The Court held that section 13 of the Partnership Act provides, inter alia, that subject to the contract between, partnership firm shall indemnify the partner in respect of the payment made and liabilities incurred by firm in the ordinary and proper conduct of business and in doing such act, in an emergency for the purpose of protecting the firm from loss  as, would be done by a person of ordinary prudence,  in his own case ,under similar circumstances .In the result these transactions resulted in loss and could not be allowed as deduction in individual capacity of assessee-partner, when the same claim is made by firm under examination.(A.Y. 2007-08)
Pravinbhai Mohanbhai Kheni v. ACIT (2013) 215 Taxman 83(Mag.) (Guj.)(HC)

S.28(i): Business income–Share dealings–Capital gains-Purchase and sale on regular basis assessable as business income. [S.45 ]
Board’s resolution authorized the assessee-company to set apart a corpus of Rs.100 crores for trading in shares which represented intention to carry out activities of purchase and sale of shares on business lines. Further, the purchase and sale transactions in shares were entered into on regular and systematic basis with profit motive which only constituted business. The long-term capital gain was a small amount as against short-term capital gain which was a strong indicator as to shares being not intended to be held by way of investments. Held, the income had to be taxed as business income. (A.Y. 2007-08)
Mafatlal Fabrics (P.) Ltd. v. Add.CIT (2013) 57 SOT 425 (Mum.)(Trib.)

S.28(va): Business income–Non-compete fees–Taxability-DTAA- India-France [Art.7]
Compensation received from foreign company in lieu of an undertaking by the assessee for not competing with Foreign company in India and for not using trade mark, designs, logo of said foreign collaborator, post settlement would be taxable in India. (A.Y. 2004-05)
Control & Switchgear Contractors Ltd. v. DCIT (2013) 57 SOT 127(URO) (Delhi)(Trib.)

S.31: Repairs and insurance of machinery, plant and furniture–Replacement of crucial components of a machine  could not be considered as current repairs. [S. 37(1)]
Replacement of crucial components of a machine which resulted in a new or fresh advantage or obtaining of enduring benefit could not be considered as current repairs expenditure and would not be allowable as deduction u/s 31(1) or u/s 37(1). (A.Y.1999-2000)
DCIT v. Printers (Mysore) (P.) Ltd. (2013) 57 SOT 117(URO) (Bang.)(Trib.)

S.32: Depreciation–Set off –Unabsorbed depreciation-Carry forward and set off permitted till final set off- Reassessment was held to be not valid. [S.147, 148]

Some case laws of 2012

 

CIRCULAR

it12cir01

Issuance of TDS Certificates in Form No.16A downloaded from TIN website - Circular under section 119 of the Income- tax Act 1961.

CASE LAWS

2012-TIOL-245-HC-MUM-IT

CIT, Pune Vs Mr Purshottam B Khutale (Dated : March 16, 2012)

Income Tax - Section 45(5) - Whether when assessee is awarded enhanced compensation on compulsory acquisition of agricultural land, the same is to be taxed as capital gains of the previous year when the compensation was received even if the final appeal is pending before the High Court. - Revenue's appeal allowed: BOMBAY HIGH COURT

2012-TIOL-244-HC-MUM-IT

CIT, Pune Vs Finolex Cables Ltd (Dated : March 1, 2012)

Income Tax - Sections 80I, 80IB - Whether where substantial investment has been made and the new plant and machinery is installed in the newly constructed building it can be said that assessee has set-up a new industrial undertaking and it is not the expansion of earlier unit and hence the depreciation of such unit is not to be set-off with the income of that unit which enjoys deduction u/s 80I. - Revenue's appeal dismissed: BOMBAY HIGH COURT

2012-TIOL-243-HC-MUM-IT

CIT, Mumbai Vs Divine Holdings Pvt Ltd (Dated : March 7, 2012)

Income Tax - Sections 119(2)(a), 143(3), 234A, 234B & 234C - Whether a notified person under the Special Court (Trial of Offences relating to Transactions in Securities) Act, 1992 is not liable to pay interest u/s. 234A, 234B, & 234C of the IT Act, 1961. - Case remanded: BOMBAY HIGH COURT

2012-TIOL-242-HC-MUM-IT

CIT, Bombay Vs M/s Airlines Hotel Pvt Ltd (Dated : March 30, 2012)

Income Tax - Section 37 - Whether settlement charges paid for re-acquiring a part of running hotel business and legal expenses incurred in relation to the same are business expenditure as per Sec 37 of the Act.- Revenue's appeal dismissed: BOMBAY HIGH COURT

2012-TIOL-177-ITAT-MUM + Tara story

Tara Jewels Exports Pvt Ltd Vs JCIT, Mumbai (Dated : March 16, 2012)

Income Tax - Sections 10A, 80HHC - Whether when SEZ-based exporter outsources manufacturing to jobworkers outside the SEZ, which accounts for large proportion of total exporters, the Sec 10A benefits are to be reduced in the same proportion - Whether for the purpose of Sec 10A benefits it is necessary for the SEZ Unit to undetake some manufacturing within the SEZ. - Case remanded: MUMBAI ITAT




SERVICE TAX SECTION

CIRCULAR

sercir156

Service tax paid on taxable services used for export of goods at the post-manufacture stage - electronic refund through the Indian Customs EDI System -- Notification 52/2011-ST – review.

CASE LAWS

2012-TIOL-410-CESTAT-MAD

M/s Logos Constructions Private Limited Vs CST, Chennai (Dated : October 13, 2011)

Service Tax - Construction Service – Commercial or Industrial Construction Services – Works Contract - Demand – Stay / Dispensation of pre-deposit – The service provider is engaged in activities relating to construction of assembly shop, press shop, office buildings, utility building, canteen building, guest houses etc. Demand of service tax is made under the category of "Construction Services", "Commercial or Industrial Construction Services", and "Works Contract". The service provider challenges the demand on the ground that for the same activity service tax has been demanded under different heads for different periods. HELD - The case involves construction activities for constructing different types of buildings and structures. On the facts of the case and the findings of the Commissioner the service provider, prima facie , has not made out a case for unconditional waiver. The service provider has admitted that their activities are liable to service tax under Works Contract from 01.06.2007 but they have not taken registration for the said services till 01.04.2008. Pre-deposit ordered. (Para 6) - Pre-deposit ordered: CHENNAI CESTAT

2012-TIOL-407-CESTAT-AHM + Adani story

Adani Gas Ltd Vs CST, Ahmedabad (Dated : March 6, 2012)

Service Tax - Stay - Pre-deposit - Charges for pipes, measuring equipment etc, at the time of providing new gas connection - Prima facie liable to tax - Pre-deposit ordered: In the present case, the customer never has a right of possession since it would never become his own property at all. At any given point of time, the appellant can take re-possession and at no time, the customer would become the owner or can claim right of possession. In the case where an item is rented, the customer has right of possession so long as he keeps paying the rent. In the absence of any payment of rent for the meter and the equipment, there is no consideration in this case for right of possession by the customer and therefore the customer cannot even claim the right of possession also. Prima facie, the conclusion is that the appellants have provided the service and are liable to Service Tax, which has been demanded. No doubt that there is a need for going into the issues and elements of service in depth in terms of statutes, meaning of various statutes and the agreement between the customer and the appellant, which can be done only at the time of final hearing. Since the appellants have not been able to make prima facie case in their favour and no financial difficulty has been pleaded, it is appropriate that the appellant should deposit 25% of the Service Tax demanded in the impugned order within 8 (eight) weeks. - Pre-deposit ordered: AHMEDABAD CESTAT

2012-TIOL-406-CESTAT-MAD

M/s City Union Bank Vs CCE, Trichy (Dated : Decemder 20, 2011)

Service Tax – Penalty – Waiver under Section 80 – The jurisdictional Commissioner in his review order has given no satisfactory reason or any finding regarding any suppression, fraud etc to reverse the finding of the original authority in regard to extending the benefit under Section 80 to the appellants. Waiver of penalty upheld. (Para 2) - Appeal allowed: CHENNAI CESTAT

CENTRAL EXCISE SECTION

2012-TIOL-409-CESTAT-MAD

M/s Jino Systems India Pvt Ltd Vs CCE, Chennai (Dated : December 16, 2011)

Central Excise – Trading – Duty received from buyer – Section 11D - Penalty – In respect of some invoices the assessee has not recovered any excess excise duty and in respect of the one invoice they have already paid the duty amount along with interest. There is no specific provision either in the Act or in the Rules for imposition of penalty for a case under Section 11D of the Act. Penalty set aside. (Para 3 & 4) - Appeals allowed : CHENNAI CESTAT

2012-TIOL-405-CESTAT-MAD

Kwality Fun Foods & Restaurant P Ltd Vs CCE, Coimbatore (Dated : January 31, 2012)

Central Excise – Valuation – Related person – HLL entering into agreement with Kwality Fun Foods & Restaurant Pvt. Ltd for manufacture of Ice Creams under the Brand name acquired by HLL - HLL was concerned with KFRL in commercial terms and KFRL having facility of manufacture, such facility was availed by HLL to get its branded goods manufactured by the former - That does not make them related persons - If the manufacturer or buyer are one and the same person behind curtain in that circumstance, holding them "related person" applying section 4 of Central Excise Act, 1944 may be possible - Merely because ice cream was manufactured using brand name acquired by HLL and entire product was sold to BILIL/HLL, that did not make them "related person" - SCNs did not lift the corporate veil to find out any mysterious arrangement between the parties to cause subterfuge to Revenue - "Related person" does not mean mere holding of shares by a company - Obligations of parties were well defined by sourcing agreement and that also separated both entities with their defined individual objects. No evidence came to record to prove that Revenue was prejudiced and there were no cogent reasons or evidence depressing the assessable value – Impugned order set aside. - Appeals allowed: CHENNAI CESTAT

2012-TIOL-404-CESTAT-BANG

CCE, Belgaum Vs M/s India Sugar & Refineries Ltd (Dated : October 28, 2011)

Central Excise – Eligibility of CENVAT Credit on MS angles, plates, sheets, rods used for fabrication and maintenance of structures/capital goods – Original authority denied credit by holding that the impugned goods are not capital goods – Appellate authority held the same as inputs and allowed credit, resulting in Revenue appeal – Original authority did not have occasion to examine whether impugned goods qualified to be capital goods or alternatively as inputs – Impugned order set aside and matter remanded – Rules 2(a) and 2(k) of CENVAT Credit Rules, 2004 - Appeal allowed by remand: BANGALORE CESTAT

Some case laws

 

[2011] 15 taxmann.com 269 (CHENNAI - ITAT)
IT : An authorized representative under section 288(2) is not required to get himself registered as an authorized income-tax practitioner under rules 54 and 55 of Income-tax Rules in order to appear before Tribunal on behalf of assessee

[2011] 15 taxmann.com 268 (CHENNAI - ITAT)
IT : Amount received by assessee from a company for providing that company easement right in private road situated on his land would be capital receipt

Direct Tax Laws Oct 2011 08

On expiry of tax holiday period under section 10B, block of assets, viz., plant and machineries of industry are available for working out relief under section 50(2) - [2011] 14 taxmann.com 82 (Madras)

Transfer pricing - Rule 10B nowhere provides that comparable uncontrolled transaction shall be only an international transaction - [2011] 14 taxmann.com 91 (New Delhi - Trib.)

Losses on sale and purchase of shares would not be treated as speculation losses of assessee engaged in bills rediscounting activities - [2011] 14 taxmann.com 81 (Mumbai - Trib.)

Where assessee which was an association related to trade had incurred revenue expenses solely for purpose of protection of common interest of its members it would be allowable as deduction under section 44A - [2011] 14 taxmann.com 80 (Delhi - Trib.)

A partner of a firm is an individual only even if he is partner as a representative of HUF and, thus, where salary is paid to such a partner for conducting affairs of business of firm, it has to be allowed as deduction in view of Explanation 4 to section 40(b) - [2011] 14 taxmann.com 79 (Ahmedabad - Trib.)

Assessee not entitled to deduction under section 80-IB(10) where it sold plots to respective customers by registering a sale deed and thereafter it constructed building at an agreed price - [2011] 14 taxmann.com 78 (Indore - Trib.)

Where assessee, a non-resident company, carried out work of offshore transportation and installation of pipelines in territorial waters of India through its vassels, it could be said to have a fixed place of business in India in terms of paragraph (1) of article 5 of Indo-Mauritius DTAA - [2011] 14 taxmann.com 77 (Delhi - Trib.)

If stock-in-trade is converted into investment and sold later on, difference between sale price of shares and their indexed cost of acquisition should be computed as capital gain - [2011] 14 taxmann.com 76 (Chennai - Trib.)

Direct Tax Laws Oct 27

Direct Tax Laws

-> Amount paid by assessee-company to Bank for services rendered in connection with issue of shares to increase capital base of company, could not be allowed as revenue expenditure - [2011] 15 taxmann 371 <Bangalore - Trib.)

-> Article 14 : DTAA between India and France - Where transactions of sale of shares by foreign entities involving another foreign company, having controlling interest in an Indian company, are part of scheme for avoidance of tax, gain arising from such transaction is taxable in India, even if it is not an alienation of shares of an Indian company - [2011] 16 taxmann 21 <New Delhi)

-> Assessee himself having treated income as business income and had suddenly changed to heading 'agricultural income' - [2011] 16 taxmann 9 <Karnataka)

-> Assessee was assessable in respect of gross interest received from department on income-tax refund and not merely on not interest remaining after set off of interest paid to department on account of late payment of tax - [2011] 15 taxmann 381 <Pune - Trib.)<TM)

-> Assessee was entitled to receive interest under section 214(1A) on difference between advance tax and tax assessed under section 251 from first day of assessment year till day of passing regular assessment order under section 143(3) - [2011] 15 taxmann 365 <Delhi - Trib.)

-> Assessee was not liable to deduct tax at source from commission payment to non-resident which was not rendering any service or performing any activity in India itself - [2011] 15 taxmann 391 <Delhi)

-> Computation of undisclosed income should be based on material seized during search - [2011] 15 taxmann 394 <Karnataka)

-> Consideration received by assessee from a company on letting his name 'S' to be used in company's name and its product would be taxable under head 'Capital gains' - [2011] 15 taxmann 388 <Chennai - Trib.)

-> Deduction under section 80P(2) cannot be denied to co-operative society engaged in producing and marketing of sugar from sugarcane grown by members - [2011] 16 taxmann 14 <Punjab and Haryana)

-> Enhanced compensation alongwith interest received by assessee on account of acquisition of his land would be taxed in assessment year in which it was received - [2011] 15 taxmann 366 <Delhi - Trib.)

-> Even where assessee deducted gross payment made to sub-contractor from its gross income from contract and had shown commission income separately in profit & loss account, TDS liability under section 194C would arise - [2011] 15 taxmann 380 <Ahmedabad - Trib.)

-> Expenditure incurred by assessee-company for installation of a common effluent treatment plant under infrastructure upgradation scheme was to be allowed as revenue expenditure - [2011] 15 taxmann 370 <Chennai - Trib.)

-> Expenses incurred by assessee on installation of an accounting software to enable management to run its business more effectively and efficiently would be revenue expenditure - [2011] 15 taxmann 382 <Delhi)

-> In case of direct nexus between borrowing and advancing of money, interest spent is to be deducted from interest earned - [2011] 15 taxmann 386 <Delhi - Trib.)

-> Liaison office of non-resident assessee in India performing activities of selection of right goods and negotiation of price as part of purchasing process as per assessee's instructions cannot be considered PE of assessee in India - [2011] 15 taxmann 358 <Mumbai - Trib.)

-> Merely because Assessing Officer had decided to disallow certain expenses on ad hoc basis after making necessary enquiry, that by itself cannot be a ground to invoke powers under section 263 - [2011] 15 taxmann 384 <Delhi - Trib.)

-> Once assessment proceedings are initiated under section 158BD for computing undisclosed income of person other than person searched, based on evidence found in course of search, then it would be open to Assessing Officer to make use of any other information available with him for making block assessment - [2011] 15 taxmann 393 <Kerala)

-> Ownership of toll road under State-private joint-venture on Build, Own, Operate and Transfer <BOOT) basis rests with private party till transfer, entitling it to depreciation on same - [2011] 15 taxmann 387 <Ahmedabad - Trib.)

-> Penalty under section 271(1)(c) was imposable where assessee wrongly claimed set off of loss incurred in capacity of a partner of a firm against his individual income - [2011] 16 taxmann 11 <Delhi - Trib.)

-> Proceedings under section 147 cannot be initiated when time available for issuing notice under section 143(2) has not expired - [2011] 16 taxmann 12 <Lucknow - Trib.)

-> Revision of AO's order where Assessing Officer after examining various details of case had disallowed a part of purchases made under section 40A(3) - [2011] 16 taxmann 13 <Mumbai - Trib.)

-> Rule 8D of Income-tax Rules 1962, which was introduced by virtue of Notification No. 45/2008, dated 24-3-2008, is prospective in operation and cannot be regarded as being retrospective - [2011] 15 taxmann 390 <Delhi)

-> Temporary wooden structure and partition for running Computer Centre is eligible to 100% depreciation.NBFC can claim deduction of irrecoverable loans and advances under section 36(1)(vii) if there is an actual write off in books - [2011] 15 taxmann 392 <Madras)

-> Terms 'exempt income' and 'deduction from income' are two different propositions and, therefore, where assessee's income was not exempt under section 10 rather same was eligible for deduction under section 80P, assessee's case was not hit by provisions of section 14A - [2011] 16 taxmann 10 <Delhi - Trib.)

-> Transfer Pricing - Where assessee-company had entered into international transaction with its AE and in course of assessment assessee had furnished all details and documents in respect of these transactions which was accepted to be one confirming to arm's length price, no penalty could be levied on assessee under section 271AA - [2011] 16 taxmann 5 <Mumbai - Trib.)

-> Tribunal was justified in holding that case of assessee was a fit case for stay of outstanding demand beyond period of 365 days as per provisions of section 254(2A) - [2011] 15 taxmann 369 <Bombay)

-> When an assessee writes off a debt or part thereof as irrecoverable in accounts for previous year, same can be allowed as deduction under section 36(1)(vii) and, no further proof is necessary - [2011] 15 taxmann 373 <Andhra Pradesh)

-> Where after completion of search proceedings, assessee did not file a block return rather, it filed a regular return belatedly which was rejected by Assessing Officer, it did not make assessee liable to penalty under section 158BFA - [2011] 15 taxmann 375 <Chennai - Trib.)

-> Where assessee borrowed certain amount for its business purpose and earned interest on unutilized portion of loan interest income was taxable as business income - [2011] 16 taxmann 8 <Bombay)

-> Where assessee entered into agreements with finance companies to provide access to their customer database, it was not a contract for service and, thus, assessee was not required to deduct tax at source while making payments to finance companies - [2011] 16 taxmann 6 <Chennai - Trib.)

-> Where assessee showed purchase value of shares as debit to profit and loss account and, further, closing stock of shares was valued at cost or market value whichever was less, it was to be held that assessee treated shares as stock-in-trade and, thus, fall in value of same was allowable as business loss - [2011] 15 taxmann 385 <Mumbai - Trib.)

-> Where assessee-authority carried on systematic activity of development and sale of immovable properties which was incidental to its main object of town planning, exemption under section 11 was available to assessee only if it maintained separate books of account for aforesaid activity - [2011] 15 taxmann 389 <Delhi - Trib.)

-> Where Assessing Officer at time of passing assessment order, charged interest under a non-existent provision, it constituted a glaring, patent and obvious mistake which had to be rectified under section 154 - [2011] 16 taxmann 15 <Chennai - Trib.)

-> Where Assessing Officer could not rebut assessee's contention that no expenditure had been incurred to earn exempt income under section 10(33) and, moreover, rule 8D of Income-tax Rules, 1962, was also not applicable for assessment year in question, disallowance made under section 14A on ad hoc basis was to be set aside - [2011] 15 taxmann 376 <Delhi - Trib.)

-> where Assessing Officer had not brought out any specific expenditure which had been incurred by assessee for earning of tax exempt dividend income, disallowance of expenses invoking provisions of section 14A was not justified - [2011] 15 taxmann 383 <Delhi - Trib.)

-> Where interest earned on FDRs had direct nexus with assessee's export business, assessee should be allowed netting of such interest from interest paid by it to bank in terms of Explanation (baa) of section 80HHC - [2011] 15 taxmann 361 <Delhi)

-> Where Tribunal remanded an issue back to Assessing Officer for disposal afresh, subsequent decision of Supreme Court on said issue did not make Tribunal's order erroneous on face of record which could be rectified under section 254 (2) - [2011] 15 taxmann 367 <Lucknow - Trib.)

Direct Tax Laws Oct 21

Where in addition to regular salaries and benefits in India, living allowance is given to employees of Indian company who are temporarily deployed in USA to work for Indian company, living allowance will be exempt from tax - [2011] 15 taxmann 328 (Kolkata - Trib.)

Printed material purchased by assessee for use in manufacture and trade of footwear was a transaction of purchase and sale and, thus, assessee was not liable to deduct tax at source under section 194C - [2011] 15 taxmann 327 (Delhi - Trib.)

Where assessment orders under section 143(3) were passed without issuing any notice to assessee under section 143(2), said orders were invalid and, thus, liable to be quashed - [2011] 15 taxmann 326 (Chennai - Trib.)

Where assessee, engaged in operation of air-transportation, did not purchase even a single aircraft till end of relevant previous year, it was to be concluded that it had not commenced its business - [2011] 15 taxmann 325 (Bangalore - Trib.)

Direct Tax Laws Oct 19 & 20

Assessability of rental income from plinths and godowns as business income - [2011] 15 taxmann 292 (Delhi - Trib.)

Conversion of aluminium sheets into bottle caps is manufacturing, eligible for deduction under section 80-IB - [2011] 15 taxmann 314 (Chennai - Trib.)

Co-ordinated investigation is valid ground for transfer of case under section 127 from one Assessing Officer to another.Writ petition is not maintainable against notice issued under section 153A - [2011] 15 taxmann 311 (Rajasthan)

Date of commencement of housing project is date when assessee actually started development and not date when project was first approved by local authoritymercial use of residential units by purchaser would not disentitle developer benefit of section 80-IB - [2011] 15 taxmann 287 (Mumbai - Trib.)

Entire amount received towards Duty Entitlement Pass Book (DEPB) and Duty Free Remission Scheme (DFRS) inclusive of face value premium would constitute profit chargeable under section 28(iiid) and section 28(iiie) - [2011] 15 taxmann 317 (Amritsar - Trib.)

Expenses incurred wholly and exclusively on prospecting of minerals are to be amortised and rest of unconnected expenses are eligible for deduction in normal course - [2011] 15 taxmann 288 (Mumbai - Trib.)

High Court has power to deal with substantial question of law not formulated at time when appeal was admitted - [2011] 15 taxmann 324 (Madras)

If sufficient reserve has been created on date of claiming deduction of investment allowance, deduction would be allowed to assessee - [2011] 15 taxmann 294 (Karnataka)

If tax is deducted at source but there is only some shortfall due to difference of opinion about provisions applicable, assessee can be declared to be an assessee-in-default under section 201 but no disallowance can be made invoking section 40(a)(ia) - [2011] 15 taxmann 289 (Kolkata - Trib.)

In course of appellate proceedings, Commissioner (Appeals) can appoint independent Government approved valuer so as to determine cost of construction incurred by assessee - [2011] 15 taxmann 304 (Jodhpur - Trib.)

In order to get benefit of section 54F, assessee should, inter alia, purchase a house and merely because he has included name of his wife and purchased property in joint names would not make any difference - [2011] 15 taxmann 307 (Delhi)

Interest expenditure incurred on loan taken for purchase of motor car cannot be included while working out fringe benefits under section 115WB - [2011] 15 taxmann 300 (Pune - Trib.)

Legal effect of transaction cannot be displaced by probing into 'substance of transaction' and taxing authority must not look at matter from their own viewpoint but that of a prudent businessman - [2011] 15 taxmann 306 (Punjab and Haryana) (FB)

Levy of penalty where certain addition was made to assessee's income only on account of divergent views taken by revenue authorities - [2011] 15 taxmann 302 (Delhi - Trib.)

Mere denial of assessee's claim of set off of business loss against capital gains would not be ground to levy penalty under section 271(1)(c) - [2011] 15 taxmann 303 (Delhi - Trib.)

No addition under section 68 was warranted where four companies had purchased shares of assessee-company and had issued confirmation letters regarding purchase of shares from assessee and had also quoted their PAN - [2011] 15 taxmann 316 (Jabalpur - Trib.)

Once Assessing Officer records a prima facie reason that certain income has escaped assessment, in such a case, mere fact that for earlier assessment years issue in dispute has been decided by Commissioner (Appeals) in assessee's favour cannot be a fetter to Assessing Officer in exercising his jurisdiction under section 147 - [2011] 15 taxmann 318 (Chennai - Trib.)(TM)

Premium paid by assessee-company on keyman's insurance policy of two of its director who were rendering their services in course of carrying on its business, was to be allowed as deduction - [2011] 15 taxmann 291 (Delhi - Trib.)

Rule 63 of Schedule II to Act does not contemplate order of confirmation of sale to be a conclusive order and, thus, an appeal lies against it under rule 86 of Schedule II to Act - [2011] 15 taxmann 310 (Allahabad)

Subsidy received from Government does not partake character of payment either directly or indirectly to meet actual cost of an asset under section 43(1) - [2011] 15 taxmann 320 (Allahabad)

Sufficiency of materials cannot be gone into by High Court in case of search proceedings and, thus, once there is a rational opinion and application of mind, High Court in its writ jurisdiction cannot interfere in said proceedings - [2011] 15 taxmann 305 (Madhya Pradesh)

Tribunal is duty bound to consider reasons given by appellate authority for its decision before upsetting order made by appellate authority - [2011] 15 taxmann 315 (Gujarat)

Where assessee had neglected opportunity provided by Assessing Officer to explain adverse documents, it was necessary for Commissioner (Appeals) to have strictly complied with rule 46A of Income-tax Rules, 1962 while accepting additional evidences in appeals - [2011] 15 taxmann 297 (Mumbai - Trib.)

Where assessee had produced loan confirmation certificates signed by creditors, disclosing their permanent account numbers and address, loans taken by assessee could not be held to be not genuine without giving further opportunity to assessee to explain information on basis of which such conclusion was arrived at - [2011] 15 taxmann 298 (Calcutta)

Where assessee having discontinued its business of manufacturing of containers, converted its factory land into stock in trade as to carry on new business of real estate development, it was entitled to benefit of section 45(2) in respect of aforesaid conversion - [2011] 15 taxmann 286 (Mumbai - Trib.)

Where assessee maintained suspense account, only those of liabilities, which had been found to have crystallised within previous year and paid out of suspense account should have been allowed - [2011] 15 taxmann 301 (Madras)

Where assessee transferred its distributorship of products of 'A' Ltd. to one 'S' along with its dealership network, list of clients, services of skilled employees, etc., commission income earned by assessee in terms of said agreement was to be brought to tax as 'business income' - [2011] 15 taxmann 296 (Delhi - Trib.)

Where assessee, a London based recognized insurance broker, acted as an intermediary in process of finalization of reinsurer, suggesting various options to Indian insurance company for their consideration and acceptance, it could not be said that assessee was providing any technical service to Indian company and, therefore, payment in respect of same could not be brought to tax in India - [2011] 15 taxmann 285 (Delhi - Trib.)

Where assessee-company engaged in business of software development and deployment, entered into an agreement with 'D' Ltd. to provide technical advisory services and assistance for designing and development of its software product, amount paid by assessee to 'D' Ltd. allowable as business expenditure - [2011] 15 taxmann 319 (Delhi - Trib.)

Where assessee-firm in course of search proceedings declared certain undisclosed income and, thereupon paid tax thereon by filing a revised return, it had complied with provisions to clause (2) of Explanation 5 to section 271(1)(c) - [2011] 15 taxmann 323 (Karnataka)

Where assessee-HUF who was a partner in a firm had been found to have made payments of Rs. 30 lakhs to partners of firm and assessee had accumulated said sum year after year in cash from agriculture, said sum could not be treated as unexplained investment under section 69 - [2011] 15 taxmann 322 (Karnataka)

Where Commissioner (Appeals) having accepted possession and sale of cattle, sheep and goats by assessee, deleted addition made under section 69A, Tribunal in appellate proceedings could go into question as to whether sale transactions were genuine or not, but not as to sale price - [2011] 15 taxmann 321 (Andhra Pradesh)

Where education trust exists solely for educational purpose and its annual receipt is less than Rs. 1 crore, it cannot be denied section 10(23C) exemption even if it has not obtained registration under section 12A - [2011] 15 taxmann 312 (Chandigarh - Trib.)

Where issue relating to bad debts was specifically raised in original assessment proceedings and on receiving explanation from assessee it was allowed it could be said that there was no failure on part of assessee to disclose fully and truly all material facts necessary for purpose of assessment and therefore, Assessing Officer could not reopen assessment on ground that bad debt was not correctly written off under section 36(1)(vii) by assessee - [2011] 15 taxmann 290 (Bombay)

Where object of assessee-trust was to establish a number of educational institutions in a brand name and run those institutions on commercial lines, it could not be regarded a charitable activity - [2011] 15 taxmann 313 (Chennai - Trib.)

Where stamp valuation authority has adopted higher valuation of a property for payment of stamp duty, same cannot be a basis to conclude escapement of income in hands of purchaser - [2011] 15 taxmann 293 (Jodhpur - Trib.)

Where Tribunal directed Assessing Officer to determine short-term capital gain on sale of a trade mark in respect of which cost of acquisition itself was indeterminable, said direction of Tribunal being unworkable, was to be expunged - [2011] 15 taxmann 299 (Delhi - Trib.)

Without affording an opportunity of hearing assessee's application seeking registration under section 12AA could not be rejected on ground that even though objects of assessee-trust were charitable in nature, yet it had not carried out any charitable activities during relevant period - [2011] 15 taxmann 295 (Jaipur - Trib.)