ITR'S TRIBUNAL TAX REPORTS (ITR (TRIB)) -- PRINT AND ONLINE EDITION
Dividend --Deemed dividend--Loan to shareholder having voting power exceeding 10 per cent.--Contention that if shares belonging to trust excluded, shareholding would be less than ten per cent.--Notarised trust deed and copy of board resolution of company produced in support of contention--Deeming fiction to be strictly construed--Loan not assessable as deemed dividend--Income-tax Act, 1961 , s. 2(22)(e) -- Krupeshbhai N. Patel v. Deputy CIT (Ahmedabad) . . . 325
Loss --Short-term capital loss--Sale of units of mutual funds--Purchases of units within period of three months prior to record date and sale within period of nine months from record date--Meaning of “within a period of three months prior to record dateâ€--Condition under section 94(7)(b)(ii) fulfilled--Disallowance of short-term capital loss justified--Income-tax Act, 1961 , s. 94(7) -- Krupeshbhai N. Patel v. Deputy CIT (Ahmedabad) . . . 325
Search and seizure --Assessment--Sale consideration of land--Additions on basis of notings on loose papers found during scrutiny--No direct evidence about receiving money--Addition not justified--Income-tax Act, 1961 -- Krupeshbhai N. Patel v. Deputy CIT (Ahmedabad) . . . 325
Business expenditure --Disallowance--Payments liable to deduction of tax at source--Commission or brokerage--Assessee, a distributor of SIM cards carrying out sale of SIM cards through dealers--Payments to dealers for activation--Are in the nature of commission or brokerage liable to tax deduction at source--Assessee failing to deduct tax at source--Expenditure not allowable under section 40(a)(ia)--Income-tax Act, 1961, ss. 40(a)(ia), 194H-- ITO v. Smart Distributors (Chandigarh) . . . 660
----Employees’ and employer’s contributions to employees’ State insurance and provident fund--Payments made before due date for filing return--Allowable--Income-tax Act, 1961, s. 36(1)(va)-- Onward Technologies Ltd. v. Deputy CIT (OSD) (Mumbai) . . . 734
----Expenses incurred on food and beverages--Failure to pay fringe benefit tax--Finding that 20 per cent. disallowance reasonable on provisions of fringe benefit tax--Justified--Income-tax Act, 1961, s. 115WB(2)-- Diamond Carpet v. Additional CIT (Agra) . . . 689
----Expenses necessary for purpose of business--Expenses incurred by manufacturer of carpets on erection of looms--Expenditure cannot be disallowed on whole--Expenditure allowable on basis of proportion of loom expenditure to gross profit in earlier year--Income-tax Act, 1961-- Diamond Carpet v. Additional CIT (Agra) . . . 689
----Interest on borrowed capital--Interest free loan given to partner--No details of own funds--Matter remanded for decision afresh on basis of formula laid down by Tribunal-- Diamond Carpet v. Additional CIT (Agra) . . . 689
Capital gains --Exemption--Sale of property and investment of consideration in purchase or construction of residential house--Provision to be liberally construed--Document not revealing actual date and amount of purchase--Assessee to place supporting evidence regarding date and amount of investment towards purchase--Matter remanded--Income-tax Act, 1961, s. 54F-- Narasimha Raju Rudra Raju v. Assistant CIT (Hyderabad) . . . 681
Capital or revenue expenditure --Expenditure for renovating rented office premises--Finding that it was difficult to bifurcate expenditure into revenue and capital and therefore 50 per cent. treated as capital expenditure and balance as revenue--Proper-- SICOM Ltd. v. Joint CIT (Mumbai) . . . 706
----Expenditure incurred on introducing compact spinning system--Revenue expenditure--Income-tax Act, 1961-- Assistant CIT v. Prabhu Spinning Mills P. Ltd. (Chennai) . . . 795
----Expenditure on installation of light fixtures and fittings, repairs and replacement of small electrical fittings--Expenses in nature of preserving and maintaining existing assets or of repairs--No new asset or any enduring benefit derived by assessee--Expenditure not capital in nature-- SICOM Ltd. v. Joint CIT (Mumbai) . . . 706
Cash credits --Company--Sums shown as share application money--Shareholders filing confirmation letters--Income-tax returns of shareholders accepted--Department cannot thereafter, without showing money emanated from assessee’s hands, tax sums as unexplained credits--Income-tax Act, 1961, s. 68-- Assistant CIT v. AMR Hospitality Services Ltd. (Hyderabad) . . . 758
Company --Book profit--Computation--Provision for bad debt and provision for leave salary--Not be included--Income-tax Act, 1961, s. 115J-- SICOM Ltd. v. Joint CIT (Mumbai) . . . 706
Depreciation --Assets forming part of block of assets and depreciation allowed in earlier years--Depreciation not to be disallowed on opening written down value--Income-tax Act, 1961, s. 32-- SICOM Ltd. v. Joint CIT (Mumbai) . . . 706
----Lease transactions--Finding that assets owned by assessee and under lease agreement assessee having right to repossess assets and assets to revert back to assessee at end of lease period--Disallowance not to be disallowed--Income-tax Act, 1961, s. 32-- SICOM Ltd. v. Joint CIT (Mumbai) . . . 706
----Ownership of asset--No evidence regarding ownership of car and use for business purpose--Depreciation not allowable--Income-tax Act, 1961, s. 32-- Diamond Carpet v. Additional CIT (Agra) . . . 689
----Sale and leaseback--Transaction of sale and leaseback taking place in preceding previous year and depreciation allowed and asset forming part of block of assets--Disallowance not proper--Commissioner (Appeals) judging genuineness of sale transactions without adverse material brought by Assessing Officer--Asset purchased and leased back to party--Assets belonging to assessee and assessee having right of reversion of possession at end of lease period--Matter remanded to Assessing Officer to examine issue of sale and leaseback agreement afresh-- SICOM Ltd. v. Joint CIT (Mumbai) . . . 706
Exemption --Export of computer software--Interest income--To be considered as income from other sources--Not eligible for exemption--Inclusion of finder fees and marketing fees in total turnover--Proper--Inclusion of expenditure incurred in foreign currency in total turnover--Not justified--Income-tax Act, 1961, s. 10A-- Onward Technologies Ltd. v. Deputy CIT (OSD) (Mumbai) . . . 734
----Interest earned by infrastructure capital fund or company--Notification by Government not received at time of assessment--Appeal--Notification received--Matter remanded for grant of exemption after verification of notification--Income-tax Act, 1961, s. 10(23G)-- SICOM Ltd. v. Joint CIT (Mumbai) . . . 706
Income --Computation--Income not includible in total income--Disallowance of expenditure--Shares held as stock in trade--Rule 8D(2)(ii) and (iii) cannot have application--Section 14A applicable--Disallowance of sum estimated at 10 per cent. of dividend earned proper--Income-tax Act, 1961, s. 14A--Income-tax Rules, 1962 r. 8D-- Deputy CIT v. Gulshan Investment Co. Ltd. (Kolkata) . . . 674
----Disallowance of expenditure related to exempt income--Disallowance to be worked out on reasonable basis--Dividend--No borrowed funds utilised for making investment in shares--Assessee buying shares in companies by way of financing to promote industrial development--Administrative costs--One per cent. to be disallowed as administrative expenses for purpose of earning exempt income--Income-tax Act, 1961, ss. 14A, 10(33)-- SICOM Ltd. v. Joint CIT (Mumbai) . . . 706
----Undertaking set up by Government for providing finance for industrial development--Port development programme of Government--Survey charges incurred and to be recovered from successful bidders--Expenses incurred in assessment year--Assessee debiting expenses to profit and loss account and claiming them as expenses and as and when recovered offering tax--Permissible--Expenses incurred in pursuance of activities assigned to assessee--Expenses offered for tax in year when recovered--Not to be disallowed in this year-- SICOM Ltd. v. Joint CIT (Mumbai) . . . 706
Income-tax --General principles--Res judicata--No estoppel against provisions of Act--Authorities clearly taking incorrect view in earlier year--Not stopped from taking correct view of statutory provisions in later year--Method employed by assessee for determining arm’s length price of international transactions contrary to statutory provisions--Assessee not entitled to continue calculating arm’s length price in erroneous manner-- Onward Technologies Ltd. v. Deputy CIT (OSD) (Mumbai) . . . 734
----General principles--Res judicata--Principle of consistency-- SICOM Ltd. v. Joint CIT (Mumbai) . . . 706
Intercorporate dividend --Special dividend--Borrowings of assessee not utilised for making investment in shares--Interest on borrowings and other expenditure allowable as deduction while computing business income--Expenditure could not once again be deducted from dividend income for purpose of computing deduction under section 80M--Deduction to be granted with reference to gross dividend--Income-tax Act, 1961, s. 80M-- SICOM Ltd. v. Joint CIT (Mumbai) . . . 706
Interest-tax --Credit institution--Definition--Finance company--Leasing company--Matter remanded for recording finding whether principally granting operating leases or finance leases--Thereafter decision to be arrived at whether assessee is credit institution--Interest-tax Act, 1974, s. 2(5B)-- Gujarat Gas Financial Services Ltd. v. Assistant CIT [SB] (Ahmedabad) . . . 775
International transactions --Arm’s length price--Determination--Impermissible to adopt combination of prescribed methods or altogether unprescribed method--Overall profit of group as whole cannot be considered for determination of arm’s length price--Mixing transactional net margin method and cost plus method in determining its arm’s length price--Not proper--Transactional net margin method--Comparable cases must be those engaged in similar business as assessee--Transfer Pricing Officer accepting as at arm’s length transactions of two segments--Determination of arm’s length price for third segment--Figures of two segments cannot be taken--Figures of relevant segment alone to be considered--Income-tax Act, 1961, ss. 92(1), 92B, 92C(1)--Income-tax Rules, 1962, r. 10B-- Onward Technologies Ltd. v. Deputy CIT (OSD) (Mumbai) . . . 734
----Arm’s length price--International transaction--Definition--Calculation of profit earned by assessee from transaction with associated enterprise--Only from transaction between two or more associated enterprises--Profit realised by foreign associated enterprise from ultimate customers--Not permissible to consider--Selection of foreign associated enterprise as tested party not permissible--Income-tax Act, 1961, ss. 92(1), 92B, 92C(1)--Income-tax Rules, 1962, r. 10B-- Onward Technologies Ltd. v. Deputy CIT (OSD) (Mumbai) . . . 734
Reassessment --Notice--Income escaping assessment--Details given not enough to establish transaction in nature of accommodation entries--Reasons do not satisfy requirement of section 147--Income-tax Act, 1961, ss. 147, 148-- ITO v. On Exim P. Ltd. (Delhi) . . . 697
----Notice--Validity--Incorrect address--Notice to be sent at address given in record of Income-tax Department--Income-tax Act, 1961, s. 148-- ITO v. On Exim P. Ltd. (Delhi) . . . 697
----Notice--Validity--Notice signed on March 31 but handed over to postal authority on April 1--Beyond period of limitation--Income-tax Act, 1961, ss. 148, 149-- ITO v. On Exim P. Ltd. (Delhi) . . . 697
Revision --Commissioner--Condition precedent--Order under revision should be erroneous and prejudicial to interests of Revenue--Income-tax Act, 1961, s. 263-- Mihir J. Doshi v. Assistant CIT (Mumbai) . . . 652
S. 10(23G) --Exemption--Interest earned by infrastructure capital fund or company--Notification by Government not received at time of assessment--Appeal--Notification received--Matter remanded for grant of exemption after verification of notification-- SICOM Ltd. v. Joint CIT (Mumbai) . . . 706
S. 10(33) --Income--Disallowance of expenditure related to exempt income--Disallowance to be worked out on reasonable basis--Dividend--No borrowed funds utilised for making investment in shares--Assessee buying shares in companies by way of financing to promote industrial development--Administrative costs--One per cent. to be disallowed as administrative expenses for purpose of earning exempt income-- SICOM Ltd. v. Joint CIT (Mumbai) . . . 706
S. 10A --Exemption--Export of computer software--Interest income--To be considered as income from other sources--Not eligible for exemption--Inclusion of finder fees and marketing fees in total turnover--Proper--Inclusion of expenditure incurred in foreign currency in total turnover--Not justified-- Onward Technologies Ltd. v. Deputy CIT (OSD) (Mumbai) . . . 734
S. 14A --Income--Computation--Income not includible in total income--Disallowance of expenditure--Shares held as stock in trade--Rule 8D(2)(ii) and (iii) cannot have application--Section 14A applicable--Disallowance of sum estimated at 10 per cent. of dividend earned proper-- Deputy CIT v. Gulshan Investment Co. Ltd. (Kolkata) . . . 674
----Income--Disallowance of expenditure related to exempt income--Disallowance to be worked out on reasonable basis--Dividend--No borrowed funds utilised for making investment in shares--Assessee buying shares in companies by way of financing to promote industrial development--Administrative costs--One per cent. to be disallowed as administrative expenses for purpose of earning exempt income-- SICOM Ltd. v. Joint CIT (Mumbai) . . . 706
S. 32 --Depreciation--Assets forming part of block of assets and depreciation allowed in earlier years--Depreciation not to be disallowed on opening written down value-- SICOM Ltd. v. Joint CIT (Mumbai) . . . 706
----Depreciation--Lease transactions--Finding that assets owned by assessee and under lease agreement assessee having right to repossess assets and assets to revert back to assessee at end of lease period--Disallowance not to be disallowed-- SICOM Ltd. v. Joint CIT (Mumbai) . . . 706
----Depreciation--Ownership of asset--No evidence regarding ownership of car and use for business purpose--Depreciation not allowable-- Diamond Carpet v. Additional CIT (Agra) . . . 689
S. 36(1)(va) --Business expenditure--Employees’ and employer’s contributions to employees’ State insurance and provident fund--Payments made before due date for filing return--Allowable-- Onward Technologies Ltd. v. Deputy CIT (OSD) (Mumbai) . . . 734
S. 40(a)(ia) --Business expenditure--Disallowance--Payments liable to deduction of tax at source--Commission or brokerage--Assessee, a distributor of SIM cards carrying out sale of SIM cards through dealers--Payments to dealers for activation--Are in the nature of commission or brokerage liable to tax deduction at source--Assessee failing to deduct tax at source--Expenditure not allowable under section 40(a)(ia)-- ITO v. Smart Distributors (Chandigarh) . . . 660
S. 54F --Capital gains--Exemption--Sale of property and investment of consideration in purchase or construction of residential house--Provision to be liberally construed--Document not revealing actual date and amount of purchase--Assessee to place supporting evidence regarding date and amount of investment towards purchase--Matter remanded-- Narasimha Raju Rudra Raju v. Assistant CIT (Hyderabad) . . . 681
S. 68 --Cash credits--Company--Sums shown as share application money--Shareholders filing confirmation letters--Income-tax returns of shareholders accepted--Department cannot thereafter, without showing money emanated from assessee’s hands, tax sums as unexplained credits-- Assistant CIT v. AMR Hospitality Services Ltd. (Hyderabad) . . . 758
S. 80M --Intercorporate dividend--Special dividend--Borrowings of assessee not utilised for making investment in shares--Interest on borrowings and other expenditure allowable as deduction while computing business income--Expenditure could not once again be deducted from dividend income for purpose of computing deduction under section 80M--Deduction to be granted with reference to gross dividend-- SICOM Ltd. v. Joint CIT (Mumbai) . . . 706
S. 92(1) --International transactions--Arm’s length price--Determination--Impermissible to adopt combination of prescribed methods or altogether unprescribed method--Overall profit of group as whole cannot be considered for determination of arm’s length price--Mixing transactional net margin method and cost plus method in determining its arm’s length price--Not proper--Transactional net margin method--Comparable cases must be those engaged in similar business as assessee--Transfer Pricing Officer accepting as at arm’s length transactions of two segments--Determination of arm’s length price for third segment--Figures of two segments cannot be taken--Figures of relevant segment alone to be considered-- Onward Technologies Ltd. v. Deputy CIT (OSD) (Mumbai) . . . 734
----International transactions--Arm’s length price--International transaction--Definition--Calculation of profit earned by assessee from transaction with associated enterprise--Only from transaction between two or more associated enterprises--Profit realised by foreign associated enterprise from ultimate customers--Not permissible to consider--Selection of foreign associated enterprise as tested party not permissible-- Onward Technologies Ltd. v. Deputy CIT (OSD) (Mumbai) . . . 734
S. 92B --International transactions--Arm’s length price--Determination--Impermissible to adopt combination of prescribed methods or altogether unprescribed method--Overall profit of group as whole cannot be considered for determination of arm’s length price--Mixing transactional net margin method and cost plus method in determining its arm’s length price--Not proper--Transactional net margin method--Comparable cases must be those engaged in similar business as assessee--Transfer Pricing Officer accepting as at arm’s length transactions of two segments--Determination of arm’s length price for third segment--Figures of two segments cannot be taken--Figures of relevant segment alone to be considered-- Onward Technologies Ltd. v. Deputy CIT (OSD) (Mumbai) . . . 734
----International transactions--Arm’s length price--International transaction--Definition--Calculation of profit earned by assessee from transaction with associated enterprise--Only from transaction between two or more associated enterprises--Profit realised by foreign associated enterprise from ultimate customers--Not permissible to consider--Selection of foreign associated enterprise as tested party not permissible-- Onward Technologies Ltd. v. Deputy CIT (OSD) (Mumbai) . . . 734
S. 92C(1) --International transactions--Arm’s length price--Determination--Impermissible to adopt combination of prescribed methods or altogether unprescribed method--Overall profit of group as whole cannot be considered for determination of arm’s length price--Mixing transactional net margin method and cost plus method in determining its arm’s length price--Not proper--Transactional net margin method--Comparable cases must be those engaged in similar business as assessee--Transfer Pricing Officer accepting as at arm’s length transactions of two segments--Determination of arm’s length price for third segment--Figures of two segments cannot be taken--Figures of relevant segment alone to be considered-- Onward Technologies Ltd. v. Deputy CIT (OSD) (Mumbai) . . . 734
----International transactions--Arm’s length price--International transaction--Definition--Calculation of profit earned by assessee from transaction with associated enterprise--Only from transaction between two or more associated enterprises--Profit realised by foreign associated enterprise from ultimate customers--Not permissible to consider--Selection of foreign associated enterprise as tested party not permissible-- Onward Technologies Ltd. v. Deputy CIT (OSD) (Mumbai) . . . 734
S. 115J --Company--Book profit--Computation--Provision for bad debt and provision for leave salary--Not be included-- SICOM Ltd. v. Joint CIT (Mumbai) . . . 706
S. 115WB(2) --Business expenditure--Expenses incurred on food and beverages--Failure to pay fringe benefit tax--Finding that 20 per cent. disallowance reasonable on provisions of fringe benefit tax--Justified-- Diamond Carpet v. Additional CIT (Agra) . . . 689
S. 147 --Reassessment--Notice--Income escaping assessment--Details given not enough to establish transaction in nature of accommodation entries--Reasons do not satisfy requirement of section 147-- ITO v. On Exim P. Ltd. (Delhi) . . . 697
S. 148 --Reassessment--Notice--Income escaping assessment--Details given not enough to establish transaction in nature of accommodation entries--Reasons do not satisfy requirement of section 147-- ITO v. On Exim P. Ltd. (Delhi) . . . 697
----Reassessment--Notice--Validity--Incorrect address--Notice to be sent at address given in record of Income-tax Department-- ITO v. On Exim P. Ltd. (Delhi) . . . 697
----Reassessment--Notice--Validity--Notice signed on March 31 but handed over to postal authority on April 1--Beyond period of limitation-- ITO v. On Exim P. Ltd. (Delhi) . . . 697
S. 149 --Reassessment--Notice--Validity--Notice signed on March 31 but handed over to postal authority on April 1--Beyond period of limitation-- ITO v. On Exim P. Ltd. (Delhi) . . . 697
S. 194H --Business expenditure--Disallowance--Payments liable to deduction of tax at source--Commission or brokerage--Assessee, a distributor of SIM cards carrying out sale of SIM cards through dealers--Payments to dealers for activation--Are in the nature of commission or brokerage liable to tax deduction at source--Assessee failing to deduct tax at source--Expenditure not allowable under section 40(a)(ia)-- ITO v. Smart Distributors (Chandigarh) . . . 660
S. 263 --Revision--Commissioner--Condition precedent--Order under revision should be erroneous and prejudicial to interests of Revenue-- Mihir J. Doshi v. Assistant CIT (Mumbai) . . . 652
R. 8D --Income--Computation--Income not includible in total income--Disallowance of expenditure--Shares held as stock in trade--Rule 8D(2)(ii) and (iii) cannot have application--Section 14A applicable--Disallowance of sum estimated at 10 per cent. of dividend earned proper-- Deputy CIT v. Gulshan Investment Co. Ltd. (Kolkata) . . . 674
R. 10B --International transactions--Arm’s length price--Determination--Impermissible to adopt combination of prescribed methods or altogether unprescribed method--Overall profit of group as whole cannot be considered for determination of arm’s length price--Mixing transactional net margin method and cost plus method in determining its arm’s length price--Not proper--Transactional net margin method--Comparable cases must be those engaged in similar business as assessee--Transfer Pricing Officer accepting as at arm’s length transactions of two segments--Determination of arm’s length price for third segment--Figures of two segments cannot be taken--Figures of relevant segment alone to be considered-- Onward Technologies Ltd. v. Deputy CIT (OSD) (Mumbai) . . . 734
----International transactions--Arm’s length price--International transaction--Definition--Calculation of profit earned by assessee from transaction with associated enterprise--Only from transaction between two or more associated enterprises--Profit realised by foreign associated enterprise from ultimate customers--Not permissible to consider--Selection of foreign associated enterprise as tested party not permissible-- Onward Technologies Ltd. v. Deputy CIT (OSD) (Mumbai) . . . 734
S. 2(5B) --Interest-tax--Credit institution--Definition--Finance company--Leasing company--Matter remanded for recording finding whether principally granting operating leases or finance leases--Thereafter decision to be arrived at whether assessee is credit institution-- Gujarat Gas Financial Services Ltd. v. Assistant CIT [SB] (Ahmedabad) . . . 775
INCOME TAX REPORTS (ITR)--PRINT AND ONLINE EDITION
Assessment --Order passed without giving assessee opportunity to be heard--Not valid--Income-tax Act, 1961-- Green Power Realtors P. Ltd. v. Deputy CIT
(Mad) . . . 332
(Mad) . . . 332
Income-tax --General principles--Principles of natural justice-- Green Power Realtors P. Ltd. v. Deputy CIT (Mad) . . . 332
Penalty --Concealment of income--Claim for deductions--Finding that claims were bona fide--Rejection of claims and additions to income--No concealment of income--Penalty could not be levied--Income-tax Act, 1961, s. 271(1)(c)-- CIT v. Balaji Distilleries Ltd. (Mad) . . . 339
Precedent --Effect of decision in Harshad Mehta’s case-- Kantilal Sakarlal Gandhi v. ITO (Guj) . . . 347
----Effect of decision of Supreme Court in Price Waterhouse Coopers P. Ltd. v. CIT [2012] 348 ITR 306-- CIT v. Balaji Distilleries Ltd. (Mad) . . . 339
Rebate --Company--Book profit--Computation of income under section 115JB--Company paying securities transaction tax--Company entitled to rebate under section 88E--Income-tax Act, 1961, ss. 87, 88E, 115JB-- CIT v. Horizon Capital Ltd.
(Karn) . . . 326
(Karn) . . . 326
Recovery of tax --Company--Private company--Directors--Liability of directors--Scope of section 179--Section 179 does not cover penalty--Penalty imposed on private company cannot be recovered from director--Income-tax Act, 1961, s. 179-- Kantilal Sakarlal Gandhi v. ITO (Guj) . . . 347
Transfer of case --Assessee’s name appearing in search of third party at Hyderabad--Notice for transfer of assessee’s case from Bangalore to Hyderabad--Authority to make available all and every relevant material, as also particulars, while calling upon assessee to submit objection for transfer of his case to another State--In the absence of such particulars, notice and order of transfer of case not valid--Income-tax Act, 1961, s. 127-- Span Design and Development (P.) Ltd. v. CIT (Karn) . . . 322
Accounting --Method of accounting--Valuation of inventory--Accounting Standard--Cost or net realisable value--Discounted value of raw material--Write off factor not proved by assessee--Assessing Officer directed to verify figure--Income-tax Act, 1961, s. 145-- Suzuki Motorcycle India P. Ltd . v . CIT (Delhi) . . . 250
Appeal to Appellate Tribunal --Cash credits--Company--Share application money--Assessing Officer making detailed investigation and finding credits not satisfactorily explained--Tribunal not justified in setting aside finding without examining matter--Matter remanded--Income-tax Act, 1961, ss. 68, 254-- CIT v . Titan Securities Ltd . (Delhi) . . . 184
Appeal to Commissioner (Appeals) --Power of Commissioner (Appeals) to admit additional evidence--Assessing Officer’s objection to admission of additional evidence overruled on ground additional evidence only clarificatory and assessee’s case not exclusively based on it--Admission of additional evidence proper--But Assessing Officer to be given opportunity to examine it and process claim of assessee--Matter remanded--Income-tax Rules, 1962, r. 46A-- CIT v . Arts Beauty Exports (Delhi) . . . 276
Assessment --Special audit--Direction for--Principles governing--Report submitted by Assessing Officer to Commissioner intimating that assessee asked to file necessary details which were being verified and examined in course of assessment proceedings--Opinion that complexities noticed and confronted to assessee have been answered by assessee--Report sent on next day to Commissioner submitting proposal for special audit--Material or compelling circumstances for change of opinion overnight not shown--Reasons vague and unconvincing--Opportunity not afforded to assessee to show cause against proposal--Circumstances to indicate opinion formed by Assessing Officer not his own--Chief Commissioner giving approval to special audit on same day--Failure to apply mind--Nothing on record to show fresh development--Approval granted by Chief Commissioner a nullity and direction for special audit quashed--Income-tax Act, 1961, s. 142(2A)-- DLF Commercial Projects Corporation v . Asst. CIT (Delhi) . . . 211
Business expenditure --Disallowance--Amounts on which tax has not been deducted at source--Scope of section 40(a)(ia)--Meaning of “payableâ€--Provision would cover amounts payable at any time during the accounting year--Income-tax Act, 1961, s. 40(a)(ia)-- CIT v. Sikandarkhan N. Tunvar (Guj) . . . 312
Capital gains --Exemption--Investment of consideration received on transfer of long-term capital assets in residential house--Meaning of residential house in section 54 and section 54F--House consisting of several units would constitute a residential house--Income-tax Act, 1961, ss. 54, 54F-- CIT v . Gita Duggal (Delhi) . . . 153
----Writ--Computation of capital gains--Reference to Valuation Officer--Effect of section 55A--Writ petition against reference to District Valuation Officer--Not valid--Income-tax Act, 1961, s. 55A--Constitution of India art. 226-- ACC Ltd . v. District Valuation Officer (Delhi) . . . 160
Cash credit --Share application money--Investigation report stating assessee engaged in accommodation entry transactions--Assessee filing certified copies issued by Registrar of Companies in relation to share application, affidavits of directors, Form 2 filed with Registrar of Companies by applicants, confirmations by share applicants, certificates by auditors--Assessing Officer not enquiring into matter or summoning share applicants or directors--No finding that material disclosed untrustworthy or lacked credibility--Addition solely based on investigation report not justified--Income-tax Act, 1961, s. 68-- CIT v . Fair Finvest Ltd. (Delhi) . . . 146
----Share application money--Section 68 applicable--Onus on assessee to prove identity of share applicants, their creditworthiness and genuineness of transaction--Creditworthiness of share applicants and genuineness of transactions not proved--Tribunal not justified in deleting addition under section 68--Matter remanded--Income-tax Act, 1961, s. 68-- CIT v. Youth Construction P. Ltd . (Delhi) . . . 197
Central Board of Direct Taxes --Beneficial circulars or circulars relaxing rigour of provisions of Act--Binding on Assessing Officer and others executing Act-- CIT v . Ashok Mittal (Delhi) . . . 245
Change of law --Circular issued under 1922 Act--Circular not withdrawn--Provisions of old and new Acts similar--Circular to be applied--Indian Income-tax Act, 1922, s. 24--Income-tax Act, 1961, s. 73--Board Circular No. 23D of 1960 dated 12-9-1960-- CIT v. Ashok Mittal (Delhi) . . . 245
Charitable purpose --Charitable trust--Exemption--No evidence to show that activities carried out by assessee were propelled by any profit motive--Section 11(4A) not applicable--Income-tax Act, 1961, ss. 2(15), 11(4A)-- PHD Chamber of Commerce and Industry v . DIT (Exemptions) (Delhi) . . . 296
Depreciation --Power plants--Machinery and equipment used in construction of projects--Machinery and equipment kept ready for use but not used--No material to indicate it related to power generation equipment and was to be installed only after project completed--Entitled to depreciation--Income-tax Act, 1961, ss. 32, 56(2)(ii)-- National Thermal Power Corporation Ltd . v . CIT (Delhi) . . . 253
Exemption --Educational institution--Meaning of educational institution in section 10(23C)(vi)--Assessee teaching Western classical music and Indian and Western dancing--Students prepared for examination conducted by Trinity College, London--Regular classes conducted in a systematic manner--Assessee was an educational institution--Rejection of application under section 10(23C)--Not valid--Income-tax Act, 1961, s. 10(23C)(vi)-- Delhi Music Society v. Director General of Income-tax
(Delhi) . . . 265
(Delhi) . . . 265
----Salary--Perquisite--Tax paid by employer on behalf of employee--Assessee receiving Rs. 77 lakhs in India on which tax payable of Rs. 35 lakhs--Assessee including Rs. 35 lakhs in his salary income and offering Rs. 1.13 crores to tax--Tax amounting to Rs. 15 lakhs paid by assessee not reimbursed by employer--Not includible in income of assessee--Interest-free deposit for accommodation not part of perquisite--No notional interest leviable--Income-tax Act, 1961-- CIT v . Jaydev H. Raja (Bom) . . . 293
Export --Exemption--Firm--Mere reconstitution of firm by taking on new partner does not amount to splitting up or reconstruction of partnership business--Custom-bonding required only where imports contemplated for manufacture for purposes of export--Assessee not importing any materials for use in manufacture or export of handicrafts--Custom-bonding of unit not to be insisted upon--Whether assessee carried on manufacture--Matter remanded--Income-tax Act, 1961, s. 10B-- CIT v . Arts Beauty Exports (Delhi) . . . 276
----Special deduction--Computation--DEPB credit utilised by assessee in its business--Section 28(iiid) not applicable--Second, third and fourth provisos to section 80HHC(3) not applicable--Whether 90 per cent. of DEPB credit can be excluded from assessed profits of the business--Assessing Officer directed to compute DEPB credit afresh--Sale of special import licence--No reduction from profits of business to the extent of ninety per cent.--Income-tax Act, 1961, ss. 28, 80HHC-- CIT v . K. R. B. L. Ltd.
(Delhi) . . . 258
(Delhi) . . . 258
Income --Interest--Interest on loan--Mercantile system of accounting--Resolution not to charge interest in view of financial difficulties of borrowing companies--Borrowing companies in sound financial position in relevant accounting year--Interest assessable--Income-tax Act, 1961-- CIT v . Brahmaputra Capital and Financial Services Ltd .
(Delhi) . . . 241
(Delhi) . . . 241
Income-tax authorities --Powers of income-tax authorities--Scope of section 119(2)(b)--No satisfactory explanation regarding delay in applying for refund or grounds for refund--Income-tax authorities could not be authorised to admit application--Income-tax Act, 1961, s. 119(2)(b)-- Kiwanis Club of New Delhi v . DIT (Exemptions)
(Delhi) . . . 205
(Delhi) . . . 205
Interpretation of taxing statutes --Strict construction-- CIT v. Sikandarkhan N. Tunvar (Guj) . . . 312
Precedent --Effect of decision of Supreme Court in the case of Sole Trustee, Loka Shikshana Trust [1975] 101 ITR 234 (SC)-- Delhi Music Society v . Director General of Income-tax (Delhi) . . . 265
Reassessment --Notice--Condition precedent--Prima facie view that income had escaped assessment--Foreign company having subsidiary in India--Payments made by subsidiary to assessee and interest-free loans by assessee to subsidiary--Notice on ground assessee had business connection in India--Notice valid--Income-tax Act, 1961, ss. 147, 148-- Convergys Customer Management v . Asst. DIT (Delhi) . . . 177
----Notice after four years--Condition precedent--Failure to disclose material facts necessary for assessment--Primary facts relating to claim for depreciation furnished--Depreciation allowed after considering facts--Notice after four years to withdraw depreciation--Not valid--Income-tax Act, 1961, s. 148-- Vatika Ltd . v . ITO
(Delhi) . . . 170
(Delhi) . . . 170
Refund --Application for refund--Delay in filing return and in making application for refund--Return not processed under section 143(1) or section 143(3)--No evidence of deduction of tax at source on payments to assessee--No satisfactory explanation regarding delay in filing return and in applying for refund--Rejection of application for refund--Justified--Income-tax Act, 1961-- Kiwanis Club of New Delhi v . DIT (Exemptions) (Delhi) . . . 205
Speculation loss --Carry forward and set off--Carried forward speculation loss to be first set off against speculative profits of current year before adjusting any other loss against those profits and other incomes--Income-tax Act, 1961, s. 73-- CIT v. Ashok Mittal (Delhi) . . . 245
Words and phrases --â€Educationâ€-- Delhi Music Society v. Director General of Income-tax (Delhi) . . . 265
Art. 226 --Capital gains--Writ--Computation of capital gains--Reference to Valuation Officer--Effect of section 55A--Writ petition against reference to District Valuation Officer--Not valid-- ACC Ltd . v. District Valuation Officer (Delhi) . . . 160
S. 24 --Change of law--Circular issued under 1922 Act--Circular not withdrawn--Provisions of old and new Acts similar--Circular to be applied-- CIT v. Ashok Mittal
(Delhi) . . . 245
(Delhi) . . . 245
S. 2(15) --Charitable purpose--Charitable trust--Exemption--No evidence to show that activities carried out by assessee were propelled by any profit motive--Section 11(4A) not applicable-- PHD Chamber of Commerce and Industry v . DIT (Exemptions) (Delhi) . . . 296
S. 10(23C)(vi) --Exemption--Educational institution--Meaning of educational institution in section 10(23C)(vi)--Assessee teaching Western classical music and Indian and Western dancing--Students prepared for examination conducted by Trinity College, London--Regular classes conducted in a systematic manner--Assessee was an educational institution--Rejection of application under section 10(23C)--Not valid-- Delhi Music Society v. Director General of Income-tax (Delhi) . . . 265
S. 10B --Export--Exemption--Firm--Mere reconstitution of firm by taking on new partner does not amount to splitting up or reconstruction of partnership business--Custom-bonding required only where imports contemplated for manufacture for purposes of export--Assessee not importing any materials for use in manufacture or export of handicrafts--Custom-bonding of unit not to be insisted upon--Whether assessee carried on manufacture--Matter remanded-- CIT v . Arts Beauty Exports (Delhi) . . . 276
S. 11(4A) --Charitable purpose--Charitable trust--Exemption--No evidence to show that activities carried out by assessee were propelled by any profit motive--Section 11(4A) not applicable-- PHD Chamber of Commerce and Industry v . DIT (Exemptions) (Delhi) . . . 296
S. 28 --Export--Special deduction--Computation--DEPB credit utilised by assessee in its business--Section 28(iiid) not applicable--Second, third and fourth provisos to section 80HHC(3) not applicable--Whether 90 per cent. of DEPB credit can be excluded from assessed profits of the business--Assessing Officer directed to compute DEPB credit afresh--Sale of special import licence--No reduction from profits of business to the extent of ninety per cent.-- CIT v . K. R. B. L. Ltd. (Delhi) . . . 258
S. 32 --Depreciation--Power plants--Machinery and equipment used in construction of projects--Machinery and equipment kept ready for use but not used--No material to indicate it related to power generation equipment and was to be installed only after project completed--Entitled to depreciation-- National Thermal Power Corporation Ltd . v . CIT (Delhi) . . . 253
S. 40(a)(ia) --Business expenditure--Disallowance--Amounts on which tax has not been deducted at source--Scope of section 40(a)(ia)--Meaning of “payableâ€--Provision would cover amounts payable at any time during the accounting year-- CIT v. Sikandarkhan N. Tunvar (Guj) . . . 312
S. 54 --Capital gains--Exemption--Investment of consideration received on transfer of long-term capital assets in residential house--Meaning of residential house in section 54 and section 54F--House consisting of several units would constitute a residential house-- CIT v . Gita Duggal (Delhi) . . . 153
S. 54F --Capital gains--Exemption--Investment of consideration received on transfer of long-term capital assets in residential house--Meaning of residential house in section 54 and section 54F--House consisting of several units would constitute a residential house-- CIT v . Gita Duggal (Delhi) . . . 153
S. 55A --Capital gains--Writ--Computation of capital gains--Reference to Valuation Officer--Effect of section 55A--Writ petition against reference to District Valuation Officer--Not valid-- ACC Ltd . v. District Valuation Officer (Delhi) . . . 160
S. 56(2)(ii) --Depreciation--Power plants--Machinery and equipment used in construction of projects--Machinery and equipment kept ready for use but not used--No material to indicate it related to power generation equipment and was to be installed only after project completed--Entitled to depreciation-- National Thermal Power Corporation Ltd . v . CIT (Delhi) . . . 253
S. 68 --Appeal to Appellate Tribunal--Cash credits--Company--Share application money--Assessing Officer making detailed investigation and finding credits not satisfactorily explained--Tribunal not justified in setting aside finding without examining matter--Matter remanded-- CIT v . Titan Securities Ltd . (Delhi) . . . 184
----Cash credit--Share application money--Investigation report stating assessee engaged in accommodation entry transactions--Assessee filing certified copies issued by Registrar of Companies in relation to share application, affidavits of directors, Form 2 filed with Registrar of Companies by applicants, confirmations by share applicants, certificates by auditors--Assessing Officer not enquiring into matter or summoning share applicants or directors--No finding that material disclosed untrustworthy or lacked credibility--Addition solely based on investigation report not justified-- CIT v . Fair Finvest Ltd. (Delhi) . . . 146
----Cash credits--Share application money--Section 68 applicable--Onus on assessee to prove identity of share applicants, their creditworthiness and genuineness of transaction--Creditworthiness of share applicants and genuineness of transactions not proved--Tribunal not justified in deleting addition under section 68--Matter remanded-- CIT v. Youth Construction P. Ltd . (Delhi) . . . 197
S. 73 --Change of law--Circular issued under 1922 Act--Circular not withdrawn--Provisions of old and new Acts similar--Circular to be applied-- CIT v. Ashok Mittal
(Delhi) . . . 245
(Delhi) . . . 245
----Speculation loss--Carry forward and set off--Carried forward speculation loss to be first set off against speculative profits of current year before adjusting any other loss against those profits and other incomes-- CIT v. Ashok Mittal (Delhi) . . . 245
S. 80HHC --Export--Special deduction--Computation--DEPB credit utilised by assessee in its business--Section 28(iiid) not applicable--Second, third and fourth provisos to section 80HHC(3) not applicable--Whether 90 per cent. of DEPB credit can be excluded from assessed profits of the business--Assessing Officer directed to compute DEPB credit afresh--Sale of special import licence--No reduction from profits of business to the extent of ninety per cent.-- CIT v . K. R. B. L. Ltd. (Delhi) . . . 258
S. 119(2)(b) --Income-tax authorities--Powers of income-tax authorities--Scope of section 119(2)(b)--No satisfactory explanation regarding delay in applying for refund or grounds for refund--Income-tax authorities could not be authorised to admit application-- Kiwanis Club of New Delhi v . DIT (Exemptions) (Delhi) . . . 205
S. 142(2A) --Assessment--Special audit--Direction for--Principles governing--Report submitted by Assessing Officer to Commissioner intimating that assessee asked to file necessary details which were being verified and examined in course of assessment proceedings--Opinion that complexities noticed and confronted to assessee have been answered by assessee--Report sent on next day to Commissioner submitting proposal for special audit--Material or compelling circumstances for change of opinion overnight not shown--Reasons vague and unconvincing--Opportunity not afforded to assessee to show cause against proposal--Circumstances to indicate opinion formed by Assessing Officer not his own--Chief Commissioner giving approval to special audit on same day--Failure to apply mind--Nothing on record to show fresh development--Approval granted by Chief Commissioner a nullity and direction for special audit quashed-- DLF Commercial Projects Corporation v . Asst. CIT (Delhi) . . . 211
S. 145 --Accounting--Method of accounting--Valuation of inventory--Accounting Standard--Cost or net realisable value--Discounted value of raw material--Write off factor not proved by assessee--Assessing Officer directed to verify figure-- Suzuki Motorcycle India P. Ltd . v . CIT (Delhi) . . . 250
S. 147 --Reassessment--Notice--Condition precedent--Prima facie view that income had escaped assessment--Foreign company having subsidiary in India--Payments made by subsidiary to assessee and interest-free loans by assessee to subsidiary--Notice on ground assessee had business connection in India--Notice valid-- Convergys Customer Management v . Asst. DIT (Delhi) . . . 177
S. 148 --Reassessment--Notice after four years--Condition precedent--Failure to disclose material facts necessary for assessment--Primary facts relating to claim for depreciation furnished--Depreciation allowed after considering facts--Notice after four years to withdraw depreciation--Not valid-- Vatika Ltd . v . ITO (Delhi) . . . 170
----Reassessment--Notice--Condition precedent--Prima facie view that income had escaped assessment--Foreign company having subsidiary in India--Payments made by subsidiary to assessee and interest-free loans by assessee to subsidiary--Notice on ground assessee had business connection in India--Notice valid-- Convergys Customer Management v . Asst. DIT (Delhi) . . . 177
S. 254 --Appeal to Appellate Tribunal--Cash credits--Company--Share application money--Assessing Officer making detailed investigation and finding credits not satisfactorily explained--Tribunal not justified in setting aside finding without examining matter--Matter remanded-- CIT v . Titan Securities Ltd . (Delhi) . . . 184
R. 46A --Appeal to Commissioner (Appeals)--Power of Commissioner (Appeals) to admit additional evidence--Assessing Officer’s objection to admission of additional evidence overruled on ground additional evidence only clarificatory and assessee’s case not exclusively based on it--Admission of additional evidence proper--But Assessing Officer to be given opportunity to examine it and process claim of assessee--Matter remanded-- CIT v . Arts Beauty Exports (Delhi) . . . 276
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