In Syncome Formulations, the Special Bench had to consider two questions i.e. (a) method of computation of deduction u/s 80HHC and (b) percentage of deduction allowable in each year. As regards the percentage of deduction, the Special Bench held that the assessee would be entitled to 100% deduction. This view was overruled by the High Court in Ajanta Pharma where it was held that in view of s. 80HHC (1B), deduction was only allowable as per the limits set out therein. However, the first issue as to the method of deduction u/s 80HHC was not before the High Court. As per Sun Engineering 198 ITR 297, the observations of a Court have to be read in context. Consequently, the judgement of the Special Bench on this aspect still held good and the assessee was entitled to deduction u/s 80HHC even though there were no normal profits.
The effect of the judgement of the Supreme Court in Transmission Corporation of India 239 ITR 587 is that the moment there is a payment to a non-resident, there is an obligation on the payer to deduct tax at source u/s 195 (1). The only way to escape the liability is for the payer to make an application to the AO u/s 195 (2) for non-deduction or for deduction at a lower rate. If the payer does not make an application and obtain an order u/s 195 (2), it is not open to him to argue that the payment has not resulted in taxable income in the hands of the non-resident recipient and that, therefore, there is no failure on the part of the payer to deduct tax u/s 195 (1)
Under the Doctrine of Merger, once an appeal against the order passed by an authority is preferred and is decided by the appellate authority, the order of the said authority merges into the order of the appellate authority. With this merger, the order of the original authority ceases to exist and the order of the appellate authority prevails, in which the order of the original authority is merged. For all intent and purposes, it is the order of the appellate authority that has to be seen for purposes of determining the limitation period u/s 154 (7) for passing a rectification order.
S. 132 (1) (c) empowers the officer to enter the premises etc and search it if he has “reason to believe” that “any person” is in possession of any money, bullion etc representing undisclosed income. As the search warrant was issued in the joint names of the assessee and her spouse, it means that the officer had reason to believe that the undisclosed assets and income were held jointly. If so, it is not open for the AO to assess the assessee individually on the basis of the assets and documents seized during the course of search in pursuance to the said warrant but the assessment ought to have been only in the capacity of AOP or BOI.
The view of the Gujarat High Court that while s. 147 permits re-assessment of income that has escaped assessment for any assessment year, assessment under Chapter XIV-B is for a block period of 10/6 years without reference to any particular assessment year and that, therefore, s. 147 does not apply to a block assessment cannot be accepted in view of the judgement of the Supreme Court in Suresh N. Gupta 297 ITR 322 where it was held that the other provisions of the Act would be applicable to the scheme under Chapter XIV-B, if no conflict arises upon such application. The provisions of Chapter XIV prescribing the period of limitation for reopening of assessments apply to block assessments under Chapter XIV-B and there is no conflict between the two.
The judgement of the Special Bench in Ashima Syntex Ltd 117 ITD 1 has to be followed in preference to the judgement of the Bombay High Court in Snowcem India Ltd 313 ITR 170 and it has to be held that the assessee was liable to pay interest u/ss 234B & 234C even when income was computed u/s 115JA.
Since the brokerage payable by the client to the broker was a part of the debt and that debt had been taken into account in computing the income, the conditions of s. 36 (2) (i) read with s. 36 (1) (viii) were satisfied and the bad debt was allowable as a deduction
Disallowance u/s 14A and Rule 8D requires a finding of incurring of expenditure. If it is found that for earning exempted income no expenditure has been incurred, disallowance u/s 14A cannot stand. The disallowance u/s 14A and Rule 8D cannot be made on presumption.
In accordance with the principles of purposive interpretation of statutes, Expl. (iii) to s. 48 has to be read to mean that the indexed cost of acquisition has to be computed by taking into account the period for which the asset was held by the previous owner.
s. 80-IA (4) (even pre-amendment) applies to a “developer”. The difference between a “developer” and “contractor” is that the former designs and conceives new projects while the latter executes the same. As the assessee was merely executing the job of civil construction, it was not eligible u/s 80-IA (4).