S. 54 Relief available to multiple sales & purchases of residential houses

Rajesh Keshav Pillai vs. ITO (ITAT Mumbai)

(732.4 KiB, 275 DLs)

S. 54 Relief available to multiple sales & purchases of residential houses

The assessee sold two separate flats and earned long-term capital gains of Rs. 1.74 crores. The assessee bought two different flats for a consideration of Rs. 1.77 crores and claimed that the LTCG of Rs. 1.74 crores was exempt u/s 54. The AO & CIT (A) followed the judgement of the Special Bench in ITO vs. Sushila Jhaveri 292 ITR (AT) 1 and held that the benefit of s. 54 was available in respect of only one flat and not two flats. On appeal to the Tribunal, HELD allowing the appeal:

(i) Though s. 54 refers to capital gains arising from "transfer of a residential house", it does not provide that the exemption is available only in relation to one house. If an assessee has sold multiple houses, then the exemption u/s 54 is available in respect of all houses if the other conditions are fulfilled;

(ii) The decision of the Special Bench in ITO vs. Sushila Jhaveri 292 ITR (AT) 1 is distinguishable. There the issue was whether if one house is sold and the proceeds are invested in several houses, the exemption u/s 54 is available and it was held that the exemption was available only for one house. But, if more than one house is sold and more than one house is bought, a corresponding exemption u/s 54 is available;

(iii) However, the exemption is not available on an aggregate basis but has to be computed considering each sale and the corresponding purchase adopting a combination beneficial to the assessee.

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Pre-retirement pay taxable in country of employment

Pre-retirement pay taxable in country of employment

The Supreme Tax Court has held that the pre-retirement pay of an employee with no further duties remained taxable in Germany as employment income despite his move to France.

Up to December 31, 2009 many larger employers operated a state-subsidised pre-retirement scheme for their older long-serving employees. The subsidies were then withdrawn for new joiners, although existing rights remained protected. Thus the concept in its original form will not entirely disappear until 2018. Broadly, the schemes operate on the principle that a qualifying employee need only work at 50% of his capacity for the six, or eight, years immediately prior to his retirement, but will continue to receive a higher proportion of his former net pay. This higher amount - typically up to 90% - is made up of 50% of the previous salary together with a tax-free supplement paid by the employer. This supplement was wholly, or partly, subsidised by the government employment agency (labour exchange). The 50% working time was agreed with the employer - often individually. Three models were common: half-day work for the full period, seasonal full-time employment and the "block" model of working full-time under otherwise unchanged conditions for the first half of the pre-retirement period, followed by full work dispensation for the remainder. An employee on the block model who moved to France on completion of his period of active duty claimed that his pre-retirement pay should be treated as a company pension under the French double tax treaty, that is, that it should be taxed in France, as the country of residence, rather than in Germany.

The Supreme Tax Court has now rejected this claim. At least the 50% base-pay portion of the pre-retirement salary had been earned during the active part of the employee's pre-retirement period. As such, it was a delayed payment of remuneration for work performed in Germany for a German employer. The treaty does not make the taxation of employment income dependent upon the time of payment, so there was no reason to treat the pre-retirement pay of the employee after his move to France differently than during his period of active duty. This contrasted with the position after formal retirement; a company retirement pension was to secure an employee's future and was not deferred compensation for work performed in the past. It was taxable in the country of residence under the treaty, but could not offer an analogy appropriate to pre-retirement pay schemes.

The court did mention that one might take a different view of the supplementary portion of the pre-retirement pay. Arguably, this had not been earned during the active period of work, but was being paid as a current inducement to the employee not to seek further employment. On that basis, the supplement would be taxable in the country of residence, at least under treaty provisions corresponding to those of the OECD model. However, those of the French treaty were different, providing that all payments relating to an employment were taxable in the country of employment. This applied to the supplement here at issue; thus the more general question could not be decided on the basis of the present case.

Supreme Tax Court judgment I R 49/10 of January 12, 2011 published on March 30

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ITR (TRIB)) Vol 8 Part 5 dated 04.04.2011

ITR'S TRIBUNAL TAX REPORTS (ITR (TRIB))
Volume 8 : Part 5 (Issue dated : 04-04-2011)
SUBJECT INDEX TO CASES REPORTED IN THIS PART
Appeal to Appellate Tribunal --Double Taxation Avoidance Agreement--Mutual assessment procedure--Does not preclude Tribunal entertaining appeal-- Gracemac Corporation v. Asst. Director of Income-tax (Delhi) . . . 522
Business expenditure --Disallowance--Payments in cash exceeding specified limit--Payment for labour and materials for construction in area where no banking facility available--Allowable--Income-tax Act, 1961, ss. 40A(3), 263--Income-tax Rules, 1962, r. 6DD(j)-- Ramakant Singh v. CIT (No. 2) (Patna) . . . 505
Deduction of tax at source --Credit for tax deducted--No requirement of confirmation by deductors--Income-tax Act, 1961, s. 199-- Ramakant Singh v. CIT (No. 2) (Patna) . . . 505
International transactions --Arm's length price--Transactional net margin method --Determination only at transaction level not at industry level--Income-tax Act, 1961, ss. 92B, 92C, 92CA(3), 92F(ii)--Income-tax Rules, 1962, r. 10B(1)(e)-- Deputy CIT v. Ankit Diamonds (Mumbai) . . . 487
Interpretation of taxing statutes --Royalty--Definition--Meaning of--To be interpreted in terms of Act and DTAA--U. S. regulations or OECD commentary not proper guides--Income-tax Act, 1961, s. 9(1)(vi)--Double Taxation Avoidance Agreement between India and the U. S. A., art. 12--Copyright Act, 1957, s. 14(a), (b), (d), (e)-- Gracemac Corporation v. Asst. Director of Income-tax (Delhi) . . . 522
----Words to be given plain meaning--Punctuation not to be treated as redundant-- Gracemac Corporation v. Asst. Director of Income-tax (Delhi) . . . 522
Non-resident --Tax residency certificates issued by competent authority of another State--Entities cannot be treated as fictitious-- Gracemac Corporation v. Asst. Director of Income-tax (Delhi) . . . 522
Revision --Commissioner--Erroneous and prejudicial to Revenue--Assessee Officer making enquiry and accepting assessee's case--Commissioner not entitled to revise on ground enquiry not adequate--Income-tax Act, 1961, s. 263-- Ramakant Singh v. CIT (No. 2) (Patna) . . . 505
Royalty --Non-resident--Sale of "off the shelf software product" by U. S. based non-resident companies to independent Indian distributors--Payments by Indian distributors--Are royalty taxable in hands of non-resident companies--Appointment of Indian distributors is business connection--Income-tax Act, 1961, ss. 9(1)(vi), 115A, 234A, 234B --Double Taxation Avoidance Agreement between India and the U. S. A., art. 12-- Gracemac Corporation v. Asst. Director of Income-tax (Delhi) . . . 522
Words and phrases --"Copyright"--"Copyrighted article"-- Gracemac Corporation v. Asst. Director of Income-tax (Delhi) . . . 522

SECTIONWISE INDEX TO CASES REPORTED IN THIS PART
Copyright Act, 1957 :
S. 14(a), (b), (d), (e) --Interpretation of taxing statutes--Royalty--Definition--Meaning of--To be interpreted in terms of Act and DTAA--U. S. regulations or OECD commentary not proper guides-- Gracemac Corporation v. Asst. Director of Income-tax (Delhi) . . . 522
Double Taxation Avoidance Agreement between India and the U. S. A. :
Art. 12 --Interpretation of taxing statutes--Royalty--Definition--Meaning of--To be interpreted in terms of Act and DTAA--U. S. regulations or OECD commentary not proper guides-- Gracemac Corporation v. Asst. Director of Income-tax (Delhi) . . . 522
----Royalty--Non-resident--Sale of "off the shelf software product" by U. S. based non-resident companies to independent Indian distributors--Payments by Indian distributors--Are royalty taxable in hands of non-resident companies--Appointment of Indian distributors is business connection-- Gracemac Corporation v. Asst. Director of Income-tax (Delhi) . . . 522
Income-tax Act, 1961 :
S. 9(1)(vi) --Interpretation of taxing statutes--Royalty--Definition--Meaning of--To be interpreted in terms of Act and DTAA--U. S. regulations or OECD commentary not proper guides-- Gracemac Corporation v. Asst. Director of Income-tax (Delhi) . . . 522
----Royalty--Non-resident--Sale of "off the shelf software product" by U. S. based non-resident companies to independent Indian distributors--Payments by Indian distributors--Are royalty taxable in hands of non-resident companies--Appointment of Indian distributors is business connection-- Gracemac Corporation v. Asst. Director of Income-tax (Delhi) . . . 522
S. 40A(3) --Business expenditure--Disallowance--Payments in cash exceeding specified limit--Payment for labour and materials for construction in area where no banking facility available--Allowable-- Ramakant Singh v. CIT (No. 2) (Patna) . . . 505
S. 92B --International transactions--Arm's length price--Transactional net margin method--Determination only at transaction level not at industry level-- Deputy CIT v. Ankit Diamonds (Mumbai) . . . 487
S. 92C --International transactions--Arm's length price--Transactional net margin method--Determination only at transaction level not at industry level-- Deputy CIT v. Ankit Diamonds (Mumbai) . . . 487
S. 92CA(3) --International transactions--Arm's length price--Transactional net margin method--Determination only at transaction level not at industry level-- Deputy CIT v. Ankit Diamonds (Mumbai) . . . 487
S. 92F(ii) --International transactions--Arm's length price--Transactional net margin method --Determination only at transaction level not at industry level-- Deputy CIT v. Ankit Diamonds (Mumbai) . . . 487
S. 115A --Royalty--Non-resident--Sale of "off the shelf software product" by U. S. based non-resident companies to independent Indian distributors--Payments by Indian distributors--Are royalty taxable in hands of non-resident companies--Appointment of Indian distributors is business connection-- Gracemac Corporation v. Asst. Director of Income-tax (Delhi) . . . 522
S. 199 --Deduction of tax at source--Credit for tax deducted--No requirement of confirmation by deductors-- Ramakant Singh v. CIT (No. 2) (Patna) . . . 505
S. 234A --Royalty--Non-resident--Sale of "off the shelf software product" by U. S. based non-resident companies to independent Indian distributors--Payments by Indian distributors--Are royalty taxable in hands of non-resident companies--Appointment of Indian distributors is business connection-- Gracemac Corporation v. Asst. Director of Income-tax (Delhi) . . . 522
S. 234B --Royalty--Non-resident--Sale of "off the shelf software product" by U. S. based non-resident companies to independent Indian distributors--Payments by Indian distributors--Are royalty taxable in hands of non-resident companies--Appointment of Indian distributors is business connection-- Gracemac Corporation v. Asst. Director of Income-tax (Delhi) . . . 522
S. 263 --Business expenditure--Disallowance--Payments in cash exceeding specified limit--Payment for labour and materials for construction in area where no banking facility available--Allowable-- Ramakant Singh v. CIT (No. 2) (Patna) . . . 505
----Revision--Commissioner--Erroneous and prejudicial to Revenue--Assessee Officer making enquiry and accepting assessee's case--Commissioner not entitled to revise on ground enquiry not adequate-- Ramakant Singh v. CIT (No. 2) (Patna) . . . 505
Income-tax Rules, 1962 :
R. 6DD(j) --Business expenditure--Disallowance--Payments in cash exceeding specified limit--Payment for labour and materials for construction in area where no banking facility available--Allowable-- Ramakant Singh v. CIT (No. 2) (Patna) . . . 505
R. 10B(1)(e)--International transactions--Arm's length price--Transactional net margin method --Determination only at transaction level not at industry level--Deputy CIT v. Ankit Diamonds (Mumbai) . . . 487

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ITR Vol 332 Part 3 dt 04.04.2011

INCOME TAX REPORTS (ITR)
Volume 332 : Part 3 (Issue dated 4-4-2011)
SUBJECT INDEX TO CASES REPORTED IN THIS PART
HIGH COURTS
Appeal to Commissioner (Appeals) --Loss on sale of shares--Additional evidence--No objection in remand report to admission of additional evidence--Evidence having direct bearing on quantum of claim--Addition deleted by Commissioner (Appeals) and confirmed by Tribunal--Justified--Work outsourced to sister concern and expenses for undertaking that work allocated on proportionate basis to assessee--Explanation furnished by assessee found to be satisfactory--Income-tax Act, 1961--Income-tax Rules, 1962, r. 46A-- CIT v. Virgin Securities and Credits P. Ltd. (Delhi) . . . 396
Appeal to High Court --Powers of court--Power to consider question of law though not formulated at time of admission of appeal--Income-tax Act, 1961, s. 260A(4)-- Helios and Metheson Information Technology Ltd . v. Asst. CIT (Mad) . . . 403
Business expenditure --Deduction only on actual payment--Law applicable--No disallowance if amount paid before due date for furnishing of return--First proviso to section 43B retrospective in operation--ESI contribution for accounting year relevant to assessment year 1998-99 paid before submission of return--Matter remanded for consideration of applicability of Allied Motors' case and CBDT Circular No. 7 of 2003--Income-tax Act, 1961, s. 43B-- Sudhir Kumar Agarwala v. CIT (Orissa) . . . 452
Business income --Estimation--Gross profit rate--No discrepancies in trading operations and stock--Non-maintenance of day-to-day stock register--Not a reason to reject books--No adverse comment regarding books produced before Assessing Officer--Lower gross profit rate in period subsequent to survey due to huge discounts on merchandise--Gross profit rate disclosed by assessee reasonable--Income-tax Act, 1961-- CIT v. Bindals Apparels (Delhi) . . . 410
Business loss --Depreciation--Carry forward and set off--Hotel business carried on by assessee--Agreement with another company for running hotel--Disputes and suit against other company--Hotel business run by court receiver who was a director of assessee-company--Assessee resuming business--No cessation of business--Losses and depreciation carried forward could be set off against profits--Income-tax Act, 1961, ss. 32, 72-- CIT v. Bencomar Hotels (Goa) P. Ltd. (Bom) . . . 441
Capital gains --Short-term capital gains--Finding that gains were short-term capital gains--Finding of fact--Income-tax Act, 1961-- Sudhir Kumar Agarwala v. CIT (Orissa) . . . 452
Cash credits --Company--Share capital--Deposits in company--Assessee providing identity and creditworthiness of shareholders and depositors--Amounts could not be added under section 68--Income-tax Act, 1961, s. 68-- CIT v. Ambuja Ginning, Pressing and Oil Co. P. Ltd . (Guj) . . . 434
Income from undisclosed sources --Assessing Officer making estimated additions on basis of loose papers found during survey--Commissioner (Appeals) as well as Tribunal partly setting aside addition holding that loose papers not to be accepted, in absence of any other material--No question of law--Income-tax Act, 1961-- CIT v. Atam Valves (P) Ltd . (P&H) . . . 468
Industrial undertaking --Manufacture--Converting raw fish into tinned fish--Processing but not manufacturing--Assessee not entitled to deduction--Income-tax Act, 1961, s. 80-IB-- CIT v. Gitwako Farma (I) P. Ltd. (Delhi) . . . 471
----Special deduction under section 80-IA --Assessee undertaking manufacturing jobs on behalf of others --Entitled to special deduction--Income-tax Act, 1961, s. 80-IA -- CIT v. Ambuja Ginning, Pressing and Oil Co. P. Ltd. (Guj) . . . 434
Interest-tax --Interest--Definition--Bank giving loan at lower rate of interest under Export Credit Subsidy Scheme of RBI--Compensation paid to bank by RBI for loss of interest--Amount received from RBI not "interest" under Interest-tax Act--Interest-tax Act, 1974, s. 2(7)-- Punjab National Bank v. CIT (Delhi) . . . 337
Non-resident --Income deemed to accrue or arise in India--Condition precedent--Business connection--Carrying out operations in India, wholly or partly, essential--Royalty--Meaning of--Transfer of rights in respect of property--Different from transfer of rights in property--Assessee, a non-resident, engaged in satellite communications and having control of satellites--Providing use of transponder facility on satellite to television companies outside India--Signals from customers' facilities received by transponder on assessee's satellite, amplified and relayed--Cable operators in India receiving and passing them on to customers--Assessee having no business operations in India--No lease of equipment but only use of broadband facility--That transponder had footprint on various continents did not imply process took place in India--Payment not royalty--Income-tax Act, 1961, ss. 5(2), 9(1)(i), (vi), Expln. 2, (vii), 90-- Asia Satellite Telecommunications Co. Ltd . v. DIT (Delhi) . . . 340
Reassessment --Notice after four years--Assessee showing receipt of substantial sum in profit and loss account in relation to transfer of division but not making reference thereto in return--Transferor and transferee companies having common directors and operating at same address--Division commenced barely two years before transfer--Copies of agreement not produced--Failure to make full disclosure of material facts--Reassessment valid--Claim that sum received as non-compete fee under restrictive covenant upon transfer of business not established--Income-tax Act, 1961, s. 147-- Helios and Metheson Information Technology Ltd. v. Asst. CIT (Mad) . . . 403
----Notice--Assessee disclosing fully and truly all material facts necessary for assessment--Notice issued beyond period of four years cannot be sustained--Income-tax Act, 1961, ss. 147, 148-- Yash Raj Films P. Ltd. v. Asst. CIT (Bom) . . . 428
----Validity--Rectification proceedings dropped--Subsequent reassessment proceedings within limitation--Valid--Income-tax Act, 1961, ss. 147, 154-- CIT v. India Sea Foods (Ker) . . . 424
Rectification of mistakes --Mistake must be obvious--Assessee carrying on hotel business setting off unabsorbed depreciation and loss carried forward--Finding that there had been no cessation of business--No mistake apparent from record--Rectification proceedings to withdraw benefit of set-off--Not valid--Income-tax Act, 1961, s. 154 -- CIT v. Bencomar Hotels (Goa) P. Ltd. (Bom) . . . 441
Tour operator --Special deduction--Advances received in foreign exchange placed in short-term deposits in banks--Interest earned in Indian currency--Interest not profits derived from services provided to foreign tourists--Not entitled to benefit under section 80HHD--Income-tax Act, 1961, s. 80HHD--Lotus Trans Travels P. Ltd. v. CIT(Delhi) . . . 463
Unexplained investment --Finding by Commissioner (Appeals) and Tribunal that explanation regarding investment was reasonable--Amount not assessable as unexplained investment--Income-tax Act, 1961, s. 69-- CIT v. Byyanna (HUF) (Karn) . . . 448
AUTHORITY FOR ADVANCE RULINGS
Business profits --Special provision--Foreign company--Turnkey power project--Contract for erection of steam turbines etc.--Applicant to deploy expats and work force--Presumptive rate of tax applicable--Income-tax Act, 1961, s. 44BBB-- Toshiba Plant Systems Services Corporation , In re . . . 456
Non-resident --Exploration of mineral oils--Special provision for computing profits--Applicable to seismic data acquisition and processing for exploration companies--Income-tax Act, 1961, s. 44BB-- Global Geophysical Services Ltd. , In re . . . 418
SECTIONWISE INDEX TO CASES REPORTED IN THIS PART
Income-tax Act, 1961 :
S. 5(2) --Non-resident--Income deemed to accrue or arise in India--Condition precedent--Business connection--Carrying out operations in India, wholly or partly, essential--Royalty--Meaning of--Transfer of rights in respect of property--Different from transfer of rights in property--Assessee, a non-resident, engaged in satellite communications and having control of satellites--Providing use of transponder facility on satellite to television companies outside India--Signals from customers' facilities received by transponder on assessee's satellite, amplified and relayed--Cable operators in India receiving and passing them on to customers--Assessee having no business operations in India--No lease of equipment but only use of broadband facility--That transponder had footprint on various continents did not imply process took place in India--Payment not royalty-- Asia Satellite Telecommunications Co. Ltd . v. DIT (Delhi) . . . 340
S. 9(1)(i), (vi), Expln. 2, (vii) --Non-resident--Income deemed to accrue or arise in India--Condition precedent--Business connection--Carrying out operations in India, wholly or partly, essential--Royalty--Meaning of--Transfer of rights in respect of property--Different from transfer of rights in property--Assessee, a non-resident, engaged in satellite communications and having control of satellites--Providing use of transponder facility on satellite to television companies outside India--Signals from customers' facilities received by transponder on assessee's satellite, amplified and relayed--Cable operators in India receiving and passing them on to customers--Assessee having no business operations in India--No lease of equipment but only use of broadband facility--That transponder had footprint on various continents did not imply process took place in India--Payment not royalty-- Asia Satellite Telecommunications Co. Ltd . v. DIT (Delhi) . . . 340
S. 32 --Business loss--Depreciation--Carry forward and set off--Hotel business carried on by assessee--Agreement with another company for running hotel--Disputes and suit against other company--Hotel business run by court receiver who was a director of assessee-company--Assessee resuming business--No cessation of business--Losses and depreciation carried forward could be set off against profits-- CIT v. Bencomar Hotels (Goa) P. Ltd. (Bom) . . . 441
S. 43B --Business expenditure--Deduction only on actual payment--Law applicable--No disallowance if amount paid before due date for furnishing of return--First proviso to section 43B retrospective in operation--ESI contribution for accounting year relevant to assessment year 1998-99 paid before submission of return--Matter remanded for consideration of applicability of Allied Motors' case and CBDT Circular No. 7 of 2003-- Sudhir Kumar Agarwala v. CIT (Orissa) . . . 452
S. 44BB --Non-resident--Exploration of mineral oils--Special provision for computing profits--Applicable to seismic data acquisition and processing for exploration companies-- Global Geophysical Services Ltd. , In re (AAR) . . . 418
S. 44BBB --Business profits--Special provision--Foreign company--Turnkey power project--Contract for erection of steam turbines etc.--Applicant to deploy expats and work force--Presumptive rate of tax applicable-- Toshiba Plant Systems Services Corporation , In re (AAR) . . . 456
S. 68 --Cash credits--Company--Share capital--Deposits in company--Assessee providing identity and creditworthiness of shareholders and depositors--Amounts could not be added under section 68-- CIT v. Ambuja Ginning, Pressing and Oil Co. P. Ltd . (Guj) . . . 434
S. 69 --Unexplained investment--Finding by Commissioner (Appeals) and Tribunal that explanation regarding investment was reasonable--Amount not assessable as unexplained investment-- CIT v. Byyanna (HUF) (Karn) . . . 448
S. 72 --Business loss--Depreciation--Carry forward and set off--Hotel business carried on by assessee--Agreement with another company for running hotel--Disputes and suit against other company--Hotel business run by court receiver who was a director of assessee-company--Assessee resuming business--No cessation of business--Losses and depreciation carried forward could be set off against profits-- CIT v. Bencomar Hotels (Goa) P. Ltd. (Bom) . . . 441
S. 80HHD --Tour operator--Special deduction--Advances received in foreign exchange placed in short-term deposits in banks--Interest earned in Indian currency--Interest not profits derived from services provided to foreign tourists--Not entitled to benefit under section 80HHD-- Lotus Trans Travels P. Ltd. v. CIT (Delhi) . . . 463
S. 80-IA --Industrial undertaking--Special deduction under section 80-IA --Assessee undertaking manufacturing jobs on behalf of others --Entitled to special deduction-- CIT v. Ambuja Ginning, Pressing and Oil Co. P. Ltd. (Guj) . . . 434
S. 80-IB --Industrial undertaking--Manufacture--Converting raw fish into tinned fish--Processing but not manufacturing--Assessee not entitled to deduction-- CIT v. Gitwako Farma (I) P. Ltd. (Delhi) . . . 471
S. 90 --Non-resident--Income deemed to accrue or arise in India--Condition precedent--Business connection--Carrying out operations in India, wholly or partly, essential--Royalty--Meaning of--Transfer of rights in respect of property--Different from transfer of rights in property--Assessee, a non-resident, engaged in satellite communications and having control of satellites--Providing use of transponder facility on satellite to television companies outside India--Signals from customers' facilities received by transponder on assessee's satellite, amplified and relayed--Cable operators in India receiving and passing them on to customers--Assessee having no business operations in India--No lease of equipment but only use of broadband facility--That transponder had footprint on various continents did not imply process took place in India--Payment not royalty-- Asia Satellite Telecommunications Co. Ltd . v. DIT (Delhi) . . . 340
S. 147 --Reassessment--Notice after four years--Assessee showing receipt of substantial sum in profit and loss account in relation to transfer of division but not making reference thereto in return--Transferor and transferee companies having common directors and operating at same address--Division commenced barely two years before transfer--Copies of agreement not produced--Failure to make full disclosure of material facts--Reassessment valid--Claim that sum received as non-compete fee under restrictive covenant upon transfer of business not established-- Helios and Metheson Information Technology Ltd. v. Asst. CIT (Mad) . . . 403
----Reassessment--Notice--Assessee disclosing fully and truly all material facts necessary for assessment--Notice issued beyond period of four years cannot be sustained-- Yash Raj Films P. Ltd. v. Asst. CIT (Bom) . . . 428
----Reassessment--Validity--Rectification proceedings dropped--Subsequent reassessment proceedings within limitation--Valid-- CIT v. India Sea Foods (Ker) . . . 424
S. 148 --Reassessment--Notice--Assessee disclosing fully and truly all material facts necessary for assessment--Notice issued beyond period of four years cannot be sustained-- Yash Raj Films P. Ltd. v. Asst. CIT (Bom) . . . 428
S. 154 --Reassessment--Validity--Rectification proceedings dropped--Subsequent reassessment proceedings within limitation--Valid-- CIT v. India Sea Foods (Ker) . . . 424
----Rectification of mistakes--Mistake must be obvious--Assessee carrying on hotel business setting off unabsorbed depreciation and loss carried forward--Finding that there had been no cessation of business--No mistake apparent from record--Rectification proceedings to withdraw benefit of set-off--Not valid-- CIT v. Bencomar Hotels (Goa) P. Ltd. (Bom) . . . 441
S. 260A(4) --Appeal to High Court--Powers of court--Power to consider question of law though not formulated at time of admission of appeal-- Helios and Metheson Information Technology Ltd . v. Asst. CIT (Mad) . . . 403
Income-tax Rules, 1962 :
R. 46A --Appeal to Commissioner (Appeals)--Loss on sale of shares--Additional evidence--No objection in remand report to admission of additional evidence--Evidence having direct bearing on quantum of claim--Addition deleted by Commissioner (Appeals) and confirmed by Tribunal--Justified--Work outsourced to sister concern and expenses for undertaking that work allocated on proportionate basis to assessee--Explanation furnished by assessee found to be satisfactory-- CIT v. Virgin Securities and Credits P. Ltd. (Delhi) . . . 396
Interest-tax Act, 1974 :
S. 2(7) --Interest-tax--Interest--Definition--Bank giving loan at lower rate of interest under Export Credit Subsidy Scheme of RBI--Compensation paid to bank by RBI for loss of interest--Amount received from RBI not "interest" under Interest-tax Act-- Punjab National Bank v. CIT (Delhi) . . . 337

ITR(Trib) Vol 7 Part 5 dated 28-03-2011

ITR'S TRIBUNAL TAX REPORTS (ITR (TRIB))

Volume 8 : Part 4 (Issue dated : 28-3-2011)

SUBJECT INDEX TO CASES REPORTED IN THIS PART

Appeal to Appellate Tribunal --Powers of Tribunal--Power to rectify mistakes in its order--Mistake must be apparent from record--Addition of undisclosed income in block assessment--Addition after considering document discovered during search--Addition not on basis of presumption under section 132(4)--Subsequent decision of Supreme Court in P. R. Metrani's case [2006] 287 ITR 209 not applicable--No mistake in original order--Addition could not be deleted in proceedings under section 254(2)--Income-tax Act, 1961, ss. 132, 254(2)-- Kailashnath Malhotra v. Joint CIT (Mumbai) . . . 457

----Rectification of mistakes--Application for rectification dismissed--Second application not maintainable--Income-tax Act, 1961, s. 254(2)-- Kailashnath Malhotra v. Joint CIT (Mumbai) . . . 457

Business expenditure --Disallowance--Consultancy charges paid to director--No evidence that payment was excessive or unreasonable--Disallowance of part of payment--Not justified--Income-tax Act, 1961, s. 40A(2)-- Tally Solutions P. Ltd. v. Deputy CIT (Bangalore) . . . 434

Business income --Benefit arising out of business--Assessee managing director of company--Pledge of shares held by company in another group company to assessee as security for loan from assessee--Shares in dematerialised form--Assessee shown as beneficial owner in account of depository participant--Not conclusive that transaction was sale--No material to show sale--Allegation that pledge was camouflage to avoid tax implications of sale and that acquisition of shares intended to acquire control of group company--Not substantiated--Loan repaid and company again shown as beneficial owner--Difference between loan amount and market price of shares not to be taxed as benefit arising out of business in assessee's hands--Income-tax Act, 1961, s. 2(24)(iv)--Companies Act, 1956, ss. 2(46), 82, 83, 187C--Depositories Act, 1996, ss. 10, 12, 25, 28--Sale of Goods Act, 1930, ss. 2(7), 19--Contract Act, 1872, ss. 148, 172--Securities and Exchange Board of India (Depositories and Participants) Regulations, 1996-- Joint CIT v. Mukesh D. Ambani (Mumbai) . . . 353

Cash credits --Return of assessee-company processed under section 143(1) accepting return--Balance-sheet showing increase in paid-up share capital and reserves--Enquiry--Directors of assessee attending from time to time and submitting list of shareholders--Letters sent to shareholders returned unserved in majority of cases--Assessee not filing any reply to show-cause notice--Sum added as unexplained cash credit--Appeal--Assessee denying filing of return and repudiating balance-sheet--Not permissible--Additional evidence cannot be admitted--Addition of cash credits proper--Income-tax Act, 1961, s. 68--Income-tax Rules, 1962, r. 46A-- Vishwanath Clorinate and Chemicals P. Ltd. v. ITO (Ahmedabad) . . . 387

Income --Remission of liability--Purchase of deep freezers for storage and supply of ice creams to dealers against deposits for deep freezers--Deposits not transferred to profit and loss account--Section 41 not applicable--Deep freezer deposits not income--Addition deleted--Income-tax Act, 1961, s. 41-- P. I. C. (Gujarat) Ltd. v. Deputy CIT (Ahmedabad) . . . 417

Penalty --Concealment of income and furnishing inaccurate particulars of income--Distinction--Amendment of section 271(1B) with retrospective effect from April 1, 1989--Distinction not maintained--Satisfaction arrived at for filing inaccurate particulars but penalty levied for concealment--Cancellation of penalty justified--Income-tax Act, 1961, ss. 271(1)(c), 271(1B)-- ITO v. Chhail Behari (Agra) . . . 383

Rectification of mistake --Assessing Officer allowing deduction under section 80HHC and later by an order under section 154 reducing deduction--Power under section 154 not to cover each and every decided issue which may result in possible loss of revenue--Order of rectification to be set aside--Income-tax Act, 1961, ss. 80HHC, 154-- Satish Kumar Aggarwal v. Deputy CIT (Delhi) . . . 424

Revision --Commissioner--Jurisdiction--Questionnaire issued by Assessing Officer covering all points raised by Commissioner in notice--Assessee replying to all points with supporting material--No ground for exercise of power of revision--Even if in opinion of Commissioner inquiry by Assessing Officer inadequate--Income-tax Act, 1961, s. 263-- Ramakant Singh v. CIT (Patna) . . . 403

----Commissioner--Set-off of unabsorbed depreciation allowed as accumulated book loss higher than unabsorbed depreciation--Revision to recompute book profit by taking into account adjustment made in earlier year--Concession in previous year not binding on assessee in other years--Order not erroneous--Income-tax Act, 1961, s. 263 -- Aircel Cellular Ltd. v. Asst. CIT (Chennai) . . . 446

Scientific research --Capital expenditure on scientific research--Deductible--Income-tax Act, 1961, s. 35(1)(iv)-- Tally Solutions P. Ltd. v. Deputy CIT (Bangalore) . . . 434

Shares --Pledge--General principles--Depositories Act--Effect of, on share transactions--Companies Act, 1956, ss. 2(46), 82, 83, 187C--Depositories Act, 1996, ss. 10, 12, 25, 28--Sale of Goods Act, 1930, ss. 2(7), 19--Contract Act, 1872, ss. 148, 172-- Joint CIT v. Mukesh D. Ambani (Mumbai) . . . 353

 

SECTIONWISE INDEX TO CASES REPORTED IN THIS PART

Companies Act, 1956 :

Ss. 2(46), 82, 83, 187C --Business income--Benefit arising out of business--Assessee managing director of company--Pledge of shares held by company in another group company to assessee as security for loan from assessee--Shares in dematerialised form--Assessee shown as beneficial owner in account of depository participant--Not conclusive that transaction was sale--No material to show sale--Allegation that pledge was camouflage to avoid tax implications of sale and that acquisition of shares intended to acquire control of group company--Not substantiated--Loan repaid and company again shown as beneficial owner--Difference between loan amount and market price of shares not to be taxed as benefit arising out of business in assessee's hands-- Joint CIT v. Mukesh D. Ambani (Mumbai) . . . 353

----Shares--Pledge--General principles--Depositories Act--Effect of, on share transactions-- Joint CIT v. Mukesh D. Ambani (Mumbai) . . . 353

Contract Act, 1872 :

Ss. 148, 172 --Business income--Benefit arising out of business--Assessee managing director of company--Pledge of shares held by company in another group company to assessee as security for loan from assessee--Shares in dematerialised form--Assessee shown as beneficial owner in account of depository participant--Not conclusive that transaction was sale--No material to show sale--Allegation that pledge was camouflage to avoid tax implications of sale and that acquisition of shares intended to acquire control of group company--Not substantiated--Loan repaid and company again shown as beneficial owner--Difference between loan amount and market price of shares not to be taxed as benefit arising out of business in assessee's hands-- Joint CIT v. Mukesh D. Ambani (Mumbai) . . . 353

----Shares--Pledge--General principles--Depositories Act--Effect of, on share transactions-- Joint CIT v. Mukesh D. Ambani (Mumbai) . . . 353

Depositories Act, 1996 :

Ss. 10, 12, 25, 28 --Business income--Benefit arising out of business--Assessee managing director of company--Pledge of shares held by company in another group company to assessee as security for loan from assessee--Shares in dematerialised form--Assessee shown as beneficial owner in account of depository participant--Not conclusive that transaction was sale--No material to show sale--Allegation that pledge was camouflage to avoid tax implications of sale and that acquisition of shares intended to acquire control of group company--Not substantiated--Loan repaid and company again shown as beneficial owner--Difference between loan amount and market price of shares not to be taxed as benefit arising out of business in assessee's hands-- Joint CIT v. Mukesh D. Ambani (Mumbai) . . . 353

----Shares--Pledge--General principles--Depositories Act--Effect of, on share transactions-- Joint CIT v. Mukesh D. Ambani (Mumbai) . . . 353

Income-tax Act, 1961 :

S. 2(24)(iv) --Business income--Benefit arising out of business--Assessee managing director of company--Pledge of shares held by company in another group company to assessee as security for loan from assessee--Shares in dematerialised form--Assessee shown as beneficial owner in account of depository participant--Not conclusive that transaction was sale--No material to show sale--Allegation that pledge was camouflage to avoid tax implications of sale and that acquisition of shares intended to acquire control of group company--Not substantiated--Loan repaid and company again shown as beneficial owner--Difference between loan amount and market price of shares not to be taxed as benefit arising out of business in assessee's hands-- Joint CIT v. Mukesh D. Ambani (Mumbai) . . . 353

S. 35(1)(iv) --Scientific research--Capital expenditure on scientific research--Deductible-- Tally Solutions P. Ltd. v. Deputy CIT (Bangalore) . . . 434

S. 40A(2) --Business expenditure--Disallowance--Consultancy charges paid to director--No evidence that payment was excessive or unreasonable--Disallowance of part of payment--Not justified-- Tally Solutions P. Ltd. v. Deputy CIT (Bangalore) . . . 434

S. 41 --Income--Remission of liability--Purchase of deep freezers for storage and supply of ice creams to dealers against deposits for deep freezers--Deposits not transferred to profit and loss account--Section 41 not applicable--Deep freezer deposits not income--Addition deleted-- P. I. C. (Gujarat) Ltd. v. Deputy CIT (Ahmedabad) . . . 417

S. 68 --Cash credits--Return of assessee-company processed under section 143(1) accepting return--Balance-sheet showing increase in paid-up share capital and reserves--Enquiry--Directors of assessee attending from time to time and submitting list of shareholders--Letters sent to shareholders returned unserved in majority of cases--Assessee not filing any reply to show-cause notice--Sum added as unexplained cash credit--Appeal--Assessee denying filing of return and repudiating balance-sheet--Not permissible--Additional evidence cannot be admitted--Addition of cash credits proper -- Vishwanath Clorinate and Chemicals P. Ltd. v. ITO (Ahmedabad) . . . 387

S. 80HHC --Rectification of mistake--Assessing Officer allowing deduction under section 80HHC and later by an order under section 154 reducing deduction--Power under section 154 not to cover each and every decided issue which may result in possible loss of revenue--Order of rectification to be set aside-- Satish Kumar Aggarwal v. Deputy CIT (Delhi) . . . 424

S. 132 --Appeal to Appellate Tribunal--Powers of Tribunal--Power to rectify mistakes in its order--Mistake must be apparent from record--Addition of undisclosed income in block assessment--Addition after considering document discovered during search--Addition not on basis of presumption under section 132(4)--Subsequent decision of Supreme Court in P. R. Metrani's case [2006] 287 ITR 209 not applicable--No mistake in original order--Addition could not be deleted in proceedings under section 254(2)-- Kailashnath Malhotra v. Joint CIT (Mumbai) . . . 457

S. 154 --Rectification of mistake--Assessing Officer allowing deduction under section 80HHC and later by an order under section 154 reducing deduction--Power under section 154 not to cover each and every decided issue which may result in possible loss of revenue--Order of rectification to be set aside-- Satish Kumar Aggarwal v. Deputy CIT (Delhi) . . . 424

S. 254(2) --Appeal to Appellate Tribunal--Powers of Tribunal--Power to rectify mistakes in its order--Mistake must be apparent from record--Addition of undisclosed income in block assessment--Addition after considering document discovered during search--Addition not on basis of presumption under section 132(4)--Subsequent decision of Supreme Court in P. R. Metrani's case [2006] 287 ITR 209 not applicable--No mistake in original order--Addition could not be deleted in proceedings under section 254(2)-- Kailashnath Malhotra v. Joint CIT (Mumbai) . . . 457

----Appeal to Appellate Tribunal--Rectification of mistakes--Application for rectification dismissed--Second application not maintainable-- Kailashnath Malhotra v. Joint CIT (Mumbai) . . . 457

S. 263 --Revision--Commissioner--Set-off of unabsorbed depreciation allowed as accumulated book loss higher than unabsorbed depreciation--Revision to recompute book profit by taking into account adjustment made in earlier year--Concession in previous year not binding on assessee in other years--Order not erroneous-- Aircel Cellular Ltd. v. Asst. CIT (Chennai) . . . 446

----Revision--Commissioner--Jurisdiction--Questionnaire issued by Assessing Officer covering all points raised by Commissioner in notice--Assessee replying to all points with supporting material--No ground for exercise of power of revision--Even if in opinion of Commissioner inquiry by Assessing Officer inadequate-- Ramakant Singh v. CIT (Patna) . . . 403

S. 271(1)(c) --Penalty--Concealment of income and furnishing inaccurate particulars of income--Distinction--Amendment of section 271(1B) with retrospective effect from April 1, 1989--Distinction not maintained--Satisfaction arrived at for filing inaccurate particulars but penalty levied for concealment--Cancellation of penalty justified-- ITO v. Chhail Behari (Agra) . . . 383

S. 271(1B) --Penalty--Concealment of income and furnishing inaccurate particulars of income--Distinction--Amendment of section 271(1B) with retrospective effect from April 1, 1989--Distinction not maintained--Satisfaction arrived at for filing inaccurate particulars but penalty levied for concealment--Cancellation of penalty justified-- ITO v. Chhail Behari (Agra) . . . 383

Income-tax Rules, 1962 :

R. 46A --Cash credits--Return of assessee-company processed under section 143(1) accepting return--Balance-sheet showing increase in paid-up share capital and reserves --Enquiry--Directors of assessee attending from time to time and submitting list of shareholders--Letters sent to shareholders returned unserved in majority of cases--Assessee not filing any reply to show-cause notice--Sum added as unexplained cash credit--Appeal--Assessee denying filing of return and repudiating balance-sheet--Not permissible--Additional evidence cannot be admitted--Addition of cash credits proper -- Vishwanath Clorinate and Chemicals P. Ltd. v. ITO (Ahmedabad) . . . 387

Sale of Goods Act, 1930 :

Ss. 2(7), 19 --Business income--Benefit arising out of business--Assessee managing director of company--Pledge of shares held by company in another group company to assessee as security for loan from assessee--Shares in dematerialised form--Assessee shown as beneficial owner in account of depository participant--Not conclusive that transaction was sale--No material to show sale--Allegation that pledge was camouflage to avoid tax implications of sale and that acquisition of shares intended to acquire control of group company--Not substantiated--Loan repaid and company again shown as beneficial owner--Difference between loan amount and market price of shares not to be taxed as benefit arising out of business in assessee's hands-- Joint CIT v. Mukesh D. Ambani (Mumbai) . . . 353

----Shares--Pledge--General principles--Depositories Act--Effect of, on share transactions-- Joint CIT v. Mukesh D. Ambani (Mumbai) . . . 353

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ITR Vol 8 Part 4 dated 28-03-2011

ITR'S TRIBUNAL TAX REPORTS (ITR (TRIB))

Volume 8 : Part 4 (Issue dated : 28-3-2011)

SUBJECT INDEX TO CASES REPORTED IN THIS PART

Appeal to Appellate Tribunal --Powers of Tribunal--Power to rectify mistakes in its order--Mistake must be apparent from record--Addition of undisclosed income in block assessment--Addition after considering document discovered during search--Addition not on basis of presumption under section 132(4)--Subsequent decision of Supreme Court in P. R. Metrani's case [2006] 287 ITR 209 not applicable--No mistake in original order--Addition could not be deleted in proceedings under section 254(2)--Income-tax Act, 1961, ss. 132, 254(2)-- Kailashnath Malhotra v. Joint CIT (Mumbai) . . . 457

----Rectification of mistakes--Application for rectification dismissed--Second application not maintainable--Income-tax Act, 1961, s. 254(2)-- Kailashnath Malhotra v. Joint CIT (Mumbai) . . . 457

Business expenditure --Disallowance--Consultancy charges paid to director--No evidence that payment was excessive or unreasonable--Disallowance of part of payment--Not justified--Income-tax Act, 1961, s. 40A(2)-- Tally Solutions P. Ltd. v. Deputy CIT (Bangalore) . . . 434

Business income --Benefit arising out of business--Assessee managing director of company--Pledge of shares held by company in another group company to assessee as security for loan from assessee--Shares in dematerialised form--Assessee shown as beneficial owner in account of depository participant--Not conclusive that transaction was sale--No material to show sale--Allegation that pledge was camouflage to avoid tax implications of sale and that acquisition of shares intended to acquire control of group company--Not substantiated--Loan repaid and company again shown as beneficial owner--Difference between loan amount and market price of shares not to be taxed as benefit arising out of business in assessee's hands--Income-tax Act, 1961, s. 2(24)(iv)--Companies Act, 1956, ss. 2(46), 82, 83, 187C--Depositories Act, 1996, ss. 10, 12, 25, 28--Sale of Goods Act, 1930, ss. 2(7), 19--Contract Act, 1872, ss. 148, 172--Securities and Exchange Board of India (Depositories and Participants) Regulations, 1996-- Joint CIT v. Mukesh D. Ambani (Mumbai) . . . 353

Cash credits --Return of assessee-company processed under section 143(1) accepting return--Balance-sheet showing increase in paid-up share capital and reserves--Enquiry--Directors of assessee attending from time to time and submitting list of shareholders--Letters sent to shareholders returned unserved in majority of cases--Assessee not filing any reply to show-cause notice--Sum added as unexplained cash credit--Appeal--Assessee denying filing of return and repudiating balance-sheet--Not permissible--Additional evidence cannot be admitted--Addition of cash credits proper--Income-tax Act, 1961, s. 68--Income-tax Rules, 1962, r. 46A-- Vishwanath Clorinate and Chemicals P. Ltd. v. ITO (Ahmedabad) . . . 387

Income --Remission of liability--Purchase of deep freezers for storage and supply of ice creams to dealers against deposits for deep freezers--Deposits not transferred to profit and loss account--Section 41 not applicable--Deep freezer deposits not income--Addition deleted--Income-tax Act, 1961, s. 41-- P. I. C. (Gujarat) Ltd. v. Deputy CIT (Ahmedabad) . . . 417

Penalty --Concealment of income and furnishing inaccurate particulars of income--Distinction--Amendment of section 271(1B) with retrospective effect from April 1, 1989--Distinction not maintained--Satisfaction arrived at for filing inaccurate particulars but penalty levied for concealment--Cancellation of penalty justified--Income-tax Act, 1961, ss. 271(1)(c), 271(1B)-- ITO v. Chhail Behari (Agra) . . . 383

Rectification of mistake --Assessing Officer allowing deduction under section 80HHC and later by an order under section 154 reducing deduction--Power under section 154 not to cover each and every decided issue which may result in possible loss of revenue--Order of rectification to be set aside--Income-tax Act, 1961, ss. 80HHC, 154-- Satish Kumar Aggarwal v. Deputy CIT (Delhi) . . . 424

Revision --Commissioner--Jurisdiction--Questionnaire issued by Assessing Officer covering all points raised by Commissioner in notice--Assessee replying to all points with supporting material--No ground for exercise of power of revision--Even if in opinion of Commissioner inquiry by Assessing Officer inadequate--Income-tax Act, 1961, s. 263-- Ramakant Singh v. CIT (Patna) . . . 403

----Commissioner--Set-off of unabsorbed depreciation allowed as accumulated book loss higher than unabsorbed depreciation--Revision to recompute book profit by taking into account adjustment made in earlier year--Concession in previous year not binding on assessee in other years--Order not erroneous--Income-tax Act, 1961, s. 263 -- Aircel Cellular Ltd. v. Asst. CIT (Chennai) . . . 446

Scientific research --Capital expenditure on scientific research--Deductible--Income-tax Act, 1961, s. 35(1)(iv)-- Tally Solutions P. Ltd. v. Deputy CIT (Bangalore) . . . 434

Shares --Pledge--General principles--Depositories Act--Effect of, on share transactions--Companies Act, 1956, ss. 2(46), 82, 83, 187C--Depositories Act, 1996, ss. 10, 12, 25, 28--Sale of Goods Act, 1930, ss. 2(7), 19--Contract Act, 1872, ss. 148, 172-- Joint CIT v. Mukesh D. Ambani (Mumbai) . . . 353

 

SECTIONWISE INDEX TO CASES REPORTED IN THIS PART

Companies Act, 1956 :

Ss. 2(46), 82, 83, 187C --Business income--Benefit arising out of business--Assessee managing director of company--Pledge of shares held by company in another group company to assessee as security for loan from assessee--Shares in dematerialised form--Assessee shown as beneficial owner in account of depository participant--Not conclusive that transaction was sale--No material to show sale--Allegation that pledge was camouflage to avoid tax implications of sale and that acquisition of shares intended to acquire control of group company--Not substantiated--Loan repaid and company again shown as beneficial owner--Difference between loan amount and market price of shares not to be taxed as benefit arising out of business in assessee's hands-- Joint CIT v. Mukesh D. Ambani (Mumbai) . . . 353

----Shares--Pledge--General principles--Depositories Act--Effect of, on share transactions-- Joint CIT v. Mukesh D. Ambani (Mumbai) . . . 353

Contract Act, 1872 :

Ss. 148, 172 --Business income--Benefit arising out of business--Assessee managing director of company--Pledge of shares held by company in another group company to assessee as security for loan from assessee--Shares in dematerialised form--Assessee shown as beneficial owner in account of depository participant--Not conclusive that transaction was sale--No material to show sale--Allegation that pledge was camouflage to avoid tax implications of sale and that acquisition of shares intended to acquire control of group company--Not substantiated--Loan repaid and company again shown as beneficial owner--Difference between loan amount and market price of shares not to be taxed as benefit arising out of business in assessee's hands-- Joint CIT v. Mukesh D. Ambani (Mumbai) . . . 353

----Shares--Pledge--General principles--Depositories Act--Effect of, on share transactions-- Joint CIT v. Mukesh D. Ambani (Mumbai) . . . 353

Depositories Act, 1996 :

Ss. 10, 12, 25, 28 --Business income--Benefit arising out of business--Assessee managing director of company--Pledge of shares held by company in another group company to assessee as security for loan from assessee--Shares in dematerialised form--Assessee shown as beneficial owner in account of depository participant--Not conclusive that transaction was sale--No material to show sale--Allegation that pledge was camouflage to avoid tax implications of sale and that acquisition of shares intended to acquire control of group company--Not substantiated--Loan repaid and company again shown as beneficial owner--Difference between loan amount and market price of shares not to be taxed as benefit arising out of business in assessee's hands-- Joint CIT v. Mukesh D. Ambani (Mumbai) . . . 353

----Shares--Pledge--General principles--Depositories Act--Effect of, on share transactions-- Joint CIT v. Mukesh D. Ambani (Mumbai) . . . 353

Income-tax Act, 1961 :

S. 2(24)(iv) --Business income--Benefit arising out of business--Assessee managing director of company--Pledge of shares held by company in another group company to assessee as security for loan from assessee--Shares in dematerialised form--Assessee shown as beneficial owner in account of depository participant--Not conclusive that transaction was sale--No material to show sale--Allegation that pledge was camouflage to avoid tax implications of sale and that acquisition of shares intended to acquire control of group company--Not substantiated--Loan repaid and company again shown as beneficial owner--Difference between loan amount and market price of shares not to be taxed as benefit arising out of business in assessee's hands-- Joint CIT v. Mukesh D. Ambani (Mumbai) . . . 353

S. 35(1)(iv) --Scientific research--Capital expenditure on scientific research--Deductible-- Tally Solutions P. Ltd. v. Deputy CIT (Bangalore) . . . 434

S. 40A(2) --Business expenditure--Disallowance--Consultancy charges paid to director--No evidence that payment was excessive or unreasonable--Disallowance of part of payment--Not justified-- Tally Solutions P. Ltd. v. Deputy CIT (Bangalore) . . . 434

S. 41 --Income--Remission of liability--Purchase of deep freezers for storage and supply of ice creams to dealers against deposits for deep freezers--Deposits not transferred to profit and loss account--Section 41 not applicable--Deep freezer deposits not income--Addition deleted-- P. I. C. (Gujarat) Ltd. v. Deputy CIT (Ahmedabad) . . . 417

S. 68 --Cash credits--Return of assessee-company processed under section 143(1) accepting return--Balance-sheet showing increase in paid-up share capital and reserves--Enquiry--Directors of assessee attending from time to time and submitting list of shareholders--Letters sent to shareholders returned unserved in majority of cases--Assessee not filing any reply to show-cause notice--Sum added as unexplained cash credit--Appeal--Assessee denying filing of return and repudiating balance-sheet--Not permissible--Additional evidence cannot be admitted--Addition of cash credits proper -- Vishwanath Clorinate and Chemicals P. Ltd. v. ITO (Ahmedabad) . . . 387

S. 80HHC --Rectification of mistake--Assessing Officer allowing deduction under section 80HHC and later by an order under section 154 reducing deduction--Power under section 154 not to cover each and every decided issue which may result in possible loss of revenue--Order of rectification to be set aside-- Satish Kumar Aggarwal v. Deputy CIT (Delhi) . . . 424

S. 132 --Appeal to Appellate Tribunal--Powers of Tribunal--Power to rectify mistakes in its order--Mistake must be apparent from record--Addition of undisclosed income in block assessment--Addition after considering document discovered during search--Addition not on basis of presumption under section 132(4)--Subsequent decision of Supreme Court in P. R. Metrani's case [2006] 287 ITR 209 not applicable--No mistake in original order--Addition could not be deleted in proceedings under section 254(2)-- Kailashnath Malhotra v. Joint CIT (Mumbai) . . . 457

S. 154 --Rectification of mistake--Assessing Officer allowing deduction under section 80HHC and later by an order under section 154 reducing deduction--Power under section 154 not to cover each and every decided issue which may result in possible loss of revenue--Order of rectification to be set aside-- Satish Kumar Aggarwal v. Deputy CIT (Delhi) . . . 424

S. 254(2) --Appeal to Appellate Tribunal--Powers of Tribunal--Power to rectify mistakes in its order--Mistake must be apparent from record--Addition of undisclosed income in block assessment--Addition after considering document discovered during search--Addition not on basis of presumption under section 132(4)--Subsequent decision of Supreme Court in P. R. Metrani's case [2006] 287 ITR 209 not applicable--No mistake in original order--Addition could not be deleted in proceedings under section 254(2)-- Kailashnath Malhotra v. Joint CIT (Mumbai) . . . 457

----Appeal to Appellate Tribunal--Rectification of mistakes--Application for rectification dismissed--Second application not maintainable-- Kailashnath Malhotra v. Joint CIT (Mumbai) . . . 457

S. 263 --Revision--Commissioner--Set-off of unabsorbed depreciation allowed as accumulated book loss higher than unabsorbed depreciation--Revision to recompute book profit by taking into account adjustment made in earlier year--Concession in previous year not binding on assessee in other years--Order not erroneous-- Aircel Cellular Ltd. v. Asst. CIT (Chennai) . . . 446

----Revision--Commissioner--Jurisdiction--Questionnaire issued by Assessing Officer covering all points raised by Commissioner in notice--Assessee replying to all points with supporting material--No ground for exercise of power of revision--Even if in opinion of Commissioner inquiry by Assessing Officer inadequate-- Ramakant Singh v. CIT (Patna) . . . 403

S. 271(1)(c) --Penalty--Concealment of income and furnishing inaccurate particulars of income--Distinction--Amendment of section 271(1B) with retrospective effect from April 1, 1989--Distinction not maintained--Satisfaction arrived at for filing inaccurate particulars but penalty levied for concealment--Cancellation of penalty justified-- ITO v. Chhail Behari (Agra) . . . 383

S. 271(1B) --Penalty--Concealment of income and furnishing inaccurate particulars of income--Distinction--Amendment of section 271(1B) with retrospective effect from April 1, 1989--Distinction not maintained--Satisfaction arrived at for filing inaccurate particulars but penalty levied for concealment--Cancellation of penalty justified-- ITO v. Chhail Behari (Agra) . . . 383

Income-tax Rules, 1962 :

R. 46A --Cash credits--Return of assessee-company processed under section 143(1) accepting return--Balance-sheet showing increase in paid-up share capital and reserves --Enquiry--Directors of assessee attending from time to time and submitting list of shareholders--Letters sent to shareholders returned unserved in majority of cases--Assessee not filing any reply to show-cause notice--Sum added as unexplained cash credit--Appeal--Assessee denying filing of return and repudiating balance-sheet--Not permissible--Additional evidence cannot be admitted--Addition of cash credits proper -- Vishwanath Clorinate and Chemicals P. Ltd. v. ITO (Ahmedabad) . . . 387

Sale of Goods Act, 1930 :

Ss. 2(7), 19 --Business income--Benefit arising out of business--Assessee managing director of company--Pledge of shares held by company in another group company to assessee as security for loan from assessee--Shares in dematerialised form--Assessee shown as beneficial owner in account of depository participant--Not conclusive that transaction was sale--No material to show sale--Allegation that pledge was camouflage to avoid tax implications of sale and that acquisition of shares intended to acquire control of group company--Not substantiated--Loan repaid and company again shown as beneficial owner--Difference between loan amount and market price of shares not to be taxed as benefit arising out of business in assessee's hands-- Joint CIT v. Mukesh D. Ambani (Mumbai) . . . 353

----Shares--Pledge--General principles--Depositories Act--Effect of, on share transactions-- Joint CIT v. Mukesh D. Ambani (Mumbai) . . . 353

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