ITR (TRIB) Volume 11 : Part 4 (Issue dated : 19-09-2011)

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

Volume 11 : Part 4 (Issue dated : 19-09-2011)

SUBJECT INDEX TO CASES REPORTED IN THIS PART

 

->> Bad debt --Deduction--Condition precedent--Writing off in accounting year--Resolution for writing off in subsequent year not relevant--Amount deductible as bad debt--Income-tax Act, 1961, s. 36-- Sashak Noble Metals Ltd. v. ITO (Mumbai) . . . 335

 

->> Business income --Remission or cessation of trading liability--Transfer of loan from sister-concern--No trading transaction--Creditor not acknowledging debt--Amount not assessable under section 41--Outstanding liability due to trading transaction becoming subsequently non-payable--Section 41 applicable--Amount to be added to business income of assessee--Income-tax Act, 1961, s. 41-- Sashak Noble Metals Ltd. v. ITO (Mumbai) . . . 335

 

->> Capital gains --Computation--Full value of consideration--Reference to Valuation Officer under section 142A for valuation of market value--Not permissible--No material to show assessee had received any sum in excess of that shown in sale deed--No material to show whether value shown in sale deed was higher or lower than stamp value--Direction to adopt value in accordance with section 50C--Income-tax Act, 1961, ss. 48, 50C, 142A-- Sumit Khurana v. Asst. CIT (Delhi) . . . 377

 

->> Charitable purpose --Charitable trust--Exemption--Registration of trust--Authorities to satisfy themselves about genuineness of activities of trust but not nature of activity by which income derived by trust--Trust formed to run hospital earnings from which to be used for charitable purpose--Assessee entitled to registration--Income-tax Act, 1961, ss. 12A, 12AA-- Guru Harkishan Medical Trust v. Director of Income-tax (Exemptions) (Delhi) . . . 361

 

->> Co-operative society --Special deduction--Interest received from credit facilities to members--Assessee not a credit society-- Not entitled to deduction--Income-tax Act, 1961, s. 80P(2)(a)(i)-- ITO v. Modern Engineers Construction Co-op. Society (Chennai) . . . 393

 

->> Penalty --Concealment of income--Additions made by Assessing Officer on account of disallowance of expenditure--No material to show concealment by assessee--Penalty not imposable--Income-tax Act, 1961, s. 271(1)(c)-- Deputy CIT v. Eagle Iron and Metal Industries Ltd. (Mumbai) . . . 384

 

->>Production of cinematograph films--Statement to be filed in Form 52A--Failure to file by due dates--Explanation that assessee under bona fide belief that form to be filed with return--Commissioner (Appeals) finding reasonable cause for delay and reducing penalty--Order attaining finality--Order of Commissioner (Appeals) confirmed--Income-tax Act, 1961, s. 272A(2)(c)-- Deputy CIT v. Dasari Narayana Rao (Chennai) . . . 403

 

->> Search and seizure --Block assessment--Assessment set aside by Tribunal with direction to decide afresh on basis of evidence found during course of search--Commissioner (Appeals) to follow directions issued by Tribunal--Income-tax Act, 1961, ss. 132(4), 158BC-- Krishna Terine P. Ltd. v. Asst. CIT (Ahmedabad) . . . 405

 

->>Block assessment--Income-tax authorities--Jurisdiction--Central Board of Direct Taxes--Powers--Joint Director substituting Deputy Commissioner--Only case of redesignation--Board has power to authorise Deputy Commissioner to carry out necessary searches--No fresh notification required--Income-tax Act, 1961, s. 132--General Clauses Act, 1897, s. 24-- Addl. CIT v. Dr. D. P. Agarwal (Lucknow) . . . 341

 

->>Block assessment--Last warrant of authorisation executed on 7-9-1999--Assessment order passed within limitation--Income-tax Act, 1961, ss. 132, 158BC, 158BE-- Addl. CIT v. Dr. D. P. Agarwal (Lucknow) . . . 341

 

->>Block assessment--Search prior to June 1, 2002--Surcharge in addition to income-tax leviable on undisclosed income--Proviso to section 113 clarificatory--Income-tax Act, 1961, ss. 113, 158BC-- Krishna Terine P. Ltd. v. Asst. CIT (Ahmedabad) . . . 405

 

->>Block assessment--Undisclosed income--Addition on unaccounted investment --No evidence found during search indicating assessee made investments--Addition to be deleted--Income-tax Act, 1961, s. 158BC-- Krishna Terine P. Ltd. v. Asst. CIT (Ahmedabad) . . . 405

 

->>Block assessment--Undisclosed income--Addition on unaccounted receivable and investment in computer--Matter remanded--Income-tax Act, 1961, s. 158BC-- Krishna Terine P. Ltd. v. Asst. CIT (Ahmedabad) . . . 405

 

->> Trust --Creation of trust--Committee empowered to create trust to manage affairs of charitable institutions--Delhi Sikh Gurudwaras Act, 1971, s. 24(iv)-- Guru Harkishan Medical Trust v. Director of Income-tax (Exemptions) (Delhi) . . . 361

 

SECTIONWISE INDEX TO CASES REPORTED IN THIS PART

->> Delhi Sikh Gurudwaras Act, 1971 :

 

S. 24(iv) --Trust--Creation of trust--Committee empowered to create trust to manage affairs of charitable institutions-- Guru Harkishan Medical Trust v. Director of Income-tax (Exemptions) (Delhi) . . . 361

 

 General Clauses Act, 1897 :

 

->> S. 24 --Search and seizure--Block assessment--Income-tax authorities--Jurisdiction--Central Board of Direct Taxes--Powers--Joint Director substituting Deputy Commissioner--Only case of redesignation--Board has power to authorise Deputy Commissioner to carry out necessary searches--No fresh notification required-- Addl. CIT v. Dr. D. P. Agarwal (Lucknow) . . . 341

 

Income-tax Act, 1961 :

->> S. 12A --Charitable purpose--Charitable trust--Exemption--Registration of trust--Authorities to satisfy themselves about genuineness of activities of trust but not nature of activity by which income derived by trust--Trust formed to run hospital earnings from which to be used for charitable purpose--Assessee entitled to registration-- Guru Harkishan Medical Trust v. Director of Income-tax (Exemptions) (Delhi) . . . 361

 

->> S. 12AA --Charitable purpose--Charitable trust--Exemption--Registration of trust--Authorities to satisfy themselves about genuineness of activities of trust but not nature of activity by which income derived by trust--Trust formed to run hospital earnings from which to be used for charitable purpose--Assessee entitled to registration-- Guru Harkishan Medical Trust v. Director of Income-tax (Exemptions) (Delhi) . . . 361

 

->> S. 36 --Bad debt--Deduction--Condition precedent--Writing off in accounting year --Resolution for writing off in subsequent year not relevant--Amount deductible as bad debt-- Sashak Noble Metals Ltd. v. ITO (Mumbai) . . . 335

 

->> S. 41 --Business income--Remission or cessation of trading liability--Transfer of loan from sister-concern--No trading transaction--Creditor not acknowledging debt--Amount not assessable under section 41--Outstanding liability due to trading transaction becoming subsequently non-payable--Section 41 applicable--Amount to be added to business income of assessee-- Sashak Noble Metals Ltd. v. ITO (Mumbai) . . . 335

 

->> S. 48 --Capital gains--Computation--Full value of consideration--Reference to Valuation Officer under section 142A for valuation of market value--Not permissible--No material to show assessee had received any sum in excess of that shown in sale deed--No material to show whether value shown in sale deed was higher or lower than stamp value--Direction to adopt value in accordance with section 50C-- Sumit Khurana v. Asst. CIT (Delhi) . . . 377

 

->> S. 50C --Capital gains--Computation--Full value of consideration--Reference to Valuation Officer under section 142A for valuation of market value--Not permissible--No material to show assessee had received any sum in excess of that shown in sale deed --No material to show whether value shown in sale deed was higher or lower than stamp value--Direction to adopt value in accordance with section 50C-- Sumit Khurana v. Asst. CIT (Delhi) . . . 377

 

->> S. 80P(2)(a)(i) --Co-operative society--Special deduction--Interest received from credit facilities to members--Assessee not a credit society--Not entitled to deduction-- ITO v. Modern Engineers Construction Co-op. Society (Chennai) . . . 393

 

->> S. 113 --Search and seizure--Block assessment--Search prior to June 1, 2002--Surcharge in addition to income-tax leviable on undisclosed income--Proviso to section 113 clarificatory-- Krishna Terine P. Ltd. v. Asst. CIT (Ahmedabad) . . . 405

 

->> S. 132 --Search and seizure--Block assessment--Last warrant of authorisation executed on 7-9-1999--Assessment order passed within limitation-- Addl. CIT v. Dr. D. P. Agarwal (Lucknow) . . . 341

 

->> S. 132(4) --Search and seizure--Block assessment--Assessment set aside by Tribunal with direction to decide afresh on basis of evidence found during course of search--Commissioner (Appeals) to follow directions issued by Tribunal-- Krishna Terine P. Ltd. v. Asst. CIT (Ahmedabad) . . . 405

 

->> S. 142A --Capital gains--Computation--Full value of consideration--Reference to Valuation Officer under section 142A for valuation of market value--Not permissible--No material to show assessee had received any sum in excess of that shown in sale deed--No material to show whether value shown in sale deed was higher or lower than stamp value--Direction to adopt value in accordance with section 50C-- Sumit Khurana v. Asst. CIT (Delhi) . . . 377

 

->> S. 158BC --Search and seizure--Block assessment--Assessment set aside by Tribunal with direction to decide afresh on basis of evidence found during course of search--Commissioner (Appeals) to follow directions issued by Tribunal-- Krishna Terine P. Ltd. v. Asst. CIT (Ahmedabad) . . . 405

 

->>Search and seizure--Block assessment--Last warrant of authorisation executed on 7-9-1999--Assessment order passed within limitation-- Addl. CIT v. Dr. D. P. Agarwal (Lucknow) . . . 341

 

->>Search and seizure--Block assessment--Search prior to June 1, 2002--Surcharge in addition to income-tax leviable on undisclosed income--Proviso to section 113 clarificatory-- Krishna Terine P. Ltd. v. Asst. CIT (Ahmedabad) . . . 405

 

->>Search and seizure--Block assessment--Undisclosed income--Addition on unaccounted investment--No evidence found during search indicating assessee made investments--Addition to be deleted-- Krishna Terine P. Ltd. v. Asst. CIT (Ahmedabad) . . . 405

 

->>Search and seizure--Block assessment--Undisclosed income--Addition on unaccounted receivable and investment in computer--Matter remanded-- Krishna Terine P. Ltd. v. Asst. CIT (Ahmedabad) . . . 405

 

->> S. 158BE --Search and seizure--Block assessment--Last warrant of authorisation executed on 7-9-1999--Assessment order passed within limitation-- Addl. CIT v. Dr. D. P. Agarwal (Lucknow) . . . 341

 

->> S. 271(1)(c) --Penalty--Concealment of income--Additions made by Assessing Officer on account of disallowance of expenditure--No material to show concealment by assessee--Penalty not imposable-- Deputy CIT v. Eagle Iron and Metal Industries Ltd. (Mumbai) . . . 384

 

->> S. 272A(2)(c)--Penalty--Production of cinematograph films--Statement to be filed in Form 52A--Failure to file by due dates--Explanation that assessee under bona fide belief that form to be filed with return--Commissioner (Appeals) finding reasonable cause for delay and reducing penalty--Order attaining finality--Order of Commissioner (Appeals) confirmed--Deputy CIT v. Dasari Narayana Rao (Chennai) . . . 403

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Project also has commercial shops, it is entitled to Sec 80IB(10) benefits

 

Income tax - Whether when project also has commercial shops, it is entitled to Sec 80IB(10) benefits if it was commenced prior to amendment in Sec 80IB from April 1, 2005 - Yes, rules ITAT

PUNE, JULY 15, 2011: THE question before the Tribunal is - Whether when the project has also commercial shops, it is entitled to deduction u/s 80IB(10) if it was commenced prior to the amendment brought into section 80IB(10) w.e.f. 1st April, 2005. Yes is the Tribunal's answer.

Facts of the case

AO denied deduction claimed u/s. 80 IB(10) on the basis that section 80IB was not applicable to a project which contained shop/commercial establishment and it did not remain a `Housing Project' - the assessee had constructed 66 shops being commercial premises included in the project admeasuring 9404 sq. ft. which was as per the assessee was about 11.88% but as AO about 12.41%.

CIT (A) confirmed the disallowance observing that the commercial construction was more than 5% or 2000 sq.ft. as per the amended provisions of Sec. 80IB (10) w.e.f. 1.4.2005. In A.Y. 2005-06, the amended provision was very much in operation.

Assessee contended that prior to the amendment in Section 80 IB(10) w.e.f. 1.4.2005, there was no restriction on the area for commercial purpses. By Finance Act 2004, the Legislature provided a ceiling of 2000 sq.ft. or 5% of the total area whichever is less. Hence, if a project was commenced prior to A.Y. 2005-06, there was no limit prescribed and accordingly, the assessee's project had satisfied all the conditions laid down in Sec. 80 IB (10). Sec. 80IB(10) states that the profit derived from the "housing project" is entitled to deduction. However, the words "housing project" is not defined in the Section. Therefore, the definition had to be considered in its general meaning and as understood in common parlance.

Further contended that CBDT vide its clarifications dt. 4th May 2001, clarified that in "housing project" certain shopping or commercial area would be mandatory – any project which was approved as a housing project by local authority would be eligible. When the assesees started the project, the old provisions of Section 80 IB(10) were on the Statute in which there was no ceiling on the portion of the commercial area – the housing project could include the commercial portion along with the residential portion. Hence, in view of the decision of the Special Bench in the case of Bramha Associates (2009-TIOL-218-ITAT-PUNE-SB), the assessees were entitled to deduction u/s. 80 IB (10).

Regarding applicability of amended provision to those projects where the project was started and completed before 1.4.2005, the assessee contended that the issue was directly covered by the decision of Mumbai Bench of the Tribunal in the case of Hiranandani Akruti J.V. v/s. DCIT, ITA No. 5416/Mum/2009 (A.Y. 2006-07) wherein it was held that the amended Section would apply to the projects started after 1.4.2005. If the project was commenced earlier, the assessee had not known that the Legislature would put such a restriction in future – the assessees were given an assurance by the Legislature that the profits from the project would be eligible for deduction even if, the project contained commercial portion and the approval was obtained before 1.4.2005 – the deduction had to be given on the basis of promissory estoppal also – it was further contended that if the assessee had followed the WIP method, the income from the project would had been taxable in the earlier years as the project was completed earlier to the amendment and in that case, as per the old provision, the assessee would had been eligible for the deduction. But, just because the assessee has followed the "Project Completion Method "in these cases, the deduction is being denied because it falls in A.Y. 2005-06.

Without prejudice it was contended that on the portion of commercial area exceeding limit under Clause (d), the deduction u/s. 80 IB(10) might not be granted but on the balance project, the deduction should be allowed.

Revenue contended that the amended provisions refer to all projects approved before 31.3.2007 and does not differentiate between Housing Project approved before 2004 or 2003. Had the Legislature wanted to make a distinction between projects commenced prior to 1.4.2005 and completed after the amendment by introducing clause (d) to Sec. 80IB(10) then the Legislature would have said so in clear terms.

In rejoinder the assessee contended that the deduction was continued and extended to the new project by extending the time limit for approval of the projects itself indicates that there was no intention to withdraw or cancel the deduction u/s. 80 IB(10).

After hearing both the parties, the ITAT held that,

++ by applying the principle of harmonious construction to interpret the provisions under Sub-section (10) to Section 80IB as amended w.e.f. 1.4.2005 the legislature always intended that the project must be approved by the local authority, thus in those approved projects where construction has been started much earlier than 1.4.2005, the assessees are required to complete the plan as it has been approved. As putting such assessees to complete the plan meeting out condition under clause (d) of the subsection would lead into absurdity and impossibility for the assessee and in contradiction to the provisions u/s. 80 IB(10) as prevailed at the time of approval and commencement of the construction of the project well before 1.4.2005;

++ in the case of Hiranandani Akruti J.V V/s. DCIT, the Mumbai Bench held that the law as existed when the assessee submitted its proposal and permission for carrying out the development was accorded and when the assessee commenced development is to be applied. In the present cases, in the case of Opel Shelter the project was commenced on 23.2.2001 and even completed on 14.5.2004, similarly in the case of D.S. Kulkarni and Associates, the project was commenced on 12.4.2001 and completed in the month of November 2003. Thus, the assessees were supposed to complete the projects as per the law as existed in the A.Y. 2001-02 in the case of Opel Shelters and in the A.Y. 2002-03 in the case of D.S. Kulkarni and Associates. Thus following the decision in the case of Hiranandani Akruti JV V/s. DCIT it is held that amended provisions under Section 80 IB(10) w.e.f. 1.4.2005 are not applicable in the present case, hence assessees are eligible for the claimed deduction u/s. 80 IB (10) of the Act.

growing of plant in lab by applying scientific method is an agriculture income

Whether growing of plant in lab by applying scientific method of tissue culture can be claimed as agricultural activity, exempt under I-T Act - NO, rules ITAT

BANGALORE, JULY 19, 2011: THE issues before the Tribunal are - Whether growing of plant in lab by applying scientific method of tissue culture can be termed as agricultural activity - Whether, to qualify as agricultural income, it is necessary for an operation to be carried on soil. Tribunal's answer for the first question is NO and YES for the latter one.

Facts of the case

Assessee is a company engaged in the business of growing and exporting of ornamental plants. It filed its return of income for the assessment year 2005-06 claiming the entire income as agricultural income and also exempt from Income-tax. The AO after visiting the premises of the assessee company and discussing the matter with Director of the company came to the conclusion that the assessee was carrying on tissue culture methodology and by this process, some of the activities carried on by the assessee are non-agriculture and, therefore, the entire income from the sale of plants cannot be termed as agricultural income. He, therefore, bifurcated the income into agricultural income and business income in the ratio of 70:30. The CIT(A) partly allowed the appeal of the assessee by restricting the business income to the tune of 10% only.

On appeal, the Tribunal held that,

++ it can be seen that the plant tissue culture is used to reproduce clones of a plant to get multiple plants with the same traits by placing various tissues of the mother plant in containers and required medium, which is definitely not consisting of land or soil. Such multiple plants which are generated or produced in the laboratories are then transferred to soil and after their adaptation to the natural conditions, they are allowed to be grown into mature plants to be sold to the customers;

++ thus, it can be seen that the subsequent argument of the assessee that the laboratories are only meant to keep the demonstration plants under controlled condition is not entirely correct. Where any operation is not carried out on land, such an operation cannot be called as agricultural operation. When the assessee is not carrying on the cultivation of land or plants in the soil in pots, the operations cannot be called as agricultural operations. The medium is not the soil or basic operations of agriculture such as tilling of the land, sowing of the seeds etc. are not carried out. Of course, once the sampling has been planted in the soil and is let to grow into a mature plant, this operation is definitely agricultural operation and income there-from has to be treated as agricultural income;

++ thus, we are in agreement with the finding of the assessing authority that the entire operation of the assessee is not agricultural income and, therefore, the entire income cannot be treated as agricultural income. AO had held that 30% of the income is non-agricultural income but he has not given any basis for such bifurcation. The criteria to bifurcate the income into agricultural and non agricultural income would be to take into account the expenditure incurred by the assessee on the micro propagation i.e tissue culture operation carried out by it and the expenditure incurred by it on growing of the plants after they are planted in the soil and in this proportion of expenditure only income can also be bifurcated into agricultural and non agriculture income. It is further observed that the assessee has filed an affidavit stating that no operations are carried on in the laboratories. This fact also needs verification by the AO. Therefore, the AO is directed to make a field inspection of the assessee's laboratory to see and observe the activities carried on by the assessee.

Notice u/s 148 issued within time , but served after limitation is valid !

Notice u/s 148 issued within time , but served after limitation is valid !

In previous posting , readers attention was brought on the invalidity of assessment if it was based on a notice u/s 143(2) which was issued in time , but served after time limitation . Contrary to the said  position is the issue of notice  u/s 148 of the I T Act. The notice u/s 148 is issued by A.O when he records reasons for reopening an assessment u/s 147 of the I .T.Act. Section 149 of the I T Act prescribes time limit within which notice us/ 148 can be issued.

Notice u/s 148

The question on validity of issue of notice us/ 148 which was issued in time , but served after the time limitation  recently came up before ITAT , Agra bench in ITO vs Sikandar Lal Jain reported in  45 SOT 113 [2011] . The tribunal held the service of notice even after the limitation date as valid if it was issued within time.
The decision of Tribunal was based on the decision of Hon'ble Supreme Court in the case of R.K. Upadhyaya v. Shanabhai P. Patel, 166 ITR 163 (SC) in which it was held that -

"The scheme of the 1961 Act so far as notice for reassessment is concerned is quite different. What used to be contained in section 34 of the 1922 Act has been spread out into three sections, being sections 147, 148 and 149, in the 1961 Act. A clear distinction has been made out between "issue of notice" and "service of notice" under the 1961 Act. Section 149 prescribes the period of limitation. It categorically prescribes that no notice under section 148 shall be issued after the prescribed limitation has lapsed. Section 148(1) provides for service of notice as a condition precedent to making the order of assessment. Once a notice is issued within the period of limitation, jurisdiction becomes vested in the Income-tax Officer to proceed to reassess. The mandate of section 148(1) is that reassessment shall not be made until there has been service. The requirement of issue of notice is satisfied when a notice is actually issued. In this case, admittedly the notice was issued within the prescribed period of limitation as March 31, 1970, was the last day of that period. Service under the new Act is not a condition precedent to conferment of jurisdiction on the Income-tax Officer to deal with the matter but it is a condition precedent to the making of the order of assessment. The High Court, in our opinion, lost sight of the distinction and under a wrong basis felt bound by the judgment in Banarsi Debi v. ITO [1964] 53 ITR 100. As the Income-tax Officer had issued notice within limitation, the appeal is allowed and the order of the High Court is vacated. The Income-tax Officer shall now proceed to complete the assessment after complying with the requirements of law."

Settled Position on issue of notice u/s 148

If the notice u/s 148 is issued within time , the notice is valid despite the fact that the said notice is served after the end of time for issue of notice.

Delhi High Court: Search Assessment u/s 153A Does Not Require Issue of Notice U/s 143(2)

Issue of notice u/s 143(2) before passing search assessment order has been controversial issue . This is for simple reason that  no clear provision regarding issue of notice has been given in the Income T Act in case of search proceeding u/s 153A . Therefore, among many grounds on which counsel for assessee challenge order by A.O u/s 153A is issuance of notice u/s 143(2).

Notice in Search Case u/s 153A

In recent past , Tribunals have given verdict that in case of search proceeding u/s 153A also , the notice u/s 143(2) is necessary . In fact , ITAT, Agra , in its order dt 30/11/2010 in case of Narendra Singh vs ITO 138 TTJ 615 held that notice u/s 143(2) is mandatory in case of search case u/s 153A.
However, Delhi High Court in a very recent judgment in case of Ashok Chadha vs CIT held that the notice u/s 143(2) is not mandatory for search assessment u/s 153A.
Search case issue before Delhi High Court

"(a) Whether the issue of notice under Section 143(2) of the Income Tax Act is mandatory for finalization of assessment under Section 153A? (b) Whether the findings of the authorities below upholding addition of Rs.10 lac of cash seized from Mr. D.S. Rawat in the hands of the Assessee was perverse and required to be set aside? "

The Court held on the issue of notice u/s 143(2) in case of search assessment u/s 153A as under

11. It is also to be noted that Section 153A provides for the procedure for assessment in case of search or requisition. Sub section (1) starts with non-obstante clause stating that it was 'notwithstanding? anything contained in sections 147, 148 and 149, etc. Clause(a) thereof provides for issuance of notice to the person searched under Section 132 or where documents etc are requisitioned under Section 132(A), to furnish a return of income. This clause nowhere prescribes for issuance of notice under Section 143(2). Learned counsel for the assessee/appellant sought to contend that the words, "so far as may be applicable" made it mandatory for issuance of notice under Section 143(2) since the return filed in response to notice under Section 153A was to be treated as one under Section 139. Learned counsel relies upon R. Dalmia v CIT (supra) wherein the question of issue of notice under Section 143(2) was examined with reference to Section 148 by the Supreme Court in the context of Section 147. The Apex Court held as under:
"As to the argument based upon Sections 144-A, 246 and 263, we do not doubt that assessments under Section 143 and assessments and reassessments under Section 147 are different, but in making assessment and re-assessments under Section 147 the procedure laid down in Sections subsequent to Section 139, including that laid down by Section 144B, has to be followed."
12. The case of R. Dalmia v CIT (supra) primarily was with regard to applicability of section 144B and Section 153 (since omitted with effect from 01.04.1989) to the assessment made under section 147 and 148 and thus cannot be said to be the decision laying down the law regarding mandatory issue of notice under Section 143(2).
13. The words "so far as may be" in clause (a) of sub section (1) of Section 153A could not be interpreted that the issue of notice under Section 143(2) was mandatory in case of assessment under Section 153A. The use of the words, "so far as may be" cannot be stretched to the extent of mandatory issue of notice under Section 143(2). As is noted, a specific notice was required to be issued under Clause (a) of sub-section (1) of Section 153A calling upon the persons searched or requisitioned to file return. That being so, no further notice under Section 143(2) could be contemplated for assessment under Section 153A.
14. No specific notice was required under section 143(2) of the Act when the notice in the present case as required under Section 153 (A) (1) (a) of the Act was already given. In addition, the two questionnaires issued to the assessee were sufficient so as to give notice to the assessee, asking him to attend the office of the AO in person or through a representative duly authorized in writing or produce or cause to be produced at the given time any documents, accounts, and any other evidence on which he may rely in support of the return filed by him.

In nutshell, the controversy regarding the issue of notice u/s 143(2) in case of search assessment u/s 153A has been set to rest by Hon'ble Delhi High Court.

Section 9(1)(vi), Mauritius

(2010) 34 (II) ITCL 508 (Bang `B' Trib)

Velankani Mauritius Ltd. & Ors. v. Dy. DIT

ORDER

These two appeals are filed by the assesses, for the common assessment year 2005-06, These appeals are directed against the orders of the Commissioner (Appeals)-IV, at Bangalore, dated. 28-8-2009 and arise out of assessment orders passed under section 143(3) row with section 147 of the Income Tax Act, 1961.

2. The assessee company M/s. Velankani Mauritius Ltd., is a company registered in Mauritius. The other company M/s. Bydesigns Inc is a company registered in USA. The assesses do not have a Permanent Establishment in India as per Article 5 of DTAA between India and Mauritius and Article 12 of DTAA between India and USA.

3. The assesses are basically involved in the supply of the software purchased from the manufacturers to the clients located in India. During the previous year relevant to the assessment year under appeal, the assesses had supplied off-the-shelf shrink-wrapped software to Infosys Technologies Ltd., (ITL) in India. The assessee did not find any reason to declare any income in India in the hands of the assesses for the reason that the software sold by the company to Indian entities were shrink-wrapped off-the-shelf software which is only the sale of copies of copyrighted articles. The assessees, therefore, assumed that the transactions did not fall within the purview of `Royalty' as defined under section 9(1)(vi) of the Income Tax Act, 1961 and filed returns declaring NIL income.

4. In the income-escaping assessments, the assessing officer took the view that the sale of the software to Indian entities generated royalties in the hands of the assessee companies and, therefore, they are liable for taxation. He, accordingly, completed the assessment by determining positive income by way of making additions which were confirmed in first appeals. Aggrieved, the assesses are in appeals before us.

5. The first common ground raised by both the assesses herein is that the Commissioner (Appeals) has erred in confirming the action of the assessing officer in reopening the assessment under section 147 r.w.s. 143(3) of the Income Tax Act, 1961. It is the case of the assesses that the reopening of the assessments under section 147 is bad in law.

6. On merits of the issue, the common ground raised by both the assesses is that the Commissioner (Appeals) has erred in confirming the action of the assessing officer in treating the sale of software as income from royalty chargeable under the Income Tax Act/DTAA and thus erred in making additions for the purpose of assessments in the hands of the assesses. It is the case of the assesses that the remittances did not fall under the purview of' Royalty' as defined under section 9(1)(vi) of the Income Tax Act, 1961/relevant DTAA.

7. We heard Shri. Arvind Sonde, the learned Advocate appearing for the assesses and Smt. Preeti Garg, the learned Commissioner of Income-tax, appearing for the Revenue, in great detail.

8. In fact, on a similar issue, the High Court of Karnataka had an occasion to decide over the question of applicability of Section 195 in the case of CIT & Ors. v. Samsung Electronics Co. Ltd. & Ors. (2010) 32 (I) ITCL 169 (Karn-HC) : (2010) 320 ITR 209 (Karn) : (2009) 185 Taxman 313 (Karn), on which decision, the Revenue has placed great reliance. In fact, the decision of the Tribunal was reversed by the Hon'ble Karnataka High Court in the above decision. But on reading through the judgement passed by the Hon'ble Karnataka High Court, we find that the Hon'ble Court has considered only the issue confining to the application of section 195 with reference to the responsibility of the assessee in deducting tax at source before making remittances to non-residents. Even though the court has held in favour of the Revenue on the application of the TDS provisions, the court has made it very clear that it has not examined the question regarding the tax liability of the non-resident assesses in respect of the payments received from the assesses in India. The court has made it clear that it was examining only the legality of the demand raised by the Revenue in terms of the provisions of Section 201 of the IT Act, 1961. An extraction from the judgement in paragraph 78 is made below :

"78. For the reasons stated above, while we refrain from answering the questions raised in these appeals relating to the actual determination of the tax liability of the non-resident assesses in respect of the payments that they had received from the resident payers figuring as respondents in all these appeals, we answer all other questions relating to the correctness or otherwise of the orders passed by the Tribunal in the negative in favour of the Revenue and against the assessee, allow the appeals, set aside the orders passed by the Tribunal and restore the orders passed by the assessing authorities and affirming orders passed by the first appellate authorities, so far as it relates to confirming the demand raised on all these respondents-assessees in terms of the provisions of section 201 of the Act for the failure of the respondents-assessees to comply with the requirement of section 195(1) of the Act"

9. Therefore, it is to be seen that the issue raised in these cases has to be considered outside the limited scope of the judgement delivered by the Hon'ble jurisdictional High Court in the case of Samsung Electronics Co. Ltd. (2010) 32 (I) ITCL 169 (Karn-HC) : (2010) 320 ITR 209 (Karn) : (2009) 185 Taxman 313 (Karn).

10. A very similar issue in similar circumstances was considered by a larger bench of the ITAT, Delhi Bench ` A' (Special Bench) in the case of Motorola Inc v. Dy. CIT (2005) 5 (II) ITCL 2 (Del `A' Trib) (SB) : (2005) 95 ITD 269 (Del `A' Trib) (SB). After considering the nature of similar sales, the Larger Bench held that the system supplied by the assessee comprising of the hardware and the software could handle a particular number subscribers. If the number of subscribers went beyond the installed capacity, then the cellular operator had a right under the supply agreement to supply additional hardware or software. The Bench continued to observe that handset which is supplied by the subscriber from the market contains several functions which perhaps the IT authorities had in mind when they stated that a part of the software itself was loaded to the handsets. It is common knowledge that a person may purchase any brand of handset from the market and still have access to mobile telephony which belies the belief of the IT authorities that a part of the software supplied by the assessee is loaded on to the handset with the subscriber. Thus, the cellular operator did not transfer or load any part of the software as to the SIM card or the handset of the subscriber. That established that the software supplied by the assessee to the cellular operator was installed on the hardware and no part of it was loaded on the SIM card or the handset of the subscriber. The Tribunal held that the crux of the issue was whether the payment was for a copyright or for a copyrighted article. If it was for a copyright, it should be classified as `Royalty' both under the Income-tax Act and under the DTAA and it would be taxable in the hands of the assessee on that basis. If the payment was for a copyrighted article, then it only represented the purchase price of the article and, therefore, could not be considered as Royalty either under the IT Act or under the DTAA.

[Emphasis, here printed in italics, supplied]

11. In the light of the rule declared by the larger bench as stated above in the case of Motorola Inc., we have to see in the present cases that a case of royalty does not arise because the payments were made for the sale of copyrighted articles.

12. The very same principle has been upheld by the Authority for Advance Rulings in the case of Airports Authority of India (2010) 323 ITR 211 (AAR), where they have held that the earnings of contract is only purchase of certain copyrighted software on outright basis and when there is no PE in India, royalty income does not arise either within the framework of Income-tax Act or under the realm of DTAA. In the present case, there is no doubt that both the assesses do not have any PE in India.

13. Exactly similar issue was considered by ITAT, Bangalore Bench in the case of Sonata Software Ltd. v. DCIT (2006) 6 SOT 700 (Bang-Trib), in their order dated. 28.4.2005. Here also, software packages were brought in India for the purpose of distributing to ultimate users and imports were made from non-residents. The Tribunal held that the payments partook the character of purchase and sale of goods; and as there is no PE in India, it could be concluded that no income accrued or deemed to accrue or arise in India.

14. The above decisions do in fact draw immense support from the judgement of the Hon'ble Supreme Court rendered in the case of Tata Consultancy Services v. State of Andhra Pradesh (2004) 271 ITR 401 (SC). In the said decision, the Apex Court has held that a software programme may consist of various commands which enable the computer to perform designated tasks. The copyright may remain with the originator of the programme, but the moment copies are made and marketed, it becomes goods which are assessable to Sales-tax. The Court continued to observe that even intellectual property once it is put to a media whether be in the form of books of canvas or computer disks or cassettes, would become "goods".

15. Therefore, in the facts and circumstances of the case, and in the light of the above binding decisions, we find that the sale of software cannot be treated as income from royalty either under the IT Act or under the terms of DTAA. Therefore, the addition made in the case of M/s. Velankani Mauritius Ltd., of Rs. 1,74,60,000 and of Rs.96,35,600 in the case of M/s. Bydesign Solutions Inc. are hereby deleted.

16. As these appeals have been determined on the merits of the issue, we have not adjudicated the legal ground of reopening of the assessments, as it will be only academic.

17. In the result, these two appeals filed by the assesses are allowed.

Order pronounced on Monday, the 31st May, 2010, at Bangalore.

__._,_.___

__,_._,___

Whether when agency agreement between assessee and non-resident continues

Whether when agency agreement between assessee and non-resident continues even after expiry but no royalty is paid, compensation paid for formal termination of contract is akin to loss of profit making apparatus, and thus, is capital receipt - NO: ITAT

MUMBAI, AUG 23, 2011: THE issue before the Tribunal is - Whether when the agency agreement between the assessee and the non-resident continues even after expiry but no royalty is paid during this period, compensation paid to the assessee after many years later for formal termination of the agreement is akin to loss of profit-making apparatus, and thus, is capital receipt. NO, rules the ITAT.

Facts of the case

The assessee company, engaged in the business of sales and manufacture of vibration analysing equipments, had entered into a joint venture agreement with IRD Mechananalysis Inc. USA in March 1979, renewed in October 1990, whereby the assessee was entitled to make use of the trade name / patents of IRD, USA and its associate concerns besides being licensed to manufacture for sale of certain products in India. The company had thus established its market presence in India under the name of "IRD Mechanalysis". The assessee had also entered into a separate Sales Representative Agreement with IRD, U.K. in respect of goods and products produced by the UK company, which were not manufactured by the assessee in India. The agreement had continued since January 1989, having been renewed in 1992, under which the assessee company received commission for sales. The joint venture agreement had expired in 1992 but continued thereafter without the approval of the Central Government until it was terminated in 2000-01, whereby no further royalty was paid, and the assessee was duly compensated for the termination of the joint venture. The sales representative agreement was terminated during the assessment year 2003-04.

The assessee had claimed the compensation received for termination of the joint venture as a capital receipt exempt from tax as it was for loss of capital or intangible asset. Following the cessation of collaboration, in view of the non-availability of technical assistance hitherto rendered by M/s Entek IRD UK, the assessee had made payment to its sister concern M/s Concast India Ltd, towards design engineering consultancy and technical support for submission of quotations for large value tender enquiries and claimed this amount as professional fees. The assessee had also claimed deduction on commission payments made to M/s Mistry Engineers, a proprietary concern of the relative of one of the directors.

The AO disallowed the professional fees paid to Concast India on the ground that there was no evidence to prove whether such services were taken by the assessee. It was held that the assessee merely handled Sales Representation for Entek IRD and had not obtained any consultancy from them towards designs for tender quotation in the last few years. Besides being unable to prove the genuineness of the transaction, the assessee company already employed a good enough number of engineers and technical personnel as its own employees whereby there was no business requirement for such consultancy. The entire technical fees paid to Concast India were disallowed. The AO also disallowed the sales commission paid to Mistry Engineers on the ground that the assessee failed to furnish the bills as required besides which it had its own large team of qualified personnel to carry out the job of sales and services. This payment of commission was thus unreasonable and unwarranted and disallowed under section 40A(2). The AO also disallowed the compensation received by the assessee on termination of the joint venture. The assessee being unable to file a copy of the joint venture agreement which expired in 1992, the AO held that the assessee had no joint venture with the foreign collaborator during the year 2001-02 and 2002-03, the period when the separation from M/s Entek IRD International Ltd., U.K. had occurred. Thus the assessee company had been acting as trading agent on behalf of Entek IRD International of UK and the termination was of the agency and not that of any joint venture, corroborated by the non-payment of any royalty, as required in the case of joint venture.

In appeal before the CIT(A) the assessee submitted that while the consultancy fees paid by the assessee were assessed to tax as income in the hands of Concast India, as business expenses these were disallowed. The CIT(A) allowed the claim holding that Concast India had rendered the services as there was no engineer engaged for designing in the assessee company. Payment had been made for business purpose and was hence allowable as business expenditure. Similarly, the commission paid to M/s Mistry Engineers had been allowed earlier and accepted as genuine, whereby there was no justification for making this disallowance. Both these disallowances were deleted. However, ruling in favour of the Revenue, the CIT(A) confirmed the taxability of the compensation received by the assessee towards termination of collaboration under section 28(ii), holding that there was no joint venture collaboration in existence during the relevant assessement years as no royalty had been paid by the assessee to Entek IRD of UK. Therefore the sum, received from Entek IRD U.K. was not on account of a termination of joint venture which had already expired in the year 1992.

Having heard the cross appeals, the Tribunal held that,

++ regarding the consultancy fees paid by the assessee, in response to the CIT(A)'s query, the AO had specifically stated that the evidences of services rendered by Concast India had been verified and found in order. If the AO had considered the payment as unreasonable, under sec 40A(2), he should have determined the reasonable charges, having regard to the market rate for such services. Revenue had not brought in any further evidence whereby the CIT(A) decision was confirmed regarding the allowability of the professional fees paid to M/s. Concast India;

++ regarding commission payment to M/s Mistry Engineers, the AO had accepted the evidence and similar commission payment by the assessee to the same party had also been accepted by the department. There was no further evidence to doubt the commission payment. The order of the CIT(A) deleting this disallowance was therefore upheld on account of consultancy charges paid to M/s Concast India and on account of commission paid to M/s Mistry Engineers. Thus the appeal filed by the Revenue was dismissed;

++ regarding the taxability of the compensation, the assessee had claimed that the income earning apparatus of the company had been lost on the termination of the joint venture agreement, impairing the complete manufacturing apparatus and trading structure of the assessee company from gaining any income. But the facts proved otherwise. The assessee had not renewed the collaboration agreement but taken the help of M/s Concast India for providing the technical knowhow for continuation of the business. This showed that the termination of collaboration was replaced by technical consultancy support from M/s Concast India. The royalty payable to M/s Entek IRD, UK for the technical assistance was replaced by technical fees, which had been upheld as business expenditure. Under the circumstances therefore, the joint venture had not resulted in any serious impairment of the profit making apparatus of the assessee, which had continued the business. Further, the collaboration agreements did not provide for payment of compensation on termination. Therefore, the payment made by M/s. Entek IRD was towards the termination of the agency agreement which was terminated during the year under appeal. Hence the amount received by the assessee was business income under section 28(ii). The CIT(A) order, upholding the payment as a revenue receipt, was therefore confirmed and the appeal of the assessee dismissed.

ITR HIGHLIGHTS ISSUE DATED 19-9-2011 Volume 337 Part 2

INCOME TAX REPORTS (ITR) HIGHLIGHTS

 

ISSUE DATED 19-9-2011

Volume 337 Part 2

 

    HIGH COURT JUDGMENTS

 

|->> Disclosure u/s. 132(4) : Income included in return and tax paid : Not a case of concealment of income : CIT v. Bhandari Silk Store (P&H) p. 153

 

|->> Interest on delayed payment of enhanced compensation : Inference of cash system of accounting : Taxable in year of receipt : CIT v. Karambir Singh (P&H) p. 159

 

|->> Tribunal finding transaction bogus and sustaining addition : Finding of fact : Papneja Traders v. CIT (P&H) p. 172

 

|->> Consideration not arising out of business but is long-term capital gains : S. 28(va) does not apply : CIT v. Mediworld Publications P. Ltd. (Delhi) p. 178

 

|->> Block assessment : Addition solely on basis of estimate by Valuation Officer not valid : CIT v. Kantilal B. Kansara (HUF) (Guj) p. 187

 

|->> Reassessment after four years to disallow deduction on ground it was capital expenditure not valid : Parle Sales and Services P. Ltd. v. ITO (Guj) p. 203

 

|->> No evidence that assessee had given cash to person searched or had received commission : Block assessment of assessee not valid : CIT v. Radhey Shyam Bansal (Delhi) p. 217

 

|->> Undisclosed income : Failure by assessee to prove that concession was as a result of intimidation, duress and coercion : No evidence that confession made as a result of mistaken belief of law or facts : Asst. CIT v. Hukum Chand Jain (Chhattisgarh) p. 238

 

|->> Compounding of offences not possible after filing complaint : Anil Batra v. Chief CIT (Delhi) p. 251

 

AUTHORITY FOR ADVANCE RULINGS

 

|->> Service of conducting seismic surveys and providing onshore seismic data acquisition and other associated services : Taxable u/s. 44BB : Bergen Oilfield Services AS, Norway, In re p. 167

 

|->> Employees of non-resident deputed to Indian subsidiary for performing managerial functions : Salary and benefits paid to expatriate employees by non-resident employer and reimbursed by Indian subsidiary are fees for included services accruing to non-resident : Verizon Data Services India P. Ltd., In re p. 192

 

|->> Tax resident of Norway providing sea logistics services for ONGC fall with s. 44BB : Siem Offshore Inc., In re p. 207

 

STATUTES AND NOTIFICATIONS

 

|->> C. B. D. T. Circulars :

 

    Circular No. 5 of 2011, dated August 16, 2011-Income-tax deduction from salaries during the financial year 2011-12 under section 192 of the Income-tax Act, 1961 p. 37

 

JOURNAL

 

|->> Unfair not to consider human body as plant in Income-tax assessments in business or profession (T. N. Pandey, Retd. Chairman, CBDT) p. 19

 

NEWS-BRIEF

 

|->> DTC would come into force from April next year

 

    The Finance Minister hoped that the Direct Taxes Code (DTC), which seeks to replace the Income-tax Act of 1961, would come into force from April 1, 2012. The DTC is an ambitious tax reform that will replace the half a century old direct tax laws.

 

    On the Goods and Services Tax (GST), he said, "We are on track . . . there has been some progress".

 

    He said both the Centre and the Empowered Committee of State Finance Ministers were in talks for implementation of the GST regime.

 

    Besides Parliament, the GST Bill needs to be cleared by half of the State Assemblies. Once implemented, GST would subsume most of the indirect taxes, like excise duty.

 

    On economic prospects this fiscal, the Finance Minister said agricultural output is expected to be good. Besides, a better show by the core sector industries would help the country in achieving economic growth in the coming quarters.

 

    While the Reserve Bank has pegged the economic growth for 2011-12 at 8 per cent, the Prime Minister's Economic Advisory Council has estimated it at 8.2 per cent.

 

    The Indian economy expanded at the slowest pace in six quarters by 7.7 per cent. in the first (April-June) quarter of the current fiscal. It was 8.8 per cent. in the corresponding period last fiscal.

 

    The output of eight infrastructure industries rose at its fastest pace in 15 months in July at 7.8 per cent., against 5.7 per cent. in the corresponding period last fiscal. [Source : www.economictimes.com dated September 2, 2011]

 

|->> IT-Agents carry firearms to crack tax evaders and money laundering

 

    "The Special Agents and agents will be able to carry firearms after the Directorate of Criminal Investigation (DCI) is operationalised in the Income-tax Department soon," a top officer of the Department, privy to the development, said.

 

    The Finance Ministry has recently notified bringing under one umbrella the intelligence and criminal investigation units of the Income-tax Department to effectively deal with terror financing cases and transactions that pose threat to national security.

 

    The Department will now recruit Special Agents and Agents (Criminal Investigation) under the new wing, half of whom would be recruited or brought on deputation from premier investigative agencies and police organisations of the country.

 

    The DCI will be headed by the Director General of Intelligence (Income-tax) and was notified in May this year to tackle the menace of blackmoney with cross-border ramifications.

 

    The new arrangement, first in Income-tax Department's history, will be duly notified. [Source : www.financialexpress.com dated September 7, 2011]

 

|->> India Signs DTAA with Uruguay

 

    The Agreement will provide tax stability to the residents of both countries, facilitate mutual economic cooperation and stimulate the flow of investment, technology and services.

 

    The Government of the Republic of India signed a Double Taxation Avoidance Agreement (DTAA) with the Oriental Republic of Uruguay for the avoidance of double taxation and for the prevention of fiscal evasion with respect to taxes on income and on capital on September 8, 2011. The Agreement was signed by the Chairman, Central Board of Direct Taxes on behalf of the Government of India and by the Ambassador of Uruguay to India, on behalf of the Oriental Republic of Uruguay.

 

    The DTAA provides that business profits will be taxable in the source state if the activities of an enterprise constitute a permanent establishment in that state. Such permanent establishment includes a branch, factory, etc. Profits of a construction, assembly or installation projects will be taxed in the state of source if the project continues in that state for more than six months.

 

    Profits derived by an enterprise from the operation of ships or aircraft in international traffic shall be taxable in the country of residence of the enterprise. Dividends, interest and royalty income will be taxed both in the country of residence and in the country of source. However, the maximum rate of tax to be charged in the country of source will not exceed 5% in the case of dividends and 10% in the case of interest and royalties. Capital gains from the sale of shares will be taxable in the country of source and tax credit will be given in the country of residence.

 

    The Agreement further incorporates provisions for effective exchange of information including banking information and assistance in collection of taxes between tax authorities of the two countries in line with internationally accepted standards including anti-abuse provisions to ensure that the benefits of the Agreement are availed of by the genuine residents of the two countries.

 

    The Agreement will provide tax stability to the residents of India and Uruguay and facilitate mutual economic cooperation as well as stimulate the flow of investment, technology and services between India and Uruguay. [Source : www.pib.nic.in dated September 8, 2011]

Penalty dies with deceased - no cause of recovery from legal heirs -

Penalty dies with deceased – no cause of recovery from legal heirs – As for duty liability, same is recoverable from legal representative to extent of property of deceased coming to hands of legal representative – Stay granted: CESTAT

MUMBAI, AUG 27, 2010: IN the case of Mrs. Nidhi N.Gupta vs. CCE, Mumbai-V, [2008-TIOL-597-CESTAT-MUM] the CESTAT had held thus – "Attachment of property - legal heir of the deceased Director claims that the property is in the name of the late Director and not the company & hence cannot be attached - Tribunal restrains the Dept. from taking further action ."

So also, in the case of Manjit Sethi vs. Collector of Customs, Chandigarh, the Tribunal had in its Order No. 259/94-A, dated 14-9-1994 observed thus -

"Generally penalty dies with the deceased. It is settled principle that penalty cannot be imposed after death and even if it was imposed but not recovered during his life time, the same cannot be recovered from the legal heirs. In other words, penalty cannot be imposed after death of the concerned person and if imposed the same cannot be recovered from the legal heir."

The present application/appeal consists of a mix of the aforesaid legal situations.

The original appellant died during the pendency of the appeal and his wife is now prosecuting the appeal in terms of an order passed by this Bench under rule 22 of the CESTAT (Procedure) Rules, 1982.

The present application seeks waiver of pre-deposit and stay of recovery in respect of the duty and penalty involved in this case. In adjudication of a show-cause notice, the Commissioner confirmed demand of duty of over Rs.5.46 crores against the original appellant and also imposed on him equal amount of penalty under section 114A of the Customs Act, besides a penalty of Rs.2.5 crores on him under section 112 of the Act.

The counsel for the appellant submitted that there can be no penal liability on the legal heir/representative of the deceased appellant.

To this, the Bench observed that in view of the Order of the Calcutta High Court in the case of Taraknath Gayen and others vs. CEGAT [C.O. No. 10344(W) of 1986, issued on 7-5-1987] penalty amount is not recoverable from the legal representatives of accused; imposition of penalty is intended to penalise the accused, therefore, recovery of penalty from the legal representatives would amount to punishing the legal representatives. The Bench, therefore, opined that that the appellant is entitled to waiver of pre-deposit and stay of recovery in respect of the penalties imposed by the Commissioner.

In relation to duty liability, the Counsel claimed support from a Stay Order of the Tribunal vide Raj & Co. vs. Commissioner 2006-TIOL-1607-CESTAT-MAD, wherein waiver and stay were granted to the legal representative of the deceased-assessee considering the submission of amicus curie to the effect that, where the assessee had died before the finalization of the assessment, the duty liability did not survive. It was also submitted that the present appellant (wife of the deceased) had, in an affidavit, affirmed that no estate was left by the deceased. This affidavit was filed in July, 2009. It was further submitted that the Patna High Court decision in Civil Writ Jurisdiction, Case No. 2905 of 1980, decided on 20-11-1985, Bhagwan Devi Banka & Others vs. R.B.Sinha and Others had held that duty recoverable from a person, who was no more, was recoverable from his legal representative to the extent of property of deceased coming to the hands of the legal representative. Inasmuch as since in the present case, no property of the deceased husband has come to the appellant's (wife) hands, nothing is recoverable from her towards the duty liability of the deceased. Moreover, an amount of ` 34 lakhs paid by the deceased was lying with the department and in view of the above it is prayed that waiver of pre-deposit and stay of recovery be granted in respect of the duty amount as well.

The Bench was satisfied with the submissions and while noting that no "counter" had been filed by the Revenue vis-à-vis the affidavit filed by the deceased's wife, it opined that it had no option but to grant waiver and stay of recovery in respect of the duty amount as well.

And, it was ordered accordingly.

In this world, nothing can be said to be certain except death and taxes – Benjamin Franklin, Nov, 13, 1789.

Where assessee-firm paid certain amount to retiring partners in terms of re

 

Where assessee-firm paid certain amount to retiring partners in terms of retirement deed, it did not create any tangible or intangible asset in its books of account on which depreciation under section 32(1)(ii) was allowable

Where assessee claimed deduction in respect of interest paid on funds borrowed for purpose of making payment to retiring partners of firm, in view of fact that continuing partners had taken a conscious view that retiring partners should be paid for safeguarding interests of firm and for purpose of better commercial expediency, interest in question was to be allowed under section 36(1)(iii) - [2011] 12 taxmann.com 504 (Mum. - ITAT)