Digest of important case law – September 2010

S. 3 (1) (b). Previous Year – Income – Separate Source of Income.
Until 31st Dec 1981, S. Enterprises was an “AOP” and thereafter ,it became a proprietary concern of the assessee w.e.f. 1st Jan 1982, and therefore  s 3(1) (b) and not s 3(1) (f) was applicable and the tribunal was not justified in holding that remuneration received by assessee from CTC was assessable in the asst year 1982-83,previous year ended on 27th Oct. 1981.Income tax liability crystallized on the last last day of the previous year, therefore new source of  income could be ascertained end of previous year.
Pradeep Trust v CIT (2010) 44 DTR 44 (Cal).
S. 4. Income- Accrual- Arbitration Proceedings Pending.
Amount due to assessee in terms of royalty agreement .Dispute between parties and arbitration, proceedings pending. There is no accrual of income .Assessment only on completion of arbitration proceedings.
FGP Ltd v CIT (2010) 326 ITR 444(Bom).
S.4: Income-Mutuality – Interest from Banks – Bonds – Company.
Principle of mutuality is applicable to the assessee even though it is an incorporated   company .Interest earned by the mutual association from banks bonds etc on surplus funds is not liable to tax.
ITO v Hill Properties Ltd (2010) TIOL 481 ITAT –Mum. (2010) BCAJ (October). P. 20.
S.4.Income – Mutuality – Income of Group Housing Society – Interest on Deposits – Sale of Shops.
Assessee, a co-operative housing society, was formed for the development and construction of residential houses/flats for its members and to provide them necessary common amenities and facilities, and therefore the principle of mutuality would apply to the income of the society, including the income from sale of shops. Principle of mutuality is attracted also to the interest derived from deposits made by the society out of contribution made by its members.
CIT v Talangang Co –operative Group Housing Society Ltd (2010) 44 DTR 58 (Del).
S. 9(1) (vi).Income Deemed to Accrue or Arise in India – Vessel -Permanent Establishment.
Mere physical presence of non-resident’s  vessel in territorial waters of India pursuant to hiring of vessel on Bareboat Charter terms by applicant does not ,without anything more ,constitute a permanent establishment. Where agreement was executed outside India and delivery of vessel also took place outside India by reason of mere presence of vessel in India without volition of VPC, source of income cannot be said to be located in India and to this extent, hire charges paid by the applicant are liable to be excluded from taxable profits of VPC.
Seabird Exploration FZ LLC, UAE, in re (AAR). (2010) 192 Taxman 471 (AAR-)
S.9 (1) (vii): Income Deemed to Accrue or Arise in India – Fees for Technical Services – International Taxation – DTAA – India –Singapore. (Art- 5(2) (b), 12(6)).
A Singapore resident company had PE in India, which provided information available in public domain to subscribers. The AO held that the income was fees for technical services (FTS) under the Income Tax Act and taxable on gross basis and not on net basis as claimed by the Tax payer under DTAA. The Tribunal held that the assessee can choose between DTAA and the Income Tax Act and tax authorities cannot thrust provisions of the Income Tax Act unless they are more beneficial.
JCIT v Telerate (2010) TII 72 –Mum-Intl. (2010) (October) BCAJ) P. 25.
S. 9 (1) (vi).Income deemed to accrue or arise in India.-Royalty- Fees for technical services- International Taxation- Self soft ware- copy right- DTAA-India-Netherland.
A Netherland resident company received payments for grant of license for off the shelf software to an Indian customer .No right in the copyright was transferred. The AAR held that payments were not royalty or FTS under DTAA and since the company did not have PE in India, payments were not taxable in India.
GeoQuest Systems B.V., IN re .AAR no 774 of 2008 (AAR) dt 6-8-2010. (2010). (BCAJ) (October) P. 25.     
S. 10. Exemption-Sportsman- Award money-Cricketer.
The Tribunal held that the assessee is entitled to exemption in respect of award money. As the claim was made for the first time the matter remanded, for verification.
Ajay Jadeja v Dy CIT (2010) 5 ITR (Trib) 233 (Delhi).
S. 10 (23C) (iiiab).Exemption-Educational institution-Profit motive.
Where the objects and activities of the assessee institution are educational in nature and the revenue has not brought any material on record to show that the college account was having surplus or profit, year after year and the revenue has not disputed that surplus was only because of salary grant from the State Government and another grant from UGC , revenue ‘s plea that the college run by assessee was for profit motive cannot be accepted .Expenditure on conducting entrance examination being application of income, non availability of evidence cannot be reason of denying the exemption under section 10 (23C)(iiiab).
Shree Saket Mahavidyalaya Samiti v DyCIT (2010) 132 TTJ (Lucknow) (UO) 39.
S.10 (23C) (iiiad).Exemption-Educational institution-Lease rent to the sons and wife of the school principal.
Exemption under section 10 (23C) (iiiad) could not be denied the assessee society established for educational purposes on the ground that the society had paid lease rent to the sons and wife of the principal of the school who were owners of the land on which school building was constructed where such lease rent was reasonable .Salary to the principal also cannot be aground for refusing the exemption.
Oasis Educational Society v Asst DIT (2010) 132 TTJ (Hyd) (UO) 59.
S.10 (26AAA): Exemption – Sikkimese-dividend-interest- revision – Condonation of delay- Retrospective amendment for granting relief. (S 264.)

In matters giving benefit to assessee, dept must avoid pedantic approach. Amendment made retrospectively exempting the interest and dividend income of sikkimese, the court held commissioner should have condoned the delay in filing the application under section 264 and ought to have granted the relief.

Danny Denzongpa vs. CIT (Bombay High Court) (www.itatonline.org)

S. 11: Income – Charitable Trust – Non Filing of Audit Report
Non-filing of audit report with ROI not fatal to s. 11 exemption. Report filed in the course of assessment proceedings should be considered.

ITO vs. Sir Kikabhai Premchand Trust (ITAT Mumbai) (www.itatonline.org)
S. 11.Charitable trust-Application of income-construction of hospital building.
Assessee trust established for the purpose of running hospitals, nursing home etc, spending the income for construction of hospital building, is an application of income for the objects of running hospitals and entitled to exemption.
CIT v Mool Chand Sharbati Devi Hospital Trust (2010) 41 DTR (All) 153.
S. 11. Charitable trust-exemption- educational institution (S, 13(1) (d), 13(1) (c), 13(2) (a).), 13 (3).
Advance paid by assessee an educational institution registered under 12A, to a club towards membership fee for providing certain amenities to the staff and students of the assessee did not attract the provisions of section 13 (1 ) (c) rws 13 (2 ) (a) as the said club is not a prohibited person as specified in section 13 (3), .Provisions of section 13 (1 ) (d ) were also not attracted as the said advance was neither a deposit nor an investment and therefore , exemption under section 11 is allowable to the assessee more so when the AO has allowed assessee’s claim of exemption under section 11 on the same set of facts in the preceding year.
Vidya Pratishthan v Dy CIT (2010) 44 DTR 145 (Pune) (Trib.).
S. 24(1) (vi).Income from house property-Deductions-interest.
If Interest paid on original loan is allowable as deduction, then interest paid on second    loan for repayment of original loan is also allowable.
K.S.Kamalakannan v Asst CIT (2010) 126 ITD 231 (Chennai).
S. 28. Business income-Income from house property-Rule of consistency. (S 22.).
Commercial complex let out and the income was assessed as business income in earlier years, as the department has not got any new facts on record for departure from its earlier stand and in view of the principle of consistency, the rental income should be assessed as business income.
CIT v Goel Builders (2010) 192 Taxman 28 (All).
S.28 (iv).Business income-Perquisite-compensation on termination-value of free room rent vouchers. (S.5).
Assessee having received 150 free room right vouchers as part of compensation on termination of arrangement for operating the resort belonging to another party following a settlement made during the year under consideration .The value of free room night vouchers accrued to the assessee in the relevant year even though these vouchers could not be utilized. The loss on account of non user of vouchers can be considered only in subsequent year and not in the year under consideration.
Tulip Hotels (P) Ltd v Dy CIT (2010) 132 TTJ (Mumbai) (TM) 633.  
S. 32. Depreciation-Foreign made cars used abroad.
Depreciation is admissible on foreign cars used at foreign sites for assessee’s business.
CIT v Punjab Chemi.Plants Ltd (2010) 43 DTR (P&H) 322.
S. 32. Depreciation- Camera given on rent-Professional charges included hire charges.
The assessee, sports personal has shown substantial amount as professional income. Assessee contended that the professional declared inclusive of camera hire charges. Assessing officer disallowed the claim for non production of agreement with company. The Tribunal held that as substantial amount of professional receipts disclosed by assessee , depreciation claim was allowed.
Ajay Jadeja v Dy CIT (2010) 5 ITR (Trib) 233 (Delhi).
S. 32. Depreciation- Computer-Router-Switches.
Router and Switches can be classified as a computer hardware  when they are used along with a computer  and when their functions are integrated with a computer .In such a situation, routers and switches are to be included in block of “computer” for purpose of determining rate of depreciation applicable to them i.e. 60%.
DY CIT v Datacraft India Ltd (2010) 40 SOT 295 (Mumbai) (SB). 
S. 32(1) (ii).Depreciation- Goodwill- Slump price-Revision- (S 263).
Business acquired by assessee on slump price and part of the price so paid allocated towards payment for the marketing and trading reputation. Trading style and name marketing and distribution territorial know-how etc and shown under the head “Goodwill” was eligible for depreciation.
Hindustan Coca Cola Beverages (P) Ltd v Dy CIT (2010) 132 TTJ (Del) 602.
S. 37. Capital or revenue expenditure- Contribution for treating effluent to protect assessee’s interest.
The contribution made by the assessee due to various business reasons ,to participate in a scheme framed by High court , as a remedy to a perpetual public hazard , i.e. social cause ,  hence the expenditure incurred allowable as  revenue expenditure.
CIT v Jayendra Kumar Hiralal (2010) 327 ITR 147 (Guj).
S. 37(1).Capital or revenue expenditure- Second –hand equipment for use a spare parts for existing equipment.
Assessee is a cardiologist purchased the second hand machines for use as spare parts to existing equipments is allowable as revenue expenditure.
Aswanth N.Rao v ACIT (2010) 326 ITR 188 (Karn).
S. 37 (1). Business Expenditure- Foreign Travelling Expenses.
Merely because there was no business activity of assessee in foreign countries during assessment year in question, it could not be said that the claim of assessee for foreign travel expenses had to be disallowed.
Scindia Investments (P) Ltd v Asst CIT (2010) 40 SOT 239 (Mumbai).
S. 37 (1).Business Expenditure – Expenditure on Closure of Manufacturing Business.
Payment of severance pay on closure of manufacturing business and expenditure incurred on market research is allowable as business expenditure.
KJS India Pvt Ltd v DCIT .ITA no 2422 /Del/2009 dt 30-7-2010.Bench “D”. (2010) (October) BCAJ. P. 24.
S. 37(1).Business Expenditure – Payment to Ex-Employees.
Amount paid by assessee to an ex-employee at the time of leaving the service as per settlement is allowable as deduction but not the amount which has already been claimed as deduction on account of provident fund in the year to which relates.
Tulip Hotels (P) lTD v Dy CIT (2010) 132 TTJ (Mumbai) (TM). 633

S. 40(a) (i): Expenses or payments not deductible- Double Taxation Avoidance Agreement – India & UK –Interest on Damages.
 
Interest on damages not Assessable to tax under DTAA If no PE, hence no disallowance can be made.

Goldcrest Exports vs. ITO (ITAT Mumbai) (www.itatonline.org)

S. 40(a) (i): Expenses or payments not deductible-Non residents-Double Taxation Avoidance Agreement – India & USA – Art. 26(3).
 
Under Art 26(3) of India-USA DTAA payments to Non-Residents are equated with payments to Residents & so s. 40(a) (i) disallowance not valid.

Central Bank of India vs. DCIT (ITAT Mumbai) (www.itatonline.org)
S. 40(a) (i).Expenses or payments not deductible-Fees for technical services.
Payment made by the assessee to an Austrian company by way of fees for technical services was not taxable in India as per art 7 of the old DTAA of 1065 as applicable to the relevant assessment year 2002-03, in view of the fact that no portion of the activities were performed by the Austrian enterprise in India , and therefore ,provisions of section 195 were not applicable to the payment made by the assessee to the said enterprise and as such fees for technical services is not hit by the provisions of section 40(a) (ia).
VA Tech Wabag Ltd v Asst CIT (2010) 133 TTJ (Chennai) 121/44DTR (Chennai) (Trib) 1. 
S. 40(a) (ia).Expenses or payments not deductible-Transport expenses-no obligation to get the accounts audited. (S 44AB, 194C) .
Since the assessee , a transporter, was not liable to get his accounts audited under section 44AB.,in the immediately preceding assessment year , he was not required to deduct tax at source under section 194C  from the payments and they   could not be disallowed under section 40(a) (ia) on account of non deduction of TDS.
ITO v Dhirubhai Dajibahi Patel (2010) 133 TTJ (Ahd) (UO) 1.  
S.44AF.Business income-Computation of profits.
Assessee engaged in wholesale grocery trade. Rate of net profit less than in retail trade .Net profit rate modified to 3 percent .Separate deduction not available for expenses.
Asst CIT v Shriram Properties and Constructions (Chennai) LTD (2010) 5 ITR (Trib) 141(Chennai).
S. 44BB.Mineral oil – Non Resident.
In the case of a non resident such as applicant engaged in the business of providing services or facilities in connection with prospecting for or extraction of mineral oil or supply of plant (Including ships ) on hire used or to be used in prospecting or extraction of mineral oil , section 44BB is squarely attracted .
Seabird Exploration FZ, LLC, UAE, In re. (2010) 192 Taxman 471 (AAR).
S. 45. Capital Gains- Possession-Date of accrual.
The assessee had given possession and received the sale consideration in pursuance  of the agreement dated march 1993.As the provisions of section 53A, of transfer of Property Act is attracted ,the capital gains would accrue in the year of possession.
D.Kasturi (Smt) v CIT (2010) 42 DTR (Mad) 288. 
S. 45. Capital gains- Transfer of TDR- FSI.
The gain arising on transfer of FSI/TDR is chargeable to tax under the head capital “capital gain”, however as there is no cost of acquisition of the asset transferred; there will be no liability to capital gains.
ITO v Shri Ram Kumar Malhotra (2010) TIOL 512 ITAT –Mum. (2010) (October) BCAJ. P 22.
S. 45. Capital gains-Transfer- agreement to sell-termination of agreement-(S. 2 (47), Transfer of property Act S. 53A.)
When the title of the property always remained with the assessee so also possession, there is no basis for the finding of the AO that there was any part performance of the contract within the meaning of section 53A of the transfer of property Act, 1982 and thereby a transfer of asset within the meaning of section 2 (47) especially when the agreement to sell had never culminated in to a contract of sale and the sale deed was never executed as proposed transfer of capital asset was aborted.
Asst CIT v Hotel Harbour View. (2010) 44 DTR (Coch) (Trib) 41.
S. 45(4). Capital gains- Partnership firm-retirement-family arrangement.
The expression “distribution of capital assets on the dissolution of a firm or
Other association of capital assets on the dissolution of a firm or other association of persons or body of individuals or otherwise” cannot be extrapolated to bring retirement of one partner in to ambit of section 45 (4).Even otherwise as there was family arrangement, provisions of section 45 (4), cannot be applicable.
Asstt .CITv Goyal Dresses (2010) 126 ITD 131 (Chennai).  
 S. 47 (v). Capital gains-Transfer of shares-subsidiary- (S 2 (47))
On 3-1-1992, assessee entered in to an agreement with ATCL a group concern of assessee, for sale of shares of ARL. Assessee applied for necessary permission to Central Government under section 372 of Companies Act, 1956.On 9-7-1992, Central Government granted approval for transfer of shares of ARL by assessee to ATCL. On 20-11-1992, ATCL acquired entire shareholding of assessee company. Thereafter, on 22-12-1992, assessee effected transfer of shares of ARL to ATCL and received consideration for transfer. The Tribunal held that transaction of transfer of shares is complete only when share certificates together with transfer deed duly signed are delivered and payment received by seller. In the instant case transfer of shares took place on 22-12-1992, i.e. on a date when assessee had already became wholly subsidiary of ATCL and therefore , capital gain  arising on sale of shares was not taxable in assessee’s hands by virtue of provisions of section 47(v).
Anusandhan Investments Ltd v ITO (2010) 40 SOT 205 (Mumbai)
S. 48. Capital gains-cost of acquisition- share acquired by a partner on dissolution of firm- (S 55(2) (b).
Though strictly speaking the capital gain on sale of the shop allotted to the assessee partner on dissolution of the firm can be computed  only by taking the fair market value of the shop on the date of dissolution ie.10th  Sept, 1990 as cost of acquisition , assessee having computed the capital gains on the basis of fair market value as on 1st  April 1981 , on which the assessee had only tenancy rights and the department having appealed against the order of CIT (A), upholding the assesse’s computation of capital gains , no direction can be given to rework the capital gain by taking the cost of acquisition as on 10th Sept. 1990, so as to place the revenue in worse off situation . Order of the CIT (A), directing the AO to accept the capital gain declared in the return is confirmed.
Dy CIT v Leelavati S .Mehta (2010) 44 DTR (Mumbai) (Trib) 34. 
S.50 C (1).Capital gains-Full value of consideration- investment in bonds. (S. 54EC).
As the agreement not registered provisions of section 50C of the Act would not apply. Sale consideration as admitted in return of income to be accepted.
ITO v Kumudini Venugopal (Mrs.) (2010) 5 ITR (Trib) 145 (Chennai).
S. 55A. Capital gains- valuation as on 1-4-1981-Valution report of departmental valuation officer.
AO can not resort to departmental valuation officer’s report for ascertaining fair market value of an asset as on 1st  April 1981, and for the purpose of computing cost of acquisition under section 55(2) (b) (i).
ITO v Surendra V.Shah .ITA no 5667/Mum/2008 Bench E. dt 23-7-2010. (2010) (October) BCAJ .P. 23.  
S.68.Cash credits- Income- balance outstanding.
Liability of an earlier year which has been shown in the balance sheet cannot be said to have been ceased to exist and therefore, addition under section 68 cannot be sustained.
Tulip Hotels (P) Ltd v Dy CIT (2010) 132 TTJ (Mumbai). (TM) 633.
 S.68. Cash credit- summons were duly served- burden of proof.
Once summons were duly served on the creditors ,their identity is duly proved  and the AO could not have drawn an inference against the assessee , without enforcing the attendance of the parties to whom summons were issued and served and without giving an opportunity to the assessee.
ITO v Mayur Agrwal (2010) 133 TTJ (Agra) (TM) 1.
S. 68. Cash credits- Share application money-opportunity for cross examination.
Assessee company having received share application money through account payee cheques and filed certificate of incorporation of the companies which had applied for shares, bank statements and affidavits confirming payment of money as share application money, existence of the applications is proved and therefore, no addition under section 68 could be made by simply relying on the statements of two persons who were not even allowed to be cross –examined by the assessee.
ITO v Nova Promoters &Finlease (P) Ltd (2010) 44 DTR (Del) (Trib) 9.
S.69: Income from undisclosed source-unexplained investment-purchase of goods.
Addition could not be made towards unrecorded purchases of goods by the assessee from a third party simply on the basis of some entries found in the books of the said party, once the assessee has denied the transaction and the statement relied upon by the revenue does not disclose the bill number through which the alleged transaction was entered in to.
ITO v Mayur Agrwal (2010) 133 TTJ (Agra) (TM) 1.
S. 73. Speculative business- Brokerage business and trading business.
Assessee having brokerage business and also trading in shares, loss arising from trading in shares speculative loss.
Priyasha Meven Finance Ltd v ITO (2010) 5 ITR (Trib.) 441 (Mumbai).
S.74: Carry forward and set off of losses-capital gains-capital loss.
While dealing with carry forward and set off losses in asst year 2003-04 loss computed for any assessment year will be governed by the amended provisions of section 74 applicable from A. Y. 2000-01 and therefore carried forward long term capital loss of A. Y. 2000-01 could not be set off against the short term capital gains for A. Y. 2003-04.
Komaf Financial Services Ltd v ITO (2010) 132 TTJ (Mumbai) 359.
S. 80HH: Deduction – Industrial Undertaking. (S. 80J).
Activity of construction and fabrication of mechanized houses cannot be equated to manufacture or production of articles or things and, therefore assessee engaged in such activity is not an industrial undertaking entitled to deduction under section 80HH, 80J.
CIT v Punjab Cheml Plants Ltd (2010) 43 DTR (P&H) 322.
S.80 – IA (10): Deduction – Industrial Undertakings – Close Connection – Reasonableness.
Provisions of section 80-IA(10), can be invoked only when there is a close connection between assessee carrying on eligible business and any other person and , course of business between them so arranged that business translated between them produces more than ordinary profits to assessee. In the instant case, assessee was generating and transmitting electricity in its own business only and there were no transactions with any other person, hence the provisions of section 80IA (10), were not applicable to its case.
Reliance Energy Ltd v DY CIT (2010) 40 SOT 314 (Mum).  
S. 80 IB (10): Housing Project – Residential Area More Than 1500 sq. ft.
The eligibility conditions under section 80IB are that the built up area should not exceed 1500 sq. ft in context of cities other than Delhi, and Mumbai and the profits must be derived in the previous year from the housing project .This restriction is applicable for the entire project .If some of the residential units of the project comprised area exceeding the prescribed limit, the benefit could not be extended to the project.The assessee cannot be granted exemption for the project.
Asst CIT v Viswas Promoters P.Ltd (2010) 5 ITR (Trib) 449 /126 ITD 263(Chennai).
Editorial.– In Sreevasta Real Estates (P) Ltd v ITO (2010) 41 DTR 497 (Chennai), latter judgment, it was held that deduction is available on pro rata basis. Also refer special Bench-Bhrama Associates 2009) 119 ITD 255 / 22 DTR 1/ 39 SOT 155/122TTJ 433. (Pune)(SB).
S. 80 P. Deduction-Business of banking-Interest on loans to non farming sector-attributable.
Interest derived by assessee co operative society on loans advanced to non farming sector qualified for deduction under section 80 P (2) (a) (i).
Guru Harsahai Primary Co-op Agri Development Bank Ltd (2010) 133 TTJ (Asr) (UO) 4.
S. 90 .Double taxation relief-Permanent establishment-International Taxation – India – UK-DTAA- (art 5 (4).
AO having held that the Indian subsidiary was an independent agent of the assessee UK company in India falling within the ambit of art 5 (5) of the Indo-UK DTAA as well as a dependent agent under art 5 (4), without spelling out his reasons for such conclusion and the CIT (A) having given contradictory finding vis-a vis existence of PE of the assessee in India, issue remanded to the AO for fresh consideration.
Jt CIT v Reuters Ltd (2010) 133 TTJ (Mumbai) 22.
S. 90. Double taxation relief-Royalty- business support market information- DTAA-India- Singapore-International taxation. (Art 12.3)
Services provided by a Singaporean company to the applicant , an Indian insurance company , such as  business support , market information ,technology support services and strategy support ,etc do not fulfill the requirements of the definition of fees for technical services in the Indo –Singapore DTAA and therefore ,the fee paid to that company by the applicant does not amount to fee for technical services within the meaning of the DTAA .Payments made  for providing access  to software applications and to server hardware system hosted in Singapore for internal purposes and for availing of related support services under the terms of the service agreement cannot be brought within the scope of the definition of “royalty” in art 12.3.
Bharati Axa General Insurance Co Ltd .IN. RE. (2010) 234 CTR (AAR) 62.
S. 90.Double taxation relief-Income deemed to accrue or arise in India-Royalty-supply of software-DTAA-India- Netherland-International Taxation-(S, 9(1) (vi), 115A (1A), art 12.4.)
A Dutch company, having supplied special purpose computer software to ONGC under an agreement stipulated that the copyright embedded in the software would always remain with the owner/licensor and that the licensed product cannot be commercially exploited by the licensee/ customer, the   amount payable to the applicant under the contract does not amount to “royalty” within the meaning of Expl 2 to section 9 (1) (vi) or art 12.4. Of the India-Netherlands DTAA nor can it be treated as “fees for technical services’ as defined in art 12.5 as the applicant has not made available its technical knowledge and expertise to ONGC by supplying software.
Geoquest Systems B.V.IN RE. (2010) 234 CTR (AAR) 73. 
S. 90. Double taxation relief- fees for technical services-DTAA- India-Austria-International taxation- (S. 40(a) (i), 195, Art 7.)
Payment made by the assessee to an Austrian company by way of fees for technical services was not taxable in India as per art 7 of the old DTAA of 1065 as applicable to the relevant assessment year 2002-03, in view of the fact that no portion of the activities were performed by the Austrian enterprise in India , and therefore ,provisions of section 195 were not applicable to the payment made by the assessee to the said enterprise and as such fees for technical services is not hit by the provisions of section 40(a) (ia).
VA Tech Wabag Ltd v Asst CIT (2010) 133 TTJ (Chennai) 121/44DTR (Chennai) (Trib) 1. 
S.115JA (2) (iii).Company –Book profit-computation of income-unabsorbed brought forward loss.
The unabsorbed brought forward loss could not be reduced from the net profit and computation done under the Explanation to section 115JA (2) (iii) of the Act. The order of the Assessing Officer was up held.
Metmin Investment and Trading P.Ltd v ITO (2010) 5 ITR (Trib) 378 (Mumbai). 
S. 115JAA. Company – Minimum alternative tax-brought forward Credit – interest. (S. 234B, 234C).
Credit for MAT brought forward credit under section 115JAA should be given effect before charging interest under sections 234B, and 234C.
CIT v Roots Multiclean Limited. (2010) 327 ITR 65 (Mad).
S. 115JB.Company-Advance tax-Book Profits-Minimum alternative tax. (S 234B, 234C.)
Interest cannot be charged under sections 234B, 234C, on the minimum alternative tax levied under section 115JB on the book profit.
CIT v Narural Gems Ltd (2010) 327 ITR 269 (Bom).

S. 115JB: Book Profit – Banks – Minimum Alternative Tax.
Banks are not liable to pay S. 115JB MAT on “book profits”

Krung Thai Bank PCL vs. JDIT (ITAT Mumbai) (www.itatonline.org)

S. 119: Delay in Filing ROI – Delay in Appointment of Statutory Auditor – Condonation.
Delay in filing ROI due to late appointment of statutory auditor must be condoned  (www.itatonline.org)

S. 119 (2). Central Board of Direct taxes- Condonation of delay in filing loss return-reasonable cause- (S 139 (3).
Board has the power under section 119 (2) (b) to condone the delay in filing the return having claim of carry forward of losses.  Delay of one day was condoned.
Lodhi Property Company Ltd v under secretary, Department of revenue. (2010) 234 CTR (Del) 99.

S. 133A: Survey – Confession – Not Conclusive-retraction.
Confession made during survey is not conclusive & can be retracted.

CIT vs. Dhingra Metal Works (Delhi High Court) (www.itatonline.org)
S.139 (3). Return- loss return-Board has the power to condone the delay- (S 119(2).
Board has the power under section 119(2) (b) to condone the delay in filing the loss return and allowed to be carried forward.
Lodhi Property Company Ltd v Under Secretary Department of revenue (2010) 234 CTR (Del) 99.
S. 145 (3).Accounts-Rejection of books of accounts-addition to specific defects.
AO having made separate and distinct additions for all the defects mentioned by him for rejection of assesse’s accounts book results could not be rejected more so when the AO has relied upon incomparable cases. Turnover and GP declared by the assessee have to be accepted.
ITO v Mayur Agarwal (2010) 133 TTJ (Agra) (TM) 1. 
S. 147: Reassessment – Reasons Recorded.
If AO does not assess income for which reasons were recorded u/s 147, he cannot assess other income u/s 147.
CIT vs. Jet Airways (I) Ltd (Bombay High Court) (www.itatonline.org)
S.148. Reassessment- Time available for issue of notice- S 143 (2).
Notice under section 148 cannot be issued for making reassessment, when time limit is available for issue of notice under section 143 (2) for making an assessment under section 143 (3).
CIT v TCP Ltd (2010) 44 DTR (Mad) 31.
S. 163(I) (c).Nonresident- Agent-deduction of tax at source-(S.195.)
Single transaction of purchase of shares by assessee from non –resident .Consideration remitted by assessee after deduction of tax at source .Assessee can be treated as an agent of nonresident ,that assessee has deducted tax at source will not preclude liability to be treated as agent.
Utkal Investments Ltd v Astt DIT (2010) 5 ITR (Trib) 481 (Mumbai).
S. 194C.Deduction at source-Payments to contractors and sub contractors-Transport expenses- No obligation to get the accounts audited (S 40(a) (ia), (44AB).
Since the assessee , a transporter was not liable to get his accounts audited under section 44AB.,in the immediately preceding assessment year , he was not required to deduct tax at source under section 194C  from the payments could not be disallowed under section 40(a) (ia) on account of non deduction of TDS.
ITO v Dhirubhai Dajibhai Patel (2010) 133 TTJ (Ahd) (UO) 1.

S. 194H: Tax Deduction at Source – Commission – Discount – Simcard.
“Discount” for supply of sim Cards is “Commission” for S. 194H is Applicable.

Vodafone Essar Cellular vs. ACIT (Kerala High Court) (www.itatonline.org)
S. 194 J. Deduction at source-Fees for professional or technical services. (S. 201(1), 201(1A), 271C.).
Department having not adduced any expert evidence to show that any human intervention is involved during the process when calls takes place so as to bring the payments of interconnect charges /access/pot charges made by the assessee to BSNAL/MTNL within the ambit of “fees for technical services” under section 194J , matter is remitted to AO to examine a technical expert and to decide a fresh .Department is not entitled to levy interest under section 201(1A), or impose penalty for non deduction of TDS on the facts and circumstances of the case for the reasons that there is no loss of revenue as tax has been paid by the recipient and the moot question involved in the case is yet to be decided.
CIT v Bharti Cellular Ltd (2010) 44 DTR 190 (SC).    
S. 195.Dedcution at source-other sums-Non resident-Technical services-International taxation-India –Austria-DTAA. (S.40 (a) (i), art 7.)  
Payment made by the assessee to an Austrian company by way of fees for technical services was not taxable in India as per art 7 of the old DTAA of 1065 as applicable to the relevant assessment year 2002-03, in view of the fact that no portion of the activities were performed by the Austrian enterprise in India , and therefore ,provisions of section 195 were not applicable to the payment made by the assessee to the said enterprise and as such fees for technical services is not hit by the provisions of section 40(a) (ia).
VA Tech Wabag Ltd v Asst CIT (2010) 133 TTJ (Chennai) 121/44 DTR (Chennai) (Trib) 1. 
S. 201.Dedcution of tax at source- Limitation.
The period of limitation for initiating proceedings four years from the end of financial year in issuing notice.
Block Development Officer v ITO (TDS) (2010) 5 ITR (Trib) 426(Delhi).
S. 201. Deduction at source-Fees for technical services-matter set aside. (S 194J, 201 (1A), 271C).)
 As the matter is remitted to AO to examine a technical expert and to decide a fresh .Department is not entitled to levy interest under section 201(1A), or impose penalty for non deduction of TDS on the facts and circumstances of the case for the reasons that there is no loss of revenue as tax has been paid by the recipient and the moot question involved in the case is yet to be decided.
CIT v Bharti Cellular Ltd (2010) 44 DTR 190 (SC).
S. 234B: Interest- Deduction of Tax at Source –Non resident- Advance Tax. (194,234D, 209(1) (d))
Non-resident recipient is not liable to pay advance tax as u/s 195 entire taxes have to be deducted at source by payee. Non-residents are not liable to pay interest u/s 234B.

 
DIT vs. Jacabs Civil Incorporated (Delhi High Court) (www.itatonline.org)

S. 234B. Interest- Minimum alternative tax-brought forward credit. (S. 115JAA, 234C.)  
Credit for MAT brought forward credit under section 115JAA, should be given effect before charging interest under sections 234B, 234C.
CIT v Roots Muliclean Limited (2010) 327 ITR 65 (Mad)
S.234B.Interest-Company-Book profit-Minimum alternative tax. (S. 115JB, 234C.)
Interest cannot be levied under sections 234B, and 234C, while computing the book profit under section 115JB.
CIT v Natural Gems Ltd (2010) 327 ITR 269 (Bom).

234D: Interest – Refund-Retrospective effect.
 
As S. 234D was inserted w.e.f. 1.6.2003, it is not retrospective.

CIT vs. Bajaj Hindustan (Bombay High Court) (www.itatonline.org)

S.234 D. Interest-Refund- Retrospective.
 
Section 234D applies from A.Y. 2004-05 and is not retrospective.

DIT v Jacabs Civil Incorporated. (Delhi High court.) www.itatonline.org
S. 234D.Interest-Refund.
Levy of interest under section 234D on excess refund was not justified for the asst year 2003-04 as the provision was applicable only from asst year 2004-05.
Komaf Financial Services Ltd v ITO (2010) 132 TTJ (Mumbai) 359.)
 S. 253(6) (d).Appellate Tribunal- Fees.-Dismissal of appeal on non-maintainability.
As the Commissioner (Appeals), dismissed the appeal on ground of non maintainability only sum of Rs 500 payable as fee.
A.Naresh Babu V ITO (2010) 5 ITR (Trib) 485 (Hyderabad).
S. 254 (1). Appellate Tribunal-additional grounds-new plea.
Grounds of appeal raised by the revenue before the Tribunal challenging the order of the CIT (A), holding that there was no PE of the assessee , a UK company ,in India is wide enough to admit the plea that the assessee has PE in India under any clauses of Art 5 of the Indo –UK DTAA and therefore ,the plea of the Revenue regarding existence of PE within the meaning of Art. 5 (2) (k) ,though not raised earlier , is well within the parameters of the grounds of appeal.
Jt CIT v Reuters Ltd (2010) 133 TTJ (Mumbai) 22. 
S. 254 (2). Appellate Tribunal- Rectification of mistakes- merger.
Once, rectification filed by  one of the parties is considered and decided by  Tribunal ,rightly or wrongly , another rectification application on same issue is not maintainable against  order passed by tribunal under section 254 (1).
CIT v Aiswarya Trading Co (2010) 192 Taxman 385 (Ker).
S. 254 (2).Appellate Tribunal- Rectification of mistakes-Subsequent decision of Jurisdictional High court or Supreme Court.
Decision of the Supreme Court or the Jurisdictional High Court is binding on the Tribunal, and therefore, constitute an apparent error in the order, which is contrary to the principle laid down in the subsequent decision. Accordingly ,the subsequent law laid down by the Supreme court or the jurisdictional High Court has to be considered for rectifying the mistake under section 254 (2) of the Income Tax Act 1961.
V.R.Chittanandam v Asst CIT (2010) 5 ITR (Trib) 258 (Chennai).
S. 260A. Appeal-High Court-Dispute between state owned corporation and Income Tax department.
Appellant being the Income tax Department, and the respondent being a State owned corporation ,before filing an appeal against the department ,the appellant ought to have obtained clearance from the Committee on Disputes, since this has not been done ,the appeal was not maintainable.
CIT v Tamil Nadu Industrial Investment Corporation Ltd (2010) 327 ITR 68 (Mad). 

S. 263: Revision – Non Application of Mind – Licences & Approvals – Intangible Assets – Depreciation (32 (1) (ii)).
 
Revision only on ground of non-application of mind by AO not proper. Licenses & Approvals are “intangible asset” u/s 32(1) (ii) & eligible for depreciation.

Piem Hotels vs. DCIT (ITAT Mumbai) (www.itatonline.org)

S. 263: Revision – Lack of Enquiry by AO.
 
Mere lack of inquiry by AO not sufficient for revision under section 263
 

CIT vs. Vikas Polymers (Delhi High Court) (www.itatonline.org)
S. 263. Revision-New benefit in reassessment proceedings.
Only in cases where assessment order is erroneous and prejudicial to interest of assessee , assessment can be reopened under section 263, and thus assessee is not eligible to claim any new benefit in assessment proceedings pursuant to section 263.
Asstt CIT v ITW India (P) Ltd (2010) 40 SOT 348 (HYD).
S.263.Revision-Goodwill-Depreciation.
Revision by CIT  on the ground that depreciation was not allowable on goodwill was not sustainable ,even if an amount is termed as “goodwill” in the books of account but it is a business or commercial right in the nature of knowhow, patent, copy rights trademarks, licences, franchises ,the claim of depreciation is indeed admissible thereon, it is not that “goodwill” is specifically excluded  from the intangible assets eligible for depreciation.
Hindustan Coca cola Beverages (P) Ltd v Dy CIT (2010) 132 TTJ (Del) 602.      

S. 264: Appeal – Condonation of Delay – Retrospective Effect- exemption- Sikkimese-(s 10 26AAA).
In matters giving benefit to assessee, dept must avoid pedantic approach. Amendment made retrospectively exempting the interest and dividend income of sikkimese, the court held commissioner should have condoned the delay in filing the application under section 264 and ought to have granted the relief.

Danny Denzongpa vs. CIT (Bombay High Court) (www.itatonline.org)
S. 269 SS. Penalty- deposits- bona fide belief- genuineness of transaction.
Money received by assessee co-operative society from its member /director and their relatives by way of deposits and sums repaid to them as part of its banking activities cannot be considered as “loan “or “deposit” so as to attract section 269SS or 269 T, as the assessee is working on the concept of mutuality and its directors  or members are not covered by the expression “any other person” occurring in section 269SS. , more so when the assessing officer has accepted the genuineness of such  deposits and the assessee was under bona fide belief the provisions of section 269SS and 269 T are not applicable.
Citizen Co-operative Society Ltd v Addl CIT (2010) 41 DTR 305 (Hyd)
S. 271 (1) (c).Penalty –Concealment-Bogus purchases.
Assessee failed to produce the parties hence the Assessing officer treated the purchases as bogus, on appeal the Tribunal has up held the a part of addition. Penalty imposed was confirmed by the CIT (A), in appeal before the tribunal it was argued that when the assessee failed to produce the parties the revenue authorities could have  exercised the power under section 131, as they have not exercised the power  the penalty levied  under section 271(1) (c ) was cancelled.
Chempure v ITO (2010) 40 SOT 164 (Mumbai).   
S. 271 (1) (C).Penalty-Concealment-disclosure of investment in mutual funds after notice by AO-AIR information.
Where the assessee had not shown in the return the investment in mutual funds but accepted the amount of investment only when the AIR information on the investment of the assessee in the mutual funds, was brought to its attention, it cannot be said that he had voluntarily offered the amount. A request made not to initiate the penalty proceedings, cannot be equated with a conditional offer. Levy of penalty in relation to the addition was justified.
Charudutt H. Dangat v ITO (2010) 132 TTJ (Mumbai) 687. 
Wealth tax.
S. 2 (ea) (i).Asset –Building- letting out factory shed – commercial.
Assessee having declared the income from the letting of the factory shed as “rental income” in its return which has been assessed accordingly and the occupant of the premises is purely that of the landlord and tenant, the factory shed is to be treated as an asset exigible to tax.
Supreme Nonwovens Ltd v Asst CIT (2010) 43 DTR (Bom) 326.
S. (2) (ea) .Asset –exemption-urban land.
Land on which construction not permitted not to be considered urban land hence the value of land not includible in net wealth.
Amrit Lal Jindal and sons (HUF) v WTO (2010) 327 ITR 161 (P&H).
S. 17.  Wealth tax – Reassessment-Report of valuation officer
Report called for after completion of assessment. Not a ground for reassessment. Report called for during pendency of assessment but received after completion of assessment. Valid ground for reassessment.
CWT v Sona Properties P. Ltd (2010) 327 ITR 592 (Bom).

Natural Justice.

Non-furnishing of “all documents” does not violate principles of natural justice

 
Kanwar Natwar Singh vs. Directorate of Enforcement 

(Supreme Court) (www.itatonline.org)
Precedent- Supreme court granting leave to appeal and dismissing-effect- Decision of High Court affirmed by Supreme Court.
Appeal was heard leave has been granted and dismissed. Placing reliance of the Supreme Court in Kunhayammed v State of Kerala (2000) 245 ITR 360 (SC), dismissal of appeal by the Supreme Court would amount to confirmation of law laid down the High Court.
CIT v Natural Gems Ltd (2010) 327 ITR 269 (Bom). 
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