ITAT (MUM): Banks are not liable to pay S. 115JB MAT on “book profits”

Krung Thai Bank PCL vs. JDIT (ITAT Mumbai)

Banks are not liable to pay S. 115JB MAT on "book profits"

The assessee, a foreign bank operating in India through a branch office, filed a return offering Nil income as per the normal provisions of the Act. Though the assessee had a net profit of Rs. 78.32 lakhs in the P&L A/c it did not compute "book profits" u/s 115JB. The AO accepted the return u/s 143(3) though he subsequently made a reassessment u/s 147 in which he assessed the "book profits" u/s 115JB. The assessee challenged the reopening on the ground that s. 115JB did not apply to banking companies. HELD upholding the challenge:

(i) S. 115 JB can only come into play when the assessee is required to prepare its profit and loss account in accordance with the provisions of Parts II and III of Schedule VI to the Companies Act. The starting point of computation of minimum alternate tax u/s 115 JB is the result shown by such a profit and loss account. In the case of banking companies, however, the provisions of Schedule VI are not applicable in view of exemption set out under proviso to S. 211 (2) of the Companies Act. The final accounts of banking companies are required to be prepared in accordance with the provisions of the Banking Regulation Act. Consequently, s. 115 JB cannot be applied to a banking company;

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ITR(Tribunal) Vol 5 Part 7

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

Volume 5 : Part 7 (Issue dated : 11-10-2010)

SUBJECT INDEX TO CASES REPORTED IN THIS PART

Appeal to Commissioner (Appeals) --Maintainability--Interest--Denial of liability to pay interest by assessee--Issue appealable--Income-tax Act, 1961, s. 220(2)-- Asst. CIT v. Hemendra M. Kothari (Mumbai) . . . 646

Assessment --Appeal to Appellate Tribunal--Order passed by Assessing Officer consequent to order of Tribunal--Tribunal holding that particular amount arising on transfer of shares not assessable in assessment year 1997-98 but in subsequent year--Tribunal not considering whether amount business income or capital gains--Assessing Officer cannot assess income in subsequent year as business income--Income-tax Act, 1961-- Asst. CIT v. Hemendra M. Kothari (Mumbai) . . . 646

Capital or revenue expenditure --Payment made for obtaining vacant and peaceful possession of premises under sub-lease--Landlord, tenants and sub-tenants and assessee-firm consisting of persons related inter se--No dispute existing--Question of payment for obtaining possession does not arise--Expenditure for renovation of leased premises--Not allowable--Income-tax Act, 1961, s. 32, Expln. 1 -- ITO v. Pritam Juice (Mumbai) . . . 664

Income --Accrual of income--Retention money--Bank guarantee in respect of due performance of contract and deficiencies in goods and equipment--Income from sale accruing to assessee at time of delivery of product and income from installation and commission at time of rendering services--Amount received in respect of delivered goods not installed to be treated as advance--Retention money cannot be excluded from total income--Income-tax Act, 1961-- Emerson Network Power India P. Ltd. v. Asst. CIT (Mumbai) . . . 727

Income from other sources --Interest--Loan obtained for setting up factory--Part of loan and capital contribution deposited in fixed deposit account--Not a condition precedent for disbursement of loan--Interest earned on fixed deposit assessable as income from other sources--Income-tax Act, 1961, s. 56-- Positive Packaging Industries Ltd. v. ITO (Mumbai) . . . 656

Industrial undertaking --Special deduction under section 80-I--Income derived from industrial undertaking alone to be considered as source of income for purpose of section 80-I(6)--Unabsorbed losses, depreciation and investment allowance set off against income of assessee from interest, capital gain and dividend in assessment years 1988-89 to 1991-92--To be reduced in accordance with section 80-I(6) from current year's profit for computation of deduction under section 80-I--Income-tax Act, 1961, s. 80-I-- Gujarat Ambuja Cements Ltd. v. Deputy CIT (Mumbai) . . . 689

----Special deduction--Industrial undertaking not carrying out trading activities--Deduction not allowable on profits and gains derived from any activity incidental to manufacturing activity--Assessee not entitled to deduction on profits of trading activities--Income-tax Act, 1961, s. 80-IA-- Emerson Network Power India P. Ltd. v. Asst. CIT (Mumbai) . . . 727

Search and seizure --Block assessment--Income disclosed prior to search cannot be assessed under sections 158BC and 158BD--Income-tax Act, 1961, ss. 158BC, 158BD-- Deputy CIT v. Suresh Chand Bafna (Chennai) . . . 675

Words and phrases --"Profits and gains derived from industrial undertaking or business of hotel" and "any business of"-- Emerson Network Power India P. Ltd. v. Asst. CIT (Mumbai) . . . 727

 

SECTIONWISE INDEX TO CASES REPORTED IN THIS PART

Income-tax Act, 1961 :

S. 32, Expln. 1 --Capital or revenue expenditure--Payment made for obtaining vacant and peaceful possession of premises under sub-lease--Landlord, tenants and sub-tenants and assessee-firm consisting of persons related inter se--No dispute existing --Question of payment for obtaining possession does not arise--Expenditure for renovation of leased premises--Not allowable-- ITO v. Pritam Juice (Mumbai) . . . 664

S. 56 --Income from other sources--Interest--Loan obtained for setting up factory--Part of loan and capital contribution deposited in fixed deposit account--Not a condition precedent for disbursement of loan--Interest earned on fixed deposit assessable as income from other sources-- Positive Packaging Industries Ltd. v. ITO (Mumbai) . . . 656

S. 80-I --Industrial undertaking--Special deduction under section 80-I--Income derived from industrial undertaking alone to be considered as source of income for purpose of section 80-I(6)--Unabsorbed losses, depreciation and investment allowance set off against income of assessee from interest, capital gain and dividend in assessment years 1988-89 to 1991-92--To be reduced in accordance with section 80-I(6) from current year's profit for computation of deduction under section 80-I-- Gujarat Ambuja Cements Ltd. v. Deputy CIT (Mumbai) . . . 689

S. 80-IA --Industrial undertaking--Special deduction--Industrial undertaking not carrying out trading activities--Deduction not allowable on profits and gains derived from any activity incidental to manufacturing activity--Assessee not entitled to deduction on profits of trading activities-- Emerson Network Power India P. Ltd. v. Asst. CIT (Mumbai) . . . 727

S. 158BC --Search and seizure--Block assessment--Income disclosed prior to search cannot be assessed under sections 158BC and 158BD-- Deputy CIT v. Suresh Chand Bafna (Chennai) . . . 675

S. 158BD --Search and seizure--Block assessment--Income disclosed prior to search cannot be assessed under sections 158BC and 158BD-- Deputy CIT v. Suresh Chand Bafna (Chennai) . . . 675

S. 220(2) --Appeal to Commissioner (Appeals)--Maintainability--Interest--Denial of liability to pay interest by assessee--Issue appealable-- Asst. CIT v. Hemendra M. Kothari (Mumbai) . . . 646

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ITR VOL 327 PART 4

INCOME TAX REPORTS (ITR)
Volume 327 : Part 4 (Issue dated 11-10-2010)
SUBJECT INDEX TO CASES REPORTED IN THIS PART

HIGH COURTS

Appeal to Commissioner (Appeals) --Power to admit additional evidence--Duty to allow Assessing Officer opportunity to examine additional evidence--Tribunal holding violation of rule for failure to allow Assessing Officer to cross-examine witnesses, but directing consideration of evidence dispensing with cross-examination--Not proper--Assessee to produce witnesses--Income-tax Rules, 1962, r. 46A-- CIT v. Subbu Shashank (Mad) . . . 577

Appeal to High Court --Competency of appeal--Monetary limit laid down in CBDT Circular--Binding on Revenue--Tax effect less than monetary limit--Appeal not maintainable--Income-tax Act, 1961, s. 260A--Circular 5 of 2008-- CIT v. Abhinash Gupta (P&H) . . . 619

Business expenditure --Disallowance--Salary and perquisites--Disallowance governed by first proviso to section 40A(5)(a) not section 40A(5)(c)--Income-tax Act, 1961, s. 40A(5)(a), (c)-- CIT v. Modi Industries Limited (Delhi) . . . 570

Cash credits --Share application money--Substantial evidence produced by assessee to prove creditworthiness of creditor and genuineness of share application--Failure to produce creditor not material--Deletion of addition--No interference--Income-tax Act, 1961, s. 68-- CIT v. Orbital Communication (P) Ltd. (Delhi) . . . 560

Commissioner --Revision--Non-consideration of appraisal report by Assessing Officer--Appraisal report essential for making assessment--Revision by Commissioner justified--Income-tax Act, 1961, s. 263-- CIT v. Daga Entrade P. Ltd. (Gauhati) . . . 467

Deduction of tax at source --Double taxation relief--Verification of certificates of tax deducted at source in two different countries--Letter informing assessee verification not practicable--Writ petition not maintainable--Income-tax Act, 1961, ss. 4, 5, 201(1A)--Constitution of India, art. 226-- V. Ganesh v. Asst. CIT (Mad) . . . 564

Depreciation --Initial depreciation--"Building", meaning of--New residential quarters--Initial depreciation allowable--Income-tax Act, 1961, s. 32(1)(iv)-- CIT v. Modi Industries Limited (Delhi) . . . 570

Income --Accrual of income--Sugar manufacturer realizing price in excess of that fixed by Government on condition excess would be refunded if its challenge failed--Excess amount a contingent receipt--Not taxable-- CIT v. Modi Industries Limited (Delhi) . . . 570

----Mutual association--Essence of mutuality--Complete identity between contributors and participators--Firm engaged in property development, commission agency and allied activities--Not a mutual association--Income of firm assessable--Income-tax Act, 1961-- Prabhashankar Plaza v. ITO (Karn) . . . 582

Income from undisclosed sources --Payment made to another assessee--Addition--Assessee failing to produce books of account--Finding that payment made out of undisclosed sources and addition proper--Findings of fact--Income-tax Act, 1961, s. 69-- Manak Chand Agarwal v. CIT (P&H) . . . 486

Income-tax survey --Statement made at time of survey not conclusive--Undisclosed money--Retraction of statement at time of assessment found bona fide by Commissioner (Appeals)--Explanation for failure to write up books for two and a half years accepted by Commissioner (Appeals) and additions deleted--Tribunal affirming on ground no defect found in books and material available with assessee for writing up books primary evidence--Findings of fact--Income-tax Act, 1961, ss. 69, 69A, 133A-- ITO v. Vijay Kumar Kesar (Chhattisgarh) . . . 497

Industrial undertaking --Special deduction under section 80-IA--Condition precedent--Profit must be "derived" from industrial undertaking--Meaning of "derived"--Freight subsidy received from Government--Not derived from industrial undertaking--Not entitled to be taken into account for computing special deduction under section 80-IA--Income-tax Act, 1961, s. 80-IA-- CIT v. Kiran Enterprises (HP) . . . 520

----Special deduction--Benefit allowed in three preceding years--Assessee entitled to deduction for following year--Income-tax Act, 1961, s. 80J-- CIT v. Modi Industries Limited (Delhi) . . . 570

Interest-tax --Charge of tax--Financial company--Definition--Leasing business--Difference between financial lease and operational lease--Company carrying on financial lease would be chargeable to tax--Matter remanded--Interest-tax Act, 1974, s. 2(5B)-- CIT v. Motor and General Finance Ltd. (Delhi) . . . 530

Offences and prosecution --Wilful attempt to evade tax--Prosecution can continue even where penalty set aside by Tribunal--Where trial has commenced court will not quash prosecution--Prosecution not to be postponed till decision in compounding proceedings--Income-tax Act, 1961, ss. 273A(4), 276C, 277, 278--Indian Penal Code, 1860, ss. 120B, 193, 196, 420, 511-- N. Athimoolam v. ITO (Mad) . . . 603

Penalty --Concealment of income--Appellate Tribunal--Power to remand--Adequate material not available before Assessing Officer for conclusive determination of issue--Tribunal remanding matter for fresh disposal--Cannot be interfered with--Income-tax Act, 1961, s. 271(1)(c)-- Kamakhya Photo Lab P. Ltd. v. CIT (Gauhati) . . . 565

----Concealment of income--Claim for deduction not bona fide--Amounts to concealment of income--Accounts showing deduction of income-tax and equipment written off--Not allowable deductions--Assessee a company with professional assistance in computing income--Assessee had concealed its income--Liable to pay penalty--Income-tax Act, 1961, s. 271(1)(c)-- CIT v. Zoom Communication P. Ltd. (Delhi) . . . 510

----Concealment of income--Companies--Book profits--Total income computed under regular provisions less than book profits--Assessment made under section 115JB--Penalty cannot be levied--Income-tax Act, 1961, ss. 115JB, 271(1)(c)-- CIT v. Nalwa Sons Investments Ltd . (Delhi) . . . 543

----Concealment of income--Value of property assessed as unexplained investment--Rejection of explanation regarding source of funds for acquisition of property--No proof of concealment of income--Penalty could not be levied--Income-tax Act, 1961, s. 271(1)(c)-- S. V. Kalyanam v. ITO (Mad) . . . 477

Search and seizure --Block assessment--Return--Delay in filing--Interest--Before expiry of time limit assessee seeking copies of documents seized for purpose of filing return--Department delaying supply of copies by over a year--Assessee filing return within forty-five days thereafter--Not to be exonerated from liability to interest--Time taken by Department to supply documents to be excluded from total period reckoned from date of notice--Interest chargeable for delay exceeding forty five days--Income-tax Act, 1961, s. 158BFA(1)-- CIT v. Mesco Airlines Ltd. (Delhi) . . . 554

Total income --Inclusions--Transfer of assets--Transfer of asset to trust for benefit of daughter-in-law and grandchildren of assessee--No direct or indirect transfer to son's wife or grandchildren--Trust an independent legal entity and trustee legal owner of trust property--Income from trust not includible in income of assessee--Income-tax Act, 1961, s. 64(1)(vi)-- CIT v. Smt. Pushpawati (Delhi) . . . 490

Unexplained investment --Scope of section 69--Section 69 confers discretion on income-tax authorities--Assessee applying for tax clearance certificate--Explanation that property owned jointly with spouse and that his spouse and son contributed to purchase--Tribunal not right in not considering explanation--Value of property not assessable as unexplained investment--Income-tax Act, 1961, ss. 69, 230A-- S. V. Kalyanam v. ITO (Mad) . . . 477

Wealth-tax --Reassessment--Grounds for reassessment--Report of Valuation Officer--Report called for after completion of assessment--Not a ground for reassessment--Report called for during pendency of assessment but received after completion of assessment--Valid ground for reassessment--Wealth-tax Act, 1957, ss. 16, 16A, 17-- CWT v. Sona Properties P. Ltd. (Bom) . . . 592

Words and phrases --Meaning of "derived"-- CIT v. Kiran Enterprises (HP) . . . 520

 

SECTIONWISE INDEX TO CASES REPORTED IN THIS PART

Constitution of India :

Art. 226 --Deduction of tax at source--Double taxation relief--Verification of certificates of tax deducted at source in two different countries--Letter informing assessee verification not practicable--Writ petition not maintainable-- V. Ganesh v. Asst. CIT (Mad) . . . 564

Income-tax Act, 1961 :

S. 4 --Deduction of tax at source--Double taxation relief--Verification of certificates of tax deducted at source in two different countries--Letter informing assessee verification not practicable--Writ petition not maintainable-- V. Ganesh v. Asst. CIT (Mad) . . . 564

S. 5 --Deduction of tax at source--Double taxation relief--Verification of certificates of tax deducted at source in two different countries--Letter informing assessee verification not practicable--Writ petition not maintainable-- V. Ganesh v. Asst. CIT (Mad) . . . 564

S. 32(1)(iv) --Depreciation--Initial depreciation--"Building", meaning of--New residential quarters--Initial depreciation allowable-- CIT v. Modi Industries Limited (Delhi) . . . 570

S. 40A(5)(a), (c) --Business expenditure--Disallowance--Salary and perquisites--Disallowance governed by first proviso to section 40A(5)(a) not section 40A(5)(c)-- CIT v. Modi Industries Limited (Delhi) . . . 570

S. 64(1)(vi) --Total income--Inclusions--Transfer of assets--Transfer of asset to trust for benefit of daughter-in-law and grandchildren of assessee--No direct or indirect transfer to son's wife or grandchildren--Trust an independent legal entity and trustee legal owner of trust property--Income from trust not includible in income of assessee-- CIT v. Smt. Pushpawati (Delhi) . . . 490

S. 68 --Cash credits--Share application money--Substantial evidence produced by assessee to prove creditworthiness of creditor and genuineness of share application--Failure to produce creditor not material--Deletion of addition--No interference-- CIT v. Orbital Communication (P) Ltd. (Delhi) . . . 560

S. 69 --Income from undisclosed sources--Payment made to another assessee--Addition--Assessee failing to produce books of account--Finding that payment made out of undisclosed sources and addition proper--Findings of fact-- Manak Chand Agarwal v. CIT (P&H) . . . 486

----Income-tax survey--Statement made at time of survey not conclusive--Undisclosed money--Retraction of statement at time of assessment found bona fide by Commissioner (Appeals)--Explanation for failure to write up books for two and a half years accepted by Commissioner (Appeals) and additions deleted--Tribunal affirming on ground no defect found in books and material available with assessee for writing up books primary evidence--Findings of fact-- ITO v. Vijay Kumar Kesar (Chhattisgarh) . . . 497

----Unexplained investment--Scope of section 69--Section 69 confers discretion on income-tax authorities--Assessee applying for tax clearance certificate--Explanation that property owned jointly with spouse and that his spouse and son contributed to purchase--Tribunal not right in not considering explanation--Value of property not assessable as unexplained investment-- S. V. Kalyanam v. ITO (Mad) . . . 477

S. 69A --Income-tax survey--Statement made at time of survey not conclusive--Undisclosed money--Retraction of statement at time of assessment found bona fide by Commissioner (Appeals)--Explanation for failure to write up books for two and a half years accepted by Commissioner (Appeals) and additions deleted--Tribunal affirming on ground no defect found in books and material available with assessee for writing up books primary evidence--Findings of fact-- ITO v. Vijay Kumar Kesar (Chhattisgarh) . . . 497

S. 80-IA --Industrial undertaking--Special deduction under section 80-IA --Condition precedent--Profit must be "derived" from industrial undertaking--Meaning of "derived"--Freight subsidy received from Government--Not derived from industrial undertaking--Not entitled to be taken into account for computing special deduction under section 80-IA-- CIT v. Kiran Enterprises (HP) . . . 520

S. 80J --Industrial undertaking--Special deduction--Benefit allowed in three preceding years--Assessee entitled to deduction for following year-- CIT v. Modi Industries Limited (Delhi) . . . 570

S. 115JB --Penalty--Concealment of income--Companies--Book profits--Total income computed under regular provisions less than book profits--Assessment made under section 115JB--Penalty cannot be levied-- CIT v. Nalwa Sons Investments Ltd .(Delhi) . . . 543

S. 133A --Income-tax survey--Statement made at time of survey not conclusive--Undisclosed money--Retraction of statement at time of assessment found bona fide by Commissioner (Appeals)--Explanation for failure to write up books for two and a half years accepted by Commissioner (Appeals) and additions deleted--Tribunal affirming on ground no defect found in books and material available with assessee for writing up books primary evidence--Findings of fact-- ITO v. Vijay Kumar Kesar (Chhattisgarh) . . . 497

S. 158BFA(1) --Search and seizure--Block assessment--Return--Delay in filing--Interest--Before expiry of time limit assessee seeking copies of documents seized for purpose of filing return--Department delaying supply of copies by over a year--Assessee filing return within forty-five days thereafter--Not to be exonerated from liability to interest--Time taken by Department to supply documents to be excluded from total period reckoned from date of notice--Interest chargeable for delay exceeding forty five days-- CIT v. Mesco Airlines Ltd. (Delhi) . . . 554

S. 201(1A) --Deduction of tax at source--Double taxation relief--Verification of certificates of tax deducted at source in two different countries--Letter informing assessee verification not practicable--Writ petition not maintainable-- V. Ganesh v. Asst. CIT (Mad) . . . 564

S. 230A --Unexplained investment--Scope of section 69--Section 69 confers discretion on income-tax authorities--Assessee applying for tax clearance certificate--Explanation that property owned jointly with spouse and that his spouse and son contributed to purchase--Tribunal not right in not considering explanation--Value of property not assessable as unexplained investment-- S. V. Kalyanam v. ITO (Mad) . . . 477

S. 260A --Appeal to High Court--Competency of appeal--Monetary limit laid down in CBDT Circular--Binding on Revenue--Tax effect less than monetary limit--Appeal not maintainable--Circular 5 of 2008-- CIT v. Abhinash Gupta (P&H) . . . 619

S. 263 --Commissioner--Revision--Non-consideration of appraisal report by Assessing Officer--Appraisal report essential for making assessment--Revision by Commissioner justified-- CIT v. Daga Entrade P. Ltd. (Gauhati) . . . 467

S. 271(1)(c) --Penalty--Concealment of income--Appellate Tribunal--Power to remand--Adequate material not available before Assessing Officer for conclusive determination of issue--Tribunal remanding matter for fresh disposal--Cannot be interfered with-- Kamakhya Photo Lab P. Ltd. v. CIT (Gauhati) . . . 565

----Penalty--Concealment of income--Claim for deduction not bona fide--Amounts to concealment of income--Accounts showing deduction of income-tax and equipment written off--Not allowable deductions--Assessee a company with professional assistance in computing income--Assessee had concealed its income--Liable to pay penalty-- CIT v. Zoom Communication P. Ltd. (Delhi) . . . 510

----Penalty--Concealment of income--Companies--Book profits--Total income computed under regular provisions less than book profits--Assessment made under section 115JB--Penalty cannot be levied-- CIT v. Nalwa Sons Investments Ltd . (Delhi) . . . 543

----Penalty--Concealment of income--Value of property assessed as unexplained investment--Rejection of explanation regarding source of funds for acquisition of property--No proof of concealment of income--Penalty could not be levied-- S. V. Kalyanam v. ITO (Mad) . . . 477

S. 273A(4) --Offences and prosecution--Wilful attempt to evade tax--Prosecution can continue even where penalty set aside by Tribunal--Where trial has commenced court will not quash prosecution--Prosecution not to be postponed till decision in compounding proceedings-- N. Athimoolam v. ITO (Mad) . . . 603

S. 276C --Offences and prosecution--Wilful attempt to evade tax--Prosecution can continue even where penalty set aside by Tribunal--Where trial has commenced court will not quash prosecution--Prosecution not to be postponed till decision in compounding proceedings-- N. Athimoolam v. ITO (Mad) . . . 603

S. 277 --Offences and prosecution--Wilful attempt to evade tax--Prosecution can continue even where penalty set aside by Tribunal--Where trial has commenced court will not quash prosecution--Prosecution not to be postponed till decision in compounding proceedings-- N. Athimoolam v. ITO (Mad) . . . 603

S. 278 --Offences and prosecution--Wilful attempt to evade tax--Prosecution can continue even where penalty set aside by Tribunal--Where trial has commenced court will not quash prosecution--Prosecution not to be postponed till decision in compounding proceedings-- N. Athimoolam v. ITO (Mad) . . . 603

Indian Penal Code, 1860 :

Ss. 120B, 193, 196, 420, 511 --Offences and prosecution--Wilful attempt to evade tax--Prosecution can continue even where penalty set aside by Tribunal--Where trial has commenced court will not quash prosecution--Prosecution not to be postponed till decision in compounding proceedings-- N. Athimoolam v. ITO (Mad) . . . 603

Interest-tax Act, 1974 :

S. 2(5B) --Interest-tax--Charge of tax--Financial company--Definition--Leasing business--Difference between financial lease and operational lease--Company carrying on financial lease would be chargeable to tax--Matter remanded-- CIT v. Motor and General Finance Ltd. (Delhi) . . . 530

Wealth-tax Act, 1957 :

Ss. 16, 16A, 17 --Wealth-tax--Reassessment--Grounds for reassessment--Report of Valuation Officer--Report called for after completion of assessment--Not a ground for reassessment--Report called for during pendency of assessment but received after completion of assessment--Valid ground for reassessment-- CWT v. Sona Properties P. Ltd. (Bom) . . . 592

Income-tax Rules, 1962 :

R. 46A --Appeal to Commissioner (Appeals)--Power to admit additional evidence--Duty to allow Assessing Officer opportunity to examine additional evidence--Tribunal holding violation of rule for failure to allow Assessing Officer to cross-examine witnesses, but directing consideration of evidence dispensing with cross-examination--Not proper--Assessee to produce witnesses-- CIT v. Subbu Shashank (Mad) . . . 577

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HC (DEL) : Confession made during survey is not conclusive & can be retracted

Friends , when ever there is survey and you are recording the statement, please keep in a mind about the following judgment..
Take concrete evidence to support the statement.


CIT vs. Dhingra Metal Works (Delhi High Court)

A survey u/s 133A was conducted in the premises of the assessee during which certain discrepancies were found in stock & cash-in-hand. The assessee surrendered an amount of Rs. 99 lakhs and offered the same to tax. The offer included a sum of Rs. 45 lakhs on account of excess stock found during the survey. Subsequently, the assessee retracted the offer of Rs. 45 lakhs in respect of the stock on the ground that the discrepancy noticed during the survey had been reconciled. The AO rejected the retraction on the ground that it was an after-thought though the CIT (A) and Tribunal upheld the assessee's claim on the basis that the AO had not made any independent investigation and had made the addition on the addition solely on the basis of the survey statement. On appeal by the department, HELD dismissing the appeal:

(i) S. 133A does not mandate that any statement recorded under that section would have evidentiary value. It merely enables the authority to record the statement of any person which may be useful for, or relevant to, any proceeding under the Act. For a statement to have evidentiary value, the survey officer should have been authorised to administer oath and to record sworn statement as under s.132 (4). While s. 132(4) specifically authorizes an officer to examine a person on oath, s. 133A does not permit the same. Paul Mathews 263 ITR 101 (Ker) & Kader Khan 300 ITR 157 (Mad) followed;

 

(ii) In any event though an admission is extremely important piece of evidence, it is not conclusive and it is open to the person who has made the admission to show that it is incorrect.

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S. 80HHC vs. 115JB Ajanta Pharma Reversed By Supreme Court

Dear Subscriber,

S. 80HHC vs. 115JB Ajanta Pharma Reversed By Supreme Court

In CIT vs. Ajanta Pharma 318 ITR 252 the Bombay High Court held (reversing the Special Bench judgement in DCIT vs. Syncome Formulations 292 ITR (AT) 144)) that the "sunset clause" of s. 80HHC (1B) applies to s. 115JB as well.

 

This judgement has been reversed by the Supreme Court today (9.9.2010). It has been held that MAT companies are not subject to the limitations of s. 80HHC (1B).

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ITR (Tribunal) ISSUE DATED 4-10-2010 Volume 5 : Part 6

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

REPORTS

> Business expenditure : Where purchase of raw material from far-off places from the premises of assessee, identity of payee and genuineness of transaction established disallowance u/s. 40A(3) not justified : Habib Agro Industries v. Addl. CIT (Bangalore) p. 531

> Unabsorbed depreciation cannot be set off against salary income : Chandrakumar v. Asst. CIT (Chennai) p. 540

> Department not entitled to raise additional grounds contrary to finding of AO : ITO v. M.M. Textiles (Mumbai) p. 547

> Rental income derived by assessee from sub-letting premises is "income from other sources" : ITO v. M. M. Textiles (Mumbai) p. 547

> AO co-relating funds contributed by partners with rate of interest on which money lent by assessee for disallowance u/s. 40A(2), not proper : ITO v. M.M. Textiles (Mumbai) p. 547

> Export : Entire direct and indirect costs deductible from sale proceeds realised in convertible foreign exchange u/s. 80HHC(3)(b) : Mectech International v. Asst. CIT (Delhi) p. 564

> Capital gains : Assessee utilising sale proceeds of shares for other purpose and purchasing property from loans taken from bank not entitled to exemption u/s. 54F : Milan Sharad Ruparel v. Asst. CIT (Mumbai) p. 570

> Income earned by exercise of profession as CA not entitled to relief u/s.80RR : Dilip K. Sheth v. ITO (Mumbai) p. 581

> Rectification : Telephone expenses allowed : Order of CIT(Appeals) confirming disallowance deleted : Dilip K. Sheth v. ITO (Mumbai) p. 581

> Sums paid voluntarily by inmates of Ashram to be treated as donations, trust entitled to approval u/s. 80G(5) : Vaidik Bhakti Sadan Asram v. CIT (Delhi) p. 590

> Right to occupy house taken on licence under agreement for period of two terms of eleven months against interest-free deposits cannot be termed to be purchase of residential house : Prafulchandra R. Shah (Late) v. Asst. CIT (Mumbai) p. 598

> Capital gains : Cost of acquisition of tenancy rights to be taken at nil u/s. 55(2) : Prafulchandra R. Shah (Late) v. Asst. CIT (Mumbai) p. 598

> Refund due to excess TDS and advance tax, assessee to be paid interest on refund u/s. 244A : Hyundai Motor India Ltd. v. Dy. CIT (Chennai) p. 611

> Reassessment : AO forming belief interest income assessable as income from other sources has jurisdiction to reassess u/s. 147 : Jagan Lamps Ltd. v. ITO (Delhi) p. 617

ITR HIGHLIGHTS ISSUE DATED 4-10-2010 Volume 326 : Part 3

INCOME TAX REPORTS (ITR) HIGHLIGHTS

ISSUE DATED 4-10-2010 Volume 326 : Part 3

SUPREME COURT JUDGMENTS

> Membership card of Bombay stock exchange is an intangible asset entitled to depreciation : Techno Shares and Stocks Ltd. v. CIT p. 323

> Duty to deduct tax at source does not arise unless remittance contains wholly or partly taxable income : GE India Technology Centre P. Ltd. v. CIT p. 456

HIGH COURT JUDGMENTS

> Withdrawal of approval u/s 10(23C)(vi) for AY 2009-10 and show-cause notices for AY 2007-08 and 2008-09 justified : Valliammai Society v. Director General of Income-tax (Investigation) (Mad) p. 337

> Valuation of stock could not be changed where no evidence that valuation not correct : Voltamp Transformers Ltd. v. CIT (Guj) p. 360

> Excise duty liability only at time of removal of goods not includible in valuation of closing stock of finished goods at end of accounting period : Asst. CIT v. Narmada Chematur Petrochemicals Ltd. (Guj) p. 369

> Activity of import of machine and indigenizing and improving it to suit Indian market entitled to deduction u/s 35(4) : CIT v. Engineering Innovation Ltd. (HP) p. 392

> Deletion of addition justified where assessee reconciling entire material recovered during survey with return filed : CIT v. Diplast Plastics Ltd. (P&H) p. 399

> Additions to income in hands of assessee valid, where husband of assessee admitting that he carried on business and that he had suppressed sales and assessee not rebutting presumption raised : T. Radha v. Asst. CIT (Mad) p. 401

> Lump sum received after retirement from service as non-compete fee not assessable as profits in lieu of salary in AY 2001-02 : CIT v. A. Khosla (Mad) p. 406

> Tribunal confirming additions proper where donors disowning making gifts and denying acquaintance with assessee : Smt. Kusum Lata Thakral v. CIT (P&H) p. 424

> Transport subsidies shown in reserve and surplus account and not in profit and loss account in original return : Reassessment proceedings valid : CIT v. Shiv Shakti Flour Mills P. Ltd. (Gauhati) p. 430

> AO passing order of rectification on ground that assessee wrongly debited warranty claims which was an uncertain liability : Debatable issue : Rectification cannot be made : CIT v. Gemi Motors India P. Ltd. (P&H) p. 443

> Tribunal finding transaction giving rise to capital gains not business income : Finding of fact : CIT v. Rohit Anand (Delhi) p. 445

> High Court has no power to review under I. T. Act : Deepak Kumar Garg v. CIT (MP) p. 448

> Order rejecting application for waiver of penalty without proper reason not valid : Shrinath Ceramics v. CIT (MP) p. 452

JOURNAL

> Education cess is allowable as business expenditure ? (Narayan Jain and Deepak Jain , Advocates) p. 1

> Is excise duty payable on manufactured goods includible in value of closing stock ? (M. S. Prasad, Retd. Director (A & PAC) CBDT) p. 11

NEWS-BRIEF

> Income-tax returns filing date extended to November 30 in Jammu and Kashmir

The Central Board of Direct Taxes (CBDT) has extended the due date of filing of returns of income for the assessment year 2010-11 for all categories of cases in the State of Jammu and Kashmir to November 30, 2010. The decision was taken by the CBDT in exercise of powers conferred under section 119 of the Income-tax Act, 1961, considering the reports of disturbance of general life, caused due to the law and order problem in the State.

Accordingly, the date for obtaining and furnishing Tax Audit report under section 44AB of the Income-tax Act is also extended to November 30, 2010. [Source : www.pib.nic.in dated September 23, 2010]

> Short-lived gift of extra 1% EPF interest under tax-net

The Labour Ministry has hiked the employees' provident fund, or EPF, rate to 9.5 per cent., but a Finance Ministry notification says that anything in excess of 8.5 per cent. will be taxed.

The Labour Ministry is, however, confident that the tax department will renotify the higher rate, as otherwise a lot of contentious issues will come up. The Labour Minister had declared a 9.5 per cent. bonanza on provident fund deposits on September 15-marking a one percentage point increase in the rate from the 8.5 per cent. paid in the last five years.

But even before the EPF board met under the Labour Minister, the Central Board of Direct Taxes had notified a tax-free PF rate of 8.5 per cent. for 2010-11-effective from September 1. This means that the 1 per cent. extra income (or Rs. 1,700 crore) that the Labour Ministry has projected as a gift to the workforce, would be fully taxable. This is the first time ever that income from provident fund would be taxable, if the tax department does not notify the higher rate.

Historically, the tax-free PF rate notified by the Income-tax Department has never been lower than the EPF rate declared for the year.

But levying the tax would be far from easy. The PF interest would be credited to workers' accounts at the end of the year. The trust in charge of the PF would be responsible for deducting the applicable tax at that time.

Usually, the Income-tax Department notifies a tax-free PF rate for the whole year. But this year, it is only applicable from September 1. So the 9.5 per cent. provident fund return would be tax-free from April to August, but taxable thereafter. "For company-run trusts, this would be a headache - calculating the tax liability on 1 per cent. PF income for seven months," said a senior vice president at a private consultancy firm.

But the most acute problem will be faced by the Employees' Provident Fund Organisation-which manages 5 crore PF accounts.

Firstly, EPFO simply does not have the systems in place to deduct tax at source. All PF account withdrawals before completing five years of service, are fully taxable, as per existing income-tax rules. But the rule has never been implemented because of EPFO's unreliable manual record-keeping systems.

Even if EPFO could deduct tax at source before crediting interest to members, the applicable income-tax bracket would vary for its members. For every deduction made, it would also have to give workers a Form 16 statement. [Source : www.economictimes.com dated September 25, 2010]

> Companies will soon be asked to unearth investments held abroad

The provision to tax productive assets will be implemented once the Direct Tax Code regime, which seeks to replace the Income-tax Act, 1961, is implemented from April 2012.

In short, investment by Indians in controlled foreign corporations (CFCs) will be liable to wealth tax, once DTC becomes law. Under the 20th Schedule of DTC, an entity is considered a CFC when one or more persons residing in India exercise control over a foreign company.

Wealth-tax Act in its current form charges tax only on non-productive assets such as urban car, motor vehicles, jewellery, yachts, boats, aircraft etc., at the rate of 1 per cent. on wealth exceeding 15 lakh. The productive assets such as investment with financial institutions, bank balances, land and machinery etc. are not liable for wealth tax.

DTC is proposing to cover productive assets such as investments in equity and preference shares of a CFC. Many Indian companies have investments in CFCs and DTC is proposing to tax these investments. [Source : www.economictimes.com dated September 25, 2010]

> SEZ developers to look at legitimate ways to beat DTC deadline

The deadline of March, 2014, under the proposed Direct Taxes Code (DTC) for making new special economic zone units operational if they are to get tax benefits is likely to speed up development of these SEZs by entrepreneurs, a report said.

The DTC Bill, which was tabled in Parliament in August, proposed that units in SEZs that commence commercial operations by March, 2014, shall be allowed profit-linked deductions permitted under the Income-tax Act, 1961.

It also proposed that SEZs notified on or before March 31, 2012, will get income-tax benefits.

With SEZs attracting investments of over Rs. 1.66 lakh crore, industry sources said the income-tax benefit provided in the SEZ Act, 2005, is the major attraction for investors.

ASSOCHAM further said that demand for offices in the SEZs is expected to be low in the next 3-6 months, as occupiers are likely to rework their real estate strategies in the wake of the new time lines proposed in the DTC.

"The real estate market in India is likely to adjust to the changing circumstances once DTC comes into force and then see a sustained demand momentum until 2014 from developers as well as occupiers," the report said.

The Government has given formal approval for setting up about 580 SEZs, of which 122 have become operational. [Source : www.economictimes.com dated September 23, 2010]

> Supreme Court launches tax evasion plea

The special leave petition of a telecom major has been listed for hearing before a three-judge bench headed by Chief Justice SH Kapadia. The apex court will decide whether the Income-tax Department has the jurisdiction to tax the company's $11.2-billion purchase of 67% controlling interest in the Indian company in February 2007.

The Income-tax Department slapped a show-cause notice on the company's Netherlands-based subsidiary, seeking $1.7 billion as capital gains tax. It also sought to impose penalty for the company's failure to deduct tax at source for the transaction. This was contested by the telecom company in the Bombay High Court, but its petition was dismissed.

The dissident approached the Supreme Court, but the apex court refused to entertain the special leave petition of the telecom giant. The court expressed its displeasure over major's refusal to divulge the details of the agreement of such transaction. "Why the details were not disclosed to the High Court (Bombay High Court). It is not even shown to us (apex court)", a bench comprising Justice SB Sinha (now retired) and Justice MK Sharma had said.
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The apex court, however, asked the assessing authority to decide on the issue of whether the Revenue Department has the jurisdiction to demand capital gain tax on the deal which was carried outside the country. The Department, after hearing it afresh, served an order on the telecom company, saying it had the jurisdiction to tax the deal and once again approached the High Court, which ruled in favour of the Department. [Source : www.economictimes.com dated September 27, 2010]


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Aayurved : खट्टे नींबू के 10 मीठे गुण

1 शुद्ध शहद में नींबू की शिकंजी पीने से मोटापा दूर होता है।

2 नींबू के सेवन से सूखा रोग दूर होता है।

3 नींबू का रस एवं शहद एक-एक तोला लेने से दमा में आराम मिलता है।

4 नींबू का छिलका पीसकर उसका लेप माथे पर लगाने से माइग्रेन ठीक होता है।

5 नींबू में पिसी काली मिर्च छिड़क कर जरा सा गर्म करके चूसने से मलेरिया ज्वर में आराम मिलता है।

6 नींबू के रस में नमक मिलाकर नहाने से त्वचा का रंग निखरता है और सौंदर्य बढ़ता है।

7 नौसादर को नींबू के रस में पीसकर लगाने से दाद ठीक होता है।

8 नींबू के बीज को पीसकर लगाने से गंजापन दूर होता है।

9 बहरापन हो तो नींबू के रस में दालचीनी का तेल मिलाकर डालें।

10 आधा कप गाजर के रस में नींबू निचोड़कर पिएँ, रक्त की कमी दूर होगी।
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HC (BOM): Circumstances subject to exercise of jurisdiction U/s 263

Where the Assessing Officer took a possible view, while passing an order of assessment, the Commissioner exceeded his jurisdiction in seeking recourse to his power under section 263.

HIGH COURT OF BOMBAY Grasim Industries Ltd. vs. CITITR No. 113 of 1990

RELEVANT EXTRACTS:

11. Section 263 of the Income Tax Act, 1961 empowers the Commissioner to call for and examine the record of any proceedings under the Act and, if he considers that any order passed therein, by the Assessing Officer is erroneous in so far as it is prejudicial to the interests of the Revenue, to pass an order upon hearing the assessee and after an enquiry as is necessary, enhancing or modifying the assessment or cancelling the assessment and directing a fresh assessment. The key words that are used by Section 263 are that the order must be considered by the Commissioner to be "erroneous in so far as it is prejudicial to the interests of the Revenue". This provision has been interpreted by the Supreme Court in several judgments to which it is now necessary to turn. In Malabar Industrial Co. Ltd. vs. CIT, 1 the Supreme Court held that the provision "cannot be invoked to correct each and every type of mistake or error committed by the Assessing Officer" and "it is only when an order is erroneous that the Section will be attracted" The Supreme Court held that an incorrect assumption of fact or an incorrect application of law, will satisfy the requirement of the order being erroneous. An order passed in violation of the principles of natural justice or without application of mind, would be an order falling in that category. The ex-pression "prejudicial to the interests of the Revenue", the Supreme Court held, it is of wide import and is not confined to a loss of tax. What is prejudicial to the interest of the Revenue is explained in the judgment of the Supreme Court:

"The phrase "prejudicial to the interests of the Revenue" has to be read in conjunction with an erroneous order passed by the Assessing Officer. Every loss of revenue as a consequence of an order of the Assessing Officer cannot be treated as prejudicial to the interests of the Revenue. For example, when an Income tax Officer adopted one of the courses permissible and the Income tax Officer has taken one view with which the Commissioner does not agree, it cannot be treated as an erroneous order prejudicial to the interests of the Revenue, unless the view taken by the Income tax Officer is unsustainable in law."

The principle which has been laid down in Malabar Industrial Co. Ltd. (supra) has been followed and explained in a subsequent judgment of the Supreme Court in Commissioner of Income Tax vs Max India Ltd . 2 While interpreting the provisions of Section 80HHC(3), the Supreme Court noted that the statutory provision had been amended eleven times and different views existed on the day when the Commissioner passed his order under Section 263.

The Court observed that "the mechanics of the section have become so complicated over the years that two views were inherently possible." Consequently, the subsequent amendment to the statutory provision, even though it was retrospective, would not attract the provisions of Section 263 particularly when the provision of law, as it stood, on the date when the Commissioner passed the order under Section 263, would have to be taken into account.

12. In Commissioner of Income Tax vs. Gabriel India Ltd.,3 a Division Bench of this Court observed that Section 263 does not confer an arbitrary or uncharted power on the Commissioner. In considering as to whether an order is erroneous in so far as it is prejudicial to the interests of the Revenue, the Commissioner must be guided by the material on the record. The power of suo motu revision under Section 263(1), is in the nature of supervisory jurisdiction. Two circumstances must exist in order to enable the Commissioner to exercise the power, namely, (i) the order must be erroneous; and (ii) by virtue of the order being erroneous, prejudice must have been caused to the interests of the Revenue.

Section 263 does not empower the Commissioner to substitute his judgment for that of the Assessing Officer, unless the decision is held to be erroneous. Both the conditions for the exercise of the power must be fulfilled. The order, in other words, sought to be revised, must be erroneous and must be prejudicial to the interests of the Revenue.

13 .The question as to whether the Commissioner has acted within the fold of his jurisdiction under Section 263 or outside it, in the present case, must be decided with reference to the principles which have been laid down by the Supreme Court and by this Court. Section 41(1) provides that where an allowance or deduction has been made in the assessment for any year in respect of a loss, expenditure or trading liability incurred by the assessee and subsequently during any previous year, the assessee obtained whether in cash or in any other manner, any amount in respect of such loss or expenditure or some benefit in respect of such trading liability by way of remission or cessation thereof, the amount obtains or the value of the benefit accruing shall be deemed to be profits and gains of business or profession and would accordingly be chargeable to income as the income of that previous year. The State Legislature enacted the Kerala Forest Produce (Fixation of Selling Price) Act, 1978. Section 3(1) empowers the Government to fix the selling price of forest produce for the following financial year. Section 5 stipulated that after the publication of the notification under Section 3, no forest produce shall be sold by the Government at a price which is less than the notified selling price. On 9th March 1979, the Government of Kerala issued notifications in exercise of its power under the Act of 1978 for the period ending 31st March 1981 and also for the period commencing from 1st April 1981, being the previous year relevant to Assessment Year 1982 83. The assessee had been allowed a deduction of an amount of Rs.1.75 crores during the Assessment Years 1980 81, 1981 82 and 1982 83. The notifications that were issued by the State Government were challenged by the assessee before the Kerala High Court. By its judgment dated 15th April 1981, the High Court struck down the notifications in so far as they related to eucalyptus, on the ground that in fixing the prices for eucalyptus, the State Government had not followed the procedure prescribed by the Act. The Kerala High Court held that matters which were required to be considered had not been placed before the Committee which was statutorily to be constituted under the provisions of the Act and the Committee had failed to consider relevant material before making its recommendations, in regard to the price of eucalyptus. The judgment of the Kerala High Court, therefore, set aside the notifications on the ground that the mandate of the Act in fixing the price of forest produce had not been followed and that relevant consideration had not been borne in mind by the Committee. The liability of the assessee to pay arose by virtue of the provisions of Section 5 of the Act, under which, no forest produce could be sold by the Government at a price, which was less than the selling price; the selling price being de1` 1fined to mean that the price of forest produce fixed by the Government under Section 3. The judgment of the Kerala High Court did not prohibit the government from issuing a fresh notification. After the decision of the Kerala High Court, the Expert Committee constituted under the provisions of Section 4, convened for the purposes of deciding afresh, the selling price of eucalyptus upto 31st March 1982. The Committee held its meeting on 25th March 1982, which was six days before the end of the relevant period here, and recommended the fixation of the selling price of eucalyptus between Rs.328/  to Rs.384/  per metric ton between 1978 and 1981. The Special Secretary to the State Government in the Forest and Minor Irrigation Department recorded in a note dated 27th March 1982 that the Kerala Forest Produce (Fixation of Selling Price) Rules, 1978 had been amended on 28th May 1981. Some doubt was expressed as to whether these Rules could fasten a liability with retrospective effect in the absence of an amendment to the parent legislation. The State Government, in pursuance of the judgment of the Kerala High Court proceeded to issue fresh notifications on 31st March 1981, 29th April 1981 and 29th May 1981. By the notification dated 29th May 1981, the Government refixed the selling price in the year 1981 82 with effect from 1st June 1981. On 31st March 1982, selling prices were notified for the period from 1st April 1982. These notifications were once again challenged by the assessee in a Writ Petition before the Kerala High Court. The Petition was allowed by the Division Bench of the Kerala High Court on 28th May 1994 and the notifications were set aside with a declaration that the prices fixed of bamboo, reed and eucalyptus were not payable by the Petitioner. The judgment of the Kerala High Court did not conclude the proceedings. Special Leave Petitions were filed before the Supreme Court in which, while granting leave, interim orders were passed by the Supreme Court, directing the assessee to pay the price of forest produce at 60% of the rate fixed in the notification issued by the State Government under Section 3(e) of the Act, less the price already paid. The Bank Guarantees furnished by the assessee were allowed to be encashed to the aforesaid extent. The Supreme Court expressed the hope that the parties would be able to arrive at a settlement which may be "beneficial to all concerned, having regard to the checkered history of the litigation with its attendant uncertainties, and to avoid further long drawn out litigation." Eventually, a settlement was arrived at between the Government of Kerala and the assessee on 27th October 1988. By the settlement, a series of matters set out in the schedule, came to be settled and parties agreed that no payment will be due by either party to the other in respect of any of the matters mentioned in the schedule.

14. The narration of facts would thus show that the liability of the assessee in respect of the payment due for the supply of forest produce, under the Kerala Forest Produce (Fixation of Selling Price) Act, 1978, was not concluded by the judgment of the Kerala High Court dated 15th April 1981. The notifications fixing the price of eucalyptus were set aside by the Kerala High Court, on the ground that the Committee statutorily constituted under the Act, had not applied its mind to the relevant material. The liability of the assessee to pay at the price notified, arose under the Act, for the supplies of forest produce effected by the State Government to the assessee . The liability arose as a result of the supply of forest produce the quantification of liability was liable to be made by the instrument of the notifications issued in accordance with the provisions of the Act. The view that there was no remission or cessation of the liability during the previous year, relevant to Assessment Year 1982- 83, was a possible view having regard to the circumstances, which transpired after the judgment of the Kerala High Court.

These circumstances included the following:

(i) The recommendations made by the Expert Committee on 25th March 1982 for the refixation of prices of forest produce six days before the end of the financial year; (ii) The issuance of fresh notifications by the State Government; (iii) The challenge by the assessee to the fresh notifications; (iv) The judgment of the Kerala High Court dated 28th May 1984, setting aside the second set of notifications; (v) The filing of Special Leave Petitions before the Supreme Court challenging the judgment of the Kerala High Court in the second round; and (vi) The interim order passed by the Supreme Court requiring the assessee to pay at the rate of 60% of the prices/notifications and allowing encashment of Bank Guarantees for that purpose; and (vii) The eventual resolution of the dispute by a settlement of 27th October 1988.

15. In these circumstances, when the Assessing Officer took a possible view, while passing an order of assessment, the Commissioner exceeded his jurisdiction in seeking recourse to his power under Section 263. At the least, it must be held that the question as to whether the liability of the assessee had ceased in the previous year relevant to the Assessment Year 1982 83, was an issue on which a possible view was that there was no final or irrevocable remission or cessation of liability, within the meaning of Section 41(1) of the Act, during Assessment Year 1982 83. This view could not, by any stretch of logic, be regarded as being insustainable in law. The condition precedent to the exercise of jurisdiction under Section 263, is that the order sought to be revised must be erroneous in so far as it is prejudicial to the interests of the Revenue. Following the judgments of the Supreme Court in Malabar Industrial Co. and Max India Ltd. (supra), it is now a settled principle that where the Assessing Officer has adopted one of the courses permissible in law or where two views are possible and the Assessing Officer has taken one view with which the Commissioner does not agree, it cannot be treated as an erroneous order prejudicial to the interests of the Revenue unless the view taken by the Assessing Officer is unsustainable in law. In the present case, two views were inherently possible and the assessee therefore, cannot be subjected to the exercise of the jurisdiction under Section 263. The Tribunal, with respect, has adopted a rather simplistic view of the matter, in coming to the conclusion that the liability had ceased to exist, consequent upon the judgment of the Kerala High Court, dated 15th Apri1981. This clearly overlooks the checkered history of the litigation. The fact that the litigation had a checkered history was noted in the interim order of the Supreme Court, which also referred to the "attendant uncertainties" and to the possibility of a "further long drawn out litigation".

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