.

Additions made on basis of inference that assessee had understated cost of purchase in books of account, merely on statement of seller, without bringing any material on record, is not justified.

Raj & Sandeep Ltd. vs. ACIT – 160 Taxman 129 (Chandigarh)

2. Amortisation of expenditure — S. 35DDA

Section 35DDA is inserted with effect from 1-4-2001 and therefore it is applicable prospectively and applicable from A.Y. 2002-03 and onwards.

PI Industries Ltd. vs. Asstt. CIT (2007) [106 ITD 401 (Jodh)].

3. Appellate Tribunal — Additional ground — S. 254

When all the relevant facts are on record and the issue being sought to be raised is a pure question of law on the basis of admitted facts of the case, the same can be admitted for decision.

Jehtalal K. Morbia vs. ACIT (2007) 109 TTJ 1 (Mum.)

4. Appellate Tribunal — Power — S. 254

Assessee can raise objection that the assessment framed by the AO was time-barred for the first time before the Tribunal as it is purely a legal issue going to the very root of the assessment.

ACIT vs. Chowdhary Motor Agency (2007) 108 TTJ 998 (Asr.)

5. Appellate Tribunal — S. 254

Special Bench of Tribunal in seisin of entire appeal, has power to admit additional ground.

ACIT vs. DHL Operations BV (2007) 108 TTJ 152 (Mum.)

Tribunal has powers and, indeed, duty, to examine the nature of order passed by the AO as ‘reassessment order’ and whether this order can be termed as a reassessment order at all.

R. K. Steel Syndicate vs. ITO (2007) (108) TTJ 353 (Mum.)

6. Appellate Tribunal — S. 254(2)

1. Where an order passed by Tribunal is based upon an interpretation or application of law which ultimately found to be wrong in light of subsequent judicial pronouncement which is rendered by jurisdictional High Court or subsequent Supreme Court would be always regarded as mistake apparent from record.
    

2. Where an order passed by Tribunal is based upon a particular decision of High Court and if the same is reversed in further proceedings would justify a rectification within the provision of section 254(2).
    

3. Where an order passed by Tribunal is based upon a particular decision of High Court which is overruled by a subsequent decision of Supreme Court then in that case the order of the Tribunal which was based on overruled decision could not be allowed to stand and therefore, the Tribunal is duty bound to pass an order in conformity with the law laid down by the Supreme Court.

Jt. CIT vs. Milton’s Ltd. (2007) [106 ITD 478 (Mum)].

7. Assessment — Claim during the course of assessment — S. 35D r.w.s. 143

According to the Tribunal, the Apex court in case of Goetze (India) Ltd., though held that the A.O. had no power to entertain any claim of the assessee otherwise than through a return or revised return, had also concurred with the judgment of National Thermal Power Corporation Ltd. by stating that the Tribunal had the power to entertain any question of law for the first time before it and the said power was not diluted. Further the assessee had made available all necessary details, and it was apparent that the assessee could not have made the claim for deduction while filing the return. Therefore, non-consideration of deduction would be perverse and would make the issue a question of law.

Lupin Agrochemicals (I) Ltd. vs. JCIT, ITA No. 3178/Mum/1999, Bench – K, A.Y. 1995-96, dt. 14-2-2007 – BCAJ p. 32, Vol. 39-D, Part 1, April 2007.

8. Assessment — S. 143

A company stands dissolved consequent upon amalgamation with another company under orders of High Court, and assessment made on such company after such dissolution u/s 143(3) had to be struck down as null and void.

Better Investments (P) Ltd. vs. ITO – (2007) 161 Taxman 130 (Delhi) (SMC)

9. Assessment — Time limit for completion of assessment or reassessment — S. 153(2)

Section 153(2) is procedural and therefore, amendment to the section would have retrospective effect.

ITO vs. O.M. Shahul Hameed [106 ITD 342 (Chennai)].

10. Bad Debt — S. 36(1)(vii)

Debt written off in the books. Assessee having bona fide written off the bad debt, same was allowable.

Kanoria Securities & Financial Services (P) Ltd. vs. ACIT (2007) 108 TTJ 473 (Mum.)

11. Block assessment — Penalty — S. 158BFA(2)

On the facts & circumstances the authorization of search u/s. 132(1) was given on
30-12-1996 and the same was executed on 3-1-1997 whereas the penal provision of section 158BFA(2) came in to effect/operation from 1-1-1997 and therefore, it was held that the provision of section 158BFA(2) could not be applied to the facts of the case. In principle, therefore, the penal provision would apply provided that the same is operational at the relevant time of authorization of search by the authorities.

Suraj Prakash Soni vs. Asstt. CIT (2007) [106 ITD 321 (Jodh)].

12. Block assessment — S. 158BE

Panchnama need not be prepared every time for purpose of lifting prohibition or making inventory of stocks. Panchnama has to be prepared independently on dates of search.

Plastika Enterprises vs. ACIT – (2007) 161 Taxman 163 (Mumbai)

13. Book profit — S. 115JA

Receipt of capital subsidy credited to profit and loss account could not form part of the book profit. The Tribunal held that if a capital subsidy was exempt from tax, then it cannot be taxed u/s 115JA of the Act. The Tribunal noted that ‘exemption allowed by one provisions of the Act cannot be taken away by another provision of the Act’.

Pal Synthetics Ltd. vs. JCIT, ITA No. 1310/Mum/2003, Bench – E, A.Y. 1997-98, dated 6-2-2007 – BCAJ p. 31, Vol. 39-D, Part 1, April 2007.

For purpose of computing book profits under section 115JA, provision made for bad debts cannot be added back by invoking clause (c) of Explanation to s. 115JA.

IBM India Ltd. vs. CIT (2007) 108 TTJ 531 (Bang.)

Provision for doubtful debts made after considering specified and identified debts which were not recoverable is to be considered as ascertained liability, and same cannot be added to income by invoking clause (c) of explanation to section 115JA.

ACIT vs. Eicher Ltd. – (2007) 160 Taxman 80 (Delhi)

14. Business expenditure — Allowability — S. 37

Assessee, though claiming entire revenue expenditure under the head "Deferred revenue expenditure" in accordance with its method of accounting consistently followed, AO was not justified in disallowing such expenditure.

Guruji Entertainment Network Ltd. vs. ACIT (2007) 108 TTJ 180 (Delhi)

15. Business expenditure — Royalty — S. 37(1)

Transaction being at arm’s length and for commercial consideration, royalty payment to foreign company under licensing agreement for use of know-how was allowable in entirely under section 37(1).

Dy. CIT vs. Vinarom Limited (2007) 108 TTJ 51 (Bang.)

16. Business expenditure — S. 37

Payment of a percentage out of total receipts of business to the directors of assessee company who were also paid salary, was not deductible as business expenditure.

I. D. O. R. I. (P) Ltd. vs. Dy. CIT (2007) 108 TTJ 433 (Pune)

Fines and penalties paid by assessee to NSE for trading beyond exposer limit are payments made in regular course of business and not for infraction of law, hence allowable.

Master Capital Services Ltd. vs. Dy. CIT (2007) 108 TTJ 389 (Chd.)

Amount paid by assessee as premium on leasehold land, in addition to annual rent, which premium amount was not refundable in case lease was terminated, was capital expenditure.

JCIT vs. Mukund Ltd. (2007) 109 TTJ 172 (Mum.)

17. Business expenditure — Sum paid on VRS — S. 37(1)

Sum paid on Voluntary Retirement Scheme (VRS) was allowable u/s. 37(1) as it was introduced with an intention to carry on its business more efficiently and profitably. However, such payment could not be regarded as capital expenditure but the same could be allowed as revenue expenditure as it did not give any advantage in capital field.

PI Industries Ltd. vs. Asstt. CIT (2007) [106 ITD 401 (Jodh)].

18. Business expenditure — Warranty liability — S. 37

Provision for warranty liability is not contingent liability, hence allowable deduction in the year of sale.

IBM India Ltd. vs. CIT (2007) 108 TTJ 531 (Bang.)

19. Business Expenses — Foreign tour expenses — S. 37

Employees assessee’s son and daughter-in-law. Assessee having furnished details supported with vouchers showing that foreign visit was for business purposes, expenditure incurred on such foreign visit was allowable business expenditure.

Mahesh Chand Jain vs. ACIT (2007) 108 TTJ 190 (Delhi)

20. Business income — Business loss or capital loss — S. 28

Building which was being used for construction of industrial galas could only be treated as a business assets and sale thereof gave rise to business loss allowable accordingly.

Magna Industries & Exports Ltd. vs. ITO (2007) 108 TTJ 833 (Mum.)

21. Business income — House Property — S. 28(1) r.w. S. 22

Where rental income had been taken as part of business income for past several years, same cannot be assessed as income from house property, in the year, without any new or distinguishing facts having been brought on record.

Diesel Engg. Co. (P) Ltd. vs ITO – (2007) 161 Taxman 129 (Delhi)

22. Business Income — Trading receipt — S. 28

Surplus amount realized by assessee bank on sale of pledged jewellery being refundable to respective borrowers could not be treated as trading receipt.

Lakshmi Vilas Bank Ltd. vs. Dy. CIT & Anr. (2007) 108 TTJ 256 (Chennai)

23. Business loss — Fluctuation loss — S. 28

Held that foreign exchange fluctuation loss is an allowable expenditure.

Indian Shaving Products Ltd. vs. ACIT – (2007) 161 Taxman 166 (Jaipur)

24. Business loss or capital loss — S. 28

Amount advanced to contractor for construction of cold storage plant becoming irrecoverable, it was a capital loss, hence, could neither be allowed as business loss nor as bad debt.

Kwality Fun Foods& Restaurants (P) Ltd. vs. DCIT (2007) 109 TTJ 112 (Chennai)

25. Capital Bonds — Transfer — S. 2(47)

Capital bonds surrendered after the date of redemption amounts to extinguishment of right and therefore, it is regarded as transfer u/s. 2(47). Thus, resultant loss amount to capital loss.

Mrs. Perviz Wang Chuk Basi vs. Jt. CIT (2007) [290 ITR 246 (Mumbai) (AT) pg.].

26. Capital Gain — Exemption — S. 54F

The Assessee invested the sale proceeds in the construction of residential house, which was constructed on a plot of a land belonging to her husband. Her claim was rejected by the A.O., on the ground that the title of the property had not been transferred in the name of the assessee. Referring to section 27(iiia) the Tribunal noted that the registration of the property in the name of the holder was no longer necessary. Hence assessee was entitled to exemption.

Kamlesh Bansal vs. ITO, ITA No. 2579/Del/2004, Bench – G, A.Y. 2001–02, dated 30-6-2006 – BCAJ p. 304, Vol. 39 – D, Part 3, June 2007

Expenditure incurred on making the house habitable should be considered as investment in purchase of the house.

Saleem Fazelbhoy vs. Dy. CIT (2007) 108 TTJ 894 (Mum.)

27. Capital Gain — Slump sale — S. 50B

In the case of slump sale, where liabilities are more than value of assets, the net worth, viz., the cost of acquisition has to be taken at nil and entire sale consideration is liable to capital gains tax.

Zuari Industries Ltd. vs. ACIT (2007) 108 TTJ 140 (Mum.)

28. Capital gains — S. 45

Capital Gains on sell of flat built on plot of land, has to be bifurcated, considering the period of holding of land and constructed flats. Held, that sale consideration attributable to cost of land has to be assessed as long-term capital gains and balance to be assessed as short-term capital gains.

CIT vs. Ashok Kumar Arora – (2007) 161 Taxman 101 (Delhi)

29. Capital or revenue expenditure — S. 37

Expenditure on acquisition of licence for use of computer software is capital expenditure.

Sudarshan Chemical Industries Ltd. vs. ACIT (2007) 108 TTJ 28 (Pune)

Expenditure on purchase of application software is allowable revenue expenditure.

IBM India Ltd. vs. CIT (2007) 108 TTJ 531 (Bang.)

Fee paid by assessee bank to SEBI for registering as merchant banker is revenue expenditure.

Lakshmi Vilas Bank Ltd. vs. Dy. CIT & Anr. (2007) 108 TTJ 256 (Chennai)

30. Capital or revenue receipt — S. 4

Consideration for transfer of distributorship rights, goodwill and non-compete covenant for a particular period constituted capital receipt.

Dy. CIT vs. Sri K. S. N. Enterprises (P) Ltd. & Ors. (2007) 108 TTJ 940 (Hyd.)

Receipt for transfer of skilled personnel and database was chargeable revenue receipt.

IBM India Ltd. vs. CIT (2007) 108 TTJ 531 (Bang.)

31. Capital revenue receipt — S. 4

Amount received by assessee on surrender of goodwill, user of trade mark rights, brand name was capital receipt.

Jt. CIT vs. Kwality Café & Restaurant (P) Ltd. (2007) 108 TTJ 230 (Chd.)

32. Cash Credits — Gifts — S. 68

Additions of Gift u/s 68 on mere suspicion, could not form the basis for coming to conclusion that the nature and source of gifts remained unexplained, when the A.O. has not exercised the inherent powers entrusted u/s 131 by issuing summons to examine various donors.

ITO vs. Sanjay Kumar Goel – (2007) 160 Taxman 169 (Delhi)

33. Cash credits — S. 68

Unexplained share capital — If the shareholders existed, then no further inquiry need be made.

ITO vs. Lanyard Foods Ltd., ITA No. 5549 – 5550/M/2003, Bench – D, A.Y. 1997-98 & 1999–2000, dated 31-1-2007 – BCAJ pg. 304, Vol. 39–D, Part 3, June 2007

34. Charitable — purpose — S. 11

Assessee society established for advancement of computer education among general public was having a charitable object and element of any personal benefit being totally absent, was eligible for exemption under section 11.

ACIT vs. Graphic Era Educational Society (2007) 108 TTJ 608 (Delhi)

35. Charitable Purpose — Registration — S. 12AA

CIT having not doubted the aims and objects of the applicant society, registration could not be denied merely on the ground that it has hired a building owned by close relatives of one of its trustees.

Modern Defence Shikshan Sansthan vs. CIT (2007) 108 TTJ 732 (Jd.)

36. Charitable purpose — S. 2(15) r.w. S. 12AA

Once it is found that association was formed for advancement of object of general public utility, and it was not intended to serve merely the interest of the members of assessee association, and that advancement of trade leading to economic prosperity brings benefit to entire community, the assessee association is entitled for Registration u/s 12AA.

Truck Operators Association vs. (2007) CIT – 160 Taxman 127 (Delhi)

37. Charitable purpose — Stock Exchange — S. 11

Revenue authorities having consistently held that the assessee, a stock exchange, is a charitable institution and allowed exemption under section 11 and there being no change in the objects of the assessee it is eligible for exemption under section 11.

ACIT vs. Jaipur Stock Exchange (2007) 108 TTJ 393 (Jp.)

38. Charitable purposes — S. 11

The revenue contented that for the purpose of section 11, incomes should be derived from property held under a trust. The Tribunal did not find any force in the Revenue’s contention that to avail exemption the property should be held under a trust and no trust was discernible in the case of the assessee, for the reason that right from its very inception, under the old Act as well as under the new Act, the assessee had been recognised as charitable institution which was holding property as legal entity, and enjoying the benefit of section 11. Accordingly, the CIT(A) had rightly held that the assessee was not engaged in any business activity, hence, the provision of section 11(4A) were not applicable.

ADIT (E) vs. The Stock Exchange, ITA No. 4870/Mum/2002, ITA No. 5242/Mum/2003 and 5798/Mum/2004, Bench - E, A. Y. 1999–2000 to 2001-02, dt. 4-1-2007 — BCAJ p. 30, Vol. 39-D, Part 1, April 2007.

39. Charitable trust — Charitable purpose — S. 11

Trust created for the benefit of a particular small community cannot be denied benefit under section 11 on the ground that it is not for general public utility.

Rajkot Visha Shrimali Jain Samaj vs. ITO (2007) 109 TTJ 286 (Rajkot)

40. Commissioner (Appeals) — S. 251

Observations of the CIT (A) that the AO could not enhance the income while completing the assessment in pursuance of directions given by the CIT were illegal and without jurisdiction.

Sadhu Ram & Sons vs. CIT & Anr. (2007) 108 TTJ 373 (Asr.)

41. Company — Book profit — Ss. 80hhc, 115jb

For purpose of section 115JB (2), deduction under section 80HCC has to be computed as per books of account and not as per method of computing profits under the head "Profits and gains of business or profession."

Banswara Syntex Ltd. vs. ACIT (2007) 109 TTJ 274 (Jd.)

42. Condonation of delay — Reasonable cause — S. 254

There cannot be a sufficient cause for condonation of delay in filing appeals before Tribunal on the basis of a subsequent decision on appeal by CIT (A).

ITO vs. Hemraj Onkarji Mali & Ors. (2007) (108) TTJ 100 (Ind.)

43. Co-operative Societies — Deduction of income of business of banking — S. 80P(2)(a)(i)

Income of co-operative bank from its banking business with non-member is eligible for deduction under section 80P(2)(a)(i).

The Milli Co-operative Urban Bank Ltd. vs. ITO (2007) 109 TTJ 116 (Hyd.)

44. Deduction — Actual payment — Allowability of Interest to Financial Institutions — S. 43B

Interest payable in earlier year to Financial Institutions was converted into shares in subsequent year, in accordance with the BIFR scheme, amount to actual payment and therefore allowable as business expenditure.

Luster Tiles Ltd. vs. Addl. CIT (Asstt) (2007) [291 ITR 152 (AT) (Jaipur)].

45. Deduction — Computation — S. 80-O

Deduction under section 80-O is not allowable on gross receipts but on net receipts after reducing the expenditure incurred.

Blue Star Ltd. vs. Jt. CIT (2007) 108 TTJ 336 (Mum.)

46. Deduction — Profits and gains — Industrial undertaking — S. 80-ib

Income earned on account of duty drawback is income derived from industrial undertaking eligible for deduction under section 80-IB.

ITO vs. Paramount Industrial Corpn. (2007) 109 TTJ 295 (Chd.)

47. Depreciation — Allowability — S. 32(1)(Ii)

Copyrights and telecast rights of TV serials. Assessee having purchased running business including tangible assets, goodwill, copyrights, telecast rights, licences, etc. it was entitled to depreciation on the cost representing value of intangible rights.

Guruji Entertainment Network Ltd. vs. ACIT (2007) 108 TTJ 180 (Delhi)

48. Depreciation — Computer software — S. 32

Computer software was ‘intangible asset’ eligible for depreciation @ 25 per cent for asst. yr. 2001-02.

Sudarshan Chemical Industries Ltd. vs. ACIT (2007) 108 TTJ 28 (Pune)

49. Depreciation — Passive user — S. 32

In the absence of actual user, depreciation was not allowable on the dumper.

R. S. Nayyar vs. Jt. CIT (2007) 108 TTJ 671 (Pune)

50. Depreciation — S. 32

Assessee is entitled to depreciation on acquiring ships even though registration took place in subsequent year as the assessee is regarded as owner on acquisition of ships.

Jt. CIT vs. Essar Shipping Ltd. (2007) [290 ITR 209 (Mumbai) (AT)].

Depreciation is a necessary deduction to arrive at the income of a charitable trust or institution available for application for charitable purposes and, therefore, depreciation is allowable even in the case of charitable institution.

ACIT vs. Jaipur Stock Exchange (2007) 108 TTJ 393 (Jp.)

51. Depreciation — S. 38(2)

In terms of section 38(2) where an asset is not exclusively used for business purpose, depreciation was to be restricted to proportionate part.

Sushil Kumar Jalani vs. ACIT (2007) 108 TTJ 724 (Jd.)

52. Distributed profits — Dividend — Ss. 115O, 115JA

Tax paid by company on distribution of dividends under section 115O is nothing but income-tax and has to be added back to book profits under section 115JA.

Dy. CIT vs. Dhanalakshmi Paper Mills Ltd. (2007) 108 TTJ 84 (Chennai)

53. Double taxation relief — Agreement between India and USA — S. 90

Assessing Officer may allow the credit for the taxed paid in USA as per the provision of section 90 r/w art. 25(2)(a) of the DTAA between India and USA, whether or not such claim is made in the return or during the assessment proceedings.

IBM India Ltd. vs. CIT (2007) 108 TTJ 531 (Bang.)

54. Expenditure in relation to income not includible — S. 14A

A.O. on the basis of material on record, should pinpoint the actual expenses incurred to earn the non taxable income, A.O. cannot estimate a part of expenditure on assumption that same must have been incurred to produce non-taxable income and disallow the same u/s 14A.

ACIT vs. Eicher Ltd. – (2007) 160 Taxman 80 (Delhi)

55. Expenditure in relation to income not includible — Disallowance — S. 14A

Borrowing for investment in shares. When the major part of investment came out of sale proceeds of assessee’s one unit and there was no material on record to prove that any interest was paid for earning tax free income no disallowance could be made by invoking section 14A.

Zuari Industries Ltd. vs. ACIT (2007) 108 TTJ 140 (Mum.)

56. Expenditure in relation to income not includible — Interest — S. 14A

Interest on money borrowed for investment in shares. Assessee doing business in financing and investment in shares, proportionate interest on money borrowed and invested in shares was disallowable under section 14A.

Mohan T. Advani Finance (P) Ltd. vs. ITO (2007) 108 TTJ 170 (Mum.)

57. Expenditure in relation to income not includible — Premium — Insurance policy — S. 14A

Income from Keyman Insurance Policy not having been included in the total income expenditure incurred by way of premium on this policy cannot be allowed as deduction in view of prohibition in section 14A.

Agarwal Packaging (P) Ltd. vs. CIT (2007) 108 TTJ 787 (Pune)

58. Expenses or payments not deductible — Disallowance — Ss. 40A(2), 40A(3)

Interest paid to sister concern. Interest paid by assessee to a sister concern on the payments which remained outstanding for more than one year at the rate of 12 per cent could not be disallowed under section 40A(2).

Anil Kumar vs. ITO (2007) 108 TTJ 22 (Asr.)

Section 40A(3) having been amended w.e.f. 1st April, 1996 and R. 6DD(j) having been omitted on 25th July, 1995, 20 per cent of the amount paid in cash has to be disallowed under the amended provisions of section 40A(3).

R. S. Nayyar vs. Jt. CIT (2007) 108 TTJ 671 (Pune)

59. Expenses or payments not deductible — Disallowance — S. 40A(9)

Payment to various clubs by way of reimbursements is not disallowable under
section 40A(9).

Zuari Industries Ltd. vs. ACIT (2007) 108 TTJ 140 (Mum.)

60. Export — Additional ground — S. 80HHC

Issue raised for deduction under section 80HHC, being a legal issue coupled with the facts already available on record, the first appellate authority should have considered this claim and decided the issue in accordance with law.

Thomas Kurian vs. ACIT (2007) 108 TTJ 439 (Coch.)

61. Export — Interest — S. 80HHC

Interest on overdue account charged to customers for belated payment is outside the purview of Expln. (baa) to section 80HHC.

Sudarshan Chemical Industries Ltd. vs. ACIT (2007) 108 TTJ 28 (Pune)

62. Export — Profits of the business — S. 80HHC

Duty free import of inputs under an advance licence by itself does not gave rise to a benefit of income nature for purpose of section 80HHC and therefore profits could not be reduced by the value of advance licence.

ACIT vs. Wyeth Lederle Ltd. (2007) 108 TTJ 889 (Mum.)

63. Export — S. 80HHC

1. Write back of Central excise liability is business profit u/s. 41(1) and it is not similar to brokerage, commission, interest or rent charges as provided under Explanation (baa) to section 80HHC(4B).
   Extrusion Process (P.) Ltd. vs. ITO [106 ITD 336 (Mum)]
    

2. Brought forward losses can be set-off for computing profits for the purpose of deduction u/s. 80HHC.

Jt. CIT vs. Milton’s Ltd. [106 ITD 478 (Mum)].

AO having noted in the assessment order itself that assessee had export turnover, claim for deduction under section 80HHC made for the first time before CIT(A) could not be rejected simply because the same was not made before the AO.

Thomas Kurian vs. ACIT (2007) 108 TTJ 439 (Coch.)

For purposes of working out export turnover of trading goods only so much of the direct cost is to be reduced as is attributable to realized trading export turnover.

ITO vs. Artmis Exports (P) Ltd. (2007) 108 TTJ 850 (Mum.)

64. Export — Total turnover — S. 80HHC

In arriving at the adjusted total turnover, only the realized sale proceeds of trading export turnover have to be reduced from total turnover.

ITO vs. Artmis Exports (P) Ltd. (2007) 108 TTJ 850 (Mum.)

65. Export of films — S. 80HHF

Deduction in respect of profits and gains from export of films – Transfer of telecast rights of film by way of assignment – Lack of documentary evidence indicating export out of India not fatal, and hence assessee entitled to deduction.

ACIT vs. J. P. Software and Exports Pvt. Ltd., ITA No. 6191/Mum/2004, Bench – C, A. Y. 2001–02, dated 2-3-2007 – BCAJ p. 303, Vol. 39-D, Part 3, June 2007

66. Firm — Salary, interest, etc. paid to partner — S. 40(b)

Section 40(b) provides framework according to which payment of salary, interest, etc. to the partners is to be paid and allowed and therefore, the same cannot be interpolated to provide for such allowances disregarding books of account.

Sri Balaji Agencies vs. ITO (2007) [106 ITD 419 (Chennai)].

67. Free Trade Zone — S. 10A

Development vis-à-vis sale of software sold through STP unit. Software designed and developed by assessee during the course of its business is eligible for deduction under section 10A.

Infosys Technologies Ltd. vs. Jt. CIT (2007) 108 TTJ 282 (Bang.)

68. Housing Project — S. 80-IB(10)

Housing project approved by the local authority as "residential as well as commercial project" is not a "housing project" eligible for relief under section 80IB(10).

Laukik Developers vs. Dy. CIT (2007) 108 TTJ 364 (Mum.)

69. Industrial undertakings — Deduction — Allowability — S. 80-IA

Income surrendered during survey not shown by assessee to be his business income is not eligible for deduction under section 80IA.

Sushil Kumar Jalani vs. ACIT (2007) 108 TTJ 724 (Jd.)

70. Industrial undertakings — Market Research and Consultancy — S. 80-IA

Assessee collecting data based on particular strategy, processing and analyzing them using sophisticated computers and software is engaged in manufacture or production eligible for deduction under section 80IA.

MBL Research & Consultancy Group (P) Ltd. vs. Jt. CIT (2007) 108 TTJ 806 (Hyd.)

71. Industrial Undertakings — Ss. 80-IA, 80-ib

Interest earned on Vikas cash certificate cannot be considered as profits and gains of business derived from industrial undertaking, hence not eligible for deduction under section 80IA.

Sudhir Engineering Co. vs. ACIT (2007) 108 TTJ 933 (Delhi)

Filling the mushroom powder in gelatin capsules does not amount to manufacture or production, hence not eligible for deduction under section 80-IB.

DXN Herbal Manufacturing (India) (P) Ltd. vs. ITO (2007) 109 TTJ 87 (Chennai)

72. Interest — Chargeability — Ss. 172(7), 234b & 234c

Non-resident assessed under section 172(7) in respect of shipping business is not liable to interest under sections 234B and 234C.

ACIT vs. Norasia Lines (Malta) Ltd. (2007) 109 TTJ 152 (Coch.)

73. Interest — Loans and advances — S. 2(7)

Interest component of finance lease is not a chargeable interest under section 2(7) of the Interest-tax Act, 1974.

Union Bank of India vs. Addl. CIT (2007) 108 TTJ 720 (Mum.)

74. Interest — S. 12B

Interest being a compensatory levy for delay in advance payment of interest tax, deduction thereof is allowable in view of clear provisions of section 18.

Mashreqbank Psc vs. Dy. Director of IT (2007) 108 TTJ 554 (Mum.)

75. Interest — S. 234‘B’ r.w. S. 234‘C’

In absence of any specific direction given for charging interest u/ss. 234B and 234C, no interest could be charged.

Santosh Kumar vs. DCIT – (2007) 161 Taxman 99 (Jaipur)

76. Interest — S. 234C

Interest u/s 234 ‘C’ is chargeable for the period of default, subject to a maximum period of 3 months, and not compulsorily for a period of 3 months. Interest should not be charged if assessee has paid the money after the due date prescribed for payment of advance tax. Further a citizen who paid advance tax belatedly cannot be worse of than the person who has not paid at all.

Panther Investrade Ltd. vs. DCIT – (2007) 160 Taxman 203 (Mumbai)

77. Interest — S. 36(1)(iii)

As A.O. had not established nexus between interest bearing borrowed funds and interest free advances given, and as interest free funds available were in excess of interest free advances given, the disallowance of interest was deleted.

DCIT vs. Kukreja Development Corp. – 161 Taxman 199 (Mumbai)

78. Interest on borrowed Capital — S. 36(1)(iii)

Notwithstanding the fact that assessee has capitalized interest on capital borrowed for expansion of plant, the same is allowable business expenditure under section 36(1)(iii).

Zuari Industries Ltd. vs. ACIT (2007) 108 TTJ 140 (Mum.)

79. Loss — Set off — S. 74

Assessee having established by furnishing details that it was engaged in business of purchase and sale of shares, AO was not justified invoking section 74 notwithstanding the fact that assessee had shown the shares in the balance sheet as "investment."

JCIT vs. Alchemic Financial Services Ltd. (2007) 109 TTJ 240 (Mum.)

80. Manufacture or production — S. 80-IB

Assessee engaged in breaking of big boulders into ‘gitty’ or ‘bajri’ is not engaged in manufacture or production, hence not eligible for deduction under section 80-IB.

ITO vs. Jitendra Stone Crushing Co. (2007) 108 TTJ 983 (Chd.)

81. Penalty — Concealments — S. 271(1)(c)

If part addition has been sustained in quantum proceedings, it is not necessary that penalty would still be leviable, as both are all together different.

ITO vs. Kuldeep Sood Enterprises – (2007) 160 Taxman 171 (Chandigarh)

Loss Return – Penalty initiated against disallowance u/s 43 B. Held, that as material facts necessary for disallowance were duly disclosed in audit report filed with Return of Income, assessee’s contention that same being genuine, bona fide and innocent mistake was accepted, and that penalty cannot be imposed, as there was no mala fide intentions on part of assessee.

Akshay Enterprises (P) Ltd. vs. ACIT – (2007) 161 Taxman 168 (Amritsar)

82. Penalty — Concealment — S. 18(1)(c)

Penalty can be levied if assessee has concealed the particulars or furnished inaccurate particulars of any asset or debts. In the instant case, there being difference in value declared by assessee on basis of valuation report, and value deemed to be taken for wealth tax purposes, same cannot be held as concealed value of the asset, and no penalty is warranted.

Hukam Chand vs DCWT – 161 Taxman 170 (Chandigarh)

83. Penalty — Evidence — S. 271(1)(c)

When no evidence was adduced by revenue to show that there was any wilful default on part of assessee, nor A.O. had recorded any satisfaction that assessee had concealed or furnished inaccurate particulars, penalty cannot be levied.

Wg. Cdr. Ashok Amir Chand Dhawan vs. ITO – 161 Taxman 201 (Delhi)

84. Penalty — Leviability — S. 271D

Penalty levied under section 271D in respect of amount added as undisclosed income in block assessment was invalid.

DCIT vs. G. S. Entertainment (2007) 109 TTJ 54 (Mum.)

85. Profession — Ss. 2(36), 14

Assessee rendering service of secretary to film star – Assessee was the mother of the film actress – There was no fixed schedule or fixed nature of work, which is generally observed in case of an employment – Her work involved rendering consultation and advice on a wide array of matters – On the facts held that same is taxable as her professional income.

DCIT vs. Krishna Ram Mukerji, ITA No. 45 Mum/2004, Bench – D, A.Y. 2000-01, dt. 28-2-2007 – BCAJ p. 162, Vol. 39-D, Part 2, May 2007.

86. Reassessment — Audit objection — S. 143(1)(a)

An assessment made under section 143(1)(a) could be validly reopened on the basis of factual error pointed out by internal audit party.

Sudhir Engineering Co. vs. ACIT (2007) 108 TTJ 933 (Delhi)]

87. Reassessment — Income escaping assessment — S. 147

As the A.O. failed to supply the copies of reasons recorded for reassessment, assessment order framed u/s. 147/143(3) were set aside, with a direction to frame assessment order de novo after supplying copies of reasons and after seeking objections against same.

Dr. S. R. Giri vs. I.T.O. — (2007) 160 Taxman 77 (Jodhpur)

88. Reassessment — Notice — S. 143 (2)

Even though time for issue of notice under section 143(2) had not expired, same could not operate as a bar for reopening of assessment under section 147.

Sudhir Engineering Co. vs. ACIT (2007) 108 TTJ 933 (Delhi)

89. Reassessment — S. 148

As no proper service of notice was done, the assessment proceedings conducted consequent thereon was held to be invalid.

Vijay Kiran Hotels (P) Ltd. vs. ITO – 161 Taxman 204 (Chandigarh)

90. Reassessment — Validity — S. 147

Initiation of reassessment proceedings during pendency of rectification proceeding on the same issue is invalid.

Jethalal K. Morbia vs. ACIT (2007) 109 TTJ 1 (Mum.)

91. Rectification — S. 154

Subsequent decision of jurisdictional High Court gives rise to a mistake apparent rectifiable under section 154.

DCIT vs. Vijay V. Meghani (2007) 109 TTJ 7 (Mum.)

92. Rectification of Mistake — S. 154

1.  Interest due to Financial Institution was converted in to shares, in accordance with the BIFR scheme, and on such conversion assessee failed to claim deduction in the relevant year despite of the fact that all requisite material was available with the A.O. at the time of assessment. On these facts & circumstances the assessee preferred an application u/s. 154 in the year of conversion for claiming deduction but the A.O. rejected the application holding that the issue was debatable. In appeal before ITAT it was held that the A.O. is duty bound to grant deduction to which he is clearly entitled under the law and held that such omission constituted bona fide mistake apparent from record and therefore, the same can be rectified u/s. 154.Luster Tiles Ltd. vs. Addl. CIT (Asstt) (2007) [291 ITR 152 (Jaipur) (AT)].
    

2. If Assessing Officer has taken any decision on a particular issue and if subsequent decision of the jurisdictional High Court is squarely applicable to relevant issue then in that case such subsequent decision would give rise to mistake apparent from record as the decision taken by the Assessing Officer is not in consonance with the view expressed by the jurisdictional High Court.Dy. CIT vs. Vijay V. Meghani (2007) [106 ITD 362 (Mum)]

93. Reopening of Assessment — S. 147/148

Reasons given by the A.O. duly explained – Additions made by the A.O. on other counts was not justified. – Merely because the assessee had not filed its return of income, one cannot infer that the deposit made in the bank account was chargeable to tax and therefore, had escaped assessment. The A.O. could be said to have reasons to believe that the income had escaped assessment only when he finds, after due verification, that the amount was not recorded in the books of account. Accordingly, it was held that the reopening of the assessment was without jurisdiction and hence, invalid. The reference to the material, other than what was mentioned in the reasons recorded for justifying reopening assessment, would not justify reopening of assessment, as assumption of jurisdiction to re-open the assessment could be examined only on the basis of the material mentioned in the reasons recorded.

Saraf Gramdyog Sansthan vs. ITO, ITA No. 2/Agr/2003, Agra Bench, A.Y. 1998–99, dated 31-10-2006 – BCAJ p. 302, Vol. 39-D, Part 3, June 2007

94. Revision — Limited scrutiny — Ss. 143(2)(i), 263

CIT was not justified in invoking jurisdiction under section 263 on issues other than those decided in limited scrutiny assessment under section 143(2)(i).

Gift Land Handicrafts vs. CIT (2007) 108 TTJ 312 (Delhi)

95. Revision — Merger — Appellate Order — S. 263

CIT was not justified in assuming jurisdiction under section 263 in respect of matters which were already considered and decided in appeal by CIT(A).

Sadhu Ram & Sons vs. CIT & Anr. (2007) 108 TTJ 373 (Asr.)

96. Revision — S. 263

A possible view taken by Assessing Officer could not be unsettled by CIT in his revisional jurisdiction.

Indian Shaving Products Ltd. vs. Addl. CIT (2007) 108 TTJ 1004 (Jp.)

Where two views are possible the order
of the AO cannot be treated as an erroneous insofar as it is prejudicial to the interest of the Revenue.

Ajit Gupta vs. ITO (2007) 108 TTJ 301 (Delhi)

Every loss of revenue as a consequence of order of A.O. cannot be treated as prejudicial to the interest of revenue.

Hero Briggs & Stratton Auto Ltd. vs. CIT – (2007) 161 Taxman 127 (Delhi)

Order passed by A.O. cannot be treated as erroneous, unless view taken by A.O. is unsustainable in law. Merely when Commissioner does not agree with the view of A.O., revision u/s 263 can not be made.

Indian Shaving Products Ltd. vs. ACIT – (2007) 161 Taxman 166 (Jaipur)

97. Royalty — S. 80 ‘O’

Held, deduction u/s 80 ‘O’ for technical and professional fees rendered from India, and received by foreign enterprise outside India, would be available, even if benefit of such services by foreign recipient is utilized in India.

AFM India Ltd. vs. Jt. CIT – (2007) 160 Taxman 125 (Delhi)

98. Salary — Relief — S. 89(1)

The payment received under Optional Early Retirement Scheme (OERS)/ Employees Early Severance Scheme (EESS) from Reserve Bank of India qualifies for exemption u/s. 10(10C) and balance qualified for relief u/s 89(1).

Shri Petric F. Britto vs. ITO, ITA No. 4493/Mum/2006, Bench – K, A.Y. 2004–05, dt. 28-3-2007 – BCAJ p. 165, Vol. 39-D, Part 2, May 2007

99. Speculation loss against speculation income — S. 73

During the year, the assessee had earned Rs. 1.52 lacs. profit on sale of shares (without taking delivery). In the same year, it had suffered a loss Rs. 4.24 lacs from trading in shares. The assessee adjusted the profit earned against the loss. A.O. disallowed the adjustment. The Tribunal observed that there was no warrant in the language of the Section for distinction between speculative losses in one business and deemed speculation losses under explanation to section 73. Hence, the profit in another speculative business has to be set off against deemed speculation losses.

Chik Mik Leasing & Investment Pvt. Ltd. vs. Asst. DCIT, ITA No. 104/Del/2003, Bench – SMC, A.Y. 1997-98, dated 12-1-2007 – BCAJ p. 31, Vol. 39-D, Part 1, April 2007.

100. TDS — Ss. 2(28A), 194A

Discounting charges paid to financiers in relation to moneys borrowed through bills was interest within the meaning of section 2(28A) hence liable to TDS under section 194A.

ITO vs. Kanha Vanaspati Ltd. (2007) 108 TTJ 816 (Delhi)

101. TDS — Interest — S. 201(1A)

Tax having been paid by payee, CIT (A) was justified in directing charging of interest from the date of deductibility of tax till payment by the payee.

ITO vs. Kanha Vanaspati Ltd. (2007) 108 TTJ 816 (Delhi)

102. Unexplained investments — S. 69

Additions made on agreed basis could not be challenged in appeal. CIT(A) having allowed benefit of set off of such additions against another addition, impugned additions cannot be disputed any more.

Anil Kumar vs. ITO (2007) 108 TTJ 22 (Asr.)