INCOME-TAX TRIBUNAL DECISIONS

Vol. 110, Part 9, for the week of February 28 – March 5, 2008

CUMULATIVE INDEX TO VOLUME 110

Income-tax Tribunal Decisions

Volume 110

Table of Orders Reported

Alcan Inc. v. Dy. CIT	(Mum.)
Anthony Phillip Witek v. Dy. CIT	(Delhi)
A-One Housing Complex Ltd. v. ITO	(Delhi)
Asstt. CIT v. J & K Bank Ltd.	(Asr.)
Asstt. CIT v. Mahavir Spg. Mills Ltd.	(Chd.)
B. Arunkumar & Co. v. Addl. CIT	(Mum.)
Cargill India (P.) Ltd. v. Dy. CIT	(Delhi)
CFL Securities Ltd. v. Dy. CIT	(Mum.)
DXN Herbal Mfg. (India) (P.) Ltd. v. ITO	(Chennai)
Datamatics Ltd. v. Asstt. CIT	(Mum.)
Dy. CIT v. Dwarkaprasad Anilkumar Investment (P.) Ltd.	(Mum.)
Dy. CIT v. Sheth & Sura Engg. (P.) Ltd.	(Pune) (TM)
Dy. CIT v. Spirax Marshall Ltd.	(Pune)
Freightship Consultants (P.) Ltd. v. ITO	(Delhi)
Govindankutty Nair (C.K.) v. WTO	(Cochin)
ITO v. Janta Bazar & Stores (P.) Ltd.	(Mum.)
ITO v. Mool Chand Gupta	(Delhi)
ITO v. Paru D. Dave (Smt.)	(Mum.)
Khinvasara Investment (P.) Ltd. v. Jt. CIT	(Pune)
Kwal Pro Exports v. Asstt. CIT	(Jodh.)
Mehtra Mfrs. v. ITO	(Mum.)
Mitsui Marubeni Corpn. v. Dy. DIT	(Delhi)
Nagnath Hanumantrao Jalkote v. Asstt. CIT	(Pune)
Navneet Kumar Thakkar v. ITO	(Jodh.) (SMC)
Nipun Mehrotra v. Asstt. CIT	(Bang.)
O.K. Pradeep & Co. v. Asstt. CIT	(Cochin)
Pfh Mall & Retail Management Ltd. v. ITO	(Kol.)
Premsudha Exports (P.) Ltd. v. Asstt. CIT	(Mum.)
Ranbaxy Laboratories Ltd.v. Addl. CIT	(Delhi)
Renu Agarwal (Smt.) v. Asstt. CIT	(Agra)
Sanghvi Movers (P.) Ltd. v. Dy. CIT	(Pune) (TM)
Sera Com. (P.) Ltd. v. ITO	(Asr.)
Sudarshan Chemical Industries Ltd. v. Asstt. CIT	(Pune)
Thermax Ltd. v. Dy. CWT	(Pune)
Torrent Finance (P.) Ltd. v. Jt. CIT	(Ahd.)
Umang Agarwal v. Asstt. CIT	(All.)
Vinbros & Co. v. ITO	(Chennai)

Index to journal section

-	Statement showing the list of Special Bench cases pending as on 1-1-2008
-	List of Special Bench cases heard and pending for orders as on 1-1-2008
-	Statement showing the list of Third Member cases pending as on 1-1-2008
-	List of Third Member cases heard and pending for orders as on 1-1-2008

Bench-wise List of Cases Reported in [2008] 110 ITD

	Name of Cases	Section/Provision on which Order was rendered
Special Bench/Third Member orders
1.	Dy. CIT v. Sheth & Sura Engg. (P.) Ltd. [2008] 110 ITD 39 (Pune) (TM)	Section 32 of the Income-tax Act, 1961
2.	Sanghvi Movers (P.) Ltd. v. Dy. CIT [2008] 110 ITD 1 (Pune) (TM)	Section 32 of the Income-tax Act, 1961
AGRA
1.	Renu Agarwal (Smt.) v. Asstt. CIT [2008] 110 ITD 421	Section 158BC of the Income-tax Act, 1961
AHMEDABAD
1.	Torrent Finance (P.) Ltd. v. Jt. CIT [2008] 110 ITD 315	Section 73 of the Income-tax Act, 1961
ALLAHABAD
1.	Umang Agarwal v. Asstt. CIT [2008] 110 ITD 391	Section 158BB of the Income-tax Act, 1961
AMRITSAR
1.	Asstt. CIT v. J & K Bank Ltd. [2008] 110 ITD 603	Section 15 of the Interest-tax Act, 1974
2.	Sera Com. (P.) Ltd. v. ITO [2008] 110 ITD 497	Section 2(47) of the Income-tax Act, 1961
BANGALORE
1.	Nipun Mehrotra v. Asstt. CIT [2008] 110 ITD 520	Section 54F of the Income-tax Act, 1961
CHANDIGARH
1.	Asstt. CIT v. Mahavir Spg. Mills Ltd. [2008] 110 ITD 211	Section 80HHC of the Income-tax Act, 1961
CHENNAI
1.	DXN Herbal Mfg. (India) (P.) Ltd. v. ITO [2008] 110 ITD 99	Section 80-IB of the Income-tax Act, 1961
2.	Vinbros & Co. v. ITO [2008] 110 ITD 185	Section 80-IB of the Income-tax Act, 1961
COCHIN
1.	Govindankutty Nair (C.K.) v. WTO [2008] 110 ITD 400	Section 17 of the Wealth-tax Act, 1957
2.	O.K. Pradeep & Co. v. Asstt. CIT [2008] 110 ITD 509	Section 154 of the Income-tax Act, 1961
DELHI
1.	Anthony Phillip Witek v. Dy. CIT [2008] 110 ITD 148	Section 10(5B) of the Income-tax Act, 1961
2.	A-One Housing Complex Ltd. v. ITO [2008] 110 ITD 361	Section 68 of the Income-tax Act, 1961
3.	Cargill India (P.) Ltd. v. Dy. CIT [2008] 110 ITD 616	Section 92D/271G of the Income-tax Act, 1961
4.	Freightship Consultants (P.) Ltd. v. ITO [2008] 110 ITD 377	Section 234B of the Income-tax Act, 1961
5.	ITO v. Mool Chand Gupta [2008] 110 ITD 89	Section 271(1)(c) of the Income-tax Act, 1961
6.	Mitsui Marubeni Corpn. v. Dy. DIT [2008] 110 ITD 535	Section 147 of the Income-tax Act, 1961
7.	Ranbaxy Laboratories Ltd.v. Addl. CIT [2008] 110 ITD 428	Section 92C of the Income-tax Act, 1961
JODHPUR
1.	Kwal Pro Exports v. Asstt. CIT [2008] 110 ITD 59	Section 10B/80HHC/253/263 of the Income-tax Act, 1961
2.	Navneet Kumar Thakkar v. ITO [2008] 110 ITD 525 (SMC)	Section 50C of the Income-tax Act, 1961
KOLKATA
1.	Pfh Mall & Retail Management Ltd. v. ITO [2008] 110 ITD 337	Section 28(i) of the Income-tax Act, 1961
MUMBAI
1.	Alcan Inc. v. Dy. CIT [2008] 110 ITD 15	Section 55 of the Income-tax Act, 1961
2.	B. Arunkumar & Co. v. Addl. CIT [2008] 110 ITD 131	Section 28(i)/80HHC of the Income-tax Act, 1961
3.	CFL Securities Ltd. v. Dy. CIT [2008] 110 ITD 611	Section 36(1)(iii) of the Income-tax Act, 1961
4.	Datamatics Ltd. v. Asstt. CIT [2008] 110 ITD 24	Section 80HHE/234B of the Income-tax Act, 1961
5.	Dy. CIT v. Dwarkaprasad Anilkumar Investment (P.) Ltd. [2008] 110 ITD 247	Section 46 of the Income-tax Act, 1961
6.	ITO v. Janta Bazar & Stores (P.) Ltd. [2008] 110 ITD 331	Section 22 of the Income-tax Act, 1961
7.	ITO v. Paru D. Dave (Smt.) [2008] 110 ITD 410	Section 45 of the Income-tax Act, 1961
8.	Mehta Mfrs. v. ITO [2008] 110 ITD 1	Section 80HHC of the Income-tax Act, 1961
9.	Premsudha Exports (P.) Ltd. v. Asstt. CIT [2008] 110 ITD 158	Section 23 of the Income-tax Act, 1961
PUNE
1.	Dy. CIT v. Spirax Marshall Ltd. [2008] 110 ITD 229	Section 5 of the Income-tax Act, 1961
2.	Khinvasara Investment (P.) Ltd. v. Jt. CIT [2008] 110 ITD 198	Section 36(1)(vii)/80-IA of the Income-tax Act, 1961
3.	Nagnath Hanumantrao Jalkote v. Asstt. CIT [2008] 110 ITD 549	Section 246/263 of the Income-tax Act, 1961
4.	Sudarshan Chemical Industries Ltd. v. Asstt. CIT [2008] 110 ITD 171	Section 32/37(1) of the Income-tax Act, 1961
5.	Thermax Ltd. v. Dy. CWT [2008] 110 ITD 591	Section 2(m)/7 of the Wealth-tax Act, 1957

Income-tax Tribunal Decisions

Volume 110

Subject Index

Appellate Tribunal

Appeals to

- Assessment year 2001-02 - Whether scope of appeal against order passed under section 263 is confined only to points taken note of by Commissioner, while resorting to section 263, holding assessment order to be erroneous and prejudicial to interest of revenue and revenue cannot be allowed to raise additional ground in appeal for strengthening order under section 263 - Held, yes - Kwal Pro Exports v. Asstt. CIT (Jodh.)

Bad debts

- 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)

Block assessment in search cases

Procedure for

- Block period 1-4-1989 to 16-2-2000 - During search carried out in case of assessee’s husband on 16-2-2000, a pronote for Rs. 1,20,000 was found - Locker in assessee’s name was also searched but no incriminating material was found - On 20-6-2000, assessee filed return for assessment year 2000-01, surrendering a sum of Rs. 1,00,000 - Thereafter, in response to notice issued under section 158BC, assessee filed nil return for block period - However, Assessing Officer brought to tax amount of Rs. 1,20,000 as undisclosed income for block period - Commissioner (Appeals) reduced addition to Rs. 1,00,000 - On second appeal, assessee, inter alia, contended that when no seizure was made in hands of assessee, order should have been passed under section 158BD and, therefore, order passed under section 158BC was bad in law - Whether since there was search of locker standing in name of assessee, order passed under section 158BC was justified on ground that two orders for same block period one under section 158BD and other under section 158BC cannot be passed - Held, yes - Whether where no books of account are maintained and assessee has paid tax, if any, by way of TDS or advance tax, only that income, which is above chargeable limit and in respect of which no tax has been paid by way of advance tax or TDS, will be liable to tax as undisclosed income for block period under section 158BB - Held, yes - Whether since in instant case no exercise was carried out in that regard by Assessing Officer as well as Commissioner (Appeals), issue was to be restored to file of Assessing Officer - Held, yes - Smt. Renu Agarwal v. Asstt. CIT (Agra)

Undisclosed income, computation of

- Block period 1-4-1996 to 4-9-2002 - Whether once an undisclosed income has been computed by Assessing Officer, it is presumed that it is aggregate of total income of previous years falling within block period, unless it is demonstrated that it is not so - Held, yes - Whether where entries are made in regular books of account in normal course of business, income computed on basis of such entries cannot form part of undisclosed income and in clause (ca) of section 158BB(1) only those cases may come, where an assessee does not maintain regular books of account for a relevant previous year - Held, yes - Whether where income as per return for assessment year 2002-03, even though it was filed belatedly, was entered into regular books of account kept in normal course of business, clause (ca) of section 158BB(1) would not be applicable and said income could not be included in block assessment - Held, yes - Umang Agarwal v. Asstt. CIT (All.)

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.)

- Assessment years 2001-02 and 2003-04 -Whether mere fact that income is attached to immovable property, cannot be sole criterion for assessment of such income as income from house property and it is necessary to dig further to find out what is primary object of assessee while exploiting property - Held, yes - Whether if it is found that main intention is for simply letting out of property or any portion thereof, resultant income must be assessed as income from house property but if main intention is found to be exploitation of immovable property by way of commercial activities, then resultant income must be held as business income - Held, yes - Whether where assessee-company had developed shopping malls/business centres on properties owned by it and had let out same to various users by providing host of services/facilities/amenities in said malls/business centres, it could be said that basic intention of assessee was commercial exploitation of its properties by developing them as shopping malls/business centres and, therefore, income derived therefrom was rightly assessed as business income and Commissioner could not revise said order by directing Assessing Officer to assess same under head ‘Income from house property’ - Held, yes - Pfh Mall & Retail Management Ltd. v. ITO (Kol.)

Capital gains

Chargeable as

- Assessment year 1994-95 - Whether during subsistence of partnership firm, partners have no defined share in assets of partnership, but have only an interest in property and, therefore, there is no relinquishment of any right in partnership property on reconstruction/retirement of a partner - Held, yes - Whether revaluation of assets by partnership firm and credit of revalued amount to capital accounts of partners in their respective sharing ratio entails transfer within meaning of section 2(47) - Held, no - Whether on introduction of new partners, there is realignment of sharing ratio between partners only to extent of sharing profit and loss of firm; on such realignment of profit sharing ratio, there is no relinquishment of any non-existent share in partnership assets as assets remained with firm; therefore, no capital gain arises on alignment of a part of profit sharing ratio, on introduction of new partners in firm - Held, yes - ITO v. Smt. Paru D. Dave (Mum.)

Cost of acquisition

- Assessment year 2001-02 - Assessee, a non-resident company, which had acquired certain shares of an Indian company prior to 1-4-1981 had sold said shares - Assessee in exercise of option available under section 55(2)(b)(i) adopted fair market value of shares as on 1-4-1981 as cost of acquisition of such shares for computing capital gain/loss arising on transfer of said shares - Whether assessee had rightly exercised option available under section 55(2)(b)(i) - Held, yes - Alcan Inc. v. Dy. DIT (International Taxation) (Mum.)

Distribution of assets by companies in liquidation

- Block period from 1-4-1989 to 8-12-1999 - ‘S’ Group was engaged in business of manufacturing aluminium, copper telephone cables, etc. - Two main companies of ‘S’ Group were SIIL and MALCO - Assessee-company was one of three investment companies which were holding shares in SIIL and MALCO - Shares of SIIL and MALCO were held by assessee as investments till 31-3-1991 - However, with effect from 1-4-1991, holding in said two companies were converted into stock-in-trade but again on 31-3-1998, said shares were converted into investments - Said aspects were duly disclosed by assessee in return of income filed for assessment year 1998-99 and accepted by department - Subsequently, in April, 1999 assessee-company was liquidated and shares of SIIL and MALCO held by assessee were transmitted to TSHL, a Mauritian Company - Thereafter, a search was carried out at various offices and factories of ‘S’ group of companies and also at residences of key individuals of group including assessee - On basis of documents seized, Assessing Officer concluded that conversion of stock-in-trade into investment was a well-planned and a calculated mode to avoid payment of tax which assessee would otherwise had to pay on liquidation - He, therefore, levied tax under section 46(2) and made certain addition to income of assessee - On appeal, Commissioner (Appeals) held that in course of regular assessment proceedings, Assessing Officer had himself accepted conversion and he could not change his stand in block assessment proceedings - He, therefore, held that said shares were truly investment and not stock-in-trade and, hence, assessee was not required to pay tax under section 46(2), thereby deleting said addition - Whether Commissioner (Appeals) was fully justified in deleting said addition - Held, yes - Dy. CIT v. Dwarkaprasad Anilkumar Investment (P.) Ltd. (Mum.)

Exemption of, in case of investment in residential house

- Assessment year 2000-01 - Whether under section 54F, assessee has to utilize amount for purchase or construction of new asset before date of furnishing return of income under section 139, and in absence of any mention of any sub-section of section 139, it cannot be interpreted that section 139 should be read as section 139(1) - Held, yes - Assessee claimed deduction under section 54F of long-term capital gain earned by him on sale of shares - Undisputedly, sale consideration had been utilised by assessee before date of filing of return under section 139(4) - Whether in view of decision of Gauhati High Court in case of CIT v. Rajesh Kumar Jalan [2006] 286 ITR 274/157 Taxman 398, wherein it was held that section 139 mentioned in section 54F will not only include section 139(1) but will also include all sub-sections of section 139, assessee was entitled to deduction claimed - Held, yes - Nipun Mehrotra v. Asstt. CIT (Bang.)

Special provisions for full value of consideration in certain cases

- Assessment year 2003-04 - Whether unless property transferred has been registered by sale deed and for that purpose value has been assessed and stamp duty has been paid by parties, section 50C inserted by Finance Act, 2002 with effect from 1-4-2003, cannot come into operation - Held, yes - Whether in such a situation, position existing prior to section 50C would apply and onus would be upon revenue to establish that sale consideration declared by assessee was understated with some clinching evidence - Held, yes - Whether where assessee transferred property in question by executing an agreement which was not registered with registering authority, section 50C could not have come into operation and resultant application of section 55A, by which Assessing Officer got property valued and adopted report of Valuation Officer as sole basis for making addition, was wholly invalid - Held, yes - Whether as Assessing Officer had not brought on record any other material to show that sale consideration declared by assessee was understated, he was not justified in making addition on that ground - Held, yes - Navneet Kumar Thakkar v. ITO (Jodh.)(SMC)

Transfer

- Assessment year 2001-02 - Whether no taxable capital gain would accrue or arise to assessee merely on receipt of bonus shares, if there is no transfer of said bonus shares within meaning of section 2(47) - Held, yes - Sera Com. (P.) Ltd. v. ITO (Asr.)

Cash credits

- Assessment year 1999-2000 - Whether application of section 68 is not restricted to receipts by way of loans or deposits and such provisions are applicable to any receipt irrespective of its nature - Held, yes - Whether onus on assessee in case of share capital by public issue is lighter one and, therefore, such onus would stand discharged if identity of share applicant is established - Held, yes - Whether where assessee-company had raised share-capital and share-application money from certain shareholders and had filed confirmation of some of shareholders and also copies of their income-tax return acknowledgements, and bank accounts, it could be said that identity of those shareholders was well-established and, therefore, share capital and share application money were not liable to be assessed under section 68 - Held, yes - Whether however, as some of share applicants had denied to have made any investments in shares and assessee failed to file their confirmation, share capital and share application money to that extent would be treated as income of assessee from undisclosed sources and addition was to be made under section 68 in said respect - Held, yes - A-One Housing Complex Ltd. v. ITO (Delhi)

Circulars and instructions/Notifications

- CBDT Circular No. 2 of 2006, dated 17-1-2006

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

- Circular No. 693, dated November 19, 1994

- Instruction No. 3 of 2003, dated 20-5-2003

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

Commissioner (Appeals)

Appealable orders

- Whether section 246 provide for an appeal to Commissioner (Appeals) against order of Commissioner passed under section 263 - Held, no - Nagnath Hanumantrao Jalkote v. Asstt. CIT (Pune)

Deductions

Exporters

- Assessment year 2002-03 - Whether word ‘or’ has been intentionally used between clauses (a) and (b) in fifth proviso to section 80HHC, which cannot be substituted with word ‘and’ - Held, yes - Assessee claimed deduction under section 80HHC - Assessing Officer noticed that total export turnover of assessee was below Rs. 10 crore; that net profit of assessee included receipt of duty drawback and DEPB; and that assessee had loss on export turnover - Assessing Officer held that since total export turnover of assessee was below Rs. 10 crore and there was loss on total export turnover, assessee was entitled to set-off of 90 per cent of any one of export incentives specified under clauses (iiia) to (iiie) of section 28 as per fifth proviso to sub-section (3) of section 80HHC - Assessing Officer, therefore, scaled down deduction under section 80HHC - Whether Assessing Officer was justified in his action - Held, yes - Mehta Mfrs. v. ITO (Mum.)

- Assessment year 2001-02 - Whether parameters for grant of deduction under section 80HHC are different from those of section 10B and deduction under section 80HHC cannot be denied simply on ground that assessee had claimed exemption under section 10B, which was not allowed by Commissioner or assessing authority - Held, yes - Kwal Pro Exports v. Asstt. CIT (Jodh.)

- 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.)

- 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.)

Profits and gains from export of computer software

- Assessment year 1993-94 - Whether where business of each unit is distinct and separate and where assessee maintains independent and separate books of account for export as well as domestic sale, turnover of each unit should be considered separately for purpose of computing deduction - Held, yes - Assessee was carrying on business of software export as well as domestic business - It claimed deduction under section 80HHE in respect of its software business and submitted before Assessing Officer that turnover for purpose of computation of deduction under section 80HHE had to be worked out on basis of export turnover alone - Assessing Officer, however, took into consideration total turnover of entire business for calculating deduction under section 80HHE - Whether since deduction under section 80HHE is computed exclusively in respect of profits from export of computer software, etc., and moreover entire activity of assessee in export zone was independent of its other business and there was no overlapping and mingling of services or any link between manufacturing activities of both, turnover for purpose of computation of deduction under section 80HHE was to be worked out on basis of export turnover alone and not on total turnover of entire business as done by Assessing Officer - Held, yes - Datamatics Ltd. v. Asstt. CIT (Mum.)

Profits and gains from industrial undertakings other than infrastructure development undertakings

- Assessment years 2003-04 and 2004-05 - Assessee-company which was dealing in Ayurvedic medicinal product, claimed deduction under section 80-IB - Assessing Officer disallowed assessee’s claim and made certain addition by relying upon statement of production incharge of assessee-company and held that assessee had not manufactured any product to enable it to deduction under section 80-IB - Assessee contended that sworn statement obtained from production incharge was not furnished to it and, therefore, it was denied opportunity of cross-examining production incharge, which amounted to violation of principles of natural justice - Whether non-furnishing of copy of statement given by production incharge did not amount to denying opportunity of cross-examination to assessee, as it did not cause any prejudice to assessee especially when addition was made solely on basis of return filed, documents produced and submissions made by assessee - Held, yes - DXN Herbal Mfg. (India) (P.) Ltd. v. ITO (Chennai)

- Assessment years 2003-04 and 2004-05 - Whether Mushroom powder even after capsulation remains same and no new article or product comes into existence on its capsulation - Held, yes - Whether, therefore, filling of mushroom powder in gelatin capsule to make it fit for marketing is nothing but a processing which does not amount to manufacture or production of any commercially distinct commodity so as to fulfil conditions stipulated for availing benefit under section 80-IB - Held, yes - DXN Herbal Mfg. (India) (P.) Ltd. v. ITO (Chennai)

- 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 years 1991-92 and 1993-94 - Whether expression ‘used’ in section 32 is to be construed in context of facts and circumstance of each case and would include not only active use of asset, but also passive use of asset for purposes of business - Held, yes - Whether hiring of asset is one way of establishing user of asset in business; it is not necessary that assessee should receive hire charges to prove user of assets; even an agreement to hire would tantamount to use of asset - Held, yes - Assessee was carrying on business of hiring of cranes and other equipments - Assessing Officer denied depreciation allowance in respect of cranes given on hire which, according to him, were not put to use during relevant previous years, inasmuch as they were purchased at fag end of previous year - Whether where one of cranes, intended for use through hire to ONGC, was purchased by assessee on 16-3-1991, delivered to transport company on 27-3-1991, reached its destination in second week of April, 1991, and thereafter contract of hiring was entered into by assessee, it could be treated as ‘used’ for purposes of business on or before 31-3-1991 or could be taken as even kept ready for such use - Held, no - Whether depreciation could be allowed on that crane in assessment year 1991-92 - Held, no - Whether in respect of another crane, which was kept ready as back-up crane for use by a concern, in case crane already hired to said concern broke down or needed repair, it would be user of crane for purposes of business and assessee would be entitled to depreciation thereon - Held, yes - Whether where assessee had placed tender with ONGC in March 1993 for hiring of two Kato cranes imported by assessee in assessment year 1993-94 to ONGC but ONGC authorities wrongfully did not open tender and cranes could not be actually hired, depreciation on those cranes could not be denied to assessee in assessment year 1993-94 as those cranes were kept ready for use - Held, yes - Sanghvi Movers (P.) Ltd. v. Dy. CIT (Pune) (TM)

- Assessment year 1993-94 - Whether for claiming depreciation, assessee has to satisfy conditions laid down in section 32; mere disclosure of amount and investment in some assets, whose description is withheld, is not sufficient to claim deduction of depreciation - Held, yes - Whether where during search of its premises, assessee-company surrendered certain amount representing ‘undisclosed income’, which included investment in plant and machinery and furniture and fixture, but failed to furnish necessary particulars of those assets, Assessing Officer was justified in disallowing assessee’s claim for depreciation on those assets, though disclosure was accepted and taxed by department - Held, yes -

Dy. CIT v. Sheth & Sura Engg. (P.) Ltd. (Pune) (TM)

- 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)

Export Oriented Undertaking

- Assessment year 2001-02 - Whether mere recognition as 100 per cent Export Oriented Undertaking (EOU) by a competent authority does not enable assessee to claim exemption under section 10B and it is only when such 100 per cent EOU manufactures or produces any articles or things or computer software along with fulfilment of other conditions stipulated under sub-section (2), that benefit of exemption can be sought - Held, yes - Assessee-company purchased fully manufactured but unpolished handicraft items like coffee table, almirah, dining table, etc., and subjected said items to processes of grinding, surface smoothening, chemical dipping and treatment, drying, heating, polishing and packaging - Whether since identity of commodity, before and after undergoing various processes, did not change and remained same in commercial world, assessee could not be said to have manufactured any article or thing -Held, yes - Whether, therefore, assessee could not be held entitled to benefit of exemption under section 10B - Held, yes - Kwal Pro Exports v. Asstt. CIT (Jodh.)

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

Accrual of

- Assessment year 1993-94 - Assessee-company supplied certain equipment manufactured by it on a warranty that same would work as per its assertions - As per contract between assessee and buyer, latter paid 90-95 per cent of price of goods at time of delivery and rest 5-10 per cent was retained and was receivable by assessee only on satisfactory performance of said equipment during warranty period, which ranged between 12 to 18 months - In its return of income for relevant year, assessee claimed exclusion of money retained by buyers on ground that same would be rightly due to it only on satisfactory performance of equipment as per agreement - Whether since payment of retention money was hinged upon condition of satisfactory performance of equipment during warranty period, no debt accrued in favour of assessee and, therefore, impugned amount did not accrue as income to assessee in year in question - Held, yes - Dy. CIT v. Spirax Marshall Ltd. (Pune)

Income escaping assessment

General

- Assessment years 1999-2000 and 2000-01 - Whether where no notice under section 143(2) is issued within a period of 12 months from end of month in which return is furnished and Assessing Officer seeks to invoke provisions of section 148, condition precedent for exercise of jurisdiction under section 148 has to be satisfied for validly reopening assessment proceedings under section 147 - Held, yes - Whether Assessing Officer has to be guided only by return and documents annexed along with return for coming to conclusion regarding understatement of income or claim of excessive loss - Held, yes - Mitsui Marubeni Corpn. v. Dy. DIT (Delhi)

Non-disclosure of primary facts

- Assessment years 1999-2000 and 2000-01 - Whether validity of reopening has to be judged solely on basis of reasons recorded by Assessing Officer and any extraneous material in this regard cannot be relied upon - Held, yes - Assessee was awarded an engineering procurement and construction contract for execution of Delhi Noida Bridge Project - For that purpose, it set up project office in India on 3-3-1998 but work commenced belatedly on 30-12-1998 when notice to commence was issued - For assessment years 1998-99 to 2000-01, assessee filed returns declaring nil income from contract on ground that it was following contract completion method of accounting - Assessments were made accordingly, but subsequently assessments for assessment years 1999-2000 and 2000-01 were reopened on ground that in assessment order for assessment year 1998-99 it had been suggested that receipts from contracts would be taxed in assessment year 1999-2000 - Whether observation made in assessment order for assessment year 1998-99 that contract of construction of Delhi Noida flyover began only in next financial year, could be said to be a suggestion that receipts from contract would be taxable in assessment year 1999-2000 - Held, no - Whether since reason to believe was not based on any relevant material and there was no nexus between belief entertained by Assessing Officer and information coming into his possession, reassessment proceedings were to be annulled - Held, yes - Mitsui Marubeni Corpn. v. Dy. DIT (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.)

Chargeable as

- Assessment years 1989-90 to 1995-96 - Whether Court has power to disregard corporate entity of company, if it is used for tax evasion or to circumvent tax obligation or to perpetrate fraud - Held, yes - Whether as per section 22, it is legal owner, in whose name property stands, that is chargeable to tax under head ‘Income from house property’ on basis of its annual value - Held, yes - Assessee-company purchased a property in 1979 - In 1982, it divided said property into 17 stalls and allotted said stalls to its members on pro rata basis - Subsequently, assessee entered into tripartite agreement with its members and a bank, in terms of which, said stalls were given to bank on lease for a consideration of Rs. 7 per sq. ft. out of which Re. 1 was to be paid to company for paying municipal taxes and maintenance charges and Rs. 6 were to be paid to its members on pro rata basis - Whether property owned by company could be treated as collectively owned property of shareholders who comprised it - Held, no - Whether by working out scheme, whereby certain interest of shareholders was said to have been created in property belonging to company, assessee had evaded payment of tax by company - Held, yes - Whether on facts, assessee was liable to pay tax under head ‘Income from house property’ on its property income at rate of Rs. 7 per sq. ft., i.e., rate on which it had given its property on lease to bank and rental income on that letting out was to be assessed by actual rent received by company - Held, yes - ITO v. Janta Bazar & Stores (P.) Ltd. (Mum.)

Income-tax Act, 1961

- Section 2(47)

- Section 5

- Section 10(5B)

- Section 10B

- Section 22

- Section 23

- Section 28(i)

- Section 32

- Section 36(1)(iii)

- Section 36(1)(vii)

- Section 37(1)

- Section 45

- Section 46

- Section 50C

- Section 54F

- Section 55

- Section 68

- Section 73

- Section 80HHC

- Section 80HHE

- Section 80-IA

- Section 80-IB

- Section 92C

- Section 92D

- Section 147