{"id":3718,"date":"2011-09-29T20:35:08","date_gmt":"2011-09-29T15:05:08","guid":{"rendered":"http:\/\/itatonline.org\/archives\/?page_id=3718"},"modified":"2011-09-29T20:35:08","modified_gmt":"2011-09-29T15:05:08","slug":"digest-of-important-case-law-august-2011","status":"publish","type":"page","link":"https:\/\/itatonline.org\/archives\/digest-of-important-case-law-august-2011\/","title":{"rendered":"Digest of important case law – August 2011"},"content":{"rendered":"
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\nNo time to read through voluminous case reports?<\/p>\n
\nCan\u2019t separate the wheat from the chaff?\n<\/div>\n
\nFret Not! The KSA Legal team will bring you up-to-speed with the choicest of case-law so you can focus your attention only on the important ones. This section is updated on a monthly basis so make sure you bookmark this page.\n<\/div>\n

Compiled By: Ajay R. Singh, Paras S. Savla, Rahul K. Hakani and Sujeet S. Karkal, Advocates<\/DIV><\/p>\n<\/div>\n

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Digest of important case law – August 2011 <\/strong><\/td>\n <\/td>\n<\/tr>\n
Download monthly<\/strong> (August 2011) digest in pdf format <\/td>\n Click here to download the judgement (digest_case_laws_august_2011.pdf) <\/strong> <\/a><\/p> <\/td>\n<\/tr>\n
Download Consolidated Digest<\/strong> (Jan 2011 to April 2011) in pdf format <\/td>\n <\/td>\n<\/tr>\n
Looking for the Previous Month’s digest? Click here.<\/a> <\/td>\n Click here to download the judgement (Consolidated_Digest_of_Case_Laws_Jan_2011_to_Apr_2011.pdf) <\/strong> <\/a><\/p> <\/td>\n<\/tr>\n<\/table>\n<\/div>\n
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Journals Referred <\/strong>: BCAJ, CTR, DTR, ITD, ITR, ITR (Trib), Income Tax Review, SOT, Taxman, Taxation, TLR, TTJ, BCAJ, ACAJ, www.itatonline.org\n <\/div>\n

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S. 2 (ia): agricultural income‐ sale of rubber scrap‐ scrap generated in industrial Activity.<\/strong> <\/strong>
\n S. 2 (14): Capital asset- Agricultural land-Payment of compensation of certain immovable property.(S. 194LA ).<\/strong>
\n Definition of “agricultural land” as given in section 2 (14) cannot be imported for purpose of payment of compensation on acquisition of certain immovable property as per section 194LA.( A.Y. 2005-06).<\/p>\n

ITO TDS v Special land Acquisition Officer ( 2011) 46 SOT 458 ( Mum) ( Trib).  <\/strong>
\n S. 2 (22) (e): Deemed dividend-Loan or advances shareholder- Loans in the ordinary course of business was not accepted- Allotment of shares of another company.<\/strong>
\n Addition of deemed dividend under section 2 (22) (e) by rejecting the explanation that the payment was made for allotment of shares in another company , was justified since no certificate from the ROC in support of his contention that shares had indeed been allotted to the investing companies was produced. The Court held that findings of the Tribunal are perverse and addition under section 2 (22) (e) was sustainable.( A.Y. 2005-06).
\n CIT v Sunil Chopra ( 2011) 242 CTR 498 ( <\/strong>Delhi<\/strong>) ( High Court).<\/strong><\/p>\n

S. 2 (47):  Transfer- Capital gains- Possession of property . (S.45.)<\/strong>
\n Assessee was given possession of property as per sale agreement dated 3-4-1999 and  assessee  also made part payment of the consideration , assets would  be deemed to be transferred to assessee on 3-4-1999 and since  land was sold on 4-4-2003 \/2-5-2003 , it would be a long term capital asset and would be long term capital gains.
\n Hasmukhbhai  v Asst CIT ( 2011) 46  SOT 419 ( Ahd) (Trib).<\/strong><\/p>\n

S.4: Income- Capital or revenue- Amount received from firm by widow of the partner is a capital receipt .<\/strong>
\n Payment towards recognition of valued services rendered by partner during life time and a sort of relief to distressed family, and that too as per terms of partnership deed, could not be said to have a revenue character in assessee’s hands. Amount received by assessee, after death of her husband from firm ,in which he was a partner , would be a capital receipt. ( A.Y. 2005-06).
\n Dy  CIT v Lakshmi  M.Aiyar ( Mrs) ( 2011) 131 ITD 436 ( Mum) (Trib).<\/strong><\/p>\n

S.4: Income- Interest awarded by <\/strong>High Court-<\/strong> Capital receipt – Income wrongly offered for tax – Powers of Commissioner (Appeals). ( S.139, 251).<\/strong>
\n Interest awarded by High Court is a capital receipt and not taxable.
\n Though the amount erroneously offered to tax in the return, the assessee is entitled to raise plea before Appellate Authorities against the assessment. The Assessing Officer cannot assess an amount which is not taxable under the law, though shown  by the assessee in the return.( A.Y.2005-06)
\n Sushil Kumar Das v ITO ( 2011) 11 ITR ( Trib) 17 ( Kolkata) (Trib). <\/strong><\/p>\n

S.5: Income- Accrual- Dividend recovered-Right to receive income.<\/strong>
\n Assessee  a non banking finance company ,it sold shares which it held as investment. Transfer of names of transferee was not recorded in register of members of company whose  shares were transferred by assessee, therefore dividend declared by companies on those  shares was paid to assessee . The assessee has shown the said dividend as under the heading “Excess dividend received refundable” . Assessing Officer treated the same as income of the assessee. The tribunal held that  when there is right to receive income  can be said to have been accrued  and without legally enforceable right there can be no accrual of income. ( A.Y. 2006-07).
\n Dy CIT v Tata Investment Corporation Ltd ( 2011) 46 SOT 359 ( Mum) (Trib).<\/strong><\/p>\n

S. 9 (1) (i): Income deemed to accrue or arise in India-Dependent Agent Permanent Establishment- Fees for technical services-DTAA-India-Singapore. ( Art . 5(9 )).<\/strong>
\n The assessee, a Singapore company, rendered repair and maintenance services and supplied spares to customers in India. While the income from repairs was offered to tax as “fees for technical services<\/em>“, the income from supply of spares<\/em> was claimed to be not taxable on the ground that it had accrued outside India. The AO, CIT (A) and Tribunal took the view that the assessee had a “permanent establishment<\/em>” on the basis that it had a “dependent agent<\/em>” in India under Article 5(9) of the India-Singapore DTAA and that the income earned from supplying spare parts was taxable in India. On appeal to the High Court, held that(i) To constitute a “<\/strong>Dependent Agent Permanent Establishment<\/strong>” under Article 5(9) of the DTAA it has to be seen whether the activities of the agent are “devoted wholly or almost wholly on behalf of the assessee<\/em>“. While the issues as to (a) whether the agent is was prohibited from taking competitive products<\/em> and (b) whether the assessee exercised extensive control over the agent<\/em> were relevant, they are not conclusive. It is<\/strong>not correct to say that merely because the agent is prohibited from taking a competitive product means that it is not an agent of independent status<\/strong>. <\/strong>What has <\/strong>to be seen is whether the “activities<\/em>” of the agent are devoted wholly or almost wholly on behalf of the assessee<\/strong>.<\/strong> If the assessee can show that it was not the sole client<\/strong> of the agent and that activities of the agent were not devoted<\/strong> wholly or almost wholly on behalf of the assessee, there may be no DAPE. The income earned by the agent from other clients and the extent of such income<\/strong> is very relevant to decide whether the criteria stipulated in Article 5(9) is satisfied or not. (Matter remanded for fresh consideration<\/em>);
\n (ii) While in principle it is correct that if a fair price is paid by the assessee to the agent<\/strong> for the activities of the assessee in India through the DAPE and the said price is taxed in India at the hands of the agent, then no question of taxing the assessee again would arise, this is subject to a Transfer Pricing Analysis<\/strong> being undertaken u\/s 92. The Transfer Pricing analysis to determine the “arms length” price has to be done by taking the “Functions, Assets used and Risk involved” (FAR)<\/strong>.<\/strong> As this has not been done, the assessee’s argument on “arms length” price is not acceptable  <\/p>\n

(iii) As the commission paid by the agent to the DAPE is not at “arms length<\/em>“, the estimation that 10% of the profits on sales of spare parts were attributable to the activities carried out by the agent in India and taxable is reasonable. The test is <\/strong>“<\/strong>profits expected to make<\/em>” and has to be determined bearing in mind the fact that the agent was merely rendering support services and had no authority to<\/strong>negotiate and accept contracts and also assumed limited risk<\/strong>. <\/strong><\/p>\n

Rolls Royce Singapore Pvt. Ltd. v ADCIT (<\/strong>Delhi<\/strong>) (High Court). www.itatonline.org.<\/strong><\/p>\n

S.9 (1) (i): Income deemed to accrue or arise in <\/strong>India-<\/strong> Foreign agent- Commission-Business connection-Permanent establishment.( S. 4 (1), 40(a) (ia), 195 ).<\/strong>
\n Where a  foreign agent of an Indian exporter operates in his own country and his commission is directly remitted to him . Such commission is not received by him or in his behalf in India , then such agent is not liable to income tax in India on commission received by him. As there was no right to receive income earned in India nor there was any business connection between assessee and ETUK, therefore when income was not chargeable to tax in India under section 4 (1), there was no question of invoking provisions of section 195 hence no disallowance can be made under section 40 (a) (ia).( A.Y. 2007-08).
\n Dy CIT v Eon Technology ( P) Ltd ( 2011) 46 SOT 323 ( <\/strong>Delhi<\/strong>) (Trib).  <\/strong><\/p>\n

S. 9 (1) (i): Income deemed to accrue or arise in India-Principles on “splitting of turnkey contracts”-Offshore supply -DTAA-India- Korea. (Art.5. (1), 5 (2).)<\/strong>
\n The assessee, a Korean company, entered (together with L&T) into a contract dated 28.2.2006 with ONGC for the “surveys, design, engineering, procurement, installation<\/em>” etc of a project on turnkey<\/em> basis. On 24.5.2006, the assessee opened a Project Office which constituted a ‘Permanent Establishment’. The assessee claimed, relying on Ishikawajima-Harima<\/strong><\/a><\/strong> 288 ITR 408 (SC) & Hyundai Heavy Industries<\/strong><\/a><\/strong> 291 ITR 482 (SC) that the revenue from “offshore supply<\/em>” and “offshore services<\/em>” was not assessable to tax in India as no part of it was attributable to the PE. The AO & DRP rejected the claim on the basis that (i) the assessee had actively participated in pre-bid meetings and the project office was in existence even at the stage of the “kick-off” meeting, on appeal by the assessee to the Tribunal, The Tribunal held (i) The contract was not divisible<\/strong> into one part for the fabrication of platform and the other for installation & commissioning. Its terms showed that it was a composite contract<\/strong> from surveys of pre-engineering to start-up and commissioning of the entire facilities; <\/p>\n

(ii) The opening of the Project Office was a condition precedent<\/strong> before the commencement of the activity of the contractor. The scope of the Project Office was not restricted either by the assessee or by the RBI. Also, the resolutions of the assessee showed that the Project Office was opened for coordination and execution of project<\/strong>. It was clear that all the activities to be carried out in respect of the contract were to be routed through the Project Office;<\/p>\n

(iii) Hyundai Heavy Industries<\/strong><\/a><\/strong> 291 ITR 482 (SC) is not applicable because there (a) the project office was to work only as a liaison office<\/strong> and was not authorized to carry on any business activity and (b) the contract was divisible<\/strong> into two parts and so the argument that the PE does not come into existence till the fabrication work is done was accepted;<\/p>\n

(iv) The argument that if an “<\/strong>installation PE<\/strong>” is to come into existence under Article 5(3), one cannot have regard to the PE under Articles 5(1) & 5(2) is not acceptable. The Project Office constituted a PE under Article 5(1) and an “Installation PE” was not necessary<\/strong>;<\/strong><\/p>\n

(v) The onus is on the assessee to show that office did not play a role in the project<\/strong>. On the other hand, the contract proceeds on the basis that the PO played a vital role<\/strong> in the execution of the project; <\/p>\n

(vi) The attribution to <\/strong>India<\/strong> of profit from off-shore supply has to be based on material<\/strong> and done based on the extent of activity done by the PO (matter remanded).
\n Samsung Heavy Industries Co. ltd. v ADCIT (<\/strong>Delhi<\/strong>)( Trib). www.itatonline.org.<\/strong>
\n S. 9 (1) (i):Income deemed to accrue or arise in India- Business connection-Offshore supply of equipments- Deduction of tax at source.-Non resident.<\/strong>
\n Non resident company is not liable to tax in India in respect of  payments for off shore supply of  equipments under the composite contracts for setting up transmission lines and consequently , no tax is required  to be deducted at source from the payments made to it for the supply of equipments.
\n Deepak Cables (<\/strong>India<\/strong>) Ltd  ( 2011) 242 CTR 469 ( <\/strong>AAR<\/strong>).<\/strong><\/p>\n

S.9(1) (i): Income deemed to accrue or arise in India –Business connection- Offshore supply of equipments materials- DTAA-India- Korea.( S. 245R (2). <\/strong>
\n Applicant , a Korean company , having entered a separate contract for off shore supply of equipments and materials along with two other contracts for on shore supply and on shore services for various projects in India , and the consideration for the sale is separately  specified , it can be separated from the whole, and since the transaction of sale and the transfer of ownership and property in goods took place out side Indian territory , applicant is not liable to tax in respect of off shore supplies.
\n LS Cables Ltd (2011) 59 DTR 216\/ 337 ITR 35 (<\/strong>AAR<\/strong>).<\/strong><\/p>\n

S.9 (1) (i):  Income deemed to accrue or arise in India –Business connection- Liaison  office of foreign company- DTAA-India- USA. (Art. 5, 7 ).<\/strong>
\n Liaison office of the applicant foreign company operating in India carrying on various activitiesit can not be said that the operations of the liaison office are confined to purchase of goods in India for the purpose of export and its income is not covered by Explanation ((b) to section 9(1) (i), even though no product of the applicant is sold in India.  The liaison office can be termed as permanent establishment with in the meaning of art 5 .(1) of the Indo-USA DTAA  and cannot be excluded from the definition of Permanent establishment  by reason of clause (d) and (e) of art 5 (3) ,  hence the applicant is liable to tax in India in terms of art 7 (1).
\n Columbia Spots wear Company ( 2011) 59 DTR 233\/ 243 CTR 42( <\/strong>AAR<\/strong>).<\/strong><\/p>\n

S. 9(1) (vi) : Income deemed to accrue or arise in <\/strong>India<\/strong>-Royalty- Income from license of software not assessable as “royalty”. <\/strong>Gracemac<\/strong><\/a>not followed; Motorola still good law- DTAA-India- Israeli.<\/strong>
\n The assessee, an Israeli company, entered into an agreement with Reliance Infocomm for supply and license of software<\/em> for RIL’s wireless network in India. The assessee received Rs. 3 crores which it claimed to be “business profits<\/em>” and not taxable for want of a permanent establishment (PE) in India. The AO took the view that the said sum was assessable as “royalty<\/em>”. This was reversed by the CIT (A) following Motorola Inc<\/strong> 96 TTJ 1 (Del) (SB). In appeal before the Tribunal, the department argued that in view of Gracemac Corp<\/strong><\/a><\/strong> 42 SOT 550 (Del), the use of software was assessable as “royalty<\/em>”. The Tribunal  dismissing the appeal held that,(i) Under Article 12 (3) of the India-Israel DTAA, royalty is defined inter alia to mean payments for the “use of<\/em>” a “copyright<\/em>” or a “process<\/em>”. There is a distinction between “use of copyright” and “use of a copyrighted article”<\/strong>.<\/strong> In order to constitute “use of a copyright<\/em>”, the transferee must enjoy four rights viz: (i) the right to make copies of the software for distribution to the public, (ii) The right to prepare derivative computer programmes based upon the copyrighted programme, (iii) the right to make a public performance of the computer programme and (iv) The right to publicly display the computer programme. If these rights are not enjoyed, there is no “use of a copyright”<\/strong>. The consideration is also not for “use of a process<\/em>” because what the customer is paying for is not for the “process” but for the “results” achieved by use of the software. It will be a hyper technical approach totally divorced from ground business realities<\/em> to hold that the use of software is use of a “process”. (Motorola Inc<\/strong> 96 TTJ 1 (Del) (SB) and Asia<\/strong> Sat<\/strong> 332 ITR 340 (Del) followed. Gracemac Corp<\/strong><\/a><\/strong> 42 SOT 550 (Del) not followed);<\/p>\n

(ii) It is well settled that a DTAA prevails over the Act where it is more favourable to the assessee. The view taken in Gracemac<\/strong><\/a>,<\/u><\/strong> relying on Gramophone Co<\/strong> AIR 1984 SC 667, that the Act overrides the treaty provisions where there is irreconcilable conflict is not acceptable because (a) it is obiter dicta, (b) contrary to Azadi Bachao Andolan<\/strong> 263 ITR 706 (SC) and (c) Gramophone Co<\/strong> not applicable to I. T. Act as it dealt with law in which specific enabling clause for treaty override did not exist. (Ram Jethmalani vs UOI<\/strong><\/a><\/strong> also considered).
\n ADIT v TII team Telecom International Pvt. Ltd. (2011) 60 DTR 177 ( Mum) (Trib).www.itatonline.org.<\/strong>
\n S.10 (23C)(vi):Educational institutions- Registration under Andhra Pradesh Charitable and Hindu Religious Institutions and Endowments, Act, 1987- Seminars- Symposiums- Work shops-Application of income- Advance of money to another educational institutions<\/strong>.
\n In order to be eligible for exemption, under section 10 (23 C (vi), it is necessary that such institution must exist solely , for educational purposes , and institution should not exist for purpose of profit. Registration under section 43A of A.P. Act is not a condition precedent for seeking approval , Chief commissioner has to examine independently. Object of Society to conduct seminars , symposiums , workshops and invite  experts from India and abroad to improve quality of education and to support students to elevate themselves to international standards is incidental and ancillary object  to primary objects of  carrying on educational activities. Money advanced to another educational institution cannot be treated as  application of income solely for the purpose of education .
\n New Noble Education Society v Chief Commissioner ( 2011) 201 Taxman 33 (AP)( High Court).         <\/strong><\/p>\n

S.12A: Exemption- Charitable purpose-Charitable or religious- Registration- Propagation of Vedas.<\/strong>
\n Assessee trust formed for propagation of Vedas was entitled to registration under section 12A, in status of religious and charitable trust.( A.Y. 2008-09).
\n Kasyapa Veda Research Foundation v CIT ( 2011) 1 31 ITD 370 ( <\/strong>Cochin<\/strong>) (Trib).<\/strong><\/p>\n

S. 12A: Exemption- Charitable purpose-Deduction- Donation- Requirement of form no 10A. (S.80G)<\/strong>
\n In instant case trust had been registered as a charitable institution under section 12A vide order dated 27-11-1975. Subsequently, in view of  the order dated 17-3- 1994 of the Charity Officer under section 50A (1) of the BPT Act ,objects of the Trust were amended . The Case of the revenue was that objects of trust could not be amended without the approval of the High Court. It was also argued that the changes in the objects of trust was not intimated to the department as provided in the Form no 10A. The  assessee contended that the when the change in the object clause approved by the Charity commissioner under section 50A(1) approval of High Court is not required. Requirement of intimation of changes  to department was provided only in Form no 10A , which was not a statutory requirement and in case the assessee had intimated the said change to department later on. Even the amended objects remained charitable and had not caused any detriment to original objects. The Tribunal held that the assessee trust continued to be eligible  for registration under section 12A and thus ,impugned order of DIT (E) rejecting for renewal of approval under section 80G could not be sustained.
\n Mehata Jivraj Makandas & Parekh Govindji Kalyani Modh Vanik Vidyarthi Public Trust v Director of Income –tax ( 2011) 131  ITD 462 ( Mum) (Trib).<\/strong><\/p>\n

S. 14A: Business expenditure- Exempted  income-Investment- Dividend income.<\/strong>
\n For the applicability of section 14A   there must be (i) income which is taxable under the Act, for the relevant assessment year and (2) there should also be income which does not form part of total income under the Act during relevant assessment year. If either one is absent, then section 14A has no applicability.( A.Y. 2006-07).
\n Siva Industries & Holdings Ltd v Asst CIT ( 2011) 59  DTR 182( Chennai) (Trib).   <\/strong>
\n S. 15: Salaries – Chargeable-Perquisites-Tax paid by employer in respect of salary.( S.17, rule  3).<\/strong>
\n Tax paid by employer in respect of salary paid to expatriate employees is salary under rule 3 of the Income tax Rules , 1962 , for  purpose of computing  value of perquisites in respect of rent free accommodation provided to said employees. ( A.Ys. 1996-97 to 1998-99 ).
\n Mitsubishi Corporation v CIT ( 2011) 200  Taxman 372 ( <\/strong>Delhi<\/strong>) ( High Court).<\/strong><\/p>\n

S.15: Salaries- Profits in lieu of salary-Tips collected and paid to employees. ( S.2 (24), 17 (1)(iv), 17(3)).<\/strong>
\n Payment of banquet and restaurant tips to the employees of assessee in its capacity as employer constitutes salary  with in the meaning of section 15 read with section 17 (3) .( A.Ys. 19999-2000 to 2005-06).
\n CIT v ITC Ltd (2011) 59 DTR 312\/ 243 CTR 114 (<\/strong>Delhi<\/strong>) (High Court). <\/strong><\/p>\n

S. 23: Income from house property-Annual value- Interest free deposit.<\/strong>
\n Interest free security deposit taken by assessee highly disproportionate to monthly rent charged . This being the device to circumvent liability to income tax , notional interest on security deposit to be treated as income from house property.( A.Y.1995-96).
\n CIT v K. Streetlite Electric Corporation ( 2011) 336 ITR 348 ( P &H) (High Court).<\/strong><\/p>\n

S. 26: Income from house property-Co-owner- Assessment.<\/strong>
\n Quantification of annual value of co-owned property in course of assessment of AOP consisting of co-owners is not a condition precedent for taxability of individual share of such income in hands of co-owners.( A.Y. 2002-03).
\n Sujeer Properties (AOP)  v ITO ( 2011) 131 ITD 377 (Mum) (Trib).<\/strong><\/p>\n

S. 28 (i): Business income-Rent from Leave and License of office premises taxable as “business profits”<\/strong>
\n Applying the test laid down in  Universal Plast Ltd<\/strong><\/a><\/strong> 237 ITR 454 (SC) as to when income from property is assessable as “business profits<\/em>” and as “income from house property<\/em>”. It was held that rental income has to be assessed  as “business profits<\/em>” because (i) all assets of the business were not rented out<\/strong> by the assessee and it continued the main business<\/strong> of dealing in scientific apparatus etc, (ii) the property was being used for the Regional Office and was let out by way of exploitation of business assets for making profit<\/strong>,<\/strong> (iii) the assessee had not sold<\/strong> away the properties or abandoned<\/strong> its business activities. The transaction was a “commercial venture<\/em>” taken in order to exploit business assets and for receiving higher income from commercial assets.
\n The Scientific Instrument co. Ltd. v CIT (All)(High Court).www.itatonline.org.<\/strong><\/p>\n

S. 31 (1): Repairs and insurance of machinery-Plant and furniture. ( S. 37 (1).).<\/strong>
\n Expenditure consisted of dismantling, cleaning  and inspection of various parts ,repairs and replacement of worn out parts , geometrical alignments of machines , painting of  machines , overhauling and repair of power transmission unit and replacement of electric panel. Expenditure was on account of current  repairs  for which deduction would be allowable under section 31 (1) as well as under section 37.( A.Ys. 2005-06-2006-07)
\n Bharat Gears Ltd v CIT ( 2011) 201  Taxman 86 ( <\/strong>Delhi<\/strong>) (High Court).   <\/strong><\/p>\n

S. 32: Depreciation- Gas Cylinder- Rate- Mounted on a chassis of a truck-Appendix-1.<\/strong>
\n Liquefied gas cylinder mounted on the chassis of the truck is for all purposes as a gas cylinder including valves and regulators as defined in Appendix 1 item III (ii) F (4) of the income tax Rules and therefore depreciation at 100 percent was allowable , instead of 40 percent applicable to transport vehicles.
\n CIT v Anatha Gas Suppliers ( 2011) 59 DTR 116 \/ 242 CTR 488( AP) (FB) (High Court).<\/strong><\/p>\n

S. 37 (1): Business Expenditure-Education expenses of son of managing director for higher education.<\/strong>
\n Where assessee being a consulting agency in manufacturing and engineering industry entered into an agreement with son of Managing Director , agreeing to spend money on higher education in USA on terms that the son of Managing Director would work with assessee company after completion of the course. Such Money spent by an assessee either in sponsoring a student or towards educational expenses of a student in a discipline , in which assessee is carrying on its business , is  a valid expenditure and is entitled to deduction. ( A.Ys. 1997-98 and 1998-99).
\n CIT v Ras Information Technologies ( P) Ltd ( 2011) 200 Taxman 305 ( Kar) (High Court). <\/strong><\/p>\n

S.37 (1): Business expenditure- Royalty.<\/strong>
\n Payment of royalty by assessee company to its US based holding company which has been incurred wholly and  exclusively for the purpose of business of the assessee is allowable  as business expenditure.( A.Y.1999-2000  to 2001-02).
\n CIT v Oracle India (P) Ltd ( 2011) 59 DTR 222\/ 243 CTR 103 (<\/strong>Delhi<\/strong>) (High Court). <\/strong><\/p>\n

S.37 (1): Business expenditure- Demolition of structure- Capital or revenue.<\/strong>
\n Amount spent by assessee on demolition of structure which had caught fire and major repair of premises during the period when the business was in existence are admissible as revenue expenditure. ( A.Y. 1995-96 ).
\n CIT v Bhupindera Flour Mills ( P) Ltd ( 2011) 59 DTR 307 ( P &H).   <\/strong><\/p>\n

S. 37 (1):Business expenditure-Capital or revenue- Reconditioning of machinery.<\/strong>
\n Assessee incurred huge expenditure on total reconditioning and overhauling of machinery . Since reconditioning had resulted in imparting useful life to hitherto old and unfit machinery  and thus , resulting  in a benefit of enduring nature expenditure was capital in nature.( A.Y.1994-95).
\n Bharat Geras Ltd v CIT ( 2011) 201 Taxman 86 ( <\/strong>Delhi<\/strong>) (High Court). <\/strong><\/p>\n

S. 37 (1): Business expenditure- Ransom money-While kidnapping is an offense, paying ransom is not; Bar in Explanation 1 to s. 37(1) not attracted.<\/strong>
\n Where payment is made by assessee as a ransom to secure the release of a kidnapped director, it was held that such a payment is not prohibited.  The Explanation of s. 37(1) provides that expenditure incurred by an assessee for any purpose which is an offence or which is prohibited by law shall not be deemed to have been incurred for the purpose of business. It has to be seen whether the expenditure is incurred for any purpose which is an offence or prohibited by law<\/strong>. Accordingly, the Explanation of to s. 37 (1) is not applicable<\/em> and the ransom is deductible as business expenditure.
\n CIT v  Khemchand Motilal Jain Tobaco Products (P) LTD (2011) 243 CTR 270 \/ 60 DTR 113 (MP) (High Court). www.itatonline.org.<\/strong><\/p>\n

S. 37 (1): Business expenditure- Capital or revenue- Convertible debentures.<\/strong>
\n Expenditure in connection with issue of 4 percent fully convertible debentures which were later converted into equity shares of the assessee company was of revenue nature. ( A.Y. 2005-06).
\n Havells India Ltd v Addl CIT ( 2011) 59  DTR 118 \/ 140 TTJ 283 \/ 47 sot 61 (<\/strong>Delhi<\/strong>) (Trib). <\/strong><\/p>\n

S. 37 (1): Business expenditure- Capital or revenue expenditure- Pre operative expenses- Expansion of existing business.<\/strong>
\n Where there is complete interlacing and intermixing of the funds of the assessee ,in all its units , besides there being a common management assessee is justified in claiming pre –operative expenses incurred for new project as deductible as revenue expenditure.( A.Y. 2005-06).  
\n Havells India Ltd v Addl CIT (2011) 59  DTR 118 \/ 140  TTJ 283 \/ 47 SOT 61 (<\/strong>Delhi<\/strong>) (Trib). <\/strong><\/p>\n

S. 37 (1): Business expenditure- Royalty paid to foreign associated enterprise.<\/strong>
\n Royalty paid to foreign associated enterprise under foreign technology collaboration agreement is allowable as revenue expenditure. ( A.Y. 2005-06).
\n Cabot India  Ltd v Dy CIT ( 2011) 46  SOT 402 ( Mum) (Trib).<\/strong><\/p>\n

S. 40 (a) (i): Amounts not deductible- Fees for technical services- Deduction of tax at source- Non resident.( S. 9 (1) (vii)(b) , 195 ).<\/strong>
\n In order to fall with in the exception of section 9 (1) (vii) (b), the technical services for which , the fees have been paid ,ought to have been utilized by resident in a business outside India or for the purpose of making or earning any income from any source outside India. Assessee having established that the testing and certification services provided by it by CSA were utilized only for export activity , section 9(1)  (vii) (b) being not attracted , section 40 (a) (i) could not be invoked.
\n ( A.Y. 2005-06).
\n Havells India Ltd v Addl CIT ( 2011) 59  DTR 118 140 TTj 28 3 \/ 47 SOT 61 (<\/strong>Delhi<\/strong>) (Trib).   <\/strong><\/p>\n

S. 40 (a) (i). Amounts not deductible- Deduction of tax at source- Non –resident-A Fee for “user of name” and “accreditation” not taxable as “royalty”. ( S.195 ).<\/strong>
\n The assessee, engaged in manufacture of tooth paste etc paid Rs 11,71,826 as “accreditation panel fees<\/em>” to British Dental Health Foundation UK without deduction of tax at source. The AO disallowed the sum u\/s 40(a)(i) on the ground that the sum was taxable as “royalty<\/em>” and tax had not been deducted at source u\/s 195(1). The CIT(A) deleted the disallowance. Before the Tribunal, the department argued that since the assessee derived valuable advantage from the accreditation by BDHF and use the same as a marketing tool, the amount constituted “royalty”<\/em>. The Tribunal  dismissing the appeal held that ,(i) The obligation to deduct tax u\/s 195(1) arises only if the payment is chargeable to tax in the hands of non-resident recipient<\/strong>. If the recipient of the income is not chargeable to tax, the vicarious liability on the payer is ineffectual. As the AO had not established how the recipient was liable to pay tax, he was in error in disallowing u\/s 40(a)(i) (GE India Technology Center<\/strong><\/a><\/strong> 327 ITR 456 (SC) followed;<\/p>\n

(ii) On merits, though the accreditation fees permitted the assessee the use of name of British Dental Health Foundation, it did not constitute “royalty” under Article 13 of the India-UK DTAA<\/strong> because it did not allow the accredited product to use, or have a right to use, a trademark, nor any information concerning industrial, commercial or scientific experience so as to fall within the definition of the term.
\n ACIT v Anchor Health and Beauty Care Pvt. Ltd. (Mum) (Trib) www.itatonline.org.<\/strong>
\n S. 40(a)(ia): Amounts not deductible- Fees for technical services- Deduction of tax at source- Non resident- DTAA- India- UK.( S. 9 (1) (vii)(b) , 195, art s 13 &15 )<\/strong>
\n By amendment in the Finance Act ,2007 ,the legislature inserted the Explanation with retrospective effect from  1 st  June  ,1976 to section 9 (2) and it was impossible for the assessee to deduct tax in the financial year 2003-04 1 st April ,2003 to 31 st March 2004 , when the obligation to deduct TDS was not on the assessee during that  period  disallowance was not sustainable. Assessee acted bona fide in conformity with the provisions of Act .( A.Y. 2004-05).
\n Sterling Abbraive Ltd v Asst CIT ( 2011) 140  TTJ 68 ( Ahd) (Trib).<\/strong><\/p>\n

S. 40(a)(ia): Amounts not deductible-Deduction of tax at source- Deposited before due date of filing of return- Amendment by FA 2010 is not retrospective.<\/strong>
\n The Finance Act, 2010 amended s. 40(a)(ia) w.r.e.f 1.4.2010 to provide that no disallowance would be made if the TDS was deposited on or before the due date for filing the return<\/em>. The assessee claimed that the said amendment was “remedial and curative in nature” and applicable from AY 2005-06<\/em>. The Special Bench, held that, the amendment to s. 40(a)(ia) by the FA 2010 was made retrospectively applicable only from AY 2010-11 and not earlier. It is nowhere stated that the amendment is curative or declaratory in nature nor is such an intention discernible<\/strong>.<\/strong> A provision giving relief cannot be regarded as retrospective only because the original provision caused hardship to the assessee<\/strong>.<\/strong> S. 40(a)(i) caused “intended difficulty<\/em>” with the object of discouraging non-compliance with the TDS provisions. A partial relaxation in its rigor, inserted with prospective effect, cannot be treated as “retrospective<\/strong>“. <\/strong>
\n Bharati Shipyard ltd. v DCIT (Mum) (SB) (Trib). (www.itatonline.org.)<\/strong>
\n S.40(b) (i):Amounts not deductible-Salary to working partner-HUF- Karta.<\/strong>
\n Salary paid to working partner even though as Karta of HUF, is received as individual and as working partner ,hence allowable as deduction while computing income of firm.( A.Y. 2005-06).
\n CIT v Jugal Kishor & Sons (2011) Tax. L.R. 550 ( All) (High Court).  <\/strong><\/p>\n

S: 40A (3):Business disallowance- Rejection of books of account.( S.145).<\/strong>
\n Assessing Officer having rejected the books of account and applied the net profit rate for the purpose of computing income, no disallowance could be made under section 40A (3).(A.Y. 2002-03).
\n ITO v Sadhwani Brothers (2011) 58 DTR 368 ( JP) (Trib)<\/strong><\/p>\n

S. 40A(9): Amounts not deductible – No disallowance for statutory corps as their Service Regulations have “<\/strong>force of law<\/strong><\/em>”<\/strong>
\n The assessee, a corporation setup under a State Act, made a contribution of Rs.16.77 lakhs, in its capacity as employer and as per the service regulations<\/em>, to the “MSW Karmachari Welfare Fund”. The AO & CIT (A) took the view that the payment to a “fund<\/em>“, was hit by s. 40A (9)<\/em> and not allowable as a deduction. The Tribunal allowing the appeal held that ,S. 40A(9) provides that no deduction shall be allowed in respect of “any sum paid by the assessee as an employer … as contribution to any fund … except where such sum is so paid … as required by or under any other law for the time being in force<\/em>“. In the case of statutory corporations, the regulations providing for the terms and conditions of employment and conditions of service have the force of law<\/strong>. Consequently, the service regulations framed by the assessee by which it agreed to make payment to the Fund carried statutory force and fell within the expression <\/strong>“<\/strong>as required by or under any other law<\/em>”<\/strong> for purposes of s. 40A(9). (<\/strong>U. P. Warehousing Corporation<\/strong> 1980 3 SCC 459 followed)
\n Maharashtra<\/strong> state warehousing corporation v ACIT ( Pune)( Trib). www.itatonline,org.<\/strong><\/p>\n

S. 43 (6) (c )(i) (B).Depreciation- Computation- Block of assets – Apparent consideration- Not Fair market value.( S. 2 (14),32 ).<\/strong>
\n The expression “moneys payable” according to Explanation 4  to section 43 (6) shall have the meaning as is in the Explanation below sub section 4 of section 41. Therefore ,the written down value of all the  assets falling with in the block of assets at the beginning of the previous year has to be adjusted by the amount at which the assets is actually sold and not the fair value of the asset that is sold.
\n CIT v Cable corporation of  India Ltd ( 2011) 336 ITR 56 ( Bom) (High Court).<\/strong><\/p>\n

S.44BB: Business of exploration of mineral oil- Technical services- Royalties-Non resident-Mobilization and demobilization revenues. S. 9 (1) (vii), 44 DA).<\/strong>
\n Applicant, a foreign company, having entered in to a contract with another foreign company whereby it is providing seismic vessels and seismic crew at the area of operations to carry out 2D geophysical survey offshore  India, it is engaged in the business of providing services or facilities in connection with extraction or production of oil and therefore , revenues earned by the applicant under the said contract are taxable in accordance with section 44BB, neither section 9 (1) (vii) nor section 44DA was applicable. Entire mobilization and demobilization revenues received by the applicant in respect of seismic data acquisition and or processing activities is taxable in India under section 44BB at an effective rate of 4.223 percent. 
\n Western International Ltd (2011) 242 CTR 634(<\/strong>AAR<\/strong>).<\/strong><\/p>\n

S.  44BB: Business of exploration of mineral oil- Technical services- Royalties-Non resident- DTAA- India- Norway- Service tax-Finance Act ,1994. S.68 (S.90, Art  23, 24 ).<\/strong>
\n Activities of providing sea logistics services viz-transportation of cargo, material and personnel required at the rig, by the applicant , to ONGC  are not technical services and thus ,the income derived by the applicant from the said activities is out of the purview of section 9 (1) (vii) and is liable to be taxed under section 44BB. Applicant company having shifted its managerial control to Norway in January , 2010 , it  is liable to be taxed in India in terms of article 23 of the DTAA between India and Norway  w.e.f. 1st Jan 2010 . Service tax said to be included in the consideration received by the applicant from ONGC has to go into computation while calculating the consideration for the services or facilities  under section 44BB or art 23 (4) of the DTAA.
\n Siem Offshore ( 2011) 242 CTR 625 \/337 ITR 207(<\/strong>AAR<\/strong>).  <\/strong><\/p>\n

S.50C: Capital gains-Stamp valuation-Power of Assessing Officer.<\/strong>
\n Once document is with stamp authority , value adopted by stamp duty authority is to be considered as value of asset for purpose of clause (b) of section 50C. Assessing Officer can not substitute value which the stamp authority ought to have adopted for purpose of stamp duty.( A.Y. 2004-05).
\n Hasmukhbhai  v Asst CIT ( 2011) 46  SOT 419 ( Ahd) (Trib).<\/strong><\/p>\n

S.50C:Capital gains- Development rights-Transfer- Valuation- Transfer of property Act, S. 53A.( S.2 (47) (v),45).<\/strong>
\n Provisions of section 50C were applicable to transfer of development rights in the property. Once the assessee handed over the possession of the property to the developer against payment then the property deemed to have been transferred as per deeming provisions of section 2 (47) (v).Not making changes in municipality records is not relevant. Valuation officer has valued much less than the stamp authority, hence there the valuation has to be accepted.
\n Arif Akhatar  Hussain v ITO ( 2011) 59 DTR 307 ( Mum) (Trib).   <\/strong><\/p>\n

S. 55(2) (b ): Capital gains- Cost of acquisition- Fair market value- 1-4-1981.<\/strong>
\n Fair market value of land at Rs 330 per square yard as on Ist April ,1981 adopted by the Tribunal in view of sale of land by Investment Trust on 1st  June ,1981 and other  comparable sale instances in the same area which is not shown to be erroneous the same has to be accepted as against Rs 60- per  square yard adopted by the Assessing Officer. ( A.Y. 1995-96 ).
\n CIT v Bhupindera Flour Mills ( P) Ltd ( 2011) 59 DTR 307 ( P &H) (High Court) <\/strong><\/p>\n

S. 68: Cash Credits – Gifts – Relation – Occasion – Unexplained investments.(S.69).<\/strong>
\n Where the donors who had made the gifts  to the assessee having appeared  before the  Assessing  Officer , submitted affidavit on oath  confirming the gifts made by them , citing their old relations with the assessee and proved their capacity to make  gifts , said  gifts could not be treated as non genuine simply because there was no occasion for making the gifts or there was no blood relation between the donors and the donee or that the gifts were made by donors by taking loans. The order of Tribunal deleting the addition was confirmed.( A.Y.2003-04).
\n CIT v Mayawati (MS).( 2011) 59  DTR 177 \/ 201\/ Taxman 1\/ 243 CTR 9 (<\/strong>Delhi<\/strong>) (High Court).<\/strong>
\n Editorial- <\/strong>Delhi Tribunal in Mayawati ( 2010) 48 DTR 233 (Delhi) (Trib) was affirmed. <\/p>\n

S.69A: Unexplained money- <\/strong>Sale<\/strong> proceeds of shares.<\/strong>
\n Where the shares sold by the assessee were received by the assessee in her demat account on July  3, 2003  transferred from another client and were not those shares stated to be purchased by the assessee on June 17, 2002. The credit in demat  account of the assessee on July 3, 2003 remaining unexplained and hence  addition was justified. (A.Y. 2004-05).
\n Kusum Lata ( Smt) v Asst CIT ( 2011) 10  ITR 737 ( Trib) ( <\/strong>Delhi<\/strong>) (Trib).<\/strong><\/p>\n

S.69A: Unexplained money- Gift – Onus on assessee to prove – Occasion .<\/strong>
\n When assessee received the gift  onus is on him  not only to establish identity  of person making gift but also his capacity to make such gift and he is also required to  demonstrate,  what kind of relationship or what kind  of love and affection donor has for assesse and to explain circumstances in which gift were made. ( A.Y. 2001-02).
\n Sushil Kumar Mohanani v ITO ( 2011) 131 ITD 237 ( Jab)( TM ) (Trib).<\/strong><\/p>\n

S. 71: losses- Set off from one head against income from another- Capital loss- Capital gains.<\/strong>
\n Assessee sold certain shares of Company “A”  and claimed  capital loss. Assessing Officer disallowed loss holding that assessee sold shares so as to claim set off this loss against capital gains arising on sale of land. Tribunal held that since shares were   duly transferred and recorded in books of account and further ,assessee also explained the circumstances in which he sold shares , capital loss on sale of shares can not be disallowed.( A.Y.2004-05).              
\n Hasmukhbhai M. Patel  v Asst CIT ( 2011) 46  SOT 419 ( Ahd) (Trib).<\/strong><\/p>\n

S.80IA: Deduction-Profits and gains derived from industrial undertaking- Liquidated damages- Interest on delayed payment.<\/strong>
\n Interest on delayed payment of sale amount is eligible for deduction under section 80IA , further , during the course of the business the assessee receives \/ pay liquidated damages for not  honouring a contract for sale of products and therefore, such income is directly derived from the industrial undertaking, thus eligible for deduction under section 80IA. ( A.Y. 2000-01).
\n CIT v Prakash Oils Ltd ( 2011) 58 DTR 279 ( MP) ( High Court).  <\/strong><\/p>\n

S. 80 IA: Deduction- Profits and gains derived from industrial undertaking- Initial year-Substantial expansion- Take over of existing units. ( 80 IB ).<\/strong>
\n Conditions as laid down for claiming deduction under section 80IA \/80IB are to be complied within the initial year and not in all the assessment years in which the assessee is eligible for deduction. Once the assessee has complied with the conditions as laid down in sections 80IA \/ 80IB in the initial year, expansion or extension of the existing unit by acquiring assets of another units in a subsequent year does not disentitle the assessee to claim deduction under sections 80IA\/80IB in respect of increased profit due to such expansion or extension of industrial undertaking.( A.Ys. 2004-05& 2005-06).
\n Aqua Plumbing (P) Ltd v Asst CIT ( 2011) 59 DTR 22 \/ 46 SOT 366( <\/strong>Agra<\/strong>) (Trib).<\/strong><\/p>\n

S. 80IB(10) : Deduction – Pro-rata basis  – Housing project – Residential buildings – Area exceeding 1500 square feet.<\/strong>
\n Whether deduction should be allowed in the case of flats having build up area not exceeding 1500 sq ft, even though some of the flats  were  exceeding 1500 sq ft. On reference to third member , the third member held that in view of order passed by Calcutta High Court in CIT v Bengal Ambuja Housing Development Ltd (IT Appeal no 458 of 2006 dated 5-1-2007 ) ,  assessee was entitled to deduction under section 80 IB (10)  in respect of flats having built up area not exceeding 1500 square feet and not entitled for deduction in respect of those flats  having their built up area  exceeding 1500 square feet. The third member also held that in view  of CIT v Brahma Associates ( 2011)197 Taxman 459 (Bom) (High Court) , finding of Vice president on the issue of fixing limit of 10 percent cap does not hold good. ( A.Ys. 2005-06 & 2006-07).
\n Sanghvi & Doshi Enterprise  v ITO ( 2011) 131 ITD 151 ( Chennai) (TM ) (Trib).        <\/strong><\/p>\n

S.80IB (10): Deduction- Housing project-Completion of entire project.<\/strong>
\n For claiming deduction under section 80IB , it is not necessary for assessee to compute entire project and even on partial completion of project , assessee would be eligible for deduction under section 80IB.( A.Y. 2005-06).
\n Nagarjuna Homes v ITO (2011) 46 SOT 287 (Hyd) (Trib).         <\/strong><\/p>\n

S.80P: Deduction- Co-operative Society- Income.<\/strong>
\n Income received by a co operative bank from deposits , whether or not they are made to discharge of a statutory obligation or otherwise , being income from banking business would be eligible for exemption under section 80 P.
\n CIT v Andhra Pradesh State Co operative Bank Ltd (2011) 200 Taxman 220 (AP) (High Court).<\/strong><\/p>\n

S.80P:Dedcution- Co-Operative Society-Interest-.Exempted income. (S.14A).<\/strong>
\n Deduction under section 80 P (2) (d) is available after deducting the  expenditure incurred in earning the income.( A.Y. 2002-03).
\n Punjab State Co-Operative Milk Producers Federation Ltd v CIT (2011) 336  ITR 495 (P&H) (High Court).<\/strong><\/p>\n

S.92C: Avoidance of tax- Transfer pricing-Royalty- Business expenditure.<\/strong>
\n Payment of royalty by assessee company to its US based holding company is not hit by the provisions of section 92 in the absence of any comparable case on record to determine the ordinary profit in similar business and the price fixed has been accepted as ALP by the TPO. Payment of royalty being a business expenditure which is incurred wholly and exclusively for the purpose of business of the assessee ,it is to be allowed  as business expenditure.( A.Y. 1999-2000 TO 2001-02) 
\n CIT v Oracle India (P) Ltd ( 2011) 59 DTR 222 (<\/strong>Delhi<\/strong>) (High Court). <\/strong><\/p>\n

S.92C:Avoidance of tax- Transfer pricing – Computation-CUP method- TNMM.<\/strong>
\n TPO having computed the ALP by applying CUP method as against TNMM adopted by the assessee and rejecting the objections raised by the assessee on the ground that all those objections were considered by the TPO in earlier years. The assessee having raised various submissions before the Tribunal which need verification at the level of the AO\/TPO matter restored for fresh verification as per law.( A.Y. 2006-07).
\n Fulford ( India ) Ltd v Dy CIT ( 2011) 59  DTR 106\/140 TTJ 183 ( Mumbai) (Trib).<\/strong><\/p>\n

S.92C:Avoidance of tax- Transfer pricing- Computation- Cup method.<\/strong>
\n Where no data was available in respect of uncontrolled transactions which were similar to transactions of assessee with its foreign associated enterprise, CUP method could not be considered as most appropriate method to determine arm’s length price of royalty by assessee to its AE for technology collaboration. Tribunal set a side matter to the file of Assessing Officer with direction to do the exercise of  determining the arm’s length price by applying the most appropriate method .( A.Y. 2005-06)   
\n Cabot India  Ltd v Dy CIT ( 2011) 46  SOT 402 ( Mum) (Trib).<\/strong><\/p>\n

S.92C: Avoidance of tax- Transfer pricing –Interest on loan granted by assessee to AE.<\/strong>
\n In case of grant of loan by assessee to its foreign subsidiary in foreign currency out of its own funds . For determining  ALP ,it is the international LIBOR rate that would apply and not the domestic prime lending rate , and assessee charging interest  at a  rate higher than the  labor rate , no addition can be made on this count.( A.Y. 2006-07) 
\n  Siva Industries  & Holdings Ltd v Asst CIT ( 2011) 59  DTR 182( Chennai) (Trib).<\/strong><\/p>\n

S. 92C:Avoidance of tax-Transfer Pricing & “Cost Contribution Agreements”: Law Explained – Commercial wisdom not to be questioned<\/strong>
\n  The assessee entered into a ‘cost contribution agreement<\/em>’ with its parent company pursuant to which it paid a sum of Rs. 10.55 crores as its share of the costs. The TPO, AO & DRP disallowed the expenditure. On appeal by the assessee, the Tribunal held that(i) The TPO was not entitled to determine the ALP under the cost contribution agreement at “Nil” on the basis that the assessee did not need the services at all. How an assessee conducts his business is entirely his prerogative and it is not for the revenue authorities to decide what is necessary for an assessee and what is not. The TPO went beyond his powers in questioning the commercial wisdom of the assessee’s decision to take benefit of its parent company’s expertise<\/strong>.<\/strong> Further, the TPO’s argument that the assessee did not benefit from the services is irrelevant<\/strong> because whether there is benefit or not has no bearing on the ALP of the services. The fact that similar services may have been granted in the past on gratuitous basis is also irrelevant in determining the ALP. The argument that no evidence of services having been rendered was produced is not acceptable because the assessee did produce voluminous evidence before the DRP which was not dealt with. The DRP ought to have dealt with the material and given reasons. Matter remanded to the AO to determine actual rendering of services<\/em> (Vodafone Essar Ltd vs. DRP<\/strong><\/a><\/strong> 240 CTR 263 (Del) followed);<\/p>\n

(ii) A cost contribution arrangement has to be consistent with the arm’s length principle. The assessee’s share of overall contribution to costs must be consistent with the benefits expected to be received, as an independent enterprise would have assigned to the contribution in hypothetically similar situation<\/strong>. <\/strong><\/p>\n

(iii) The disallowance of payment under the ‘cost contribution agreement’ u\/s 37(1) & 40A(2)<\/strong> is not justified because the payment did not involve mark-up and was at arms length price<\/strong>. The services were for furtherance of the assessee’s business interests; <\/p>\n

(iv) The disallowance of payment u\/s 40(a)(i)<\/strong> for want of TDS is not justified because the payment was not taxable in the AE’s hands under Article 5 & 12 of the India-USA DTAA<\/strong> as the AE did not have a PE and the services did not constitute “fees for included services”. (GE India Technology Centre<\/strong><\/a><\/strong> 327 ITR 456 (SC) followed);<\/p>\n

(v) The TPO’s argument that in charging for the services rendered to the AE, a 10% discount could not be given is not acceptable. Discount is a normal occurrence even in independent business situations. The material factor is whether the 10% discount is an arm’s length discount<\/strong> and there is nothing on record to suggest that it is not so.
\n Dresser-Rand India Pvt.Ltd. v ACIT (Mum) (Trib). www.itatonline.org.<\/strong><\/p>\n

 S. 112 (1): Capital gains- Computation –Non resident-  <\/strong>Sale<\/strong> of shares- Proviso. ( S. 48).      <\/strong>
\n Operation of the proviso to section 112 (1), is confined to assets not covered by the first proviso to section 48 and the assets specified in the proviso to section 112 (1) itself ,therefore , a non resident is not eligible to avail the benefit of lower rate of tax of 10 percent on the capital gains on the sale of shares. (S. 48).
\n Cairn U.K.Holdings  Ltd IN RE( 2011) 59 DTR 121\/ 242 CTR 449 (<\/strong>AAR<\/strong>).<\/strong>
\n S.115JB:  Company-Book profits- Minimum alternative tax- Capital gains- Exemption . ( S. 54EC.).<\/strong>
\n Profit on sale of assets credited to profit and loss account cannot be excluded in computing  book profit under section 115JB even though capital gain arising from sale of that asset is not subject to tax under normal provisions of Act by virtue of provisions of section 54EC. ( A.Y. 2005-06).
\n Technicarts ( P) Ltd v ITO ( 2011) 46 SOT 294 ( Mum) (Trib).<\/strong><\/p>\n

S.115H: Non –residents-Interest on investment made out of foreign funds-Concessional rate.<\/strong>
\nWhere assessee received interest on investment made out of foreign funds which was chargeable to tax at concessional rate under section 115H , said special treatment could not be extended  to interest on interest  re-deposited with original sum. ( A.Y. 1996-97 ).
\nM. Manohar ( Dr ) v Asst CIT ( 2011) 201  Taxman 106 ( Mad) (High Court).  <\/strong><\/p>\n

S. 132: Search and Seizure- Validity-Information- Writ Petition – Dismissed on ground of delay <\/strong>
\n On the facts the court upheld the validity of search on the ground that the Assessing Officer gathered the information about undisclosed income. Apart from that the Writ petition was filed after  two years  hence the petition was dismissed on ground of laches. Section  131(1A) ,operates in a different field than section 132, while section 131(1A) ,occupies field before issuing search and seizure warrant , section 132 comes into play thereafter. Assuming the power is invoked it will not any way affect the validity of search and seizure operation.
\n V.S. Chauhan ( Dr ) v  Director of Income Tax ( 2011) 200 Taxman 413 ( All) (High Court).     <\/strong><\/p>\n

S.143 (3): Assessment- Order giving effect to order of Tribunal- Scope- Binding nature of order of Tribunal. ( S.237, 254 (1))<\/strong>
\n While giving effect to the appellate order, the Assessing Officer cannot travel beyond the order of Tribunal. Assessing Officer being a quasi judicial authority and subordinate to the Tribunal is bound by the decision of the Tribunal. ( A.Y.2001-02).
\n Lopmudra Mishra  v Asst CIT ( 2011) 59  DTR 257 ( Orissa) (High Court).<\/strong><\/p>\n

S. 145: Method of accounting- Estimation of profits- Survey-Rejection of books of accounts.  <\/strong>
\n For the relevant assessment year the assessee filed the nil income. In the course of survey the  Assessing  Officer found that there was certain unaccounted stock . The Assessing Officer rejected the books of account under section 145 (3) and estimated the net profit  and also sales. He also made separate addition were made in respect of unaccounted stock  under section 69 as well as disallowances and additions in respect of excess wastages etc. The direction given to the Commissioner ( Appeals) to work out the net profit by applying a rate as had been in the immediately preceding assessment year .( A.Y. 2001-02).
\n Asst CIT v Ratan Industries (P) Ltd ( 2011) 131 ITD 195 ( Agra) (TM ) (Trib).<\/strong><\/p>\n

S. 147: Reassessment-Full and true disclosure- Notice after expiry of four years- Change in Shareholding. ( S.79).<\/strong>
\n Assessing officer reopened the assessment only on the ground that there is a change in the share holding  more than 51 %in the assessment year 2001-02 in which the loss was incurred and therefore the loss incurred in the assessment year 2001-02 cannot be  allowed to be set off  in the assessment year 2003-04. The court held that the effective shareholding of Ned Bank Nihilent Technologies (P) Ltd in the assessee company has gone down below 51% having been specifically brought to the notice of the Assessing Officer by the assessee ,there was no failure to disclose fully and truly all material facts necessary for the purpose of assessment and reassessment proceedings could not be initiated after four yeas.( A.Y.2003-04)
\n Nihilent Technologies (P) Ltd v Dy CIT ( 2011) 59 DTR 281\/243 CTR 77 ( Bom) (High Court)<\/strong><\/p>\n

S.147: Reassessment-Valuation of closing stock (S. 145A ).<\/strong>
\n Assessee had not included CST and excise duty paid on closing stock ,while making its valuation thereby claimed excess loss. The Court held that the Assessing Officer had sufficient reason to form belief that income of assessee had escaped assessment, hence reassessment held to be valid.( A.Y. 2000-2001 , 2001-02).
\n Ginni Filaments Ltd v CIT ( 2011) T ax .L.R. 538 ( All) (High Court). <\/strong><\/p>\n

S. 147: Reassessment- Notice- Validity-Status-HUF ( S. 292B ).<\/strong>
\n Assessee and also his counsel through their respective letters having submitted that return which had already filed in the capacity of HUF may be treated to have been filed in pursuance to the notice issued under section 148. The said notice issued by the Assessing Officer without specifying the status of the assessee did not render the proceedings invalid , as the said defect stood cured by operation of section 292B.( A.Ys 1976-77 to 1978-79)
\n CIT v Rajbir Singh ( 2011) 59 DTR 285\/ 243 CTR 185 (P&H) (High Court).<\/strong><\/p>\n

S.147: Reassessment-Notice-Validity-Service (S. 292B, 292BB ).<\/strong>
\n Assessee having filed return stating that the same is filed in response to notice under section 148 and no objection was raised before the Assessing Officer regarding validity of service of notice under section 148, in view of section 292BB it  cannot be contended that there was valid service of notice. Section 292BB is applicable to alI proceedings  pending on 1st April ,2008.
\n CIT v Panchvati Motors (P) Ltd ( 2011) 59 DTR 289 \/243 CTR 189(P& H)( High Court).    <\/strong><\/p>\n

S.147: Reassessment- Income from house property-Co-owner- Assessment. ( s. 22).<\/strong>
\n Scheme of the Act does not envisage that annual value of co owned property , upon being determined  in assessment of AOP , is to be divided amongst co-owners in pre determined ratio.  in hands of AOP was wholly academic  infructuous .  Quantification of annual value of co-owned property in course of assessment of AOP consisting of co-owners is not a condition precedent for taxability of individual share of such income in hands of co-owners. The very initiation of reassessment proceedings in hands of AOP of co owners was unsustainable by law.( A.Y. 2002-03).
\n Sujeer Properties (AOP)  v ITO ( 2011) 131 ITD 377 (Mum) (Trib).  <\/strong><\/p>\n

S.147: Reassessment- Issue is subject matter of appeal-Tribunal.( S.148 ).<\/strong>
\n Once an issue is subject matter of appeal before Tribunal, issuance of notice of reassessment  on said ground has to be considered bad in law. (A.Y. 2000-01).
\n Chika Overseas (P) Ltd v ITO ( 2011) 131  ITD 471 (Mum) (Trib).<\/strong><\/p>\n

S. 147: Reassessment- Additions not made on the basis of reopening- Reassessment bad in law. ( S. 148 ).<\/strong>
\n If no addition is made on the basis of recording of reasons, the reassessment is bad in law. ( A.Y. 2000-01).
\n ITO v  Bidbhanjan Investment & Trading CO (P ) Ltd ( 2011) 59 DTR 345 ( Mum) (Trib).          <\/strong><\/p>\n

S. 148: Reassessment- Transfer pricing –Jurisdiction- Writ petition.(S, 92C, Art 226 of the constitution.<\/strong>
\n Honourable court observed that as fundamental facts  have to established ,the assessee ought not to have filed the writ petition. Accordingly the assessee relegated to proceedings pending before Authorities. ( Judgment of  High Court ( Coca Coala India Inc v Asst CIT ( 2009) 309  ITR 194 ( P&H).
\n Coca Cola India Inc v Adddl CIT ( 2011) 336  ITR 1 ( SC).<\/strong><\/p>\n

S. 150: Reassessment- Limitation- Finding or Direction. (S.149.).<\/strong>
\n Assessment having not been reopened to give effect to the order of the CIT (A). According to the Assessing Officer because of giving effect to the order made by the CIT (A) ,  will result in to escapement of income . The court held that section 150 did not apply. As there was no failure on the part of assessee to disclose fully and truly all material facts , reassessment is clearly time barred.( A.Y. 1988-89).
\n Harsiddh Specific Family Trust v JCIT ( 2011) 58 DTR 149 ( Guj) (High Court).<\/strong>
\n S.150:Reassessment- Finding- Direction-Limitation . ( S.149 ).<\/strong>
\n Since no findings or directions had been given in assessment year 1992-93 to tax the receipt in question in assessment year 1994-95  under appeal which is also inherently impossible in view of the findings that it is capital receipt ,provisions of section 150 would apply in the case of the assessee and reopening of the assessment made after a period of six years from the end of the assessment year was clearly time barred.( A.Y. 1994-95).
\n Vadilal  Dairy International Ltd v Asst CIT ( 2011) 140  TTJ 371 ( Ahd) (Trib).  <\/strong><\/p>\n

S. 150: Reassessment- Power of Appellate authority.<\/strong>
\n Section 150 does not enable or require an appellate authority to give any directions for reopening of assessment, but it deals with a situation in which a reassessment is to be initiated to give effect to finding or direction of appellate authority or Court.( A.Y. 2002-03).
\n Sujeer Properties (AOP)  v ITO ( 2011) 131 ITD 377 (Mum) (Trib). <\/strong><\/p>\n

S. 154: Rectification of mistakes- Apparent from records-Overlooking statutory provision.<\/strong>
\n Overlooking of statutory  provision is clearly a mistake on record and , on that basis , rectification under section 154 is clearly admissible. ( A.Y. 1985-86).
\n CIT v Steel Strips Ltd ( 2011) 200 Taxman 368 ( Punj & Har) (High Court).  <\/strong><\/p>\n

S. 154: Rectification of mistakes-Apparent from records- Salaries- Perquisites-Tax paid by employer- Merger. ( S. 15, 17 ).<\/strong>
\n While computing assessee’s original assessment , Assessing Officer did not include tax payment by employer to exchequer on behalf of employee as part of salary for computing value of rent free accommodation perquisite under rule 3 . On appeal , Tribunal quashed of Assessing Officer for financial years 1995-96 to 1997-98, after grossing up income under section 195A  and directed Assessing Officer to recomputed tax liability for said financial years. Order giving effect was also passed. However thereafter , Assessing Officer rectified assessment under section 154 by  recomputing value of perquisite in rest of rent free accommodation after including tax element in gross salary. Assessee challenged the order on the ground that the issue being debatable and original order being merged with the order of Tribunal  the Assessing Officer did not have jurisdiction to rectify the mistake under section 154.High Court held that when an earlier occasion ,Tribunal had not at all considered aforesaid issue , doctrine of merger would not be applicable in instant case. When jurisdictional Court and other Courts had held at relevant time that income tax paid by employer on behalf of employee is part of salary , issue could not be said to be debatable and therefore , there was legal error apparent from record which was rightly corrected by Assessing Officer under section 154.
\n Mitsubishi Corporation v CIT ( 2011) 200  Taxman 372 ( <\/strong>Delhi<\/strong> ) (High court).<\/strong><\/p>\n

S. 154: Rectification of Mistake- Subsequent decision of Supreme Court.( S. 10 (10C ).<\/strong>
\n In view of subsequent judgment of the Supreme Court setting a side the judgment of the High Court, ,the assessees are entitled to exemption under section 10 (10C), and therefore Assessing Officer is directed to rectify the assessment order to allow exemption under section 10(10C)
\n K.R.Alagappan & Ors v Asst CIT ( 2011) 59 DTR 295\/ 243 CTR 85 (Mad) (High Court).<\/strong><\/p>\n

S.158BD:Block Assessment-Third person- Office note-Presumption.( S. 292C).<\/strong>
\n If any material is found during  search and seizure indicating undisclosed income of third person , further investigation is not necessary. Presumption under section 292C  is applicable. Office note of Assessing Officer regarding undisclosed income of third person is valid for proceedings under section 158BD  of the Income Tax Act.
\n CIT v Mukta Metal Works ( 2011) 336 ITR 555 (P& H) (High Court).<\/strong><\/p>\n

S.161: Representative Assessee-No liability for unconnected income.( S. 163 ).<\/strong>
\n The whole of the share capital of Genpact India, an Indian company, was held by a Mauritius company. The whole of the share capital of the Mauritius company was in turn held by General Electric Co, USA. The Mauritius company “gifted<\/em>” the shares of Genpact India to another Mauritius company, whose shares were then ultimately sold to a Luxembourg company. The AO claimed that the transaction of transfer of shares of Genpact <\/em>India<\/em> had resulted in capital gains to General Electric, <\/em>USA<\/em>, and so he issued a notice u\/s 163 proposing to treat Genpact <\/em>India<\/em> as an “agent” of General Electric and to assess it as a “representative assessee”<\/em>. This was challenged by a Writ Petition. Upholding the challenge the court held that, the mere fact that a person is an agent or is to be treated as an agent u\/s 163 and is assessable as “representative assessee” does not automatically mean that he is liable to pay taxes on behalf of the non-resident<\/strong>.<\/strong> U\/s 161, a representative assessee is liable only “as regards the income in respect of which he is a representative assessee<\/em>“. This means that there must be some connection or concern between the representative assessee and the income<\/strong>.<\/strong> On facts, even assuming that Genpact India was the “agent” and so “representative assessee” of General Electric, there was no connection between Genpact India and the capital gains alleged to have arisen to General Electric<\/strong> (from the sale of shares of Genpact India). Consequently, the s. 163 proceedings seeking to assess Genpact India for the capital gains of General Electric were without jurisdiction.
\n General Electric Co v  DDIT ( <\/strong>Delhi<\/strong>) ( High Court)www.itatonline.org.<\/strong>
\n S. 194H: Deduction of tax at source- Commission-Brokerage- Discount.<\/strong>
\n Assessee company was engaged in business  of providing cellular mobile telephone services under brand name ‘Airtel’ , provided the services through its distributors\/franchisees who kept sufficient stock of rechargeable coupons and starter packs with them. After selling the Sim cards and prepaid coupons to retailers , franchisees were to make payment of sale proceeds to assessee after deducting the discount. The court held that receipt of discount by franchisee was in real  sense, commission paid to franchisees and same would attract provisions of section 194 H.
\n Bharati Cellular Ltd v Asst CIT ( 2011) 200  Taxman 254 ( <\/strong>Cal<\/strong>) (High Court).<\/strong><\/p>\n

S. 194H: Deduction of tax at source- Commission-Brokerage- Discount.<\/strong>
\n The assessee mobile phone service provider to the distributors in the course of selling SIM cards and recharge coupons under prepaid scheme against advance payment received from the distributors. Section 194H is applicable.( A.Y. 2007-08 & 2008-09).
\n ITO v Vodafone Essar Cellular Ltd ( 2011) 59 DTR 75 ( Chennai) (Trib).<\/strong><\/p>\n

S. 194LA: Payment of compensation on acquisition of certain immoveable property-Deduction of tax at source- Agricultural land.( S. 2(14).)<\/strong>
\n When land itself was agricultural land though it may not be used for agricultural purpose but unless and until same was used for non agricultural purpose , it had to be treated as agricultural land for purpose of section 194LA, therefore Special Land Acquisition Officer was not required to deduct tax at source from amount of compensation paid for acquisition of land .Definition of “agricultural land” as given in section 2 (14) cannot be imported  for purpose of section 194LA.( A.Y. 2005-06).
\n ITO ,TDS v Special land Acquisition Officer ( 2011) 46 SOT 458 ( Mum) ( Trib).  <\/strong><\/p>\n

S. 195: Other sums- Payments to non residents-Deduction of tax at source- Income deemed to accrue or arise in India- Foreign agent- Commission-Business connection-Permanent establishment.( S. 4 (1), 40(a) (ia), 195 ).<\/strong>
\n A foreign agent of an Indian exporter operates in his own country and his commission is directly remitted to him. Such commission is not received by him or in his behalf in India, and such agent is not liable to income tax in India on commission received by him. As there was no right to receive income earned in India nor there was any business connection between assessee and ETUK, therefore when income was not chargeable to tax in India under section 4 (1), there was no question of invoking provisions of section 195 hence no disallowance can be made under section 40 (a) (ia).( A.Y. 2007-08).
\n Dy CIT v Eon Technology ( P) Ltd ( 2011) 46 SOT 323 ( <\/strong>Delhi<\/strong>) (Trib).     <\/strong><\/p>\n

S.195:Other sums- Payments to non residents- Deduction of tax at source- Off the Shelf Software -Fee for user of software taxable as “Royalty”- DTAA- India- Switzerland.( S.9 (1) (vi), 201 ).<\/strong>
\n While the license to use the “shrink wrapped<\/em>” or “off the shelf<\/em>” software does not involve transfer of intellectual property, it constitutes “royalty” u\/s 9(1)(vi) and Article 12(3) of the DTAA because it is for “the use of and the right to use of intellectual property such as copyright of a literary, artistic or scientific work or any patent, trade mark, design or model, plan etc<\/em>“. Thus, the consideration received by Oracle for use of its software constitutes “royalty” and the assessee ought to have deducted tax at source.
\n ING Vysya Bank Ltd v DDCIT ( Bang) (Trib). www.itatonline.org.<\/strong>
\n S.201 (IA): Interest- Deduction of tax at source- Assessee in default – Profits in lieu of salary-Tips collected and paid to employees. ( S.2 (24),15 17 (1)(iv), 17(3) ), 192, 201, 273B).<\/strong>
\n Payment of banquet and restaurant tips to the employees of assessee in its capacity as employer constitutes salary  within the meaning of section 15 read with section 17 (3) .Assessee is considered as assessee in default for non deduction of tax at source on account of banquet and restaurant tips collected by its employees and was liable to interest under section 201 (IA). In the given circumstances  no under section 201 could be charged , however levy of interest under section 201 (IA), is neither treated as penalty nor has the said  provision been  included in section 273B to make reasonableness of the cause for the failure to deduct a relevant consideration , hence there is no question of waiver of such interest on the basis that default was not intentional or any other basis.( A.Ys. 19999-2000 to 2005-06).
\n CIT v ITC Ltd ( 2011) 59 DTR 312 ( <\/strong>Delhi<\/strong>) (High Court). <\/strong>
\n S. 201(IA):Interest – Deduction of tax at source- Payment by cheque- Delay by collecting bank.<\/strong>
\n Assessee having deposited the TDS for June 2008 , vide pay order dated 4 th July 2008,in the authorized bank and the latter having collected the same on 7 th July ,2008 , which was the due date for payment of said TDS ,it cannot be said that there was a default on the part of the assessee simply because the amount was credited to the Central Government by the bank on 8th July 2008 , and therefore ,interest under section 201 (IA) was not chargeable.( A.Y. 2009-10).
\n ICIC I Bank Ltd v Dy CIT ( 2011) 58 DTR 284 ( <\/strong>Lucknow<\/strong>) ( Trib). <\/strong><\/p>\n

S. 245S. Authority for Advance Rulings-Precedent- Binding nature.<\/strong>
\n An advance ruling under the Act is  confined to the facts and law projected in the application leading  to the ruling and is binding only on the party and the revenue.
\n Cairn U.K.Holdings  Ltd IN RE( 2011) 59 DTR 121 \/ 242 CTR 449(<\/strong>AAR<\/strong>). <\/strong><\/p>\n

S. 246A: Appeal – Commissioner of Income tax ( Appeals)- Power- Direction.<\/strong>
\n Proceedings for assessment of an assessee cannot be based on directions issued by another co-ordinate Tribunal or even a higher forum , if that was not the subject matter before it. That would be an exercise without jurisdiction. Power of commissioner ( Appeals) , directing to tax certain amounts in hands of a third party, held  to be not valid. ( A.Y. 2006-07).
\n CIT v Krishi Utpadan Mandi Samiti  ( 2011) 336 ITR 77\/ 200 Taxman 362 ( All) (High Court).<\/strong><\/p>\n

S. 246A (1)(a ): Appeal – Commissioner ( Appeals)- Withholding tax  ( S. 90, 91 ).<\/strong>
\n Question of not allowing relief in respect of withholding tax under section 90\/91 has direct effect of reducing refund or enhancing amount of tax payable , such an issue is squarely covered with in ambit of section 246A (1) (a).  ‘Amount of tax determined’  as per section 246A(1) (a) encompasses not only determination of amount of tax on total income but also any  other thing which has an effect of reducing or enhancing total amount of tax payable by assessee.( A.Y. 2006-07).
\n Capgemini Business Services ( India) Ltd v Dy CIT ( 2011) 131 ITD 396 ( Mum) (Trib). <\/strong><\/p>\n

S.251: Appeal- Commissioner ( Appeals)-Powers – No Jurisdiction to determine tax liability of third party : <\/strong>
\n Powers of appellate authority is normally co –extensive with that of original authority. It would not be open to appellate authority to exercise a jurisdiction which Assessing Officer did not have. Assessee claimed to be charitable institution, in its assessment. Assessing Officer held that amount transferred by assessee to Mandi Parishad as development cess and administrative expenditure were for non charitable purpose and ,therefore , were added in assessee’s income.<\/p>\n

On appeal Commissioner (Appeals) held that both amounts could not be assessed in hands of assessee, but in hands of Parishad .He observed that amount transferred to Mandi Parishad was not credited to “Cess Fund” (Central Mandi Fund) . Accordingly he directed Assessing Officer to make a reference to Assessing Officer of Mandi Parishad to make remedial measures, if necessary, in relevant   assessment years to tax relevant receipts in hands of Mandi Parishad .The court held that it is not open to another quasi judicial authority  to give direction to determine tax liability of third party. Accordingly observations made by Commissioner (Appeals) were without jurisdiction.
\n CIT v Krishi Utpadan Mandi Samiti ( 2011) 336 ITR 77  \/ 200 Taxman 362 ( All) (High Court). <\/strong><\/p>\n

S. 253 (1): Appeal – Tribunal- Maintainability- Penalty ( S. 246A(1)(q), 271FA).<\/strong>
\n Tribunal has no power to entertain the appeal against the order passed under section 271FA. Appeal against the order passed under section 271FA can be appealed under section 246A (1) (q) before Commissioner (Appeals). (A.Y. 2005-06).
\n Sub-Registrar , Nakoar v Dy CIT (2011) 139 TTJ 734 ( Asr) (Trib).  <\/strong><\/p>\n

S.254(1): Appellate Tribunal- Order giving effect to order of Tribunal- Scope- Binding nature of order of Tribunal- Assessment. (S.143 (3), 237)<\/strong>
\n While giving to the effect to the appellate order Assessing Officer cannot travel beyond the order of Tribunal and assessee the prize money as income from other sources. Assessing Officer being a quasi judicial authority and subordinate to the Tribunal is bound by the decision of the Tribunal. The assessee is entitled to refund of advance tax collected with interest as per law.  ( A.Y.2001-02).
\n Lopamudra Misra( Miss)  v Asst CIT ( 2011) 59  DTR 257\/ 243  CTR 66\/ 337 ITR 92 ( Orissa) (High Court).<\/strong>
\n S. 254 (1): Appellate Tribunal- Duty- Additional evidence – Report of Forensic & S Scientific Laboratory <\/strong>
\n The revenue has filed the report of the Forensic Science Laboratory was a relevant material and so was affidavit of the searched person. The additional evidence was necessary for just decision of the matter. The Tribunal was not justified in declining to consider the additional evidence comprising the opinion of the laboratory of the Government examiner and also the affidavit of the author of the diary, as the documents had a direct bearing on the issue.
\n CIT v Mukta Metal Works (2011) 336 ITR 555 ( P&H)( High Court).  <\/strong><\/p>\n

S. 254 (1) : Appellate Tribunal- Powers- Assessment- New claim- Without revised return.<\/strong>
\n Assessee has raised new claim before the Assessing Officer with regard to doctrine of mutuality without filing revised return under section 139. Assessing officer has not entertained the claim following the judgment of Apex court in Goetze (India) Ltd v CIT (2006) 284 ITR 323 (SC),  which was confirmed by CIT (A). On further appeal, the Tribunal held that  as the issue required proper verification of facts and relevant facts are not available  on record nor in the assessment proceedings  it could not be admitted . If this ground was admitted, it had to go back to the  Assessing Officer to verify the facts and adjudicate  the claim of assessee would be against the spirit of the Supreme Court Judgment. Therefore , the claim of assessee with regard to doctrine of mutuality could not be entertained at this stage. ( A.Y. 2004-05).
\n Jay Bharat Co-operative Society Ltd v ITO ( 2011) 10 ITR 717 ( Trib) (Mumbai).<\/strong>
\n Editorial –<\/strong> Refer  ( Mumbai )   and Delhi   ( High Court) – CIT v Jai Parabolic Springs Ltd (2008) 306 ITR 42 (Delhi) &  CIT vs. Ramco International (2009) 221 CTR 491 (P & H)  <\/p>\n

S. 254(1) : Appellate Tribunal-Powers- Contempt-CIT-DR’s “false & frivolous” submissions constitute “criminal contempt” & justify recovery of costs from salary.<\/strong>
\n In the department’s appeal, the assessee raised a preliminary objection that the notice u\/s 143(2) was not issued within the prescribed period of 12 months. The AO accepted that the s. 143(2) notice had not been issued in time<\/em>. Accordingly, the Tribunal, relying on Hotel Blue Moon<\/strong><\/a><\/strong> 321 ITR 362 (SC), dismissed the department’s appeal without going into the merits of the appeal. Thereafter, the CIT-DR addressed two letters to the Hon’ble Members in which it made certain allegation against the bench . It was also alleged that the letter was sent by post as the Bench clerk had refused to accept the letter. The letters were treated as a MA by the Tribunal and heard. Thereafter, the CIT-DR filed a letter of apology<\/em> clarifying that it was not his intention to “hurt the sentiments<\/em>” of the Members though he did not appear personally before the Bench. The Tribunal dealing meticulously with each assertion made by the CIT-DR and terming them as “frivolous and untrue<\/em>“ and held that :<\/p>\n

“We are of the view that the conduct of the learned CIT(A) in addressing correspondence to the Hon’ble Members in respect of an appeal which has been heard and under consideration for passing orders is improper. It is an attempt to interfere with the due course of any judicial proceeding and tends to interfere with or obstructs or tends to obstruct the administration of justice and as such would be <\/strong>“<\/strong>Criminal contempt<\/em>”<\/strong> within the meaning of the Contempt of Courts Act, 1971<\/strong>. The allegations made in the letters dated 23.3.2010 and 24.3.2010 are serious enough to warrant an action seeking protection of the Hon’ble High Court in exercise of its powers to punish for contempt of the sub-ordinate Courts and Tribunals<\/strong>.<\/strong> In our opinion, there cannot be a fitter case for imposition of exemplary costs on the learned Departmental Representative, who in our view, is responsible for such a M.A. and for wasting the time of the Tribunal by raising frivolous arguments<\/strong> and making blatantly false submissions<\/strong>.<\/strong> The cost should have to be recovered from the salary<\/strong> of the delinquent employee, who is responsible for such actions and entry made in his service record<\/strong> on the adverse comments made against the D.R. by the Tribunal. We however refrain from doing so in the hope that such indiscretion would not be repeated in future and also in view of the letter of apology filed by the D.R.”<\/p>\n\n\n
\n

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No time to read through voluminous case reports? Can\u2019t separate the wheat from the chaff? Fret Not! The KSA Legal team will bring you up-to-speed with the choicest of case-law so you can focus your attention only on the important …<\/p>\n

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