ITR (TRIB) Volume 11 : Part 5 Issue dated : 26-09-2011, SUBJECT INDEX

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

Volume 11 : Part 5 (Issue dated : 26-09-2011)

SUBJECT INDEX TO CASES REPORTED IN THIS PART

->> Charitable purposes --Registration--Society running educational institutions--No proof that funds applied for non-charitable or religious purposes--Direction to grant to retrospective registration--Income-tax Act, 1961, s. 12AA-- Karandhai Tamil Sangam v. CIT (Chennai) . . . 430

->> Charitable trust --Registration--Denial of registration as activities confined to one religion--Finding that activities not only religious but also charitable--Assessee to be given status of religious and charitable trust--Income-tax Act, 1961, s. 12A-- Kasyapa Veda Research Foundation v. CIT (Cochin) . . . 468

->> Company --Computation of profits under section 115JB--Provision for bad debts--Amount to be added to book profits--Income-tax Act, 1961, s. 115JB-- Magnum Power Generation Ltd. v . Deputy CIT (Delhi) . . . 493

->> Income from house property --Business income--Income from property or business income--Assessee constructing residential units and dealing in them--Amount received on lease of some units--Not from business--Income from property--Income-tax Act, 1961, ss. 22, 28-- Roma Builders P. Ltd. v. Joint CIT (Mumbai) . . . 503

->> Income from undisclosed sources --Survey in premises of assessee--Defects in books of account--No nexus between un-accounted profit earned and investment made in properties outside books of account--Set off allowed--Amounts to reducing additional income declared by assessee--Set off not justified--Income-tax Act, 1961-- V. R. Textiles v. Joint CIT (Ahmedabad) . . . 476

->> Income-tax survey --Accounting--Rejection of books of account--Defects in books of account--Entire undisclosed sales cannot be treated as profit of assessee--Commissioner (Appeals) applying gross profit rate--Proper--Income-tax Act, 1961, s. 145-- V. R. Textiles v. Joint CIT (Ahmedabad) . . . 476

->> Industrial undertaking --Generation and supply of power--Amount received from sale of scrap and writing back of credit balances--No finding whether credit balances related to business and whether scrap was generated by industrial undertaking--Matter remanded--Income-tax Act, 1961, s. 80-IA-- Magnum Power Generation Ltd. v. Deputy CIT (Delhi) . . . 493

->> ----Generation and supply of power--Special deduction under section 80-IA--Agreement for supply of power--Agreement providing that if power not required compensation charges to be paid--Amount received for deemed generation of power--Entitled to special deduction under section 80-IA--Income-tax Act, 1961, s. 80-IA-- Magnum Power Generation Ltd. v. Deputy CIT (Delhi) . . . 493

->> Non-resident --Advance tax--Interest--Not payable where entire income liable to deduction of tax at source--Income-tax Act, 1961, ss. 195, 234B-- Samsung Heavy Industries Co. Ltd. v. Addl. DIT (International Taxation) (Delhi) . . . 513

->> ----Taxability in India--Turnkey project in India--Permanent establishment--Project office in Mumbai involved in activities of project from commencement--Contract indivisible--No material to show project office concerned only with activities outside India--Mode of accounting of expenses of project office not decisive--Mumbai office constituted permanent establishment--Ad hoc attribution of percentage of income to permanent establishment not permissible--Matter remanded for determination on basis of material --Income-tax Act, 1961, s. 144C--Double Taxation Avoidance Agreement between India and Korea, art. 5-- Samsung Heavy Industries Co. Ltd. v. Addl. DIT (International Taxation) (Delhi) . . . 513

->> Penalty --Concealment of income--Discrepancy in accounts--Amount surrendered because auditors raided and books of account could not be produced--Explanation of assessee reasonable--Penalty cannot be levied--Income-tax Act, 1961, s. 271(1)(c)-- ITO v. Dr. V . Muralikrishnan (Chennai) . . . 443

->> Perquisites --Employees stock option--Equity warrant certificates--Not by themselves securities but merely granting option to obtain shares--Date of exercise of option is date of acquisition of shares not date of certificate--Warrrant issued in February 1999 and assessee exercising option in April 1999--Perquisites arise and taxable in financial year 1999-2000 relevant to assessment year 2000-01--Income-tax Act, 1961, s. 17(2)(iiia) -- Deputy CIT v. Vijay Gopal Jindal (Delhi) . . . 451

->> Reassessment --Notice--Notice after four years--Validity--No failure to disclose material facts necessary for assessment--Returns accompanied by audited accounts--Special deduction under section 80HHC allowed after considering material on record--Reassessment proceedings after four years to reduce special deduction--Barred by limitation--Income-tax Act, 1961, ss. 80HHC, 147, 148-- Deputy CIT v. Purolator India Ltd. (Delhi) . . . 434

SECTIONWISE INDEX TO CASES REPORTED IN THIS PART

->> Double Taxation Avoidance Agreement between India and Korea :

art. 5 --Non-resident--Taxability in India--Turnkey project in India--Permanent establishment--Project office in Mumbai involved in activities of project from commencement--Contract indivisible--No material to show project office concerned only with activities outside India--Mode of accounting of expenses of project office not decisive--Mumbai office constituted permanent establishment--Ad hoc attribution of percentage of income to permanent establishment not permissible--Matter remanded for determination on basis of material-- Samsung Heavy Industries Co. Ltd. v. Addl. DIT (International Taxation) (Delhi) . . . 513

Income-tax Act, 1961 :

->> S. 12A --Charitable trust--Registration--Denial of registration as activities confined to one religion--Finding that activities not only religious but also charitable--Assessee to be given status of religious and charitable trust-- Kasyapa Veda Research Foundation v. CIT (Cochin) . . . 468

->> S. 12AA --Charitable purposes--Registration--Society running educational institutions--No proof that funds applied for non-charitable or religious purposes--Direction to grant to retrospective registration-- Karandhai Tamil Sangam v. CIT (Chennai) . . . 430

->> S. 17(2)(iiia) --Perquisites--Employees stock option--Equity warrant certificates--Not by themselves securities but merely granting option to obtain shares--Date of exercise of option is date of acquisition of shares not date of certificate--Warrrant issued in February 1999 and assessee exercising option in April 1999--Perquisites arise and taxable in financial year 1999-2000 relevant to assessment year 2000-01-- Deputy CIT v. Vijay Gopal Jindal (Delhi) . . . 451

->> S. 22 --Income from house property--Business income--Income from property or business income--Assessee constructing residential units and dealing in them--Amount received on lease of some units--Not from business--Income from property-- Roma Builders P. Ltd. v. Joint CIT (Mumbai) . . . 503

->> S. 28 --Income from house property--Business income--Income from property or business income--Assessee constructing residential units and dealing in them--Amount received on lease of some units--Not from business--Income from property-- Roma Builders P. Ltd. v. Joint CIT (Mumbai) . . . 503

->> S. 80-IA --Industrial undertaking--Generation and supply of power--Amount received from sale of scrap and writing back of credit balances--No finding whether credit balances related to business and whether scrap was generated by industrial undertaking--Matter remanded-- Magnum Power Generation Ltd. v. Deputy CIT (Delhi) . . . 493

->> ----Industrial undertaking--Generation and supply of power--Special deduction under section 80-IA--Agreement for supply of power--Agreement providing that if power not required compensation charges to be paid--Amount received for deemed generation of power--Entitled to special deduction under section 80-IA-- Magnum Power Generation Ltd. v. Deputy CIT (Delhi) . . . 493

->> S. 80HHC --Reassessment--Notice--Notice after four years--Validity--No failure to disclose material facts necessary for assessment--Returns accompanied by audited accounts--Special deduction under section 80HHC allowed after considering material on record--Reassessment proceedings after four years to reduce special deduction--Barred by limitation-- Deputy CIT v. Purolator India Ltd. (Delhi) . . . 434

->> S. 115JB --Company--Computation of profits under section 115JB--Provision for bad debts--Amount to be added to book profits-- Magnum Power Generation Ltd. v. Deputy CIT (Delhi) . . . 493

->> S. 144C --Non-resident--Taxability in India--Turnkey project in India--Permanent establishment--Project office in Mumbai involved in activities of project from commencement--Contract indivisible--No material to show project office concerned only with activities outside India--Mode of accounting of expenses of project office not decisive--Mumbai office constituted permanent establishment--Ad hoc attribution of percentage of income to permanent establishment not permissible--Matter remanded for determination on basis of material-- Samsung Heavy Industries Co. Ltd. v. Addl. DIT (International Taxation) (Delhi) . . . 513

->> S. 145 --Income-tax survey--Accounting--Rejection of books of account--Defects in books of account--Entire undisclosed sales cannot be treated as profit of assessee--Commissioner (Appeals) applying gross profit rate--Proper-- V. R. Textiles v. Joint CIT (Ahmedabad) . . . 476

->> S. 147 --Reassessment--Notice--Notice after four years--Validity--No failure to disclose material facts necessary for assessment--Returns accompanied by audited accounts--Special deduction under section 80HHC allowed after considering material on record--Reassessment proceedings after four years to reduce special deduction--Barred by limitation-- Deputy CIT v. Purolator India Ltd. (Delhi) . . . 434

->> S. 148 --Reassessment--Notice--Notice after four years--Validity--No failure to disclose material facts necessary for assessment--Returns accompanied by audited accounts--Special deduction under section 80HHC allowed after considering material on record--Reassessment proceedings after four years to reduce special deduction--Barred by limitation-- Deputy CIT v. Purolator India Ltd. (Delhi) . . . 434

->> S. 195 --Non-resident--Advance tax--Interest--Not payable where entire income liable to deduction of tax at source-- Samsung Heavy Industries Co. Ltd. v. Addl. DIT (International Taxation) (Delhi) . . . 513

->> S. 234B --Non-resident--Advance tax--Interest--Not payable where entire income liable to deduction of tax at source-- Samsung Heavy Industries Co. Ltd. v. Addl. DIT (International Taxation) (Delhi) . . . 513

->> S. 271(1)(c) --Penalty--Concealment of income--Discrepancy in accounts--Amount surrendered because auditors raided and books of account could not be produced--Explanation of assessee reasonable--Penalty cannot be levied-- ITO v. Dr. V. Muralikrishnan (Chennai) . . . 443

.......

=============================================================================

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.

=========================================================================

ITR ISSUE DATED 26-09-2011 Volume 337 Part 3, SUBJECT INDEX TO CASES REPORTED IN THIS PART

INCOME TAX REPORTS (ITR)

Volume 337 : Part 3 (Issue dated 26-9-2011)

SUBJECT INDEX TO CASES REPORTED IN THIS PART

HIGH COURTS

->> Advance tax --Interest payable by assessee--Default in payment of advance tax--Withdrawal of investment allowance--Fiction under section 32A(5) applicable to levy of interest --Income-tax Act, 1961, ss. 32A(5), 234B-- I. C. I. India Ltd . v. CIT (Cal) . . . 327

->> Assessing Officer --Powers of Assessing Officer--Remand by Commissioner (Appeals) in respect of specific issues--Assessing Officer has no power to consider a new issue--Income-tax Act, 1961, ss. 32A, 43(3), 250-- Deputy CIT (Asstt.) v. Surat Electricity Co. Ltd. (Guj) . . . 271

->> Bad debt --Condition precedent for allowance--Effect of amendment of section 36 w.e.f. 1-4-1989--Writing off amount is sufficient--Assessee need not prove that debt had been bad--Income-tax Act, 1961, s. 36(1)(vii), (2)(iii)-- Asst. CIT v. Pullen Pump Industries (Guj) . . . 294

->> Capital gains --Business income--Purchase of shares and sale within a short time--Finding that shares had been purchased as investment--Gains assessable as capital gains--Income-tax Act, 1961, ss. 28, 45-- CIT v. Consolidated Finvest and Holding Ltd . (Delhi) . . . 264

->> Current repairs --Business expenditure--Meaning of current repairs--Capital or revenue expenditure--Breakdown of machinery after long use--Expenditure on overhauling and reconditioning machinery--Not deductible as current repairs or revenue expenditure--Expenditure on minor repairs of many machines--Deductible--Income-tax Act, 1961, ss. 31, 37-- Bharat Gears Ltd. v. CIT (Delhi) . . . 368

->> Depreciation --Rate of depreciation--Motor vehicle--Difference between lease and hire--Assessee leasing motor vehicles to clients--Not engaged in business of hire--Not entitled to higher rate of depreciation--Income-tax Act, 1961, s. 32--Income-tax Rules, 1962, Appendix I-- Bhagwati Appliance v. ITO (Guj) . . . 286

->> Exemption --Difference between sections 10 and 11--Agricultural marketing committee--Law applicable--Effect of insertion of clause (26AAB) in section 10 w.e.f. 1-4-2009--Provision not retrospective--Committee entitled to exemption under section 10(26AAB) from 1-4-2009--Income-tax Act, 1961, ss. 10, 11-- CIT v. Agriculture Market Committee (AP) . . . 299

->> Interpretation of taxing statutes --Rule against retrospectivity--Declaratory legislation-- CIT v. Agriculture Market Committee (AP) . . . 299

->> Investment allowance --Withdrawal of allowance--Conditions precedent--Transfer of entire division in slump sale within eight years--No price separately indicated for plant and machinery--Section 32A(5) applicable--Withdrawal of investment allowance--Justified--Income-tax Act, 1961, s. 32A(5)-- I. C. I. India Ltd . v. CIT (Cal) . . . 327

->> Penalty --Concealment of income--Failure to furnish return of income when amounts to concealment--Effect of Explanation 3 to section 271(1)--Conditions enumerated in the Explanation are cumulative--Notice under section 148 within period stipulated in section 153(1)--Explanation not applicable--Penalty could not be levied--Income-tax Act, 1961, s. 271-- Chhaganlal S Uteriya v. ITO (Guj) . . . 350

->> Precedent --Effect of decision of Supreme Court in CIT v. Gupta Global Exim P. Ltd. [2008] 305 ITR 132 (SC)-- Bhagwati Appliance v. ITO (Guj) . . . 286

->> Residence --Requirement of stay in India for specified period in previous year--Effect of Explanation (a) to section 6(1)(c)--Employment includes self-employment--Indian citizen doing business in foreign country and staying in India for one hundred and seventy-seven days in the previous year--To be treated as non-resident--Income-tax Act, 1961, s. 6(1)(c)-- CIT v. O. Abdul Razak (Ker) . . . 267

->> Revision --Application for revision--Rejection of application without considering merits--Levy of penalty not valid--Rejection of application not justified--Income-tax Act, 1961, s. 264-- Chhaganlal S Uteriya v. ITO (Guj) . . . 350

->> Search and seizure --Assessment of third person--Condition precedent--Satisfaction of Assessing Officer that undisclosed income found during search belonged to third person--Cash belonging to third person seized from his employee in premises of searched person--No evidence to indicate satisfaction of Assessing Officer that cash seized belonged to third person--Notice under section 158BD to third person--Not valid--Income-tax Act, 1961, s. 158BD-- Chandrakantbhai Amratlal Thakkar v. Deputy CIT (Guj) . . . 258

->> ----Block assessment--Penalty--Scope of section 158BFA--Substantial addition to income returned under section 158BC--Tax not paid--Penalty to be levied--Commissioner allowing payment of tax in instalments--Not relevant--Income-tax Act, 1961, s. 158BFA-- CIT v. Heera Construction Co. P. Ltd. (Ker) . . . 359

AUTHORITY FOR ADVANCE RULINGS

->> Non-resident --Transfer to non-resident subsidiary of shares in Indian company without consideration--Not taxable in India--Transfer pricing provisions not applicable--No requirement of deduction of tax at source--But liable to file return--Income-tax Act, 1961, ss. 45, 47(iii), 92 to 92F, 139, 195-- Deere and Company, In re. . . 277

SECTIONWISE INDEX TO CASES REPORTED IN THIS PART

Income-tax Act, 1961 :

->> S. 6(1)(c) --Residence--Requirement of stay in India for specified period in previous year--Effect of Explanation (a) to section 6(1)(c)--Employment includes self-employment--Indian citizen doing business in foreign country and staying in India for one hundred and seventy-seven days in the previous year--To be treated as non-resident-- CIT v. O. Abdul Razak (Ker) . . . 267

->> S. 10 --Exemption--Difference between sections 10 and 11--Agricultural marketing committee--Law applicable--Effect of insertion of clause (26AAB) in section 10 w.e.f. 1-4-2009--Provision not retrospective--Committee entitled to exemption under section 10(26AAB) from 1-4-2009-- CIT v. Agriculture Market Committee (AP) . . . 299

->> S. 11 --Exemption--Difference between sections 10 and 11--Agricultural marketing committee--Law applicable--Effect of insertion of clause (26AAB) in section 10 w.e.f. 1-4-2009--Provision not retrospective--Committee entitled to exemption under section 10(26AAB) from 1-4-2009-- CIT v. Agriculture Market Committee (AP) . . . 299

->> S. 28 --Capital gains--Business income--Purchase of shares and sale within a short time--Finding that shares had been purchased as investment--Gains assessable as capital gains-- CIT v. Consolidated Finvest and Holding Ltd .(Delhi) . . . 264

->> S. 31 --Current repairs--Business expenditure--Meaning of current repairs--Capital or revenue expenditure--Breakdown of machinery after long use--Expenditure on overhauling and reconditioning machinery--Not deductible as current repairs or revenue expenditure--Expenditure on minor repairs of many machines--Deductible-- Bharat Gears Ltd. v. CIT (Delhi) . . . 368

->> S. 32 --Depreciation--Rate of depreciation--Motor vehicle--Difference between lease and hire--Assessee leasing motor vehicles to clients--Not engaged in business of hire--Not entitled to higher rate of depreciation-- Bhagwati Appliance v. ITO (Guj) . . . 286

->> S. 32A --Assessing Officer--Powers of Assessing Officer--Remand by Commissioner (Appeals) in respect of specific issues--Assessing Officer has no power to consider a new issue-- Deputy CIT (Asstt.) v. Surat Electricity Co. Ltd. (Guj) . . . 271

->> S. 32A(5) --Advance tax--Interest payable by assessee--Default in payment of advance tax--Withdrawal of investment allowance--Fiction under section 32A(5) applicable to levy of interest-- I. C. I. India Ltd . v. CIT (Cal) . . . 327

->> ----Investment allowance--Withdrawal of allowance--Conditions precedent--Transfer of entire division in slump sale within eight years--No price separately indicated for plant and machinery--Section 32A(5) applicable--Withdrawal of investment allowance--Justified-- I. C. I. India Ltd . v. CIT (Cal) . . . 327

->> S. 36(1)(vii) --Bad debt--Condition precedent for allowance--Effect of amendment of section 36 w.e.f. 1-4-1989--Writing off amount is sufficient--Assessee need not prove that debt had been bad-- Asst. CIT v. Pullen Pump Industries (Guj) . . . 294

->> S. 36(2)(iii) --Bad debt--Condition precedent for allowance--Effect of amendment of section 36 w.e.f. 1-4-1989--Writing off amount is sufficient--Assessee need not prove that debt had been bad-- Asst. CIT v. Pullen Pump Industries (Guj) . . . 294

->> S. 37 --Current repairs--Business expenditure--Meaning of current repairs--Capital or revenue expenditure--Breakdown of machinery after long use--Expenditure on overhauling and reconditioning machinery--Not deductible as current repairs or revenue expenditure--Expenditure on minor repairs of many machines--Deductible-- Bharat Gears Ltd. v. CIT (Delhi) . . . 368

->> S. 43(3) --Assessing Officer--Powers of Assessing Officer--Remand by Commissioner (Appeals) in respect of specific issues--Assessing Officer has no power to consider a new issue-- Deputy CIT (Asstt.) v. Surat Electricity Co. Ltd. (Guj) . . . 271

->> S. 45 --Capital gains--Business income--Purchase of shares and sale within a short time--Finding that shares had been purchased as investment--Gains assessable as capital gains-- CIT v. Consolidated Finvest and Holding Ltd .(Delhi) . . . 264

->> ----Non-resident--Transfer to non-resident subsidiary of shares in Indian company without consideration--Not taxable in India--Transfer pricing provisions not applicable--No requirement of deduction of tax at source--But liable to file return-- Deere and Company, In re (AAR) . . . 277

->> S. 47(iii) --Non-resident--Transfer to non-resident subsidiary of shares in Indian company without consideration--Not taxable in India--Transfer pricing provisions not applicable--No requirement of deduction of tax at source--But liable to file return-- Deere and Company, In re (AAR) . . . 277

->> Ss. 92 to 92F --Non-resident--Transfer to non-resident subsidiary of shares in Indian company without consideration--Not taxable in India--Transfer pricing provisions not applicable--No requirement of deduction of tax at source--But liable to file return-- Deere and Company, In re (AAR) . . . 277

->> S. 139 --Non-resident--Transfer to non-resident subsidiary of shares in Indian company without consideration--Not taxable in India--Transfer pricing provisions not applicable--No requirement of deduction of tax at source--But liable to file return-- Deere and Company, In re (AAR) . . . 277

->> S. 158BD --Search and seizure--Assessment of third person--Condition precedent--Satisfaction of Assessing Officer that undisclosed income found during search belonged to third person--Cash belonging to third person seized from his employee in premises of searched person--No evidence to indicate satisfaction of Assessing Officer that cash seized belonged to third person--Notice under section 158BD to third person--Not valid-- Chandrakantbhai Amratlal Thakkar v. Deputy CIT (Guj) . . . 258

->> S. 158BFA --Search and seizure--Block assessment--Penalty--Scope of section 158BFA--Substantial addition to income returned under section 158BC--Tax not paid--Penalty to be levied--Commissioner allowing payment of tax in instalments--Not relevant-- CIT v. Heera Construction Co. P. Ltd. (Ker) . . . 359

->> S. 195 --Non-resident--Transfer to non-resident subsidiary of shares in Indian company without consideration--Not taxable in India--Transfer pricing provisions not applicable--No requirement of deduction of tax at source--But liable to file return-- Deere and Company, In re (AAR) . . . 277

->> S. 234B --Advance tax--Interest payable by assessee--Default in payment of advance tax--Withdrawal of investment allowance--Fiction under section 32A(5) applicable to levy of interest-- I. C. I. India Ltd . v. CIT (Cal) . . . 327

->> S. 250 --Assessing Officer--Powers of Assessing Officer--Remand by Commissioner (Appeals) in respect of specific issues--Assessing Officer has no power to consider a new issue-- Deputy CIT (Asstt.) v. Surat Electricity Co. Ltd. (Guj) . . . 271

->> S. 264 --Revision--Application for revision--Rejection of application without considering merits--Levy of penalty not valid--Rejection of application not justified-- Chhaganlal S Uteriya v. ITO (Guj) . . . 350

->> S. 271 --Penalty--Concealment of income--Failure to furnish return of income when amounts to concealment--Effect of Explanation 3 to section 271(1)--Conditions enumerated in the Explanation are cumulative--Notice under section 148 within period stipulated in section 153(1)--Explanation not applicable--Penalty could not be levied-- Chhaganlal S Uteriya v. ITO (Guj) . . . 350

Income-tax Rules, 1962 :

->> Appendix I --Depreciation--Rate of depreciation--Motor vehicle--Difference between lease and hire--Assessee leasing motor vehicles to clients--Not engaged in business of hire--Not entitled to higher rate of depreciation-- Bhagwati Appliance v. ITO (Guj) . . . 286

.......

=============================================================================

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.

=========================================================================

Direct Tax Laws Sept 2011

Where assessees filed an application for restoration of a writ petition after a delay of more than 30 years without providing satisfactory explanation for said delay writ petition could not be restored - [2011] 13 taxmann 135 (Calcutta)

Having regard section 158BB(1) as amended with effect from 1-7-2002, addition made on basis of statement of manager of assessee-firm recorded prior to date of search, was to be upheld - [2011] 13 taxmann 134 (Madras)

Where in return of income, assessee had not declared any additional amount of income surrendered during course of survey and later agreed to pay income-tax thereon along with interest under section 234B, Assessing Officer was justified in levying penalty under section 271(1)(c) - [2011] 13 taxmann 133 (Punjab & Haryana)

Reassessment is not justified where AO just changes& his opinion regarding assessee's system of accounting appropriate, it was a case of mere change of opinion on basis of which reassessment could not be made - [2011] 13 taxmann 132 (Rajasthan)

Once assessee had explained source of investment in shares and debentures by stating that they belonged to some other person and his explanation had been accepted, then if further investigation was required in case of said other person, that aspect could not be considered while considering assessment of assessee - [2011] 13 taxmann 131 (Delhi)

Designated authority under provisions of Kar Vivad Samadhan Scheme has no power to condone delay in making payment of amount of tax as required under section 90(2) - [2011] 13 taxmann 130 (Madhya Pradesh)

Payment made outside India for services rendered outside India is not taxable in India and, consequently, no disallowance could be made invoking section 40(a)(i) - [2011] 13 taxmann 137 (Mumbai - Trib.)

To treat a person as an agent of non-resident, it is to be proved that such person has business connection with non-resident and from or through such a person, non-resident is in receipt of income, whether directly or indirectly - [2011] 13 taxmann 136 (Mumbai - Trib.)

Depletion claimed by assessee on account of reduction in value of capital expenditure incurred on account of exploration and development of oil and gas is to be treated as depreciation for purpose of computation of book profits under section 115JB - [2011] 13 taxmann 129 (Chennai - Trib.)

An order can be revised only if twin conditions of 'error in order' and, 'prejudice caused to revenue' co-exist - [2011] 13 taxmann 127 (Chennai - Trib.)

There could be a cold chain facility for storage only without involving transportation of agricultural produce; various attendant facilities provided along with storage complete cold chain facility insofar as storage is concerned - [2011] 13 taxmann 126 (Agra - Trib.)

.......

=============================================================================

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.

=========================================================================

Whether when someone else deducts tax at source from payments made on beha

I-T - Whether when someone else deducts tax at source from payments made on behalf of assessee, it can be said that assessee has discharged its liability u/s 194C - NO, rules ITAT

THE issues before the Tribunal are - Whether, for attracting the provisions of Sec 194C, the presence of an express agreement vis-à-vis transportation charges, is a condition precedent; Whether liability of section 194C can be said to have been discharged if someone else deducts tax at source from payments made on behalf of the assessee and whether when assessee has diverted interest bearing funds to its sister concerns without charging any interest, disallowance of interest after allocation of interest bearing funds to tax free unit and non tax free unit is tenable, particularly for the period when the commercial production has not commenced. And the verdict goes against the assessee.

Facts of the case

Assessee company is engaged in the business of manufacturing pharmaceuticals products - filed its ROI, claiming deduction of certain expenses - it also paid interest on interest bearing funds and at the same time advanced interest free funds to its sister concerns – A.O. disallowed both these expenses on the grounds that expenses were incurred without deducting TDS and the interest bearing funds were diverted to sister concern without charging any interest. In respect of second issue it was observed by the AO that the assessee was having two units one was tax free and other was not - accordingly, the AO allocated the interest bearing funds among the units and disallowed the interest pertaining to that period during which commercial production was not commenced – CIT (A) affirmed the order of the A.O. – Before the ITAT, the AR of the assessee pleaded that the payments to the transporters were made on behalf of distributor and there was no written agreement between those transporters and the assessee.

After hearing the parties ITAT held that,

++ the distributors were acting merely as agents of the assessee and making the payment of freight charges on behalf of the assessee. Besides, the very fact that the assessee had claimed the impugned expenses as deduction shows that the assessee-company was not only liable to meet the same but had also actually met the same. It cannot therefore be accepted that the assessee was not required to pay freight charges or that it had not paid them. The mere fact that the payment was made by the distributors on behalf of the assessee will not alter the true nature, character and substance of the transaction. All the requirements of section 194C are fulfilled. Therefore it was the statutory responsibility of the assessee to deduct tax at source out of such payments and pay the same to the Government. In this view of the matter, the submission made on behalf of the assessee that the distributors were required to deduct tax at source out of impugned payments is rejected;

++ the submission made on behalf of the assessee that the distributors had deducted tax at source out of such payments and therefore the AO was not justified in making the impugned disallowance does not carry any force for several reasons. One, section 40(a)((ia) fixes the responsibility on the assessee (and none else) claiming deduction of expenses to deduct tax at source and deposit the same with the Government. The aforesaid statutory condition is not satisfied in the present case and therefore the assessee is not entitled to claim deduction of the impugned expenses. Two, as held by the CIT(A), distributors have not deducted tax at source. Three, the judgment in Transmission Corporation of AP Ltd. v. CIT (2002-TII-01-SC-INTL) referred to by the ld. authorized representative is inapplicable to the facts of the case and also for the reason that it has not been rendered in the context of section 40(a)(ia);

++ in CIT v. Abhishek Industries (2006-TIOL-314-HC-P&H-IT), the jurisdictional High Court has held that entire money in a business entity comes in a common kitty. The monies received as share capital, as term loan, as working capital loan, as sale proceeds, etc. do not have any different colour. Whatever are the receipts in the business; they have the colour of business receipts and have no separate identification. Sources have no concern whatsoever. Though the aforesaid judgment has been rendered in the context of section 36(1)(iii), the observations of the Hon'ble High Court as referred to above are quite apposite on the facts and in the circumstances of the case before us. Baddi unit and Dera Bassi unit are sister units of the same assessee. Dera Bassi unit has diverted part of its funds including interest-bearing funds to Baddi unit. The funds so transferred have cost. If the funds diverted are borrowed funds, then the cost is interest paid by the unit diverting its funds. If it is its own money (e.g., internal accruals, etc.), the cost is the amount of interest foregone by the unit diverting its funds. Quite obviously, not only the funds so transferred by Dera Bassi unit to Baddi unit but also interest thereon would need to be allocated to Baddi unit otherwise the profits of Baddi unit, which are exempt from tax, would stand inflated while the profits of taxable unit being Dera Bassi unit would stand artificially suppressed. In this view of the matter, the action of the AO/CIT(A) in allocating the impugned funds and interest thereon to Baddi unit and thereby capitalizing the same in terms of the proviso to u/s 36(1)(iii) is held to be in order. Ground No. 4 taken by the assessee is dismissed.

__,_._,___

Merely because surplus from educational activity, does not mean it is NOT from Educational Activity

 Merely because surplus has arisen to assessee during its educational activity does not mean that assessee is not existing solely for education purpose

Income-tax : If main object of an assessee is imparting of education and during course of imparting education, if some surplus has arisen to assessee, it cannot be said that assessees institution is not engaged for charitable purpose as defined under section 2(15) [Section 10(23C) Income-tax Act, 1961 - Charitable/religious institutions] - [2011] 10 taxmann.com 156 (Agra - ITAT)

If two views are possible than A.O. should take the one favourable to the Assessee

CIT Vs Mahavir Irrigation Pvt Ltd

[ITA No.1266/2009, dtd. 03.08.2011]

If two views are possible than Assessing Officers should take the one favourable to the Assessee and penalty for concealment cannot be levied

Where there is no finding that any details supplied by the assessee in its Return is incorrect or erroneous or false, there would be no question of inviting the penalty under Section 271 (1)(c) of the Act. A mere making of the claim, which is not sustainable in law, by itself, will not amount to furnishing inaccurate particulars regarding the income of the assessee. Such claim made in the Return cannot amount to the inaccurate particulars.

.......

=============================================================================

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.

=========================================================================

Capital gains earned by a Dutch company on transfer of shares held in an In

Capital gains earned by a Dutch company on transfer of shares held in an Indian company to a foreign company is taxable only in Netherlands

Income-tax : Capital gains earned by the applicant on transfer of shares would be covered by Article 13(5) of the Tax Treaty and shall be taxable only in the Netherlands, the State in which the transferor is a resident [Section 90 of the Income-tax Act, 1961 read with Article 13(5) of the India-Netherlands DTAA - Double Taxation Relief - Where agreement exists (Capital gains)]

l The applicant is required to file return of income under section 139 even if the capital gain is not taxable in India because instead of causing inconvenience to the applicant, the process of filing of return would facilitate the applicant in all future interactions with the Income-tax department - [2011] 10 taxmann.com 157 (AAR - New Delhi

Direct Tax Laws Sept 2011

Whether services rendered by assessee is a technical service or not, require scrutiny by Court; no final assessment order should be passed till scrutiny is over - [2011] 13 taxmann 123 (Uttarakhand)

Before order of TPO determining transfer price is passed, opportunity of hearing is to be given to assessee - [2011] 13 taxmann 122 (Bombay)

Where assessee did not disclose salary of 8 months received from former employer and showed salary of only 4 months received from new employer, provisions of section 271(1)(c) were attracted - [2011] 13 taxmann 115 (Calcutta)

Addition under section 68 could not be made where assessee had explained receipt of loan by cheques with help of bank statements and income-tax returns of creditors - [2011] 13 taxmann 114 (Delhi)

Where assessee branch office of German company received order from Indian client and negotiations and conclusion of contract were done in Germany by head office, allocation of income at 40 per cent for role played by head office was justified - [2011] 13 taxmann 124 (Delhi - Trib.)

Where difference between sale consideration in transactions with AE and ALP determined by TPO is less than 5 per cent, no addition is required - [2011] 13 taxmann 121 (Mumbai - Trib.)

Reserve created under section 80HHC can be distributed amongst partners - [2011] 13 taxmann 113 (Ahmedabad - Trib.)
.......

=============================================================================

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.

=========================================================================

INTEREST-FREE LOANS TO LOSE TAX BURDEN

INTEREST-FREE LOANS TO LOSE TAX BURDEN

ITAT Ruling On Loans From Non-Relatives

Ram Narsinghdev Sahgal MUMBAI

IN A first-of-its- kind judgement, the Income-Tax Appellate Tribunal (ITAT) recently ruled that a recipient of an interest-free loan from a non-relative is not liable to pay tax. The judgement will come as a major relief for people who borrow money from friends and colleagues and latter grapple with notices from tax authorities.
Section 56 (2)(v) of the Income Tax Act provides for taxing any sum of money in excess of Rs 25,000 received without consideration by an individual or a Hindu Undivided Family (HUF) from any source other than a relative. Occasions where the recipient is exempted from tax are during a marriage, or in cases where the amount is received under a will, or by way of inheritance or in contemplation of death of the payer.
Applying this section, an income-tax assessing officer treated interest-free loans amounting to Rs 54.7 lakh received by one Chandrakant Shah from nonrelatives as a sum without consideration and taxed it.

New section came into force in 2004

THE assessee approached the Commissioner of I-T (Appeals), but was not granted relief. He then appealed before the Mumbai ITAT, where his legal counsel said that the lower authorities had "misinterpreted" the new section, which came into effect on September 1, 2004. Furthermore, Mr Shah's counsel said the sum of interest-free loans taken by him even before that date (September 1, 2004) did not fall within the ambit of the amended section.
Bhupendra Shah, Mr Shah's counsel, argued before a division bench comprising Madhavi Devi and VK Gupta that an interest-free loan could not be taxed under Section 56 (2)(v), as the repayment of a loan itself is treated as consideration between two parties and not a sum without consideration. The counsel said the amounts were shown in the balance sheet by the assessee as unsecured loan liabilities, and, hence, could not be treated as an addition to capital as in the case of a gift.
The counsel contended that the term "loan" meant delivery by one party to and receipt by another party of a sum of money upon agreement expressed or implied condition, to repay it with or without interest.
He maintained that it was inessential for an interest component to make a transaction of lending of money a loan transaction, by referring to a decision of the Court of Appeal of State of California. The US court had observed that a loan of money was a contract by which one delivered a sum of money to another, and the latter agreed to return at a future time without interest that sum which he borrowed.
The bench upheld the counsel's argument, saying: "We hold that a transaction of loan can be without interest and a transaction of loan implies an agreement to repay the money that is borrowed, which also gives reply to the revenue's query regarding the existence of the obligation to repay the money at the time of taking such loan." Section 56 (2)(v) was introduced to fill up the vacuum created by the abolition of the Gift Tax Act in 1997, which was donor-based, meaning the giver of a gift was taxed.

Section 115-O(5) did not, in any way, restrict allowability of claim u/s 80 M

Section 115-O(5) did not, in any way, restrict allowability of claim under section 80M - [2011] 10 taxmann 135 (Bom.)

An income already taxed under one head cannot, at subsequent period, be tax

An income already taxed under one head cannot, at subsequent period, be taxed under a different head - [2011] 10 taxmann.com 139 (Cal.)

Society , trading activity can not be claimed benefit u/s 12A & 80 G

Society for The Small & Medium Exporters Vs DIT [ITA No.3182 & 3183/Del/2008, dtd. 29.04.2011]
Benefits of Sec. 12A and 80G cannot be allowed if there is no charitable activity and assessee undertakes only commercial activity

ITAT Delhi bench held that in a case where the objects of the society may be charitable, but, in the absence of carrying on those activities despite the fact that the activities which were carried on were for the purpose of generating income, the society is not entitled for registration for benefits of Sec. 12A and 80G for that year. It has been held that for assessment years in which the assessee does not carry out charitable activity, the assessee has been rightly refused to get benefit of registration as charitable institution. The only activity which has been carried out is for the purpose of generating income, which is not a charitable activity in itself........

=============================================================================

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.

=========================================================================

Losses in non-delivery based share transactions can be set off against speculation profit

Losses in non-delivery based share transactions can be set off against profits of speculation business under deeming fiction of Explanation to section 73 - [2011] 11 taxmann.com 385 (Mum. - ITAT)

Interest received by public financial institution

 

Interest received by public financial institution on loans and advances made under bills re discounting scheme from different banking companies to which Banking Regulation Act, 1949 applies, does not form part of chargeable interest - [2011] 11 taxmann 412 (Cal.)