Year: 2011

Archive for 2011


COURT:
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COUNSEL:
DATE: (Date of pronouncement)
DATE: February 26, 2011 (Date of publication)
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CITATION:

The law relating to validity of the assessment proceedings in absence of issuance of notice u/s 143(2), in a case where the AO proceeded to frame the assessment in pursuance of a return is well established. If the assessment is framed u/s 143 (3), either read with s. 158 BC or s. 147, it is mandatory for him to issue notice u/s 143 (2). The issuance and service of notice u/s 143 (2) is mandatory and not procedural. If the notice is not served within the prescribed period, the assessment order is invalid (Pawan Gupta 318 ITR 322 (Del), Hotel Blue Moon 321 ITR 362 (SC) & C. Palaniappan 284 ITR 257 (Mad) followed)

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COUNSEL:
DATE: (Date of pronouncement)
DATE: February 26, 2011 (Date of publication)
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CITATION:

The assessee has “accepted and admitted” that it has not given details with regard to proportionate expenses relatable to tax free income and argued that it was not required to disclose the same as s. 14A was not in the statute book when the ROI was filed. However, the details ought to have been given at the stage of the assessment proceedings & the failure to do so is a “failure to disclose material facts”. It is the duty of the assessee to bring to the notice of the AO particular items in the books of account or portions of documents which are relevant. Material facts are those facts which if taken into accounts they would have an adverse affect on assessee by the higher assessment of income than the one actually made. The assessee is a multinational company and it is difficult to perceive and accept that its tax or the legal department was not aware and did not have knowledge about s. 14A (Consolidated Photo 281 ITR 394 (Del) followed)

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DATE: (Date of pronouncement)
DATE: February 23, 2011 (Date of publication)
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CITATION:

While the Special Bench was right in holding that a project with residential and commercial user to the extent permitted under DC Rules would be a “housing project” and eligible for deduction, it was not justified in confining the deduction only to projects having commercial area upto 10% of the BUA because once the basic argument of the revenue that the housing projects with commercial user are not entitled to Section 80IB(10) deduction is rejected, no restriction could be imposed. If the project is approved as a “housing project” deduction u/s 80-IB(10) is allowable irrespective of the commercial area

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DATE: (Date of pronouncement)
DATE: February 21, 2011 (Date of publication)
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CITATION:

U/s 151, a notice u/s 148 cannot be issued after the expiry of 8 years (now 4 years) from the end of the assessment year “unless the Board is satisfied on the reasons recorded by the Income-tax Officer that it is a fit case for the issue of such notice“. In the present case, approval had been accorded by affixing a mere rubber stamp. Rubber stamping of underlying material is hardly a process which can get the imprimatur of the Court as it suggests that the decision has been taken in a mechanical manner. Even if the reasoning set out by the ITO was to be agreed upon, the least, which is expected, is that an appropriate endorsement is made in this behalf setting out brief reasons. Reasons are the link between the material placed on record and the conclusion reached by an authority in respect of an issue, since they help in discerning the manner in which conclusion is reached by the concerned authority. There is no proper application of mind by the Board (Chuggamal Rajpal 79 ITR 603 (SC) followed)

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DATE: (Date of pronouncement)
DATE: February 20, 2011 (Date of publication)
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CITATION:

U/s 72(1)(i), the brought forward business loss can be set-off against “the profits and gains of any business or profession carried on” by the assessee. S. 72 (1)(i) does not use the word “assessable under the ‘head‘ profits & gains of business”. So, the question is whether the securities formed part of the trading assets of the business and the income there from was income from the business. The answer to this question has to be decided on commercial principles and not on the basis of the classification of ‘heads of income’ in s. 14. Though for the purpose of computation of the income, dividends are assessable under the head “Other Sources”, it does not cease to be part of the income from business if the securities are part of the trading assets (Cocanada Radhaswmi Bank 57 ITR 306 (SC) & New India Investment 130 ITR 778 (Cal) followed)

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DATE: (Date of pronouncement)
DATE: February 19, 2011 (Date of publication)
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CITATION:

There is a difference between “issue” and “service”. To obtain jurisdiction to assess/reassess the escaped income, the s. 148 notice has to be “issued” but need not be “served”. Service is not a condition precedent to conferment of jurisdiction on the AO but a condition precedent only to the making of the order of assessment. The word “issue” means that the notice must leave the custody of the AO and as the Post Office is not the department’s agent, sending it by post completes “issue”. Accordingly, though the first notice was not (according to the assessee & department) served on the assessee, the AO was vested with power to assess/reassess the escaped income (R. K. Upadhyaya 166 ITR 163 (SC) & Sheo Kumari Debi 157 ITR 13 (Pat) (FB) followed)

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DATE: (Date of pronouncement)
DATE: February 19, 2011 (Date of publication)
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CITATION:

U/s 92C read with Rule 10B, the most appropriate method has to be applied for determination of arm’s length price. In principle, the CUP method (the traditional transaction method) is preferable to the other methods because all other things being equal, the CUP and traditional transactional methods lead to more reliable results vis-a-vis the results obtained by applying transaction profit method (UCB India 121 ITD 131 and Serdia Pharmaceuticals followed)

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DATE: (Date of pronouncement)
DATE: February 18, 2011 (Date of publication)
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CITATION:

5 Judge Bench of the Supreme Court recalls law requiring PSUs to obtain COD approval

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DATE: (Date of pronouncement)
DATE: February 17, 2011 (Date of publication)
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CITATION:

On the issue whether the activity of promoting micro finance services is a “charitable purpose” u/s 2(15), as per CBDT Circular No.11 of 2008 dated 19.12.2008, a wide range of objects for the welfare of economically and socially disadvantaged people are covered and entities which pursue these objects will be eligible for exemption even if they incidentally carry on a commercial activity, subject, however, to the conditions stipulated in s. 11(4A) or the seventh proviso to s.10(23C)

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DATE: (Date of pronouncement)
DATE: February 15, 2011 (Date of publication)
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CITATION:

To decide whether the institution exists solely for education and not to earn profit the test of predominant object of the activity has to be seen to decide. The purpose does not lose its character merely because some profit arises from the activity. It is not possible to carry on educational activity in such a way that the expenditure exactly balances the income and there is no resultant profit, for, to achieve this, would not only be difficult of practical realization but would reflect unsound principles of management. In order to ascertain whether the institute is carried on with the object of making profit or not it is duty of the prescribed authority to ascertain whether the balance of income is applied wholly and exclusively to the objects for which the applicant is established (Aditanars Educational Institution 224 ITR 310 (SC) & American Hotel and Lodging Association 301 ITR 86 (SC) followed)