{"id":7224,"date":"2013-09-30T01:06:47","date_gmt":"2013-09-29T19:36:47","guid":{"rendered":"http:\/\/itatonline.org\/archives\/?page_id=7224"},"modified":"2013-10-09T22:51:27","modified_gmt":"2013-10-09T17:21:27","slug":"digest-of-important-case-laws-january-to-august-2013","status":"publish","type":"page","link":"https:\/\/itatonline.org\/archives\/digest-of-important-case-laws-january-to-august-2013\/","title":{"rendered":"Digest Of Important Case Laws &#8211; January To August 2013"},"content":{"rendered":"<div id=AddressingEnvelope>\n<a href=\"https:\/\/i0.wp.com\/itatonline.org\/archives\/wp-content\/uploads\/2008\/10\/ksalegal.gif\"><img data-recalc-dims=\"1\" loading=\"lazy\" decoding=\"async\" src=\"https:\/\/i0.wp.com\/itatonline.org\/archives\/wp-content\/uploads\/2008\/10\/ksalegal.gif?resize=157%2C133\" alt=\"\" title=\"ksalegal\" width=\"157\" height=\"133\" class=\"alignleft size-full wp-image-183\" \/><\/a><\/p>\n<div id=MainEnvelope>\nNo time to read through voluminous case reports?<\/p>\n<div id=RSVP>\nCan\u2019t separate the wheat from the chaff?\n<\/div>\n<div id=Invite>\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<p><DIV class=team>Compiled By: Ajay Singh, Paras Savla, Rahul Hakani, Rahul Sarda &#038; Neelam Jadhav<\/DIV><\/p>\n<\/div>\n<p><DIV class=clear-simple><\/DIV>\n<\/div>\n<div class=\"clock\">\n<table border=\"0\">\n<tr>\n<td colspan=\"2\"><strong>Digest of important case law &#8211; January 2013 to August 2013 <\/strong><\/td>\n<\/tr>\n<tr>\n<td width=\"264\" rowspan=\"2\" valign=\"top\">\n<script type=\"text\/javascript\"><!--\ngoogle_ad_client = \"ca-pub-6440093791992877\";\n\/* DLCenter_336x280 *\/\ngoogle_ad_slot = \"7705834990\";\ngoogle_ad_width = 336;\ngoogle_ad_height = 280;\n\/\/-->\n<\/script><br \/>\n<script type=\"text\/javascript\"\nsrc=\"http:\/\/pagead2.googlesyndication.com\/pagead\/show_ads.js\">\n<\/script><\/p>\n<\/td>\n<td width=\"271\" valign=\"top\">\n<script type=\"text\/javascript\"><!--\ngoogle_ad_client = \"ca-pub-6440093791992877\";\n\/* DLCenter_336x280 *\/\ngoogle_ad_slot = \"7705834990\";\ngoogle_ad_width = 336;\ngoogle_ad_height = 280;\n\/\/-->\n<\/script><br \/>\n<script type=\"text\/javascript\"\nsrc=\"http:\/\/pagead2.googlesyndication.com\/pagead\/show_ads.js\">\n<\/script><\/p>\n<\/td>\n<\/tr>\n<tr>\n<td valign=\"top\"><\/td>\n<\/tr>\n<tr>\n<td>Download Monthly <strong>August 2013<\/strong> Digest in pdf format<\/td>\n<td align=\"right\">Download <strong>Consolidated Digest<\/strong> (Jan 2013 to August 2013) in pdf format<\/td>\n<\/tr>\n<tr>\n<td align=\"left\" valign=\"top\"><a href=\"https:\/\/itatonline.org\/archives\/?dl_id=1080\" onclick=\"if (event.button==0) \r\n     setTimeout(function () { window.location = 'http:\/\/itatonline.org\/downloads.php?varname=dl_id=1080&varname2=Monthly_Digest_Aug_2013.pdf'; }, 100)\" ><strong>Click here to download the judgement (Monthly_Digest_Aug_2013.pdf) <\/strong> <\/a><\/p> <\/td>\n<td align=\"right\" valign=\"top\"><a href=\"https:\/\/itatonline.org\/archives\/?dl_id=1081\" onclick=\"if (event.button==0) \r\n     setTimeout(function () { window.location = 'http:\/\/itatonline.org\/downloads.php?varname=dl_id=1081&varname2=Consolidated_Digest_Jan_Aug_2013.pdf'; }, 100)\" ><strong>Click here to download the judgement (Consolidated_Digest_Jan_Aug_2013.pdf) <\/strong> <\/a><\/p> <\/td>\n<\/tr>\n<tr>\n<td colspan=\"2\">\n<div class=\"journal2\">Download <strong>Consolidated Digest<\/strong> (Jan 2012 to December 2012) in pdf format <a href=\"https:\/\/itatonline.org\/archives\/?dl_id=1087\" onclick=\"if (event.button==0) \r\n     setTimeout(function () { window.location = 'http:\/\/itatonline.org\/downloads.php?varname=dl_id=1087&varname2=Consolidated_Digest_Jan_Dec_2012.pdf'; }, 100)\" ><strong>Click here to download the judgement (Consolidated_Digest_Jan_Dec_2012.pdf) <\/strong> <\/a><\/p><\/div>\n<\/td>\n<\/tr>\n<tr>\n<td colspan=\"2\"><a href=\"http:\/\/itatonline.org\/archives\/index.php\/digest-of-important-case-laws-january-to-july-2013\/\">Looking for the Previous Month&#8217;s digest? Click here.<\/a> <\/td>\n<\/tr>\n<\/table>\n<\/div>\n<p><script type=\"text\/javascript\"><!--\ngoogle_ad_client = \"ca-pub-6440093791992877\";\n\/* DLCenter_728x90 *\/\ngoogle_ad_slot = \"3275635396\";\ngoogle_ad_width = 728;\ngoogle_ad_height = 90;\n\/\/-->\n<\/script><br \/>\n<script type=\"text\/javascript\"\nsrc=\"http:\/\/pagead2.googlesyndication.com\/pagead\/show_ads.js\">\n<\/script><\/p>\n<div class=\"journal\">\n<p><strong>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<div>\n<div style='float:left; margin-top:5px ; margin-left:5px ; margin-right:10px ; margin-bottom:5px ;'>\n<\/div>\n<p><strong>S.2(14):  Capital asset&ndash;Agricultural land&ndash;Urban land-Distance from municipality-Different  States-Assessable as capital gains.<\/strong><br \/>\n  Land  within specified distance from Panchkula municipality fell in the State of  Haryana while the land was in the State of Punjab. Thus, the land was urban  land for the purpose of the definition of &quot;capital asset&quot;. The  concept of municipality as a unit of State or the fact that a State has no  jurisdiction to make law beyond its territory have no relevance for the purpose  of determining whether a particular land was &quot;capital asset&quot;&#8217; or not  for the purpose of taxing capital gains. Even if the municipality and the land  fall in different States ,the land will continue to be urban land&nbsp; and gains on sale of agricultural is  assessable as capital gains. (AY. 1997-1998)<br \/>\n  <strong>CIT v. Anjana  Sehgal (Smt.)(2013) 355 ITR 294  (P&amp;H)(HC) <\/strong><\/p>\n<p><strong>S.2(14):  Capital asset&ndash;Agricultural Land&ndash;Situated Within 8 K.M. <\/strong><br \/>\n  Since the land in Question was  Situated Within 8 K.M From Local Limits Of Hyderabad Municipal Corporation  Which Was Notified Area, It Cannot Be Treated As Agricultural Land. (A.Y. 2007-2008) <br \/>\n  <strong>Syed  Nawab Hussain v. ACIT (2013) 24 ITR 180 (Hyd.)(Trib.) <\/strong><\/p>\n<p><strong>S.2(15):  Charitable purpose&ndash;&ldquo;Advancement of any other object of public utility&rdquo; &#8211; First  proviso to s. 2(15) amended by Finance (No. 2) Act, 2009.<\/strong><br \/>\n  First proviso to s. 2(15) amended by Finance (No. 2) Act, 2009 is  applicable in cases where an assessee claims that it is carrying on charitable  purpose covered by residuary clause i.e., &#8216;advancement of any other object of  public utility&#8217;, and proviso is not applicable in case an assessee or  institution claims that it is carrying on charitable purposes like relief to  poor, education, medical relief etc., i.e., purposes which have been specifically  enumerated and stated in earlier part of s.2(15). Where question of application  of income, quantum of surplus available or whether activities undertaken by  third party to whom more than 85 per cent surplus was donated could be treated  as charitable activity under s. 2(15) had not been examined while rejecting  registration under s. 10(23C)(iv), matter was to be remitted to decide issue  afresh.  (AY 2004-05)<br \/>\n  <strong>Hamdard  Laboratories India v. DGIT (2013) 216 Taxman 201 (Delhi)(HC)<\/strong><\/p>\n<p><strong>S.2(15):  Charitable purpose&ndash;Intention to make profit &ndash; Denial of exemption was held to  be not justified.[S.11,12A]<\/strong><br \/>\n  Profit earned by sale of milk,  fodder and other items by gaushala established by Mahatma Gandhi to breed and  keep cows, to improve quality of cows and oxen, to produce and sell cow&#8217;s milk  and its various preparations was entitled to exemption. Held, intention to make  profit was essential to attract disqualification and that some profit  incidentally earned, is not sufficient. (A.Y.2009-10) <br \/>\n  <strong>Sabarmati  Ashram Gaushala Trust v. Addl. DIT (Exemption) (2013) 25 ITR 701 (Ahd.)(Trib.)<\/strong><br \/>\n  <strong>&nbsp;<\/strong><br \/>\n  <strong>S.2(22)(e):  Deemed dividend- Loans and advances&ndash;Genuineness of trust.<\/strong><br \/>\n  The assessee had taken loan from a  company &ldquo;C&rdquo; in which he was having shareholding and voting power exceeding 10  per cent. The assessee contended that section 2(22)(e) was not applicable since  all shares of said company had been settled in a trust resulting in no  beneficial interest in said company. This explanation was rejected by the  Assessing Officer and the Commissioner (Appeals). The Tribunal allowed  assessee&#8217;s claim after examination of trust deed and carrying out of all  relevant enquiries. Held, where the Tribunal came to conclusion that trust was  genuine, view of revenue that shares were not settled in said trust since there  was no financial transaction in name of trust and trust deed was not found at  time of search was not acceptable and therefore, loan could not be held as  deemed dividend.(AY 2006-07)<br \/>\n  <strong>CIT  v. Krupeshbhai N. Patel (2013) 216 Taxman 61 (Guj)(HC)<\/strong><\/p>\n<p><strong>S.2(22)(e):  Deemed dividend-Loans or advances to shareholder&ndash; Condition precedent.<\/strong><br \/>\n  Where assessee shareholder had already divested his interest in shares of  a company in favour of a trust, assessee could no more be said to be beneficial  owner of those shares and, thus, any sum advanced by company to assessee  subsequently could not be treated as deemed dividend. (AY 2006-07)<br \/>\n  <strong>CIT  v. Navinbhai N. Patel (2013) 216 Taxman 137(Mag.) (Guj)(HC)<\/strong><\/p>\n<p><strong>S.2(24): Income &ndash;Gift-Prizes-Rewards-Received by  non-professional sportsman shall not be income chargeable to tax.[S. 10(17A,  56(2)]<\/strong><br \/>\n  The  assessee&nbsp; was a shooter who won medals  international events including a gold medal in Olympic Games. AO held that  prize money received are liable to be taxed on the ground that Circular no  447dt 22-1-1986, is not applicable due to amendment in section 10(17A) and  insertion of&nbsp; section 56(2)(v).On appeal  Commissioner (Appeals) enhanced the Income and held that awards \/rewards  received from various Governments are also liable to be taxed. On appeal Tribunal&nbsp; relying on the Circular no 447 dt 22-1-1986  held that the CBDT has distinguished&nbsp; a  sportsman who is professional and who is non professional. In the case of a  professional sportsman ,the award received by him will be in the nature of  benefit in exercise of his profession and therefore ,will be liable to tax .But  in the case of a non-professional ,the award the award received by him will be  in the nature of gift or personal testimonial and it will not be liable to be  taxed. Since in the present case , the assessee is a non-professional sportsman  , the rewards and awards received by him is not liable to be taxed.<br \/>\n  <strong>Abhinav Bindra v. DCIT (2013) 35 taxmann.com 575 (Delhi)(Trib.)&nbsp; <\/strong><\/p>\n<p><strong>S.2(47):Transfer&ndash;Year  Of Transfer&ndash;Capital gains-Development Agreement-Joint venture-No transfer as  commencement of construction activity was not started.[S. 2(47)(v), 45,  Transfer of Property, Act, 1882, S.53A )<\/strong><br \/>\n  Tribunal held that during the  previous year only an agreement&nbsp; to  develop&nbsp; the property was entered in to  ,whereby assigned his landed&nbsp; property in  favour of joint venture between him and developer ,without commencement of  construction activity. Tribunal held that there is no transfer , as there is no  extinguishment&nbsp; of rights or receipt of  consideration, it&nbsp; could not be said that  developer had performed its obligations as envisaged in section 53A of Transfer  of Property Act , and therefore there was no transfer as per section 2(47) so  as to attract capital gain tax.(ITA no 290\/292 &amp;336 \/Hyd\/ Bench &lsquo;&nbsp; &lsquo; dt 7-06-2013 (A.Y.2006-07). <br \/>\n  <strong>S.Ranjit  Reddy&nbsp; v. Dy.CIT (Hyd.)(Trib.)(Unreported)&nbsp; <\/strong><\/p>\n<p><strong>S.2(47):Transfer&ndash;Year  Of Transfer&ndash;Development Agreement-Possession. [S.2(47)(V), 45 ] <\/strong><br \/>\n  &quot;Possession&quot; as &nbsp;contemplated in Section 2(47)(V) need not necessarily  be sole and exclusive possession, so long as the transferee is enabled to exercise  general control over the property and to make use of it for the intended purpose.  In the case of an agreement for development of property, the mere fact &nbsp;that the Assessee, as owner, has also the right  to enter the property to oversee the development work or to ensure performance of  the terms of the agreement, does not restrict the rights of the developer or introduce  any incompatibility. (A.Y.2005-06) <br \/>\n  <strong>Durdana  Khatoon(Mrs)&nbsp; v. ACIT (2013) 24 ITR&nbsp; 55 (Hyd.)(Trib.)<\/strong><br \/>\n  <strong>&nbsp; <\/strong><br \/>\n  <strong>S.4:  Charge of income-tax&ndash;Inherited&ndash;Sale proceeds of agricultural land&nbsp; as per will of late father is not assessable  as income.<\/strong><br \/>\n  Sale proceeds of agricultural land  received by assessee from her brother in accordance with direction given by her  late father in his will could not be treated as income of assessee.(A.Y.2006-07)<br \/>\n  <strong>CIT  v. Neera Bhandari (2013) 216 Taxman 88 (Mag.) (Delhi)(HC)<\/strong><\/p>\n<p><strong>S.4:  Charge of income-tax&ndash;Waiver of loan&ndash;Loan used for acquisition of capital  asset-Capital receipt cannot be subject to tax.<\/strong><br \/>\n  Where the loan taken was utilised for acquiring a capital asset, waiver  of payment of such loan being in nature of capital receipt could not be  subjected to tax. (A.Y.2001-02)<br \/>\n  <strong>CIT  v. Softworks Computers (P.) Ltd. (2013) 216 Taxman 219 (Mag.) (Bom.)(HC)<\/strong><br \/>\n  <strong>&nbsp; <\/strong><br \/>\n  <strong>S.4: <\/strong><strong>Charge of income-tax-<\/strong><strong>Accrual of  income-Retention money cannot be said to be accrued. [S.5]<\/strong><br \/>\n  Amount retained to ensure satisfactory performance  of contract cannot be held to accrue. Retention money could not be said to  have accrued to assessee, and therefore, this amount did not represent  assessee&#8217;s accrued income. &nbsp;(AY 2003-04)<br \/>\n  <strong>DIT (IT) v.<em>&nbsp;<\/em>Ballast  Nedam International (2013) 355 ITR  300 \/216 Taxman 69 (Guj.)(HC)<\/strong><br \/>\n  <strong>S.4: Charge of Income-tax-<\/strong><strong>Subsidy&ndash;Special incentive for boosting mega  investment is capital receipt.<\/strong><br \/>\n  Subsidy received under a scheme  clearly mentioning that it was given as special incentive for boosting mega  investments in the state was a capital receipt. (A. Y. 2007-2008)<br \/>\n  <strong>Ford  India P. Ltd. v. DCIT (2013) 25 ITR 456 (Chennai)(Trib.)<\/strong><\/p>\n<p><strong>S.9(1)(i): Income deemed to accrue or arise in  India &#8211; Business connection- DTAA-India-USA-<\/strong><strong>Taxation  of branch of foreign company&ndash;Head office incurred loss &ndash; Permanent  establishment [Art. 5(1), 7(3), R.10 of Income-tax Rules, 1962]<\/strong><br \/>\n  The assessee, an American company,  engaged in the business of medical transcription and software development  related to health care, opened a branch in India after obtaining permission  from the Reserve Bank of India. The Assessing Officer was of the view that the  branch office, engaged in software development, software product enhancements,  customer care and medical transcription services for its head office was a  permanent establishment in India under article 5(1) of the Double Taxation  Avoidance Agreement between India and the USA and came to the conclusion that  the assessee&#8217;s income had to be estimated at cost plus 15% mark up. The  Commissioner (Appeals) reduced the profit mark up to 10%. Held that the branch  was a permanent establishment in India and the contention that the head office  had suffered loss and hence there could not be any profit to the branch office  was held to be unacceptable as profit of the branch office had to be computed  in accordance with the income earned by it. Tribunal held that Article 7(3) has  two parts. The first part relates to commercial and business activities carried  on by a PE where as second part relates to certain specified non-commercial  services performed by PE for its Head Office .While commercial and business  services are taxable , if HO assigns some non-commercial activities to its BO  ,income from such activities would not be taxable in terms of Article 7(3) of  the India &ndash;USA DTAA. In the present case BO provided customer care and medical  transcription services to the HO . These were commercial services outsourced by  the HO, hence consideration for such services was taxable in India. Since the  assessee has not at all provided any basis of computation of profit, estimation  of profit at 10 percent was held to be reasonable. (A.Y.2006-07)<br \/>\n  <strong>Wellinx  Inc. v. ADIT(IT) (2013) 25 ITR 671 \/ 143 ITD 749 \/ 35 Taxmann.com 420  (Hyd.)(Trib.)<\/strong><\/p>\n<p><strong>S.9(1)(vi): Income deemed to accrue or arise in India &ndash;  Subscription charges &ndash; Royalty-Deduction at source-DTAA-India-USA [S. 195,  201(1), (1A), Art. 12]<\/strong><br \/>\n  Payments to foreign publishing house for  subscription to web-based foreign publishing house constitute royalty from which  tax is deductible at source.(A.Ys. 2001-2002,  2003-2004)<br \/>\n  <strong>CIT v. Wipro Ltd.(2013) 355 ITR 284 (Karn.)(HC)<\/strong><br \/>\n  <strong>Editorial: <\/strong>Decision in Wipro Ltd v. ITO (2005) 278 ITR 57(AT) (Bang.)(Trib.) is reversed.<\/p>\n<p><strong>S.9(1)(vi): Income deemed to accrue or arise in  India&ndash;Royalty&ndash;DTAA-India-USA-<\/strong><strong>Consideration for supply of  software which is not embedded in equipment is taxable as &ldquo;royalty&rdquo;<\/strong>. <strong>[Art 12(3)].<\/strong><br \/>\n  The  assessee, Reliance Infocomm Ltd, wanting to establish a wireless  telecommunications network in India, entered into a contract with Lucent  Technologies for supply of software required for the telecom network. The  assessee claimed, that amount paid by it to Lucent for acquiring the software  was for purchase of a &ldquo;<em>copyrighted article<\/em>&rdquo; and &ldquo;<em>goods<\/em>&rdquo;  and that it was not assessable to tax as &ldquo;<em>royalty<\/em>&rdquo; u\/s.9(1)(vi)  or Article 12(3) of the India-USA DTAA. The claim was upheld by the CIT(A). On  appeal by the department to the Tribunal HELD allowing the appeal: <br \/>\n  There  is a distinction between a case where the software is supplied along with  hardware as part of the equipment and there is no separate sale of the software  and a case where the software is sold separately. Where the software is an  integral part of the supply of equipment, the consideration for that is not  assessable as &ldquo;<em>royalty<\/em>&rdquo;. However, in a case where the  software is sold separately, the consideration for it is assessable as &ldquo;<em>royalty<\/em>&rdquo;.  On facts, the assessee had acquired the software independent of the equipment.  It had received a license to use the copyright in the software belonging to the  non-resident. The non-resident supplier continued to be the owner of the  copyright and all other intellectual property rights. As there was a transfer  of the right to use the copyright, the payment made by Reliance to Lucent was &ldquo;<em>for  the use of or the right to use copyright<\/em>&rdquo; and constituted &ldquo;<em>royalty<\/em>&rdquo;  under s. 9(1)(vi) and Article 12(3) of the India-USA DTAA&nbsp; (A. Y. 2003-04 to2007-08) <\/p>\n<h2>DDIT v. Reliance Infocom Ltd (Mum.)(Trib.) <a href=\"http:\/\/www.itatonline.org\/\">www.itatonline.org<\/a>.<\/h2>\n<h2>DDIT v. Lucent Technologies (Mum.)(Trib.) <a href=\"http:\/\/www.itatonline.org\/\">www.itatonline.org<\/a>.<\/h2>\n<h2>&nbsp; <\/h2>\n<p><strong>S.9(1)(vi): Income deemed to accrue or arise in  India&ndash;Royalty&ndash; Right to use any property in existence at the time of  use-DTAA-India-Netherland. [Art.7, 12(4)]<\/strong><br \/>\n  The  assessee is a tax resident of Netherlands. The tax payer had entered in to a  Franchise agreement with a hotel in India for providing sales, marketing publicity  and promotion services outside India. The Indian hotel was also to participate  in the hotel system of the tax payer. The assessee contended that the payment  was purely reimbursement of expenses on sales promotion and marketing and hence  was not &ldquo;royalties&rdquo;. The Tribunal held that to cover any amount within the  purview of Article 12(4) of India &ndash;Netherlands DTAA, the payment should be  received as consideration &lsquo;for use of right to use&lsquo; any defined property (i.e.  copy right ,patent, trade mark, etc). Thus, a payment would be &ldquo;royalties&rdquo; if  it is made for defined property existing at the time of use and not for  creation of defined property. Even if the payment contributed towards brand  building, it would not be for use of the brand and hence cannot be characterized  as &ldquo;royalties&rdquo;. The Tribunal also held that the contribution , being a  percentage of gross revenue, was reimbursement of actual expenses on itemized  basis and no material was placed on record to demonstrate that actual expenses  were equal&nbsp; to the reimbursed amount.  Therefore, the AO should decide on the taxability of the amounts under Article  7 of India &ndash;Netherlands DTAA. (A.Y.2003-04)<br \/>\n  <strong>DDIT v. Marriott International Licencing Company BV  (2013) 35&nbsp; Taxmann.com 400 (Mum.)(Trib.)<\/strong><\/p>\n<p><strong>&nbsp;<\/strong><\/p>\n<p><strong>S.9(1)(vii): Income deemed to accrue or arise in  India-Fees for technical services-Training fee to service provider-Make  available-DTAA-India-UK . [Art.13(4)(c)]<\/strong><br \/>\n  The assessee made certain payments  to a UK service provider for providing &lsquo;market awareness and development  training&rsquo; to its employees. Tribunal&nbsp;  held that unless the technical service provided by the UK company  resulted in transfer of technology ,the &lsquo;make available&rsquo; condition was not  satisfied. To &lsquo;make available&rsquo; clause, the onus is on the tax authority to demonstrate  that the training services involved transfer of technology .This onus was not  discharged. The training services provided were general in nature and did not  involve transfer of technology. Therefore, the fees paid for the same could not  be covered under Article 13(4) of India &ndash;UK DTAA.(A.Y. 2008-09)<br \/>\n  <strong>ITO  v. Veeda Clinical Research Pvt. Ltd. (2013) 35 Taxmann.com 577 (Hyd.)(Trib.)&nbsp; <\/strong><\/p>\n<p><strong>&nbsp;<\/strong><\/p>\n<p><strong>S.10(1):  Exempt income-Agricultural income&ndash;Certificate of Agricultural Officer and  Village Officer\/ Report of the Inspector of Income-tax.<\/strong><br \/>\n  The assessee furnished documents  in support of his claim that he carried on agricultural operations in these  lands. The Assessing Officer contended that the certificates given by the  Agricultural Officer and Village Officer did not show that the assessee carried  on agricultural activities thereon. The Assessing Officer as well as the  Commissioner (Appeals) relied on the report of the Inspector of Income-tax and  the development work carried out by the purchaser of land. Therefore, the order  of the Commissioner (Appeals) was to be set aside and the matter remitted to  the file of the Assessing Officer with direction to examine the case of the  assessee and decide the issue afresh in accordance with law. (A.Y. 2007-08)<br \/>\n  <strong>Mampilly  Antony (Dr.)&nbsp; v. DDIT (IT) (2013) 25 ITR  91 (Cochin)(Trib)<\/strong><\/p>\n<p><strong>S.10(23C):  Exempt income &ndash; Educational institution &ndash; Contribution to lions club-Being  social club, exemption is not allowable.<\/strong><br \/>\n  The assessee-trust was running an  educational institution for women. Contributions towards Lions Club and Fine  Arts Academy were claimed for exemption under section 10(23C)(iiiab). Held,  Lions Club might be undertaking some charitable activities, but by and large it  was a social club and could not be construed a social organisation for  undertaking social work as envisaged in the study curriculum. No explanation  was furnished by the assessee why contributions were made to the Fine Arts  Academy. The only plausible reason for making contributions to the two  organisations was that secretary-cum-correspondent of the assessee was the  office bearer of the organisations. Therefore, the assessee was not entitled to  exemption under section 10(23C)(iiiab). (A.Y.2009-2010)<br \/>\n  <strong>Ganapathy  Educational Trust v. ADIT (Exemption) (2013) 25 ITR 231 (Chennai)(Trib.)<\/strong><\/p>\n<p><strong>S.10(23C):  Exempt income&ndash;Medical institution &ndash;Wholly or substantially funded by Government  of India or State Government, exemption is automatic. [S.10(23C)(iiiac)]&nbsp; <\/strong><br \/>\n  The  assessee-society, an association of persons, was formed by the Government of  Karnataka for charitable purposes. The Government of India for implemented its  public health, family welfare, child welfare and various diseases control  objectives through the assessee. Held the purpose of establishing State and  district level health societies was to act as nodal agency for implementation  of the Central Government&#8217;s programme of the National Rural Health Mission and,  thus, there could be no profit motivation. The assessee-society had been  recognised as a Government established or sponsored entity, as affirmed by the  Ministry of Finance. Therefore, exemption was automatic for entities which were  wholly or substantially funded by the Government of India or a State Government  under s. 10(23C)(iiiac). (AY. 2008-2009, 2009-2010)<br \/>\n  <strong>The  District Health and Family Welfare Society v. DCIT (2013) 24 ITR 604 (Bang.)(Trib.)<\/strong><\/p>\n<p><strong>S.10(26AAB):  Exempt income&ndash;Supply of essential commodities for general public&ndash;Similar issue  in last year.[S. 143]<\/strong><br \/>\n  Since no order of Appellate Tribunal had been passed for earlier  assessment year on similar issue of deduction under s. 10(26AAB), proceedings  pertaining to assessment year 2010-11 should be kept in abeyance, till disposal  of appeal filed by department before Tribunal. (A.Y.2010-11)<br \/>\n  <strong>U.P.  State Food &amp; Essential Commodities Corpn. Ltd. v CCIT (2013) 216 Taxman 89  (Mag.) (All)(HC)<\/strong><\/p>\n<p><strong>S.10(34):<\/strong><strong> Exempt  income-Dividend&ndash;Shares held in subsidiary company as investment-Dividend is  exempt.<\/strong><br \/>\n  Tribunal  held that assessee was entitled to exemption under section 10(34) in respect of  dividend received on shares held in subsidiary company and reflected in balance  sheet&nbsp; under the head &lsquo;investments&rsquo;  .(A.Y. 2007-08) <br \/>\n  <strong>Dy.CIT  v. Auto Ltd (2013) 144 ITD 1 (TM)(Rajkot)(Trib.)<\/strong><\/p>\n<p><strong>S.10A:  Free trade zone &ndash; Computation of deduction &ndash; Communication charges-Export  turnover-Total turnover.<\/strong><br \/>\n  While computing exemption under  section 10A of the Act, communication charges were to be excluded from the  export turnover as well as the total turnover. (A. Y. 2007-2008) <br \/>\n  <strong>Zavata  India P. Ltd. v. DCIT (2013) 25 ITR 504 (Hyd.)(Trib.)<\/strong><\/p>\n<p><strong>S.10B:  Hundred percent export&ndash;Export is more than 75 percent of total sales, satisfies  condition. <\/strong><br \/>\n  Where export is more than 75 per cent of total sale, it satisfies  condition prescribed for availing relief under s. 10B. (A.Ys.1995-96 and 1997-98)<br \/>\n  <strong>CIT  v. WTI Advanced Technology Ltd. (2013) 216 Taxman 179 (Mag.) (Mad)(HC)<\/strong><\/p>\n<p><strong>S.10B:  Hundred percent export&ndash;Deduction to be allowed without setting off unabsorbed  depreciation and brought forward business losses.<\/strong><br \/>\n  Deduction under s. 10B is to be allowed on profits of current year  without setting off unabsorbed depreciation and brought forward business  losses. (AY 2007-08)<br \/>\n  <strong>CIT  v. Ganesh Polychem Ltd. (2013) 216 Taxman 179 (Mag.) (Bom)(HC)<\/strong><\/p>\n<p><strong>S.10B:  Hundred per cent export&ndash;Manufacture of plants-Assembled machines partially  disassembled for proper packaging for export, transportation and  installation-Entitled to deduction.<\/strong><br \/>\n  Held, plants were supplied in the  form of sub-assemblies and components after manufacturing them or after getting  them manufactured in accordance with the prescribed specifications. These  sub-assemblies and components were manufactured outside and transported to the  exports processing zone and thereafter, certain operations were carried out and  disassembling was done prior to export of the subassemblies and components to  the ultimate destination. This process was required for containerisation and  packing of these items on account of their size which was a necessary process  for transportation and installation. The assessee was engaged in the  manufacturing and assembling the plants which were disassembled for export.  Hence, the assessee was entitled to deduction under s. 10B. (A.Ys. 2007-08,  2008-09)<br \/>\n  <strong>Aar  Ess Exim P. Ltd. v. ITO (2013) 25 ITR 14 (Delhi.)(Trib.)<\/strong><br \/>\n  <strong>&nbsp;<\/strong><br \/>\n  <strong>S.10B:  Hundred per cent export&ndash;Loss in one unit&ndash;Set off of loss-Provision is not  attracted in case of unit suffering loss. [S.14A]<\/strong><br \/>\n  Provisions of section 14A are not  attracted in the case of the unit suffering losses eligible for deduction under  section 10B and further the assessee is entitled to set off of loss of STP unit  under section 10B against other business income.(A.Y.2008-09)<br \/>\n  <strong>Sandoz  P. Ltd. v. DCIT (2013) 25 ITR 347 (Mum.)(Trib.)<\/strong><br \/>\n  <strong>&nbsp; <\/strong><br \/>\n  <strong>S.10B: Hundred per cent Export-Oriented Undertaking-Certificate  produced first time before&nbsp; Commissioner (Appeals)&ndash;Matter  set aside. <\/strong><br \/>\n  The Assessee Company is engaged in  the business of software development, filed its return of income for the year  declaring a total income of Rs. 4,36,600. Subsequently, the assessee filed  revised return on March 31, 2005, declaring Rs. nil income after claiming  deduction under section 10B. The assessment was completed by the Assessing  Officer under section 143(3) read with section 147 determining the total income  at Rs. nil. A. O. disallowed  the claim of the Assessee. Before the Commissioner of Income-tax (Appeals), the  authorised representative for the assessee submitted that the assessee had got  a clarification from the Joint Director, Software Technology Park of India,  Hyderabad, where they have clearly mentioned that they have the power to grant  approval and their approval is eligible to get exemption under section 10B of  the Act. on that basis CIT(A)  allowed claim of assessee. where assessee did not produce necessary material  before Assessing Officer for consideration on having identical issue, it was  just and proper to set aside order of Commissioner (Appeals) and remit matter  back to Assessing Officer for passing a de novo order. (A.Y. 2005-06 and  2008-09) <br \/>\n  <strong>ITO v.Singularity Software (India) (P.) Ltd. (2013) 143 ITD 483  \/ 34 taxmann.com 198 (Hyd.)(Trib.)<\/strong><strong> <\/strong><\/p>\n<p><strong>S.11:  Property held for charitable purposes&ndash;Business held in trust &ndash; Insurance  business. [S.13]<\/strong><br \/>\n  Even if business of insurance was carried out by assessee-society for  carrying on primary purpose of charitable activities in accordance with aims  and objects of trust, assessee would still be entitled to exemption. (A.Y.  1977-78)<br \/>\n  <strong>CIT  v. Modi Charitable Fund Society (2013) 216 Taxman 140 (Mag.) (All)(HC)<\/strong><\/p>\n<p><strong>S.11: Property held for charitable purposes &#8211; Education-Conducting seminars, workshops and  diploma courses are educational activities. [S.2(15)]<\/strong><br \/>\n  Assessee an educational institution conducting  various courses categorized as continuing education diploma and certificate  programmes, management development programmes, seminars and workshops and  conferences. 80 % receipts were from continuing education programme. The A.O. was of  the opinion that on going through the nature of courses and duration, the  resultant surplus for each activity, the activity of the assessee is not  educational and it was held by the A.O. that the assessee&#8217;s activities are not  educational and since the provisions of Section 2(15) are applicable and  therefore the assessee is not entitled for exemption. In appeal CIT (A) also  confirmed the view of A.O. On appeal the Tribunal held that the assessee is  conducting various&nbsp; diploma courses,  certificate progarmmes seminars, workshops etc all these programmes fulfilled  systematic instruction and training test hence covered under section 2 (15) as  education hence eligible for exemption under section 11. (A.Y.2009-10) <br \/>\n  <strong>Ahmedabad Management Association v.JDIT(Exemption)  (2013) 143 ITD 476 (Ahd.)(Trib.)<\/strong> <\/p>\n<p><strong>S.12A:  Registration&ndash;Genuineness of  activities&ndash;Sufficient evidence was not furnished. [S.12AA]<\/strong><br \/>\n  Where the list of donors submitted  by assessee contained insufficient information and no proof had been adduced  regarding specific direction with which donations were made towards corpus of  trust, activities of trust could not be held as genuine, and therefore,  registration under s. 12A could be declined. <br \/>\n  <strong>CIT  v. Savior Charitable Trust (2013) 216 Taxman 91 (Mag.) (P&amp;H)(HC)<\/strong><\/p>\n<p><strong>S.12A:  Registration&ndash;Amendment in object clause&ndash;Amended clause to be considered-Matter  remanded.<\/strong><br \/>\n  Since the denial of registration  was based on the pre-amended clause, the registration application was to be  considered in light of the amended clause. Matter remanded<br \/>\n  <strong>Vyapari  Vyavasayi Ekopana Samithi Welfare Society v. CIT (2013) 24&nbsp; ITR 528 (Cochin)(Trib.) <\/strong><\/p>\n<p><strong>S.12AA:  Procedure for registration&ndash;Denial of registration was not justified only  because the Trust has not commenced the activities. [S.12A]<\/strong><br \/>\n  Where there was no material to  conclude that objects of trust or activities of trust were not genuine or any  doubt arose in respect of genuineness of activities, registration under s. 12AA  could not be denied. <br \/>\n  Only because trust has not  commenced activities, Commissioner would have no authority to ipso facto reject  application made under s. 12A for registration under s. 12AA.<br \/>\n  <strong>DIT  v. Pannalalbhai Foundation (2013) 216 Taxman 148 (Guj.)(HC)<\/strong><br \/>\n  <strong>&nbsp;&nbsp;&nbsp; <\/strong><br \/>\n  <strong>S.12AA: Procedure for registration-Trust or  institution-<\/strong><strong> Genuineness of trust.  [S.10(22),10(23C) 11, 12]<\/strong><br \/>\n  The  principles laid down for excluding the income from consideration under s.  10(22) [now 10(23C)] or s. 11\/ 12 are not applicable while considering the  application for registration under s. 12AA. S. 12AA requires satisfaction in  respect of the genuineness of the activities of the trust, which includes the  activities which the trust is undertaking at present and also which it may  contemplate or undertake. The stage for application of income&nbsp; arise when it files its return. Appeal of  revenue was dismissed. <br \/>\n  <strong>CIT v. Surya  Educational and Charitable Trust (2013)  355 ITR 280 (P&amp;H)(HC)<\/strong><br \/>\n  <strong>CIT v. Bahara Educational and Charitable Society (2013) 355  ITR 280 (P&amp;H)(HC)<\/strong><\/p>\n<p><strong>S.12AA: Procedure for registration-Not passing of  order even after&nbsp; six months from receipt  of Tribunal&rsquo;s order remitting the matter to him will be deemed to have been  granted. [S.80G]<\/strong><br \/>\n  Tribunal  had passed the order on 12th December 2008 remitting the matter to  Commissioner to decide fresh in accordance with law. Commissioner passed the  order on 28th October 2011 refusing to grant the registration. On  appeal Tribunal held that where Commissioner does not pass any order even after  six months from receipt of Tribunal&rsquo;s order remitting the matter to him ,the  registration will be deemed to have been granted. Approval under section 80G  having been denied for want of registration under section 12AA, now that  registration under section 12AA is granted , very foundation for denial of  approval under section 80G&nbsp; ceases to  hold good in law, Commissioner was directed to grant approval under section 80G&nbsp; also.<br \/>\n  <strong>Harshit Foundation&nbsp;  v.CIT (2013) 156 TTJ 422 (Lucknow)(Trib.) <\/strong><\/p>\n<p><strong>S.12AA: Procedure for registration-Cancellation of  registration was restored. [S.2(15)]<\/strong><br \/>\n  The  Trust was granted registration under section 12A(a), since 1984. AO held that  the trust is carrying on activities in the nature of trade, commerce or  business &amp; the registration granted was cancelled or withdrawn w.ef. A.Y.  2009-10 on the ground that sale of liquor at Rs 1.45 crores, canteen  compensation etc are in nature of business income &amp; &nbsp;therefore proviso of section 2(15) which came  in to effect from A.Y. 2009-10 is applicable. Before Tribunal the assessee  relied on the order of earlier year of ITAT.&nbsp;&nbsp;  The Tribunal held that the department has no where mentioned that&nbsp; &ldquo;social intercourse among members&rdquo; was not  one of the objects of the Trust when it was originally formed on 04-10-1934.  Further earlier order of Tribunal is in favour of assessee. Following the  earlier year order cancellation of registration was restored. [ITA No.373\/Mum\/2012  dt 10-07-2013.Bench &ldquo;A&rdquo;]<br \/>\n  <strong>Khar Gymkhana v. DIT (E)(2013) BCAJ-September-P. 27  (Mum.)(Trib.)&nbsp; <\/strong><\/p>\n<p><strong>S.12AA: Procedure for registration-Object to <\/strong>&nbsp;<strong>take  over&nbsp; school for better administration is  not charitable in nature, hence refusal of registration was justified. [S.<\/strong><strong> 2(15)] <\/strong><br \/>\n  Assessee Society had filed an application under  section 12AA. Commissioner made certain enquiries in order to verify  genuineness of the objects and activities of assessee society. The assessee  stated&nbsp; that their trustees were already  running schools and it proposed to take over one of such school for better  administration. Commissioner observed that activities proposed to be undertaken  were not charitable in nature and no activities were yet being carried out by  assessee society hence refused registration .On appeal the Tribunal held that  ,objects of assessee society were found to be varied and were not in any  particular direction of imparting education or for relief of poor since  assessee-society had not initiated any activity, there was no material to  verify genuineness of its object and activities and thus order of Commissioner  refusing to grant registration was to be upheld. <br \/>\n  <strong>Suchinta Educational Society&nbsp; v. CIT(2013)  143 ITD 487 \/ 35 taxmann.com 178 (Chd.)(Trib.) <\/strong><br \/>\n  <strong>&nbsp;<br \/>\n    S.12AA: Procedure for registration&ndash;Charging huge fees &ndash; Charitable purpose.  [S.2(15)]<\/strong><br \/>\n  Application for registration was  liable to be rejected since the society was charging huge fees from public in  addition to prescribed fee of Punjab Government.<br \/>\n  <strong>Sukhmani  Society for Citizen Services v. CIT&nbsp;  (2013) 24 ITR 443 (Amritsar) (Trib.) <\/strong><\/p>\n<p><strong>S.14A:  Disallowance of expenditure&ndash;Exempt income-Expenditure not connected with&nbsp;&nbsp; exempt income disallowance cannot be made.<\/strong><br \/>\n  The Tribunal held that expenses  which had been claimed by assessee were not towards exempted income. Held in  view of factual finding recorded by Tribunal, disallowance was to be limited.(A.Y.2008-09)<br \/>\n  <strong>CIT  v. Oriental Structural Engineers (P.)Ltd.&nbsp;  (2013) 216 Taxman 92 (Mag) (Delhi)(HC)<\/strong><\/p>\n<p><strong>S.14A:  Disallowance of expenditure&ndash;Reasonable disallowance- Income from tax-free and  infrastructure bonds and dividend.<\/strong><br \/>\n  Disallowance of 2% of expenditure  following reasonable computation method was held to be justified. (A.Ys.  1999-2000, 2000-01, 2001-02, 2004-05, 2005-06, 2006-07) <br \/>\n  <strong>KarurVysya  Bank Ltd. v. ACIT (2013) 25 ITR 731 (Chennai)(Trib.)<\/strong><\/p>\n<p><strong>S.14A:  Disallowance of expenditure&ndash;Exempt income-Shipping company&ndash;Tonnage tax scheme.<\/strong><br \/>\n  Since the AO embarked upon computing disallowance under rule 8D  without considering the assessee&#8217;s claim, the disallowance under section 14A  could not stand. The assessee had not directly incurred any expenditure for  earning the exempt income and the Assessing Officer had not recorded any  satisfaction with reference to the accounts of the assessee or claim that no  expenditure was incurred. The assessee offered most of the income under the  tonnage tax scheme and the remaining expenditure was for earning taxable  non-tonnage tax income. Therefore, the question of invocation of rule 8D for  disallowing the expenditure under section 14A on presumptive basis does not  arise.&nbsp;(A.  Y. 2008-2009)<br \/>\n  <strong>Raj Shipping  Agencies Ltd. v. Add. CIT (2013) 24  ITR 249 (Mum.)(Trib.) <\/strong><\/p>\n<p><strong>S.22:  Income from house property&ndash;Commercial complex-Rental income&nbsp; assessed as&nbsp;  income house property and not as business income. [S. 28(i), 147]<\/strong><br \/>\n  Assessee, a partnership firm, filed its return declaring rental income as  income from business which was assessed accordingly. Subsequently, the  Assessing Officer initiated reassessment proceedings, taking a view that income  was coming from letting out of commercial complex and it was only income of  assessee-firm, thus it was to be assessed under heading &#8216;income from house  property&#8217;. The Commissioner (Appeals) as well as Tribunal confirmed said order.  Held no substantial question of law arose for consideration (A.Y.2003-04)<br \/>\n  <strong>Mahesh  Investments v. ACIT (2013) 216 Taxman 93 (Mag.) (Karn.) (HC)<\/strong><\/p>\n<p><strong>S.22:<\/strong><strong> Income from house property-Firm-Partner-Partner would qualify exemption  provided under section 22.<\/strong><br \/>\n  Property  let out to partnership firm where the assessee&nbsp;  was partner, income from house property which was used in the business  carried out in partnership firm which the assessee was a partner&nbsp; would qualify for the exemption provided  under section 22.Tribunal relied on CIT v. Rabindranth Bhol (1995) 211 ITR 799  (Orissa)(HC)(ITA no 4032\/Mum\/2009 dt 25-05-2012 Bench &ldquo;F&rsquo;). (A.Y. 2006-07)<br \/>\n  <strong>Bhawanji Kunverji H aria v. DCIT (2013) BCAJ  &ndash;September-P. 28 (Mum.)(Trib.)<\/strong><br \/>\n  <strong>&nbsp; <\/strong><br \/>\n  <strong>S.23:<\/strong><strong> Income from house property-<\/strong><strong>Annual  Value&ndash;Notional interest on security deposit cannot be added. [S.22]<\/strong><br \/>\n  It is open to the Assessing  authority to take note of the amount of advance paid which gives an indication  of fair rent of property that it fetches in market. However, the addition of notional interest on the  interest-free security deposit to the rent agreed upon is not permissible in  law. (A.Ys.  1997-1998, 1998-1999)<br \/>\n  <strong>CIT v.<em>&nbsp;<\/em>Shastha  Pharma Laboratories P. Ltd (2013)  355 ITR 316\/216 Taxman 73 (Karn.)(HC) <\/strong><\/p>\n<p><strong>S.23:<\/strong><strong> Income from house property-Notional rent-Property let out from April  2006-Income cannot be estimated on notion basis for the year ending 31-03-2005.<\/strong><br \/>\n  Assessee  received the possession of property in December 2005.Assessee took three months  to complete the furniture work and the property was let out from April 2006. AO  held that as the property was in possession of the assessee, the provisions of  section 23(1) were attracted and annual value of the property was deemed to be  the income of the assessee. Tribunal held that where on account of interior  work being carried out during the year the property could only be leased out  from the next financial year , no notional rent could be added as the income of  the assessee in the current year.(ITA no 4032\/Mum\/2009 dt 25-05-2012 Bench &ldquo;F&rsquo;).(A.Y.  2006-07)<br \/>\n  <strong>Bhawanji Kunverji Haria v. DCIT (2013)  BCAJ&ndash;September-P. 28(Mum.)(Trib.)<\/strong><\/p>\n<p><strong>S.28(i):  Business income&ndash;Income from other sources-Survey- Amount surrendered assessed  as business income and set off loss is permissible. [S. 56, 133A]<\/strong><br \/>\n  No perversity had been pointed out  in finding of Commissioner (Appeals) as well as Tribunal to extent that  surrendered amount was an income of assessee from business and not from other  sources as held by Assessing Officer. Therefore, set off was permitted against  the amount of Rs. 1.75 crores surrendered during survey under s. 133A. (AY  2004-05)<br \/>\n  <strong>CIT  v. Ram Gopal Manda (2013) 216 Taxman 95(Mag.) (Raj.)(HC)<\/strong><br \/>\n  <strong>&nbsp;<\/strong><br \/>\n  <strong>S.28(i):  Business income&ndash;Income from house property-Rented property&ndash;Assured return in  lieu of profit\/loss. [S.22]<\/strong><br \/>\n  The assessee had not only rented  out property but had allowed its use thereof for purpose of joint venture  business and in addition to space with proper infrastructural facilities, it  also provided other facilities to be used for purpose of diamond processing.  Thus, it could not be said that the assessee was not in business through joint  venture of processing of diamonds, and merely because agreement envisaged  assured return to assessee, in lieu of either profit or loss to be shared from  joint venture would not take away fact that assessee was engaged in business.(A.Y.2006-07)<br \/>\n  <strong>CIT  v. Tirupati Organisers (P.) Ltd. (2013) 216 Taxman 84 (Guj.)(HC)<\/strong><\/p>\n<p><strong>S.28(i):  Business income&ndash;Set up of business-Commencement of business&ndash;Previous year-First  year of business-Participation in an auction to acquire land. [S.3,57(iii)]<\/strong><br \/>\n  The assessee obtained loan from  its holding company and deposited same as earnest money to acquire land.  However, it could not succeed in auction and paid interest on borrowed fund and  received interest on earnest money. It claimed differential between interest as  loss and claimed for carry forward of said loss. However, the Assessing Officer  found that current year was first year of existence of assessee and since it  failed to acquire land, it could not be said that business was set up in  relevant year and disallowed the said claim. The Tribunal held that acts of  applying for participation in tender, borrowing of monies on interest from  holding company and deposit of borrowed monies on same day as earnest money  clearly established that business had been set-up. Held the finding returned by  Tribunal, being a finding of fact, no question of law arose. (A.Y.2006-07)<br \/>\n  <strong>CIT  v. Dhoomketu Builders &amp; Development (P.) Ltd. (2013) 216 Taxman 76 (Delhi)(HC)<\/strong><\/p>\n<p><strong>S.28(i):  Business income&ndash;Idle funds-Interest earned on investment of idle funds  assessable as business income. [S.56]<\/strong><br \/>\n  Assessee set up as joint venture  with Government to consult on transport delivery systems Interest earned on  investment of idle funds was not income from other sources but business income.  (AY 2007-2008) <br \/>\n  <strong>&nbsp;Urban Mass Transit Company Ltd. v. ACIT(2013)  24 ITR 741 (Delhi) (Trib.)<\/strong><br \/>\n  <strong><br \/>\n    S.28(i): Business income&ndash;Agricultural and non-agricultural income&ndash;  Apportionment. [Income&ndash;Tax Rules, 1962, Rule 8]<\/strong><br \/>\n  The  assessee was engaged in the business of growing, manufacturing and selling tea.  For the purpose of apportionment between agricultural income and business  income in the ratio of 60:40, interest on investment is not to be regarded as  income from sale of tea and hence, liable to be excluded for purpose of  apportionment. (A.Y.2007-08)<br \/>\n  <strong>DCIT v. Mcleod Russel India Ltd. (2013) 24 ITR 262 (Kol.)(Trib.) <\/strong><br \/>\n  <strong>S.28(i):  Business loss&ndash;Share transactions&ndash;Loss on sale of shares transaction is&nbsp; to be set off against profit.<\/strong><br \/>\n  The assessee sold three sets of  shares, realized profit from one while loss from others. The Assessing Officer  held that loss was intentional to set off gain and found that shares were not  quoted shares and valuation of shares both at time of purchase as well as at  time of sale of said shares was made on net worth basis which had not been  challenged by Revenue. Further, the Revenue was unable to produce any evidence  to dispel credibility of the prices. Held, the prices arrived at on basis of net  worth would have to be accepted and, thus, no addition could be made as  transactions would be in order. (A.Y.2005-06)<br \/>\n  <strong>CIT  v. Bhushan Capital &amp; Credits Services (P.) Ltd. (2013) 216 Taxman 94 (Mag.)(Delhi)(HC)<\/strong><\/p>\n<p><strong>S.28(i):  Business loss-Bad debt-Provision towards doubtful advances &ndash;Mere provision is  not allowable. [S.36(1)(vii)]<\/strong><br \/>\n  Held, mere provision in accounts  was not equivalent to write-off. Addition was rightly made for provision  towards doubtful advances written off as irrecoverable when there was nothing  to prove actual write-off. (A. Y. 2007-08)<br \/>\n  <strong>Ford  India P. Ltd. v. DCIT (2013) 25 ITR 456 (Chennai)(Trib.)<\/strong><\/p>\n<p><strong>S.32:  Depreciation&ndash;Software&ndash;Held to be allowable.<\/strong><br \/>\n  The Assessing Officer disallowed  the claim of depreciation on software for want of details regarding valuation  and nature of software. The relevant details were furnished by the assessee  before the Commissioner (Appeals) and Revenue had not doubted them. Held the  Commissioner (Appeals) was justified in deleting the addition.<br \/>\n  <strong>CIT  v. Net 4 Nuts Ltd. (2013) 216 Taxman 99 (Mag.) (Guj)(HC)<\/strong><br \/>\n  <strong>&nbsp;<\/strong><strong> <\/strong><br \/>\n  <strong>S.32:  Depreciation&ndash;Lease-Use by third party&ndash;Business of leasing of vehicles.<\/strong><br \/>\n  For claiming depreciation usage of asset by assessee is not mandatory, as  long as asset is utilized for purpose of its business. Where assessee leased  out vehicles to customers, vehicles were assets of its business and thus,  depreciation on same was allowable.<br \/>\n  <strong>PKF  Finance Ltd. v. CIT (2013) 216 Taxman 141 (Mag.) (P&amp;H)(HC)<\/strong><\/p>\n<p><strong>S.32:  Depreciation&ndash;Construction of building&ndash;Disallowance cannot be made on account of  procedural irregularities.&nbsp; <\/strong><br \/>\n  Where the appellate authorities allowed expenses after analyzing material  on record and ground realities, as well as, inconsistencies in order of  Assessing Officer, it could not be said that order of appellate authorities  suffered from any perversity. (A.Y.2005-06)<br \/>\n  <strong>CIT  v. Bohra Industries Ltd. (2013) 216 Taxman 143 (Mag.) (Raj.)(HC)<\/strong><\/p>\n<p><strong>S.32:  Depreciation&ndash;Cost of asset exempted&ndash;Explanation 5.<\/strong><br \/>\n  Entire expenditure incurred towards purchase of certain fixed assets had  already been exempted in its entirety in current year or in earlier year.  However, in view of specific provision as contained in Explanation 5 to  s.32(1), depreciation in respect of such assets would be allowable in hands of  assessee.<br \/>\n  <strong>CIT  v. Krishi Upaj Mandi Samiti, Timarni (2013) 216 Taxman 172 (Mag.) (MP)(HC)<\/strong><\/p>\n<p><strong>S.32:  Depreciation&ndash;Hospital building&ndash;Plant and machinery.<\/strong><br \/>\n  Where nursing home was equipped  with scientific instruments, same would be treated as plant and machinery and  depreciation should be allowed on it accordingly.(A.Y.1995-96)<br \/>\n  <strong>Shri  Shashi Nursing Home Ltd. (2013) 216 Taxman 97 (Mag.) (All)(HC)<\/strong><\/p>\n<p><strong>S.32: Depreciation-Income from undisclosed source-Existence  of Crane was proved, disallowance&nbsp; of  depreciation was not justified.<\/strong><strong> Depreciation. [S.69]<\/strong><br \/>\n  Assessee  proved purchase and existence of crane and the cost of crane was not claimed in  return in the profit and loss account. Hence, no addition could be made in  respect of the purchase price. Since there was no material to show that the  crane was not in existence, depreciation was not disallowable. (A.Y.1997-1998)<br \/>\n  <strong>CIT v. Vijay M.  Mistry Construction Ltd. (2013) 355  ITR 498 (Guj.) (HC)<\/strong><\/p>\n<p><strong>S.32:  Depreciation&ndash;Rate&nbsp; of 60%-Computer  peripherals.<\/strong><br \/>\n  The assessee was  eligible for depreciation at 60% on computer accessories and peripherals. (A.Ys. 2007-08,  2008-09) <br \/>\n  <strong>Hughes  Systique India P. Ltd. v. ACIT (2013) 25 ITR 556 (Delhi)(Trib.)<\/strong><\/p>\n<p><strong>S.32: Depreciation-Sale and lease-Banks-Sale &amp; lease  transactions by banks are genuine and eligible for depreciation.<\/strong> <br \/>\n  The  assessee, a Bank, purchased windmills worth Rs.27 crore in a  sale-and-lease-back transaction and claimed depreciation thereon. The AO &amp;  CIT(A) rejected the claim and held that the transaction was not one of purchase  but was a finance transaction in which the windmills were received as security  on the basis that (a) under the Banking Regulation Act, 1949, the assessee was  not permitted to engage in any business other than banking, (b) the lease  rentals were fixed on the basis of interest on advances and other charges  receivable by the assessee as a financier and were not co-related to the  projected income on the capacity of each wind energy generator, (c) the  assessee was not entitled for surplus income on excess generation of power and  was not to suffer any loss owing to lesser production or any other  contingencies, (d) the return of the assessee on financing was granted by  taking interest-free deposit, (e) the assessee had no responsibility of labour,  repairs, taxes etc in running of the project and (f) though the purchase of  wind energy generators was in the assessee&rsquo;s name, the land and power purchase  agreements with the Electricity Boards were not in its name. On appeal by the  assessee to the Tribunal HELD allowing the appeal:<br \/>\n  S.32  allows depreciation if the asset is &ldquo;<em>owned, wholly or partly, by the  assessee and used for the purposes of the business<\/em>&ldquo;. There is no  requirement that the asset must be used by the assessee himself. It is  sufficient if the asset is utilized for the purpose of business of the  assessee. The argument, relying on <strong>McDowell<\/strong> and co.  Ltd. v. CTO (1985)154 ITR 148 (SC), that Sale &amp; Lease Back transactions are  a devise for lowering the tax effect cannot be accepted. Sale &amp; Lease Back  transactions are genuine and cannot be considered to be sham.(ITA No.  2572,2737\/A\/2006, 4386,4388\/A\/2007,236,238\/A\/2000, 790\/A\/2012, (A.Ys. 2002-03,  2004-05 &amp; 2007-08) <\/p>\n<h2>UTI Bank Limited v. ACIT (Ahd.)(Trib.)  www.itatonline.org<\/h2>\n<p><strong>S.32: Depreciation-Lease-Banks-Lease transactions by Banks are in  the nature of loans\/advances. Transaction of sale &amp; lease back of railway  assets cannot be treated as genuine, it is a nature of finance transaction.<\/strong> <br \/>\n  The  assessee, a Bank, entered into a sale and lease back transaction with Konkan  Railway Corporation pursuant to which it bought assets like railway tracks,  rails, sleepers etc for a consideration of Rs. 25 crore and leased it back for  a period of 84 months for a monthly lease rental. The AO &amp; CIT(A)  disallowed the claim for depreciation on the ground that the sale and lease  back transaction was in the nature of a financial transaction and that it was  given the shape of a lease transaction only in order to enable the  assessee-bank to claim depreciation and reduce its taxable income. On appeal by  the assessee to the Tribunal HELD dismissing the appeal:<\/p>\n<p>The  real object of the entering into the sale and lease back transaction so far as  Konkan Railway is concerned is to raise funds. The transaction of sale of the  asset to the assessee bank and its lease back to Konkan Railway cannot be  separated. It was not possible for Konkan Railway to sell out the railway  system. Thus, the sale transaction was merely on paper and to facilitate the  financial arrangement by the assessee to Konkan Railway without involving any  real intention of transfer of the assets. The terms of the lease agreement are  only to secure the interest of the bank till the recovery of the full amount  along with the interest. The assessee cannot exercise the real and actual  ownership over the asset keeping in view the facts and circumstances and nature  of the asset in question. Further, under the Banking Regulation Act, 1949 read  with RBI circular dated 19.2.1994, banking companies can undertake the  activities of equipment leasing but these are required to be treated on par  with loans and advances. Therefore, the activity of equipment leasing permitted  by the RBI is only in the nature of finance lease. The terms and conditions  specified by the RBI for income recognition of lease transactions are also on  par with the manner in which a loan transaction is treated. In view of the said  circular, there is no scope for treating the instant lease agreement as that of  an operating lease (<a href=\"http:\/\/itatonline.org\/archives\/index.php\/indusind-bank-ltd-vs-acit-itat-mumbai-special-bench-difference-between-finance-lease-operating-lease-explained\/\">IndusInd Bank<\/a><strong> limited v. Add. CIT&nbsp; (2012) <\/strong>&nbsp;135 ITD 165 (Mum) (SB) followed; <strong>ICDS<\/strong> ltd. v. CIT (2013) 350 ITR 527 (SC) distinguished on the basis that the lease  there was not by a Bank but by a NBFC). ( ITA No. 5470\/Mum\/2002, dt.  26\/07\/2013) (A.Y.1996-97) <\/p>\n<h2>State Bank of India v. DCIT (Mum.)(Trib.)  www.itatonline.org.<\/h2>\n<p><strong>S.32: Depreciation-Finance lease-A finance lease designed as a  sale-and-lease back has to be treated as a sham transaction.<\/strong> <br \/>\n  The  assessee, an investment company, bought electric meters from the Gujarat State  Electricity Board (GSEB) which were leased back to GSEB simultaneously. The  assessee claimed 100% depreciation on the purchase cost of the meters. The AO  and CIT(A) rejected the claim on the ground that the circumstances like no  physical possession of the meters given etc showed that the transaction of  &lsquo;sale and lease-back&rsquo; was a &ldquo;<em>sham<\/em>&rdquo; and that it was one merely  of giving finance and that the assets were held as a security for the finance  given. On appeal by the assessee to the Tribunal HELD:<br \/>\n  A  distinction between an &lsquo;<em>operating lease<\/em>&rsquo; and a &lsquo;<em>finance  lease<\/em>&rsquo; has been made by the Special Bench in <a href=\"http:\/\/itatonline.org\/archives\/index.php\/indusind-bank-ltd-vs-acit-itat-mumbai-special-bench-difference-between-finance-lease-operating-lease-explained\/\">IndusInd Bank<\/a><strong> limited v. Add. CIT&nbsp; (2012) <\/strong>&nbsp;135 ITD 165 (Mum) (SB) on the basis of which  it can be said that a &lsquo;<em>finance lease<\/em>&rsquo; is a &lsquo;sale&rsquo; which is  given the colour of a &lsquo;lease&rsquo; by the parties for their mutual benefit and to  avoid tax. In such transactions, it has to be seen whether the sale transaction  is a real transaction or a sham transaction with the object of enabling the  alleged purchaser to claim himself as the owner of the goods, which are further  claimed to be leased back to the original owner of the goods. In a sham  transaction of sale and lease back the ownership of the goods is not  transferred to the alleged lessor, but is shown to be done, so as to enable the  purchaser to claim ownership for the goods for the purpose of tax relief. On  facts, the &lsquo;sale and lease back&rsquo; transaction is a sham transaction done with  the object to facilitate the benefits of depreciation to a person who otherwise  is not eligible to claim the same. The intention of the parties was not that of  sale or lease but was a loan transaction. The rates of interest\/ rental have  been fixed taking into consideration that the equipments are eligible for 100%  depreciation and it is provided that if the claim of depreciation is changed,  the rental in the shape of interest will accordingly change. Such clauses  cannot be a part of any lease agreement but finance agreement only because in a  normal lease agreement, the lessee is not concerned as to what benefits are  available to the owner\/lessor under the Income-tax Act. The contention that as  the transaction is with a State Government undertaking, it would be highly  improper to impute any collusiveness or colourable nature of the transaction is  misconceived. The argument that there is no bar for the assessee for making tax  planning so as to reduce its taxes, provided it is within the framework of the  law, is also not acceptable as u\/s 23 of the Indian Contract Act, even if the  consideration or object of an agreement may not be expressly forbidden by law,  but if it is of such a nature that, if permitted, it would defeat the provisions  of law, the same will not be lawful. Engaging in sham transactions with the  object of reducing tax liability cannot be said to be a case of tax avoidance  but is one of tax evasion .( ITA No.4069 &amp; 2406\/Mum\/2001 dt. 07\/08\/2013) (A.Y.1994-95) <\/p>\n<h2><a href=\"http:\/\/itatonline.org\/archives\/index.php\/hathway-investments-pvt-ltd-vs-acit-itat-mumbai-s-32-a-finance-lease-designed-as-a-sale-and-lease-back-has-to-be-treated-as-a-sham-transaction\/\" title=\"Permanent Link to Hathway Investments Pvt. Ltd vs. ACIT (ITAT Mumbai)\">Hathway Investments Pvt. Ltd v. ACIT  (Mum.)<\/a>(Trib.) www.itatonle.org<\/h2>\n<p><strong>&nbsp; <br \/>\n  S.32:  Depreciation&ndash;Computers, Accessories and peripherals&ndash;Rate of depreciation at  60%.<\/strong><br \/>\n  The  assessee was eligible to claim depreciation at 60% on computers, accessories  and peripherals.&nbsp; (A.Ys.  2006-07, 2007-08, 2008-09)<br \/>\n  <strong>Canon  India P. Ltd. v. DCIT (2013) 24 ITR 694 (Delhi)(Trib.) <\/strong><br \/>\n  <strong><br \/>\n    S.32:  Depreciation&ndash;Computer peripherals&ndash;Rate of depreciation at 60%.<\/strong><br \/>\n  The  assessee was entitled to depreciation in regard to the computer peripherals at  60%. (A.Y. 2007-08,  2008-09) <br \/>\n  <strong>Sojitz India P.  Ltd. v. DCIT (2013) 24 ITR 474 (Delhi)(Trib.) <br \/>\n  <\/strong><strong> <\/strong><br \/>\n  <strong>S.32:  Depreciation&ndash;Block of assets-Put to use&ndash;Claim of depreciation in subsequent  years. <\/strong><br \/>\n  Held there was no  basis for working out the utilised and unutilised areas as was done by the  Assessing Officer when the entire multiplex was put to use. The assessee had  started operation in only three places and the other projects were under  various stages of construction. Therefore, what the assessee claimed was  depreciation of projects under operation and repairs and maintenance thereof.  Once the entire project had commenced business operations, just because part of  it was not leased out or commercially exploited that could not be a basis for  disallowing depreciation and expenditure. Once an asset has entered into  &quot;block of assets&quot; and depreciation has been granted on it,  depreciation cannot be denied in subsequent years. (A.Y.2005-06) <br \/>\n  <strong>E-City  Entertainment (India) Pvt. Ltd. v. Add.CIT (2013) 24 ITR 73 (Mum.)(Trib.)<\/strong><\/p>\n<p><strong>S.32:Depreciation-Software  purchase&ndash;Treated as capital expenditure. [S.37(1)]<\/strong><br \/>\n  Depreciation was to be allowed on  software purchases where the same was &nbsp;treated as capital expenditure.<br \/>\n  <strong>Sandoz  P. Ltd. v. DCIT (2013) 25 ITR 347 (Mum.)(Trib.)<\/strong><\/p>\n<p><strong>S.32:  Depreciation-Use of vehicle contravention of rules of Transport department-  Depreciation is allowable.<\/strong><br \/>\n  AO&nbsp;  did not allow the depreciation on the ground that assessee did not have  a certificate and permission from the authorities to transport the goods and  transporting goods on a chassis&nbsp; without  a body was in violation of law. On appeal Tribunal held that to allow  depreciation, the assessee has only to prove that he has put the vehicle to use  before the relevant date. If the vehicle is used in contravention of the rules  provided by the respective transportation department, AO&nbsp; cannot disallow the depreciation.(ITA no  1726\/Hyd\/2012 dt.24-5-2013) (A.Y.2005-06)<br \/>\n  <strong>R. Viswanath&nbsp; v. ITO (Hyd.)(Trib.)(Un reported)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <\/strong><\/p>\n<table border=\"1\" cellspacing=\"0\" cellpadding=\"5\">\n<tr>\n<td width=\"90%\" valign=\"top\">\n<p>The contents of this document are solely for informational purpose. It does not constitute professional advice or a formal recommendation. While due care has been taken in preparing this document, the existence of mistakes and omissions herein is not ruled out. Neither the author nor itatonline.org and its affiliates accepts any liabilities for any loss or damage of any kind arising out of any inaccurate or incomplete information in this document nor for any actions taken in reliance thereon. No part of this document should be distributed or copied (except for personal, non-commercial use) without express written permission of itatonline.org. <\/p>\n<\/td>\n<\/tr>\n<\/table>\n<\/div>\n","protected":false},"excerpt":{"rendered":"<p>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 &hellip;<\/p>\n<p class=\"read-more\"> <a class=\"\" href=\"https:\/\/itatonline.org\/archives\/digest-of-important-case-laws-january-to-august-2013\/\"> <span class=\"screen-reader-text\">Digest Of Important Case Laws &#8211; January To August 2013<\/span> Read More &raquo;<\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"parent":0,"menu_order":0,"comment_status":"open","ping_status":"closed","template":"","meta":{"_acf_changed":false,"jetpack_post_was_ever_published":false,"footnotes":""},"class_list":["post-7224","page","type-page","status-publish","hentry"],"acf":[],"jetpack_sharing_enabled":true,"_links":{"self":[{"href":"https:\/\/itatonline.org\/archives\/wp-json\/wp\/v2\/pages\/7224","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/itatonline.org\/archives\/wp-json\/wp\/v2\/pages"}],"about":[{"href":"https:\/\/itatonline.org\/archives\/wp-json\/wp\/v2\/types\/page"}],"author":[{"embeddable":true,"href":"https:\/\/itatonline.org\/archives\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/itatonline.org\/archives\/wp-json\/wp\/v2\/comments?post=7224"}],"version-history":[{"count":0,"href":"https:\/\/itatonline.org\/archives\/wp-json\/wp\/v2\/pages\/7224\/revisions"}],"wp:attachment":[{"href":"https:\/\/itatonline.org\/archives\/wp-json\/wp\/v2\/media?parent=7224"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}