TAXMAN
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Vol. 168, Part 2, for the week
of March 22 – March 28, 2008 |
statutes
q circular
- Finance Act, 2007 - Explanatory Notes on
provisions relating to Direct Taxes
q press release
Income-tax Act
- Clarification on amendment to section 271 of
Income-tax Act
q Rules/amendment rules
Income-tax (Fourth
Amendment) Rules
- Income-tax (Fourth Amendment) Rules, 2008 - Insertion
of rule 125 - Electronic Payment of tax
Tax Reports
Table
of cases
CIT v. Asian
Hotels Ltd. (
CIT v.
CIT v. Bharat
Heavy Electricals Ltd. (
CIT v.
Bilahari Investment (P.)
Ltd. (SC)
CIT v.
Guru Nanak Mercantile
CIT v.
Laxmi Narain (Punj. & Har.)
CIT v.
Ratnasi Deoji Patel (HUF) (Bom.)
CIT v.
Sethi (S.C.) (Raj.)
CIT v.
Singhvi (Dr. A.M.) (Raj.)
Dabwali
Transport Co. v. CIT (Punj. & Har.)
Dy. CIT v.
Torqouise Investment & Finance Ltd. (SC)
Hassan
Ali Khan v. Settlement Commission (Bom.)
Selladurai (V.) v.
Chief CIT (OSD) (
V. Ravi Narayanan, In
re (AAR -
subject index
Appellate Tribunal
Powers of
- Revenue filed writ petition against order of
Tribunal permitting assessee to raise an additional ground without approval of
Committee on Disputes - Whether revenue could always contest appeal pending
before Tribunal on merits and in event of failure, it would be open for it to
challenge order passed by Tribunal under section 260A and to urge that Tribunal
had erroneously permitted assessee to raise additional ground without approval
of Committee on Disputes - Held, yes - Whether therefore, writ petition
would not serve any purpose and same should be disposed of accordingly - Held,
yes - CIT v. Bharat Heavy Electricals Ltd. (Delhi)
Assessment
Additions to income
- Assessment year 2000-01 - Assessee-firm,
deriving income from transportation contracts, claimed certain sum as labour
expenses - Assessing Officer, finding that assessee had paid labourers at rates
more than market rates, partially disallowed amount claimed by assessee -
Commissioner (Appeals) as well as Tribunal reduced quantum of disallowance to
some extent - Whether in absence of any standard method or chart which might
constitute basis to say that norms of computation of labour expenses had been
violated, finding of Tribunal, being pure finding of fact, was to be upheld - Held,
yes - Dabwali Transport Co. v. CIT (Punj. & Har.)
- Assessment year 1993-94 - On basis of some
entry in loose papers seized from residence of one ‘A’, additions were made in
income of assessee as income from undisclosed source - On appeal, Commissioner
(Appeals) noticed that apart from said loose papers, there was no other
incriminating material before Assessing Officer; that none of entries in seized
documents indicated that amount was received by assessee; and that assessment
also suffered from procedural errors inasmuch as assessee was not offered an
opportunity to cross-examine ‘A’ - Therefore, Commissioner (Appeals) set aside
assessment order and directed Assessing Officer to complete assessment de
novo - However, Assessing Officer, without seeking presence of ‘A’,
reiterated his earlier assessment order - On appeal, Commissioner (Appeals)
deleted addition on ground that Assessing Officer had still not obtained
attendance of ‘A’ for being cross-examined by assessee - Tribunal upheld order
of Commissioner (Appeals) - Whether Tribunal was justified - Held, yes -
CIT v. S.C. Sethi (Raj.)
Time-limit for
completion of
- Assessment year 1978-79 - By order dated
10-9-1981, Commissioner (Appeals) set aside assessment order made by Assessing
Officer - After remand, Assessing Officer sent draft assessment order to
assessee on 23-1-1984 and after receiving directions from IAC under section
144B on 19-7-1984, completed fresh assessment on 21-7-1984 - Tribunal set aside
assessment order, holding that in terms of section 153(2A), assessment having
not been completed within two years of remand, same was barred by time -
Whether Tribunal was wrong in not giving benefit of extended period of
limitation of 180 days as stipulated under Explanation 1(iv) to section
153(2A) - Held, yes - Whether if period of 173 days, as spent in
proceedings under section 144B, was added in normal period of limitation, fresh
order passed after remand was clearly within period of limitation as provided
for under Act - Held, yes - CIT v. Guru Nanak Mercantile Co. (Punj.
& Har.)
Business
expenditure
Allowability of
- Assessment year 1996-97 - Assessee, an
advocate, occupied a rented premises for office use - During relevant
assessment year, he carried out certain repairs and renovations in office premises
in order to see that said premises was kept in a proper condition and
professional activities were carried out effectively and smoothly - Whether
since expenditure incurred by assessee was in connection with
profession/business and for smooth working thereof, leaving fixed capital
untouched, expenditure in question was revenue expenditure and, hence,
allowable under section 37(1) - Held, yes - CIT v. Dr. A.M.
Singhvi (Raj.)
Business income
Value of any
benefit or perquisite, arising from business or exercise of profession
- Assessment years 1995-96 and 2000-01 -
Whether notional interest on interest-free deposit can be added to income of
assessee under section 28(iv) on basis that it may have been earned by
assessee if placed as a fixed deposit - Held, no - Assessee received
interest-free deposit in respect of shops given on rent - Assessing Officer
added notional interest on said deposit in assessee’s income on ground that by
accepting interest-free deposit, a benefit had accrued to assessee which was
chargeable to tax under section 28(iv) - However, on second appeal,
Tribunal held that notional interest on refundable interest free deposit
received by assessee in respect of a shop let out on rent was neither taxable
as business profit under section 28(iv) nor as income from house
property under section 23(1)(a) - Whether Tribunal was justified - Held,
yes - CIT v. Asian Hotels Ltd. (Delhi)
Collection and
recovery of tax
Penalty payable
when tax in default
- Assessment years 1982-83 and 1983-84 -
Whether assessee having failed to comply with provisions of TDS would be liable
to penalty under section 221, notwithstanding fact that TDS and interest if any
accrued thereon, have been paid prior to initiation of penalty proceeding - Held,
yes - CIT v. Bareilly Development Authority (All.)
- Assessment years 1982-83 and 1983-84 -
Assessee having failed to comply with provisions regarding TDS, penalty was
levied upon it under section 221 - However, on appeal, Tribunal set aside
penalty on grounds, that ITO’s discretion to levy penalty had not been fairly
exercised; and that no penalty could be levied for non-filing of Form No. 26C -
Whether even though no penalty is leviable under section 221(1) for not
furnishing Form No. 26C, yet since in instant case penalty proceedings were
initiated for violation of provisions of section 201(1), Tribunal had
misdirected itself on that issue - Held, yes - Whether, however,
Tribunal’s findings, that ITO’s discretion to levy penalty on assessee had not
been fairly exercised, being based on appreciation of evidence and material on
record, could not be interfered with and, therefore, penalty was rightly
deleted by Tribunal - Held, yes - CIT v. Bareilly Development
Authority (All.)
Double Taxation
Relief
Where agreement
exists
- Assessment year 1992-93 - Whether in terms of
article XI of DTAA dividend income derived by assessee from a company in
Malaysia was not liable to be taxed in its hands in India - Held, yes - Dy.
CIT v. Torqouise Investment & Finance Ltd. (SC)
Foreign exchange
asset
- Assessment year 2008-09 - Whether
Non-Resident Ordinary (NRO) deposit acquired with convertible foreign exchange
in a banking company, which is not a private company as per Companies Act,
1956, shall be treated as a ‘foreign exchange asset’ under section 115C(b)
- Held, yes - Whether interest on such NRO deposit shall be treated as
investment income under section 115C(c) which is liable to be taxed at
rate of 20 per cent under section 115E - Held, yes - Whether, therefore,
banks paying interest on such NRO deposit are required to deduct tax at source
at rate of 20 per cent - Held, yes - V. Ravi Narayanan, In re (AAR
- New Delhi)
Income escaping
assessment
Issue of notice for
- Assessment years 1987-88 to 1989-90 - Whether
non-service of a notice under section 148 on proper person would go to roots
and cannot be condoned - Held, yes - Whether where revenue had not been able to produce
any material to show that any notice under section 148 was served upon assessee
before framing assessment under section 147, Tribunal was justified in
annulling that assessment as invalid - Held, yes - CIT v.
Laxmi Narain (Punj. & Har.)
Income-tax Act,
1961
- Section 28(iv)
- Section 37(1)
- Section 90
- Section 115C
- Section 143
- Section 145
- Section 148
- Section 153
- Section 221
- Section 245D
- Section 254
- Section 263
- Section 271(1)(c)
Method of
accounting
Change of
- Assessment years 1991-92 to 1997-98 - Whether
every assessee is entitled to arrange its affairs and follow method of
accounting, which department has earlier accepted, and it is only in those
cases where department records a finding that method adopted by assessee
results in distortion of profits, that it can insist on substitution of
existing method - Held, yes - Assessee-company was subscribing to chits
as its business activity - In context of ‘chit discount’, it was following
‘completed contract method’ of accounting which was earlier accepted by
department over several years - For relevant assessment years, Assessing
Officer substituted that method by ‘deferred revenue expenditure method’ -
Whether since in past department had accepted completed contract method; entire
exercise arising out of change of method from completed contract method to
deferred revenue expenditure was revenue neutral; and method adopted by
assessee did not result in distortion of profits, High court was justified in
holding that completed contract method of accounting adopted by assessee was
valid, and that department had erred in spreading discount over remaining
period of chit on proportionate basis - Held, yes - CIT v.
Bilahari Investment (P.) Ltd. (SC)
Penalty
For concealment of
income
- Assessment years 1982-83 to 1985-86 -
Pursuant to a search, assessee filed returns declaring income as noticed from
note book seized during search - Assessing Officer completed assessment
accepting said income, but levied penalty under section 271(1)(c) by
invoking Explanations 1, 4(a) and 5 thereto - Assessee’s case was that
note book seized during course of search was books of account maintained by it
in regular course of business and, therefore, Assessing Officer was not
justified in levying penalty - Commissioner (Appeals) as well as Tribunal
deleted penalty - Whether in view of decision of Bombay High Court in Sheraton
Apparels v. Asstt. CIT [2002] 256 ITR 20/123 Taxman 238 holding that
books recording facts, but not maintained for computation of income, could not
be said to be books of account, questions of law did arise out of order of
Tribunal - Held, yes - CIT v. Ratnasi Deoji Patel (HUF) (Bom.)
Revision
Of orders
prejudicial to interest of revenue
- Assessment year 2001-02 - During relevant
assessment year, assessee constructed a building - Assessing Officer allowed 10
per cent rebate for personal supervision while computing value of construction
of said building - Chief Commissioner set aside assessment order under section
263 on ground that percentage of rebate given was not correct - Admittedly,
before passing said order, no personal hearing was given to assessee and there
was, thus, clear violation of principles of natural justice - Whether on that
ground itself, impugned order was liable to be set aside and matter should be
remanded back to Chief Commissioner - Held, yes - V. Selladurai v.
Chief CIT (OSD) (Mad.)
Settlement
Commission
Procedure on
application under section 245C
- Assessment years 2000-01 to 2007-08 - Whether
Settlement Commission can treat an application for settlement as invalid
meaning thereby non est, if applicant has not made a true and full
disclosure - Held, yes - Whether once decision is taken by Settlement
Commission, which acts in a quasi judicial capacity, it is for applicants to
point out that there has been either a failure to exercise jurisdiction or that
exercise of jurisdiction is based on an assumption not warranted or that order
suffers from an error of law apparent on face of record when it holds
application to be invalid and it is only in those cases, that High Court will
exercise its extraordinary jurisdiction subject of course to discretion it has
- Held, yes - During search conducted at residential premises of
petitioners, husband and wife, certain document pertaining to evasion of
foreign exchange were found - Petitioners filed income-tax returns disclosing
income from horse racing - Subsequently, they filed applications for settlement
before Settlement Commission - Settlement Commission constituted Special Bench
which rejected applications holding that same did not contain full and true
disclosure of income/wealth of petitioners - Petitioners challenged rejection
of their applications mainly on grounds that there was failure of principles of
natural justice and no sufficient opportunity was given to them as documents
relied upon by revenue were made available to them only at time of hearing;
that reasons for constitution of Special Bench were not given; and that
rejection was without jurisdiction - Whether since all documents and statements
relied upon were made available to petitioners and they had dealt with said
documents, it could be said that there was a failure of principles of natural
justice and fair play - Held, no - Whether discretion to constitute a
Bench, if there be a case which requires to be decided by Special Bench, is
that of Chairman of Commission; since petitioners had themselves set out nature
and circumstances of case and complexities of investigations which were involved
and Chairman borrowed same phraseology to constitute Special Bench, it could
not be said that action of Chairman was without jurisdiction or exercise of
power was illegal - Held, yes - Whether when during search prima
facie material of evasion of foreign exchange had come on record and same
was prima facie contrary to disclosed source of income, i.e.,
horse racing, order of Settlement Commission rejecting applications could not
be said to have suffered from either want of jurisdiction, excess of jurisdiction
or disclosing an error of law apparent on face of record - Held, yes - Hassan
Ali Khan v. Settlement Commission (Bom.)
Wealth-tax
Settlement
Commission
Procedure
on application made under section 29C
- Assessment years 2000-01 to 2007-08 - Whether
in view of facts under heading ‘Settlement Commission - Procedure on
application under section 245C’, once Commission found that applications filed
under Income-tax Act, 1961 were not bona fide, it was open to
Commission, even in respect of an application under Act, to treat application
as invalid - Held, yes - Hassan Ali Khan v. Settlement
Commission (Bom.)
Wealth-tax Act,
1957
- Section 22D
magazine
q finance bill, 2008
SURENDRA BHARGAVA, Chief Commissioner/RIDHI KARAN, Chartered Accountant
- Amendment in section 195 :
Confusion Continues
NARAYAN JAIN, Advocate and Tax Consultant
- Relief in personal income-tax will help to
develop tax culture
V. GANGADHARAN, Asstt. Officer (Taxes)
- Budget gains confidence of both taxpayers and
consumers
T.C.A. SANGEETHA, Advocate
- Finance Bill, 2008 :
An Overview
SUBHASH CHANDRA
SINGHAL, Chartered Accountant
- Violative of liberty - Proposed amendment in
section 292BB
SRIKUMAR BANERJEE, Chartered Accountant
- Budget 2008-09 - Major tax Proposals
B.N. DAS, Consultant
- Budget Bonanza
RAJIV TULI, Chartered Accountant
- Budget 2008-09 : Impact Analysis