ITR Volume 330 Part 3 dated 17-01-2011

INCOME TAX REPORTS (ITR)

Volume 330 : Part 3 (Issue dated 17-1-2011)

SUBJECT INDEX TO CASES REPORTED IN THIS PART

SUPREME COURT

Adjudication --Natural justice--Duty of disclosure--Extent and scope-- Kanwar Natwar Singh v. Directorate of Enforcement . . . 374

Company --Book profits--Computation--Reduction of net profit by amount withdrawn from revaluation reserve--Only if amount added back in year of creation of revaluation reserve--Income-tax Act, 1961, s. 115JB-- Indo Rama Synthetics (I.) Ltd. v. CIT . . . 363

Foreign exchange --Adjudication--Notice to show cause why enquiry should not be conducted--Noticee not entitled to copies of documents not relied on by adjudicating authority--Foreign Exchange Management Act, 1999, s. 16--Foreign Exchange Management (Adjudication Proceedings and Appeal) Rules, 2000, r. 4(1)-- Kanwar Natwar Singh v. Directorate of Enforcement . . . 374

HIGH COURTS

Advance tax --Interest--Waiver of interest--Grounds for waiver of interest under section 234A different from grounds for waiver of interest under sections 234B and 234C--Compensation received by assessee on surrender of tenancy rights--Position of tax liability not clear--Non-payment of advance tax--Interest liability fixed at Rs. 1 lakh under sections 234B and 234C--Income-tax Act, 1961, ss. 234A, 234B, 234C--Notification No. 400/234/95/IT dated May 23, 1996-- Chief CIT v. Jimmichan M. Varicatt

(Ker) . . . 338

Appeal to Appellate Tribunal --New plea--No such plea taken before lower authorities--Rejection of additional plea--Proper--Income-tax Act, 1961-- CIT v. Hindustan Tin Works Ltd. (Delhi) . . . 350

Appeal to High Court --Findings of fact by Tribunal--Findings cannot be set aside unless perverse--Income-tax Act, 1961, s. 260A-- CIT v. D. S. Promoters and Developers Pvt. Ltd. (Delhi) . . . 291

----Maintainability--Provision empowering CBDT to prescribe monetary limits for litigation by Revenue--Instruction of CBDT binding on Revenue--Tax effect less than prescribed in Instruction--Appeal barred--Income-tax Act, 1961, ss. 260A, 268A-- CIT v. Kironmoy Roy Choudhury (Gauhati) . . . 316

Business expenditure --Initial expenditure for commencement of business and for opening branches amortized--Closure of one branch--Unabsorbed expenditure of closed branch to be apportioned equally amongst head office and other branches--Income-tax Act, 1961, s. 37-- Victoria Gold Gallery v. CIT (Ker) . . . 330

Business loss --Purchase and redemption of units of mutual fund--Disallowance on ground that transaction collusive and accommodation entry--Finding by Commissioner (Appeals) as well as Tribunal that transaction genuine and deleting addition--Findings of fact--Income-tax Act, 1961-- CIT v. Hindustan Tin Works Ltd .

(Delhi) . . . 350

Capital gains --Acquisition of land--Enhanced compensation--Introduction of section 45(5)(b) w.e.f. 1-4-1988--Land acquired on 4-2-1972 and enhanced compensation received on 28-5-1984--No return filed for 1972-73--Rectification cannot be made under section 155(7A)--Enhanced compensation not taxable either in year of receipt or in year of acquisition--Income-tax Act, 1961, ss. 45(5)(b), 155(7A)-- CIT v. Smt. Parkash Kaur (P&H) . . . 332

----Exemption--Investment in residential house--Assessee selling agricultural land and claiming purchase of a flat--Finding that most of instalments for flat paid prior to sale--Flat not in name of assessee-HUF but in joint names of individual and his mother--Assessee not entitled to claim benefit of section 54F--Income-tax Act, 1961, s. 54F-- Vipin Malik (HUF) v. CIT (Delhi) . . . 309

----Transfer of goodwill--Sale of entire business, including all assets and liabilities, as a going concern--Not possible to bifurcate consideration received on account of transfer--Transfer does not give rise to capital gains--Income-tax Act, 1961-- Asst. CIT v. Patel Specific Family Trust (Guj) . . . 397

Cash credits --Burden of proof--Initial burden on assessee to prove identity of creditors--Burden then shifts to Revenue to prove credits were not genuine--Identity of applicants for shares and their PAN numbers furnished--Amounts received through account payee cheques--Inability to find a few applicants--Not sufficient to invoke section 68--Income-tax Act, 1961, s. 68-- CIT v. Dwarkadhish Investment P. Ltd .

(Delhi) . . . 298

Company --Book profit--Assessing Officer not entitled to go into profit and loss account prepared by assessee as per Companies Act--Book profit arrived at to be the basis for taxation--Companies Act, 1956--Income-tax Act, 1961, ss. 80HHC, 115JA-- AVT Natural Products Ltd. v. Deputy CIT (Mad) . . . 360

Firm --Registration--Continuance of registration--Delay in filing declaration in Form 12--Rejection of application without affording opportunity to be heard--Not valid--Income-tax Act, 1961, s. 184(7)-- Bharat Construction Company v. CIT

(All) . . . 285

Income or capital --Assessee founder member and secretary of educational society and working voluntarily as headmaster of school run by society--Amount received for relinquishment of life membership and secretaryship of society--Income receipt--Assessable under income from other sources--Income-tax Act, 1961-- CIT v. H. S. Ramachandra Rao (Karn) . . . 322

Interest --Acquisition of land--Enhanced compensation--No record to suggest that assessee declaring interest income on yearly accrual basis--Assessee following cash system--Interest received taxable--Income-tax Act, 1961-- CIT v. Smt. Parkash Kaur

(P&H) . . . 332

Other sources --Business--Income from property owned by assessee on property taken on lease--Finding based on facts that income from business--Income was assessable as business income--Income-tax Act, 1961, ss. 28, 56-- CIT v. D. S. Promoters and Developers Pvt. Ltd . (Delhi) . . . 291

Reassessment --Assessing Officer under section 143(1)(a) admitting claim of assessee in respect of incentive bonus and additional conveyance allowance--Disallowance of claim in reassessment proceedings--Reassessment valid--Income-tax Act, 1961, s. 147-- Ramesh Chander Singla v. CIT (P&H) . . . 288

----Notice--Income escaping assessment--Wrong claim treating interest receipt as export incentive--Assessing Officer having reason to believe that income has escaped assessment--Reassessment proceedings cannot be quashed--Writ petition not maintainable--Income-tax Act, 1961, ss. 147, 148-- Tamil Nadu Petroproducts Ltd. v. CIT

(Mad) . . . 342

Refund --Claim for refund--Claim withdrawn on ground beyond time specified under section 239--Assessing Officer failing to raise any issue with regard to plea under section 239 at appropriate stage--Commissioner (Appeals) passing order of refund on appeal--Revenue liable to make refund--Income-tax Act, 1961, ss. 239, 240-- Hind Samachar Limited v. Union of India (P&H) . . . 266

----Interest on refund--Assessee deducting and depositing TDS on time but filing TDS certificates during assessment proceedings--Interest under section 244A cannot be denied--Income-tax Act, 1961, s. 244A-- CIT v. Larsen and Toubro Ltd.

(Bom) . . . 340

Return --Company--Rectification of mistakes--Return of company not signed by managing director but by person authorised by board resolution--Defect curable under section 292B--Income-tax Act, 1961, ss. 140, 154, 239, 240, 292B-- Hind Samachar Limited v. Union of India (P&H) . . . 266

SECTIONWISE INDEX TO CASES REPORTED IN THIS PART

Foreign Exchange Management (Adjudication Proceedings and Appeal) Rules, 2000 :

R. 4(1) --Foreign exchange--Adjudication--Notice to show cause why enquiry should not be conducted--Noticee not entitled to copies of documents not relied on by adjudicating authority-- Kanwar Natwar Singh v. Directorate of Enforcement

(SC) . . . 374

Foreign Exchange Management Act, 1999 :

S. 16 --Foreign exchange--Adjudication--Notice to show cause why enquiry should not be conducted--Noticee not entitled to copies of documents not relied on by adjudicating authority-- Kanwar Natwar Singh v. Directorate of Enforcement

(SC) . . . 374

Income-tax Act, 1961 :

S. 28 --Other sources--Business--Income from property owned by assessee on property taken on lease--Finding based on facts that income from business--Income was assessable as business income-- CIT v. D. S. Promoters and Developers Pvt. Ltd .

(Delhi) . . . 291

S. 37 --Business expenditure--Initial expenditure for commencement of business and for opening branches amortized--Closure of one branch--Unabsorbed expenditure of closed branch to be apportioned equally amongst head office and other branches-- Victoria Gold Gallery v. CIT (Ker) . . . 330

S. 45(5)(b) --Capital gains--Acquisition of land--Enhanced compensation--Introduction of section 45(5)(b) w.e.f. 1-4-1988--Land acquired on 4-2-1972 and enhanced compensation received on 28-5-1984--No return filed for 1972-73--Rectification cannot be made under section 155(7A)--Enhanced compensation not taxable either in year of receipt or in year of acquisition-- CIT v. Smt. Parkash Kaur (P&H) . . . 332

S. 54F --Capital gains--Exemption--Investment in residential house--Assessee selling agricultural land and claiming purchase of a flat--Finding that most of instalments for flat paid prior to sale--Flat not in name of assessee-HUF but in joint names of individual and his mother--Assessee not entitled to claim benefit of section 54F-- Vipin Malik (HUF) v. CIT (Delhi) . . . 309

S. 56 --Other sources--Business--Income from property owned by assessee on property taken on lease--Finding based on facts that income from business--Income was assessable as business income-- CIT v. D. S. Promoters and Developers Pvt. Ltd .

(Delhi) . . . 291

S. 68 --Cash credits--Burden of proof--Initial burden on assessee to prove identity of creditors--Burden then shifts to Revenue to prove credits were not genuine--Identity of applicants for shares and their PAN numbers furnished--Amounts received through account payee cheques--Inability to find a few applicants--Not sufficient to invoke section 68-- CIT v. Dwarkadhish Investment P. Ltd . (Delhi) . . . 298

S. 80HHC --Company--Book profit--Assessing Officer not entitled to go into profit and loss account prepared by assessee as per Companies Act--Book profit arrived at to be the basis for taxation-- AVT Natural Products Ltd. v. Deputy CIT

(Mad) . . . 360

S. 115JA --Company--Book profit--Assessing Officer not entitled to go into profit and loss account prepared by assessee as per Companies Act--Book profit arrived at to be the basis for taxation-- AVT Natural Products Ltd. v. Deputy CIT

(Mad) . . . 360

S. 115JB --Company--Book profits--Computation--Reduction of net profit by amount withdrawn from revaluation reserve--Only if amount added back in year of creation of revaluation reserve-- Indo Rama Synthetics (I.) Ltd. v. CIT

(SC) . . . 363

S. 140 --Return--Company--Rectification of mistakes--Return of company not signed by managing director but by person authorised by board resolution--Defect curable under section 292B-- Hind Samachar Limited v. Union of India

(P&H) . . . 266

S. 147 --Reassessment--Assessing Officer under section 143(1)(a) admitting claim of assessee in respect of incentive bonus and additional conveyance allowance--Disallowance of claim in reassessment proceedings--Reassessment valid-- Ramesh Chander Singla v. CIT (P&H) . . . 288

----Reassessment--Notice--Income escaping assessment--Wrong claim treating interest receipt as export incentive--Assessing Officer having reason to believe that income has escaped assessment--Reassessment proceedings cannot be quashed--Writ petition not maintainable-- Tamil Nadu Petroproducts Ltd. v. CIT

(Mad) . . . 342

S. 148 --Reassessment--Notice--Income escaping assessment--Wrong claim treating interest receipt as export incentive--Assessing Officer having reason to believe that income has escaped assessment--Reassessment proceedings cannot be quashed--Writ petition not maintainable-- Tamil Nadu Petroproducts Ltd. v. CIT

(Mad) . . . 342

S. 154 --Return--Company--Rectification of mistakes--Return of company not signed by managing director but by person authorised by board resolution--Defect curable under section 292B-- Hind Samachar Limited v. Union of India

(P&H) . . . 266

S. 155(7A) --Capital gains--Acquisition of land--Enhanced compensation--Introduction of section 45(5)(b) w.e.f. 1-4-1988--Land acquired on 4-2-1972 and enhanced compensation received on 28-5-1984--No return filed for 1972-73--Rectification cannot be made under section 155(7A)--Enhanced compensation not taxable either in year of receipt or in year of acquisition-- CIT v. Smt. Parkash Kaur (P&H) . . . 332

S. 184(7) --Firm--Registration--Continuance of registration--Delay in filing declaration in Form 12--Rejection of application without affording opportunity to be heard--Not valid-- Bharat Construction Company v. CIT (All) . . . 285

S. 234A --Advance tax--Interest--Waiver of interest--Grounds for waiver of interest under section 234A different from grounds for waiver of interest under sections 234B and 234C--Compensation received by assessee on surrender of tenancy rights--Position of tax liability not clear--Non-payment of advance tax--Interest liability fixed at Rs. 1 lakh under sections 234B and 234C--Notification No. 400/234/95/IT dated May 23, 1996-- Chief CIT v. Jimmichan M. Varicatt (Ker) . . . 338

S. 234B --Advance tax--Interest--Waiver of interest--Grounds for waiver of interest under section 234A different from grounds for waiver of interest under sections 234B and 234C--Compensation received by assessee on surrender of tenancy rights--Position of tax liability not clear--Non-payment of advance tax--Interest liability fixed at Rs. 1 lakh under sections 234B and 234C--Notification No. 400/234/95/IT dated May 23, 1996-- Chief CIT v. Jimmichan M. Varicatt (Ker) . . . 338

S. 234C --Advance tax--Interest--Waiver of interest--Grounds for waiver of interest under section 234A different from grounds for waiver of interest under sections 234B and 234C--Compensation received by assessee on surrender of tenancy rights--Position of tax liability not clear--Non-payment of advance tax--Interest liability fixed at Rs. 1 lakh under sections 234B and 234C--Notification No. 400/234/95/IT dated May 23, 1996-- Chief CIT v. Jimmichan M. Varicatt (Ker) . . . 338

S. 239 --Refund--Claim for refund--Claim withdrawn on ground beyond time specified under section 239--Assessing Officer failing to raise any issue with regard to plea under section 239 at appropriate stage--Commissioner (Appeals) passing order of refund on appeal--Revenue liable to make refund-- Hind Samachar Limited v. Union of India (P&H) . . . 266

----Return--Company--Rectification of mistakes--Return of company not signed by managing director but by person authorised by board resolution--Defect curable under section 292B-- Hind Samachar Limited v. Union of India (P&H) . . . 266

S. 240 --Refund--Claim for refund--Claim withdrawn on ground beyond time specified under section 239--Assessing Officer failing to raise any issue with regard to plea under section 239 at appropriate stage--Commissioner (Appeals) passing order of refund on appeal--Revenue liable to make refund-- Hind Samachar Limited v. Union of India (P&H) . . . 266

----Return--Company--Rectification of mistakes--Return of company not signed by managing director but by person authorised by board resolution--Defect curable under section 292B-- Hind Samachar Limited v. Union of India (P&H) . . . 266

S. 244A --Refund--Interest on refund--Assessee deducting and depositing TDS on time but filing TDS certificates during assessment proceedings--Interest under section 244A cannot be denied-- CIT v. Larsen and Toubro Ltd. (Bom) . . . 340

S. 260A --Appeal to High Court--Findings of fact by Tribunal--Findings cannot be set aside unless perverse-- CIT v. D. S. Promoters and Developers Pvt. Ltd.

(Delhi) . . . 291

----Appeal to High Court--Maintainability--Provision empowering CBDT to prescribe monetary limits for litigation by Revenue--Instruction of CBDT binding on Revenue--Tax effect less than prescribed in Instruction--Appeal barred-- CIT v. Kironmoy Roy Choudhury (Gauhati) . . . 316

S. 268A --Appeal to High Court--Maintainability--Provision empowering CBDT to prescribe monetary limits for litigation by Revenue--Instruction of CBDT binding on Revenue--Tax effect less than prescribed in Instruction--Appeal barred-- CIT v. Kironmoy Roy Choudhury (Gauhati) . . . 316

S. 292B --Return--Company--Rectification of mistakes--Return of company not signed by managing director but by person authorised by board resolution--Defect curable under section 292B-- Hind Samachar Limited v. Union of India

(P&H) . . . 266

.

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ITR Volume 329 Part 4 dated 20-12-2010

INCOME TAX REPORTS (ITR)

Volume 329 : Part 4 (Issue dated 20-12-2010)

SUBJECT INDEX TO CASES REPORTED IN THIS PART

HIGH COURTS

Accounting --Compulsory audit of accounts--Compulsory audit required where turnover exceeds forty lakhs of rupees--Meaning of account books--Books recording cash sales and purchase register constitute books of account--Income-tax Act, 1961, s. 2(12A)-- CIT v. S. C. Naregal (Karn) . . . 615

----Compulsory audit of accounts--Failure to get accounts audited--Penalty--Amount received whether commission or profits not relevant--Turnover is the criterion for getting accounts audited--Ignorance of law is no excuse--Penalty to be levied--Income-tax Act, 1961, ss. 44AB, 271B-- CIT v. S. C. Naregal (Karn) . . . 615

----Compulsory audit of accounts--Failure to get accounts audited--Penalty--Limitation--Six months from end of month in which penalty proceedings were initiated--Penalty proceedings initiated in March 2002--Imposition of penalty on 23-9-2002--Not barred by limitation--Income-tax Act, 1961, ss. 44AB, 275-- CIT v. S. C. Naregal

(Karn) . . . 615

Appeal to Appellate Tribunal --Powers of Tribunal--Industrial undertaking--Power to remand--Claim for special deduction in assessment year 2003-04 in respect of business started in the year 1997-98--Tribunal justified in remanding matter--Income-tax Act, 1961, ss. 80-IB, 254-- Mrs. Bharti Sharma v. Asst. CIT (Delhi) . . . 534

Appeal to High Court --Competency of appeal--Monetary limit fixed by CBDT Circular--No bar for appeal where substantial question of law has been raised--Income-tax Act, 1961, s. 260A-- CIT v. S. C. Naregal (Karn) . . . 615

----Valuation of stock--Stock difference arrived at at time of survey--Worked out on basis of selling price instead of at cost price or market price whichever is less--Finding that there was no supporting evidence to prove there was really a stock difference--No substantial question of law--Income-tax Act, 1961, s. 260A-- CIT v. C. Jayantilal

(Mad) . . . 530

Appeal to Supreme Court --Effect of decision of Supreme Court--Interpretation of provision from the beginning of its existence--Income-tax Act, 1961-- Kartikeya International v. CIT (All) . . . 539

Assessment --Special audit--Change of law--Condition precedent--Assessee to be given opportunity to be heard--Assessee must be informed that hearing is for considering approval for special audit--Prior to participation in hearing, assessee to be given access to material on basis of which approval for special audit proposed to be granted--Furnishing such material at hearing not sufficient--Income-tax Act, 1961, s. 142(2A)-- Indian Aluminium Co. Ltd. v. Deputy CIT (Cal) . . . 550

Audit --Order for special audit--Writ--High Court can consider whether there was material for issuing order--Sufficiency of material cannot be considered--Income-tax Act, 1961, s. 142(2A)--Constitution of India, art. 226-- Purvanchal Vidyut Vitran Nigam Ltd. v. Union of India (All) . . . 508

----Special audit--Accounts found to be complex--Order in the interests of Revenue--Order for special audit--Valid--Income-tax Act, 1961, s. 142(2A)-- Purvanchal Vidyut Vitran Nigam Ltd . v. Union of India (All) . . . 508

Business expenditure --Business loss--Illegal gratification for procuring car dealership not reflected in books of account--No business set up--Loss not allowable--Not permissible expenditure--Income-tax Act, 1961, s. 37-- CIT v. Jagdish Chand Gupta

(P&H) . . . 583

Capital gains --Business income--Capital gains or business income--Assessee developing land and getting a portion of it as consideration--Assessee not engaged in developing real estate--Amount spent on developing land constituted sale consideration of portion of land obtained--Gains on sale of land--Assessable as capital gains--Income-tax Act, 1961, ss. 28, 45-- CIT v. S. Rajamannar (Karn) . . . 626

Commissioner --Revision--Assessing Officer failing to tax cash seized and later surrendered by assessee--Assessment order erroneous and prejudicial to interest of Revenue--Invocation of section 263 proper--Income-tax Act, 1961, s. 263--CIT v. Jagdish Chand Gupta (P&H) . . . 583

Company --Minimum alternate tax--Advance tax--Interest--MAT credit to be given before charging interest under sections 234B and 234C--Income-tax Act, 1961, ss. 115JAA, 234B, 234C-- CIT v. Salora International Ltd. (Delhi) . . . 568

Income --Accrual of income--Mercantile system of accounting--Income must accrue-- Devsons Pvt. Ltd. v. CIT (Delhi) . . . 483

Income-tax enquiry --Notice to furnish particulars in connection with proceedings under sections 201 and 271C--Notice under section 131--Prior permission of Director/Commissioner not needed--Income-tax Act, 1961, ss. 131, 133, 201, 271C-- Thaliparamba Municipal Vanitha Service Sahakarana Sangham Ltd. v. ITO

(Ker) . . . 609

Investment allowance --Condition precedent--Creation of reserve--Law applicable--Effect of amendment of sections 32A and 34 with retrospective effect--Reserve need not be created in a year in which loss has been incurred or where profits are insufficient--Income-tax Act, 1961, ss 32A, 34-- CIT v. Nagaland Roller Flour Mills Ltd. (Guwahati) . . . 631

Penalty --Concealment of income--Appeal to Appellate Tribunal--Findings in appeal from assessment not binding--Tribunal to examine material afresh and decide whether penalty for concealment or furnishing inaccurate particulars justified--Income-tax Act, 1961, s. 271(1)(c)-- Devsons Pvt. Ltd. v. CIT (Delhi) . . . 483

----Concealment of income--Business expenditure--Sundry creditors--Sums due to sub-contractors but not paid--Claim substantiated by log book verified by authorities and tax deducted on sums credited to sub-contractors--Claim accepted in other years--Not a case of furnishing inaccurate particulars--Income-tax Act, 1961, s. 271(1)(c)-- Devsons Pvt. Ltd. v. CIT (Delhi) . . . 483

----Concealment of income--Contractor--Total bills raised against municipality disclosed but sums deducted by municipality not shown in gross receipts--Matter in dispute and High Court finally holding against assessee--Not a case of concealment--Not a case of change of method of accounting from mercantile to cash--Income-tax Act, 1961, s. 271(1)(c)-- Devsons Pvt. Ltd. v. CIT (Delhi) . . . 483

----Concealment of income--Debatable claim to deduction--Not a case of furnishing inaccurate particulars--Income-tax Act, 1961, s. 271(1)(c)-- Devsons Pvt. Ltd. v. CIT (Delhi) . . . 483

----Furnishing inaccurate particulars--Industrial undertaking--Special deduction--Disallowance of claim to deduction--Not a case of furnishing inaccurate particulars of income--Penalty not leviable--Income-tax Act, 1961, ss. 80-IA, 80-IB, 271(1)(c)-- CIT v. Dharampal Premchand Ltd. (Delhi) . . . 572

Precedent --Effect of decision in Liberty India v. CIT [2009] 317 ITR 218-- Kartikeya International v. CIT (All) . . . 539

Reassessment --Notice--Notice within four years--Notice based on Supreme Court decision--Notice valid--Income-tax Act, 1961, ss. 147, 148-- Kartikeya International v. CIT (All) . . . 539

----Objections of assessee not considered--Reassessment set aside--Matter remanded--Income-tax Act, 1961-- IOT Infrastructure and Energy Services Ltd. v. Asst. CIT (Bom) . . . 547

Rectification of mistake --Mistake apparent from record--Assessing Officer disallowing deduction of bad debts--Tribunal holding entire amount including interest allowable--Assessee filing a rectification application for treating interest also as bad debt--Question not covered by original assessment--Issue not debatable or subject-matter of appeal--"Record" includes record available with Assessing Officer--Rectification can be done--Income-tax Act, 1961, s. 154-- CIT v. Lakshmi Vilas Bank

(Mad) . . . 591

----Interest charged under sections 234B and 234C without allowing MAT credit--Debatable issue--Interest cannot be charged in rectification proceedings--Income-tax Act, 1961, ss. 115JAA, 154, 234B, 234C-- CIT v. Salora International Ltd .

(Delhi) . . . 568

Revision --Commissioner--Where two views possible, Assessing Officer adopting one view--Revision not permissible--Income-tax Act, 1961, s. 263-- CIT v. Saluja Exim Ltd . (P&H) . . . 603

Undisclosed income --Assessee surrendering amount seized--Statement admitting sum paid as illegal gratification for car dealership--Statement corroborated by circumstances not shown to be erroneous--Retraction after four months--Is an afterthought--Sum represents undisclosed income of assessee--Income-tax Act, 1961, s. 69-- CIT v. Jagdish Chand Gupta (P&H) . . . 583

Unexplained investment --Finding that investments had been satisfactorily explained--No addition could be made under section 69--Income-tax Act, 1961, s. 69-- CIT v. Ashok Arora (P&H) . . . 578

Wealth-tax --Reassessment--Property valued at much higher figure in income-tax return--Reassessment proceedings based on such return--Valid--Wealth-tax Act, 1957, s. 17-- P. K. Kurian v. Asst. CWT (Ker) . . . 529

Writ --Order of Tribunal rectifying its order on merits--Rejection of application for rectification on question of reopening of assessment--Writ--Proper remedy is appeal--Writ petition not maintainable--Income-tax Act, 1961, s. 260A-- Lakshmi Vilas Bank Ltd. v. ITAT (Mad) . . . 564

SECTIONWISE INDEX TO CASES REPORTED IN THIS PART

Constitution of India :

Art. 226 --Audit--Order for special audit--Writ--High Court can consider whether there was material for issuing order--Sufficiency of material cannot be considered-- Purvanchal Vidyut Vitran Nigam Ltd. v. Union of India (All) . . . 508

Income-tax Act, 1961 :

S. 2(12A) --Accounting--Compulsory audit of accounts--Compulsory audit required where turnover exceeds forty lakhs of rupees--Meaning of account books--Books recording cash sales and purchase register constitute books of account-- CIT v. S. C. Naregal (Karn) . . . 615

S. 28 --Capital gains--Business income--Capital gains or business income--Assessee developing land and getting a portion of it as consideration--Assessee not engaged in developing real estate--Amount spent on developing land constituted sale consideration of portion of land obtained--Gains on sale of land--Assessable as capital gains-- CIT v. S. Rajamannar (Karn) . . . 626

S. 32A --Investment allowance--Condition precedent--Creation of reserve--Law applicable--Effect of amendment of sections 32A and 34 with retrospective effect--Reserve need not be created in a year in which loss has been incurred or where profits are insufficient-- CIT v. Nagaland Roller Flour Mills Ltd. (Guwahati) . . . 631

S. 34 --Investment allowance--Condition precedent--Creation of reserve--Law applicable--Effect of amendment of sections 32A and 34 with retrospective effect--Reserve need not be created in a year in which loss has been incurred or where profits are insufficient-- CIT v. Nagaland Roller Flour Mills Ltd. (Guwahati) . . . 631

S. 37 --Business expenditure--Business loss--Illegal gratification for procuring car dealership not reflected in books of account--No business set up--Loss not allowable--Not permissible expenditure-- CIT v. Jagdish Chand Gupta (P&H) . . . 583

S. 44AB --Accounting--Compulsory audit of accounts--Failure to get accounts audited--Penalty--Amount received whether commission or profits not relevant--Turnover is the criterion for getting accounts audited--Ignorance of law is no excuse--Penalty to be levied-- CIT v. S. C. Naregal (Karn) . . . 615

----Accounting--Compulsory audit of accounts--Failure to get accounts audited--Penalty--Limitation--Six months from end of month in which penalty proceedings were initiated--Penalty proceedings initiated in March 2002--Imposition of penalty on 23-9-2002--Not barred by limitation-- CIT v. S. C. Naregal (Karn) . . . 615

S. 45 --Capital gains--Business income--Capital gains or business income--Assessee developing land and getting a portion of it as consideration--Assessee not engaged in developing real estate--Amount spent on developing land constituted sale consideration of portion of land obtained--Gains on sale of land--Assessable as capital gains-- CIT v. S. Rajamannar (Karn) . . . 626

S. 69 --Undisclosed income--Assessee surrendering amount seized--Statement admitting sum paid as illegal gratification for car dealership--Statement corroborated by circumstances not shown to be erroneous--Retraction after four months--Is an afterthought--Sum represents undisclosed income of assessee-- CIT v. Jagdish Chand Gupta (P&H) . . . 583

----Unexplained investment--Finding that investments had been satisfactorily explained--No addition could be made under section 69-- CIT v. Ashok Arora

(P&H) . . . 578

S. 80-IA --Penalty--Furnishing inaccurate particulars--Industrial undertaking--Special deduction--Disallowance of claim to deduction--Not a case of furnishing inaccurate particulars of income--Penalty not leviable-- CIT v. Dharampal Premchand Ltd.

(Delhi) . . . 572

S. 80-IB --Appeal to Appellate Tribunal--Powers of Tribunal--Industrial undertaking--Power to remand--Claim for special deduction in assessment year 2003-04 in respect of business started in the year 1997-98--Tribunal justified in remanding matter-- Mrs. Bharti Sharma v. Asst. CIT (Delhi) . . . 534

----Penalty--Furnishing inaccurate particulars--Industrial undertaking--Special deduction--Disallowance of claim to deduction--Not a case of furnishing inaccurate particulars of income--Penalty not leviable-- CIT v. Dharampal Premchand Ltd.

(Delhi) . . . 572

S. 115JAA --Company--Minimum alternate tax--Advance tax--Interest--MAT credit to be given before charging interest under sections 234B and 234C-- CIT v. Salora International Ltd. (Delhi) . . . 568

----Rectification of mistake--Interest charged under sections 234B and 234C without allowing MAT credit--Debatable issue--Interest cannot be charged in rectification proceedings-- CIT v. Salora International Ltd . (Delhi) . . . 568

S. 131 --Income-tax enquiry--Notice to furnish particulars in connection with proceedings under sections 201 and 271C--Notice under section 131--Prior permission of Director/Commissioner not needed-- Thaliparamba Municipal Vanitha Service Sahakarana Sangham Ltd. v. ITO (Ker) . . . 609

S. 133 --Income-tax enquiry--Notice to furnish particulars in connection with proceedings under sections 201 and 271C--Notice under section 131--Prior permission of Director/Commissioner not needed-- Thaliparamba Municipal Vanitha Service Sahakarana Sangham Ltd. v. ITO (Ker) . . . 609

S. 142(2A) --Assessment--Special audit--Change of law--Condition precedent--Assessee to be given opportunity to be heard--Assessee must be informed that hearing is for considering approval for special audit--Prior to participation in hearing, assessee to be given access to material on basis of which approval for special audit proposed to be granted--Furnishing such material at hearing not sufficient-- Indian Aluminium Co. Ltd. v. Deputy CIT (Cal) . . . 550

----Audit--Special audit--Accounts found to be complex--Order in the interests of Revenue--Order for special audit--Valid-- Purvanchal Vidyut Vitran Nigam Ltd . v. Union of India (All) . . . 508

----Audit--Order for special audit--Writ--High Court can consider whether there was material for issuing order--Sufficiency of material cannot be considered-- Purvanchal Vidyut Vitran Nigam Ltd. v. Union of India (All) . . . 508

S. 147 --Reassessment--Notice--Notice within four years--Notice based on Supreme Court decision--Notice valid-- Kartikeya International v. CIT

(All) . . . 539

S. 148 --Reassessment--Notice--Notice within four years--Notice based on Supreme Court decision--Notice valid-- Kartikeya International v. CIT

(All) . . . 539

S. 154 --Rectification of mistake--Interest charged under sections 234B and 234C without allowing MAT credit--Debatable issue--Interest cannot be charged in rectification proceedings-- CIT v. Salora International Ltd . (Delhi) . . . 568

----Rectification of mistake--Mistake apparent from record--Assessing Officer disallowing deduction of bad debts--Tribunal holding entire amount including interest allowable--Assessee filing a rectification application for treating interest also as bad debt--Question not covered by original assessment--Issue not debatable or subject-matter of appeal--"Record" includes record available with Assessing Officer--Rectification can be done-- CIT v. Lakshmi Vilas Bank (Mad) . . . 591

S. 201 --Income-tax enquiry--Notice to furnish particulars in connection with proceedings under sections 201 and 271C--Notice under section 131--Prior permission of Director/Commissioner not needed-- Thaliparamba Municipal Vanitha Service Sahakarana Sangham Ltd. v. ITO (Ker) . . . 609

S. 234B --Company--Minimum alternate tax--Advance tax--Interest--MAT credit to be given before charging interest under sections 234B and 234C-- CIT v. Salora International Ltd. (Delhi) . . . 568

----Rectification of mistake--Interest charged under sections 234B and 234C without allowing MAT credit--Debatable issue--Interest cannot be charged in rectification proceedings-- CIT v. Salora International Ltd . (Delhi) . . . 568

S. 234C --Company--Minimum alternate tax--Advance tax--Interest--MAT credit to be given before charging interest under sections 234B and 234C-- CIT v. Salora International Ltd. (Delhi) . . . 568

----Rectification of mistake--Interest charged under sections 234B and 234C without allowing MAT credit--Debatable issue--Interest cannot be charged in rectification proceedings-- CIT v. Salora International Ltd . (Delhi) . . . 568

S. 254 --Appeal to Appellate Tribunal--Powers of Tribunal--Industrial undertaking--Power to remand--Claim for special deduction in assessment year 2003-04 in respect of business started in the year 1997-98--Tribunal justified in remanding matter-- Mrs. Bharti Sharma v. Asst. CIT (Delhi) . . . 534

S. 260A --Appeal to High Court--Competency of appeal--Monetary limit fixed by CBDT Circular--No bar for appeal where substantial question of law has been raised-- CIT v. S. C. Naregal (Karn) . . . 615

----Appeal to High Court--Valuation of stock--Stock difference arrived at at time of survey--Worked out on basis of selling price instead of at cost price or market price whichever is less--Finding that there was no supporting evidence to prove there was really a stock difference--No substantial question of law-- CIT v. C. Jayantilal

(Mad) . . . 530

----Writ--Order of Tribunal rectifying its order on merits--Rejection of application for rectification on question of reopening of assessment--Writ--Proper remedy is appeal--Writ petition not maintainable-- Lakshmi Vilas Bank Ltd. v. ITAT

(Mad) . . . 564

S. 263 --Commissioner--Revision--Assessing Officer failing to tax cash seized and later surrendered by assessee--Assessment order erroneous and prejudicial to interest of Revenue--Invocation of section 263 proper--CIT v. Jagdish Chand Gupta

(P&H) . . . 583

----Revision--Commissioner--Where two views possible, Assessing Officer adopting one view--Revision not permissible-- CIT v. Saluja Exim Ltd .

(P&H) . . . 603

S. 271(1)(c) --Penalty--Concealment of income--Appeal to Appellate Tribunal--Findings in appeal from assessment not binding--Tribunal to examine material afresh and decide whether penalty for concealment or furnishing inaccurate particulars justified-- Devsons Pvt. Ltd. v. CIT (Delhi) . . . 483

----Penalty--Concealment of income--Business expenditure--Sundry creditors--Sums due to sub-contractors but not paid--Claim substantiated by log book verified by authorities and tax deducted on sums credited to sub-contractors--Claim accepted in other years--Not a case of furnishing inaccurate particulars-- Devsons Pvt. Ltd. v. CIT

(Delhi) . . . 483

----Penalty--Concealment of income--Contractor--Total bills raised against municipality disclosed but sums deducted by municipality not shown in gross receipts--Matter in dispute and High Court finally holding against assessee--Not a case of concealment--Not a case of change of method of accounting from mercantile to cash-- Devsons Pvt. Ltd. v. CIT (Delhi) . . . 483

----Penalty--Concealment of income--Debatable claim to deduction--Not a case of furnishing inaccurate particulars-- Devsons Pvt. Ltd. v. CIT (Delhi) . . . 483

----Penalty--Furnishing inaccurate particulars--Industrial undertaking--Special deduction--Disallowance of claim to deduction--Not a case of furnishing inaccurate particulars of income--Penalty not leviable-- CIT v. Dharampal Premchand Ltd.

(Delhi) . . . 572

S. 271B --Accounting--Compulsory audit of accounts--Failure to get accounts audited--Penalty--Amount received whether commission or profits not relevant--Turnover is the criterion for getting accounts audited--Ignorance of law is no excuse--Penalty to be levied-- CIT v. S. C. Naregal (Karn) . . . 615

S. 271C --Income-tax enquiry--Notice to furnish particulars in connection with proceedings under sections 201 and 271C--Notice under section 131--Prior permission of Director/Commissioner not needed-- Thaliparamba Municipal Vanitha Service Sahakarana Sangham Ltd. v. ITO (Ker) . . . 609

S. 275 --Accounting--Compulsory audit of accounts--Failure to get accounts audited--Penalty--Limitation--Six months from end of month in which penalty proceedings were initiated--Penalty proceedings initiated in March 2002--Imposition of penalty on 23-9-2002--Not barred by limitation-- CIT v. S. C. Naregal

(Karn) . . . 615

Wealth-tax Act, 1957 :

S. 17 --Wealth-tax--Reassessment--Property valued at much higher figure in income-tax return--Reassessment proceedings based on such return--Valid-- P. K. Kurian v. Asst. CWT (Ker) . . . 529

ITR Volume 329 Part 5 dated 13-12-2010

INCOME TAX REPORTS (ITR)

Volume 329 : Part 3 (Issue dated 13-12-2010)

SUBJECT INDEX TO CASES REPORTED IN THIS PART

HIGH COURTS

Advance tax --Interest--Company--Assessment on book profits basis--No liability to pay advance tax--No interest leviable for default in payment of advance tax--Income-tax Act, 1961, ss. 115J, 115JA, 207, 208, 234B, 234C-- Binani Industries Ltd. v. CIT

(Cal) . . . 323

Appeal to High Court --Powers of High Court--Finding of fact cannot normally be set aside--Income-tax Act, 1961, s. 260A-- CIT v. Forech India Ltd.

(Delhi) . . . 336

----Powers of High Court--Point not raised before lower authorities cannot be considered by High Court--Income-tax Act, 1961, s. 260A-- CIT v. Chand Ratan Bagri

(Delhi) . . . 356

Business expenditure --Capital or revenue expenditure--Lease rent paid to State Industrial Development Corporation for use of land for ninety-nine years--Registration of lease deed not relevant--Land not acquired by assessee--Payment made to carry on business--Lease rent deductible--Income-tax Act, 1961, s. 37-- Deputy CIT v. Sun Pharmaceuticals Ind. Ltd. (Guj) . . . 479

Capital gains --Computation of capital gains--Gains on transfer of intellectual property rights--Tribunal not justified in blindly applying B. C. Srinivasa Setty's case and concluding capital gains could not be computed--Matter remanded--Income-tax Act, 1961, ss. 45, 48-- CIT v. P. R. Seshadri (Karn) . . . 377

----Exemption--Investment of net consideration in residential house--Fact that land was owned by assessee's spouse and she had used construction for mortgage purposes--Not relevant--Finding that house had been constructed--Assessee entitled to benefit of section 54F--Income-tax Act, 1961, s. 54F-- CIT v. P. R. Seshadri

(Karn) . . . 377

Capital or revenue expenditure --Fees paid to foreign company for designs and drawings and expenses on foreign technicians for training assessee's personnel--Expenditure for facilitating process of manufacture--Expenses incurred are revenue expenditure--Income-tax Act, 1961-- CIT v. Munjal Showa Ltd.

(Delhi) . . . 449

Deduction of tax at source --Certificate for non-deduction--Assesssee claiming income was exempt under section 11--Amendment of section 2(15) w.e.f. 1-4-2009 not challenged--Union of India not impleaded as a party--Effect of amendment of section 2(15) could not be considered--Refusal to issue certificate for non-deduction of tax at source--Justified--Income-tax Act, 1961, ss. 2(15), 11, 197-- Infoparks Kerala v. Deputy CIT (Ker) . . . 404

Depreciation --Plant--Poultry sheds--Building specifically designed with a view to protecting birds from disease--Building designed proper and scientific feeding arrangement, proper water system, proper arrangement for collection of manure and droppings, proper arrangement for medication and vaccination--Building specifically designed to further the cause of manufacture or production--Is plant--Entitled to depreciation and investment allowance--Income-tax Act, 1961, s. 43(3)-- CIT v. Shivalik Hatcheries P. Ltd. (HP) . . . 432

----Poultry sheds, fencing, water and water tank--Entitled to extra shift allowance--Income-tax Act, 1961-- CIT v. Shivalik Hatcheries P. Ltd. (HP) . . . 432

Exemptions --Educational institution--Registered society running schools--Society granted exemption under section 10(23C) up to assessment year 2001-02--Law applicable--Effect of amendment of section 10(23C)--Condition regarding application of funds--Applicability of condition--Exemption already being granted could not be refused for assessment years 2002-03 to 2004-05--Income-tax Act, 1961, s. 10(23C)(vi)-- Digember Jain Society for Child Welfare v. Director General of Income-tax (Exemptions) (Delhi) . . . 459

Export --Special deduction under section 80HHC--Computation of export turnover--Freight and insurance not includible in export turnover--Income-tax Act, 1961, s. 80HHC-- CIT v. King Metal Works (Bom) . . . 426

----Special deduction under section 80HHC--Computation of special deduction--Meaning of profits of business--Entire sale consideration on transfer of DEPB credit assessable under section 28(iiid)--Income-tax Act, 1961, ss. 28, 80HHC-- CIT v. King Metal Works (Bom) . . . 426

Income from undisclosed sources --Additions to income on basis of admission by assessee and consideration of material on record--Deletion of addition without adequate consideration--Not valid--Matter remanded--Income-tax Act, 1961-- CIT v. Swastik India (Karn) . . . 473

Industrial undertaking --Special deduction under section 80-IA--Condition precedent--Manufacture of article--Meaning of "manufacture"--Conversion of limestone into limestone powder constitutes manufacture--Assessee entitled to special deduction under section 80-IA--Income-tax Act, 1961, s. 80-IA-- CIT v. Janak Raj Bansal

(HP) . . . 417

----Special deduction under section 80-IB--Condition precedent--Manufacture of article--Meaning of manufacture--Process of making transformer core from cold rolled coils amounts to "manufacture"--Assessee entitled to special deduction under section 80-IB--Income-tax Act, 1961, s. 80-IB-- CIT v. Alfa Lamination

(Guj) . . . 348

Industrial undertaking in backward area --Special deduction--Finding that industrial undertaking was situated in district notified as a backward area--Assessee entitled to special deduction under section 80HH--Notification No. S. O. 165(E), dated December 19, 1986--Income-tax Act, 1961, s. 80HH-- CIT v. Guffic Chem P. Ltd .

(Karn) . . . 470

Interpretation of taxing statutes --Literal interpretation-- CIT v. King Metal Works (Bom) . . . 426

Loss --Short-term capital loss--Forfeiture of amount paid towards convertible warrants--Loss deductible as short-term capital loss--Income-tax Act, 1961-- CIT v. Chand Ratan Bagri (Delhi) . . . 356

Non-resident --Income deemed to accrue or arise in India--Royalty--Agreement between Indian company and foreign company for supply of plant know-how and product know-how--Agreement concluded and data delivered abroad--Purchase of drawings and documents abroad--Transaction was one of sale--No income could be deemed to accrue or arise to non-resident--Income-tax Act, 1961, s. 9(1)(vi)-- CIT v. Maggronic Devices P. Ltd. (HP) . . . 442

Penalty --Concealment of income--Search and seizure--Additional income offered by assessee and assessed on estimate--Levy of penalty not permissible without detailed discussion of documents and explanation for offer of additional income--Income-tax Act, 1961, s. 271(1)(c)-- CIT v. Suresh Chand Bansal (Cal) . . . 330

Precedent --Effect of decision of Supreme Court in Lucky Minmat v. CIT [2000] 245 ITR 830-- CIT v. Janak Raj Bansal (HP) . . . 417

----Effect of decisions of Supreme Court in American Hotel and Lodging Association Educational Institute v. CBDT [2008] 301 ITR 86 and Aditanar Educational Institution v. Additional CIT [1997] 224 ITR 310-- Digember Jain Society for Child Welfare v. Director General of Income-tax (Exemptions) (Delhi) . . . 459

----Ratio of case when applicable-- CIT v. P. R. Seshadri (Karn) . . . 377

----Supreme Court--One-line order of Supreme Court dismissing appeal after it is admitted and heard--Binding--Constitution of India, arts. 136, 141-- Binani Industries Ltd. v. CIT (Cal) . . . 323

Reassessment --Limitation--Law applicable--Effect of amendment of section 143 w.e.f. 1-4-1989--Return filed on 24-1-2003 in response to notice under section 148--No notice issued under section 143(2) but assessee having opportunity to be heard--Order of reassessment passed on 26-3-2004--Barred by limitation--Income-tax Act, 1961, ss. 143, 148--Circular No. 549 dated 31-10-1989-- CIT v. Deep Baruah

(Gauhati) . . . 362

----Notice--Notice beyond four years--Condition precedent--Failure to disclose material facts necessary for assessment--Facts relating to sale of shares disclosed and assessment after enquiry--Notice after four years on ground that transaction not genuine--Notice not valid--Income-tax Act, 1961, ss. 147, 148-- Smt. Raj Rani Gulati v. Union of India (All) . . . 370

----Notice--Oral direction not to proceed with enquiry--Enquiry without affording an opportunity to assessee--Assessment order set aside--Matter remanded--Income-tax Act, 1961, ss. 147, 148-- Vira Properties (Madras) Pvt. Ltd. v. Asst. CIT

(Mad) . . . 389

----Writ--Writ court cannot consider facts--Return submitted by assessee--Survey showing undisclosed income--Notice of reassessment was valid--Income-tax Act, 1961, ss. 147, 148--Constitution of India, art. 226-- Dr. Lata Chouhan v. ITO

(MP) . . . 400

Rectification of mistake --Mistake apparent from record--Search and seizure--Refund--Interest on refund--Assessee entitled to interest--Assessee to seek rectification --Income-tax Act, 1961, ss. 132, 154-- CIT v. Sri Krishna Saraf

(Mad) . . . 342

Search and seizure --Addition on account of documents found at premises of a relative of assessee--Investment in purchase of car and interest--Tribunal remanding the matter to Assessing Officer--Findings of fact--Income-tax Act, 1961, s. 158BFA(1)-- CIT v. Harjit Singh (P&H) . . . 422

----Penalty--No concealment of income--No failure to furnish inaccurate particulars of income--Assessing authority not justified in levying penalty--Income-tax Act, 1961, s. 271(1)(c)-- CIT v. Sri Krishna Saraf (Mad) . . . 342

----Search at premises of third person--Seizure and recovery from safe deposits belonging to assessee--Issue of notice under section 142(1) after search revealing search having nexus with assessee--Assessment under section 143(3)--Assessee entitled to seek necessary relief under section 132B(4)--Income-tax Act, 1961, ss. 132, 132B(4), 143-- CIT v. Sri Krishna Saraf (Mad) . . . 342

Undisclosed stock --Books of account incomplete at time of survey--Finding of Commissioner (Appeals) and Tribunal that stock related to import purchases verifiable from customs records--Accounts reconciled later--Finding of fact--Income-tax Act, 1961-- CIT v. Forech India Ltd. (Delhi) . . . 336

Unexplained investment --Assessee purchasing demand drafts and remitting to a party--No proof that sum represented bad debt or business loss--Addition as unexplained investment--Justified--Income-tax Act, 1961, s. 69-- Satish Kumar v. CIT

(P&H) . . . 396

Wealth-tax --Company--Exemption--Asset used for business--Land used for internal roads and playground--Not entitled to exemption--Wealth-tax Act, 1957--Finance Act, 1983, s. 40(3)(vi)-- Motwane Manufacturing Co. Pvt. Ltd . v. CWT

(Bom) . . . 413

Words and phrases --Meaning of "manufacture"-- CIT v. Alfa Lamination

(Guj) . . . 348

----Meaning of "manufacture"-- CIT v. Janak Raj Bansal (HP) . . . 417

SECTIONWISE INDEX TO CASES REPORTED IN THIS PART

Constitution of India :

Art. 136 --Precedent--Supreme Court--One-line order of Supreme Court dismissing appeal after it is admitted and heard--Binding-- Binani Industries Ltd. v. CIT

(Cal) . . . 323

Art. 141 --Precedent--Supreme Court--One-line order of Supreme Court dismissing appeal after it is admitted and heard--Binding-- Binani Industries Ltd. v. CIT

(Cal) . . . 323

Finance Act, 1983 :

S. 40(3)(vi) --Wealth-tax--Company--Exemption--Asset used for business--Land used for internal roads and playground--Not entitled to exemption-- Motwane Manufacturing Co. Pvt. Ltd . v. CWT (Bom) . . . 413

Income-tax Act, 1961 :

S. 2(15) --Deduction of tax at source--Certificate for non-deduction--Assesssee claiming income was exempt under section 11--Amendment of section 2(15) w.e.f. 1-4-2009 not challenged--Union of India not impleaded as a party--Effect of amendment of section 2(15) could not be considered--Refusal to issue certificate for non-deduction of tax at source--Justified-- Infoparks Kerala v. Deputy CIT (Ker) . . . 404

S. 9(1)(vi) --Non-resident--Income deemed to accrue or arise in India--Royalty--Agreement between Indian company and foreign company for supply of plant know-how and product know-how--Agreement concluded and data delivered abroad--Purchase of drawings and documents abroad--Transaction was one of sale--No income could be deemed to accrue or arise to non-resident-- CIT v. Maggronic Devices P. Ltd. (HP) . . . 442

S. 10(23C)(vi) --Exemptions--Educational institution--Registered society running schools--Society granted exemption under section 10(23C) up to assessment year 2001-02--Law applicable--Effect of amendment of section 10(23C)--Condition regarding application of funds--Applicability of condition--Exemption already being granted could not be refused for assessment years 2002-03 to 2004-05-- Digember Jain Society for Child Welfare v. Director General of Income-tax (Exemptions)

(Delhi) . . . 459

S. 11 --Deduction of tax at source--Certificate for non-deduction--Assesssee claiming income was exempt under section 11--Amendment of section 2(15) w.e.f. 1-4-2009 not challenged--Union of India not impleaded as a party--Effect of amendment of section 2(15) could not be considered--Refusal to issue certificate for non-deduction of tax at source--Justified-- Infoparks Kerala v. Deputy CIT (Ker) . . . 404

S. 28 --Export--Special deduction under section 80HHC--Computation of special deduction--Meaning of profits of business--Entire sale consideration on transfer of DEPB credit assessable under section 28(iiid)-- CIT v. King Metal Works

(Bom) . . . 426

S. 37 --Business expenditure--Capital or revenue expenditure--Lease rent paid to State Industrial Development Corporation for use of land for ninety nine years--Registration of lease deed not relevant--Land not acquired by assessee--Payment made to carry on business--Lease rent deductible-- Deputy CIT v. Sun Pharmaceuticals Ind. Ltd. (Guj) . . . 479

S. 43(3) --Depreciation--Plant--Poultry sheds--Building specifically designed with a view to protecting birds from disease--Building designed proper and scientific feeding arrangement, proper water system, proper arrangement for collection of manure and droppings, proper arrangement for medication and vaccination--Building specifically designed to further the cause of manufacture or production--Is plant--Entitled to depreciation and investment allowance-- CIT v. Shivalik Hatcheries P. Ltd.

(HP) . . . 432

S. 45 --Capital gains--Computation of capital gains--Gains on transfer of intellectual property rights--Tribunal not justified in blindly applying B. C. Srinivasa Setty's case and concluding capital gains could not be computed--Matter remanded-- CIT v. P. R. Seshadri (Karn) . . . 377

S. 48 --Capital gains--Computation of capital gains--Gains on transfer of intellectual property rights--Tribunal not justified in blindly applying B. C. Srinivasa Setty's case and concluding capital gains could not be computed--Matter remanded-- CIT v. P. R. Seshadri (Karn) . . . 377

S. 54F --Capital gains--Exemption--Investment of net consideration in residential house--Fact that land was owned by assessee's spouse and she had used construction for mortgage purposes--Not relevant--Finding that house had been constructed--Assessee entitled to benefit of section 54F-- CIT v. P. R. Seshadri (Karn) . . . 377

S. 69 --Unexplained investment--Assessee purchasing demand drafts and remitting to a party--No proof that sum represented bad debt or business loss--Addition as unexplained investment--Justified-- Satish Kumar v. CIT (P&H) . . . 396

S. 80HH --Industrial undertaking in backward area--Special deduction--Finding that industrial undertaking was situated in district notified as a backward area--Assessee entitled to special deduction under section 80HH--Notification No. S.O. 165(E), dated December 19, 1986-- CIT v. Guffic Chem P. Ltd . (Karn) . . . 470

S. 80HHC --Export--Special deduction under section 80HHC--Computation of export turnover--Freight and insurance not includible in export turnover-- CIT v. King Metal Works (Bom) . . . 426

----Export--Special deduction under section 80HHC--Computation of special deduction--Meaning of profits of business--Entire sale consideration on transfer of DEPB credit assessable under section 28(iiid)-- CIT v. King Metal Works

(Bom) . . . 426

S. 80-IA --Industrial undertaking--Special deduction under section 80-IA--Condition precedent--Manufacture of article--Meaning of "manufacture"--Conversion of limestone into limestone powder constitutes manufacture--Assessee entitled to special deduction under section 80-IA-- CIT v. Janak Raj Bansal (HP) . . . 417

S. 80-IB --Industrial undertaking--Special deduction under section 80-IB--Condition precedent--Manufacture of article--Meaning of manufacture--Process of making transformer core from cold rolled coils amounts to "manufacture"--Assessee entitled to special deduction under section 80-IB-- CIT v. Alfa Lamination (Guj) . . . 348

S. 115J --Advance tax--Interest--Company--Assessment on book profits basis--No liability to pay advance tax--No interest leviable for default in payment of advance tax-- Binani Industries Ltd. v. CIT (Cal) . . . 323

S. 115JA --Advance tax--Interest--Company--Assessment on book profits basis--No liability to pay advance tax--No interest leviable for default in payment of advance tax-- Binani Industries Ltd. v. CIT (Cal) . . . 323

S. 132 --Rectification of mistake--Mistake apparent from record--Search and seizure--Refund--Interest on refund--Assessee entitled to interest--Assessee to seek rectification-- CIT v. Sri Krishna Saraf (Mad) . . . 342

----Search and seizure--Search at premises of third person--Seizure and recovery from safe deposits belonging to assessee--Issue of notice under section 142(1) after search revealing search having nexus with assessee--Assessment under section 143(3)--Assessee entitled to seek necessary relief under section 132B(4)-- CIT v. Sri Krishna Saraf (Mad) . . . 342

S. 132B(4) --Search and seizure--Search at premises of third person--Seizure and recovery from safe deposits belonging to assessee--Issue of notice under section 142(1) after search revealing search having nexus with assessee--Assessment under section 143(3)--Assessee entitled to seek necessary relief under section 132B(4)-- CIT v. Sri Krishna Saraf (Mad) . . . 342

S. 143 --Reassessment--Limitation--Law applicable--Effect of amendment of section 143 w.e.f. 1-4-1989--Return filed on 24-1-2003 in response to notice under section 148--No notice issued under section 143(2) but assessee having opportunity to be heard--Order of reassessment passed on 26-3-2004--Barred by limitation--Circular No. 549 dated 31-10-1989-- CIT v. Deep Baruah (Gauhati) . . . 362

----Reassessment--Limitation--Law applicable--Effect of amendment of section 143 w.e.f. 1-4-1989--Return filed on 24-1-2003 in response to notice under section 148--No notice issued under section 143(2) but assessee having opportunity to be heard--Order of reassessment passed on 26-3-2004--Barred by limitation--Circular No. 549 dated 31-10-1989-- CIT v. Deep Baruah (Gauhati) . . . 362

----Search and seizure--Search at premises of third person--Seizure and recovery from safe deposits belonging to assessee--Issue of notice under section 142(1) after search revealing search having nexus with assessee--Assessment under section 143(3)--Assessee entitled to seek necessary relief under section 132B(4)-- CIT v. Sri Krishna Saraf (Mad) . . . 342

S. 147 --Constitution of India, art. 226--Reassessment--Writ--Writ court cannot consider facts--Return submitted by assessee--Survey showing undisclosed income--Notice of reassessment was valid-- Dr. Lata Chouhan v. ITO (MP) . . . 400

----Reassessment--Notice--Notice beyond four years--Condition precedent--Failure to disclose material facts necessary for assessment--Facts relating to sale of shares disclosed and assessment after enquiry--Notice after four years on ground that transaction not genuine--Notice not valid-- Smt. Raj Rani Gulati v. Union of India

(All) . . . 370

----Reassessment--Notice--Oral direction not to proceed with enquiry--Enquiry without affording an opportunity to assessee--Assessment order set aside--Matter remanded-- Vira Properties (Madras) Pvt. Ltd. v. Asst. CIT (Mad) . . . 389

S. 148 --Constitution of India, art. 226--Reassessment--Writ--Writ court cannot consider facts--Return submitted by assessee--Survey showing undisclosed income--Notice of reassessment was valid-- Dr. Lata Chouhan v. ITO (MP) . . . 400

----Reassessment--Notice--Notice beyond four years--Condition precedent--Failure to disclose material facts necessary for assessment--Facts relating to sale of shares disclosed and assessment after enquiry--Notice after four years on ground that transaction not genuine--Notice not valid-- Smt. Raj Rani Gulati v. Union of India

(All) . . . 370

----Reassessment--Notice--Oral direction not to proceed with enquiry--Enquiry without affording an opportunity to assessee--Assessment order set aside--Matter remanded-- Vira Properties (Madras) Pvt. Ltd. v. Asst. CIT (Mad) . . . 389

S. 154 --Rectification of mistake--Mistake apparent from record--Search and seizure--Refund--Interest on refund--Assessee entitled to interest--Assessee to seek rectification-- CIT v. Sri Krishna Saraf (Mad) . . . 342

S. 158BFA(1) --Search and seizure--Addition on account of documents found at premises of a relative of assessee--Investment in purchase of car and interest--Tribunal remanding the matter to Assessing Officer--Findings of fact-- CIT v. Harjit Singh

(P&H) . . . 422

S. 197 --Deduction of tax at source--Certificate for non-deduction--Assesssee claiming income was exempt under section 11--Amendment of section 2(15) w.e.f. 1-4-2009 not challenged--Union of India not impleaded as a party--Effect of amendment of section 2(15) could not be considered--Refusal to issue certificate for non-deduction of tax at source--Justified-- Infoparks Kerala v. Deputy CIT (Ker) . . . 404

S. 207 --Advance tax--Interest--Company--Assessment on book profits basis--No liability to pay advance tax--No interest leviable for default in payment of advance tax-- Binani Industries Ltd. v. CIT (Cal) . . . 323

S. 208 --Advance tax--Interest--Company--Assessment on book profits basis--No liability to pay advance tax--No interest leviable for default in payment of advance tax-- Binani Industries Ltd. v. CIT (Cal) . . . 323

S. 234B --Advance tax--Interest--Company--Assessment on book profits basis--No liability to pay advance tax--No interest leviable for default in payment of advance tax-- Binani Industries Ltd. v. CIT (Cal) . . . 323

S. 234C --Advance tax--Interest--Company--Assessment on book profits basis--No liability to pay advance tax--No interest leviable for default in payment of advance tax-- Binani Industries Ltd. v. CIT (Cal) . . . 323

S. 260A --Appeal to High Court--Powers of High Court--Finding of fact cannot normally be set aside-- CIT v. Forech India Ltd. (Delhi) . . . 336

----Appeal to High Court--Powers of High Court--Point not raised before lower authorities cannot be considered by High Court-- CIT v. Chand Ratan Bagri

(Delhi) . . . 356

S. 271(1)(c) --Penalty--Concealment of income--Search and seizure--Additional income offered by assessee and assessed on estimate--Levy of penalty not permissible without detailed discussion of documents and explanation for offer of additional income-- CIT v. Suresh Chand Bansal (Cal) . . . 330

----Search and seizure--Penalty--No concealment of income--No failure to furnish inaccurate particulars of income--Assessing authority not justified in levying penalty-- CIT v. Sri Krishna Saraf (Mad) . . . 342

ITR Volume 329 : Part 3 dated 13-12-2010

ITR Volume 329 : Part 3 (Issue dated 13-12-2010)

SUBJECT INDEX TO CASES REPORTED IN THIS PART

HIGH COURTS

Advance tax --Interest--Company--Assessment on book profits basis--No liability to pay advance tax--No interest leviable for default in payment of advance tax--Income-tax Act, 1961, ss. 115J, 115JA, 207, 208, 234B, 234C-- Binani Industries Ltd. v. CIT

(Cal) . . . 323

Appeal to High Court --Powers of High Court--Finding of fact cannot normally be set aside--Income-tax Act, 1961, s. 260A-- CIT v. Forech India Ltd.

(Delhi) . . . 336

----Powers of High Court--Point not raised before lower authorities cannot be considered by High Court--Income-tax Act, 1961, s. 260A-- CIT v. Chand Ratan Bagri

(Delhi) . . . 356

Business expenditure --Capital or revenue expenditure--Lease rent paid to State Industrial Development Corporation for use of land for ninety-nine years--Registration of lease deed not relevant--Land not acquired by assessee--Payment made to carry on business--Lease rent deductible--Income-tax Act, 1961, s. 37-- Deputy CIT v. Sun Pharmaceuticals Ind. Ltd. (Guj) . . . 479

Capital gains --Computation of capital gains--Gains on transfer of intellectual property rights--Tribunal not justified in blindly applying B. C. Srinivasa Setty's case and concluding capital gains could not be computed--Matter remanded--Income-tax Act, 1961, ss. 45, 48-- CIT v. P. R. Seshadri (Karn) . . . 377

----Exemption--Investment of net consideration in residential house--Fact that land was owned by assessee's spouse and she had used construction for mortgage purposes--Not relevant--Finding that house had been constructed--Assessee entitled to benefit of section 54F--Income-tax Act, 1961, s. 54F-- CIT v. P. R. Seshadri

(Karn) . . . 377

Capital or revenue expenditure --Fees paid to foreign company for designs and drawings and expenses on foreign technicians for training assessee's personnel--Expenditure for facilitating process of manufacture--Expenses incurred are revenue expenditure--Income-tax Act, 1961-- CIT v. Munjal Showa Ltd.

(Delhi) . . . 449

Deduction of tax at source --Certificate for non-deduction--Assesssee claiming income was exempt under section 11--Amendment of section 2(15) w.e.f. 1-4-2009 not challenged--Union of India not impleaded as a party--Effect of amendment of section 2(15) could not be considered--Refusal to issue certificate for non-deduction of tax at source--Justified--Income-tax Act, 1961, ss. 2(15), 11, 197-- Infoparks Kerala v. Deputy CIT (Ker) . . . 404

Depreciation --Plant--Poultry sheds--Building specifically designed with a view to protecting birds from disease--Building designed proper and scientific feeding arrangement, proper water system, proper arrangement for collection of manure and droppings, proper arrangement for medication and vaccination--Building specifically designed to further the cause of manufacture or production--Is plant--Entitled to depreciation and investment allowance--Income-tax Act, 1961, s. 43(3)-- CIT v. Shivalik Hatcheries P. Ltd. (HP) . . . 432

----Poultry sheds, fencing, water and water tank--Entitled to extra shift allowance--Income-tax Act, 1961-- CIT v. Shivalik Hatcheries P. Ltd. (HP) . . . 432

Exemptions --Educational institution--Registered society running schools--Society granted exemption under section 10(23C) up to assessment year 2001-02--Law applicable--Effect of amendment of section 10(23C)--Condition regarding application of funds--Applicability of condition--Exemption already being granted could not be refused for assessment years 2002-03 to 2004-05--Income-tax Act, 1961, s. 10(23C)(vi)-- Digember Jain Society for Child Welfare v. Director General of Income-tax (Exemptions) (Delhi) . . . 459

Export --Special deduction under section 80HHC--Computation of export turnover--Freight and insurance not includible in export turnover--Income-tax Act, 1961, s. 80HHC-- CIT v. King Metal Works (Bom) . . . 426

----Special deduction under section 80HHC--Computation of special deduction--Meaning of profits of business--Entire sale consideration on transfer of DEPB credit assessable under section 28(iiid)--Income-tax Act, 1961, ss. 28, 80HHC-- CIT v. King Metal Works (Bom) . . . 426

Income from undisclosed sources --Additions to income on basis of admission by assessee and consideration of material on record--Deletion of addition without adequate consideration--Not valid--Matter remanded--Income-tax Act, 1961-- CIT v. Swastik India (Karn) . . . 473

Industrial undertaking --Special deduction under section 80-IA--Condition precedent--Manufacture of article--Meaning of "manufacture"--Conversion of limestone into limestone powder constitutes manufacture--Assessee entitled to special deduction under section 80-IA--Income-tax Act, 1961, s. 80-IA-- CIT v. Janak Raj Bansal

(HP) . . . 417

----Special deduction under section 80-IB--Condition precedent--Manufacture of article--Meaning of manufacture--Process of making transformer core from cold rolled coils amounts to "manufacture"--Assessee entitled to special deduction under section 80-IB--Income-tax Act, 1961, s. 80-IB-- CIT v. Alfa Lamination

(Guj) . . . 348

Industrial undertaking in backward area --Special deduction--Finding that industrial undertaking was situated in district notified as a backward area--Assessee entitled to special deduction under section 80HH--Notification No. S. O. 165(E), dated December 19, 1986--Income-tax Act, 1961, s. 80HH-- CIT v. Guffic Chem P. Ltd .

(Karn) . . . 470

Interpretation of taxing statutes --Literal interpretation-- CIT v. King Metal Works (Bom) . . . 426

Loss --Short-term capital loss--Forfeiture of amount paid towards convertible warrants--Loss deductible as short-term capital loss--Income-tax Act, 1961-- CIT v. Chand Ratan Bagri (Delhi) . . . 356

Non-resident --Income deemed to accrue or arise in India--Royalty--Agreement between Indian company and foreign company for supply of plant know-how and product know-how--Agreement concluded and data delivered abroad--Purchase of drawings and documents abroad--Transaction was one of sale--No income could be deemed to accrue or arise to non-resident--Income-tax Act, 1961, s. 9(1)(vi)-- CIT v. Maggronic Devices P. Ltd. (HP) . . . 442

Penalty --Concealment of income--Search and seizure--Additional income offered by assessee and assessed on estimate--Levy of penalty not permissible without detailed discussion of documents and explanation for offer of additional income--Income-tax Act, 1961, s. 271(1)(c)-- CIT v. Suresh Chand Bansal (Cal) . . . 330

Precedent --Effect of decision of Supreme Court in Lucky Minmat v. CIT [2000] 245 ITR 830-- CIT v. Janak Raj Bansal (HP) . . . 417

----Effect of decisions of Supreme Court in American Hotel and Lodging Association Educational Institute v. CBDT [2008] 301 ITR 86 and Aditanar Educational Institution v. Additional CIT [1997] 224 ITR 310-- Digember Jain Society for Child Welfare v. Director General of Income-tax (Exemptions) (Delhi) . . . 459

----Ratio of case when applicable-- CIT v. P. R. Seshadri (Karn) . . . 377

----Supreme Court--One-line order of Supreme Court dismissing appeal after it is admitted and heard--Binding--Constitution of India, arts. 136, 141-- Binani Industries Ltd. v. CIT (Cal) . . . 323

Reassessment --Limitation--Law applicable--Effect of amendment of section 143 w.e.f. 1-4-1989--Return filed on 24-1-2003 in response to notice under section 148--No notice issued under section 143(2) but assessee having opportunity to be heard--Order of reassessment passed on 26-3-2004--Barred by limitation--Income-tax Act, 1961, ss. 143, 148--Circular No. 549 dated 31-10-1989-- CIT v. Deep Baruah

(Gauhati) . . . 362

----Notice--Notice beyond four years--Condition precedent--Failure to disclose material facts necessary for assessment--Facts relating to sale of shares disclosed and assessment after enquiry--Notice after four years on ground that transaction not genuine--Notice not valid--Income-tax Act, 1961, ss. 147, 148-- Smt. Raj Rani Gulati v. Union of India (All) . . . 370

----Notice--Oral direction not to proceed with enquiry--Enquiry without affording an opportunity to assessee--Assessment order set aside--Matter remanded--Income-tax Act, 1961, ss. 147, 148-- Vira Properties (Madras) Pvt. Ltd. v. Asst. CIT

(Mad) . . . 389

----Writ--Writ court cannot consider facts--Return submitted by assessee--Survey showing undisclosed income--Notice of reassessment was valid--Income-tax Act, 1961, ss. 147, 148--Constitution of India, art. 226-- Dr. Lata Chouhan v. ITO

(MP) . . . 400

Rectification of mistake --Mistake apparent from record--Search and seizure--Refund--Interest on refund--Assessee entitled to interest--Assessee to seek rectification --Income-tax Act, 1961, ss. 132, 154-- CIT v. Sri Krishna Saraf

(Mad) . . . 342

Search and seizure --Addition on account of documents found at premises of a relative of assessee--Investment in purchase of car and interest--Tribunal remanding the matter to Assessing Officer--Findings of fact--Income-tax Act, 1961, s. 158BFA(1)-- CIT v. Harjit Singh (P&H) . . . 422

----Penalty--No concealment of income--No failure to furnish inaccurate particulars of income--Assessing authority not justified in levying penalty--Income-tax Act, 1961, s. 271(1)(c)-- CIT v. Sri Krishna Saraf (Mad) . . . 342

----Search at premises of third person--Seizure and recovery from safe deposits belonging to assessee--Issue of notice under section 142(1) after search revealing search having nexus with assessee--Assessment under section 143(3)--Assessee entitled to seek necessary relief under section 132B(4)--Income-tax Act, 1961, ss. 132, 132B(4), 143-- CIT v. Sri Krishna Saraf (Mad) . . . 342

Undisclosed stock --Books of account incomplete at time of survey--Finding of Commissioner (Appeals) and Tribunal that stock related to import purchases verifiable from customs records--Accounts reconciled later--Finding of fact--Income-tax Act, 1961-- CIT v. Forech India Ltd. (Delhi) . . . 336

Unexplained investment --Assessee purchasing demand drafts and remitting to a party--No proof that sum represented bad debt or business loss--Addition as unexplained investment--Justified--Income-tax Act, 1961, s. 69-- Satish Kumar v. CIT

(P&H) . . . 396

Wealth-tax --Company--Exemption--Asset used for business--Land used for internal roads and playground--Not entitled to exemption--Wealth-tax Act, 1957--Finance Act, 1983, s. 40(3)(vi)-- Motwane Manufacturing Co. Pvt. Ltd . v. CWT

(Bom) . . . 413

Words and phrases --Meaning of "manufacture"-- CIT v. Alfa Lamination

(Guj) . . . 348

----Meaning of "manufacture"-- CIT v. Janak Raj Bansal (HP) . . . 417

SECTIONWISE INDEX TO CASES REPORTED IN THIS PART

Constitution of India :

Art. 136 --Precedent--Supreme Court--One-line order of Supreme Court dismissing appeal after it is admitted and heard--Binding-- Binani Industries Ltd. v. CIT

(Cal) . . . 323

Art. 141 --Precedent--Supreme Court--One-line order of Supreme Court dismissing appeal after it is admitted and heard--Binding-- Binani Industries Ltd. v. CIT

(Cal) . . . 323

Finance Act, 1983 :

S. 40(3)(vi) --Wealth-tax--Company--Exemption--Asset used for business--Land used for internal roads and playground--Not entitled to exemption-- Motwane Manufacturing Co. Pvt. Ltd . v. CWT (Bom) . . . 413

Income-tax Act, 1961 :

S. 2(15) --Deduction of tax at source--Certificate for non-deduction--Assesssee claiming income was exempt under section 11--Amendment of section 2(15) w.e.f. 1-4-2009 not challenged--Union of India not impleaded as a party--Effect of amendment of section 2(15) could not be considered--Refusal to issue certificate for non-deduction of tax at source--Justified-- Infoparks Kerala v. Deputy CIT (Ker) . . . 404

S. 9(1)(vi) --Non-resident--Income deemed to accrue or arise in India--Royalty--Agreement between Indian company and foreign company for supply of plant know-how and product know-how--Agreement concluded and data delivered abroad--Purchase of drawings and documents abroad--Transaction was one of sale--No income could be deemed to accrue or arise to non-resident-- CIT v. Maggronic Devices P. Ltd. (HP) . . . 442

S. 10(23C)(vi) --Exemptions--Educational institution--Registered society running schools--Society granted exemption under section 10(23C) up to assessment year 2001-02--Law applicable--Effect of amendment of section 10(23C)--Condition regarding application of funds--Applicability of condition--Exemption already being granted could not be refused for assessment years 2002-03 to 2004-05-- Digember Jain Society for Child Welfare v. Director General of Income-tax (Exemptions)

(Delhi) . . . 459

S. 11 --Deduction of tax at source--Certificate for non-deduction--Assesssee claiming income was exempt under section 11--Amendment of section 2(15) w.e.f. 1-4-2009 not challenged--Union of India not impleaded as a party--Effect of amendment of section 2(15) could not be considered--Refusal to issue certificate for non-deduction of tax at source--Justified-- Infoparks Kerala v. Deputy CIT (Ker) . . . 404

S. 28 --Export--Special deduction under section 80HHC--Computation of special deduction--Meaning of profits of business--Entire sale consideration on transfer of DEPB credit assessable under section 28(iiid)-- CIT v. King Metal Works

(Bom) . . . 426

S. 37 --Business expenditure--Capital or revenue expenditure--Lease rent paid to State Industrial Development Corporation for use of land for ninety nine years--Registration of lease deed not relevant--Land not acquired by assessee--Payment made to carry on business--Lease rent deductible-- Deputy CIT v. Sun Pharmaceuticals Ind. Ltd. (Guj) . . . 479

S. 43(3) --Depreciation--Plant--Poultry sheds--Building specifically designed with a view to protecting birds from disease--Building designed proper and scientific feeding arrangement, proper water system, proper arrangement for collection of manure and droppings, proper arrangement for medication and vaccination--Building specifically designed to further the cause of manufacture or production--Is plant--Entitled to depreciation and investment allowance-- CIT v. Shivalik Hatcheries P. Ltd.

(HP) . . . 432

S. 45 --Capital gains--Computation of capital gains--Gains on transfer of intellectual property rights--Tribunal not justified in blindly applying B. C. Srinivasa Setty's case and concluding capital gains could not be computed--Matter remanded-- CIT v. P. R. Seshadri (Karn) . . . 377

S. 48 --Capital gains--Computation of capital gains--Gains on transfer of intellectual property rights--Tribunal not justified in blindly applying B. C. Srinivasa Setty's case and concluding capital gains could not be computed--Matter remanded-- CIT v. P. R. Seshadri (Karn) . . . 377

S. 54F --Capital gains--Exemption--Investment of net consideration in residential house--Fact that land was owned by assessee's spouse and she had used construction for mortgage purposes--Not relevant--Finding that house had been constructed--Assessee entitled to benefit of section 54F-- CIT v. P. R. Seshadri (Karn) . . . 377

S. 69 --Unexplained investment--Assessee purchasing demand drafts and remitting to a party--No proof that sum represented bad debt or business loss--Addition as unexplained investment--Justified-- Satish Kumar v. CIT (P&H) . . . 396

S. 80HH --Industrial undertaking in backward area--Special deduction--Finding that industrial undertaking was situated in district notified as a backward area--Assessee entitled to special deduction under section 80HH--Notification No. S.O. 165(E), dated December 19, 1986-- CIT v. Guffic Chem P. Ltd . (Karn) . . . 470

S. 80HHC --Export--Special deduction under section 80HHC--Computation of export turnover--Freight and insurance not includible in export turnover-- CIT v. King Metal Works (Bom) . . . 426

----Export--Special deduction under section 80HHC--Computation of special deduction--Meaning of profits of business--Entire sale consideration on transfer of DEPB credit assessable under section 28(iiid)-- CIT v. King Metal Works

(Bom) . . . 426

S. 80-IA --Industrial undertaking--Special deduction under section 80-IA--Condition precedent--Manufacture of article--Meaning of "manufacture"--Conversion of limestone into limestone powder constitutes manufacture--Assessee entitled to special deduction under section 80-IA-- CIT v. Janak Raj Bansal (HP) . . . 417

S. 80-IB --Industrial undertaking--Special deduction under section 80-IB--Condition precedent--Manufacture of article--Meaning of manufacture--Process of making transformer core from cold rolled coils amounts to "manufacture"--Assessee entitled to special deduction under section 80-IB-- CIT v. Alfa Lamination (Guj) . . . 348

S. 115J --Advance tax--Interest--Company--Assessment on book profits basis--No liability to pay advance tax--No interest leviable for default in payment of advance tax-- Binani Industries Ltd. v. CIT (Cal) . . . 323

S. 115JA --Advance tax--Interest--Company--Assessment on book profits basis--No liability to pay advance tax--No interest leviable for default in payment of advance tax-- Binani Industries Ltd. v. CIT (Cal) . . . 323

S. 132 --Rectification of mistake--Mistake apparent from record--Search and seizure--Refund--Interest on refund--Assessee entitled to interest--Assessee to seek rectification-- CIT v. Sri Krishna Saraf (Mad) . . . 342

----Search and seizure--Search at premises of third person--Seizure and recovery from safe deposits belonging to assessee--Issue of notice under section 142(1) after search revealing search having nexus with assessee--Assessment under section 143(3)--Assessee entitled to seek necessary relief under section 132B(4)-- CIT v. Sri Krishna Saraf (Mad) . . . 342

S. 132B(4) --Search and seizure--Search at premises of third person--Seizure and recovery from safe deposits belonging to assessee--Issue of notice under section 142(1) after search revealing search having nexus with assessee--Assessment under section 143(3)--Assessee entitled to seek necessary relief under section 132B(4)-- CIT v. Sri Krishna Saraf (Mad) . . . 342

S. 143 --Reassessment--Limitation--Law applicable--Effect of amendment of section 143 w.e.f. 1-4-1989--Return filed on 24-1-2003 in response to notice under section 148--No notice issued under section 143(2) but assessee having opportunity to be heard--Order of reassessment passed on 26-3-2004--Barred by limitation--Circular No. 549 dated 31-10-1989-- CIT v. Deep Baruah (Gauhati) . . . 362

----Reassessment--Limitation--Law applicable--Effect of amendment of section 143 w.e.f. 1-4-1989--Return filed on 24-1-2003 in response to notice under section 148--No notice issued under section 143(2) but assessee having opportunity to be heard--Order of reassessment passed on 26-3-2004--Barred by limitation--Circular No. 549 dated 31-10-1989-- CIT v. Deep Baruah (Gauhati) . . . 362

----Search and seizure--Search at premises of third person--Seizure and recovery from safe deposits belonging to assessee--Issue of notice under section 142(1) after search revealing search having nexus with assessee--Assessment under section 143(3)--Assessee entitled to seek necessary relief under section 132B(4)-- CIT v. Sri Krishna Saraf (Mad) . . . 342

S. 147 --Constitution of India, art. 226--Reassessment--Writ--Writ court cannot consider facts--Return submitted by assessee--Survey showing undisclosed income--Notice of reassessment was valid-- Dr. Lata Chouhan v. ITO (MP) . . . 400

----Reassessment--Notice--Notice beyond four years--Condition precedent--Failure to disclose material facts necessary for assessment--Facts relating to sale of shares disclosed and assessment after enquiry--Notice after four years on ground that transaction not genuine--Notice not valid-- Smt. Raj Rani Gulati v. Union of India

(All) . . . 370

----Reassessment--Notice--Oral direction not to proceed with enquiry--Enquiry without affording an opportunity to assessee--Assessment order set aside--Matter remanded-- Vira Properties (Madras) Pvt. Ltd. v. Asst. CIT (Mad) . . . 389

S. 148 --Constitution of India, art. 226--Reassessment--Writ--Writ court cannot consider facts--Return submitted by assessee--Survey showing undisclosed income--Notice of reassessment was valid-- Dr. Lata Chouhan v. ITO (MP) . . . 400

----Reassessment--Notice--Notice beyond four years--Condition precedent--Failure to disclose material facts necessary for assessment--Facts relating to sale of shares disclosed and assessment after enquiry--Notice after four years on ground that transaction not genuine--Notice not valid-- Smt. Raj Rani Gulati v. Union of India

(All) . . . 370

----Reassessment--Notice--Oral direction not to proceed with enquiry--Enquiry without affording an opportunity to assessee--Assessment order set aside--Matter remanded-- Vira Properties (Madras) Pvt. Ltd. v. Asst. CIT (Mad) . . . 389

S. 154 --Rectification of mistake--Mistake apparent from record--Search and seizure--Refund--Interest on refund--Assessee entitled to interest--Assessee to seek rectification-- CIT v. Sri Krishna Saraf (Mad) . . . 342

S. 158BFA(1) --Search and seizure--Addition on account of documents found at premises of a relative of assessee--Investment in purchase of car and interest--Tribunal remanding the matter to Assessing Officer--Findings of fact-- CIT v. Harjit Singh

(P&H) . . . 422

S. 197 --Deduction of tax at source--Certificate for non-deduction--Assesssee claiming income was exempt under section 11--Amendment of section 2(15) w.e.f. 1-4-2009 not challenged--Union of India not impleaded as a party--Effect of amendment of section 2(15) could not be considered--Refusal to issue certificate for non-deduction of tax at source--Justified-- Infoparks Kerala v. Deputy CIT (Ker) . . . 404

S. 207 --Advance tax--Interest--Company--Assessment on book profits basis--No liability to pay advance tax--No interest leviable for default in payment of advance tax-- Binani Industries Ltd. v. CIT (Cal) . . . 323

S. 208 --Advance tax--Interest--Company--Assessment on book profits basis--No liability to pay advance tax--No interest leviable for default in payment of advance tax-- Binani Industries Ltd. v. CIT (Cal) . . . 323

S. 234B --Advance tax--Interest--Company--Assessment on book profits basis--No liability to pay advance tax--No interest leviable for default in payment of advance tax-- Binani Industries Ltd. v. CIT (Cal) . . . 323

S. 234C --Advance tax--Interest--Company--Assessment on book profits basis--No liability to pay advance tax--No interest leviable for default in payment of advance tax-- Binani Industries Ltd. v. CIT (Cal) . . . 323

S. 260A --Appeal to High Court--Powers of High Court--Finding of fact cannot normally be set aside-- CIT v. Forech India Ltd. (Delhi) . . . 336

----Appeal to High Court--Powers of High Court--Point not raised before lower authorities cannot be considered by High Court-- CIT v. Chand Ratan Bagri

(Delhi) . . . 356

S. 271(1)(c) --Penalty--Concealment of income--Search and seizure--Additional income offered by assessee and assessed on estimate--Levy of penalty not permissible without detailed discussion of documents and explanation for offer of additional income-- CIT v. Suresh Chand Bansal (Cal) . . . 330

----Search and seizure--Penalty--No concealment of income--No failure to furnish inaccurate particulars of income--Assessing authority not justified in levying penalty-- CIT v. Sri Krishna Saraf (Mad) . . . 342

ITR(Trib) Vol 8 Part 2 dated 14-03-2011

ITR'S TRIBUNAL TAX REPORTS (ITR (Trib)) HIGHLIGHTS
ISSUE DATED 14-3-2011 Volume 8 Part 2
       

    APPELLATE TRIBUNAL ORDERS

   >> Where Tribunal confirming addition finding explanation of assessee that cash seized belonged to company not bona fide, penalty leviable : Harish Dargan v. Dy. CIT (Delhi) p. 125

   >> Application for rectification of order on application for rectification not permissible u/s. 254(2) : Padam Prakash (HUF) v. ITO (Delhi) [SB] p. 135

   >> Bad debts written off not a factor to determine ALP of international transactions u/r. 10B : C. A. Computer Associates P. Ltd. v. Dy. CIT (Mumbai) p. 142

   >> Litigation expenses on criminal proceedings against actor in his individual capacity not deductible u/s. 37 : Dy. CIT v. Salman Khan (Mumbai) p. 150

   >> Stock broker : Sums receivable from clients allowable deduction u/s. 36(2) : Bhavik Rajesh Khandra Share and Stock Brokers P. Ltd. v. Dy. CIT (Mumbai) p. 155

   >> International transactions : Interest on outstandings to be calculated for overflow period after allowing interest-free period, proper : Logix Micro Systems Ltd. v. Asst. CIT (Bangalore) p. 159

   >> International transactions : Dispute Resolution Panel must consider submissions of assessee and pass speaking order : GAP International Sourcing India P. Ltd. v. Dy. CIT (Delhi) p. 177

   >> Lease income exploitation of property income from house property : Asst. CIT v. T & R Welding Products (India) Ltd. (Chennai) p. 181

   >> Carried forward business loss cannot be set off against lease income : Asst. CIT v. T & R Welding Products (India) Ltd. (Chennai) p. 181

   >> International transactions : TPO cannot take up other transactions suo motu for verification and suggest adjustments : Amadeus India P. Ltd. v. Asst. CIT (Delhi) p. 187

   >> Pre-weaving machines not covered under block III (6) of Appendix I , assessee entitled to depreciation at normal rate : Eagle Synthetics P. Ltd. v. ITO (Ahd) p. 211

   >> Search and seizure : Failure to mention section 158BD in notice not fatal, defect in notice curable u/s. 292B : Asst. CIT v. Dilip Kumar Balar (Bangalore) p. 229

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ITR(Trib) Vol 8 Part 1 dated 07-03-2011

ITR'S TRIBUNAL TAX REPORTS (ITR (Trib)) HIGHLIGHTS

    ISSUE DATED 7-3-2011    Volume 8 Part 1

APPELLATE TRIBUNAL ORDERS

 

  --> Where assessee availing of services for movement of containers by use of cranes liable to TDS u/s. 194C : Asst. CIT (TDS) v. Merchant Shipping Services P. Ltd. (Mumbai) p. 1

 

  --> Non-resident : Remittance from foreign country through banking channels cannot be taxed u/s. 5(2)(b) : Smt. Susila Ramasamy v. Asst. CIT (Chennai) p. 18

 

  --> Where no evidence relating to specific expenditure to tax free dividend , deletion of addition proper : Asst. CIT v. Sun Investments P. Ltd. (Delhi) p. 33

 

  --> Where assessment barred by time in absence of satisfaction of AO, notice invalid : Dy. CIT v. Rano Singh (Delhi) p. 36

 

  --> Assessee incurred loss on share trading and quantum of loss not disputed, levy of penalty not justified : SRJ Securities Ltd v. ITO (Delhi) p. 41

 

  --> Net profit rate subject to depreciation and interest more than restricted trading addition to be deleted : Asst. CIT v. Prabhu Dayal Kanojiya (Jaipur) p. 45

 

  --> No separate addition required to be made in respect of bank FDRs and NSC interest income : Asst. CIT v. Prabhu Dayal Kanojiya (Jaipur) p. 45

 

  --> Where loss occuring on account of purchase of capital asset and placing security deposit, penalty not leviable : Microsoft Corporation (India) P. Ltd. v. Dy. CIT (Delhi) p. 58

 

  --> Expenditure on payment of tax was appropriation of income, penalty leviable u/s. 271(1)(c) : Microsoft Corporation (India) P. Ltd. v. Dy. CIT (Delhi) p. 58

 

  --> Change of ownership of unit is not a reconstruction, deduction allowable u/s. 10B : ITO v. Veto Electropowers (Jaipur) p. 76

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Transfer Pricing: CUP method is preferable to TNMM

Clear Plus India Pvt Ltd vs. DCIT (ITAT Delhi)


The assessee sold automobile wipers to its associated enterprise and claimed that as per the "Comparable Uncontrolled Price" (CUP) method, the transactions were at arms' length basis. The TPO rejected the CUP method on the basis that the comparability of controlled and uncontrolled transactions was not established with certain degree of reasonableness and accuracy and that the conditions prevailing in the market were not established to be identical. The TPO adopted the TNMM and directed that an adjustment be made by adopting the mean profit of comparables. This was confirmed by the DRP. On appeal, HELD:


(i) U/s 92C read with Rule 10B, the most appropriate method has to be applied for determination of arm's length price. In principle, the CUP method (the traditional transaction method) is preferable to the other methods because all other things being equal, the CUP and traditional transactional methods lead to more reliable results vis-a-vis the results obtained by applying transaction profit method (UCB India 121 ITD 131 and Serdia Pharmaceuticals followed);


(ii) For the CUP method, the focus is on the market in which the products are sold by the assessee and any unique feature of the market in which assessee is situated is of no importance in relative terms. As the goods were sold by the assessee as well as the competitive Chinese manufacturers in the USA market, the market conditions in the territory of sale were the same. The buyer in the USA market will be more concerned with quality and price rather than economic conditions prevailing in China and India (SNF (Australia) Pty. Ltd. Vs. COT (2010) FCA 635 referred to);


(iii) As regards the comparability of the products the assessee has to provide the sale data of the AE in terms of sale price of Chinese and assessee's goods in the USA market and quantitative data of purchase of Chinese and Indian wipers by the AE and the terms of payment and the AO shall compute the arm's length price using this data on CUP method.


Note: For more on transfer pricing law, see Transfer Pricing Implications Of Business Restructuring by Multi Nationals


Related Judgements
Serdia Pharmaceuticals (I) Pvt Ltd vs. ACIT (ITAT Mumbai) On merits, the CUP method is the `most appropriate method' to determine the arm's length price in the cases of generic drug manufacturers so long as comparables are available. As the API imported by the assessee was a generic drug and not patent protected, the CUP method could be…


Philips Software vs. ACIT (ITAT Bangalore) (4 MB) The AO/TPO have to satisfy and communicate to the taxpayer which one of the four conditions prescribed in s. 92C (3) are satisfied before applying the transfer pricing provisions and the failure to demonstrate this to the assessee renders the transfer pricing order void


Intel Asia Electronics Inc vs. ADIT (ITAT Bangalore) The CUP method for determining the ALP is suitable when goods of a similar type are sold by independent enterprises. In an isolated transaction of sale of the PE as a `going concern' to the AE, there are no similar comparable independent transactions available for comparison. In order to…


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