ITR Volume 333 Part 4 issue3 dated 16-05-2011

INCOME TAX REPORTS (ITR)

Volume 333 : Part 4 (Issue dated 16-5-2011)

SUBJECT INDEX TO CASES REPORTED IN THIS PART

SUPREME COURT

Salaries --Duty to deduct estimated tax and pay to authority--Failure to deduct and pay--Attracts penalty of amount equal to tax--Income-tax Act, 1961, ss. 192, 200, 206, 271C, 276B, 276BB-- Rajeswar Tiwari v. Nanda Kishore Roy . . . 534

High Court --Matter of civil nature--Prosecution wrongly laid--Application by accused for relief--High Court ought to interfere by using inherent powers to prevent abuse of process--Indian Penal Code, 1860, ss. 120B, 406--Code of Criminal Procedure, 1973, ss. 200, 482-- Rajeswar Tiwari v. Nanda Kishore Roy . . . 534

HIGH COURTS

Advance tax --Interest--Condition precedent--Default by assessee in estimating income and paying tax in accordance with law as on date of payment of advance tax--Assessee claiming exemption in respect of capital gains on sale of shares to holding company--Return found defective and assessee filing corrected return--By this time holding company no longer holding company--No default at time of payment of advance tax--Interest for default not chargeable--Income-tax Act, 1961, ss. 47(v), 139(9), 234B, 292B-- Prime Securities Ltd. v. Asst. CIT (Investigation) (Bom) . . . 464

----Interest--Waiver of interest--Interest on bank deposits held to be income from other sources in assessment years 1993-94, 1994-95 and 1995-96--Refusal to waive interest justified--Claim for waiver for assessment year 1996-97 to be considered--Income-tax Act, 1961, s. 234B-- Royal Stitches P. Ltd. v. Chief CIT (Mad) . . . 523

Appeal to Appellate Tribunal --Duty of Tribunal to consider reasons for decision of Commissioner (Appeals)--Assessing Officer granting opportunity to assessee to prove genuineness of alleged gift--No proof that gift was genuine--Addition to income upheld by Commissioner (Appeals)--Tribunal not justified in remanding matter to Assessing Officer--Income-tax Act, 1961, s. 254-- CIT v. Mira S. Khurana (Guj) . . . 488

----Interest-tax--Imposition of penalty on several grounds--One ground held not tenable--Matter remanded to consider other grounds-- CIT v. H. P. State Co-operative Bank (HP) . . . 441

Bad debt --Condition precedent--Law applicable--After 1-4-1989 sufficient if debt is written off in accounts--Income-tax Act, 1961, s. 36-- CIT v. Krone Communication Ltd . (Karn) . . . 497

Capital gains --Depreciable asset--Assessee claiming depreciation on asset for 21 years and thereafter discontinuing claim--Sale of asset after two years--Profit on sale of depreciable asset is short-term capital gains--Income-tax Act, 1961, s. 50-- CIT v. Sakthi Metal Depot (Ker) . . . 492

----Sale of shares--Finding that profits on sale of shares are capital gain as shares not treated as stock-in-trade but shown under investment portfolio--Finding of fact--Income-tax Act, 1961--CBDT Circular No. 4 of 2007 dated 15-6-2007-- CIT v. Jubilant Securities P. Ltd . (Delhi) . . . 445

Export --Special deduction under section 80HHC--Computation of special deduction--Exports and domestic sales--Calculation of turnover--Scrap sales and insurance--Income from scrap sales part of business profits--Insurance receipt on loss of goods part of business profits--Matter remanded--Income-tax Act, 1961, s. 80HHC-- CIT v. Kar Mobiles Ltd . (Ker) . . . 478

----Special deduction--Computation--Excise duty and sales tax not part of turnover--90 per cent. of net commission to be taken into account in determining projects of business--Income-tax Act, 1961, s. 80HHC-- CIT v. Krone Communication Ltd. (Karn) . . . 497

Interest-tax --Penalty--Presumption against assessee in case of non-filing of return within time under Income-tax Act not applicable to income-tax proceedings--Grounds for imposition of penalty laid down in section 13 of Interest-tax Act--Interest-tax Act, 1974, ss. 13, 21--Income-tax Act, 1961, s. 271(1)(c)-- CIT v. H. P. State Co-operative Bank (HP) . . . 441

Kar Vivad Samadhan Scheme --Declaration by assessee--Certificate issued and later amended making additions--Amendment order not determination order--No time limit specified for payment in terms of amendment order--Assessee making payment in reasonable time as per amendment orders--Assessee entitled to certificate under section 90(2)--Finance (No. 2) Act, 1998, ss. 88, 89, 90-- Sri Balaji Finance v. ITO (Mad) . . . 512

----Declaration by assessee--Certificate issued--Later designated authority finding mistake and making amendments--Not a reopening of assessment--Amendment can be made at any stage-- Finance (No. 2) Act, 1998, s. 90--Income-tax Act, 1961, s. 140A-- Sri Balaji Finance v. ITO (Mad) . . . 512

Penalty --Failure to deduct tax at source--Limitation--Order of penalty passed after expiry of six months from end of month in which show-cause notice issued--Barred by limitation--Income-tax Act, 1961, ss. 271C, 275(1)(c)-- CIT (TDS) v. Ikea Trading Hong Kong Ltd. (Delhi) . . . 565

Reassessment --Conditions precedent--Notice after four years--Based on subsequent amendment of law with retrospective effect--No dispute that there was no failure on part of assessee to disclose fully and truly all material facts--Notices invalid--Income-tax Act, 1961, ss. 147, 148-- Sadbhav Engineering Ltd . v. Deputy CIT (Guj) . . . 483

----Reassessment after four years based on audit report--Assessee disclosing truly and completely material particulars--Tribunal cancelling reassessment holding proceedings based on change of opinion--Proper--Income-tax Act, 1961, ss. 143(3), 147, 148--Circular dated 28-7-1960-- CIT v. Simbhaoli Sugar Mills Ltd . (Delhi) . . . 470

Return --Revised return--Revised return filed after intimation under section 143(1)(a) but within time limit--Duty of Assessing Officer to process--Income-tax Act, 1961, ss. 139(5), 143(1B)-- CIT v. Himgiri Foods Limited (Guj) . . . 508

Revision --Commissioner--Powers--Scope of section 263--Order of Assessing Officer in consonance with decisions of Tribunal--Revision to recompute special deduction not valid--Income-tax Act, 1961, s. 263-- CIT v. Honda Siel Power Products Ltd. (Delhi) . . . 547

Search and seizure --Assessment in search cases--Assessment of income of third person--Condition precedent for notice under section 153C--Valuable thing or document should belong to such third person--Income-tax Act, 1961, s. 153C-- Vijaybhai N. Chandrani v. Asst. CIT (Guj) . . . 436

----Block assessment--Limitation--Assessment of third person--Notice issued under section 158BC--But later fresh notice issued under correct section, section 158BD--Time for making assessment to be reckoned from first notice--Assessment barred by time--Income-tax Act, 1961, ss. 158BC, 158BD, 158BE(2)(b)-- CIT v. K. M. Gamesman (Mad) . . . 562

----Block assessment--Limitation--Last panchanama is document evidencing conclusion of actual search--Block assessment to be within two years from such date--Prohibitory order under section 132(3) in force for 60 days--Lifting prohibitory order after 60 days does not amount to continuation of search--Not to be taken into account for ascertaining date of execution of last warrant of authorisation--Income-tax Act, 1961, ss. 132, 158BE-- Rakesh Sarin v.Deputy CIT (Mad) . . . 451

Writ --Maintainability--Block assessment--Appeal before Commissioner (Appeals) against assessment on merits--Writ petition--Maintainable--Constitution of India, art. 226-- Rakesh Sarin v. Deputy CIT (Mad) . . . 451

SECTIONWISE INDEX TO CASES REPORTED IN THIS PART

Code of Criminal Procedure, 1973 :

Ss. 200, 482 --High Court--Matter of civil nature--Prosecution wrongly laid--Application by accused for relief--High Court ought to interfere by using inherent powers to prevent abuse of process-- Rajeswar Tiwari v. Nanda Kishore Roy (SC) . . . 534

Constitution of India :

Art. 226 --Writ--Maintainability--Block assessment--Appeal before Commissioner (Appeals) against assessment on merits--Writ petition--Maintainable--Rakesh Sarin v. Deputy CIT (Mad) . . . 451

Finance (No. 2) Act, 1998 :

Ss. 88, 89, 90 --Kar Vivad Samadhan Scheme--Declaration by assessee--Certificate issued and later amended making additions--Amendment order not determination order--No time limit specified for payment in terms of amendment order--Assessee making payment in reasonable time as per amendment orders--Assessee entitled to certificate under section 90(2)-- Sri Balaji Finance v. ITO (Mad) . . . 512

S. 90 --Kar Vivad Samadhan Scheme--Declaration by assessee--Certificate issued--Later designated authority finding mistake and making amendments--Not a reopening of assessment--Amendment can be made at any stage-- Sri Balaji Finance v. ITO (Mad) . . . 512

Income-tax Act, 1961 :

S. 36 --Bad debt--Condition precedent--Law applicable--After 1-4-1989 sufficient if debt is written off in accounts-- CIT v. Krone Communication Ltd .(Karn) . . . 497

S. 47(v) --Advance tax--Interest--Condition precedent--Default by assessee in estimating income and paying tax in accordance with law as on date of payment of advance tax--Assessee claiming exemption in respect of capital gains on sale of shares to holding company--Return found defective and assessee filing corrected return--By this time holding company no longer holding company--No default at time of payment of advance tax--Interest for default not chargeable-- Prime Securities Ltd. v. Asst. CIT (Investigation) (Bom) . . . 464

S. 50 --Capital gains--Depreciable asset--Assessee claiming depreciation on asset for 21 years and thereafter discontinuing claim--Sale of asset after two years--Profit on sale of depreciable asset is short-term capital gains-- CIT v. Sakthi Metal Depot (Ker) . . . 492

S. 80HHC --Export--Special deduction under section 80HHC--Computation of special deduction--Exports and domestic sales--Calculation of turnover--Scrap sales and insurance--Income from scrap sales part of business profits--Insurance receipt on loss of goods part of business profits--Matter remanded-- CIT v. Kar Mobiles Ltd . (Ker) . . . 478

----Export--Special deduction--Computation--Excise duty and sales tax not part of turnover--90 per cent. of net commission to be taken into account in determining projects of business-- CIT v. Krone Communication Ltd. (Karn) . . . 497

S. 132 --Search and seizure--Block assessment--Limitation--Last panchanama is document evidencing conclusion of actual search--Block assessment to be within two years from such date--Prohibitory order under section 132(3) in force for 60 days--Lifting prohibitory order after 60 days does not amount to continuation of search--Not to be taken into account for ascertaining date of execution of last warrant of authorisation-- Rakesh Sarin v. Deputy CIT (Mad) . . . 451

S. 139(5) --Return--Revised return--Revised return filed after intimation under section 143(1)(a) but within time limit--Duty of Assessing Officer to process--CIT v. Himgiri Foods Limited (Guj) . . . 508

S. 139(9) --Advance tax--Interest--Condition precedent--Default by assessee in estimating income and paying tax in accordance with law as on date of payment of advance tax--Assessee claiming exemption in respect of capital gains on sale of shares to holding company--Return found defective and assessee filing corrected return--By this time holding company no longer holding company--No default at time of payment of advance tax--Interest for default not chargeable-- Prime Securities Ltd. v. Asst. CIT (Investigation) (Bom) . . . 464

S. 140A --Kar Vivad Samadhan Scheme--Declaration by assessee--Certificate issued--Later designated authority finding mistake and making amendments--Not a reopening of assessment--Amendment can be made at any stage-- Sri Balaji Finance v. ITO (Mad) . . . 512

S. 143(1B) --Return--Revised return--Revised return filed after intimation under section 143(1)(a) but within time limit--Duty of Assessing Officer to process--CIT v. Himgiri Foods Limited (Guj) . . . 508

S. 143(3) --Reassessment--Reassessment after four years based on audit report--Assessee disclosing truly and completely material particulars--Tribunal cancelling reassessment holding proceedings based on change of opinion--Proper--Circular dated 28-7-1960-- CIT v. Simbhaoli Sugar Mills Ltd . (Delhi) . . . 470

S. 147 --Reassessment--Conditions precedent--Notice after four years--Based on subsequent amendment of law with retrospective effect--No dispute that there was no failure on part of assessee to disclose fully and truly all material facts--Notices invalid-- Sadbhav Engineering Ltd . v. Deputy CIT (Guj) . . . 483

----Reassessment--Reassessment after four years based on audit report--Assessee disclosing truly and completely material particulars--Tribunal cancelling reassessment holding proceedings based on change of opinion--Proper--Circular dated 28-7-1960-- CIT v. Simbhaoli Sugar Mills Ltd . (Delhi) . . . 470

S. 148 --Reassessment--Conditions precedent--Notice after four years--Based on subsequent amendment of law with retrospective effect--No dispute that there was no failure on part of assessee to disclose fully and truly all material facts--Notices invalid-- Sadbhav Engineering Ltd . v. Deputy CIT (Guj) . . . 483

----Reassessment--Reassessment after four years based on audit report--Assessee disclosing truly and completely material particulars--Tribunal cancelling reassessment holding proceedings based on change of opinion--Proper--Circular dated 28-7-1960-- CIT v. Simbhaoli Sugar Mills Ltd . (Delhi) . . . 470

S. 153C --Search and seizure--Assessment in search cases--Assessment of income of third person--Condition precedent for notice under section 153C--Valuable thing or document should belong to such third person-- Vijaybhai N. Chandrani v. Asst. CIT (Guj) . . . 436

S. 158BC --Search and seizure--Block assessment--Limitation--Assessment of third person--Notice issued under section 158BC--But later fresh notice issued under correct section, section 158BD--Time for making assessment to be reckoned from first notice--Assessment barred by time-- CIT v. K. M. Gamesman (Mad) . . . 562

S. 158BD --Search and seizure--Block assessment--Limitation--Assessment of third person--Notice issued under section 158BC--But later fresh notice issued under correct section, section 158BD--Time for making assessment to be reckoned from first notice--Assessment barred by time-- CIT v. K. M. Gamesman (Mad) . . . 562

S. 158BE --Search and seizure--Block assessment--Limitation--Last panchanama is document evidencing conclusion of actual search--Block assessment to be within two years from such date--Prohibitory order under section 132(3) in force for 60 days--Lifting prohibitory order after 60 days does not amount to continuation of search--Not to be taken into account for ascertaining date of execution of last warrant of authorisation-- Rakesh Sarin v. Deputy CIT(Mad) . . . 451

S. 158BE(2)(b) --Search and seizure--Block assessment--Limitation--Assessment of third person--Notice issued under section 158BC--But later fresh notice issued under correct section, section 158BD--Time for making assessment to be reckoned from first notice--Assessment barred by time-- CIT v. K. M. Gamesman (Mad) . . . 562

S. 192 --Salaries--Duty to deduct estimated tax and pay to authority--Failure to deduct and pay--Attracts penalty of amount equal to tax-- Rajeswar Tiwariv. Nanda Kishore Roy (SC) . . . 534

S. 200 --Salaries--Duty to deduct estimated tax and pay to authority--Failure to deduct and pay--Attracts penalty of amount equal to tax-- Rajeswar Tiwariv. Nanda Kishore Roy (SC) . . . 534

S. 206 --Salaries--Duty to deduct estimated tax and pay to authority--Failure to deduct and pay--Attracts penalty of amount equal to tax-- Rajeswar Tiwariv. Nanda Kishore Roy (SC) . . . 534

S. 234B --Advance tax--Interest--Condition precedent--Default by assessee in estimating income and paying tax in accordance with law as on date of payment of advance tax--Assessee claiming exemption in respect of capital gains on sale of shares to holding company--Return found defective and assessee filing corrected return--By this time holding company no longer holding company--No default at time of payment of advance tax--Interest for default not chargeable-- Prime Securities Ltd. v. Asst. CIT (Investigation) (Bom) . . . 464

----Advance tax--Interest--Waiver of interest--Interest on bank deposits held to be income from other sources in assessment years 1993-94, 1994-95 and 1995-96--Refusal to waive interest justified--Claim for waiver for assessment year 1996-97 to be considered-- Royal Stitches P. Ltd. v. Chief CIT (Mad) . . . 523

S. 254 --Appeal to Appellate Tribunal--Duty of Tribunal to consider reasons for decision of Commissioner (Appeals)--Assessing Officer granting opportunity to assessee to prove genuineness of alleged gift--No proof that gift was genuine--Addition to income upheld by Commissioner (Appeals)--Tribunal not justified in remanding matter to Assessing Officer-- CIT v. Mira S. Khurana (Guj) . . . 488

S. 263 --Revision--Commissioner--Powers--Scope of section 263--Order of Assessing Officer in consonance with decisions of Tribunal--Revision to recompute special deduction not valid-- CIT v. Honda Siel Power Products Ltd. (Delhi) . . . 547

S. 271(1)(c) --Interest-tax--Penalty--Presumption against assessee in case of non-filing of return within time under Income-tax Act not applicable to income-tax proceedings--Grounds for imposition of penalty laid down in section 13 of Interest-tax Act-- CIT v. H. P. State Co-operative Bank (HP) . . . 441

S. 271C --Penalty--Failure to deduct tax at source--Limitation--Order of penalty passed after expiry of six months from end of month in which show-cause notice issued--Barred by limitation-- CIT (TDS) v. Ikea Trading Hong Kong Ltd. (Delhi) . . . 565

----Salaries--Duty to deduct estimated tax and pay to authority--Failure to deduct and pay--Attracts penalty of amount equal to tax-- Rajeswar Tiwari v.Nanda Kishore Roy (SC) . . . 534

S. 275(1)(c) --Penalty--Failure to deduct tax at source--Limitation--Order of penalty passed after expiry of six months from end of month in which show-cause notice issued--Barred by limitation-- CIT (TDS) v. Ikea Trading Hong Kong Ltd. (Delhi) . . . 565

S. 276B --Salaries--Duty to deduct estimated tax and pay to authority--Failure to deduct and pay--Attracts penalty of amount equal to tax-- Rajeswar Tiwariv. Nanda Kishore Roy (SC) . . . 534

S. 276BB --Salaries--Duty to deduct estimated tax and pay to authority--Failure to deduct and pay--Attracts penalty of amount equal to tax-- Rajeswar Tiwari v. Nanda Kishore Roy (SC) . . . 534

S. 292B --Advance tax--Interest--Condition precedent--Default by assessee in estimating income and paying tax in accordance with law as on date of payment of advance tax--Assessee claiming exemption in respect of capital gains on sale of shares to holding company--Return found defective and assessee filing corrected return--By this time holding company no longer holding company--No default at time of payment of advance tax--Interest for default not chargeable-- Prime Securities Ltd. v. Asst. CIT (Investigation) (Bom) . . . 464

Indian Penal Code, 1860 :

S. 120B --High Court--Matter of civil nature--Prosecution wrongly laid--Application by accused for relief--High Court ought to interfere by using inherent powers to prevent abuse of process-- Rajeswar Tiwari v. Nanda Kishore Roy (SC) . . . 534

S. 406 --High Court--Matter of civil nature--Prosecution wrongly laid--Application by accused for relief--High Court ought to interfere by using inherent powers to prevent abuse of process-- Rajeswar Tiwari v. Nanda Kishore Roy (SC) . . . 534

Interest-tax Act, 1974 :

Ss. 13, 21 --Interest-tax--Penalty--Presumption against assessee in case of non-filing of return within time under Income-tax Act not applicable to income-tax proceedings--Grounds for imposition of penalty laid down in section 13 of Interest-tax Act-- CIT v. H. P. State Co-operative Bank (HP) . . . 441

For transfer pricing adjustment, assessee should take same class of transa

For transfer pricing adjustment, assessee should take same class of transactions for comparing profit with comparables

Income-tax : When the comparables are not licensee manufacturers of the similar commodity then it would not satisfy the requirement of the law as well as the rules prescribed under the Statute for comparing profit with comparables [Section 92C of the Income-tax Act, 1961 - Transfer Pricing] - [2011] 10 taxmann.com 125 (Mum. - ITAT)

Where assessee installed machinery on its bona fide business consideration,

Where assessee installed machinery on its bona fide business consideration, absence of proof of actual use thereof was not enough to deny claim for depreciation - [2011] 10 taxmann.com 84 (Punj. & Har.)

Remittances for acquisition of 'TALO' processes (used in sugar industry) by

Remittances for acquisition of `TALO' processes (used in sugar industry) by assessee on a non-exclusive basis from U.K. can't be construed as royalties

Income-tax : Consideration paid by assessee for transfer of drawings, designs, etc., outside India by an English company, having expertise in TALO processes, to the assessee did not constitute royalty "as contemplated under Article 13 of the DTAA" [Section 9 of the Income-tax Act, 1961 - Income - Deemed to accrue or arise in India - Indo-UK Tax Treaty - Article 13 (Royalties and Fees for Technical Services)] - [2011] 10 taxmann.com 124 (Delhi)

Even if assessee, on a bona fide calculation, found that no advance tax was

Even if assessee, on a bona fide calculation, found that no advance tax was payable, still liability of interest under section 234B would be attracted on income assessed under section 143(1) or 143(3) - [2011] 10 taxmann.com 107 (Punj. & Har.)

ITR Highlights Volume 334 Part 1 Dated 30.05.2011

INCOME TAX REPORTS (ITR) HIGHLIGHTS

ISSUE DATED 30-5-2011

Volume 334 Part 1

SUPREME COURT JUDGMENTS

--> Interest-tax : Supreme Court remanding matter to determine questions that arose, such as whether assessee "credit institution" and decide them : Motor and General Finance Ltd. v. CIT p. 33

HIGH COURT JUDGMENTS

--> AO not considering explanation of assessee that it was under bona fide belief that there was no liability to deduct taxes : Matter remanded : CIT v. Nissin Food Products Co. Ltd. (Karn) p. 1

--> Machinery purchased and installed in earlier accounting year : Assessee not entitled to deduction u/ss. 80HH and 80-I : CIT v. Wipro Ltd. (Karn) p. 6

--> Period of limitation for filing loss return not applicable for carrying forward of unabsorbed depreciation : CIT v. Govind Nagar Sugar Ltd. (Delhi) p. 13

--> Addition on ground transaction not genuine : Receipt of commission shown by company in return and tax paid : Matter remanded : Pawan Kumar Jain v. CIT (Delhi) p. 23

--> Reassessment : Notice : Date of issue would be date on which notice was handed over for service to proper officer : Kanubhai M. Patel (HUF) v. Hiren Bhatt or his successors to office (Guj) p. 25

--> Order confirming auction sale not conclusive : Appeal to Commissioner maintainable : Vijay Kumar Ruia v. CIT (All) p. 38

--> Land acquired by succession from ex-Ruler of Indian State who acquired it under instrument of annexation : Cost of acquisition to be taken as market value as on 1-1-54 or 1-1-64, as the case may be : CIT v. Raja Malwinder Singh (P&H) [FB] p. 48

--> Provision for warranty liability : Actual expenditure more than provision : Deductible : Himalaya Machinery P. Ltd. v. Deputy CIT (Guj) p. 64

--> Failure by person responsible for paying income to deduct and pay tax at source : Assessee liable to pay tax directly but not liable to pay interest u/s. 234B : Director of Income-tax v. Maersk Co. Ltd. (Uttarakhand) [FB] p. 79

--> Assessee seeking revision for AY 1995-96 pursuant to orders in appeal for later years but withdrawing its appeals to Tribunal : Commissioner ought to have considered petition for condonation of delay liberally : Subuthi Finance Ltd. v. CIT (Mad) p. 90

--> Attachment of property : Entire shareholding of assessee in company attached : High Court directed to restrict attachment to a part of shareholding : Subuthi Finance Ltd. v. CIT (Mad) p. 90

AUTHORITY FOR ADVANCE RULINGS

--> Non-resident company transferring shares held in Indian company to foreign company : Capital gains not taxable : VNU International B. V., In re p. 56

--> Foreign company holding 74 per cent. of paid up capital of Indian company proposed to contribute voluntarily entire 74 per cent. shares to Singapore based company without consideration : No capital gains : Goodyear Tire and Rubber Co., In re p. 69

STATUTES AND NOTIFICATIONS

--> From our Reporter at the Supreme Court :

Appellate Tribunal : No power of review p. 1

Block assessment : Limitation for issue of notice p. 1

Block assessment : Limitation for assessment : Date of last panchnama p. 1

Educational institution : Approval of institution p. 2

Educational institution : Prescribed authority to recall or review approval p. 2

Penalty : Concealment of income : Whether leviable whether there was a net loss p. 3

Revision : Erroneous and prejudicial to Revenue p. 3

Royalty : Payments for use of international communications network p. 3

 Rules :

Income-tax (Third Amendment) Rules, 2011 p. 6

C. B. D. T. Circulars :

Circular No. 3 of 2011, dated 13th May, 2011-Issuance of TDS Certificates in Form No. 16A downloaded from TIN website and option to authenticate the same by way of digital signature-Circular under section 119 of the Income-tax Act, 1961 p. 4

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Dear Friends : The emails are schedule to be posted in the blog and will sent to the group on carious dates and time fixed. Instead of sending it on one day it is spread on various dates. regards. R R Makwana

Loans/advances given by a company to another company, which is not a shareh

Loans/advances given by a company to another company, which is not a shareholder of lender company, can't be treated as deemed dividend

Income-tax : Deeming fiction of s. 2(22)(e) can be applied only in the hands of the shareholder and not the non-shareholder [Section 2(22) of the Income-tax Act, 1961 - Deemed dividend] - [2011] 10 taxmann.com 122 (Indore - ITAT)

Section 194H is not applicable where agreements between assessee-manufactur

Section 194H is not applicable where agreements between assessee-manufacturer and distributors was on principal to principal basis - [2011] 10 taxmann.com 115 (Delhi)

Recent Cases

CASE LAWS

2011-TIOL-300-HC-KOL-IT + theft story

M/s Dheeraj Associates Pvt Ltd Vs CIT, West Bengal (Dated: May 13, 2011)

Income tax – Section 37 – Loss on account of theft – Whether, if assessee claims expenses incurred with respect to theft of goods, onus to disprove the same lies on the AO before it disallows the same - Whether the principle of prepondernance of probability favours assessee if such a claim is made - Whether, if assessee made similar claims in the past, and the same were allowed, it can be presumed that there cannot be further theft in subsequent year - Whether, if police failed to recover goods stolen in the past, the non-performance of the Police can go agaisnt the assessee's claim in the impugned year. - Assessee's appeal allowed: CALCUTTA HIGH COURT;

2011-TIOL-299-HC-DEL-IT

CIT Vs Ashok Logani (Dated: May 11, 2011)

Income tax – Section 263 – Whether when AO fails to make a proper enquiry and has not recorded its satisfaction regarding accepting the claim of the assessee for not disclosing the surrendered income at the time of search in the income tax return filed, the CIT is right in initiating proceedings u/s 263. - Revenue's appeal dismissed: DELHI HIGH COURT;

2011-TIOL-298-HC-DEL-IT

CIT Vs Tulip Star Hotels Ltd (Dated: May 11, 2011)

Income tax – Sections 36(1)(vii), 36(2), 37 – Whether when bank guarantee given by the assessee in the case of a loan taken by the co-promoter under an agreement is adjusted by the bank against the loan in the case of co-promoter's failure to repay the loan, assessee can treat such BG written off as bad debt. - Revenue's appeal dismissed: DELHI HIGH COURT;

2011-TIOL-297-HC-DEL-IT

CIT Vs NHK Japan Broadcasting Corporation (Dated: May 11, 2011)

Income Tax - Sections 192, 201(1), 201(1A) - Whether when TDS issue is debatable, AO is right in holding the assessee-in-default u/s 192 - Whether when Revenue files appeals for 11 AYs together, Tribunal's order holding the same as time-barred is sustainable - Revenue's appeal dismissed: DELHI HIGH COURT;

2011-TIOL-296-HC-ALL-IT

CIT Vs Atma Ram Tulsyan (Dated: May 10, 2011)

Income Tax - Section 45 - Whether AO can doubt the share transactions declared by assessee merely on ground that shares were of lesser known companies and their value cannot appreciate to the level claimed by the assessee - Revenue's appeal dismissed: ALLAHABAD HIGH COURT;

SERVICE TAX SECTION

2011-TIOL-621-CESTAT-DEL + independent story

CST, New Delhi Vs M/s Independent News Services Pvt Ltd (Dated: March 22, 2011)

Service tax - Section 73(3) of Finance Act, 1994 - After making provision in law, the Revenue should respect the provision made rather than feel aggrieved that the provision is too lenient : DELHI CESTAT;

2011-TIOL-620-CESTAT-MAD

M/s International Travel House Ltd Vs CST, Chennai (Dated: February 7, 2011)

Service Tax – Taxability of service – Tour Operator - Stay / Dispensation of pre-deposit service - Service provided by the appellants is planning, scheduling, organizing or arranging tours including arrangements for accommodation, sight-seeing or other similar services for outbound tourism and they are being paid for the said purpose in India. Prima-facie no case made out by the assessee. Pre-deposit ordered: CHENNAI CESTAT;

CENTRAL EXCISE SECTION

2011-TIOL-302-HC-ALL-CX + triveni story

M/s Triveni Glass Ltd Vs CCE, Allahabad (Dated: April 29, 2011)

Central Excise - Department has not proved service of order on the appellant - Limitation to appeal starts from the day the appellant got the order : The respondents have failed to establish that they have served the order or decision in the manner required under Section 37-C (1) (a) of the Act, there is service on 25.02.2009. It is no doubt true that in the matter of service of notice, it being merely procedural, a party has to establish the prejudice occasioned on account of non-service in the matter. However, when the matter arises as to the right of a party in the form of extinguishment of remedy of an appeal, then such provision, though procedural, must be strictly construed or in other words, the strict mandate of the language of the Section must be complied with. Furthermore, between taking a view which permits a party to pursue his remedy and which defeats the right to such remedy, the law must lean in favour of the person, who comes to the Court to pursue his remedy, rather than the person seeking to defeat the remedy, on technicalities.: ALLAHABAD HIGH COURT;

2011-TIOL-301-HC-KAR-CX

CCE, Mysore Vs M/s Sree Chamundeswari Sugars Ltd (Dated: February 11, 2011)

Central Excise - Order of CESTAT - Rectification of Mistake - Condonation of delay in filing application - Application for rectification of mistake filed beyond six months from the date of order.

HELD - Tribunal is right in rejecting the application for rectification on the ground that it is barred by time as Section 35C(2) does not provide for condonation of delay. Legislative intent to be respected.: KARNATAKA HIGH COURT;

2011-TIOL-618-CESTAT-MUM

CCE, Mumbai Vs M/s Goodlas Nerolac Paints Ltd (Dated: February 1, 2011)

Appeal filed by an officer other than the adjudicating authority not maintainable – appeal filed by an Assistant Commissioner challenging the order of Deputy Commissioner not maintainable - Revenue appeal rejected: MUMBAI CESTAT;

CUSTOMS SECTION

2011-TIOL-619-CESTAT-AHM

M/s Rachana Seeds Industries Vs CCE, Bhavnagar (Dated: April 5, 2011)

Customs – Stay/Dispensation of pre-deposit – Goods imported under Duty Free Credit Entitled Certificate sent to job work for conversion – Denial of exemption on the ground that job worker's names were not endorsed on the licences - The only bar is that the sale of imported product cannot be effected to the job worker prior to conversion – Prima facie case made out for waiver of pre-deposit. : AHMEDABAD CESTAT;

Dear Friends : The emails are schedule to be posted in the blog and will sent to the group on carious dates and time fixed. Instead of sending it on one day it is spread on various dates. regards. R R Makwana

Even transactions, which are not speculative within 43(5) should be deemed

Even transactions, which are not speculative within 43(5) should be deemed to be speculative one if those come within purview of Explanation to section 73

Income-tax : Transaction arising from business of purchasing and selling of shares where there has been actual delivery of transfer of scrips comes within ambit and scope of speculative transaction as defined in section 43(5) so as to apply section 73 by taking aid of Explanation to section 73 [Section 73 of the Income-tax Act, 1961 - Losses in speculation business] - [2011] 10 taxmann.com 121 (Cal.)

Donation by a charitable trust to other charitable institution cannot resul

Donation by a charitable trust to other charitable institution cannot result in same becoming income of donor-trust

Income-tax : If the assessee-trust either itself uses any part of its income for charitable purposes or donates the same to any other charitable trust, such income is exempt from inclusion in the total income of the assessee trust for the relevant year [Section 11 of the Income-tax Act, 1961 - Charitable or religious trust - Exemption of income from property held under] - [2011] 10 taxmann.com 128 (Delhi - ITAT)

As TDR has no cost of acquisition, amount received not taxable

ITO vs. Hemandas J. Pariyani (ITAT Mumbai)

The assessee was a member of Rajratan Palace Co-op Hsg Society. The Society entered into an agreement with a developer for redevelopment of the building owned by the Society pursuant to which the Society and its Members received Rs. 3.02 crores “on account of sale of FSI” from the developer. While Rs. 2.99 crores was received directly by the 51 members of the society, the Society received Rs. 2.51 lakhs. The AO took the view that the entire consideration of Rs. 3.02 crores was taxable in the hands of the Society {this was struck down in Raj Ratan Palace Co-op Hsg Soc vs. DCIT (ITAT Mumbai)}. A protective assessment was made in the hands of the Members on the ground that the “share of the assessee in the total FSI available to the CHS was a capital asset held by the assessee and that this was transferred to the developer“. This was reversed by the CIT (A). On appeal by the department, HELD dismissing the appeal:

Transferable Development Rights (TDR) granted by the Development Control Regulations for Greater Mumbai, 1991, qualifying for equivalent Floor Space Index (FSI) have no cost of acquisition and so sale thereof does not give rise to taxable capital gains (Jethalal D. Mehta vs. DCIT 2 SOT 422 (Mum) followed).

Forfeiture of convertible warrant would amount to 'transfer' within meaning

Forfeiture of convertible warrant would amount to `transfer' within meaning of section 2(47) - [2011] 10 taxmann.com 129 (Delhi)

Department is not precluded from taking a correct view of matter in subsequ

Department is not precluded from taking a correct view of matter in subsequent years during reassessment proceedings

Income-tax : Merely on basis of wrong view taken by Assessing Officer in earlier assessment year it cannot be held that the Department is precluded from taking a correct view of matter in subsequent years [Section 148 of the Income-tax Act, 1961 - Income escaping assessment - Issue of notice for] - [2011] 10 taxmann.com 127 (Delhi - ITAT)

Closing stock of an erstwhile firm converted into stock-in-trade by a propr

Closing stock of an erstwhile firm converted into stock-in-trade by a proprietorship concern will have to be valued at the market value

Income-tax : On dissolution of a firm closing stock has to be valued on the basis of real value i.e., market value, which is independent of the fact whether or not the erstwhile partners of a dissolved firm continue to do business with assets received on dissolution [Section 145 of the Income-tax Act, 1961 - Method of accounting - Valuation of stock] - [2011] 10 taxmann.com 126 (Delhi)

Decision regarding territorial jurisdiction of High Court in New India Assu

Decision regarding territorial jurisdiction of High Court in New India Assurance Co. Ltd. v. UOI [AIR 2010 Delhi 43 (FB)] referred to a Larger Bench

Income-tax : Statement of law with regard to `cause of action', `sole cause of action', `forum conveniens' and `the imposition of limitation for exercise of jurisdiction under Article 226 and discretionary exercise of power' have been too broadly stated in all encompassing manner by Full Bench of High Court of Delhi in said case (supra) and, therefore, said decision requires to be reconsidered by a Larger Bench [Article 26 of the Constitution of India - Writ - Maintainability of] - [2011] 10 taxmann.com 120 (Delhi)

Unless and until gift is connected with profession or avocation, it cannot be ta

Unless and until gift is connected with profession or avocation, it cannot be taxed

In the absence of link or connection between the gift made by the devotees and the profession or avocation carried on by the assessee, a religions head, the personal gift cannot be termed as income taxable under the Act


[2010] 6 taxmann.com 87 (Mad.)
HIGH COURT OF MADRAS
CIT   v. Gopala Naicker Bangaru
TAX CASE APPEAL NO. 308 OF 2009
JULY 21, 2010

FACTS

As per the profile submitted by the Respondent/Assessee, he was born on 3-3-1941 at Melmaruvathur Village, Kanchipuram District and during his childhood, Goddess Adhiparasakthi frequented in his dreams to make it known that she wanted him to build a temple and use it to alleviate the sufferings of humanity. The devotees are believing that the Assessee is believed to be an Avatar and incarnation of Goddess Adiparasakthi. The Assessee's Oracles and Miracles attract millions of devotees from all over the world who come to Melmaruvathur to seek his blessings. The devotees calling him as `Amma' and he is rendering tireless serves to the mankind irrespective of caste, creed, colour, religion, economic status and integrity.

The devotees of the Assessee come and make their offerings for contribution voluntarily to him at the time of his birthday and the same has been accounted as capital receipts and receipts have also been issued. Thus, the Assessee is performing religious practice for the benefit of mankind.

According to the Revenue, the Assessee filed his Return of Income for the assessment year 2004-05 declaring taxable income of Rs.5,23,680/- and the same was accepted under section 143(1) of the Income-tax Act. On scrutiny of the Balance-sheet, it has been revealed that an amount of Rs.1,75,70,347/- was received as gifts during that year and was shown as capital receipts.

The Assessing Officer during the course of assessment, treated the gifts as having nexus to his profession as a religious head and hence, brought the entire income within the net of tax and vide assessment order dated 5-11-2007 under section 143(3) r/w section 147 of the Income-tax Act, 1961 and credited the above said gift as professional income and held that the Assessee is liable to pay a sum of Rs.75,56,439/- as Income-tax. It is also indicated in the said order that penalty proceedings under Section 271(1)(c) are being initiated separately.

HELD


The Respondent/Assessee as a religious head, is not involving himself in any profession or avocation and also not performing any religious rituals/poojas for his devotees for some consideration or other. In fact the Respondent/Assessee is doing charitable work and spiritualization and made his devotees to follow the same for the benefit of mankind.

The devotees out of natural love and affection and veneration used to assemble in large numbers on the birthdays of the Assessee and voluntarily made gift, and at any stretch of imagination it cannot be said that the amount received by the Respondent by way of gift would amount to vocation or profession. It is not the case of the department that the devotees were compelled to make gift on the occasion of the birthday of the Respondent/Assessee. The facts of the present case would disclose that the amount/gift received by the Respondent/Assessee cannot said to have any direct nexus with any of his activities as a religious person/Head.

The Commissioner of Income-tax(Appeals) as well as the Income-tax Appellate Tribunal held that simply because the Respondent/Assessee practicing ritualism while leading normal family life, cannot said to be carrying on any profession or vocation and that no link has been established between the receipt received on the occasion of the birthday and so called vocation carried on by the Assessee.

The decisions reported in 171 ITR 447 (Mad.), Commissioner of Income-tax vs. Mr.Balamuralikrishnan, 160 ITR 534 C.P.Chitrarasu vs. Commissioner Income-tax, Madras, 231 ITR 632 Commissioner Income-tax vs. Sri Vanamamalai Ramanuja Jeer Swamigal, the facts of which have been discussed in detail by this Court in the earlier paragraphs, are squarely applicable to the facts of this case, for the reason that the gifts made by the followers are voluntary in nature which are neither income nor capital in the hands of the Assessee. It has been further held in those decisions that unless and until the gift is connected with the profession or avocation, it cannot be taxed and in the absence of link or connection between the gift made by the devotees and the profession or avocation carried on by the Assessee, the personal gift cannot be termed as income taxable under the Act. It is pertinent to point out at this juncture, in the Respondent / Assessee's own case in Assessment year 1988-89, the Department has accepted the position that gifts received by him on birthdays and other occasions were not taxable. In the decision reported in 193 ITR 321 (SC) Radhasoami Satsang vs. Commissioner of Income-Tax, it has been held that -

"Where a fundamental aspect permeating through the different assessment years has been found as a fact one way or the other and parties have allowed that position to be sustained by not challenging the order, it would not be at all appropriate to allow the position to be changed in a subsequent years."

Since, there is no change in facts and law in the present case, the reasons assigned by the Income-tax Appellate Tribunal are correct and this Court finds no infirmity or error apparent on the face of record in the impugned order.

________JUDGMENT__________


M.SATHYANARAYANAN, J


The Revenue has preferred this Appeal under Section 260-A of the Income-tax Act, 1961 challenging the vires of the order dated 17.10.2008 passed by the Income-tax Appellate Tribunal `C' Bench, Chennai, made in I.T.A 588/Mds./2005.

2. This appeal was admitted on the following substantial questions of law:-

1. Whether on the facts and circumstances of the case, the Income-tax Appellate Tribunal was right in law in holding that the gifts received on Assessee's birthday of Rs.1,75,70,347/- as Capital Receipt and having no nexus with his profession as vocation of religious practice is valid?

2. Whether on the facts and circumstances of the case, the Income-tax Appellate Tribunal was right in saying that the reopening under Section 147 of the Income-tax Act, on mere surmise, even though the assessment was reopened within 4 years with valid reasons from the end of the assessment year and hence no proviso to Section 147 will apply to the facts of this case?:

3. The facts leading to the filing of this appeal are as follows:-

As per the profile submitted by the Respondent/Assessee, he was born on 03.03.1941 at Melmaruvathur Village, Kanchipuram District and during his childhood, Goddess Adhiparasakthi frequented in his dreams to make it known that she wanted him to build a temple and use it to alleviate the sufferings of humanity. The devotees are believing that the Assessee is believed to be an Avatar and incarnation of Goddess Adiparasakthi. The Assessee's Oracles and Miracles attract millions of devotees from all over the world who come to Mel Maruvathur to seek his blessings. The devotees calling him as `Amma' and he is rendering tireless serves to the mankind irrespective of caste, creed, colour, religion, economic status and integrity.

4. The devotees of the Assessee come and make their offerings for contribution voluntarily to him at the time of his birthday and the same has been accounted as capital receipts and receipts have also been issued. Thus, the Assessee is performing religious practice for the benefit of mankind.

5. According to the Revenue, the Assessee filed his Return of Income for the assessment year 2004-2005 declaring taxable income of Rs.5,23,680/- and the same was accepted under Section 143(1) of the Income-tax Act. On scrutiny of the Balance-sheet, it has been revealed that an amount of Rs.1,75,70,347/- was received as gifts during that year and was shown as capital receipts.

6. The Assessing Officer during the course of assessment, treated the gifts as having nexus to his profession as a religious head and hence, brought the entire income within the net of tax and vide assessment order dated 5.11.2007 under Section 143(3) r/w Section 147 of the Income-tax Act, 1961 and credited the above said gift as professional income and held that the Assessee is liable to pay a sum of Rs.75,56,439/- as Income-tax. It is also indicated in the said order that penalty proceedings under Section 271(1)(c) are being initiated separately.

7. The Assessee/Respondent herein aggrieved by the Assessment Order passed by the Assistant Commissioner of Income-tax Circle I, Tambaram, Chennai-45, has preferred appeal before the Commissioner of Income-tax (Appeals), Chennai in I.T.A No.97/07-08. The Commissioner of Income-tax (Appeals) vide order dated 9.1.2008, has set aside the order passed by the Assistant Commissioner of Income-tax Circle-I, on the ground that the amounts received by the Assessee are gifts and they are not consideration for profession/vocation. The Commissioner of Income-tax (Appeals) has also considered the decision reported in 231 ITR page 632 (Mad.) Commissioner of Income Tax vs. Sri.Vanamamalai Ramanuja Jeer Swamigal for arriving at such a finding and allowed the appeal filed by the Assessee.

8. The Department/Revenue aggrieved by the order passed by the Commissioner of Income Tax (Appeals), had preferred further appeal before the Income Tax Appellate Tribunal `C' Bench, Chennai in I.T.A.No.588/Mds./2005 for the assessment year 2004-2005.

9. The appellate Tribunal after taking into consideration the rival submissions and considering the various decisions cited before him, vide order dated 17.10.2008, has dismissed the appeal on the ground that that the gifts received by the Assessee, have no direct nexus with any of his activities and it is squarely covered by the decision cited supra (231 ITR page 632). The Revenue aggrieved by the order of dismissal of the appeal passed by the Income Tax Appellate Tribunal `C' Bench, Chennai, had preferred this appeal.

10. Mr.J.Nareshkumar, learned Senior Standing Counsel appearing for the Income Tax Department/appellant, has submitted that but for the fact the Assessee is a religious leader, and that his profile also states that he is performing Oracles , the devotees would not have made gifts to him.

11. It is further submitted by the learned senior standing counsel appearing for the appellant that the Assessee is admittedly living with his family and keeping the amount in his bank account and it was also shown in his Wealth Tax Returns filed for the Assessment year 2005-2006. It is the further submission of the learned senior standing counsel appearing for the appellant, the Assessee has not offered any proper explanation as to why gifts/donations received from his devotees were deposited in his individual bank account and even though two charitable trusts are run by him, the Assessee has not deposited the donations in the accounts of the trust. Therefore, the learned senior standing counsel appearing for the appellant would submit that in the absence of any supporting material produced by the Assessee that it is a capital receipt, the Assessing Officer on a careful consideration of the materials available on record, has rightly arrived at a finding that it is liable to be taxed and consequently levied tax on the said income with liberty to proceed under Section 271(1)(c) by way of penalty proceedings. It is the further submission of the learned senior standing counsel appearing for the Department that the Commissioner of Income Tax (Appeals) as well as the Tribunal had failed to take into consideration the said vital aspects and by placing reliance upon the decisions which are not applicable to the facts of the case, had upheld the claim of the Assessee and therefore, the impugned order passed by the Tribunal confirming the order passed by the Commissioner of Income Tax (Appeals) is liable to be set aside.

12. Learned senior standing counsel appearing for the appellant in order to buttress his submissions, has placed reliance upon the following decisions:-

i. 35 ITR 48 (SC) - Krishna Menno (P) vs. Commissioner of Income-tax

ii. 34 ITR 92 (Bombay) Govindlalji Ranchhodalalji (Maharaj Shri) vs. Commissioner of Income-tax

iii. 156 ITR 412 (SC) George Thomas (K.) (Dr.) vs. Commissioner of Income-tax

iv. 176 ITR 78 (Kerala) Father Epharam vs. Commissioner of Income-tax

v. Unreported Judgment dated 16.12.2008 in W.P.Nos.15527 to 15537 of 2003

13. In 35 ITR 48 (SC) - Krishna Menon (P) vs. Commissioner of Income-tax, the Assessee after his retirement as a Superintendent of Police, spending his time in studying Vedanta Philosophy and expounding the same to such persons. He soon gathered a number of disciples. One of the disciples had transferred the entire balance outstanding in his account to the credit of the Assessee and the said amount was the subject matter of assessment. The Income-tax Officer had assessed the said income as a taxable income and the Assessee preferred an appeal before the Assistant Commissioner who dismissed the appeal. The Assessee's appeal to Appellate Tribunal has also ended in dismissal and hence further appeal was preferred before the High Court of Bombay which has also ended in dismissal. The Assessee filed appeal before the Hon'ble Supreme Court of India. The Hon'ble Supreme Court on the facts, found that the Assessee was teaching his disciples Vedanta, without any motive or intention of making profit out of such activity and that teaching of Vedanta by the Assessee can properly be called the carrying on of a vocation by him. The Supreme Court held that the importing of the teaching was the cause causans of the making of the gift and that the payments with which were income arising from the vocation of the appellant as a teacher of Vedanta, no question of exemption under Section 4(3)(vii) of the Act arises. The Supreme Court citing the said reasons has dismissed the appeal filed by the Assessee.

14. In 34 ITR 92 (Bombay) Govindlalji Ranchhodalalji (Maharaj Shri) vs. Commissioner of Income-tax, the Assessee is a direct descendant of Shri Vallabhacharyaji who founded the faith known as `Vallabh Sampradaya' Maharaj Shri is not a sanyasi and he has married and has children. He is succeeded by his sons who inherit and divide the properties. The Assessee keeps an idol of Lord Krishna in his house and the offerings are made to the Assessee. The authorities below held that the Assessee therein was carrying on a vocation and the Assessee aggrieved by the same, preferred an appeal to the High Court of Bombay. The Bombay High Court held that even practice of religion can become a vocation and more so, when it brings in a steady income. Therefore, the Bombay High Court upheld the claim of the Department that the Assessee was rightly assessed to tax as income.

15. In 156 ITR 412 (SC) George Thomas (K.) (Dr.) vs. Commissioner of Income-tax, the Assessee was a lecturer in a college and he associated himself wit the Indian Gospel Masson in the USA, which collected money for its working abroad through the Indian Christian Crusade. On returning to India, the Assessee was propagating the ideals of the Indian Christian Crusade and was engaging in a movement for the spread of religion etc., and he also started publishing a daily newspaper. The income of the Assessee was subjected to tax and challenge made by the Assessee before the authorities below had ended in futile before the High Court of Kerala also. Hence, the Assessee preferred an appeal before the Hon'ble Supreme Court of India.

16. The Hon'ble Supreme Court of India in the decision held that there was a link between the activities of the appellant and the payments received by him and the link was close enough and that the appellant got receipts on account of carrying on of his vocation and they were not casual and non-incurring receipts. The Hon'ble Supreme Court of India citing the said reasons, has upheld the case of the Department that the incomes were taxable.

17. In 176 ITR 78 (Kerala) Father Epharam vs. Commissioner of Income-tax, the Assessee was a Priest in a Monastery and he received substantial foreign remittances and the surplus amount that remained after distribution to various other Priests for performing the mass, was treated as the income of the Assessee and was taxed. The Assessee challenged the imposition of tax, and lost before the authorities and hence he preferred further appeal to High Court of Kerala. The High Court of Kerala held that there was a close and intimate link between the occupation or avocation of the Assessee and the payments received by him and based on the said reason, dismissed the appeal filed by the Assessee.

18. Similar view was taken in the unreported judgment dated 16.12.2008 made in W.P.Nos.15527 to 15537 of 2003.

19. The learned senior standing counsel appearing for the appellant/Department by placing strong reliance on the above cited decisions would submit that but for the fact the Assessee/Respondent herein is a religious leader, he would not have received gifts and hence there is a close and intimate link between the activities/avocation of the Assessee and the payments received by him and therefore, it was rightly taxed by the Assessing Officer and it was erroneously reversed by the Commissioner of Income-tax (Appeals) and the Appellate Tribunal and hence the learned standing counsel appearing for the appellant praying for the setting aside of the order passed by the Tribunal and to confirm the order passed by the Assessing Officer.

20. Per contra Mr.V.Ramachandran, learned senior counsel appearing for M/s.P.Sivagnanam and A.S.Balaji, learned counsel appearing for the Respondent / Assessee would submit that the Commissioner of Income-tax (Appeals) as well as the Appellate Tribunal had rendered a clear and categorical finding that there was no nexus between the receipt of the birthday gifts and the exercise of any profession or vocation by the Assessee and that the gifts were voluntarily made by the devotees on account of personal esteem and veneration and therefore, the said finding cannot be disturbed. It is further submitted by the learned senior standing counsel appearing for the appellant that the assessee's own case in Assessment year 1988-89, the Department has accepted his case after due enquiry and that the gifts received by the Respondent herein on birthdays and other occasions were not taxable. The learned senior counsel appearing for the Respondent in support of his submissions, though relied upon number of decisions, it will be useful to refer to the following decisions:-

1. 171 ITR 447 (Mad.) Commissioner of Income-tax vs. Mr.Balamuralikrishna.

2.160 ITR 534 C.P.Chitrarasu vs. Commissioner Income-tax, Madras.

3.231 ITR 632 Commissioner Income-tax vs. Sri Vanamamalai Ramanuja Jeer Swamigal.

In all the said decisions the judgment of the Hon'ble Supreme Court of India reported in 35 ITR 48 Krishna Menon vs. Commissioner of Income-tax has been referred.

21. 171 ITR 447 (Mad.) Commissioner of Income-tax vs. Mr.Balamuralikrishnan, the Assessee is a Musician by profession and he claimed a sum of Rs.30,000/- given to him by his fans in appreciation of his completing 30 years of service rendered to Carnatic Music as exempted from tax. The Income Tax Officer treated the said income as professional income and levied tax. The Assessee preferred appeal and the Appellate Authority held that the said payment was received by way of a testimonial or personal gift and not taxable and the said view was also upheld by the Tribunal and hence the Department taken up the matter for further appeal before this Court. A Division Bench of this Court by placing reliance upon 35 ITR page 48 (SC) (Krishna Menon's case), 114 ITR page 253 (Mad) S. A. Ramakrishnan vs. CIT and other decisions, has held that though the Assessee is an artist by profession, there is no direct nexus between this payment and his vocation though it may not be denied that there is an indirect connection between the two. The payment received by the Assessee from his fans, was expression of their good will and hence the said amount cannot be said to have been paid to him by way of remuneration for those services Citing the said reasons, this Court in the said decision, has upheld the claim of the Assessee and dismissed the appeal preferred by the Income-tax Department.

22. In 160 ITR 534 C.P.Chitrarasu vs. Commissioner Income-tax, Madras, the Assessee was an active member of a political party and held various offices. A committee consisting of the party men of that party had collected donations from the members of the party, businessmen and public and also arranged a drama for the purpose of donating a purse and the same was donated to the Assessee. The Income-tax Officer held that a sum of Rs.51,000/- out of the amount given to the Assessee by his admirers, would constitute income received by the Assessee in the course of his vocation as a politician and therefore, it was taxable. The Assessee was successful before the authorities below and hence the Revenue preferred the said appeal before this Court. A Division Bench of this Court after taking into consideration the factual aspects and the decisions cited before it, held that the presentation of Rs.51,000/- to the Assessee amounted to windfalls or gift for his personal qualities, though his profession or vocation as a politician. This Court further held that no materials placed before the lower authorities by the Revenue that the presentation of Rs.51,000/- to the Assessee will amount to a receipt arising from the exercise of a profession or vocation or occupation and therefore, for the said reasons, the appeal preferred by the Revenue was dismissed.

23. In 231 ITR 632 Commissioner Income-tax vs. Shri Vanamamalai Ramanuja Jeer Swamigal, the Assessee namely Shri Vanamamalai Ramanuja Jeer Swamigal, Nanguneri, Tirunelveli District, received amounts by way of Kanikkai and Sambhavanai amounting to a sum of Rs.12,156/-. The question arose was whether the said amount was assessable as income-tax under the Income-tax Act, for the assessment year 1974-75. The Tribunal held that the said presentation was out of personal regard, personal esteem and veneration for Swamigal and did not constitute income from the exercise of any profession or vocation and that there was no evidence to show that Swamiji had been exercising any profession or vocation. The Revenue preferred appeal before this Court and it was contended that any amount brought by his followers would amount to income assessable to tax under the Income-tax Act. A Division Bench of this Court in the said decision, has taken into consideration the Krishna Menon s case reported in 35 ITR 48 (SC) and other decisions, held that Kanikkai and Sambhavanai were paid by the devotees to the Jeer Swamigal out of personal regard, esteem and veneration and that the Swamigal is not exercising any profession or avocation and the voluntary offerings made by the devotees are not on account of any profession or vocation. This Court for the said reasons, has held that the said offerings will not be considered as income under the Income-tax Act and therefore, dismissed the appeal preferred by the Revenue.

24. Learned senior counsel appearing for the Respondent/Assessee would submit that the decision reported in 231 ITR 632 (Mad.) is squarely applicable to the facts of the case and further that the Commissioner of Income-tax (Appeals) as well as the Income-tax Appellate Tribunal had upheld the case of the Respondent by rendering concurrent findings. It is further submitted that no substantial questions of law arose for consideration in this appeal and hence prayed for dismissal of this appeal.

25. This Court has carefully considered the submissions made by the learned senior standing counsel appearing for the appellant and the learned senior counsel appearing for the Respondent and also the decisions relied on by the respective counsel.

26. The Religion is a matter of faith stemming from the depth of the heart and mind and is a belief which binds the spiritual nature of men to super natural being. Devotion is a consecration and denotes an act of worship. Faith, in the strict sense constitutes firm reliance on the truth of religious doctrines in every system of religion and religion, faith or devotion is not easily interchangeable. Religion has reference to one s views of his relations to his Creator, and to the obligations they impose of reverence for his being and character, and of obedience to his will.

27. The profile of the Respondent/Assessee would indicate that Goddess Adhiparasakthi frequented in his dreams to make it known that she wanted to build a temple and use it to alleviate the sufferings of humanity and accordingly the Respondent / Assessee has built a temple which is also known as `Sakthi Peedam'. The devotees on important occasions, used to throng the temple and as per the practice prevails in the temple, the devotees irrespective of their gender, can perform poojas and Abishegams to the presiding deity namely Goddess Parasakthi. The above said practice of devotees performing Abishegams and poojas to the presiding deity is not prevalent in the State and therefore out of love and affection and veneration, they used to assemble in great numbers on the eve of the birthday of the Respondent/Assessee and offer gifts.

28. It is to be pointed out at this juncture that the Respondent/Assessee as a religious head, is not involving himself in any profession or avocation and also not performing any religious rituals/poojas for his devotees for some consideration or other. In fact the Respondent/Assessee is doing charitable work and spiritualization and made his devotees to follow the same for the benefit of man kind.

29. The devotees out of natural love and affection and veneration used to assemble in large numbers on the birthdays of the Assessee and voluntarily made gift, and at any stretch of imagination it cannot be said that the amount received by the Respondent by way of gift would amount to vocation or profession. It is not the case of the department that the devotees were compelled to make gift on the occasion of the birthday of the Respondent/Assessee. The facts of the present case would disclose that the amount/gift received by the Respondent/Assessee cannot said to have any direct nexus with any of his activities as a religious person/Head.

30. The Commissioner of Income-tax (Appeals) as well as the Income-tax Appellate Tribunal held that simply because the Respondent/Assessee practicing ritualism while leading normal family life, cannot said to be carrying on any profession or vocation and that no link has been established between the receipt received on the occasion of the birthday and so called vocation carried on by the Assessee.

31. The decisions relied on by the learned senior standing counsel appearing for the appellant/Department have no application to the facts of the present case as in those cases, Courts held that the activities of the concerned Assessees would amount to vocation and object of which, is to make a profit and also amount to revenue receipt.

32. The decisions reported in 171 ITR 447 (Mad.) Commissioner of Income-tax vs. Mr.Balamuralikrishnan, 160 ITR 534 C.P.Chitrarasu vs. Commissioner Income-tax, Madras, 231 ITR 632 Commissioner Income-tax vs. Sri Vanamamalai Ramanuja Jeer Swamigal, the facts of which have been discussed in detail by this Court in the earlier paragraphs, are squarely applicable to the facts of this case, for the reason that the gifts made by the followers are voluntary in nature which are neither income nor capital in the hands of the Assessee. It has been further held in those decisions that unless and until the gift is connected with the profession or avocation, it cannot be taxed and in the absence of link or connection between the gift made by the devotees and the profession or avocation carried on by the Assessee, the personal gift cannot be termed as income taxable under the Act. It is pertinent to point out at this juncture, in the Respondent / Assessee's own case in Assessment year 1988-89, the Department has accepted the position that gifts received by him on birthdays and other occasions were not taxable. In the decision reported in 193 ITR 321 (SC) Radhasoami Satsang vs. Commissioner of Income-Tax, it has been held that -

"Where a fundamental aspect permeating through the different assessment years has been found as a fact one way or the other and parties have allowed that position to be sustained by not challenging the order, it would not be at all appropriate to allow the position to be changed in a subsequent years."

Since, there is no change in facts and law in the present case, the reasons assigned by the Income Tax Appellate Tribunal are correct and this Court finds no infirmity or error apparent on the face of record in the impugned order.

33. This Court after taking into consideration the factual as well as the legal aspects is of the considered opinion that the substantial questions of law raised by the Revenue are to be answered in negative against them. Therefore, the appeal is dismissed confirming the order dated 17.10.2008, passed by the Income-tax Appellate Tribunal `C' Bench, Chennai in I.T.A.No.588/Mds/2005. In the circumstances, there will be no order as to costs.