- Assessment year 1998-99 - Whether a debt which is otherwise a proper bad debt and recovery of which has been pending for quite sometime, does not become a good debt merely on reasoning that no step has been taken to recover same - Held, yes - Whether where certain debts which had been considered earlier in computation of income of assessee had been written off from its books of account and in most of cases, legal proceedings for recovery of same were barred by limitation, assessee would be entitled to deduction of said amount under section 36(1)(vii) - Held, yes - Khinvasara Investment (P.) Ltd. v. Jt. CIT (Pune)

Business expenditure

Allowability of

- Assessment year 2000-01 - Assessee entered into a licence agreement with SAP, for a period of 25 years for use of its R/3 software, for purposes of its business - Assessee paid a sum of Rs. 1 crore to SAP and claimed deduction of same as revenue expenditure - Whether R/3 software and a licence to use this software were both ‘intangible assets’ within meaning of clause (ii) of section 32(1) - Held, yes - Whether, therefore, expenditure of Rs. 1 crore incurred for acquiring said licence was to be treated as capital expenditure as against revenue expenditure claimed by assessee - Held, yes - Sudarshan Chemical Industries Ltd. v. Asstt. CIT (Pune)

Business income

Chargeable as

- Assessment years 1995-96 and 2000-01 - Assessee-company had borrowed certain sum from bank and had paid interest on same - Out of said borrowing, assessee had advanced temporary loans on interest pursuant to which it raised interest - Assessee claimed that amount of interest received on such temporary advances was to be treated as income from business and also claimed benefit of set-off of interest payments against interest receipts - Whether if assessee establishes that interest bearing advances were made as a temporary measure out of interest bearing credit facilities obtained from banks and set apart by it for business purpose so as to reduce interest burden then interest income would be assessable under head ‘Business income’ and would be set-off against interest payments - Held, yes - Whether however, if assessee fails to establish said fact, then interest receipts would be taxed as income from other sources under section 56 without setting-off same against interest payments - Held, yes - B. Arunkumar & Co. v. Addl. CIT (Mum.)

Circulars and Notifications

- Circular No. 693, dated November 19, 1994

- CBDT Circular No. 20D, dated July 7, 1964

- Notification No. S.O. 569(E), dated July 27, 1993

Deductions

Exporters

- Assessment year 1998-99 - Whether turnover of an export oriented unit, whose income is exempt under section 10B, can be included in turnover calculated for purpose of deduction under section 80HHC - Held, no - Asstt. CIT v. Mahavir Spg. Mills Ltd. (Chd.)

- Assessment years 1995-96 and 2000-01 - Whether rough diamonds are minerals and not processed minerals within meaning of section 80HHC and, therefore, profit derived from export of rough diamonds would not be eligible for deduction under section 80HHC - Held, yes - B. Arunkumar & Co. v. Addl. CIT (Mum.)

Profits and gains from industrial undertakings other than infrastructure development undertakings

- Assessment years 2003-04 and 2004-05 - Whether ‘rectified spirit’ on one hand and ‘beer, wine and other alcoholic spirits’ on other hand, are quite different and conversion of ‘rectified spirit’ into beer, wine and other alcoholic spirits bring into existence a totally different commodity - Held, yes - Whether, therefore, assessee being a small scale industry engaged in production of IMFL from rectified spirit would be entitled to relief under section 80-IB - Held, yes - Vinbros & Co. v. ITO (Chennai)

Profits and gains from infrastructure undertakings

- Assessment year 1998-99 - Whether in view of fiction being created by section 80-IA(5), for purpose of computing deduction under section 80-IA, it has to be presumed that assessee was running only one unit, i.e., eligible unit, for which deduction was available and no other unit in initial assessment year and in subsequent years - Held, yes - Whether, therefore, carried forward losses and unabsorbed depreciation of eligible unit have to be kept separately from other units operated by assessee, if any, as also its profits; and loss incurred by assessee in respect of its eligible unit cannot be set off against profits of some other unit held by assessee - Held, yes - Khinvasara Investment (P.) Ltd. v. Jt. CIT (Pune)

- Assessment year 1998-99 - Assessee was operating two units - Whether for purpose of computing profits of eligible unit under section 80-IA, direct expenses, which were properly relatable to one or other unit, were to be allocated to that unit only - Held, yes - Whether, however, head office expenses such as salary, printing and stationery, telephone expenses, vehicle expenses, which were common to both units, and directors’ remuneration, should be allocated on basis of turnover of two units - Held, yes - Khinvasara Investment (P.) Ltd. v. Jt. CIT (Pune)

Depreciation

Allowance/Rate of

- Assessment year 2000-01 - Whether in view of facts stated under heading ‘Business expenditure - Allowability of’ such computer software would be eligible for depreciation at rate of 25 per cent - Held, yes - Sudarshan Chemical Industries Ltd. v. Asstt. CIT (Pune)

Foreign technician

- Assessment year 2002-03 - Whether where assessee, a foreign national, having specialization in telecommunication technology providing technical assistance in field of telecommunications claimed exemption under section 10(5B), assessee was a technician and was entitled to exemption under section 10(5B) - Held, yes - Anthony Phillip Witek v. Dy. CIT (Delhi)

Income from house property

Annual value

- Assessment year 2003-04 - Whether words, ‘property is let’ as appearing in section 23(1)(c) mean actual letting out of property - Held, no - Whether if a property is held with an intention to let out coupled with efforts made for letting it out, it could be said that, such a property is a let out property and, therefore, its annual letting value would be worked out as per clause (c) of section 23(1) - Held, yes - Premsudha Exports (P.) Ltd. v. Asstt. CIT (Mum.)

Income-tax Act, 1961

- Section 10(5B)

- Section 23

- Section 28(i)

- Section 32

- Section 36(1)(vii)

- Section 37(1)

- Section 80HHC

- Section 80-IA

- Section 80-IB

Words and phrases

- Word ‘processed’ as appearing in Explanation to the Twelfth Schedule of the Income-tax Act, 1961

- Words ‘property is let’ as appearing in section 23(1)(c) of the Income-tax Act, 1961

INCOME-TAX TRIBUNAL DECISIONS