.

1. Income attributable to the extent of Advance Tax paid cannot be considered as undisclosed Income.

2. Cash credits appearing in the regular books, and for which no material found suggesting the same as bogus or ingenuine cannot be considered as undisclosed income .
   
   N. R. Sudhir vs. D.C.I.T. — 159 Taxman 87 (Bangalore)

18. Block assessment — S. 158BD
    
    Documents having been received from the business premises of K and block assessment having been made in her hands substantively, protective assessment in the hands of assessee without recourse to section 158BD was invalid.
    
    ACIT vs. Ashok Kumar Vig (2007) 106 TTJ 422 (Ranchi)

19. Block assessment — Time limit of completion of block assessment — S. 158BE
    
    The Explanation 2 of section 158BC was inserted by the Finance (No. 2) Act, 1998, with retrospective effect from 1-7-1995, which makes it clear that the authorization referred to in sub-section (1) of section 158BE shall be deemed to have been executed on the conclusion of search as recorded in the last panchanama drawn in relation to any person, in whose case the warrant of authorization has been issued. The said Explanation is with regard to authorization referred to in sub-section (1), which refers to last of the authorizations, which means that the last of the panchanama has to be taken into account in respect of last of the authorizations for search, as there could be more than one panchanamas in respect of same authorization. So the limitation will start from the end of the month in which last of the authorizations is executed.
    
    Shahrukh Khan vs. ACIT [104 ITD 221 (Mum.)]

20. Business connection — S. 9(1)(i)
    
    The term “business connection” is so broad in scope. Explanation 2 inserted below section 9(1) by the Finance Act, 2003 with effect from 1-4-2004 expands the scope of the expression. Though the Explanation dose not apply to the year under consideration; i.e., A.Y. 2001-02, even applying the tests laid down in decided cases the issue resolved against the assessee. In CIT vs. R.D. Aggarwal & Co. [1965] 56 ITR 20 the Supreme Court held that the expression means something more than a business, that it presupposes an element of continuity between the business of the non-resident and the activity in the taxable territory though a stray or isolated transaction would not be taken in, that the connection may take several forms, that it may include carrying on a part of the main business or activity incidental to the non-resident through an agent or it may merely be a relation between the business of the non-resident and the activity in the taxable territory which facilitates or assists the carrying on of that business.
    
    Western Union Financial Services Inc. vs. Assistant Director of Income-tax, International Taxation 104 ITD 34 (Delhi)

21. Business expenditure — Addition — S. 69C
    
    Unexplained expenditure on construction of shopping complex his business expenditure and is allowable as deduction.
    
    ITO vs. Jagdish Chandra Virmani (2007) 106 TTJ 1073 (Delhi)

22. Business expenditure — Commission — S. 37
    
    Assessee having furnished all primary details of commission and brokerage paid by it to certain parties. Deduction of full amount is allowable to the assessee.
    
    GE Capital Services India vs. Dy. CIT (2007) 106 TTJ 65 (Delhi)

23. Business expenditure — Disallowance — S. 40A(2)
    
    Disallowance under section 40A(2) was not justified simply because the average price paid by the assessee for purchase of raw material from its sister concerns was marginally higher than the prices charged by these concerns from other parties.
    Pondy Metal & Rolling Mills (P) Ltd. vs. Dy. CIT (2007) 107 TTJ 336 (Delhi)

24. Business expenditure — Ex gratia payments — S. 37
    
    Assessee having supplied all the relevant details, it could not be held that the expenditure was not verifiable and, therefore, the payments are allowable as deduction.
    
    GE Capital Services India vs. Dy. CIT (2007) 106 TTJ 65 (Delhi)

25. Business expenditure — Genuineness — S. 37
    
    CIT (A) was not justified in mechanically disallowing certain expenses for want of vouchers without asking the assessee to furnish the same.
    
    Silicon Graphics Systems (I) (P) Ltd. vs. Dy. CIT (2007) 106 TTJ 1153 (Delhi)

26. Business expenditure — Labour expenses — S. 37
    
    Ad hoc disallowance of labour expenses could not be made simply on the basis that the vouchers were self made and not reliable without making any test check and pinpointing which item of expenditure is not verifiable.
    
    ACIT vs. Allied Construction (2007) 106 TTJ 616 (Delhi)

27. Business expenditure — Liability in special cases — Discontinued business — S. 28
    
    Arbitration award received by assessee after discontinuation of business cannot be taxed on gross basis.
    
    Van Oord Dredging & Marine Contractors BV vs. Dy. Director of IT (2007) 106 TTJ 889 (Mum.)

28. Business expenditure — Miscellaneous — S. 37
    
    Miscellaneous expenses which were in the nature of legitimate business expenditure could not be disallowed.
    
    Hughes Escorts Communications Ltd. vs. Jt. CIT (2007) 106 TTJ 1065 (Delhi)

29. Business expenditure — Payment to settle dispute — S. 37
    
    Payment made by assessee to settle the continuing dispute between two groups of familymembers which had adversely affected the reputation and business of the company was allowable as business expenditure.
     
    USV Ltd. vs. Jt. CIT (2007) 106 TTJ 535 (Mum.)

30. Business expenditure — Rent — S. 37
     
    For purpose of allowability of rent of godown, passive user is sufficient and rent could not be disallowed.
    
    Sanat Products Ltd. vs. Dy. CIT (2007) 107 TTJ 238 (Delhi)

31. Business expenditure — S. 37(1)
    
    Allowability of disputed liability – Assessee followed mercantile system of accounting claimed as business expenditure liability to the extent admitted by it – A.O. treated as contingent liability. On appeal, CIT(A) allowed only amount actually paid. Tribunal noted that assessee followed mercantile system and expenditure to be allowed on accrual basis. To the extent as provided by the assessee, there was no dispute and it was ascertained liability. Hence deduction allowed.
     
    Hemchand & Co. vs. ITO, ITAT Mumbai, Bench – I, ITA No. 5146/Mum/2002, A.Y. 1997-98, dated 6-10-2006, – BCAJ p. 658, Vol. 39-C, Part 6, March 2007.

32. Business expenditure — Salary — S. 37
    
    No part of salary payment could be disallowed on the ground that the payment in the relevant year is substantially higher than the payment made in the preceding year.
    
    ITO vs. Rajendra Kumar Taparia (2007) 106 TTJ 712 (Jd.)

33. Business expenditure — Software
    
    Expenditure on software is allowable as revenue expenditure.
    
    GE Capital Services Indian vs. Dy. CIT (2007) 106 TTJ 65 (Delhi)

34. Business expenditure — Trade Show — S. 37
    
    Expenses incurred on tradeshow recoverable from client. Expenses incurred by assessee on organizing a meeting in a hotel during the trade show in the course of its business are allowable as deduction.
    
    Silicon Graphics Systems (I) (P) Ltd. vs. Dy. CIT (2007) 106 TTJ 1153 (Delhi)

35. Business expenditure — User of shop for business — S. 37
    
    Expenditure on shop rent is allowable as deduction, although the vouchers were issued in the name of another concern, same being defunct.
    
    ITO vs. Rajendra Kumar Taparia (2007) 106 TTJ 712 (Jd.)

36. Business Income — Business Loss — S. 28
    
    Loss on account of purchase of raw material and services is on the trading account crystallizing on the last date of financial year and is an allowable deduction.
    
    Lucent Technologies Hindustan Ltd. vs. Jt. CIT (2007) 106 TTJ 205 (Bang.)
    
    Loss arising by way of increase in liability towards working capital loan as a result of fluctuation in foreign exchange rate is allowable as deduction in the very year of fluctuation.
    
    Silicon Graphics Systems (I) (P) Ltd. vs. Dy. CIT (2007) 106 TTJ 1153 (Delhi)

37. Capital expenditure — Stop manufacturing — S. 37
    
    Payment made in consideration of another company agreeing to stop manufacturing permanently the equipments manufactured by assessee constituted capital expenditure.
    
    Lucent Technologies Hindustan Ltd. vs. Jt. CIT (2007) 106 TTJ 205 (Bang.)

38. Capital Gain — S. 50 r.w. Ss. 45(1A) & 48
    
    It was held that, as the amount received from Insurance Co. for loss of depreciable asset was lower or lesser than the items mentioned in section 50(1), the entire receipts has been rightly adjusted against the w.d.v. of assets u/s. 43(6), and there would be no Capital Gains as per provisions of section 45(1A).
    
    A.C.I.T. vs. Nidan Chemicals (P) Ltd. — 158 Taxman 109 (Ahmedabad)

39. Capital Gains — Addition — S. 4(1)(a)
    
    Addition on account deemed gift under section 4(1)(a) could not be made on the basis of fair market value of plot determined by DVO for the purpose of computing capital gains.
     
    Yash Pal Bajaj vs. GTO (2007) 107 TTJ 294

40. Capital Gain — Enhanced compensation — S. 45(5)

1. Section 45(5) deals with a situation where compensation on compulsory acquisition is enhanced (including further enhanced) by any court, Tribunal or other authority. Such enhancement of compensation is brought to charge in the year in which such enhanced compensation is received.

2. Section 45(5) is a complete code as it provides not only for charging enhanced compensation but also contains a machinery for computation of income by providing that cost of acquisition and cost of improvement in such a case would be nil. It further provides that in case of a death, enhanced compensation shall be deemed to be the income of the person receiving it. The amount is to be taxed in the year of the receipt. Thus, section 45(5) is an overriding provision and quite different from sub-section (1) of section 45 in content and texture.
   
   DCIT vs. Padam Prakash (HUF) [104 ITD 1 (Delhi) (SB)]

41. Capital Gains — Chargeability — Ss. 45(4), 50B
    
    Distribution of assets to ex-partners for satisfaction of their debts representing their capital on the date of retirement is not caught within the mischief of section 45(4).
    
    Gandamal & Sons vs. ACIT (2007) 107 TTJ 228 (Pune) Gains arising from the slump sale of its manufacturing division by the assessee company was not liable to tax prior to introduction of section 50B w.e.f. 1st April, 2000.
    
    Jt. CIT vs. Steri Sheets Ltd. (2007) 106 TTJ 460 (Delhi)

42. Capital Gains — Cost of Acquisition — S. 55(2)(b)
    
    Fair market value as on 1st April, 1981. Value of raw and uncut diamond as on 1st April, 1981, is to be taken by obtaining valuer’s report and not by applying the cost inflation index in the reverse direction.
    
    Hiralal Lokchandani vs. ITO (2007) 107 TTJ 405 (Kol.)

43. Capital Gains — Exemption — S. 54
    
    If the assessee purchases two houses out of the sale proceeds of one residential house, exemption under section 54 cannot be denied.
    
    ITO vs. P. C. Ramakrishna (HUF) (2007) 107 TTJ 351 (Chennai)

44. Capital Gains — S. 55(2)(b)
    
    CIT (A) was justified in estimating the fair market value of assessee’s property located at prime location as on 1st April, 1981 as per registered valuer’s report for the purpose of computation of capital gains.
    
    ITO vs. P. C. Ramakrishna (HUF) (2007) 107 TTJ 351 (Chennai)

45. Capital or revenue expenditure — Advertise — S. 37
    
    Expenditure on advertisement, publicity, trade shows, etc. Expenditure on advertisement, publicity, trade shows, etc. does not bring into existence any capital asset and, therefore, it is allowable as revenue expenditure.
    
    Silicon Graphics Systems (I) (P) Ltd. vs. Dy. CIT (2007) 106 TTJ 1153 (Delhi)

46. Capital or revenue expenditure — S. 37(1)
    
    Expenditure incurred on construction of a strong room in a rented premises was allowable as revenue expenditure.
    
    Muthoot Bankers vs. DCIT, ITAT Kochin Bench, ITA No. 1114/Coch/2005, A.Y. 2001-02, dated 16-10-2006, — BCAJ p. 523, Vol. 39-C, Part 5, February 2007.
    
    Assessee had purchased accounting software for Rs. 3 lakhs and claimed as revenue expenditure. Held that, in view of the fast changing technology in the field of software, need for its replacement at short interval was essential. Relying on the Supreme Court decision in case of Empire Jute Co. Ltd., it observed that if the expenditure was in the revenue field, then the same could not be disallowed merely on the ground of acquiring benefit of enduring nature.
    
    DCIT vs. Express Airotronics Pvt. Ltd., Mumbai ITAT Bench ‘G’, ITA No. 7105/Mum/2002, A. Y. 1995-96, dated 23-2-2006 – BCAJ p. 657, Vol. 39-C, Part 6, March 2007.

47. Capital receipt — S. 4
    
    Consideration of sale of technical know-how. Consideration received by assessee for transferring manufacture and process know-how to another company in terms of a technology transfer agreement, is capital receipt.
    
    Dy. CIT vs. Indian Syntans Investments (P) Ltd. (2007) 106 TTJ 388 (Chennai)

48. Capital revenue — Lease hold premises — S. 37
    
    New office expenses and compensation paid to lessor for making alteration of leasehold premises for new office are allowable revenue expenses.
    
    Lucent Technologies Hindustan Ltd. vs. Jt. CIT (2007) 106 TTJ 205 (Bang.)

49. Capital revenue — Marketing information — S. 37
    
    Payment for obtaining scientific and market information is allowable as revenue expenditure.
    
    USV Ltd. vs. Jt. CIT (2007) 106 TTJ 535 (Mum.)

50. Cash credit — Genuineness — S. 68
    
    CIT (A) was not justified in deleting addition under section 68 without specifically dealing with the adverse comments of the AO and deliberating upon additional evidence as regards genuineness of credits and creditworthiness of creditors by a reasoned speaking order.
    
    Dy. CIT vs. Shri Shyam Pulp & Board Mills Ltd. (2007) 106 TTJ 973 (Delhi) Cash credits standing in the names of trade creditors, all income-tax assessees, could not be treated as non-genuine and addition could not be made in respect of cash credits or interest paid thereon.
     
    ITO vs. Rajendra Kumar Taparia (2007) 106 TTJ 712 (Jd.)

51. Charitable Trust — Exemption — S. 11
    
    Income from letting out wedding hall is to be regarded as a charitable trust entitled for exemption under section 11.
    
    ACIT vs. Kalyan Mitra Trust (2007) 106 TTJ 241 Exemption is allowable following the rule of consistency as exemption has been allowed to the assessee for several assessment years either by the AO himself or by the Tribunal.
    
    Samaj Kalyan Parishad vs. ITO (2007) 107 TTJ 302 (Delhi)

52. Charitable Trust — Registration — Agriculture Market Committee — S. 12A
    
    Objects of applicant market committee are charitable in nature failing within the purview of “advancement of any other object of general public utility” within the meaning of section 2(15) and therefore, it is entitled to registration under section 12A.
    
    Krishi Upaj Mandi Samiti, Hindaun City vs. CIT (2007) 107 TTJ 381 (Jp.)Charitable Trust — S. 11
    
    Auditoriums and ladies hostel constructed by assessee in terms of its objects were property held under trust and rental and other income therefrom being utilized by assessee towards objectives of trust, excess of income over expenditure was exempt under section 11.
    
    Dy. Director of IT (Exemptions) vs. Willingdon Charitable Trust (2007) 106 TTJ 1121 (Chennai)

53. Charitable Trust — Registration — S. 12A
    
    Non-filing of return or non-filing of audited accounts along with return is no hurdle to registration under section 12A.
    
    Rajasthan State Agricultural Marketing Board vs. CIT (2007) 106 TTJ 1109 CIT was not justified in refusing registration on the conjecture that assessee-trust had no intention to carry out those activities.
    
    Sardari Lal Oberai Memorial Charitable Trust vs. ITO (2007) 106 TTJ 468
    
    CIT having passed no order of refusal within the time period of six months prescribed in section 12AA(2), application under section 12A for registration of trust shall be deemed to have been allowed.
    
    Sardari Lal Oberai Memorial Charitable Trust vs. ITO (2007) 106 TTJ 468 (Delhi)

54. Charitable Trust — S. 11
    
    Auditoriums and ladies hostel constructed by assessee in terms of its objects were property held under trust and rental and other income therefrom being utilized by assessee towards objectives of trust, excess of income over expenditure was exempt under section 11.
    
    Dy. Director of IT (Exemptions) vs. Willingdon Charitable Trust (2007) 106 TTJ 1121 (Chennai)

55. Charitable Trust — Scope and applicability — S. 11(4A)
    
    Assessee trust having been all along held to be pursuing an object of general public utility, assessee is eligible for exemption under section 11 despite the fact that it is carrying on the activity for profit.
    
    IAC & Ors. vs. Saurashtra Trust (2007) 107 TTJ 297 (Mum.)

56. Company — Book profit — S. 115JA
    
    Where the amount of profit is worked out in the assessee’s P&L a/c. prepared in accordance with the provisions of Companies Act, Assessing Officer cannot substitute the same for the purpose of adjustment under clause (iv) of Explanation to section 115JA.
    
    Steel & Power Ltd. vs. ACIT (2007) 106 TTJ 943 (Delhi) Provision for doubtful debts and diminution in the value of investment cannot be added to the book profit under explanation (c) to section 115JA.
    
    Peerless Gen. Fin. & Inv. Co. Ltd. vs. ACIT (2007) 107 TTJ 186 (Kol.)

57. Computing — Book profit — Amount taken directly to Capital Reserve — S. 115JA
    
    Amount received towards transfer of technical know-how, tangible and intangible assets which have been taken directly to the capital reserve account could not be taken into account for computing book profit under section 115JA.
    
    Dy. CIT vs. Indian Syntans Investments (P) Ltd. (2007) 106 TTJ 388 (Chennai)

58. Concealment penalty — S. 271(1)(C)
    
    Unexplained Cash found in locker be added in the year in which locker is sealed. Date of opening of locker has no relevance. Penalty levied accordingly was upheld.
    
    On account of non acceptance of evidence furnished by an assessee, an addition can be made but penalty u/s. 271(1)(c) should not be levied.
    
    Mamnilal G. Biyani vs. A.C.I.T. — 158 Taxman 31 (Mumbai)

59. Condition of delay — S. 246A
    
    Illness of the director of the assessee company constituted sufficient cause for the delay and, therefore, the delay in filing the appeal is condoned.
    
    Orbitel Communication (P) Ltd. vs. ITO (2007) 107 TTJ 112 (Delhi)

60. Condonation of delay — Charitable Trust — S. 253
    
    Applicant society working under Government supervision having applied for registration under section 12A as a result of amendment of law, there was reasonable cause for the delay in filing the application for registration under section 12A and, therefore, the delay is to be condoned.
    
    Krishi Upaj Mandi Samiti, Hindaun City vs. CIT (2007) 107 TTJ 381 (Jp.)

61. Condonation of delay — Reasonable cause — S. 246
    
    Prosecution notice alone was the provocation for filing the appeal after a long delay of 13 years which did not constitute a reasonable cause, therefore, the delay could not be condoned.
    
    Jetha Drums & Containers (P) Ltd. vs. ACIT (2007) 106 TTJ 1047 (Mum.)

62. Condonation of delay — S. 253
    
    Applicant having filed belated application for registration under section 12A as it came to know only at a later stage from a decision of the Tribunal that it can claim exemption under section 11, there was reasonable cause for the delay in filing the application.
    
    Rajasthan State Agricultural Marketing Board vs. CIT (2007) 106 TTJ 1109

63. Co-op Society — Deduction Business of Banking — S. 80p(2)(A)(I)
    
    Interest income arising from investment of funds out of reserves in Kisan Vikas Patras, NABARD bonds, State Government securities and IDBI bonds is income from banking business and is eligible for deduction under section 80P(2)(a)(i).
    
    ITO vs. D. C. C. Bank Ltd. (2007) 107 TTJ 83 (Bang.)

64. Cost of any appeal — S. 254(2B)
    
    Assessment made without following the directions of the CIT(A) and without giving adequate opportunity to the assessee. The Tribunal imposed cost of Rs. 5,000/- upon the appellant for the casual and irresponsible approach of the Assessing Officer, which led the assessee into two rounds of litigation.
    
    DCIT vs. Dalal Street Press Ltd., ITAT Bench ‘B’, - ITA No. 3756/Mum/2003, A.Y. 1997-98, dated 20-6-2006 - BCAJ p. 403, Vol. 39-C, Part 4, January 2007

65. Deduction — Allowability — S. 80IA
    
    Assessee manufacturing detergent cakes is eligible for deduction under section 80IA.
    
    Dy. CIT vs. Balaji Detergents & Chemicals Ltd. (2007) 106 TTJ 480 (Chennai)

66. Deduction — Allowability — Survey — S. 80I
    
    Income disclosed during survey / search on account of excess stock of paper is not income ‘derived from’ industrial undertaking, hence not eligible for deduction under section 80I.
    
    ACIT vs. Priya Paper Works (2007) 106 TTJ 234 (Jab.)

67. Deduction — Computation — Ss. 80HH, 80I
    
    Amount deposited under section 32AB cannot be deducted while computing the profits for purposes of section 80HH/80I.
    Bajaj Auto Ltd. vs. Dy. CIT (2007) 106 TTJ 333 (Mum.)

68. Deduction — Manufacture or production — S. 80IB
    
    Assessee engaged in the manufacture/ production of polished marble slabs, tiles, table tops, etc. is entitled to deduction under section 80IB.
    
    Aakash Stone Industries Ltd. vs. ACIT (2007) 106 TTJ 128 (Mum.)

69. Deduction — Professional income from Foreign Source — S. 80RR
    
    Assessee actor used his skills as an actor or as an artist in anchoring the television game show “Kaun Banega Crorepati”, payment received by the assessee for acting as an anchor for the said show was derived by him as an ‘artist’ and deduction under section 80RR is allowable in respect of payment received by him from a foreign company.
    
    Amitabh Bachchan vs. Dy. CIT (2007) 106 TTJ 925 (Mum.)

70. Deduction — Profits and Gains — Industrial undertaking — S. 80HH
    
    Marketing activities carried on by the assessee being independent of the activities of the industrial undertaking have to be excluded from the profits and gains of the industrial undertaking for the purpose of allowing deduction under section 80HH.
    
    USV Ltd. vs. Jt. CIT (2007) 106 TTJ 535 (Mum.)

71. Deduction — S. 80P
    
    Interest income derived from investment out of its reserves in Government securities by an Co-operative Society carrying on banking business is eligible for deduction u/s. 80P(2)(a)(i).
    
    Kota Central Co-operative Bank Ltd. vs. J.C.I.T. — 159 Taxman 124 (Jaipur)

72. Deduction — Ss. 80-IA/80-IB
    
    Assessee engaged in integrated activity of mining, processing and grinding of Wollastonite and Calcite products is engaged in manufacture or production eligible for deduction under sections 80IA and 80IB.
    
    ACIT vs. Wolkem India Ltd. (2007) 107 TTJ 439 (Jd.)

73. Deduction — Stock exchange Card — Allowability — S. 32
    
    Stock exchange membership card is an intangible asset and, therefore, it was not eligible for depreciation in asst. year 1998-99.
    
    Vyomit Shares, Stocks and Investments (P) Ltd. vs. Dy. CIT (2007) 107 TTJ 422 (Mum.)

74. Deduction — Treatment of depreciation — S. 80-I
    
    In computing deduction under sections 80HH and 80I, depreciation of the eligible unit has to be taken into account notwithstanding introduction of concept of block of assets.
    
    Bajaj Auto Ltd. vs. Dy. CIT (2007) 106 TTJ 333 (Mum.)

75. Deduction — Year allowability — S. 145
    
    Dispute relating to a contractual liability of an earlier year having been settled during the year under consideration, same is allowable as deduction in the relevant year.
    
    Silicon Graphics Systems (I) (P) Ltd. vs. Dy. CIT (2007) 106 TTJ 1153 (Delhi)

76. Deduction in respect of intercorporate dividend — S. 80M r.w.s 115-O
    
    The assessee had complied with the conditions of distribution of dividend before the due date as per section 80M. It further observed that the provisions of section 115-O were prospective in nature, and hence, were not applicable to the assessment proceedings for any year up to A.Y. 1997-98. Further, no amendments had been made u/s. 80M, which correspond to provisions of section 115-O(5). Further, the restriction had been put u/s. 115-O(5), only to ensure that share holders did not claim any further deduction in respect of dividend income. It was not to restrict the quantum of deduction as provided in section 80M up to A.Y. 1997-98. Accordingly, the claim of assessee was allowed.
    
    Eastin Hospital Services Pvt. Ltd. vs. DCIT, ITAT Delhi, ‘SMC’ Bench, ITA No.3985/Delhi/2001, A.Y. 1997-98, dt. 15-9-2006 - BCAJ p. 523, Vol. 39-C, Part 5, February 2007.

77. Depreciation — Actual cost — S. 43(1)
    
    Value of land as taken for stamp duty purposes and not the value as shown in the report of the valuer has to be taken and the understand value of the land is to be reduced in entirely from the value of plant and machinery for the purpose of working out depreciation.
    
    South Asia Tyres Ltd. vs. Dy. CIT (2007) 107 TTJ 319 (Pune)

78. Depreciation — S. 32
    
    Depreciation claimed on office building was denied by the A.O., on the ground that the same was held in the name of the two partners of the firm and not in the name of the firm. Held that though partnership firm is assessed as a separate entity under the Income-tax Act, it is not distinct from its partners under the Partnership Act. Depreciation on said office was allowable.
    
    Muthoot Bankers vs. DCIT, ITAT Kochin Bench, ITA No. 1114/Coch/2005, A.Y. 2001-02, dated 16.10.2006, - BCAJ pg. 523, Vol. 39-C, Part 5, February 2007.

79. Disallowance — Interest — S. 14A
    
    The interest expenditure incurred on the borrowed funds, which were invested in acquisition of shares, cannot be allowed as deduction against the interest income of the assessee in view of prohibition in section 14A.
    
    Sunash Investment Co. vs. ACIT (2007) 106 TTJ 855 (Mum.)

80. Disallowance — Ss. 40A(2), 40A(3)
    
    Disallowance made by CIT (A) under section 40A(2) by employing cost plus method for determining fair market value of services did not call for any interference.
    
    Nutan Warehousing Co. (P) Ltd. vs. ITO (2007) 106 TTJ 137 (Pune) Where the assessee has appropriated certain amount out of its income and made payment to another person under a profit sharing agreement, provisions of section 40A(3) are not attracted to such payment.
    
    ITO vs. Smt. N. Padma (2007) 106 TTJ 739 (Chennai)

81. Disallowance — Stock liability — S. 43B
    
    Entire amount of customs duty paid by assessee in the relevant year is allowable as deduction irrespective of the amount of customs duty included in the valuation of closing stock at the end of the year.
    
    Silicon Graphics Systems (I) (P) Ltd. vs. Dy. CIT (2007) 106 TTJ 1153 (Delhi)

82. Disallowances — S. 37
    
    Payment being unvouched and unverifiable and there being steep fall in GP rate as compared to last year, accounts were rightly by AO.
    
    Pannalal Construction Co. vs. ITO (2007) 107 TTJ 114 (Jd)

83. Dividend — Deemed — S. 2(22)(e)
    
    Advances made during the ordinary course of business for business expediencies do not constitute ‘loan’ for purpose of section 2(22)(e) and cannot be taxed as deemed dividend.
    
    Dy. CIT vs. Lakra Brothers (2007) 106 TTJ 250 (Chd.)

84. Double Taxation Relief — Agreement between India and Germany — S. 90
    
    Payment for transfer of design documentation. Fee paid for design documentation to German company for outright sale was not royalty as per DTAA or IT Act and German company having no PE in India, same was not taxable in India and assessee was not obliged to deduct tax at source.
    
    Dy. CIT vs. Finolex Pipes Ltd. (2007) 106 TTJ 741 (Pune)

85. Double Taxation Relief — Agreement between India and USA — S. 90
    
    Payment for advertising, publicity and sales promotion services. Receipts were neither ‘royalty’ nor ‘fee for technical services’ nor ‘fee for included services’ as envisaged under the IT Act and the DTAA so as to be taxable in India.
    
    Sheraton International Inc. vs. Dy. Director of IT (2007) 106 TTJ 620 (Delhi)

86. Double Taxation Relief — Agreement between Indian and Netherlands — S. 90
    
    Assessee Company, having executed a project in India in earlier years, it had a PE in India in those years, the amount of arbitration award received by assessee being attributable to said project was taxable in the relevant assessment year; i.e., year of receipt.
    
    Van Oord Dredging & Marine Contractors BV vs. Dy. Director of IT (2007) 106 TTJ 889 (Mum.)

87. Double Taxation Relief Agreement — S. 90
    
    Wherever there is a DTAA between India and another country, then the provisions of the DTAA will override those of the Income-tax Act.
    
    Western Union Financial Services Inc. vs. Assistant Director of Income-tax, International Taxation 104 ITD 34 (Delhi)

88. Entertainment expenditure — S. 37(2)
    
    1/3rd of the entertainment expenses can reasonably be attributed towards employee’s participation and the same are not to be disallowed under section 37(2).
    
    Hughes Escorts Communications Ltd. vs. Jt. CIT (2007) 106 TTJ 1065 (Delhi)

89. Exemption — Allowability — S. 10A
    
    Where the firm was entitled to exemption under section 10A, exemption could not be denied on its conversion into private limited company under Part IX of Companies Act, 1956, on the ground that company was separately granted recognition by STPI from a later date.
    
    Kumaran Systems (P) Ltd. vs. ACIT (2007) 106 TTJ 484 (Chennai)

90. Exemption — Allowability — S. 10B
    
    Assessee acting as a professional recruiting agency is not eligible for exemption under section 10B.
    
    Cybertech Systems & Software Ltd. vs. Dy. CIT (2007) 106 TTJ 257 (Mum.)

91. Expenditure incurred in relation to exempt income — S. 14A
    
    Investments in shares yielding tax-free income – Disallowance based on the proportion of interest bearing funds actually employed for the purpose of making investment in tax-free investments of that year only wherein the investments were made.
    
    Garware Engineering Ltd. vs. ITO, ITA No. 3402/Mum/2003, Bench–A, A.Y. 1999-2000, Dated 25-9-2006 – BCAJ pg. 402, Vol. 39-C, Part 4, January 2007

92. Expenditure on repair and renovation of leasehold premises — S. 31
    
    Expenditure has to be treated as capital expenditure except to the extent of 5 per cent which would adequately cover the expenditure on repairs of the premises.

93. Export — Deduction — Allowability — S. 80HHE
    
    Activities carried out by the assessee company were in respect of recruitment, training and export of software professionals and therefore, assessee is not eligible for deduction under section 80HHE.
    
    Cybertech Systems & Software Ltd. vs. Dy. CIT (2007) 106 TTJ 257 (Mum.)

94. Export — Deduction — Computation — S. 80HHC/80-IA
    
    Profits of business for purposes of section 80HHC have to be reduced to the extent allowed deduction under section 80-IA.
    
    Leben Laboratories Ltd. vs. Dy. CIT (2007) 107 TTJ 1 (Mum.)

95. Export — Marketing receipts — S. 80HHC
    
    90 per cent of net marketing receipts are to be excluded as per clause (baa) of Explanation to section 80HHC. Such gross marketing receipts would not form part of total turnover.
    
    USV Ltd. vs. Jt. CIT (2007) 106 TTJ 535 (Mum.)

96. Export — Profit of business — S. 80hhc
    
    Receipt by way of job word constitute operating income of the assessee and cannot be reduced by 90 per cent, under Expln. (baa) to section 80HCC for purpose of computing profits of business.
    
    Ahmednagar Forgings Ltd. vs. ACIT (2007) 107 TJJ 129 (Pune)

97. Export — Profits of the business — S. 80HHC
    
    90 per cent of the gross receipts like interest, rent, etc. which are included in business profits has to be excluded while computing the profits of the business for the purpose of deduction under section 80HHC.
    
    Jt. CIT vs. Global Calcium (P) Ltd. (2007) 106 TTJ 179 (Chennai)

98. Fine or penalty — S. 37(1)
    
    Assessee’s tanker had hit one person which resulted in death, an compensation was paid as per Motor Accident Claims Tribunal’s Award to victims family. Held that expenditure is not for paying fine or penalty, or for an offence prohibited by law, and so the Explanation to section 37(1) would not be attracted and sum paid would be an allowable expenditure.
    
    I.T.O. vs. Triputi International — 158 Taxman 65 (Delhi)

99. Gift from NRI — S. 68
    
    Statement of the donor recorded behind the back of the assessee without being subjected to cross-examination cannot be fully admitted as evidence against the assessee.
    
    Vijender Kumar Jain & Sons (HUF) vs. ACIT (2007) 106 TTJ 83 (Delhi)

100. Income — Promotion receipt — S. 28
     
     The value of said car is chargeable to tax as part of professional income of the assessee in the year in question.
     
     Amitabh Bachchan vs. Dy. CIT (2007) 106 TTJ 925 (Mum.)

101. Income — Undisclosed Income — Addition — S. 69
     
     Rates of local PWD has to be adopted and not that of CPWD and therefore CIT(A) was justified in deleting under section 69.
     
     ITO vs. L. N. Memorial & Hospital Research Center (2007) 107 TTJ 291 (Jd.)

102. Income from House Property — Business income — Ss. 22, 56
     
     Income from letting out of warehouse was assessable as income from house property.
     
     Nutan Warehousing Co. (P) Ltd. vs. ITO (2007) 106 TTJ 137 (Pune)

103. Income from other sources — Business income — Ss. 56, 28
     
     Interest from FDRs is assessable as income from other sources and cannot be treated as business income. Interest paid to the bank cannot be allowed as deduction.
     
     Dy. CIT vs. Allied Construction (2007) 106 TTJ 595 (Delhi)

104. Income from other sources — interest on deposits — S. 56
     
     Interest earned on FDRs purchased by the assessee for the purpose of obtaining overdraft and bank guarantee which have been utilized for the business of the assessee has to be treated as a business income of the assessee.
     
     ACIT vs. Allied Construction (2007) 106 TTJ 616 (Delhi)

105. Income from undisclosed Income — Addition — S. 69
     
     Difference between the cost of construction declared by the assessee and the cost estimated by DVO being negligible, it cannot be inferred that the assessee has made any undisclosed investment and therefore, no addition can be sustained.
     
     Smt. Saroj Gupta vs. ITO (2007) 106 TTJ 1073 (Delhi)

106. Interest — Borrowed capital — S. 36(1)(iii)
     
     Interest paid on capital borrowed for acquiring premises in a residential apartment was disallowed based on ruling out its use as office premises. It was held that the residential nature of any premises does not preclude its use for the purpose of its business, and there may be a practical compulsion, but there is no legal compulsion to have an office in prime commercial area, and A.O. is not justified in disallowing Interest.
     
     I.T.O. vs. Beekay Fintech Ltd. — 158 Taxman 145 (Kolkata)

107. Interest — Borrowings for purchase of capital assets — S. 36(1)(iii)
     
     For purposes of allowability under section 36(1)(iii) it is immaterial whether the borrowing is utilised for acquisition of capital asset or for a revenue purpose.
      
     ACIT vs. Videocon VCR Ltd. (2007) 106 TTJ 474 (Pune)

108. Interest — Business expenditure — Interest on Borrowed capital — S.14A
     
     Interest on amount borrowed was rightly disallowed under section 14A where no interest was paid and there was no nexus between amount borrowed and remuneration received from firm for services rendered.
     
     D. J. Mehta vs. ITO (2007) 107 TTJ 12 (Mum.)

109.  Interest — Chargeability — S. 234B
     
     Assessee’s tax liability more than Rs. 1,500/ Rs. 5,000. Assessee was liable to pay advance tax and assessee having failed to do so, interest under section 234B was chargeable.
     
     R. M. Chinniah vs. ITO (2007) 106 TTJ 1001 (Chennai)

110. Interest — Chargeability — Ss. 234B, 234D
     
     Interest under ss. 234B and 234C can be charged where assessment is made under section 115JA.
     
     Jindal Steel & Power Ltd. vs. ACIT (2007) 106 TTJ 943 (Delhi)

111. Interest — Chargeability — S. 234D
     
     Interest under section 234D cannot be charged for the period prior to 1st June, 2003 but chargeable w.e.f. 1st June, 2003.
     
     Jindal Steel & Power Ltd. vs. ACIT (2007) 106 TTJ 943 (Delhi)

112. Interest — Disallowance — S. 14A
     
     Assessee having claimed deduction of interest on borrowed funds which were invested in purchase of shares of group companies under bona fide belief that such interest was deductible in entirely, penalty under section 271(1)(c) could not be levied on account of disallowance of pro rata interest expenditure by invoking the provisions of section 14A.
     
     Sunash Investment Co. vs. ACIT (2007) 106 TTJ 855 (Mum.)

113. Interest — S. 234B
     
     Where income of assessee is subject to TDS, interest under section 234B cannot be charged even though no tax is deducted.
     
     Sheraton International Inc. vs. Dy. Director of IT (2007) 106 TTJ 620 (Delhi)

114. Interest — S. 234D
     
     Interest under section 234D is not chargeable where the order granting refund was passed prior to insertion of section 234D.
     
     Van Oord Dredging & Marine Contractors BV vs. Dy. Director of IT (2007) 106 TTJ 889 (Mum.)

115. Interest — S. 36(1)(iii)
     
     Advances to sister-concern having been given out of sale proceeds of its manufacturing division, interest paid by assessee on borrowed funds could not be disallowed.
     
     Jt. CIT vs. Steri Sheets Ltd. (2007) 106 TTJ 460 (Delhi) Assessing Officer has to establish the nexus between interest-bearing funds and interest-free advances to justify disallowance of interest paid.
     
     Ravindra Kumar Sharma vs. ITO, ITAT Jaipur, ‘SMC’ Bench, ITA No. 905/Jp/2005, A.Y. 2001-02, dt. 27-10-2006 – BCAJ p. 524, Vol. 39-C, Part 5, February 2007.

116. Interest for deferment of advance tax — S. 234C
     
     Assessee company incorporated on 4-12-2002 and commenced business in January. Held that assessee company was not liable to pay advance tax in December.
     
     BVQI (India) Pvt. Ltd. vs. ACIT, ITA No. 1309/Mum/2005, Bench — K, A. Y. 2003-04, dt. 7-11-2006 — BCAJ pg. 401, Vol. 39-C, Part 4, January 2007.

117. Method of accounting — S. 145
     
     Assessee builder was following project completion method, and was assessed for earlier years. A.O. on noticing that possession of certain flats were given in the year under assessment, adopted percentage of completion method. It was held that once a particular method of computing profits is adopted that would bind him for all subsequent years until project is completed.
     
     It was also observed that general rule in income tax law that each year is distinct and separate could not be strictly applied.
     
     Bakshi Vikram Vikas Construction Co (P) Ltd. vs. D.C.I.T. — 158 Taxman 61 (Delhi)

118. Minimum Alternate Tax — S. 115JA

1. For the purpose of section 115JA, addition to book profit, i.e. computed as per Parts II and III of Schedule VI to Companies Act, 1956, can be made only if it is permissible by clauses (a) to (f) of Explanation to section 115JA.

2. Merely because deduction of provision for bad and doubtful debt is not allowable in computing total income there would be no ground for including same in book profit as per section 115JA.

3. Adjustments to be made to net profit disclosed in profit and loss account for purpose of section 349 of Companies Act are quite different than adjustment required to be made under Explanation to section 115JA. However, it is not necessary that same is to be included in book profit for purpose of section 115JA merely because some item debited to profit and loss account is required to be added to net profit for purpose of computing director’s remuneration under section 349 of Companies Act.

4. Provision for bad and doubtful debt is not a provision for liability but it is a provision for diminution in value of assets and, therefore, clause (c) of Explanation to section 115JA would not be applicable in respect of provision for bad and doubtful debts.

5. Provision for bad and doubtful debt, if not proved to be excessive or unreasonable, cannot be considered to be reserve falling under clause (b) of Explanation to section 115JA. Therefore, on facts, provision for bad and doubtful debts would not fall within purview of adjustments under section 115JA.

6. Provision for wealth-tax does not fall under any of items of Explanation to section 115JA and, therefore, no adjustment could be made in respect of same while computing book profits under section 115JA.
   
   Jt. CIT vs. Usha Martin Industries Ltd. [104 ITD 249 (Kol.) (SB)/288 ITR 63 (AT)]

119. Mistake apparent on record — S. 234B
     
     There being nothing on assessment record of AO to entertain the plea of assessee that he was not liable to pay advance tax and hence interest under section 234B and the matter also being debatable, AO was justified in rejecting assessee’s application under section 154.
     
     R. M. Chinniah vs. ITO (2007) 106 TTJ 1001 (Chennai)

120. Mistake apparent with Record — Appeal — Tribunal — Rectification — S. 254(2)
     
     There being nothing on record to show that additional ground taken by the Revenue was ever sought to be argued for admission by the Departmental Representative, Tribunal committed no mistake rectifiable under S. 254 (2) in not considering the sane in its appellate order.
     
     ACIT vs. J & K Bank Ltd. (2007) 107 TTJ 135 (Asr.)

121. Mistakes Appeal with Record — Rectification — Debatable issue — S. 154
     
     Where more than one view is possible, orders under section 154 could not be passed by AO for treating the returns as invalid and withdrawing the refund granted earlier.
     
     ACIT vs. Hing Samchar Ltd. (2007) 106 TTJ 441 (Asr.)

122. Mutuality — S. 4
     
     Income derived by assessee club letting out its premises and by extending services to guest, relatives, etc. is not taxable.
     
     Bhubaneswar Club Ltd. vs. ACIT (2007) 107 TTJ 40 (Ctk.)

123. Non Compete Fee — Income — S. 4
     
     Non Compete Fee received by the assessee cannot be treated as goodwill and it is not taxable as income.
     
     Dy. CIT vs. Indian Syntans Investments (P) Ltd. (2007) 106 TTJ 388 (Chennai)

124. Non disclosure of primary facts — S. 147
     
     Explanation 1 to section 147 cannot be applicable to the documents which the assessee is obliged to file along with the return, such documents cannot be considered as produced for purpose of explanation 1 of section 147.
     
     The explanation refers to the books of account or other evidence produced during the course of assessment.
     
     Otis Elevator Co. (India) Ltd. vs. D.C.I.T. — 159 Taxman 128 (Mum.)

125. Option — Power Generating Undertaking — R. 5(1A)
     
     Assessee having begun to generate power and exercised his option to claim depreciation under Rule 5(1) r/w. Appendix I; i.e., on WDV basis, there was proper compliance of the requirement and the claim is admissible.
     
     Jindal Steel & Power Ltd. vs. ACIT (2007) 106 TTJ 943 (Delhi)

126. PE in India
     
     Four categories: (a) fixed place PE; (b) dependent agents PE; (c) software as PE or (d) LO as PE. However, very relevant and important Question may arise, on holding that there is a “business connection”, as to whether there is a PE. In other words, a doubt may arise as to whether there is any difference between the two concepts — the concept of “business connection” and the concept of “PE” — and whether once a foreign enterprise is found to have a business connection in India, can it not also automatically be held to have a PE in India. There is a distinction between the two. “Business connection” seems to be a much wider concept than a “PE”. The former has not been statutorily defined whereas the latter has been defined in the DTAA where the criteria has been more specifically laid down. The Board in its Circular No. 23 dated 23-7-1969, referred to before us in a different context, recognizes that the “expression ‘business connection’ admits of no precise definition”

1. Fixed place PE :
   
   Article 5.1 of the DTAA says that PE means a fixed place of business through which the business of an enterprise is wholly or partly carried on article 5.2 includes several places as a PE of the foreign enterprise. General definition of the PE in the first part of the article postulates (a) the existence in India of a fixed place of business in India and (b) that the business of the foreign enterprise shall be carried on (wholly or partly) through the said place. Under article 5.3(e), the maintenance of a fixed place of business solely for the purpose of advertising, for the supply of information, for scientific research or for other activities which have a preparatory or auxiliary character cannot be considered to be a PE. However, mere use of software for purpose of assessee’s business from premises of agents could not lead to decision that premises-cum-software would be permanent establishment (PE) of assessee in India under article 5 of DTAA.

2. Agency PE –
   
   The stand of the income-tax department is that the agents are not “independent agents” under article 5.5 of the treaty but are “dependent agents” under article 5.4(a) of the treaty.
   
   Under article 5.4 “independent agents” there are three conditions which are required to be satisfied in order that an agent may be said to be an independent agent: (1) he should be acting in the ordinary course of his business; (2) his activities should not be devoted wholly or almost wholly on behalf of the foreign enterprise for whom he is acting as agent and (3) the transactions between the foreign enterprise and the agent should be at arm’s length.

3. Is the software “VOYAGER” the PE?
   
   The department has made out a case that the software, which affords access to the agents to the assessee’s mainframe, computers in USA for the purpose of finding out the matching of the MTCN numbers, has been installed in the premises of the agents and hence taken together with the premises constitutes the PE. The premises of the agents are either owned or hired by them. There is no evidence to show that the assessee can as a matter of right enter and make use of the premises for the purpose of its business. The software is the property of the assessee and it has not parted with its copyright therein in favour of the agents. The agents have only been allowed the use of the software in order to gain access to the mainframe computers in the USA. Mere use of the software for the purpose from the premises of the agents cannot lead to the decision that the premises-cum-software will be the PE of the assessee in India. Under article 5.2(j) and installation may amount to a PE provided it is used for the exploration of natural resources. Therefore, even if the software is to be considered as an installation, since it is not used for exploration or exploitation of natural resources it cannot per se be treated as a PE.

4. Is LO the fixed place of business (and hence a PE)?
   
   The first is whether the LO [Liaison Office] can be considered to be the fixed place of business of the assessee in India. Under article 5.3(e) the maintenance of a fixed place of business solely for the purpose of advertising, for the supply of information, for scientific research or for other activities which have a preparatory or auxiliary character cannot be considered to a PE. None of the activities could be described as anything other than of preparatory or auxiliary character. Therefore, the LO could not be considered to be the PE in India.

5. Credit cards and PE :
   
   The Assessing Officer stated that the assessee permits the use of credit cards for drawing cash from its outlets in India, this has been specifically denied before the CIT(A) in writing (letter read out before us). The CIT(A) has not doubted or rejected the denial. Even before the Hon’ble Tribunal, the learned CIT(DR) did not touch the point. Therefore, there is no material from which it can be gathered that the assessee permitted withdrawal of monies from its outlets by the use of credit cards. In fact, the existence of the assessee’s own “outlets” in India has been stoutly denied. As the observations of the Assessing Officer were not being supported by any evidence and the CIT(A) not having specifically approved them, it was held that there can be no PE on account of the use of the credit cards.
   
   Western Union Financial Services Inc. vs. Assistant Director of Income-tax, International Taxation 104 ITD 34 (Delhi)

127. Penalty — Concealment — S. 271(1)(c)

1. 1. Mere fact that disallowance has been made and upheld in appeal, does not justify the imposition of penalty u/s. 271(1)(c), as both penalty and assessment proceedings are separate and independent. The findings recorded in the assessment order only lays down the foundation for levy of penalty
   
   A.C.I.T. vs. Baldeep Singh Swani — 158 Taxman 143 (Amritsar)

2. Penalty under section 271(1)(c) could not be imposed in respect of additions to income which were either deleted in appeal or were made on estimate basis.
   
   ACIT vs. Allied Construction (2007) 106 TTJ 616 (Delhi)

128. Penalty — Failure to deduct tax at source — S. 271C
     
     Reasonable cause assessee having short deducted tax at source under bona fide belief that payee sister concerns would have no tax liability and in most of the cases payee concerns fund to be entitled to refund, penalty under section 271C was not attracted.
     
     ITO vs. Muthoot Financiers (2007) 107 TTJ 141 (Coch.)

129. Penalty — Failure to get account audited — S. 271B
     
     Assessee having filed no agreement or document to show that the transportation receipts did not belong to him, same cannot be excluded from total turnover and therefore, penalty under section 271B was valid.
     
     Sardari Lal Oberai vs. ITO (2007) 106 TTJ 1033

130. Penalty — Fine of Interest-tax Act, 1974 — S. 12B
     
     Interest payable under section 12B of Interest-tax Act, 1974 not being penal in nature is allowable as deduction.
     
     GE Capital Services Indian vs. Dy. CIT (2007) 106 TTJ 65 (Delhi)

131. Penalty — S. 158BFA(2)
     
     Penalty under section 158BFA(2) is optional and onus lies on the Department to prove concealment.
     
     Enfield Industries Ltd. vs. Dy. CIT (2007) 106 TTJ 89 (Kol.)

132. Penalty — Validity — S. 271(1)(c)
     
     Assessing Officer having recorded no satisfaction as contemplated while framing the assessment order or at the time of initiating penalty proceedings under section 271(1)(c), penalty is not valid.
     
     Verma Tractors vs. ACIT (2007) 106 TTJ 591 (Jd.)

133. Penalty for failure to get accounts audited — S. 271B r.w.s. 44AB
     
     No penalty leviable where reasonable cause for delay – It was not a case of the Revenue that there was a deliberate defiance of law or the assessee was guilty of conduct contumacious or dishonest or the assessee had acted in conscious disregard of his obligation – Penalty u/s. 271B should normally not be imposed unless the explanation or cause for such commission or omission was not reasonable.
     
     S.D. Pharmacy vs. ACIT, ITAT Kochin Bench, ITA No. 862/Coch/2005, A.Y. 2000-01, dt. 29-5-2006 – BCAJ p. 402, Vol. 39-C, Part 4, January 2007

134. Precedence —
     
     Decision of the Special Bench even of three Members is entitled to all the weight and must have precedence over the decision of a Third Member. Regular Benches are required to follow and act upon the decision of Special Bench and in case its views are contradictory to the views of the Third Member, preference is required to be given to Special Bench
     
     Dy. CIT vs. Padam Prakash (HUF) [104 ITD 1 (Delhi) (SB)/288 ITR 1(AT)]

135. Reassessment — Change of opinion — S. 143(1)(A)
     
     After assessments completed under section 143(1)(a), Assessing Officer having found that interest to partners allowed in the assessment of firm was not being offered for taxation by partners, he had reason to believe that income chargeable to tax has escaped assessment and reopening was valid.
     
     ACIT vs. Vijay Kumar Patni (2007) 107 TTJ 20 (Nag.)

136. Reassessment — Change of opinion — S. 195(2)
     
     Assessee having filed no return, there is no question of change of opinion while issuing notice under section 148 and any opinion expressed under section 195(2) is irrelevant.
     
     Sheraton International Inc. vs. Dy. Director of IT (2007) 106 TTJ 620 (Delhi)

137. Reassessment — Full and true disclosure — S. 148
     
     AO having reopened the assessment by forming the belief that assessee’s income has escaped assessment merely on perusal of facts already on record and nowhere stated in the reasons recorded by him that there was any failure on the part of the assessee reopening of assessment after expiry of four years was not valid.
     
     ACIT vs. Vindhya Telelinks Ltd. (2007) 107 TTJ 149 (Jab.)
     
     There being no failure on the part of assessee to disclose material facts, notice under section 148 issued after expiry of four years from the end of the relevant assessment year was barred by limitation.
     
     Ahmednagar Forgings Ltd. vs. ACIT (2007) 107 TTJ 129 (Pune)

138. Reassessment — Information — S. 147(b)
     
     Valuation Officer’s report does not constitute information under section 147(b) for purposes of reopening of assessment.
     
     ITO vs. L. N. Memorial & Hospital Research Center (2007) 107 TTJ 291 (Jd.)

139. Reassessment — Limitation — S. 149
     
     CIT (A) having deleted certain additions made by AO he could not issue any direction to the AO to assess the same by issuing a fresh notice under section 148.
     
     Jindal Steel & Power Ltd. vs. ACIT (2007) 106 TTJ 943 (Delhi)

140. Reassessment — Notice — S. 148
     
     Notice under section 148 cannot be issued on the basis of mere suspicion or to make further investigation.
     
     ACIT vs. Heera Lal (2007) 106 TTJ 114 (Jp.)
     
     It is proper for the Tribunal to decide the validity of reopening of assessment rather than sending the matter back to the AO.
     
     ACIT vs. Vindhya Telelinks Ltd. (2007) 107 TTJ 149 (Jab.)

141. Reassessment — Reason to believe — S. 148

1. Assessee having disclosed all the primary facts which have been discussed in the original assessment, reopening the assessment was merely a change of opinion and, therefore, the reopening was bad in law.
   
   Dy. CIT vs. Indian Syntans Investments (P) Ltd. (2007) 106 TTJ 388 (Chennai)

2. DVO’s report showing fair market value of assessee’s plot far in excess of sale consideration constituted reason to believe that there was a gift which has escaped assessment and, therefore, reopening of assessment was valid.
   
   Yash Pal Bajaj vs. GTO (2007) 107 TTJ 294

3. Assessing Officer having examined the books of account and found that the purchases and sales made by the assessee were not verifiable, the reasons for reopening of assessment were valid.
   
   Jagdamba Trading Company vs. ITO (2007) 107 TTJ 398 (Jd.)

142. Reassessment — Rectification — Limitation — S. 148
     
     Reassessment being invalid, limitation for rectification shall reckon from the date of original assessment and thus computed, rectification was barred by limitation.
     
     Indian Farmers Fertiliser Co-operative Ltd. vs. Jt. CIT (2007) 107 TTJ 98 (Delhi)

143. Reassessment — S. 148
     
     In the absence of anything to show that the reasons recorded by the AO are not bases on facts of the case and are mere pretence, initiation of proceedings under section 147 was valid.
     
     Jindal Steel & Power Ltd. vs. ACIT (2007) 106 TTJ 943 (Delhi)

144. Reassessment — Scope — S. 147
     
     Proceedings under section 147 are for the benefit of Revenue and not for the assessee. AO should have dropped the proceedings instead of framing the assessment at loss.
     
     Videocon Leasing & Ind. Fin. Ltd. vs. Jt. CIT (2007) 106 TTJ 524 (Ahd.)

145. Reassessment — Validity — S. 143(2)
     
     Where notice under section 143(2) is not served on the assessee at all, amended proviso to section 148 is not applicable and reassessment proceedings are not valid.
     
     Dy. CIT vs. Indian Syntans Investments (P) Ltd. (2007) 106 TTJ 388 (Chennai)

146. Reassessment — Validity — S. 148
     
     A reassessment without jurisdiction though not appealed against can be challenged in appeal against rectification of such reassessment.
     
     Indian Farmers Fertiliser Co-operative Ltd. vs. Jt. CIT (2007) 107 TTJ 98 (Delhi)

147. Rectification — Ss. 154 /155(4)
     
     An order of rectification on the basis of rectification of earlier year seeking to disturb deduction under section 80I cannot be sustained under section 155(4).
     
     Indian Farmers Fertiliser Co-operative Ltd. vs. Jt. CIT (2007) 107 TTJ 98 (Delhi)

148. Rectification of mistake — S. 154
     
     Omission to apply statutory provisions is surely a mistake apparent from record capable of being rectified under section 154 by Assessing Officer.
     
     GTC Industries Ltd. vs. Dy. CIT [104 ITD 86 (MUM.) (TM)]

149. Rejection — Ss. 144, 145
     
     From asst. year 1997-98 onwards it is mandatory to compute the income in accordance with either cash or mercantile method of accounting. Assessee having continued to maintain books of account as per hybrid method of accounting. Assessing Officer was justified in rejecting the books of account.
     
     Dy. CIT vs. Allied Construction (2007) 106 TTJ 595 (Delhi)

150. Rejection of Accounts — S. 143 r.w. S. 145
     
     Held that additions made merely on noticing the difference between stock as per books and shown to bank, cannot be sustained, when no other evidence was on record that assessee had more stock than shown.
     
     The accounts cannot be rejected for difference between stock details submitted to bank and value of stock disclosed in the books.
     
     Beekay Appliances (P) Ltd. vs. D.C.I.T. — 158 Taxman 67 (Delhi)

151. Reopening — S. 148 r.w. S. 147
     
     Reopening of assessment based only on the belief of DDIT (Inv) that Capital Gains transaction might be bogus, and notice issued without application of mind by A.O. and without recording of any separate reasons disclosing his satisfaction was quashed, and assessment made in pursuance thereof was annulled.
     
     Mrs. Vinita Jain vs. I.T.O. — 158 Taxman 167 (New Delhi)

152. Re-opening of Assessment — S. 147
     
     Seized material cannot be used for purpose of Re-opening the assessment. Reopening has to be based on an independent information available justifying prima facie escapement of Income.
     
     I.T.O. vs. T. Mohan Rao - 158 Taxman 35 (Chennai)

153. Revision — Lack of proper enquiry — S. 263
     
     Assessing Officer having fully verified the purchases / sales of goods, it could not be said that the AO has not applied his mind to the relevant material and therefore, the order of AO cannot be said to be erroneous and could not be revised by the CIT under section 263.
     
     Pawan Kumar vs. AO (2007) 106 TTJ 494 (Jd.)

154. Revision — S. 263

1. Once the regular assessment accorded fully with the provisions of law on all issues on which the revision u/s. 263 was considered necessary, the order of Commissioner cannot be sustained, on ground that order of A.O is erroneous and prejudicial to revenue.
   
   Amit Vegetable Oils Ltd. vs. C.I.T. - 158 Taxman 36 (Allahabad) SMC

2. Mere filing of claim with insurance company by itself without its acceptance does not result in accrual of income and, therefore, the CIT was not justified in exercising power under section 263.
   
   Rama Associates Ltd. vs. Dy. CIT (2007) 106 TTJ 448 (Delhi)

3. Order of Commissioner u/s. 263 was held to be set aside, when the proceedings u/s. 148 were still pending.
   
   Ritz (P) Ltd. vs. J.C.I.T. — 158 Taxman 168 (Mumbai)

155. Speculative loss — Applicability of explanation — S. 73
     
     Principal business of the assessee-company not being of banking or of granting loans and advances. Explanation to section 73 was applicable and the loss from share trading activity had to be treated as speculative loss.
     
     Jt. CIT vs. Kalindi Holdings (P) Ltd. (2007) 106 TTJ 292 (Pune)

156. Speculative loss — S. 73

1. Assessee company’s business loss being much higher than income from other sources, “gross total income” of assessee would become nil and loss from dealing in shares shall be deemed to be speculative loss by application of Explanation to section 73.
   
   I. I. T. Investrust Ltd. vs. ITO (2007) 106 TTJ 1037 (Mum.)

2. Explanation to section 73 is application even where the entire business of the company consits of trading in shares and therefore, speculation loss arising from share transactions where delivery of shares was not taken is to be set off against the profit from trading in shares where delivery was taken.
   
   ACIT vs. Sucham Finance & Investments (I) Ltd. (2007) 107 TTJ 315 (Mum.)

3. Interest earned by the assessee company on FCDs held as stock-in-trade to be treated as business income and is to be adjusted against the loss arising from the sale of shares and then the net amount of loss is to be treated as a speculative loss within the meaning of explanation to section 73.
   
   Jt. CIT vs. Kalindi Holdings (P) Ltd. (2007) 106 TTJ 292 (Pune)