Tax on Deposits + S. 80HH/ 80-I separate unit accounts + s. 234A to 234C interest

DATE: (Date of pronouncement)
DATE: September 13, 2012 (Date of publication)

Sundaram Finance Ltd vs. ACIT (Supreme Court) Click here to download the judgement (sundaram_finance_contingent_deposits_income.pdf)

"Contingent deposits" received from customers is "income"

It is now well settled that in determining whether a receipt is liable to be taxed, the taxing authorities cannot ignore the legal character of the transaction which is the source of the receipt. The taxing authorities are bound to determine the true legal character of the transaction. "Contingent deposits" received from leasing/hire purchase customers with a view to protect from potential sales tax liability, which is credited to turnover, is assessable to income-tax (Bazpur Co-operative Sugar Factory (1988) 3 SCC 533 distinguished).

CIT vs. Bongaigaon Refinery and Petrochemical Ltd (Supreme Court) Click here to download the judgement (Bongaigaon_Refinery_80HH_80-I.pdf)

S. 80HH & 80-I do not require maintenance of seperate books

S. 80HH & 80-I do not require maintenance of accounts unit wise and deduction can be claimed on the basis of consolidated accounts. To avoid litigation, the assessee should get the working of unit wise net profits certified by the Chartered Accountant.

Note: This impliedly approves Indian Aluminum 88 ITR 257 (Cal) & Mahindra Sintered 177 ITR 111 (Bom). Contrast with Arisudana Spinning Mills Ltd (SC)
Karanvir Singh Gossal vs. CIT (Supreme Court) Click here to download the judgement (karanvir_singh_gossal_234A_234B.pdf)

S. 234A to 234C is mandatory & can be levied even if assessment order is silent

As held in Anjum M.H. Ghaswala 252 ITR 1 (SC), interest u/s 234A to 234C is mandatory and interest under Section 234B/234C is mandatory in nature and there is no need for the AO to specifically recite in the assessment order that the said interest shall be levied. The Tribunal should consider whether the assessee is eligible for waiver of interest as per Notification No.F.No.400/234/95-IT(B), dated May 23, 1996

Note: This impliedly reverses CIT vs. Awadh Hotels (P) Ltd (All) & Dehradun Club(Utt) where it was held that despite Anjum Ghaswala, a specific direction in the assmt order is necessary. Also, the Tribunal was asked to consider waiver even though under the Notification, the CCIT/DGIT has the power to waive & not the Tribunal.

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