Though in general law, a firm and its partners are not distinct, this is subject to statutory exceptions. Under the scheme of assessment of firms applicable from AY. 1993-94 a firm is treated as an independent entity and the expenditure by way of remuneration, interest, commission etc. paid to partners is allowable to it as a deduction subject to ceilings and such interest, salary etc is taxable in the hands of the partners. A firm and its partners are consequently separate entities under the Act. Accordingly, the fact that the profits are charged to tax in the hands of the firm does not mean that the share of such profits is non – exempt in the hands of the partner. The profits being exempt in the hands of the partner, s. 14-A does apply in computing his total income.
Mahendra Mills 243 ITR 56 has to be understood in the context in which the said decision was rendered. The decision was rendered in the context of determining total income under Ch. IV and not in the context of determining the deduction under Ch. VIA. Mahendra Mills has not laid down any proposition of law that by disclaiming depreciation, the assessee can claim enhanced deduction allowable under any other provision in the Act.
S. 170 provides that where there is a “succession of business”, the predecessor has to be assessed in respect of the income upto the date of succession and the successor has to be assessed thereafter. 100% of the assessee’s shares were sold by the existing shareholders to another person. The CIT in revision took the view that the result of the said transfer of shares was that there was a “succession” and that the loss incurred prior to the date of succession could not be allowed to the “successor” assessee. The assessee’s appeal was allowed by the Tribunal. On appeal by the Revenue, HELD dismissing the appeal even if it is accepted that by a transfer of shares u/s 2(47), there is a transfer in the right to use the capital assets of the company, still s. 170 is not attracted because there is no “transfer of business”. A company is a juristic person and owns the business. The share holders are not the owners of the company. By a transfer of the shares, there is no transfer so far as the company is concerned.
The provision of the transponder through which the telecasting companies are able to uplink the desired images/data and downlink the same in the desired area is a “process”. To constitute “royalty”, it is not necessary that the process should be a “secret process”. The fact there is a ‘comma’ after the words “secret formula or process” in the DTAA does not mean that a different interpretation has to be given to the DTAA as compared to the Act. The consideration paid by telecasting companies to satellite companies is for the purpose of providing “use of the process” and consequently assessable as “royalty” under the Act and the DTAA.
Expl. 7 to s. 271 (1) (c) provides that in the case of an assessee who has entered into an international transaction, any amount added or disallowed in computing the total income u/s 92C (4) shall for purposes of s. 271 (1) (c) be deemed to represent income in respect of which particulars have been concealed or inaccurate particulars furnished unless the assessee shows that the s. 92C computation was made in good faith and with due diligence.
(i) The question whether the provision for bad debt in respect of sum owed by the parent company is a matter falling in the ordinary course of trade or whether it is an extraordinary item warranting exclusion from operational cost is a debatable point on which there can be two opinions. The fact that the assessee accepted the addition and did not challenge the same will not change this aspect;
(ii) In accordance with the law in Hindustan Steel 83 ITR 26 (SC) and Nath Bros 288 ITR 670 (Del), penalty u/s 271 (1) (c) cannot be imposed where there is merely a difference of opinion. Penalty also cannot be imposed unless the party obliged either acted deliberately in defiance of law or was guilty of conduct contumacious or dishonest, or acted in conscious disregard of its obligation;
S. 54 provides that if an assessee has LTCG on transfer of a residential house and he purchases or constructs a residential house within the specified period then the amount appropriated towards the new house shall be deducted from the LTCG. The assessee sold a house and used the sale proceeds to buy commercial property. Subsequently (but within the specified period) he borrowed funds and purchased a new house. The AO denied deduction u/s 54 on the ground that the new house had been purchased out of borrowed funds and not out of the consideration received for the old house. On appeal, the Tribunal and High Court upheld the claim on the ground that s. 54 merely required the purchase of the new house to be within the specified period. The source of funds for the purchase was irrelevant.
(i) The writ petition against the MA order was maintainable because the assessee has no alternative remedy. An appeal u/s 260A can be filed only against an order passed u/s 254 (1) and not against one passed u/s 254 (2);
(ii) On merits, even though it was true that in the original order the Tribunal had not referred to the order of co-ordinate Bench of the Kolkata Tribunal and the subsequent decision of the Calcutta High Court, the substance of the same has been discussed in detail. The assessee had a right of appeal and therefore the application for rectification u/s 254(2) was misconceived;
(iii) A decision of the High Court of different jurisdiction is not binding on the Tribunal. Non-consideration of the same is not a “mistake” u/s 254 (2).
The assessee, engaged in shipping business, owned a barge which was included in the block of assets. The barge met with an accident and sank on 6.3.2000 (AY 2000-01). As efforts to retrieve the barge were uneconomical, the barge was sold on as-is-where-is in May 2001 (AY 2002-03). As the barge was non-operational and not used for business at all in AY 2001-02, the AO denied depreciation. The CIT (A) upheld the stand of the AO. On appeal by the assessee, the Tribunal took the view that after the insertion of the concept of “block of assets” by the T. L. (A) Act, 1988 w.e.f 1.4.1988 individual assets had lost their identity and only the “block of assets” had to be considered. It was held that the test of “user” had to be applied upon the block of assets as a whole and not on individual assets. On the appeal by the Revenue, the High Court dismissed the appeal holding that the issue was squarely covered by its earlier judgements in Whittle Anderson 79 ITR 613 and G. N. Agrawal 217 ITR 250.
The judgement of the Full Bench of the Delhi High Court in CIT vs. Kelvinator of India Ltd. 256 ITR 1 where it was held that when an order u/s 143 (3) is passed, a presumption is raised that it has been passed on application of mind and that the Revenue cannot support reopening on the ground of non-application of mind because that would amount to giving a premium to an authority to take benefit of its own wrong cannot be followed as it is contrary to the law laid down by the Supreme Court in Kalyanji Mavji 102 ITR 286, Indian Eastern Newspaper Society 119 ITR 996 and A. L. A. Firm 189 ITR 285 where it was held that if the AO had not considered the material on record and subsequently came across it, the case fell within the scope of s. 147(b) and could be reopened. The Full Bench also did not consider the effect of Explanations 1 & 2 to s. 147.
The fact that the assessee is a regulatory body does not mean it cannot pursue an ‘object of general public utility’ which qualifies to be a charitable activity u/s 2(15). The scope of the expression ‘any other object of general public utility’ is very wide, though it excludes objects of private gain such as an undertaking for commercial profit even though the undertaking may subserve general public utility. On facts, as the assessee was engaged in the activities of “prevention, control or abatement of pollution”, its objects were of general public utility