Category: Supreme Court

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DATE: (Date of pronouncement)
DATE: March 23, 2010 (Date of publication)
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The argument of the revenue that “submitting an incorrect claim for expenditure would amount to giving inaccurate particulars of such income” is not correct. By no stretch of imagination can the making of an incorrect claim in law tantamount to furnishing inaccurate particulars. A mere making of the claim, which is not sustainable in law, by itself, will not amount to furnishing inaccurate particulars regarding the income of the assessee. If the contention of the Revenue is accepted then in case of every Return where the claim made is not accepted by the AO for any reason, the assessee will invite penalty u/s 271(1)(c). That is clearly not the intendment of the Legislature

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DATE: (Date of pronouncement)
DATE: March 2, 2010 (Date of publication)
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The cost for carrying forward the contracted foreign currency not immediately required for repayment is called the roll over charge(s). The argument that s. 43A applies only to cases where there is a fluctuation in the rate of exchange and that since roll over charges are paid to avoid increase or reduction in liability on account of such fluctuation, s. 43A does not apply has no merit because s. 43A applies to the entire liability remaining outstanding at the year end and is not restricted merely to the installments actually paid during the year. Therefore the year-end liability of the assessee has to be looked into. Further, it cannot be said that roll over charge has nothing to do with the fluctuation in the rate of exchange. Roll over charges represent the difference arising on account of change in foreign exchange rates. Roll over charges paid/ received in respect of liabilities relating to the acquisition of fixed assets should be debited/ credited to the asset in respect of which liability was incurred. However, roll over charges not relating to fixed assets should be charged to the Profit & Loss Account.

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DATE: (Date of pronouncement)
DATE: February 22, 2010 (Date of publication)
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The position in law is well-settled. After 1.4.1989, it is not necessary for the assessee to establish that the debt, in fact, has become irrecoverable. It is enough if the bad debt is written off as irrecoverable in the accounts of the assessee. When a bad debt occurs, the bad debt account is debited and the customer’s account is credited, thus, closing the account of the customer. In the case of companies, the provision is deducted from Sundry Debtors.

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DATE: (Date of pronouncement)
DATE: February 17, 2010 (Date of publication)
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CITATION:

The law laid down in Malayala Manorama 300 ITR 251 {that (i) Schedule VI does not create any obligation to provide for any depreciation much less for depreciation at Schedule XIV rates, (ii) As per the Company Law Board Circular the rates in Schedule XIV are the minimum rates and a company can provide for higher rates and (iii) Schedule XIV itself contemplates that depreciation can be provided at rates different from the Schedule rates} needs re-consideration because s. 115J by a deeming fiction legislatively only incorporates provisions of Parts II and III of Schedule VI of the Companies Act and not sections 205, 350 or 355. Once a company, whether private or public, falls within the ambit of it being a MAT company, s. 115J applies and is required to prepare its Profit & loss account only in terms of Parts II and III of Schedule VI. By the Companies (Amendment) Act, 1988, the linkage between depreciation as per Rule 5 and the Companies Act have been expressly de-linked and the rates are also different.

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DATE: (Date of pronouncement)
DATE: February 11, 2010 (Date of publication)
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CITATION:

The interest on surplus invested in short-term deposits, not being attributable to the business of providing credit facilities to the members or marketing of agricultural produce of the members, is assessable as “other income” and not as “business profits”. The words “the whole of the amount of profits and gains of business” attributable to one of the activities specified in s. 80P (2)(a) mean that the source of income is relevant and that the income must be “operational income”.

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DATE: (Date of pronouncement)
DATE: February 4, 2010 (Date of publication)
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CITATION:

While notice u/s 143 (2) is not necessary if the AO accepts the return as filed, the notice within the prescribed time is mandatory if the AO proposes to make an assessment u/s 158BC r.w.s143 (3). Omission to issue notice u/s 143(2) is not a procedural irregularity and the same is not curable and, the requirement of notice u/s 143(2) cannot be dispensed with. If the intention of the legislature was to exclude the provisions of s. 143 (2), the legislature would have indicated that.

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DATE: (Date of pronouncement)
DATE: January 25, 2010 (Date of publication)
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Though the Court has repeatedly asked the department to examine the process applicable to the product in question and not to go only by dictionary meanings, the recommendation is not being followed. Even when the assessee gives an opinion on a given process, the Department does not submit any counter opinion. Applying the test laid down in Oracle Software India Ltd, as POY simplicitor is not fit for being used in the manufacture of a fabric and it becomes usable only after it undergoes the operation/process which is called as thermo mechanical process which converts POY into texturised yarn, the said process is “manufacture”.

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DATE: (Date of pronouncement)
DATE: January 25, 2010 (Date of publication)
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The term “manufacture” implies a change, but, every change is not a manufacture, despite the fact that every change in an article is the result of a treatment of labour and manipulation. However, this test of manufacture needs to be seen in the context of the process adopted by the assessee for duplication of software. If an operation/ process renders a commodity or article fit for use for which it is otherwise not fit, the operation/ process falls within the meaning of the word “manufacture”. Applying this test, as the assessee has undertaken an operation which renders a blank CD fit for use for which it was otherwise not fit, the duplicating process constitutes ‘manufacture’ u/s 80IA(12)(b).

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DATE: (Date of pronouncement)
DATE: January 19, 2010 (Date of publication)
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CITATION:

Though the power to reopen under the amended s. 147 is much wider, one needs to give a schematic interpretation to the words “reason to believe” failing which s. 147 would give arbitrary powers to the AO to re-open assessments on the basis of “mere change of opinion”, which cannot be per se reason to re-open. One must also keep in mind the conceptual difference between power to review and power to re-assess. The AO has no power to review; he has the power to re-assess. But re-assessment has to be based on fulfillment of certain pre-condition and if the concept of “change of opinion” is removed, as contended on behalf of the Department, then, in the garb of re-opening the assessment, review would take place. One must treat the concept of “change of opinion” as an in-built test to check abuse of power by the AO. Hence, after 1.4.1989, the AO has power to re-open, provided there is “tangible material” to come to the conclusion that there is escapement of income from assessment. Reasons must have a live link with the formation of the belief. This is supported by Circular No.549 dated 31.10.1989 which clarified that the words “reason to believe” did not mean a change of opinion.

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DATE: (Date of pronouncement)
DATE: January 12, 2010 (Date of publication)
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CITATION:

The RBI Directions issued u/s 45JA of the RBI Act provide that anticipated losses must be taken into account but expected income need not be taken note of. This is for ensuring that NBFCs state true and correct profits without projecting inflated profits. These are prudential norms or disclosure norms but have nothing to do with the computation or taxability of the provisions for NPA under the IT Act. Further though the RBI Directions deviate from the accounting practice as provided in the Companies Act, they do not override the provisions of the IT Act. The RBI Directions 1998 and the IT Act operate in different fields. The “Provision for NPA” made in terms of the RBI Directions does not constitute expense for purposes of s. 36(1)(vii). The said Provision is for presentation purposes and in that sense it is notional.