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INCOME TAX REPORTS (ITR)--PRINT AND ONLINE EDITION
Cash credits --Share application money--Genuineness of transactions--Burden of proof--Onus on assessee--Genuineness of transaction and creditworthiness of applicants not proved--Addition of amount under section 68 justified--Income-tax Act, 1961, s. 68-- CIT v. Focus Exports P. Ltd. (Delhi) . . . 320
Company --Book profits--Computation--Difference between "provision" and "reserve"--Amounts transferred to special reserve under Reserve Bank of India Act--Debt redemption reserve--Includible in book profits--Income-tax Act, 1961, s. 115JB-- SREI Infrastructure Finance Ltd. v. Addl. CIT (Delhi) . . . 300
Depreciation --Rate of depreciation--Motor vehicles given on lease--Entitled to depreciation at the rate of 30 per cent. for assessment years 2006-07 and 2007-08--Income-tax Act, 1961, s. 32-- SREI Infrastructure Finance Ltd. v. Addl. CIT (Delhi) . . . 300
Agricultural income-tax --Legislative powers--Retrospective legislation--Recovery of tax--Firm--Dissolution--Recovery in respect of income earned prior to dissolution of firm but received after dissolution--High Court holding levy impermissible in absence of provision permitting recovery from dissolved firm--Amendment with retrospective effect deeming dissolved firm to be in existence for purpose of recovery--Not a case of overruling of decision of court by Legislature--Merely of rendering basis thereof ineffective--Amendment valid--Karnataka Agricultural Income-tax Act, 1957, ss. 26(4), Expln., 27-- Asst. Commr. of Agrl. I. T. v. Netley "B" Estate . . . 590
Business expenditure --General principles--Entries in books of account not determinative as to allowability-- Taparia Tools Ltd. v. Joint CIT . . . 605
----Interest on borrowings--Factors to be considered--Income-tax Act, 1961, s. 36(1)(iii)-- Taparia Tools Ltd. v. Joint CIT . . . 605
----Mercantile system of accounting--General rule--Revenue expenditure to be allowed in year in which incurred--"Incurred", "paid", meanings of--Assessee seeking to spread expenditure over period of years--Principle of matching concept applicable--Income-tax Act, 1961, ss. 36(1)(iii), 43(2)-- Taparia Tools Ltd. v. Joint CIT . . . 605
----Year in which allowable--Non-convertible debentures--Terms and conditions of issue giving option to subscribers to receive interest periodically over period of debentures or one-time payment of lower sum payable immediately--One-time payment of interest shown in books as deferred expenditure to be written off over period of debentures--Not to affect claim to deduction in year of incurring liability--Liability incurred upon exercise of option by subscriber--Sum paid in first year--Deductible in full in that year--Income-tax Act, 1961, s. 36(1)(iii)-- Taparia Tools Ltd. v. Joint CIT . . . 605
Exemption --Educational institution--General principles--Whether institution exists solely for educational purposes and not for profit--Tests--That it makes profit does not necessarily mean it exists for profit--Whether on an overall view in year in question object was to make profit as opposed to educating persons to be seen--Income-tax Act, 1961, ss. 10(23C)(iiiad), (vi), third prov, thirteenth prov, 11(5)-- Queen’s Educational Society v. CIT . . . 699
Appeal to Appellate Tribunal --Powers of Tribunal--Power to rectify mistake--Rejection of application for rectification--Second application on same grounds not maintainable--Tribunal not justified in considering second application and rectifying its order--Income-tax Act, 1961, s. 254(2)-- CIT v. Smt. Vasantben H. Sheth (Guj) . . . 536
Business expenditure --Amount paid to employees under voluntary retirement scheme--Expenditure incurred on ground of commercial expediency--Expenditure laid out wholly and exclusively for purposes of business of assessee--Allowable--Income-tax Act, 1961, s. 37-- CIT v. Orient Paper and Industries Ltd. (Cal) . . . 680
----Bogus purchases--No rejection of books of account--Substantial amount of sales made to Government Department--Confirmation letters filed by suppliers, copies of invoices for purchases as well as copies of bank statement indicating purchases were made--Non-appearance of suppliers before authorities--Not ground to hold purchases bogus--Tribunal deleting addition not only on basis of stock statement but also in view of other facts--No addition could be made--Income-tax Act, 1961, s. 37-- CIT v. Nikunj Eximp Enterprises Pvt. Ltd. (Bom) . . . 619
Business income --Income from house property--Primary source of income of assessee letting out godowns and warehouses to manufacturers, traders and companies carrying on warehousing business--Income assessable as business income--Income-tax Act, 1961-- CIT v. NDR Warehousing Pvt. Ltd. (Mad) . . . 690
Capital or revenue expenditure --Paper industry--Condition of National Forest Policy of 1988 that all forest-based industries must take up plantation to maintain forest ecology--Plantation expenditure--Revenue expenditure--Income-tax Act, 1961, s. 37-- CIT v. Orient Paper and Industries Ltd. (Cal) . . . 680
Deduction of tax at source --Failure to deduct--Limitation--Proceedings initiated after four years from end of financial year--Barred by limitation--Income-tax Act, 1961, s. 201-- CIT (TDS) v. C. J. International Hotels P. Ltd. (Delhi) . . . 684
Depreciation --Additional depreciation--Assessee using plant and machinery for purpose of generation of power necessary for its business of manufacture and production of sponge iron ingots and billets--Entitled to additional depreciation irrespective of its original claim for depreciation under section 32(1)(i)--Income-tax Act, 1961, s. 32(1)(iia)-- CIT v. Ankit Metal and Power Ltd. (Cal) . . . 660
Dividend --Deemed dividend--Loan to shareholder--Individual a shareholder in a company and not a shareholder in assessee--Individual borrowing amounts from assessee--Not a deemed dividend--Income-tax Act, 1961, s 2(22)(e)-- CIT (TDS) v. C. J. International Hotels P. Ltd. (Delhi) . . . 684
Exemption --Member of scheduled tribe--Conditions precedent for exemption under section 10(26)--Member of scheduled tribe should reside in specified area--Residence refers to stay in area for a long time for purposes of livelihood--Member of scheduled tribe in one area residing in another specified area--Entitled to exemption--Certificate of exemption to be obtained under section 197--Certificate valid for one year--Income-tax Act, 1961, ss. 10(26), 197-- Chandra Mohan Sinku v. Union of India [FB] (Tripura) . . . 627
Income --Computation--Disallowance of expenditure on earning non-taxable income--Disallowance only to extent of expenditure incurred by assessee in relation to tax exempt income--No reason for disallowance of sum volunteered--No scrutiny of accounts--Entire tax exempt income lower than disallowance--Matter remanded--Income-tax Rules, 1962, r. 8D--Income-tax Act, 1961, s. 14A-- Joint Investments Pvt. Ltd. v. CIT (Delhi) . . . 694
----Principle of real income--Question whether income has actually arisen is a question of fact--Finding that income had arisen--Income assessable--Income-tax Act, 1961-- Neo Trust v. ITO (Guj) . . . 546
Income from undisclosed sources --Foreign remittances--India Development Bonds--Bond holder--Immunities--Immunity against disclosure of nature and source of investment in bonds to non-resident Indian or overseas corporate body owning bonds and to Indian resident to whom gift of such bonds made by non-resident Indian or overseas corporate body--Only on full satisfaction of requirements--India Development Bonds Scheme, 1991, s. 5--Remittances of Foreign Exchange and Investment in Foreign Exchange Bonds (Immunities and Exemptions) Act, 1991, ss. 6, 7-- Rajendra Kumar Gupta v. CIT [FB] (All) . . . 730
----Sale of agricultural land--Sale consideration deposited in bank and return filed voluntarily disclosing income--Assessing Officer without giving reasons discarding overwhelming evidence led by assessee and framing assessment and raising demand--Improper--Tribunal deleting addition made by Assessing Officer--Justified--Income-tax Act, 1961, s. 68-- CIT v. Intezar Ali (All) . . . 651
Interpretation of taxing statutes --Interpretation in favour of assessee-- Chandra Mohan Sinku v. Union of India [FB] (Tripura) . . . 627
Investment allowance --Investment deposit account--Discontinuance of investment allowance from 1986 and re-introduction of investment allowance from 1989--Effect--Benefit of investment allowance given to plant and machinery installed after 31st March but before 1st April 1988--Assessee had option to claim deduction either under section 32A or section 32AB for assessment year 1989-90--Assessee allowed deduction under section 32AB for assessment years 1987-88 and 1988-89--Assessee entitled to deduction under section 32AB for assessment year 1989-90--Income-tax Act, 1961, ss. 32A, 32AB--CBDT Circular No. 559, dated 4-5-1990-- CIT v. Indian Petrochemicals Corporation Ltd. (Guj) . . . 568
Reassessment --Notice--Validity--Notice after four years--Condition precedent--Failure to disclose material facts necessary for assessment--Decision regarding failure must be based on law applicable on date of filing return--Subsequent retrospective amendment of law would have no effect--Assessment after scrutiny granting special deduction under section 80-IA--No failure to disclose material facts--Subsequent retrospective amendment of section 80-IA--Notice not valid--Income-tax Act, 1961, ss. 80-IA, 147, 148-- Ranjit Projects P. Ltd. v. Deputy CIT (Guj) . . . 529
----Notice after four years--Revenue accepting all relevant facts pertaining to claim of depreciation were disclosed and produced at time of assessment--Reassessment not valid--Income-tax Act, 1961, ss. 147, 148-- Gujarat Eco Textile Park Ltd. v. Asst. CIT (Guj) . . . 584
Recovery of tax --Stay application--Authority to prima facie consider merits and balance of convenience and irreparable injury--Authority to record reasons and then conclude whether stay should be granted and if so on what condition--No examination and no consideration--Order rejecting stay not valid--Income-tax Act, 1961-- Hitech Outsourcing Services v. ITO (Guj) . . . 582
Representative assessee --Trustee--Assessment--Difference between specific trust and discretionary trust--Some beneficiaries of specific trust being discretionary trusts--Effect of sections 161 and 164--Trustee to be assessee under section 161 in respect of specific trust and under section 164 in respect of beneficiary discretionary trust--Income-tax Act, 1961, ss. 161, 164--Indian Trusts Act, 1882-- Neo Trust v. ITO (Guj) . . . 546
Revision --Commissioner--Neither proper books of account produced before Assessing Officer nor examination and scrutiny of documents and papers carried out--Failure to show that there was wrong exercise of revisional powers--Sufficient material to conclude that Assessing Officer’s order erroneous and prejudicial to interests of Revenue--Revision valid--Income-tax Act, 1961, s. 263-- Mattewal Labour and Construction Co-operative Society Ltd. v. CIT (P&H) . . . 665
Search and seizure --Assessment in search cases--Appellate Tribunal--No relief granted to assessee in relation to grounds given up--Tribunal finding taxation of investment in closing stock as well as withdrawal from bank account not proper--Tribunal taking matter item-wise and addition-wise--Findings based on reflecting a possible view--Income-tax Act, 1961, s. 153A-- CIT v. Jalaj Batra (Bom) . . . 622
S. 2(22)(e) --Dividend--Deemed dividend--Loan to shareholder--Individual a shareholder in a company and not a shareholder in assessee--Individual borrowing amounts from assessee--Not a deemed dividend-- CIT (TDS) v. C. J. International Hotels P. Ltd. (Delhi) . . . 684
S. 10(23C)(iiiad), (vi), third prov, thirteenth prov. --Exemption--Educational institution--General principles--Whether institution exists solely for educational purposes and not for profit--Tests--That it makes profit does not necessarily mean it exists for profit--Whether on an overall view in year in question object was to make profit as opposed to educating persons to be seen-- Queen’s Educational Society v. CIT (SC) . . . 699
S. 10(26) --Exemption--Member of scheduled tribe--Conditions precedent for exemption under section 10(26)--Member of scheduled tribe should reside in specified area--Residence refers to stay in area for a long time for purposes of livelihood--Member of scheduled tribe in one area residing in another specified area--Entitled to exemption--Certificate of exemption to be obtained under section 197--Certificate valid for one year-- Chandra Mohan Sinku v. Union of India [FB] (Tripura) . . . 627
S. 11(5) --Exemption--Educational institution--General principles--Whether institution exists solely for educational purposes and not for profit--Tests--That it makes profit does not necessarily mean it exists for profit--Whether on an overall view in year in question object was to make profit as opposed to educating persons to be seen-- Queen’s Educational Society v. CIT (SC) . . . 699
S. 14A --Income--Computation--Disallowance of expenditure on earning non-taxable income--Disallowance only to extent of expenditure incurred by assessee in relation to tax exempt income--No reason for disallowance of sum volunteered--No scrutiny of accounts--Entire tax exempt income lower than disallowance--Matter remanded-- Joint Investments Pvt. Ltd. v. CIT (Delhi) . . . 694
S. 32(1)(iia) --Depreciation--Additional depreciation--Assessee using plant and machinery for purpose of generation of power necessary for its business of manufacture and production of sponge iron ingots and billets--Entitled to additional depreciation irrespective of its original claim for depreciation under section 32(1)(i)-- CIT v. Ankit Metal and Power Ltd. (Cal) . . . 660
S. 32A --Investment allowance--Investment deposit account--Discontinuance of investment allowance from 1986 and re-introduction of investment allowance from 1989--Effect--Benefit of investment allowance given to plant and machinery installed after 31st March but before 1st April 1988--Assessee had option to claim deduction either under section 32A or section 32AB for assessment year 1989-90--Assessee allowed deduction under section 32AB for assessment years 1987-88 and 1988-89--Assessee entitled to deduction under section 32AB for assessment year 1989-90-- CIT v. Indian Petrochemicals Corporation Ltd. (Guj) . . . 568
S. 32AB --Investment allowance--Investment deposit account--Discontinuance of investment allowance from 1986 and re-introduction of investment allowance from 1989--Effect--Benefit of investment allowance given to plant and machinery installed after 31st March but before 1st April 1988--Assessee had option to claim deduction either under section 32A or section 32AB for assessment year 1989-90--Assessee allowed deduction under section 32AB for assessment years 1987-88 and 1988-89--Assessee entitled to deduction under section 32AB for assessment year 1989-90-- CIT v. Indian Petrochemicals Corporation Ltd. (Guj) . . . 568
S. 36(1)(iii) --Business expenditure--Interest on borrowings--Factors to be considered-- Taparia Tools Ltd. v. Joint CIT (SC) . . . 605
----Business expenditure--Mercantile system of accounting--General rule--Revenue expenditure to be allowed in year in which incurred--"Incurred", "paid", meanings of--Assessee seeking to spread expenditure over period of years--Principle of matching concept applicable-- Taparia Tools Ltd. v. Joint CIT (SC) . . . 605
----Business expenditure--Year in which allowable--Non-convertible debentures--Terms and conditions of issue giving option to subscribers to receive interest periodically over period of debentures or one-time payment of lower sum payable immediately--One-time payment of interest shown in books as deferred expenditure to be written off over period of debentures--Not to affect claim to deduction in year of incurring liability--Liability incurred upon exercise of option by subscriber--Sum paid in first year--Deductible in full in that year-- Taparia Tools Ltd. v. Joint CIT (SC) . . . 605
S. 37 --Business expenditure--Amount paid to employees under voluntary retirement scheme--Expenditure incurred on ground of commercial expediency--Expenditure laid out wholly and exclusively for purposes of business of assessee--Allowable-- CIT v. Orient Paper and Industries Ltd. (Cal) . . . 680
----Business expenditure--Bogus purchases--No rejection of books of account--Substantial amount of sales made to Government Department--Confirmation letters filed by suppliers, copies of invoices for purchases as well as copies of bank statement indicating purchases were made--Non-appearance of suppliers before authorities--Not ground to hold purchases bogus--Tribunal deleting addition not only on basis of stock statement but also in view of other facts--No addition could be made-- CIT v. Nikunj Eximp Enterprises Pvt. Ltd. (Bom) . . . 619
----Capital or revenue expenditure--Paper industry--Condition of National Forest Policy of 1988 that all forest-based industries must take up plantation to maintain forest ecology--Plantation expenditure--Revenue expenditure-- CIT v. Orient Paper and Industries Ltd. (Cal) . . . 680
S. 43(2) --Business expenditure--Mercantile system of accounting--General rule--Revenue expenditure to be allowed in year in which incurred--"Incurred", "paid", meanings of--Assessee seeking to spread expenditure over period of years--Principle of matching concept applicable-- Taparia Tools Ltd. v. Joint CIT (SC) . . . 605
S. 68 --Income from undisclosed sources--Sale of agricultural land--Sale consideration deposited in bank and return filed voluntarily disclosing income--Assessing Officer without giving reasons discarding overwhelming evidence led by assessee and framing assessment and raising demand--Improper--Tribunal deleting addition made by Assessing Officer--Justified-- CIT v. Intezar Ali (All) . . . 651
S. 80-IA --Reassessment--Notice--Validity--Notice after four years--Condition precedent--Failure to disclose material facts necessary for assessment--Decision regarding failure must be based on law applicable on date of filing return--Subsequent retrospective amendment of law would have no effect--Assessment after scrutiny granting special deduction under section 80-IA--No failure to disclose material facts--Subsequent retrospective amendment of section 80-IA--Notice not valid-- Ranjit Projects P. Ltd. v. Deputy CIT (Guj) . . . 529
S. 147 --Reassessment--Notice--Validity--Notice after four years--Condition precedent--Failure to disclose material facts necessary for assessment--Decision regarding failure must be based on law applicable on date of filing return--Subsequent retrospective amendment of law would have no effect--Assessment after scrutiny granting special deduction under section 80-IA--No failure to disclose material facts--Subsequent retrospective amendment of section 80-IA--Notice not valid-- Ranjit Projects P. Ltd. v. Deputy CIT (Guj) . . . 529
----Reassessment--Notice after four years--Revenue accepting all relevant facts pertaining to claim of depreciation were disclosed and produced at time of assessment--Reassessment not valid-- Gujarat Eco Textile Park Ltd. v. Asst. CIT (Guj) . . . 584
S. 148 --Reassessment--Notice--Validity--Notice after four years--Condition precedent--Failure to disclose material facts necessary for assessment--Decision regarding failure must be based on law applicable on date of filing return--Subsequent retrospective amendment of law would have no effect--Assessment after scrutiny granting special deduction under section 80-IA--No failure to disclose material facts--Subsequent retrospective amendment of section 80-IA--Notice not valid-- Ranjit Projects P. Ltd. v. Deputy CIT (Guj) . . . 529
----Reassessment--Notice after four years--Revenue accepting all relevant facts pertaining to claim of depreciation were disclosed and produced at time of assessment--Reassessment not valid-- Gujarat Eco Textile Park Ltd. v. Asst. CIT (Guj) . . . 584
S. 153A --Search and seizure--Assessment in search cases--Appellate Tribunal--No relief granted to assessee in relation to grounds given up--Tribunal finding taxation of investment in closing stock as well as withdrawal from bank account not proper--Tribunal taking matter item-wise and addition-wise--Findings based on reflecting a possible view-- CIT v. Jalaj Batra (Bom) . . . 622
S. 161 --Representative assessee--Trustee--Assessment--Difference between specific trust and discretionary trust--Some beneficiaries of specific trust being discretionary trusts--Effect of sections 161 and 164--Trustee to be assessee under section 161 in respect of specific trust and under section 164 in respect of beneficiary discretionary trust-- Neo Trust v. ITO (Guj) . . . 546
S. 164 --Representative assessee--Trustee--Assessment--Difference between specific trust and discretionary trust--Some beneficiaries of specific trust being discretionary trusts--Effect of sections 161 and 164--Trustee to be assessee under section 161 in respect of specific trust and under section 164 in respect of beneficiary discretionary trust-- Neo Trust v. ITO (Guj) . . . 546
S. 197 --Exemption--Member of scheduled tribe--Conditions precedent for exemption under section 10(26)--Member of scheduled tribe should reside in specified area--Residence refers to stay in area for a long time for purposes of livelihood--Member of scheduled tribe in one area residing in another specified area--Entitled to exemption--Certificate of exemption to be obtained under section 197--Certificate valid for one year-- Chandra Mohan Sinku v. Union of India [FB] (Tripura) . . . 627
S. 201 --Deduction of tax at source--Failure to deduct--Limitation--Proceedings initiated after four years from end of financial year--Barred by limitation-- CIT (TDS) v. C. J. International Hotels P. Ltd. (Delhi) . . . 684
S. 254(2) --Appeal to Appellate Tribunal--Powers of Tribunal--Power to rectify mistake--Rejection of application for rectification--Second application on same grounds not maintainable--Tribunal not justified in considering second application and rectifying its order-- CIT v. Smt. Vasantben H. Sheth (Guj) . . . 536
S. 263 --Revision--Commissioner--Neither proper books of account produced before Assessing Officer nor examination and scrutiny of documents and papers carried out--Failure to show that there was wrong exercise of revisional powers--Sufficient material to conclude that Assessing Officer’s order erroneous and prejudicial to interests of Revenue--Revision valid-- Mattewal Labour and Construction Co-operative Society Ltd. v. CIT (P&H) . . . 665
S. 26(4), Expln. --Agricultural income-tax--Legislative powers--Retrospective legislation--Recovery of tax--Firm--Dissolution--Recovery in respect of income earned prior to dissolution of firm but received after dissolution--High Court holding levy impermissible in absence of provision permitting recovery from dissolved firm--Amendment with retrospective effect deeming dissolved firm to be in existence for purpose of recovery--Not a case of overruling of decision of court by Legislature--Merely of rendering basis thereof ineffective--Amendment valid-- Asst. Commr. of Agrl. I. T. v. Netley "B" Estate (SC) . . . 590
S. 27 --Agricultural income-tax--Legislative powers--Retrospective legislation--Recovery of tax--Firm--Dissolution--Recovery in respect of income earned prior to dissolution of firm but received after dissolution--High Court holding levy impermissible in absence of provision permitting recovery from dissolved firm--Amendment with retrospective effect deeming dissolved firm to be in existence for purpose of recovery--Not a case of overruling of decision of court by Legislature--Merely of rendering basis thereof ineffective--Amendment valid-- Asst. Commr. of Agrl. I. T. v. Netley "B" Estate (SC) . . . 590
Remittances of Foreign Exchange and Investment in Foreign Exchange Bonds (Immunities and Exemptions) Act, 1991 :
S. 6 --Income from undisclosed sources--Foreign remittances--India Development Bonds--Bond holder--Immunities--Immunity against disclosure of nature and source of investment in bonds to non-resident Indian or overseas corporate body owning bonds and to Indian resident to whom gift of such bonds made by non-resident Indian or overseas corporate body--Only on full satisfaction of requirements-- Rajendra Kumar Gupta v. CIT [FB] (All) . . . 730
S. 7 --Income from undisclosed sources--Foreign remittances--India Development Bonds--Bond holder--Immunities--Immunity against disclosure of nature and source of investment in bonds to non-resident Indian or overseas corporate body owning bonds and to Indian resident to whom gift of such bonds made by non-resident Indian or overseas corporate body--Only on full satisfaction of requirements-- Rajendra Kumar Gupta v. CIT [FB] (All) . . . 730
R. 8D --Income--Computation--Disallowance of expenditure on earning non-taxable income--Disallowance only to extent of expenditure incurred by assessee in relation to tax exempt income--No reason for disallowance of sum volunteered--No scrutiny of accounts--Entire tax exempt income lower than disallowance--Matter remanded-- Joint Investments Pvt. Ltd. v. CIT (Delhi) . . . 694
S. 5 --Income from undisclosed sources--Foreign remittances--India Development Bonds--Bond holder--Immunities--Immunity against disclosure of nature and source of investment in bonds to non-resident Indian or overseas corporate body owning bonds and to Indian resident to whom gift of such bonds made by non-resident Indian or overseas corporate body--Only on full satisfaction of requirements-- Rajendra Kumar Gupta v. CIT [FB] (All) . . . 730
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