ITR Vol 335 Part 2 dated 11-07-2011

INCOME TAX REPORTS (ITR)

Volume 335 : Part 2 (Issue dated 11-7-2011)

SUBJECT INDEX TO CASES REPORTED IN THIS PART

HIGH COURTS

Appeal to Appellate Tribunal --Powers of Tribunal--Business expenditure--Commission paid to direct selling agents for services in sourcing hirers--Tribunal remanding matter to Assessing Officer as no sufficient material to give a finding as to allowability of entire brokerage--No infirmity--Income-tax Act, 1961-- Citi Financial Consumer Finance India Ltd . v. CIT (Delhi) . . . 209

Assessee --Person--Sports association is an assessee--Income-tax Act, 1961, s. 2(17), (31)-- PILCOM v. CIT (Cal) . . . 147

Assessment --Special audit--Order under section 142(2A) directing special audit--Condition precedent--Assessing Officer should be satisfied that accounts were complex and special audit was necessary--Reasons for special audit not mentioned--Order under section 142(2A)--Not valid--Income-tax Act, 1961, s. 142(2A)-- Hind Samachar Ltd . v. Asst. CIT (P&H) . . . 277

Business expenditure --Expenditure on advertisement and sales promotion--To be allowed--Income-tax Act, 1961, s. 37-- CIT v. Casio India Ltd . (Delhi) . . . 196

----General principles--Travel expenses--Resolution of company authorising foreign travel of managing director and his wife for business purposes--Travel expenses deductible--No resolution authorising foreign travel of wife of deputy managing director--Travel expenses of wife of deputy managing director--Not deductible--Income-tax Act, 1961, s. 37-- J. K. Industries Ltd . v. CIT (Cal) . . . . 170

----Manufacturer of soft beverages--Loss on bottle breakage--Deductible--Cost of repairs to wooden crates--Deductible--Income-tax Act, 1961, s. 37-- CIT v. Brindavan Beverages P. Ltd . (Karn) . . . 163

Capital gains --Capital asset--Definition--Exception--Personal effects--Sale of household items--Whether falling under section 2(14)--Matter remanded--Income-tax Act, 1961, s. 2(14)-- CIT v. Faiz Murtaza Ali (Delhi) . . . 272

Depreciation --Rate of depreciation--100 per cent. depreciation for machinery and plant used in mineral oil concerns--Wireline logging and perforation equipment used for oil companies--Entitled to 100 per cent. depreciation--Income-tax Act, 1961, s. 32--Income-tax Rules, 1962, r. 5-- CIT v. HLS India Ltd . (Delhi) . . . 292

Income from undisclosed sources --Manufacturer of soft beverages--Security deposit from distributors towards wooden crates and bottles--No evidence that amounts not received--Amount cannot be treated as income of assessee merely because distributors were related to assessee or employees of assessee--Income-tax Act, 1961-- CIT v. Brindavan Beverages P. Ltd. (Karn) . . . 163

Industrial undertaking --Investment allowance--Special deduction under sections 80-IA and 80-IB--Meaning of industrial undertaking--Manufacture or production of article or thing--Assessee providing wireline logging and perforation services to oil companies--Assessee is an industrial undertaking for purposes of section 32A and section 80-IA/80-IB--Income-tax Act, 1961, ss. 32A, 80-IA, 80-IB-- CIT v. HLS India Ltd .(Delhi) . . . 292

Interest on borrowed capital --Exemption--Claim to deduction of interest paid on borrowed capital--Borrowing for purpose of investment in partnership--Claim not established--Interest not allowable--Income-tax Act, 1961, ss. 10(2A), 36(1)(iii)-- CIT v. K. L. Srihari (Karn) . . . 215

Interpretation of taxing statutes --Interpretation should not lead to anomaly-- CIT v. Mridula, Prop. Dhruv Fabrics (P&H) . . . 266

Non-banking financial company --Income--Mercantile system of accounting--Interest on loans given--Loans became non-performing assets--Interest not received and possibility of recovery nil--Interest not to be treated to be accrued in favour of assessee--Income-tax Act, 1961, s. 5-- Director of Income-tax v. Brahamputra Capital Financial Services Ltd. (Delhi) . . . 182

Penalty --Concealment of income--Commissioner (Appeals) setting aside penalty, without going into merits--Matter to be heard with quantum appeal filed by assessee--Income-tax Act, 1961, s. 271(1)(c)-- CIT v. Rajesh Rana (P&H) . . . 207

----Concealment of income--Discrepancy in stocks found during search--Voluntary surrender of income by assessee during assessment proceedings to buy peace--Not by itself ground to impose penalty--Assessee placing evidence with corroborating proof explaining discrepancy in stocks--Deletion of penalty in identical circumstances in case of firm of which assessee partner becoming final--Penalty not imposable on assessee--Income-tax Act, 1961, s. 271(1)(c)-- CIT v. Harsh Talwar (Delhi) . . . 200

----Concealment of income--Survey--Assessing Officer initiating penalty on ground of discrepancies found during survey--Assessee disclosing particulars of income and surrendering entire amount in return duly filed--Penalty cannot be imposed --Income-tax Act, 1961, s. 271(1)(c)-- CIT v. SAS Pharmaceuticals (Delhi) . . . 259

Precedent --Effect of decision of Supreme Court in CIT v. Walchand and Co. P. Ltd. [1967] 65 ITR 381--J . K. Industries Ltd . v. CIT (Cal) . . . . 170

Reassessment --Notice after four years--Failure to disclose material facts necessary for assessment--Original assessment allowing deduction for housing project after examining facts--Notice after four years alleging that assessee was a works contractor and not a developer--No failure to disclose material facts necessary for assessment--Notice not valid--Income-tax Act, 1961, ss. 80-IB(10), 147, 148-- Aayojan Developers v. ITO (Guj) . . . 234

----Notice--Condition precedent--Recording of reasons--Effect of affidavit--Affidavit can explain reasons but cannot validate notice--Income-tax Act, 1961, s. 148-- Aayojan Developers v. ITO (Guj) . . . 234

----Notice--Validity--Notice for rectification issued beyond period of limitation--Rectification proceedings not pending--Notice of reassessment can be issued--Income-tax Act, 1961, ss. 148, 154-- CIT v. S. M. Overseas P. Ltd . (P&H) . . . 281

----Notice--Validity--Payment of usance interest on purchase of ship without deducting tax at source for assessment year 1994-95--Amendment of section 10(15) with retrospective effect from 1-4-1962 exempting usance interest--Notice not valid--Income-tax Act, 1961, ss. 10(15)(iv)(c), 40(a)(i), 148-- Trivenu Ship Breakers v. Harsh Prakash (Guj) . . . 284

Rectification of mistakes --Application for rectification--Effect of sub-section (8) of section 154--Order on application to be made within six months of receipt of application--Failure to pass order--Application again made to new incumbent upon restructuring of Department--Application cannot be rejected on the ground of limitation--Income-tax Act, 1961, s. 154(8)-- State Bank of India v. CIT (TDS) (Patna) . . . 287

Return --Delay in filing return--Interest--Assessing Officer holding assessee not eligible for benefit of loss to be carried forward for failure to file return within due date and levying interest--Tribunal following identical issue in the case of a family member allowing assessee's claim--That assessee, a partner of firm in whose case due date for filing return was later--Whether assessee also partner--Matter remanded--Income-tax Act, 1961, ss. 139, 234A-- CIT v. Sashi Prakash Khemka (Delhi) . . . 176

Search and seizure --Block assessment--Assessment of third person--Scope of section 158BD--Action under section 158BD must be taken before completion of assessment of searched person--Block assessment under section 158BC completed on 30-3-2005--Satisfaction under section 158BD recorded on 15-7-2005--Proceedings not valid--Income-tax Act, 1961, ss. 158BC, 158BD-- CIT v. Mridula, Prop. Dhruv Fabrics (P&H) . . . 266

----Block assessment--Delay in filing returns--Interest payable--Income-tax Act, 1961, s. 158BFA-- CIT v. K. L. Srihari (Karn) . . . 215

----Block assessment--Surcharge to be paid--Income-tax Act, 1961, s. 113-- CIT v. K. L. Srihari (Karn) . . . 215

----Requisitioning of assets--Warrant of authorisation under section 132A--Cash and silver seized by Railway police--Report of Director of Income-tax that assets would not be disclosed to Revenue--Warrant of authorisation under section 132A--Valid--Income-tax Act, 1961, s. 132A-- Smt. Suman Singhai v. Director of Income-tax (Investigation) (MP) . . . 188

Sports association --Deduction of tax at source--Effect of sections 115BBA and 194E--Sports association in England granting permission to Indian sports association to conduct matches in India--Amount paid by Indian sports association to non-resident sports association--Tax to be deducted on such payments--Income-tax Act, 1961, ss. 115BBA, 194E-- PILCOM v. CIT (Cal) . . . 147

SECTIONWISE INDEX TO CASES REPORTED IN THIS PART

Income-tax Act, 1961 :

S. 2(14) --Capital gains--Capital asset--Definition--Exception--Personal effects--Sale of household items--Whether falling under section 2(14)--Matter remanded-- CIT v. Faiz Murtaza Ali (Delhi) . . . 272

S. 2(17) --Assessee--Person--Sports association is an assessee-- PILCOM v. CIT (Cal) . . . 147

S. 2(31) --Assessee--Person--Sports association is an assessee-- PILCOM v. CIT (Cal) . . . 147

S. 5 --Non-banking financial company--Income--Mercantile system of accounting--Interest on loans given--Loans became non-performing assets--Interest not received and possibility of recovery nil--Interest not to be treated to be accrued in favour of assessee-- Director of Income-tax v. Brahamputra Capital Financial Services Ltd. (Delhi) . . . 182

S. 10(2A) --Interest on borrowed capital--Exemption--Claim to deduction of interest paid on borrowed capital--Borrowing for purpose of investment in partnership--Claim not established--Interest not allowable-- CIT v. K. L. Srihari (Karn) . . . 215

S. 10(15)(iv)(c) --Reassessment--Notice--Validity--Payment of usance interest on purchase of ship without deducting tax at source for assessment year 1994-95--Amendment of section 10(15) with retrospective effect from 1-4-1962 exempting usance interest--Notice not valid-- Trivenu Ship Breakers v. Harsh Prakash (Guj) . . . 284

S. 32 --Depreciation--Rate of depreciation--100 per cent. depreciation for machinery and plant used in mineral oil concerns--Wireline logging and perforation equipment used for oil companies--Entitled to 100 per cent. depreciation-- CIT v. HLS India Ltd .(Delhi) . . . 292

S. 32A --Industrial undertaking--Investment allowance--Special deduction under sections 80-IA and 80-IB--Meaning of industrial undertaking--Manufacture or production of article or thing--Assessee providing wireline logging and perforation services to oil companies--Assessee is an industrial undertaking for purposes of section 32A and section 80-IA/80-IB-- CIT v. HLS India Ltd . (Delhi) . . . 292

S. 36(1)(iii) --Interest on borrowed capital--Exemption--Claim to deduction of interest paid on borrowed capital--Borrowing for purpose of investment in partnership--Claim not established--Interest not allowable-- CIT v. K. L. Srihari (Karn) . . . 215

S. 37 --Business expenditure--Expenditure on advertisement and sales promotion--To be allowed-- CIT v. Casio India Ltd . (Delhi) . . . 196

Business expenditure--General principles--Travel expenses--Resolution of company authorising foreign travel of managing director and his wife for business purposes--Travel expenses deductible--No resolution authorising foreign travel of wife of deputy managing director--Travel expenses of wife of deputy managing director--Not deductible-- J. K. Industries Ltd . v. CIT (Cal) . . . 170

Business expenditure--Manufacturer of soft beverages--Loss on bottle breakage--Deductible--Cost of repairs to wooden crates--Deductible-- CIT v. Brindavan Beverages P. Ltd . (Karn) . . . 163

S. 40(a)(i) --Reassessment--Notice--Validity--Payment of usance interest on purchase of ship without deducting tax at source for assessment year 1994-95--Amendment of section 10(15) with retrospective effect from 1-4-1962 exempting usance interest--Notice not valid-- Trivenu Ship Breakers v. Harsh Prakash (Guj) . . . 284

S. 80-IA --Industrial undertaking--Investment allowance--Special deduction under sections 80-IA and 80-IB--Meaning of industrial undertaking--Manufacture or production of article or thing--Assessee providing wireline logging and perforation services to oil companies--Assessee is an industrial undertaking for purposes of section 32A and section 80-IA/80-IB-- CIT v. HLS India Ltd . (Delhi) . . . 292

S. 80-IB --Industrial undertaking--Investment allowance--Special deduction under sections 80-IA and 80-IB--Meaning of industrial undertaking--Manufacture or production of article or thing--Assessee providing wireline logging and perforation services to oil companies--Assessee is an industrial undertaking for purposes of section 32A and section 80-IA/80-IB-- CIT v. HLS India Ltd . (Delhi) . . . 292

S. 80-IB(10) --Reassessment--Notice after four years--Failure to disclose material facts necessary for assessment--Original assessment allowing deduction for housing project after examining facts--Notice after four years alleging that assessee was a works contractor and not a developer--No failure to disclose material facts necessary for assessment--Notice not valid-- Aayojan Developers v. ITO (Guj) . . . 234

S. 113 --Search and seizure--Block assessment--Surcharge to be paid-- CIT v. K. L. Srihari (Karn) . . . 215

S. 115BBA --Sports association--Deduction of tax at source--Effect of sections 115BBA and 194E--Sports association in England granting permission to Indian sports association to conduct matches in India--Amount paid by Indian sports association to non-resident sports association--Tax to be deducted on such payments-- PILCOM v. CIT (Cal) . . . 147

S. 132A --Search and seizure--Requisitioning of assets--Warrant of authorisation under section 132A--Cash and silver seized by Railway police--Report of Director of Income-tax that assets would not be disclosed to Revenue--Warrant of authorisation under section 132A--Valid-- Smt. Suman Singhai v. Director of Income-tax (Investigation) (MP) . . . 188

S. 139 --Return--Delay in filing return--Interest--Assessing Officer holding assessee not eligible for benefit of loss to be carried forward for failure to file return within due date and levying interest--Tribunal following identical issue in the case of a family member allowing assessee's claim--That assessee, a partner of firm in whose case due date for filing return was later--Whether assessee also partner--Matter remanded-- CIT v. Sashi Prakash Khemka (Delhi) . . . 176

S. 142(2A) --Assessment--Special audit--Order under section 142(2A) directing special audit--Condition precedent--Assessing Officer should be satisfied that accounts were complex and special audit was necessary--Reasons for special audit not mentioned--Order under section 142(2A)--Not valid-- Hind Samachar Ltd . v. Asst. CIT (P&H) . . . 277

S. 147 --Reassessment--Notice after four years--Failure to disclose material facts necessary for assessment--Original assessment allowing deduction for housing project after examining facts--Notice after four years alleging that assessee was a works contractor and not a developer--No failure to disclose material facts necessary for assessment--Notice not valid-- Aayojan Developers v. ITO (Guj) . . . 234

S. 148 --Reassessment--Notice--Condition precedent--Recording of reasons--Effect of affidavit--Affidavit can explain reasons but cannot validate notice-- Aayojan Developers v. ITO (Guj) . . . 234

Reassessment--Notice--Validity--Notice for rectification issued beyond period of limitation--Rectification proceedings not pending--Notice of reassessment can be issued-- CIT v. S. M. Overseas P. Ltd . (P&H) . . . 281

Reassessment--Notice--Validity--Payment of usance interest on purchase of ship without deducting tax at source for assessment year 1994-95--Amendment of section 10(15) with retrospective effect from 1-4-1962 exempting usance interest--Notice not valid-- Trivenu Ship Breakers v. Harsh Prakash (Guj) . . . 284

Reassessment--Notice after four years--Failure to disclose material facts necessary for assessment--Original assessment allowing deduction for housing project after examining facts--Notice after four years alleging that assessee was a works contractor and not a developer--No failure to disclose material facts necessary for assessment--Notice not valid-- Aayojan Developers v. ITO (Guj) . . . 234

S. 154 --Reassessment--Notice--Validity--Notice for rectification issued beyond period of limitation--Rectification proceedings not pending--Notice of reassessment can be issued-- CIT v. S. M. Overseas P. Ltd . (P&H) . . . 281

S. 154(8) --Rectification of mistakes--Application for rectification--Effect of sub-section (8) of section 154--Order on application to be made within six months of receipt of application--Failure to pass order--Application again made to new incumbent upon restructuring of Department--Application cannot be rejected on the ground of limitation-- State Bank of India v. CIT (TDS) (Patna) . . . 287

S. 158BC --Search and seizure--Block assessment--Assessment of third person--Scope of section 158BD--Action under section 158BD must be taken before completion of assessment of searched person--Block assessment under section 158BC completed on 30-3-2005--Satisfaction under section 158BD recorded on 15-7-2005--Proceedings not valid-- CIT v. Mridula, Prop. Dhruv Fabrics (P&H) . . . 266

S. 158BD --Search and seizure--Block assessment--Assessment of third person--Scope of section 158BD--Action under section 158BD must be taken before completion of assessment of searched person--Block assessment under section 158BC completed on 30-3-2005--Satisfaction under section 158BD recorded on 15-7-2005--Proceedings not valid-- CIT v. Mridula, Prop. Dhruv Fabrics (P&H) . . . 266

S. 158BFA --Search and seizure--Block assessment--Delay in filing returns--Interest payable-- CIT v. K. L. Srihari (Karn) . . . 215

S. 194E --Sports association--Deduction of tax at source--Effect of sections 115BBA and 194E--Sports association in England granting permission to Indian sports association to conduct matches in India--Amount paid by Indian sports association to non-resident sports association--Tax to be deducted on such payments-- PILCOM v. CIT (Cal) . . . 147

S. 234A --Return--Delay in filing return--Interest--Assessing Officer holding assessee not eligible for benefit of loss to be carried forward for failure to file return within due date and levying interest--Tribunal following identical issue in the case of a family member allowing assessee's claim--That assessee, a partner of firm in whose case due date for filing return was later--Whether assessee also partner--Matter remanded-- CIT v. Sashi Prakash Khemka (Delhi) . . . 176

S. 271(1)(c) --Penalty--Concealment of income--Commissioner (Appeals) setting aside penalty, without going into merits--Matter to be heard with quantum appeal filed by assessee-- CIT v. Rajesh Rana (P&H) . . . 207

Penalty--Concealment of income--Discrepancy in stocks found during search--Voluntary surrender of income by assessee during assessment proceedings to buy peace--Not by itself ground to impose penalty--Assessee placing evidence with corroborating proof explaining discrepancy in stocks--Deletion of penalty in identical circumstances in case of firm of which assessee partner becoming final--Penalty not imposable on assessee-- CIT v. Harsh Talwar (Delhi) . . . 200

Penalty--Concealment of income--Survey--Assessing Officer initiating penalty on ground of discrepancies found during survey--Assessee disclosing particulars of income and surrendering entire amount in return duly filed--Penalty cannot be imposed -- CIT v. SAS Pharmaceuticals (Delhi) . . . 259

Income-tax Rules, 1962 :

r. 5 --Depreciation--Rate of depreciation--100 per cent. depreciation for machinery and plant used in mineral oil concerns--Wireline logging and perforation equipment used for oil companies--Entitled to 100 per cent. depreciation-- CIT v. HLS India Ltd .(Delhi) . . . 292

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Dear Friends : The emails are schedule to be posted in the blog (itronline.blogspot.com)and will sent to the group on various dates and time fixed. Instead of sending it on one day.

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Foreign training expenses incurred on son of director, who is not even an e

Foreign training expenses incurred on son of director, who is not even an employee of company, is not an allowable expenditure - [2011] 10 taxmann.com 91 (Mum. - ITAT)

Capital gain on sale of property is assessable in that assessment year only

Capital gain on sale of property is assessable in that assessment year only when sale deed is executed and possession of property is handed over to buyer - [2011] 10 taxmann.com 92 (Mum. - ITAT)

Once assessee should excess consumption of raw material....

IT : Once assessee should excess consumption of raw material, natural inference was that there would be excess production which would have been sold outside books of account and, thus, matter was to be remanded back to Commissioner (Appeals) with a direction to make separate addition in respect of excess consumption of raw material as deemed sales - [2011] 11 taxmann.com 425 (Agra - ITAT)(TM)

Merely because appeal memo is not signed by all legal representatives, it c

Merely because appeal memo is not signed by all legal representatives, it cannot be rejected on that ground

Income-tax : As per section 159, every legal representative is personally liable to the extent of interest in the estate inherited by him and he being deemed assessee under section 159(3), is to be treated as an assessee aggrieved as contemplated under section 246A, and, therefore, entitled to file appeal subject to fulfillment of other conditions [Section 159 of the Income-tax Act, 1961 - Legal representatives] - [2011] 10 taxmann.com 101 (Mum. - ITAT)

Where FMV declared by assessee was more than FMV declared by DVO, estimatio

Where FMV declared by assessee was more than FMV declared by DVO, estimation of FMV as made by assessee was to be accepted - [2011] 10 taxmann.com 99 (Mum. - ITAT)

Activity of assembling wind mills would amount to 'manufacture' as well as

Activity of assembling wind mills would amount to `manufacture' as well as `production' of a thing or article as set out in section 80-IB(2)(iii) - [2011] 10 taxmann.com 81 (Mad.)

Payment made by Indian customers to Singapore Company for use of telecom ne

Payment made by Indian customers to Singapore Company for use of telecom network infrastructure is royalty for use of `process'

Income-tax : The payment made by the Indian customer to Singapore company for use of telecom network infrastructure is not royalty for the use of equipment, it is the royalty for the use of `process' [Section 90 of the Income-tax Act, 1961 read with Article 12(3) of the Indo-Singapore DTAA - Double Taxation Relief - Where agreement exists (Royalties and Fees for Technical Services)] - [2011] 10 taxmann.com 93 (Chennai - ITAT)

When Commissioner (Appeals) calls for remand report in a case.

When Commissioner (Appeals) calls for remand report in a case, Assessing Officer is under an obligation to place on record proper facts instead of merely challenging power of Commissioner (Appeals) to call for remand report - [2011] 10 taxmann.com 94 (Mum. - ITAT)

Exclusion of income up to date of search is permissible only if time for fi

Exclusion of income up to date of search is permissible only if time for filing return for relevant assessment year is not already over and income was found to be accounted for by assessee - [2011] 10 taxmann.com 111 (Ker.)

Types of frauds by promoters or companies.

Types of frauds by promoters or companies
Posted in Company Law Type: News on June 29, 2011

Methods or types of frauds by promoters or companies:

During the course of investigation by SFIO over the years, different types of frauds/fraudulent activities have been unearthed. Some of the types of frauds are illustrated below:

(a) Project Financing:

In one of the cases investigated by SFIO, it was noticed that an Indian company imported second hand plant and machinery from its parent company at a very high price. This over valued plant and machinery was used to obtain higher term loans from funding institutions. The loan amount thus obtained was transferred to parent company as payment liability against such plant and machinery. It was also noticed that the Indian company had received different invoices for majority of its machinery for submission to different Government agencies.

(b) Frauds during operations:

In one of the cases investigated by SFIO, it was noticed that an Indian company raised bills showing trading of diamonds among its various group companies in circular manner viz company "A" selling to "B", then "B" selling to "C" and again "C" selling back to "A". Thus, in this process, no goods were transferred and only sale and purchase bills were raised. These bills were discounted with banks and the company received huge amount of rupees as advance from banks against such bills. Initially the company complied in repayment of amount specified in the discounted bills after prescribed period. However, after sometimes, payment was stopped and main promoter of the company who was controlling all the affairs of the company fled the country and the company stopped functioning resulting into huge amount of bank funds becoming NPA.
In some cases investigated by SFIO, huge payments were shown to have been made to petty suppliers of steel items or to group companies during the period of construction of project by recording of supply of materials made by these entities. All these supplies were reflected in the books of account as work-in-progress, which was not verifiable, and during the course of investigation, these petty suppliers were found either nonexistent or not traceable. Group companies were also found to be either woundup or non-operational with no director of those companies being traceable. Funds transferred to these entities showing supply of material were found to have been taken out in cash by rotating through certain accounts or showing payments for certain non-verifiable expenses.

(c) Falsification of Financial Statements:

In some cases investigated by SFIO, it was found that, by following two accounting years, company was showing losses or very nominal profit in the Profit & Loss account filed to the Income tax department. However, huge profit was being shown in the Profit & Loss accounts filed with stock exchanges, ROC etc. The different amount of profits in the two sets of Profit & Loss Account for the same year was shown by resorting to valuation of stock at inflated value in the Profit & Loss Account that was filed with ROC, Stock exchanges following the accounting year other than financial year. In few cases, sales having heavy profit margin were recorded in those months, which were included in the accounting year followed for preparing the Profit & Loss Account filed with ROC and used for the purposes of investors or other stakeholders.

Source: MCA

Bundle of case law

IT : Where pursuant to an agreement a US company, which had a global central purchasing unit (CPU) in USA allowed access to use of CPU to assessee and assessee made payment to said non-resident company on account of link charges, since manner in which services were provided could not be easily ascertained matter was to be remanded to lower authorities for deciding as to whether payment amounted to `royalty' or `fees for technical services' in order to bring it to tax in India - [2011] 11 taxmann.com 225 (Mum. - ITAT)

IT : By way of amendment made in section 43(5) with effect from 1-4-2006 legislature did not intend to take away brought forward losses of dealing in derivatives or make them ineligible for being set off against profits of same business in subsequent years - [2011] 11taxmann.com 231 (Mum. - ITAT)

IT : Assessing Officer after making enquiries has taken a permissible view on a issue while passing assessment order and if on same facts Commissioner has a different opinion, revisionary proceedings under section 263 cannot be initiated by him - [2011] 11 taxmann.com 230 (Ahd. - ITAT)

IT : Where financial data of three comparable companies were not before Assessing Officer/TPO at time of making assessment and they were not examined on their merit, it was considered fit and proper to restore matter regarding determination of arm's length price of international transactions entered into by assessee with AE to the file of Assessing Officer/TPO for fresh adjudication - [2011] 11taxmann.com 232 (Delhi - ITAT)

IT : Mere making of a claim by assessee in its return based upon ruling of AAR which it had subsequently revised voluntary as per latter ruling of AAR would not amount to concealment of income on part of assessee warranting levy of penalty under section 271(1)(c) - [2011] 11taxmann.com 226 (Mum. - ITAT)

IT : Section 44BB would be applicable to a non-resident-company who entered into turnkey basis contracts with ONGC even though it had bifurcated contract price into two segments one relating to supply of services and other relating to supply of spares - [2011] 11taxmann.com 229 (Delhi - ITAT)

IT : Where no opportunity was provided to assessee by way of issuing show cause notice prior to making order under section 92CA(3), matter was to be remanded back to file of Assessing Officer to comply with provisions of law and provide adequate and meaningful opportunity of being heard on issues and then decide matter afresh in accordance with law - [2011] 11 taxmann.com 228 (Delhi - ITAT)

IT : Where assessee-society advanced rupees five lakhs to one of its members allegedly for improvement and expansion of her building which accommodated school being run by assessee, but there was no evidence that amount had been utilized for purpose it had been lent, assessee was denied exemption under section 11 - [2011] 11 taxmann.com 234 (Patna)

IT : Where Commissioner noticed vital flaws in order of assessment entirely attributable to extremely dishonest and defiant approach of assessee, he was justified in setting aside assessment order by invoking powers under section 263 - [2011] 11 taxmann.com 237 (Patna)

IT : For initiating penalty proceedings under section 271(1)(c) recording of satisfaction about concealment of assessee's income is not necessary to be recorded in specific terms and words - [2011] 11 taxmann.com 236 (Cal.)

IT : Income from sale of scrap generated in course of extraction of rubber latex from trees, which is purely an agricultural operation, cannot be brought to Central Income-tax by applying rule 7A of Income-tax Rules - [2011] 11 taxmann.com 239 (Ker.)

IT : Grant of exemption to assessee-trust under section 11 would not effect assessee's right of claming depreciation - [2011] 11taxmann.com 242 (Punj. & Har.)

IT : Tax of non-resident recipient borne by Indian payer is nothing but deemed income of non-resident and same would not fall within definition of tax on income for disallowance under section 40(a)(ii) - [2011] 11 taxmann.com 268 (Mum. - ITAT)

: Notional interest on interest free security cannot be taken as determinative factor to arrive at fair rent - [2011] 11 taxmann.com 265 (Mum. - ITAT)

IT : Production of television and radio programmes for purpose of telecasting and broadcasting through assessee's own network or through network hired by it did not constitute advancement of any object of general public utility within meaning of section 2(15) - [2011] 11 taxmann.com 240 (Ker.)
2011-TIOL-387-HC-AHM-IT

Vinodbhai Arvindbhai Patel Proprietor Shakti Construction Vs ITO (Dated: May 3, 2011)

Income tax – Sections 147, 148, 149, 150 – Whether when assessment is framed as per remand order of the Tribunal, re-assessment can be initiated even after completion of six years from the end of the assessment. - Assessee's appeal allowed: GUJARAT HIGH COURT;

2011-TIOL-369-ITAT-COCHIN + depreciation story

Dy.DIT, Ernakulam Vs Adi Sankara Trust (Dated: June 16, 2011)

Income Tax - Sections 11, 12A, 32(1) - Whether when assessee, a charitable body, has already claimed deduction for acquisition of capital assets as application of money, the further claim of depreciation on the same assets would amount to double benefits. - Revenue's appeal allowed : COCHIN ITAT;

2011-TIOL-368-ITAT-MUM

The Tata Power Co Ltd Vs Addl.CIT, Mumbai (Dated: May 31, 2011)

Income Tax - Sections 54EC, 72, 74 - Whether when assessee has long-term capital gains, the stage of setting off of long-term capital loss comes only after grant of exemption u/s 54EC. - Revenue's appeal allowed: MUMBAI ITAT;

2011-TIOL-367-ITAT-CHD

M/s Vodafone Essar Ltd Vs Addl.CIIT, Chandigarh (Dated: April 7, 2011)

Income Tax - Sections 14A, 40(a)(ia), 80IA, 115JB, 143(3), 144C(13), 194C, 195, 220(6), 226(3) - Whether when Sec 80IA benefits are debatable, the Tribunal is right in granting conditional stay of high-pitch demand raised - Whether, to do justice to the cause of Revenue, Tribunal is right in directing the assessee to pledge its investments in subsidiaries as security with the AO for the balance demand. - Case disposed of: CHANDIGARH ITAT;

2011-TIOL-366-ITAT-MAD

M/s Rane Brake Lining Ltd Vs ITO, Chennai (Dated: April 21, 2011)

Income tax – Sections 14A, 80HHC, 80IB – Whether disallowance can be made u/s 14A for the interest on borrowed fund even if it is explained that the funds utilised for investments are not borrowed funds – Whether 90% of the rent recovered as sublet is to be excluded from the profit eligible for deduction u/s 80HHC while computing the deduction – Whether the deduction u/s 80HHC is to be allowed after reducing the deduction u/s 80IB. - Assessee's appeal partly allowed : CHENNAI ITAT;



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Where assessee submits details for loan taken

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IT : Where assessee had taken loan from certain concern and had submitted confirmation of said concern along with their PAN, copy of bank statement as well as cash book, it could be said that assessee had proved genuineness of said loan and no addition could be made under section 68 - [2011] 12 taxmann.com 5 (Agra - ITAT)(TM)

Explanation 1 to section 271(1)(c) would be attracted in case assessee make

Explanation 1 to section 271(1)(c) would be attracted in case assessee makes a bogus claim - [2011] 10 taxmann.com 97 (Ahd. - ITAT)

ISSUES CONCERNING TAX TREATY WITH MAURITIUS

ISSUES CONCERNING TAX TREATY WITH MAURITIUS

T.N. PANDEY

EX-CHAIRMAN CBDT

In the span of merely few months, many irons have been put by the Government in the fire because of various pressures to check black money, tax avoidance and evasion. These, inter-alia, relate to Direct Tax Avoidance Agreements (DTAA for short), where the exercises relate to revision of existing DTAAs, entering into new ones and negotiations for new series of exchange of information agreements. Such exercises are part of broader strategy of checking corruption, black money and tax evasion. Almost every day there is mention about these in media either from the Government's side or from other forums.

** ** **

DTAA with Mauritius [`M' for short]

2. This agreement based on UN Model Convention, with certain departures, was notified on 6th December, 1983 and has been the most controversial agreement concerning Direct Taxes, benefiting `M' substantially as a consequence of which, Foreign Direct Investment (FDI) and portfolio investments in companies (nearly 40 & 50 percent of total inflow) are being routed through this island country. `M' has become a big centre for treaty shopping, leading to tax escapement/evasion/avoidance. The agreement is on usual lines based on UN Model, but deviating from it in some vital respects.

Tax on capital gains

3. In the DTAA with `M', the main irritant for India is tax on capital gains. The DTAA spares investors, resident in `M' from capital gain tax on the sale of shares of Indian companies. This is because the tax treaty provides that capital gains arising from sale of such shares by `M' residents would be taxed only in that country and since it does not tax capital gains, the tax becomes zero. Because of this, persons from third countries do treaty shopping, routing their investments through `M' to escape tax. `M' has no large companies and persons of its own origin, who can invest in big way in India and get the treaty benefit. A study needs to be done to support the view that `M' has become merely a centre (conduit) for saving tax to other countries at India's cost.

** ** **

Besides the capital gains, negotiations are necessary in regard to furnishing of information concerning tax matters of interest to India, assistance in investigation of tax delinquency/frauds, bank details, assistance in recovery and other allied matters.

Actually, it would be appropriate to have a consolidated approach – not single out `M' only for treaty reforms and have negotiations with other countries also like Cyprus, Singapore, Netherlands, etc. To have uniform approach, instead of having separate JWGs, it would be more useful to have a single body for negotiations from India's side – a commission or a committee, specially constituted for this purpose. Further, provisions in the DTC, like GAAR, need to be incorporated/strengthened in such a way that India can be in a bargaining position – not under pressure of losing foreign investments routed through countries like `M'. India now is in a position to attract FDI/FII on its own strength. The uncertainty need to be set at rest expeditiously.
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Recent case laws

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2011-TIOL-363-ITAT-DEL + ca story

M/s Siel Ltd Vs DCIT, New Delhi (Dated: May 20, 2011)

Income Tax - Sections 37, 43B, CBDT Circular 601 of 1990 - Whether when assessee makes a claim u/s 43B, a CA's certificate in place of original tax challan is sufficient to prove that payment was deposited - Whether payment of excise duty on behalf of a going concern of which the assessee has undertaken the liabilities is revenue expense. - Assessee's appeal disallowed : DELHI ITAT;

2011-TIOL-362-ITAT-MUM

LIC Housing Finance Ltd Vs DCIT, Mumbai (Dated: April 29, 2011)

Income tax – Sections 10(33), 10(15), 14A, 143(1), 147, 148, Rule 8D – Whether where all the facts regarding the amount written off for non-convertible debentures are considered by the AO in the original assessment, reassessment proceedings cannot be initiated by issuing notice u/s 148 merely on change of opinion – Whether disallowance cannot be made u/s 14A by applying rule 8D for the period prior to A.Y. 2008-09. - Assessee's appeal allowed : MUMBAI ITAT;

2011-TIOL-361-ITAT-MAD

The Lakshmi Vilas Bank Ltd Vs Addl.CIT, Tiruchirapalli (Dated: May 6, 2011)

Income tax – Sections 36(1)(vii), 263 – Whether where the AO has considered all the points, on the basis of which the CIT initiated proceedings u/s 263, following the decision of the ITAT and High Court in the case of the assessee itself, proceedings initiated u/s 263 are not valid as it is not prejudicial to the interests of the Revenue. - Assessee's appeal allowed : CHENNAI ITAT;

2011-TIOL-360-ITAT-AHM

ACIT, Gandhinagar Vs Gujarat State Energy Generation Ltd (Dated: April 15, 2011)

Income tax – Sections 32, 80IA, 115JB – Whether the assessee which once opted for SLM method of depreciation, can change it to WDV by filing a valid revised return before the assessment is made – Whether the expenses for which the liability has crystallized during the year cannot be treated as prior period expenses – Whether the adjustment can be made in the book profit u/s 115JB for the items which are not mentioned specifically in the explanation to section 115JB – Whether the assessee is entitled to deduction u/s 80IA even when there is no positive income - Assessee's appeal partly allowed: AHMEDABAD ITAT;

2011-TIOL-359-ITAT-AHM

Shantaben Karshanbhai Patel Vs DCIT, Ahmedabad (Dated: December 31, 2010)

Income Tax - Sections 154, 244A(2), 246A - Whether the claim of interest simpliciter is appeallable order before the CIT(A) as per section 246A. - Assessee's appeal dismissed : AHMEDABAD ITAT;

Monetary limit applies in group cases also.

Monetary limit — In group cases also, each single case must be taken up individually to decide the monetary limits for filing appeal before High Court — as held by HPHC in CIT v Steinle Machine Fabric India — In favour of: Others ; ITA No. 36 of 2005

CIT v Steinle Machine Fabric India

High Court of Himachal Pradesh

I.T.A No. 36 of 2005

Deepak Gupta and Sanjay Karol, JJ.

Decided on: 6 May 2011

Counsel appeared:

Ms Vinay and Vandana Kuthiala, Advs. for the appellant .

Mr. Vishal Mohan, Adv. for the respondent

Deepak Gupta, J.(Oral)

This appeal was admitted on the following substantial question of law:-

“Whether the Ld. Tribunal was right in law in not considering the CIT’s main ground for order u/s 263 regarding the Assessing Officer’s failure to invoke the mandatory provisions of sub-sections (8) and (10) of section 801A (sic) and not giving its finding on this issue and yet set aside the order u/s 263 of the CIT. Assessee’s all sales had been made to the sister concern, M/s.Kandhari Beverages Pvt. Ltd. and many of the essential expenses were either very little or totally absent in the P&L account. It is matter of record that the Assessing Officer neither considered nor raised a query about this aspect and, therefore, the question of forming a view, much less a substantial one, by the A.O. did not arise.”

2. At the time of hearing of the appeal, Sh.Vishal Mohan, learned counsel for the respondent raised a preliminary objection that the appeal is not maintainable since the tax effect is less than 4 lacs.

3. In the present case, the entire declared income for the relevant year was Rs.3,94,839/- and, therefore, the tax effect is definitely much less than Rs.4 lacs. Reliance has been placed by Sh.Vishal Mohan, Advocate on Circular No.279/126/98-IT dated March 27, 2000 issued by the Central Board of Direct Taxes.

4. On the other hand, Sh.Vinay Kuthiala, learned counsel for the appellant- revenue submits that clause-3 of the instructions states that where a case involves a substantial question of law of importance or where the same question of law is involved in a number of cases then the appeal may be filed on merits without being hindered by the monetary limits.

5. Sh.Kuthiala in support of his contention has relied upon two judgments of Bombay High Court in Commissioner of Income Tax v Shivaji Works Ltd. 2007 (295) ITR 542 and Commissioner of Income Tax v Chhajer Packaging and Plastics P.Ltd. 2008 (300) LTR 180.

6. In our view, these judgments are not applicable. The Circular is specific that in group cases also, each single case must be taken up individually to decide the monetary limits. It appears that these instructions were issued to avoid unnecessary litigation and also litigation where the tax effect was much less and it waste time and money recovering small amounts but we hasten to add that dismissal of such appeals on the ground that the tax effect is low does not mean that we have given any decision on merits nor have we decided such questions of law. These questions can be decided in appropriate proceedings where the tax effect is more than the limit prescribed in the circular.

7. The argument of Sh. Kuthiala cannot be accepted since the instructions itself clearly state that the monetary limits would apply with reference to each case take singly. The Circular itself envisages that where group cases are involved, each case shall individually satisfy the monetary limits. No doubt, clause-3 of the instructions states that where a case involves a substantial question of law of importance or where the same question of law is involved in a number of cases then the appeal may be filed on merits without being hindered by the monetary limits. This clause envisages despite the effect being not within the monetary limits due to compelling reasons spelt out in this clause the revenue feels that it is necessary to have a judgment of the High Court. No doubt, if such important question is identified and the revenue makes out a case that it had taken a conscious decision to file an appeal, the appeal can be entertained.

8. In the present case, there was no such averment in the ground of appeal that any such conscious decision had been taken. However, we may clarify that we have disposed of the appeal on the ground of maintainability and have not touched the merits of the contentions and our decision shall not be treated as res judicate in any other proceedings. The appeal is disposed of in the aforesaid terms. No costs. .

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Flats which are acquired on 22-11-2001 and sold on 28-1-2003 are not long-t

Flats which are acquired on 22-11-2001 and sold on 28-1-2003 are not long-term capital asset, not liable for indexation - [2011] 10 taxmann.com 96 (Mum. - ITAT)

Interest attributable to borrowed funds diverted by assessee to its sister

Interest attributable to borrowed funds diverted by assessee to its sister concern, which was a finance company, without charging interest, were to be disallowed - [2011] 10 taxmann.com 108 (Ker.)

Foreign training expenses incurred on son of director, who is not even an e

Foreign training expenses incurred on son of director, who is not even an employee of company, is not an allowable expenditure - [2011] 10 taxmann.com 91 (Mum. - ITAT)

THE PROVISIONS OF SECTION 206AA(1) OF I. T. ACT, 1961 ARE ULTRA VIRES THE CONSTITUTION

THE PROVISIONS OF SECTION 206AA(1) OF I. T. ACT, 1961 ARE ULTRA VIRES THE CONSTITUTION-BEING DISCRIMINATORY

In order to strengthen permanent account number (PAN) mechanism, the Finance (No.2) Act, 2009 inserted section 206AA in the Income-tax Act, 1961 which came into effect from 01-04-2010. This section makes certain provisions relating to collection and recovery of tax to enforce certain requirements in relation to PAN. Sub-section (1) of the newly inserted section prescribes certain punitive rates to be imposed in case a deductee (i.e., a person from whose income tax is deducted at source) who fails to furnish his PAN to the deductor (i.e., to the person deducting such TDS). In this article, the author illustrates by giving examples that the quantum of penalty and/or the penal consequence is not equal in case of the various defaulting deductee and so, on the grounds of discrimination, the provisions of section 206AA(1) are ultra vires the Constitution.

Introduction

Section 206AA of the Income-tax Act, 1961 was introduced by the Finance (No. 2) Act, 2009 and it came into effect from 1-4-2010. This section makes certain provisions relating to collection and recovery of tax to enforce certain requirements in relation to permanent account number (PAN). This section has come into force with effect from 1-4-2010 and it is reproduced below for ready reference:

"206AA. [Requirement to furnish Permanent Account Number. (1) Notwithstanding anything contained in any other provisions of this Act, any person entitled to receive any sum or income or amount, on which tax is deductible under Chapter XVIIB (hereafter referred to as deductee) shall furnish his Permanent Account Number to the person responsible for deducting such tax (hereafter referred to as deductor), failing which tax shall be deducted at the higher of the following rates, namely:—

(i) at the rate specified in the relevant provision of this Act; or

(ii) at the rate or rates in force; or

(iii) at the rate of twenty per cent.

(2) No declaration under sub-section (1) or sub-section (1A) or sub-section (1C) of section 197A shall be valid unless the person furnishes his Permanent Account Number in such declaration.

(3) In case any declaration becomes invalid under sub-section (2), the deductor shall deduct the tax at source in accordance with the provisions of sub-section (1).

(4) No certificate under section 197 shall be granted unless the application made under that section contains the Permanent Account Number of the applicant.

(5) The deductee shall furnish his Permanent Account Number to the deductor and both shall indicate the same in all the correspondence, bills, vouchers and other documents which are sent to each other.

(6) Where the Permanent Account Number provided to the deductor is invalid or does not belong to the deductee, it shall be deemed that the deductee has not furnished his Permanent Account Number to the deductor and the provisions of sub-section (1) shall apply accordingly.]"

The Legislative Intent behind introducing the section

The purpose behind introducing section 206AA(1) has been stated in the Memorandum explaining the provision of the Finance (No. 2) Bill, 2009 as under :

"d. Improving compliance with provisions of quoting PAN through the TDS regime. - Statutory provisions mandating quoting of Permanent Account Number (PAN) of deductees in Tax Deduction at Source (TDS) statements exist since 2001 duly backed by penal provisions. The process of allotment of PAN has been streamlined so that over 75 lakh PANs are being allotted every year. Publicity campaigns for quoting PAN are being run since the last three years. The average time of allotment of PAN has come down to 10 calendar days. Therefore, non-availability of PAN has ceased to be an impediment. In a number of cases, the non-quoting of PAN's by deductees is creating problems in the processing of return of income and in granting credit for tax deducted at source, leading to delays in issue of refunds."

In order to strengthen the PAN mechanism, it is proposed to make amendments in the Income-tax Act to provide that any person whose receipts are subject to deduction of tax at source i.e., the deductee, shall mandatorily furnish his PAN to the deductor, failing which the deductor shall deduct tax at source at higher of the following rates

(i) the rate prescribed in the Act;

(ii) at the rate in force, i.e., the rate mentioned in the Finance Act; or at the rate of 20%.

Provisions Explained

From above, it is clear that the object of section 206AA(1) is to (a) ensure compliance with the PAN mechanism; (b) address problems associated with non-quoting (and not non-obtaining) of PAN, like processing of returns, claiming credit for TDS and granting of refund; and (c) ensure that the assessees do not give reasons like non-issuance of PAN as a reason for not furnishing it, keeping in mind that the PAN allotment machinery has been fully strengthened and streamlined.

** **
**

The sub-section (1) of section 206AA requires any person (hereinafter referred to as the 'deductee'), receiving any sum, income or amount which is liable to tax deduction at source (TDS in short), to furnish his PAN to the person responsible to deduct tax at source (hereinafter referred to as the 'deductor'). In case the deductee fails to furnish his PAN, the deductor is liable to deduct tax on the sum, income or amount ('income' in short) payable to the deductee, at a rate which is higher of:

(i) the rate specified in the Act;

(ii) the rate or rates in force; or

(iii) 20%.

The Provisions are discriminatory

It is clear from the aforesaid sub-section that it prescribes a rate of TDS by way of a punitive measure in case of default by a deductee in furnishing his PAN to the deductor. In cases where the rate specified in the Act and/or the rate/rates in force is less than 20%, the rate of TDS otherwise applicable would be enhanced up to 20% as a punitive measure. But where the rate specified in the Act and/or the rate or rates in force is more than 20%, this sub-section will be of no consequence and as such higher rates would not be further enhanced. In this way, all the defaulting deductees do not bear the same consequences. Given below are some examples in respect of same:

l Example 1

The sub-section discriminates between (a) the defaulting deductees in whose cases the rates of TDS are more than 20%; and (b) those in whose cases the rates of TDS are less. The defaulting deductees in whose case the rates of TDS are more than 20% there is no penal consequence and they are subjected to same rate of TDS in spite of section 206AA. There is no rationale for such a discriminatory treatment and, for this reason, the provisions of this sub-section are ultra vires the Constitution.

l Example 2

In following cases, rates of TDS in case of non-residents are lower than 20% :

Sl. No. Nature of payment Rate of TDS (exc: surcharge, cess, etc.)
1 Section 194LB – Payment by way of interest by infrastructure debt fund 5%
2 Section 195 – Income by way of long-term gains referred to in section 115E 10%
3 Section 195 – Income by way of short-term gains under section 111A 15%
4 Section 195 – Royalty where the agreement is made on or after June 1, 2005 10%
5 Section 195 – Fee for technical services where the agreement is made on or after June 1, 2005 10%
6 Section 196B – Income from Units 10%
7 Section 196C – Income from foreign currency bonds or GDR 10%

Apart from above, it is also observed that wherever the rates are lower than 20%, the same are sought to be enhanced to 20%. In this way, among various defaulting deductees, for the same nature of offence, someone is subject to higher penalty than the other. For example, in cases where rate of TDS is 5%, it is increased by four times and where it is 10%, it is twice the normal rate of TDS. Thus, for similar offences, the quantum of penalty in the shape of punitive rate is not equal in case of all the defaulting deductees and for this reason also, the provision of sub-section (1) is discriminatory and ultra vires the Constitution.

** **
**

It may be observed that wherever the rates are lower than 20%, the same are sought to be enhanced to 20%. In this way, among various defaulting deductees, for the same nature of offence, someone is subject to higher penalty than the other. For example, in cases where rate of TDS is 1%, it is increased by twenty times and where it is 10%, it is twice the normal rate of TDS. Thus, for similar offences, the quantum of penalty in the shape of punitive rate is not equal in case of all the defaulting deductees and, for this reason also, the provisions of sub-section (1) are discriminatory and ultra vires the Constitution.

recent - Case Laws

Income Tax - 2009 - TMI - 34176 - HC

Concept of Mutuality – Taxability of Income received from its members – Co-operative Housing Society - High Court held that concept of mutuality can be tested considering the followings (1) Is there any commerciality involved. (2) From the moneys received are the services offered in the nature of profit sharing or privileges, advantages and conveniences. (3) Are the participants and contributors identifiable and belong to the same class in the case of cooperative housing society. (4) Do the members have the right to share in the surplus and do they have a right to deal with its surpluses. - Once these tests are satisfied, there can be no doubt that the principle of mutuality will apply to a cooperative Housing Society which has its predominant activity, the maintenance of the property of the society which includes its building or buildings and as long as there is no taint of commerciality, trade or business – Transfer fee received from its members it not taxable.

Income Tax - 2009 - TMI - 34175 - HC

Recognition as Scientific and Industrial Research Organization (SIRO) - The aims and objects of the society inter alia includes research in planetary science, astronomy – astrophysics, solar physics and allied subjects. Apart from that other objects are to popularize science among the general public of our country, to conduct short courses on science, astronomy, geography for students and teachers in schools, colleges and universities, to Publish news letters/magazines etc. - The Ministry of Science and Technology, accorded to the Petitioner, recognition as Scientific and Industrial Research Organization (SIRO) – But CBDT refused to recognize u/s 35(1)(ii) – HC after setting aside the order of CBDT ordered the Board to reconsider the matter afresh.

Central Excise - 2009 - TMI - 34174 - HC

Order of the Settlement Commission – request to pay in installments – Extra ordinary jurisdiction of High Court - it is clear that as the order of settlement commission is final and mode of recovery is also set out therein - can a writ court exercising extra ordinary jurisdiction, when the settlement commission has thought it fit not to grant any installment, grant installments assuming that under section 32F(8) there is an implied power to grant installments. This court ordinarily, ought not to interfere in the exercise of its extra ordinary jurisdiction with the order passed by the Settlement Commission - the language of section 32F(10) as it earlier stood read with section 32(7) provided for installments. That is not the case now. - the legislature has expressly done away with the power to make payment by installments. – HC refused to grant relief to pay in installments.

Income Tax - 2009 - TMI - 34173 - HC

PSU – approval of COD before filing an appeal before tribunal - ITAT refused to admit the appeal as no COD approval was obtained – In the present case, the impugned order reveals that the Tribunal has assumed powers which it does not have, for determining whether the appeal is to be admitted or not. The Tribunal has lost sight of the fact that, both the assessee and the Revenue, are statutorily vested with a right under the Act by virtue of section 253(1), 253(2) and 253(4) of the Act to file an appeal or cross-objections. Such right granted by the statute cannot be divested by the Tribunal on an erroneous assumption of powers arrogated to itself under a mistaken belief of law - The appeals filed by the assessee and the Revenue before the Tribunal stand restored to the file of the Tribunal for being heard and decided afresh on the merits in accordance with law.

Income Tax - 2009 - TMI - 34172 - HC

Rate of Depreciation – 100% depreciation on certain goods - The table includes energy saving device in the context and for the purpose of encouraging industries to adopt energy saving measures - While it was possible, in the context of encouraging industrial activity, to bring within the net of exemption, manufacture of products which may even be remotely considered as "paper" – but the same reasoning can not be adopted here - since the table indicates its intention to afford depreciation at the rates mentioned only to the specifically listed equipments - It is not even proved that a drier of the kind mentioned herein is an energy saving device – tribunal is not correct to allow 100% depreciation on fluid bed drier.

Income Tax - 2009 - TMI - 34171 - HC

How to calculate ten years for claiming exemption u/s 80HH – tribunal allowed deduction u/s 80HH for the 11th year on the ground that for the first year there was no specific previous year – held that tribunal is incorrect in allowing deduction for the 11th year – sales tax does not form part of total turnover for the purpose of calculation of deduction under section 80HHC - interest accrued but had not become due in the present assessment year is not assessable to tax for the assessee following the mercantile system of accounting

Income Tax - 2009 - TMI - 34170 - HC

Industrial Undertaking - The expression "manufacture" or "production" are different expressions and the word "production" has a wider meaning - the word "production" under section 10B considering similar expression in section 80IB will have to be given this wider meaning, considering that the expressions are not defined in the Act but the expressions are used in the same Act. The only difference between section 80-IB and section 10B is that section 10B applicable to a 100 per cent. export oriented unit, whereas section 80-IB can be in respect of any unit – held that the cutting, polishing and sizing granites amounted to either manufacturing or processing and accordingly, the assessee was entitled for deduction under section 10B of the Income-tax Act.