Tribunal

1. Actual Payment – Excise duty – S. 43B

Excise duty deposited under protest on basis of show cause notice without any order, and shown as advance in books, cannot be allowed as deduction u/s 43B.

Gillette India Ltd. vs. JCIT (2006) – 156 Taxman 236 (Jaipur)

2. Addition – S. 69C

Assessee having admitted to have spent Rs. 4,000 on Mahurat of shop but not disclosed the same in the books of account, addition under section 69C was justified.

Bhimraj Rajpurohit vs. ITO (2006)105 TTJ 899 (Jd.)

3. Appeal – Reference to third member – S. 253

Additional evidence cannot be admitted by the Third Member and the matter has to be decided by him on the basis of record available before the original Bench.

Ms. Aishwarya K. Rai vs. Dy. CIT (2006) 105 TTJ 825 (Mum.)

4. Appeal – Condonation of delay – S. 253(5)

Reasonable cause – Delay of 310 days in filing appeal before the Tribunal occurring solely due to misplacement of CIT(A)’s order is attributable to negligence and inaction and the same did not constitute sufficient and good reason for condonation of delay.

Jt. CIT vs. Tractors & Farm Equipments Ltd. (2006) 105 TTJ 705 (Chennai) (TM)

5. Appeal to the Appellate Tribunal – S. 253

If tax effect in an appeal filed by the revenue before it is nil then in that case the said appeal is not maintainable in view of the CBDT Instruction No. 1979, dated – 27-3-2000 even if it involves a question of law.

Jt. CIT vs. Peerless Developers Ltd., [103 ITD 349 / 287 ITR 153 (Kol) (SB)]

6. Appealable order – S. 246

Interest charged u/s. 158BFA an order passed u/s. 158BC is which appealable.

Bachubhai S. Antrolia vs. Asstt. CIT, [103 ITD 66 (Rajkot)]

7. Applicability — Exemption — SS. 10(15)(iv)(fa), 14A

Exemption is allowable in respect of gross interest on foreign currency but any expenditure incurred in relation to earning of exempt income is to be disallowed under section 14A.

Dresdner Bank AG vs. Addl. CIT (2006) 105 TTJ 149 (Mum.)

8. Assessment – S. 143

Assessment made against deceased assessee without bringing on record the legal heirs though made known to the AO was void ab initio.

Late A. Y. Prabhakar (Indl.) vs. ACIT (2006) 105 TTJ 391 (Chennai)

Company having been dissolved by amalgamation under orders of High Court, assessment on it was invalid even though the company itself filed a return.

Modi Corp. Ltd. vs. Jt. CIT (2006) 105 TTJ 303 (Del.)

9. Assessment – Issue of notice – S. 143(3)

Mere issuance of notice could not be deemed to have been served upon the assessee within 12 months from the end of the month in which the return has been filed. In the instant case as notice u/s 143(2) had not been served within a statutory period of limitation, assessment framed by A.O. was invalid and was to be quashed.

Cals Ltd. vs. DCIT (2006) – 157 Taxman 193 (Delhi)

10. Asset – S. 2(ea)

Commercial property (factory building) which was leased to holding company, is subjected to Wealth Tax, and will not be covered by exception u/s 2(ea)(v).

DC Wealth Tax vs. MIPCO Seamless Rings (Gujarat) Ltd. (2006) – 156 Taxman 80 (Mumbai)

11. Bad debts – S. 36(i)(vii)

Once the amount has been debited in P & L Account under head “Bad Debts”, and debtors balance having been reduced to that extent, there is no requirement to establish that debt has become bad.

Gillette India Ltd. vs. JCIT (2006) – 156 Taxman 236 (Jaipur)

12. Block Assessment – 158 BC

1. Addition in respect of deposits in bank account not being based on any seized material could not be made in block assessment.

2. Addition on account of payment of on-money on purchase of flat could not be made on the basis of the statement of assessee’s father recorded under section 132(4).

3. Amount of credit in the foreign bank account which was not disclosed in the regular returns and had escaped assessment is to be treated as undisclosed income.

4. Computation of undisclosed income –Amount of prize money and remuneration received by the assessee was not charged to tax after due application of mind by the AO cannot included in undisclosed income in the block assessment.

5. Amount on account of creditors written back by the assessee could not be included in undisclosed income in the block assessment.

6. Assessee having declared the entire credits in a bank account as undisclosed income, payments said to have been made by her by utilizing a part of money withdrawn from the said account cannot be treated as undisclosed income.

7. Assessee having explained the cash found at the time of search on the basis of cash book the explanation cannot be rejected and the cash cannot be treated as undisclosed income.

8. Computation of undisclosed income – In view of existence of relevant material to support the assessee’s claim of depreciation cannot be treated as false and therefore, AO could not treat the amount of depreciation as undisclosed income of the block period.

9. Once the acquisition of jewellery is duly reflected in the regular books of account, mere appreciation in its value due to passage of time cannot be subject- matter of addition.

Ms. Aishwarya K. Rai vs. Dy. CIT (2006) 105 TTJ 825 (Mum.) (TM)

Protective Addition u/s. 158BD

Proceedings under section 158BD – Assessment made under section 158BC in the case of Karta as individual having been struck down as time-barred, the substantive additions made therein do not exist at all and consequently protective additions could not be made in the hands of HUF in assessment under section 158BD.

Ramesh Chand Prem Raj Soni (HUF) vs. ACIT (2006) 105 TTJ 904 (Jd.)

13. Block Assessment – Interest for delay in filing return – S. 158BFA(1)

Assessee’s application for extension of time for filing of return was not rejected. In such a case return filed by the extended period cannot be considered late. And hence no interest chargeable for delay in filing of return.

Sheila D’Souza vs. JCIT, Mumbai ITAT, Bench ‘C’, IT(SS)A No. 342/M/03, A.Ys. 1990–91 to 2000 – 01, dated 10th July, 2006, BCAJ p. 154, Vol. 39-C, Part 2, November 2006

14. Block assessment – S. 158BC

Ownership of assets and their leasing having been shown in the return and balance sheet depreciation thereon could not be disallowed in block assessment.

Sigma Securities vs. Jt. CIT (2006) 105 TTJ 428 (Mum.)

15. Block Assessment – Undisclosed income — S. 158B(b)

Assessee is employment, not filed her return of income and tax was not deducted as salary was below taxable – Salary income could not be considered as undisclosed income.

Sheila D’Souza vs. JCIT, Mumbai ITAT, Bench ‘C’, IT(SS)A No. 342/M/03, A.Ys. 1990–91 to 2000 – 01, dated 10th July, 2006, BCAJ p. 154, Vol. 39-C, Part 2, November 2006

16. Block assessment S. 158BC

1. Computation of undisclosed is made de hors books of account and on the basis of the seized material and therefore, the provisions of section 40A(3) are not applicable.

2. Valid statement, recorded u/s. 132(4), can be used an evidence in the block assessment proceedings even if that statement is retracted later on.

3. Accounting of undisclosed profits as a consequence of search & seizure action u/s. 132 has to be made on the basis of method of accounting followed.

Dhanvarsha Builders & Developers P. Ltd. [102 ITD 375 (Pune)].

17. Book profit – S. 115JA

Provisions for bad debts is not to be added to net profit while computing book profit under section 115JA.

Dresdner Bank AG vs. Addl. CIT (2006) 105 TTJ 149 (Mum.)

18. Book Profits – Income tax within the meaning of Explanation (a) to section 115JA(2)

Interest paid on income-tax cannot be construed to be a part of income tax and it falls outside the scope of the term ‘income-tax’ as used in the Explanation (a) to section 115JA(2).

Salgaocar Mining Ind. P. Ltd., [102 ITD 289/287 ITR 65 (Panaji)]

19. Business Expenditure – Advertisement Expenses – S 37(1)

Advertisement expenditure incurred had a direct nexus with its earning of income could be allowed even if it might have also benefited the principal of the assessee.

Star India P. Ltd vs. Addl. CIT., [103 ITD 73 (Mum) (SB)].

20. Business expenditure – Bank Commission – S. 37(1)

Bank commission and rate difference which could be reconciled, no disallowance could be made.

Supreme Rayons (P) Ltd. vs. Dy. CIT (2006) 104 TTJ 896 (Jd.)

21. Business expenditure – Commission – S. 37(1)

Compensation paid for right to use land for laying of pipeline is capital in nature.

Chembur Patalganga Pipelines Ltd. vs. Jt. CIT (2006) 105 TTJ 788 (Mum.)

22. Business expenditure – Commission payment – S. 37(1)

Assessee having filed confirmation of the recipient of the commission payment the same cannot be disallowed on the ground that the confirmation was not supported by details of working of the quantum of the commission amount.

Supreme Rayons (P) Ltd. vs. Dy. CIT (2006) 104 TTJ 896 (Jd.)

23. Business Expenditure – Communication System – S. 37(1)

Date of placing an order for purchasing the equipment necessary for its business, is an activity which was necessary before assessee could render service of providing satellite based business communication system, held to be an date on which business had been set up, and expenses incurred after placing purchase order held to be an revenue expenditure.

Hughes Escorts Communications Ltd. vs. JCIT (2006) – 157 Taxman 46 (Delhi)

24. Business Expenditure – Expenses for exempt income – S. 14A

Determination of expenditure incurred to earn exempt income – nexus between the two is essential.

Kaynet Capital Ltd. vs. DCIT, Mumbai ITAT, Bench ‘D’, ITA Nos. 3870,3871 & 4871/Mum/2005, A.Y. 2001 – 02, dated 16th March, 2006 – BCAJ p. 275, Vol. 39-C, Part 2, December 2006

25. Business expenditure – Foreign Travelling Expenses – S. 37(1)

In the absence of evidence in form of correspondence or otherwise with the foreign party, and mere statement that it is a business trip, the matter was remanded to A.O. Anand Automobiles vs. DCIT (2005) – 156 Taxman 75 (Mumbai)

26. Business expenditure – Foreign trips of wives – S. 37(1)

Expenditure incurred on foreign trips of wives is not allowable as deduction.

Thomas Cook (India) Ltd. vs. Dy. CIT (2006) 105 TTJ 317 (Mum.)

27. Business expenditure – Leave salary – S. 37

Provision for encashment of leave salary is allowable as deduction.

Thomas Cook (India) Ltd. vs. Dy. CIT (2006) 105 TTJ 317 (Mum.)

28. Business expenditure – Pooja – S. 37(1)

For the purpose of allowing expenses on performing poojas throughout the year and constructing a temple in business premises it is necessary to establish the business nexus.

ACIT vs. Maharashtra Metal Powers Ltd. [102 ITD 214 (Nag)].

29. Business Expenditure – Dies & Moulds – S. 37(1)

Expenses on providing dies and moulds to vendors, to assure supply of components suitable to its requirement on continuous basis was held to be an revenue expenses.

Honda Siel Power Products Ltd. vs. DCIT (2006) – 157 Taxman 128 (Delhi)

30. Business Expenditure – Software development expenses – S. 37(1)

Software development charges shown under “Deferred Revenue Expenses” was claimed as revenue expenses as same was spent for computer management and control of business activities, held same is allowable as revenue expenditure.

Samtel Colour Ltd. vs. DCIT (2006) – 157 Taxman 39 (Delhi)

31. Business Expenditure – Technical know-how – S. 37(1)

Payment made for exclusive acquisition of technical know-how or information would be capital expenditure but if payment is made only to secure use of technical know-how or knowledge and not for acquiring ownership of technical know-how or knowledge would be allowable as revenue expenditure.

Hero Honda Motors Ltd. vs. Jt. CIT, [103 ITD 157 (Delhi)].

32. Business Expenditure – Warranty – S. 37(1)

Cars sold were covered under warranty and after sale services for period of 1 year. Provision made for warranty, as liability was incurred on date when sales were made, and same being an ascertained and accrued liability is an allowable expenses.

Honda Siel Cars India Ltd. vs. ACIT (2006) – 157 Taxman 76 (Delhi)

33. Business Expense – New Model – S. 37(1)

Expenses incurred in respect of on-going business, but related to launching of a new model towards its marketability can not be said to have acquired advantage of enduring nature, and disallowance of expenses as capital expenditure is not justified.

Honda Siel Cars India Ltd. vs. ACIT (2006) – 157 Taxman 76 (Delhi)

34. Business expenses – Fluctuation in Foreign Exchange – S. 37(1)

Loss arising as a result of fluctuation in foreign exchange rate on closing day of year, on the basis of mercantile system of accounting followed on consistent basis in accordance with A.S. II issued by ICAI, is allowable.

Gillete India Ltd. vs. JCIT (2006) – 156 Taxman 236 (Jaipur)

35. Business expenses – Licence fee for software – S. 37(1)

Payments made for licence fee for use of software is revenue expenditure Kaynet Capital Ltd. vs DCIT, Mumbai ITAT, Bench ‘D’, ITA No. 3870,3871 & 4871/Mum/2005, A.Y. 2001–02, dated 16th March, 2006 – BCAJ p. 275, Vol. 39-C, Part 2, December 2006

36. Business expenses – Miscellaneous expenses – S. 37(1)

Items debited in miscellaneous expenses were part and parcel of expenses in connection with business, and A.O. having not pointed out any item of expenses which was of a disallowable nature order deleting the addition was sustained.

Hughes Escorts Communications Ltd. vs. JCIT (2006) – 157 Taxman 46 (Delhi)

37. Business income – Business loss – S. 28

Assessee is entitled to claim deduction of exchange fluctuation loss in respect of foreign currency loan taken by it, notwithstanding that no actual repayment of loan was made during the year.

Silicon Graphics Systems (I) Ltd. vs. ACIT (2006) 105 TTJ 591 (Del.)

38. Business income – Profit chargeable to tax – S. 41(1)

Amount in unclaimed balance account and cheques suspense account which had become time barred and were unilaterally written back by assessee are not chargeable to tax as there was no cessation of liabilities.

Thomas Cook (India) Ltd. vs. Dy. CIT (2006) 105 TTJ 317 (Mum.)

39. Capital asset – Membership card of stock exchange – S. 2(14)

Membership card of a stock exchange can be construed as capital asset within the meaning of section 2(14) and therefore, consideration received on transfer is exigible for capital gains tax.

R. M. Valliappan vs. Asstt. CIT, [103 ITD 63 (Chennai) (SB)/287 ITR 203]

40. Capital gain – S. 45

Assessee cannot be charged to tax in relation to an amount other than amount actually received or accruing as consideration for transfer of any asset. In such cases the Revenue has to establish that certain consideration was either received by or accrued as income chargeable under the head ‘Capital Gain’ by the assessee which is sought to be taxed as such.

Addl. CIT vs. Glad Investments (P.) Ltd., [102 ITD 227 (Delhi)].

41. Capital Gain vis-à-vis block assessment – S. 112 vis-à-vis 113

Tax on the undisclosed Long-term Capital Gain is chargeable at 60% and not at 20%.

Parshuram D. Patil vs. ACIT [102 ITD 241 (Pune)].

42. Capital or revenue expenditure – Software – S. 37(1)

Expenses incurred on upgradation of software is allowable as revenue expenditure.

Thomas Cook (India) Ltd. vs. Dy. CIT (2006) 105 TTJ 317 (Mum.)

Interior maintenance expenses incurred by assessee being expenditure on repair of flat are allowable as revenue expenditure.

Thomas Cook (India) Ltd. vs. Dy. CIT (2006) 105 TTJ 317 (Mum.)

43. Cash credit – S. 69

Genuineness – Where the creditor who was assessee’s mother could not be produced for reasons beyond assessee’s control, the matter is remanded to decide afresh after allowing a reasonable opportunity to the assessee.

Bhimraj Rajpurohit vs. ITO (2006) 105 TTJ 899 (Jd.)

44. Charitable purpose – S. 2(15) Registration u/s 12A

Application u/s 12A by a local authority constituted under the respective State Act, was rejected on the ground that objects were commercial and not charitable in nature, as the activity carried on were of commercial nature where profit motive was involved.

Punjab Urban Planning & Development Authority vs. CIT (2006) – 156 Taxman 37 (Chandigarh)

45. Charitable trust – Registration – S. 12AA

While dealing with an application for registration under section 12AA jurisdiction of the CIT is confined to examination of the objects of the applicant trust and the genuineness of its activities.

Acharya Sewa Niyas Uttaranchal vs. CIT (2006) 105 TTJ 761 (Del.)

46. Civil construction business – S. 44AD

Section 44AD is not applicable when contract receipts are more than 40 lakhs, and the income be computed by applying net profit rate of 6% instead of 8%.

Dhalewan Co-operative L & C Society vs. ITO (2006) – 157 Taxman 239 (Amritsar)

47. Commencement of or carrying on business activities – 28(1) vis-à-vis 10(20A)

If a new company has taken over or purchased an existing undertaking then in that case it means the company has commenced its business. If the new company has taken over the entrusted activities then in that case it is held that the company has commenced its entrusted activities.

Vidarbha Irrigation Development Corporation vs. Jt. CIT [102 ITD 1 (Mum)].

48. Deductibility of period cost vis-à-vis completed contract method – S. 37(1) vis-à-vis 145

Finance cost in the nature of interest is a period cost and therefore deductible in the year in which it is incurred or accrued. Such claim is in conformity with the Accounting Standard – 7 of the ICAI. In the Accounting Standard it is suggested that where expenditure cannot be attributed to a particular project then in that case such expenditure may be allowed as a period cost.

Jt. CIT vs. K. Raheja P. Ltd. [102 ITD 414 (Mum)].

49. Deduction – New Industrial Undertaking – S.80-I r.w. 80HH

Profits earned from sale of imported spare parts and tools could not be considered eligible for deduction u/ss 80HH & 80-I, as same cannot be said to have been derived from industrial undertaking.

Honda Siel Power Products Ltd. vs. DCIT (2006) – 157 Taxman 128 (Delhi)

50. Deduction – S. 80HHC

Turnover does not include excise duty and sales tax

Hygienic Research Institute vs. ITO, Mumbai ITAT, Bench ‘E’, ITA No. 2770/Mum/2003, A.Y. 1999 – 2000, dated 12th July, 2006 – BCAJ p. 155, Vol. 39-C, Part 2, November 2006

51. Deduction of interest out of dividend income – 37 vis-à-vis 80M

Deduction u/s. 80M is allowed on net, which is computed as per the provisions of sections 57 to 59, i.e. after deducting expenditure incurred for the purpose of earning dividend but there is no question of allowing deduction of interest to which the provisions of section 36(1)(iii) are applicable.

Punjab State Industrial Development Corpn. Ltd. vs. Dy. CIT, [102 ITD 1 (Chd) (SB)].

52. Depreciation – Unabsorbed depreciation vis-à-vis capital gains – S. 32(2)(iii)

Set-off of brought forward depreciation of earlier year cannot be allowed against the capital gains of current year in view of the provisions of section 32(2)(iii).

53. Depreciation – Ownership – S. 32

Assessee having taken possession of the property purchased by it and used it, it is entitled to depreciation notwithstanding that conveyance deed had not been executed in favour of assessee.

Thomas Cook (India) Ltd. vs. Dy. CIT (2006) 105 TTJ 317 (Mum.)

54. Depreciation – Right to use land – S. 32

Compensation paid for acquiring right to use land for laying naphtha pipes is not eligible for depreciation.

Chembur Patalganga Pipelines Ltd. vs. Jt. CIT (2006) 105 TTJ 788 (Mum.)

55. Depreciation – S. 32

In the absence of any business activity, depreciation on vehicle and furniture & fixtures was disallowed, holding that contemplated business and carrying on business are two different issues, and depreciation cannot be allowed on anticipated business.

Anand Automobiles vs. DCIT (2006) – 156 Taxman 75 (Mumbai)

56. Depreciation – S. 32 r.w. s. 43A

Addition to cost of machinery on account of liability arising out of foreign exchange rate fluctuation, will be eligible for depreciation.

Forbes Gokak Ltd. vs. DCIT (2006) 156 Taxman 129 (Mumbai)

57. Depreciation – Stock Exchange – S. 32

Depreciation on stock exchange card is allowable

Kaynet Capital Ltd. vs DCIT, Mumbai ITAT, Bench ‘D’, ITA No. 3870,3871 & 4871/Mum/2005, A.Y. 2001 – 02, dated 16th March, 2006 – BCAJ p. 275, Vol. 39-C, Part 2, December 2006

58. Depreciation – Truck – S. 32

Depreciation was allowable on truck ‘kept ready for use’ but not actually used in the year under consideration.

Rajan H. Shinde vs. Dy. CIT, [103 ITD 360 (Pune) (TM)].

59. Depreciation – User for business – S. 32

Depreciation is not allowable in respect of new office premises which was being made fit for occupation during the relevant year but was not ready for use by the assessee at the relevant time.

Thomas Cook (India) Ltd. vs. Dy. CIT (2006) 105 TTJ 317 (Mum)

60. Disallowance – Gift – Rule 6B

No disallowance under rule 6B can be made where the gift articles do not carry the logo of the assessee company.

Thomas Cook (India) Ltd. vs. Dy. CIT (2006) 105 TTJ 317 (Mum.)

61. Disallowance – S. 43B

Provident fund contribution deposited after the due date but within the grace period cannot be disallowed under section 43B.

ACIT vs. Maharashtra Metal Powers Ltd. (2006) 105 TTJ 361(Nag.)

62. Dividend – Deemed – Ss. 2(22)(e), 158BC

Undisclosed income assessed by the AO in block assessment under section 158BC would not constitute ‘accumulated profits’ for purposes of applicability of section 2(22)(e) and existence of accumulated profits has to be ascertained as on the date of loan or advance.

Pramod Kumar Dang vs. Jt. CIT (2006) 105 TTJ 511 (Del.)

63. Double taxation relief – Agreement between india and Australia – S. 90

Payment made by assessee, an Indian company to an Australian company is not covered by the expression ‘royalty’ under any of the clauses of article 12(3) of the DTAA between India and Australia and it is not taxable in India and consequently the assessee did not have any tax withholding liability in respect of such payment.

Kotak Mahindra Primus Ltd. vs. Dy. Director of IT (2006) 105 TTJ 578 (Mum.)

64. Double Taxation Relief — Ss. 90, 115JA

Once the assessee chooses to be assessed as per provisions of the Act, in preference over the provisions of the tax treaty, it is not open to the assessee to seek treaty protection in respect of MAT under section 115 JA.

Dresdner Bank AG vs. Addl. CIT (2006) 105 TTJ 149 (Mum.)

65. Duty drawback – S. 28(iiic)

Duty drawback credited as income on mercantile basis in books of account which were audited and shown as receivable in Balance Sheet, on basis of same being lodged with Government, but same was excluded from Computation of Income. Held A.O. is not justified in adding duty drawback to income as right to receive would not be created in favour of the assessee unless an order is passed by appropriate authority as per the rules.

Samtel Colour Ltd. vs. DCIT (2006) – 157 Taxman 39 (Delhi)

66. Exchange – Deduction : S. 80HHC

Exchange gain pertaining to the exports made in the earlier year could form part of the current year’s export turnover

ITO vs. S. Kumar & Co., Mumbai ITAT, Bench ‘K’, ITA No. 5482/Mum/2004, A.Y. 2001-02, dated 26th June, 2006 – BCAJ p. 277, Vol. 39-C, Part 2, December 2006

67. Exemption – Gross or net interest – S. 10(15)(iv)(fa)

Finding of CIT(A) that assessee had not incurred any expenditure in earning interest income having not been challenged by Revenue, the question whether exemption was allowable on gross or on net basis was purely academic and needed no adjudication.

Addl. CIT vs. Dresdner Bank AG (2006) 105 TTJ 185 (Mum.)

68. Export – Deduction – S. 80HHC

Export profit eligible for deduction – Brought forward business loss should be set off while computing deduction
DCIT vs. Suashish Jewellery Ltd., Mumbai ITAT, Bench ‘A’, ITA No.1179/M/04, A.Y. 2001-02, dated 8th May, 2006 – BCAJ p. 155, Vol. 39-C, Part 2, November 2006

69. Export – S. 80HHC

Foreign exchange being money cannot be considered as “goods” and assessee is not entitled to deduction under section 80HHC in respect of foreign exchange transferred to bank accounts outside India.

Thomas Cook (India) Ltd. vs. Dy. CIT (2006) 105 TTJ 317 (Mum.)

70. Gift – S. 4

Assessee received from the employer, a personal gift, as a token of personal esteem and veneration for personal qualities cannot be taxed as income out of business or vocation, and same cannot be added to the income as salary.

Mrs. Meena Rajagopal vs. ACIT (2006) – 156 Taxman 40 (Mumbai) (A.Y. 2000-01)

71. Income – S. 2(24)

Assessee, co-operative housing society, earning non–occupancy charges from its members and interest from money invested – Such receipts is not liable to tax.

ITO vs. Sagar Sanjog C.H.S. Ltd., Mumbai ITAT, Bench ‘H’, ITA Nos. 1972 to 1974 & 2231 to 2233/Mum/2005, A.Ys. 1998-99 to 2000-01 dated 10th July, 2006 – BCAJ p. 276, Vol. 39-C, Part 2, December 2006

72. Income from house property – Annual value – S. 22

Property demolished during the year–Property in question not capable of being let out or used for any purpose and having been demolished. AO was not justified in making addition.

ACIT vs. Dr. Amrit Lal Adlakha (2006) 105 TTJ 271 (Asr.)

73. Income from House Property – Deduction – S. 24(1)(vi)

Interest on unpaid interest payable on capital charge cannot be allowed as deduction under section 24.

Late A. Y. Prabhakar (Indl.) vs. ACIT (2006) 105 TTJ 391 (Chennai)

74. Income from House Property – Interest – S. 24(b)

Deduction under section 24(b) could not be denied on the ground that interest was paid on funds borrowed for acquisition of plot and not house property.

ACIT vs. Dr. Amrit Lal Adlakha (2006) 105 TTJ 271 (Asr.)

75. Income from undisclosed sources – Addition – S. 143

When the statement of assessee’s wife was not confronted to the assessee nor he was allowed any opportunity to cross-examine his wife, such statement could not be relied upon to make addition in the hands of the assessee.

Bhimraj Rajpurohit vs. ITO (2006)105 TTJ 899 (Jd.)De

76. Income from undisclosed sources – Addition – S. 145

The statement of the assessee admitting suppression of sales, provisions of section 145 were rightly invoked – CIT(A) having allowed partial relief by reducing the addition, no interference is warranted.

Bhimraj Rajpurohit vs. ITO (2006) 105 TTJ 899 (Jd.)

77. Income from undisclosed sources – Addition – S. 69

Assessee having adduced all the requisite evidence the transactions could not be treated as bogus, and the explanation of the assessee that the investment in construction of residential house was made out of sale proceeds of shares could not be rejected. Addition under section 69 rightly deleted.

ITO vs. Smt. Kusumlata (2006) 105 TTJ 265 (Jd.)

78. Income from undisclosed sources – Addition – S. 69

Sale of jewellery declared under Voluntary Disclosure Scheme–Assessee having sold jewellery which was duly disclosed by him under VDIS, 1997, and produced bills and vouchers and sale consideration which was received through account payee draft, the primary onus cast on the assessee stood discharged and, therefore, addition could not be made.

Badri Vishal Aggarwal vs. Dy. CIT (2006) 105 TTJ 418 (Del.)

79. Interest – S. 36(1)(iii)

Interest paid by Assessee engaged in money lending business and investment in shares, was disallowed by A.O. on the ground that interest earned was not apportionable to interest paid, and also as dates of loans received did not coincide with loans advanced. It was held that for disallowance of interest a clear finding be given that borrowed money has been utilized for non-business purpose, and as it was evident that money was borrowed and interest was paid, same is eligible for deduction.

Kalpana Trading Corporation vs. ITO (2006) - 156 Taxman 78 (Mumbai)

80. Interest – S. 5

Interest receivable by Indian branch from head office/overseas branches of non-resident bank is to be taken into account for the purposes of computing profits arising or accruing in India under section 5(2)(b).

Dresdner Bank AG vs. Addl. CIT (2006) 105 TTJ 149 (Mum.)

81. Interest – S. 57 r.w. s. 56

Interest expenditure incurred having a direct nexus with interest income earned, is liable to be set-off against income earned, and taxing interest earned as other sources, and disallowing interest paid on ground that assessee has not commenced its business during the year is not justifiable.

Pench Power Ltd. vs. ACIT (2006) – 156 Taxman 84 (Delhi)

82. Interest on partners balance – Sec 36(1)(iii)

The assessee being the partner paid interest for debit balance in his partnership firm. Such interest is allowable as deduction.

Pratap V. Padode vs. ACIT, Mumbai ITAT, Bench ‘F’, ITA No. 1741/Mum/2003, A.Y. 1998 – 99, dated 30th May, 2006 – BCAJ p. 277, Vol. 39-C, Part 2, December 2006

83. Interpretation of statutes – Meaning of a word

Where a word or an expression has been defined in a particular enactment and is not defined in a subsequent legislation, then the meaning of such word or expression has to be understood in that legal sense in which it is used in the earlier enactment, unless contrary intention appears.

Thomas Cook (India) Ltd. vs. Dy. CIT (2006) 105 TTJ 317 (Mum)

84. Investment allowance – S. 32A

The assessee who has engaged in a profession of pathological laboratory could be said to be carrying on a business as an industrial undertaking, which produced an article or thing and was thus entitled to investment allowance u/s 32A on the new machinery installed in his clinic.

CIT vs. Suresh Amin Family Trust – Gujarat High Court – Income Tax Reference No. 237 of 1995, dated 1st August, 2006 – Ahmedabad Chartered Accountants Journal, November 2006 – P. 441

85. Jurisdiction of Assessing Officer : S. 2(7A) 120(4)(m)

The Addl. CIT cannot exercise the authority of Assessing Officer to make assessment of income, and assessment made by such Addl. CIT is liable to be quashed

Bindal Apparels Ltd. vs. ACIT, Delhi ITAT, Bench ‘F’ , ITA No. 507/Del/2003, A.Y. 1999–2000, dated 31st March, 2006 – BCAJ p. 20, Vol. 39-C, Part 1, October 2006.

86. Jurisdiction of Assessing Officer u/s. 124

Assessee cannot question jurisdiction of the Assessing Officer after the expiry of one month from the date on which an assessee was served with a notice u/s. 143(2) and when authorities to whom request to transfer case to other Assessing Officer had rejected.

Ram Bhaj & Sons P. Ltd. vs. ITO [102 ITD 93 (Asr)].

87. Loss of animals – S. 36(1)(vi)

Assessee is entitled to deduction under section 36(1)(vi) in respect of parent and grandparent birds destroyed by it which had been used for its business purpose.

India Poultry (P) Ltd. vs. Jt. CIT (2006) 105 TTJ 312 (Hyd.)

88. Maintenance of Register – S. 44AA r.w. rule 6F

Assessee company running a nursing home is not required to maintain daily case register as per rule 6F(3), as the company cannot be said to be engaged in profession, and addition made by estimating gross receipts at higher figure in absence of daily case register is not justified.

ITO vs. Ashalok Nursing Home (P) Ltd. (2006) – 156 Taxman 86 (Delhi)

89. MAT – Book Profit – S. 115JA

Provision for foreign exchange fluctuation, provision for Bad & Doubtful Debts and provision for loss on sale of Fixed Asset cannot be added while computing profit u/s 115JA

Gillette India Ltd. vs. JCIT (2006) – 156 Taxman 236 (Jaipur)

90. New Industrial Undertaking – Deduction u/s. 80IA

Assessee company was set up to manufacture paper and paperboards etc. In the course of the business it set up four DG sets, power unit, for purpose of generation of power which was used to meet requirement of power in its unit for manufacturing its products. Deduction in respect of the power unit is allowable u/s. 80-IA.

West Coast paper Mills Ltd. vs. Asstt. CIT, [103 ITD 19 (Mum)].

91. Notice u/s 148 – S. 143(3), 147/148

Issuance of notice u/s 148 when assessment proceedings u/s 143(3) are pending was illegal and invalid and, hence, reassessment proceedings were void ab initio.

Fateh International vs. DCIT, Mumbai ITAT, Bench ‘B’, ITA No. 1036/M/2005, A.Y. 2000–01, dated 26th April, 2006 – BCAJ p. 20, Vol. 39-C, Part 1, October 2006

92. Penalty – Concealment – S. 271(1)(c)

Agricultural income shown in Return was surrendered for reason that supporting evidence was misplaced and tax was paid thereon. Held mere surrender could not be considered as concealed income, and same being done before any inquiry, penalty u/s 271(1)(c) could not be levied.

DCIT vs. Rakesh Kumar (2006) - 157 Taxman 71 (Chandigarh)

There being no concealment of facts, penalty under section 271(1)(c) cannot be levied.

Thomas Cook (India) Ltd. vs. Dy. CIT (2006) 105 TTJ 317 (Mum.)

93. Penalty – Concealment – S. 271(1)(c)

Penalty under section 271(1)(c) is not leviable on account of disallowance of certain expenses particulars whereof were correctly furnished along with the return.

Dy. CIT vs. Indiahit Com (P) Ltd. (2006) 105 TTJ 501 (Del.)

94. Penalty – Failure to get accounts audited – Ss. 44AB, 271B

Assessee having failed to get his accounts audited under section 44AB acting on wrong advice of the advocate, there was reasonable cause for default and, therefore, penalty under section 271B is not leviable.

Dr. Sunderlal Surana vs. ITO (2006) 105 TTJ 907 (Jd.)

95. Reassessment – Reason to believe – S. 147

The bank account through which draft was received by assessee was benami, which was sufficient to form a belief that income of assessee had escaped assessment and therefore, initiation of reassessment proceedings was valid.

Badri Vishal Aggarwal vs. Dy. CIT (2006)105 TTJ 418 (Del.)

96. Reassessment – S. 147

Reopening of assessment after 4 years from end of relevant Assessment year; i.e., beyond the time laid down, as well as on ground of merely change of an opinion can not be sustained.

C. P. Kukreja & Associates (P) Ltd. vs. DCIT (2006) – 156 Taxman 184 (Delhi)

97. Reassessment – S. 147 r.w. s. 148

Reopening of assessment made with two contradictory reasons, held to be bad in law as re-opening had been done on the basis of reasons recorded on incorrect facts, and thus reasons were, in fact, no reason at all.

Cals Ltd. vs. DCIT (2006) – 157 Taxman 193 (Delhi)

Notice u/s 148 issued on basis of tax evasion complaint cannot be sufficient material for formation of belief that income had escaped assessment. In the instant case as there was no reason to believe, the assumption of jurisdiction u/s 147 were not justified, and as initiation of proceedings u/s 147 are invalid, the reassessment order is liable to be set aside.

Dr. Dinesh Kumar Dwivedi vs. ITO (2006) – 156 Taxman 132 (Lucknow)

98. Reassessment – S. 147, 148

1. Incorrect determination of Investment Allowance to be carried forward to the succeeding years is an escapement of income by virtue of clause (c)(iv) of Explanation 2 to section 147.

2. Validity of reopening does not depend upon quantum of finally assessed income. Therefore, merely because the ‘Book Profit’ computed u/s. 115J was still higher, after the reassessment, then the income computed under the normal provisions of the Act will not invalidate the reopening u/s. 147.

Jt. CIT vs. D. C. Polyster (P.) Ltd., [102 ITD 394 (Mum)]

1. Income for the purpose of reassessment cannot be a negative figure.

2. Assessing Officer to close the reassessment proceedings on satisfying with the returned income, where the assessee had declared loss, as he cannot determine loss and allow thereby giving assessee a right to claim set-off in subsequent year to detriment of revenue and such act will be contrary to object, scope and ambit of section 147.

Videocon Leasing & Ind. Fin. Ltd. vs. Jt. CIT, [103 ITD 309 (Ahd)].

In absence of any new material discovered or found by A.O., the re-opening of assessment and re-framing the assessment, by enhancing the addition made was held as not sustainable.

JCIT vs. Akhil K. Dalal (2006) – 156 Taxman 82 (Mumbai)

99. Reassessment – S. 148

The notice u/s 148 having been served on wrong address, and that the notice u/s 148 issued was without the approval of Joint Commissioner as required in accordance with section 151(2), the proceedings held to be bad in law.

Cals Ltd. vs. DCIT (2006) – 157 Taxman 193 (Delhi)

It is only necessary to reach a prima facie conclusion that income chargeable to tax has escaped assessment. At the time of issue of notice the Assessing Officer is not expected to build a fool-proof case before proceeding to issue the notice.

ITO vs. Smt. Gurinder Kaur, [102 ITD 189 (Delhi)].

Non – furnishing of the reasons for initiation of the proceedings is a valid ground for terminating the proceedings and declaring the reassessment proceedings as illegal.

Mafatlal Fabrics Pvt. Ltd. vs ITO, Mumbai ITAT, Bench ‘D’, ITA No. 341/Mum/2004, A.Y. 1995 – 96, dated 29th May 2006 – BCAJ p. 22, Vol. 39-C, Part 1, October 2006

100. Reassessment – Ss. 143(1)(a), 147

Where assessment is made under section 143(1)(a) reopening of assessment is permissible.

Late A. Y. Prabhakar (Indl.) vs. ACIT (2006) 105 TTJ 391 (Chennai)

101. Registration application – S. 12AA

Order rejecting application u/s 12A passed after the period of limitation prescribed has expired. The said impugned order refusing registration is noting but a nullity, and application for grant of registration is deemed to have been allowed.

Sambandh Organisation vs. CIT (2006) – 156 Taxman 183 (Delhi)

102. Revision – Erroneous and prejudicial order – S. 263

AO having given credit for tax paid by assessee it cannot be said that the AO had allowed the credit without verifying the claim and, therefore, the order of the AO could not be revised under section 263.

Infosys Technologies Ltd. vs. Jt. CIT (2006) 105 TTJ 802 (Bang.)

103. Revision – Limitation – S. 263(2)

Limitation prescribed in section 263(2) has to be reckoned from the date of original order of assessment and not from the date of order giving effect to the appellate order of the CIT(A).

Infosys Technologies Ltd. vs. Jt. CIT (2006) 105 TTJ 802 (Bang.)

104. Revision – S. 263

View taken by AO being plausible and consistent with the view taken by CIT(A) and for another year in assessee’s own case, the order was not amenable to revisional jurisdiction of CIT.

Oil & Natural Gas Corporation Ltd. vs. Dy. CIT (2006) 104 TTJ 900 (Del.)

105. Revision – S. 263, 143(3)

The A.O. on verification of the assessee’s stock record, found it to include the customer’s goods accepted by it against order(s) received in the regular course of its business. The assessee, however, while submitting the figures of its stock to the bankers, from whom overdraft facility against stock stood enjoyed, reported a higher borrowing capacity to its bank. The held that there was sufficient discharge of onus by the assessee and there was no incorrect appreciation of facts by the Assessing Officer and therefore, the revisionary jurisdiction of the CIT was not in accordance with the law.

M/s Shree Mukta Jewellers vs. ITO, Ahmedabad ITAT, ITA No. 948/Ahd/2003, A.Y. 2000 – 01, dated 30th August, 2006 – Ahmedabad Chartered Accountants Journal, October 2006, p. 387

106. Scope of total income – S. 5

Consideration receivable under the agreement kept under escrow and interest earned thereon – Assessee’s claim that the interest was taxable in the year of receipt and not on accrual was justified.

DCIT vs. Ram Kumar Giri, Chennai ITAT, Bench ‘D’, ITA No. 1661/Mds./2004, A.Y. 2000 – 01, dated 12th May 2006 - BCAJ p. 21, Vol. 39-C, Part 1, October 2006

107. Stock valuation – S. 145

Held that addition made on account of excise duty in respect of uncleared finished goods lying in factory premises be excluded from value of the closing stock

Honda Siel Power Products Ltd. vs. DCIT (2006) – 157 Taxman 128 (Delhi)

108. TDS – S. 192 r.w. s. 201

Obligations cast u/s 192 is being said to be duly discharged when the belief entertained by the company was bonafide and the estimate of salary made for purpose of deduction of tax at source was fair and honest estimate. The issue of short deduction raised by A.O. on basis of his opinion that particular sum were liable to tax in India and forms part of salary cannot make an assessee, as assessee in default.

DCIT vs. Whirlpool India Holdings Ltd. – 156 Taxman 233 (Delhi)

109. TDS – S. 195

Assessee company imported some software packages from various overseas vendors under separate agreements for the purpose of distributing those software to its customers. Therefore, what the assessee company acquired under the agreement was copy-righted article which partook the character of purchase and sale of goods and therefore, in terms of the CBDT Circular No. 23, dated 23-7-69, no tax was needed to be deducted u/s. 195.

Sonata Information Technology Ltd. vs. Addl. CIT, [103 ITD 324 (Bang)].

110. Technician – S. 10(5B)

Assessee qualifies to be a “technician” within the meaning of section 10(5B) and is entitled to exemption, notwithstanding the fact that he is managing director of the company.

John Lewis Banner vs. Jt. CIT (2006) 105 TTJ 298 (Del.)

111. Trust – Income in the hands of beneficiary – S. 2(24), 164

Trust settled abroad distributing income out of its corpus and/or accumulated income to the Assessee, who is the beneficiary of the discretionary trust. The said amount is not taxable in the hands of the beneficiary

JCIT vs. Late Shantaben M. Patel, Mumbai ITAT, Bench ‘B’, ITA No. 5000/Mum/2001, A.Y. 2000 – 01, dated 17th February, 2006 - BCAJ p. 22, Vol. 39-C, Part 1, October 2006

112. Valuation of closing stock – S. 80HHC, 145A

The Amendment of section 145A has not changed the position of law enumerated by the decision of Bombay High Court in case of Sudarshan Chemicals Inds. Ltd. 245 ITR 769 (Bom) as well as ITAT Special Bench of Calcutta Bench in case of IFB Agro Industries Ltd. 83 ITD 96. There is also no corresponding amendment in the provisions of section 80HHC.

ITO vs. M/s Dispo Dye Chem, Ahmedabad ITAT, ITA No. 184/Ahd/2005, A.Y. 2001–2002, dated 11th August, 2006 – Ahmedabad

Chartered Accountants Journal, October 2006 – Page 387