- Assessment year 2000-01 - Assessee-society filed an application on 5-11-2001 for registration under section 12A since its inception, but Director (Exemptions) granted such registration with effect from 1-4-2001 - Against such registration, assessee filed appeal, with a delay of more than 4 years and prayed for condonation of delay - Assessee’s case was that against registration so granted, assessee filed rectification application as per advice given by its counsel, but with no response; subsequently, another legal advisor of assessee pointed out that provisions of section 253(1)(c) were amended with effect from 1-6-1999 to provide for an appeal before Tribunal against an order passed under section 12AA and advised that filing of rectification application and pursuing same was not appropriate remedy and proper course was to file an appeal before Tribunal along with an application for condonation of delay - Whether assessee could not be faulted for having bona fide acted on advice received by it for filing rectification application before Director (Exemptions) and pursuing it - Held, yes - Whether, therefore, it could be said that assessee was prevented by sufficient cause from preferring appeal, and delay in question was to be condoned - Held, yes - Edith Wilkins Hope Foundation v. DIT (Exemption) (Kol.)

Assessment

Additions to income

- Assessment years 1987-88 and 1988-89 - Whether merely on basis of admission and statement of assessee recorded during course of search conducted in year 1995, addition could be made to income of assessee for assessment years 1987-88 and 1988-89, when no incriminating document or material relating to said assessment years was found in course of search - Held, no - Mrs. Catherine Thomas v. Dy. CIT (Cochin)

Block assessment in search cases

Assessment of undisclosed income

- Block period 2-1-1995 to 15-12-1999 - Whether what has already been included in a regular assessment under section 143(3) cannot be included in block assessment under section 158BC - Held, yes - Assessee filed returns of undisclosed income under section 158BC - Subsequently, it filed revised block return of undisclosed income declaring nil amount, stating that income earlier disclosed had already been assessed by way of regular assessment under section 143(3) - Assessing Officer rejected revised return holding that return of undisclosed income once filed could not be revised by assessee on subsequent occasion - Commissioner (Appeals) dismissed assessee’s appeal as unadmitted on ground that assessee had not paid any tax on undisclosed income - Whether even though there is no provision in Chapter XIV-B for revision of a return of undisclosed income, yet from that it does not follow that Assessing Officer is bound to assess undisclosed income as per return filed by assessee, more so, when assessee contends that such income has already been assessed by way of regular assessment under section 143(3) - Held, yes - Whether, therefore, matter was to be remanded to Commissioner (Appeals) with direction that he would verify contention of assessee that undisclosed income as returned in return of undisclosed income under section 158BC had already been offered to assessment during course of regular assessment proceedings under section 143(3) and tax thereon had already been paid before assessee filed appeal against block assessment order before Commissioner (Appeals) - Held, yes - Asheesh Securities Ltd. v. Dy. CIT (Delhi)

Undisclosed income

- Block period 1-4-1991 to 3-8-2000 - On 3-8-2000, a search and seizure operation was conducted at premises of ‘FP’ wherein statements of its owner ‘M’ and other persons were recorded - ‘M’ had admitted that all transactions undertaken by him through ‘FP’ were bogus transactions, in nature of merely providing accommodation entries without any real physical transactions relatable to those entries, (i.e., he was issuing cheques in lieu of cash receipts from various parties, which could have been entered by them in any manner, i.e., as gifts, loans, income, etc.,) and that such entries were taken by a number of persons including assessee - ‘M’ also stated that such entries were provided by charging commission and with a view to help beneficiaries reduce their income for purpose of payment of tax - On basis of said information, Assessing Officer found that assessee had received an aggregate amount of Rs. 1,78,20,431 from FP by way of accommodation entries - Consequently, on 7-10-2003, a notice under section 158BC was issued to assessee - In response, assessee filed return declaring undisclosed income of Rs. 27,90,274 - Regarding difference between sum received and sum disclosed by assessee, it was explained that a sum of Rs. 1,50,30,137 was offered by him for taxation in return of income for assessment year 2000-01 and sum of Rs. 27,90,274 was offered for taxation in assessment of block period - However, Assessing Officer held that in view of clear deposition of ‘M’, and in absence of any evidence, impugned receipts could not be said to be backed by any genuine transactions and only after conduct of search and seizure operation in case of FP on 3-8-2000, assessee tried to show a substantial part of income in return for assessment year 2000-01, with a view to reduce tax liability from rate of 60 per cent to maximum marginal rate of 30 per cent - Accordingly, Assessing Officer came to conclusion that whole of income of Rs. 1,78,50,431 was taxable in proceedings of block assessment - Whether since neither taxes relatable to income were paid by assessee in advance or on prescribed dates nor said transactions were entered in books of account maintained in normal course before date of search, it could be said that, on date of search, income had not been disclosed to revenue nor it was intended to be disclosed but only after search at premises of FP, income or transactions were disclosed - Held, yes - Whether, therefore, assessee’s case was clearly covered in definition of ‘undisclosed income’ - Held, yes - Raghav Bahl v. Dy. CIT (Delhi)

Capital gains

Year in which assessable

- Assessment year 1992-93 - Whether as per provisions of sub-section (5) of section 45, where assessee’s immovable property is compulsorily acquired by Government under any law and compensation awarded for such acquisition is enhanced by any Court, subsequently, such enhanced compensation is to be taxed in year of receipt, irrespective of fact that such enhanced compensation has been received by assessee on furnishing bank guarantee or on any other condition - Held, yes - Mrs. Catherine Thomas v. Dy. CIT (Cochin)

Charitable or religious trust

Registration of

- Assessment year 2000-01 - Whether Commissioner is empowered to condone delay in making of application for registration if he is so satisfied and grant registration from date of establishment of institution but if he is not so satisfied, registration is to be granted from first day of financial year in which application is made - Held, yes - With a view to perform various charitable activities, assessee was registered as a society on 4-10-1999 - On 5-11-2001, assessee filed application for registration under section 12AA with a request for condonation of delay and grant registration from date of its inception - Director (Exemptions), however, granted such registration only with effect from 1-4-2001 - Assessee’s case was that its office bearers and members were completely involved in charitable work since its inception and bona fide proceeded on basis that there was no income-tax implication, since no income was being earned and assessee was only spending contributions received for charitable purposes; and it came to know about need for registration only in October 2001 when person entrusted to perform functions of Secretary learnt of it from similar organizations and immediately thereafter it applied for registration with prayer for condonation of delay - Whether since assessee had nothing to gain by delaying application and it applied for registration as soon as it became aware of its obligation, instant case was a fit case where delay should have been condoned and registration should have been granted from 1-4-1999 - Held, yes - Edith Wilkins Hope Foundation v. DIT (Exemption) (Kol.)

Deduction of tax at source

Payment to non-resident

- Assessment years 2003-04 and 2004-05 - Whether section 195 takes within its sweep any sums paid to a non-resident which do not wholly represent income or profits chargeable under Act but a portion of which only so represents - Held, yes - Under a Bare Boat Charter-cum-Demise (BBCD) agreement, entered into by assessee with a foreign company, assessee secured a vessel with an option to purchase same - For user of said ship, assessee paid rentals to owner, a non-resident, but did not exercise option to purchase vessel till end of relevant previous years - Assessing Officer treated payment made by assessee as hire charges for user of ship and also treated assessee-in-default for not deducting any tax at source in respect of said payments - Whether transaction in question could not be construed to be a transaction for purchase of ship on basis of BBCD Agreement - Held, yes - Whether, therefore, what assessee paid to owner of ship was hire charges for user of ship and not payment for purchase of ship - Held, yes - Whether ship being an equipment under article 12, hire charges for user of ship partook of character of royalty for use of equipment under provisions of section 9(1)(vi) and, hence, exigible to tax in India - Held, yes - Whether, therefore, assessee was under an obligation to deduct tax at source in respect of said payments - Held, yes - West Asia Maritime Ltd. v. ITO (Chennai)

Income

Accrual of

- Assessment year 2001-02 - Whether income that is received or deemed to be received in previous year is exigible to tax and obligation to use income in a particular manner does not remove it from category of income; there is absolutely nothing in Act to permit assessee to treat part of income as deferred income and to offer it for taxation as per its own sweet will - Held, yes - Sterling Holiday Resorts (India) Ltd. v. Asstt. CIT (Chennai)

Income from other sources

Year in which assessable

- Assessment years 1987-88, 1988-89, 1990-91 to 1992-93 - Whether interest on enhanced compensation for compulsory acquisition of assessee’s immovable pro-perty would be taxed on accrual basis from date of delivery of possession of property and such interest cannot be assessed in one lump sum in year in which final order is made - Held, yes - Mrs. Catherine Thomas v. Dy. CIT (Cochin)

Income-tax Act, 1961

- Section 5

- Section 12A

- Section 45

- Section 56

- Section 115JB

- Section 143

- Section 158B(b)

- Section 158BA

- Section 195

- Section 254

Interpretation of statutes

- Rule of liberal construction

Minimum alternate tax

- Assessment year 2002-03 - Whether all items, which are generally classified in appropriation account, are to be included in profit and loss account (P&L account) prepared as per Parts II and III of Schedule-VI to the Companies Act, 1956 for purposes of section 115JB and, thus, even extraordinary items have to be debited to P&L account - Held, yes - Assessee-company, which was engaged in manufacturing detonators, industrial explosives and its accessories, filed loss return - Since section 115JB was attracted, it worked out book profits by starting with net profit of Rs. 978.55 lakhs, which was profit before taxation shown in P&L account arrived at after crediting Rs. 3.06 lakhs as write off/provision and after charging Rs. 109.96 lakhs as additional advisory fee for sale of investments classified as extraordinary items in P&L account - Profit before those items was Rs. 1,085.45 lakhs - According to Assessing Officer, extraordinary items should have been ignored and Rs. 1,085.45 lakhs should have been taken as base figure for computation of book profit - Whether it was in accordance with law for assessee to have taken Rs. 978.55 lakhs as base figure for computation of book profits for purposes of section 115JB - Held, yes - Gulf Oil Corporation Ltd. v. Asstt. CIT (Hyd.)

Words and phrases

- ‘Any other sum’ as occurring in section 195(1) of the Income-tax Act, 1961

INCOME-TAX TRIBUNAL DECISIONS