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New Delhi: Shrugging off as "nothing new", the Income Tax Appellate Tribunal's (ITAT) finding that Ottavio Quattrocchi indeed received kickbacks in the Bofors deal, the CBI on Tuesday reiterated its plea to close criminal proceedings against the Italian businessman. The court, however, decided to put off its order until January 6.
   Chief metropolitan magistrate Vinod Yadav will hear anew the arguments of the CBI and Ajay Aggarwal, who is opposing the agency's move. He had cited the ITAT order to back his case that criminal proceedings against Quattrocchi need not be dropped.

CBI accuses Aggarwal of theatrics

The arguments on the ITAT order could not be
completed since Ag (gar (wal had to leave because of his mother's sudden illness. The matter will now be heard on Thursday. The court seemed reluctant to take cognisance of the ITAT's order, saying that it was passed by a quasi-judicial forum on a different issue (IT), before it agreed to hear the two sides again.
   The tax tribunal order dominated the 3-hour-long proceedings, but failed to faze the CBI, with the agency repeating its request for winding up the attempts to prosecute Quattrocchi in the payoffs case. The CBI had, in October 2009, sought permission of the court to withdraw the case against Quattrocchi, saying that his continued prosecution was unjustified in the light of various factors, including the failed attempts of the CBI to extradite him first from Malaysia and then from Argentina.
   On a day when the Left appeared to compete with the BJP in attacking the government over its failure to bring Quattrocchi to book, the agency told the CMM that there was nothing new in the tribunal order that should come in the way of the withdrawal of the over 2-decade-old cri (mi (nal pro (ce (endings against the Italian.
   Though finance minister Pranab Mukherjee said that the law ministry was examining the issue, the CBI's posture in the court seemed to rule out any real rethink. "I am not disputing what the tribunal has said. That is the case of prosecutor (CBI) also and it is mentioned in the charge sheet. There is nothing new," CBI's counsel, additional solicitor general P P Malhotra, told chief metropolitan magistrate Vinod Yadav.
   The CBI further said the application for withdrawal of the proceedings against Quattrocchi was filed after considering all aspects of the case.
   Sources in the agency headquarters defended the stand it took in the court. "It is not right to say that the order, coming at a time when we are about to close the case for lack of evidence, is going to give us any new leads or force us to relook at the existing evidence. This is largely about information that was already known," they said. In the court, Malhotra almost brushed aside Aggarwal's claim that law minister M Veerappa Moily had assured on Monday that the government will examine the issue afresh.
   When asked to respond by the CMM Yadav, the additional solicitor general said that he was not aware of any such statement, adding that he had not received any instruction from the CBI headquarters to suggest any change in stand because of tribunal's order.
   The agency further said that the court should decide the CBI's plea for withdrawing the case without going into its merits, limiting itself to examining merely whether the application has been filed bona fide, in good faith and in public interest. Aggarwal had submitted that the matter needed arelook in the light of the CBI trying to protect Quattrocchi as he had always been seen as "very close to the family of former PM Rajiv Gandhi".
   To support his allegations, he read out excerpts from a book titled "Who owns CBI—The Naked Truth" by retired CBI officer B R Lall, in which it was stated that the Italian businessman and his wife Maria had a proximate relationship with the Gandhis and they used to meet frequently. The CBI denied this allegation and accused Aggarwal of theatrics to grab eyeballs and publicity. After hearing the arguments, the court adjourned proceedings till January 6, as Aggarwal expressed inability to continue in view of his mother's illness.

Q clean chit: PM must apologize

New Delhi: For the second time in 2 days, the BJP on Tuesday tore into the ruling party alleging that alleged Bofors middleman Ottavio Quattrocchi was being protected by the government because of his links with the Gandhi family. In the wake of the I-T tribunal order indicting Quattrocchi and another accused, Win Chadha, the party sought an apology from PM Manmohan Singh for the clean chit earlier provided to Quattrocchi by government agencies. TNN

Q, Jain got Bofors bribe: Ex-CBI man

New Delhi: An ex-CBI officer who supervised the Bofors case claimed that alleged hawala dealer S K Jain told the CBI that he and Ottavio Quattrocchi received kickbacks from projects routed through them including the howitzer deal. Citing a written submission made by Jain on March 13, 1995, former CBI joint director B R Lall said, "The duo (Jain and Quattrocchi) have taken the contract in partnership and have close connection with high and mighty people." TNN

Total RECALL


Mar 24, 1986 | The Rs 1,437 crore deal between India and A B Bofors for supply of 400 155 mm howitzers signed
Apr 16, '87 |
Swedish Radio claims Bofors paid kickbacks to netas and defence officials
Apr 20 | PM Rajiv Gandhi assures LS neither any middleman was involved nor kickback paid
Aug 6 | JPC set up to probe charges
Jan 22, '90 |
CBI registers FIR Dec '92 | SC reverses Delhi HC order quashing FIR
Feb 12, '97 |
Letters rogatory issued to Malaysia, UAE seeking Quattrocchi, Win Chadha's arrest and extradition
May '98 | Delhi HC rejects Q plea for quashing red corner notice
Oct 22, '99 | CBI files chargesheet naming Win Chadha, Q, former defence secy S K Bhatnagar, former Bofors chief Martin Ardbo
Nov 07 | Trial court issues warrant against Q
Dec 13, '99 | CBI team in Malaysia to seek Quattrocchi extradition but fails
Mar 18, 2000 |
Chadha comes from UAE to face trial Jul 29 | Court issues NBW against Ardbo
Dec 20 | Q held in Malaysia, gets bail
Aug 6, '01 | Former defence secy dies
Oct 24 | Win Chadha dies of heart attack
Nov 15, '02 |
Hindujas charged with cheating, conspiracy, graft
Dec 2 | Malaysia court denies permission for Q's extradition
July 28, '03 | UK freezes Q's bank a/c
Feb 4, '04 | HC clears Rajiv Gandhi in Bofors scandal
May 31, '05 | HC clears Hindujas
Feb 6, '07 | Q held in Argentina
Feb 23 | Q freed
Sept '09 | Centre informs SC it was stopping prosecution against Quattrocchi

S. 50C applies to transfer of development rights in propertyArif Akhatar Hussain vs. ITO (ITAT Mumbai)

After judges, govt wants to fix accountability on lawyers
Moily Moots Identical Proposal With Three-Pronged Mechanism


Dhananjay Mahapatra TNN



New Delhi: After the Judicial Standards and Accountability Bill to prevent instances of indiscipline and corruption among judges in higher judiciary, law minister M Veerappa Moily has now brought about an identical legislative proposal to enforce accountability among advocates.
   The proposal—Legal Practitioners (Regulation and Maintenance of Standards in Professional, Protecting the Interest of Clients and Promoting Rule of Law) Bill, 2010—envisages a threepronged mechanism through a Legal Services Board, a Consumer Panel and an Ombudsman to check malpractices by advocates.
   Though the bill clarifies that work of the board, panel and ombudsman would be distinct from the mandate of the Bar Council of India (BCI) and state Bar Councils, which under the Advocates Act, 1961, were the sole regulators of professional ethics of lawyers, the BCI headed by Solicitor General Gopal Subramaniam is not pleased and it has passed a resolution in November registering its firm opposition to the Bill.
   But, Moily remains unfazed. "How can we have standards and accountability for the Judges and not for the Lawyers?" he counter questioned. "If we have strict accountability norms for Judges but not for lawyers, it will create an imbalance in the judicial system," he added.
   "We are not doing anything surreptitiously. We have put the Bill in the public domain and have sought the views and reactions of public at large," he told TOI.     With nearly a million advocates practicing in the threetier justice delivery system, the bar councils have a statutory role in reining in a few who get accused of exploiting litigants and not adhering to strict standards of professional ethics. The protest from the BCI is because of the perceptible intrusion the proposed law intends to make into its exclusive domain as the sole regulator of the legal community.
   The fears of the BCI may not be out of place. For, the Legal Services Board is mandated to protect the interest of the litigants and promoting adherence to the professional principles.

Income-tax - Where assessee, carrying on business of construction and development of flats, adopted completed contract method of accounting, in view of fact that assessment in question related to period subsequent to amendment made in section 145(2), Tribunal ought to have looked into matter to ascertain whether assessee could adopt completed contract method which was not contemplated under section 145(1) as it referred to method of accounting as cash or mercantile system of accounting and, since, Tribunal failed to do so, matter was to be remanded back for disposal afresh - [2010] 8 TAXMANN.COM 164 (KAR.)

Income-tax - Civil Suit seeking to restrain income-tax authorities from
realizing income-tax dues can be filed only after exhausting statutory remedy
available under Income-tax Act - [2010] 8 TAXMANN.COM 181 (KER.)

Short of judges,govt to start 2 IAS-like servicesDhananjay Mahapatra | TIMES NEWS NETWORK

New Delhi: The Centre is finalizing the creation of two new all-India
servicesIndian Judicial Service (IJS) and Indian Legal Service (ILS)to fulfil
its promise to create 15,000 additional courts by 2012 and meet the demand for
services of legal professionals from various departments of the Union and state
governments.
We will create two all-India servicesIJS and ILSmainly aimed at capacity
building at the lower levels of the judiciary and to provide professional legal
advice to various departments, law minister M Veerappa Moily told TOI.
Though he was tight-lipped about the timeframe of the plan,the minister said the
IJS would help attract talent from all over the country for appointment at the
sessions judge level.
The ministrys Vision Document prepared last year had promised the creation of
15,000 posts of judges for two years to tackle the backlog of nearly 2.5 crore
cases in the trial courts.But with that apparently not working out,the
government is keen to add to the number of nearly 17,000 trial court judges by
creating the IJS.

Law leash on lawyers conduct likely soon


The government has proposed a law,the Legal Practitioners (Regulations and
Maintenance of Standards in Professions,Protecting the Interest of Clients and
Promoting the Rule of Law) Act,2010,to oversee the conduct of more than one
million legal professionals and supervise legal education.It also envisages a
Legal Services Board that will establish a panel to represent the interests of
clients of legal professionals.P 15

Related Articles

--------------------------------------------------------------------------------
Services proposed 25 years ago

[[Govt proposes super regulator for lawyers

Once Passed,Law Will Clip Bar Councils Wings
]Dhananjay Mahapatra TNN

New Delhi: The Centre on Thursday came out with a proposed legislation to create
a super regulatory body to oversee the ethics and conduct of more than one
million advocates and legal professionals as well supervise the legal education
system.Given the flexing of muscle by the Bar Council of India (BCI) in the recent past
by being the sole regulatory body for advocates,the ministrys move is seen by
experts as one that would clip the wings of BCI.
Importantly,the proposed law Legal Practitioners (Regulations and Maintenance of
Standards in Professions,Protecting the Interest of Clients and Promoting the
Rule of Law) Act,2010 aims to control the conduct of legal professionals
solicitors not appearing in courts,those appearing in tribunals or even
representing clients in departmental inquiries who had not been within the ambit
of the regulatory mechanism of BCI.
It aims to protect clients from harassment at the hands of those legal
professionals who are not covered under the Advocates Act,1961,having not been
registered by the concerned state Bar Councils.The ministry has sought comments
on the proposed law from the public and the legal fraternity.
In addition,the Legal Services Board (LSB),proposed to be set up under the Act
in line with the one functioning in UK,would establish and maintain a panel of
persons to be known as consumer panel to represent the interests of consumers
and clients of the legal professionals.This move is meant to check exploitation
of litigants and clients by legal professionals,including advocates.The consumer
panel shall have a fair degree of representation of both the consumers/clients
of the legal professionals and those who are using or may be contemplating using
the services of the legal professionals as consumers/clients, the proposed law
mentioned.

F.No. 225/72/2010-ITA.II
Government of India
Ministry of Finance
Department of Revenue
Central Board of Direct Taxes

Dated : September 27, 2010

Order under Section 119 of the Income Tax Act, 1961

On consideration of the reports of disturbance of general life caused due to
floods and heavy rains, the Central Board of Direct Taxes, in exercise of powers
conferred under section 119 of the Income Tax Act, 1961, hereby extends the due
date of filing of returns of income for the Assessment Year 2010-11 from
30.09.2010 to 15th October 2010. Accordingly the due date for Tax Audit report
u/s. 44AB of the Income Tax Act is also extended to 15th October, 2010.
(Ajay Goyal)
Director (ITA. II)

Income tax - Sec 40(a)(ia) - merely because certain business expenses are capitalised, assessee is not barred from claiming same as revenue expenditure: ITAT


NEW DELHI, AUG 16, 2010: THE simple issue before the Tribunal is - Whether if certain business expenses are capitalised, the assessee is barred from claiming the same as revenue in nature. Whether depreciation @ 100% is allowable on the expenditure incurred on purely temporary structures such as wooden structure, false ceiling, painting etc. on leasehold premises.

Facts of the case

The assessee is in the business of providing education and vocational training in the field of airhostess/ cabin crew, hospitality and travel management and has offices at various places. During the year in question the assessee opened new offices or renovated old offices and incurred expenditure in respect of renovation of offices. The renovation was done of these premises and expenses incurred was in respect of wall hanger fitting, polishing, PVC flooring, painting, main door repairs, office renovation, wooden partition, PVC flooring, false ceiling, carpentry work etc. Besides, some fabrication of aircraft model etc. was done in order to frame cabin crew. Assessee, though has capitalized these expenses, however, contended that what was carried out was erection of some temporary wooden partition and temporary renovations. Therefore, the expenses were allowable either as 100% depreciable asset or of expenditure incurred wholly and exclusively for the purpose of business. It was pleaded that cabin crew training center business requires frequent renovation, remodeling of offices, training areas and to maintain high standard assessee has to take up frequent renovation. Besides the assessee's premises being leased premises, no asset owned by the assessee came into existence. The AO disallowed the expenses as capital in nature. CIT(A) held an amount of Rs. 8,78,003/- as pertaining to temporary wooden structures, which cannot be classified as furniture and thus allowable expenses.

Further, in respect of the expenses incurred by the assessee from 1-4-2004 to 28-2-2005, it was contended by the assessee that section 40(a)(ia), as amended by the Finance Act 2010 w.e.f. 1-4-2010, now prescribes that if the TDS due has been paid on or before the due date of filing of return u/s 139(1), the payment shall be allowable in the year in which it was incurred. It was pleaded that this amendment may be held to be clarificatory in nature as it has been introduced to alleviate the difficulties paused by not allowing the expenses in the same year. Alternatively, it was pleaded that the law, as existed, provided that in case of delayed TDS payment, the expenses shall be allowable in the year in which TDS is paid. However, no expenses were allowed either by AO or by CIT(A).

On appeal by the assessee, the ITAT held that,

++ there is merit in the plea of the assessee that due to wrong classification and capitalization of expenses, the whole controversy has arisen and expenses incurred are purely in the nature of revenue. In the aviation crew training business, the same necessitates frequent renovations, paintings and training requirements. False ceiling will constitute temporary structure apart from mock air-craft for training of employees which also have to be renewed from time to time, polishing, painting also will constitute revenue expenses. Thus, the issue about capital or revenue nature of each item has not been properly verified. Mere capitalization of expenses will not disentitle the assessee from valid claim of revenue expenses;

++ no reason is to disturb the finding given by the CIT(A) that an amount of Rs. 8,78,003/- represents purchase of temporary wooden structure not amounting to furniture, therefore revenue's ground in this behalf is dismissed. For the balance amount of such expenses, the matter was set aside back to the file of AO to verify the capital and revenue nature of the expenses, particularly keeping in view details thereof as painting, polishing, white-wash, carpentry work & PVC flooring etc. assessee is eligible for revenue expenses in respect of these items on verification;

++ the assessee's plea of amendment by Finance Act, 2010 should be considered as clarificatory cannot be accepted. However, alternate plea about allowing the expenses in AY 2006-07 when TDS is paid, deserves to be accepted. Consequently, the issue was set aside back to the file of AO with above observation to verify the details and to allow expenses incurred by the assessee from 1-4-2004 to 28-2-2005 in AY 2006-07 i.e. the year in which the payment of TDS have been claimed to be made by the assessee.

Assessee's appeal partly allowed.

[color=limegreen]SC dismisses MSM plea against I-T dept

The Supreme Court today dismissed the petition of Multi Screen Media (MSM)
challenging a notice by the Income Tax (I-T) department, which sought
reassessment of four year old returns filed by the company because of a possible
mistake on the part of the authorities. A Bench comprising Chief Justice S H
Kapadia and Justice K S Radhakrishnan dismissed the petition of MSM challenging
that the tax department can not issue notice to it for reassessment of its tax
returns filed four years ago. Earlier, the Bombay High Court had also rejected
MSM's plea that I-T department can not issue notice in 2009 for the reassessment
of the tax returns filed for financial year 2004-05. MSM, formerly known as SET
India is an Indian subsidiary of Sony Entertainment Television and operates
channels under the name Sony Entertainment TV. In its assessment for the
financial year 2004-05, MSM had claimed tax benefits for expenditure on
advertisements, sales promotion, market research and publicity. The
entertainment firm claimed that it was done for the purpose of business and
could be deducted under section 37(1) of the Income Tax Act, 1961. However, four
years after that, I-T department decided to reassess MSM's return and issued
notice on March 25, 2009. The department said that there was a reason to believe
that the Assessing Officer had made a mistake in 2005, by possibly extending
more relief under the advertisement and publicity expenses in the assessment
year of 2004-05. According to the department, MSM had debited Rs 26 crore for
advertisement and publicity expenses, Rs 2.83 crore for market research and Rs
6.42 crore as dealer incentives. Consequently, it has also debited selling and
distribution charges amounting in all to Rs 26.01 crore. The Bombay High Court
had dismissed the broadcaster's plea observing, "In our considered view, the I-T
department did have tangible material to reopen the assessment under Section 147
of the Act and to form a reason to believe that income had escaped assessment."[/color]–

SC rules RK Jain Editor of Excise Law times who has been fearlessly writing for decades cannot be silenced- RK Jain projected  true state of the functioning of CESTAT on administrative side and to some extent on judicial side- By doing so, he had merely discharged the constitutional duty of a citizen enshrined in Article 51A(h)-Indirect Tax Practitioners Association was on wrong side of law-Contents of the editorial by RK Jain in Excise Law Times do not constitute criminal contempt within the meaning of Section 2(c) of the Contempt of Courts Act, 1971-The object of the editorial was to highlight the irregularities in the appointment, posting and transfer of the members of CESTAT and instances of the abuse of the quasi judicial powers- By writing the editorial which must have caused embarrassment to functionaries of the Central Government and CESTAT and even some members of the petitioner-Association but that cannot be dubbed as an attempt to scandalize CESTAT as a body or interfere with the administration of justice- petition lacks bonafide and is an abuse of the process of the Court- the petition is dismissed- For filing a frivolous petition, the petitioner is saddled with cost of Rs.2 Lakh of which Rs.1 Lakh shall be paid to RK Jain-[/move]

If there is lack of enquiry on part of A.O., provisions of section 263 can be applied

Where the Assessing Officer has not carried out necessary enquiry which ought to have been carried out for allowing deduction to the assessee under section 40(b), the order passed by the Assessing Officer was erroneous and prejudicial to the interest of the Revenue and CIT has rightly invoked the provisions of section 263

[2010] 6 taxmann.com 89 (AGRA - ITAT)(TM)

ITAT AGRA BENCH, AGRA (THIRD MEMBER)

Shiva Automobiles

v.

ITO

ITA No. 110/Agr./2006

April 13, 2010


FACTS


The assessment in the case of the assessee was completed under section 143(3) of the Income-tax Act, 1961 ('the Act' hereinafter) vide order dated 29.08.2003, assessing the income of the assessee at Rs.91,240/-. In the assessment order, salary and interest to the partners was allowed at Rs. 1,22,646/- and Rs.32,685/- respectively and the assessee was assessed in the status of a firm. Subsequently, the C.I.T. issued show-cause notice under section 263 of the Act to the assessee on 9-3-2006 requiring him to show-cause as to why the assessment order dated 29-08-2003 may not be set aside by invoking the provisions of section 263 of the Act.

Against this notice, the assessee submitted reply to the C.I.T. vide his submissions dated 27-03-2006 and 29-03-2006. The main contentions of the assessee was that the order passed by the A.O. on 29-08-2003 under section 143(3) is not erroneous because the provisions of section 185 can be applied only when the assessee does not fulfil the provisions of section 184 of the Act which are as under :-

i)         The partnership deed is evidenced by an instrument;

ii)        The individual shares of the partners are specified in that instrument;

iii)       Certified copy of the partnership deed is filed.

Since the assessee complied with all the conditions, the assessee has to be assessed as a firm and not as AOP under section 185 of the Act. As per section 184(3), once the firm is assessed as a firm for any Assessment Year, it shall be assessed in the same capacity for every subsequent year, if there is no change in the constitution of the firm or the shares of the partners. The firm is assessed to tax as partnership firm since 1-4-1998. Therefore, the question of assessing the assessee as AOP does not arise. It was also submitted that there is no bar in the Partnership Act to transfer the assets from the partners to the firm or vice versa. The credit entries made in the capital account of the partner represented genuine transaction and do not violate the terms of the partnership deed as well as the provisions of section 184 of the Act. The payment of interest was made in accordance with the provisions of section 40(b) of the Act. The provisions of section 14A cannot be applied as the income from trading of the shares is not totally exempt. Only a part of the income earned as dividend is exempt. As per proviso to section 14A the A.O. has no power to reassess or rectify the assessment for disallowing the interest. The C.I.T. after considering the submissions of the assessee came to the view that the issue under consideration is not concerned with the transfer of the shares from partners to the firm, but the same is concerned with the distribution of profits from dividend/shares, in accordance with the partnership deed. It was observed that the assessee filed partnership deed and the assessee was assessed as a firm since 1-04-1998, but according to the C.I.T. if the partnership deed is not being followed in practical sense, the same becomes merely a written instrument, having no legal sanctity whatsoever. According to the C.I.T., since the dividend derived from the shares did not appear in the books of accounts of the assessee and there is no evidence to show that the same is distributed amongst the partners as per the provisions of partnership deed, the A.O. failed to investigate this issue and, therefore, ultimately the CIT, concluded that the order passed by the A.O. on 29-08-2003 was erroneous in-so-far as prejudicial to the interest of the Revenue. Accordingly, he set aside the assessment order with the directions that the A.O. shall make enquiries about the genuineness of the provisions contained in sections 184 and 185 of the Act. If the profit of the firm has not been distributed in accordance with the partnership deed, the firm has to be assessed as per the provisions of section 185. It was further directed that the A.O. should see that the expenses including interest against exempt income are not allowed. The assessee came in appeal against the order of C.I.T. before the Tribunal.



HELD



It is apparently clear that in order to invoke the provisions of section 263, both the conditions that the order passed by the AO is erroneous and also that it is prejudicial to the interest of Revenue must be satisfied. If one of them is absent, the provisions of section 263 cannot be invoked. The term 'erroneous' has not been defined under the Income-tax Act but it is well settled that each and every type of mistake or error committed by the AO cannot be said to be an error. An order can be said to be erroneous if there is incorrect assumption of facts or incorrect application of law in the order by the AO. If the AO after making the enquiries and examining the records taken one of the possible view, it cannot be said that the order passed by the AO was erroneous.

While in the instant case the proceedings u/s 263 of the Act has been initiated by the CIT not on the basis that the assessee had made entries in the partners' capital account represented by creditors otherwise than credit of money, i.e. transfer of shares held in the name of partners by book entry without the shares having been transferred in the name of the firm. He was of the view that the interest allowed by the AO to the partners on the capital in respect of such credits is not admissible as deduction within the meaning of section 36(l)(iii) read with section 14A. This is a fact that the assessee was not dealing in shares. The dividend income from the shares so transferred to the firm by book entries has been enjoyed by the partners. Even if this income is exempt but it amounts to sharing the profits of me firm otherwise than in accordance with the partnership deed. Ultimately CIT held the assessment order dt. 29.8.03 to be erroneous as well as prejudicial to the interest of the revenue on two grounds one being that the dividends from shares is not appearing in the books of account of the assessee and there is no evidence to show that the same is being distributed amongst the partners as per the provisions of the partnership deed and the AO has failed to investigate this issue. Second being the interest against the dividend income is not allowable and the AO has failed to look into this aspect. But, in the case before me, there is no application of mind on the part of the A.O. as the A.O. has not at all made any enquiry or applied his mind on the aspect whether the interest as claimed by the assessee is disallowable in view of the fact that the capital account of the partners have been credited by the shares held in the name of the partners and the dividend income received on the shares was exempt. The assessee has claimed interest on the capital account for which the credit has arisen due to the shares, the income on which is exempt. The provision of section 14A has not at all been examined. This is also fact that the A.O. has also not applied his mind to the fact whether the dividend income as received by the partner on the shares which has been brought into the partnership firm has been brought into the P&L account of the firm or not. This case clearly lays down, if there is lack of enquiry on the part of the A.O., provisions of section 263 of the Act can be applied.

In the case of the assessee the Assessing Officer has not carried out necessary enquiry which ought to have been carried out for allowing deduction to the assessee u/s 40(b) of the Act. Therefore, in my opinion, the order passed by the Assessing Officer was erroneous and prejudicial to the interest of the Revenue. The CIT has rightly invoked the provisions of section 263.

When assessee is engaged in business of buying and selling shares, profit or
loss on such shares would be profit and loss of such business unless assessee
establishes that shares in question were bought as a long term investment[/color]

In a case where a company is dealing in the sale and purchase of shares,
prima-facie the profits derived from the sale and purchase of shares would be
treated to be business income of the assessee since the assessee is a trader in
shares, that does not mean that a trading firm cannot make long term investment
in shares and income from sale of such shares may fall under the head of capital
gains but when a trading firm is involved the onus would be heavily on such a
firm to show that this investment was actually a long term investment


[2010] 6 taxmann.com 83 (HP)
HIGH COURT OF HIMACHAL PRADESH
Ankita Deposits and Advances Pvt. Ltd.

v.

CIT

ITA Nos.33 & 34 of 2008

Mere disclosing amount of any income or loss without disclosing particulars of
income or loss cannot be said to be a full and true disclosure of facts for
purpose of determining total income under Income-tax Act

Merely because the assessee is not required to disclose the particulars of sale
and purchase of units in audit report obtained under the Companies Act, it
cannot be a bona fide reason or an excuse for not disclosing the same in the
statement of accounts or any annexure filed along with the return of income for
the purpose of determining the total income under the Act


[2010] 6 taxmann.com 79 (New Delhi - ITAT)
ITAT DELHI BENCH `G': NEW DELHI
Survidhi Financial Services Ltd.

v.

ACIT

ITA No. 12/Del of 2010

May 26, 2010

 

I-T- Sec 14A - assessee can claim deduction of interest paid on borrowed funds utilised for acquisition of shares only if shares are held as stock-in-trade and not investment: HC

ERNAKULAM, AUG 05, 2010: THE issue before the HC is - Whether the assessee is entitled to deduction of substantial amount paid towards interest on borrowed funds utilised for acquisition of shares in a company in which assessee over a period of 10 years,acquired controlling interest upto 90%.

Facts of the case

Assessee is engaged in trading of goods. The assessee paid Rs 17,44,310/- towards interest at 24% p.a. on funds borrowed for purchase of shares in a company. The company in which assessee made investments was engaged in leasing of household articles and assessee as proprietrix of the business sold such articles to the said leasing company. The said company was registered in 1991 and assessee started acquiring shares ever since its formation, and by the year ending 31st March, 2001, acquired 90% shares. The assessee's claim was that since the borrowed funds were utilised for acquisition of shares of the company under the control of the assessee, the utilisation of borrowed funds was for business purpose entitling it for deduction of interest u/s 36(1)(iii).

Brushing aside the contention of the Assessee, AO held that the assessee made investments by utilising borrowed funds in the form of acquisition of shares in the company and the only benefit assessee got was dividend income. On the basis of Section 14A, the AO disallowed the claim of interest paid by the assessee during the accounting year for the funds borrowed for the acquisition of shares in the leasing company. CIT(A) confirmed the assessment.

The Tribunal relying on decision of the Supreme Court in S.A.BUILDERS LTD. VS. COMMISSIONER OF INCOME TAX (APPEALS) (2006-TIOL-179-SC-IT) substantially allowed the claim, but made a disallowance of Rs.2 lakhs being the interest stated to be attributable to the dividend income of Rs.3 lakhs earned by the assessee from the leasing company during the previous year.


Having heard the parties the High Court held that,

++ assessee is entitled to deduction of interest u/s 36(1)(iii) on borrowed funds utilised for the acquisition of shares only if shares are held as stock in trade which arises only if the assessee is engaged in trading in shares. So far as acquisition of shares is in the form of investment and the only benefit assessee derived is dividend income which is not assessable under the Act, the disallowance u/s 14A is squarely attracted and the AO, rightly disallowed the claim.

Profit on account of frequent purchase and sale of shares in short period by
assessee has to be treated as `income from business'



The activity of frequent buying and selling of shares over a short span of
period has to be treated as business being adventure in the nature of trade and
the income has to be treated as business income and not as capital gain
[2010] 6 taxmann.com 75 (Mum. - ITAT)
ITAT `H' BENCH, MUMBAI
Harsha N. Mehta

v.

DCIT

ITA NO. 1859/Mum/2009

July 16, 2010

Housing project for purpose of section 80-IB(10) does not include construction
of commercial establishment carried out by another entity in that area



Claim of the assessee for deduction under section80-IB (10) for the housing
project cannot be denied because the commercial project was carried out by its
sister concern in the same area[/color]
ITAT MUMBAI BENCH `H' MUMBAI

ITO

v.

Khyati Financial Services
ITA No.3740/Mum/2008

When an assessee-company exploits its property to earn income in form of rent,
rental income received by assessee is chargeable to tax under head "income from
house property" and not under head "profits and gains of business"

· Merely because the property was given on leave or licence for a
specific purpose of running restaurant or it was given along with furniture,
fixtures as well as other equipments required for running of restaurant, the
same, could not change the character of rental income which is "income from
house property" and the same would not become business income even if the hire
was inclusive of other assets which were incidental to running a restaurant

[
ITAT MUMBAI BENCHES `B'

Batra Gulati Hotels

South East Impex Pvt Ltd. 41 DTR 1[delhi ]


matter remanded back

For purposes of clause (iv) of Explanation 1 to section 115JB, extent of
reduction in respect of deduction available under section 80HHC has to be
computed strictly in accordance with provisions of section 80HHC



Tribunal was not justified in coming to the conclusion that the amount to be
reduced under clause (iv) of Explanation 1 to Section 115JB in respect of the
profits eligible for deduction under Section 80HHC has to be computed with
reference to the net profits in the profit and loss account and not according to
the profits of the business computed under the head of profits and gains of
business or profession[2010]

HIGH COURT OF BOMBAY

CIT

v.

Al-Kabeer Exports Ltd.