INCOME TAX REPORTS (ITR)--PRINT AND ONLINE EDITION
Search and seizure --Warrant of authorisation--Validity--Reason to believe existence of undisclosed assets--Writ--High Court--Can scrutinise file to find whether authority has appropriately recorded reasons for forming opinion--High Court without calling for file concluding warrant of authorisation issued without reason--Not sustainable--Matter remanded for decision afresh--Income-tax Act, 1961, s. 132(1)-- Union of India v. Agarwal Iron Industries . . . 180
Accounting --Business of precious and semi-precious stones--What should be a reasonable profit on account of trading transactions--Question of fact--Rejection of accounts--Assessee recording bogus purchases and opening and closing stocks not capable of verification in books--Application of higher gross profit rate justified--Income-tax Act, 1961, s. 145(3)-- Vimal Singhvi v. Asst. CIT (Raj) . . . 275
Assessment --Amalgamation of companies--Effect--Amalgamating company ceases to exist--Order of assessment on amalgamating company--Not valid--Not a procedural irregularity to be cured by section 292B--Income-tax Act, 1961, ss. 170, 176, 292B-- CIT v. Dimension Apparels P. Ltd. (Delhi) . . . 288
Business --Capital gains--Adventure in the nature of trade--Assessee acquiring right to sell property--No intention to hold property--Sale of property subsequently--Transaction constituted adventure in the nature of trade--Gains assessable as business income--Income-tax Act, 1961, ss. 28, 45-- CIT v. Shahrooq Ali Khan (Karn) . . . 246
Business expenditure --Capital or revenue expenditure--Expenses incurred on transmission lines and contribution paid to State power corporation--Expenses for facilitating the efficient conduct of assessee’s business--Revenue expenditure--Income-tax Act, 1961, s. 37(1)-- Addl. CIT v. Dhampur Sugar Mill P. Ltd. (All) . . . 194
----Mercantile system of accounting--Expenditure on contract work shown as work-in-progress for assessment years 1999-2000 and 2000-01--Termination of contract in October, 2002--Amount spent on contract work--Could not be shown as work-in-progress--Amount deductible--Income-tax Act, 1961-- Asia Power Projects P. Ltd. v. Deputy CIT (Karn) . . . 257
Business income --Capital gains--Agricultural land--Whether land is agricultural or a non-agricultural land--Question of fact--No evidence by assessee to substantiate claim of carrying out agricultural operations--Sale deed clearly showing assessee as absolute owner of residential land having converted its use from agricultural--Surplus assessable as business income--Income-tax Act, 1961, s. 2(14)(iii)-- Vimal Singhvi v. Asst. CIT (Raj) . . . 275
Cash credits --Arrack business--Security deposit from retail dealers--Source of income properly explained--Not undisclosed credit--Income-tax Act, 1961, s. 68-- CIT v. M. Venkateswara Rao (T & AP) . . . 212
----Burden of proof--Onus on assessee to prove genuineness of transaction and creditworthiness of creditors--No satisfactory explanation--Addition under section 68 justified--Income-tax Act, 1961, s. 68-- CIT v. T. S. Kishan and Co. Ltd. (Delhi) . . . 163
----Finding that assessee had reasonable explanation for cash credits--No addition on that account could be made--Income-tax Act, 1961, s. 68-- CIT v. ABT Ltd. (Mad) . . . 159
----Firm--Partners’ contributions of capital for business of firm--Firm cannot be called upon to explain source of income of partners--Income-tax Act, 1961, s. 68-- CIT v. M. Venkateswara Rao (T & AP) . . . 212
----No proper explanation regarding loan transactions--Addition of 10 per cent. of value of credits--Justified--Income-tax Act, 1961, s. 68-- CIT v. Bellary Steels and Alloys Ltd. (Karn) . . . 226
Deduction of tax at source --Contractor--State Government undertaking to pay wages to leader of group of workmen--Leader of group whether contractor--Matter remanded--Income-tax Act, 1961, s. 194C-- Karnataka Rural Infrastructure Development Ltd. v. ITO (Karn) . . . 222
Depreciation --Condition precedent for allowance--Rate of depreciation--Option exercised in terms of second proviso to rule 5(1A) in return filed under section 139(1)--No separate procedure necessary--Assessee entitled to depreciation on windmills at 80 per cent.--Income-tax Act, 1961, s. 32--Income-tax Rules, 1962, r. 5-- CIT v. ABT Ltd. (Mad) . . . 159
Exemption --Industrial undertaking--Exemption under section 10A--Condition precedent--Manufacture or production of article in electronic technology park--Manufacture or production should have commenced in previous year--Registration as STPI unit not a requirement--Income-tax Act, 1961, s. 10A-- CIT v. Soffia Software Ltd. (Mad) . . . 146
Export --Special deduction--Computation--Pharmaceuticals company--Assessee processing raw materials supplied to it by other manufacturing companies and handing over end products to such companies--Conversion charges--Not deductible for purpose of determining “profits of the businessâ€--Income-tax Act, 1961, s. 80HHC-- Aurobindo Pharma Ltd. v. CIT (T & AP) . . . 216
Housing project --Special deduction--Condition precedent--Built-up area should not exceed 1,500 sq. ft--Meaning of “built-up areaâ€--Same construction must be there--Open courtyard within compound wall--Not a built-up area--Assessee entitled to special deduction--Income-tax Act, 1961, s. 80-IB-- Commonwealth Developers v. Asst. CIT (Bom) . . . 265
Income --Computation of income--Disallowance of expenditure incurred for earning non-taxable income--Tribunal finding interest expenditure attributable to business income assessable to tax and could not be disallowed--Finding consistent with provisions--Income-tax Act, 1961, s. 14A-- Addl. CIT v. Dhampur Sugar Mill P. Ltd. (All) . . . 194
----Expenditure in relation to income not includible in taxable income--Assessee could not have debited dividend amount and expenses on interest in profit and loss account--Assessing Officer not satisfied with correctness of claim of assessee on basis of accounts and making total disallowance--Justified--Income-tax Act, 1961, s. 14A-- Dhampur Sugar Mills Ltd. v. CIT (All) . . . 187
----Principle of real income--Excess billing discovered by assessee and rectified--Rectification by making appropriate entries in account books--No income arises--Income-tax Act, 1961-- CIT v. Tyco Sanmar Ltd. (Mad) . . . 173
Income from undisclosed sources --Amount claimed as lease rental on purchase and lease back of assets--Transaction of lease purchase and lease back found to be bogus--Addition of amount claimed as deduction to total income of assessee--Justified--Income-tax Act, 1961-- CIT v. Bellary Steels and Alloys Ltd. (Karn) . . . 226
Interest on borrowed capital --Disallowance of interest deleted in earlier years--No distinction warranting to take a different view--Deletion of addition justified--Income-tax Act, 1961, s. 36(1)(iii)-- Addl. CIT v. Dhampur Sugar Mill P. Ltd. (All) . . . 194
----Finding that amount borrowed had been used for non-business purposes--Interest not deductible--Income-tax Act, 1961, s. 36(1)(iii)-- CIT v. Bellary Steels and Alloys Ltd. (Karn) . . . 226
Investment deposit account --Scope of section 32AB--Assessing Officer has power only to examine whether books of account are certified by authorities under Companies Act--Principles for determination of income under the Income-tax Act--Not applicable--Income-tax Act, 1961, s. 32AB-- Jindal Aluminium Ltd. v. Deputy CIT (Assessment) (Karn) . . . 235
Reassessment --Notice after four years--Conditions precedent--Notice on basis that disallowance of interest paid on borrowings for subsequent year--No indication in reasons that assessee failed to disclose truly and fully material facts necessary for assessment--Notice to stand or fall on basis of reasons recorded at time of issue--Notices not valid--Income-tax Act, 1961, ss. 147, 148-- Business India v. Joint CIT (Bom) . . . 154
Refund --Interest--Only where delay is on part of Department--Failure by assessee to furnish tax deduction at source certificates--Refund directed after filing of affidavit and indemnity bond with particulars by assessee--No delay by Department after furnishing indemnity bond--No interest payable--Income-tax Act, 1961, s. 244A(2)-- L. Madanlal Steels Ltd. v. Chief CIT (T & AP) . . . 205
Search and seizure --Block assessment--Assessment of third person--Condition precedent--Satisfaction of Assessing Officer that seized material belonged to third person--Meaning of “belongâ€--Reference to documents in searched material--No indication in satisfaction note that documents belonged to third person--No disclaimer by person in respect of whom search conducted that documents did not belong to him--Notice under section 153C not valid--Income-tax Act, 1961, s. 153C.-- Pepsico India Holdings P. Ltd. v. Asst. CIT (Delhi) . . . 295
----Block assessment--Undisclosed income--Cash credits against assessee reflected in books referable to concerned assessment years--Block assessment unsustainable--Income-tax Act, 1961, s. 158BB-- CIT v. Tharmandal Builders P. Ltd. (T & AP) . . . 209
S. 2(14)(iii) --Business income--Capital gains--Agricultural land--Whether land is agricultural or a non-agricultural land--Question of fact--No evidence by assessee to substantiate claim of carrying out agricultural operations--Sale deed clearly showing assessee as absolute owner of residential land having converted its use from agricultural--Surplus assessable as business income-- Vimal Singhvi v. Asst. CIT (Raj) . . . 275
S. 10A --Exemption--Industrial undertaking--Exemption under section 10A--Condition precedent--Manufacture or production of article in electronic technology park--Manufacture or production should have commenced in previous year--Registration as STPI unit not a requirement-- CIT v. Soffia Software Ltd. (Mad) . . . 146
S. 14A --Income--Computation of income--Disallowance of expenditure incurred for earning non-taxable income--Tribunal finding interest expenditure attributable to business income assessable to tax and could not be disallowed--Finding consistent with provisions-- Addl. CIT v. Dhampur Sugar Mill P. Ltd. (All) . . . 194
----Income--Expenditure in relation to income not includible in taxable income--Assessee could not have debited dividend amount and expenses on interest in profit and loss account--Assessing Officer not satisfied with correctness of claim of assessee on basis of accounts and making total disallowance--Justified-- Dhampur Sugar Mills Ltd. v. CIT (All) . . . 187
S. 28 --Business--Capital gains--Adventure in the nature of trade--Assessee acquiring right to sell property--No intention to hold property--Sale of property subsequently--Transaction constituted adventure in the nature of trade--Gains assessable as business income-- CIT v. Shahrooq Ali Khan (Karn) . . . 246
S. 32 --Depreciation--Condition precedent for allowance--Rate of depreciation--Option exercised in terms of second proviso to rule 5(1A) in return filed under section 139(1)--No separate procedure necessary--Assessee entitled to depreciation on windmills at 80 per cent.-- CIT v. ABT Ltd. (Mad) . . . 159
S. 32AB --Investment deposit account--Scope of section 32AB--Assessing Officer has power only to examine whether books of account are certified by authorities under Companies Act--Principles for determination of income under the Income-tax Act--Not applicable-- Jindal Aluminium Ltd. v. Deputy CIT (Assessment) (Karn) . . . 235
S. 36(1)(iii) --Interest on borrowed capital--Disallowance of interest deleted in earlier years--No distinction warranting to take a different view--Deletion of addition justified-- Addl. CIT v. Dhampur Sugar Mill P. Ltd. (All) . . . 194
----Interest on borrowed capital--Finding that amount borrowed had been used for non-business purposes--Interest not deductible-- CIT v. Bellary Steels and Alloys Ltd. (Karn) . . . 226
S. 37(1) --Business expenditure--Capital or revenue expenditure--Expenses incurred on transmission lines and contribution paid to State power corporation--Expenses for facilitating the efficient conduct of assessee’s business--Revenue expenditure-- Addl. CIT v. Dhampur Sugar Mill P. Ltd. (All) . . . 194
S. 45 --Business--Capital gains--Adventure in the nature of trade--Assessee acquiring right to sell property--No intention to hold property--Sale of property subsequently--Transaction constituted adventure in the nature of trade--Gains assessable as business income-- CIT v. Shahrooq Ali Khan (Karn) . . . 246
S. 68 --Cash credits--Arrack business--Security deposit from retail dealers--Source of income properly explained--Not undisclosed credit-- CIT v. M. Venkateswara Rao (T & AP) . . . 212
----Cash credits--Burden of proof--Onus on assessee to prove genuineness of transaction and creditworthiness of creditors--No satisfactory explanation--Addition under section 68 justified-- CIT v. T. S. Kishan and Co. Ltd. (Delhi) . . . 163
----Cash credits--Finding that assessee had reasonable explanation for cash credits--No addition on that account could be made-- CIT v. ABT Ltd. (Mad) . . . 159
----Cash credits--Firm--Partners’ contributions of capital for business of firm--Firm cannot be called upon to explain source of income of partners-- CIT v. M. Venkateswara Rao (T & AP) . . . 212
----Cash credits--No proper explanation regarding loan transactions--Addition of 10 per cent. of value of credits--Justified-- CIT v. Bellary Steels and Alloys Ltd. (Karn) . . . 226
S. 80HHC --Export--Special deduction--Computation--Pharmaceuticals company--Assessee processing raw materials supplied to it by other manufacturing companies and handing over end products to such companies--Conversion charges--Not deductible for purpose of determining “profits of the businessâ€-- Aurobindo Pharma Ltd. v. CIT (T & AP) . . . 216
S. 80-IB --Housing project--Special deduction--Condition precedent--Built-up area should not exceed 1,500 sq. ft--Meaning of “built-up areaâ€--Same construction must be there--Open courtyard within compound wall--Not a built-up area--Assessee entitled to special deduction-- Commonwealth Developers v. Asst. CIT (Bom) . . . 265
S. 132(1) --Search and seizure--Warrant of authorisation--Validity--Reason to believe existence of undisclosed assets--Writ--High Court--Can scrutinise file to find whether authority has appropriately recorded reasons for forming opinion--High Court without calling for file concluding warrant of authorisation issued without reason--Not sustainable--Matter remanded for decision afresh-- Union of India v. Agarwal Iron Industries (SC). . . 180
S. 145(3) --Accounting--Business of precious and semi-precious stones--What should be a reasonable profit on account of trading transactions--Question of fact--Rejection of accounts--Assessee recording bogus purchases and opening and closing stocks not capable of verification in books--Application of higher gross profit rate justified-- Vimal Singhvi v. Asst. CIT (Raj) . . . 275
S. 147 --Reassessment--Notice after four years--Conditions precedent--Notice on basis that disallowance of interest paid on borrowings for subsequent year--No indication in reasons that assessee failed to disclose truly and fully material facts necessary for assessment--Notice to stand or fall on basis of reasons recorded at time of issue--Notices not valid-- Business India v. Joint CIT (Bom) . . . 154
S. 148 --Reassessment--Notice after four years--Conditions precedent--Notice on basis that disallowance of interest paid on borrowings for subsequent year--No indication in reasons that assessee failed to disclose truly and fully material facts necessary for assessment--Notice to stand or fall on basis of reasons recorded at time of issue--Notices not valid-- Business India v. Joint CIT (Bom) . . . 154
S. 153C --Search and seizure--Block assessment--Assessment of third person--Condition precedent--Satisfaction of Assessing Officer that seized material belonged to third person--Meaning of “belongâ€--Reference to documents in searched material--No indication in satisfaction note that documents belonged to third person--No disclaimer by person in respect of whom search conducted that documents did not belong to him--Notice under section 153C not valid-- Pepsico India Holdings P. Ltd. v. Asst. CIT (Delhi) . . . 295
S. 158BB --Search and seizure--Block assessment--Undisclosed income--Cash credits against assessee reflected in books referable to concerned assessment years--Block assessment unsustainable-- CIT v. Tharmandal Builders P. Ltd. (T & AP) . . . 209
S. 170 --Assessment--Amalgamation of companies--Effect--Amalgamating company ceases to exist--Order of assessment on amalgamating company--Not valid--Not a procedural irregularity to be cured by section 292B-- CIT v. Dimension Apparels P. Ltd. (Delhi) . . . 288
S. 176 --Assessment--Amalgamation of companies--Effect--Amalgamating company ceases to exist--Order of assessment on amalgamating company--Not valid--Not a procedural irregularity to be cured by section 292B-- CIT v. Dimension Apparels P. Ltd. (Delhi) . . . 288
S. 194C --Deduction of tax at source--Contractor--State Government undertaking to pay wages to leader of group of workmen--Leader of group whether contractor--Matter remanded-- Karnataka Rural Infrastructure Development Ltd. v. ITO (Karn) . . . 222
S. 244A(2) --Refund--Interest--Only where delay is on part of Department--Failure by assessee to furnish tax deduction at source certificates--Refund directed after filing of affidavit and indemnity bond with particulars by assessee--No delay by Department after furnishing indemnity bond--No interest payable-- L. Madanlal Steels Ltd. v. Chief CIT (T & AP) . . . 205
S. 292B --Assessment--Amalgamation of companies--Effect--Amalgamating company ceases to exist--Order of assessment on amalgamating company--Not valid--Not a procedural irregularity to be cured by section 292B-- CIT v. Dimension Apparels P. Ltd. (Delhi) . . . 288
R. 5 --Depreciation--Condition precedent for allowance--Rate of depreciation--Option exercised in terms of second proviso to rule 5(1A) in return filed under section 139(1)--No separate procedure necessary--Assessee entitled to depreciation on windmills at 80 per cent.-- CIT v. ABT Ltd. (Mad) . . . 159
| | CBDT Circular No. 14/2001, dated 9-11-2001 |
PFA
FINANCE ACT, 2001 - CBDT CIRCULAR NO. 14/2001, dated 9-11-2001 Amendments at a glance Rate Structure Amendments to Wealth-tax Act Amendments to Expenditure-tax Act Amendments to National Bank for Agriculture and Rural Development act, 1981 Amendments to National Banking Housing Act, 1987 Amendments to Small Industries Development Bank of India Act, 1989
ITR'S TRIBUNAL TAX REPORTS (ITR (Trib)) HIGHLIGHTS
F International transactions : ALP : Company carrying out work of different nature, having different model of business and registered exceptionally high profits to be excluded from set of comparables : Techbooks International P. Ltd. v. Asst. CIT (Delhi) p. 34
F Co-operative society : Special deduction : Cottage industry : Huge capital outlay, high turnover and large number of workers not reasons to deny deduction u/s. 80P : Asst. CIT v. Vengamedu WCS Ltd. (Chennai) p. 53
F Housing project : Special deduction : Specification of area of residential unit : Where conditions fulfilled u/s. 80-IB(10), assessee eligible for deduction : Naresh T. Wadhwani v. Dy. CIT (Pune) p. 179
F Income earned in course of development and execution of housing project to be treated as business income, assessee eligible for deduction u/s. 80-IB(10) : Naresh T. Wadhwani v. Dy. CIT (Pune) p. 179
F Business expenditure : Expenditure incurred on stamp duty paid on shares to shareholders not enumerated in provision not allowable u/s. 35D : Yamaha Motor India P. Ltd. v. Asst. CIT (Delhi) p. 208
F Depreciation : Building : Assessee in possession of property in his own title entitled to depreciation : Indian Renewable Energy development Agency Ltd. v. Joint CIT (Delhi) p. 250 (21-11-2014)
F Accounting : Assessee had not accounted for additional customs duty paid and short span of time available for verification of books not grounds for rejection of accounts : Tianjin Tianshi Biological Development Co. Ltd. v. Dy. CIT (Delhi) p. 260 (28-11-2014)
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