Wednesday, November 30, 2011
Some important cases
Direct Tax Laws Oct 21
Where in addition to regular salaries and benefits in India, living allowance is given to employees of Indian company who are temporarily deployed in USA to work for Indian company, living allowance will be exempt from tax - [2011] 15 taxmann 328 (Kolkata - Trib.)
Printed material purchased by assessee for use in manufacture and trade of footwear was a transaction of purchase and sale and, thus, assessee was not liable to deduct tax at source under section 194C - [2011] 15 taxmann 327 (Delhi - Trib.)
Where assessment orders under section 143(3) were passed without issuing any notice to assessee under section 143(2), said orders were invalid and, thus, liable to be quashed - [2011] 15 taxmann 326 (Chennai - Trib.)
Where assessee, engaged in operation of air-transportation, did not purchase even a single aircraft till end of relevant previous year, it was to be concluded that it had not commenced its business - [2011] 15 taxmann 325 (Bangalore - Trib.)
Monday, November 28, 2011
Direct Tax Laws Oct 19 & 20
Assessability of rental income from plinths and godowns as business income - [2011] 15 taxmann 292 (Delhi - Trib.)
Compilations of case law: STATUS OF ASSESSEE ; PARTNERSHIP FIRM
PARTNERSHIP FIRM
Firm is not an independent entity – Partners are real owners of assets of firm.
N. Khadervali Saheb & Anr. v. N. Gudu Sahib (Decd) & Ors. (SC) 261 ITR 1
Dissolution of firm on death of one of the partners .
Dahi Laxmi Dal Factory Vs CIT & Anr. (All) 103 ITR 517
Narayanan Chettiar Vs Umayal Achi AIR 1959 Mad 283
CIT Vs Seth Govindram Sugar Mills (SC) 57 ITR 510
Mavukkarai (N) Estate Tea Factory Vs Addl. CIT (Mad) 112 ITR 715
CIT Vs Sukh Dayal Sobh Raj (All) 218 ITR 309
CIT Vs Sherally Meherally and Sons (Bom) 230 ITR 120
ITO Vs Kalyan Das Madan Mohan (All) 230 ITR 191
CIT Vs Madhavdas Lalchand (Mad) 230 ITR 877
Nandlal Sohanlal Vs CIT (P & H) 110 ITR 170
CIT Vs Surya Bhagavan Vastralayam (AP) 227 ITR 304
For transferring immovable property by a firm to its partners, registered document is necessary.
CIT Vs Dadha & Co. (Mad) 142 ITR 792
CIT Vs Palaniappa Enterprises (Mad) 234 ITR 635
Jansons Vs CIT (Kar) 154 ITR 432
Ram Narain & Brothers Vs CIT (All) 73 ITR 423
S.N. Syed Mohammed Saheb & Bros. Vs CIT (Ker) 68 ITR 791
For transferring immovable property by a firm to its partners, registered document is not necessary.
Sunil Siddharthbhai Vs CIT (SC) 156 ITR 509
When individual property is converted to partnership property, there is transfer of property.
Addl. CIT Vs M.A.J. Vasanaik (Kar) 116 ITR 110
Firm dissolved on death of a partner- two assessments to be made
CIT Vs Ayyanarappan & Co. & Anr. (SC) 236 ITR 410
A partner in a firm cannot be employee of that firm.
S. Magnas Vs CIT (Bom) 33 ITR 538
144 Order –Firm assessed as AOP – No interest / salary to partners allowed.
Rama Boiled Modern Rice Mill Vs ITO (ITAT, Hyd) 97 ITD 379
Interest paid to partners u/s.40(b) – calculate in Reducing Balance method.
Architectural Associates Vs ACIT (ITAT, Hyd) 92 ITD 479
Interest to partners disallowed u/s 40(b) eventhough firm purchased goods from proprietary concern of partner and interest pertains to outstanding balance in that account.
Shakuntala Industries Vs CIT (Raj) 216 ITR 507
Interest paid to partner – claim that transactions carried out through partner's bank account and that interest actually paid to bank – No material to support claim – disallowance justified.
CIT Vs Thulasidhar & Co. (Mad) 229 ITR 425
A deity cannot be a partner of a valid partnership firm
Ramakrishna Chit Fund Co. Vs ITO (ITAT, Hyd) 106 ITD 350
Gift entries made in books to circumvent 40(b) provisions and interest paid to family members of partners – Transaction not genuine – interest disallowed u/s 40(b)
Auto Sales Vs CIT (All) 227 ITR 790
Minors admitted as full partners – Partnership deed not signed by guardians of minors – No valid partnership.
Kumar Financing Corpn. Vs CIT (Cal) 122 ITR 192
Addl. CIT Vs Uttam Kumar Pramod Kumar (All) 115 ITR 796
CIT Vs Khetan & Co. (Cal) 45 ITR 170
Adult admitted to benefits of partnership – No valid partnership
CIT Vs B. Pandiah & Co. (AP) 143 ITR 464
CIT Vs Shankar Cottons (Mad) 222 ITR 445
CIT Vs J.B. Coal Traders (Patna) 164 ITR 450
Deed not specifying share of one partner – No valid partnership
K.S. Badrinarayana Rao Vs CIT (Kar) 152 ITR 159
On the date of execution of partnership deed, one of the partners, who was signatory to the deed, was a minor – No valid partnership
Udayalakshmi Hardware Stores Vs CIT (SC) 180 ITR(St)39
CIT Vs Oriental T. Maritime (AP) 227 ITR 244
Some partners held to be benamidars – Firm not genuine
S.P. Gramaphone Co. Vs CIT (SC) 158 ITR 313
CIT Vs Jayalakshmi Oil Farm (AP) 228 ITR 443
Duty of ITO to find whether firm was genuine – Failure to produce partners of firm on demand by ITO – firm held not genuine.
Frontier Construction Vs CIT (Gau) 221 ITR 878
One partner acting as consultant, not contributing capital, not taking interest in the business, not entitled to share in profits / losses, paid fixed commission and to be indemnified against claim for damage - No genuine firm
CIT Vs Ravi Constructions (AP) 169 ITR 662
The execution of a partnership deed is not by itself a talisman which can entitle a firm to be registered - There must be circumstances and facts to who that it had come into existence and that it had carried on business.
CIT Vs S.S.A.M. Shanmugha Nadar Financing Corpn. (Mad) 141 ITR 656
No business carried on – No partnership firm.
Sudarshan & Company Vs CIT (Mys) 89 ITR 85
CIT Vs Ferozepur Ice Manufacturers' Association (P&H) 84 ITR 607
Letting out building & collecting rent do not amount o carrying on of business, but are only incidental to ownership – No valid partnership – assessed as AOP.
CIT Vs Phabiomal & Sons (AP) 158 ITR 773
CIT Vs Veerabhadra Industries (AP) 240 ITR 5
Ramniklal Sunderlal Vs CIT (Bom) 36 ITR 464
Partnership formed with object of purchasing lottery tickets and sharing prize money – No business was carried on.
CIT Vs S. Mariappan (Mad) 238 ITR 826
State Abkari Act prohibiting licensee from selling or otherwise transferring his license – Licensee entering into partnership – Partnership not valid
CIT Vs Narayanan & Co.(Ker-FB) 223 ITR 209, 234 ITR 133
Biharilal Jaiswal etc. Vs CIT (SC) 217 ITR 746
Motilal Chunilal Vs CIT (SC) 234 ITR 472
Gold Control Act prohibits transfer of license – Dealing in Gold by firm on the basis of license obtained by partner – Partnership not valid.
CIT Vs Koonan's Jewellery (Ker) 226 ITR 588
Only salary actually paid or provided in accounts can be allowed as deduction and not the maximum limit worked out as per sec. 40(b)
Sri Balaji Agencies Vs ITO (ITAT, Chennai) 106 ITD 419
Saturday, November 26, 2011
Direct Tax Laws Oct 18
In case of failure of assessee to file a return within prescribed time, Assessing Officer was to be directed to carry out penalty proceedings in accordance with section 13 of the Interest Tax Act and totally uninfluenced by provisions of section 271(1)(c) of Income-tax Act, 1961 - [2011] 15 taxmann 280 (HP)
Where movable and immovable properties of a hotel were transferred to assessee-trust for providing catering education therein and in hands of doner said transfer was not treated as gift on ground that it was only a permission granted for a college, said property could not be treated as assessee's wealth in its wealth tax assessment - [2011] 15 taxmann 279 (KAR.)
Sale of shares held by assessee as investment for ten years would result in long-term capital gains - [2011] 15 taxmann 278 (CHENNAI - ITAT)
In absence of pendency of any proceedings before Assessing Officer, he could not have referred case of assessee-housing society to District Valuation Officer in exercise of power under section 131 - [2011] 15 taxmann 277 (AHD. - ITAT)
While determining book profits under section 115JB profit eligible for deduction under section 80HHC is to be reduced and not amount of deduction under section 80HHC - [2011] 15 taxmann 276 (KAR.)
If there is tangible material before Assessing Officer on basis of which he has formed belief that income had escaped assessment, that would furnish jurisdiction to him to reopen assessment - [2011] 15 taxmann 275 (BOM.)
Interest Tax : Amount received by assessee-bank as export subsidy from RBI could not be treated as interest under section 2(7) - [2011] 15 taxmann 274 (DELHI)
Where assessee engaged in business of ginning and pressing of cotton, etc., had done ginning and processing job work on behalf of others, income derived from such activity would be eligible for deduction under section 80-IA - [2011] 15 taxmann 273 (GUJ.)
Section 271F is also applicable whenever there is a violation of section 153C, read with section 153A in respect of filing return of income - [2011] 15 taxmann 270 (DELHI - ITAT)
An authorized representative under section 288(2) is not required to get himself registered as an authorized income-tax practitioner under rules 54 and 55 of Income-tax Rules in order to appear before Tribunal on behalf of assessee - There is no provision in sections 11, 12 and 13 mentioning that a trust can not make changes of name and address of trust without getting prior clearance from department - [2011] 15 taxmann 269 (CHENNAI - ITAT)
Amount received by assessee from a company for providing that company easement right in private road situated on his land would be capital receipt - [2011] 15 taxmann 268 (CHENNAI - ITAT)
Merely because proceedings could not be initiated by creditor against assessee-sick company for enforcing decree for want of consent of BIFR, it would not mean that liability had not accrued, particularly where assessee was following mercantile system of accounting - [2011] 15 taxmann 267 (DELHI)
Transfer pricing - While computing ALP, adjustment of depreciation on administrative assets has to be made - Expenditure on sign boards have be treated as revenue expenditure - [2011] 15 taxmann 266 (PUNJ. & HAR.)
Compilations of case law: STATUS OF ASSESSEE ; DEVOLUTION OF PROPERTY
DEVOLUTION OF PROPERTY
Properties inherited by widow as sole heir on the death of her husband – Adoption by widow subsequently – Does not divest widow of properties – Properties do not become joint family properties – Female cannot throw property into family hotchpot.
R. Rajathy Ammal Vs CWT (Mad) 164 ITR 605
Punithavalli Ammal Vs Ramalingam AIR 1970 SC 1730
As per Sec.14(1) of Hindu Succession Act, a widow after death of her husband became absolute owner of properties left by her husband – on adoption of a son subsequently, such rights did not get divested – On death of such a widow, these rights passed on to the adopted son.
Asst. Controller of estate duty Vs Channamma P. Jabin (ITAT, Bang) 70 ITD 194
Widow inheriting limited right in property under will in lieu of her right to maintenance – Limited right was transferred into absolute right by Sec.14(1) of H.S.A.- Gift of property by widow valid.
Beni Bai Vs Raghubir Prasad (SC) 236 ITR 898
Partner dying intestate – wife of deceased admitted as partner – Property devolved on class I heirs in individual capacity – Declaration that shares held by new partner in partnership was on behalf of her HUF, not relevant – Share income is her individual income.
CIT Vs J.R. Lalwani (Bom) 240 ITR 750
Individual property of deceased person devolves on his son in his individual capacity and not on the HUF of son and his sons.
CWT etc. Vs Chander Sen etc. (SC) 161 ITR 370
CIT Vs C.G. Venkatasubban (Mad) 240 ITR 674
Property received on partition of HUF by a single coparcenor became the HUF property on his subsequent marriage – Assessment to be in HUF status.
H.P.A.R. Rajagopalan Vs CWT (Mad) 241 ITR 344
Dr. Prakash B. Sultane Vs CIT ( Bom ) 280 ITR 593
Hindu female inherited property from her father or mother – She has no children- Dying intestate – Property would devolve on heirs of her father.
Bhagar Ram v. Teja Singh (SC) 237 ITR 364
Karta of HUF cannot gift HUF properties to member / coparcener / stranger.
DCIT Vs A. Tenzing (ITAT, Mad) 62 ITD 76
Assessee beneficiary is a Trust – No absolute right in beneficial interest – He cannot impress his beneficial interest to HUF hotch-pot.
Maharaja Bahadursingh, Kasliwal Vs WTO (ITAT, Indore) 64 ITD 305
(ITR) Volume 339 : Part 1 (Issue dated 28-11-2011) SUBJECT INDEX TO CASES REPORTED IN THIS PART
Friday, November 25, 2011
The Indian Hume Pipe Co Ltd vs. ACIT (Bombay High Court)
S. 147: “Full & true disclosure of material facts” means “specific” disclosure of “each” fact
The assessee entered into an agreement in July 2001 for sale of development rights for Rs.39 crores. The transfer was in December 2003. The assessee computed LTCG of Rs. 23.19 crores. The assessee invested in eligible bonds between Feb & June 2002 (after the agreement to sell but before the transfer) and claimed exemption u/s 54EC. During the assessment proceedings, the AO asked for a copy of the agreements with the purchaser and other details which the assessee furnished. A copy each of the s. 54EC bonds (which gave the dates of investments) was also furnished. The AO allowed the deduction as claimed. After the expiry of 4 years from the end of the assessment year, the AO issued a notice u/s 148 claiming that as the investments were made prior to the date of transfer (Dec 2003), s. 54EC deduction was not admissible. The assessee filed a Writ Petition to challenge the reopening on the ground that there was no failure on its part to make a full and true disclosure of material facts. HELD dismissing the Petition:
(i) “Full and true disclosure of material facts” means that the disclosure should not be garbled or hidden in the crevices of the documentary material which has been filed by the assessee with the AO. The assessee must act with candor. A full disclosure is a disclosure of all material facts which does not contain any hidden material or suppression of fact. It must be truthful in all respects;
(ii) On facts, though the AO enquired into the matter and the assessee furnished a copy of the s. 54EC bonds (from which the dates of allotment/ investment were evident), there was no (specific) reference by the assessee to the dates on which the amounts were invested in the s. 54EC bonds. Also, it was it was evident that the AO had not applied his mind to the issue of s. 54EC exemption. Accordingly, the AO was justified in reopening the assessment.
Thursday, November 24, 2011
Direct Tax Laws Oct 17
Merely because an educational society was charging fees and was getting surplus would not be a reason to deny registration under section 80G(5)(vi) - [2011] 15 taxmann 250 (Punjab and Haryana)
There is no bar in law to sent a notice under section 148 after return is filed by assessee; such a notice can be issued by Assessing Officer if on consideration of return assessee is found to have understated his income or claimed excessive loss or deduction in return - [2011] 15 taxmann 249 (Karnataka)
Notice under section 158BC is not a procedural requirement, but it gives very jurisdiction to Assessing Officer to proceed under section 158BC - [2011] 15 taxmann 264 (Chennai - Trib.)
MAT liability - In view of addition of clause (g) to section 115JA, provision for bad debts is to be added back for computing net profits.Under MAT, profit derived by industrial undertaking from business of generation and distribution of power has to be reduced from net profit whether or not such profit appears in P&L account; however, no addition of loss can be made to net profit. Just for reason that assessee has started making provision for first time, leave encashment cannot be disallowed. Equipment constructed or installed at other's premises does not give enduring benefit.Provision for wealth-tax would come within ambit of clause (a) of Explanation to 115JA - [2011] 15 taxmann 262 (Chennai - Trib.)
Guideline value collected from sub-registrar office is only a guiding factors for valuing a property and such guideline value need not be market value for all time. Market value is determined by so many external factors including prevalent market conditions and, therefore, a detailed enquiry is needed for arriving at a reasonable market value of property - [2011] 15 taxmann 257 (Chennai - Trib.)(TM)
Where assessee could not file appeal against penalty order within prescribed time period due to death of her husband, it constituted a sufficient cause and, thus, Commissioner (Appeals) was to be directed to condone delay in filing appeal and dispose it of on merits - [2011] 15 taxmann 256(Kolkata - Trib.)
Where stay of demand was granted to assessee and therefore balance outstanding demand was to be stayed - [2011] 15 taxmann 255 (Mumbai - Trib.)
Where DRP did not consider assessee's objections and passed a cryptic order a prima facie case for stay of demand arose during pendency of proceedings before Tribunal - [2011] 15 taxmann 254 (Mumbai - Trib.)
Where assessee, a manufacturer of ice cream, failed to prove source of deposits allegedly received from dealers said amount could not be added to assessee's taxable income under section 41(1) - [2011] 15 taxmann 253 (Ahmedabad - Trib.)
Expression 'shareholder being a person who is beneficial owner of shares' referred to in first limb of section 2(22)(e) refers to both a registered shareholder and beneficial shareholder - [2011] 15 taxmann 252 (Kolkata - Trib.)
Tax is not liable to be deducted at source under section 195 on payments made to foreign companies which do not have branches, or business place in India, and have rendered services outside India - [2011] 15 taxmann 251 (Chennai - Trib.)