Month: September 2012

Archive for September, 2012


S. 40A(9) + Valuation of Closing Stock + What Is “Manufacture”

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DATE: (Date of pronouncement)
DATE: September 27, 2012 (Date of publication)
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CITATION:

The interpretation of Section 40A(9) of the Act clearly brings out a dichotomy between `contribution’ and `reimbursement’. Section 40A(9) of the Act was inserted by Finance Act No.2 of 1984. The Explanatory Memo to the Finance Bill, 1984 indicates the reasons why the word `contribution’ finds place in Section 40A of the Act. It appears that Section 40A(9) of the Act was inserted as a measure for combating tax avoidance

Posted in All Judgements, Supreme Court

Price Waterhouse Coopers Pvt. Ltd vs. CIT (Supreme Court)

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DATE: (Date of pronouncement)
DATE: September 26, 2012 (Date of publication)
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CITATION:

Notwithstanding the fact that the assessee is undoubtedly a reputed firm and has great expertise available with it, it is possible that even the assessee could make a “silly” mistake. The fact that the Tax Audit Report was filed along with the return and that it unequivocally stated that the provision for payment was not allowable u/s 40A(7) indicates that the assessee made a computation error in its return of income. Apart from the assessee, even the AO who framed the original assessment order made a mistake in overlooking the contents of the Tax Audit Report. The contents of the Tax Audit Report suggest that there is no question of the assessee concealing its income. There is also no question of the assessee furnishing any inaccurate particulars. All that happened in the present case is that through a bona fide and inadvertent error failed to add the provision for gratuity to its total income. This can only be described as a human error which we are all prone to make. The calibre and expertise of the assessee has little or nothing to do with the inadvertent error. That the assessee should have been careful cannot be doubted, but the absence of due care, in a case such as the present, does not mean that the assessee is guilty of either furnishing inaccurate particulars or attempting to conceal its income. Consequently, given the peculiar facts of this case, the imposition of penalty on the assessee is not justified

Posted in All Judgements, Supreme Court

ACIT vs. Champion Commercial Co Ltd (ITAT Kolkata)

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DATE: (Date of pronouncement)
DATE: September 25, 2012 (Date of publication)
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CITATION:

Rule 8D(2)(ii) allocates “expenditure by way of interest ……….. which is not directly attributable to any particular income or receipt”. This refers to interest relatable to tax-free income as well as taxable income. However, the definition of variable ‘A’ embedded in the formula under Rule 8D(2)(ii) refers only to interest expenditure directly related to tax exempt income but not to interest expenditure directly related to taxable income. The result is that while Rule 8D(2)(ii) seeks to allocate all interest expenditure, it ends up allocating only interest expenditure relatable to tax-free income. This is clearly incongruous. In Godrej & Boyce Mfg Co Ltd 328 ITR 81 (Bom), the department took the stand, to defend the constitutional validity of Rule 8 D, that both, interest directly attributable to tax exempt income as well as interest directly relatable to taxable income would be excluded from the definition of variable ‘A’ in the Rule 8D(ii) formula. Once the Revenue has taken a particular stand about the applicability of the formula in Rule 8 D(2)(ii) based on which the constitutional validity of Rule 8D is upheld, it is not open to the Revenue to take any other stand on the issue with regard to the actual implementation of the formula in the case of any assessee. Accordingly, the correct application of the formula set out in Rule 8D(2)(ii) is, as noted in Godrej and Boyce, that interest expenses directly attributable to tax exempt income as also directly attributable to taxable income have to be excluded from the computation of common interest expenses to be allocated under Rule 8D(2)(ii)

Posted in All Judgements, Tribunal

CIT vs. Usha International Ltd (Delhi High Court – Full Bench)

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DATE: (Date of pronouncement)
DATE: September 24, 2012 (Date of publication)
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CITATION:

The expression “change of opinion” postulates formation of opinion and then a change thereof. The question of “change of opinion” arise only when the AO at the s. 143(3) stage forms an opinion and accepts the assessee’s stand. There is a difference between “change of opinion” and failure to “form an opinion“. However, for determining whether or not there is “change of opinion“, the fact that the assessment order is silent is not relevant because the assessee has no control over the way the order is written. There may also be cases where though the AO has not raised a query, the issue may be so apparent and obvious that to say that the AO has not formed an opinion would be contrary and opposed to normal human conduct

Posted in All Judgements, Supreme Court

Manan Corporation vs. ACIT (Gujarat High Court)

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DATE: (Date of pronouncement)
DATE: September 20, 2012 (Date of publication)
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CITATION:

The judgement of the Bombay High Court in Brahma Associates 333 ITR 289 (Bom) that w.e.f. 1.4.2005, deduction u/s 80-IB(10) would be governed by the restriction on commercial area imposed by clause (d) does not mean that even projects approved prior to 1.4.2005 would be governed by the said restriction. Neither the assessee nor the local authority responsible to approve the construction projects are expected to contemplate future amendment in the statute and approve and/or carry out constructions maintaining the ratio of residential housing and commercial construction as provided by the amended Act. The entire object of s. 80-IB(10) is to facilitate the construction of residential housing project and if at the stage of approving the project, there was no such restriction in the Act, the restriction subsequently imposed has to be necessarily construed on a prospective basis and as applying to projects approved after that date

Posted in All Judgements, High Court

S. 80-IB(10)(d) + Diversion By Overrding Title + Speculative Transaction

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DATE: (Date of pronouncement)
DATE: September 20, 2012 (Date of publication)
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CITATION:

Though the assessee’s project, when it was commenced in the year 2003, was in compliance with s. 80-IB(10) as it then stood, the law prevailing in the year of completion of the project has to be seen. As the Project breached the ceiling of maximum commercial area imposed by s. 80-IB(10)(d) inserted w.e.f. 1.4.2005 (lesser of 2000 sq. ft or 5% of aggregate BU area), the assessee is not eligible for s. 80-IB(10) relief (Saroj Sales Corp vs. ITO 115 TTJ Mum 485 not followed; Brahma Associates 333 ITR 289 (Bom) & Reliance Jute 120 ITR 921 (SC) referred)

Posted in All Judgements, Tribunal

Probe “Peculiar Phenomena” Of Delay In High Stake Appeals + Low Tax Effect Circular

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DATE: (Date of pronouncement)
DATE: September 18, 2012 (Date of publication)
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FILE: Click here to view full post with file download link
CITATION:

In large number of cases, we find a peculiar phenomenon. In cases, where huge revenue/demand from the Department is involved, invariably, there is inordinate delay in filing appeals before the High Court under Section 260A of the Income Tax Act, 1961, and in filing special leave petitions before this Court. We do not know the reason why such inordinate delays take place only in matters of stakes. This aspect needs to be looked into. This aspect has been brought to the notice of the learned Attorney General as well as the Ministry of Law in the past. This is one such case. Even in the past, this Court has raised a similar query. Moreover, once a matter is dismissed on the ground of delay, it has a ricocheting effect

Posted in All Judgements, Supreme Court

S. 41(1) Waiver Of Loan Whether Income + S. 234D Interest Post Amendment

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DATE: (Date of pronouncement)
DATE: September 17, 2012 (Date of publication)
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FILE: Click here to view full post with file download link
CITATION:

The cessation of liability to repay the loan taken for purchase of a car is not assessable as income u/s 41(1) in accordance with Mahindra and Mahindra Ltd 261 ITR 501 (Bom). Though in Solid Containers Ltd 308 ITR 407 (Bom) it was held that waiver of a loan taken for trading activity would become the assessee’s income and be subject to tax even if the assessee had never claimed a deduction for the loan, that decision is not applicable because there the loan was taken for "trading purposes" and not for purchase of a capital asset. In the alternative, the waiver of a loan is not taxable u/s 28(iv) as that provision applies only when a benefit or perquiste is received in kind and not in cash

Posted in All Judgements, High Court

S. 68 “Gifts” + S. 147 Reopening + “Matching Principle”

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DATE: (Date of pronouncement)
DATE: September 17, 2012 (Date of publication)
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FILE: Click here to view full post with file download link
CITATION:

CIT vs. P.R. Ganapathy (Supreme Court) S. 68: Burden on assessee to show that donors have financial capacity to give gifts U/s 68, the burden is on the assessees to show that the amount received by purported gift(s) from the

Posted in All Judgements, Supreme Court

Natural Justice + Review + Rolls Royce + Reopening + OTSS

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DATE: (Date of pronouncement)
DATE: September 17, 2012 (Date of publication)
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FILE: Click here to view full post with file download link
CITATION:

Hindusthan Tobacco Company vs. CIT (Calcutta High Court) Plea of natural justice breach/ cross-examination should be raised at the earliest opportunity The principles of natural justice cannot be construed in isolation from the factual matrix of the case. Though the

Posted in All Judgements, High Court
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