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DATE: February 10, 2012 (Date of publication)
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S.143(3) contemplates that the AO shall pass an order of assessment in writing. If the assessment order is signed then because the computation of tax is a ministerial act, ITNS-150 need not be signed by the AO. However, if the assessment order is not signed, then the fact that he has signed the tax computation form and the notice of demand is irrelevant. The omission to sign the assessment order cannot be explained by relying on s. 292B. If such a course is permitted to be followed than that would amount to delegation of powers conferred on the AO by the Act. Delegation of powers of the AO u/s 143(3) is not the intent and purpose of the Act. An unsigned assessment order is not in substance and effect in conformity with or according to the intent and purpose of the Act (Kilasho Devi Burman 219 ITR 214 (SC) followed; Kalyankumar Ray 191 ITR 634 (SC) explained)

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DATE: February 9, 2012 (Date of publication)
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For Expl (baa) to s. 80HHC, netting of income from expenditure is allowed The AO & CIT(A) computed s. 80HHC deduction by deducting 90% of the gross interest received from the profits of business. However, the Tribunal, relying on Lalsons …

ACG Associated Capsules Pvt. Ltd vs. CIT (Supreme Court) Read More »

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DATE: February 9, 2012 (Date of publication)
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DEPB is “cash assistance” receivable against exports under the scheme of the Government. While the face value of the DEPB falls under clause (iiib) of s. 28, the difference between the sale value and the face value of the DEPB (the “profit”) will fall under clause (iiid) of s. 28. The High Court was not right in taking the view that the entire sale proceeds of the DEPB realized on transfer of the DEPB and not just the difference between the sale value and the face value of the DEPB represent profit on transfer of the DEPB. DEPB represents part of the cost incurred by a person for manufacture of the export product and hence even where the DEPB is not utilized by the exporter but is transferred to another person, the DEPB continues to remain as a cost to the exporter. When DEPB is transferred, the entire sum received on such transfer does not become his profits. It is only the amount that he receives in excess of the DEPB which represents his profits on transfer of the DEPB

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DATE: February 9, 2012 (Date of publication)
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Though the assessment was originally u/s 143(1), it is clearly evident from the recorded reasons that there was no new material coming to the possession of the AO on the basis of which the s. 143(1) assessment was reopened. In Telco Dadaji Dhackjee Ltd, the Third Member held, after considering Rajesh Jhaveri Stock Brokers 291 ITR 500 & Kelvinator of India 320 ITR 561 (SC), that a s. 143(1) assessment could not be reopened u/s 147 without there being any new material coming to the possession of the AO. As the AO had reopened the s. 143(1) assessment on the basis of the material which was already on record, the reopening was not valid.

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DATE: February 9, 2012 (Date of publication)
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As the method for accounting for lease rentals was based on the Guidance Note “Accounting For Leases” issued by the ICAI, the AO was not entitled to disregard the same. The Guidance Note reflects the best practices adopted by accountants the world over and the fact that it was not mandatory is irrelevant. The ICAI is recognized as the body vested with the authority to recommend Accounting Standards for ultimate prescription by the Central Government u/s 211(3C) of the Companies Act. Also AS-1 pertaining to Disclosure of Accounting Policies has mandatory status for periods commencing on or after 01.04.1991. The change by the assessee in the policy of accounting for leases had the imprimatur of the ICAI and so the AO was not entitled to disregard the books of accounts or the method of accounting for leases

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DATE: February 8, 2012 (Date of publication)
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Tribunal’s order is binding and failure to follow it is ‘Contempt of Court’ Though the Tribunal in the assessee’s own case held that exemption u/s 11 was available and the facts were identical, the CIT (A), for a subsequent year, …

M/s. Cargo Handling Private Workers Pool vs. DCIT (ITAT Vizag) Read More »

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DATE: February 8, 2012 (Date of publication)
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In view of this Court’s Order in the case of CIT vs. Bhari Information Technology Systems upholding the judgment of the Special Bench of Tribunal in DCIT vs. Syncome Formulations (I) Ltd 106 ITD 193, the impugned judgment of the High Court is set aside and the judgments of the ITAT in these cases stand affirmed

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DATE: February 8, 2012 (Date of publication)
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The argument that since the payee has already paid due tax on the income, s. 40(a)(ia) cannot be invoked is not correct. The law in Hindustan Coca Cola Beverage 293 ITR 226 (SC) that if the payee is assessed, the tax cannot be recovered from the payer was in the context of s.201 and pursuant to Circular No.275/201/95-IT dated 29-1-1997. In the absence of such circular in case of disallowance u/s 40(a)(ia), the principle laid down cannot be adopted for s. 40(a)(ia). As regards the principle that the department had accepted the position in the past, the defense is available for AY 2007-08 but not for AY 2008-09

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DATE: February 8, 2012 (Date of publication)
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S. 194H defines the expression “commission or brokerage” to include any payment received by a person acting on behalf of another person for services rendered or for any services in the course of buying or selling of goods …. Applying the principle of noscitur a sociis & ejusdem generis, the expression “commission” has to take its colour from the expression “brokerage”. As the expression “brokerage”, in common parlance and in law, means ‘fees or commission given to or charged by a broker’, the expression ‘commission’ must be confined to a payment made to agents etc for effecting sales and carrying out business transactions and cannot extend to payments which are for services rendered or products offered on a principal to principal basis. A principal-agent relationship is a sine qua non for invoking the provisions of s. 194 H. As there is no principal agent relationship between a bank issuing the bank guarantee and the assessee, the payment, though termed “commission”, is not covered by s. 194H (SRL Ranbaxy Ltd vs ACIT referred)

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DATE: February 4, 2012 (Date of publication)
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The interrogation continued till 3.30 a.m. on the second night of search and seizure as per the department’s record. The search and seizure manual does not prescribe any time limit for search and survey operation and the same may continue for days if required, but it has to be in keeping with the basic human rights and dignity of an individual. The purpose of the Act is to give effect to the process of execution of actions of executive and bureaucratic machinery in line of accepted standard of basic human rights which are internationally recognized. The laws, and approach to law for its execution must confirm to the charter of human values and dignity. Even a person accused of a serious offence has to be produced before the nearest Magistrate within 24 hours minus the time taken in reaching the Court. There is no possible justification to continue interrogation and keep the assessee awake till 3 a.m. on the second night of search and interrogations. No reason has been assigned as to why the interrogations could not have been deferred till the morning of the next day. The officials could have continued with the interrogation on the next day in the morning after allowing the assessee to retire at an appropriate time in the night. Sleep deprivation method of interrogation amounts to inhuman treatment and violation of Article 3 of the European Convention on Human Rights. The Convention prohibits in absolute terms torture or Inhuman or degrading treatment or punishment. No exception to Article 3 can be made even in the event of Public Emergency threatening the life of the Nation. Accordingly, the department is guilty of violating human rights even though the operations were conducted in best interest of revenue and good faith (Ireland vs. UK (1978) ECHR 1, Kalashnikov vs. Russia (2002) ECHR 596 & Salmouni vs. France (2000) 29 EHRR 403 followed; Rajendran Chingaravelu 2010(1) SCC 45 distinguished)