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INCOME TAX REPORTS (ITR) HIGHLIGHTS
| Vol. 359, Part 3, dated 16-12-2013 | | | | | | | | | | | | | | | | | | | | | | | | |
F Failure to produce approval of Additional Commissioner or Joint Commissioner : Notice of reassessment not valid : DSJ Communication Ltd. v. Deputy CIT (Bom) p. 558
F Reassessment of issue decided by Settlement Commission not valid : Omaxe Ltd. v. Addl. CIT (Delhi) p. 563
F Sufficient opportunity not given to society to place documents relevant to enquiry before rejecting application : Matter remanded to decide application afresh : C. P. Vidya Niketan Inter College Shikshan Society v. Union of India (All) p. 322
F Interest-free loans to a few selected sister concerns of assessee but other sister concerns charged interest : Whether deemed gift : Matter remanded : CIT v. Sahara India (Firm) (All) p. 337
F Loan not deemed dividend where the assessee not a shareholder in lending company : CIT v. G. T. Z. Securities Ltd. (J & K) p. 345
F Block assessment : Proceedings time barred : Direction to give effect to order of Tribunal against which no appeal filed : Naresh Chand Agarwal v. Union of India (All) p. 353
F Revisional order justified where claim for deduction allowed without application of mind : CIT v. Alloy Steels (Karn) p. 355
F Rejection of application under section 10(23C)(vi) as either delayed or pre-mature not justified where application reaching competent authority within time : Lokmanya Shiksha Samiti v. ITO (OSD) (MP) p. 361
F Depreciation allowable on revaluation of agency rights including goodwill : Not on value mentioned in agreement : CIT v. Manipal Universal Learning P. Ltd. (Karn) p. 369
F Practice of mentioning of matter must allowed by the Tribunal : Bharat Petroleum Corporation Ltd. v. ITAT (Bom) p. 371
F Tribunal has no power to dismiss appeal on ground of non-prosecution : Bharat Petroleum Corporation Ltd. v. ITAT (Bom) p. 371
F Error apparent on face of record : Application for recall whether governed by section 254(1) or section 254(2) : Bharat Petroleum Corporation Ltd. v. ITAT (Bom) p. 371
F Rectification of mistake : Limitation : Four years from date of order sought to be rectified : Bharat Petroleum Corporation Ltd. v. ITAT (Bom) p. 371
F Amount of service tax, under contract, to be paid separately : Not subject to tax deduction at source : CIT v. Rajasthan Urban Infrastructure Development Project (Raj) p. 385
F Sum offered was income of assessee from business and not from other sources : Assessee entitled to set off loss against such income : CIT v. Ram Gopal Manda (Raj) p. 389
F Reference to DVO only after rejection of books of account : CIT v. Chohan Resorts (P & H) p. 394
F AO cannot refer valuation to DVO where books of account produced by assessee not rejected : Nirpal Singh v. CIT (P & H) p. 398
F Unexplained payment made by an educational institution : Presumption that institution was not existing solely for educational purpose : Cambrian Hall Educational Trust v. CIT (Uttarakhand) p. 401
F Deletion of addition based solely on assessment order of different assessee by different AO : Not justified : CIT v. Kamal Kumar Bansal (Cal) p. 406
F Assessee, lessor of vehicles, entitled to depreciation : CIT v. Baid Leasing and Finance Co. Ltd. (Raj) p. 413
F Estate duty in relation to property inherited by trust : Does not constitute expenditure referable to property : CIT v. Trustees of HEH the Nizam's Mukarramjah Trust for Education and Learnings (AP) p. 419
F Nil deduction of tax at source certificate granted for earlier year : Rejection of application not justified : UPS Worldwide Forwarding Inc. v. UPS Jetair Express P. Ltd. (Bom) p. 427
F Member of ST should reside in area specified in provision : Amal Shyam v. Union of India (Tripura) p. 440
F No satisfaction recorded by AO that income has escaped assessment by reason of failure on part of assessee to disclose fully and truly all material facts necessary for its assessment : Notice after four years not valid : Kanak Fabrics v. ITO (Guj) p. 447
F Settlement of cases : Order based on material determining income in excess of that declared : Justified : Major Metals Ltd. v. Union of India (Bom) p. 450
F Penalty imposed after consideration of evidence and after giving assessee opportunity to be heard : Valid : Major Metals Ltd. v. Union of India (Bom) p. 450
F Anonymous donations under section 115BBC will not entail levy of interest under section 234B and penalty under section 271(1)(c)-S. K. Tyagi, Advocate p. . . . 76
F Tax exemption for education-Section 2(15) is not being correctly construed by Assessing Officers-T. N. Pandey, Retd. Chairman, CBDT p. . . . 62
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GOODS AND SERVICE TAX REPORTS (GSTR) HIGHLIGHTSF Where entire unit of defaulting assessee not purchased as a business, purchaser not liable for discharging excise dues of assessee : Rana Girders Ltd. v. Union of India P. 321
F Denial of benefit of Division Bench's decision solely on ground that assessee not party to that proceedings or no order passed in its favour not proper : Utkal Lumbers P. Ltd. v. Commissioner of Central Excise (Guj) P. 333
F Denial of benefit of Division Bench's decision solely on ground that assessee not party to that proceedings or no order passed in its favour not proper : Shree Balaji Lumbers P. Ltd v. Union of India (Guj) P. 338
F Authority must objectively consider whether grounds on which waiver of pre-deposit sought constitute undue hardship to assessee : Amber Aniruddha Mufti v. Commissioner of Customs (Appeals) (Bom) P. 341
F Where no proof that imported goods were "seconds" or "defective" prohibited for import, exemption granted to "all goods other than seconds and defectives" falling under Customs Tariff Headings 72.03 to 72.17, available : Sabari Exim P. Ltd. v. Commissioner of Customs (Imports) P. 347
F Value of imported marbles less than 50 US dollars and in violation of the notification, confiscation of the goods was justified : Worldwide Hometex P. Ltd. v. Commissioner of Customs (Imports) P. 352
F Where software forming integral part of imported hardware and not having independent existence, software not eligible for exemption under Notification No. 17/2001-Customs : Accel Ltd. v. Commissioner of Customs (Air) P. 355
F Presumption of deliberate delay in filing appeal on account of culpable negligence or mala fides not permissible : Where no reasonable cause for delay, delay of 603 days not condoned : S. Benjamin Ltd. v. Commissioner of Central Excise P. 360
F Where failure to declare gold, confiscation proper : Sale of confiscated goods during appeal proceedings, importer not liable to pay duty : Yakub Ibrahim Yusuf v. Commissioner of Customs P. 364
F Concealment of gold biscuits with foreign markings amounts to smuggling and goods liable to absolute confiscation : P. M. Abdul Nazer v. Commissioner of Customs P. 377
F Cenvat credit on value of inputs written off for income-tax purposes need not be reversed for period prior to May 11, 2007 : ADC India Communications Ltd. v. Commissioner of Central Excise P. 385
F Credit of service tax paid on annual maintenance contract for air-conditioners, computers, street plant for sewage disposal, pest control services and online auction service, allowable : ADC India Communications Ltd. v. Commissioner of Central Excise P. 385
F Where number of employees during material period less than statutory liability to maintain canteen, denial of Cenvat credit on tax paid on canteen service, proper : ADC India Communications Ltd. v. Commissioner of Central Excise P. 385
F Declaration that imported goods bio-organic fertilizer liquid, burden on Department to prove that item prohibited for importation and not bio-organic fertilizer as declared : Pasura Life Sciences P. Ltd. v. Commissioner of Customs P. 391
F Cenvat credit of special additional duty/countervailing duty at 4 per cent. included in list of duties from 1-3-2005 cannot be denied : G. R. Polyfilms P. Ltd. v. Commissioner of Central Excise P. 398
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S. 41(1): Liability outstanding for long period of time is assessable as income (despite no write-back in A/cs) if assessee is unable to prove genuineness of liability
The assessee, engaged in the business of civil construction and labour contractor, had an amount of Rs. 86.25 lakhs shown as outstanding labour charges in his balance sheet that had remained unpaid for more than three years. The AO held that the fact that the amount was outstanding for so many years was abnormal. As the assessee was unable to give the addresses and labour bills of the labourers, he held that the assessee had failed to prove the genuineness of the liability and that it had ceased to exist. He therefore assessed the said sum as income u/s 41(1). On appeal, the CIT(A) reversed the AO on the ground that the fact that the amount was outstanding for a long period and that the assessee was unable to furnish confirmations did not mean that there was a remission or cessation of liability during the assessment year so as to attract s. 41(1). On appeal by the department to the Tribunal HELD allowing the appeal: It is very improbable that payments to labour can remain outstanding for more than three years. The assessee has not been able to produce the records relating to the name, addresses and bills of the labour etc to prove that the liability continues to exist. It is accordingly a case of cessation of liability. The assessee has just continued the entry of the same in his books of account without any intention to pay back the same. The view that such sums shown as liability is assessable to tax is sanctioned by Chipsoft Technology 210 Taxman 173 (Del) ( attached) where the view was taken that it would be illogical to say that a debtor or an employer, holding on to unpaid dues, should be given the benefit of his showing the amount as a liability, even though he would be entitled in law to say that a claim for its recovery is time barred, and continue to enjoy the amount. This view is not contrary to the view taken in Vardhaman Overseas Ltd 343 ITR 408 (Del) where the law was laid down that s. 41(1) does not apply if the amount of liability is not written back in the accounts. If both judgements are read in harmony, it can be observed that the assessee cannot be allowed to show an amount as a liability even though he has no intention to pay it back but to enjoy the same for an unlimited period without being added to his income only on the excuse that he has not written off the same in his books of accounts. However, if the facts of the case establish that the liability has been genuinely shown by the assessee and his subsequent conduct shows that he has paid back the said credits and his intention was not to enjoy the amount for unlimited period without any intention to pay back the same, then it cannot be said to be a case of cessation of liability. On facts, not only is the existence of outstanding liability of labour charges for so many years improbable in the normal course of business but the assessee has also failed to give any evidence regarding the identity & genuineness of the creditors. Accordingly it is a case of cessation of liability and s. 41(1) applies ( Yusuf R. Tanwar vs. ITO followed ( attached)).
Note: The view in Chipsoft Technology that an outstanding liability can be assessed as income u/s 41(1) is contrary to Vardhaman Overseas Ltd where it was held (after considering Sugauli Sugar Works 236 ITR 518 (SC)) that s. 41(1) does not apply in the absence of a write-back of the liability (one of the judges ( Easwar J.) is common). Also, the view taken in Chipsoft is contrary ( as noted in that judgement itself) to the law laid down in J.K. Chemicals Ltd 62 ITR 34 (Bom), Sadabhakti Prakashan 125 ITR 326 (Bom), etc, that the mere fact that an amount is outstanding for a long time does not mean that there is a remission or cessation of liability. Also, it is not clear how the amount is assessable in the present AY given that there is no event of the year.
-- Regards,
Pawan Singla BA (Hon's), LLB Audit Officer On Monday, 16 December 2013 4:30 PM, "info@cliofindia.com" <info@cliofindia.com> wrote:
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ITR'S TRIBUNAL TAX REPORTS (ITR (Trib)) HIGHLIGHTS | | Vol. 28, Part 4, dated 16-12-2013 | | | | | | | | | | | | | | | | | | | | | | | | | | | |
APPELLATE TRIBUNAL ORDERS |
F Where no evidence to show deposit money related to other parties, deposit should be treated as unexplained cash credit : S. Muthukumar v. ITO (Chennai) p. 518
F Where defects in account books and application of flat rate of gross profit penalty cannot be imposed on estimated trading profit of assessee : Whiteline Chemicals v. ITO (Ahd.) p. 523
F Failure of assessee to produce comparable figures of job work rate prevailing in market, disallowance confirmed : Whiteline Chemicals v. ITO (Ahd.) p. 523
F Unaccounted investment : Mere discrepancy between purchase figures of assessee and those of suppliers not sufficient to treat purchases as unexplained : Kailash Chandra Sahoo v. ITO (Cuttack) p. 530
F Accounting : Rejection accounts : Where absence of books of account and supporting evidence against not profit shown by assessee, profit to be determined at 3.5 per cent. : Dineshbhai Dhansukhlal Mithaiwala v. ITO (Ahd.) p. 536
F Charitable purpose : Where auditorium incidentally let out to outsiders for commercial purpose will not fall in category of "advancement of any other object of general public utility" in section 2(15), cancellation of registration not justified : Lala Lajpatrai Memorial Trust v. DIT (Exemption) (Mumbai) p. 546
F Assessment framed u/s. 143(3) read with section 147 without issue of notice u/s. 143(2) invalid : ITO v. D.D.Ahuja and Brothers (Lucknow) p. 551
F Where sale of pesticides and seeds at subsidised rates to farmers in relation to purchase directly for business purpose, loss to be allowed : Asst. CIT v. Shree Khedut Sahakari Khand Udhyog Madli Ltd. (Ahd.) p. 556
F Advance receipt of payment on account of sale of goods not cash credits as envisaged u/s. 68 : Hareshbhai Jagmohandas Mehta (HUF) v. Asst. CIT (Ahd.) p. 561
F Business expenditure : Where failure on assessee to show amount advanced was out of interest-free funds and in course of business, disallowance of interest to be upheld : Hareshbhai Jagmohandas Mehta (HUF) v. Asst. CIT (Ahd.) p. 561
F Where assessee not engaged in educational or medical facilities so as to be entitled to exemption : Advance Transfusion Medicine Research Foundation v. Asst. DIT (Exemption) (Ahd.) p 566
F Search and seizure : Issue of notice u/s. 143(2) within prescribed time mandatory : Dy. CIT v. Shrikant Rathi (Indore) p. 576
F No tax was required to be deducted at source on fees charged by bank on credit card transactions : ITO v. Jet Airways (India) Ltd. (Mumbai) p. 582
F Assessee collecting passenger service fees from passengers on behalf of airport authorities not rent or lease or tenancy, section 194-I not attracted : Asst. CIT v. Jet Airways (India) Ltd. (Mumbai) p. 594
F Expenditure incurred on retainership fee and guest house expenses allowable as business expenditure : Asst. CIT v. Phillips Carbon Black Ltd. (Kolkata) p. 603
F Assessee in process of setting up project for refining crude oil and for this purpose, incurring expenditure on exploration sites, bidding of tenders, travelling treated as revenue expenditure : Essar Oil Ltd. v. Addl. CIT (Mumbai) p. 609
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