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

U/s 250(4), the CIT (A) has the power to direct enquiry and call for evidence from the assessee. Under Rule 46A, the assessee has the right to ask for the admission of additional evidence. If the CIT (A) exercises his powers u/s 250(4) to call for additional evidence, the AO need not be given an opportunity to show-cause. However, if the CIT (A) acts on an application under Rule 46A, then the requirement of giving the AO an opportunity as per Rule 46A(3) is mandatory. The argument that in all cases where additional evidence is admitted, the CIT (A) should be considered to have exercised his powers u/s 250(4) is not acceptable as it will render Rule 46A redundant. On facts, as the assessee had produced the evidence, the CIT (A) ought to have followed Rule 46A(3) and remanded the evidence to the AO for comments and verification (matter remanded to the CIT(A))

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

S. 147: AO must specify what facts are failed to be disclosed. Lapse by AO no ground for reopening if primary facts disclosed In AY 2001-02, the AO assessed advances of Rs. 1.56 crores received from a group concern as …

Atma Ram Properties Pvt Ltd vs. DCIT (Delhi High Court) Read More »

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DATE: (Date of pronouncement)
DATE: November 18, 2011 (Date of publication)
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No S. 14A or Rule 8D Disallowance without showing how assessee’s calculation is wrong. Only real expenditure can be disallowed The High Court had to consider two issues: (a) whether interest paid on funds borrowed to acquire “trading shares” is …

Maxopp Investment Ltd vs. CIT (Delhi High Court) Read More »

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

To decide whether a contract is one for transportation or for hiring, the crucial thing is to see who is doing the transportation work. If the assessee takes the trucks and does the work of transportation himself, it would amount to hiring. However, if the services of the carrier were used and the payment was for actual transportation work, the contract is for transportation of goods and not an arrangement for hiring of vehicles. On facts, the agreement was of the nature of transport agreement and not one for hiring of vehicles because the tank truck owners did not simply confine themselves to providing vehicles at the disposal of the assessee in lieu of rent but also engaged their drivers in driving such vehicles and thereby in transporting petroleum products from one place to the other. In effect, the truck remained in the possession of the staff of the carrier. Further, the assessee was required to pay for the transportation work on the basis of distance and no idle charges were payable. There was no transfer of the right to use the vehicle involved in the agreement. The agreement was merely for carriage of petroleum products and so s. 194-I was not applicable

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

S. 80IB(2)(iv)(iii) provides that an industrial undertaking must “employ” ten or more workers in a manufacturing process carried on with the aid of power. The expression ‘worker’ which is not defined in the Act means any person employed by the assessee directly or by or through any agency (including a contractor). What is relevant is the employment of ten or more workers and not the mode and the manner of employment. The fact that the employer – employee relationship between the workers employed by the assessee differs cannot be a ground to deny deduction u/s 80IB (Sawyer’s Asia Ltd 122 ITR 259 (Bom) followed; Venus Auto Private Limited 321 ITR 504 (All) dissented from)

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DATE: (Date of pronouncement)
DATE: November 11, 2011 (Date of publication)
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CITATION:

Though in Gold Mines Shares & Finance 116 TTJ (Ahd) (SB) 705 it was held that in view of s. 80IA(5), the eligible unit had to be treated as the only source of income and the profits had to be computed after deduction of the notionally brought forward losses and depreciation of the eligible business even though they were in fact set-off against other income in the earlier years, the Madras High Court held in Velayudhaswamy Spinning Mills P. Ltd. v. ACIT 38 DTR 57 that such a notional exercise was not contemplated by s. 80IA (5). It was held that the fiction in s. 80-IA (5) that the eligible unit is the only source of income begins from the “initial assessment year” which is not the same thing as the year of commencement of activity. The law contemplates looking forward to a period of ten years from the initial assessment and does not allow the Revenue to look backward and find out if there is any loss of earlier years and bring forward notionally even though the same were set off against other income of the assessee and the set off against the current income of the eligible business. Once the set off has taken place in an earlier year against the other income, the Revenue cannot rework the set off amount and bring it notionally. The fiction in s. 80-IA(5) is for a limited purpose and does not contemplate to bring set off amount notionally. The judgement of a constitutional court has overriding effect over the decision of a Special Bench of the Tribunal and the latter cannot be followed

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DATE: (Date of pronouncement)
DATE: November 11, 2011 (Date of publication)
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CITATION:

For s. 80-IB, Modvat credit is “derived” from industrial undertaking The assessee availed/set off Modvat credit of excise duty of earlier years amounting to Rs. 1.93 crores. The AO held that s. 80-IB deduction was not admissible on the said …

ACIT vs. The Total Packaging Services (ITAT Mumbai) Read More »

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DATE: (Date of pronouncement)
DATE: November 9, 2011 (Date of publication)
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CITATION:

S. 40(b) (i) to (v) which prescribe the conditions for deduction of remuneration paid to a partner require that the payment should be authorized by, and be “in accordance with the terms of the partnership deed“. This mandates that the quantum of remuneration or the manner of computing the quantum of remuneration should be stipulated in the partnership deed and should not be left undetermined, undecided or to be determined or decided on a future date

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DATE: (Date of pronouncement)
DATE: November 8, 2011 (Date of publication)
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CITATION:

On issue (i), s. 10A was amended by the FA 2000 w.e.f. 1.4.2001 to convert it from an “exemption” provision to a “deduction” provision. S. 10A allows deduction “from the total income“. The phrase “total income” in s. 10A means “the total income of the STP unit” and not “total income of the assessee“. Consequently, s. 10A deduction has to be given before computing the “profits & gains of business” under Chapter IV. This proposition is in line with the form of return. Allowing deduction at the earliest stage of business income computation will blur the difference between “commercial profits” and “tax profits“. Further, though s. 10A was amended to make it a “deduction” provision, it continues to remain in Chapter III and was not moved to Chapter VI-A. The result is that even now s. 10A is in the nature of an “exemption” provision and the profits of the eligible unit have to be deducted at source level and do not enter into the computation of income. Consequently, the losses suffered by non-eligible units cannot be set-off against the eligible profits

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DATE: (Date of pronouncement)
DATE: November 6, 2011 (Date of publication)
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CITATION:

The test of enduring benefit is not a certain or a conclusive test which the courts can apply almost by rote. What is required to be seen is the real intent and purpose of the expenditure and whether the expenditure results in creation of fixed capital for the assessee. Expenditure incurred which enables the profit making structure to work more efficiently leaving the source of the profit making structure untouched is expense in the nature of revenue expenditure. Fine tuning business operations to enable the management to run its business effectively, efficiently and profitably; leaving the fixed assets untouched is of revenue expenditure even though the advantage may last for an indefinite period. Test of enduring benefit or advantage collapses in such like cases especially in cases which deal with technology and software application which do not in any manner supplant the source of income or added to the fixed capital of the assessee (Alembic Chemical Works 177 ITR 377 followed)

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