{"id":5969,"date":"2012-12-06T14:36:06","date_gmt":"2012-12-06T14:36:06","guid":{"rendered":"http:\/\/itatonline.org\/archives\/?page_id=5969"},"modified":"2012-12-06T14:36:06","modified_gmt":"2012-12-06T14:36:06","slug":"digest-of-important-case-law-october-2012","status":"publish","type":"page","link":"https:\/\/itatonline.org\/archives\/digest-of-important-case-law-october-2012\/","title":{"rendered":"Digest of important case law – October 2012"},"content":{"rendered":"
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\nNo time to read through voluminous case reports?<\/p>\n
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\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 – October 2012 <\/strong><\/td>\n <\/td>\n<\/tr>\n
Download monthly<\/strong> (October 2012) digest in pdf format <\/td>\n Click here to download the judgement (digest_important_case_laws_october_2012.pdf) <\/strong> <\/a><\/p> <\/td>\n<\/tr>\n
Download Consolidated Digest<\/strong> (Jan 2012 to Sept 2012) 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_2012_sept_2012.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(1A): Definitions-Agricultural Income-Converting raw peas held to be agricultural income. <\/strong>
\n Where assessee was engaged in the activity of converting raw peas which are perishable items having no ready market in to pea seeds by drying, thrashing and winnowing such uprooted pea plant, for which ready market was available.  Income derived from such activity was held to be agricultural income exempt under the Act.(A.Y.1997-98)
\n CIT v. Rana Gurjit Singh (2012) 75 DTR 376 (P&H)(High Court)<\/em><\/strong><\/p>\n

S.2(7): Definitions – Assessee – No business income in the hands of assessee where assessee is agent of the State Government. <\/strong>
\n Assessee was a town development authority for various towns of Maharashtra. Assessee’s business activity was construction of residential and commercial structures as well as development of infrastructures and towns. On basis of report of Special Auditor, A.O. brought to tax certain amount as business income of assessee. In resolution passed by State Government it was clearly mentioned that assessee would act as a subsidiary company under control and supervision of State Government. All dealings of assessee had to be routed through authorizations by Government and all funds receivable would be in compliance and with intimations to officials of various Government departments. It was also undisputed that as soon as assessee completed any development project same was immediately handed back to State Govt. It was held that assessee was an agent of State Govt. and, thus, revenue authorities were not justified in assessing business income in hands of assessee. (A.Y. 2006-07)
\n City and Industrial Development Corpn of Maharashtra Ltd. v. ACIT (2012) 138 ITD 381 (Mum.)(Trib.)<\/em><\/strong><\/p>\n

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S.2(15): Definitions-Charitable purpose-Hinduism-“Hinduism” is not a religion and worship of Hindu Gods is not “religious purpose” assessee is eligible for certificate under section 80G(5)(S.80G.)<\/strong> <\/strong>
\n The assessee trust was set up with the object of “worship of Lord Shiva, Hanumanji, Goddess Durga and maintaining of temple” and “to celebrate festivals like Shivratri, Hanuman Jayanti, Ganesh Uttasav, Makar Sankranti”. It applied for a certificate under section 80G. S. 80G (5) provides that the trust should be established for a “charitable purpose”. Explanation 3 to s. 80G provides that “charitable purpose” does not include a purpose which is of a “religious nature”. S. 80G(5)(iii) also stipulates that the trust should not be expressed to be for the benefit of any particular religious community or caste. The CIT rejected the application on the ground that the assessee was set up for “religious” purposes. On appeal by the assessee to the Tribunal, Held reversing the  order of Commissioner of Income tax :The objects of the assessee is not for advancement, support or propagation of a particular religion. Worshipping Lord Shiva, Hanumanji, Goddess Durga and maintaining the temple is not advancement, support or propagation of a particular religion. Lord Shiva, Hanumanji & Goddess Durga do not represent any particular religion. They are merely regarded to be the super power of the universe. Further, there is no religion like “Hinduism”. The word “Hindu” is not defined in any of the texts nor in judge made law. The word was given by British administrators to inhabitants of India, who were not Christians, Muslims, Parsis or Jews. Hinduism is a way of life. It consists of a number of communities having different gods who are being worshipped in a different manner, different rituals, different ethical codes. The worship of god is not essential for a person who has adopted Hinduism way of life. Therefore, expenses incurred for worshipping of Lord Shiva, Hanuman, Goddess Durga and for maintenance of temple cannot be regarded to be for religious purpose .
\n Shiv Mandir Devsttan Panch Committee Sanstan v. CIT(Nagpur) (Trib.)<\/em><\/strong>www.itatonline.org<\/em><\/strong><\/a><\/strong>
\n  Editorial-Refer CWT v. Late R. Shridharan (1976) 104 ITR 436(SC), where entire concept of “Hinduism” has been explained.
\n   <\/strong>
\n S.2(22)(e): Definitions- Deemed dividend – Loan – Advanced was at pre-condition of granting bank guarantee and collateral security for funding of company . Arrangement merely for sake of convenience arising out of business expediency  is not deemed dividend. <\/strong>
\n Assessee was a managing director in a company. She had taken a loan of Rs.17,65,517 from company. Assessing Officer treated said amount as `deemed dividend’. Assessee contended that said amount was advanced to her as per her pre-condition of granting bank guarantee and collateral security for funding of company and at time of extending guarantee\/security she had sought liberty to withdraw funds from company as and when required by her for personal purposes. It was held that on facts it could be said that arrangement between assessee and company was merely for sake of convenience arising out of business expediency, which could not partake character of deemed dividend. (A.Y. 2006-07)
\n ACIT v. G. Sreevidya(Smt) (2012) 138 ITD 427 (Chennai) (Trib.)<\/em><\/strong><\/p>\n

S.2(22)(e): Definitions-Dividend-Deemed dividend-<\/strong> The amount forwarded by the company to the assessee was not in the shape of advances or loans. The arrangement between the assessee and the company was merely for the sake of convenience arising out of business expediency  hence loan cannot be assessed as deemed dividend.<\/strong>
\n The assessee, a substantial shareholder of a closed held company, availed of a loan from the company. She claimed that the said loan was not assessable as “deemed dividend” u\/s 2(22)(e) as she had given a personal guarantee and collateral security to a third party to enable the company to avail of credit facilities and in return she was entitled to withdraw funds from the company as and when required by her for personal purposes. The AO rejected the claim though the CIT(A) accepted it. On appeal by the department, held dismissing the appeal:<\/p>\n

Every payment by a company to its shareholders may not be a loan\/ advance so as to come within the ambit of s. 2(22)(e). In the present case, the amount was withdrawn by the assessee from the company only to meet her short term cash requirements. By virtue of offering personal guarantee and collateral security for the benefit of the company, the liquidity position of the assessee had gone down. In the strict sense, the amount forwarded by the company to the assessee was not in the shape of advances or loans. The arrangement between the assessee and the company was merely for the sake of convenience arising out of business expediency (Pradip Kumar Malhotra<\/a> v. CIT (2011) 338 ITR 538 (Cal) & CIT v. Creative Dyeing & Printing (2009) 318 ITR 476 (Delhi) followed).(A. Y. 2006-07)
\n ACIT v. G. Sreevidya Chennai)(Trib.)<\/em><\/strong><\/a>www.itatonline.org <\/em><\/strong>
\n   <\/strong><\/p>\n

S.4: Charge of income-tax-Income-Capital or revenue receipt – Sale of assets, properties and rights of business. <\/strong>
\n The consideration of Rs,2,02,25,000\/- is not the consideration paid for transfer of any goodwill. The said consideration is paid for sale, transfer and assigning the business, the network and benefits and obligations of pending contracts of the business and commercial rights associated with or embedded therein. These are the properties owned by the assessee company. It is that property which is transferred for consideration of Rs.2,02,25,000. In the transfer deed, having set out the particulars of the properties, the rights which are transferred in the end as a residuary, it is stated that all the goodwill pertaining thereon. Now the finding by the AO is there is no goodwill. Therefore, consideration paid is not for the goodwill but it is for the assets, properties and rights of the transferor. Consequently if that is so, for transfer of capital asset no tax is payable. This is what precisely the Tribunal has held. Tribunal was therefore right in holding that the sum of Rs.2,02,25,000\/- paid for transfer of the assessee’s business should be treated as a capital receipt. (A.Y. 2000 – 01)
\n CIT v. Asiatic Inds. Cases Ltd (2012) 77 DTR 44 (Karn)(High Court)<\/em><\/strong><\/p>\n

S.5: Scope of total income-Income-Accrual of income- Disputed claim<\/strong>
\n Amount receivable by the assessee from another company has not been recognized in any earlier year or during the year under consideration on the ground that the same is disputed. Admittedly, the payment in question has actually been received in financial year 2006-07 i.e. asst. Year 2007-08 and duly recognized in the books of account in that year. No useful purpose would be served by disturbing the accounts. AO is directed not to assessee the amount in the current asst. Year. 2006-07 after verifying the correctness of the said claim. (A.Y 2006 – 2007)
\n Addl. DIT (International Taxation) v. Dalma Energy LLC (2012) 78 DTR 219 (Ahd.)(Trib.)<\/em><\/strong><\/p>\n

S.5(2): Scope of total income-Compensation-Fraud-Taxability of Compensation for misrepresentation, fraud compensation on settlement of suits for misstatements ,cause of action in India  is taxable in India as IFOS and liable to withholding tax.(S.56 ,195)<\/strong>
\n Shares of an Indian company were listed on BSE and NSE while its American Depository Receipt (ADS) were listed on New York Stock Exchange. Price of its shares fell suddenly as a result of admission by its former Chairman from India that its accounts as on 30.09.2008 contained misstatements. A number of suits were filed against the company and its auditors in US claiming damages. The suits were based on tort, misrepresentation, deceit, fraud. The suits were consolidated and Lead plaintiffs through the lead counsel filed consolidated Class Action Complaint. The parties arrived at a negotiated settlement of disputes subject to approval of court. Company agreed to pay $125 million and auditors agreed to pay $25 million to Qualified Settlement Fund (QSF) to be administered by Lead Counsel for distribution amongst those qualified to participate in class action. The amounts were transferred by company and auditors to QSF after taking RBI approval. US Court passed final judgment confirming the settlement as fair, reasonable and adequate.<\/p>\n

Issue that came up before AAR was whether the compensation was taxable in India and liable to withholding tax under section 195 of the Act.<\/p>\n

The Authority observed that right of action is different from cause of action. Even though the plaintiffs had a right of action in US, their cause of action arose or accrued in India by reason of the alleged misrepresentation, tort,  etc practiced by the company and its auditors in India. Therefore it ruled that compensation accrued or arose in India within the meaning of section 5(2). It further ruled that the compensation was neither capital receipt nor capital gains but a revenue receipt and that the compensation or damages are taxable as income from other sources under section 56(1).
\n Satyam \/ PWC – A.A.R. No.1045, 1060, 1078, 1087 & 1088  dt. 27\/08\/2012 (AAR)<\/em><\/strong><\/p>\n

S.6: Residence in India–Non-resident-Numbers of days stay in India – If<\/strong> the period of a person in India is less than 182 days then status to be applied would be of non-resident and his global income cannot be taxed in India.<\/strong>  <\/strong>
\n Residential status of a person for purpose of section 6 is to be determined only on basis of number of days of his stay in India and there is no restriction for number of days spend abroad. Hence, if the period of a person in India is less than 182 days then status to be applied would be of non-resident and his global income cannot be taxed in India. (A.Y. 2002-03 & 2004-05)
\n Suresh Nanda v. ACIT (2012) 53 SOT 322 (Delhi) (Trib.) <\/em><\/strong><\/p>\n

S.6(6): Residence in India- Not ordinary resident – Income deemed to accrue or arise in India-DTAA-India-Japan-<\/strong> When provisions of Income-tax Act were more beneficial to assessee, same should have been preferred over DTAA, since assessee was a person ‘not ordinarily resident’ in India, salary earned in Japan for employment under S could not be assessed in India, .hence the income earned by assessee outside India could not be taxed in India.(S. 5(1)(c ), 9(1)(i),90(2),Art 15 )  <\/strong>
\n Assessee was a permanent resident of Japan. He was employed with a Japanese Company S. By virtue of a collaboration agreement entered into between S and an Indian company M, assessee was deputed to India to offer guidance and technical assistance to M. During relevant previous year, assessee worked in India for 273 days and was not a ‘resident’ in India in any of nine out of ten previous years .Assessee received salary from S in Japan. Assessing Officer held that assessee was liable to tax in respect of salary received by him in Japan. Tribunal found that provisions of Income-tax Act were more beneficial to assessee, same should have been preferred over DTAA, and, thus income earned by assessee outside India could not be taxed in India. Whether since assessee was a person ‘not ordinarily resident’ in India, salary earned in Japan for employment under S could not be assessed in India. Since in the provisions of sections 6(6) read with section 5(1)(c ) and section 9 (1)(i) were more beneficial to the assessee the same should be preferred over DTAA,  accordingly the order of Tribunal  was up held and appeal of revenue was dismissed.   
\n CIT v. Sakakibara Yutaka (2012) 210 Taxman 286  (Delhi)(High Court) <\/em><\/strong>
\n   <\/strong>
\n S.9: Income deemed to accrue or arise in India – Capital gains-Foreign exchange forward contracts-DTAA-India –Singapore – Gains earned on cancellation of foreign exchange forward contracts treated as capital gains.<\/strong>
\n Gain earned on cancellation of foreign exchange forward contracts is a capital receipt and has to be treated as capital gains and, therefore, A.O. and DRP were not justified in treating gains earned by assessee as income from other sources. (A.Y. 2007-08)
\n Credit Suisse (Singapore) Ltd v.. ADIT(IT)(2012) 53 SOT 306 (Mum.)(Trib.)<\/em><\/strong><\/p>\n

S.9(1)(vii): Income deemed to accrue or arise in India –Fees for technical services-DTAA- India – UK- Receipts from marketing contribution and value added service (VAS)  was taxed as fess for technical services.(S.115A )<\/strong>
\n Receipts from marketing contribution and value added service (VAS) is to be treated as fees for technical services (FTS) as per sec. 9(1) (vii) and article 12 of Indo UK tax treaty. It was held that receipt is to be taxed at rate of 10 per cent u\/s. 115A(1) instead of 15 per cent on gross basis. (A.Y. 2008-09)
\n De Beers UK Ltd v. Dy. DIT (IT) (2012) 53 SOT 319 (Mum.)(Trib.)<\/em><\/strong>
\n S.9(1)(vii): Income deemed to accrue or arise in India- Fees for technical services-Business of exploration, etc of mineral oil- Gathering of seismic data for contractor – FTS and not as undertaking the mining project – Exemption under Explanation 2 to S. 9(1)(vii) is not available – covered under s. 44D and not s. 44BB.(S.44BB, 44DA )<\/strong>
\n The applicant, an Austrian company, was awarded work of acquisition & processing of 3D land seismic data in a block by an Indian consortium. It contended that the activity rendered by it is a mining activity and the fees received were not covered within the definition of FTS by virtue of the exception enacted by Expln. 2 to S. 9(1)(vii) of the Act which provides for specific exclusion for any consideration received for any construction, assembly, mining or like project undertaken by the recipient. It further relied on the ruling in Geofizvka Torun Sp. zo.o (AAR No. 813 of 2009) and contended that it would be assessable only under S. 44BB(1).
\n The Authority observed that a person who has merely gathered seismic data for a contractor who has undertaken a mining or like project cannot be said to have undertaken a mining project. Hence, it cannot claim benefit of exception contained in Expln. (2) of S. 9(1)(vii) and hence consideration is in nature of Fees for Technical Services. Further, S.44DA was introduced w.e.f. 1.4.2011 after the ruling in Geofizvka was given. Subsequent to such amendment, the instant case cannot be brought under S. 44BB if S. 44DA or S.115A is applicable to it. Hence, it ruled that the said consideration is not covered under S. 44BB but is liable to be taxed as fees for technical services under S. 9(1)(vii).
\n  C.A.T. Geodata Gmbh, Austria – A.A.R. No. 1119 dt. 31\/07\/2012(AAR)<\/em><\/strong><\/p>\n

S. 9(1)(vii):Income deemed to accrue or arise in India- Fees for technical services- Business of exploration, etc of mineral oil- mineral oils-<\/strong> Services in connection with exploration and extraction of mineral oil – project is undertaken by Indian concern – income in nature of FTS and not covered u\/s 44BB. (S. 44BB, 44DA)<\/strong>
\n The applicant, incorporated in Cayman Islands, has a Project Office in India. It enters into a contract with an Indian concern for rendering services in connection with exploration and extraction of mineral oil. It contends that the consideration would not qualify as Fees for Technical Services under S. 9(1)(vii) due to exception contained in Expln. (2) thereto  and hence should be assessed under S. 44BB(1). It further relied on the wide scope of the expression ‘in connection with’ in S. 44BB(1) with reference to the ruling in Geofizvka Torun Sp. zo. (AAR No. 813 of 2009). The Authority observed that the project is undertaken by the Indian concern and the applicant can only claim that it is rendering services in connection with such project. Hence, it cannot claim benefit of exception contained in Expln. (2) of S. 9(1)(vii) and hence consideration is in nature of Fees for Technical Services. Further, as services are in connection with extraction of mineral oil, prima facie, applicant could invoke S. 44BB(1). But S.44DA was introduced w.e.f. 1.4.2011 after the ruling in Geofizvka was given. Subsequent to such amendment, the instant case cannot be brought under S. 44BB if S. 44DA or S.115A is applicable to it. Hence, it ruled that the said consideration is not covered under S. 44BB but is liable to be independently taxed as fees for technical services under S. 9(1)(vii).
\n M-1 Overseas Ltd. – A.A.R. No. 968 dt. 01\/08\/2012(AAR)<\/em><\/strong><\/p>\n

S. 9(1)(vi): Income deemed to accrue or arise in India-Royalty-DTAA– India-Saudi Arabia -Payment for acquiring the capacity – obtained right to exploit the capacity and not title in capital asset- taxable as royalty. [Article,12, 13]<\/strong>
\n The applicant, an Indian company, is engaged in the business of providing telecommunication services. Saudi Telecom Limited (“STC”), a company registered in Saudi Arabia indirectly holds 18.5% in the applicant.
\n STC was part of the consortium which had entered into a Construction and Maintenance Agreement (C&MA) to plan and lay a cable system called Europe India Gateway  Submarine Cable (‘EIG’). As per the C&MA, STC acquired 7.125 percent stake in EIG for a consideration of USD 50 million. STC transferred the right to use 40 percent of its allocated capacity in the EIG system under an EIG -Capacity Transfer Agreement (“EIG CTA”) with the applicant as per the terms of C&MA for a consideration of USD 20 million.
\n The applicant contented that payments made by it to STC under EIG CTA towards acquisition of EIG capacity would be not be chargeable to tax in India as it was a case of transfer of a capital asset, which is situated outside India. Relying on Article 13 of the India-Saudi Arabia tax treaty, capital gains, if any, shall not be chargeable to tax in India. Also, payment is mere recoupment of part costs initially paid by STC to the consortium for acquiring 40 percent of the originally allocated capacity.
\n The Authority observed that the applicant had obtained a non transferrable exclusive right to exploit the transferred EIG capacity. Post transfer, STC continued to be liable for any claims arising out of violations by the applicant. Hence it was a consideration paid for the right to use the system and not transfer of absolute title of the capital asset. It further did not agree with the argument of reimbursement since the primary obligation to pay the consortium was still on STC and the applicant was in no way liable to the consortium.
\n The Authority accordingly ruled that the consideration paid for right to use a process and\/or right to use a commercial or scientific equipment would clearly fall within the definition of royalty as per section 9 of the Act especially in light of the clarificatory amendment by Finance Act, 2012 by way of explanation 5 and 6 to section 9(1)(vi) of the Act with retrospective effect. Article 12 of the India-Saudi Arabia tax treaty provided for taxation of royalties as per the domestic laws of the payer i.e. India in the case of the applicant.
\n Dishnet Wireless Ltd – A.A.R.  No. 863 dt. 24\/08\/2012(AAR)<\/em><\/strong>
\n   <\/strong>
\n S. 9(1)(vii): Income deemed to accrue or arise in India- Fees for technical services –DTAA- India-Australia –<\/strong> Payment to Australian co for software development & related services – source of income in India , FTS and not royalty under article 12, is   not  chargeable to tax in India under DTAA [S.90, 195,Articles 5, 12]<\/strong>
\n Infosys India, the applicant, has a 100% subsidiary Infosys Australia. The applicant undertakes work for software development & related services for its clients in Australia. It then sub-contracts a part of the work to its subsidiary, Infosys Australia. Infosys Australia performs the work wholly in Australia. The applicant makes payment to Infosys Australia for such work. The issue is whether the payments made by it to Infosys Australia as consideration for the sub-contract work, is chargeable to tax in India, either under the IT Act or under the DTAA between India and Australia.
\n The applicant contends that Infosys Australia is not performing any services in India. The source of income of Infosys Australia is Australia, the place where the services are performed. Under Article 7.1 of the DTAC between India and Australia, this income of Infosys which is in the nature of business income of that entity, is taxable only in Australia and not in India since Infosys Australia does not have any permanent establishment in India. The applicant is not a permanent establishment of Infosys Australia going by Article 5 of the Convention. Even if the source is deemed to be where the payer, the applicant, is situated, even then, by virtue of the Explanation to section 9(1)(i)(a) of the Act only such part of the income that could be attributed to the activities in India can be taxed in India.
\n The Authority observed that source of income is India. It further ruled that what is paid to Infosys Australia is fees for technical services under section 9(1)(vii) of the Act, but it is not royalty in terms of Article 12 of the DTAC between India and Australia in terms of the requirements of paragraph 3 (g) of the said Article. Further, since the payment is in the nature of FTS, the question of permanent establishment in India does not arise. Hence in terms of DTAA, the fees for technical services paid is not chargeable to tax in India. ( A.A.R. No. 1065 dt. 27\/08\/2012)<\/em><\/strong>
\n Infosys Technologies Ltd (2012) 253 CTR 16\/210 Taxman 295(AAR)<\/em><\/strong><\/p>\n

S.10B: Newly established hundred per cent export-oriented undertakings- Amalgamation<\/strong>
\n The subsidiary company amalgamated with the holding company w.e.f. 1st Jan. 1993 and as a result of the merger, the business of the amalgamating company became the business of the assessee company. Given the fact that the assessee is a holding company of the subsidiary company, when the assets stood transferred to the amalgamated company, evidently, the export business done by the assessee is not a business formed by splitting up or reconstruction of a business already in existence. As far as sub cl. (iii) of s. 10B(2) is concerned, the criteria for grant of the relief is that the undertaking is not formed by transfer to a new business of machinery or plant previously used for any purpose. On merger, the amalgamating company looses its entity. But, then by such merger there is no formation of new business to disqualify the claim of the assessee for deduction under s. 10B. The CBDT Circular F.No. 15\/5\/63-ITA-I, dated 13th Dec. 1963, referred the benefit of S. 84 as available to successor for remaining years. After the deletion of s. 84 from the statute book, and insertion of 80J and thereafter benefit under s. 10B being attached to the undertaking, there is no ground to reject the assessee’s claim for 100 per cent deduction attached to the undertaking. (A.Y. 1994 – 95)
\n CIT v. Shri Renuga Textiles Mills Ltd. (2012) 77 DTR355 (Mad.)(High Court)<\/em><\/strong><\/p>\n

S.11: Charitable or religious purpose- Contribution-Application of income- Contribution to  Mandi Parishd to Constitutes application of income u\/s 11(1)(a)of the Act. (S.2(15),12)<\/strong>
\n The word ‘contribution’ under Uttar Pradesh Krishi Utpadan Mandi Adhiniyam, 1964 is in context of what the members contribute to the funds held statutorily by Mandi Samiti which merely transfers the amounts to the funds of the Mandi Parishad. Thus, the question of voluntary contribution u\/s.11(1)(d) \/ 12(1) does  not arise. Neither S. 11(1)(d) nor 12(1) of the Act is attracted to the question whether the amounts statutorily transferred to Rajya Krishi Utpadan Mandi Parishad would constitute application of income for charitable purposes u\/s 11(1)(a) of the Act. The transfer of the amounts by the Mandi Samiti constitutes application of income u\/s 11(1)(a)of the Act.
\n CIT v. Krishi Utpadan Mandi Samiti (2012) 348 ITR 566\/79 DTR 142 (SC)<\/em><\/strong>
\n  <\/strong>
\n S.11: Charitable or religious purpose-Capital expenditure-Depreciation-After writing off the  expenditure incurred for acquisition of capital assets  as application of income the trust cannot claim the depreciation on said assets on notional basis this will be  violation of section 11(1)(a).<\/strong>
\n The assessee a charitable institution running hospital, acquired medical equipment with surplus funds available. It treated expenditure incurred for acquisition of capital assets as application of income u\/s 11(1)(a). It was held that after writing off the full value of the capital expenditure on acquisition of assets as application of income for charitable purposes and when assessee again claimed the same amount in the form of depreciation, such notional claim became cash surplus available with the assessee, which was outside the books of account of the trust unless it was written back which was not done by the assessee. It was thus held that it was not permissible for a charitable institution to generate income outside the books in this fashion and there would be violation of section 11(1)(a ). (A.Y. 2005-06)
\n Lissie Medical Institutions v. CIT (2012) 348 ITR 344 (Ker.)(High Court))   <\/em><\/strong>
\n   <\/strong>
\n S.11: Charitable or religious purposes–Exemption-Medical relief through ayuryedic system– Since medical relief through allopathic treatment did not fall within ambit of objects mentioned in trust deed, surplus from said activity could not form subject matter of exemption under section 11 therefore the exemption was denied to the assessee.<\/strong>
\n The assessee trust was formed   with object of providing medical relief through ayurvedic system of medicine. However, with passage of time, medical relief through auyrvedic medicines and research was relegated to background and activities mainly constituted of providing medical relief through allopathic system of medicines. The Assessing Officer thus rejected assessee’s claim for exemption under section 11 of the Act. Upholding the order of the Assessing Officer the Hon’ble Tribunal held that since medical relief through allopathic treatment did not fall within ambit of objects mentioned in trust deed, surplus from said activity could not form subject matter of exemption under section 11 whether, therefore the exemption was denied to the assessee trust.( A.Y. 2006-2007)
\n Dy.DIT(Exemption ) v. Mool Chand Kharaiti Ram Trust (2012)52 SOT 429(URO) (Delhi) (Trib.)<\/strong><\/p>\n

S.11: Charitable and religious trust –Donation-Corpus fund- Donation for establishment of a technical education centre in a village, amount constituted `corpus fund’ of society and not taxable u\/s 11.<\/strong>
\n Assessee education society had received donation for establishment and development of a technical education centre in a village. It had produced its books of account along with names and complete address of donors. Donors too certified to have donated towards corpus fund of assessee. It was held that amount in question constituted `corpus fund’ of society and would be out of purview of taxation as per section. 11. (A.Y. 2000-01)
\n ITO v. Sardar  Vallabhbhai Education Society (2012) 138 ITD 245 (Ahd.) (Trib.)  <\/em><\/strong><\/p>\n

S.12A: Trust or institution- Registration-Irregularities cannot be the ground for denial of registration. <\/strong>
\n Where there were certain irregularities on the part of the education society in the manner of functioning, these irregularities themselves cannot be put at par with lack of genuineness of the society or its activities, so that the registration under section 12A of the Act be denied to the society. (A.Y. 1997-98)
\n DIT (E) v. Venkatesha Education Society (2012) 75 DTR 51 (Karn.)(High Court)<\/em><\/strong><\/p>\n

S.12AA: Trust or institution-Registration-One of the object non charitable registration cannot be denied. <\/strong>
\n The assessee society having undertaken only charitable activities cannot be denied registration simply in view of one non-charitable object which remained only on paper and was not at all implemented and has been already deleted.
\n BABA Amarnath Educational Society v. CIT (2012) 149 TTJ 373 (Chd.)(Trib.)<\/em><\/strong><\/p>\n

S.13: Trust or institution-Exemption-Education-Exemption cannot be denied  on the ground that high salary was paid to office bearers of management committee  unless it was established it was established that it was not open market remuneration.(S. 11, 12)<\/strong>
\n The assessee society was formed with the object to provide education including opening of schools and colleges and to run them according to recognized standard. The assessee declared “NIL’ income. In the course of assessment A.O. took a view that assessee had debited high amount of salary in profit and loss account. However A.O. had not brought any independent evidence on record which could show how much salary various office bearers of management committee could fetch in open market. Also the 6th pay commission had resulted into a handsome enhancement in salary of employees including Government teaching staff. In view of the aforesaid the CIT(A) deleted the disallowance and the ITAT upheld the order of the C.I.T (A) as no independent evidence was being led by the A.O. to sustain the said disallowance.( <\/strong>A.Y. 2006-2007)<\/strong>
\n  ACIT v. Indicula Trust Society (Regd). [(2012) 52 SOT 1 (Delhi)(Trib.)] <\/strong><\/em><\/p>\n

S.14A: Expenditure disallowance – Exempt income – No exempt income earned during the year no disallowance. <\/strong>
\n No disallowance can be made (i) in the absence of any exempt income earned during the year; or (ii) if investment is also capable of generating taxable income. (A.Y. 2003-04 & 2004-05)
\n Avshesh Merantile P. Ltd. & Others v. DCIT, ITAT ‘F’ Bench, Mumbai, ITA No. 5779, 5780\/Mum.\/2006, dated 13-06-2012, BCAJ Pg. 33, Vol. 44-A Part 6, September 2012.(Mum.)(Trib.)<\/em><\/strong><\/p>\n

S.14A: Expenditure disallowance – Exempt – Provisions cannot extend to investments made in shares of foreign companies.<\/strong>
\n Provisions of sec. 14A cannot extend to investments made in shares of foreign companies. It was held that where no interest bearing funds were deployed by assessee company for making investment in shares of domestic companies from which exempt dividend income was earned, no disallowance u\/s. 14A could be made. (A.Y. 2001-02)
\n ITO v. Stides Arcolab Ltd. (2012) 138 TD 323 (Mum.)(Trib.)<\/em><\/strong><\/p>\n

S.14A: Expenditure disallowance-Exempt income- Notional expenditure- The assessee had not retained shares with intention of earning dividend income but such income was incidental to business of  shares trading, no notional expenditure could be deducted by invoking section 14A.  <\/strong>
\n The Assessing Officer found that the assessee had earned dividend income which was exempt and disallowed the expenditure in relation to earning of such income. The Assessing Officer attributed certain expenditure to share trading activity and certain amount in respect of dividend earned from PMS account .In appeal  Commissioner (Appeals) deleted the disallowance  in respect PMS account and retained the disallowance in respect of share trading account. The Tribunal held that the assessee earned the dividend income as incidental to trading activity hence no  notional expenditure could be deducted by invoking section 14A.The Tribunal followed the ratio of Karnataka High Court in CCI Ltd v.Jt.CIT (2012) 206 Taxman 563 (Karn.)(High Court) (A.2006-07)   
\n Apoorva Patni  v. Addl.CIT (2012) 24 Taman.com 223 (Pune.)(Trib). <\/em><\/strong><\/p>\n

S.17(2): Salary –Perquisite-Rent free accommodation- Rent free accommodation provided by Indian Company was not perquisite and entitled to exemption under section 10(14) (S.10(4))<\/strong>
\n The Court held that rent free accommodation  provided by Indian Company was not perquisite and entitled to exemption under section 10(14). Ratio of CIT v. Morgenstern Werner ( 2003) 259 ITR 486(SC)  and Moregesntern Werner v. CIT ( 1998) 233 ITR 751(All) (High Court) followed.
\n CIT  v. Sakakibara Yutka ( 2012) 210 Taxman 286 (Delhi) (High Court)      <\/em><\/strong><\/p>\n

S.17(2): Salary – Perquisite – Reimbursement of medical expenses –Reimbursement cannot be considered  for the purpose of chapter XII-H ) <\/strong>
\n Medical reimbursement is taxable as perquisite in the hands of individual employees and therefore it cannot be said to be a fringe benefit for the purposes of chapter XII-H.(A.Y.2006-07)
\n Intervalue (India) Ltd. v. Addl. CIT (2012) 149 TTJ 365 (Pune)(Trib.)<\/em><\/strong><\/p>\n

S.23: Income from house property-Annual value-Property not let out-When assessee not established that the property was not intended to be let out annual value could not be taken as nil.<\/strong>
\n The assessee had declared annual value of his property at nil  by applying the provisions of section 23(1)(c ). The Assessing Officer computed the income adopting annual value on basis of fair rent. The Commissioner (Appeals) deleted the addition. On appeal by revenue the Tribunal held that before availing the benefit of section 23(1)(c), assessee has to establish that property was intended to be let  but remained to be vacant in absence of tenant. On the facts the Assessing Officer gave a specific finding that no efforts have been made to let out property  which was not controverted  by assessee  hence annual value of property could not be taken at Nil.(A.Y.2006-07)
\n Addl.CIT  v. Apoorva Patni (2012) 24 Taman.com 223 (Pune.)(Trib.).<\/em><\/strong><\/p>\n

 <\/strong><\/p>\n

S.23: Income from house property-Annual value- Interest free deposit- Notional interest on deposit not includible in annual letting value.<\/strong> <\/strong>
\n  The assessee let out its property on a monthly rent of Rs.1 per sq. ft. It also received Rs.78 crores as an interest-free deposit. The assessee claimed that as the municipal ratable value of the said Property was higher than the actual rent received the said municipal ratable value had to be taken as the ALV. The AO held that notional interest at the rate of 18% p.a. on the said deposits had to be added to the actual rent received so as to determine the ALV. The CIT(A) held that while the AO was wrong in adding the notional interest on the security deposit, the assessee was also wrong in insisting on the municipal rateable value to be the ALV. He held that the ALV had to be decided as per the rent fetched by similar properties located in the same vicinity. On cross appeals by both parties, held by the Tribunal:
\n As per Circular No.204 dated 24.7.1976 (1977) 110 ITR 21(St), issued by the CBDT the expression “the sum for which the property might reasonably be expected to let from year to year” used in s. 23(1)(a) means the municipal valuation of the property. In Reclamation Reality<\/a>, the Tribunal held, after considering the entire law on the subject, including the said Circular & M.V. Sonavala v.CIT  (1989  )177 ITR 246 (Bom) that the ALV had to be determined on the basis of either the Municipal rateable value (23(1)(a)) or the actual rent received (23(1)(b)), whichever is the higher. There is no scope for adding the notional interest on the security deposit to the ALV. Judicial propriety and judicial discipline require that this view be followed (CIT v. Moni Kumar Subba<\/a> (2011) 333 ITR 38 (Del) (FB) noted).(A. Y. 2006-07)
\n Gagan Trading Co. Ltd v. ACIT( Mum.)(Trib.) www.itatonline.org. <\/em><\/strong><\/p>\n

S.23:Income from house property- Annual value- Surcharge collected from tenants<\/strong>
\n Assessee being the lessor and\/or landlord and\/or owner is under obligation to pay the consolidated rates of taxes on the land and buildings – Under the conjoint reading of the provisions of the KMC Act the owner is enjoined with statutory right to recover commercial surcharge from occupants and on recovery of the same it is his obligation to pay to the corporation authorities – It is not correct to contend that the surcharge does not have any correlation with the rate. Thus, assessees contention that the payability of the surcharge by the tenant should be kept outside the purview of the rental income from house property as it is not really appropriate or retained by the owner as ultimately it has to be paid or it has to be worked out otherwise by way of agreement is not sustainable. Consequently the moment  the commercial surcharge is  recovered irrespective of the provisions of the agreement entered into by and between the landlord and tenant it immediately becomes exigible to tax as rental income from house property for agreement binds the parties thereto and it becomes irrelevant the moment it is found to be in conflict with legal provision on the subject. (A.Y. 1997 – 98)
\n Poddar Projects Ltd. v. CIT (2012) 77 DTR 464  (Cal.)(High Court)<\/em><\/strong><\/p>\n

S.24: Income from house property- Deductions –Interest- Interest paid on borrowing for acquiring house is  deductible under section 24(b) and as cost of acquisition under section 48.<\/strong> <\/strong>
\n The assessee borrowed funds for purchasing a house. The interest paid on the said loan was claimed as a deduction u\/s 24(b). When the house was sold, the interest paid on the said loan was treated as “cost of acquisition” and claimed as a deduction u\/s 48 in computing the capital gains. The AO held that as the interest had been allowed as a deduction u\/s 24(b), it could not allowed again in computing capital gains. The CIT(A) allowed the claim. On appeal by the department to the Tribunal, held  dismissing the appeal:
\n Deduction u\/s 24(b) and computation of capital gains u\/s 48 are altogether covered by different heads of income i.e., income from ‘house property’ and ‘capital gains’. Neither of them excludes the other. A deduction u\/s 24(b) is claimed when the assessee computes income from ‘house property’, whereas, the cost of the same asset is taken into consideration when it is sold and capital gains are computed under section 48. There is no doubt that the interest in question is an expenditure in acquiring the asset. Since both provisions are altogether different, the assessee is entitled to include the interest at the time of computing capital gains u\/s 48.(A. Y. 2007-08)
\n ACIT v. C. Ramabrahmam (Chennai)(Trib.) www.itatonline.org. <\/em><\/strong>
\n      
\n S.28(1): Business loss-Bad debt-Even if the deduction was not allowable as a bad debt  the same could be allowable as business loss under section 28(1)(S.36(2)<\/strong>
\n The assessee was a stock and share broker. He  wrote off an amount of Rs 47.58 lakhs as bad debts due to breach committed by three of Bombay Stock Exchange. The Assessing Officer held that the assessee has not satisfied the conditions precedent as provided under section 36(2) of the Act , which  required that the amount must be offered to tax in the earlier previous year .The Commissioner (Appeals) allowed for part of amount as business loss. On further appeal the Tribunal held that this was not correct. On appeal the following question of law was raised before the High Court “ whether , on the facts and in the circumstances of the case , the ‘vastv kasar’ of Rs 44,98, 210 , which was held to be not deductible as bad debt in view of the provisions of section 36(2) could be considered as an allowable business loss”. The Honourable High Court held that even if the deduction was not allowable as a bad debt , the Tribunal ought to have considered the assessee’s claim for deduction as a business loss. For arriving the conclusion the High Court referred the ratio of Apex court in Badridas Daga v.CIT (1958) 34 ITR 10(SC) and Bombay High court judgment in   CIT v. R.B.Rungta and Co (1963) 50 ITR 233 (Bom.)(High Court). Accordingly the appeal of assessee was allowed. (A.Y.1991-92)
\n Harsad J.Choksi v. CIT ( 2012) 349 ITR 250 (Bom.)(High Court) <\/em><\/strong><\/p>\n

 <\/strong>S.32: Depreciation-Intangible asset-Non-compete right-Goodwill- A “non-compete right” is not an “intangible asset” though “goodwill” is, therefore non-compete right is not eligible for depreciation. To be an “intangible asset” u\/s 32(1)(ii), the rights must be “in rem”  and transferable.<\/strong> <\/strong>
\n The assessee, a joint venture of Sharp Corp, Japan, and L&T Ltd, paid Rs. 3 crores to L&T as consideration for the latter not competing with the assessee for 7 years. The assessee claimed that the non-compete fee was revenue in nature. It also claimed, in the alternative, that the rights under the non-compete agreement were an “intangible asset” u\/s 32(1)(ii) eligible for depreciation. The AO, CIT(A) & Tribunal rejected the assessee’s claim. On further appeal by the assessee before the High Court held  dismissing the appeal: (i) The advantage derived by the assessee from the non-compete agreement entered into with L&T is for a substantial period of 7 years and ensures a certain position in the market by keeping out L&T. The advantage cannot be regarded as being merely for facilitation of business and ensuring greater efficiency & profitability. The advantage falls in the capital field  
\n (ii)        The non-compete rights cannot be treated as an “intangible asset” u\/s 32(1)(ii) because (a) the nature of the rights mentioned in the definition of “intangible asset” spell out an element of exclusivity which enures to the assessee as a sequel to the ownership. But for the ownership of the intellectual property or know-how or license or franchise, it would be unable to assert the right “in rem”, as against the world. In the case of a non-competition agreement, it is a right “in personam” where the advantage is restricted & does not confer an exclusive right to carry-on the primary business activity. (b) Another way of looking at the issue is whether such rights can be treated or transferred. Every species of right spelt-out such as know-how, franchise, license etc. and even those considered by Courts, such as goodwill, can be said to be alienable. Such is not the case with an agreement not to compete which is purely personal.(A.Y. 2001-02).
\n Sharp Business System v. CIT (Delhi)( High Court) <\/em><\/strong>www.itatonline<\/em><\/strong><\/a>.org. <\/em><\/strong><\/p>\n

S.32A: Investment allowances-Labour contractor- Excavation work-Activity undertaken by the assessee was removal of overburden \/earth excavation work carried out for facilitating mining at  project site hence not entitled to investment allowance.<\/strong>
\n The assessee claimed to be in the business of mining; the only activity undertaken by the assessee was removal of overburden\/earth excavaction work carried out for facilitating mining at lignite project site at Rajpardi and Pandhro ; and that the assessee was merely a labour contractor hence the assessee was not entitled to investment allowance. Appeal of revenue  was allowed.(A.Y. 1987-88)
\n CIT v. General Contractors Co (2012) 210 Taxman 277\/79 DTR 97 (SC)<\/em><\/strong><\/p>\n

S.32A: Investment allowance-Manufacture-Mining of granite- Activities of mining from quarries and exporting them after cutting, polishing etc, which tantamount to manufacture for the purpose of section 32A.<\/strong>
\n The issue before the Court was whether the assessee entitled to investment allowance  on the activities of the assessee, viz, mining granite from quarries and exporting them after cutting, polishing etc, which tantamount to manufacture for the purpose of Section 32A of the Income-tax Act, 1961. Following the case in Gem Granites v. CIT (2004) 141 Taxman 528(SC), Civil appeal filed by the assessee was allowed.
\n Tamil Nadu Minerals Ltd v. CIT (2012) 210 Taxman 257\/254 CTR 105\/79 DTR 44(SC)<\/em><\/strong><\/p>\n

S.32A: Investment allowance- Production- Engaged in mining, polishing and export granites constitute ‘production’ for claiming deduction under section 32A, matter was remitted to the Assessing Officer for reconsideration.<\/strong>
\n The issue before the Court was whether the assessee has undertaken activity which results in production and consequently, whether the assessee is entitled to claim the benefit of investment allowance under section 32A  of the Income –tax Act 1961.The Court observed that the assessee has not led evidence before the Assessing Officer as to the exact nature of activities undertaken by it in the course of mining, polishing and export of granites. For the reasons the order of High Court as well as Tribunal was set aside and matter remitted to the Assessing Officer to decide the issue within three months .
\n Vijay Granites (P) Ltd v. CIT (2012) 210 Taxman 228\/254 CTR 101\/79 DTR 11 (SC) <\/em><\/strong><\/p>\n

S. 36(1)(iii):Deductions-Interest on borrowed capital-Extension of existing business-Interest paid on funds borrowed for purposes of setting up of sugar plant was held to be as allowable deduction. <\/strong>
\n The assessee having a ferroalloys manufacturing plant has set up a sugar pant at different places out of its borrowed fund. There was a unity of control and management  in respect of ferroalloys plant as well as sugar plant and there was also intermingling of funds and dove –tailing of business. Since it was mere extension of business of ferro-alloys plant ,interest paid on funds borrowed for purpose of setting up of sugar plant was allowable as deduction (A.Y. 1996-97)
\n CIT v. Monnet Industries Ltd (2012) 210 Taxman 264\/254 CTR 109\/79 DTR 47 (SC)<\/em><\/strong>
\n Editorial:<\/strong> CIT v. Monnet Industries Ltd ( 2009)332 ITR 627\/ 176 Taxman 81 (Delhi) (High Court), affirmed. <\/p>\n

S.36(1)(iii): Deductions-Interest on borrowed capital-Acquisition of capital asset-Interest paid in respect of borrowings for acquisition of capital assets not put to use in concerned financial year can be allowed as deduction under section 36(1)(iii).<\/strong>
\n The question before the Court was whether the interest paid in respect of borrowings for acquisition of capital assets not put to use in the concerned financial year can be permitted as allowable deduction under section 36(1)(iii) of the Income –tax Act ,1961.Following the judgment in Dy.CIT v. Core Health Care Ltd (2008) 298 ITR 194 (SC) , the Civil appeals filed by the assessee are allowed. (A.Y. 1992-93)
\n Vardhaman Polytex Ltd v. CIT ( 2012) 210 Taxman 261\/254 CTR 102\/79 DTR 41(SC)<\/em><\/strong>
\n Editorial: Proviso  to section 36(1)(iii) inserted by the Finance Act , 2003, w.e.f 1.4.2003)   <\/p>\n

S.36(1)(iii): Deductions-Interest on borrowed capital- interest free advances to subsidiary <\/strong>
\n There is no need to establish the nexus when it is proved that  assessee has its own funds which are much more than the advances\/investments made by assessee to its sister concern. It is further seen that the only loan taken by assessee was of Rs.10.5 crores during the year and interest paid by assessee on its loan and advances was Rs.27 crores, therefore, disallowance cannot exceed these amounts. Therefore, for this reason also disallowance deserves to be deleted. Even otherwise, the amount has been advanced to its sister concern\/subsidiary, which are doing business and it has been clearly stated that the same has been advanced for commercial expediency, therefore, no disallowance is to be made. (A.Y.1997-98 & 1999 – 2000)
\n Hutchison Essar Telecom Ltd v. Jt. CIT (2012) 78 DTR 1(Delhi) (Trib.) <\/em><\/strong><\/p>\n

S.36(1)(iii): Deductions-Interest on borrowed capital – deduction of interest on loans taken from two banks, money had been borrowed in earlier years ,no evidence to show that money utilized for personal benefit hence claim was  allowed.<\/strong>
\n The assessee claimed deduction of interest on loans taken from two banks taken in the financial year 2002-03 and 2003-04 respectively for discharge of personal liabilities. The AO disallowed the claim on the ground that the assessee had borrowed the sums for personal use, and had given loans of to various parties from whom no interest was offered as income. It was held that the money had been borrowed in earlier years. Although the A.O. had mentioned that the amount had been borrowed for personal use he had not brought any material on record to substantiate this. The assessee being a film star had to maintain a certain standard of living for which he may require money from time to time. Even assuming that the assessee had borrowed money to purchase a luxurious car, that would justify looking to the nature of profession of the assessee. The claim was rightly allowed.(A.Y. 2002-03, 2003-04)
\n Jackie Shroff v. ITO (2012) 19 ITR 83 (Mum.)(Trib.)<\/em><\/strong><\/p>\n

S.36(1)(vii): Deductions-Bad debts-Schedule bank-Provision for bad and doubtful debt- Deduction is allowable independently and irrespective of provision for bad and doubtful debts created by it. [S. 36(1)(vii)]<\/strong>
\n The question before the Court was whether in case of schedule bank, deduction under section 36(1)(vii) is available independently  and irrespective of provision for bad and doubtful debts created by it in relation to advances made by its rural branches. Subject to limitation that an amount should not be deducted twice under section 36(1)(vii) and 36(1)(viia) simultaneously .The court followed the ratio of the judgment in case of Catholic Syrian Bank Ltd v.CIT (2012) 343 ITR 270(SC), and dismissed the civil appeal of the department.(A.Y. 1993-94 , 1994-95)
\n Dy.CIT v. Karnataka Bank Ltd ( 2012) 210 Taxman 235\/254 CTR 103\/79 DTR 42  (SC).<\/em><\/strong>
\n Editorial:<\/strong> Judgement in Dy.CIT v. Karnataka Bank Ltd (2008) 175 Taxman 325(Karn.)(High Court), is affirmed.   <\/p>\n

S.37(I): Business expenditure- Personal expenditure<\/strong>–Company-no disallowance for ‘personal expenditure’ in case of a company.<\/strong>
\n  There can be no disallowance for ‘personal expenditure’ in case of a company(A.Y.1988-89).
\n CIT v. Nuchem (2012) 208 Taxman 250(Mag.)(P & H.)<\/em><\/strong> (High  Court)<\/strong>.<\/p>\n

S.37(1): Business expenditure- Marketing and travelling expenses <\/strong>
\n The Tribunal observed that the disallowance had been sustained by the DRP mainly on the ground that assessee has been unable to justify the incurrence of such expenditure wholly and exclusively for the purpose of its business. Observations of DRP vide which the addition has been sustained cannot be said to be speaking observation to hold the matter against the assessee. Moreover, the Assessee had furnished a chart to show that all these expenses have been recovered as cost. A clear finding of fact has to be recorded on such arguments of the assessee. Assessee has also been able to show that most part of the cost is incurred on the media covering Indian territory. Matter is remanded for reconsideration. Regarding foreign travel expenses, when complete details are filed, disallowances cannot be made on adhoc basis. Expenses relating to travelling to Singapore having been allowed by DRP only on the ground that assessee has AE in Singapore and for other countries these expenses have not been allowed on the ground that travel to other countries was not justified. Such reason is not sufficient to make disallowance. (A.Y. 2007 – 08)
\n Symantec Software Solution (P) Ltd. v. ACIT (2012) 77 DTR 161 (Mum) (Trib)<\/em><\/strong><\/p>\n

S.37(1): Business expenditure- Foreign travel expenses-New business-Allowable as revenue expenditure.<\/strong>
\n Foreign travel expenses incurred to explore new business opportunities, are eligible       as ‘revenue’ in nature.(A.Y.1988-89)
\n CIT v. Nuchem 208 Taxman 250(Mag.) (P & H.)<\/em><\/strong> (High Court)<\/strong>.<\/strong><\/p>\n

 <\/strong><\/p>\n

S.37(1): Business expenditure –Education abroad- Son of ex-director-Expenditure was held to be allowable.  <\/strong>
\n The assessee is engaged in the business of printing and distribution of news papers and magazines, it incurred expenditure on employee who was son of the ex director for higher studies in printing technology .It claimed the said expenditure as allowable expenditure. The Assessing Officer disallowed the expenditure. Tribunal in appeal allowed the claim of assessee. On appeal by the revenue the court  up held the view of  Tribunal by holding that ex-director’s son was an employee of assessee and he was sent by assessee to have advanced knowledge of latest printing technology which was directly related to assessee-company business. Appeal of revenue was dismissed. (A.Ys. 2005-06, 2006-07)
\n CIT v. Naidunia News and Networking (P.) Ltd. (2012) 210 Taxman 73   (MP) (High Court) <\/em><\/strong><\/p>\n

S.37(1): Business expenditure- lease rent- Allowable as revenue expenditure. <\/strong>
\n There is a lot of difference between the purchase, hire purchase and lease agreement. In this case, the terms indicate that the provider of the machines was required to maintain the machines and, therefore, he was entitled to take the rent also as per the terms of the agreement, and the assessee, in the relevant year, could not have exercised his right to purchase the air conditioner and his right to purchase the air conditioner could have been exercised after expiry of certain period of time. Therefore, in that situation, there was an agreement for lease only and the Tribunal was right in allowing the claim of expenses on lease rent as revenue expenditure.
\n CIT v. Tata Robins Fraser Ltd. (2012) 78 DTR 22 (Jharkhand)(High Court)<\/em><\/strong><\/p>\n

S.37(1): Business expenditure- Subsidy to school <\/strong>
\n Subsidy to school in which children of the employees of the assessee company study was deductible as business expenditure.
\n CIT v. Tata Robins Fraser Ltd. (2012) 78 DTR 22 (Jharkhand)(High Court)<\/em><\/strong><\/p>\n

S.37(1): Business expenditure- Capital or revenue – abandoned project <\/strong>
\n It is not in dispute that the project could not be accomplished because of the reason that the place where it was to be undertaken had a poor quality of soil and all the construction already damaged – other articles bought by the assessee also got damaged. In that fact situation, the Tribunal was fully justified in holding that such expenditure which may be pre operational expenditure for a project can be treated to be a revenue expenditure actually and not a capital expenditure.
\n CIT v. Tata Robins Fraser Ltd. (2012) 78 DTR 22 (Jharkhand)(High Court)<\/em><\/strong><\/p>\n

 S.37(1): Business expenditure –Lease 90 years-Amortisation of premium  – Lease premium held to be capital in nature and cannot be allowed as revenue in nature for the assessment year 2004-05.<\/strong>
\n Assessee entered into an agreement with development authority in 1989 by which certain land was allotted in favour of assessee for a period of 90 years. Assessee was entitled to set up office complex on said land. It paid substantial amount of premium (upfront fee) to development authority at time of allotment. In addition, assessee had to pay 2.5 per cent of said premium as annual rent. Assessee amortized amount of premium paid over period of lease and claimed deduction of same in relevant assessment year. In fact the revenue authorities have allowed the claim for 15 years , however for the relevant assessment year the revenue authorities rejected assessee’s claim holding that lease of land for 90 years conferred a benefit of enduring nature to assessee and, consequently, it was in nature of capital expenditure. The view of Assessing  Officer  was up held by the Commissioner (Appeals) and Tribunal. On appeal to the High Court the Court held that  in view of fact that tenure of lease was quite substantial and virtually created ownership rights in favour of assessee who was at liberty to construct upon plot, expenditure incurred by assessee towards upfront fee was capital in character and could not be allowed to be amortized over period of lease.  The Court also held that the  fact that for period of about 15 years, income-tax authorities had accepted assessee’s claim and permitted annual amortization of initial lease consideration as advance rent, could not be ground to allow such deduction in relevant assessment year.(A.Y.2004-05 )    
\n Krishak Bharati Cooperative Ltd. v. Dy. CIT (2012) 210 Taxman 123  (Delhi) (High Court) <\/em><\/strong><\/p>\n

S.37(1): Business expenditure – Payment of premium for purchase of its own shares from shareholder creating problem – Allowable as business expenditure as smoothens functioning of business.<\/strong>
\n Expenditure incurred by the assessee company on payment of premium for purchase of its own shares from warring group of shareholders who were creating problems in the smooth functioning of the business and raising dispute which adversely affected day to day business of the assessee is revenue expenditure and is allowable as business expenditure. <\/strong>(A.Y. 2007-08)
\n Chemosyn Ltd. v. ACIT (2012)139 ITD 68\/19 ITR 6\/ 149 TTJ 294\/79 DTR 89 (Mum.)(Trib.)<\/em><\/strong><\/p>\n

S.37(1): Business expenditure –<\/strong> Replacing old worn out mechanical yarn clearers-  Revenue expenditure – Expenditure incurred on replacing old worn out mechanical yarn clearers held as revenue expenditure. <\/strong>
\n Expenditure incurred on replacing old worn out mechanical yarn clearers with electronics yarn clearers is not new advantage to assessee, and hence, expenditure is held as revenue expenditure. (A.Y. 2007-08)
\n Prabhu Spinning Mills P. Ltd. v. Dy. CIT(2012) 19 ITR 106 (Chennai) (Trib.)<\/em><\/strong>
\n Sudhan Spinning Mills P. Ltd. v. Dy. CIT (2012) 19 ITR 106 (Chennai) (Trib.)<\/em><\/strong><\/p>\n

S.37(1): Business expenditure- Fine – Transporter of goods-Held not allowable.<\/strong>
\n Assessee is engaged in the business of transport of goods.Police authorities levied penalty in the course of regulating the traffic. The Tribunal held that whatever may be the reason for paying penalty, it is paid for violation of traffic rules,therefore, it is against the public policy and hence such payment cannot be allowed as business expenditure. (A.Y. 2006-07)
\n T.T. Kuruvilla v. Dy. CIT (2012) 77 DTR 278 (Cochin)(Trib.) <\/em><\/strong><\/p>\n

S.37(1): Business expenditure- Expenditure incurred on a director for studies abroad. <\/strong>
\n No bond executed by director that she would work for the assessee company after she completes the course and on failure shall return the money spent – said director had applied for the said course even before she completed her graduation and joined the same in continuation. Expenditure was not wholly and exclusively for business of assessee company, hence not allowable as business expenditure. (A.Y.    )
\n Natco Exports (P) Ltd v. CIT  (2012) 78 DTR 37 (Delhi)(Trib.)<\/em><\/strong><\/p>\n

S.37(1):Business expenditure- Capital or revenue – Repairs and maintenance<\/strong>
\n Expenditure was incurred on upkeep, servicing and maintenance of drilling rigs and its auxiliary equipments. Equipments had been already installed and the expenditure was incurred purely towards repairs and maintenance of the same. Expenditure was incurred on procurement of stores, spares, consumables, etc. These consumable items do not have substantial life and are required to be replaced frequently. Further, it was incorrect to contend that the impugned expenditure was incurred prior to the commencement of business. As per the details of expenditure placed on record, same was incurred after the date of acquisition of business. No capital asset had come into existence whereby assessee has obtained enduring benefit. Therefore, the expenditure in question is revenue in nature. (A.Y. 2004 – 05 to A.Y 2006 – 2007)
\n Addl. DIT (International Taxation) v. Dalma Energy LLC (2012) 78 DTR 219 (Ahd.)(Trib.)<\/em><\/strong> <\/p>\n

S.37(1): Business expenditure –Set up of business-Commencement of business-<\/strong> Business of  assessees should be considered to be set up from date when water was supplied through main  canals during current year and all revenue expenditure after that date had to be allowed as deduction.  <\/strong>
\n A company can be said to have set up its business from date when one of categories of its business is started and it is not necessary that all categories of its business activities must start either simultaneously, or that last stage must start before it can be said that business was set up. Test to be applied is as to when a businessman would regard a business as being commenced and approach must be from a commonsense point of view. Assessee corporation had object to promote government irrigation and water supply in State. It was claim of assessee that during year under consideration it had started activity of supplying water to people through its canal from Narmada Dam. It claimed that all expenditure incurred by it for purpose of carrying on its business had to be allowed as deduction. Assessee in fact achieved purpose for which it was established and mere fact that entire stretch of canal up to desired destination was not completed would not be sufficient to hold that assessee’s business was not set up\/commenced.  Business of  assessees should be considered to be set up from date when water was supplied through main  canals during current year and all revenue expenditure after that date had to be allowed as deduction.(A.Y. 2001-02)
\n Sardar Sarovar Narmada  Nigam Ltd. v. ACIT(2012) 138 ITD 203 \/ 149 TTJ 809 \/ 78 DTR 172(SB) (Ahd.)(Trib.) <\/em><\/strong><\/p>\n

S.40(a)(i): Amounts not deductible-Deduction at source- Interest<\/strong>
\n Usance interest is charged in connection with import of law material. Usance interest paid to non resident for availing 180 days credit facility on the value of goods imported was interest paid in respect of debt incurred and constituted interest within the meaning of s. 2(28A), hence non deduction of tax therefrom under s. 195(1) attracted disallowance u\/s. 40(a)(i). Same cannot be considered as part of value of goods. (A.Y.2002 – 03)
\n Uniflex Cables Ltd v. DCIT (2012) 78 DTR 118 (Mum.) (Trib.) <\/em><\/strong><\/p>\n

 S.40(a)(ia): Amounts not deductible- Deduction at source-Payment to contractors-Form no 15-I-<\/strong> Once the assessee obtained Form No.15-I from the sub-contractors whose contents are not disputed or whose genuineness is not doubted then the assessee is not liable to deduct tax from the payments made to sub-contractors. Once assessee is not liable to deduct tax u\/s 194C then disallowance u\/s 40(a)(ia) cannot be made. . (S.194C.)<\/strong>
\n The second Proviso to s. 194C read with Rule 29-D provides that no tax need be deducted at source if the sub-contractor produces a declaration in Form 15-I that he does not own more than 2 goods carriages and the assessee (payer) furnishes a declaration in Form 15-J to the CIT on or before 15th June of the FY. The assessee obtained Form 15-I from the sub-contractors but did not file Form 15-J with the CIT within the prescribed due date. The AO & CIT(A) held that as there was a breach of the requirement of s. 194-C, the assessee ought to have deducted TDS u\/s 194-C and as it had failed to do so, the expenditure had to be disallowed u\/s 40(a)(ia). On appeal by the assessee, the Tribunal (order included) reversed the lower authorities. On appeal by the department to the High Court, held dismissing the appeal:
\n Once the assessee obtained Form No.15-I from the sub-contractors whose contents are not disputed or whose genuineness is not doubted then the assessee is not liable to deduct tax from the payments made to sub-contractors. Once assessee is not liable to deduct tax u\/s 194C then disallowance u\/s 40(a)(ia) cannot be made. The assessee’s breach of the requirement to furnish details to the income tax authority in the prescribed form within prescribed time may attract other consequences but cannot result in a s. 40(a)(ia) disallowance.(A.Y.2006-07)
\n CIT v. Valibhai Khanbhai Mankad (Guj. )( High Court) www.itatonline.org. <\/em><\/strong>
\n Editorial:<\/strong> Judgment of Tribunal Valbhai Khanbhai Mankad v. Dy.CIT (2011) 56 DTR 89\/ 46 SOT 469\/139  TTJ 70 (Ahd.)(Trib.) is affirmed.<\/p>\n

 <\/strong><\/p>\n

S. 40(a)(ia): Amount not deductible – deduction at source – Amounts payable on last date of previous year-Provision applied only to those amounts which were remaining payable as on the last day of the previous year.<\/strong>
\n The provisions of sec. 40(a)(ia) applied only to those amounts which were remaining payable as on the last day of the previous year. So what had been paid during the relevant year would not be hit by sec. 40(a)(ia). (A.Y. 2009-10)
\n S.S. Warad v. Addl. CIT (2012) 19 ITR 35 (Bang)(Trib.)<\/em><\/strong><\/p>\n

S.40(a)(ia): Amounts not deductible-Deduction at source- Fees for professional fees<\/strong>
\n If the doctors to whom the payments are made are rendering services in respect of the principal activity of the assessee’s nursing home, the firm would be professional firm. However, if the doctors are practicing independently in their respective areas of practice for a separate charge or are paid a fixed sum by the nursing home, it will partake the character of “business”  – Matter having not been considered in its correct perspective whether the assessee was carrying on profession or business vis-a-vis requirement of audit under s. 44AB matter remanded for consideration afresh. (A.Y. 2007 – 08)
\n Sunil Chandak v. ITO (2012) 77 DTR 305 (Jodhpur) (Trib.)<\/em><\/strong><\/p>\n

S.40A(3): Expenses not deductible- Cash payment exceeding limits-If building constructed was not for personal use  the  disallowance will be justified if the cash payment were made exceeding the prescribe limit.<\/strong>
\n The assessee constructed the building for  business and leasing . The Assessing Officer disallowed the cash expenses . On appeal Tribunal  deleted the disallowances . On appeal by the revenue the Court held that , when the assessee was putting up  construction not for self  occupation , but for business of selling a portion of building and leasing over the premises the cash payment exceeding the limit prescribed under section 40A(3)  has to be disallowed . Accordingly the appeal of revenue was allowed. (A.Y. 1996-97)
\n CIT v. Sanu Family Trust ( 2012) 209 Taxman 529 (Karn.)(High Court)<\/em><\/strong><\/p>\n

   <\/strong> <\/strong>
\n S.40A(3): Expenses not deductible- Applicability of amended provision – Expenditure incurred for which liability has been incurred in AY 2008-09 or in any subsequent year, not to AY 2007-08.<\/strong>
\n Amended provisions of S. 40A(3) and 40A(3A) are applicable in respect of those expenditure for which liability has been incurred in AY 2008-09 or in any subsequent year but it cannot be made applicable to the liability incurred upto AY 2007-08. (A.Y. 2008-09)
\n Anandkumar Rawatram Joshi v. ITO (2012) 149 TTJ 197 (Ahd)(Trib.)<\/em><\/strong><\/p>\n

S.40A(9): Expenses or payments not deductible- Bonus to employees- Contribution to schools for education of employees’ children <\/strong>
\n The supreme court held that there is a difference between  reimbursement and contribution. Matter is remitted to the Tribunal for de novo consideration by bifurcating the payments made by the assessee company between payments made to the school promoted by it for the education of its employees’ children and other schools. If the Tribunal comes to the conclusion that the amount has been reimbursed, the quantified amount has to be certified by a chartered accountant to enable the assessee to make the claim.         (A.Y. 1994 – 95)
\n Kennametal India Ltd. v. CIT (2012) 77 DTR 236 (SC) <\/em><\/strong><\/p>\n

S.43A: Rate of exchange-Foreign currency-  depreciation <\/strong>
\n Assessee was entitled to depreciation on additional liability for loan raised in foreign currency, due to fluctuation in change rate, notwithstanding the fact that there was no actual payment. Amendment to s.43A by Finance Act,2002 w.e.f. 1st April, 2003, was not retrospective. CIT vs. Woodward Governor India (P) Ltd. (2009) 312 ITR 254 (SC) followed. (A.Y. 1994 – 95 to 96-97 and 2002 – 03)
\n CIT v. Oswal Spinning & Weaving Mills Ltd. (2012) 77 DTR 228 (P&H)(High Court)<\/em><\/strong><\/p>\n

S.43B: Deductions on actual payment-Bonus-Deposit in separate bank account-<\/strong> Deposit of amount in a separate account maintained by assessee did not satisfy the requirement of law under section 43B as to actual payment.<\/strong>  <\/strong>
\n There was a dispute between management and employees as regards percentage of bonus payable by assessee.In respect of admitted percentage of bonus payable as per settlement of dispute, assessee deposited amount in a separate bank account. It was held that the requirement of section 43B is an actual payment and not deemed payment and even creating an irrevocable trust would not satisfy requirement of law. Hence  mere fact that assessee had quantified bonus payment and deposited in a separate account maintained by assessee did not mean that requirement of law under section 43B as to actual payment stood satisfied. Appeal of assessee was dismissed. (A.Y.1997-98 )
\n Thanjavaur Textiles Ltd. v. JCIT (2012) 210 Taxman 111  (Mad.) (High Court) <\/em><\/strong><\/p>\n

S.44B: Shipping business-Non-residents-Permanent establishment- DTAA-India-Swiss- Shipping profits not taxable in India even if there is a Permanent establishment. (Article. 7, 8, 22 )<\/strong> <\/strong>
\n The assessee, a Swiss company, earned shipping profits. Article 7 of the India-Swiss DTAA excluded shipping profits from its ambit. Article 22 of the DTAA provided that any other income not specifically dealt with would be taxable only in Switzerland and not in India. The assessee claimed that in accordance with Article 22, its shipping profits were taxable only in Switzerland. However, the department held, relying on Gearbulk AG 184 Taxman 383 (AAR), that as shipping profits had been “dealt with” in the DTAA, Article 22 would not apply and the income would be assessable u\/s 44B of the Act. It was also held that even if Article 22 (1) applied, as the assessee’s agent in India constituted a PE, the shipping profits were assessable to tax in India under Article 22(2). The CIT(A) accepted the assessee’s stand that Article 22 of the DTAA applied to it. He further held that though the assessee’s agent was its’ PE, the income from the ships was not “effectively connected” with the PE as the ships were owned by the assessee and not by the agent. On appeal by the department, held by the Tribunal: 
\n (i) Article 22 (1) provides that items of income of a resident of Switzerland “which are not dealt with” in the foregoing Articles of the DTAA shall be taxable only in that State. The department’s argument that by agreeing to exclude shipping profits from Article 8 as well as Article 7 of DTAA, it has been “dealt with” and, therefore, Article 22(1) shall not apply is not correct. The expression “dealt with” contemplates a positive action and it is necessary that the relevant article must state whether Switzerland or India or both have a right to tax such item of income. Vesting of such jurisdiction must positively and explicitly stated and it cannot be inferred by implication. It is also the view of the Competent Authorities in the letters exchanged that shipping profits would be governed by Article 22 & not s. 44B of the Act (Gearbulk AG 184 Taxman 383 (AAR) not followed);
\n (ii) As regards Article 22(2), the agent did constitute a PE as it (the agent) was legally and economically dependent on the assessee and the assessee was managing and controlling some of its business operations in India through the said agent. However, the property in respect of which the shipping income was received by the assessee was not “effectively connected” with the PE. Economic ownership has to be taken as the basis or criteria to apply the concept of “effectively connected with”. Since the economic ownership of the ships cannot be allocated to the PE but always remained with the assessee, it cannot be said that the property in the said ships is “effectively connected” with the PE in India (Sumitomo Mitsui Banking Corp<\/a> followed)( A. Y. 2002-03)
\n ADIT v. Mediterranean Shipping Co. S.A ( Mum)(Trib.)www.itatonline.org <\/em><\/strong>
\n  <\/strong>
\n S.44BB: Mineral oils-Processing and interpreting raw seismic data for a UAE Co – income not from the Government or Indian concern  is  not covered  under, sections, 44D, 44DA or 115A is  assessed u\/s.44BB(1<\/strong>).( S. 44D, 44DA, 115A )<\/strong>
\n The applicant, formed in UK, was awarded a contract by a UAE company for processing and interpreting raw seismic data acquired by the UAE company on board its vessels during survey in Krishna Godavari basin under contract from ONGC. Revenue contended that the applicant is only a sub-contractor of a sub-contractor of ONGC engaged in exploration and extraction of oil and such a sub-contractor is not entitled to rely on section 44BB(1) of the Act since the services provided cannot be said to be in connection with prospecting for oil.
\n The Authority observed that the income derived by the applicant is from a UAE company and not from the Government or an Indian concern. Hence the income cannot be brought within the purview of S. 44D, 44DA, or 115A because they only speak of income by way of fees for technical services received from Government or an Indian concern. It accordingly ruled that since income derived by the applicant, is from an activity in connection with the prospecting for mineral oils and from a foreign company, the applicant would be entitled to claim to be assessed under section 44BB(1) of the Act.
\n Spectrum Geo Ltd., UK – A.A.R. No. 954 dt. 01\/08\/2012(AAR)<\/em><\/strong><\/p>\n

S.44C:Non-residents- Head office expenditure-Indo – UAE DTAA<\/strong>
\n Where an assessee does not have any business overseas the question of allocating a part of the expenditure to the business carried on in India cannot arise. If there is overseas business, the head office expenditure which is not entirely for the PE in India but also pertains to the foreign head office has to be restricted. View of the CIT(A) that the provisions of s. 37(1) become redundant in view of the restrictions under s. 44C cannot be accepted. Clause (c) of s. 44C states that so much of the head office expenditure as its attributable to the business of the assessee in India is to be allowed subject to a ceiling of upper limit as prescribed in s. 44C – In the instant case, the ALP of the transaction as reported by assessee has been accepted by the TPO. AO is directed to verify as to whether the allocation of common administrative expenditure for the year under consideration is on the same pattern as in the earlier year which has been accepted to be at arms’s length by the TPO. By amendment of art. 7(3) of the DTAA between India and UAE vide Notification No.282 of 2007, dated 28th Nov. 2007, it was decided to incorporate that, for the purposes of determining the profits of PE, there shall be allowed deduction of expenses incurred for the purposes of the business of the PE including general administrative expenses but in accordance with the provisions and also subject to the limitations of the tax laws of that state. Applicability of the provisions of s. 44C has been enforced, nevertheless w.e.f. 1st April 2008. (A.Y. 2004 – 05 to A.Y 2006 – 2007)
\n Addl. DIT (International Taxation) v. Dalma Energy LLC (2012) 78 DTR 219 (Ahd.)(Trib.)<\/em><\/strong> <\/p>\n

S.45: Capital gains- Allotment letter-Under construction-Long term-Short term-Flat sold after three years  from  date of allotment of flat under construction but within three  years from  date of possession, held to be long term.(S. 2(29A), 2(42B), 54)<\/strong>
\n The assessee was allotted a flat on 27-2-1982, thereafter on completion of construction of the same the assessee was handed over the possession on 15-5-1986 and the flat was sold on 6-1-1989. The assessee claimed the sale as a long term capital gain and invested the same in a another apartment and claimed deduction u\/s 54 of the Act. The AO, CIT(A) and tribunal both held that the sale amounts to short term capital gain as the flat was sold within 36 months from the date the assessee received possession of the said flat. On appeal to the High Court by the assessee the High Court while allowing the appeal held that as per paragraph 2 of circular No.471 dated 15-10-1986, 162 ITR (St) 41 issued by the board as to the nature of that right that an allottee acquires on allotment of flat, the allottee gets title to the property on the issuance of an allotment letter and the payments of installments was only a consequential action upon which the delivery of possession follows. The High Court therefore held that in the instant case the right of the assessee prior to the possession of the flat was a right in the property, and therefore in such a situation it cannot be held that prior to that date, the assessee was not holding the flat, and therefore held that the sale of the flat amounts to a long-term capital gain.( <\/strong>A.Y. 1989-90)
\n Vinod Kumar Jain v. CIT(2012) 344 ITR 501 (P&H)(High Court) <\/em><\/strong> <\/p>\n

S.45: Capital gains – Computation-Accrual of income-Tripartite development agreement – Amount never received by assessee under the arrangement capital gain cannot be assessed. (S.48)<\/strong>
\n Agreed consideration in the form of constructed area of 18000 sq ft as stated in the development agreement between the assessee landowner and the developer not having been actually received by the assessee as a result of subsequent developments i.e. sale of entire property to a third party, that part of the consideration did not actually accrue to the assessee and, therefore, same cannot be taken into account for the purpose of computation of capital gain arising from the transfer of property. (A.Y. 2007-08)
\n Chemosyn Ltd. v. ACIT (2012)139 ITD 68\/19 ITR 6\/ 149 TTJ 294\/77 DTR 89 (Mum.)(Trib.)<\/em><\/strong><\/p>\n

S.45: Capital gains – Consideration – Entire consideration on transfer of property is to be taken for consideration during year in which transfer is effective.<\/strong>
\n In view of provisions of sec. 45(1) entire consideration on transfer of property is to be taken for consideration during year in which transfer is effective, irrespective of fact that payment of a part of consideration may have been deferred by parties. (A.Y. 2006-07)
\n ITO v.  Indira R. Shete(Ms) (2012) 138 ITD 264 (Mum.)(Trib.)<\/em><\/strong><\/p>\n

S.45: Capital gains- Port folio management service (PMS)-Business income- Gains from port folio management provider has to be assessed as capital gains and not as business income. [S.28(i)].<\/strong>
\n The assessee declared the capital gains in respect of investments made through the PMS providers. The Assessing Officer assessed the long term as well as short term gains as business income. On  appeal Commissioner (Appeals)  upheld the contention of assessee. On further appeal to Tribunal by revenue, the Tribunal held that  by engaging PMS provider, assessee was looking  for appreciation and maximization of wealth and not merely encashing of profits as trader , gain from such activity was liable to be considered as derived from activity of investment and not trading  hence liable to be assessed as capital gains. (A.Y.2006-07)
\n Apoorva Patni  v. Addl.CIT (2012) 24 Taman.com 223 (Pune.)(Trib). <\/em><\/strong>
\n  <\/strong>
\n S.45: Capital gains-Merger and amalgamation-100% subsidiary-Merger by takeover of all assets and liabilities of 100% subsidiary without any consideration ,gain is not determinable u\/s 45 and s. 48 is not chargeable to tax( S.2(IB), 47 (via), 48)<\/strong>
\n Swiss applicant had 100% subsidiary in India and intended to merge with Swiss parent under the Swiss Merger Act. All assets & liabilities of the applicant would be assumed by the Swiss parent and no consideration would pass to the applicant consequent on the merger. The Authority observed that the gain if any in this case is not determinable within the scope of section 45 and section 48 of the Act as postulated in the Ruling in Dana Corporation (AAR No.788 of 2008). Accordingly, it ruled that vesting of shares of Indian subsidiary in parent company after amalgamation is not chargeable to capital gains tax under S. 45. However it also held that the merger was not exempt u\/s 47(via). Sec 47(via) exempts transfer of Indian assets pursuant to amalgamation of foreign companies, subject to certain conditions which are not met.( A. A. R. No. 956 dt. 22\/08\/2012) <\/em><\/strong>
\n Credit Suisse (International) Holding AG (2012) 252 CTR 250(AAR)<\/em><\/strong><\/p>\n

S.45: Capital Gains-Buy back of shares-Mauritius tax resident –Transfer pricing-DTAA- India-Mauritius -Capital gains in hands of Mauritian shareholder on buy back is exempt, section 47(iv)is  not applicable as entire capital is not held by Mauritius co, transfer pricing  provisions would apply. (S.47(iv), 92C)<\/strong>
\n The applicant, a tax resident of Mauritius is a wholly-owned subsidiary of a UK Company (‘UK Co.’). Indian Company (‘Ind Co.’) is held by the applicant (99.97%) and UK Co. (0.03%). Ind. Co proposes to buyback a part of its shares from the applicant under Section 77A of the Companies Act, 1956. Revenue contended that the applicant is a shell company with no business purpose and that the transactions were undertaken with the motive of tax avoidance.<\/p>\n

The Authority observed that sufficient evidence was not produced by IT Dept to substantiate that investments were made through the applicant to take advantage of the India-Mauritius DTAA and to avoid tax in India. It relied on the Supreme Court decision in the case of Azadi Bachao Andolan [2004] 10 SCC 1 (SC) and held that the applicant was eligible to claim the benefit under the said DTAA and capital gains should be taxed only in Mauritius. It further ruled, placing reliance of ruling in the case of RST (AAR No.1067 of 2011) that benefit of S. 47(iv) would not be available as the entire share capital of Ind. Co was not held by the applicant but jointly by the applicant and UK Co. Further placing reliance on the ruling in Castleton Investment Ltd. (AAR No. 999 of 2010), it ruled that transfer pricing provisions would apply for income from international transactions even though the transaction may not be taxable in view of the DTAA . ( A.A.R. No. 1044 dt. 22\/08\/2012) <\/em><\/strong>
\n Armstrong World Industries Mauritius Multiconsult Limited(2012) 252 CTR 260\/210 Taxman 303(AAR)<\/em><\/strong>
\n  
\n S.48: Capital gains – Computation-Constructed area-<\/strong> Agreed consideration not being actually received the same cannot be taken into account for the purpose of computation of capital gains.<\/strong> <\/strong>
\n Agreed consideration in the form of constructed area of land as stated in the development agreement between the assessee-landowner and the developer not having been actually received by the assessee, the same cannot be taken into account for the purpose of computation of capital gain arising from the transfer of the property.(A.Y.2007-08 )
\n Chemosyn Ltd. v. ACIT (2012) 139 ITD 68\/19 ITR 6\/ 149 TTJ 294\/77 DTR 89  (Mum.)(Trib.)<\/em><\/strong> <\/strong><\/p>\n

S.48: Capital gains – Agricultural land –Compensation received for right of lifting water from well  was not liable to  capital gain.(S.45 )<\/strong>
\n The assessee was the owner of the agricultural land situated in Pune on which a well was existing.  State Government acquired assessee’s land along with a well thereon and paid compensation. State Government granted a special privilege to assessee for lifting water from well by paying nominal rent of Re. one per year. Subsequently Municipal Corporation. took over aforesaid land along with well and paid to assessee Rs.15 lakhs for surrendering his right to lift water from well. Since right of lifting water from well was not acquired by incurring any cost, no capital gain could be worked out on aforesaid amount. (A.Y. 2003-04)
\n Dilip G. Sopal Barshi v. ITO (2012) 138 ITD 272 (Pune)(Trib.)<\/em><\/strong><\/p>\n

S.48: Capital gains- Income from house property- Deductions –Interest- Interest paid on borrowing for acquiring house is  deductible under section 24(b) and as cost of acquisition under section 48. [S.24(b)]<\/strong> <\/strong>
\n  The assessee borrowed funds for purchasing a house. The interest paid on the said loan was claimed as a deduction u\/s 24(b). When the house was sold, the interest paid on the said loan was treated as “cost of acquisition” and claimed as a deduction u\/s 48 in computing the capital gains. The AO held that as the interest had been allowed as a deduction u\/s 24(b), it could not allowed again in computing capital gains. The CIT(A) allowed the claim. On appeal by the department to the Tribunal, held  dismissing the appeal:
\n Deduction u\/s 24(b) and computation of capital gains u\/s 48 are altogether covered by different heads of income i.e., income from ‘house property’ and ‘capital gains’. Neither of them excludes the other. A deduction u\/s 24(b) is claimed when the assessee computes income from ‘house property’, whereas, the cost of the same asset is taken into consideration when it is sold and capital gains are computed under section 48. There is no doubt that the interest in question is an expenditure in acquiring the asset. Since both provisions are altogether different, the assessee is entitled to include the interest at the time of computing capital gains u\/s 48.(A. Y. 2007-08)
\n ACIT v . C.  Ramabrahmam  (Chennai)(Trib.) www.itatonline.org. <\/em><\/strong><\/p>\n

S.48: Capital gains-Computation- Divided by subsidiary before sale of shares by holding company.<\/strong>
\n Distribution of dividend by the wholly owned subsidiary of the assessee company prior to sale of its shares by the assessee, though tax advantageous, cannot be termed as a colourable device or sham transaction as the subsidiary company was in the process of changing ownership and was having sufficient reserves and surplus as well as cash balance and the tax paid on distribution of dividend has been duly accepted and, therefore, the receipt of dividend cannot be recharacterized as sale consideration of the shares in the hands of the assessee for the purpose of computation of capital gains on the sale of said shares. (A.Y. 2006 – 07)
\n Asst. Director of Income tax  v. Maersk Line UK Ltd.(2012) 77 DTR 282(Kol.)(Trib.)<\/em><\/strong> <\/p>\n

S.54: Capital gains-Property used for residence-Exemption-Booking of the flat with the builder is to be treated as construction of flat and extended period under section 139(4) has to be considered for the purpose of utilisation of capital gain amount. – S. 139(4).<\/strong>
\n The assessee sold the property and invested in residential property. The Assessing Officer denied the exemption on the ground that the assessee has failed to deposit the balance amount in the account in any of the specified bank as required under section 54 and utilize the same in accordance with the scheme framed by the Government and could not produce evidence regarding taking possession of the new flat. On appeal Commissioner (Appeals) confirmed the disallowance. On appeal to Tribunal the Tribunal held that the assessee had booked the new flat with the builder and as agreement, the assessee was to make payment by installments and the builder was to hand over the possession of the flat after construction. Based on the circular no 672 dated 16-12-1993(1994) 205 ITR (St) 47, read with circular no 472 dated 15-10-1986,(1986) 162 ITR (st)17 in the case of the assessee was to be considered as construction of new residential house and purchase of flat. The Tribunal held that in the case of assessee had invested the capital gains in construction of a new residential house within a period of three years, this should be treated as sufficient compliance of section 54 and it was not necessary that the possession of the flat should also be taken within the period of three years. The Tribunal also held that the due date of filing of return of income under section 139(1) has to be construed with respect to the due date of section 139(4) as the section 139(4) provides for the extended period of filing return as an exception to the section 139(1) and considering this there is no default as the entire amount of capital gain had been invested within due date under section 139(4).(A.Y. 2006-07)
\n Kishore H.Galaiya v.ITO, ITAT ‘A’ Bench, Mumbai, ITA No. 7326\/Mum.\/2010, dated 13-06-2012, BCAJ Pg. 58, Vol. 44-A Part 4, July 2012.(Mum.)(Trib.)<\/em><\/strong><\/p>\n

S.54EA: Capital gains –Investment in specified securities-Net Consideration includes cash and kind – Exemption on transfer of long term capital asset not to be charged in case of investment on specified securities. <\/strong>
\n Assessee transferred her land to a developer under a development agreement in order to construct a 16 storied apartment. Assessee got 6 flats as consideration of which 3 flats were sold by her for Rs. 41.13 lakhs and sale proceeds were invested in specified securities and exemption under section 54EA was claimed. The Assessing Officer held that the assessee had sold land and received six flats in lieu of such land , and out of six flats three were sold, accordingly the Assessing Officer held that the long term gain has arisen on sale of land and therefore , it could not be said that the amount invested in specified securities were qualified for deduction under section 54EA as the condition of section 54EA was not fulfilled hence not entitle to for deduction under section 54EA. In appeal Commissioner (Appeal) allowed the claim of assessee which was confirmed by the Tribunal. On appeal by the revenue to High Court the Court held that the net consideration, as defined under section 54EA not only refers to consideration received in cash but also refers to full value of consideration which might have been accruing  hence the  assessee was entitled to exemption under section 54EA.Accordingly the appeal of revenue was  dismissed .(A.Y 1999-2000 ) 
\n CIT v.  Padmavathy(Smt) (2012) 210 Taxman 105 (Karn.) (High Court) <\/em><\/strong><\/p>\n

S.54F: <\/strong>Capital gains- Investment in residential house-Exemption – C<\/strong>onsideration from sale of shares is invested in purchase of residential house property  – Exemption allowed<\/strong> <\/strong>
\n Where assessee invested consideration received from sale of shares in purchase of residential house property, exemption under section 54F could not be denied to it on ground that flat was registered in name of assessee’s minor daughter. (A.Y. 2008-09)
\n N. Ram Kumar v. ACIT  (2012) 138 ITD 317 (Hyd.)(Trib.)<\/em><\/strong><\/p>\n

S.55: Capital gains – Cost of improvement –Cost of acquisition – No capital gain when no cost incurred for acquiring land .<\/strong>
\n Since assessee had not incurred any cost for acquiring land in question because it was allotted to assesse’s father by Govt. of India, being refugee from Pakistan at relevant point of time, capital gain was not assessable in respect of sale of such land. (A.Y. 2007-08)
\n Manohar Pyarelal Sadane v. ITO (2012) 138 ITD 250 (Pune)(Trib.)<\/em><\/strong>
\n <\/strong>
\n S:56(2):<\/strong> Income from other sources –Gifts-Marriage of daughter Gifts received on the occasion of marriage of daughter,<\/strong> AO was justified in including the gifts in the hands of assessee in terms of s. 56(2)(vi) .<\/strong>
\n Provisions of S. 56(2)(vi) r\/w proviso (b) clearly reveal that the provisions of s. 56(2)(vi) shall not apply to any sum of money or any property received on the occasion of the marriage of the individual; where the gift cheques were in the name of the assessee and not in the name of the assessee’s daughter, whose marriage was solemnized and the amount of such gifts was credited by the assessee to his bank account. It was held that AO was justified in including the gifts in the hands of assessee in terms of s. 56(2)(vi)(A.Y.2007-08).
\n Rajinder Mohan Lal v. Dy. CIT(2012) 75 DTR85(Chandigarh) (Trib.)<\/em><\/strong><\/p>\n

S.56(2): Income from other sources- Gift <\/strong>
\n Assessee received a gift of Rs.5 lakhs from his father NK who was assessed to income tax. AO found that the HUF of NK issued a cheque of Rs.5 lakhs in the name of MJ, a proprietary concern of NK individual and on the same date, MJ issued a cheque of Rs.5 lakhs in the name of the assessee – Accordingly, AO treated the amount of Rs.5 lakhs received by the assessee as income from other sources on the ground that the amount of Rs.5 lakhs gifted to the assessee belonged to the HUF and in reality the HUF made the gift to the assessee which was not covered under the definition of the “relative” as given in the Explanation to S. 56(2)(vi). Tribunal held NK was having opening balance as well as closing balance of more than Rs.20 lakhs in his capital account.    The transaction was a genuine transaction. Nothing has been brought on record to substantiate that the loan received by NK from his HUF was bogus or non genuine – Donor is identifiable, his creditworthiness has not been doubted and there was occasion for making the gift. Donor being the father of the assessee, CIT(A) was not justified in confirming the addition made by the A.O. (A.Y. 2007-08)
\n Amit Jain v. Dy. CIT (2012) 77 DTR 235 (Jodhpur) (Trib.)<\/em><\/strong><\/p>\n

S.68: Cash credits- proof<\/strong>
\n Order of CIT(A) deleting addition was upheld by Tribunal after finding that the assessee had submitted the accounts of returns, the computations of income, and the balance sheets of creditors and also supplied all their particulars; that the money given to the assessee had been shown in the respective balance sheets of the creditors; and that the creditors who were called by the AO did affirm the fact of giving money and explained the source. Tribunal also found that the circumstances of deposit of cash in the bank accounts of some of the  creditors before giving the cheques to the company by itself, would not lead to the conclusion that the money was deposited by the assessee company. On the question as formulated in the present case, there is no reason to enter into the factual inquiry so as to appreciate and evaluate the evidence over again. No substantial question of law arises. (A.Y. 1994 – 1995)
\n CIT v. H.S. Builders (P) (2012) 78 DTR169 (Raj)(High Court)<\/em><\/strong><\/p>\n

S.68: Cash  credits – Payment of school fees paid by mother-in-law- No details or proper evidences provided – Addition sustained. <\/strong>
\n In the instant case a sum was paid by the mother-in-law of the assessee as school fees. The confirmation letter of the assessee’s mother in law did not mention the amount paid by her nor give details of her bank account or the mode of payment. The assessee had not filed any other corroborative evidence to substantiate his claim that the payment of school fees had been made by his mother in law. The assessee could not supply before the Tribunal the copy of the bank statements from which the amount had been transmitted to India. The onus was on the assessee to explain the sources from which the payment of school fees had been made. The assessee had failed to discharge the onus and the addition was liable to be confirmed. (AY 2005-06)
\n Jackie Shroff v. ITO (2012) 19 ITR 83 (Mum.) (Trib.)<\/em><\/strong>
\n S.69: Unexplained investments-Income from undisclosed sources- Reference to DVO u\/s 142A<\/strong>
\n AO is first required to reject the books of account before making a reference to the valuation officer under s. 142A; AO having not mentioned at any stage that the assessee’s books of account are defective or that the cost of construction as shown in the books of account is not the true cost of construction there was no occasion for the AO to make reference to the valuation office report made by the valuation officer pursuant to such invalid reference could not have been made the basis of the addition under s. 69. (A.Y. 1989 – 90)
\n Goodluck Automobiles (P) Ltd v. ACIT (2012) 78 DTR 104 (Guj.)(High Court)<\/em><\/strong><\/p>\n

S.69A: Unexplained money-Survey- Statement-Retraction-Addition made on the basis of  purchaser which was retracted latter, addition was deleted.(S.133A )  <\/strong>
\n A survey was conducted at the premises of the assessee firm, which was engaged in the construction of flats. In the course of the survey conducted in assessee’s case, one of the purchasers of the flat made a statement that he had paid certain amount to assessee over and above the amount mentioned in the sale deed. On basis of the said statement, Assessing Officer made addition to assessee’s income. Later on, the same purchaser of flat retracted from his  aforesaid statement in course of the cross examination and revenue failed to bring on record any evidence showing that any amount in excess of sale deed have  been paid on assessee firm. In view of the aforesaid fact the impugned addition made by the A.O. under section 69A of the Act was deleted by the e Tribunal. <\/strong>(A.Y. 2004-05)
\n Rajdeep Builders v. ACIT(2012)52 SOT 62(Chandigarh) (Trib.)<\/em><\/strong><\/p>\n

S.72A: Carry forward and set off-Amalgamation-Accumulated loss-<\/strong> BIFR has power to grant benefit flowing from section 72A without referring matter to revenue. [Sick Industrial Companies (Special Provisions) Act, 1985, S.  32(2)]<\/strong>
\n The assessee company was referred to BIFR. BIFR has accepted the plea of the assessee company that relief flowing from section 72A of the Income-tax Act should be granted by the BIFR itself and should not be directed  to be considered by the department despite the plea of the revenue that concession sought under section 72A should be directed to be considered by revenue. The appeal of revenue before AAIFR  was dismissed. Against the said order the revenue filed a writ petition before High Court . The Court dismissed the writ petition by holding that   by  virtue of section 32(2) of Sick Industrial Companies (Special Provisions) Act, 1985, in case of amalgamation of sick industrial company with another company BIFR has power to grant benefit flowing from section 72A without referring matter to revenue. Accordingly the writ petition of revenue was dismissed.
\n Director General of Income-tax ( Government of India (Dept of revenue) v. Orient Vegetax Pro Ltd. (2012) 210 Taxman 1 (Delhi) (High Court) <\/em><\/strong><\/p>\n

S.80HH: Deduction -Profits and gains from hotels or industrial undertakings in backward area- Maintenance of accounts unit wise-Neither section 80HH, nor section  80I statutorily obliged  to maintain the accounts unit wise hence consolidated accounts held to be valid and revision was held to be not valid. (S.80I, 263 )<\/strong>
\nThe Assessing Officer has allowed the deduction under section 80HH, after examining the   unit wise profit and loss  statement filed by the Assessee. Commissioner revised the order under section and disallowed the deduction on the ground that the assessee should have maintained Segregated Accounts for each of the three units to avail benefit  of section 80HH and section 80I . In appeal before the Tribunal the Tribunal held that  assessee should submit unit wise audited accounts and claim deduction under section 80HH and 80 I. On appeal the High Court set a side the order of Tribunal. On appeal to Supreme Court the Court held that neither section 80HH nor section 80I (as it then stood) statutorily  obliged the assessee to maintain its accounts unit wise and it was open to the assessee to maintain its accounts in a consolidated form ,in order to put to an end to the litigation between the tax department and the PSU the matter was remitted back to the Assessing Officer to ascertain whether the assessee had correctly calculated the net profits for claiming deduction under section 80HH and 80I . If not done , it could be done such working is certified by the Auditors the net profit computation (Unit wise ) could be placed before the AO  who can find out whether such profits is properly worked out and on that basis compute deduction under section  80HH\/80I.  (A.Y.1992-93)(From the judgment of Gauhati High Court ITR no 4 of 2001 dated 6-6-2002)
\nCIT v. Bongaigaon Refinery & Petrochemical Ltd ( 2012) 210 Taxman 229\/ 79 DTR 8 (SC)<\/em><\/strong><\/p>\n

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S.80HHC: Deduction-Export-Telecasting rights of T.V.Serials  are entitled to benefit of section 80HHC.<\/strong>
\n The question involved was  whether telecasting rights of a T.V.Serial are entitled to the benefit of section 80HHC . Following the decision in CIT v.B.Suresh ( 2009) 313 ITR 149 (SC), the civil appeal filed by the department was dismissed.(A.Y. 1995-96)
\n CIT v. Faquir Chand (HUF) (2012) 210 Taxman 232\/254 CTR 107\/79 DTR 45 (SC)<\/em><\/strong><\/p>\n

S.80HHC:Deduction-Export-Leasing rights –Leasing rights is considered  to be ‘goods’ and transfer of such rights constitute ‘sales’ for the purpose of section 80HHC.<\/strong>
\n The issue involved in the appeals were whether leasing rights can be considered to be ‘goods’ and whether transfer of such rights would constitute ‘sale’, for the purpose of deduction under section 80HHC. Following the ratio of decision in  CIT v.  B. Suresh (2009) 313 ITR 148 (SC),appeal filed by the department were dismissed. (A.Y. 1994-95).
\n CIT v. Romesh Sharma (2012) 210 Taxman 260 (SC)<\/em><\/strong><\/p>\n

S.80HHC: Deduction-Export- Excise duty and sales tax-Total turnover-Excise duty and sales tax need not be included in total turnover in formula ‘Business income’ multiplied by  ‘export turnover’<\/strong>
\n The question which was raised before the Apex court was ,whether excise duty and sales tax need to be included in the total turnover in the formula ‘Business income’ multiplied by ‘export turnover’ and divided by ‘total turnover’ in section 80HHC(3) of the Income –tax Act 1961.Following the ratio of in the case of CIT v.Lakshmi Machne Woeks (2007) 290 ITR (SC), the civil appeal filed by the department was dismissed.(A.Y. 2001-02)
\n CIT v. Shiva Tex Yarn Ltd ( 2012) 210 Taxman 256\/254 CTR 104\/79 DTR 43 (SC)   <\/em><\/strong><\/p>\n

S.80HHC: Deductions-Export-Supporting manufacturer-90 percent of export benefits disclaimed in favour  of supporting manufacturer have to be reduced in terms of Explanation (baa) of section 80HHC , while computing deduction admissible to such supporting manufacturer under section 80HHC(3A).<\/strong>
\n Department has raised the question whether 90% of export benefits disclaimed in favour of a supporting manufacturer (assessee herein) have to be reduced in terms of Explanation(baa) of Section 80HHC of the Income-tax Act , 1961, while computing deduction admissible to such supporting manufacturer under Section 80HHC(3A) of the Act.?. Following the ratio in the case of CIT v. Baby Marine Exports ( 2007) 290 ITR 323 (SC) ,the appeal of revenue was dismissed.
\n CIT v. Sushil Kumar Gupta (2012) 210 Taxman 251 (SC) <\/em><\/strong><\/p>\n

S.80HHC: Deduction-Export- Granite-Export of granite, held deduction under section 80HHC was not allowable.<\/strong>
\n The question before the Court was whether the assessee is entitled to deduction to the extent of profits referred to in sub-section I-B of section 80HHC of the Income-tax Act , derived from export of goods –in this case , granite , for the Assessment Year 1988-89.Apex Court following the judgment in Gem Granites v.CIT ( 20040 141 Taxman 528(SC),held that the assessee is not entitled. The question was answered against the assessee.(A.Y.1988-89)
\n Tamil Nadu Minerals Ltd  v. CIT ( 2012) 210 Taxman 257\/254 CTR 105\/79 DTR 44 (SC)  <\/em><\/strong><\/p>\n

S.80HHF: Deduction – Export or transfer of film software-Computation–Deduction cannot be allowed under both the sections. (S.10B)<\/strong>
\n Assessee is not entitled to exemption under section 10B as well as deduction under section 80HHF as both the sections prohibit to allow deduction other than allowable under the respective sections. (A.Y.2001-02)
\n ACIT v. Sri Adhikari Brothers Television Network Ltd. (2012) 149 TTJ 324 (Mum.)(Trib.<\/em><\/strong>)<\/em><\/p>\n

S.80I: Deduction-Industrial undertaking- Manufacture-Cutting of jumbo rolls of photographic films in to smaller marketable sizes would constitute ‘manufacture’ for purpose of deduction under section 80I.<\/strong>
\n The question before the Court was whether cutting of jumbo rolls of photographic films in to smaller marketable sizes would constitute ‘manufacture’ under section 80I . The apex Court following the ratio in India Cine Agencies v. CIT ( 2009) 308 ITR 98 (SC) ,held that the activity will amount to manufacture, accordingly civil appeal of the assessee was allowed. (A.Y. 1988-89)
\n India Cine Agencies v. Dy. CIT (2012) 210 Taxman 253 (SC). <\/em><\/strong><\/p>\n

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S.80IA: Deduction-Industrial undertakings- Duty drawback-Duty drawback is not eligible for deduction under section 80IA.<\/strong>
\n Following the ratio of decision of apex court in Liberty India v. CIT ( 2009) 317 ITR 218 (SC) , the court held that deduction under section 80IA is not allowable on amount of duty draw back  and the appeal of the department was allowed.
\n CIT v. Orchev Pharma (P) Ltd ( 2012) 210 Taxman 236(SC)<\/em><\/strong>
\n Editorial:<\/strong> CIT v. Orchev Pharma (P.) Ltd (2012) 25 Taxman.com 379 (para 4) reversed. <\/p>\n

S.80IA: Deduction-Industrial undertaking-Manufacture-Texturing and twisting of polyester yarn amount to ‘manufacture’.<\/strong>
\n The question raised before the Supreme Court  was whether texturing and twisting of polyester yarn amount to ‘manufacture’ for the purpose of computation of deduction under section 80IA  of the Income-tax Act , 1961.Following the ratio in the case of CIT v. Emptee poly –Yarn (P) Ltd ( 2010) 320 ITR 665\/ 188 Taxman 188\/229CTR 1\/2SCC 720 (SC), the question was answered in favour  of assessee and the   civil appeal filed by the department was dismissed.(A.Y. 1998 , 2001-02)
\n CIT v. Yashasvi Yarn Ltd ( 2012) 210 Taxman 262\/254 CTR 112\/79 DTR 98(SC)<\/em><\/strong><\/p>\n

S.80IA: Deduction-Industrial undertaking-Manufacture-Production of film-Matter remitted back  to the High Court to decide in accordance with law.<\/strong>
\n The question which was raised before the Court was whether production of film amount to manufacture under section 80IA of the Income-tax Act .On going through the records the court found that the assesse had not claimed the benefit of deduction under section 80IA either before the Assessing Officer or Commi ssioner (Appeals).It was first time before the Tribunal the assessee has raised the additional ground , which was admitted and the matter was set aside before the Assessing Officer. The High Court dismissed the appeal , as there was delay of 761 days. The Supreme Court set aside the order and directed the High Court to  decide the issue on merit whether producing a film would amount to ‘manufacture’ within the meaning of section 80IA .(A.Y. 1994-95)
\n CIT v. Zee Tele films Ltd ( 2012) 210 Taxman 283\/79 DTR 148 (SC) <\/em><\/strong><\/p>\n

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S. 80IA: Deduction – New Industrial Undertakings-Failure to maintain separate  proper Books of account for trading and manufacturing-Deduction, calculated in terms of quantity of raw wool produced held to be proper. No deduction of entire profit in case where there is failure to maintain separate books of accounts .<\/strong>
\n The assessee was engaged in manufacture of yarn. The assessee did not maintain a separate account for trading and for goods manufactured. During the relevant year under consideration, assessee sold raw wool, wool waste and textile and knitting cloths. It was held that deduction with respect to entire profit (calculated in terms of quantity of wool) could not be granted as assessee failed to maintain separate books of accounts. (A.Y. 1998-99)
\n Arisudana Spinning Mills Ltd. v. CIT (2012) 348 ITR 385\/78 DTR 393 (SC) <\/em><\/strong><\/p>\n

S.80-IA: Deductions-Industrial undertakings-Infrastructure development- Manufacture or production – providing engineering drawings, designs, fabricating and installing drilling equipment for oil platforms etc. <\/strong>
\n The capital asset acquired by the assessee, namely, the technical know how in the shape of drawings, designs, charts, plans processing data and other literature falls within the definition of “plant” and is, therefore, a depreciable asset. The assessee brings into existence new and distinct product and designs which are client specific as per their requirement and thereafter advise the clients in manufacture, production according to the designs and also advise the clients in manufacture, production according to the designs and also advise the client in its installation after the manufactured goods are brought into country for installation. In other words, what is transferred to the client is not the intellectual property, the consideration of which is for supply of drawings and design. Instructions given for preparing the equipment according to the drawings and also its installation when it is installed. Therefore, the said activity of the assessee falls within the meaning of the word `manufacture’ or `produce’ used in s. 80-IA. Even if the assessee as ancillary or incidental or in connection with the aforesaid activity renders some service by way of advice or review or procurement of materials, the said service is a part of the manufacturing or a production activity with which it carriers on and therefore, the Tribunal was justified in exitending the benefit of s 80-IA to the assessee in the light of the undisputed and admitted facts on record. The material on record discloses that the assessee has employed nearly about 400 persons as work force to carry out it activities. The word `worker’ used in the section cannot be construed in the context of the Inds. Disputes Act, 1947. The meaning of the word `worker’ has to be noted in the context of manufacture or production activity carried on by the assessee, which in turn earns foreign exchange certainly which requires highly qualified  persons such as engineers. Even otherwise,  the material on record shows the assessee is carrying on its activities with the aid of power and it has engaged more than the requisite number of draftsmen, supervisors and even persons who are technically qualified. Therefore, the Tribunal was justified in extending the benefit of s. 80IA to the assessee.  (A.Y. 1994 – 95 to 1999 – 2000)
\n CIT v. John Brown Technologies India (P) Ltd.(2012) 77 DTR 58 (Karn.)(High Court)<\/em><\/strong><\/p>\n

S.80-IA:Deductions-Industrial undertakings-Infrastructure development- Simultaneous claim u\/s.80-O<\/strong>
\n Sec.80-IA and S. 80-O both are independent of each other, hence assessee is entitled to claim deduction under both the sections but the overall claim under both sections has to be restricted to the total profits and gains of eligible business from the total profits and gains.
\n (A.Y. 1994 – 95 to 1999 – 2000)
\n CIT v. John Brown Technologies India (P) Ltd.(2012) 77 DTR 58 (Karn.)(High Court)<\/em><\/strong><\/p>\n

S.80IA: Deduction–Infrastructure undertakings- Post amendment – infrastructure facility is only required to be developed and  there is no condition that assessee should also operate same.<\/strong>
\n After amendment by Finance Act, 2002 for claim of deduction u\/s. 80IA(4) infrastructure by Finance Act, 2002 for claim of deduction u\/s. 80IA(4) infrastructure facility is only required to be developed and  there is no condition that assessee should also operate same. Assessee, engaged in construction of roads for Govt. Departments, claimed deduction u\/s. 80IA. In view of post amendment situation, A.O. was required to examine terms and conditions of each and every contract entered into by assessee with Govt. to find out whether assessee had worked simplicitor as a contractor or as a developer of infrastructure facility as a whole. The matter was remanded on this account. (A.Y. 2007-08)
\n Sanee Infrastructure (P) Ltd. v. ACIT (2012) 138 ITD 433 (Indore)(Trib.)<\/em><\/strong><\/p>\n

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S.80IB: Deduction- Industrial undertakings- Manufacture-Blending and bottling of Indian Manufactured Foreign liquor(IMFL) ,would amounts to ‘manufacture’ for the purpose of deduction 80IB.<\/strong>
\n The question before the Apex court was whether  blending and bottling of Indian  Manufactured Foreign Liquour(IMPL) , would amount to ‘manufacture’ for purpose of claiming deduction under section 80IB, the court answered the question in favour of assessee and civil appeal of the department was dismissed.(A.Y.2003-04 , 2004-05)
\n CIT v. Vinbros &Co (2012) 210 Taxman 252\/254 CTR 110\/79 DTR 48 (SC).<\/em><\/strong>
\n Editorial:<\/strong> Judgement of Madras High Court in CIT v. Vinbros & Co. (2009) 177 Taxman 217(Mad) (High Court), affirmed. <\/p>\n

S.80-IB(10): Deduction-Undertaking-Development and construction- Housing project- Entitled for benefit under section 80-IB(10) in respect of flats completed before prescribed limit even though the housing project was not completed in time due to reasons beyond control.<\/strong>
\n The assessee was entitled for benefit under section 80-IB(10) in respect of flats completed before prescribed limit even though the housing project was not completed in time due to reasons beyond control. (A.Y. 2007-08)
\n Ramsukh Properties v. Dy. CIT [2012] 138 ITD 278 (Pune)(Trib.) <\/em><\/strong><\/p>\n

S.80IB(10): Deduction- Undertaking-Developing and building-Housing project. S.263<\/strong>
\n According to the CIT the project consists of some commercial portion and the deduction is allowable only to a purely residential project. In case project is having some commercial area, it does not mean that it is not a housing project. Secondly, it was pointed out of behalf of the assessee that the project had commenced much before 1st April, 2005 from which date of sub-cl (d) of S.80IB(10) was introduced. The assessee had no occasion to comply with the new conditions with effect 1st April, 2005 that the commercial portion should not exceed 2,000 sq. ft. and hence it was not applicable in respect of the projects which have commenced prior to 1st April, 2005. The assessment year involved in the present appeal is 2004 – 2005 and therefore, the question of applicability of the sub.cl(d) of S.80-IB(10) does not arise.(A.Y. 2004 – 2005)
\n Brahma Builders v. DCIT (2012) 77 DTR 249 (Pune)(Trib.)<\/em><\/strong><\/p>\n

S.80IB(10): Deduction- Undertaking-Developing and building-Housing project- Built up area – Area less than 1500 sq. ft.<\/strong>
\nThe definition of “built up area” inserted by Finance (No.2) Act, 2004 which came into effect from 1st April, 2005 is only prospective in nature. It has no application to the housing projects which were approved by the local authority prior to that date. Prior to 1st April, 2005, in calculating the 1,500 sq. ft. Of a residential unit, the area covered by a balcony was excluded. Therefore, the definition of built up area which is now inserted has no application to construction which were put up in accordance with the housing projects approved by the local authority prior to that date.
\nInsofar as the last flat is concerned, the purchasers have taken the last floor and the penthouse on that floor under two independent sale deeds. Therefore, the total area covered under each sale deed is less than 1,500 sq.ft. in order to prevent such transactions, law is amended preventing a person from purchasing two flats in the same project which is again prospective in nature. Therefore, seen from any angle the assessee is entitled to the benefit under s. 80IB(10). (A.Y. 05 – 06 & 06 – 07)
\nCIT v. Anriya Project Management Services (P) Ltd (2012) 78 DTR 198 (Karn)(High Court) <\/em><\/strong> <\/p>\n

S.80IB(10): Deduction- Undertaking-Developing and building-Housing project- Plot size – subsequent acquisition <\/strong>
\n Though the assessee owned only 38 guntas of land when he started the construction, he acquired an extent of 1,440 sq.ft. of land adjoining the said land, thus making the total land in which the project was put up, to 44,470 sq.ft. more than 43,480 sq.ft. which is prescribed under the law. Modified housing project was approved in the year 2001 after the aforesaid land was acquired. Construction was completed on 20th May, 2003, i.e. within four years period. Fact that purchasers are using the flats as service apartments for which the assessee cannot be held liable in any way and on that ground he cannot be denied the benefit. Further, prior to 1st April, 2005, balconies and common areas were to be excluded for the purpose of calculating the built up area. If those two areas are excluded, admittedly the apartments measure less than 1,500 sq.ft. Deduction under sec. 80IB(10) could not therefore be denied. (A.Y.2004 – 05)
\n CIT v. Mystic Investments (2012) 78 DTR 202  (Karn.)(High Court)<\/em><\/strong> <\/p>\n

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S.80IB(10):Deduction-Undertaking-Developing and building-Housing project – Revalidation of the project. <\/strong>
\n The housing project consisted small commercial area. Project started wide commencement certificate 17th March, 2001. A.O. was not justified to take the date of commencement as 20th April, 2005 which was the date of revalidation. Thus project had already commenced on 17th March, 2001. i.e. prior to 1st April, 2005. Similarly in respect of another project, plan was sanctioned on 27th June, 2003 i.e. much before 1st April, 2005. If a housing project is started prior to 1st April. 2005, the limit for commercial area prescribed in s.80IB(10) viz., 2000 sq. ft or 5 % whichever is less, is not applicable and deduction is to be allowed to entire project. Therefore, deduction u\/s 80IB(10) was allowable in respect of both the projects.  (A.Y. 2005 – 2006)
\n Brahma Builders v. DCIT (2012) 77 DTR 249 (Pune)(Trib.)<\/em><\/strong><\/p>\n

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S.80-O: Deduction-Royalties-Foreign enterprises- Services from India-Computation-<\/strong>
\n Explanation to S. 80-O makes it clear that service rendered outside India shall include service rendered from India, but not service rendered in India – Therefore, assessee was entitled to claim deduction since the service was being made use of by the foreign enterprise outside the country notwithstanding the fact that the foreign enterprise making use of the service rendered by the assessee after manufacturing the equipments though brought  it again into the country and erect the same. Expenditure has to be necessarily deducted out of the gross total income in order to arrive at the taxable income, whether that  expenditure was incurred by way of foreign exchange or in Indian currency goes to the background and therefore, the expenditure incurred either by way of foreign exchange or Indian currency is to be deducted.  (A.Ys. 1994 – 95 to 1999 – 2000)
\n CIT v. John Brown Technologies India (P) Ltd.(2012) 77 DTR 58 (Karn.)(High Court)<\/em><\/strong><\/p>\n

S.80P: Deduction-Co-operative societies-Income earned from underwriting commission and interest on PSEB Bonds and IDBI Binds is eligible for deduction under section 80P(2)(a)(i).<\/strong>
\n The question  raised before the apex court was whether the assessee was entitled for deduction under Section 80(P)(2)(a)(i) of the Income-tax Act , 1961 in respect of income from underwriting commission and interest on PSEB Bonds and IDBI Bonds. Following the ratio  in CIT Jalandhar v. Nawanshahar Central Co-Operative Bank Ltd ( 2007) 160 Taxman 48 (SC), appeals filed by the department were dismissed.
\n CIT v. Nawanshahar Central Co-Operative Bank Ltd ( 2012) 210 Taxman 263\/254 CTR 108\/79 DTR 46 (SC)   <\/em><\/strong><\/p>\n

S.80P: Deduction – Co-operative societies-Primary co-operative Bank-Deduction is allowable if provision of section 80P(4) is not applicable.<\/strong>
\n If the provisions of section 80P(4) are not applicable to the assessee co-op. society and if the assessee cannot be regarded to be a primary co-op. bank as defined in section 5(ccv) of the Banking Regulation Act, 1949, the assessee is entitled for the deduction under section 80P(2)(a)(i).(A.Y.2007-08 to 2009-2010)
\n Dy. CIT v. Jayalakshmi Mahila Vividodeshagala Souharda Sahakari Ltd. (2012) 149 TTJ 356 (Panaji)(Trib.)<\/em><\/strong><\/p>\n

S.80P: Deduction- Co-operative societies- Interest income <\/strong>
\n Interest income of the assessee co-op society from NSC will be treated as income from other sources, which is not exempt under s. 80P(2)(a)(i); interest income from post office will be exempt under s. 10(15). (A.Y. 1985 -86)
\n CIT v. Mawana Co-op. Cane Development Union (2012) 77 DTR 189 (All.)(High Court)<\/em><\/strong><\/p>\n

S.80VV: Deduction – Expenses incurred with regards to income tax proceedings – amount paid by assessee to various advocates and consultants in relation to conferences, advice and consultation pertaining to income tax matters – Not within purview of S.  80VV.<\/strong>
\n Section 80VV restricts deduction in respect of expenses incurred in respect of any proceedings before any I.T. Authority or Appellate Tribunal or any Court relating to determination of any liability under Income tax Act by way of tax, penalty or interest. Thus, amount paid by assessee to various advocates and consultants in relation to conferences, advice and consultation pertaining to income tax mattes did not fell within purview of sec. 80VV and, hence, no disallowance could be made in respect of these expenditures. (AY 1985-86)
\n Tata Chemicals Ltd v. ACIT (2012) 138 ITD 458 (Mum)(Trib.) <\/em><\/strong><\/p>\n

S.90: Double taxation relief- Capital gains- Mauritius tax resident –No PE in India-DTAA- India-Mauritius –<\/strong> Capital gains exempt in India as per Article 13 of India  (S.45, Article 13)<\/strong>
\n The applicant, a tax resident of Mauritius has invested funds in India which are pooled from various individual & institutional investors from around the world. It is registered with SEBI as a Foreign Venture Capital Investor. It does not have a permanent establishment in India. The applicant proposes to sell the shares of some of the companies that would generate capital gains which should be exempt by virtue of Article 13 of India-Mauritius DTAA. Revenue contended that only 4 out of 55 investors were from Mauritius; also only two of the Directors of the applicant were from Mauritius and the three others were from India and decisions were taken from India by the Board of Directors. Thus this was a case of routing of investments for evasion of taxes. Further, unless the capital gain is actually taxed in Mauritius the DTAA would not apply in the context of section 90(1) and section 90(2) of the Act.
\n The Authority observed that the applicant being a tax resident of Mauritius in the light of the tax residency certificate produced by it, it is bound to follow the decision in Union of India vs. Azadi Bachao Andolan. Further, since chapter X-A introduced into the Act by the Finance Act 2012 is to come into force only on 1.4.2013, sections 90 (2A) & 90(4) of the Act has no relevance at this stage. Accordingly, it ruled that the gain that may arise to the applicant is not chargeable to tax in India.
\n Dynamic India Fund I – A.A.R. No. 1016 dt. 18\/07\/2012(AAR)<\/em><\/strong><\/p>\n

S.90: Double taxation avoidance – Non-residents- Capital Gains on transfer of shares – Legal vs Beneficial ownership – India-Mauritius DTAA-Ultimate beneficial owner is Jersey Co – Benefit of DTAA be available – legal ownership prevail over beneficial ownership in absence of any contrary evidence. Gains not chargeable to tax in India hence seller is not bound to deduct tax at source. Minimum alternative tax provision will apply to foreign company.(S.45, 115JB,195, Art . 13(4) )<\/strong>
\n The Applicants, Moody’s Analytics Inc. Co., USA (“Moody’s USA”), Moody’s Group Cyprus Limited (“Moody’s Cyprus”), CRL Mauritius and CMRL Mauritius, sought a ruling from the AAR with respect to the following transactions: (a) Sale of shares of CRIPL, an Indian company held by CRL Mauritius to Moody’s Cyprus; and (b) Sale of Exevo USA shares held by CMRL Mauritius to Moody’s USA. Exevo USA held 100% shares of an Indian company.<\/p>\n

Revenue contended that the transactions were a scheme for avoiding taxes. The beneficial ownership of the shares transferred in both the transactions were held by CPL Jersey. Since there is no DTAA between India and Jersey, both the transactions were taxable in India as per the provisions of the Act. The first transaction involved sale of shares of an Indian Company and the second transaction which involved sale of shares of a US company, holding underlying shares in the Indian Company is also taxable as per the amended provisions [Expln.5 to S. 9(1)] of the Act.  It further contended that the Tax Residency Certificates submitted by CRL Mauritius and CMRL (”the sellers”) is not a conclusive evidence for determining their residential status as held by the Supreme Court (“SC”) in Vodafone International Holdings BV Vs Union of India and Others. The management and control of the seller companies did not lie in Mauritius as the whole transaction was left to the discretion and management of an individual, a resident of UK.
\n Based on the Supreme Court decision in the case of Azadi Bachao Andolan, the Authority concluded that the applicant was eligible to avail the benefit of the DTAA and the direct or indirect transfer of shares of the Indian Company shall not be liable to tax in India under the India–Mauritius DTAA. Further, the AAR also concluded that the concept of legal ownership prevails over beneficial ownership as the concept of legal ownership is recognized under the Company Law as well as on the principle that in the absence of any cogent material to hold otherwise, the legal structure for investments would hold good. On the question of applicability of MAT provisions, as the parties had not posed any arguments, the AAR only observed that MAT provisions were applicable even to a foreign company.( A.A.R. No. 1186 dt. 31\/07\/2012\/- A.A.R. No. 1187 dt. 31\/07\/2012\/- A.A.R. No. 1188 dt. 31\/07\/2012\/ A.A.R. No. 1189 dt. 31\/07\/2012))<\/em><\/strong>
\n Moody’s Analytics Inc., USA (2012) 348 ITR 205(AAR)<\/em><\/strong>
\n Moody’s Group Cyprus Ltd.(2012) 348 ITR 205 (AAR)<\/em><\/strong>
\n Copal Research Ltd(2012) 348 ITR 205 (AAR)<\/em><\/strong>
\n Copal Market Research Ltd(2012) 348 ITR 205 (AAR)<\/em><\/strong><\/p>\n

S.90: Double taxation relief – Professional income of Swiss law firm – DTAA – India -Switzerland –<\/strong> Swiss Law partnership firm, transparent entity is not a person liable to benefit under treaty, legal fees earned would be taxable in India. [Articles 1, 4, 14]<\/strong>
\n The applicant is a Switzerland based law firm. The partnership firm and all its partners are tax residents of Switzerland. It was appointed by Siemens India to represent it in an arbitration proceedings in Switzerland. Except for a site visit and an adjudication hearing in India for about a week, no other activity was carried on in India by the law firm. The applicant argued that it was entitled to the benefit under the Indo-Swiss DTAA and the professional income derived by it was not taxable in India under Article 14. The Revenue however argued that the partnership was not entitled to DTAA benefit as it was not a ‘resident’ of Switzerland.
\n The Authority observed that the receiver of the income (partnership firm) and the person taxed on such income (the partners), were not the same. It further observed that under Article 1, the Indo-Swiss DTAA would apply only to the residents of India or Switzerland. Article 4 provides that ‘resident’ means any person who under the laws of that State is liable to taxation in that State by reason of his domicile, i.e. residence, place of incorporation, place of management, or any other criteria of similar nature. While the partnership could be said to be domiciled in Switzerland, Authority held that it was not a ‘person’ within the meaning of the DTAA. Consequently, the AAR held that as Swiss partnership firm isn’t a person liable to be taxed in Switzerland, no treaty benefit would be available to it and legal fees would be taxable in India.( A.A.R. No. 1029 dt. 27\/08\/2012) <\/em><\/strong>
\n Schellenberg Wittmer(2012) 210 Taxman 319(AAR)<\/em><\/strong><\/p>\n

S.90: Double taxation relief- Ship owned by Iranian company chartered by Dutch company – Indo – Netherlands DTAA<\/strong>
\n Ship owned by an Iranian company has been chartered by a Dutch shipping company P which regularly calls Indian ports for loading export cargo – Clause 13 of the charter party document stipulates payment of minimum freight to the owner of the ship (Iranian party) owner of the ship is not only entitled to freight of a minimum 19,500 tonnes but also additional freight depending on the intake of the cargo. Hence, risk and liabilities are undertaken by P only in the event of the tonnage being less than 19,500 tonnes. Raising of invoice by the character and charging 49 Euros per MT is of no relevance since substantial portion of the freight is paid to the owner of the ship. Therefore, relief under the DTAA is not allowable. (A.Y.2009-10)
\n Marine Links Shipping Agencies v. ACIT (2012) 77 DTR 292 (Bang) (Trib.)<\/em><\/strong><\/p>\n

S.90: Double taxation relief- royalty – sale of software – Indo US DTAA  <\/strong>
\n Assessee, an US company, received a sum of Rs.58.30 lakhs from NIPL an Indian company, towards the direct sale of  software, which were subsequently resold by NIPL to its end customers, without giving any right to duplicate the same in any manner. This is a clear cut case of consideration received for the transfer of copyrighted products and not for the transfer of copyrights in the computer software programme – Same has been received by the assessee not as a consideration `for the use of’ or the `right to use any copyright’ of a computer software but is a consideration for acquisition of the computer software meant for the exclusive use of the end users, and it cannot be brought within the ambit of art. 12(3). As such, it would partake of the character of business profits and not royalties regardless of the fact that the assessee chose to describe its products as `intellectual value’ in its invoices. No disallowance u\/s. 40(a)(i) has been made in the assessment of the NIPL, which implies that the AO accepted such payment to the assessee by NIPL as having been made on transaction of purchase and not as royalty. Since assessee does no have any permanent establishment, income arising from such sale of software is not chargeable to tax in India s per art. 7.
\n Novel Inc. v. Dy. Director of Income tax (International Taxation) (2012) 78 DTR 158 (Mum.) (Trib.)<\/em><\/strong><\/p>\n

S.90: Double taxation relief- disallowance u\/s 43B – Indo Mauritius DTAA<\/strong>
\n Article 7(3) of Indo Mauritius DTAA expressly provides for deduction of all expenses which are incurred for the purpose of the business of the PE in India without any restriction on the allowability of such expenses on the basis of the limitation enshrined in the India IT Act and, therefore, no disallowance u\/s. 43B can be made in respect of the bonus which was not paid before the due date of filing of return u\/s. 139(1). (A.Y. 1999 – 2000)
\n State Bank of Mauritius Ltd v. Dy. DIT (2012) 78 DTR 62  (Mum.)(Trib.)<\/em><\/strong> <\/p>\n

S.90: Double taxation relief- Borrowed amount invested in tax free bonds – Allowability of  interest paid thereon – Indo Mauritius DTAA<\/strong>
\n Interest expenditure incurred on amount borrowed which was invested in tax free bonds. If an item of income is exempt and gets excluded at the very outset from entering into computation of total income, any expenditure incurred in relation to such income should also meet with the same fate. Once a particular item of income does not itself constitute business profit as per art. 7 because of its exemption under the IT Act there is no question of allowing any deduction for an expenditure incurred in relation to such income against other taxable business income. If such expenses have been included in the business expenses claimed as deduction under art. 7(3), then these are required to be reduced accordingly. Sec. 14A snatches away the deductibility of expenses incurred in relation to an exempt income at the very threshold.  Therefore, since the interest income from the tax free bonds per se is not includible in the business profits of the assessee’s PE in India, the expenses incurred in relation to such interest income cannot be allowed as deduction. (A.Y. 1999 – 2000)
\n State Bank of Mauritius Ltd v. Dy. DIT (2012) 78 DTR 62 (Mum.)( Trib.)<\/em><\/strong> <\/p>\n

 <\/strong><\/p>\n

S.90: Double taxation relief- head office expenses– Indo Mauritius DTAA  – Art. 7<\/strong>
\n Article 7(3) of Indo Mauritius DTAA does not provide for limiting the deduction of expenses incurred for the business of the PE subject to the limitations contained in the IT Act, therefore, the restriction contained in s. 44C for allowing the head office expenditure does not apply for allowing deduction of head office expenses attributable to Indian operations. (A.Y. 2000-01 to 2004-05)
\n Dy.DIT v. State Bank of Mauritius Ltd (2012) 78 DTR 86 (Mum.) (Trib.)<\/em><\/strong><\/p>\n

 <\/strong><\/p>\n

S.90: Double taxation relief- Business profits – Indo – UAE DTAA<\/strong>
\n In view of the provisions of art. 7(3) of the DTAA as they existed prior to 1st April, 2008, there was no restriction on allowance of head office expenses and others expenses attributable to PE in determining the profits of PE in India. However, with the insertion of the phrase “in accordance with the provisions of and subject to the limitations of the tax laws of that state” in art. 7(3) as amended by protocol notified on 28th Nov. 2007, effective  from 1st April, 2008, the mandate of applicability of the domestic law has been provided in allowing the deduction of  expenses of the PE and determination of profit under the IT Act. Consequently, s. 44C becomes applicable. Once the Govt. Of India and the Govt. Of UAE had not used the limitation clause of applicability of domestic law in determining the profits and deduction of expenses of PE in art. 7(3), the same cannot be read into it even impliedly. When a particular provision in the agreement has been brought from a particular date, it has to be prima facie taken to be prospective in operation. If retrospective operation is given to art. 7(3), it would create new obligation and disturb the assessability of the profit of the PE. Thus, the amendment in art. 7(3) w.e.f. 1st April, 2008, is not applicable retrospectively prior to the said date. Article 25 per se does not provide any rules regarding the mechanism for computing relief. Interpretation of art. 25 that it extends to art. 7 for applicability of domestic law would not be correct. Consequently, computation of income and disallowance of expenses relating to head office cannot be made by invoking the provisions of s. 44C . Thus, income of the PE of the assessee, a USE banking company, has to be computed after allowing all the expenses attributable to its business in India, including the head office expenses.
\n (A.Y. 1995 – 96 to 2000 – 01)
\n Abu Dhabi Commercial Bank Ltd v. Additional Director of Income tax (Int. Taxation) (2012) 78 DTR 234 (Mum.)(Trib.)<\/em><\/strong><\/p>\n

92CA: Avoidance  of tax- Transfer pricing – Arms’ length price-Comparable- Assessee has not conducted a proper transfer pricing study and has wrongly chosen these four comparables. The four companies in question were engineering companies.<\/strong>
\n The assessee, a wholly owned subsidiary of a Hongkong based private limited company providing internet data and international communication services, was established with the objective of rendering marketing support services to the parent company. The assessee carried out a transfer pricing analysis and close the transactional net margin method as the most appropriate method. Assessee has not conducted a proper transfer pricing study and has wrongly chosen these four comparables. The four companies in question were engineering companies providing end-to-end solutions whereas the assessee company provided marketing support services to the parent company, which was in the nature of support service and hence not functionally comparable. Concluded that the risk profile was vastly different and hence on this count also they were not comparable. (A.Y. 2004-05, 2005-06)
\n Dy. CIT v. MCI Com India P. Ltd(2012) 19 ITR 42 (Delhi)(Trib.)<\/em><\/strong>
\n  Jt. CIT v. Verizon India P. Ltd(2012) 19 ITR 42 (Delhi)(Trib.)<\/strong><\/em><\/p>\n

S.92C: Avoidance of tax- Transfer pricing-Arms’ length price- reasoned order<\/strong>
\n Specific issues raised by the assessee before DRP have not been addressed and decided by way of a speaking order. It has been pleaded that CMC Ltd. should be excluded on the basis of the fact that it has significant related party transactions. Leaving aside CMC Ltd. which is should to be excluded on account of significant related parties transactions, the other comparables, ICC Ltd. and TSR Ltd. are required to be excluded on account of significantly higher operating margins. Matter restored back to the file of the DRP with a direction to pass a speaking order. (A.Y. 2007 – 08)
\n Symantec Software Solution (P) Ltd. v. ACIT (2012) 77 DTR 161 (Mum) (Trib)<\/em><\/strong> <\/strong><\/p>\n

 <\/strong><\/p>\n

S.92C: Avoidance of tax- Transfer pricing-Arms’ length price<\/strong>
\n Perusal of the provisions of S. 92C shows that the words used are “in relation to an international transaction, having regard to the nature of transaction or class of transaction or class of associated persons or functions performed by such persons”. The terms `class of transaction’ and `nature of transaction’ come to the forefront in the present case. In the assessee’s case, the transaction with the AE is not one of simple purchase or simple sale. The assessee purchases from one and sells to another. The assessee has purchased from its AEs in Hong Kong, Sri Lanka, Malaysia, Pakistan and Randy Asia and has sold to its AEs in Sri Lanka, Korea, Hong Kong, Fulf, Egypt, Bangladesh, Malaysia, Taiwan, UK and Pakistan. What is noticed is t hat on the purchase the assessee has a positive differential i.e. the assessee purchases at a lower price from its AE than the non AE and when it sells to the AE, its selling price is lower than the selling price as compared with the non AE. There is no question that the assessee is generating profits from the transaction. There is no dispute that the assessee is also paying taxes on the profits that it has generated from its transaction of purchase and sale with its AE. The assessee, thus it is noticed, is doing the business of trading when it purchased from its AE from one country and sells to another AE in another country. This marging could be on account of both foreign exchange fluctuations as also the mark up done by the assessee. These transactions clearly show that what is done by the assessee is one of purchase and sale. With this in mind reading of the provisions of s. 92C shows that the words used are “nature of transaction”. “Nature of transaction” would be a particular set of transactions, which are to be seen together. When the assessee is buying from one place and selling at another that would be a “class of transaction”. When the assessee is doing the business of trading, it would not be right to hold that the purchase is one “class of transaction” and the sales are another “class of transaction”. The assessee dealing with the AEs is in a better position to negotiate better prices and consequently would be able to get a better bargain. Here, what is to be seen is whether the transaction of purchase and sale being the nature of transaction, when seen in consolidated form, generates profits which normally would be generated. For this both the purchase and sale transactions would have to be considered. The profitability if considered without considering the positive deviations would lead to impossible profitability positions, which is not what is contemplated under the provisions of S. 92C. In the circumstances, the AO is directed to recomputed the ALP by taking into consideration both the net difference on the sale to the AE and purchase from the AE. The AO may look into the fact as to the margins of the profits in regard to the transactions done by the assessee with its AE, as also the non AE transactions and then compute the adjustment of ALP, if any. (A.Y. 2007 – 2008)
\n Mainetti India (P) Ltd v. Asst. CIT(2012) 77 DTR 60 (Chennai ) (Trib.)<\/em><\/strong><\/p>\n

S.92C: Avoidance of tax-Transfer pricing-Arm’s length price-Aggregation- Application of “Aggregation”\/ “Portfolio Approach”-<\/strong> The assessee cannot take advantage of its own mistake. Even if the TPO’s report on that issue is illegal, the AO is now aware of the fact that there is such an international transaction and he is empowered u\/s 92C(3) to determine the ALP thereof.<\/strong> <\/strong>
\nThe Tribunal had to consider the following transfer pricing issues: (i) whether the principle of “aggregation” or “portfolio approach” could be adopted so as to adjust the under-charge of one international transaction against the over-charge for another; (ii) whether an adjustment for the “difference in application” of the product by the customer could be made; (iii) whether an adjustment towards “quantity discount” could be made; (iv) whether the “tax avoidance motive” is relevant in invoking transfer pricing provisions; (v) whether (pre sub-sec. (2A) of s. 92CA) if the TPO determines the ALP of a transaction which is not referred to him, can the AO use the material to himself determine the ALP? Held by the Tribunal:<\/p>\n

(i) Rule 10A(d) defines the term “transaction” to include a number of closely linked transactions. The “closely linked transactions” are those which cannot be segregated and if segregated, cannot be evaluated adequately on a separate basis and it is impractical to determine the price of each individual product or transaction. This is also the purport of the OECD Guidelines. On facts, as the transactions are neither of same ‘product-line’ nor ‘routed-in-parts’, the ‘portfolio-approach’ is not called for ( CIT v Tara Ultimo & UE Trade Corporation ( 2011) 45 SOT 197 (Delhi) referred);<\/p>\n

(ii) An adjustment towards ‘difference in application’ i.e. that the ALP should be determined depending on what the end user uses the product for is not acceptable because the purpose for which the buyer uses the product has no relevance in fixation of sale price; <\/p>\n

(iii) However, an adjustment towards ‘quantity discount’ is permissible because it is a common market practice that bulk purchasers are generally given some discount. The assessee has to show that such discount have been given to non AEs as well;
\n (iv) The argument that the department has to show “tax avoidance motive” before invoking transfer pricing provisions is not acceptable because the language used by the legislature is clear (Azetc Software & Technology Service Ltd. v. ACIT (2007) 107 ITD 141 (Bang) (SB) followed);<\/p>\n

(v) While it is true, as held in CIT v. Amadeus India (P) Ltd. ( 2012)  246 CTR 338 (Del), that pre sub-sec. (2A) of s. 92CA, the TPO could not inquire into matters that were not referred to him by the AO, it is a fact that he could not make a reference to the TPO because the information about the transaction was not reported in Form 3CEB. The assessee cannot take advantage of its own mistake. Even if the TPO’s report on that issue is illegal, the AO is now aware of the fact that there is such an international transaction and he is empowered u\/s 92C(3) to determine the ALP thereof. (A. Y. 2006-07)
\n Atul Limited v. ACIT (ITAT)(Ahd.)(Trib.)www.itatonline.org. <\/em><\/strong><\/p>\n

S.92C: Avoidance of tax- Transfer pricing-Arms’ length price<\/strong>
\n Assessee purchased six items at a higher price from its AE than the cost at which it purchased similar items from non AEs – DRP has specifically mentioned that the rates of purchase from the AE have crossed the tolerance limit only in respect of 6 of the 35 items purchased by the assessee from the same AE – Other 29  items have been found to be appropriately priced since no ALP revision has been recommended for such items – Assessee had substantial volume of international transactions with its AEs – Aes of the assessee were supplying designs, placing orders, supplying raw materials and finally purchasing its products – In such a scenario, if the assessee had an intention to price its products and purchases so as to give undue benefits to the AEs outside India, it could have done so in other volunminous transactions with the AEs – Out of Rs.227.244 crores worth of transactions with AE, TPO found nothing warranting a revision of ALP other than purchase of six items–Thus, it cannot be accepted that the assessee has indulged in a pricing methodology to benefit its AEs in respect of purchase of six item codes – Hence, the explanation of the assessee that it was forced to pay more amount for the items under six codes to its AE than the comparable prices of supplies from non AEs due to mainimum order quantity restrictions imposed by the said entities cannot be brushed aside – Even otherwise, if the other materials falling under 29 items codes purchased from the very same AEs are also considered, it would wipe out the advantage that the assessee derived from any possible over payment of the materials falling under 6 item codes purchased by it – Consideration of only these six items from a pack of 35 items for making a revision of ALP will not give a fair result at all – Lower authorities went off tangent in reaching an adverse finding without considering the total volume of transactions made by the assessee with its AEs- Therefore, the impugned addition on account of revision in ALP was not called for.
\n (A.Y. 2006 – 07 & 2007 – 08)
\n Intimate Fashions (India) (P) Ltd v. Asst. CIT (2012) 77 DTR 68 (Chennai) (Tri.)<\/em><\/strong><\/p>\n

S.92C: Avoidance of tax- Transfer pricing-Arms’ length price-<\/strong>
\n Selection of PLI depends on number of economic factors which may vary on year to year basis and thus, the principle of consistency or the principle of res judicata is not applicable to the selection of PLI; it is open to the taxing authorities to consider the position on year to year basis for working out the appropriate PLI.
\n Cost of precious metal (raw material) imported by assessee as per the specifications of its customer MU Ltd. for manufacture of automobile catalysts which are not sold\/supplied directly to MU Ltd. but are sold\/supplied to the vendors of MU Ltd. cannot be said to be a pass through cost and, therefore, PLI is to be arrived at by taking operating profit as a percentage of total cost inclusive of purchase cost of the precious metal.
\n Tolerance band provided in the proviso is not to be construed as a standard deduction. In this case, the TPO has adopted the arithmetic mean of several comparables for taking out a PLI which would be tested with the PLI of the assessee. If that arithmetic mean falls within the range of tolerance band then there may not be any adjustment but if it exceeds then ultimate adjustment is not required to be computed after reducing the arithmetic mean by 5 per cent. Actual working is to be taken into consideration. (A.Y. 2003 – 2004)
\n Johnson Matthey India (P) Ltd v. Dy. CIT (2012) 78 DTR12. (Delhi.)(Trib.)<\/em><\/strong><\/p>\n

S.94: Avoidance of tax-Transaction in securities- Units<\/strong>
\n Units are governed by the provisions of s. 94(7)(b)(ii) and not s. 94(7)(b)(i); contention that “units” are included within the meaning of the word “securities” and therefore, s. 94(7)(b)(i) is applicable and the period of holding has to be only three months is not sustainable. (A.Y. 2005 – 2006)
\n Sista’s (P) Ltd v. CIT (2012) 78 DTR 81 (Bom.)(High Court)<\/em><\/strong><\/p>\n

 <\/em><\/p>\n

S. 115JB:Company-Book profit-Exempt income- Special Economic Zone units continue to be exempt from minimum alternative tax (MAT)(S. 10A, 10AA)<\/strong> <\/strong>
\n The assessee had two undertakings, one of which was a SEZ unit and the other which was a STPI unit. Both units were eligible for deduction u\/s 10A. By the Special Economic Zone Act, 2005, s. 10AA was inserted w.e.f. 10.2.2006 to provide deduction in respect of units established in SEZs. By the same Act, sub-sec (6) was inserted in s. 115JB to provide that the profits of an SEZ unit would not be liable to MAT. By the Finance Act, 2007, clause (f) to explanation (1) to s. 115JB (2) was amended w.e.f. 1.4.2008 so as to delete the words “sections 10A or 10B” though sub-sec (6) of s. 115JB was retained. The AO & CIT(A) held that the effect of the deletion of the reference to s. 10A & 10B in s. 115JB meant that the units which were eligible for s. 10A & 10B deduction were no longer exempt from s. 115JB and only units which were eligible for s. 10AA deduction would be exempt from s. 115JB. On appeal by the assessee, Held, allowing the appeal:<\/p>\n

S. 115JB (6) does not refer to either s. 10A or s. 10AA but simply provides that the MAT provisions shall not apply to income arising from any business carried on in an unit located in a SEZ. Consequently, despite the fact that an amendment was made in clause (f) of Explanation (1) to s. 115JB(2) to provide that MAT shall apply to units eligible for s. 10A or 10B, a unit which is situated in a SEZ will continue to be exempt from MAT by virtue of s. 115JB(6). ( A. Y. 2009-2010)
\n Genesys International Corpn. Ltd v. ACIT (Mum.)(Trib.)www.itatonline.org. <\/em><\/strong>
\n    <\/strong>
\n S.115WB: Fringe benefit – Expenditure on non-employee – Not fringe benefit <\/strong>
\n Any expenditure incurred by employer in the course of his business or profession, which is not a consideration for employment, cannot be considered as “fringe benefit” cannot arise when expenditure is incurred on person who are not employees. (AY 2006-07) 
\n Dy.CIT v. Kotak Mahindra Old Mutual Life Insurance Ltd. (2012) 149 TTJ 332 (Mum)(Trib.)<\/em><\/strong><\/p>\n

S.115WB: Fringe benefits- Expenditure on non-employees<\/strong>
\n Expression “any consideration for employment” in s. 115WB(1) is significant in as much as the benefits listed in cls. (a)to (d) therein are directed towards the employees or their families including former employees – sec. 115WB(2) includes fringe benefits which are deemed to have been provided by the employer to the employees – Though s. 115WB(2) does not contain the expression “means any consideration for employment”, since sub-s(1) of s. 115WB itself states that the meaning of the expression `fringe benefits’  contained therein is “for the purposes of this chapter”, it implies that the overriding condition of incurrence of  expenditure in consideration for employment is even relevant for the purposes of ascertaining fringe benefits which are deemed to have been provided by the employer to its employees in terms of sub s. (2) of s. 115WB also – therefore, even in the circumstances provided in sub-s (2) of s. 115WB, fringe benefits can be deemed to have been provided by the employer to his employees only in cases where the prescribed  expenditure is incurred in consideration for employment  – Clarification issued by the CBDT vide question No.14 Circular No.8 of 2005, dated 29th Aug. 2005 seeks to enlarge the scope of levy of FBT, which is not supported by the language of the statute – It can be clearly observed from the speech of the Finance Minister in the Parliament while introducing the relevant provisions that the import and intent of introducing chapter XII-H was to tax such benefits which are collectively enjoyed by the employees and cannot be attributed to any individual employee – Therefore, the expenses prescribed in s. 115WB(2) are liable to be considered as fringe benefits only to the extent the same are incurred in consideration for employment i.e. for employees. (A.Y. 2006 – 07)
\n Intervalve (India) Ltd v. Addl. CIT (2012) 77 DTR 113 (Pune)( Tri.)<\/em><\/strong><\/p>\n

S.115WB: Fringe Benefit – Benefits – Available only on expenses incurred on employees<\/strong>
\n Expenses prescribed in Section 115WB(2) are liable to be considered as fringe benefit only to the extent the same are incurred in consideration for employment i.e. for employees and not with respect to expenses incurred on person who are not employees of the assessee. (AY 2006-07)
\n Intervalve (India) Ltd. v. Addl CIT (2012) 149 TTJ 365 (Pune) (Trib.)<\/em><\/strong><\/p>\n

S.115WB: Fringe benefit –Charge of tax- Day to day travelling and taxi hire charges –<\/strong> Expenses paid to employees for day-to-day local travelling and tax hire charges during their working hours cannot be regarded as fringe benefit.<\/strong>
\n Expenditure under consideration are day to day local travelling expenditure and taxi hire charges for movement of employees during their working hours; it is not conveyance expenses paid to the employee for travelling between his residence and office; under these circumstances, the payment is not consideration for employment and fringe benefit tax was not chargeable. Expenses paid to employees for day-to-day local travelling and tax hire charges during their working hours cannot be regarded as fringe benefit.  (AY 2006-07)
\n Dy. CIT v. Kotak Mahindra Old Mutual Life Insurance Ltd. (2012) 149 TTJ 332 (Mum) (Trib.) <\/em><\/strong>
\n S.115WB: Fringe benefits – Charge of tax-Postage, e-mail and courier expenses are cannot be treated as fringe benefit.<\/strong>
\n Expenditure under the head postage, e-mail, lease line and courier are not covered by section 115WB(2)(J).(A.Y.2007-08)
\n SGS India (P) Ltd. v. Addl. CIT (2012) 149 TTJ 392 (Mum.)(Trib.)<\/em><\/strong><\/p>\n

S.115WB: Fringe benefit – Freebies and products along – Not be treated as fringe benefit <\/strong>
\n Expenditure incurred by the assessee on the freebies and giving products free along with sale of products of assessee cannot be treated as fringe benefits; expenditure on celebrity endorsement also cannot be treated as fringe benefit. (A.Y. 2006-07 to 2008-09) 
\n Glaxo Smithkline Consumer HealthCare Ltd. v. Addl. CIT (2012) 149 TTJ 246 (Chandigarh)(Trib.)<\/em><\/strong><\/p>\n

S.115WB: Fringe benefits- Expenditure on non-employees<\/strong>
\n Any expenditure incurred by an employer in the course of his business or profession, which is not a consideration for employment, cannot be considered as “fringe benefit”, “fringe benefit” cannot arise when expenditure is incurred on persons who are not employees. (A.Y.06-07)
\n Dy. CIT v. Kotak Mahindra Old Mutual Life Insurance Ltd. (2012) 77 DTR 108 (Mum) (Trib.)<\/em><\/strong><\/p>\n

S.115WB: Fringe benefits- Telephone expenses <\/strong>
\n Expenditure incurred on office telephones – No benefit flows to the employee by reason of his employment as far as expenditure on office telephone is concerned – CIT(A) was justified in deleting the FBT levied on telephone\/fax expenses in respect of telephones installed in the office premises.(A.Y.06-07)
\n Dy. CIT v. Kotak Mahindra Old Mutual Life Insurance Ltd. (2012) 77 DTR 108 (Mum) (Tri.)<\/em><\/strong><\/p>\n

S.115WB: Fringe benefits- Conveyance expenses <\/strong>
\n Expenditure under consideration are day to day local travelling expenditure and taxi hire charges for movement of employees during their working hours; it is not conveyance expenses paid to the employee for travel between his residence and office; under these circumstances, the payment is not consideration for employment and fringe benefit tax was not chargeable. (A.Y.06-07)
\n Dy. CIT v. Kotak Mahindra Old Mutual Life Insurance Ltd. (2012) 77 DTR 108 (Mum) (Tri.)<\/em><\/strong>
\n S.119: Income tax authorities- Instructions-Requantification of income-CBDT was directed to pass speaking order after hearing the assessee. Attachment to be lifted after furnishing bank guarantee.<\/strong>
\n The petitioner company represented to CBDT stating that income declared by earlier management in the return of income had been overstated and tax credit thereon was excessively claimed as evident from the subsequent restatement of accounts at the instance of company law Board and consequent upon investigation by SFIO. The CBDT  rejected the representation of the company for re-quantification \/reassessment of income for various years , however no hearing was given to the assessee. The assessee filed a writ petition ,the High Court directed the petitioner company to pay 350 crores and bank guarantee for Rs 267 crores pending the hearing and disposal of writ petition. Against the said order special leave petition was filed. The Court directed the company to file a fresh comprehensive petition\/representation before the CBDT giving all requisite details \/particulars in support of its case and the CBDT is directed to dispose of the case by a reasoned order after hearing the petitioner company. Company  was directed to file undertaking with the Registry of the Supreme Court to furnish bank guarantee of a nationalized bank in the sum of Rs 617 crores where upon the attachment levied by the department is to be lifted .(A.Ys. 2003-04 to 2008-09)
\n Satyam Computer Services Ltd v. CIT ( 2012)346 ITR 566\/77 DTR 434\/253 CTR 175 (SC)  <\/em><\/strong><\/p>\n

S.119: Income-tax authorities- Power- Delay in claiming refund – Condonation of delay – Trust was  not under obligation to file return  hence the delay condoned and refund was directed to be granted.<\/strong>
\n Where the petitioner filed application u\/s 119(2) before CCIT submitting along with the application a  note explaining that the delay in filing return to the office of CCIT was caused by the bifurcation of trust and the power grid corporation  with consequential bifurcation of the fund. It was held that the Trust was deprived of the refund for which it could not be blamed at all and it had no liability whatsoever to pay  this amount to the Revenue and hence, petitioner was entitled to condonation of delay in the filing claim for refund. (A.Y. 1995-96 to 1998-99)
\n North Eastern electric Power Corporation Employees Provident Fund Trust v. UOI (2012) 348 ITR 584 (Gauhati)(High Court)<\/em><\/strong><\/p>\n

 <\/strong><\/p>\n

S.139: Assessment-   Return of Income – Electronic filing of return is not mandatory, hence, return filed manually before due date cannot be ignored. (S.80-IC) <\/strong>
\n It is directed by CBDT as to there is no provision in Act or Rules making electronic filing of return mandatory.  Hence, Return filed manually before due date cannot be ignored. Thus, Denial of deduction under sec. 80-IC on ground electronic return filed only after due date is not permissible.  (A.Y. 2008-09).
\n Gemini Communication Ltd. v. ACIT (2012) 19 ITR (Chennai) (Trib.)<\/em><\/strong><\/p>\n

S.127: Income tax-authorities- Power to transfer cases-Reassessment- Conduct” of ACIT and Commissioner of Income tax in seeking to circumvent the law strongly condemned and awarded cost. (S.148 )<\/strong> <\/strong>
\n Pursuant to the assessee’s request, the Commissioner of  Income tax- passed an order dated 22.11.2011 u\/s 127(2) transferring the assessee’s case from Mumbai to Pune. Despite the said transfer, the ACIT, Mumbai, issued a s. 148 notice seeking to reopen the assessee’s case. The assessee filed a Writ Petition to challenge the reopening on the ground that the ACIT, Mumbai, had no jurisdiction. Before the Court, the department revealed that the ACIT had written a letter to the CIT requesting that the transfer of the case be cancelled “to circumvent any jurisdictional issue” and that the CIT had passed a “corrigendum order” stating that the transfer order was “temporarily withdrawn for the sake of administrative convenience“. The said “corrigendum order” was passed without hearing the assessee and even a copy thereof was not served on the assessee. Held  by the Court allowing the Petition: The conduct of the ACIT & CIT is highly deplorable. Once the jurisdiction to assess the assessee was transferred from Mumbai to Pune, it was totally improper on the part of ACIT Mumbai to request the CIT to pass a corrigendum order with a view to circumvent the jurisdictional issue. Making this request was in gross abuse of the process of law. If there was any time barring issue, the ACIT Mumbai ought to have asked his counterpart at Pune to whom the jurisdiction was transferred to take appropriate steps in the matter instead of taking steps to circumvent the jurisdictional issue. It does not befit the ACIT Mumbai to indulge in circumventing the provisions of law and his conduct has to be strongly condemned. Instead of bringing to book persons who circumvent the provisions of law, the ACIT has himself indulged in circumventing the provisions of law which is totally disgraceful. The CIT ought not to have succumbed to the unjust demands of the ACIT and ought to have admonished the ACIT for making such an unjust request. The CIT ought to have known that there is no provision under the Act which empowers the CIT to temporarily withdraw the order passed by him u\/s 127(2) for the sake of administrative convenience or otherwise. If the CIT was honestly of the opinion that the order passed u\/s 127(2) was required to be recalled for any valid reason, he ought to have issued notice to that effect to the assessee and passed an order after hearing it. Further, though the CCIT agrees that the actions of the CIT and ACIT are patently unjustified and not as per law, he has expressed his helplessness in the matter. It is expected that the CCIT shall take immediate remedial steps to ensure that no such incidents occur in the future. The department shall pay costs of Rs. 10,000 which may be recovered from the CIT & ACIT.
\n Fiat India Automobiles Ltd v. ACIT (Bom.)( High Court)www.itatonline.org <\/em><\/strong><\/p>\n

S.133A: Assessment- Survey-Statement-Survey does not empower any ITO to examine any person on oath, statement recorded under section 133A has no evidenciary  value  addition cannot be  made merely on the basis of such statement.<\/strong>
\n The Tribunal deleted the addition made by the Assessing Officer on the basis of statement recorded during the survey proceedings. In an appeal before the High Court, the High Court by passing a detailed order and referring the circular of Board  dated 10 th March 2003 has held that  merely on the basis of statement recorded in the Course of survey , which was retracted subsequently addition cannot be made. High Court explained the difference between section 132(4) and section 133A. High  Court held that statement obtained under section 133A would not  automatically bind upon the assessee  and confirmed the  order of Tribunal. On appeal by the Department to the Apex court the Court held that in view of the concurrent findings of fact, the civil appeal of department was dismissed.(A.Y. 2001-02)
\n CIT v. S. Khader Khan Son ( 2012) 210 Taxman 248\/79 DTR 184 (SC).<\/em><\/strong>
\n Editorial:<\/strong> View of Madras High Court in CIT v. S.Khader KhanSon (2008) 300 ITR 157 (Mad.) affirmed.
\n Instruction no F.No 286\/2\/2003 –IT (Inv) dt 10-3-2003 (April 2003 AIFTP Journal P.25 ) <\/p>\n

S.139: Return-Capital gains-Non-resident-Investment in shares-Transfer pricing-MAT-DTAA-India- Mauritius-Capital gains on sale of shares to group company –  Filing of return of income – India-Mauritius DTAA –<\/strong> Capital gain in hands of Mauritian applicant – exempt under Article 13 – Transfer pricing and  Minimum Alternative Tax provisions be applicable. Return of income is to be filed compulsory. [S. 2(14), 92, 115JB, 195,Article 13(4)]<\/strong>
\n The applicant incorporated in Mauritius was part of Glaxo Smithkline group of companies (GSK group). It claimed to be a tax resident of Mauritius. It had held the shares of Glaxo Smithlkine Pharmaceuticals Limited (‘GSKPL’) (a company incorporated in India), as investment so as to benefit from the profits accruing in the long term. As a part of reorganization of the group structure, the applicant proposes to transfer the shares of GSKPL to group company GSK Pte, the Singapore Company. The transfer was for cash consideration at fair market value and off-market. <\/p>\n

The issues were whether such transfer of shares is taxable in India, applicability of TP provisions, MAT and whether return of income should be filed in India. The Revenue contented that the whole scheme devised by the group is one for avoidance of capital gains in India by taking advantage of the India-Mauritius DTAC and that there is round tripping as well as treaty shopping and such an attempt should not be allowed to succeed. <\/p>\n

Authority observed that even if one takes it that there was treaty-shopping, that has been held to be not taboo in UOI v Azadi Bachao Andolan, by the Supreme Court. It hence ruled that the capital gains would not be chargeable to tax in India in view of paragraph 4 of Article 13 of the DTAC between India and Mauritius.<\/p>\n

While considering applicability of TP provisions, it took a view contrary to earlier rulings. After considering the purpose for which sections 92 to 92F are enacted and on an interpretation of its provisions under the golden rule of construction, it observed that applicability of section 92 does not depend on the chargeability under the Act. Whether ultimately the gain or income is taxable in the country or not, Sections 92 to 92F would apply if the transaction is one coming within those provisions.<\/p>\n

Further, it held that it would be mandatory for the foreign company to file the return of income so as to take the benefit of DTAA as, in terms of section 90(2) of the Act, it has to be shown that the benefit of a DTAA is being claimed, that the claimant is eligible to make that claim and that DTAA is more beneficial to the concerned person, which cannot be done without filing return of income.<\/p>\n

As regards applicability of MAT provisions it ruled that they would equally apply to a foreign company as Section 115JB is an overriding provision. It observed that there may be practical difficulties for foreign companies to prepare an account in terms of Schedule VI of the Companies Act, but that is no reason to whittle down the scope of section 115JB of the Act. The difficulties are for the legislature to consider and remove and not for itself((A.A.R. No. 999 dt. 14\/08\/2012\/  A.A.R. No. 1004 dt. 16\/08\/2012)( <\/em><\/strong>.
\n Castleton Investment Ltd(2012) 348 ITR 5379(AAR)<\/em><\/strong>
\n SmithKline Beecham Port Louis Ltd (2012)348 ITR 556\/ 252 CTR 255 (AAR)<\/em><\/strong><\/p>\n

S.143(3): Assessment- Set a side  de novo-Limitation – Despite set aside for “de novo consideration”, Assessing Officer cannot look at fresh issues.<\/strong> <\/strong>
\nThe CIT(A) disposed off the appeal filed by the assessee by observing “A perusal of the above additions clearly show that the AO has made the assessment in a very casual manner … Considering the heavy additions made and the necessity for making adequate enquiries into the matter, it is considered necessary to set aside the assessment for denovo consideration”. In the order passed pursuant to the said order of the CIT(A), the AO made additions on issues other than those that were covered in the first order. The assessee challenged this on the basis that even though the CIT(A) had set aside for “denovo consideration”, the AO could not look into new issues. Held by the Tribunal:<\/p>\n

The scope of proceedings after remand depend on the terms of the remand order. If the appellate authority has set aside the assessment and directed the making of a fresh assessment without imposing any restrictions or limitations, the AO has the same powers in making fresh assessment as he originally had. However, if any restrictions are placed, the AO cannot travel beyond those restrictions. The scope of the remand order has to be determined depending on the subject matter of the appeal and the appellate order read as a whole in its proper context. On facts a perusal of the findings of the CIT (A) shows that he was concerned with the additions made in the original assessment order and it was in the light of the additions made therein, that the assessment was set aside for de novo consideration. This clearly shows that the directions of the CIT (A) for de novo assessment were restricted to the additions made by the AO in the original assessment order and, therefore, the AO had no jurisdiction to look at other issues.( A. Y. 1996-97)
\n Gemini Oils Pvt. Ltd v. ITO ( Mum.)(Trib.).www.itatonline.org<\/em><\/strong>
\n <\/strong>
\n S.145: Assessment- Method of accounting – Hire purchase-When character of transaction as hire purchase transaction, income that flew from transaction had to necessarily follow treatment that was given under hire purchase agreement hence the EMI method for taxation was accepted. <\/strong>
\n Assessee had entered into agreements to give vehicles on hire purchase basis.In books of account, assessee was computing income under sum of digits (SoD) method. However, while returning income under Act, assessee had followed equated monthly installment (EMI) method. Assessing Officer held that the assessee was prohibited from adopting a different method of accounting for purpose of returning income. It was apparent from records that assessee had not given any loan or money for purchase of vehicle in question and thus, transaction was not a loan transaction, but only a hire purchase agreement. Once revenue had accepted character of transaction as hire purchase transaction, income that flew from transaction had to necessarily follow treatment that was given under hire purchase agreement .Appeal of revenue was dismissed. (A.Y.1991-92, 1992-93, 1999-2000,2003-04)
\n CIT v. Ashok Leyland Finance Ltd. (2012) 210 Taxman 95 (Mad.) (High Court) <\/em><\/strong><\/p>\n

S.145: Assessment-Method of accounting-Income – Accrual-Mercantile system of accounting-<\/strong> When the assessee was following mercantile system of accounting, accrual of interest income was to be assessed in year in which it had accrued and had become due.<\/strong> (S.5 )<\/strong>   <\/strong>
\n Assessee was following mercantile systems of accounting. It advanced loan of Rs.25 lakhs to a company on 11\/5\/1995 and received interest till 16\/8\/1996.  Thereafter assessee did not receive any interest. Subsequently, during year ending on 31\/3\/199, assessee created a contingency reserve for Rs.25 lakhs and ultimately in year 2007, wrote off said amount. For relevant year assessee claimed that accrual of interest income was shown in book which was only an hypothetical income and, hence, same was not available for taxation .The Court held that since assessee was following mercantile system of accounting, accrual of interest income was to be assessed in year in which it had accrued and had become due  hence the  assessee was liable to tax on interest shown in the  books of account. Appeal of Assessee was dismissed(A.Y.1998-99)   
\n United Nilagiri Tea Estates Co.  v. Dy. CIT (2012) 210 Taxman 62  (Mad.) (High Court) <\/em><\/strong><\/p>\n

 <\/strong><\/p>\n

S.145: Assessment- Method of accounting-Hire purchase transactions <\/strong>
\n A perusal of the order of the Tribunal clearly showed that the nature of the business transactions conducted by the assessee was one of a hire purchase giving vehicles on hire purchase and the assessee had not given any finance or loan for the purchase of vehicle. A reading of the agreement shows that the principal and finance charges for the entire period of contract had been shown separately in the schedule attached to the agreement. Thus the method employed for arriving at the monthly instalment is an EMI method and the rights of the assessee to receive the hire purchase charges on various due dates are as per the schedule mentioned in the agreement. Same method had been accepted in the past. Tribunal was therefore right in holding that the assessee is justified in following the EMI method to account the finance charges for the income tax purposes though it was following SOD method to account the finance charges to arrive at balance sheet and profit and loss statements. (A.Y. 1991-92, 92-93 , 99 – 2000 & 2003- 2004)
\n CIT v. Ashok Leyland Finance Ltd. (2012) 77 DTR 72 (Mad.)(High Court)<\/em><\/strong><\/p>\n

S.147: Reassessment- Change of opinion-Beyond four years-Subsequent reversal of Judgment  by supreme Court- Subsequent reversal of legal position by judgment of Supreme Court does not authorize department to re-open assessment , which stood closed on basis of law , as it stood at relevant time.( S.80HH,149(IA).<\/strong>
\n At the relevant time, when the assessment order got completed , the law as declared by the jurisdictional High Court, was that the civil construction work carried out by the assessee would be entitled to the benefit of section 80HH  of the Act , which view was squarely reversed in the  case of CIT v. N.C. Budharaja &Co (1993) 204 ITR 412(SC). The Court held that the subsequent reversal of the legal position by the judgment of the Supreme Court does not authorise the Department to reopen the assessment , which stood closed on the basis of the law , as it stood  at the relevant time. The  Court also observed that once limitation period of four years provided under the Act expires then the question of reopening by the Department does not arise .Accordingly the Civil appeal of department was dismissed.
\n Dy.CIT v. Simplex Concrete Piles (India ) Ltd (2012) 210 Taxman 278 (SC) <\/em><\/strong>
\n Editorial:<\/strong> Refer ,Simplex Concrete Piles (India) Ltd  v. Dy.CIT ( 2003) 262 ITR 605(Cal.)(High Court) <\/p>\n

 <\/strong><\/p>\n

S.147: Reassessment- Full and true disclosure –Notice after 4 years <\/strong>
\n From the return filed and the document s annexed with the return, no where it can be ascertained what was the holding of the  assessee company (in terms of voting power) in SDBL – By simply stating that the assessee company holds certain shares in SDBL, the duty to truly and fully disclose all material facts necessary for assessment of the income, in the present case, was not discharged – Reasons recorded clearly envisage escapement of income on account of non disclosure by the assessee of its holding in SDBL for the relevant assessment year. Such discrepancy came to light only while framing the assessment of the subsequent year i.e. 2006-07, while during the course of inquiry, the assessee was asked to submit such details through which it was found that the assessee holds 22.3per cent of the shares of SDBL – Reopening was therefore sustainable. (A.Y. 2003 – 2004)
\n Dishman Pharmaceuticals & Chemicals Ltd v. Dy. CIT (2012) 77 DTR 158 (Guj.) (High Court)<\/em><\/strong><\/p>\n

S.147: Reassessment- Full and true disclosure – addition on different issue <\/strong>
\n Close perusal of the reasons recorded would immediately establish that, quite apart from no suggestion in the reasons regarding any attribution on the part of the assessee in fully and truly not disclosing material facts, all facts necessary for framing the assessment were very much before the AO when the previously took the return of the assessee for scrutiny assessment – Further if the reopening of assessment fails, on account of non existence of reasons for such reopening, the revenue cannot either sustain such reopening or bring within the assessment proceedings any other head of escaped income not mentioned in the reasons for reopening – Reopening on the ground of wrong deduction under s. 80HHC could not therefore be sustained on account of deemed dividend under s. 2(22)(e). (A.Y.2004 – 05)
\n Dishman Pharmaceuticals and Chemicals Ltd v. Dy. CIT (2012) 77 DTR 173 (Guj.)(High Court)<\/em><\/strong><\/p>\n

S.147: Reassessment – Shipping company-When the conditions of section 147\/148 are satisfied , notice for reassessment can be issued even when orders are passed under section 172(4) or section 172(7).(S. 172(2), 172(7) )<\/strong>
\n In terms of Circular No.732 dated 20th Dec. 1995 the petitioner was issued an `annual no objection certificate’ and in terms thereof, the ships operated and owned by the petitioner were allowed to leave  the ports. The certificate as itself was treated as valid and binding and in compliance with the S. 172. It is after the ships had left the ports and after the end of assessment year on 31st March, 2007, that the petitioner had filed an annual return on 18th June, 2007. It is difficult to accept the contention of the petitioner that provisions of s. 147\/148 cannot be invoked in the present case or in cases where summary assessment is made u\/s. 172(4). As in the present case, no objection certificate was issued in terms of Circular No.732, dated 20th Dec. 1995 and no summary assessment order was passed. Only a prima facie or tentative view is taken, when an `annual no objection certificate’ is issued under the Circular No.732, dated 20th Dec. 1995. No doubt, s. 172 is a special and specific provision and is a complete code but the exception or special procedure carved out is confined and restricted to the stipulations and what is circumscribed and stated in sub sections. S. 172(1) states that notwithstanding other provisions of  Act, tax shall be levied and recovered in the manner stated in the section. The said section does not postulate or mandate that s. 147\/148 or other provisions like ss. 154, 263 etc .would not be applicable. There is no conflict between ss. 147, 148 and 172. Provisions of ss. 147 and 148 can apply even when an order under s. 172(4) or s. 172(7) has been passed. There can be escapement of income even when order under s. 172(4) or s. 172(7) is passed and therefore when conditions of s. 147\/148 are satisfied, notice for reassessment can be validity issued. (A.Y. 2007 – 2008)
\n Emirates Shipping Line, FZE v. Asst. Director of Income tax (2012) 77 DTR 329 (Delhi) (High Court)<\/em><\/strong> <\/p>\n

 <\/strong><\/p>\n

S.147: Reassessment- Reason to believe – Shipping  business- DTAA- India-Assessment cannot be reopened merely on the ground that it has claimed exemption from tax in India under Article 8 of the DTAA though no income tax is currently paid in UAE.  (S.90,Art.4 (1),8 ) <\/strong>
\n Reason to believe does not mean `reason to suspect. There must be some prima facie opinion that income has escaped assessment. This material or information should not be wholly vague, indefinite or far fetched. It must have nexus or live link with the information of belief. In the instant case, AO reopened the assessment of the assessee, a UAE based shipping company, on the ground that it has claimed exemption from tax in India under art. 8 of the Indo UAE DTAA even though no income tax is currently paid in UAE – Not justified A company incorporated in UAE and carrying on shipping business in India is entitled to benefit of art. 8 of the DTAA – Further, under art. 4(1) as amended w.e.f. 1st April, 2008, the requirement of liability to tax has been done away with. Therefore, impugned notice u\/s. 148 and the reassessment proceedings are quashed. (A.Y. 2007 – 2008)
\n Emirates Shipping Line, FZE v. Asst. Director of Income tax (2012) 77 DTR329 (Delhi)(High Court)<\/em><\/strong><\/p>\n

S.147: Reassessment – Change of opinion – Exemption under section 54EC-Application of law or interpretation of a statute leading to a particular conclusion cannot lead to a conclusion that tax has escaped assessment hence reassessment was held to be not valid.(S.54EC.)<\/strong>
\n The assessee sold a property to a builder for consideration and prior to execution of conveyance deed, the assessee invested the amount from consideration received in notified bonds from the earnest money and was granted deduction u\/s 54EC. Inspite of all the records and details submitted the AO reopened the assessment denying the claim of deduction. It was held that application of law or interpretation of a statute leading to a particular conclusion cannot lead to a conclusion that tax has escaped assessment for this would then certainly amount to review of order which is permitted unless so specified in a statute. It was further held that initiation of proceedings u\/s 147 also proceeded on the view that there had been non-application of mind during original proceedings for assessment. This was unsustainable in law and fresh application of mind on the same set of facts amounted to change of opinion and did not warrant reopening. (A.Y. 2006-07)
\n Parveen P. Bharucha(Mrs) v. Dy. CIT (2012) 348 ITR 325 (Bom.)(High Court)<\/em><\/strong><\/p>\n

S.147: Reassessment – Notice – After four years – incorrect decision by Assessing officer after due application of mind does not confer Assessing Officer jurisdiction to reopen the assessment.(S.148 )<\/strong>
\n An incorrect decision by assessing officer after exchange of correspondence, raising of questionnaire and satisfactory reasons received from assessee, does not confer AO jurisdiction to reopen the assessment even after amendment of section 147\/ 148. (A.Y. 2001-02)
\n Rosed Serviced Apartments Pvt. Ltd. v. Dy.CIT (2012) 348 ITR 452 (Delhi)(High Court)<\/em><\/strong><\/p>\n

 <\/strong><\/p>\n

S.147: Reassessment- Non-disclosure of primary facts-Amendment in the Act retrospectively-After four years-Reassessment held to  be not be not valid  as there was no failure on the part of assessee to disclose all material facts.(S.80HHC, 148 ) <\/strong>  <\/strong>
\n In the return of income the assessee claimed the deduction under section 80HHC.The assessment was completed under section 143(3)wherein Assessing Officer did not grant deduction in respect of DEPB licences. Commissioner(Appeals), partly allowed the appeal. Revenue went in appeal before the Tribunal. When the appeal of revenue  was pending before the Tribunal the Assessing Officer issued the notice to reopen the assessment, to verify whether the or not assessee had fulfilled the conditions laid down by amended provisions of section 80HHC. The Assessee filed the writ petition challenging the issue of notice under section 148. Allowing the Writ petition the court held that ,when the assessee filed its return of income for the assessment year 2000-01, it could not have assumed that section 80HHC was going to be amended in the year 2005 and file its return accordingly. Under the circumstances, the contention put forth on behalf of the revenue that the assessee by not filing its return in terms of the amended provisions of section 80HHC had failed to disclose fully and truly all material facts deserves to be stated only to be rejected. When the amended provisions of section 80HHC were not in existence at the relevant time when the return came to be filed, no such failure can be attributed to the assessee. In the aforesaid premises, it is apparent that the basic requirement for reopening the assessment after the expiry of the period of four years from the end of the assessment year, namely, that there is escapement of income chargeable to tax by reason of failure on the part of the assessee to disclose fully and truly all material facts is not satisfied, thereby rendering the impugned notice under section 148, unsustainable.(A.Y.2000-01)       
\n Dishman Pharmaceuticals & Chemicals Ltd. v. Dy. CIT (2012) 210 Taxman 149 (Guj.) (High Court)<\/em><\/strong><\/p>\n

S.147:<\/strong> Reassessment – Full and true disclosure – Notice after expiry of four years.<\/strong> The validity of the reasons has to be judged only on the basis of what was originally recorded under s. 148(2).There  is no authority given by the section enabling the Assessing Officer to reopen the assessment on the ground that credit for TDS was wrongly allowed in the original assessment.(S.9(1)(vi), 148, 154, 155(14 )<\/strong> <\/strong>
\n In the Note No. <\/strong>6 to the statement of total income filed along with the return of income on 30th Oct., 2003, not only has the petitioner drawn the attention of the Assessing Officer to the fact that in the asst. yr. 1997-98 the Tribunal has held that its receipts were in the nature of “royalty” as defined in s. 9(1)(vi), but the petitioner has also stated that it has not accepted the order of the Tribunal and has filed an appeal to the High Court and that notwithstanding the adverse order of the Tribunal, it is still keeping its claim alive. Thus, the material fact that t for an earlier assessment year there was an adverse order of the Tribunal has been brought to the attention of the respondent in the return of income itself. As far as the legal aspect is concerned, there are several authorities to the effect that the reasons recorded prior to the issue of notice under s. 148 cannot be improved upon and the gaps cannot be supplied later.  The validity of the reasons has to be judged only on the basis of what was originally recorded under s. 148(2).   The Court accepted the submission of assessee that  section 147 can be invoked only “if the AO has reason to believe that  any income chargeable to tax has escaped assessment for any assessment year” and that there is no authority given by the section enabling the AO to reopen the assessment on the ground that credit for TDS was wrongly allowed in the original assessment”. On the facts the credit for TDS  was under section 155(14) read with section 154 Explanation, hence the reopening of assessment beyond four years was held to be in valid.(A.Y.2003-04)    
\n Asia Satellite Telecommunications Co. Ltd. v. Asstt. DIT (2012) 253 CTR 150 (Delhi) (High Court)<\/em><\/strong><\/p>\n

S.147:<\/strong> Reassessment – Reason to believe – Absence of material or rational belief-<\/strong> Assessing Officer  was not justified in reopening assessment on the ground that deduction under s. 80-IA was allowed in excess while the deduction was computed in the same manner as in earlier years.  (S.80IA)<\/strong>
\n The Assessee disclosed all particulars in the original assessment proceedings.  The Assessment was reopened on the ground that the excess deduction was allowed. The Court held that in the absence of any new material with Assessing Officer   or failure on the part of assessee to make full and true disclosure, Assessing Officer was not justified in reopening assessment on the ground that deduction under s. 80-IA was allowed in excess while the deduction was computed in the same manner as in earlier years. The Court also observed that similar deduction under section 80I  was allowed for the assessment year 1996-97. Accordingly the appeal of assessee was allowed and decided in favour of assessee.(A.Y.1997-98, 1998-99 & 2000-01)
\n Puri Brothers v. CIT (2012) 252 CTR 316 (HP) (High Court)   <\/em><\/strong><\/p>\n

 <\/strong><\/p>\n

S.147: Reassessment- Change of opinion.<\/strong>
\n During the course of assessment proceedings, the AO has raised certain queries with regard to deductions, which were replied by the assessee and in the assessment order the AO has dealt with the question of grant of deduction under s. 10B and has allowed deduction. Reasons given for reopening the assessment and the notice issued u\/s. 148 is nothing, but a change of opinion. Reopening was not therefore sustainable. (A.Y. 2007 – 2008)
\n Metal Alloys Corporation v. ACIT (2012) 77 DTR 87 (Guj.)(High Court)<\/em><\/strong><\/p>\n

S.147: Reassessment- reason to believe – DVO report <\/strong>
\n DVO’s report per se is not an information for the purposes of reopening assessment u\/s. 147 – AO has to apply his mind on the information, if any, collected and must form a belief thereon for reopening the assessment. There has to be something more than the report of DVO for the belief of the A.O. (A.Y. 1997-98 to 2001 – 02)
\n CIT v. Vridnaban Real Estate (P) Ltd. (2012) 78 DTR 100 (All.)(High Court)<\/em><\/strong><\/p>\n

 <\/strong><\/p>\n

S.147: Reassessment- Full and true disclosure – Explanation 2 – Notice after 4 years <\/strong>
\n Assessee had taken the position that since all its operations are carried out in Hong Kong and it did not have any office or branch or subsidiary in India nor did it receive any amount in India, it was not  assessable to tax in India – Material fact that for an earlier assessment year there was an adverse order of the Tribunal has been brought  to the attention of the AO in the return of income itself – Explanation 2 to S. 147 was not attracted – No claim for the TDS of Rs.2,11,16,426 was made by the petitioner “in the return” nor was any credit given in the demand notice for any TDS – order passed by the AO on 27th June, 2006 is traceable to s. 155(14) r.w.s. 154 and by claiming credit for TDS the assessee cannot be said to have furnished untrue or incorrect particulars of its income, nor can it be said that by allowing credit for the TDS the AO has given excessive relief – Other assumption which has to be made for Expln. 2 to apply is that the relief was allowed to the assessee in the original assessment order, which would be an erroneous assumption since no credit for TDS was allowed in the original assessment order – Further,  the cases enumerated in the explanation should also be cases where income chargeable to tax had escaped assessment – It cannot be so construed as to rope in cases where credit for TDs, which is a credit given against the tax payable and is not any allowance or deduction or loss or relief against the income chargeable to tax was erroneously given reopening was not therefore sustainable. (A.Y. 2003 – 04)
\n Asia Satellite Telecommunications Co. Ltd v. Asst. Director of Income tax (International Taxation) (2012) 77 DTR 121 (Delhi)(High Court)<\/em><\/strong><\/p>\n

S.147: Reassessment- Change of opinion <\/strong>
\n When in an assessment framed by the AO, if a certain claim of the assessee is not examined, no queries raised, no answers elicited, it cannot be stated that merely because the AO did not reject such a claim in the final order of assessment, he should be deemed to have expressed an opinion with respect to such a claim and any reopening of an assessment of this nature even within a period of four years from the end of relevant assessment year would amount to change of opinion. We are further of the opinion that in any such case, as long as there is some tangible material on the basis of which the AO can form a belief that the income chargeable to tax has escaped assessment, it would be permissible to reopen the assessment in exercise of powers under s. 147 of the Act, particularly after the amendments made w.e.f. 1st April 1989. Such tangible material need not be alien to the record.
\n In situation where the AO during scrutiny assessment, notices a claim of exemption, deduction or such like made by the assessee, having some prima facie doubt raises queries, asking the assessee to satisfy him with respect to such a claim and thereafter, does not make any addition in the final order of assessment, he can be stated to have formed an opinion whether or not in the final order he gives his reasons for not making the addition.
\n In the present case, entire information and the material that the AO had at his command was reflected from the record itself – This coupled with the fact that in the original assessment, the AO  examined such claims in detail, would convince that any reopening of the assessment of same claims on the basis of same material, amounts to a mere change of opinion – Fact that the AO did not record reasons for making no disallowance on such claim of exemption, would be of no consequence reopening was not therefore sustainable. (A.Y. 2002 – 03)
\n Gujarat Power Corporation Ltd v. Asst. CIT (2012) 77 DTR 89 (Guj.)(High Court)<\/em><\/strong><\/p>\n

S.148: Reassessment- Rectification-Vague notice-Notice was set aside. (S.154)<\/strong> <\/strong>
\n The Assessing Officer has not even indicated as to what basis he has allowed excess set off hence the notice under section 154 was held not maintainable. The second notice which was issued under section 148 was on the basis of notice under section 154 . The Apex court held that the High Court was justified in setting aside both notices .Accordingly the civil appeal filed by the department was dismissed.
\n Add.CIT v. Shreyas  Gramin Bank (2012) 210 Taxman 276 (SC) <\/em><\/strong><\/p>\n

S.148: Reassessment- Notice- Composite notice for four years<\/strong>
\n Each assessment year is taken to be an independent unit of assessment and the provisions of Act apply separately. Even where there has been escapement of income, the A.O.  is obliged to issue separate notice for each assessment year. Entire reassessment proceedings are wholly without jurisdiction. (A.Y. 1996 – 1997)
\n Mohd. Ayub v. ITO (2012) 78 DTR 79 (All.)(High Court)<\/em><\/strong><\/p>\n

S.153A: Assessment- Search or requisition- Computation of undisclosed income.<\/strong>
\n Both the CIT(A) and the Tribunal have recorded a concurrent finding that there was no basis for making any addition towards low gross profit. They have found that the search on the assessee did not yield any incriminating material on the basis of which it can be said that the assessee was indulging in under invoicing or suppression of sales. They also found that the documents on which the AO  has placed reliance, were seized from a different person and not from the assessee and that no nexus between that person and the assessee has been established beyond doubt. In such circumstances, it has been held that the seized material cannot be used against the assessee. It has also been recorded by the CIT(A), whose decision has been confirmed by the Tribunal, that the documents upon which the AO placed reliance relate to a subsequent period and not to the years under consideration. They relate to the period from 1st Nov. 2005 to 18th Nov. 205. It has thus been concurrently found by the CIT(A) and the Tribunal that even if an estimate of the gross profits has to be made, it has to be based on valid material which was absent in the present case and that there was no justification for making an addition for low gross profits on pure guess work. These factual findings have not been sought to be disturbed or impeached by reference to any material or evidence to the contrary. The AO has not referred to any material to show that the quality of the Hing sold by the assessee was the same as that sold by the members of the group from whom the sales bills were seized during the search carried out simultaneously. Therefore, the CIT(A) and the Tribunal have rightly held that there was nothing to connect the assessee with those sales bills. In the light of this position, their finding that no addition can be made to the gross profit by substituting the sale price mentioned in the seized sales bills cannot be said to be vitiated as reasonable. (A.Y. 2000 – 01, 2003 – 04 & 2004 – 05)
\n CIT v. Lachman Dass Bhatia (2012) 77 DTR 17 (Delhi)(High Court) <\/em><\/strong><\/p>\n

S.153A: Assessment- Search or requisition- Computation<\/strong>
\nBy virtue of s. 158BI the various provisions of chapter XIV-B are made inapplicable to proceedings under ss. 153A\/153C. The effect of this is that while the provisions of Chapter XIV-B limit the inquiry by the AO to those materials found during the search and seizure operation, no such limitation is found insofar as ss. 153A\/153C are concerned. Therefore, it follows that for the purposes of ss. 153A\/153C the AO can take into consideration material other than what was available during the search and seizure operation for making an assessment of the undisclosed income of the assessee. It was contended by counsel for the assessee that there was no evidence before the AO to conclude that on money was received by firm AH in respect of all the sale transactions. It was submitted that there may have been material with regard to eight such transactions but that does not mean that the same script was played out for all the transactions. This submission is not sustainable. There was adequate material before the AO in the form of eight sale needs and in the form of replies given by the G to questions posed to him with read to receipt of non money to enable the AO to come to an informed conclusion in this regard. Appreciation of the available material is within the domain of the AO and this does not lead to any substantial question of law, unless the conclusions arrived at are perverse. That is not the position in this case.
\nGopal Lal Bhadruka & Ors v. Dy. Commissioner of Income tax (2012) 77 DTR 146 (AP)(High Court)<\/em><\/strong> <\/p>\n

S.153A: Assessment- Search or requisition- Computation of undisclosed income <\/strong>
\n There is no condition in S. 153A that additions should be strictly made on the basis of evidence found in the course of the search or other post search material or information available with the AO which can be related to the evidence found.  This, however, does not mean that the assessment under S.153A can be arbitrary or made without any relevance or nexus with the seized material. Obviously an assessment has to be made under this section only on the basis of seized material.  Question, however, is whether the seized material can be relied upon to also draw the inference that there can be similar transactions throughout the period of six years covered by S. 153A In the present case, there was material to show that the assessee has been indulging in off record transactions. Tribunal lost sight of the fact that all was not well with the books of account maintained by the assessee and it has been keeping away its income from the books. That should have been sufficient for the Tribunal to examine the estimate made by the AO. Assessee cannot be permitted to take advantage of his own illegal acts, it was his duty to place all facts truthfully before the assessing  authority, if he fails to do his duty he cannot be allowed to say that assessing authority failed to establish suppression of income. Papers themselves show two different rates, one higher and the other lower and on  comparison with the sale bills it has been found that the sale bills show the lower rate and these findings have not been denied by the assessee. Tribunal, therefore, erred in looking for some other corroboration to substantiate the contents of the loose papers, overlooking that the loose papers needed  no further corroboration and the sale bills compared with the seized papers themselves corroborated the suppression of income. A broker is stated to have admitted that the rate of import of Hing is between Rs.1,500\/- to Rs.1,700 per kg. approximately and the same was being sold in the local market at Rs.3,000 per kg. CIT(A) has held that the rate of Rs.2,000 is unreasonable and arbitrary.  Whether this finding can stand ought to have been examined by the Tribunal in the light of the statement of the broker as well as the seized papers where the sale rate per kg. of Hing ranges from Rs.300 to Rs.1,900. Therefore, the findings of fact arrived at by the Tribunal are not borne out by the evidence on record. Tribunal was not  therefore justified in upholding the order of CIT(A) deleting addition – matter remanded for reconsideration. (A.Y. 2000 – 01 to 2006 – 07)
\n CIT v. Chetan Das Lachman Das (2012) 77 DTR 25 (Delhi) (High Court))<\/em><\/strong><\/p>\n

S.153A: Assessment- Search or requisition- Computation of undisclosed income-<\/strong> Assessing Officer  can take into consideration material other than what was available during the search and seizure operation for making an assessment of the undisclosed income of the assessee.<\/strong>  (S.153C, 158BI ) <\/strong>
\n Section 58BI, specifically state that   the various provisions of Chapter XIV-B are not applicable to proceedings under ss. 153A\/153C i.e. Search initiated under section 132  or requisitioned under section 132A  after the 31st day of May 2003. The effect of this is  while the provisions of Chapter XIV-B limit the inquiry by the Assessing Officer to those materials found during the search and seizure operation, no such limitation is found insofar as ss. 153A\/153C are concerned. Therefore, it follows that for the purposes of  sections 153A\/153C the Assessing Officer  can take into consideration material other than what was available during the search and seizure operation for making an assessment of the undisclosed income of the assessee. On facts the Court held that no substantial question of law arise, unless the conclusion arrived at are perverse, that was not the position in this case hence appeal of assessee was dismissed.   
\n Gopal Lal Bhadruka & Ors. v. Dy. CIT (2012) 253 CTR 80 (AP) (High Court)  <\/em><\/strong><\/p>\n

S.153C: Assessment- Income  of any other person-Search and seizure-Best assessment-Quoting wrong section will not make the assessment invalid. (S.144)<\/strong>
\n For the assessment year 2009-10 the best assessment was made under section 144 by making references to section 153C  and 153A. The assessee  challenged the assessment order by filing writ petition stating that the assessing Officer referred the section 153A, and 153C which are not applicable to relevant year. The Court held that best assessment cannot be held to be invalid merely because the Assessing Officer wrongly quoted the sections 153A, and 153C.(A.Y. 2009-10)
\n K.M. Mehaboob (Dr.) v. Dy.CIT ( 2012) 76 DTR 449(Ker.)(High Court) <\/em><\/strong><\/p>\n

S.153C: Assessment- Income of any other person-Search and seizure- Computation<\/strong>
\n A.O. made the addition of Rs.5,00,000\/- as unexplained investment in purchase of land. The CIT(A) deleted the same. The Tribunal held that, since all the sale deeds have undisputedly been registered and the assessee has paid the registration amount, it is difficult to accept that without passing of the sale consideration, duly stated therein, a vendor has executed the sale in favour of the assessee. Amount of consideration might have been received by the vendor in price meal but within the financial year under consideration. Therefore, the consideration of Rs.5 lacs had been paid, the source of which remained unexplained, hence rightly taxed by the A.O. (A.Y. 1999 – 2000)
\n Dy. CIT v. Sandip M. Patel (2012) 78 DTR 260 (Ahd.)(Trib.)<\/em><\/strong> <\/p>\n

 <\/strong><\/p>\n

S.153C: Assessment- Income of any other person-Search and seizure- Materials forwarded by other government authority<\/strong>
\n In a situation where certain incriminating material has been forwarded by another Government authority, i.e. Police Department to the AO and those requisitioned documents did belong to the assessee, then the only recourse left with the AO was to start the proceedings under s. 153C so that the investigation on those documents could be made. It may or may not reveal the concealed amount of income, the AO is duty bound first to investigate and then only be able to decide about the factum of concealed income. Therefore, there was no fallacy in the issuance of notice u\/s. 153C.
\n (A.Y. 2002 – 03)
\n Dy. CIT v. Sandip M. Patel (2012) 78 DTR 260 (Ahd.)(Trib.)<\/em><\/strong> <\/p>\n

S.153C: Assessment-Income  of any other person-Search and seizure-Recording of satisfaction-For transferring material no satisfaction is required to be recorded that the books of account or other evidence or material seized in the course of search represent undisclosed income of the other person.(S.153A)<\/strong>
\n The assessee challenged the assessment completed under section 153C, read with section 153A , on the ground that the Assessing Officer who conducted search on the assessee at Mangalore under section 132 has not recorded the satisfaction as required under section 153C   before transferring the files to the Assessing Officer of the assessee to make assessment under section 153C, read with 153A.The court held that for transferring material no satisfaction is required to be recorded that the books of account or other evidence or material seized in the course of search represent undisclosed income of the other person. Accordingly the writ petition was dismissed. The Court followed K.M.Mehaboob (Dr.) v. Dy.CIT ( 2012) 76 DTR 90(Ker)(High Court)(A.Ys 2003-04 to 2008-09)
\n K.M. Mehaboob (Dr.) v. Dy.CIT (2012) 76 DTR 449(Ker.)(High Court) <\/em><\/strong><\/p>\n

S.154: Assessment- Rectification of  mistake – Book profit-Entries in the books of account-Issues and contentions being debatable and in realm of uncertainty , Invoking section 154 is  not justified (S. 115JB)<\/strong>
\n The book profit as declared were in conformity with the provisions of Part II and III of Schedule VI to 1956 Act. The AO and the commissioner (appeals) had not adversely commented or stated that the entry was contrary to the part II and III of schedule VI. The first proviso to section 115JB(2) had not been specifically referred to and applied by the AO and CIT(A). They had not stated as to why and how the book profit were not computed in consonance with the provisions of part II and III of schedule VI to 1956 Act. The issues and contentions being debatable and in realm of uncertainty. It was held that invoking of Section 154 was not correct. (A.Y. 2002-03)
\n CIT v. R.T.C. L. Ltd (2012) 348 ITR 120 (Delhi)(High Court)<\/em><\/strong><\/p>\n

 <\/strong><\/p>\n

S.154: Assessment-Rectification of mistake- Debatable issue<\/strong>
\n Questions as to whether the assessee is under compulsion to claim current years depreciation for asst. Year. 2000-01 even when it has opted not to claim it and whether the amendment made to s. 32 from asst. Year 2002-03 has a prospective effect or retrospective effect vis-a-vis claim for current years depreciation are debatable issues which do not fall in the category of mistake apparent from record and, therefore, assessment for asst. Year 2000-01 could not be rectified u\/s. 154 by allowing the current years depreciation which was not claimed by the assessee. (A.Y.2000 – 2001)
\n CIT v. Historic Resort Hotels (2012) 78 DTR 73 (Raj.)(High Court)<\/em><\/strong><\/p>\n

S.158BB: Block assessment- Computation-Undisclosed income- Deduction u\/s 80IB(10)<\/strong>
\n As per explanation to s.158BB(1), as amended with retrospective from 1st July, 1995, total income\/loss for the block period has to be computed in accordance with the provisions of the Act and the same would include Chapter VI-A. S. 80IB is a part of Chapter VI-A. In view of the above, while computing the undisclosed income for the block period the assessee is entitled to claim the deduction u\/s 80IB.  (Block Period 1-04-95 to 21-02-02)
\n CIT v. Sheth Developers (P) Ltd. (2012) 77 DTR 249 (Bom.)(High Court)<\/em><\/strong><\/p>\n

S.158BE: Block assessment- Time limit- Extension u\/s 158BE, Explanation 1(iii) – S.127, 129 <\/strong>
\n S.129 is applicable when in the same jurisdiction, there is a change of incumbent and one A.O. is succeeded by another. In such a case, the main section provides that the successor officer is entitled to continue the proceeding from the stage at which it was left by his predecessor subject to the caveat, expressed in the proviso, that if the assessee demands that before the proceeding is continued the previous proceedings or any part thereof shall be reopened or that before any assessment order is passed against him, he shall be reheard, such a demand has to be accepted. If as a result of accepting the assessee’s demand under the proviso to S.129 some time is taken and the assessment proceedings cannot be completed within the normal period of limitation, then the period of limitation gets extended by such time taken for giving the assessee an opportunity to reopen the earlier proceedings or for rehearing. S. 129 is applicable to normal assessments made under s.143(3) as well as the block assessments made under s.158BC. The question however is whether there was a change in the incumbent of the office in the assessee’s case so as to attract s.129. S.129 is not attracted to the assessee’s case. The case of the assessee is one of a transfer under s.127 from one jurisdiction to another jurisdiction. By order passed under s.127 on 15th May, 2002, the jurisdiction to assess the assessee was transferred from the ITO, Bangalore to ITO New Delhi. S. 129 speaks of change of an incumbent of an office without any change of the jurisdiction. Explanation 1(iii) to S.158BE speaks only of the proviso to S.129. There were no earlier proceedings against the assessee pursuant to the search in Bangalore which got transferred to Delhi. The notice u\/s 158BC was itself issued only by the A.O. at Delhi and it is by this notice that the proceedings were commenced. If the proceedings had been commenced by the A.O. at Bangalore and during the pendency of the proceedings the case had been transferred to Delhi it would possibly be argued that the proviso to S.129 would extend the time limit. However, no opinion is expressed about the same because that is not the factual position in the present case. In the present case the assessee proceedings were commenced only by the A.O. at Delhi by notice issued on 11th June, 2002. Thereafter there was no change in the incumbent of the office so as to attract the provisions of S.129. In such a situation there is no scope for importing the proviso to S.129 to extend the period of limitation. Even factually there is nothing on record to show that the assessee made any request or demand before the A.O. in Delhi that the previous proceedings, if any, should be reopened or that before any order of assessment is passed against her, she should be reheard. Therefore, both factually and legally there is no scope for invoking Explanation 1(iii) to S.158BE to extend the period of limitation. The assessment order u\/s 158BC ought to have, therefore, been completed on or before 30th June, 2002 as per S.158BE(1)(b). Since it was completed only on 30th July, 2002, it is barred by limitation.
\n Shibani Dutta v. CIT (2012) 77 DTR 220 (Delhi) (High Court)<\/em><\/strong><\/p>\n

S.158BC: Block assessment –Procedure- Notice –Search and seizure- Assessee to submit its return of income “within period of 15 days”, which is less than 15 days as mandatory period of time as stipulated u\/s 158 BC had not been complied with, hence, notice invalid, as notice being  void ab initio, consequently block assessment also held to be invalid.(S.292B)<\/strong>
\n The time to be granted to assessee in terms of section 158BC is a minimum of 15 days and a maximum of 45 days. If the said period of time is not granted, notice is invalid rendering the entire proceedings as without jurisdiction. In the instant case, notice u\/s 158BC called upon the assessee to submit its return of income “within period of 15 days”. Within a period of 15 days was less than 15 days. Therefore the mandatory period of time as stipulated u\/s 158 BC had not been complied with. Notice was invalid. As per statute, no extra time can be granted subsequently. Hence, grant of extra time is without authority of law. It cannot validate an invalid notice. Notice being void  ab initio consequent block assessment held to be invalid.(Block period-1-4-1987 to 5-11-1996-1988 to 1998-99)
\n CIT v.  Micro Labs Ltd. (2012) 348 ITR 75\/254 CTR 81 (Karn.)(High Court) <\/em><\/strong>
\n         <\/strong>
\n S.158BD: Block assessment-Undisclosed income of any other person- Recording of satisfaction –If the assessing officer is same for under section 158BC and 158BD ,recording of satisfaction is not required. (S.158BC) <\/strong>
\n Where the assessing officer has jurisdiction to assess the searched person under section 158BC and also to assessee the other persons under section 158BD of the Act whose undisclosed income is found during the search.  Then there is no necessity for the assessing officer to record satisfaction as required under section 158BD of the Act.
\n CIT v. Bimbis Creams & Bakes (2012) 75 DTR 362 (Ker.)(High Court)<\/em><\/strong><\/p>\n

S.158BD: Block assessment –Undisclosed income of  any other person –Satisfaction- Assessment of the assessee u\/s. 158 BD is held to be valid.  (S.158BC). <\/strong>
\n Assessment under section 158BC on the persons searched having been concluded on 6th July 2007 and satisfaction note for proceeding u\/s 158BD against assessee having been recorded on the basis of letter of Dy.CIT dt. 13th July 2007 and further the assessment u\/s 158 BC having been quashed as barred by limitation by the Tribunal and the High Court, assessment of the assessee u\/s 158 BD is valid. (Block period 1st April 1996 to 31st Dec 2002)
\n Gopal S. Agrawal v. Dy. CIT (2012) 149 TTJ 313 (Mum.) (Trib.)<\/em><\/strong><\/p>\n

 <\/strong><\/p>\n

S.158BE:Block assessment –Time limit- Assessment order was passed beyond one year from that date, and, hence, same was liable to be set aside.<\/strong>
\n Premises of assessee was searched thrice, respective panchanama for them were drawn on 7\/2\/1996, 19\/2\/1996 and 24\/4\/1996.The assessment order was passed on 24\/4\/1997. Tribunal held that as there was no seizure vide panchanama dated 24\/4\/1996, same was not a valid panchanama for purpose of section 158BE and last panchanama for same would be 19\/2\/1996 when certain books of account and documents were seized. Accordingly Tribunal held that assessment order was passed beyond one year from that date, and, hence, same was liable to be set aside. On appeal by revenue the Court held that the  order passed by Tribunal was justified.(B.P. 1\/4\/1985 to 6\/2\/1996) 
\n D.T.S. Rao v. ACIT (2012) 210 Taxman 47 (Mag.) (Karn.) (High Court) <\/em><\/strong>
\n  <\/strong>
\n S.194C: Deduction  at source – Contract work – Transport Contractor – As no contract with truck owner and truck merely hired not liable to deduct tax at source<\/strong>
\n Assessee was a transport contractor for one `J’ and payments were made to truck owner and driver by `J’ on behalf of assessee after deducting TDS. Assessing Officer held that assessee had availed services of truck drivers or transporters for carrying out work of `J’ thus, there existed sub contractorship and assessee itself should have deducted tax at source. Since assessee had not entered into a contract with truck owners for part performance of its works with joint liability and he had simply hired trucks under his own obligation, he was not liable to deduct tax under sec. 194C. (AY 2007-08)
\n Kuldeep Kumar Sharma v. ITO (2012) 53 SOT 230 (Delhi)(Trib.) <\/em><\/strong><\/p>\n

S.194C: Deduction  at source – Contractors – Agreement for refurbishment of hotel at NIBM campus – assessee solely responsible for `carrying out the work” – clear cut relationship of `contractor’ and `sub-contractor’ existed – S. 194C attracted <\/strong>
\n Assessee entered into an agreement with NIBM for comprehensive refurbishment of hotel at NIBM campus. As per agreement entered into between assessee and NIBM, assessee was assigned and was solely responsible for `carrying out the work”. It was held that there was a clear cut relationship of `contractor’ and `sub-contractor’ between assessee qua JR & Co. and, thus, assessee was responsible for deducting TDS under sec. 194C for making payment to JR & Co. (AY 2007-08)
\n Ratan J. Batliboi v. ACIT (2012) 138 ITD 355 (Mum.)(Trib.)<\/em><\/strong><\/p>\n

S.194C: Deduction at source–Contractors-Hire charges for machinery\/equipments was  not liable to tax at source. [S.40(a)(ia)]<\/strong>
\n Assessee firm executed a contract job for construction of fencing along with boarder road at Meghalaya. Assessee obtained on hire machinery\/equipments from `B’ and made payment of hire charges to `B’. Assessee had to put machinery in use not on hour basis but on earth cutting measurement basis. Certificate issued by `B’ also states that payment was on account of hire charges to `B’ on measurement basis for excavation of earth and rock and not for any contractual work relating to  construction for boarder fencing. It was held that assessee was not liable to deduct TDS u\/s. 194C on payments made to `B’ and, therefore, addition u\/s. 40(a)(ia) made by A.O. and sustained by Commissioner (Appeals) was unwarranted. (A.Y. 2006-07 & 2007-08)
\n Roy Mitra Enterprise v. ACIT (2012) 53 SOT 238 (Kol.)(Trib.)<\/em><\/strong><\/p>\n

S.194I: Deduction at source – Rent – Upfront charges was liable for tax deduction at source. [S. 201(1)&201(1A)] <\/strong>
\n Assessee had taken a land on lease for a period of 99 years from `S’. It paid certain amount to `S’ as upfront charges which was non refundable. Assessee did not deduct TDS from such payment. It was held that definition of `rent’ given under Explanation to section 194-I would squarely cover payment made by assessee as upfront fee and, therefore, assessee having not deducted tax at source, rigours of sec. 201(1) and 201(1A) were attracted. However, since `S’ had included upfront charges paid by assessee in its income and paid taxes thereon, TDS could not be recovered from assessee on such amounts despite assessee being one in default.  (AY 2007-08)
\n Foxconn India Developers Ltd. v. ITO (2012) 53 SOT 213 (Chennai) (Trib.)<\/em><\/strong><\/p>\n

S.201: Deduction at source- Failure to deduct or pay-<\/strong> As the provision was made without making specific entries into the accounts of the parties and the payee was not identifiable, the TDS provisions are not applicable.<\/strong> Once the amount has been disallowed u\/s 40(a)(i) for non-deduction of tax, it cannot be subject to TDS provisions again so as to make the assessee liable to pay the tax u\/s 201 & interest u\/s 201(1A). [S.40(a)(ia)]<\/strong> 
\n The assessee made a provision for Rs. 10 crores in respect of payment due to various parties but did not deduct TDS thereon. The provision was made without making specific entries into the accounts of the parties. The assessee disallowed the expenditure in respect of the said provision u\/s 40(a)(i) & 40(a)(ia). Next year the entire provision of expenses was written back and the actual amounts paid to the respective parties were credited to their respective accounts after deducting TDS. The AO held that despite such disallowance, the assessee was liable u\/s 201 as an assessee-in-default for failure to deduct TDS. On appeal by the assessee, held by the Tribunal:
\n (i) As the provision was made without making specific entries into the accounts of the parties and the payee was not identifiable, the TDS provisions are not applicable. The whole scheme of TDS proceeds on the assumption that the person whose liability is to pay an income knows the identity of the beneficiary or the recipient of the income. The TDS mechanism cannot be put into practice until identity of the person in whose hands it is includible as income can be ascertained (IDBI v. ITO (2007) 107 ITD 45(Mum) followed);
\n (ii) Once the amount has been disallowed u\/s 40(a)(i) for non-deduction of tax, it cannot be subject to TDS provisions again so as to make the assessee liable to pay the tax u\/s 201 & interest u\/s 201(1A). If the AO’s view was accepted that the assessee was liable to pay the TDS not deducted, then a disallowance u\/s 40(a)(i) and 40(a)(ia) cannot be made and those provisions may become otiose. (A. Y. 2007–2008)
\n Pfizer Ltd v. ITO ( Mum.)(Trib.).www.itatonline.org. <\/em><\/strong><\/p>\n

S.194J: Deduction at source – Fees for technical services – Super stockist charges  was not liable to deduction of tax at source. <\/strong>
\n Assessee company was engaged in manufacturing, trading and distribution of drugs. It entered into an agreement with `Z’ Ltd., appointing said firm as its `super stockist’. Super stockist was be responsible for getting stock of manufactured products of assessee company, for onward transmission to market, through retailer.  It was noted that super stockiest was not an employee, agent or legal representative or partner of assessee for any purpose. It was also apparent that super stockiest was selling goods produced by assessee at rate of 80 per cent of MRP and in that way it was earning income of 10 per cent of MRP which was stipulated in Memorandum of Understanding (MOU) and, hence, there was no direct payment made by assessee to super stockiest, relationship between assessee company and its super stockiest was on a principal to principal basis and, in such a case, provisions of sec. 194J were not applicable.   (A.Y. 2007-08 to 2011-12)
\n Piramal Healthcare Ltd. v. ACIT (2012) 53 SOT 253 (Mum.)(Trib.)<\/em><\/strong><\/p>\n

S.195: Deduction at source-Non-resident– Secondment agreement – Reimbursement of salaries to US principal-Right to terminate secondment is not right to terminate employment , payment not reimbursement but income , withholding u\/s 195 subject to adjudication by assessing authority. (S.9)<\/strong>
\n The applicant, an Indian company is a wholly owned subsidiary of a company incorporated in USA. It entered into an agreement with its U.S. principal for seconding certain of the employees of the principal to the applicant based on the U.S. principal’s global mobility policy. The applicant was to reimburse the principal for salaries of these employees and also pay the principal a service charge at $ 15 per employee per payroll cycle for processing the payroll of the seconded employees. These employees are to act in accordance with the instructions and directions of the applicant.
\n The questions before the Authority were whether amount reimbursed to US principal on cost to cost basis under the terms of secondment agreement would be taxable in India and taxes to be withheld and whether payments for payroll processing charges is taxable as per the provisions of the DTAA between India and USA.<\/p>\n

Authority observed that mere right of applicant to terminate secondment of employees from its foreign parent is not sufficient to establish employer-employee relationship. Right to terminate secondment is not the right to terminate their employment. In the result, what is paid by applicant to foreign parent under the secondment agreement is not mere reimbursement but is income chargeable to tax. As applicant has not furnished adequate details and not sought any ruling on whether reimbursement and payroll processing payments are fees for technical services, payments to foreign parent held liable to withholding tax under section 195 subject to any final adjudication by assessing authority.( A.A.R. No. 851 dt. 16\/08\/2012)<\/em><\/strong>
\n Target Corporation India (P) Ltd ( 2012) 252 CTR 242 (AAR) <\/em><\/strong><\/p>\n

S.197: Deduction at source-Certificate for lower rate-Pendency of proceedings <\/strong>
\nIssue of certificate under sub s. (1) of s. 197 is mandatory on fulfillment of conditions enumerated under the Rules. Rejection of application of assessee on the ground that the assessee had violated the provisions of TDS and proceedings under s. 276B and 271C were pending was not sustainable. None of these grounds validly form part of reasons for rejecting an application filed by an assessee under s. 197(1) r\/w\/r 28AA. The objection raised by the Revenue with regard to alternative remedy of revision available under s. 264 cannot act as a complete bar to the exercise of writ jurisdiction of this Court. Where the order challenged is patently illegal or invalid as being contrary to law, the petition would lie to the High Court. AO is directed to redecide the application within a period of two weeks. 
\nSerco BPO (P) Ltd. v. ACIT (2012) 77 DTR 81 (P & H)(High Court)<\/em><\/strong><\/p>\n

 <\/strong><\/p>\n

S. 199: Deduction at source- Credit for tax deducted-Deducted twice-Credit must be given. <\/strong>
\n There was one transaction resulting into income but deduction of tax at source has been made twice to facilitate the compliance with the requisite provisions; assessee having received the impugned amount after deduction of tax at source from G&G and such amount not admittedly chargeable to tax in its hands, credit for TDS should be allowed to assessee in the PY relevant to AY under consideration. (A.Y. 2007-08)
\n Arvind Murjani Brands P. Ltd. v. ITO (2012) 149 TTJ 221 (Mum.)(Trib.) <\/em><\/strong><\/p>\n

S. 201: Deduction at source – Failure to deduct or pay-Interest- Amount of tax deducted at source would be treated as paid to Govt. when said amount is actually credited and actually paid to Govt. of India<\/strong>
\n Levy of interest u\/s. 201(1A) is mandatory in nature and time taken for clearance of cheques and Govt. holidays and any reasonable cause were not reasons which could be considered while levying interest u\/s. 201(1A). Amount of TDS would be treated as paid to Govt. when said amount is actually credited and actually paid to Govt. of India. Since assessee had not deposited TDS within prescribed time, assessee was liable for interest u\/s. 201(1A). (AY 2008-09)
\n G.M MPRRDA, PIU v. ITO (2012) 53 SOT 268 (Agra)(Trib.)<\/em><\/strong><\/p>\n

S.220: Collection and recovery- Assessee deemed in default- Interest u\/s. 220(2) – Waiver or reduction u\/s. 220(2A) – Conditions precedent <\/strong>
\n It is for the CIT or the Chief CIT to consider with reference to facts on record as to whether all the three conditions stated in s. 220(2A) are satisfied and if so, to grant partial or full waiver – In fact, waiver can be directly proportionate to the extent of satisfaction of conditions – In the instant case, for 16 years after completion of assessment, Department did not try to trace the partners of the defunct\/defaulter firm and for the first time notice of demand was served on the assessee in 2005  by virtue of his liability as partner of dissolved firm u\/s. 189(3) – Within one month from date of service of notice, the assessee made full payment – therefore, on facts there is nothing irregular, illegal or improper on the part of the single Judge to direct Revenue to grant full waiver of interest. (A.Y.1987-88)
\n Chief Commissioner of Income tax v. Dr. K.M. Mehaboob (2012) 78 DTR (Ker) 33<\/em><\/strong><\/p>\n

S.234B: Interest-Advance tax-Deduction at source- When entire income was subject to deduction of tax at source, interest under section 234B could not be charged from him for non-payment of advance tax.<\/strong>   <\/strong>
\n Where assessee had no liability to pay advance tax in view of fact that his entire income was subject to deduction of tax at source, interest under section 234B could not be charged from him for non-payment of advance tax.
\n CIT v. Robert Michael Arthey<\/em><\/strong> (2012) 209 Taxman 482 (Delhi) (High Court)<\/em><\/strong><\/p>\n

S.234B: Interest – Advance tax – Deduction at source-Royalty and Fees for technical services- Interest u\/s 234B is to be computed after reducing amount of tax deductible at source in relation to royalty and fees for technical services from advance tax payable.<\/strong>
\n Interest u\/s. 234B cannot be charged where tax is deductible at source in relation to royalty and FTS, therefore, interest us. 234B, is to be computed after reducing amount of tax deductible at source in relation to royalty and FTS from advance tax payable. (A.Y. 2008-09)
\n De Beers UK Ltd v. Dy. DIT (IT) (2012) 53 SOT 319 (Mum.)(Trib.)<\/em><\/strong><\/p>\n

S.234D: Interest on excess refund –-Regular assessment-Interest is payable by assessee only on completion of assessment and not when original refund is  granted.<\/strong>
\n Occasion for charging of interest u\/s. 234D can arise only on completion of assessment and not when original refund is granted. However, date of original grant of refund is relevant for purpose of calculation of amount of interest under this section as interest is payable by assessee form the date of grant of refund to date of regular assessment. (A.Y. 2001-02)
\n ITO v. Stides Arcolab Ltd. (2012) 138 TD 323 (Mum.)(Trib.)<\/em><\/strong><\/p>\n

S.237: Refunds- Delay and laches by Assessee.<\/strong>
\n Petitioner has not explained why he remained silent from the date of filing of return from 1st Sept. 2003 till July, 2008 when he made representation. Petitioner has also not explained why it belatedly approached the Court in Oct. 2011. AO had written a letter dated 1st June, 2004 requiring certain clarifications from the assessee regarding interest income and contract work receipt in relation to which TDS certificate had been submitted. Where there is a dispute as to the entitlement of assessee to get refund, the AO has to cause necessary enquiry and after giving opportunity to the assessee shall come to a conclusion- Though there is no specific provision empowering the AO to investigate such a claim, such a power is implicit and inherent in the AO as would be evident from a plain reading of s. 237. Therefore, assessee is direct to appear before the AO with supporting documents  about his entitlement to get refund. (A.Y.2003-04)
\n Santuka Agencies v. ITO (2012) 78 DTR 1 (Ori.)(High Court) <\/em><\/strong><\/p>\n

S.240: Refund-Annul of assessment-Adjustment of tax paid-Assessee was entitled to refund, in respect of taxes adjusted .<\/strong>
\n The assessee has not paid the tax along with the return declared in the block return. The Assessing Officer adjusted of tax paid under the VDIS  and the refund due to the assessee for other assessment years. Though the  assessment was annulled the Assessing Officer refused to grant the refund. In appeal the  Commissioner (Appeals) confirmed the order of Assessing Officer. The Tribunal held that the assessee is entitled to refund. On appeal to High Court the Court held that it cannot be held that the assessee has paid taxes and accordingly ,in terms of proviso to section 240 to deny  refund to the assessee. Order of Tribunal up held.(Block period 1998-99 to 1998-99)
\n CIT v. Micro Labs Ltd ( 2012)348 ITR 75\/ 254 CTR 81(Karn.)(High Court)    <\/em><\/strong><\/p>\n

S.244A: Refunds- Interest-Computation<\/strong>
\n Interest under s. 244A on the refund due to the assessee is to be calculated without reducing the interest under s. 244A which is a part of the refund earlier granted from the refund due.(A.Y. 96-97)
\n Abu Dhabi Commercial Bank Ltd v. Additional Director of Income tax (Int. Taxation) (2012) 78 DTR 234 (Mum.)(Trib.)<\/em><\/strong> <\/p>\n

S.244A: Interest on refunds –Deposit -Refund-If delay is not attributable to the assessee, the petitioner was entitled to receive interest on the amount which was refunded to it on various dates for relevant  assessment years  from date of actual deposit to the date of actual refund.<\/strong>   <\/strong>
\n A look at the scheme of the Act clearly demonstrated that at initial stage of any proceedings under the Act, any refund will be dependent on whether any tax has been paid by an assessee in excess of tax actually payable by him. The ambit and scope of S. 244A has been explained in Departmental Circular No. 549 dated October 1989, which supports the view that interest on refund amount is due from the date of actual payment u\/s 244A(1)(b)to the date of refund. It was held except making bald statement, it was neither pleaded nor proved with the help of cogent material that the delay was attributable to petitioner. The petitioner was entitled to receive interest on the amount which was refunded to it on various dates for relevant AY from date of actual deposit to the date of actual refund. (AY 1992-93, 1993-94 & 1994-95)
\n Prayag Udyog P. Ltd. v. UOI (2012) 348 ITR 217 (All.)(High Court)<\/em><\/strong><\/p>\n

 <\/strong><\/p>\n

S.244A: Interest on refunds – Interest on interest-<\/strong> Tax paid cannot be presumed against interest-Interest under section 244A is also payable on interest portion of tax demand. <\/strong>
\n On final assessment the assessee was found eligible to have income tax refund .Revenue denied to pay interest under section 244A on the ground that part payment deposited earlier by assessee was towards discharge of interest liability and no interest was payable on interest. The Assessee filed a writ petition before the High Court. The Court held that where the treasury challans filed by the assessee shows that part payment was towards income-tax , revenue  was not entitle to draw the inference or presumption that amount was not deposited as tax but interest . The Court also held that nevertheless, even if such payment was to be presumed to be as interest , interest under section 244A was payable on interest portion of tax demand. Accordingly the writ petition  was allowed.(A.Y.1993-94 )
\n Lohia Starlinger Ltd. v. CIT (2012) 209 Taxman 484 (All.) (High Court)    <\/em><\/strong><\/p>\n

 <\/strong><\/p>\n

S.245C: Settlement Commission- Settlement of cases- Conditions<\/strong>
\n Settlement of cases – Order of Settlement Commission – Jurisdiction of settlement commission – assessee declared certain income in the settlement application which referred to several documents seized from premises of third parties – While accepting application the settlement commission inter alia held that no immunity is granted in respect of income contained in the seized papers on the basis of which computation of income has been made in the settlement application and which has been held not to belong to the applicant company and that department will be free to initiate penalty and prosecution proceedings in respect of these papers in appropriate hands as per law. Contention that the directions\/observations should be set aside as they are destructive of the very object, letter and  spirit behind settlement provisions and the statutory and salutary purpose enshrined and elucidated in ss. 245D(4) and 245-I is not sustainable. No third person can gain from the immunity in case the seized papers relate to the third person. Seized papers can be used and utilized against third persons. Therefore, the assessee should not have any grievance and objection to the said observation because they are not affected or prejudiced. (A.Y. 2005 – 2006 to 2009 – 2010)
\n Gupta Perfumers (P) Ltd v. Income tax Settlement Commission and Ors. (2012) 78 DTR 87 (Delhi)(High Court)<\/em><\/strong><\/p>\n

S.245-I: Settlement Commission <\/strong>–Order-Conclusive<\/strong>–Commission having accepted the income disclosed, and  granted, Immunity against prosecution, and waiver of penalty, applicant cannot thereafter plead that application be rejected. <\/strong>
\n The petitioner not being person subject to search filed application for settlement. The Commission substantially accepted the surrender of income made by the petitioner and granted immunity from penalty and prosecution. It was held that the petitioner could not insist and claim that its application should have been dismissed on the ground that it had failed of the manner in which income was earned. Further, the petitioner could not challenge and question the order of settlement commission being the beneficiary order. Observation of Settlement Commission that immunity was not available to third persons whose income had been discovered , the applicant cannot ask that those observations be expunged. The Court also observed that litigant cannot and should not be allowed to urge the reverse of what was pleaded before the statutory forum\/Court.  (A.Y. 2005-06, 2007-08, 2008-09 and 2009-10)
\n Gupta Perfumers P. Ltd. v. Income Tax Settlement Commission & Ors (2012) 348 ITR 86\/253 CTR 573 (Delhi)(High Court)<\/em><\/strong><\/p>\n

S.245R: Advance ruling- Rectification of apparent mistake- Modification of certificate granted to the company by AO under section 195 or 197 cannot prevent the Authority from rectifying an apparent mistake. (S.195, 197, Rule 19 of AAR (Procedure) Rules, 1996)<\/strong>
\n Application was made by the Revenue under Rule 19 of the Authority for Advance Rulings (Procedure) Rules, 1996 for amending its initial order with a view to rectifying a mistake apparent from the record. According to the Revenue, in AAR 854 of 2009, Authority had held that the taxable unit in respect of the transaction relied on by the applicant was an AOP. However, the Authority has gone on to rule that the transaction put forward by the applicant related to offshore supply of equipments and is not taxable in the country, proceeding as if the applicant alone is the assessee under the Act. According to the Revenue, this is an error apparent on the face of the record or a mistake coming within the purview of Rule 19 and the ruling in that regard requires to be corrected. It should be noted that subsequent to the initial ruling, the Officer dealing with withholding tax, has given effect to the Order by modifying the withholding tax Order under section 195.
\n Authority observed that where it is clear from it’s order that it had not considered the impact of a finding by it on its ruling, there is a mistake apparent from record in the ruling. An order under section 195 or 197 has been understood only as a provisional certificate subject to regular assessment. Therefore, modification of certificate granted to the company by AO under section 195 or 197 cannot prevent the Authority from rectifying an apparent mistake. (A.A.R. No. 854  dt. 27\/08\/2012) <\/em><\/strong>
\n CTCI Overseas Corpn. Ltd(2012) 253 CTR 11 (AAR)<\/em><\/strong><\/p>\n

S.245R: Advance rulings-Procedure- Applicant- Subsidiary of government company.<\/strong>
\n Petitioners being step down subsidiary companies of a Government company are covered within the definition of the “applicant” in terms of s. 69A(b) of Finance Act, 1994, and therefore, the applications filed by the petitioners before the AAR under s. 96C are maintainable.
\n GSPL India Transco Ltd. v. Union of India & Anr. (2012) 77 DTR  441(Guj.)(High Court)<\/em><\/strong><\/p>\n

S.245R: Advance rulings-Procedure-Application- rejection of application – similar application by holding company <\/strong>
\n Questions raised in the applications filed by the Petitioners were not pending in the petitioners own case before any Central Excise Officer, Tribunal or any court; further, petitioners having sought advance ruling in respect of activity\/service which has not yet started, it could not be inferred that the proposed transaction of the petitioners would be identical to that undertaken by their holding company merely because  the proposed business of the petitioners would be similar to that of the holding company and, therefore, the applications of the petitioners could not be rejected on the ground that the ruling might result in incompatible decisions on an identical question.
\n GSPL India Transco Ltd. v. Union of India & Anr. (2012) 77 DTR441 (Guj.)(High Court)<\/em><\/strong><\/p>\n

 <\/strong><\/p>\n

S. 249: Appeal- Form of appeal and limitation –Admitted tax-If admitted tax is not paid the appeal is not maintainable. If admitted tax is paid thereafter the Commissioner (Appeals) can entertain the appeal. <\/strong>
\n The assessee admitted the income as per return of income. He did not pay the admitted tax on returned income. The Assessing Officer made certain additions . The Assessee filed an appeal before the Commissioner (Appeals). The Commissioner (Appeals) rejected the appeal in limine under section 249(4) . Thereafter the assessee paid the admitted tax liability and filed an application before the Commissioner (Appeals) seeking recall of the earlier  order. The Commissioner(Appeals) rejected the said application. On appeal to the Tribunal the Tribunal remitted the matter back to the Commissioner (Appeal) to verify whether the entire admiite tax was paid and if so he should decide the case on merit. On appeal to the High Court by revenue the Court held that if  admitted tax is not paid which fall sunder clause (a) of sub-section (4) of section 249, Commissioner (Appeals) is not vested with any power to waive payment of such admitted tax and entertain appeal, in such a case, order of dismissing appeal is automatic and justified. However, if after such dismissal, if assessee pays admitted tax and requests appellate authority to recall order dismissing appeal in limine and to consider appeal on merits under aforesaid provision or under any other provision of Act, there is no prohibition or legal impediment for appellate authority to recall its earlier order and entertain appeal and decide same on merits. Accordingly the appeal of revenue was dismissed and the order of Tribunal was up held.(A.Y.2007-08 )       
\n CIT v. K. Satish Kumar Singh (2012) 209 Taxman 502 (Karn.) (High Court) <\/em><\/strong><\/p>\n

S.251: Commissioner(Appeals) – Powers-Enhancement – Commissioner (Appeals) has power to consider such items which was considered by the Assessing Officer and enhance assessment. <\/strong>
\n Items considered by the AO but no addition made. It was held that commissioner appeal has power to consider such items and enhance assessment. Accordingly addition made by the Commissioner (Appeals), on the basis of analyzing the documents which was  confirmed by the Tribunal was held to be proper. (Block Period 1990-91 to 2001-02)
\n Gurinder Mohan Singh Nindrajog v. CIT (2012) 348 ITR 170 (Delhi)(High Court)<\/em><\/strong><\/p>\n

<\/strong>
\n S.251: Commissioner (Appeals) – Power-Withdrawal-<\/strong> After filing appeal could not at his option or at his discretion withdraw said appeal to prejudice of revenue. (S. 245C , 245D ). <\/strong>
\n When the appeal was pending before the Commissioner (Appeals) the Assessee moved the settlement Commission under section 245C. The Assessee made an application before the Commissioner (Appeals) to withdrawal of appeal. The Commissioner (Appeals) based on the letter of the assessee dismissed the appeal as in fructuous. The Settlement Commission thereafter passed an order that since the appeal was withdrawn after the  date of filing of the petition for settlement , the petition itself was not maintainable hence the petition was dismissed. The Assessee against the order of the Commissioner (Appeals) filed an appeal before the Tribunal. The Tribunal held that as the order of Commissioner (Appeals) dismissing the appeal as in fructuous was justified, hence no cause of action arose for the assessee to file an appeal before the Tribunal. In an  appeal before the High Court the Court held that after filing  an appeal the  assessee  could not at his option or at his discretion withdraw said appeal to prejudice of revenue. However, in considering question as to withdrawal of appeal from file of Commissioner (Appeals), objection or no objection from revenue for such withdrawal could not play any role.  The  assessee now took plea that appeal filed before Commissioner (Appeals) should not have been rejected and same should be continued to completion. It was held that the order passed by Commissioner (Appeals) allowing withdrawal of appeal was not justified even if revenue had not objected to same, therefore, assessment should be considered by Commissioner (Appeals) on merits. The order of Tribunal was set a side and matter restored back to the file of Commissioner (Appeals) for considering the assessment on merits. (A.Y.1992-93 , 1993-94, 1996-97)         
\n M. Loganathan v. ITO (2012) 209 Taxman 508 (Mad.) (High Court) <\/em><\/strong>
\n  <\/strong>
\n S.251: Commissioner (Appeals) – Powers- Set aside order  –Commissioner (Appeals)  has the power to remand the matter even after amendment to section 251(1)(a) with effect from 1-6-2001.<\/strong>
\n In the set a side proceedings by the Tribunal the Assessing officer rejected the higher rate of depreciation, without granting sufficient time. On appeal Commissioner (Appeals) held  that the Assessing Officer has failed to  carry out the requirements of the orders earlier passed by the Tribunal restoring the issue to the file of the Assessing Officer accordingly  set a side the matter to the Assessing Officer to pass a fresh order after verifying the facts . The department challenged the order of Commissioner (Appeals), the Tribunal confirmed the order of Commissioner (Appeals).On appeal be revenue the Court held that ,even if the amendment in the clause (a) of section 251(1) has been made so as to provide that the Commissioner (Appeals) may not set aside the assessment and refer the case back to the Assessing Officer for making fresh assessment with a view to help brining an early finalization of the assessment, it cannot be assumed that the Commissioner (Appeals) is divested of the power to annul the assessment and then to pass appropriate consequential order. Accordingly the appeal filed by the revenue was dismissed. (A.Y. 1979-80 to 1981-82)  
\n CIT v. Hindustan Zinc Ltd. (2012) 209 Taxman 519 (Raj.) (High Court)<\/em><\/strong><\/p>\n

S.251: Commissioner (Appeals) – Powers- where Commissioner (Appeals) relied upon information which was furnished by assessee in view of direction given by Commissioner (Appeals) for effective disposal of appeal, there was no violation of rule 46A.(Income –tax Rules ,1962,Rule 46A)<\/strong> <\/strong>
\n The revenue contended that the Commissioner (Appeals) relied on additional documents i.e. books of account produced before the Commissioner (Appeals) for the first time which is contrary to rules 46A.The Court held that where Commissioner (Appeals) relied upon information which was furnished by assessee in view of direction given by Commissioner (Appeals) for effective disposal of appeal, there was no violation of rule 46A.(A.Y. 1996-97)
\n CIT v. Sanu Family Trust (2012) 209 Taxman 529 (Karn.) (High Court)<\/em><\/strong><\/p>\n

S.251: Commissioner (Appeals)-Powers- Power of first appellate authority is co-terminus with that of Assessing Officer.<\/strong>
\n Power of first appellate authority is co-terminus with that of Assessing Officer  and he is required to look into issue and examine same which has not been properly dealt with by Assessing Officer. (AY 2007-08)
\n Ratan J. Batliboi v. ACIT (2012) 138 ITD 355 (Mum.)(Trib.)<\/em><\/strong><\/p>\n

S.253: Appeal- Appellate Tribunal- Right of respondent – Rule 27<\/strong>
\n Assessee respondent having not appealed against the order o the first appellate authority, is not entitled to contend the question of jurisdiction of the assessment in a departments appeal before the Tribunal. A cross objector has a legal right to support an order o the first appellate authority but no right is enshrined under r. 27 of ITAT Rules to attack that judgment. In the present case, though the first appellate authority has decided the issue of the applicability of the provisions of s. 153C which was one of the grounds of appeal raised by the assessee before CIT(A), but even after an adverse decision of the CIT(A) on the said legal ground, no appeal was preferred by the assessee. Because of this reason, the Tribunal is not empowered to pass an order “thereon” on the subject matter which is not in appeal as per the appeal memo to be adjudicated upon. (A.Y. 2002 – 2003)
\n Dy. CIT v. Sandip M. Patel (2012) 78 DTR 260 (Ahd.) (Trib.)<\/em><\/strong> <\/p>\n

S.253(3): Appellate Tribunal- Reference to special Bench-Entire appeal for consideration- Order of the President of the Tribunal referring the entire appeal for consideration by the Special Bench  as against the questions referred by special bench cannot be questioned.<\/strong>
\n The Tribunal held that order of President of the Tribunal referring the entire appeal for consideration by the Special Bench as against the questions referred to by the division bench cannot be questioned . The preliminary objections raised by the Departmental Representative was not accepted . Order of the President of the Tribunal referring the entire appeal for consideration by the Special Bench  as against the questions referred by special bench cannot be questioned.(A.Y.2001-02)
\n Sardar Sarovar Narmada  Nigam Ltd. v. ACIT(2012) 138 ITD 203\/149 TTJ 809\/78 DTR 172(SB) (Ahd.)(Trib.) <\/em><\/strong><\/p>\n

S.254(1): Appellate Tribunal-Orders- Additional ground<\/strong>
\n Claim for deduction not made in the return. Tribunal was justified in allowing the claim of deduction u\/s 80IB(10) where no such claim is made by the assessee in the return of income for block period. (Block Period 1-04-95 to 21-02-02)
\n CIT v. Pruthvi Brokers & Shareholders (P) Ltd. (2012) 74 DTR 321 (Bom) followed)<\/em><\/strong>
\n CIT v. Sheth Developers (P) Ltd. (2012) 77 DTR 249 (Bom)(High Court)<\/em><\/strong>
\n    <\/strong>
\n S.254(2): Appellate Tribunal-Order-Rectification of mistake-Wrongly application of principle laid down by the  Jurisdictional High Court , recalling of order is held to be justified.<\/strong>
\n The Tribunal had considered the Judgment of Jurisdictional High Court in Swadeshi  Cotton Mills Co Ltd v. CIT ( 1980) 125 ITR 33 (All.)(High Court), and allowed the Departmental appeal. Assessee filed the miscellaneous application and contended that the Tribunal has wrongly applied the ratio of the judgment. Tribunal recalled the order under section 254(2).On reference to High Court, the Court held that though the Tribunal had referred to the Judgment in Swadeshi Cotton Mills , but later on, on the application given by the assessee that it wrongly applied the principle of law in Swadeshi Cotton Mills, to the present case, found that there is difference between hypothecation and pledge of the stock. The hypothecation of the goods could not be treated as same as in the case of pledge. The Tribunal realized its mistake in wrongly applying the principle laid down in Swadeshi Cotton Mills and rectified the mistake .In the absence of power of review , where the Tribunal finds that there was apparent mistake in its order , which has caused serious prejudice to the assessee, in view of the judgments in Honda Siel Power Products Ltd v.CIT ( 2007) 295 ITR 466(SC) and CIT v. Saurashtra Kutch Stock Exchange Ltd (2008) 305 ITR 227(SC),it could have rectified the mistake, which was apparent on record. The Court held that there is no difference in the circumstances where the Tribunal ignores the judgment of the jurisdictional Court, or wrongly relies upon the principles of law laid down by the jurisdictional High Court ; Tribunal was justified in rectifying the order. Reference  decided in favor of assessee.
\n CIT v. Quality Steel Tubes Ltd ( 2012) 76 DTR 457 \/ 253 CTR 298(All.)(High Court)<\/em><\/strong>
\n             <\/strong>
\n S.254(2): Appellate Tribunal- Orders- Rectification of mistake apparent from the record-Recall of order<\/strong>
\n Assessee having contended that she was not served with notice of appeal, Tribunal was not justified in rejecting the application u\/s. 254(2) for recall of ex parte order on the ground of delay of four years without examining the correctness of assessee’s contention from the material on record. Matter remanded to Tribunal for deciding the application of assessee u\/s. 254(2) afresh. (A.Y. 1997-98)
\n Santosh Singla v. ITO (2012) 77 DTR 438 (Delhi)(High Court)<\/em><\/strong><\/p>\n

S.254(2): Appellate Tribunal-Order  Rectification of mistake- Mere reliance and reference to the reason stated in the decision referred by Tribunal which was not been cited at the time of hearing , could not be regarded as a mistake apparent on record.<\/strong>
\n In the instant case, the entire issue was examined on the merits including judgment relied upon by the assessee. After due consider and examining the matter in detail the department appeal was allowed. While allowing the appeal, it also referred to another decision of the Tribunal, which had been not cited at the time of hearing . It was held that mere reliance and reference to the reason stated in the decision could not be regarded as a mistake apparent on record, when the matter was decided on merit..
\n Geofin Investment (P.) Ltd. v. CIT (2012) 348 ITR 118 (Delhi)(High Court)  <\/em><\/strong>
\n  <\/strong>
\n S.260A: Appeal high Court- Not represented by departmental counsel-Non payment of fees- High Court directed to make the payments within two months and the member   CBDT  promised  that there would be no laxity in the assistance rendered to the court in future.<\/strong> <\/strong>
\n The Department filed an appeal in the High Court. However, the matter was not properly represented by the department’s counsel and it transpired that the department’s Counsel had not been paid their fees by the department for a long time. The Court directed the CBDT to file a chart giving details of the total bills raised month-wise by each of the 10 standing counsels, the amounts for which these have been settled and the payments released against the bills. It directed that the reason for the difference between the bills raised and as paid should be communicated to the counsels and incorporated in the chart. However, there was continuous non-compliance by the CBDT, the Court directed the Member CBDT and the Chief Commissioner to appear in person and explain the position.  Mr. K.P. Chowdary, Member, CBDT (A&J) and Mr.Amitabh Misra, Chief Commissioner-III appeared before the court and promised that necessary action with regard to revamping the system and giving better assistance to the court had been taken. As regards the non-payment of fee to counsel, it was stated that the arrears towards the admitted fee would be cleared in the next two months and in cases where there was a dispute of parameters, it would be sorted out with the counsels themselves. The CBDT Member requested that a quietus may be given to the issue and assured the court that there would be no laxity in the assistance rendered to the court in future.
\n CIT v. Jackson Engineers Ltd (Delhi)( High Court)(www.itatonline.org) <\/em><\/strong><\/p>\n

S.260A: Appeal- High Court- Condonation of delay <\/strong>
\n Revenue, having regard to the steps taken from time to time, cannot be criticized  of being either sluggish, indifferent or causal in its approach to the requirement of filing the appeals. Last date for completing assessment being 22nd Jan., 2008, the AO might have diverted his attention to the assessment cases, which were to get time barred prior thereto, i.e. 31st Dec. 2007. Merely because instructions were provided to the standing counsel by the Revenue on more than one occasion, the same is not demonstrative of unnecessary wastage of time by it. More so, there is nothing to the contrary to even infer the same. Personal problems plaguing the standing counsel have not been controverted by the opposite party so as to discard the same as untrue. On a totality of the considerations the applications have considerable merit and ought to succeed. Delay of 290\/287 days in preferring the appeals condoned. (A.Y. 1996 – 97 & 2000 – 01)
\n CIT v. Williamson Tea(Assam) Ltd (2012) 78 DTR 181  (Gau.)(High Court)<\/em><\/strong><\/p>\n

S.260A: Appeal- High Court- Review – Retrospective amendment<\/strong>
\n Amended s. 260A being, by virtue of a legal fiction on the statute book w.e.f. 1st Oct. 1998, the order dated 16th June, 2010 whereby the Revenues appeal being barred by limitation, was rejected on the ground that the curt as on that day had no power to condone the delay in filing the appeal under s. 260A, cannot be allowed to continue. In that view of the matter, the order dated 16th June, 2010, is hereby recalled. Refusal to review under order 47 of the CPC on the basis of a subsequent judicial decision or an alteration of law lacks persuasion.
\n CIT v. Williamson Tea (Assam) Ltd. (2012) 78 DTR189 (Gau.)(High Court) <\/em><\/strong> <\/p>\n

S.260A : Appeal – High Court – Maintainability – Small tax effect <\/strong>
\n Circulars or instruction issued under s.268A by the CBDT are applicable not only to new cases but to pending cases as well. Such circulars have been issued under s.268A which is an exception to the provisions of s.260A. CBDT being mindful of this position has issued the instructions in question. Therefore, the instructions would be applicable to pending cases as well. Instruction No. 5 of 2008 and Instruction No.3 of 2011 are pari materia. Main objective of such instructions is to reduce the pending litigation where the tax effect is considerably small. Therefore, the tax appeals are required to be dismissed, as they are not maintainable in view of the provisions of S.268A and the Instruction No.3 of 2011, dt. 9th Feb, 2011. (A.Y. 1988 – 89 & 1989 – 90)
\n CIT v.  Vijaya V. Kavekar (Smt)L\/H of Late Vijaykumar B. Kavekar (2012) 77 DTR 203 (Bom) (High Court) <\/em><\/strong>
\n Editorial -CIT v. Madhukar K. Inamdar (HUF) (2009) 318 ITR 419\/ 27 DTR 132 (Bom) followed<\/em>
\n Refer  CIT v.Virendra & Co ( 2012) 77 DTR 210\/ 253 CTR 488 (Bom.)(High Court)<\/em>
\n <\/strong>
\n S.260A: Appeal – High Court – Maintainability – Small tax effect <\/strong>
\n Instruction No.3 of 2011, dt. 9th Feb. 2011 would also apply to pending appeals. Tax appeal below the tax effect of Rs.10 lacs is not maintainable. Since in this appeal the tax effect on the quantum of penalty deleted by the Tribunal is Rs.5,21,530\/-, which is less than Rs.10 lakhs fixed under Instruction No. 3 of 2011, therefore, this tax appeal filed under s.260A is dismissed as not maintainable.
\n CIT v. Sureshchandra Durgaprasad Khatod (HUF) (2012) 77 DTR 213 (Guj) (High Court) <\/em><\/strong>
\n <\/strong> <\/strong>
\n  <\/strong>S.263: Commissioner- Revision of orders prejudicial to revenue- – Limitation – Notice-Doctrine of merger.<\/strong>
\n No jurisdiction could be bought u\/s. 263 on the impugned issues which had almost been covered by the original Assessment Order u\/s. 143(3) and which does not prima facie form the subject matter of reassessment.. Limitation must, therefore, begin to run from the order u\/s. 143(3).Explanation (c ) appended to sub-section (1 ) of f section 263 of the Act which deals with the power of the Commissioner in revision , is clear and unambiguous , as in terms thereof the doctrine of merger applies only in respect of such items which were the subject –matter of appeal and not in respect of those which were not..(A.Y.1994-95,1995-96 ,1996-97)
\n CIT  v. Alagendian Finance Ltd(2012). 293 ITR 1 (SC) <\/em><\/strong><\/p>\n

S.263: Commissioner-Revision of orders prejudicial to revenue- Profits and gains from hotels or industrial undertakings in backward area- Maintenance of accounts unit wise-Neither section 80HH, nor section  80I statutorily obliged  to maintain the accounts unit wise hence consolidated accounts held to be valid and revision was held to be not valid. (S. 80HH, 80I)<\/strong>
\n The Assessing Officer has allowed the deduction under section 80HH, after examining the   unit wise profit and loss  statement filed by the Assessee. Commissioner revised the order under section and disallowed the deduction on the ground that the assessee should have maintained Segregated Accounts for each of the three units to avail benefit  of section 80HH and section 80I . In appeal before the Tribunal the Tribunal held that  assessee should submit unit wise audited accounts and claim deduction under section 80HH and 80 I. On appeal the High Court set a side the order of Tribunal. On appeal to Supreme Court the Court held that neither section 80HH nor section 80I ( as it then stood) statutorily  obliged the assessee to maintain its accounts unit wise and it was open to the assessee to maintain its accounts in a consolidated form ,in order to put to an end to the litigation between the tax department and the PSU the matter was remitted back to the Assessing Officer to ascertain whether the assessee had correctly calculated the net profits for claiming deduction under section 80HH and 80I . If not done , it could be done such working is certified by the Auditors the net profit computation (Unit wise ) could be placed before the AO  who can find out whether such profits is properly worked out and on that basis compute deduction under section  80HH\/80I.  (A.Y.1992-93)(From the judgment of Gauhati High Court ITR no 4 of 2001 dated 6-6-2002)
\n CIT v. Bongaigaon Refinery & Petrochemical Ltd ( 2012) 210 Taxman 229\/79 DTR 8 (SC)<\/em><\/strong><\/p>\n

S.263: Commissioner- Revision of orders prejudicial to revenue- No mention in the notice<\/strong>
\n The CIT mentioned that the auditor has not attached the P & L A\/c and the balance sheet of the Brahma Aangan Project along with the audit report and hence deduction u\/s 80IB(10) was wrongly allowed by the A.O. In the notice under s.263, the CIT has nowhere mentioned the above reason that the audit report was blank. The stand of the assessee is that no opportunity of hearing has been given by the CIT on a particular issue so he is not justified in revising the order on that issue. Therefore, it could not form the basis for revision of the assessment order u\/s 263. (A.Y. 04 – 05)
\n Brahma Builders v. DCIT (2012) 77 DTR 249 (Pune)(Trib)<\/em><\/strong>
\n  <\/strong>
\n S.271(1)(c): Penalty- Concealment<\/strong>
\n Marketing expenditure and additions to closing stock the High Court having remanded the matter to Tribunal which in turn referred the same to A.O. for fresh consideration, penalty u\/s 271(1)(c) on these two counts is rendered infructuous. (A.Y. 2001 – 02)
\n CIT v. Nokia India (P) Ltd. (2012) 77 DTR 254 (Delhi)(High Court)<\/em><\/strong><\/p>\n

S.271(1)(c): Penalty- Concealment – Ad hoc disallowance <\/strong>
\n Ad hoc disallowance towards obsolescence cannot be made basis of penalty u\/s 271(1)(c). (A.Y. 2001 – 02)
\n CIT v. Nokia India (P) Ltd. (2012) 77 DTR 254 (Delhi)(High Court)<\/em><\/strong><\/p>\n

S.271(1)(c): Penalty- Concealment – Explanation 5 <\/strong>
\n The explanation 5 to S.271(1)(c) is premised on search of the assessee. The structure of the provision and the explanation make it clear that the first part, i.e. concealment of income, or furnishing of inaccurate particulars, results in the presumption, that it is liable for penalty. The onus is upon the assessee, whose premises are subjected to search, and from where the books of account pertaining to the undisclosed particulars are found, to show that he falls within the two exceptions, carved out of the Explanation. The assessees did not disclose the income or the assets any time in the returns filed by them. Furthermore, the search conducted was not in their premises; it was in the premises of someone else. They filed a return, which for the first time, disclosed the hitherto concealed income. Their explanations were not of the kind which therefore, fell within the exception to Explanation 5 of S. 271(1)(c). Levy of penalty u\/s 271(1)(c) was therefore sustainable.  (A.Y. 1999 – 2000 to 2003 – 04)
\n CIT v.  Meera Devi(Smt) (2012) 77 DTR 382 (Delhi)(High Court)<\/em><\/strong>
\n Kiran Devi v. CIT (2012) 77 DTR 382 (Delhi)(High Court)<\/em><\/strong><\/p>\n

S.271(1)(c): Penalty – Concealment– Disallowance of fees paid to Registrar of companies and claim of depreciation, error being genuine and bona fide, no penalty be levied.<\/strong>
\n The AO levied penalty in case of disallowance of fees paid to Registrar of companies and claim of depreciation. It was held that the AO did not contradict the plea of the assessee that the excess claim of depreciation was an inadvertent error. As elements in the case indicate that the error by the assessee was genuine and bona fide, deletion of penalty was justified. (A.Y. 2001-02)
\n CIT v. Brahmaputra Consortium Ltd. (2012) 348 ITR 339 (Delhi)(High Court)<\/em><\/strong><\/p>\n

S.271(1)(c): Penalty- Concealment-Revised return-Surrender in the course of survey-Revised return filed before issue of formal  notice does not necessarily avoid levy of concealment  penalty, on the facts levy of penalty was held to be justified. (S.35CCA<\/strong> )
\n The assessee filed a ROI claiming deduction u\/s 35CCA for a donation made to another party. The department had information that the donation was bogus and so a survey was conducted on the assessee’s premises. Pursuant to the survey, the assessee filed a revised return of income in which it withdrew the claim for deduction and paid up the taxes thereon. The AO imposed penalty u\/s 271(1)(c) on the ground that the revised return withdrawing the claim was not voluntary but was pursuant to the survey. The CIT (A) & Tribunal deleted the penalty on the ground that as the revised return was filed before any concrete evidence was gathered by the income tax authorities the assessee was exonerated from guilt. On appeal by the Department to the High Court, held reversing the Tribunal:<\/p>\n

The mere fact that a revised return was filed withdrawing a claim or offering additional income before issue of a formal notice by the AO does not necessarily mean that the return is voluntary. The filing of a revised return does not expatiate the contumacious conduct, if any, on the part of the assessee in not having disclosed the true income in the original return. At the same time, it cannot be said that the revised return is of no consequence at all. The original return cannot be considered in isolation without reference to the conduct of the assessee subsequent to the filing of the original return. The question whether a revised return is “voluntary” or not has to be decided in the light of the entire material brought on record and whether the revised return was filed when the assessee is cornered by the evidence or material collected by the revenue authorities or before that stage. On facts, the revised return was filed by the assessee only when it was cornered and the income tax authorities had collected material on the basis of which it could be said that the claim for deduction was false or bogus. The filing of the revised return is thus an act of despair and the assessee can gain nothing from it (Qammar-Ud-Din v. CIT (1981) 129 ITR 703 (Del), A. N. Sarvaria v CIT (1986) 158 ITR 803 (Del), CIT v Ramdas Pharmacy (1970) 77 ITR 276 (Mad) &  CIT v SAS Pharmaceuticals (2011) 335 ITR 259 (Del) referred)(A. Y. 1983-84)
\n CIT v. Usha International Ltd (Delhi High Court) www.itatonline.org <\/em><\/strong><\/p>\n

S.271(1)(c): Penalty – Concealment- Amounts not deductible- Failure to deposit tax ducted at source-The issue being debatable in view of Special Bench decision holding that amendment in section 40(a)(ia) being not retrospective matter remanded back to Tribunal.(S.40(a)(ia))<\/strong>
\n The Assessing Officer held that the assessee has failed to deposit the tax deducted at source on before due date a disallowance was to be effected as per section 40(a)(ia), accordingly penalty under section 271(1)(c ) was levied. In appeal Commissioner (Appeals) deleted the penalty. Appeal of revenue was dismissed by the Tribunal . On appeal to High Court by the revenue contended that subsequent decision of Special Bench in Bharati Shi yard Ltd v. Dy.CIT (2011) 11 ITR 599 (SB)(Mum)(Trib.)holding that the amendment brought about by the Finance Act , 2010 to section 40(a)(ia) was not remedial and curative in nature and would  therefore , not retrospective  effect, hence the view of Tribunal cannot be sustained. The Assessee contended that the issue is debatable . The Court held that since the submission of assessee was not considered the matter was set aside for fresh consideration before the Tribunal . (A.Y. 2006-07)
\n CIT v. Shyam Narayan and Bros. (2012) 349 ITR 145 (Bom.)(High Court)        <\/em><\/strong><\/strong>
\n S. 271(1)(c): Penalty – Concealment-Bonafide mistake-Levy of penalty is not justified. <\/strong>
\n Assessee could not be held to be liable for levy of penalty under section 271(1)(c) where the mistake committed by the assessee is a bona fide mistake.(A.Y.2006-07)
\n ITO v. Gurmeet Kaur (Smt.) (2012) 149 TTJ 28(UO) (Chd.)(Trib.)<\/em><\/strong><\/p>\n

S.271(1)(c): Penalty- Concealment- additional income declared in return u\/s 153A.<\/strong>
\n Where returned income disclosed in the return filed u\/s. 153A is accepted by the AO, there is no concealment and consequently penalty u\/s. 271(1)(c) is not leviable. There was no provision relating to entries in expl. 5 prior to insertion of Expl. 5A in s. 271(1) w.e.f 1st June, 2007 and therefore, penalty u\/s. 271(1)(c) cannot  be imposed even by invoking expl. 5 is asst. Year 2004-05 in respect of the unaccounted cash found during the search on 22nd Nov. 2006 merely on the presumption that the assessee might have been in possession of such cash throughout the period covered by the search assessments. Hence, till insertion of Expln. 5A and s. 271AAA by the Finance Act, 2007, the scheme of assessment gave immunity to the assessee in respect of undisclosed income based on the entries in the seized material.            (A.Y.2004 – 2005)
\n Prem Arora v. Dy. CIT (2012) 78 DTR  91(Delhi) (Trib.)<\/em><\/strong>
\n  <\/strong>
\n S.271AAA: Penalty- Search initiated on or after 1st June, 2007- Conditions precedent.<\/strong>
\n The Assessees have disclosed concealed income while giving statements u\/s 132 during the course of search and paid the tax thereon and showed the said undisclosed income in the return filed under the head “Income from business” and Department has accepted these returns and accordingly passed the assessment orders. It is not the case of the Departmental authorities that the assessee has not satisfied the manner in which the income is derived and the assessee has not paid the tax with interest on the undisclosed income. Undisputedly the assessees have shown the undisclosed income under the head ‘Income from business’ in the returns filed by them and that was accepted by the Department by passing the assessment orders accordingly.
\n The impugned orders having been made contrary to the provisions contained in s.271AAA(2), they are not sustainable for legal scrutiny. Hence, the impugned orders of the authorities below are set aside and the penalty levied u\/s 271SAAA in the cases of the assessees is cancelled. (A.Y.2007-08 & 2008-09)
\n Ashok Kumar Sharma v. DCIT (2012) 77 DTR 241 (Ctk.)(Trib.)<\/em><\/strong><\/p>\n

S.271AAA: Penalty- Search initiated on or after 1st June, 2007- Conditions precedent.<\/strong>
\n Assessee surrendered certain income for the relevant assessment years in the statements during the course of search and filed returns declaring the same pursuant to notice u\/s 153A which has been accepted by the A.O. No definition could be given to the ‘specified manner’ insofar as the very statement on oath u\/ 132(4) specifies the manner on which the assessee is prepared to pay tax thereon. The inscribing in the books of account was taken care of by the assessee when he filed the returns in pursuance to notice u\/s 153A accounting the assets. The penalty is not automatic if one of the purposed conditions is not fulfilled although all the conditions have been agreed to of having fulfilled by the A.O. insofar as the tax and interest have been recovered. Penalty has been levied after the tax has been recovered therefore answers the queries raised by the Departmental Representative for that the said provisions become redundant was not the intention of the legislation. The manner, during the search operation, is noted by the search party which the A.O. has acceded to. There is no prescribed method to indicate the manner in which income was generated when the definition of ‘undisclosed income’ has been defined in the Act itself when no income of the specified previous year represented ‘either wholly or partly’ which onus lay upon the assessee stood discharged. In view of the above, the levy of penalty u\/s 271AAA is not justified and such, the penalty so levied u\/s 271AAA for the assessment years under consideration in the case of respective assessees is cancelled. (A.Y.2007-08 & 2008-09)
\n Pramod Kumar Jain v. DCIT (2012) 77 DTR 241 (Ctk.)(Trib.)<\/em><\/strong><\/p>\n

S.271B: Penalty-Failure to get accounts audited –Exempt income-Penalty for failure to get the accounts was not imposable.(S. 10 (20), 44AB ) <\/strong>
\n Assessee filed its return along with which it provided not that it had property income which was exempt under section 10(20).Assessing Officer found that its gross receipts were more than prescribed limit under section 44AB for getting accounts audited and accordingly, he imposed penalty under section 271B. Since there was no income which would fall under heading ‘Profits and gains of business or profession’ and income of assessee was exempt under section 10(20), section 44AB was not applicable and consequently, penalty under section 271B was not imposable. (A.Y.1996-97) 
\n CIT v. Market Committee, Sirsa (2012) 210 Taxman 20 (P & H) (High Court) <\/em><\/strong><\/p>\n

 <\/em><\/strong><\/p>\n

S.271(1)(c): Penalty- Concealment- additional income declared in return u\/s 153A.<\/strong>
\n Where returned income disclosed in the return filed u\/s. 153A is accepted by the AO, there is no concealment and consequently penalty u\/s. 271(1)(c) is not leviable. There was no provision relating to entries in expl. 5 prior to insertion of Expl. 5A in s. 271(1) w.e.f 1st June, 2007 and therefore, penalty u\/s. 271(1)(c) cannot  be imposed even by invoking expl. 5 is asst. Year 2004-05 in respect of the unaccounted cash found during the search on 22nd Nov. 2006 merely on the presumption that the assessee might have been in possession of such cash throughout the period covered by the search assessments. Hence, till insertion of Expln. 5A and s. 271AAA by the Finance Act, 2007, the scheme of assessment gave immunity to the assessee in respect of undisclosed income based on the entries in the seized material.            (A.Y.2004 – 2005)
\n Prem Arora v. Dy. CIT (2012) 78 DTR  91(Delhi) (Trib.)<\/em><\/strong><\/p>\n

Wealth Tax <\/u><\/strong><\/p>\n

S. 2(ea) – Asset – Urban Land – Construction not permissible<\/strong>
\n Vide notification dated 12th Nov. 1992 under the MRTP Act, 1966, the land in question was reserved to the extent of 50 per cent for park and the remaining 50 per cent of the land to be deleted and included in C-I zone for specific purpose of development of hotel subject to the conditions that the parties should develop and maintain the park and shall keep them for general public during restricted hours – Conditions as provided in the notification are not in the nature of prohibition of development and construction of the land, rather the notification permits the development of the land subject to fulfilment of certain conditions as prescribed in the notification. Therefore, said notification, would not render the land in question under the exception as enumerated under cl. (b) of Expln. 1 of s. 2(ea).(A.Y. 1996 – 97 to 98 – 99)
\n Mars Hotels & Resorts (P) Ltd. v. Dy. CIT (2012) 77 DTR 265 (Mum.) (Trib.)<\/em><\/strong><\/p>\n

S. 2(ea) – Asset – Urban Land – Held for industrial purpose<\/strong>
\n Land in question having been reserved for hotel by notification dated 12th Nov. 1992 issued under s. 43 of the Maharashtra Regional Town Planning Act, 1966 the same is `industrial land’ within the meaning of s. 3(c) of the Industrial Development Bank of India Act, 1964 exempt from wealth tax for two years from the date of acquisition viz., 30th Nov. 1995, hence not chargeable to wealth tax for asst. Year 1996-97 by application of Expl. 1(b) to s. 2(ea). (A.Y. 1996 – 97 to 98 – 99)
\n Mars Hotels & Resorts (P) Ltd v. Dy. CIT (2012) 77 DTR 265 (Mum.) (Trib.)<\/em><\/strong> <\/p>\n

S. 3 – Net wealth – Value of silver bars confisticated <\/strong>
\n In the light of the provisions of sub-s (3) of S. 7 of the SAFEMA, upon the passing of the order under s. 7 on 8th June, 1979, the subject assets stood forfeited to the Central Govt. Free from all encumbrances. Such position continued to exist till the order of the competent authority came to be asset aside by the Tribunal for Forfeited property on 24th June, 1992. As such, the assessee ceased to have any legal interest in the subject assets during the period when the aid order of forfeiture was in operation. However, till then, the same stood vested in the Central Govt. Under the circumstances, when the subject assets did not legally belong to the assessee during the period under consideration, the same could not have been included while computing his net wealth. (A.Y.84-85, 85-86, 88-89 & 89-90)
\n Wealth Tax Officer v. Lallubhai Jagibhai Patel (2012) 78 DTR (Guj.) 9<\/em><\/strong><\/p>\n

S.7: Valuation- Large land <\/strong>
\n The contention of the assessee is that since the land in question is larger area of 12 acres; therefore, while taking the stamp duty rate for determining the market value of the land, 40 per cent of deduction should be allowed. There is force in the contention of the assessee on this point because when the area of land in question is 12 acres and the rate as per the stamp duty authorities are taken as per square metre; therefore, the rate of per square metre cannot be directly adopted for a larger area of land of 12 acres. Accordingly, the deduction of 40 per cent is allowed while computing the fair market value of the land in question on account of large track of the land. Further the development of the land in question was allowed to the extent of 50 per cent subject to the conditions that the assessee should develop a park on the 50 per cent of the land which shall be opened for the public. It is to be noted that the net wealth has been computed on the land and the value of the land is directly connected with the potentiality of the land for development of hotel. The infirmity attached to the land in question has a direct effect on the value of the land in comparison to the land free from any such infirmity. Therefore, such an infirmity would certainly deflate the value (market value) of the land  in comparison to the value of other normal land. In that view of the matter, the assessee has incurred the expenditure for removing all the defects\/hurdles attached to the property in question prior to its development. This expenditure incurred by the assessee in developing the public park as a precondition to clear the way for development of land. Further the valuation date of the land in question is prior to development of the hotel at the land in question. Accordingly, the expenditure, which is incurred for exploiting the potential development of the land, is an allowable deduction for computation of fair market value while determining the net wealth. (A.Y. 1996 – 97 to 98 – 99)
\n Mars Hotels & Resorts (P) Ltd. v. Dy. CIT (2012) 77 DTR 265 (Mum.) (Trib.)<\/em><\/strong><\/p>\n

S.7: Valuation- Shares – Lock in period <\/strong>
\nThe shares were given to the assessee on promoters quota, they being family members of the promoter; the shares were held at the value of Rs.10 per share. It is an admitted fact that the shares of the company are quoted shares. Even though market value as a concept would hold good even in respect of shares suffering restriction on their transferability, there is need for assigning a depreciated value to such market value. In respect of shares with a lock in period held out of the promotes quota, necessarily one has to arrive at the depreciated value of these shares. It is an open secret that in the absence of any such guideline, the depreciation may range from 0 to 100 and it is always a question of debate. Apparently, on account of all these, the CWT justifiably adopted r. 11 of Part C of the Sch. III, which is with reference to unquoted equity shares. By adopting the principle as given under r. 11, one is neither treating the shares as unquoted shares, nor  is he ignoring the fact that the company shares are quoted shares. Though the assessee is not in a position to show what could be the depreciated value of the restriction on the transfer, even invoking r. 21, as had been done by the Revenue, r. 11 could only be a plausible method to arrive at the depreciated value of a quoted share, which suffers a lock in period, by reason of it being allotted as a promoters quota.<\/p>\n

\n CWT v. Thirupathy Kumar Khemka & Ors. (2012) 77 DTR (Mad) 475<\/em><\/strong> <\/p>\n

 <\/strong><\/p>\n

Interpretation-Precedent.<\/strong>
\n Interpretation-Precedent- Authority for advance Rulings-Authority is not barred from expressing opinion different from view expressed in another earlier Ruling.<\/strong>
\n The Authority should be slow in disagreeing  with a proposition of law unrelated to facts , enunciated in an  earlier ruling .But , when the Authority is convinced  that  a view already expressed may not be correct, it should not deter the Authority from expressing itself.
\n Castleton Investment Ltd ( 2012) 348 ITR 537 (AAR)    <\/em><\/strong><\/p>\n

Interpretation- Doctrine of merger- Review petition-Special leave petition.<\/strong>
\n The petitioner had preferred appeal against order passed in writ petition. When appeal has been preferred against an order and dismissed ,review petition cannot be allowed against the same order. Decision of lower court merges in to decision of appellate Court and latter’s decision which subsists , remains operative and is capable of  enforcement in eyes of law. Court would have no jurisdiction to entertain review petition as petitioner had exhausted option of preferring appeal, hence review petition was not maintainable.  Doctrine of merger is not attracted when question whether leave to appeal should be granted or not is considered and decided . It is attracted when leave to appeal is granted, and order from which appeal arose and order granting leave get merged. When special leave to appeal is declined , there is no appeal and question of merger does not arise at all. It is only when leave to appeal is granted before Supreme Court , jurisdiction of High Court to review is lost.<\/p>\n

Anup Kumar Roy & Ors v. State of Tripura & Ors  AIR 2012  Gauhati 163 (High Court)     <\/em><\/strong> <\/p>\n

Central Excise Act, 1944 – Appeal-Dismissed-Limitation-Interpretation-Merger-Doctrine of merger. <\/strong>
\n If for any reason an appeal is dismissed on the ground of limitation an not on the merits, that order would not merge with the orders passed by the first appellate authority.<\/p>\n

\n Raja Mechnical Co. (P.) Ltd. v. CCE [2012] 345 ITR356 (SC)<\/em><\/strong><\/p>\n

 <\/u><\/strong><\/p>\n

 <\/u><\/strong><\/p>\n

Service Tax<\/u><\/strong><\/p>\n

Finance Act 1994, S.65(25) – Taxable Service – clearing and forwarding agent – Consignment agent selling goods to customers under its own invoice. <\/strong>
\n Though the definition of C & F agent is quite wide, essentially what is a taxable service is a service rendered by a C & F agent to a client in relation to clearing and forwarding operation. In the instant case, assessee has been appointed as a consignment agent by BALCO. None of the tasks detailed in para 2.2. of Trade Notice No.87 of 1997, dt. 14th July, 1997, has been entrusted to the assessee. It was receiving goods for outright sale to the customers that it would get. Though price therefo was pre-decided by the principal, and the assessee could not charge any higher rate, sale was made by the assessee under its own invoice. For such purpose, assessee was receiving certain discount. It is assessee who is liable to pay sales tax and other taxes. Renewal of agency depended on the performance of the assessee in fulfilling its minimum consignment commitment and regular payments. Thus assessee did not act as a C & F agent. Merely because the assessee has been referred to as a consignment agent in the agreement in question cannot by itself be sufficient to treat it as a C & F agent as defined in S. 65(25) as it did not provide any service to the principal in relation to clearing and forwarding of goods. Therefore, assessee cannot be said to be a C & F agent of BALCO.
\n CCE v. Trade Tek Corporation (2012) 77 DTR 193 (Guj)(High Court)<\/em><\/strong><\/p>\n

Service Tax Rules – Cenvat Credit – Penalty <\/strong>
\n Assessee, a cellular telephone service provider, which was not paying service tax on roaming charges having wilfully suppressed the fact of  availment of  Cenvat credit in respect of exempted service in excess of the prescribed limit of 35per cent laid down in r. 3(5) of service tax credit Rules, 2002, it is liable for penalty under ss. 76 and 78 r\/w\/r. 6 of service tax rules, 1994.
\n Vodafone Digilink Ltd v. CCE (2012) 78 DTR (Raj) 128<\/em><\/strong><\/p>\n

Circulars:<\/strong>
\n 7 of 2012 dated 21-9-2012- Approval of loan agreements \/long term infrastructure bonds and rate of interest for the purpose of section 194LC of the Income-tax Act 1961.(2012)348 ITR 130(Statutes)
\n 8 of 2012 dated 5-10-2012 – Income tax deduction from salaries during the financial year 2012-2013, under section 192.(2012) 348 ITR 144(Statutes)
\n Reports;<\/p>\n

\n Report of the committee on roadmap for fiscal consolidation(3-9-2012) (Vijay L.Kelkar) (2012) 348 ITR 207 (Statutes)<\/p>\n

Articles:<\/strong>
\n S.9(1)(vi): Income-Non-resident- The   givings and misgivings  of the new section 9(1)(vi) –Royalty  on software and cable operators  by Madhulika  vyas (2012) 253 CTR 71 (Articles )
\n S.10(14):Exemption-Living allowance  paid to Indian employees for working abroad is exempt . by T.N.Pandey  (2012) 253 CTR 52 (Articles)
\n S.10AA: Exemption- Special Economic  Zone related benefits –Whether such provisions can override section 10AA. By  T.N.Pandey ( 2012) 253 CTR 4 (Articles) 4
\n S.14A:Business expenditure-Section 14A-Facing conceptual dilemma by, Minu Agrwal (2012) 253 CTR 49(Articles)
\n S.32: Depreciation- A depreciation problem- Assets  of partner used by partnership firm by S.Narayanan ( 2012) 253 CTR 13 (Articles)
\n S.37(1):Business expenditure- Commission , gifts , freebies to private Doctors –Not admissible ( 2012) 348 ITR 17(Journal)
\n S.54F: Capital gains –Section 54F verses section 50C  by Aadesh Kumar  Agarwal and Nritya Agarwal ( 2012) 252 CTR 102 (Articles)
\n S.90: Double tax Avoidance- Interpretation of Double tax Avoidance  Agreement by  N.M.Ranka (2012) 253 CTR 65 (Articles)
\n S.92C: Transfer pricing-Carlyle Advisors India Case- Alost opportunity  for revenue –Need to change strategy  by Gopal Nathani  (2012) 210 Taxman 132 (Mag.)
\n S.142A: Assessment- Ready for judicial Battle  by  Minu Agarwal (2012) 253 CTR 89
\n S.145: Accounts- Can audited books of accounts be rejected by the Assessing Officer by N.R.Chakrabarti (2012) 253 CTR 85 (Articles)
\n S.147: Reassessment- Change of opinion in the context of reassessment –Mystry  yet to be solved  by Minu Agarwal (2012) 252 CTR 97 (Articles)
\n S.147: Reassessment- Doctrine of change of opinion  in reassessment proceedings –Last word still not said by Tilak Channdra ( 2012) 253 CTR 25 (Articles)
\n S.159: Representative assessee- Admission by deceased assessee in search proceedings: How far binding on legal representative. by T.N. Pnadey (2012) 348 ITR 33 (Statutes)
\n S.245: Advance Ruling- Is its shine being lost by S. Rajarathnam (2012) 252 CTR 67(Articles)
\n S.245: Advance Ruling-How final is the ruling of the AAR  by T.C.A.Ramanujam ( 2012) 253 CTR 1(Articles)
\n S.269T: Penalty-Repayment loan –Deposit-Paper penalty-Whether rational by  Minu Agrwal (2012) 252 CTR 65(Articles )
\n S.271(1)(c): Penalty –Concealment-Cost of  buying peace with the income tax department by T.N.C. Ramanujam (2012) 253 CTR 92 (Articles) <\/p>\n

A.
\n Accounts –As, 4, As 12 and  As 22- Proposed limited revisions  by S.Rmachandran ( 2012) 253 CTR 40 (Articles)
\n B.
\n Black money- Whether tax amnesty can be a solution to tackle black money problem . by T.N.Pandey ( 2012) 210 Taxman 1 (Mag.)
\n D.
\n Direct taxes code- An open letter to Finance Minister concerning  Direct taxes Code  -By T.N.Pandey ( 2012) 348 ITR 23 (Journal)
\n E.
\n Estate duty- Why not an inheritance tax in India by T.N.Pandey ( 2012) 252 CTR 73 (Articles )
\n G.
\n GAAR- General Anti –Avoidance Rules –Recommendations of Parthsrathi Shome Committee by Sangeeta Jain ( 2012) 253 CTR 34 (Articles)
\n I.
\n Interpretation- Whether ‘proviso” always provides exception ? by Rohit Grag ( 2012) 209 Taxman 125 (Mag.)<\/p>\n

S.
\n Service tax- Legal services –Taxation and exemption  by Dr Sanjiv Agrwal (2012) 252 CTR 76 (Articles )
\n Service tax- Settlement of cases in service tax by Dr.Sanjiv Agarwal (2012) 252 CTR 114 (Articles)
\n Service tax- Reverse charge mechanism in service tax by Dr.Sanjiv Agarwal( 2012) 253 CTR 9 (Articles)
\n Service tax- Basic  ingredients  of show cause notice and adjudication by Dr. Sanjiv Agarwal (2012) 253 CTR 79 (Articles )
\n Service  tax on legal and consultancy services –Scenario  before and after Changeover to  taxation of all services  by T.N. Pnadey (2012) 253 CTR 96 (Articles)
\n Service tax-Issue in levy of Service tax on Director’s Services by Dr. Sanjiv Agrwal (2012) 253 CTR (Articles) 103
\n T.
\n Taxation –Recent Trends in Taxation  -Speech of Justice F.M.Ibrahim Kalifulla  Honourable Judge of Supreme Court of India(Late V. Ramachandran  Memorial lecture) ( 2012) 348 ITR 37 (Statutes) <\/p>\n

Taxation-Critical appraisal of recommendation of  Kelkar   Commitee concerning income taxation in the report on fiscal consolidation . by T.N.Pandey  (2012) 210 Taxman 125 (Mag) <\/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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