- Assessment year 1990-91 - Notice of hearing sent to assessee-company was returned with endorsement that assessee had left premises - Tribunal passed an ex parte order - Assessee filed application to recall its order stating that it was available at address given and postal authorities wrongly returned notice - Tribunal was satisfied and recalled its ex parte order - Whether in view of rule 24 of Appellate Tribunal Rules, Tribunal had correctly exercised its discretion to recall its order after being satisfied that report given by postal authorities was incorrect - Held, yes - CIT v. Hitech Flexotext (P.) Ltd. (Delhi)

Assessment

Additional tax

- High Court following decision of Division Bench of Gauhati High Court in CIT v. Sati Oil Udyog Ltd. 2002 (2) GLT 257, disposed of appeal preferred by assessee - Whether matter was to be remitted to High Court for fresh consideration in light of decision of Supreme Court in Asstt. CIT v. J.K. Synthetics Ltd. [2001] 251 ITR 200/116 Taxman 598 wherein effect of amendment of section 143(1A) with retrospective effect had been considered - Held, yes - CIT v. Ashok Paper Mills (SC)

Avoidance of tax by certain transactions in securities

- Assessment year 2001-02 - Assessee purchased certain units of mutual funds - After receiving dividend, assessee sold those units within two or three days at a loss - In its return for relevant assessment year, assessee adjusted loss incurred in sale of units against its business profits - Assessing Officer accepted bona fides of transaction in question and allowed said adjustment - However, Commissioner invoking section 263 set aside assessment order on ground that transaction entered into by assessee was not bona fide - On basis of amendment made to section 94 with reference to assessment year 2002-03, revenue contended that Commissioner had validly exercised his powers under section 263 - Whether since disallowance of loss under section 94 in respect of transaction in question was effective only from assessment year 2002-03, same could not be invoked in assessment year in question - Held, yes - Whether since view taken by Assessing Officer with reference to assessment year in question, was only possible view, there was no occasion for Commissioner to exercise his powers under section 263 to revise order passed by Assessing Officer - Held, yes - CIT v. Vimgi Investment (P.) Ltd. (Delhi)

Bad debts

- Assessment year 1994-95 - Whether requirement of assessee to prove that a debt has become a bad debt is dispensed with by 1989 amendment in section 36(1)(vii) and, thereafter, all that assessee has to do is to write off a bad debt as irrecoverable in its account - Held, yes - CIT v. Autometers Ltd. (Delhi)

Bonus or commission

- Assessment year 1988-89 - Whether where Tribunal, following its orders for earlier assessment years, had allowed deduction with regard to payment made to employees as good work reward and expenditure incurred in giving momentoes to employees despite fact that same was in nature of bonus and, therefore, subject to limits prescribed in proviso to section 36(1)(ii) and those orders were accepted by revenue, revenue had no reason to take a different stand in respect of assessment year in question - Held, yes - CIT v. D.C.M. Ltd. (Delhi)

Business expenditure

Allowability of

- Assessment year 1988-89 - Whether in view of Delhi High Court Order in ITA No. 930 of 2005 pertaining to same assessee for assessment year 1987-88, Tribunal was justified in allowing deduction towards additional fuel surcharge liability though, according to revenue, liability neither accrued during relevant year nor paid during year in question - Held, yes - CIT v. D.C.M. Ltd. (Delhi)

- Assessment year 1988-89 - Tribunal allowed deduction of amount paid by assessee to Sales Tax Department due to delayed deposits of sales tax holding same as compensatory in nature - Whether in view of decision of Supreme Court in Mahalakshmi Sugar Mills Co. v. CIT [1980] 123 ITR 429/3 Taxman 52, no substantial question of law arose for consideration - Held, yes - CIT v. D.C.M. Ltd. (Delhi)

- Assessment years 1995-96 and 1996-97 - Assessee was engaged in business of marketing time shares of various holiday resorts - For marketing time shares, assessee engaged some consultants from Europe including ‘M’ - Assessee claimed deduction of commission paid to consultants including ‘M’ - While Assessing Officer accepted amount of commission in respect of some of consultants calculated at 3 per cent of value of contract, he found that commission paid to ‘M’ was Rs. 93,10,418 which was 11 per cent of total value of contract and restricted deduction in respect of this payment to 3 per cent of contract value and treated Rs 66,07,193 as undisclosed income of assessee - Tribunal observed that same Assessing Officer, as in case of assessee, had passed an assessment order in respect of ‘M’ on same date wherein Assessing Officer accepted fact that ‘M’ had been paid an amount of Rs. 93,10,418 but in case of assessee Rs. 66,07,193 was disallowed and added back to income of assessee as undisclosed income - Tribunal, accordingly, deleted addition - Whether Assessing Officer could not have taken two conflicting views on same date and in respect of same transaction and, therefore, Assessing Officer was unjustified in treating amount paid to ‘M’ as undisclosed income of assessee - Held, yes - CIT v. Five Star Holidays (Delhi)

- Assessment year 1990-91 - Assessee had certain dumpers and tippers which it gave on hire to contractors on a daily basis - It had incurred certain expenditure towards repairs of hired vehicles - Said amount was disallowed due to low receipts and high amount of repairs - Under terms of agreement entered into between assessee and hirer, responsibility of hirer was only to effect minor repairs and vehicles had to be maintained by assessee in case of major breakdown and failure - Whether expenditure in question was an allowable deduction - Held, yes - CIT v. Raj Kumar Singh & Co. (All.)

Chartered Accountants Act

Professional misconduct

- Bank had sanctioned term loan of Rs. 630 lakhs to company ‘H’ for its expansion-cum-modernisation project - While requesting disbursement of loan amount, company produced certificate dated 10-2-1998 issued by respondent, a Chartered Accountant, certifying that company had already spent Rs. 147 lakhs for project including Rs. 6.61 lakhs paid to bank as upfront fee - On basis of said certificate, bank disbursed Rs. 315 lakhs to company and advised it to furnish a utilization certificate - Company furnished certificate dated 26-12-1998 issued by respondent certifying that funds were utilized by company and certain sum as a interest was also paid to Bank – Subsequently, Bank on finding that a sum of Rs. 6.61 lakhs had already been shown as amount paid to the complainant-bank for upfront fee, while said amount was received from funds inducted by promoters before disbursement of said amount; amount of interest alleged to have been paid to bank was never received by bank, filed complaint alleging that respondent had not verified records properly before issuing aforesaid certificates and said certificates did not reflect end use of funds - Council found respondent guilty of professional misconduct and recommended to remove name of respondent from register of members for a period of three months - Whether since lack of responsibility displayed by respondent clearly showed that he had acted in a manner unbecoming of a Chartered Accountant, Council was justified in recommending removal of name of respondent from register of its members for a period of three months - Held, yes - Council of Institute of Chartered Accountants of India v. R.K. Tayal (Delhi)

Chartered Accountants Act, 1949

- Section 22

Circulars & notifications

- Notification dated 23-5-1996

- Circular No. 551, dated 23-1-1990

Deduction of tax at source

Salary

- Assessee had deducted TDS from salary paid to expatriate employee - However, only after survey conducted under section 133A, it deposited TDS so deducted with Government - High Court dismissed appeal filed by department under section 260A on ground that no question of law arose - Whether matter was to be remitted to High Court since a question of law, namely, as to whether assessee was entitled to plead reasonable cause for not depositing tax, arose in instant case - Held, yes - CIT v. Air Liquide India Holding (P.) Ltd. (SC)

Deductions

Exporters

- Assessment year 1996-97 - In previous year relevant to assessment year 1996-97, assessee did not make any export but sold REP licences - Whether since REP licences were given to assessee by way of an export incentive, they would be relatable to export made by assessee as part of its business so as to entitle it to benefit of section 80HHC - Held, yes - CIT v. Fragrance Credits & Securities (P.) Ltd. (Delhi)

Depreciation

Allowance/Rate of

- Question arose as to whether an assessee had an option in law to claim partial depreciation in respect of any block of assets - High Court relied upon judgment of Supreme Court in CIT v. Mahendra Mills [2000] 109 Taxman 225/243 ITR 56 wherein it was held that assessee has an option to claim such depreciation - However, section 34(1) had been omitted with effect from 1-4-1988 and at time of deciding case of Mahendra Mills (supra), concept of ‘block of assets’, was not there - Whether in instant case substantial question of law did arise for adjudication before High Court under section 260A - Held, yes - Jt. CIT v. United Phosphorous Ltd. (SC)

- Assessment year 1990-91 - Whether where assessee was required to provide certain tippers and a recovery van as stand by so that in event of any major breakdown or otherwise if any vehicle on hire was not capable of being used, extra tipper provided as a standby could have been used, depreciation and repairs expenses on such vehicles were allowable - Held, yes - CIT v. Raj Kumar Singh & Co. (All.)

High Court, appeals to

- Whether case was to be remanded to High Court for a fresh decision in accordance with law, after framing a substantial question of law, in light of judgment of Supreme Court in Manish Maheshwari v. Asstt. CIT [2007] 289 ITR 341/159 Taxman 258 - Held, yes - Anwar Pasha v. CIT (SC)

- Assessment year 1989-90 - Whether where High Court had disposed of appeal without considering as to whether a substantial question of law was involved or without framing question(s) of law, case was to be remitted to High Court for a fresh decision - Held, yes - Consolidated Engg. Enterprises v. Asstt. CIT (SC)

- Whether where High Court failed to frame substantial question of law as required under section 260A and interfered with concurrent findings given by Commissioner (Appeals) and Tribunal without giving any reasons, matter was to be remitted to High Court for consideration - Held, yes - P. Iya Nadar Charitable Trust v. CIT (SC)

Income escaping assessment

General

- Assessment year 1988-89 - Whether where reasons to believe which led to initiation of proceedings were not disclosed before Tribunal, Tribunal did not err in coming to conclusion that Assessing Officer was not justified in assuming jurisdiction for re-opening assessment - Held, yes - CIT v. A&A Enterprises (Delhi)

Income from other sources

Chargeable as

- Assessment year 1996-97 - Assessee-company had entered into an agreement with a foreign company for purchase of a second-hand plant - It generated funds by issuing shares and unsecured loans and put such funds in short-term fixed deposit and earned interest on same - Later assessee’s deal with foreign company fell through - Assessing Officer assessed interest so earned by assessee as income from other sources - Assessee’s case was that amount deposited was towards margin money for opening a letter of credit in favour of foreign company and, therefore, it was capital receipt - It did not place any material on record to show that it had deposited money to open a letter of credit - All that was available on record was that assessee deposited money in short-term fixed deposits - Whether Tribunal was justified in holding that amount raised by assessee were, in fact, surplus funds with assessee and, therefore, interest income earned by assessee on said deposits was to be taxed as income earned from other sources and not as a capital receipt as claimed by assessee - Held, yes - Kiranjit Foils Ltd. v. CIT (Delhi)

Income-tax Act 1961

- Section 4

- Section 32

- Section 32A

- Section 35AB

- Section 36(1)(ii)

- Section 36(1)(iii)

- Section 36(1)(vii)

- Section 37(1)

- Section 56

- Section 73

- Section 80HHC

- Section 94

- Section 132B

- Section 143

- Section 145

- Section 147

- Section 192

- Section 234B

- Section 237

- Section 254

- Section 260A

- Section 261

- Section 271(1)(c)

Individual

Assessable as

- Assessment year 1996-97 - Whether where notices under section 148 and other sections were issued by treating assessee as an individual, Assessing Officer could not have framed assessment by treating income in hands of HUF - Held, yes - CIT v. Rohtas (Punj. & Har.)

Interest on borrowed capital

- Whether in view of decision of Delhi High Court in CIT v. Saraswati Chemicals & Allied Industries (P.) Ltd. [2001] 249 ITR 235/114 Taxman 564 undisbursed salaries to directors did not amount to borrowed capital and, therefore, interest payable on these salaries was not an admissible deduction under section 36(1)(iii) - Held, yes - CIT v. Saraswati Chemical & Allied Industries (P.) Ltd. (Delhi)

- Whether in view of Supreme Court’s judgment in case of Dy. CIT v. Core Health Care Ltd. [2008] 167 Taxman 206, it was to be held that interest paid in respect of borrowing for purchasing capital assets, which are not put to use in concerned financial year, can be permitted as an allowable deduction - Held, yes - Jt. CIT v. United Phosphorous Ltd. (SC)

- Assessment year 1990-91 - Assessee-firm had taken interest-free advance from ‘J’ - Later, it borrowed money from market on interest to return advance of ‘J’ - Assessing Officer disallowed interest incurred on said borrowing - Whether since assessee as a prudent businessman had decided to borrow money from market instead of liquidating its assets, interest paid was allowable as a business expenditure - Held, yes - CIT v. Raj Kumar Singh & Co. (All.)

Interest, chargeable as

- Assessment years 1989-90 to 1991-92 - Assessing Officer disallowed assessee-trust’s claim of exemption under section 11(4A) and raised demand on entire income - High Court quashed order of Assessing Officer and declared assessee as not assessable - Supreme Court reversed order of High Court - Assessing Officer, thereafter, passed fresh order of assessment raising demand and computed interest under section 234B - Assessee filed a petition for waiver of interest placing reliance on Notification issued by CBDT on 23-5-1996 and contended that liability to pay tax on its income arose only after decision of Apex Court - Director General (Exemptions) however rejected waiver petition - Whether, on facts, and in view of Board’s Notification petition for waiver of interest was to be reconsidered - Held, yes - Thanthi Trust v. Director General of Income-tax (Exemptions) (Mad.)

Investment allowance

- Assessment year 1988-89 - Whether in view of Delhi High Court Order in ITA No. 930 of 2005 pertaining to same assessee for assessment year 1987-88, Tribunal was justified in allowing investment allowance on machinery installed in Data Processing Unit, though according to revenue, same was covered by Entry 22 of Eleventh Schedule and no reserve was created during relevant year - Held, yes - CIT v. D.C.M. Ltd. (Delhi)

Losses

In speculation business

- Assessment year 1994-95 - Assessee-company claimed set off of loss on sale of shares against ‘interest income’, ‘dividend income’, ‘hire charge income’ and ‘other income’ - Assessing authority disallowed assessee’s claim on ground that loss suffered by assessee in its share dealing was speculation loss within meaning of section 73 and same could be set off only against profits of another speculation business - Assessee claimed that its principal business was of granting loans and advances and, thus, under Explanation to section 73, it was entitled to set off of loss as claimed - Tribunal accepted contention of assessee and set aside order of Assessing Officer - Whether since Tribunal had not considered whether assessee-company could prove that its principal business was of granting loans and advances and, thus, came within exception stipulated in Explanation to section 73, order passed by Tribunal was to be set aside - Held, yes - CIT v. Micro India Ltd. (Gauhati)

Method of accounting

Rejection of accounts

- Assessment year 1987-88 - Whether when an estimate is made to best judgment of an Assessing Officer, he substitutes income that is to be computed under section 29 - Held, yes - Whether once best judgment assessment is made by fixing a rate of net profit, assessee’s claim for deduction on account of expenses cannot be deemed to have been ignored - Held, yes - Whether net profit rate is applied after taking into consideration all factors and it accounts for all deductions which are referred to under section 29 and are deemed to have been taken into consideration while making such an estimate - Held, yes - CIT v. Gian Chand Labour Contractors (Punj. & Har.)

- Assessment year 1990-91 - Whether where payment made by hirer of machineries stood confirmed from account books maintained by hirer as also that of assessee and there was no discrepancy in recording any major payment in books of account, provision of section 145(2) was not attracted and income had to be assessed on basis of actual receipt as disclosed by assessee - Held, yes - CIT v. Raj Kumar Singh & Co. (All.)

System of accounting

- Whether an assessee has liberty to adopt any recognized method of accounting for its business and income should be computed in accordance with such regular maintained accounting system - Held, yes - Whether income-tax authority has no jurisdiction to meddle in matter either by directing assessee to maintain its account in a particular manner or adopt a different method for valuing work-in-progress - Held, yes - MKB (Asia) (P.) Ltd. v. CIT (Gauhati)

Penalty

For concealment of income

- Assessment year 1994-95 - Tribunal deleted penalty on ground that Assessing Officer had not recorded his satisfaction in assessment order that penalty proceedings ought to be initiated - Whether since in assessment order Assessing Officer had recorded that since assessee had furnished inaccurate particulars of its income and had deliberately reduced its income liable to tax, penalty proceedings under section 271(1)(c) had been initiated separately, it could be said that Assessing Officer had recorded his prima facie satisfaction about initiation of penalty proceedings - Held, yes - Whether, therefore, Tribunal erred in law in coming to conclusion that Assessing Officer had not recorded his prima facie satisfaction about initiation of penalty proceedings - Held, yes - CIT v. Aravali Securities & Finance Ltd. (Delhi)

- Assessment year 2002-03 - Whether where from assessment order it was not possible to discern any satisfaction of Assessing Officer that penalty proceedings must be initiated against assessee under section 271(1)(c), penalty proceedings could be sustained - Held, no - CIT v. O.P. Lohia (Delhi)

Refunds

General

- Assessment year 1997-98 - Whether in order to consider belated return for refund on merits, delay has to be necessarily condoned by Board under section 119(2)(b) - Held, yes - Whether Board should condone delay if failure to condone delay causes genuine hardship to assessee, no matter whether delay in filing return is meticulously explained or not - Held, yes - Pala Marketing Co-operative Society Ltd. v. Union of India (Ker.)

Search and seizure

Retained assets, application of

- Whether where (i) order passed under section 132B showed that certain amount withdrawn from assessee’s bank account, which had been seized, was retained for estimated liability pending completion of assessment, (ii) there was no challenge to order passed under section 132B, and (iii) assessment was yet to be completed, no relief to assessee against retention of amount could be granted - Held, yes - KCC Software Ltd. v. DIT (Inv.) (SC)

Supreme Court, appeals to

- Whether instant appeal was to be listed after decision of Constitution Bench of Supreme Court in Brij Lal v. CIT [2005] 279 ITR 432/[2006] 150 Taxman 106 - Held, yes - Kumar Maini v. CIT (SC)

- Whether since matter in instant case was squarely covered by decision of Supreme Court in Siddheshwar Sahakari Sakhar Karkhana Ltd. v. CIT [2004] 139 Taxman 434, appeals were to be disposed of in terms of said judgment - Held, yes - CIT v. Malegaon Sahakari Sakhar Karkhana Ltd. (SC)

Technical know-how expenditure

- Assessee had started a computer training centre in collaboration with NIIT - Pursuant to agreement, assessee paid certain sum as technical know-how fee to NIIT for getting technical assistance from NIIT and claimed deduction of same - Assessing Officer invoking Explanation to section 35AB treated expenditure as capital expenditure - Whether since assessee was utilizing said technical know-how for imparting training in computer operation for coaching students which was neither manufacture nor processing of goods, Explanation to section 35AB was not applicable and entire expenditure could not be treated as capital expenditure - Held, yes - CIT v. Frontline Software & Services (P.) Ltd. (MP)

magazine

features

q fbt

geeta das, Chartered Accountant

- FBT on ESOPs - Some clarifications

q budget 2008 - pre-budget analysis

T.N. Panday, Ex-Chairman, CBDT

- Budget 2008 : Finance Minister needs to be fair to salaried employees by restoring standard deduction

q general concepts

gouri puri

- Equity in taxation

case digest/itat

q table of cases digested

Cargill India (P.) Ltd. v. Dy. CIT (Delhi - Trib.)

q subject index to cases digested

Income-tax

Penalty

For failure to furnish information or document under section 92D

- Assessment year 2002-03 - Whether provisions of section 271G are quite different from provisions of section 271(1) and, therefore, no satisfaction need be recorded before initiating proceedings under section 271G - Held, yes - Cargill India (P.) Ltd. v. Dy. CIT (Delhi)

Transfer pricing

Maintenance and keeping of information and document by person entering into an international transaction

- Assessment year 2002-03 - Whether statutory scheme envisages that TPO shall first serve notice under section 92CA(2) requiring assessee to produce evidence in support of his computation of Arm’s Length Price (ALP) and it is only if complete information is not furnished, or otherwise, TPO is of view that more information on specified points is required from assessee, that he can issue notice under section 92D(3); there is no rationality in requiring information, documents from assessee first under section 92D(3) and thereafter provide opportunity to assessee to support its ALP - Held, yes - Whether further, notice under section 92D(3) cannot be vague but must require specific information or document which according to TPO is necessary for determination of ALP of international transactions - Held, yes - Whether under section 92D(3), it will not be possible to call for all information prescribed under rule 10D including supporting information and documents mentioned in rule 10D(3) in a routine or casual manner without application of mind as to what specific information is required to achieve said purpose; information, which has already been furnished by assessee either in audit report or in response to notice under section 92CA(2), would be of no use and there is no point in requiring same information again or require unprescribed information under section 92D(3) and cast additional burden on assessee; in all such cases, notice would no more remain valid notice under section 92D(3)/271G - Held, yes - In respect of international transactions carried by assessee during relevant year, Assessing Officer made reference to TPO for determination of ALP of those transactions - TPO issued notices and asked assessee to support and substantiate computation of ALP in said transactions - TPO further required assessee to furnish information including balance sheet, profit and loss account, statement of computation of income, audit report, tax report and also information and documents maintained as prescribed under section 92D, without specifying any particular information clause of rule 10D - Assessee submitted those documents, though with a delay of about one month - As regards delay, it was explained that same took place on account of a reasonable cause as its financial controller, being out of town, was not available to furnish information which was voluminous and highly technical in nature - However, Assessing Officer concluded that by not submitting required documents in time, assessee committed a default under section 271G and, thus, imposed penalty on assessee under section 271G -Whether since notices in question were issued by TPO without application of mind and without considering documents already placed by assessee on record and without consideration as to which of specific clauses of sub-rule (1) or other sub-rules of rule 10D was attracted or which relevant information was needed, said notices could not be treated as valid and legal notices in terms of section 92D(3) and failure of assessee to comply with such notices in time could not justify levy of penalty under section 271G - Held, yes - Whether moreover, since Assessing Officer recorded no finding on reasonable cause and imposed penalty without considering section 273B, imposition of impugned penalty on mere technical ground, was not sustainable - Held, yes - Cargill India (P.) Ltd. v. Dy. CIT (Delhi - Trib.)

Income-tax Act, 1961

- Section 92D

- Section 271G

special leave petitions decided by supreme court of india

q Table of cases

Balmuri Jagadeeswarrao v. LIC of India

CIT v. Ajanta Electronics (P.) Ltd.

CIT v. Babulal Mishri Lal Lodha

CIT v. Bhushan Metsllies Ltd.

CIT v. Divine Leasing & Finance Ltd.

CIT v. Kothari Trading Co.

CIT v. L. G. Balakrishnan & Bros.

CIT v. Prabhat Builders (P.) Ltd.

CIT v. S.K. Construction Company

CWT v. Girija Ammal (T.)

Dy. CIT v. Hamidaben N. Narsinh

Jt. CIT v. V.S. Dempo & Co. (P.) Ltd.

TAXMAN