ITR (TRIB)) Vol 9 Part 6 dated 06.06.2011

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

Volume 9 : Part 6 (Issue dated : 06-06-2011)

SUBJECT INDEX TO CASES REPORTED IN THIS PART

--> Appeal to Appellate Tribunal --Issue raised by assessee answered in its favour by Commissioner (Appeals)--Assessee cannot challenge decision in appeal to Tribunal--Income-tax Act, 1961-- ITO v. United Marine Academy [SB] (Mumbai) . . . 639

--> Order of Tribunal--Where facts not disputed, no additional arguments advanced and Tribunal fully agreeing with reasons given by Commissioner (Appeals), Tribunal need not repeat reasons given by him--Order of Tribunal not illegal on that ground--Income-tax Act, 1961-- Asst. CIT v. Safe Enterprises (Mumbai) . . . 533

--> Bad debts --Change of law--Assessee only to write it off as bad debt--Not required to prove that debts had become bad-- Income-tax Act, 1961, s. 36(1)(vii)-- Asst. CIT v. Safe Enterprises (Mumbai) . . . 533

--> Disallowance--Entire bad debts written off in books of account maintained under Income-tax Act--Separate books maintained under Companies Act not relevant--Assessee claiming only that sum which has been written off--To be allowed--Income-tax Act, 1961, s. 36(1)(vii)-- Asst. CIT v. Shriram Transport Finance Co. Ltd. (Chennai) . . . 543

--> Business expenditure --Disallowance--Payments subject to tax deduction at source --Amendment of section 40(a)(ia) by Finance Act, 2010--Amendment retrospective--Tax deducted at source from freight charges during period 1-4-2005 to 28-2-2006 and paid in July and August 2006 i.e. before due date for filing return--Freight charges could not be disallowed in assessment for 2006-07--Income-tax Act, 1961, s. 40(a)(ia) -- Bansal Parivahan (India) P. Ltd. v. ITO (Mumbai) . . . 565

--> Disallowance--Payments to non-resident subject to deduction of tax at source--Interest--Difference between definition of interest in Interest-tax Act and that in Income-tax Act--Discounting charges not interest for purposes of Income-tax Act--Tax not deductible at source on discounting charges--Income-tax Act, 1961, ss. 2(28A), 40(a)(i)--Circular No. 647, dated 22-3-1993-- Asst. CIT v. Cargill Global Trading (I) P. Ltd.(Delhi) . . . 558

-->----Firm--Expenditure on education of partner in foreign country--No evidence of commercial expediency in incurring expenditure--Expenditure not deductible--Income-tax Act, 1961, s. 37-- Kohinoor Cloth Stores v. Asst. CIT (Pune) . . . 585

-->Business loss --Corporate guarantee given to subsidiary company--Granting of guarantee part of business of assessee--Guarantee given for commercial purposes--Loss due to such guarantee--Deductible as business loss--Income-tax Act, 1961-- Asst. CIT v. W. S. Industries (India) Ltd. (Chennai) . . . 596

-->Capital gains --Computation of capital gains--Two fictions in sections 50 and 50C--Section 50 modifies expression "cost of acquisition"--Section 50C modifies expression "full value of consideration"--Both operate in different fields--Both can be applied simultaneously--Sale of block of assets including land--Stamp duty valuation of land can be taken into consideration for computing capital gains--Income-tax Act, 1961, ss. 45, 50, 50C-- ITO v. United Marine Academy [SB] (Mumbai) . . . 639

-->Capital or revenue expenditure --Royalty paid for using logo--Payment for non-exclusive user of logo based on turnover and not lump sum payment--Revenue expenditure--Income-tax Act, 1961-- Asst. CIT v. Shriram Transport Finance Co. Ltd. (Chennai) . . . 543

-->Charitable purposes --Definition--Change of law--"Object of general public utility" not to include activity of rendering service in relation to trade, commerce or business--Board constituted under law as regulatory board for environment protection and pollution control--Not rendering service in relation to trade, commerce or business--Registration not to be cancelled--Income-tax Act, 1961, ss. 2(15), 12AA-- Himachal Pradesh Environment Protection and Pollution Control Board v. CIT (Chandigarh) . . . 604

-->Non-banking financial company --Long-term capital loss--Carry forward--Assessee compelled to divest shares in accordance with RBI directions--Assessing Officer not doubting genuineness of transactions--Similar issue decided in favour of assessee in previous years--To be allowed--Income-tax Act, 1961-- Asst. CIT v. Shriram Transport Finance Co. Ltd. (Chennai) . . . 543

-->----Securities--Diminution in value--Classified as investment and income earned in nature of dividends--Investments in securities a statutory direction which has to be necessarily complied with assessee--Classification under "investments" immaterial--Assessee entitled to claim of diminution in value of securities which held for purpose of its business--Income-tax Act, 1961-- Asst. CIT v. Shriram Transport Finance Co. Ltd.(Chennai) . . . 543

-->Non-resident --Double taxation avoidance--Interest on refund of tax deducted at source from receipts of permanent establishment--Provisions of Double Taxation Avoidance Agreement more beneficial and applicable--Payment of tax responsibility of foreign company--Collection of tax at source not effective connection of indebtedness with permanent establishment in India--Amount taxable under article 11(2) of Double Taxation Avoidance Agreement--Income-tax Act, 1961, s. 90--Double Taxation Avoidance Agreement between Australia and India, art. 11(2)-- Asst. CIT v. Clough Engineering Ltd. [SB] (Delhi) . . . 618

-->Words and phrases --"Interest"-- Asst. CIT v. Cargill Global Trading (I) P. Ltd. (Delhi) . . . 558

SECTIONWISE INDEX TO CASES REPORTED IN THIS PART

Double Taxation Avoidance Agreement between Australia and India :

-->Art. 11(2) --Non-resident--Double taxation avoidance--Interest on refund of tax deducted at source from receipts of permanent establishment--Provisions of Double Taxation Avoidance Agreement more beneficial and applicable--Payment of tax responsibility of foreign company--Collection of tax at source not effective connection of indebtedness with permanent establishment in India--Amount taxable under article 11(2) of Double Taxation Avoidance Agreement-- Asst. CIT v. Clough Engineering Ltd. [SB] (Delhi) . . . 618

Income-tax Act, 1961 :

-->S. 2(15) --Charitable purposes--Definition--Change of law--"Object of general public utility" not to include activity of rendering service in relation to trade, commerce or business--Board constituted under law as regulatory board for environment protection and pollution control--Not rendering service in relation to trade, commerce or business--Registration not to be cancelled-- Himachal Pradesh Environment Protection and Pollution Control Board v. CIT (Chandigarh) . . . 604

-->S. 2(28A) --Business expenditure--Disallowance--Payments to non-resident subject to deduction of tax at source--Interest--Difference between definition of interest in Interest-tax Act and that in Income-tax Act--Discounting charges not interest for purposes of Income-tax Act--Tax not deductible at source on discounting charges--Circular No. 647, dated 22-3-1993-- Asst. CIT v. Cargill Global Trading (I) P. Ltd.(Delhi) . . . 558

-->S. 12AA --Charitable purposes--Definition--Change of law--"Object of general public utility" not to include activity of rendering service in relation to trade, commerce or business--Board constituted under law as regulatory board for environment protection and pollution control--Not rendering service in relation to trade, commerce or business--Registration not to be cancelled-- Himachal Pradesh Environment Protection and Pollution Control Board v. CIT (Chandigarh) . . . 604

-->S. 36(1)(vii) --Bad debts--Change of law--Assessee only to write it off as bad debt--Not required to prove that debts had become bad-- Asst. CIT v. Safe Enterprises (Mumbai) . . . 533

-->----Bad debts--Disallowance--Entire bad debts written off in books of account maintained under Income-tax Act--Separate books maintained under Companies Act not relevant--Assessee claiming only that sum which has been written off--To be allowed-- Asst. CIT v. Shriram Transport Finance Co. Ltd. (Chennai) . . . 543

-->S. 37 --Business expenditure--Firm--Expenditure on education of partner in foreign country--No evidence of commercial expediency in incurring expenditure--Expenditure not deductible-- Kohinoor Cloth Stores v. Asst. CIT (Pune) . . . 585

-->S. 40(a)(i) --Business expenditure--Disallowance--Payments to non-resident subject to deduction of tax at source--Interest--Difference between definition of interest in Interest-tax Act and that in Income-tax Act--Discounting charges not interest for purposes of Income-tax Act--Tax not deductible at source on discounting charges--Circular No. 647, dated 22-3-1993-- Asst. CIT v. Cargill Global Trading (I) P. Ltd.(Delhi) . . . 558

-->S. 40(a)(ia) -- Business expenditure--Disallowance--Payments subject to tax deduction at source--Amendment of section 40(a)(ia) by Finance Act, 2010--Amendment retrospective--Tax deducted at source from freight charges during period 1-4-2005 to 28-2-2006 and paid in July and August 2006 i.e. before due date for filing return--Freight charges could not be disallowed in assessment for 2006-07-- Bansal Parivahan (India) P. Ltd. v. ITO (Mumbai) . . . 565

-->S. 45 --Capital gains--Computation of capital gains--Two fictions in sections 50 and 50C--Section 50 modifies expression "cost of acquisition"--Section 50C modifies expression "full value of consideration"--Both operate in different fields--Both can be applied simultaneously--Sale of block of assets including land--Stamp duty valuation of land can be taken into consideration for computing capital gains-- ITO v. United Marine Academy [SB] (Mumbai) . . . 639

-->S. 50 --Capital gains--Computation of capital gains--Two fictions in sections 50 and 50C--Section 50 modifies expression "cost of acquisition"--Section 50C modifies expression "full value of consideration"--Both operate in different fields--Both can be applied simultaneously--Sale of block of assets including land--Stamp duty valuation of land can be taken into consideration for computing capital gains-- ITO v. United Marine Academy [SB] (Mumbai) . . . 639

-->S. 50C --Capital gains--Computation of capital gains--Two fictions in sections 50 and 50C--Section 50 modifies expression "cost of acquisition"--Section 50C modifies expression "full value of consideration"--Both operate in different fields--Both can be applied simultaneously--Sale of block of assets including land--Stamp duty valuation of land can be taken into consideration for computing capital gains-- ITO v. United Marine Academy [SB] (Mumbai) . . . 639

-->S. 90 --Non-resident--Double taxation avoidance--Interest on refund of tax deducted at source from receipts of permanent establishment--Provisions of Double Taxation Avoidance Agreement more beneficial and applicable--Payment of tax responsibility of foreign company--Collection of tax at source not effective connection of indebtedness with permanent establishment in India--Amount taxable under article 11(2) of Double Taxation Avoidance Agreement-- Asst. CIT v. Clough Engineering Ltd. [SB] (Delhi) . . . 618

ITR Volume 334 Part 2 issue dated 06-06-2011

INCOME TAX REPORTS (ITR)

Volume 334 : Part 2 (Issue dated 6-6-2011)

SUBJECT INDEX TO CASES REPORTED IN THIS PART

HIGH COURTS

Business expenditure --Capital or revenue expenditure--Company--Expenditure on raising convertible debentures--Revenue expenditure--Income-tax Act, 1961, s. 37-- CIT v. ITC Hotels Ltd.(Karn) . . . 109

-->Deduction only on actual payment--Contribution to employees' State insurance--Disallowed as deposited beyond due date--Amendment to first proviso to section 43B by Finance Act, 2003 with retrospective effect--Applicable--Assessee entitled to deduction--Income-tax Act, 1961, s. 43B-- CIT v.Rai Agro Industries Ltd. (P&H) . . . 122

-->Deduction only on actual payment--Disallowance on ground that expenses related to prior period and not present assessment year--Tribunal finding all expenses settled in current year and covered under section 43B(d)--Justified--Income-tax Act, 1961, s. 43B(d)-- CIT v. Modipon Ltd. (No. 1 ) (Delhi) . . . 102

-->Deduction only on actual payment--Excise duty paid in advance--Assessing Officer holding that deduction can be claimed only on removal of goods from factories--Not proper--Assessee entitled to deduction--Income-tax Act, 1961, s. 43B-- CIT v. Modipon Ltd. (No. 2 ) (Delhi) . . . 106

-->Disallowance--Travelling expenses--Addition made in subsequent years accepted by assessee--To be followed this year also--Income-tax Act, 1961, s. 37--Income-tax Rules, 1962, r. 6D-- CIT v. Modipon Ltd. (No. 2 ) (Delhi) . . . 106

-->Capital gains --Company--Sale of property by company--Company not in liquidation--Section 49 not applicable--Capital gains assessable in hands of company--Income-tax Act, 1961, ss. 45, 49-- CIT v.Shashi Charla (Delhi) . . . 129

-->Exemption--Long-term capital gains--Investment of net consideration from transfer of depreciable asset under Capital Gains Deposit Account Scheme--Assessee entitled to exemption--Income-tax Act, 1961, s. 54F-- CIT v. Rajiv Shukla (Delhi) . . . 138

-->Full value of consideration--Provision for adopting value assessed for stamp duty purposes--Provision not beyond legislative competence and not violative of article 14--Income-tax Act, 1961, s. 50C--Constitution of India, art. 14 ; Sch VII, List I, entry 82-- Bhatia Nagar Premises Co-operative Society Ltd . v. Union of India (Bom) . . . 145

-->Company --Computation of book profits under section 115JB--Depreciation--Change in method of computation of depreciation from straight line method to written down value method--Change reflected in profit and loss account audited and certified by registering authority under company law--Change valid--Income-tax Act, 1961, s. 115JB-- CIT v. Tidel Park Ltd. (Mad) . . . 126

-->Exemption --Export oriented industry--Conditions precedent for exemption--Conditions should be satisfied in initial year of manufacture or production--Value of machinery and plant in initial year of manufacture more than 20 per cent. of total value of machinery and plant--Purchase of new machinery and value reduced to less than 20 per cent. in a subsequent year--Assessee not entitled to exemption under section 10B--Income-tax Act, 1961, s. 10B-- Sami Labs Ltd. v. Asst. CIT (Karn) . . . 157

-->Export --Special deduction--Computation--Income from duty drawback, duty entitlement pass book and duty-free remission scheme--To be treated as business income--Income-tax Act, 1961, s. 80HHC--CIT v. F. C. Sondhi and Co. P. Ltd .(P&H) . . . 141

-->Income from undisclosed sources --Purchasers found to be fictitious--Addition to income valid--Purchases by account payee cheques--Inability to produce purchaser after three years--Not material--Addition not justified--Income-tax Act, 1961-- Diagnostics v. CIT (Cal) . . . 111

-->Interpretation of taxing statutes --Words-- CIT v. Oceanic Shipping Service of M. T. Suhail (Guj) . . . 132

-->Non-resident --Shipping business--Conditions precedent for application of section 172--Carriage of goods shipped at Indian port--Tug towing ship which could not sail by itself--No carriage of goods--Section 172 not applicable--Income-tax Act, 1961, s. 172-- CIT v. Oceanic Shipping Service of M. T. Suhail (Guj) . . . 132

-->Revision --Commissioner--Jurisdiction--Amendment to section 263 permitting revision of orders of Inspecting Assistant Commissioner--Not retrospective--Income-tax Act, 1961, s. 263-- CIT v. Smt. Asha M. Primlani (Delhi) . . . 143

-->Valuation of closing stock --Excise and customs duties--Assessee entitled to exclude excise and customs duties paid from value of closing stock--Income- tax Act, 1961-- CIT v. Modipon Ltd. ( No. 2 )(Delhi) . . . 106

-->Wealth-tax --Appeal to Appellate Tribunal--Contradiction in Tribunal's order regarding valuation of land--Recall of order by Tribunal--Tribunal holding no contradiction in its findings--Amounts to review of its earlier order--Not permissible--Tribunal directed to reconsider matter--Wealth-tax Act, 1957, ss. 7(4), 24-- Raja Malwinder Singh v. CWT (P&H) . . . 115

-->Words and phrases --"Shipping" and "goods"--Meanings of-- CIT v. Oceanic Shipping Service of M. T. Suhail (Guj) . . . 132

-->Writ --Capital gains--Development agreement to develop property of assessee--Reference by developer--Determination of stamp duty payable--Developer paying--Assessee cannot challenge valuation by stamp valuation authority--Remedy available under Stamp Act--Bombay Stamp Act, 1958, ss. 31, 53 ; Sch. I, art. 5(ga)--Income-tax Act, 1961, s. 50C-- Bhatia Nagar Premises Co-operative Society Ltd. v. Union of India (Bom) . . . 145

SECTIONWISE INDEX TO CASES REPORTED IN THIS PART

Bombay Stamp Act, 1958 :

S. 31, 53 ; Sch. I, art. 5(ga) --Writ--Capital gains--Development agreement to develop property of assessee--Reference by developer--Determination of stamp duty payable--Developer paying--Assessee cannot challenge valuation by stamp valuation authority--Remedy available under Stamp Act-- Bhatia Nagar Premises Co-operative Society Ltd. v. Union of India (Bom) . . . 145

Constitution of India :

Art. 14 ; Sch VII, List I, entry 82 --Capital gains--Full value of consideration--Provision for adopting value assessed for stamp duty purposes--Provision not beyond legislative competence and not violative of article 14-- Bhatia Nagar Premises Co-operative Society Ltd . v. Union of India (Bom) . . . 145

Income-tax Act, 1961 :

-->S. 10B --Exemption--Export oriented industry--Conditions precedent for exemption--Conditions should be satisfied in initial year of manufacture or production--Value of machinery and plant in initial year of manufacture more than 20 per cent. of total value of machinery and plant--Purchase of new machinery and value reduced to less than 20 per cent. in a subsequent year--Assessee not entitled to exemption under section 10B-- Sami Labs Ltd. v. Asst. CIT (Karn) . . . 157

S. 37 --Business expenditure--Capital or revenue expenditure--Company--Expendi-ture on raising convertible debentures--Revenue expenditure-- CIT v. ITC Hotels Ltd. (Karn) . . . 109

-->Business expenditure--Disallowance--Travelling expenses--Addition made in subsequent years accepted by assessee--To be followed this year also-- CIT v. Modipon Ltd. (No. 2) (Delhi) . . . 106

-->S. 43B --Business expenditure--Deduction only on actual payment--Contribution to employees' State insurance--Disallowed as deposited beyond due date--Amendment to first proviso to section 43B by Finance Act, 2003 with retrospective effect--Applicable--Assessee entitled to deduction-- CIT v. Rai Agro Industries Ltd. (P&H) . . . 122

-->Business expenditure--Deduction only on actual payment--Excise duty paid in advance--Assessing Officer holding that deduction can be claimed only on removal of goods from factories--Not proper--Assessee entitled to deduction-- CIT v. Modipon Ltd. ( No. 2) (Delhi) . . . 106

-->S. 43B(d) --Business expenditure--Deduction only on actual payment--Disallowance on ground that expenses related to prior period and not present assessment year--Tribunal finding all expenses settled in current year and covered under section 43B(d)--Justified-- CIT v. Modipon Ltd. (No. 1 )(Delhi) . . . 102

-->S. 45 --Capital gains--Company--Sale of property by company--Company not in liquidation--Section 49 not applicable--Capital gains assessable in hands of company-- CIT v. Shashi Charla (Delhi) . . . 129

-->S. 49 --Capital gains--Company--Sale of property by company--Company not in liquidation--Section 49 not applicable--Capital gains assessable in hands of company-- CIT v. Shashi Charla (Delhi) . . . 129

-->S. 50C --Capital gains--Full value of consideration--Provision for adopting value assessed for stamp duty purposes--Provision not beyond legislative competence and not violative of article 14-- Bhatia Nagar Premises Co-operative Society Ltd . v. Union of India (Bom) . . . 145

-->Writ--Capital gains--Development agreement to develop property of assessee--Reference by developer--Determination of stamp duty payable--Developer paying--Assessee cannot challenge valuation by stamp valuation authority--Remedy available under Stamp Act-- Bhatia Nagar Premises Co-operative Society Ltd. v. Union of India (Bom) . . . 145

-->S. 54F --Capital gains--Exemption--Long-term capital gains--Investment of net consideration from transfer of depreciable asset under Capital Gains Deposit Account Scheme--Assessee entitled to exemption-- CIT v. Rajiv Shukla (Delhi) . . . 138

-->S. 80HHC --Export--Special deduction--Computation--Income from duty drawback, duty entitlement pass book and duty-free remission scheme--To be treated as business income-- CIT v. F. C. Sondhi and Co. P. Ltd . (P&H) . . . 141

-->S. 115JB --Company--Computation of book profits under section 115JB--Depreciation--Change in method of computation of depreciation from straight line method to written down value method--Change reflected in profit and loss account audited and certified by registering authority under company law--Change valid-- CIT v. Tidel Park Ltd. (Mad) . . . 126

-->S. 172 --Non-resident--Shipping business--Conditions precedent for application of section 172--Carriage of goods shipped at Indian port--Tug towing ship which could not sail by itself--No carriage of goods--Section 172 not applicable-- CIT v. Oceanic Shipping Service of M. T. Suhail (Guj) . . . 132

-->S. 263 --Revision--Commissioner--Jurisdiction--Amendment to section 263 permitting revision of orders of Inspecting Assistant Commissioner--Not retrospective-- CIT v. Smt. Asha M. Primlani(Delhi) . . . 143

Income-tax Rules, 1962 :

-->R. 6D --Business expenditure--Disallowance--Travelling expenses--Addition made in subsequent years accepted by assessee--To be followed this year also-- CIT v. Modipon Ltd. (No. 2) (Delhi) . . . 106

Wealth-tax Act, 1957 :

-->S. 7(4) --Wealth-tax--Appeal to Appellate Tribunal--Contradiction in Tribunal's order regarding valuation of land--Recall of order by Tribunal--Tribunal holding no contradiction in its findings--Amounts to review of its earlier order--Not permissible--Tribunal directed to reconsider matter-- Raja Malwinder Singh v. CWT (P&H) . . . 115

-->S. 24 --Wealth-tax--Appeal to Appellate Tribunal--Contradiction in Tribunal's order regarding valuation of land--Recall of order by Tribunal--Tribunal holding no contradiction in its findings--Amounts to review of its earlier order--Not permissible--Tribunal directed to reconsider matter-- Raja Malwinder Singh v. CWT (P&H) . . . 115

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)