MEDICAL FACILITIES FOR RETIRED EMPLOYEES

With the intention that any our retired member can be benefited.

MEDICAL FACILITIES FOR RETIRED EMPLOYEES

FACILITIES FOR RETIRED EMPLOYEES

'RETIRED EMPLOYEES CAN SUE GOVT FOR NEGLIGENCE UNDER CGHS'

The verdict, read with a ruling of the SC in 1995 that in-service Central Government employees are consumers under the Central Government Health Service Scheme, now catgorieses the entire working and retired work force as consumers, as far as health care is concerned under the scheme

Lakhs of retired central government employees can rejoice as the apex consumer forum has held them to be the consumers under the CGHS scheme, thus conferring a right on them to sue the Center for damage in case of deficiency in health care provided to them and their dependents.

This was unanimous decision of a full Bench of the National Consumer Disputes Redressal Commission (NCDRC) comprising its president Justice M.B.Shah, members Rajyalakshi Rao, B.K. Taimni, Justice K.S.Gupta, Justice S.N. Kapoor and P.D.Shenoy. This verdict, read with a ruling of the Supreme Court in 1995 that in-service central government employees are consumers under the Central Government Health Scheme (CGHS). now categorises the entire working and retired work force of the Central Government as consumers, as far as health are is concerned under the scheme.

The question before the NCDRC was "whether a pensioner and beneficiary of the CGHS would be a consumer under the provisions of Consumer Protection Act, 1986, for alleged deficiency in service by the CGHS Medical Officer".

Answering in the affirmative, NCDRC said medical treatment facilities extended to a retired under CGHS could not be termed as 'free service' as it was in consideration of service rendered by him to the government till the age of superannuation, which conferred a right on him to get pension as well as other benefits, including medical treatment prescribed by various rules or the schemes framed by the Center.

"Such employee would be a consumer as defined in Section 2(1)(d)(ii) of the Consumer Protection Act," said Justice Shah , writing for the Bench. Explaining the reason behind the conclusion that would make the retired employees feel less neglected, the NCDRC said service rendered by the government employees before retirement would be "consideration" for providing medical facilities to him or his family members.

"Hence, it cannot be said that the hospital which is subsidized by the government is rendering service free of charge," it said.

The NCDRC verdict came on a petition filed by retired employee Jagdish Kumar Bajpai, throgh advocate Nikhil Nayar, claiming that he was refused medicines for his wife by the CGHS dispensary in Kanpur. He also claimed damages to the tune of Rs. 4 lakh alleging that his wife died due to the negligence of the medical officer.

(The above news item appeared in Ahmedabad Edition of Times of India dated November 7, 2005 - Needless to say that this verdict is relevant to the working and retired employees of ONGC as the Central Government Medical Attendance Rules also apply on ONGC.)


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ITR'S TRIBUNAL TAX REPORTS (ITR (Trib)) HIGHLIGHTS ISSUE DATED 19-4-2010 Volume 2 : Part 7

ITR'S TRIBUNAL TAX REPORTS (ITR (Trib)) HIGHLIGHTS
ISSUE DATED 19-4-2010
Volume 2 : Part 7  

 

 

REPORTS

> Where valid data supported by appropriated documentation furnished for the project regarding administrative expenses, deletion of addition justified : ITO v. B. Nagi Reddy (Chennai) p. 730

 

> Deduction of premium on secured premium notes allowable u/s. 36(1)(iii) : Jt. CIT v. Bombay Dyeing Mfg. Co. Ltd. (Mumbai) p. 733

 

> AO has no jurisdiction to reopen case for AY 1998-99 under proviso to s. 14A : Jt. CIT v. Bombay Dyeing Mfg. Co. Ltd. (Mumbai) p. 733

 

> Advances adjusted against professional fees, in absence of contract for any film, not assessable as income : R.S. Suriya v. Dy. CIT (Chennai) p. 746

 

> Where TDS prior to due date u/s. 139(1) deduction of payment by actor to organisation for managing call sheets allowable u/s. 40(a)(ia)(A) : R.S. Suriya v. Dy. CIT (Chennai) p. 746

 

> Higher rate of depreciation allowable on wind mill as requirement of second proviso to r. 5(1A) fulfilled : K. Ravi v. Asst. CIT (Chennai) p. 752

 

F Immovable property devolving on assessee and her children, children

relinquishing share in favour of assessee cannot be deemed gift for purposes of computing cost of acquisition : M. Suseela v. ITO (Vishakhapatnam) p. 760

 

> Loss on account of transactions in shares and transactions of future options is speculative loss : Renaissance Asset Management Co. P. Ltd. v. AO (Delhi) p.765

 

> Appeal filed after ten years without reasonable cause : delay cannot be condoned : Foramer France v. Dy. CIT (Delhi) p. 773

 

> Payment of incentive to Dock Labour Board workers disallowed u/s.37 : Sical Logistics Ltd. v. Dy. CIT (Chennai) p. 786

 

> Assessee claiming deduction u/s 80-O for interest income is liable to penalty u/s. 271(1)(c) : Asst. CIT v. Surinder Lal Chopra (Delhi) p. 790

 

NEWS-BRIEFS

> Finmin work in haste to give final shape to direct taxes code

The Finance Ministry has set up a task force to draft the Bill, by almost doubling the strength of its revenue officials working on the Direct Taxes Code, as it is running against time to present it in the monsoon session of Parliament. The Government has posted seven Commissioners and Joint Commissioners of income-tax as Officers on Special Duty (OSD) in Tax Policy Legislation (TPL), a division of the Central Board of Direct Taxes (CBDT).

With the addition of seven officials in two rounds (three in first round and four in the second), it has now 17 officials to finalise the architecture of the code. The newly deputed officials are busy giving shape to the Direct Tax Bill.

The Finance Minister has assured the industry that the Government is open to re-examining the proposals relating to the Minimum Alternate Tax (MAT), capital gains tax, Double Taxation Avoidance Agreement (DTAA), general anti-avoidance rule, taxation of charitable organisations and foreign companies in India, exempt-exempt-tax regime, deductions in case of retirement benefits and income from house property. Apart from the nine areas identified by the Finance Minister, the taskforce was looking at various parts of the draft code.

The Government is planning to implement the Direct Taxes Code in April 2011. It will replace the Income-tax Act, 1961. The Finance Ministry will have to get the Bill vetted by the Law Ministry before it takes it to Parliament. [Source : www.businessstandard.com dated April 9, 2010]

 

 

> Aayakar Sewa Kendra Pune receives ISO certification

The nodal agency for implementation of Sevottam scheme, and the Aayakar Sewa Kendra (ASK) unit at Pune has received certification under IS 15700 : 2005 from the Bureau of Indian Standards for excellence in public delivery system after audit of the Directorate of Organisation and Management Services (DOMS) along with the Central Board of Direct Taxes (CBDT) and the Income-tax Department.

ASK is a one stop computerized center for the taxpayers to obtain services promised by the Department in its Citizens' Charter in a time bound manner. ASK provides a front office backed by re-engineered processes and a new outlook of the officials to quickly redress grievances of taxpayers and also to prevent grievances. The first ASK was inaugurated in Pune on May 18, 2009, followed by two more ASKs at Kochi and Chandigarh.

IS 15700 : 2005 requires a public service organization to demonstrate its ability to consistently provide effective and efficient service that meets customer and applicable legal, statutory and regulatory requirements. It aims to enhance customer satisfaction and to continually improve its service and service delivery process. [Source : www.pib.nic.in dated April 6, 2010]

 

> CBDT move to early resolution of tax case disputes

The Central Board of Direct Taxes (CBDT) has brought all the dispute resolution panels (DRP) under the supervision of the Director-General of Income-tax (International Taxation).

Budget 2009-10 had introduced the concept of DRPs to provide an alternate dispute resolution mechanism to facilitate expeditious resolution of disputes on a fast track basis. This facility was made available only to foreign companies.

Official sources said that the latest move to "subordinate" the 10 DRPs (Delhi-2, Mumbai-2, one each in Pune, Hyderabad, Chennai, Kolkata, Bangalore and Ahmedabad) to the Director-General of Income-tax (International Taxation) should be seen as a step for administrative purposes only.

The larger objective of independence and functioning of the panel as a dispute resolution body need to be subserved. The day-to-day functioning of the panel should not be subordinated to a meticulous scrutiny of an administrative authority, said a partner in tax services. [Source : www.hindubusinessline.com dated April 8, 2010]

 

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Government introduce a new Medical Scheme for Central Government Employees and Pensioners

13 February 2010

Government introduce a new Medical Scheme for Central Government Employees and Pensioners

Government introduce a new Medical Scheme for Central Government Employees and Pensioners as in the name of Central Government Employees and Pensioners Health Insurance Scheme (CGEPHIS). In all over India, pensioners are getting meager amount of Rs.100 as Medical Allowance (except CGHS beneficiaries). It is estimated that approximately 17 lakh serving employees and 7 lakh pensioners shall be offered this Scheme and Government plan to enroll all serving employees and pensioners on compulsory / optional basis.

Some key points regarding the scheme:-

CENTRAL GOVERNMENT EMPLOYEES AND PENSIONERS HEALTH INSURANCE SCHEME (CGEPHIS)

BENEFICIARIES:
CGEPHIS shall be compulsory to new Central Government Employees who would be joining service after the introduction of the Health Insurance Scheme.

CGEPHIS shall be compulsory to new Central Government retirees who would be retiring from the service after the introduction of the Insurance Scheme.

CGEPHIS would be available on voluntary basis for the following:
Existing Central Government Employees and Pensioners who are already CGHS beneficiaries. In this case they have to opt out of CGHS scheme. They will also have the option of choosing both CGHS and Insurance policy. In such case the total insurance premium has to be borne by the member.

Existing Central Government Employees and Pensioners who are not CGHS beneficiaries but are covered under CS (MA)

INSURANCE COVERAGE:
In-patient benefits – The Insurance Scheme shall pay all expenses incurred in course of medical treatment availed of by the beneficiaries in an Empanelled Hospitals/ Nursing Homes (24 hours admission clause) within the country, arising out of either illness/disease/injury and or sickness.

NOTE: In case of organ transplant, the expenses incurred for the Donor are also payable under the scheme.

Pre & Post hospitalization benefit: Benefit up to 30 days Pre Hospitalization & up to 60 days Post Hospitalization respectively which would cover all expenses related to treatment of the sickness for which hospitalization was done.

FAMILY SIZE:
Serving/Retired Employees: Self, Spouse, Two dependent children and up to Two Dependent Parents. New born shall be considered insured from day one till the expiry of the current policy irrespective of the number of members covered subject to eligibility under maternity benefit.

Any additional dependent member in addition to above [Sr. No. 5 (1)] can be covered under the Scheme by paying the fixed amount of premium. This additional full premium shall be borne by the beneficiary.

IDENTIFICATION OF FAMILY:
Beneficiaries shall be identified by a "Photo Smart Card" issued by the insurer to all beneficiaries which would have all personal details, medical history, policy limits etc. of the CGEPHIS members. This card would be used across the country to accessHealth Insurance Benefits. The photograph embedded in the chip of the Smart Card will be taken as the proof for determining the eligibility of thebeneficiaries.

SUM INSURED AND BUFFER / CORPORATE SUM INSURED
SUM INSURED:
The Scheme shall provide coverage for meeting all expenses relating to hospitalization of beneficiary members up to Rs. 5, 00,000/- per family per year in any of the Empanelled Hospital/Nursing Home/Day Care Unit subject to stated limits on cashless basis through smart cards. The benefit shall be available to each and every member of the family on floater basis i.e. the total reimbursement of Rs. 5.00 lakh can be availed by one individual or collectively by all members of the family.

Entitlements for various types of wards: CGHS beneficiaries are entitled to facilities of private, semi-private or general ward depending on their pay drawn in pay band / pension. These entitlements are amended from time to time and the latest order in this regards needs to be followed. The entitlement is as follows:-

Pay drawn in pay band/Basic Pension - Entitlement
Rs. 13,950/-(up to)……………………………… General Ward
Rs. 13,960/- to 19,530/- …………………… Semi-Private Ward
Rs. 19,540/- and above ……………………… Private Ward

CASHLESS ACCESS SERVICE:
The Insurer has to ensure that all CGEPHIS members are provided with adequate facilities so that they do not have to pay any deposits at the commencement of the treatment or at the end of treatment to the extent as the Services are covered underthe Scheme . The service provided by the Insurer along with subject to responsibilities of the Insurer as detailed in this clause is collectively referred to as the "Cashless Access Service."

The services have to be provided by the Empanelled Hospitals/Nursing Homes/Day Care Clinics to the beneficiary based on Photo Smart Card authentication only without any delay. Thebeneficiaries shall be provided treatment free of cost for all such ailments covered under the Scheme within the limits/sub-limits of defined package rates and sum insured, i.e., not specifically excluded under the scheme.
ENROLMENT PROCESS
The process of enrolment shall be as under:
Serving Employees:
1. Departments and offices will call for options from employees to join voluntary CGEPHIS with or without existing CGHS/CS (MA) benefits.

2. Head of Department of the Administrative Ministry/Department would be the contact point for the Insurance Companies.

3. Enrolment forms giving details about self and family and authorization to the department for recovery of premium on a monthly basis would be consolidated by the Administrative Ministry / Department. The data of the beneficiary and dependent members to be covered along with 2 recent passport size photo and copy of enrolment form will be forwarded to Insurance Company on monthly basis.

4. Insurance Company will issue Smart Cards on the basis of information received of the beneficiaries for enrolment.

5. Such Smart Cards along with the enrollment kit shall be sent by the insurers directly to the insured persons at their respective mailing addresses at insurer's cost within 7 days.

Insurance Premium:-
The beneficiary will have to pay an annual premium which will be determined after the formal introduction of the Scheme. It will vary according to the grade pay of the officer. The estimated annual premium for a standard family size will be in the range of Rs.8000 to Rs.12000 p.a. It is however proposed to be subsidized by the Government to a considerable extent.

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Before due date simply refers and means that not after the expiry of due date

Before due date simply refers and means that not after the expiry of due date; if the requisite act is done before the last day expires then it will be simply said that before due date; when the time of filing the return is available to the assessee till the last moment of the due date then the whole of that day is available to the assessee and due date expires only when the last day is expired; as such the option exercised on the due date is nothing but before the due date as the same is not after the due date.

CASE LAWS DETAILS

DECIDED BY: ITAT, BENCH `D', CHENNAI, IN THE CASE OF: K. K. S. K. Leather Processors (P.) Ltd. v. ITO, APPEAL NO: ITA No. 826 & 827/Mds./2009,    DECIDED ON: November 20, 2009

RELEVANT PARAGRAPH

7. We have considered the rival contentions, relevant record and various decisions relied upon by both the parties. The undisputed factual position emerging out of the record is that in the case of first assessee in ITA Nos.826 & 827/09 the return of income for the assessment year 2003-04 was filed on due date but the return of income for 2005-06 was filed after the due date as prescribed under section 139(1) of Income-tax Act. Similarly in the case of the second assessee in ITA Nos.828 & 829/09 the return of income for the assessment year 2003-04 was filed on due date and for the assessment year 2005-06 was filed after due date. In the case of third assessee in ITA No.832/09 the return of income was filed on due date. In the case of the fourth assessee in ITA Nos.833 to 836/09 all the returns for the four assessment years were filed on due dates. As far as the entitlement of higher rate of depreciation on windmill as per Appendix I to Rule 5(1A) is concerned, there is no dispute that the assessee is entitled because the Revenue has not disputed the entitlement on merits. But the claim was disallowed by the Assessing Officer1 on the ground that the assessee did not exercise the option as prescribed under Second Proviso to Rule 5(1A). The two questions arising for consideration and determination in the facts of ihese cases are.

(i) whether the claim made in the return of income along with audit report showing the claim of the assessee regarding depreciation of windmill would amount to exercising option as required under Second Proviso to Rule 5(1 A) of Income-tax Rules?

(ii) whether the return filed on the due date of Tiling the return of income under section 139(1) would be considered as exercising of option before due date as prescribed in the Second Proviso of Rule 5(1 A)

Before discussing these two questions, it is appropriate to discuss the relevant provisions for depreciation provided under Section 32 of Income- • tax Act as well as Appendix (I) & Appendix (1A) to Rule 5(1A) of Income- tax Rules. For better understanding we quote sub-dause (i) & {it);..'$ftSection 32(1) which is as under:

32. (1) In respect of depreciation of-

(i) in the case of assets of an undertaking engaged in generation or generation and distribution of power, such percentage on the actual cost thereof to the assessee as may beprescribed;

(ii) – (in the case of- any block of assets, such percentage on the written down value thereof

as may be prescribed:

As per clause (i) of sub-section (1) of Section 32 the depreciation on the assets of an undertaking engaged in generation or generation and distribution of power is at a percentage as prescribed as per rates on the actual cost thereof. Thus sub-clause (i) of sub-section (1) of Section 32 provides the depreciation at a prescribed rate on the assets of specified undertaking on the actual cost instead of written down value. Explanation 5 to sub-section (1) ofSection 32 makes it clear that the provisions of sub-section (1) to section 32 of Income-tax Act shall apply whether or not the assessee has claimed the deduction in respect of depreciation in computing his total income. We quoit? Explanation 5 winch is as under:

"For the removal of doubts, it is hereby declared that the provisions of this subjection shall apply whether or not the assessee has claimed the deduction in respect ofdepreciation in computing his total income; "

From the provisions of sub-section (1) of Section 32 along with the Explanation 5, it is dear that "the Assessing Officer is duty beyond and under obligation to allow the deduction ofdepreciation as per the provisions of sub-section (1) of Section 32. Since two rates of depreciation are prescribed as per Appendix (1) as well as Appendix (1A) to Rule 5 of Income-tax Rules in respect of assets of the undertaking engaged for generation and distribution of power. Thus to make it dear and to facilitate the Assessing Officer has to see which of the rates provided

under two different Appendixes of ..depredation shall be allowed, second proviso to Rule 5(1A) requires the assessee to exercise its option thatdepreciation be allowed as per Appendix 1. Though the proviso of that if such option is exercised before the due date of furnishing the 'return of income under sub-section (1) of Section 139 of the Income-tax Act, in our view the second proviso to Rule 5(1A) is only to facilitate the Assessing Officer in discharging of its obligationas per Explanation 5 to sub-section (1) of Section 32 of Income-tax Act so that the depreciation shall be allowed as per the option of the assessee and not on the discretion of the Assessing Officer. The Assessing Officer is otherwise under obligation to allow thedepreciation but because the depreciation specified under two different Appendixes (1) & (1A) and the choice is given to the assessee in respect of the assets specified under clause (1) of sub-section (1) of

"Section 139 of the Act" Therefore the provisions contained in the Rules cannot override the provisions contained in the statute and the requirement of option under proviso to Rule 5(1A) cannot be held in the nature that on failure of the same would be so fatal that the very object c' the provision for providing higher rate ofdepreciation is defeated. When there is no specific form or method prescribed for exercising the said option then the claim made in the return of income as well as reflected from the books of account and audit report filed along with return of income is more than the exercise of the option as required under second proviso to Rule 5(1A).

8. In the case of CIT vs. Shivanand Electronics (209 1TR 63), the Hon'ble Bombay High Court has held at page 71 as under: "The requirement of filing theaudit report "along with the return of income" is directory and if the assesses complies with the same before completion of the assessment and offers a satisfactory explanation for his failure to submit the same in time, the Income Tax Officer may consider the same and examinethe claim of the assessee for deduction under section 80] on the basis of such report, We, however, do not subscribe to the view taken by the Tribunal-that it is the duty of the Income Tax Officer to the assessee that as, he had not submitted the report of audit required by sub-sect/on (6A), his claim would not be allowed and to give him an opportunity to file the same."

Therefore even if option is not exercised within the stipulated time as per second proviso to Rule 5(1A), the same cannot have a serious consequence of total denial of the claim of the assessee. There is ho doubt in our mind that when there is no prescribed procedure or mode of exercising option prescribed in the Rules then the option exercised by the assessee by way of making a claim in the return of income along with the audit report is definitely more than the requirement of the second proviso.

Even otherwise the question of exercising the option in the return of income is not seriously agitated by the Revenue, As per the order of the lower authorities the depreciation claimed has been rejected on the ground that option has not been exercised before the due date. Therefore the second question whether the filing of the return on due date is exercising of option before due date or not is of importance. In the case of CIT vs. G.R.Govindarajulu 'and Sons Charities (271 ITR 145), the Hon'ble Junsidictional High Court has held as under at page 152;

"The other 'contention raised by learned counsel for the appellant is that the assessee failed to exercise the option as contemplated under section 11(2) of the Act In a prescribed form, namely, Form No. 10. But the said contention was rightly rejected by both the Commissioner (Appeals) and the Tribunal There is no mandatory requirement under section 11(1) of the Act requiring the assessee to exercise the option when he seeks relief under section 11(1) of the Act, as It is enough for the assessee to submit a statement along with the return to exercise such option. "

Further in the case of CTT vs. Adar Tea Products Company (314 ITR 38), the Hon'ble Jurisdictional High Court has held at page 46 as under:

"The Supreme Court has held that if a provision is made in the context of a law providing for concessional rates of tax for the purpose of encouraging an industrial activity, a liberal construction should be put upon the language of the statute -vide CIT k Straw Board Manufacturing Co. Ltd. (1989) 5upp 2 SCC523.

The items in an exemption notification are to be strictly construed, but once the goods in question fall even narrowly in one of the exempted categories, then the exemption notification has to be construed broadly and widely – vide Bombay Chemical Pvt. Ltd. v. CCE, AIR 1995 SC1469.

The table includes energy saving device in the context and for the purpose of encouraging industries to adopt energy saving measures. While it was possible, in the context. of, encouraging industrial activity, to bring within' the net of exemption, manufacture of products which may even be remotely considered as "paper"; we cannot adopt the same reasoning here, since the table indicates its intention to afford depreciation at the rotes mentioned only to the specifically listed equipments. It is not even proved that a drier of the kind mentioned herein is an energy saving device. "

In our view, the requirement of second proviso to Rule 5(1A) is satisfied if the option is exercised before the expiry of due date of filing of return of income under -section 139(1) of the Income-tax Act. The meaning of the term before due date shall be understood as it is understood by a man of ordinary prudence. Before due date simply refers and means that not after the expiry of due date. If the requisite act is done before the last day expires then it will be simply said that before due date; when the time of filing the return is available to the assessee till the test moment of the due date then the whole of that day is available to the assessee and due date expires only when the last day is expired; as such the option exercised on the due date is nothing but before the due date as the same is not after the due date, In the case of CIT vs. Vijaya Hirasa Kalamkar (HUF), (229 ITR 772), the Hon'ble Bombay High Court has held at pages 774 & 775 as under:

"Having regard to the obtect of the Ordinance and the words used in section 3(1), it seems to as that the declaration received on January 1, 1976, was well within time. In the whole context, the word "before" will have to be construed as "upto" or as "not after". There are various provisions in the Income-tax Act. wherein the expression "before" has been used (sections 139(l)(a)(i) , section 139(l)(b); section 184, section 212). The expression has always been taken to mean "upto Section 3 spec/fi^d^ the period before which a declaration in respect of income has to be made for the purposes of getting a benefit under the Ordinance It provides a period of limitation within which certain benefits are available. In case of ambiguity the construction which preserves the right to the one which defeats it, has to be preferred. After alt, this is a taxing statute which m case of doubt should be interpreted in favour of a taxpayer. Had the legislative intention been to make December 31. 1975. the last day for making the declaration, it could have clearly-said so in the proviso. The very fact that the date January 1, 1&76. is in terms mentioned indicates that the time limit was up to that date. That in a given case the word "before" in the context of the time can be construed as "not after" is well settled ( R.v

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ITR'S TRIBUNAL TAX REPORTS (ITR (Trib)) HIGHLIGHTS, issue dt 12.04.2010 Vol2 Part 6

ITR'S TRIBUNAL TAX REPORTS (ITR (Trib)) HIGHLIGHTS

ISSUE DATED 12-4-2010
Volume 2 : Part 6

F Credit for TDS must be given to assessee u/s 205 : Ahluwallia and Associates v. ITO (Ahd.) p.582

F Where expenses incurred by assessee for earning salary as well as share in profits of the firm, proportionate disallowance to be worked out u/r. 8D: Dharmasingh M. Popat v. Asst. CIT (Mumbai) p. 586

F Receipt declared as income from other sources but expenses claimed against income from profession not allowable : Dharmasingh M. Popat v. Asst. CIT (Mumbai) p. 586

F Assessee sold units within three months from record date : loss to be ignored u/s.94(7): Tube Investments of India Ltd. v. Jt. CIT (Chennai) p. 612

F Where capital borrowed for business purposes and TDS from interest payment and deposited with Govt., addition to be deleted : Dy. CIT v. J.H. Finvest P. Ltd. (Delhi) p. 620

F Where assessee providing evidence regarding identity of share applicants, deletion of addition justified : Dy. CIT v. J.H. Finvest P. Ltd. (Delhi) p. 620

F Stocks brought into account from year to year and forming part of current stock, assessee entitled to deduction of loss in relevant AY : Dy. CIT v. Indroyal Furniture Co. P. Ltd. (Cochin) p. 628

F Payment of royalty towards right to use technical know-how with no asset of enduring benefit transferred in favour of assessee is revenue expenditure : Modi Revlon P. Ltd. v. Asst./Dy. CIT (Delhi) p. 632

F Advertisement expenses incurred for promotion of brand in interest of business of company allowable u/s 37: Modi Revlon P. Ltd. v. Asst./Dy. CIT (Delhi) p. 632

F Web hosting, web development, telephone handsets expenses, as revenue expenditure : Radial Marketing P. Ltd. v. ITO (Mumbai) p. 641

F Software development charges, capital expenditure : Radial Marketing P. Ltd. v. ITO (Mumbai) p. 641

F Assessee entitled to credit for TDS on foreign income : Rectification to allow credit proper : Asst. CIT v. Ms. Aishwarya K. Rai (Mumbai) p. 644

F Where service of assessment notice on company not denied, notice valid : Amrac Automotive India P. Ltd. v. Asst. CIT (Delhi) p. 649

F Reassessment notice sent to correct address, not received back : Power of attorney issued to CA after date of notice and subsequent notices issued : notice validly served : Avneesh Kumar Singh v. ITO (Agra) p.663

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Fwd: Pre-Print Highlights of ITR from CLI

INCOME TAX REPORTS (ITR) HIGHLIGHTS

ISSUE DATED 12-4-2010 Volume 322 : Part 3

SUPREME COURT	HIGH COURTS	ENGLISH CASES	AAR
TRIBUNAL	STATUTES	JOURNAL	NEWS BRIEF

HIGH COURT JUDGMENTS

F High Court has no power to condone delay beyond period prescribed under I. T. Act : Sukhvinder Singh v. CIT (P&H) p. 339

F Finance commission allowed as deduction in prior years : Deduction could not be denied in relevant assessment year : CIT v. Heeralal Kataria (Raj) p. 342

F Trucks entitled to depreciation at 30 per cent. : CIT v. Bimalchand Jain (Raj) p. 346

F Estimate based on comparable cases valid : Salem Steel Co. v. CIT (Mad) p. 349

F Son participating in income-tax proceedings not a ground to fasten liability for commission of any offence under I. T. Act : Roshan Lal v. Special Chief Judicial Magistrate (All) p. 353

F Estimation of profits based on facts justified : Sri Vaddanahal Rajanna (HUF) v. Asst. CIT (Karn) p. 356

F Tribunal can correct factual error in order : CIT v. ITAT (Bom) p. 359

F Failure to consider assessee's statement made subsequent to retracted statement documentary evidence on record : Matter remanded : CIT v. Omprakash K. Jain (Bom) p. 362

F Seed money received for commencement of business : Parting of part of profit by assessee instead of paying interest : Transaction not a colourable device : CIT v. V. G. Siddartha (Karn) p. 365

F Reassessment proceedings on same grounds not valid : Berger Paints India Ltd. v. Asst. CIT (Cal) p. 369

F Passport cannot be impounded under the I. T. Act : Avinash Bhosale v. UOI (Bom) p. 381

F Rectification to withdraw deduction on export incentive, duty drawback : Matter debatable : Rectification not permissible : CIT v. TTK Prestige Ltd. (Karn) p. 390

F Books of account available with AO would indicate capacity of party to advance loan : No need to prove on assessee to prove capacity : CIT v. Tania Investments P. Ltd. (Bom) p. 394

F Copies of seized material not provided to assessee nor assessee given opportunity to cross-examination of person on whose statement AO relied upon : Fatal to proceedings : CIT v. Ashwani Gupta (Delhi) p. 396

F Tribunal confirming deletion of addition made by AO without verifying whether creditor paid tax on amount added as cash credit : Matter remanded : CIT v. Vinod Swarupchandra Mehta (Guj) p. 399

F Amount paid by builder as regularisation fee for violating building by-laws not deductible u/s 37 : Millennia Developers P. Ltd. v. Deputy CIT (Karn) p. 401

F Interest on refund of income-tax entitled to deduction u/s 80P : CIT v. Haryana State Co-operative Apex Bank Ltd. (P&H) p. 404

F Assessee seeking proper opportunity to make effective submissions before Tribunal : Matter remanded : Anand Flori Farms India P. Ltd. v. ITO (Delhi) p. 406

F Provision for bad doubtful debts : CIT (Appeals) deleting addition and Tribunal upholding order : Finding of fact : CIT v. Mysore Paper Mills Ltd. (Karn) p. 428

F Gross amount of interest to be taken into account for computation of deduction u/s 80HHC : CIT v. Devraj Nensee and Co. (Mad) p. 430

F Estimate of income can be made on rational basis : Prakash Automobiles v. CIT (Ker) p. 435

F Trial court has power to decide whether particular SC decision is applicable : P. Kuknhappa Nair and Co. v. Deputy CIT (Ker) p. 437

F Interest not leviable while computing income u/s 115J : Deputy CIT (Assessment) v. Madhusudan Industries Ltd. (Guj) p. 438

F Conviction of women : Release under Probation of Offenders Act justified : Union of India v. Smt. Mamta Sethi (MP) p. 440

F ITNS 150 accompanying order of assessment specifying provision of law and amount of interest charged : Order valid : Hari Narain Soni v. ITO (Raj) p. 444

F Voluntary offer of income for taxation to avoid probe and assessment of such income u/s 68 valid : T. P. Indrakumar v. ITO (Karn) p. 454

F Voluntary offer of income for taxation to avoid probe : Interest not chargeable u/ss 234A and 234B : T. P. Indrakumar v. ITO (Karn) p. 454

F Higher rate of depreciation applicable to motor lorries used in transportation business : CIT v. S. C. Thakur and Bros. (Bom) p. 463

F Export inspection charges and interest on export packing credit loans not entitled to weighted deduction : KEC International Ltd. v. CIT (Bom) p. 465

F Revised rates of depreciation with effect from April 2, 1983, not applicable for AY 1980-81 : KEC International Ltd. v. CIT (Bom) p. 465

F Mere remark that prices were rising not sufficient for pre-emptive purchase : Cigeo Construction Co. P. Ltd. v. Appropriate Authority (Bom) p. 474

F Object of constructing dam and effect of expenditure is to facilitate assessee's trade operation and enable assessee to conduct business more efficiently : Revenue expenditure : CIT v. Hindustan Zinc Ltd. (Raj) p. 478

F Guest house expenditure not allowable : CIT v. Hindustan Zinc Ltd. (Raj) p. 478

AUTHORITY FOR ADVANCE RULINGS

F Off-shore contract for design, engineering, manufacture, etc., testing of supplier's works and dispatching to port of disembarkation in India : Amount received by non-resident not taxable in India : Joint Stock Company Foreign Economic Association "Technopromexport", In re p. 409

STATUTES

F Rules :

Income-tax (First Amendment) Rules, 2010 : Corrigendum p. 24

F Notifications :

Income-tax Act, 1961 : Notification under section 10(6C) : Exemption of income of Sinclair Knight Merz Pty Limited, Australia for providing services in or outside India in projects connected with the security of India p. 24

Income-tax Act, 1961 : Notification under section 35AC(1) Expln., clause (b) : Eligible projects or schemes p. 17

JOURNAL

F CIT v. Samsung Electronic Co. Ltd. 320 ITR 209 is not based on current law-V. Prabhakar, Advocate p. 11

F Whether preventive detention of a person under section 132 and seizure of explained cash with him is legal ?-Supreme Court's view-T. N. Pandey, Retd. Chairman, CBDT p. 29

NEWS-BRIEF

F I-T Department is acting perfunctorily

The Bombay High Court, in its March 25 order on an insurance company's petition, came down heavily on the Income-tax Department, saying the Department acted perfunctorily for recovering tax dues before the end of the fiscal.

A Division Bench comprising Justice DY Chandrachud and Justice JP Deodhar, quoting an earlier Bombay High Court order, observed : "In a large number of matters, this court has been observing that orders are passed perfunctorily by the department only with an idea of effecting recovery before March 31, though such orders could have been passed in detail and after recording proper reasons."

The complaint to the court was that the Commissioner (TDS) did not give any reason for not staying the demand for 2010-11, except saying that the plea of the assessee is not acceptable and the demands have to be realised for the current year.

The Division Bench believes the Commissioner should have given a proper reasoning before rejecting the petition for staying the I-T demand.

The High Court in an earlier decision had recommended to the I-T Department to give orders explaining in detail the reasons. Some of these parameters are: Order on stay applications should contain a summary of the assessee's case.

And if the taxpayer is not looking for unconditional stay, the I-T authorities can ask for part depositing the I-T demand for which reasons should be given in the order. Besides, the I-T authorities should also give an indication to the financial soundness of the taxpayer. [Source : www.economictimes.com dated April 1, 2010]

F Landmark ruling as infrastructure companies, seek only to execute a project

The Authority for Advance Ruling's (AAR) order, which many tax experts termed as landmark, would effectively mean that in most cases foreign entities in such partnerships would pay much less tax than what they would have paid as "association of persons", which is how a consortium is defined in the tax law. The firms bidding for contracts in India, depending on the character of income (royalty, fee from technical services and the like in addition to normal business income), as tax could now be levied at comparatively low rates of 10-20%.

The ruling came in the case of a consortium bidding for a Delhi Metro Rail Corporation (DMRC) project. The AAR said the firms in the consortium would be taxed as separate taxable entities. The tax rate could vary for each partner, depending on the character of its income. Certain kinds of income could even be exempt. So, effectively, getting taxed as an independent taxable entity would mean a lower tax liability in many cases, besides clarity on taxation for firms coming together to take up a project in India.

The AAR, while stating that companies would have to be taxed independently, pointed out, "the first and foremost thing is that the nature of work undertaken and capable of being executed by each party is very much different and the scope of work assigned to one party cannot be undertaken or relocated to another."

Earlier, taxed as an association of persons was a hassle for companies, especially when profit-sharing ratios were not determined. The authority said, "it is ruled that a Consortium cannot be treated as association of persons for the purposes of assessment under the Income-tax Act, 1961 and the applicants can only be subjected to taxation on the basis that they are separate taxable entities." [Source : www.financialexpress.com dated April 6, 2010]

F Litigation between I-T and insurers may prolong through the year

The year 2010 may well see the beginning of litigation between life insurance industry and the Income-tax Department. The I-T Department is raising demands on companies with large accumulated losses which the life insurance industry is determined to appeal.

The early disputes relate to the Department's decision to impose tax on funds transferred from shareholders' account to policyholders accounts. Secondly, insurers are also worried that the proposed Minimum Alternate Tax (MAT) would be much higher than the regular rate of taxation. The insurance industry also wants to be treated distinctly compared to other companies when it comes to income recognition.

Unlike other companies, life insurers bring out two sets of accounts. One is in respect of the policyholder's funds and the second is in respect of shareholders' funds. Even among the policyholder funds, there are two sets of accounting norms. One applies to the traditional life business and the second to the unit-linked business.

Funds collected under traditional business-the endowment policies where returns are in the form of bonus declared year after year-are all combined in a life fund. Every investor earns identical returns under the life fund. The surplus generated under the fund is distributed among shareholders and policyholders in the ratio of 10:90. Companies can declare a bonus only when the fund is in surplus. To ensure that early customers do not suffer, private life companies have been transferring funds from the shareholders' account to the policyholders' account in the hope that they can get back the funds when it turns into surplus. That they will be able to do so is now uncertain.

In case of unit-linked insurance plan, there is no such issue as any appreciation in the value of the investment is clearly assigned to the investor in the form of a higher net asset value. [Source : www.economictimes.com dated March 31, 2010]

F Sweeping Direct tax collections to exceed budget estimate

The Government said direct tax collection has surpassed the budget estimate of Rs 3.70 lakh crore for the 2010 fiscal.

Direct tax realisation, however, is likely to fall short of the enhanced target of Rs. 3.87 lakh crore, mentioned in the revised estimate for 2009-10. Direct taxes include, corporate tax, personal income-tax and wealth-tax.

During the 11-month period of the 2010 fiscal, direct tax collection was Rs. 2.78 lakh crore, nearly Rs. 1 lakh crore short of the budget estimate.

In February, direct tax collection grew by a robust 27.54 per cent. on a year-to-year basis. Tax collection stood at Rs. 14,675 crore against Rs. 11,506 crore in February 2009. This was against a negative growth of 19.84 per cent. in January.

In February, corporate tax collection grew by a healthy 16.87 per cent., while personal income-tax mop up jumped by a robust 37.58 per cent.

With more and more people investing in the stock markets, the securities transaction tax (STT) fetched a handsome Rs. 5,975 crore during the first 11 months of the just-concluded fiscal, which is a smart 17.65 per cent. over the year-ago period.

The Government, in the current fiscal (2010-11) expects to mop up Rs. 4.30 lakh crore from direct taxes, higher by over 10 per cent. from what it is likely to collect the 2010 fiscal. This is despite the widening of income tax slabs and reduction in surcharge on corporate taxes to 7.5 per cent. from 10 per cent. The minimum alternate tax (MAT) will, however, has been increased from 15 to 18 per cent. on book profit of companies which do not fall under the tax net due to various exemptions. [Source : www.economictimes.com dated April 2, 2010]

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CASE LAW DIGEST FEB 2010

1. Advance Ruling- Maintainability of application- S 245N (a).

Advance Ruling sought by the applicant regarding the tax implications of its proposed amalgamation with another company cannot be declined on the ground of pendency of proceedings under the Companies Act.

Star Television Entertainment Ltd & Ors In Re (2010) 229 CTR (AAR) 7.

 

2. Appellate Tribunal- power- search and seizure- S 132, 254.

 

Tribunal cannot examine validity of a search initiated under section 132(1 ).

 

 Asst CIT v Chilka Vyankatesh Sidram ( 2010 ) 122 ITD 293 (Pune).

aaykarbhavan group

3. Appellate Tribunal- Additional grounds- S 254, Rule 11.

 

Appellant can raise an additional legal ground for first time before Tribunal by obtaining leave of Tribunal and also affected party must be given an opportunity of being heard.

aaykarbhavan group

ITO v M.M.Textiles ( 2010 ) 122 ITD 435 (Mum).

 

4. Appellate Tribunal – Additional grounds- S. 254 ( I ), Rule 11.

 

aay ka rbh av a n g r o u pAssessee’s prayer for admission, of additional ground cannot be rejected on the hyper technical ground that the specific space provided to mention the actual additional ground on page 2 of the petition was left blank by oversight.

a a y ka r b hav a n  g r o up

Everwin Export Corporation v ITO ( 2010 ) 128 TTJ ( Chennai ) (TM ) 19 (2010 ) 34 DTR (Chennai ) (TM ) (Trib )256.

 

aay  kar b  ha v  an   gr o u p 5. Appellate Tribunal- Rectification of Mistakes- S 254 (2 ).

 

When first miscellaneous application is rejected, second miscellaneous application is not maintainable.

 

Hexa Securities & Finance Co Ltd v ITO ( 2010 ) 127 TTJ ( Del ) 510.

a  a yka rbha va n g r  ou  p

6. Appellate Tribunal – Powers- Direction to give credit of tax paid in subsequent year – S 254 (1).

 

Capital gains being assessable in asst year 2002-03 direction is given to the AO to give credit for the tax already paid by the assessee on this very income in the later years as such direction is necessary for disposal of the appeal.

 

a aykarbhava n gr oupDy CIT v Standard Fire Works ( P ) Ltd ( 2010 ) 34 DTR (Chennai ) (TM ) 270.

 

aa yk arb hav an  gro up7. Appellate Tribunal – Rectification of Mistakes – S. 254(2).

 

ITAT has no power u/s 254 (2) to re-evaluate correctness on merits of earlier decision.

 

aaykarbhavan groupCIT vs. Earnest Exports (Bombay High Court)

 

8. Appellate Tribunal – Power- Stay- Proceedings before AO.S 254 (2)

 

Tribunal can stay the proceedings before the AO in exercise of its incidental powers as well as in view of aay ka rbh av a n g r o u pthe proviso to section 254 ( 2A ). T he tribunal disposed the stay application by directing the AO to pass the assessment order by 31-12-2009 in accordance with the law but not to serve on the assessee, and thus not to give effect to the same for a period of a six months from the date a a y ka r b hav a n  g r o upof passing of its order or till date of passing of the appellate order, which ever is earlier.

 

Pancard Clubs Ltd v DCIT Stay NO 235 /2009 dt 18-12-2009 Bench C (BCAJ march2010 14. 642 ( 2010 ) 41 aay  kar b  ha v  an   gr o u p –BCAJ.)

 

9. Appeal- High Court- Power of Review- S 260A., Civil Procedure,1908, S, 96, 100 114 & order 47.

 

Power of review has not been conferred on the High Court under the Income Tax Act, the review a  a yka rbha va n g r  ou  ppetition is not maintainable.

 

CIT v West Coast Paper Mills Ltd ( 2010 ) 229 CTR 239 (Bom).

 

10. Assessment – Search and Seizure – S. 153A.

 

S.153A does not authorize de novo assessment. Non-pending assessments do not abate. Additions must a aykarbhava n gr oupbe confined to search material.

 

aa yk arb hav an  gro upAnil Kumar Bhatia v. ACIT (ITAT Delhi) Source: www.itatonline.org

11. Assessment- Special audit- S. 142 (2A ).

 

Directing special audit without affording reasonable opportunity of being heard to assesse is merely an aaykarbhavan groupirregularity and not illegality.

 

Asstt CIT v Sushila Milk Specialities ( P ) ltd ( 2010 ) 122 ITD 48 ( Delhi ) ( SB). (2010 )I ITR (Trib ) 639 ( Delhi ) (SB ).

 

aay ka rbh av a n g r o u p 12. Assessment- Notice – S 143 (2 ).292 B.

 

In the absence of service of notice the AO had no jurisdiction to make assessment.

a a y ka r b hav a n  g r o up

CIT v Cebon India Ltd ( 2010 ) 34 DTR 119., 229 CTR 188 ( P&H ).

 

Editorial- Cebon India Ltd v Add CIT ( 2008 ) 12 DTR ( Del ) (Trib ) 402.affirmed.

aay  kar b  ha v  an   gr o u p 

13. Agricultural income- S 2 (1A ) 10 (1 ).

 

Seeds or crops produced at first level by assessee would constitute agricultural income as per rule 7 (1 ) (a ).

a  a yka rbha va n g r  ou  p

Pioneer Overseas Corporation v Dy CIT ( 2010 ) 35 SOT. 467 (Delhi ).

 

14. Bad Debts – Mere write-off sufficient – S. 36(1)(vii)

 

After Ist April, 1989, it is not necessary for the assessee to establish that the debt in fact has became irrecoverable. It is sufficient if they are written off as irrecoverable in the accounts of the assessee..

a aykarbhava n gr oup

T.R.F. Limited v. CIT ( 2010 ) 35 DTR 156 (SC),: www.itatonline.org

aa yk arb hav an  gro up

15. Book Profit- Deduction- Export- S. 80 HHC, 115JB.

 

Deduction under section 80 HHC is to be computed by taking into consideration “book profit’ and can aaykarbhavan groupnot be restricted to the profits of the business as computed under normal provisions of the ACT..

 

DY CIT v Glenmark Laboratories Ltd ( 2010 ) 127 TTJ (Mumbai ) 719.

 

aay ka rbh av a n g r o u pEditorial- Asstt CIT v Ajanta Pharma Ltd ( 2009) 318 ITR 252 (Bombay ), distinguished.

 

a a y ka r b hav a n  g r o up16. Book Profit - Deduction- Export- S. 80HHC, 80 IB, 115JB.

 

Explanation to section section 115JB, does not permit any adjustment with reference to deduction under section 80 IB, and therefore deduction under section 80 IB, can not be reduced from the book aay  kar b  ha v  an   gr o u p profit of the assessee while computing the deduction under section 80HHC in the context of a MAT assessment.

 

Cello Pens & Stationery (P ) Ltd v Asstt CIT (2010 ) 127 TTJ (Ahd ) 723.

 

a  a yka rbha va n g r  ou  p17. Book Profit- Adjustment for advance against Depreciation – S 115JB.

 

Advance against Depreciation is timing difference,it is not a reserve,it is not carried through P&loss account, and it is “income received in advance’ subject to adjustment in future and therefore clause (b ) of Explanation 1 to section 115 JB is not applicable.

 

National Hydroelectric Power Corpn Ltd v CIT ( 2010 ) 34 DTR (SC ) 65.

a aykarbhava n gr oup

18. Book Profit-Depreciation- Companies Act- S 115J, Income Tax Rules, 5.

aa yk arb hav an  gro up

Question whether the AO was right in directing the assessee to provide for depreciation at the rate specified in Sch XIV to the Companies Act and not in terms of rule 5 of the Income tax Rules for computing book profit is referred to larger Bench.

aaykarbhavan group

Dynamic Orthopedics (P ) Ltd v CIT ( 2010 ) 35 DTR 81, 229 CTR 317.(SC ).

 

19. Block Assessment-Undisclosed income-Noting on seized paper- S.158BC.

 

aay ka rbh av a n g r o u pNoting on the seized paper representing payment schedule of agreement yet to be executed. Assessee establishing that noting on the seized paper was from regular books of account.Deletion was justified.

a a y ka r b hav a n  g r o up

CIT v Tips Industries P.Ltd ( 2010 )321 ITR 154 ( Bom )(2010 ) 35 DTR (Bom ) 10..

 

 20. Block Assessment- Statement of third party- S 132 (4 ), 158BD.

aay  kar b  ha v  an   gr o u p 

Statements recorded of from third parties which have been relied upon by the AO for the purpose of assessment not having been provided to the assessee,order of AO is bad in law to that extent,impugned order is set a side and the AO is directed to re do the assessment according to law by providing the said statement to the assessee as well as recorded satisfaction u/s 158BD.

a  a yka rbha va n g r  ou  p

Hamish Engineering Industries (P ) Ltd v Dy CIT ( 2010 ) 34 DTR ( Mumbai ) ( Trib ) 490.

 

21. Block Assessment- Undisclosed Income- Computerised accounts-Bank accounts of third party- Gifts- S. 158BB.

 

Computerised books of account not found at the time of search, but produced at the time of assessment a aykarbhava n gr oupcannot be ignored.

 

aa yk arb hav an  gro upAmount credited in the bank accounts of wife and son cannot be treated as undisclosed income of the assessee.

 

Whisky bottles received by the assessee in appreciation of good work as gifts cannot be assessed as aaykarbhavan groupincome from undisclosed source.

 

G.G.Dhir (Dr ) v Asst CIT ( 2010 ) 35 DTR 81 (TM) (Trib) (Agra).

 

22. Business Expenditure – Exchange of currency – Roll over charges –Forward contracts- S.36 (1) (iii ) aay ka rbh av a n g r o u p37(I ), 43A.

 

Roll-over charges paid on foreign exchange forward contracts in respect of liabilities relating to the a a y ka r b hav a n  g r o upacquisition of fixed assets are to be capitalized in terms of Expln 3 to section 43A as it stood prior to the amendment made by the Finance Act, 2002 and same are not allowable as business expenditure.

 

aay  kar b  ha v  an   gr o u p ACIT vs. Elecon Engineering Co ( 2010 ) 35 DTR 209 (SC ). www.itatonline.org

 

23. Business Expenditure – Employees Contribution – PF – S. 43B.

 

Delayed payment of employees’ PF contribution allowable u/s 43B

a  a yka rbha va n g r  ou  p

Pik Pen Pvt. Ltd vs. ITO (ITAT Mumbai)

 

24. Business Expenditure – Disallowance – Charter hire payments – S 9, 40(a) (i).

 

Charter hire charges paid to foreign Ship did not constitute royalty payments section 9 is not attracted nor is there any liability for TDS and consequently section 40 (a ) (i) cannot be invoked.

a aykarbhava n gr oup

Asst CIT v Kin Ship Services ( India ) ( P ) Ltd ( 2010 ) 128 TTJ ( Coch ) 108.

aa yk arb hav an  gro up

25. Business Expenditure- Fluctuation in exchange rate- S.37.

 

Claim for depreciation on account of enhanced cost of depreciation due to fluctuation in foreign aaykarbhavan groupexchange rate was admissible for deduction under section 37.

 

CIT v Maruti Udyog Ltd ( 2010 ) 229 CTR 5, 186 Taxman 49. (SC ).

 

26. Business Expenditure- Provision for NPA in terms of RBI Directions- S. 36 (I ) (VII ).

aay ka rbh av a n g r o u p

RBI directions 1988, are merely disclosure norms or norms regarding presentation of NPA provisions in the balance sheet of an NBFC and therefore,provision for NPA in terms of RBI directions does not a a y ka r b hav a n  g r o upconstitute expenses on the basis of which deduction can be claimed but has to be added back to the total income even by applying the theory of real income.

 

Southern Technologies Ltd v JCIT ( 2010 ) 34 DTR 11/187 Taxman 346 (SC ).

aay  kar b  ha v  an   gr o u p 

27. Business Expenditure –Contribution as per direction of State Government- Commercial Expediency- S.37.

 

Payment made by assessee on the direction of the State Government to suppliers who supplied fodder a  a yka rbha va n g r  ou  pto various cattle camps in the wake of drought conditions, for maintaining smooth relations with the Government, satisfies the test of commercial expediency and therefore allowable under section 37.

 

 Surat Electricity Co Ltd v Asst CIT ( 2010) 35 DTR 272 (Ahd.) (Trib)

 

28. Business Income- Computation- Stamp duty valuation- S 28 (I ) 50C.

a aykarbhava n gr oup

Provisions of section 50C can be applied only to find out the true value of a capital asset and not for aa yk arb hav an  gro upcomputing business income hence the same cannot be applied when sale of stock in trade.

 

CIT v Thiruvengadam Investments ( P ) Ltd ( 2010 ) 34 DTR 81/ 320 ITR— / 229 CTR 284 (Mad).

aaykarbhavan group

29. Business Income- Disclosure in the course of survey- S. 40 (b ), 133A.

 

If the assets disclosed during the survey are identified with the business of the assessee then the same have to be treated as part of business income while computing total income, and the consequential aay ka rbh av a n g r o u pdeduction under section 40 (b ) has to be allowed.

 

Fashion World v Asstt ITA no 1634 Bench B dt 12-2-2010 ( Feb 2010, 598 Ahmedabad Chartered a a y ka r b hav a n  g r o upAccountants Journal )

 

30. Business Loss- Forex loss on advance repayment- S 28 (I ).

 

aay  kar b  ha v  an   gr o u p Foreign exchange loss incurred on refund of trading advance in view of order cancellation due to change in the Government policy is allowable as business loss.

 

Loksons (P ) Ltd v Asstt CIT ( 2010 ) 187 Taxman 55 (Bom ).

 

a  a yka rbha va n g r  ou  p31. Business Loss – Capital Loss – S. 37(1).

 

Advance payment made for purchase of machinery written off as business loss. Hon’ble Tribunal allowed the Appeal by Relying on the Hon’ble High Court of Rajasthan in the case of CIT Vs. Anjani Kumar co. Ltd. 259 ITR 114 (Raj.).

 

Pik Pen Pvt Ltd vs. ITO (ITAT Mumbai)

a aykarbhava n gr oup

32. Business Loss- Non realisability of balance-S 28

aa yk arb hav an  gro up

Non realisability of balance ling with a bank in FD and current accounts held to be allowable as business loss.

 

aaykarbhavan groupMehul H. Mehta v ITO ITA no 8531 /2004 Bench B dt 15-6-2009. March BCAJ p 17 645 (2010) 41-B BCAJ.

 

33. Capital Gains- Accrual- Sale of land converted in to stock in trade- S 2 (47 ), 45 (I ) 45 (2 ).

 

aay ka rbh av a n g r o u pAssessee having converted land in to stock in trade in an earlier year and sold the same in the relevant year by executing a general power of attorney, showing it as sale of stock in trade and crediting the sale proceeds land stood “otherwise transferred” and hence, capital gain is a a y ka r b hav a n  g r o uptaxable under section 45 (2 ) in the relevant assessment year though no conveyance deed was registered.

 

Wipro Ltd v Dy CIT (2010) 34 DTR ( Bang ) (Trib) 493.

aay  kar b  ha v  an   gr o u p 

34. Capital Gains- Agricultural Land. – s. 2 (14) (iii), 54 B.

 

Report of the Tehsildar having certified that the assessee’s land was 8 kms, away from the municipal limits the land constituted agricultural land hence the assessee is entitled to exemption under section a  a yka rbha va n g r  ou  p54B.

 

CIT v Lal Singh & Ors ( 2010 ) 228 CTR 575 (P& H ).

 

35. Capital Gains-Agricultural Land- Measurement of distance- S. 2 (14) (III )(b ), 45.

 

Distance of the agricultural land belong to the assessee within meaning of section 2 ( 14 ) (iii) (b ) has to a aykarbhava n gr oupbe measured in terms of the approach by road and not by a straight line distance on horizontal plane or as per crow’s flight.

aa yk arb hav an  gro up

CIT v Satinder Pal Singh ( 2010 ) 229 CTR 82 / 188 Taxman 54(P& H ).

 

36. Capital gains- Development agreement- Transfer- S. 2 (47 ) (V ), 54, 53A, transfer of property Act.

aaykarbhavan group

When possession was handed over and total consideration was also agreed upon by parties and vendee was allowed to enjoy and entertain property for purpose for which it was taken over,then the transaction had fulfilled conditions required under section 53A, of Transfer of Property Act, 1982, and therefore,it was covered under definition of ‘Transfer’ under section 2 (47 ) (v ).

aay ka rbh av a n g r o u p

R. Kalanidhi v ITO ( 2010 ) 122 ITD 388 ( Chennai)

 

a a y ka r b hav a n  g r o up37. Capital Gains- Conversion of Proprietary concern in to Firm- S 45 (3 ).

 

Conversion of proprietary concern in to firm in 1994.Valuation of assets and credit in same year. Transaction gave rise to capital gains.

aay  kar b  ha v  an   gr o u p 

Dharamshibhai B.Shah v ITO ( 2010 ) I ITR (Trib ) 536 ( Ahmedabad )

 

38. Capital Gains- Contribution of personal asset towards capital of firm- Stock in trade-S. 2 ( 47 ) 28 (I ), 45 (2 ) 45 ( 3 ).

a  a yka rbha va n g r  ou  p

Where the land held by assessee company as stock in trade was contributed as capital in a partnership firm after revaluing the same,the surplus was assessable as capital gains by application of section 45 (3 ). Even other wise,transaction of such conversion was device or ruse to convert the land in to money substantially for the benefit of the assessee and therefore same was assessable as business income.

 

DLF Universal Ltd v Dy CIT ( 2010 ) 34 DTR 105,/ 36 SOT 1 / 128 TTJ 121 (SB) (Delhi).

a aykarbhava n gr oup

39. Capital Gains- Reconstitution of firm- S 2 (47 ), 45 (4 ).

aa yk arb hav an  gro up

When there were only four partners, first change in June 1994 when two partners retired and two new partners inducted. Second change in 2004 when remaining two partners also retired and two more partners, who have brought the capital. The court held that the provisions of section 45 (4 ) is applicable aaykarbhavan groupas it amounts to transfer Hence capital gain is applicable.

 

CIT v Gurunath Talkies ( 2010 ) 214 Taxation 729 ( Kar ).

 

40. Capital Gains-Capital Asset- lease from Municipal Corporation -S. 2 (14 ), (47 ), 45.

aay ka rbh av a n g r o u p

Assessee’s right as lessee is capital asset. Receipt of one time fee for foregoing right to use property assessable as capital gains.

a a y ka r b hav a n  g r o up

Asstt CIT v United Motors (I ) Ltd ( 2010 ) 1 ITR ( Trib ) 578 (Mumbai ), (2010 ) 34 DTR (Mumbai ) (Trib) 399.

 

aay  kar b  ha v  an   gr o u p 41. Capital Gains- Sale of stock in trade- Deeming provisions- S – 45,50 C.

 

Sale of stock in trade. Officer making addition in sale price based on fair market value arrived at rent capitulation method. Addition made not justified.

 

a  a yka rbha va n g r  ou  pAsstt CIT v Excellent Land Developers P.Ltd ( 2010 ) 1 ITR (Trib ) 563 (Delhi).

 

Editorial- Refer( 2010 )CIT v Thiruvengadam Investments (P ) LTD ( 2010 ) 34 DTR (Mad) 81 320 ITR (Mad). Inderlok Horels P Ltd v ITO (200) 318 ITR (At ) 234 (Mum).

 

 42. Capital Gains- depreciable assets- Stamp valuation – s 50, 50C.

 

a aykarbhava n gr oupStamp duty valuation is not applicable in respect of sale of assets where depreciation has been allowed.

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Panchiram Nahata v Jt CIT ( 2010 ) 127 TTJ (Kol ) (UO ) 128.

 

43. Capital Gains – Loss- Exemption – S. 10 (38), 70(3), 74 (1 )

aaykarbhavan group

Non-exempt capital loss cannot be set off against exempt capital gains

 

G.K. Ramamurthy vs. JCIT ( 2010 ) 2 ITR (Trib )139 (Mumbai ) www.itatonline.org

 

aay ka rbh av a n g r o u p44. Capital Gains- Short term or Long Term-Renouncement of right to receive right shares-S. (2 ) 29A ), 2 (42A ), 45 (1 ) 48 ( 2 ).

 

a a y ka r b hav a n  g r o upRight to subscribe for additional offer of shares /debentures on rights basis comes in to existence when the company decides to come out with the rights offer and,therefore,in order to determine the nature of the capital gains/loss on renunciation of right to subscribe for additional shares /debentures,the crucial date is the date on which such right to subscribe for additional aay  kar b  ha v  an   gr o u p shares /debentures comes in to existence and the date of transfer ie. renunciation of such right.

 

Navin Jindal & Ors v Astt CIT (2010 ) 320 ITR 708/34 DTR 1(SC.)

 

a  a yka rbha va n g r  ou  p45. Capital Gains –Computation-Sale of property in consideration of flats.- S 45, 48.

 

Assessee having sold land also while executing lease deed in favour of purchaser /developer who had agreed to give 11 flats to the assessee in the building to be constructed,the AO was justified in taking in to consideration value of land also apart from the value of flats and thus value of Rs332.335 per sq.ft taken by the AO as against Rs 200 per sq.ft adopted by the assessee was sustainable.

a aykarbhava n gr oup

CIT v N. Srirama Reddy ( Decd ) ( 2010) 228 CTR 541 ( Kar).

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46. Capital Gains-Amalgamation- Foreign Companies- Transaction not regarded as transfer- S 47 (vi), 47 (Vii).

 

aaykarbhavan groupApplicant companies having resolved to amalgamate in order to achive synergies or operation, enhanced operational flexibility and to create a stronger base for future growth of the amalgamated entity, the amalgamation can not be characterized as a mere device for avoidance of tax within the meaning of cl (iii) of the proviso to section 245 R (2 ).Applicants would therefore be entitled to benefits of sections 47 (vi ) and (vi ) and consequently no tax liability would arise in respect of transfer aay ka rbh av a n g r o u pof assets/shares pursuant to and as a part of the terms of amalgamation.

 

Star Television Entertainment Ltd & Ors, ( 2010 ) 229 CTR (AAR )7.

a a y ka r b hav a n  g r o up

47. Capital or revenue Expenditure- Upgrading computers- s 37 (1 ).

 

Expenditure on upgrading computers is revenue expenditure.

aay  kar b  ha v  an   gr o u p 

CIT v Sundarm Clayton Ltd ( 2010 ) 321 ITR 69 ( Mad ).

 

48. Capital or Revenue Expenditure- Consultancy fees-S. 37.

 

a  a yka rbha va n g r  ou  pConsultancy fee paid by assessee for carrying out detailed operational efficiency and profitability study of the assessee was allowable as revenue expenditure even though the said assignment was terminated before conclusion of the study,though there was no written agreement.

 

Indo Rama Synthetics (I ) Ltd v CIT ( 2010 ) 228 CTR 278 ( Del )

 

49. Capital or Revenue Receipts- Non Compete fee- Income- S 4.

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Non –compete fee received by assessee for refraining from manufacturing and selling timepieces for a aa yk arb hav an  gro upperiod of ten years after the sale of one units while it was continuing with its other business activities constituted revenue receipt.

 

CIT v Tata Coffee Ltd ( 2010 ) 229 CTR 38 (Kar ).

aaykarbhavan group

Editorial – refer CITv Shyam Sunder Chhaparia- amount received after retirement held taxable.

 

50. Capital or Revenue Receipt- Capital subsidy- S.4.

 

aay ka rbh av a n g r o u pThe purpose of the grant or the subsidy being for the construction of the capital assets viz.The tube wells and lift irrigation schemes, which constitute the permanent apparatus from which the assessee derives income by way of water charges,the subsidy has to be held to a a y ka r b hav a n  g r o upconstitute capital receipt by applying the “purpose test”.

 

Gujarat Water Resources Development Corporation Ltd v JCIT. ITA no 167/168/ Bench A dt 16-10-2009 ( Feb 2010 p 594 Vol 33 part 11. Ahamedabad Chartered Accounts journal ),

aay  kar b  ha v  an   gr o u p 

51. Cash Credits- Gift- S 68.

 

There is no legal basis to assume that to recognize the gift to be genuine,there should be any blood relationship, or any close relation ship, between the donor and the done. When assessee produced the a  a yka rbha va n g r  ou  paffidavit, gift deed in the absence of anything to show that the gift was by way of money laundering addition under section 68 as cash credit not justified.

 

CIT v Padama Sungh Chauhan ( 2010 ) 214 Taxation 792 (Raj ).

 

52. Cessation – remission of liability- Profits chargeable to tax- Old outstanding-S. 41 (1 ).

 

a aykarbhava n gr oupThe fact that the liability was old would not make any any ground for addition. So long as there was no cessation of liability by writing back same no addition could be made under section aa yk arb hav an  gro up41 (1 ).

 

CIT v Sita Devi Juneja (Smt ) ( 2010 ) 187 Taxman 96 ( Punj & Har ).

 

aaykarbhavan groupCIT v Jaipur Jewellers ( Exports ) ( 2010 ) 187 Taxman 169( Delhi ).

 

53. Cessation –Remission of liability-Business Income- Profits chargeable to tax-S 41 ( I ).

 

Assessee having shown the amount payable by it to another company as an existing liability in its books aay ka rbh av a n g r o u pand not written back the same,it cannot be said that the aforesaid liability has ceased to exist and therefore it can not be assessed as income by invoking the provisions of section 41 (I ).

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CIT v GP International Ltd ( 2010 ) 229 CTR 86 ( P & H )

 

54. Cessation of liability- Remission- Waiver of loan- S. 41 ( 1 ).

aay  kar b  ha v  an   gr o u p 

Waiver of loan to discharge the liabilities of business to recoup losses over period of time were consequential to contractual agreement, can not be assessed under section 41 ( 1 ).

 

Mindteck ( India ) Ltd v ITO ( 2010 ) 122 ITD 486 (Mum )

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 55. Deduction – Set -off of losses – S. 10A

 

Deduction has to be made at the stage of computing the income under head “Profits & gains” and not at the stage of computing the gross total income. The deduction u/s 10A attaches to the undertaking and not to the assessee. The losses of a non-eligible unit cannot be set off against the profits of an eligible unit and are eligible to be set-off against other income or to be carried forward.

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Scientific Atlanta v. ACIT (ITAT Chennai Special Bench) Source: www.itatonline.org

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56. Deduction –Computation-set off of loss of other Unit- S.80 (B ) (5 ), 80-IA

While computing deduction under section 80 IA, loss of one eligible unit is not to be set off or adjusted against profit of another eligible unit..

aaykarbhavan group

CIT v. Sona Koya Steering Systems Ltd ( 2010 )35 DTR 273 (Delhi ) www.itatonline.org

 

 

57. Deduction of tax at source- Fess for professional or technical services- VSAT- S. 194 J.

aay ka rbh av a n g r o u p

Payment made to Stock exchange for providing infrastructure to their members is not in the nature of technical services to attract provisions of section 194 J.

a a y ka r b hav a n  g r o up

Dy CIT v Angel Broking Ltd ( 2010 )35 S0T 457. (MUM )

 

Editorial – see-Kotak Securities Ltd v Addl CIT ( 2009) 24 DTR 214 (Mumbai ) (Trib ).

aay  kar b  ha v  an   gr o u p 

58. Deduction of Tax at source- Non Resident- Royalty- DTAA- India-USA-UK S – 5, (2 ), 9 (1) (vi ), 40 (a ) (I ),195, art, 26 (3 ), art 26 (4 ).

 

Payments to non resident for hire of transponders is royalty,tax has to be deducted at source.

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Asianet Communications Ltd v Dy CIT ( 2010 ) 1 ITR (Trib ) 683 (Chennai ).

 

59. Deduction – Export- Claim under Reassessment proceedings-S 80 HHC.147.

 

Assessee having not claimed deduction under section 80 HHC in its return because it had only income from other sources and no business income,it was well with in its right to claim the said deduction by a aykarbhava n gr oupfiling the audit report when the business income turned positive as a result of disallowance of local cess under section 43B,in the reassessment proceedings and therefore,the order of aa yk arb hav an  gro upthe CIT (A ) directing the AO to consider assesse,s claim for deduction under section 80 HHC is up held.

 

ITO v Tamil Nadu Minerals Ltd ( 2010 0 35 DTR ( Chennai ) (TM ) (Trib )

aaykarbhavan group

60. Deduction- Manufacture- Production-S 33B, 80IAB(I ), 80 (IA) (12 ).

 

Duplicating process carried out to prepare a recorded CD from the master media changes the basic character of a blank CD, dedicating it to a specific use and therefore,the process by which a blank CD is aay ka rbh av a n g r o u ptransformed in to software loaded disc constitutes “manufacture” or processing of goods”.in terms of section 80IA (12 ) (b ) r/w s. 33B.

 

a a y ka r b hav a n  g r o upCIT v Oracle Software India Ltd.( 2010 ), 320 ITR 546/ 187 Taxman 275. (SC ).

 

61. Deduction-Industrial Undertaking- Export Incentives- Duty draw back- DEPB license- Exchange rate difference- S 80IB.

aay  kar b  ha v  an   gr o u p 

Deduction under section 80IB is not allowable in respect of duty draw back, export entitlement and DEPB license.

 

Exchange rate difference arises out of and is directly related to sale involving export of the industrial a  a yka rbha va n g r  ou  pundertaking,hence entitled to deduction under section 80 IB.

 

CIT v Rachana Udhyog ( 2010) 35 DTR 65 (Bom ).

 

Editorial- Liberty India (2009) 317 ITR 218 (SC ), considered.

 

62. Deduction-Actual payment- Employees gratuity fund- S 43B.

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Contribution towards employees gratuity fund was allowable if paid before filing of the return of aa yk arb hav an  gro upincome.

 

CIT v Popular Vehicle & Services Ltd ( 2010 ) 228 CTR 346 ( Ker ).

 

aaykarbhavan group 63. Deduction- Computer soft ware- S. 80HHE.

 

Receipts incidental to the activities of the assessee “involving the writing of computer software’ ie. Set of instructions,were the eligible receipts, so long as the software was exported outside India or technical services were provided outside India,the provisions do not bar the assessee from claiming deduction on aay ka rbh av a n g r o u pthe basis of the actual use or utilization of the said exported software in India.

 

Orbitech Ltd v JCIT.( 2010 ) 35 SOT 46. (MUM ) (URO).

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64. Deduction – Computer software- S 80HHE.

 

Sending information which was sought by companies situated abroad, said activity amount to export of aay  kar b  ha v  an   gr o u p customized electronic data hence the assessee is eligible deduction under section 80HHE.

 

Asst CIT v Malhar Information Services ( 2010 ) 122 ITD 421 (Mum ).

 

a  a yka rbha va n g r  ou  p65. Deduction- Manufacture- Poultry farming- S 80HHA, 80I.

 

Poultry farming cannot be treated as manufacturing activity for purposes of deduction under sections 80HHA, 80 I.

 

CIT v J.D.Farms ( 2010 ) 187 Taxman 151 ( Delhi ).

 

a aykarbhava n gr oup66. Deduction – Dividend- Gross or Net. S 80 M.

 

aa yk arb hav an  gro upAssessee company being a development organization having made investment in shares of companies promoted by it and other upcoming companies in its role as development organization and not as an investor to earn dividend income,various activities carried out by the assessee constitute one single indivisible business and therefore no expenditure is to be apportioned to aaykarbhavan groupthe dividend lncome of the assessee which is assessable as business income and deduction under section 80 M is allowable on gross amount of dividend.

 

Dy CIT v Tamilnadu Industrial Development Corporation Ltd (2010) 127 TTJ ( Chennai ) (TM ) 625 (2010) 34 DTR (Chennai) (TM) (Trib) 233.

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67. Deduction- Co-operative Societies. S.56, 80 P.(2 ) (a ) (i ).

 

a a y ka r b hav a n  g r o upInterest earned by a co- operative society by investing surplus funds in short term deposits and Government Securities assessable as “income from other sources” and it can not be said to be attributable to the activities of the society hence interest income will not qualify deduction under section 80 P (2 ) (a ) ( I ).

aay  kar b  ha v  an   gr o u p 

The Totgars Co-operative Sales Society Ltd v ITO ( 2010 ) 35 DTR 25/ 229 CTR 209 (SC )

 

68. Deduction- Co-Operative Society- Interest Income- S 80 P (2 ) (a ) (I ).

 

a  a yka rbha va n g r  ou  pWhere the surplus funds not immediately required for day to day banking were kept voluntarily reserves and invested in KVP/VP,the interest income received from KVP/VP would be income from banking business eligible for deduction under section 80 P (2 ) (a ) (I ).

 

CIT v Solapur Nagari Audyogic Sahakari Bank Ltd ( 2010 ) 229 CTR 73 ( Bom )

 

69. Depreciation- Plant- Flyover,roads, bridges-S 32.

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Assessee being engaged in building flyover,roads bridges express highways ROB, etc and carrying on its aa yk arb hav an  gro upactivities of developing and maintaining infrastructure, facilities by permitting vehicles to ply over these structures,they are tools of the trade and essential adjuncts to the business and therefore, constitute plant entitled to depreciation at 25 percent.

 

aaykarbhavan groupMaharastra State Road Development Corporation Ltd v Astt CIT (2010) 128 TTJ (Mumbai) 32.(2010 ) 34 DTR (Mumbai) (Trib) 389.

 

70. Depreciation- Earth moving equipment- S 32.

 

aay ka rbh av a n g r o u pEarth moving equipment namely JCB is eligible depreciation at 40 % which rate is provided for “Motor Buses, Motor Lorries, Motor Taxis,which is used in the business of running them on hire.

a a y ka r b hav a n  g r o up

CIT v Gaylord Constructions, Kachappilly House,Angamaly ( 2010 ) TAX.L.R.85 (Ker ).

 

71. Depreciation- Motor Vehicles on hire- S 32.

aay  kar b  ha v  an   gr o u p 

Assessee is entitled to higher rate of depreciation as per Appendix I, Income Tax Rules, 1961Entry III (3 )(ii) in respect of motor cars used in the business of running them on hire.

 

Magma Fincorp Ltd v Asstt CIT ( 2010 ) 35 DTR 76 ( Trib ) ( Kol ).

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72. Exemption- Export of Customized electronic data - S. 10A.

 

Assessee having provided the services of recruitment and training of software professionals to its parent company in USA by storing the relevant data in an electronic device and transmitting the same to USA for the use of the parent company, it is a customized electronic data with in the meaning of clause (I ) of the assessee is entitled to deduction in India under section 10 A in respect of the income earned by it a aykarbhava n gr oupfrom its parent company for providing the said services.

 

aa yk arb hav an  gro upITO v Accurum India (P ) Ltd ( 2010 ) 34 DTR ( Chennai ) (TM ) 301./ 128 TTJ 249 (TM ).

 

73. Exemption – Export incentive- S 10A.

aaykarbhavan group

Export incentive which are includible in the profits of the business of the undertaking are entitled to exemption under section 10A.

 

Wipro Ltd v Dy CIT ( 2010 ) 34 DTR ( Bang ) ( Trib ) 493.

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74. Exemption- Free Trade Zone- Manufacture- S 10A.

 

a a y ka r b hav a n  g r o upBlending and repacking of tea is manufacture. Since the purpose of exemption under section 10A is to give effect to the EXIM Policy of the Government,the definition of “Manufacture” contained in the EXIM police is applicable.

 

aay  kar b  ha v  an   gr o u p Girnar Industries v CIT ( 2010 ) 187 Taxman 136 (Ker).

 

75. Income from house property- Business income- S. 22, 28 (i ), 22.

 

When income has been earned by mere exploitation of ownership of property,the same is assessable as a  a yka rbha va n g r  ou  pincome from house property. If immoveable property has been temporarily let out with primary object to exploit same by way of complex commercial activity, then income is assessable as business income.

 

Hiranandani Developers (P ) Ltd v JT CIT.(2010 ) 35 SOT 430 (Mum )

 

76. Income from undisclosed sources- Addition – On money- S. 69.

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In the absence of any material on record to show that the assessee has in fact paid on money for the aa yk arb hav an  gro uppurchase of flat, addition could not be made in the hands of the assessee merely on the basis of the statement of a partner of the vendor firm or the notings on a document which was seized from the business premises of the said firm.

 

aaykarbhavan groupJawaharlalbhai Atmaram Hatthiwala v ITO ( 2010 ) 128 TTJ ( Ahd) (UO )36.

 

77. Income- Prizes won on in entertainment programmes on television- 2 ( 24 ).

 

Prizes won in entertainment programmes on television included by amendment in section 2 ( 24 ) w.e.f. aay ka rbh av a n g r o u pfrom 1-4-2002, said amendment is prospective.

 

Miss Lopamudra Misra v Asstt CIT ( 2010 ) Tax LR. 49 ( Orissa ).

a a y ka r b hav a n  g r o up

78. Interest – Advance Tax – Tax Deducted at Source – S. 195, 234B.

 

Income subject to tax deduction at source,interest cannot be charged.

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Joint DIT v Krup Uhde GmbH(2010 ) 1 ITR (Trib ) 614 (Mumbai ).

 

79. International Taxation – Transfer pricing- arm,’ length price- S. 92C.

 

a  a yka rbha va n g r  ou  pPrice on which a particular product is available in one country may largely vary from price prevailing in other countries due to host of factors such as climatic conditions and demand and supply factors etc. In such a situation a valid comparison could not be made between price charged by assessee from other countries with that from USA,particularly when quantity exported to USA was on whole sale basics, where as it was on in smaller lots on retail basis to other countries. In such a situation CUP method adopted by the authorities were set a side. AO was directed to get the ALP afresh.

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 Gharda Chemicals Ltd v DY CIT ( 2010 )35 SOT 406 (Mum ).

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80. International Taxation –Reimbursement of expenses- Permanent establishment- India –German- DTAA- Art 5, (2) (I ), 12., S 195.

 

aaykarbhavan groupReimbursement of expenses incurred on travel not involving element of income not taxable-

 

Various sites cannot be considered together when contract are not interconnected.Period to be computed separately in respect of each activity. Activity once commenced continues till completion of aay ka rbh av a n g r o u pcontract. Intervening period cannot be excluded.Period of six months to be counted irrespective of years involved.

 

a a y ka r b hav a n  g r o upJoint DIT v Krupp Uhde GmbH.( 2010 )1 ITR (Trib ) 614 (Mumbai).

 

81. International Taxation – Permanent Establishment- DTAA-India- South Korea- S.90, art 5, 7.

 

aay  kar b  ha v  an   gr o u p Income derived from Korean company from overseas operations cannot be subjected to tax in India in view of art 5 of DTAA between India and South Korea and since the assessee did not have PE in India its project office cannot be treated as PE.

 

Dy CIT v Hyundai Heavy Industries Co Ltd ( 2010 ) 128 TTJ (Del ) (UO ) 4.

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82. International Taxation- Sale of Software- DTAA- India- Japan.- S. 9 (I ) (vi ),90, art 7, 12.

 

Payment received by the applicant from VARs on account of supplies of software products to the end customers (from whom the licence fee is not in the nature of royalty to the applicant.As the VAR cannot be said to be the agents or dependent agents hence the applicant cannot be deemed to have a PE in India therefore the payment received by the applicant from VARs cannot be taxed as business profits in a aykarbhava n gr oupIndia under art 7 of Indo Japan DTAA.

 

aa yk arb hav an  gro upDassault Systems K.K.In Re.( 2010 ) 229 CTR (AAR ) 105.

 

83. International Taxation- Fees for technical services- DTAA- S 9 (I ) (vii ), art 12.

 

aaykarbhavan groupApplicant a Germany company having undertaken a contract as consultant for supply of architectural designs and drawings for constructing complex of Tamil Nadu legislative assembly whereby it is preparing complete working drawings and details for proper execution works during construction and offering technical advice to the sub contractor by deploying its expertise and is required to be associated with conceptual design stage and ending with the “completion” the aay ka rbh av a n g r o u ptransaction cannot be described as a pure sale of drawings and designs and therefore the consideration received by the applicant can be legitimately treated as fees for technical services.

 

a a y ka r b hav a n  g r o upGMP International GmbH In Re.( 2010 ) 229 CTR (AAR ) 139.

 

 84. Non Resident- Status- S 2 (30 ), 6 (1 ).

 

aay  kar b  ha v  an   gr o u p Applicant who left India for USA for employment and was in India for 123 days in the relevant previous year neither satisfies cl (a ) nor cl (c ) of section 6(1 ) and therefore, he was a non resident during the relevant period and the income that accrued to him outside India by reason of his employment in USA can not form part of taxable income in India.

 

a  a yka rbha va n g r  ou  pAnurag Chaudhry In Re. ( 2010 ) 35 DTR (AAR ) 77.

 

85. Reassessment- reasons to believe – S. 143, 147.

Even if there is no assessment u/s 143 (3), reopening u/s 147 is bad if there are no proper “reasons to believe”. AO cannot go beyond the recorded reasons.

Prashant S. Joshi vs. ITO (Bombay High Court)

 

a aykarbhava n gr oup86. Reassessment – Retrospective Amendment – S. 147, 148.

 

aa yk arb hav an  gro upValidity of s. 147 reopening has to be determined on the basis of law prevailing on date of issue of s. 148 notice and not on retrospectively amended law.

 

Rallis India vs. ACIT (Bombay High Court) Source: www.itatonline.org

aaykarbhavan group

 

 87. Reassessment- After four Years- S, 147,148.

 

AO having reopened assessee’s assessment after expiry of four years from the relevant assessment year aay ka rbh av a n g r o u pby placing reliance on a commencement certificate of housing projects undertaken by the assessee which was furnished to the AO in the course of assessment proceedings under section 143 (3 ) it self and was already on record, it can not be said that the assessee had failed to a a y ka r b hav a n  g r o updisclose relevant documents or material facts and therefore recourse to the provisions of.section 147 can not be sustained.

 

Mistry Lalji Narsi Development Corporation v Asst CIT ( 2010 ) 34 DTR (Bom ) 273. /229 CTR 359 (Bom )

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88. Revision – Two views. S 263.

 

The condition precedent to the exercise of jurisdiction under section 263, was that the order sought to be revised must be erroneous in so far as it was prejudicial to the interest of revenue. When two views a  a yka rbha va n g r  ou  pwere possible and the assessment could not be revised.

 

Grasim Industries Ltd v CIT ( 2010 ) 321 ITR 92 ( Bom )./ 229 CTR 347(Bom )/35 DTR 142 ( Bom ).

 

89. Revision- Erroneous and Prejudicial Order- S 263.

 

AO having accepted the annual value of the property on the basis of the actual rent received by the a aykarbhava n gr oupassessee for the property from a group concern which was admittedly less than the annual value fixed by the Corporation, CIT was justified in setting a side the assessment order on this aa yk arb hav an  gro upissue and giving appropriate direction to the AO to examine the issue from all angles.

 

Sical Logistics Ltd v Add CIT ( 2010 ) 34 DTR ( Chennai ) ( TM ) (T rib )350.

aaykarbhavan group

90. Salary- Capital receipt- S 4, 15, 56.

 

Where amount received by assessee was not in her capacity as employee,but was only compensation for injury caused to her by denying her employment, after having been declared employable by aay ka rbh av a n g r o u pfollowing a discriminatory general practice prohibited by law in USA,it amounted to capital receipt not liable to tax, so far as pre-judgment interest on amount of compensation was concerned,if it was a part of settlement, amount,its character would be same as that of principal a a y ka r b hav a n  g r o upamount of compensation ie. Capital receipt, not liable to tax.

 

Asstt CIT v Rani Shanker Mishra (smt ) ( 2010 ) 122 ITD 360 ( Delhi ).

 

91. Speculation Loss – Set off against delivery based profit – S. 43(5), 73.

 

Speculation loss can be set off against delivery based profits

 

CIT vs. Lokmat Newspapers (Bombay High Court)

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