ITR ISSUE DATED 26-09-2011 Volume 337 Part 3, SUBJECT INDEX TO CASES REPORTED IN THIS PART

INCOME TAX REPORTS (ITR)

Volume 337 : Part 3 (Issue dated 26-9-2011)

SUBJECT INDEX TO CASES REPORTED IN THIS PART

HIGH COURTS

->> Advance tax --Interest payable by assessee--Default in payment of advance tax--Withdrawal of investment allowance--Fiction under section 32A(5) applicable to levy of interest --Income-tax Act, 1961, ss. 32A(5), 234B-- I. C. I. India Ltd . v. CIT (Cal) . . . 327

->> Assessing Officer --Powers of Assessing Officer--Remand by Commissioner (Appeals) in respect of specific issues--Assessing Officer has no power to consider a new issue--Income-tax Act, 1961, ss. 32A, 43(3), 250-- Deputy CIT (Asstt.) v. Surat Electricity Co. Ltd. (Guj) . . . 271

->> Bad debt --Condition precedent for allowance--Effect of amendment of section 36 w.e.f. 1-4-1989--Writing off amount is sufficient--Assessee need not prove that debt had been bad--Income-tax Act, 1961, s. 36(1)(vii), (2)(iii)-- Asst. CIT v. Pullen Pump Industries (Guj) . . . 294

->> Capital gains --Business income--Purchase of shares and sale within a short time--Finding that shares had been purchased as investment--Gains assessable as capital gains--Income-tax Act, 1961, ss. 28, 45-- CIT v. Consolidated Finvest and Holding Ltd . (Delhi) . . . 264

->> Current repairs --Business expenditure--Meaning of current repairs--Capital or revenue expenditure--Breakdown of machinery after long use--Expenditure on overhauling and reconditioning machinery--Not deductible as current repairs or revenue expenditure--Expenditure on minor repairs of many machines--Deductible--Income-tax Act, 1961, ss. 31, 37-- Bharat Gears Ltd. v. CIT (Delhi) . . . 368

->> Depreciation --Rate of depreciation--Motor vehicle--Difference between lease and hire--Assessee leasing motor vehicles to clients--Not engaged in business of hire--Not entitled to higher rate of depreciation--Income-tax Act, 1961, s. 32--Income-tax Rules, 1962, Appendix I-- Bhagwati Appliance v. ITO (Guj) . . . 286

->> Exemption --Difference between sections 10 and 11--Agricultural marketing committee--Law applicable--Effect of insertion of clause (26AAB) in section 10 w.e.f. 1-4-2009--Provision not retrospective--Committee entitled to exemption under section 10(26AAB) from 1-4-2009--Income-tax Act, 1961, ss. 10, 11-- CIT v. Agriculture Market Committee (AP) . . . 299

->> Interpretation of taxing statutes --Rule against retrospectivity--Declaratory legislation-- CIT v. Agriculture Market Committee (AP) . . . 299

->> Investment allowance --Withdrawal of allowance--Conditions precedent--Transfer of entire division in slump sale within eight years--No price separately indicated for plant and machinery--Section 32A(5) applicable--Withdrawal of investment allowance--Justified--Income-tax Act, 1961, s. 32A(5)-- I. C. I. India Ltd . v. CIT (Cal) . . . 327

->> Penalty --Concealment of income--Failure to furnish return of income when amounts to concealment--Effect of Explanation 3 to section 271(1)--Conditions enumerated in the Explanation are cumulative--Notice under section 148 within period stipulated in section 153(1)--Explanation not applicable--Penalty could not be levied--Income-tax Act, 1961, s. 271-- Chhaganlal S Uteriya v. ITO (Guj) . . . 350

->> Precedent --Effect of decision of Supreme Court in CIT v. Gupta Global Exim P. Ltd. [2008] 305 ITR 132 (SC)-- Bhagwati Appliance v. ITO (Guj) . . . 286

->> Residence --Requirement of stay in India for specified period in previous year--Effect of Explanation (a) to section 6(1)(c)--Employment includes self-employment--Indian citizen doing business in foreign country and staying in India for one hundred and seventy-seven days in the previous year--To be treated as non-resident--Income-tax Act, 1961, s. 6(1)(c)-- CIT v. O. Abdul Razak (Ker) . . . 267

->> Revision --Application for revision--Rejection of application without considering merits--Levy of penalty not valid--Rejection of application not justified--Income-tax Act, 1961, s. 264-- Chhaganlal S Uteriya v. ITO (Guj) . . . 350

->> Search and seizure --Assessment of third person--Condition precedent--Satisfaction of Assessing Officer that undisclosed income found during search belonged to third person--Cash belonging to third person seized from his employee in premises of searched person--No evidence to indicate satisfaction of Assessing Officer that cash seized belonged to third person--Notice under section 158BD to third person--Not valid--Income-tax Act, 1961, s. 158BD-- Chandrakantbhai Amratlal Thakkar v. Deputy CIT (Guj) . . . 258

->> ----Block assessment--Penalty--Scope of section 158BFA--Substantial addition to income returned under section 158BC--Tax not paid--Penalty to be levied--Commissioner allowing payment of tax in instalments--Not relevant--Income-tax Act, 1961, s. 158BFA-- CIT v. Heera Construction Co. P. Ltd. (Ker) . . . 359

AUTHORITY FOR ADVANCE RULINGS

->> Non-resident --Transfer to non-resident subsidiary of shares in Indian company without consideration--Not taxable in India--Transfer pricing provisions not applicable--No requirement of deduction of tax at source--But liable to file return--Income-tax Act, 1961, ss. 45, 47(iii), 92 to 92F, 139, 195-- Deere and Company, In re. . . 277

SECTIONWISE INDEX TO CASES REPORTED IN THIS PART

Income-tax Act, 1961 :

->> S. 6(1)(c) --Residence--Requirement of stay in India for specified period in previous year--Effect of Explanation (a) to section 6(1)(c)--Employment includes self-employment--Indian citizen doing business in foreign country and staying in India for one hundred and seventy-seven days in the previous year--To be treated as non-resident-- CIT v. O. Abdul Razak (Ker) . . . 267

->> S. 10 --Exemption--Difference between sections 10 and 11--Agricultural marketing committee--Law applicable--Effect of insertion of clause (26AAB) in section 10 w.e.f. 1-4-2009--Provision not retrospective--Committee entitled to exemption under section 10(26AAB) from 1-4-2009-- CIT v. Agriculture Market Committee (AP) . . . 299

->> S. 11 --Exemption--Difference between sections 10 and 11--Agricultural marketing committee--Law applicable--Effect of insertion of clause (26AAB) in section 10 w.e.f. 1-4-2009--Provision not retrospective--Committee entitled to exemption under section 10(26AAB) from 1-4-2009-- CIT v. Agriculture Market Committee (AP) . . . 299

->> S. 28 --Capital gains--Business income--Purchase of shares and sale within a short time--Finding that shares had been purchased as investment--Gains assessable as capital gains-- CIT v. Consolidated Finvest and Holding Ltd .(Delhi) . . . 264

->> S. 31 --Current repairs--Business expenditure--Meaning of current repairs--Capital or revenue expenditure--Breakdown of machinery after long use--Expenditure on overhauling and reconditioning machinery--Not deductible as current repairs or revenue expenditure--Expenditure on minor repairs of many machines--Deductible-- Bharat Gears Ltd. v. CIT (Delhi) . . . 368

->> S. 32 --Depreciation--Rate of depreciation--Motor vehicle--Difference between lease and hire--Assessee leasing motor vehicles to clients--Not engaged in business of hire--Not entitled to higher rate of depreciation-- Bhagwati Appliance v. ITO (Guj) . . . 286

->> S. 32A --Assessing Officer--Powers of Assessing Officer--Remand by Commissioner (Appeals) in respect of specific issues--Assessing Officer has no power to consider a new issue-- Deputy CIT (Asstt.) v. Surat Electricity Co. Ltd. (Guj) . . . 271

->> S. 32A(5) --Advance tax--Interest payable by assessee--Default in payment of advance tax--Withdrawal of investment allowance--Fiction under section 32A(5) applicable to levy of interest-- I. C. I. India Ltd . v. CIT (Cal) . . . 327

->> ----Investment allowance--Withdrawal of allowance--Conditions precedent--Transfer of entire division in slump sale within eight years--No price separately indicated for plant and machinery--Section 32A(5) applicable--Withdrawal of investment allowance--Justified-- I. C. I. India Ltd . v. CIT (Cal) . . . 327

->> S. 36(1)(vii) --Bad debt--Condition precedent for allowance--Effect of amendment of section 36 w.e.f. 1-4-1989--Writing off amount is sufficient--Assessee need not prove that debt had been bad-- Asst. CIT v. Pullen Pump Industries (Guj) . . . 294

->> S. 36(2)(iii) --Bad debt--Condition precedent for allowance--Effect of amendment of section 36 w.e.f. 1-4-1989--Writing off amount is sufficient--Assessee need not prove that debt had been bad-- Asst. CIT v. Pullen Pump Industries (Guj) . . . 294

->> S. 37 --Current repairs--Business expenditure--Meaning of current repairs--Capital or revenue expenditure--Breakdown of machinery after long use--Expenditure on overhauling and reconditioning machinery--Not deductible as current repairs or revenue expenditure--Expenditure on minor repairs of many machines--Deductible-- Bharat Gears Ltd. v. CIT (Delhi) . . . 368

->> S. 43(3) --Assessing Officer--Powers of Assessing Officer--Remand by Commissioner (Appeals) in respect of specific issues--Assessing Officer has no power to consider a new issue-- Deputy CIT (Asstt.) v. Surat Electricity Co. Ltd. (Guj) . . . 271

->> S. 45 --Capital gains--Business income--Purchase of shares and sale within a short time--Finding that shares had been purchased as investment--Gains assessable as capital gains-- CIT v. Consolidated Finvest and Holding Ltd .(Delhi) . . . 264

->> ----Non-resident--Transfer to non-resident subsidiary of shares in Indian company without consideration--Not taxable in India--Transfer pricing provisions not applicable--No requirement of deduction of tax at source--But liable to file return-- Deere and Company, In re (AAR) . . . 277

->> S. 47(iii) --Non-resident--Transfer to non-resident subsidiary of shares in Indian company without consideration--Not taxable in India--Transfer pricing provisions not applicable--No requirement of deduction of tax at source--But liable to file return-- Deere and Company, In re (AAR) . . . 277

->> Ss. 92 to 92F --Non-resident--Transfer to non-resident subsidiary of shares in Indian company without consideration--Not taxable in India--Transfer pricing provisions not applicable--No requirement of deduction of tax at source--But liable to file return-- Deere and Company, In re (AAR) . . . 277

->> S. 139 --Non-resident--Transfer to non-resident subsidiary of shares in Indian company without consideration--Not taxable in India--Transfer pricing provisions not applicable--No requirement of deduction of tax at source--But liable to file return-- Deere and Company, In re (AAR) . . . 277

->> S. 158BD --Search and seizure--Assessment of third person--Condition precedent--Satisfaction of Assessing Officer that undisclosed income found during search belonged to third person--Cash belonging to third person seized from his employee in premises of searched person--No evidence to indicate satisfaction of Assessing Officer that cash seized belonged to third person--Notice under section 158BD to third person--Not valid-- Chandrakantbhai Amratlal Thakkar v. Deputy CIT (Guj) . . . 258

->> S. 158BFA --Search and seizure--Block assessment--Penalty--Scope of section 158BFA--Substantial addition to income returned under section 158BC--Tax not paid--Penalty to be levied--Commissioner allowing payment of tax in instalments--Not relevant-- CIT v. Heera Construction Co. P. Ltd. (Ker) . . . 359

->> S. 195 --Non-resident--Transfer to non-resident subsidiary of shares in Indian company without consideration--Not taxable in India--Transfer pricing provisions not applicable--No requirement of deduction of tax at source--But liable to file return-- Deere and Company, In re (AAR) . . . 277

->> S. 234B --Advance tax--Interest payable by assessee--Default in payment of advance tax--Withdrawal of investment allowance--Fiction under section 32A(5) applicable to levy of interest-- I. C. I. India Ltd . v. CIT (Cal) . . . 327

->> S. 250 --Assessing Officer--Powers of Assessing Officer--Remand by Commissioner (Appeals) in respect of specific issues--Assessing Officer has no power to consider a new issue-- Deputy CIT (Asstt.) v. Surat Electricity Co. Ltd. (Guj) . . . 271

->> S. 264 --Revision--Application for revision--Rejection of application without considering merits--Levy of penalty not valid--Rejection of application not justified-- Chhaganlal S Uteriya v. ITO (Guj) . . . 350

->> S. 271 --Penalty--Concealment of income--Failure to furnish return of income when amounts to concealment--Effect of Explanation 3 to section 271(1)--Conditions enumerated in the Explanation are cumulative--Notice under section 148 within period stipulated in section 153(1)--Explanation not applicable--Penalty could not be levied-- Chhaganlal S Uteriya v. ITO (Guj) . . . 350

Income-tax Rules, 1962 :

->> Appendix I --Depreciation--Rate of depreciation--Motor vehicle--Difference between lease and hire--Assessee leasing motor vehicles to clients--Not engaged in business of hire--Not entitled to higher rate of depreciation-- Bhagwati Appliance v. ITO (Guj) . . . 286

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Activity of assembling wind mills would amount to 'manufacture' as well as

Activity of assembling wind mills would amount to `manufacture' as well as `production' of a thing or article as set out in section 80-IB(2)(iii) - [2011] 10 taxmann.com 81 (Mad.)

recent - Case Laws

Income Tax - 2009 - TMI - 34176 - HC

Concept of Mutuality – Taxability of Income received from its members – Co-operative Housing Society - High Court held that concept of mutuality can be tested considering the followings (1) Is there any commerciality involved. (2) From the moneys received are the services offered in the nature of profit sharing or privileges, advantages and conveniences. (3) Are the participants and contributors identifiable and belong to the same class in the case of cooperative housing society. (4) Do the members have the right to share in the surplus and do they have a right to deal with its surpluses. - Once these tests are satisfied, there can be no doubt that the principle of mutuality will apply to a cooperative Housing Society which has its predominant activity, the maintenance of the property of the society which includes its building or buildings and as long as there is no taint of commerciality, trade or business – Transfer fee received from its members it not taxable.

Income Tax - 2009 - TMI - 34175 - HC

Recognition as Scientific and Industrial Research Organization (SIRO) - The aims and objects of the society inter alia includes research in planetary science, astronomy – astrophysics, solar physics and allied subjects. Apart from that other objects are to popularize science among the general public of our country, to conduct short courses on science, astronomy, geography for students and teachers in schools, colleges and universities, to Publish news letters/magazines etc. - The Ministry of Science and Technology, accorded to the Petitioner, recognition as Scientific and Industrial Research Organization (SIRO) – But CBDT refused to recognize u/s 35(1)(ii) – HC after setting aside the order of CBDT ordered the Board to reconsider the matter afresh.

Central Excise - 2009 - TMI - 34174 - HC

Order of the Settlement Commission – request to pay in installments – Extra ordinary jurisdiction of High Court - it is clear that as the order of settlement commission is final and mode of recovery is also set out therein - can a writ court exercising extra ordinary jurisdiction, when the settlement commission has thought it fit not to grant any installment, grant installments assuming that under section 32F(8) there is an implied power to grant installments. This court ordinarily, ought not to interfere in the exercise of its extra ordinary jurisdiction with the order passed by the Settlement Commission - the language of section 32F(10) as it earlier stood read with section 32(7) provided for installments. That is not the case now. - the legislature has expressly done away with the power to make payment by installments. – HC refused to grant relief to pay in installments.

Income Tax - 2009 - TMI - 34173 - HC

PSU – approval of COD before filing an appeal before tribunal - ITAT refused to admit the appeal as no COD approval was obtained – In the present case, the impugned order reveals that the Tribunal has assumed powers which it does not have, for determining whether the appeal is to be admitted or not. The Tribunal has lost sight of the fact that, both the assessee and the Revenue, are statutorily vested with a right under the Act by virtue of section 253(1), 253(2) and 253(4) of the Act to file an appeal or cross-objections. Such right granted by the statute cannot be divested by the Tribunal on an erroneous assumption of powers arrogated to itself under a mistaken belief of law - The appeals filed by the assessee and the Revenue before the Tribunal stand restored to the file of the Tribunal for being heard and decided afresh on the merits in accordance with law.

Income Tax - 2009 - TMI - 34172 - HC

Rate of Depreciation – 100% depreciation on certain goods - The table includes energy saving device in the context and for the purpose of encouraging industries to adopt energy saving measures - While it was possible, in the context of encouraging industrial activity, to bring within the net of exemption, manufacture of products which may even be remotely considered as "paper" – but the same reasoning can not be adopted here - since the table indicates its intention to afford depreciation at the rates mentioned only to the specifically listed equipments - It is not even proved that a drier of the kind mentioned herein is an energy saving device – tribunal is not correct to allow 100% depreciation on fluid bed drier.

Income Tax - 2009 - TMI - 34171 - HC

How to calculate ten years for claiming exemption u/s 80HH – tribunal allowed deduction u/s 80HH for the 11th year on the ground that for the first year there was no specific previous year – held that tribunal is incorrect in allowing deduction for the 11th year – sales tax does not form part of total turnover for the purpose of calculation of deduction under section 80HHC - interest accrued but had not become due in the present assessment year is not assessable to tax for the assessee following the mercantile system of accounting

Income Tax - 2009 - TMI - 34170 - HC

Industrial Undertaking - The expression "manufacture" or "production" are different expressions and the word "production" has a wider meaning - the word "production" under section 10B considering similar expression in section 80IB will have to be given this wider meaning, considering that the expressions are not defined in the Act but the expressions are used in the same Act. The only difference between section 80-IB and section 10B is that section 10B applicable to a 100 per cent. export oriented unit, whereas section 80-IB can be in respect of any unit – held that the cutting, polishing and sizing granites amounted to either manufacturing or processing and accordingly, the assessee was entitled for deduction under section 10B of the Income-tax Act.