Supreme Court recalls law requiring PSUs to obtain COD approval

Electronics Corporation of India Ltd vs. UOI (Supreme Court – 5 Judge Bench)

Friday, February 18th, 2011

Supreme Court recalls law requiring PSUs to obtain COD approval

 

In ONGC vs. CCE 104 CTR (SC) 31, the Supreme Court directed the Central Government to set up a 'Committee on Disputes' to monitor disputes between the Government and Public Sector Enterprises and give clearance for litigation. It was held the no litigation could be proceeded with in the absence of COD approval. This was followed in ONGC vs. CIDCO (2007) 7 SCC 39 and it was held that even disputes between PSUs and State Governments would require COD approval.

 

In CCE vs. Bharat Petroleum Corporation, a 2 Judge Bench of the Supreme Court held that the working of the COD had failed and that the time has come to revisit the law. The matter was referred to a Larger Bench for reconsideration.

 

HELD by the Larger Bench recalling its orders in ONGC vs. CCE 104 CTR (SC) 31, (2004) 6 SCC 437 and ONGC vs. CIDCO (2007) 7 SCC 39:

 

The idea behind setting up of the … "Committee on Disputes" (CoD) was to ensure that resources of the State are not frittered away in inter se litigations between entities of the State, which could be best resolved, by an empowered CoD … Whilst the principle and the object behind the aforestated Orders is unexceptionable and laudatory, experience has shown that despite best efforts of the CoD, the mechanism has not achieved the results for which it was constituted and has in fact led to delays in litigation …. on same set of facts, clearance is given in one case and refused in the other.

 

This has led a PSU to institute a SLP in this Court on the ground of discrimination. We need not multiply such illustrations. The mechanism was set up with a laudatory object. However, the mechanism has led to delay in filing of civil appeals causing loss of revenue. For example, in many cases of exemptions, the Industry Department gives exemption, while the same is denied by the Revenue Department. Similarly, with the enactment of regulatory laws in several cases there could be overlapping of jurisdictions between, let us say, SEBI and insurance regulators. Civil appeals lie to this Court. Stakes in such cases are huge. One cannot possibly expect timely clearance by CoD. In such cases, grant of clearance to one and not to the other may result in generation of more and more litigation. The mechanism has outlived its utility. In the changed scenario indicated above, we are of the view that time has come under the above circumstances to recall the directions of this Court

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HC Ruling-Merely because of the fact that the assessee had asserted that it is a

HC Ruling-Merely because of the fact that the assessee had asserted that it is a developer in the returns filed by him, it cannot be said that there is any failure on the part of the petitioner to disclose fully and truly all material facts. At best, the petitioner has made a claim along with supporting documents, namely, development agreements for construction of housing projects, etc. and based upon the said documents, the AO had formed an opinion and granted deduction under section 80-IB(10) of the Act. As to whether in a given set of facts, the assessee is a developer or a works contractor is a matter of inference. Hence, the assertion that the petitioner is a developer, without anything more cannot be said to be an incorrect disclosure of facts, as is sought to be contended on behalf of the revenue. In the circumstances, in the absence of any failure on the part of the petitioner to disclose fully and truly all material facts necessary for its assessment for the assessment year under consideration, the assumption of jurisdiction under section 147 of the Act after the expiry of four years from the end of the relevant assessment year is illegal and invalid. The proceedings under section 147 of the Act which have been initiated by issuance of the impugned notice under section 148 of the Act, therefore, cannot be sustained-AIT-2011-92-HC

S. 148 notice, even if unserved, is valid & second s. 148 notice issued to meet assessee’s claim of non-service, is invalid & renders assessment void

Sanjay Kumar Garg vs. ACIT (ITAT Delhi)

S. 148 notice, even if unserved, is valid & second s. 148 notice issued to meet assessee's claim of non-service, is invalid & renders assessment void

 

For AY 2001-02 (and other years), the AO recorded reasons for reopening of assessment on 22.9.05 and issued s. 148 notice on 23.9.05. The notice was sent through speed post and was not returned undelivered. Though the assessee appeared before the AO on several occasions and wrote letters, he claimed vide Affidavit that the s. 148 notice was not received by him. Pursuant to the assessee's claim, the AO issued another notice dated 25.9.06 u/s 148 and an assessment order u/s 143(3)/147 was passed on 24.12.2007. The assessee challenged the reassessment on the ground that (i) with respect to the s. 148 notice dated 23.9.05, the assessment order passed on 24.12.07 was time-barred and (ii) with respect to the s. 148 notice dated 25.9.06 that it could not have been issued during the pendency of the first notice. The department argued that as the assessee had claimed that he had not received the first notice dated 23.9.05, only the second notice could be considered and if so, the assessment was valid. HELD allowing the appeal:

 

(i) Though the assessee claimed by affidavit that he had not received the first s. 148 notice (and that formed the basis of the second 148 notice), as the first notice was sent by speed post as permitted by s. 282, it is presumed to have been duly served upon the assessee and was valid;

 

(ii) There is a difference between "issue" and "service". To obtain jurisdiction to assess/reassess the escaped income, the s. 148 notice has to be "issued" but need not be "served". Service is not a condition precedent to conferment of jurisdiction on the AO but a condition precedent only to the making of the order of assessment. The word "issue" means that the notice must leave the custody of the AO and as the Post Office is not the department's agent, sending it by post completes "issue". Accordingly, though the first notice was not (according to the assessee & department) served on the assessee, the AO was vested with power to assess/reassess the escaped income (R. K. Upadhyaya 166 ITR 163 (SC) & Sheo Kumari Debi 157 ITR 13 (Pat) (FB) followed);

 

(iii) With regard to the second notice, as the first s. 148 notice was valid and reassessment proceedings were pending, the second s. 148 notice is a 'nullity'. Unless the reassessment proceedings initiated u/s 147 are concluded & brought to a logical end, the AO cannot issue fresh notice u/s 148. This is not an "irregularity" but a "nullity" (Ranchhoddas Karsandas 26 ITR 105 (SC) & Jai Dev Jain 227 ITR 301 (Raj) followed);

 

(iv) The result is that the limitation period has to be reckoned with reference to the first notice dated 23.09.05 as per which the assessment order dated 24.11.07 is beyond time.

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Reassessment [Section 147] : Decision of assessing officer may not be correct

Income-tax : Reassessment [Section 147] : Decision of assessing officer may not be correct in a case, but the same cannot be made subject matter of reopening of assessment under section 147/148 - [2011] 9 taxmann.com 272 (Delhi)

ITR 331[2]

From: GlobalIndianCAs@yahoogroups.com [mailto:GlobalIndianCAs@yahoogroups.com] On Behalf Of CABHUPENDRASHAH
Sent: Friday, February 18, 2011 5:40 PM
To: GlobalIndianCAs@yahoogroups.com
Subject: [GlobalIndianCAs] itr 331[2]

 

INCOME TAX REPORTS (ITR)

Volume 331 : Part 2 (Issue dated 21-2-2011)

SUBJECT INDEX TO CASES REPORTED IN THIS PART

HIGH COURTS

Appeal to High Court --Delay in filing appeal--High Court can condone delay--Income-tax Act, 1961, s. 260A-- CIT v. R. K. B. K. Ltd . (Cal) . . . 269

Capital gains --Exemption--Transfer of residential house and purchase or construction of a residential house within the prescribed time--Meaning of "a residential house" in section 54--Transfer of residential house and purchase of four flats in the same residential building--Assessee entitled to exemption under section 54--Income-tax Act, 1961, s. 54--General Clauses Act, 1897, s. 13-- CIT v. Smt. K. G. Rukminiamma

(Karn) . . . 211

Charitable purpose --Charitable institution--Registration--Agricultural produce market committee--Income received to be spent for purpose mentioned--Including object of general public utility--Samiti entitled to registration--Income-tax Act, 1961, ss. 2(15), 12A, 12AA-- CIT v. Krishi Upaj Mandi Samiti, Jaisalmer

(Raj) . . . 135

----Charitable institution--Registration--Agricultural produce marketing committees set up by State Government--Charitable institution entitled to registration--Income-tax Act, 1961, ss. 2(15), 11, 12, 12A-- CIT v. Krishi Upaj Mandi Samiti, Shrimadhopur

(Raj) . . . 174

----Registration of trust--Agricultural produce marketing committees--Delay in application for registration from assessment year 2003-04 due to bona fide belief that registration was not necessary and in getting approval and legal advice from Government authorities--Delay to be condoned--Income-tax Act, 1961, ss. 12A, 12AA-- CIT v. Krishi Utpadan Mandi Samiti (All) . . . 154

----Registration of trust--"Charitable purposes", "property"--Meanings of--Samiti set up by State Government to regulate sale and purchase of agricultural produce and develop facilities for marketing of agricultural produce--Committees declared as local authorities exempted from tax till 2003--Dominant object of samitis was advancement of general public utility--Cess collected by samitis utilised for objects of samitis--Samitis entitled to registration--Income-tax Act, 1961, ss. 2(15), 11, 12A, 12AA-- CIT v. Krishi Utpadan Mandi Samiti (All) . . . 154

----Registration of trust--Market committee constituted statutorily with object of helping agriculturists and consumers--Entitled to registration--Benefit of exemption depends upon whether income utilised for charitable purpose--Income-tax Act, 1961, ss. 11, 12A, 12AA-- CIT v. Krishi Upaj Mandi Samiti (MP) . . . 140

Charitable trust --Registration--Application for registration--Delay in filing application--Assessee executing trust deed in 2000, started activities in 2005--Assessee as per advice of chartered accountant filing application belatedly--Delay to be condoned--Income-tax Act, 1961, s. 12AA-- CIT v. Indian Gospel Fellowship Trust

(Mad) . . . 283

Commissioner --Revision--Depreciation on goodwill--Revision on ground goodwill not an asset entitled to depreciation--Goodwill valuable commercial asset similar to other intangibles eligible to depreciation--Where two views are possible and Assessing Officer accepting one view which is a plausible one, not appropriate to exercise power under section 263--Income-tax Act, 1961, ss. 32, 263-- CIT v. Hindustan Coco Cola Beverages P. Ltd. (Delhi) . . . 192

Income --Accrual--Non-banking financial company--Method of accounting--Mercantile system of accounting--Interest accrued on non-performing assets not recognised as income--In conformity with notification issued by Reserve Bank of India--No question of accrual of income--Income-tax Act, 1961-- CIT v. Coimbatore Lakshmi Inv. and Finance Co. Ltd . (Mad) . . . 229

Income from other sources --Deduction--Interest on borrowed capital--Assessee manufacturing and exporting textiles--Funds transferred from cash credit/packing credit--Interest on such funds--Not entitled to deduction--Income-tax Act, 1961, s. 57(iii)-- CIT v. Dhanalakshmi Weaving Works (Ker) . . . 188

Industrial undertaking --Special deduction--Duty draw back --Does not form part of net profit--Income-tax Act, 1961, s. 80-IB-- Eastman Exports Global Clothing P. Ltd. v. Asst. CIT (Mad) . . . 232

Interpretation of taxing statutes --Effect of Explanation -- CIT v. Jet Airways (I) Ltd . (Bom) . . . 236

----Purposive interpretation--Casus omissus-- CIT v. R. K. B. K. Ltd.

(Cal) . . . 269

Reassessment --Notice--Deduction allowed under section 80-IA --Initiation of proceedings on change of opinion on whether assessee engaged in manufacture--Not permissible--Assessee allowed deduction in preceding as well as subsequent years--Group company engaged in similar activity also allowed deduction--Proceedings to be quashed--Income-tax Act, 1961, ss. 80-IA, 147, 148-- Northern Strips Ltd . v. ITO

(Delhi) . . . 224

----Scope of power of Assessing Officer--Law applicable--Effect of amendment of section 147 w.e.f. 1-4-1989--Assessing Officer can also assess other incomes not referred to in notice of reassessment--Power to assess such other income only if income referred to in notice of reassessment has been assessed--Income-tax Act, 1961, s. 147-- CIT v. Jet Airways (I) Ltd. (Bom) . . . 236

Recovery of tax --Hindu undivided family--Firm--Hindu undivided family or individual property--Karta of Hindu undivided family becoming partner in firm--Finding that he had become a partner in his individual capacity--Hindu undivided family properties could not be attached in proceedings for recovery of tax due by firm--Income-tax Act, 1961-- ITO v. Tippala China Appa Rao (AP) . . . 248

----Provisional attachment--Limitation--Department to show whether time extended as required under law--Income-tax Act, 1961, s. 281B-- VLS Finance Ltd. v. Asst. CIT (Delhi) . . . 131

Revision --Commissioner--Assessing Officer allowing claim for depreciation without examining facts--False claim for depreciation in prior years--Order erroneous--Commissioner justified in setting aside order in revision--Income-tax Act, 1961, s. 263-- CIT v. English Indian Clays Ltd. (Ker) . . . 219

Search and seizure --Return of seized assets--Direction not to release seized assets till assessment completed--Assessment made treating as unexplained investment of assessee--Tribunal deleting addition on jewellery--Jewellery not released on ground it did not belong to assessee alone--No proof that jewellery belonging to a third person--Matter remanded--Income-tax Act, 1961, s. 69A-- Madhu Lalwani v. CIT

(Delhi) . . . 184

Unexplained investment --Cost of construction of property--Estimate based on relevant material--Justified--Income-tax Act, 1961-- CIT v. Smt. V. Gajalakshmi

(Mad) . . . 216

SECTIONWISE INDEX TO CASES REPORTED IN THIS PART

General Clauses Act, 1897 :

S. 13 --Capital gains--Exemption--Transfer of residential house and purchase or construction of a residential house within the prescribed time--Meaning of "a residential house" in section 54--Transfer of residential house and purchase of four flats in the same residential building--Assessee entitled to exemption under section 54-- CIT v. Smt. K. G. Rukminiamma (Karn) . . . 211

Income-tax Act, 1961 :

S. 2(15) --Charitable purpose--Charitable institution--Registration--Agricultural produce market committee--Income received to be spent for purpose mentioned--Including object of general public utility--Samiti entitled to registration-- CIT v. Krishi Upaj Mandi Samiti, Jaisalmer (Raj) . . . 135

----Charitable purpose--Charitable institution--Registration--Agricultural produce marketing committees set up by State Government--Charitable institution entitled to registration-- CIT v. Krishi Upaj Mandi Samiti, Shrimadhopur (Raj) . . . 174

----Charitable purpose--Registration of trust--"Charitable purposes", "property"--Meanings of--Samiti set up by State Government to regulate sale and purchase of agricultural produce and develop facilities for marketing of agricultural produce--Committees declared as local authorities exempted from tax till 2003--Dominant object of samitis was advancement of general public utility--Cess collected by samitis utilised for objects of samitis--Samitis entitled to registration-- CIT v. Krishi Utpadan Mandi Samiti

(All) . . . 154

S. 11 --Charitable purpose--Charitable institution--Registration--Agricultural produce marketing committees set up by State Government--Charitable institution entitled to registration-- CIT v. Krishi Upaj Mandi Samiti, Shrimadhopur

(Raj) . . . 174

----Charitable purpose--Registration of trust--"Charitable purposes", "property"--Meanings of--Samiti set up by State Government to regulate sale and purchase of agricultural produce and develop facilities for marketing of agricultural produce--Committees declared as local authorities exempted from tax till 2003--Dominant object of samitis was advancement of general public utility--Cess collected by samitis utilised for objects of samitis--Samitis entitled to registration-- CIT v. Krishi Utpadan Mandi Samiti

(All) . . . 154

----Charitable purpose--Registration of trust--Market committee constituted statutorily with object of helping agriculturists and consumers--Entitled to registration--Benefit of exemption depends upon whether income utilised for charitable purpose-- CIT v. Krishi Upaj Mandi Samiti (MP) . . . 140

S. 12 --Charitable purpose--Charitable institution--Registration--Agricultural produce marketing committees set up by State Government--Charitable institution entitled to registration-- CIT v. Krishi Upaj Mandi Samiti, Shrimadhopur

(Raj) . . . 174

S. 12A --Charitable purpose--Charitable institution--Registration--Agricultural produce market committee--Income received to be spent for purpose mentioned--Including object of general public utility--Samiti entitled to registration-- CIT v. Krishi Upaj Mandi Samiti, Jaisalmer (Raj) . . . 135

----Charitable purpose--Charitable institution--Registration--Agricultural produce marketing committees set up by State Government--Charitable institution entitled to registration-- CIT v. Krishi Upaj Mandi Samiti, Shrimadhopur (Raj) . . . 174

----Charitable purpose--Registration of trust--Agricultural produce marketing committees--Delay in application for registration from assessment year 2003-04 due to bona fide belief that registration was not necessary and in getting approval and legal advice from Government authorities--Delay to be condoned-- CIT v. Krishi Utpadan Mandi Samiti (All) . . . 154

----Charitable purpose--Registration of trust--"Charitable purposes", "property"--Meanings of--Samiti set up by State Government to regulate sale and purchase of agricultural produce and develop facilities for marketing of agricultural produce--Committees declared as local authorities exempted from tax till 2003--Dominant object of samitis was advancement of general public utility--Cess collected by samitis utilised for objects of samitis--Samitis entitled to registration-- CIT v. Krishi Utpadan Mandi Samiti

(All) . . . 154

----Charitable purpose--Registration of trust--Market committee constituted statutorily with object of helping agriculturists and consumers--Entitled to registration--Benefit of exemption depends upon whether income utilised for charitable purpose-- CIT v. Krishi Upaj Mandi Samiti (MP) . . . 140

S. 12AA --Charitable purpose--Charitable institution--Registration--Agricultural produce market committee--Income received to be spent for purpose mentioned--Including object of general public utility--Samiti entitled to registration-- CIT v. Krishi Upaj Mandi Samiti, Jaisalmer (Raj) . . . 135

----Charitable purpose--Registration of trust--Agricultural produce marketing committees--Delay in application for registration from assessment year 2003-04 due to bona fide belief that registration was not necessary and in getting approval and legal advice from Government authorities--Delay to be condoned-- CIT v. Krishi Utpadan Mandi Samiti (All) . . . 154

----Charitable purpose--Registration of trust--"Charitable purposes", "property"--Meanings of--Samiti set up by State Government to regulate sale and purchase of agricultural produce and develop facilities for marketing of agricultural produce--Committees declared as local authorities exempted from tax till 2003--Dominant object of samitis was advancement of general public utility--Cess collected by samitis utilised for objects of samitis--Samitis entitled to registration-- CIT v. Krishi Utpadan Mandi Samiti

(All) . . . 154

----Charitable purpose--Registration of trust--Market committee constituted statutorily with object of helping agriculturists and consumers--Entitled to registration--Benefit of exemption depends upon whether income utilised for charitable purpose-- CIT v. Krishi Upaj Mandi Samiti (MP) . . . 140

----Charitable trust--Registration--Application for registration--Delay in filing application--Assessee executing trust deed in 2000, started activities in 2005--Assessee as per advice of chartered accountant filing application belatedly--Delay to be condoned-- CIT v. Indian Gospel Fellowship Trust (Mad) . . . 283

S. 32 --Commissioner--Revision--Depreciation on goodwill--Revision on ground goodwill not an asset entitled to depreciation--Goodwill valuable commercial asset similar to other intangibles eligible to depreciation--Where two views are possible and Assessing Officer accepting one view which is a plausible one, not appropriate to exercise power under section 263-- CIT v. Hindustan Coco Cola Beverages P. Ltd.

(Delhi) . . . 192

S. 54 --Capital gains--Exemption--Transfer of residential house and purchase or construction of a residential house within the prescribed time--Meaning of "a residential house" in section 54--Transfer of residential house and purchase of four flats in the same residential building--Assessee entitled to exemption under section 54-- CIT v. Smt. K. G. Rukminiamma (Karn) . . . 211

S. 57(iii) --Income from other sources--Deduction--Interest on borrowed capital--Assessee manufacturing and exporting textiles--Funds transferred from cash credit/packing credit--Interest on such funds--Not entitled to deduction-- CIT v. Dhanalakshmi Weaving Works (Ker) . . . 188

S. 69A --Search and seizure--Return of seized assets--Direction not to release seized assets till assessment completed--Assessment made treating as unexplained investment of assessee--Tribunal deleting addition on jewellery--Jewellery not released on ground it did not belong to assessee alone--No proof that jewellery belonging to a third person--Matter remanded-- Madhu Lalwani v. CIT (Delhi) . . . 184

S. 80-IA --Reassessment--Notice--Deduction allowed under section 80-IA--Initiation of proceedings on change of opinion on whether assessee engaged in manufacture--Not permissible--Assessee allowed deduction in preceding as well as subsequent years--Group company engaged in similar activity also allowed deduction--Proceedings to be quashed-- Northern Strips Ltd . v. ITO (Delhi) . . . 224

S. 80-IB --Industrial undertaking--Special deduction--Duty draw back --Does not form part of net profit-- Eastman Exports Global Clothing P. Ltd. v. Asst. CIT

(Mad) . . . 232

S. 147 --Reassessment--Notice--Deduction allowed under section 80-IA --Initiation of proceedings on change of opinion on whether assessee engaged in manufacture--Not permissible--Assessee allowed deduction in preceding as well as subsequent years--Group company engaged in similar activity also allowed deduction--Proceedings to be quashed-- Northern Strips Ltd . v. ITO (Delhi) . . . 224

----Reassessment--Scope of power of Assessing Officer--Law applicable--Effect of amendment of section 147 w.e.f. 1-4-1989--Assessing Officer can also assess other incomes not referred to in notice of reassessment--Power to assess such other income only if income referred to in notice of reassessment has been assessed-- CIT v. Jet Airways (I) Ltd. (Bom) . . . 236

S. 148 --Reassessment--Notice--Deduction allowed under section 80-IA --Initiation of proceedings on change of opinion on whether assessee engaged in manufacture--Not permissible--Assessee allowed deduction in preceding as well as subsequent years--Group company engaged in similar activity also allowed deduction--Proceedings to be quashed-- Northern Strips Ltd . v. ITO (Delhi) . . . 224

S. 260A --Appeal to High Court--Delay in filing appeal--High Court can condone delay-- CIT v. R. K. B. K. Ltd . (Cal) . . . 269

S. 263 --Commissioner--Revision--Depreciation on goodwill--Revision on ground goodwill not an asset entitled to depreciation--Goodwill valuable commercial asset similar to other intangibles eligible to depreciation--Where two views are possible and Assessing Officer accepting one view which is a plausible one, not appropriate to exercise power under section 263-- CIT v. Hindustan Coco Cola Beverages P. Ltd.

(Delhi) . . . 192

----Revision--Commissioner--Assessing Officer allowing claim for depreciation without examining facts--False claim for depreciation in prior years--Order erroneous--Commissioner justified in setting aside order in revision-- CIT v. English Indian Clays Ltd. (Ker) . . . 219

S. 281B --Recovery of tax--Provisional attachment--Limitation--Department to show whether time extended as required under law-- VLS Finance Ltd. v. Asst. CIT

(Delhi) . . . 131

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Transfer Pricing (Section 92C) - Lack of segmental reporting for re

Income-tax : Transfer Pricing (Section 92C) - Lack of segmental reporting for reason that transactions with AEs and non-AEs belong to same item of software related services, cannot be made a basis for rejecting assessee's method of computing Arm's Length Price by way of internal comparison made between transaction with AEs and unrelated parties. - [2011] 9 taxmann.com 263 (Delhi - ITAT)

Profits & gains from industrial undertakings [Section 80-IB] - Acti

Income-tax : Profits & gains from industrial undertakings [Section 80-IB] - Activity of mixing rubber with chemicals, process oil, etc., for making compound rubber by an industrial unit is covered by section 80-IB

l Compound rubber produced by the assessee on job work for the tyre manufacturing companies is an intermediary from which tyre is manufactured; if processing of iron ore which is only raw material for producing iron therefrom, amounts to manufacture or production of any article or thing then there is no reason why compound rubber cannot be treated as an article produced by the assessee though for the tyre manufacturing company under contract meaning thereby that there is nothing in the section 80-IB to indicate that article or thing produced or manufactured should be final product in itself. - [2011] 9 taxmann.com 264 (Ker.)

Penalty [Section 271(1)(c)] : Where ITAT, hold assessee's explaination reasonable

Income-tax - Penalty [Section 271(1)(c)] : Where Tribunal, holding assessee's explanations to be reasonable, deleted penalty under section 271(1)(c) - [2011] 9 taxmann.com 268 (Delhi)

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ITR Volume 331 part 2 dated 21.02.2011

INCOME TAX REPORTS (ITR) HIGHLIGHTS  ISSUE DATED 21-2-2011  Volume 331 Part 2

    HIGH COURT JUDGMENTS

  --> Limitation for provisional attachment : Department to show whether time extended as required under law : VLS Finance Ltd. v. Asst. CIT (Delhi) p. 131

  --> Samiti set up by State Government entitled to registration u/s 12A : CIT v. Krishi Upaj Mandi Samiti, Jailsalmer (Raj) p. 135, CIT v. Krishi Utpadan Mandi Samiti (All) 154 and CIT v. Krishi Upaj Mandi Samiti, Shrimadhopur (Raj) p. 174

  --> Market committee constituted statutorily with object of helping agriculturists and consumers entitled to registration u/s 12A : CIT v. Krishi Upaj Mandi Samiti (MP) p. 140

  --> Seizure of jewellery not released on ground it did not belong to assessee alone where no proof that jewellery belonging to a third person : Matter remanded : Madhu Lalwani v. CIT (Delhi) p. 184

  --> Interest on funds transferred from cash credit/packing credit not entitled to deduction : CIT v. Dhanalakshmi Weaving Works (Ker) p. 188

  --> Revision on ground goodwill not an asset entitled to depreciation not valid : CIT v. Hindustan Coco Cola Beverages P. Ltd. (Delhi) p. 192

  --> Assessee transferring residential house and purchasing four flats in the same residential building entitled to exemption u/s 54 : CIT v. Smt. K. G. Rukminiamma (Karn) p. 211

  --> Cost of construction of property : Estimate based on relevant material justified : CIT v. Smt. V. Gajalakshmi (Mad) 216

  --> AO allowing claim for depreciation without examining facts : Revision by Commissioner justified : CIT v. English Indian Clays Ltd. (Ker) 219

  --> Reassessment proceedings on change of opinion on whether assessee engaged in manufacture not permissible : Northern Strips Ltd. v. ITO (Delhi) p. 224

  --> Mercantile system of accounting : Interest accrued on non-performing assets not recognised as income : No accrual of income : CIT v. Coimbatore Lakshmi Inv. and Finance Co. Ltd. (Mad) p. 229

  --> Duty draw back does not form part of net profit : Eastman Exports Global Clothing P. Ltd. v. Asst. CIT (Mad) p. 232

  --> Power of AO to assess such other income only if income referred to in notice of reassessment has been assessed : CIT v. Jet Airways (I) Ltd. (Bom) p. 236

  --> Recovery of tax : Tribunal finding karta had become a partner in his individual capacity : HUF property could not be attached : ITO v. Tippala China Appa Rao (AP) p. 248

  --> High Court can condone delay in filing appeal : CIT v. R. K. B. K. Ltd. (Cal) p. 269

  --> Assessee executing trust deed in 2000 starting activities in 2005 : Application belatedly filed as per advice of chartered accountant : Delay to be condoned : CIT v. Indian Gospel Fellowship Trust (Mad) p. 283

    NEWS-BRIEF

  --> Plan to cure tax assessment limits of I-T officials'

    In a significant organisational revamp, the Central Board of Direct Taxes has raised the monetary limit of tax assessments handled by income-tax officers or ITOs.

    The move is designed to lighten the load on senior officers so that they can concentrate more on investigations, international taxation issues and transfer pricing. It also aims to ease the hardships of taxpayers in small towns and mofussil areas who have to travel to cities to attend to their tax matters.

    Under the revised monetary limits, revenue cadre officials in metros will handle non-corporate taxpayers with an annual income above 20 lakh and corporates with an income above 30 lakh. In case of non-metros, they will deal only with non-corporate taxpayers with an annual income above 15 lakh and corporates with income over 20 lakh.

    This is a big respite for taxpayers in small towns who until now had to travel to big centres where a Commissioner or an Assistant Commissioner usually has his office.

    The Central Board of Direct Taxes has also finalised a strategic plan that includes creation of dedicated directorates for criminal investigation and risk management.

    Resources freed up as part of this restructuring will be diverted to these specialised units. This will help in mounting an effective surveillance on fund flows into the country that have the potential to impact national security.

    The country's direct tax revenues have grown from 13,000 crore in 1991-92 to 3.87 lakh crore in 2009-10. The number of taxpayers has also grown nearly five times over the period to more than 3.2 crore. [Source : www.economictimes.com dated February 5, 2011]

  --> Tax cap ruling against evaders in line with litigation policy

    The IT Department is mulling over development of an increase in limits above which it files appeals against tax evaders in the tribunal or courts.

    "The Department is planning to change the tax limits for appeals. Now, for filing an appeal in Income-tax Appellate Tribunal (ITAT), the tax effect should be Rs. 3 lakh, for High Courts it has been increased to Rs. 10 lakh and for Supreme Court it is Rs. 25 lakh," the official said.

    With the move, the Income-tax Department expects to reduce up to 13 per cent. cases at ITAT level and 25-30 per cent. cases at High Court and Supreme Court level each, the source added.

    "Even if the case is strong enough to be taken to the Tribunal, the Department will not do so. This will cut down the wastage of resources in unnecessary litigation and reduce the burden of overburdened courts while at the same time assessee would also benefit from this policy," the official added.

    According to the National Litigation Policy, the Government should work towards reducing litigation in courts so that valuable court time would be spent in resolving other pending cases. This will help in achieving the goal in the National Legal Mission to reduce average pendency time from 15 years to 3 years.

    The initiative by the Income-tax Department comes in the backdrop of criticism by the Finance Minister that the I-T Department has emerged as the largest litigant in the country.

    Last year, the Comptroller and Auditor General of India (CAG) had stated in its report that the disputed tax amount "can wipe off the revenue deficit of the Government in 2008-09".

    The total amount of direct tax stuck at the Commissioner (Appeals) level is Rs. 2.2 lakh crore for 2008-09, the CAG had pointed out.

    Apart from that, Rs. 12,757.59 crore is stuck at Income-tax Appellate Tribunal, Supreme Court and High Court levels, the Finance Minister had told the Parliament last year.

    The move is to cut down wastage of resources in unnecessary litigation and reduce the burden of overburdened courts. [Source : www.financialexpress.com dated January 31, 2011]

  --> Survey says to raise IT exemption limit to rough ride over inflation fears

    The Government must increase the personal income tax exemption limit to at least Rs. 3 lakh from Rs. 1.6 lakh at present in the upcoming Budget for giving relief to taxpayers from high inflation, majority of CEOs surveyed by industry body ASSOCHAM has said.

    "In view of the unprecedented inflation particularly the food inflation, the Government must increase the personal income-tax exemption limit from the existing Rs. 1.6 lakh to at least Rs. 3 lakh to give adequate relief to the larger sections of the society, added the majority of the CEOs," the pre-Budget survey said.

    The Budget 2011-12 would be unveiled by the Finance Minister on February 28. At present, income up to Rs. 1.6 lakh is exempted from tax for individuals. For women and senior citizens, the limit is Rs. 1.9 lakh and Rs. 2.4 lakh, respectively.

    The survey further said that due to continuous elevated inflation and high commodity prices across globe, there is a strong case for continuation of stimulus package so that the growth momentum is not spiked.

    It was a pre-Budget expectations survey conducted under the Associated Chambers of Commerce and Industry of India (ASSOCHAM) with participation from its 1,000 CEOs. Inflation, particularly food inflation, has been a concern for both the Government and the common man. For the past few months, food prices are at high levels.

    The WPI inflation for December rose to 8.43 per cent., from 7.48 per cent. in the previous month. Food inflation, based on wholesale prices, rose to 17.05 per cent. for the week ended January 22, on account of escalating vegetable prices, particularly, onions. It was at 15.57 per cent. in the previous week.

    Around 84 per cent. of the CEOs belonging to large, micro, small and medium enterprises polled in the survey held that stimulus package for textiles, gems and jewellery, construction and real estate, cement and steel, among others, should continue for the next fiscal. [Source : www.economictimes.com dated February 6, 2011]

  --> ASSOCHAM offers a neat way to enhance deduction on health insurance premiums

    The Associated Chambers of Commerce and Industry of India (ASSOCHAM) in its pre-budget memorandum recommended that the deduction (under section 80D) in respect of medical insurance premium of an individual or his family should be raised to Rs. 25,000 from Rs. 15,000.

    The rationale given by ASSOCHAM is "In the context of the sharply increasing medical expenses, medical insurance premiums are escalating every year. Also, there is need to increase the penetration ratio of insurance by providing encouragement through tax reliefs for opting for medical insurance." [Source : www.economictimes.com dated February 8, 2011]

  --> Amendment in DTC is the best hope for CARE

    Global agency CARE said the Government should amend the provisions of the Direct Taxes Code in the forthcoming Budget so that balances of non-profit organisation (NPOs) are not treated as income.

    ". . . retained balances of specific-purpose grants received by NPOs should not be treated as 'income' so long as it is applied for the specified purpose," CARE said in a statement.

    It asked the Government that NPOs should be allowed to retain 15 per cent. of general contributions or other incomes to provide a buffer for ongoing activities.

    "Considering that taxable income of the NPOs are computed largely on the same lines as commercial organisations, the DTC must also provide carry forward and set-off of deficit in any financial year against the surplus in subsequent years," the agency said. [Source : www.economictimes.com dated February 8, 2011]

  --> Indian Merchants' Chamber offers Pre-Budget proposals

    Indian Merchants' Chamber (IMC) has submitted its Pre-Budget Memorandum for the budget proposals for direct taxes and issues to the Prime Minister, the Finance Minister and the Chairman, C.B.D.T.

    IMC says, in light of the measures proposed in the revised Direct Taxes Code (DTC) Bill, 2010 it is necessary that none of the proposals contained in the DTC should be introduced through the Finance Bill.

    Some of the key recommendations explained in detail in the memorandum are listed below.

    Retrospective Amendment Should Be Avoided

    Definition of "Charitable Purpose" : Section 2(15)

    Year of Deductibility Of Legitimate Business Expenditure-Reduce Avoidable Litigation

    Exemption from T.D.S. for Regular Assessees

    Disallowance of expenses relating to exempt income : Section 14A

    Gifts etc. in kind to be treated as income : Section 56(2)

    Failure to make claim for certain deductions in the return of Income : Section 80A(5)

    Distribution of capital assets on dissolution of firm to partners : Section 45(4)

    Stay of demand until disposal of the appeal, no recovery proceedings

    Extension of the facility of advance ruling to domestic enterprises

    Dispute Resolution Panel (Section 144C of Income-tax Act) [Source : www.economictimes.com dated February 10, 2011]

  --> Constant agriculture sector incentives worrying the market

    Industry chamber CII called for the Government to provide tax incentives on agricultural activities in the forthcoming Budget to encourage private participation and adoption of new technologies in the sector.

    "CII has recommended encouraging private sector participation through various tax measures (in agriculture)," the industry chamber said in a statement. It said that additional tax incentives need to be given on expenses incurred on new technology and inputs.

    CII also said the Government should incentivise best crop raising practices, soil testing, residue analysis and diagnostics. According to the Government's advance estimates, the output of the agriculture and allied sectors is likely to grow by 5.4 per cent. in 2010-11, compared to just 0.4 per cent. in 2009-10.

    Experts said growth of the sector needs to be encouraged through calibrated Budget measures, as agriculture in India is primarily monsoon-dependent and any minor changes in rainfall patterns affect productivity and quality.

    With regard to the infrastructure sector, CII hopes that the Union Budget presented on February 28 will help reverse the declining investment trend by introducing certain innovative fiscal measures.

    "Emerging challenges such as rising input costs and interest rates amid still subdued global demand will have to be dealt with," CII's Director-General said.

    The industry chamber also asked the Government to reduce the tax liabilities of infrastructure companies to motivate them to make larger investments. India needs a whopping USD 1 trillion investment in the infrastructure sector in the 12th Five-Year Plan (2012-17), of which it expects 50 per cent. to come from the private sector. [Source : www.economictimes.com dated February 8, 2011]



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Indo-UK DTAA : Dividend received by a resident Indian from an English Company is

Indo-UK DTAA : Dividend received by a resident Indian from an English Company is to be increased by 1/9th of the same and on increased amount, which is a gross dividend, same is to be considered as dividend received by assessee for the purpose of Income-tax Act

If the resident of the Contracting State is given some benefit under the Treaty but with conditions then those conditions are also binding for availing the benefit


[2010] 6 taxmann.com 126 (Mum.)
ITAT, MUMBAI BENCH `L', MUMBAI
ACIT

v.

Homy N. J. Dady
ITA No. 470/Mum/2008
July 30, 2010

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