Search Results For: 37(1)


Harish Narinder Salve vs. ACIT (ITAT Delhi)

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DATE: August 13, 2019 (Date of pronouncement)
DATE: August 17, 2019 (Date of publication)
AY: 2011-12
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CITATION:
S. 37(1): In the professional field there are innovative ways visualized by professionals to make themselves visible in the professional circle and to build their own professional profile for generating higher and value-added business such as sponsoring seminars, becoming knowledge partners, setting up prizes and awards, creating competitive award ceremonies, hosting vibrant summits etc. The way professionals promote themselves is changing very fast and benefits of such expenditure are huge and wide

The level at which the assessee is carrying on the profession, perhaps, he might not have thought it proper to increases visibility by attending the conferences, seminars et cetera. He has different vision of carrying himself in the professional field to increases visibility and social status. He thought fit to set up a scholarship to Indian students in Oxford University. Thus, in the present case definitely there is a nexus between the expenditure incurred by the assessee and the professional services rendered by the assessee. He has also shown that the student to moving the scholarship has been granted has helped him in famous case of Vodafone represented by him

DCIT vs. Comet Investment Pvt. Ltd (ITAT Mumbai)

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DATE: May 13, 2019 (Date of pronouncement)
DATE: August 3, 2019 (Date of publication)
AY: 2010-11
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CITATION:
Suppression of profit/ fictitious loss in stocks/ derivatives by way of Client Code Modification (CCM): CCM within 1% is absolutely normal. By no stretch of imagination can any AO consider a transaction on the Stock Exchange as income of a person other than the one who has either actually received monies in his bank account (in case of profit) and/or paid any monies from his bank account (in case of losses). The AO has to show that the losses were purchased and the party was given cheque or cash payment in view of such favours

The broker, through whom the assessee carried on share transactions, were also not imposed any penalty. No co-relation between the assessee on the one hand and the other parties on the other hand has been brought on record to co-relate that the parties to whom the alleged profits or loss is supposed to have been diverted to reduce the taxable income of the assessee, has been brought on record to show that there was any collusion with each other and were known to each, so that one party diverted its profit or loss to the other parties. Even nothing has been brought on record to suggest that the said losses were purchased and the party were given cheque or cash payment in view of such favour

CIT vs. Tasgaon Taluka S.S.K. Ltd (Supreme Court)

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DATE: March 5, 2019 (Date of pronouncement)
DATE: March 9, 2019 (Date of publication)
AY: -
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CITATION:
S. 37(1)/40A(2) Business expenditure vs. sharing of profit: The AO has to take into account the manner in which the business works, the modalities and manner in which SAP/additional purchase price/final price are decided and determine what amount forms part of the profit. Whatever is the profit component is sharing of profit/distribution of profit and the rest is deductible as expenditure

Merely because the higher price is paid to both, members and non-members, qua the members, still the question would remain with respect to the distribution of profit/sharing of the profit. So far as the non-members are concerned, the same can be dealt with and/or considered applying Section 40A (2) of the Act, i.e., the assessing officer on the material on record has to determine whether the amount paid is excessive or unreasonable or not

PCIT vs. BLB Cables And Conductors Pvt. Ltd (Calcutta High Court)

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DATE: June 19, 2018 (Date of pronouncement)
DATE: February 23, 2019 (Date of publication)
AY: 2009-10
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CITATION:
S. 68 Bogus transactions: The AO cannot treat losses from off market commodity transactions as bogus and inadmissible in the eyes of the law if the transactions through the broker are duly recorded in the books of the assessee. The broker has also declared in its books of accounts and offered for taxation. To hold a transaction as bogus, there has to be some concrete evidence where the transactions cannot be proved with the supportive evidence. The fact that the broker was expelled from the commodity exchange cannot be the criteria to hold the transaction as bogus

To hold a transaction as bogus, there has to be some concrete evidence where the transactions cannot be proved with the supportive evidence. Here in the case the transactions of the commodity exchanged have not only been explained but also substantiated from the confirmation of the party. Both the parties are confirming the transactions which have been duly supported with the books of accounts and bank transactions. The ld. AR has also submitted the board resolution for the trading of commodity transaction. The broker was expelled from the commodity exchange cannot be the criteria to hold the transaction as bogus

PCIT vs. M/s. Chamundi Winery and Distillery (Karnataka High Court)

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DATE: (Date of pronouncement)
DATE: September 26, 2018 (Date of publication)
AY: 2010-11
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CITATION:
Entire law on "real income theory" and distinction between "application of income" vs. "diversion of income by overriding title" explained with reference to case laws. Law on whether if an amount is not treated as "diversion of income", it can be allowed as "business expenditure" u/s 37(1) or as a "trading loss" u/s 29 also explained. Issue of “Base Erosion and Profit Shifting” (BEPS) also raised in the context of "tax avoidance vs. tax evasion" and diversion of income by a MNC

Courts and the Tax Authorities can look into the real purpose of the commercial arrangements and transactions to reach the truth and the transactions having the sole purpose of tax avoidance may be held to be having no effect on the actual tax liability of the tax payer. Book entries and Method of Accounting is not determinative and conclusive for deciding the computation of ‘taxable income’ in the hands of the Assessee though they may be relevant to be considered. “Diversion of income by transfer of overriding title at source” should normally have the support of the statutory requirements or some decretal binding character of Courts of law and even though the private contractual obligations can also bring about such “diversion of income at source” but in this last sphere of private contractual obligations, the Courts and the Income Tax Authorities have to examine such aspects carefully in comparison to the above two other categories of statutory requirements and the Court decrees and then examine the real purport and object of such private arrangements and Contracts

Chambal Fertilisers And Chemicals Ltd vs. JCIT (Rajasthan High Court)

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DATE: July 31, 2018 (Date of pronouncement)
DATE: August 23, 2018 (Date of publication)
AY: -
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CITATION:
S. 40(a)(ii): Education cess is not part of tax. Accordingly, the same is allowable as a deduction and disallowance u/s 40(a)(ii) cannot be made. CBDT Circular referred

That on a plain reading of the above provision of section 40(a) (ii), it is evident that a sum paid of any rate or tax is expressly disallowed by this sub-clause in two cases : (i) where the rate is levied on the profit or gains of any business or profession, and (ii) where the rate or tax is assessed at a proportion of or otherwise on the basis of any such profits or gains. It is evident that nowhere in the said section it has been mentioned that education cess is not allowable. Education cess is neither levied on the profits or gains of any business or profession nor assessed at a proportion of, or otherwise on the basis of, any such profits or gains.

CIT vs. The KCP Limited (Andhra Pradesh High Court)

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DATE: May 1, 2018 (Date of pronouncement)
DATE: August 17, 2018 (Date of publication)
AY: 1984-85
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CITATION:
S. 37(1)/145(2): Entire law on accrual of liability under mercantile system of accounting explained in the context of Accounting Standard 4 (AS-4) (contingencies and events occurring after the balance sheet date) issued by the ICAI and s. 211 of the Companies Act, 1956, after referring to all important judgements of the Supreme Court and High Courts

While the judgment in Challapalli Sugars Ltd is that of a two Judge bench of the Supreme Court, the judgment in Tutirorin Alkali Chemicals and Fertilizers Ltd is that of a three Judge bench of the Supreme Court. As the judgment in Challapalli Sugars Ltd was noticed by the Supreme Court, in its subsequent judgment in Tutirorin Alkali Chemicals and Fertilizers Ltd, the law declared in Challapalli Sugars Ltd, as explained in the subsequent judgment of the Supreme Court in Tutirorin Alkali Chemicals and Fertilizers Ltd, is binding on this Court. The law declared in Challapalli Sugars Ltd, as explained in Tutirorin Alkali Chemicals and Fertilizers Ltd, is that, in the absence of a provision in the Income-tax Act indicating the contrary, the rules of accountancy or the Accounting Standards framed by the Institute of Chartered Accountants of India can be adopted.

PCIT vs. Rungta Mines Ltd (Calcutta High Court)

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DATE: June 21, 2018 (Date of pronouncement)
DATE: August 17, 2018 (Date of publication)
AY: -
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CITATION:
S. 37(1): Law on whether payment of a one-time fee to continue the business of mining constitutes capital expenditure or revenue expenditure explained with reference to R.B.Seth Moolchand Sugachand v CIT 86 ITR 647 (SC) and Bikaner Gypsums 187 ITR 39 (SC)

The distinction between the judgment in R.B. Seth Moolchand Sugachand and the judgment in Bikanker Gypsums Ltd is that in Bikaner Gypsums Ltd there was a pre-existing right and the expenditure was incurred not to assert a new right but to exercise a pre-existing right. In the present case, it is the same as in Bikaner Gypsums Ltd. since the mining licence was previously issued in favour of the assessee and the payment of the NPV did not extend the area of the assessee’s mining operations, it merely removed an impediment in the carrying on of the operations in terms of the original licence

PCIT vs. Chawla Interbild Construction Co. Pvt. Ltd (Bombay High Court)

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DATE: February 28, 2018 (Date of pronouncement)
DATE: May 24, 2018 (Date of publication)
AY: 2009-10
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CITATION:
The fact that the parties to whom payments were made did not appear before the AO does not justify a disallowance if the assessee has discharged the initial onus and produced documentary proof. The assessee cannot compel the appearance of the parties before the AO. The onus is on the AO to carry out enquiries based on the PAN Nos to find out the genuineness of the parties

The respondent – assessee had done everything to produce necessary evidence, which would indicate that the payments have been made to the parties concerned. The details furnished by the respondent assessee were sufficient for the Assessing Officer to take further steps if he still doubted the genuineness of the payments to examine whether or not the payment was genuine. The Assessing Officer on receipt of further information did not carry out the necessary enquiries on the basis of the PAN numbers, which were available with him to find out the genuineness of the parties. The CIT(A) as well as the Tribunal have correctly held that it is not possible for the assessee to compel the appearance of the parties before the Assessing Officer

Standard Batteries Ltd vs. CIT (Bombay High Court)

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DATE: April 27, 2018 (Date of pronouncement)
DATE: April 30, 2018 (Date of publication)
AY: 1986-87
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CITATION:
S. 35AB: Question whether the term "acquiring know-how" means acquiring on ownership basis or on lease and whether deduction can be allowed u/s 37(1) for revenue expenditure explained. Judgements in Anil Starch Products 232 TM 129 and Diffusion Engineers 376 ITR 487 (Kar) (based on Swaraj Engines 301 ITR 284 (SC)) dissented from

Therefore, the reliance by the Gujarat High Court in Anil Starch Products Ltd. (supra) and Sayaji Industries Ltd.(supra) and Karnataka High Court in Diffusion Engineers Ltd. (supra) on the basis of the Apex Court decision in Swaraj Industries Ltd. (supra) to hold that all expenditure which is revenue in nature would not fall under section 35AB of the Act and would have necessarily to fall under Section 37 of the Act to our mind is not warranted by the decision of the Apex Court in Swaraj Engines Ltd. (SC)

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