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GENERAL TOPICS 41. AFFIDAVIT – How far reliable ? 42. ESTOPPEL – Whether applicable ? 43. INTERPRETATION OF STATUTES 54. JUDICIAL DISCIPLINE 105. JURISDICTION 136. LIFTING OF CORPORATE VEIL 167. OPPORTUNITY OF BEING HEARD 178. PROCEDURAL LAPSE – When fatal ? 199. SERVICE OF NOTICE 2310. STATEMENTS RECORDED – USE IN ASSESSMENT &

RETRACTION25

11. STAY ORDERS 2712. Income Tax Act related topics 2813. LOSS / DEPRECIATION – CARRY FORWARD & SET-OFF 3014. LOSS FROM SPECULATION 3315. RECEIPT OF NRE GIFTS - TAXABILITY 3516. SEARCHES UNDER I.T. ACT 3617. VDIS / KVSS 3718. STATUS OF ASSESSEE 3819. AOP / BOI 4120. COMPANIES – EFFECT OF AMALGAMATION 4321. HUF 4422. PARTITION 4523. DEVOLUTION OF PROPERTY 4724. PARTNERSHIP FIRM 4925. TRUST 5226. Exemption 5527. CLUBBING OF INCOME 5928. INCOME – CHARGEABILITY AND COMPUTATION 6129. Computation of Income under various heads 6930. HOUSE PROPERTY INCOME 7431. Business income 7832. DEEMED INCOME U/S 41(1) 9033. DEDUCTIONS 9734. DEPRECIATION 9935. DISALLOWANCE OF EXPENDITURE 10636. EXPENSES NOT DEDUCTIBLE 12437. Cash Payments falling u/s 40 A(3) 12838. Deduction u/s 35D 13039. DISALLOWANCE OF EXPENSES WHERE TAX NOT

DEDUCTED131

40. Disallowance u/s 43 B 13241. Excess payments to relatives etc. u/s 40 (A) (2) 13442. Expenses not for the purpose of business 13543. Expenses not proved by assessee 13744. Expenses on exempted income 13745. Infraction of Law 13846. Interest on borrowed capital – whether allowable ? 14047. Personal expenses 14248. Tax payments and Interest relating to it 144

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49. METHOD OF ACCOUNTING 14650. REJECTION OF BOOKS AND ESTIMATION OF INCOME 14951. Closing stock valuation 15252. CAPITAL GAINS 15453. Whether Capital gain arises? 15454. Claim of Transfer of Agricultural land 16055. When Capital gain arises ? 16156. Whether Short-term / Long term Capital gains? 16357. Computation 16558. Exemptions 16959. Income from Other Sources 17160. CASH CREDITS 17161. Deemed dividend 17462. Interest receipts 17663. Unexplained investment 17764. DEDUCTIONS AND EXEMPTIONS 17965. General aspects 17966. Only Net income eligible 18267. “Derived from” meaning of 18468. Whether Manufacturing / Industrial Undertaking 18669. Whether New Industrial Undertaking 19070. Sec. 80HHC 19271. Sec. 80 O 19672. Sec. 80 P 19773. Exemptions u/s 10 19974. Agricultural income 20275. PROCEDURAL ASPECTS 20476. FILING OF RETURNS AND ASSESSMENT 20477. BEST JUDGEMENT ASSESSMENT 20778. RE-OPENING OF ASSESSMENT ( SEC. 147/148 ) 20879. Reasons for re-opening – General 20880. Information from other offices 21281. Information from proceedings of other years 21382. Information from other proceedings 21383. Information from Audit 21484. Reopening on the basis of Court decisions 21485. Re-opening on the basis of Court direction - Extended

period available 215

86. Service of notice u/s 147 21587. Other issues relating to re-assessment 21688. Appeal before CIT(A) / ITAT – Law and procedure 21989. Admission of Additional evidence 21990. Admission of Additional / New grounds 22091. Agreed Addition 22192. Condonation of delay 22293. Inherent Powers 22294. Jurisdiction 22495. Power of Enhancement 22696. Procedure 22797. Revision by CIT under section 263 23098. RECTIFICATION UNDER SECTION 154 & 254(2) 23499. Special Provisions for assessment 240100. Minimum alternate tax u/s 115 J, 115JA & 115JB 240

101. BLOCK ASSESSMENT UNDER CHAPTER XIV-B 243

102. INTERNATIONAL TAXATION ISSUES 249

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103. ACCRUAL OF INCOME IN INDIA 252

104. TAX DEDUCTION AT SOURCE 256

105. INTERESTS UNDER I.T. ACT 262

106. PENALTIES UNDER I.T. ACT 264

107. 271(1)(C) 264

108. 271 B 272

109. 271 D, 271 E, 271G 273

110. 140A(3) 273

111. OTHER TAXES 274

112. Expenditure Tax 274

113. FRINGE BENFIT TAX 274

114. INTEREST TAX 274

115. WEALTH TAX 275

116. Exemptions 277

117. Valuation 279

118. Liabilities not deductible 281

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GENERAL TOPICS

AFFIDAVIT – How far reliable ?

Affidavit need not always be accepted as correctSri Krishna Vs CIT (All) 142 ITR 618

Affidavit says “notice send by registered post on 31.8.88”- Not denied in rejoinder affidavit –Fact of issuing notice accepted eventhough no evidence was produced.Arjun Singh & Anr. Vs ADIT & Ors. (MP) 246 ITR 363

ESTOPPEL – Whether applicable ?

The doctrine of promissory estoppel cannot be used to compel the Government to carry out any representation or promise which is contrary to law or which was outside the authority or power of the officer of the Government.Delite Cinema Vs Municipal Corporation of Delhi & Anr. (Del) 172 ITR 208CIT Vs Bankam Investment Ltd. (Cal) 208 ITR 208Union of India & Ors. Vs Godfrey Philips India Ltd. (SC) 158 ITR 574

Tribunal upheld reopening u/s 147 and on merits remitted to Assessing Officer – Assessing Officer passed subsequent order – Question of validity of reopening u/s 147 cannot be challenged again in subsequent proceedings.Gowri Rajes & ors. Vs CIT (Mad) 241 ITR 506M.S.P. Senthil Kumar Vs CIT (Mad) 241 ITR 502

Court decisions based on concession of parties do not constitute binding precedents for other authorities.Lakshmi Shankar Srivastava AIR 1979 SC 451

The doctrine of “approbate and reprobate ” is a species of estoppels. It applies to the conduct of parties. The assessee having opted for a scheme and having availed the benefit, cannot lateron claim that the benefit was wrongly conferred on it.CIT Vs V. MR. P. Firm (SC) 56 ITR 67

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INTERPRETATION OF STATUTES

Words to be given plain grammatical meaning Orissa State Warehousing Corpn. Vs CIT (SC) 237 ITR 589CIT Vs Gautam Sarabhai Trust (Guj) 173 ITR 216CBDT Vs Cochin Goods Transport Associate (Ker) 236 ITR 993G. Rao Electrodes Ltd. Vs CIT (Ker) 173 ITR 351CIT Vs Casino (P) Ltd. (Ker) 91 ITR 289M.P. Poddar (HUF) & Anr. Vs Appropriate Authority & Anr. (Del) 240 ITR 372

Word of analogous meaning coupled together – General word to be construed in the restricted sense in which the analogous less general word is used.G. Claridge and company Ltd. (SC)(1991) 2 Supreme Court cases 229Dr. Devendra M. Surti (SC) AIR 1969 Supreme Court 63

Definition of expression in one statute cannot automatically be applied to another statute.CIT Vs Vasan Publications P. Ltd. (Mad) 159 ITR 381CIT Vs Buhari Sons P. Ltd. (Mad) 144 ITR 12

Provision of another statute does not apply ipso facto but guidelines under such provision may be applied.CGT Vs Prithvi Nath Sharma (Guj) 239 ITR 809

“Income” – meaning – should be the same as that of word occurring in legislature list –is of widest amplitude and must be given natural and grammatical meaning CIT Vs G.R. Karthikeyan (SC) 201 ITR 866

When the meaning of words is clear and unambiguous, the Court has to give effect to it whatever be the consequences, as the Court has no jurisdiction to mitigate harsh consequences of the statute, if any.Patil Vijayakumar & Ors. Vs Union of India & Anr. (Kar) 151 ITR 48

Words take colour from context in which they are used.CIT Vs Venkateswara Hatcheries (P) Ltd. (SC) 237 ITR 174

Dictionary meaning of words not to be adopted where context conveys different shades of meaning.CIT Vs Anand Theatres (SC) 244 ITR 192

‘Etc.’ means things of same character or those things “ejusdem generis” CIT Vs Maulana Tea Co. (Ker) 244 ITR 589

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No retrospectivity unless expressly stated or clearly impliedVirtual Soft Systems Ltd. Vs CIT (SC) 289 ITR 83Gem Granites Vs CIT (SC) 271 ITR 322

It is necessary to spell out the degree of retrospectivity of a statutory provision from the language of the provision itself.Union of India & Anr. Vs Raghubir Singh (SC) 178 ITR 548

An explanation brought in the statute Book is ordinarily clarificatory in nature and has retrospective effect.Laxmi Industries Ltd. Co. & Ors Vs ITO & Anr. (Raj) 231 ITR 514Beneficial provision does not necessarily imply that the amendment is to be given retrospective effect, unless specifically made it as retrospective in operation.CIT Vs Pooshya Exports (P) Ltd. (Mad) 262 ITR 417CWT Vs Reliance Motor Co. Ltd. (Mad) 260 ITR 571CWT Vs B.R. Theatres & Industrial Concerns (P) Ltd. (Mad) 272 ITR 177

When a particular enactment or amendment is the result of the recommendation of the Law Commission, it is permissible to refer to the relevant report of the Commission.It cannot be said to be an invariable rule that a statute could not be retrospective unless so expressed in the very terms of the section which had to be construed.When an Act is declaratory in nature, the presumption against its retrospectivity is not applicable.Mithilesh Kumari & Anr. Vs Prem Behari Khare (SC) 177 ITR 97

Effect of substitution of one provision by another – substituted provision deemed to be part of act from very inception.K.T. Venkatappa & Ors. Vs K.N. Krishnappa & Ors. (Kar) 173 ITR 678

Prospective over ruling – Declaration of invalidity by SC to take effect from date of judgement.Somaiya Organics (India) Ltd. & Anr. Vs State of Uttar Pradesh & Anr. (SC) 251 ITR 20

No prospective overruling unless so specified by SC.M.A. Murthy Vs State of Karnataka & Ors. (SC) 264 ITR 1

When a statutory provision is interpreted by the Supreme Court in a manner different from the interpretations made in the earlier decisions by a smaller Bench, the law laid down by the larger Bench would constitute the law of the land and is to be regarded as law as it always was unless declared by the Court itself to be prospective in operationSouthern Industrial Corpn. Ltd. Vs CIT (Mad) 258 ITR 481

Interpretation in conformity with object of provision

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American Hotel and Lodging Association Educational Institute Vs CBDT (Del) 289 ITR 46

Marginal note or heading – can be taken into account to arrive at reasonable construction.Shree Sajjan Mills Ltd. Vs CIT & Anr. (SC) 156 ITR 585

The preamble of a statute is apart of the Act. And is an admissible guide to construction. Preamble is to express the scope, object and purpose of the Act. Secretary, Regional Transport Authority Vs D.P. Sharma AIR 1989 SC 509 pp. 511

Speech of Finance Minister can be referred to ascertain object of legislation.Soorajmull Nagarmull Vs CIT (Cal) 190 ITR 418

Legislative history and Circulars of CBDT can be used as aids for interpretation of provisions.CIT Vs M.K. Vaidya (Kar) 224 ITR 186

Press note issued by Finance Ministry – Does not have force of lawTarak Nath Paul Vs CWT (Cal) 142 ITR 468Result of interpretation should not give rise to absurdity.ITO Vs. H.P. Vishweswaraiah (Kar) 250 ITR 863Chartered Housing v. Appropriate Authority (Kar) 250 ITR 1

If a strict and literal construction of the statute leads to an absurd result, i.e., a result not intended to be sub served by the object of the legislation ascertained from the scheme of legislation, then, if another construction is possible, apart from the strict literal construction, that construction should be preferred to the strict literal construction.CIT Vs Gotla J.H. (SC) 156 ITR 323K.P. Verghese Vs ITO & Anr. (SC) 131 ITR 597CIT Vs Malayala Manorama & Co. Ltd. (Ker) 143 ITR 29Ansal Properties & Industries Ltd. Vs Appropriate Authority & Ors. (Del) 236 ITR 793ITO Vs Bharthi Trust (ITAT, Ahd) 60 ITD 261CIT Vs P.K. Noorjahan (SC) 237 ITR 570Nayantara G. Agrawal Vs CIT (Bom) 207 ITR 639CWT Vs K.S. Vaidyanathan (Mad) 153 ITR 11C.W.S. (India) Limited etc. Vs CIT (SC) 208 ITR 649CIT Vs Laxmi Metal Industries (All) 236 ITR 130V. Guruviah Naidu & Sons Vs CIT (Mad) 216 ITR 156Shree Sajjan Mills Ltd. Vs CIT & Anr. (SC) 156 ITR 585

Sometimes one finds two or more enactments operating in the same field and each containing a non obstante clause stating that its provision will have effect notwithstanding anything inconsistent therewith contained in any other law for the time being in force. The conflict in such case is resolved on consideration of purpose and policy underlying the enactments and the language used in themSarvan singh Vs Kasturilal AIR 1977 SC 265 pp. 274-275

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Ashoka Marketing Ltd. Vs Punjab National Bank AIR 1991 SC 855 pp. 878-879

Legal fictions are limited to the purpose for which they are created and should be taken to their logical end in application of the fiction to the facts the Court has to consider.Chidambaram Mulraj & Co. Pvt. Ltd,. Vs CIT (Bom) 58 ITR 206

When language is vague and is capable of different interpretations, Court may derive some guidance from speech of Minister – Views expressed in reports need not be considered.Delhi Flour Mills Co. Ltd. Vs CIT (Del) 95 ITR 151

The provisions in a taxing statute dealing with machinery for assessment have to be construed by the ordinary rules of construction, that is to say, in accordance with the clear intention of the legislature, which is to make a charge levied effective.Sardar Harvindar Singh Sehgal & Ors. Vs ACIT & Ors. (Gau) 227 ITR 512Gursahai Saigal Vs CIT (SC) 48 ITR 1Jayalakshmi Leasing Co. Vs ACIT (ITSC-SB) 228 ITR (AT)1

Principle of beneficial interpretation would apply only in a case where the Court is in doubt about the true scope and ambit of the provision or finds two equally reasonable interpretations and not where the words of the statute are plain, precise and unambiguous.Indian Rayon Corporation Limited Vs CIT (Bom) 231 ITR 26

Specific provision over-rides general provisionsSouth India Corporation Vs Secretary, Board of Revenue, Trivandrum AIR 1964 SC 207 pp. 215Provision granting exemption – Strict construction.Kota Co-operative Marketing Society Ltd. Vs CIT (Raj) 207 ITR 608CIT Vs Orissa State Warehousing Corporation (Ori) 201 ITR 729Renuka Datla Vs CIT & Anr. (AP) 240 ITR 463Novopan India Ltd. Vs Commissioner of Central Excise 1994 (73) E.L.T. 769 (SC)

No ambiguity in the provisions of the statute – Provisions cannot be interpreted to confer benefit on assesseeSeshasayee Paper & Boards Limited Vs DCIT (Mad) 272 ITR 165IPCA Laboratory Ltd. Vs DCIT (SC) 266 ITR 521

“Casus omissus” – Matters which should have been provided but not provided for in a statute – cannot be supplied by Courts.Laxmandas Pranchand & Ors. Vs Union of India & Ors. (MP) 234 ITR 261CIT Vs R.J. Trivedi & Sons (MP) 183 ITR 420

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Executive instruction can only supplement statute – cannot curtail the statute or whittle down its effect.State of M.P. & another Vs G.S. Dall and Flour Mills (SC) 187 ITR 478

Decision is an authority for what it actually decided and not for what follows from observations made while deciding case.Nav Nirman P. Ltd. Vs CIT (MP) 174 ITR 574CIT Vs Sun Engineering Works (P) Ltd. (SC) 198 ITR 297

Interpretation of orders of Courts & Tribunals must be in context of actual findings.Thanthi Trust Vs ACIT (Mad) 238 ITR 117

Subsidiary and integral transactions have to take colour from Principal transactions.Hindalco Industries Ltd. Vs ACIT (ITAT, Mum) 94 ITD 242

A party cannot escape the consequences of law merely by describing an agreement in a particular form though in essence and in substance, it may be a different transaction.CIT Vs Panipat Woollen & General Mills Co. Ltd. (SC) 103 ITR 66

Compulsive provision will control a discretionary provisionLife Insurance Corporation of India Ltd. Vs S.V. Oak AIR 1965 SC 975 pp. 980

If a provision is mandatory, an act done in breach thereof will be invalid, but if directory, the act will be valid although non-compliance may give rise to some other penalty if provided by the statuteC. Drigraj Kuer Vs Amar Krishna Narain singh AIR 1960 SC 234 pp. 449, 451Union of India Vs Tulsiram Patel AIR 1985 SC 1416

Once it is shown that the case of the assessee comes within the letter of law, he must be taxed, however greater the hardship may appear to the judicial mind, to be.Tarulata Shayam & ors. Vs CIT (SC) 108 ITR 345CWT Vs K.S. Vaidyanathan (Mad) 153 ITR 11Padmasundara Rao (Deceased) & Ors. Vs State of Tamil Nadu & Ors. (SC) 255 ITR 147ACIT & Ors. Vs Velliappa Textiles Ltd. & Ors. (SC) 263 ITR 550 Prakash Nath Khanna & Anr. Vs CIT & Anr. (SC) 266 ITR 1

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JUDICIAL DISCIPLINE

IT Proceedings – Res judicata not applicable.CIT Vs Syed Saddique Imam & Others (Patna) 111 ITR 475Tamilnadu Chlorates Vs JCIT ( ITAT, Chennai ) 98 ITD 1New Jehangir Vakil Mills Co. Ltd. Vs CIT (SC) 49 ITR 137Kotak Mahindra Finance Ltd. Vs DCIT (Bom) 265 ITR 114

Decision of Courts of co-ordinate jurisdiction binds each other – An established position should not be easily distortedCIT Vs Meat Products of India Ltd (Ker) 224 ITR 1CIT Vs L.G. Ramamurthy & ors. (Mad) 110 ITR 453CIT Vs Sterling Foods (SC) 153 CTR 439/237 ITR 579Lakshmi Vilas bank Ltd. Vs CIT (Mad) 284 ITR 93

Difference of opinion before co-ordinate Benches of a Court – Matter referred to larger Bench.Aditya Minerals Pvt. Ltd,. Vs CIT (SC) 236 ITR 39ITO Vs Ramkrishna Bajaj (ITAT,Bombay SB) 198 ITR (AT) 1

Reconsidering facts for a later year and recording different finding – Finding for earlier year not conclusive.Ace Investments (P) Ltd. Vs CIT (Mad) 244 ITR 166

If the previous decision is plainly erroneous, there is a duty of the Court to review it and not perpetuate the mistake ie. a vital point was not considered OR when an earlier relevant statutory provision had not been brought to the notice of Court.Union of India & Anr. Vs Raghubir Singh (SC) 178 ITR 548Sri Agasthyar Trust Vs CIT (SC) 236 ITR 23Sriram Transport Finance Co. Ltd. Vs ACIT (ITAT, Mad) 70 ITD 406

If there is conflict between the two decisions of Supreme Court the one decided by a larger Bench is binding – If both decisions are rendered by Bench consisting of equal number of judges, the later decision is binding.Govindanaik Vs West Patent Press Co. Ltd. AIR 1980 Kar 92 (FB)Bhika Ram & Ors. Vs Union of India & Ors.(Del) 238 ITR 113

Later judgement explaining earlier judgement – cannot be disregarded.CGT Vs Arunbhai Hargovandas Patel (Guj) 264 ITR 586

Cases which are over ruled should not be quoted.CIT Vs Dugdh Utpadak Sahkari Sangh Ltd. (All) 277 ITR 35

Third Member decision and Special bench decision of ITAT are of the same nature

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DCIT Vs Oman International Bank SAOG ( ITAT, Mumbai – SB ) 100 ITD 285

Where contrary views are held by Third member and Special bench, view of Special bench takes precedenceDCIT Vs Padam Prakash (HUF) (ITAT, Del-SB) 104 ITD 1

Rejection of SLP does not mean that decision of HC has been approved.CIT Vs Quality (Pat) 224 ITR 77CIT Vs Shree Manjunatheswara Packing Products & Camphor Works (SC) 231 ITR 53J.K Charitable Trust Vs WTO & Ors. (All) 222 ITR 523

Dismissal of appeal simpliciter – Not a declaration of law – No binding precedentCIT Vs Geetha Ramakrishna Mills P. Ltd. (Mad) 288 ITR 489 S. Shanmughavel Nadar Vs State of Tamil Nadu & Anr. (SC) 263 ITR 658Kunhayammed & Ors. Vs State of Kerala & Anr. (SC) 245 ITR 360Saurashtra Oil Mills Assn., Gujarat Vs State of Gujarat & Anr. 2002 AIR 1130 SC

Special Leave petition dismissed with speaking order – Declaration of law by Supreme CourtAfter rejection of SLP, lower Courts can review its orderOnce SLP is admitted, lower Courts have no jurisdiction to review the orderKunhayammed & Ors. Vs State of Kerala & Anr. (SC) 245 ITR 360

Lower authority bound by order passed by higher authorityCIT Vs Ralson Industries Ltd. (SC) 288 ITR 322Nokia Corporation Vs DIT (Int. Taxation) (Del) 292 ITR 22 Obiter dictum is expression of opinion on a point which is not necessary for the decision of a case. Obiter dictum of Supreme Court binding on all the High CourtsTata Iron & Steel co. Ltd. Vs D.V. Bapat, ITO & Anr. (Bom) 101 ITR 292

Essence of a decision is its ratio decedendi and not every observation found therein – the concrete decision alone is binding – Obiter dictum not bindingUnion of India Vs Dhanwanti Devi (1996) 6 SCC 44 pp. 96CIT Vs Sun Engineering Works Pvt. Ltd. (SC) 198 ITR 297

Impact of ITAT order extends to only its jurisdictionSaipem S.P.A. Vs DCIT (ITAT, Delhi) 86 ITD 572

Decision of High Court binding on Income Tax authoritiesOm Prakash Trivedi Vs Union of India (All) 287 ITR 11

Single Judge cannot give a decision contrary to earlier judgement by a Division BenchMehta Vegetables P. Ltd Vs Union of India & Anr.(Raj) 235 ITR 425

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Decision of one High Court not binding on another High Court – Not binding on Tribunal in other States.Patil Vijayakumar and Ors. Vs Union of India & Anr.(Kar) 151 ITR 48

Decision of High Court binding on Tribunal within its territorial jurisdiction.Taylor Instrument Co.(India) Ltd Vs CIT (Del) 232 ITR 771CIT Vs Mohan Lal Kansal (P & H) 114 ITR 583Jorehaut Group Ltd. Vs ACIT (Gau) 289 ITR 422

Decision of High Court not binding on Tribunals outside its territorial jurisdiction.Geoffrey Manners & Co. Ltd. Vs CIT (Bom) 221 ITR 695

Where there is only one decision of a H.C. on a particular point and there is no decision of any other H.C. contrary to that decision, Tribunal has to follow that view, not withstanding fact that its earlier Bench had taken a view contrary to that of H.C. on that point.CIT Vs Godavridevi Saraf (Bom) 113 ITR 589 ITO Vs P.M. Suthar (ITAT, Ahd-TM), 53 ITD 1Lakshmi Precison screws Ltd Vs DCIT (ITAT, Del) 59 ITD 295

Law declared by Supreme Court is binding on all courts including ITAT & CIT(A) and not Board's Circular contrary to it.American Expresss Bank Ltd. Vs DCIT (ITAT, Mum) 65 ITD 67

Against similar decision of High Court, no appeal was preferred – Does not affect the appeal preferred in other cases, if public interest is involvedState, CBI Vs Sashi Balasubramanian (SC) 289 ITR 8

“ Per incurium ” defined – When an order is passed ignoring the provisions of the statute or binding precedentsCIT Vs B.R. Constructions (AP) 202 ITR 222

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JURISDICTION

Law to be applied is that in force in the Assessment Year unless otherwise provided expressly or by necessary implications.Reliance Jute & Industries Ltd Vs CIT (SC) 120 ITR 921

For wealth-tax cases, law as it stood on first day of assessment year is applicableCWT Vs S.A.P. Annamalai (Mad) 141 ITR 578

Penalty to be levied based on law as on date of committing default.CIT Vs Onkar Saran and Sons (SC) 195 ITR 1CIT Vs Gopi Ram Mulakh Raj (P & H) 178 ITR 680CWT Vs Bhagwan Prasad Kanoi (Cal) 184 ITR 95CIT Vs A. Mohd. Abdul Khader (Mad) 260 ITR 650

Proceedings for imposition of penalty can be initiated only after an assessment order has been made – who has the authority to impose penalty at that point of time, should remain the authority finally to impose penalty also.Varkey Chacko Vs CIT (SC) 203 ITR 885.CIT Vs Kausalya & others (Bom) 216 ITR 660

Circulars dated 4.10.69 and 18.9.72 on the same subject – A.Y. 1971-72 - Circular dated 04.10.69 is law applicable on the 1st day of AY – irrespective of accounting year followed.CIT Vs Prasad Production P. Ltd. (Mad) 179 ITR 147CIT Vs Jyoti Pictures (AP) 169 ITR 412

CBDT is not competent to give directions regarding the exercise of any judicial power by its subordinate authoritiesJ.K. Synthetics Ltd and Ors. Vs CBDT & Ors. (SC) 83 ITR 335

As per the address given on the return filed by assessee himself, jurisdiction over the case vests with an Assessing Officer – Notice u/s 143(2) issued by him but no objection raised against jurisdiction u/s 124(3) – Assessment validRam Bhaj & Sons (P.) Ltd. Vs ITO (ITAT, Asr) 102 ITD 93

Assessment proceedings are quasi judicial in nature. While making assessments, ITO is solely to be guided by provisions of law and not instructions of CBDT.Raja V.V.R.K. Yachendra Kumar Rajah of Venkatagiri Vs ITO & Anr. (AP) 70 ITR 772

Circulars cannot over-ride provisions of act – Circular giving concession can be withdrawn prospectivelyState Bank of Travancore Vs CIT (SC) 158 ITR 102Kerala Financial Corporation Vs CIT (SC) 210 ITR 129

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Circular which is contrary to provisions of law is not binding on IT Offices.Ambika Constructions Vs ITO & Ors. (Patna) 234 ITR 716Delhi Flour Mills Co. Ltd. Vs CIT (Del) 95 ITR 151

Circulars issued by Company Law Board – Not binding on IT authoritiesStumpp, Schule and Somappa Ltd Vs CIT (Kar) 190 ITR 152

Circular issued by CBDT not binding on CourtCIT Vs Abhishek Industries Ltd. (P&H) 286 ITR 1For AY 73-74, IAC was vested with jurisdiction to exercise his powers conferred upon him u/s 271(1)( c) irrespective of the fact that the order in question was passed after coming into force of the amendment taking away this right from IAC.CIT Vs Kashi Prasad & Sons ( All ) 222 ITR 626

Tribunal setting aside assessment and remitting matter to ITO – ITO has jurisdiction to consider entire matters afresh. CIT Vs D. Veerappan (Mad) 215 ITR 533Nenmal Champalal Sha & Ors Vs CIT (Bom) 238 ITR 266CIT Vs Highway Constructions Co.(P) Ltd (Gau) 223 ITR 498Saheli Synthetics (P) Ltd. Vs ACIT (ITAT, Ahd) 57 ITD 65

There is no inherent right of appeal – It is to be specifically conferred by the statute providing for an appeal.Caltex Ore Refining (India) Ltd. Vs CIT (Bom) 202 ITR 375.

High Court having jurisdiction over ITO who made the assessment can hear a reference arising out of the ITO’s ordersCIT Vs Madanlal and Co. (Kar) 202 ITR 360CIT Vs Parke Davis Ltd. (AP) 239 ITR 820Suresh Desai & Associates Vs CIT (Del) 230 ITR 912

Letters addressed by CBDT to State Government –cannot be treated as Circular CIT Vs Kerala Financial Corpn. Ltd,. (Ker) 155 ITR 246

Order transferring a file cancelled by High Court – Before High Court order, new Assessing Officer passed assessment orders – Not invalid – To be set-aside and remand to the Assessing Officer having jurisdiction.ACIT Vs Shravan Mahipat Hedau (HUF) (ITAT, Amritsar) 62 ITD 70

Transfer of case from one Assessing Officer to another – Order u/s 127 necessary.All India Children Care & Educational Dev. Society Vs JCIT (ITAT, All) 87 ITD 209

A wrong reference to the power under which an order is made does not per se vitiate the order if there is some other power under which the order could

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lawfully be made. The validity of the impugned order has to be tested by reference to the question whether the ITO had any power at all to make an order of this nature. If the power is otherwise established, the fact that the source of power has been incorrectly described would not make the order invalid.VR.C.RM. Adaikkappa Chettiar Vs CIT (Mad) 78 ITR 285R.P. Kandaswami & others Vs CIT (Mad) 49 ITR 344

If subsequent amendment enlarges time limit while period of limitation prescribed under old law has not expired, subsequent law will govern the proceedings.Gujarat Forging (P) Ltd. Vs ITO (ITAT, Ahd) 56 ITD 208

Lack of jurisdiction will vitiate the proceedings rendering them and the orders passed therein as nullity.Budlina Swain & others v. Gopinath Deb & Ors. AIR 1999 SC 2089

Existence of alternate remedy – Not a bar for writCIT Vs Foramer France (SC) 264 ITR 566Carried on business at Delhi – Head Office at Delhi – Territorial jurisdiction vests with Assessing Officer at Delhi - Assessee challenged jurisdiction at Ghaziabad and requested CCIT, Kanpur to transfer file –specific order by CCIT, Kanpur is not necessary – Transfer order issued by CCIT, Delhi is valid. Since Assessing Officer at Delhi has territorial jurisdiction, 148 notice issued prior to file transfer order is valid.Amulya General Trading & Agencies Ltd. Vs ACIT (ITAT, Del) 65 ITD 329.

Tribunal passing order u/s 260(1) to give effect to opinion of High Court – Subsequent decision of Full Bench of the same High Court in case of another assessee taking a different view – Tribunal has no power to implement decision of Full Bench.Sasidhara Shenoy & Bros. Vs DCIT (Ker) 241 ITR 333.

Notification will come into operation as soon as it is published in official gazette.Union of India Vs. Ganesh Das Bhojraj (SC) 244 ITR 691.CIT Vs Haripal Singh (P&H) 224 ITR 147

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LIFTING OF CORPORATE VEIL

Dealings involving funds transfer to near and dear ones need to be looked into with care and caution and necessary inferences drawn if there are abnormalities attaching to such transactions.Siddho Mal & Sons Vs CIT (Del) 122 ITR 839CIT Vs Shekhawai Rajputana Trading Co.(P) Ltd. (Cal) 236 ITR 950Workmen, Associated Rubber Industry Ltd. Vs Associated Rubber Industry Ltd. (SC) 157 ITR 77Union of India & Ors. Vs Playworld Electronics P. Ltd. & Anr. (SC) 184 ITR 308CIT Vs Indian Express Newspapers (Madurai) P. Ltd. (Mad) 238 ITR 70

Colourable devices are not part of tax planningMcDowell and Co. Ltd. Vs Commercial Tax officer (SC) 154 ITR 148

Assessee having deposit with company – At the instance of assessee credit transferred to a firm constituted by assessee’s children – Return of sum by firm to company – company again transfer it to assessee’s children – Not general loan transaction – Interest on deposits taxable in assessee’s hands S.P. Jaiswal etc. Vs CIT (SC) 224 ITR 619

IT Authorities are not bound to recognise a firm merely because the firm has been registered under the Partnership Act. If ITO finds on investigation that number of firms carrying on business under different names really belong to one and the same group of persons, he can hold it as not a genuine firm.Ladhu Ram Taparia Vs CIT (SC) 44 ITR 521

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OPPORTUNITY OF BEING HEARD

ITO issuing notice u/s.271(1)(a) – No explanation furnished by assessee – change of ITO – assessee not asking for opportunity to be heard by successor ITO – Imposition of penalty by successor ITO without giving assessee opportunity to be heard – Penalty valid.CIT Vs Laljidas Agarwalla (Patna) 190 ITR 429CWT Vs Gilliaram Suggiram (Patna) 186 ITR 445CWT Vs Azizunnisa Begum (SC) 243 ITR 852

Change of incumbent of office during pendency of assessment proceedings – As per Sec.129, re-hearing by new officer is not obligatory – it is required only when there is a demand from assessee.K. Venkata Ramana & Budha Appa Rao Vs CIT (AP) 168 ITR 747CWT Vs Umrao Lal (All) 136 ITR 49

Opportunity to be heard afforded to major partner of firm – Amounts to opportunity to be heard given to firm.Manaklal Porwal Vs CIT (Raj) 155 ITR 648

Assessee not availing of opportunities given before completion of assessment – Not entitled to allege contravention of principles of natural justice.P.N. Baslasubramanian Vs ITO & Ors. (AP) 112 ITR 512

The principle of “audi alteram partem” only means that the party affected should be given sufficient opportunity to meet the case against him. It is not necessary that assessee should be heard at each and every stage of proceedings – when an appeal was filed before AAC, ITO’s orders merges with order of AAC and where there is no grievance that no opportunity was given by AAC, he cannot have a grievance that he was denied reasonable opportunity by ITO.Kashmir Vastralaya Vs CIT (Pat) 112 ITR 630

ITO is not bound by any technical rules of the law of evidence – He can record statement from witnesses in the absence of assessee – But before using the same, assessee should be given opportunity to cross –examine.C. Vasantal & Co. Vs CIT (SC) 45 ITR 206

Firm dissolved - Penalty notice issued to one of the partners – is sufficient notice – Individual notice on every partner is not necessary.India Chemical Agency Vs CIT (Mad) 119 ITR 569

For every reason formulated by ITO in his order, no need to give opportunity to produce fresh evidence or fresh explanation.Newton Chikli Collieries Ltd. Vs CIT (SC) 44 ITR 495

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DCIT Vs Subhash Kumar Jain (ITAT, Chd) 69 ITD 313

Right to cross –examine witness who made adverse report, is not an invariable attribute of requirement of ‘audi alteram parterm’ - When statement of witness is only secondary evidence, there is no denial of natural justice if witnesses were not allowed to be cross-examined by assessee.G.T,.C. Industries Limited Vs ACIT (ITAT, Bom) 65 ITD 380 Suit against Public Officer in respect of act done under warrant of authorization – opportunity to be granted to Public Officer before granting relief – notice mandatoryUnion of India v. Natwarlal M. Bandari (Guj) 250 ITR 641

Simply because an opportunity of being heard was not given to the assessee, will not invalidate an assessment order – It is only a procedural lapseKailash Moudgil Vs DCIT (ITAT, Del-SB) 72 ITD 97

If assessee is aware of the contents of the statements recorded from witnesses, failure to provide copies of the same before cross-examination, is not fatal – Addition on account of inflation of purchase price upheldH.M. Sarif and Sons Vs CIT (All) 296 ITR 523

Non-furnishing of copy of statement given by production-in-charge did not amount to denying opportunity of cross examination to assessee, especially when the addition was made solely on the basis of return filed, documents produced and submissions made by assessee.DXN Herbal Mfg. (India)(P.) Ltd. Vs ITO (ITAT, Chennai) 110 ITD 99

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PROCEDURAL LAPSE – When fatal ?

A wrong reference to the power under which an order is made does not per se vitiate the order if there is some other power under which the order could lawfully be made. The validity of the impugned order has to be tested by reference to the question whether the ITO had any power at all to make an order of this nature. If the power is otherwise established, the fact that the source of power has been incorrectly described would not make the order invalid.VR.C.RM. Adaikkappa Chettiar Vs CIT (Mad) 78 ITR 285R.P. Kandaswami & others Vs CIT (Mad) 49 ITR 344CIT Vs Hargopal Balan & Sons (P &H) 82 ITR 243L. Hazir Mal Kuthiala Vs ITO & Anr. (SC) 41 ITR 12CIT Vs Motor Industries Co. (Kar) 229 ITR 126K.P. Paulose & Co. Vs CIT (Ker) 230 ITR 798

Non-mention of Section under which statement of assessee is recorded will not invalidate statement recorded during course of proceedings u/s.132A.ACIT Vs M.V. Nagaraja (ITAT, Bang) 70 ITD 318

Failure to mention specific provision under which interest is charged does not make the order bad.CIT Vs Quality (Pat) 224 ITR 77

Assessment completed without following prescribed procedure – Non-compliance is only a procedural irregularity and will not render the assessment ab initio void – Direction to ITO to redo assessment after following prescribed procedure is validG.R. Steel and Alloys P. Ltd,. Vs CIT (Kar) 152 ITR 220Saraljit Singh Vs CIT (Del) 234 ITR 641V. Raju Vs CIT (Mad) 147 ITR 212M.S. Kimtee Vs CIT (MP) 151 ITR 73

Assessee participating in reassessment proceedings – Failure to consider objection to 148 notice and failure to issue notice under section 143(2) – Reassessment order not void but irregular – Matter remitted to assessing OfficerAreva T & D India Ltd. Vs ACIT (Mad) 294 ITR 233

Penalty proceedings validly initiated – No opportunity of being heard given – Order set-aside – Continuation of proceedings from stage of notice – validGuduthur Bros Vs ITO (SC) 40 ITR 298Thakur V. Hari Prasad Vs CIT (AP) 167 ITR 603Addl. CIT Vs Boina Surana (AP) 124 ITR 328

Where an invalid assessment is annulled, it should be remanded to the ITO so that the assessee is not set at large without payment of tax

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CIT Vs Anaimugan Transports (P) Ltd. (Mad) 215 ITR 553

Death of assessee in course of assessment procedure – Legal representative impleaded and heard – Assessment order mentioning name of deceased assessee instead of legal heir – Only a clerical error – Assessment is validSwaran Kanta Vs CIT (P & H) 176 ITR 291

Assessment order passed without giving notice to assessee – Assessment only legally vitiated but not warranting annulment.C.G.G. Panicker Vs CIT (Ker) 237 ITR 443Notice to only one legal representative of deceased – No objection taken by him and other legal representatives against non-impleadment of other heirs – assessment so made is valid.ITO Vs Shahid Atiq, L/H of Late Atiquer Rehman (ITAT, Del) 89 ITD 489CIT Vs Chandra Mohan Verma (All) 244 ITR 430CIT Vs Pushpa Devi (Raj) 250 ITR 495A.K.M. Govindaswamy Chettiar & Ors. Vs ITO ( Mad ) 244 ITR 559

Assessment order against deceased passed after his death – His son, with an advocate appeared in the proceedings – Assessment set-aside to ITO for impleading the legal heirsCIT Vs Roshan Lal & Ors. (Del) 134 ITR 145

Penalty u/s 271(1)( c) quashed by CIT(A) as ITO had not obtained approval of IAC – ITAT directed ITO to pass an order afresh in accordance with law – held ITAT was justified.Prabhudayal Amichand Vs CIT ( M P ) 180 ITR 84 CIT Vs Vijay Dal Mills (MP) 230 ITR 301Gayathri Textiles Vs CIT (Kar) 243 ITR 674Sardar Harinder Singh Vs ITO & Ors. (All) 219 ITR 257CIT Vs Damodardas Murarilal (AP) 222 ITR 401

Act does not contemplate a hearing being given to the assessee by IAC before approving the penalty.Lachmandas Mahar Chand Vs ITAT (Lahore) 12 ITR 432.

Office note is part of assessment orderBimla Gulati Vs Appellate Asst. Commissioner (MP) 165 ITR 296

Computation of Total income made in assessment order and tax computed only on ITNS 50 – valid.CIT Vs Hotel Highland Park (J&K) 246 ITR 130

Determination of tax not incorporated in assessment order but on a separate sheet of paper accompanying it – forms part of assessment orderKaruna Rani Jain & Ors. Vs CIT (P&H) 178 ITR 321

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Kalyankumar Ray Vs CIT (SC) 191 ITR 634Shashi Mangla Vs ACIT (ITAT, Del ) 60 TTJ 362

Notice issued u/s.148 vague as ‘status’ not mentioned therein – Assessee consciously and intentionally waived his right to object to defect in notice – Defect stood caused by sec.292 B – notice valid CIT Vs Rajbir Singh (P & H) 233 ITR 126

Mere mistake in language used in penalty notice and non-striking of the inapplicable portion cannot by itself invalidate the notice.CIT Vs Kausalya and others (Bom) 216 ITR 660H.P. State Forest Corpn. Ltd. Vs CIT & Ors. (HP) 267 ITR 285CIT Vs Maharaj Kishan (Del) 246 ITR 327

Penalty notice served along with an enclosure – Enclosure signed by ITO but notice not signed – Penalty not vitiated – There is nothing to indicate that the assessee was prejudiced by the defective notice served on him.Kashmir Vastralaya Vs CIT (Pat) 112 ITR 630

Failure to serve Demand Notice – Recovery proceedings – not validMohan Wahi Vs CIT & Ors. (SC) 248 ITR 799Original assessment allowing development rebate – AAC set-aside whole assessment order – During fresh assessment proceedings, information that machinery was sold within 10 years – Development rebate can be rejected straight away – No need to allow it first and cancel u/s.35(11).Indian Motors Transport P. Ltd Vs CIT & Ors. (SC) 156 ITR 489

Failure to quantify amount of penalty in the order – will not invalidate orderAssam Frontier Veneer & Saw Mills Vs CIT (Gau) 104 ITR 479CIT Vs Jayantilal Meghani (Cal) 244 ITR 468

Office copy of notice available in assessment records – show notice validly issued by Assessing Officer – No evidence for proper service of such notice – Illegality occurred at this stage – Assessing Officer can proceed further from this stageRaju Saigal Vs ITO (ITAT, Del) 106 Taxman (Mag) 12.

Death of assessee – Notice issued in the name of a person who was dead – widow of such person participating in re-assessment proceedings. Defect in notice stood automatically cured.Kausalyabai Vs CIT (MP) 238 ITR 1008

Non-service of assessment order before serving of demand notice would not invalidate assessment order.Surya Proteins Ltd. Vs ACIT ( ITAT, Indore ) 56 ITD 367

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After abolition of Sec. 144B, Assessing Officer passed order after getting approval of Deputy Commissioner – Only a procedural lapse - Does not make assessment order invalid.Amulakhbhai R.Patel Vs ACIT (ITAT, Ahd) 68 ITD 434

Penalty proceedings conducted by IAC – IAC directed ITO to levy penalty and to issue Demand Notice - Penalty validA.M. Shah & Co. Vs CIT (Guj) 238 ITR 415

Omissions of Assessing Officer to confront assessee with materials collected by him – Irregularity in exercise of jurisdiction and not lack of jurisdiction – Remand to Assessing OfficerCIT Vs Bharatkumar Modi (Bom) 246 ITR 693

Calling for information u/s.133(6) without approval of CIT – Procedural lapse – curable defect – Still material obtained can be used.Gyarsri Lal Gupta & Sons Vs ITO (ITAT, JP) 94 ITD 329.

Expl. 3 to sec. 153 – Direction by CIT(A) to initiate re-assessment proceedings against third person – Such person was aware of proceedings and given opportunity of being heard – Formal notice not necessary – Proceedings validAtul Traders Vs ITO ( All ) 282 ITR 536

Assessment order in the name of non-existent entity was passed on account of ignorance of fact of amalgamation. Irregularity only – Remit to Assessing Officer to issue notice in the name of successor companyCentury Enka Ltd. Vs DCIT ( Mum ) 101 ITD 489 144 Asst – Registration cancelled without affording opportunity – Not justified - Matter restored to Assessing Officer for considering afresh.Indotia Construction Co. Vs ITO (ITAT, Jp) 61 TTJ 398

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SERVICE OF NOTICE

Notice in the name of Company received by Director – Attended further proceedings – Later on cannot challenge validity of service of notice.Southern Plantations Ltd.Vs Commissioner of Agrl. IT (Ker) 236 ITR 509

Chartered Accountant representing assessee received notice and assessee ratified receipt of notice – Estoppel from challenging service of notice on Chartered Accountant.Y. Rajendra, DCIT Vs Khoday Eshwarsa & Sons & Ors. (Kar) 272 ITR 448

Notice served on assessee’s husband – Assessee participating in proceeding – valid serviceCIT Vs Kanti Devi Gupta (MP) 274 ITR 526CIT Vs Uttam Chand Nahar (Raj) 295 ITR 403

Notice served on the father of the assessee who was also the Managing Partner of the firm in which assessee is a partner – Service validLatha Chandy Vs CIT (Ker) 260 ITR 385

Notice by affixture – No objection to mode of service of notice – Assessee participating in proceedings before Assessing Officer and CIT(A) – Irregularity in notice waived by assessee - assessment valid.CIT Vs Premium Capital Market & Investment Ltd (MP) 275 ITR 260

Notices dispatched by Registered Post – Either not received back or received back with endorsement “refused” – Deemed serviceRamesh Khosla Vs ITO & Anr. (P&H) 155 ITR 556

Notice send by speed post – Quite reasonable to infer that it was served within 3-4 daysCapital Gem Overseas (P) Ltd. Vs ITO ( ITAT, Del ) 101 ITD 117

Service of notice on agent – Different persons have acted in the past in absence of power agent to receive notices – Service on one such person – Notices were complied with – Assessee raised no objection before ITO – such service constitute valid service.A.K. M. Govindaswamy Chettiar & Ors.Vs ITO (Mad) 244 ITR 559X vs. ITO (ITAT, Bang) 9 ITD 715CIT Vs Regency Express Builders P. Ltd. (Del) 291 ITR 55

Receipt of notice by employee who endorsed his acknowledgement under the seal of firm – Valid serviceM.X. De Nornha & Sons Vs CIT (All) 18 ITR 928

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Though the notice sent to assessee firm was served on a person who was not a partner of assessee firm, it is valid as the assessee failed to establish that such person was a stranger and was not concerned with day-to-day business of the firm.Salar Publications Trust Vs ITO & Anr. (Kar) 235 ITR 13

Assessee for the first time filed affidavit before ITAT in which it denied receipt of notice under section 143(2) – ITAT erred in placing reliance on such belated affidavit – Presumption of service of notice not successfully rebutted by assessee.CIT Vs Vins Overseas India Ltd (Del) 165 Taxman 95Burden on assessee to prove that there was no service of notice under section 143(2) within timeCIT Vs Shanker Lal Ved Prakash (Del) 300 ITR 243

“Forwarding” of draft assessment order – date on which it was given to process-server or delivered at post office or handed over to representative of assessee.CIT Vs Shahzadi Begum (AP) 225 ITR 963.

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STATEMENTS RECORDED – USE IN ASSESSMENT & RETRACTION

Authorised Officer can record statement on oath on all matters pertaining to suppressed income – Explanation to Sec. 132 inserted w.e.f. 1.4.89 is clarificatory- Assessment on the basis of the voluntary statement was valid V. Kunhambu & Sons Vs CIT (Ker) 219 ITR 235Iswardin Mewalal Vs CIT (MP) 169 ITR 584Greenview Restaurant Vs CIT (Gau) 263 ITR 169

Presumption u/s 132(4) is applicable to the assessment proceedings alsoP.R. Metrani Vs CIT (SC) 287 ITR 209

Addition made on the basis of admission by assessee – justified.Hira Singh and Co Vs CIT (HP) 230 ITR 791

Where the petitioner entered into a voluntary settlement with the Government and his liability to pay tax arose from such settlement, he cannot question the settlement – unless and until he can establish that his consent was improperly procured.Dewan Bahadur Seth Gopal Das Mohta Vs The Union of India & Ors.(SC) 26 ITR 722

An admission is the best evidence that an opposing party can rely upon and though not conclusive, is decisive of the matter, unless successfully withdrawn or proved erroneous.Narayan Bhagwantrao Gosavi Batajiwale Vs Gopal AIT 1960 SC 100Pranav Construction Co. Vs ACIT (ITAT, Mum) 61 TTJ 145

Preliminary statement recorded before start of actual search in which questions put to assessee were general in nature and not related to any specific asset / document – Not a valid legal statement – cannot be relied upon. Second statement during search – valid – could not be ignoredRishab Kumar Jain Vs ACIT (ITAT, Del) 63 TTJ 236

Customs Officials are not Police Officers. The confession through retracted, is an admission and binds the petitioner.Surjeet Singh Chhabra v. Union of India AIR 1997 SC 2560

In statement u/s 132(4), assessee never indicated about receipt of agricultural income outside the books – Later on assessee cannot change stand.Jaikisan R. Agarwal Vs ACIT (ITAT, Pune) 66 TTJ 704

In a case where party relied on self-serving recitals in documents it was for the party to establish the truth of these recitals. - The taxing authorities were

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entitled to look into the surrounding circumstances and find out the reality of such recitals.CIT Vs Durga Prasad More (SC) 82 ITR 540

For retraction to be valid, threat or coercion has to be proved .Manharlal Kasturchand Chokshi Vs ACIT (ITAT, Ahd) 61 ITD 55Param Anand Builders Vs ITO (ITAT, Mum) 59 ITD 29Works of Art (P) Ltd, Vs ACIT (ITAT, Jp) 65 ITD 40Amritlal Bhagwandas Soni Vs DCIT (ITAT, Ahd) 59 TTJ 418Hiralal Maganlal & Co. Vs DCIT (ITAT, Mum) 96 ITD 113

Addition on the basis of stock statement given to Bank – valid.Coimbatore Spinning & Weaving Co. Ltd. Vs CIT (Mad) 95 ITR 375CIT Vs Ashok Textiles (P) Ltd. (Ker) 141 ITR 785Great Indian Textiles Vs DCIT (ITAT, Cochin) 58 TTJ 123God Granites Vs ITO (ITAT, Bang) 65 ITD302Tip Top Plastic Industries P. Ltd. Vs ITO (Mad) 214 ITR 778Kaila Sweet Supplier Vs CIT (All) 100 Taxman 59S. Murugappa Chettiar Vs CIT (Ker) 174 ITR 245Ramanlal Kacharulal Tejmal Vs CIT (Bom) 146 ITR 368

Valuation done by qualified engineers for LIC and loan advanced by LIC on that basis – AO can rely on such valuation report.G. Anirudhan Vs ACIT (ITAT,Cochin) 60 TTJ 49

When statement was made voluntary and was not alleged to have been obtained under threat or coercion, onus was on assessee to prove that said declaration was made under any misconception of facts – Since assessee had not taken any steps to rectify its declaration before authorities before whom such declaration was made, there was no valid reason for retraction of same after a gap of about two and a half monthsCarpenters Classics (Exim) (P) Ltd. Vs DCIT ( ITAT, Bang ) 108 ITD 142

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STAY ORDERS

To grant interim relief straightaway will jeopardize public interest.Union of India & Ors. Vs Oswal Woollen Mills Ltd. (SC) 154 ITR 135Assistant Collector of Central Excise Vs Dunlop India Limited & Others (SC)154 ITR 172

Only when strong prima facie case is made out, in deserving and appropriate cases, Tribunal should grant stay.ITO Vs M.K. Mohammed Kunhi (SC) 71 ITR 815Khivraj Motors Ltd. Vs DCIT & Ors. ( Mad ) 205 ITR 462Sri Balaji Trading Co. Vs DCIT & Anr. (Mad) 175 ITR 428

Non-compliance of Tribunal’s direction was a clear act of contempt of court – extension of stay sought after stay granted expired – Application needs to be rejected.Endeavour Investments Ltd. Vs DCIT (ITAT, Mad – TM) 70 ITD 17Roxy Eng. P. Ltd. Vs ACIT ( ITAT, Chd ) 68 TTJ 482

No early hearing when demand is not huge – Bench has to order early hearing.Olympia Paper & Stationery Stores Vs ACIT (ITAT, Mad) 63 ITD 148

Stay Petition moved by Public Sector undertakings – COD permission necessary.Transmission Corpn. Of A.P. Ltd. Vs ACIT (ITAT, Hyd) 97 ITD 171

Demand for several assessment years – separate stay petition necessary.Wipro Ltd.Vs ITO (ITAT, Bang) 86 ITD 407.

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Income Tax Act related topics

GENERAL ISSUES

Additional Commissioner is also Joint CommissionerArun Kumar Maheshwari Vs ITO (All) 285 ITR 179

Instruction that cases where international transactions exceed Rs. 5 crore to be taken up for scrutiny – No discrimination – Instruction validSony India P. Ltd. Vs CBDT (Del) 288 ITR 52

Reduction of loss – Not a case of NIL tax effect – Instruction of CBDT fixing monetary limit for filing of appeal does not affect maintainability of appeal in such casesCIT Vs Abhishek Industries Ltd. (P&H) 286 ITR 1

FD in Bank attached by Dept – Can foreclose such FDVysya Bank Ltd. Vs JCIT & Anr. (Kar) 241 ITR 178

Bank statement is not books of accounts maintained by assessee.ITO Vs Samyeshi Majhi (ITAT, Calcutta) 13 ITD 61.

IT proceedings – strict rules of evidence do not apply – conclusive proof is not necessary to arrive at a conclusion / to establish a fact.Mriganka Mohan Sur Vs CIT (Cal) 120 ITR 529

Claim that substantial amounts have been won in horse racing in two consecutive accounting years – claim is not justified considering the test of human probabilities.Sumati Dayal Vs CIT (SC) 214 ITR 801

Protective assessment permissible but appellate authorities cannot make protective orderCIT Vs Durgawati Singh (All) 234 ITR 249Jagannath Bawri & Ors. Vs CIT & Ors. (Gau) 234 ITR 464

Units of UTI are not sharesCIT Vs Apollo Tyres Ltd. (Ker) 237 ITR 706Shree Synthetics Ltd. Vs DCIT (ITAT, Indore) 61 ITD 253

Manufacturing beedis –no patent / copyright / know-how involvedCIT Vs Mangalore Ganesh Beedi Works (Kar) 264 ITR 142

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Assessing Officer cannot entertain claim for deduction otherwise than by filing a revised returnGoetze (India) Ltd. Vs CIT (SC) 284 ITR 323

Controlling interest in the company is an incidence of shareholding and has no independent existence – It is by reason of control over the shares that the shareholder is able to exercise control over the managementVenkatesh & Ors. Vs CIT (Mad) 243 ITR 367

The word “business” is one of wide import and it means an activity carried on continuously and systematically by a person by the application of his labour and skill with a view to earning an incomeBarendra Prasad Ray Vs ITO (SC) 129 ITR 295 pp. 296Works Contract – definedState of Gujarat ( Commissioner of Sales Tax), Ahmedabad Vs Variety Body Builders (1976) CTR (SC) 228Venguard Rolling Shutters & Steel Works Vs Commissioner of Sales Tax (1977) CTR (SC) 190The Assistant Sales Tax Officer Vs B.C. Kame (1977) CTR (SC) 67Crompton Engineering Co. Ltd. Vs The State of Tamil Nadu (1976) CTR (Mad) 428CIT Vs Kumudam Publications P. Ltd. (Mad) 188 ITR 84

Diaries are not books of accountsSheraton Apparels Vs ACIT (Bom) 256 ITR 20

Composite business – Tests – Single books of accounts, carried on business in the same premises, no bifurcation in the bank accounts, common administration, common funds, common management, unity of control etc.CIT Vs Kothari & Sons ( Agencies ) P. Ltd. ( Mad ) 211 ITR 928Veecumsees Vs CIT ( SC ) 220 ITR 185B.R. Ltd. Vs V.P. Gupta ( SC ) 113 ITR 647Produce Exchange Corpn. Ltd. Vs CIT ( SC ) 77 ITR 739CIT Vs Late T.S. Srinivasa Iyer ( Mad ) 192 ITR 50

Firm of Chartered Accountants – Carries on “Profession” and not “Business”G.K. Choksi and Co. Vs CIT (SC) 295 ITR 376

Limitation – Assessment of income to be completed within the time period provided in the statute – However the order of assessment need not be communicated within that period.RM. P.R. Viswanathan Chettiar Vs CIT (Mad) 25 ITR 79

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LOSS / DEPRECIATION – CARRY FORWARD & SET-OFF

Since income from a certain activity is not taxable, loss incurred in such activity cannot be set off against income from other headsCIT Vs S.S. Thiagarajan (Mad) 129 ITR 115

Loss return filed after due date disclosing 115 J income – since RI filed late, no carry forward of loss to subsequent year.ACIT Vs Dynavision Ltd (ITAT, Chennai) 88 ITD 213

Carry forward and set off of unabsorbed depreciation and losses – Specific and clear finding in prior assessment years, is necessary.Sri Rajarathinam Transports P. Ltd. Vs CIT (Mad) 199 ITR 203S.K.V. Selvaraj Vs CIT (Mad) 240 ITR 217

No appeal filed in the year in which loss occurred for which return filed late and Assessing Officer did not allow carry forward of loss – Appeal in subsequent year in which profit was earned to get this loss set off – Not maintainable.CIT Vs Dalmia Cement (Bharat) Ltd. (SC) 216 ITR 79Poddar Tyres Limited Vs DCIT (ITAT, Mum) 59 ITD 548

Brought forward unabsorbed depreciation of one amalgamating firm cannot be set off against profit of amalgamated firm.Anand & Co. Vs ACIT (ITAT, Kol) 89 ITD 125

Carry forward of loss – Assessee receiving share of loss from firm – Assessee not filed return – Loss not allowed to carried forward.K.V.K. Raju (HUF) Vs CIT (AP) 252 ITR 724

A Member of AOP cannot claim in his personal assessment, set off of his share of loss in AOP.CIT Vs Lalitha M. Bhatt (Bom) 234 ITR 319

Loss of AOP can be set off only against its own profits and not against profits of its members.CIT Vs Lalita M. Bhat (Bom) 234 ITR 319

Merger of Co-operative Societies and formation of a new co-operative society – carry forward losses of merged co-operative society cannot be set off against profits of new co-operative society.Rajasthan Rajya Sahakari Spinning & Ginning Mills Fed. Ltd. Vs ITAT & Anr. (Raj) 260 ITR 167

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Share of loss from Trust – No need to adjust this against individual income of beneficiaries as done in partner’s cases.M. Manoj Shenoy Vs ITO (ITAT, Bang) 35 TTJ 333

Machinery and Plant sold – No manufacturing activity carried on – Receiving interest income on outstanding dues on sale of plant & machinery – No actual sale of stocks – No continuation of business – Interest income not from business – Brought forward loss cannot be set off against interest income – claim of bad debts cannot be allowed.Good earth Engines (P) Ltd. Vs ACIT (ITAT, Del) 62 TTJ 740

Loss in jute business – Discontinuance of business – Income from letting out godown used in jute business held assessable as House Property income – Loss in earlier year cannot be set off.CIT Vs Bengal Jute Mills Co. Ltd (Cal) 165 ITR 631

Carry forward loss and unabsorbed depreciation – set off of – Business should be carried on.Nakavar Agricultural Co. Ltd. Vs CIT (Ker) 229 ITR 548

Two proprietary business – Separate accounts – Separate premises – separate entities – one business stopped – Loss of that business cannot be set off against income from the other business.C.L. Mehra Vs ITO (ITAT, Del) 59 ITD 99

Unabsorbed depreciation to be set off before unabsorbed Investment Allowance.Seshasayee Paper & Boards Ltd. Vs DCIT (Mad) 272 ITR 165

Return of loss filed in response to notice u/s.148 – No carry forward and set off.Koppino Pvt. Ltd. Vs CIT ( Cal) 207 ITR 228

Cost of prints cannot be included in cost of acquisition of exhibition right in film which can be carried forward – Rule 9BITO Vs Honey Enterprises (ITAT, Del) 89 ITD 301

Assessee never admitted the Trust as his benami – ITO rejected set off of loss in the case of Trust against income of assessee – upheld in spite of the fact that income from said Trust was included in the hands of assessee in earlier years.ITO Vs B.N. Mathur (ITAT, Del) 30 ITD 9

Claim of loss from share transaction – some brokers not identifiable – some brokers could not file details – No details of distinctive number of share scrips purchased / sold, given – Loss not provedACIT Vs Rameshchandra R. Patel (ITAT, Ahd-TM) 89 ITD 203

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A.Y. 1999-00 - Brought forward depreciation of earlier years cannot be set off against capital gainsSouthern Travels Vs ACIT (ITAT, Chennai-SB) 103 ITD 198

Transport business - Not maintaining books - Income computed u/s 44AE - Assessee not entitled to set off unabsorbed depreciation.DCIT Vs Sunil M. Kankariya (ITAT, Pune) 298 ITR (AT) 205

Provisions of section 71(2) and 72(1) to be read in harmony – Word ‘may’ used in section 71(2) is only to give flexibility to the assessee which may choose to adjust the losses against other income including capital gains.Ashok Leyland Ltd. Vs ACIT 2008-TIOL-15-ITAT-MAD

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LOSS FROM SPECULATION

Speculative transaction – if actual delivery of share scrips does not take place both for purchases as well as sales – Sec.43(5) – delivery recalled by brothers – No actual delivery – speculative transaction. – Loss can’t be set off against business income.ACIT Vs Claytone Commercial Co. Ltd. (ITAT, Delhi) 67 ITD 118Ram Lal & Sons Vs ITO (ITAT, Asr) 71 ITD 256

Purchase of shares and sales back to them at a loss – No evidence about effective delivery of shares and payment of purchase consideration – transaction not genuineCIT Vs Shekhawati Rajputana Trg. Co. (P) Ltd. ( Cal ) 236 ITR 950

Transaction of purchase and sale of units & Government securities by Banking Company through Banker's Receipt without actual delivery – speculative transaction ANZ Grindlays Bank Vs DCIT ( ITAT, Del) 88 ITD 53

Shares purchased from broker on principal to principal basis and resold without taking physical delivery of shares – Loss by paying difference between purchase and sale value of shares – Speculation lossBhikamchand Betala and Sons Vs ITO (Gau) 294 ITR 10

Applicability of Sec. 73 - Set off of Speculation Loss - No need to prove tax avoidanceDCIT Vs Front Line Capital Services Ltd. ( ITAT, Del ) 96 TTJ 201 overruled SMC

decision in Aman Portfolio (P) Ltd. Vs DCIT

Sec. 73 and 43(5) operate in different fields - Sec. 73 applies even to shares transferred with deliveryRohini Capital Services Ltd. Vs DCIT ( ITAT, Del ) 92 ITD 317Paharpur Cooling Towers Ltd. Vs DCIT ( ITAT, Kol ) 85 ITD 745AMP Spg. & Wvg. Mills (P) Ltd. Vs ITO ( ITAT, Ahd-SB ) 100 ITD 142

Provisions of sec. 73 explained in detailMelville Finvest Ltd. Vs JCIT ( ITAT, Hyd ) 89 ITD 528DCIT Vs Aakrosh Investment & Leasing (P) Ltd. ( ITAT, Mum ) 90 ITD 287Yucca Finvest (P) Ltd Vs DCIT ( ITAT, Mum ) 101 ITD 403

Investment companies are not exempted under sec. 73JCIT Vs Haldia Investment Co. Ltd. ( ITAT, Kol ) 85 ITD 212RPG Industries Ltd. Vs ACIT ( ITAT, Kol – TM ) 85 ITD 105

34

Forward transaction – Raw materials in which transaction made must have a direct connection with goods manufactured or items sold.Delhi Flour Mills Co. Ltd,. Vs CIT (Del) 95 ITR 151

Explanation to section 73 – Physical delivery of shares not relevant – Gross Total income does not consist mainly of income chargeable under the heads “Interest on securities”, “Income from House property”, “Capital gains” and “Income from other Sources” OR assessee’s principle business is not banking or granting loans and advances – Exemptions will not applyCIT Vs Intermetal Trade Ltd. (MP) 285 ITR 536

35

RECEIPT OF NRE GIFTS - TAXABILITY

Donors not relatives and friends of assessee – No reason for receiving gifts – Unexplained investment of assesseeLall Chand Kalra Vs CIT (P & H) 22 CTR 135Harish Kumar Singal Vs ACIT (P & H) 276 ITR 355ITO Vs Dr. A.K. Sharma (ITAT, Amritsar) 63 TTJ 380D.C. Rastogi (HUF) Vs ACIT (ITAT, Delhi) 57 ITD 295Jyotsna Suri Vs DCIT (ITAT, Delhi) 61 ITD 139Sanjeev Batra Vs ACIT (ITAT, Del) 69 ITD 23Renu Gupta Vs DCIT (ITAT, Mum) 72 ITD 306Deepak Kumar Agarwal (ITAT, Jab) 110 Taxman 233 (Mag)Mahesh Kumar Singal Vs ACIT ( P & H ) 193 CTR 271CIT Vs P. Mohanakala (SC) 291 ITR 278

Gift of cheque from strangers –no occasion to make gifts - Donor less wealthier – income from undisclosed sources eventhough donors confirmed giftsITO Vs Dr. Jagdish J. Kansagara (ITAT, Ahd) 66 ITD 381

Burden of proof on assessee to establish that donor had means and gift was genuine, for natural love and affectionJaspal Singh Vs CIT (P&H) 290 ITR 306

36

SEARCHES UNDER I.T. ACT

Assessee merely contended that Director of Investigation has no valid information on the basis of which he could issue warrant of search – Assessee not supporting contention with cogent material – Department cannot be asked to produce records to show information having been received – 132(3) order not seizure – No order u/s 132(3) can be passed when Assessing Officer is in doubt whether asset is disclosed or not.Sriram Jaiswal Vs Union of India & Ors.(All) 176 ITR 261

“Reason to believe” need not be disclosed when a mere allegation made by petitioner – Illegality of search does not vitiate evidence collected during search.Dr. Pratap Singh & another Vs Director of Enforcement & Ors.(SC) 155 ITR 166

Preliminary statement recorded before start of actual search and in which questions put to assessee were of general nature – was not at all a statement u/s 132(4) – Revenue cannot rely on such an unauthorized statement.Rishab Kumar Jain Vs ACIT (ITAT,Del) 63 TTJ 236

Evidence collected during an illegal search can be used against the searched party.State of Punjab Vs Baldev Singh etc (SC) 157 CTR 3Vimalchand Jain Vs ACIT (ITAT, Jp) 64 ITD 394Pooran Mal Vs Director of Inspection (Investigation) & Ors. ( SC ) 93 ITR 505

Amount seized and retained u/s 132(5) cannot be adjusted against advance-tax.Kanhaiya Lal Doshi Vs ACIT (ITAT, Jaipur) 56 ITD 486ACIT Vs Topsel (P) Ltd.(ITAT, Cal) 56 ITD 186DCIT Vs Muni Lal & Ors. (ITAT, Chd) 57 TTJ 596

When the search continues over a period, it is not necessary that the same witness should be present on all occasions.T.S. Chandrasekhar Vs ACIT (ITAT, Bang) 66 TTJ 360

Assessing Officer includes ADIT alsoDr. N.S.D. Raju Vs DGIT(Inv.) & Anr. ( Ker ) 282 ITR 154

Initiation of search – when authorities issue authorization and not when it is executedSuraj Prakash Soni Vs ACIT (ITAT, Jodh) 106 ITD 321

37

VDIS / KVSS

VDIS – “income” in respect of which warrant has been issued – income is material and not person to whom warrant is issued – Amount cannot be disclosed under VDIS Nandlal Rander Vs CIT (Cal) 245 ITR 810.

Assessee filing petition under VDS – Disclosure not accepted by Department – Amount disclosed assessable as income from undisclosed sources.Baldeo Prasad Vs CIT (Patna) 166 ITR 205

Immunity conferred under VDIS is of limited character and is not an absolute or universal immunity. The immunity cannot be extended beyond the confines specified by the said provisions.Tekchand etc. Vs Competent Authority (SC) 112 CTR 458

VDIS declaration filed, but tax not paid – No immunityCWT Vs Sudha Devi Khaitan (Pat) 223 ITR 740

Issues decided by A.O. and subject matter of dispute only will be covered in KVSSBhilwara Spinners Ltd. ( ITAT, Jodhpur ) 101 ITD 237TVS Motor Company Ltd. Vs ACIT (Mad) 293 ITR 394

Issues not covered by KVSS are subject to revision u/s 263Siddhartha Tubes Ltd. Vs CIT (ITAT, Ind) 85 ITD 316

KVSS – Pendency of litigation is a must – Artificial creation of such pendency is not permissible.Gopal Films Vs DCIT (Kar) 237 ITR 655

38

STATUS OF ASSESSEE

General

Assessment can be made in a different status than what was claimed in the return.Munilal Shivnarain Kothari Vs CIT (Raj) 149 ITR 567

Correct person to be assessed – Assessment of different persons in respect of same income will not absolve the correct person’s liabilityCIT Vs Sriram Jagannath ( Raj ) 250 ITR 689S.P. Jaiswal etc. Vs CIT (SC) 224 ITR 619CIT Vs Ch. Atchaiah (SC) 218 ITR 239K. Bhoomiamma Vs CIT (Kar) 194 ITR 723ACIT Vs Puri Brs (ITAT, Asr) 69 ITD 165CIT Vs Murugesa Naicker Mansion (Mad) 244 ITR 461

Status of deity is individual.Shri Shankar Bhagwan Estate Vs ITO (ITAT, Cal) 61 ITD 196

State Forest Corporation is not a local authority.CIT Vs U.P. Forest Corporation (SC) 230 ITR 945

Co-operative Society has no power to make retrospective amendment to by-lawsCIT Vs Bazpur Co-operative Sugar Factory Ltd. (SC) 172 ITR 321

Private Ltd. Company becoming a Public Ltd. Company by virtue of deeming fiction under Companies Act – Articles of Association restricting transferability of shares – Company cannot be treated as a Company in which public are substantially interested.CIT Vs Light Publications Ltd (Guj) 251 ITR 120

Trusts for the benefit of general public holds more than 50% shares in a company – But members of the Trust does not have interest in the company – So Company is not one in which public are substantially interestedTata Sons Ltd. Vs DCIT (ITAT, Mum-TM) 104 ITD 45

Official liquidator is principal officer of company – can be directed to file I.T. ReturnsITO, Nellore Vs Official Liquidator (AP) 106 ITR 119

39

Official receiver is not Representative of insolvent – He hold properties on behalf of creditors of insolvent – Transfer of property by official receiver – Capital gains are assessable in his hands.CIT Vs J. Narayana Murthy (AP) 228 ITR 99

Scheme of amalgamation specifying date of transfer – Court not modifying date of transfer – amalgamation takes effect on date of transfer specified in scheme and not on date of court’s order. – From that date income of subsidiary company belongs to holding company.Marshall Sons & Co. (India) Ltd. Vs ITO (SC) 223 ITR 809

Administrator of estate – sale of assets declared – Capital Gains arisesJames Anderson Vs CIT (SC) 39 ITR 123

Firm of clearing, forwarding and shipping agents – Not professional firm.CIT Vs International clearing & Shipping Agency (Mad) 241 ITR 172

Firm – Dissolution – Winding up under supervision of Court – Subsequent sale of assets after few years – Capital Gains assessable in the hands of firm – income earned for the period upto sale assessable in the hands of AOP.Raghurama Prabhu Estate, Executrix, M. Kaveri Bai & Ors. Vs JCIT (Kar) 264 ITR 124

Suit for dissolution of firm – Receivers appointed to carry on the business till winding up – Receivers carried on business on behalf of erstwhile partners with their consent – Profits to be assessed as an AOP.N.V. Shanmugham & Co. Vs CIT (SC) 81 ITR 310

The executor will continue to be assessed until the estate is distributed among the beneficiaries according to their several interests.Navnit Lal Sakarlal Vs CIT (SC) 193 ITR 16

Mother can be natural guardian even during life time of father.Githa Hariharan & Anr. Vs Reserve bank of India & Anr. (SC) 236 ITR 380

As per contract, export benefit received by assessee would be passed on to foreign buyers – Assessee was treated as agent of non-resident foreign buyers u/s 163 in respect of said benefit DCIT Vs A. Tosh & Sons Ltd. (ITAT, Kol) 89 ITD 138

Tax paid by representative assessee would be grossed up for purpose of computing taxable income in hands of beneficiary assessee.Clouth Gummiwerke Aktiengesellschaft Vs CIT (AP) 238 ITR 861

Income arising to Non-resident through agent – Direct assessment of non-Resident in respect of other income – would not bar assessment of agent u/s.163

40

CIT Vs Fertilizers & Chemicals (Travancore) Ltd. (Ker) 166 ITR 823

Assessee bed-ridden – His son was doing business using license in the name of assessee – Books of accounts and assets seized from the bedroom of son – Son to be assessedCIT Vs Nikunja Behari das ( Cal ) 244 ITR 244

Investment by firm shown in Balance Sheet of assessee – subsequent claim that amount belonged to partners – Not relevant – Interest on investment assessable as income of firm .G. Ramchand Vs CIT (Mad) 185 ITR 140

Liquor business – Person paying license fee and taking contract for sale of liquor – Assessment on such person on profits from liquor business justified.Rampal Thakurdin Gupta Vs CIT (MP) 234 ITR 304CIT Vs Oswal Enterprises (P) Ltd. (Del) 234 ITR 483

Agency in the name of assessee – Agreement to transfer income to firm – Firm not having license to carry on insurance business – insurance commission income of assessee CIT Vs L. Alagappan (Mad) 254 ITR 77

41

AOP / BOI

Distinction between AOP & BOICIT Vs Deghamwala Estates (Mad) 121 ITR 684

Business carried on by individual – Death – Business continued by wife on her behalf and on behalf of minor children – BOI.Meera & Company etc. Vs CIT (SC) 224 ITR 635CIT Vs Renuka Ganguly & Ors. (Cal) 240 ITR 889Sakinabai Ibrahim & Sons Vs CIT (Mad) 101 Taxman 473

AOP consisting of an adult and a minor – No evidence that guardian of minor had given his consent to minor’s membership in AOP – AOP was not valid.Bhupindra Food and Malt Industries Vs CIT (HP) 229 ITR 496

Business conducted by Mohammedan – Heirs desiring to continue business – suit for partition – Receivers appointed – Status AOPMohamed Noorullah Vs CIT (SC) 42 ITR 115

Agreement to share the prize money was entered into between A & O after A had already purchased the prize winning lottery ticket – There was no AOP as there was no consensus ad idem.CIT Vs O.K. Arumugham Chettiar & Anr.(Mad) 224 ITR 391

By deed of indenture R gifted her 50% of 1/3 share of a trust to her sons M & J on principle of joint and survivorship as a BOI – Status is BOI – Tax at normal rates – Sec.167B applicable to AY 89-90M.J. Associates Vs ACIT (ITAT, Ahd) 91 Taxman (Mag) 225

Mutual concerns – Automobile association – Publishing magazine – Advertisement charges received from member & non-members – Profit of association chargeable to IT.Automobile Association of Bengal Vs CIT (Cal) 69 ITR 878

Principle of mutuality is confined to transactions with members – Interest on FD with banks is assessable income.Sports Club of Gujarat Ltd. Vs CIT (Guj) 171 ITR 504Rajpath Club Ltd.Vs CIT (Guj) 211 ITR 379CIT Vs Bangalore Club (Kar) 287 ITR 263

Floor charges collected from non-members on the basis of transaction in purchase and sale of shares by them – No mutuality – Taxable.Investors Club Vs ITO (ITAT, Coch) 84 ITD 273

42

House Property owned by member’s club – No rent received – Not occupied by Club for business or vocation – Principle of mutuality does not arise – Annual value liable to tax.Chemford Club Ltd. CIT Vs (Del) 200 ITR 493

Mutual concern - complete identity between contributors and participators in fund mandatory - Right to contribute not enoughWankaner Jain Social Welfare Society Vs CIT (Mad) 260 ITR 241

43

COMPANIES – EFFECT OF AMALGAMATION

Amalgamation of subsidiary companies with assessee-company – Property, rights and powers of subsidiary companies transferred and vested in assessee-company – All liabilities and debts of subsidiary companies to become liabilities and debts of assessee Company as from take of amalgamation – Net assets of amalgamating companies taken over by assessee much less / more in value than value of shares held by assessee in subsidiary companies – Diff. is not capital loss or capital gainsShaw Wallace & Co. Ltd. Vs CIT (Cal) 119 ITR 399Forbes Campbell & Co. Ltd. Vs CIT (Cal) 150 ITR 529Alembic Chemical Works Co. Ltd. Vs ACIT (ITAT, Ahd) 72 ITD 251

AY 84-85 – PY ended on 1.1.84 – Entire business of assessee taken over by holding company under an agreement dated 10.12.83 and registered deed executed on 29.12.83 – Business carried on by assessee and not holding company during the year – income assessable in the hands of assessee company.Ponds Exports Ltd. Vs ITO (ITAT, Mad) 58 ITD 417

Closure of business of amalgamating company – No rehabilitation of workers of amalgamating company – carry forward and set off of loss of amalgamating company not allowed against profits of amalgamated company. Indian Metals & Ferro Alloys Ltd,. Vs union of India & ors. (Ori) 262 ITR 553

Unabsorbed depreciation of amalgamating company added to the opening Written Down value of it for the year of depreciation and the claim of depreciation for the year was worked out on this basis – This was claimed as set off against profits of amalgamated company – Not correct – Expl. 2 to Sec. 43(6)© will applyACIT Vs McDowell & Co. Ltd. (ITAT, Bang) 83 ITD 221

During the period of effective date as provided in the scheme of amalgamation to the date of the order of High Court approving such scheme, amalgamating company is deemed to have conducted business on behalf of the amalgamated companyMarshall Sons & Co. (India) Ltd. Vs ITO (SC) 223 ITR 809

When two companies are merged and are so joined as to form a third company or one is absorbed into one or blended with another, the amalgamating company loses its identity and the amalgamated company acquires a new statusSaraswati Industrial Syndicate Ltd. Vs CIT (SC) 186 ITR 278

44

HUF

General

Wife of Karta has taxable income – HUF to be assessed as specified as HUF.Kushal Chand Sharma Vs CWT (Raj) 216 ITR 56Prakash Chand Surana Vs CWT (Raj) 228 ITR 604

Specified HUF – Income of a member including income of spouse and minor child to be considered.CIT Vs P.A. Venkatraman (Mad) 246 ITR 773

An HUF cannot exist with one member alone.Krishna Prasad Vs CIT (SC) 97 ITR 493

Though a Hindu widow cannot be a coparcenor, she has coparcenary interest and she is also a member of the coparcenory by virtue of the rights conferred on her under Hindu Women’s Right to Property Act, 1937.Controller of Estate Duty Vs Alladi Kuppuswamy (SC) 108 ITR 439

Difference between value of corpus and aggregate shares of beneficiaries is assessable under Wealth Tax Act – Sec. 21(1A) – TrustH.E.H. The Nizam’s Jewellery Trust Vs ACWT & Ors. (AP) 227 ITR 52

Wife of Karta cannot relinquish her status as member of HUF by a unilateral declaration while retaining her marital tie.CWT Vs M.A.R. Rajkumar (AP) 226 ITR 804

Jat Sikh is a Hindu – Ancestral property is HUF property.Controller of estate duty Vs Homojit Singh (P&H) 223 ITR 139

The Kerala Joint Hindu Family System (Abolition) Act, 1975 has no application to assessee who is domicile in Tamil Nadu having properties in Kerala.Dayalan Rajes Vs State of Kerala & Anr. (Ker) 231 ITR 707

Amount received by individual under accident insurance policy covering risk to life of his father – includible in his hands as Individual and not in HUF.L. Bansi Dhar & Sons Vs CIT (Del) 157 CTR 340.

45

PARTITION

Death of coparcenor – No ipso facto partitionCIT Vs Charan Das (HUF) (All) 280 ITR 637

No evidence that after the death of Kartha, partition by metes and bounds took place – No partition as per Expl. 1 to Sec. 6 – Sale deed executed by son of deceased Kartha on behalf of HUF – Entire property treated as that of HUF for capital gains computation – Share of deceased Kartha not to be excludedCIT Vs Dharam Pal Singh (HUF) (All ) 280 ITR 629

In the absence of more than on coparcenor, a partition is impossible – A sole surviving coparcenor with female members – Grant of share in property to female members – could only be in the nature of settlement of property.V.V.S. Natarajan Vs CIT (Mad) 111 ITR 539B.T. Ravindranath Punja Vs CIT (Kar) 179 ITR 243Sat Pal Bansal Vs CIT (P&H) 162 ITR 582

IT authorities had their own view to take and were not bound by the partition decree – A junior member can act as the karta of a HUF with the consent of all the other members.Narendrakumar J. Modi Vs CIT (SC) 105 ITR 109

Even after death of a male coparcenor in the joint family and even after the undivided shares of the family members became defined under the Hindu Succession Act, until an order u/s.171 is passed by ITO recognizing the partition in the family on the basis of any claim made in this behalf HUF continue to be assessed to IT & WT.Narendrakumar Modi Vs CIT (SC) 105 ITR 109R.B. Tunki Sah Baidyanath Prasad Vs CIT (SC) 212 ITR 632.Kalloomal Topeswari Prasad (HUF) Vs CIT (SC) 133 ITR 690.

Partition not registered – No physical division – No actual division of assets – No partition in HUF.CIT Vs Venugopal Inani (SC) 239 ITR 514Kanhaiyalal Thawarji Vs CIT (HP) 176 ITR 329Satish Chandra Modi (HUF) Vs CIT & Anr. (AP) 216 ITR 717

Partial partition not valid after insertion of 171(9) w.e.f. 1.4.1980CIT Vs Tej Cloth Weaving Factory (P&H) 178 ITR 474

Death of karta after Hindu Succession Act came into force – Female members of family entitled to definite share in family property –Female members not becoming divided from members of family.

46

State of Maharashtra Vs Narayana Rao Sham Rao Deshmuk & others (SC) 163 ITR 31

Proviso to sec. 6 of Hindu Succession Act does not effect a disruption in coparcenory family – No partition effected by operation of law.Addl. CIT Vs Maharani Raj Laxmi Kumari Devei (SC) 224 ITR 582

HUF consisting of karta, wife, 2 daughters and adopted son – Karta died – Property continued to belong to HUF.Gowli Buddanna Vs CIT (SC) 60 ITR 293

Widow’s share in coparcenary property must be ascertained by adding the share to which she would be entitled at a notional partition immediately before her husband’s death and the share which she would get in her husband’s interest upon his death.Gurupad Khandappa Magdum Vs Hirabai Khandappa Magdum & Ors.(SC) 129 ITR 440

Only one coparcenor – No partition possible – Karta cannot gift any HUF property to himself.T.G.K. Raman (HUF) Vs CIT (Mad) 140 ITR 876Balchand Malaiya HUF Vs CWT (MP) 227 ITR 651

HUF consisting of 2 brothers – No partition took place by virtue of Sec.6 of Hindu Succession Act on death of one brother – Interest of deceased in HUF cannot be excluded for assessment.CWT Vs Chandrasinhrao D.Gaekward (Guj) 237 ITR 875

Sec. 20 applies to transactions entered into prior to enactment of WT Act – Order of WTO recording partition, mandatory.Tatavarthi Rajah & Anr Vs CWT (SC) 225 ITR 561

Partial partition of HUF not recognized under WT Act – HUF would continue to be assessable as if no partial partition had taken place.Lalchand Kothari Vs CWT (Raj) 225 ITR 142

Deceased and his brother coparceners in HUF – Deceased dying issueless leaving widow – His entire share in coparcenory property passes – No question of deemed parturition with wife.Bhartiben S. Jhaveli Vs Controller of estate duty (Guj) 238 ITR 995

Setting up certain assets of HUF in respect of certain coparcener on a condition that no further claim will be allowed – Partial partition – Not recognized in IT Act. ITO Vs P. Shankaraiah Yadav (ITAT, Hyd) 91 ITD 228

47

DEVOLUTION OF PROPERTY

Properties inherited by widow as sole heir on the death of her husband – Adoption by widow subsequently – Does not divest widow of properties – Properties do not become joint family properties – Female cannot throw property into family hotchpot.R. Rajathy Ammal Vs CWT (Mad) 164 ITR 605Punithavalli Ammal Vs Ramalingam AIR 1970 SC 1730

As per Sec.14(1) of Hindu Succession Act, a widow after death of her husband became absolute owner of properties left by her husband – on adoption of a son subsequently, such rights did not get divested – On death of such a widow, these rights passed on to the adopted son.Asst. Controller of estate duty Vs Channamma P. Jabin (ITAT, Bang) 70 ITD 194

Widow inheriting limited right in property under will in lieu of her right to maintenance – Limited right was transferred into absolute right by Sec.14(1) of H.S.A.- Gift of property by widow valid.Beni Bai Vs Raghubir Prasad (SC) 236 ITR 898

Partner dying intestate – wife of deceased admitted as partner – Property devolved on class I heirs in individual capacity – Declaration that shares held by new partner in partnership was on behalf of her HUF, not relevant – Share income is her individual income.CIT Vs J.R. Lalwani (Bom) 240 ITR 750

Individual property of deceased person devolves on his son in his individual capacity and not on the HUF of son and his sons.CWT etc. Vs Chander Sen etc. (SC) 161 ITR 370CIT Vs C.G. Venkatasubban (Mad) 240 ITR 674

Property received on partition of HUF by a single coparcenor became the HUF property on his subsequent marriage – Assessment to be in HUF status.H.P.A.R. Rajagopalan Vs CWT (Mad) 241 ITR 344Dr. Prakash B. Sultane Vs CIT ( Bom ) 280 ITR 593

Hindu female inherited property from her father or mother – She has no children- Dying intestate – Property would devolve on heirs of her father.Bhagar Ram v. Teja Singh (SC) 237 ITR 364

Karta of HUF cannot gift HUF properties to member / coparcener / stranger.DCIT Vs A. Tenzing (ITAT, Mad) 62 ITD 76

48

Assessee beneficiary is a Trust – No absolute right in beneficial interest – He cannot impress his beneficial interest to HUF hotch-pot.Maharaja Bahadursingh, Kasliwal Vs WTO (ITAT, Indore) 64 ITD 305

49

PARTNERSHIP FIRM

Firm is not an independent entity – Partners are real owners of assets of firm.N. Khadervali Saheb & Anr. v. N. Gudu Sahib (Decd) & Ors. (SC) 261 ITR 1

Dissolution of firm on death of one of the partners .Dahi Laxmi Dal Factory Vs CIT & Anr. (All) 103 ITR 517Narayanan Chettiar Vs Umayal Achi AIR 1959 Mad 283CIT Vs Seth Govindram Sugar Mills (SC) 57 ITR 510Mavukkarai (N) Estate Tea Factory Vs Addl. CIT (Mad) 112 ITR 715CIT Vs Sukh Dayal Sobh Raj (All) 218 ITR 309CIT Vs Sherally Meherally and Sons (Bom) 230 ITR 120ITO Vs Kalyan Das Madan Mohan (All) 230 ITR 191CIT Vs Madhavdas Lalchand (Mad) 230 ITR 877Nandlal Sohanlal Vs CIT (P & H) 110 ITR 170CIT Vs Surya Bhagavan Vastralayam (AP) 227 ITR 304

For transferring immovable property by a firm to its partners, registered document is necessary.CIT Vs Dadha & Co. (Mad) 142 ITR 792CIT Vs Palaniappa Enterprises (Mad) 234 ITR 635Jansons Vs CIT (Kar) 154 ITR 432Ram Narain & Brothers Vs CIT (All) 73 ITR 423S.N. Syed Mohammed Saheb & Bros. Vs CIT (Ker) 68 ITR 791

For transferring immovable property by a firm to its partners, registered document is not necessary.Sunil Siddharthbhai Vs CIT (SC) 156 ITR 509

When individual property is converted to partnership property, there is transfer of property.Addl. CIT Vs M.A.J. Vasanaik (Kar) 116 ITR 110

Firm dissolved on death of a partner- two assessments to be madeCIT Vs Ayyanarappan & Co. & Anr. (SC) 236 ITR 410

A partner in a firm cannot be employee of that firm.S. Magnas Vs CIT (Bom) 33 ITR 538

144 Order –Firm assessed as AOP – No interest / salary to partners allowed.Rama Boiled Modern Rice Mill Vs ITO (ITAT, Hyd) 97 ITD 379

Interest paid to partners u/s.40(b) – calculate in Reducing Balance method.Architectural Associates Vs ACIT (ITAT, Hyd) 92 ITD 479

50

Interest to partners disallowed u/s 40(b) eventhough firm purchased goods from proprietary concern of partner and interest pertains to outstanding balance in that account.Shakuntala Industries Vs CIT (Raj) 216 ITR 507

Interest paid to partner – claim that transactions carried out through partner’s bank account and that interest actually paid to bank – No material to support claim – disallowance justified.CIT Vs Thulasidhar & Co. (Mad) 229 ITR 425

A deity cannot be a partner of a valid partnership firmRamakrishna Chit Fund Co. Vs ITO (ITAT, Hyd) 106 ITD 350Gift entries made in books to circumvent 40(b) provisions and interest paid to family members of partners – Transaction not genuine – interest disallowed u/s 40(b)Auto Sales Vs CIT (All) 227 ITR 790

Minors admitted as full partners – Partnership deed not signed by guardians of minors – No valid partnership.Kumar Financing Corpn. Vs CIT (Cal) 122 ITR 192Addl. CIT Vs Uttam Kumar Pramod Kumar (All) 115 ITR 796CIT Vs Khetan & Co. (Cal) 45 ITR 170

Adult admitted to benefits of partnership – No valid partnership CIT Vs B. Pandiah & Co. (AP) 143 ITR 464CIT Vs Shankar Cottons (Mad) 222 ITR 445CIT Vs J.B. Coal Traders (Patna) 164 ITR 450

Deed not specifying share of one partner – No valid partnership K.S. Badrinarayana Rao Vs CIT (Kar) 152 ITR 159

On the date of execution of partnership deed, one of the partners, who was signatory to the deed, was a minor – No valid partnership Udayalakshmi Hardware Stores Vs CIT (SC) 180 ITR(St)39CIT Vs Oriental T. Maritime (AP) 227 ITR 244

Some partners held to be benamidars – Firm not genuine S.P. Gramaphone Co. Vs CIT (SC) 158 ITR 313CIT Vs Jayalakshmi Oil Farm (AP) 228 ITR 443

Duty of ITO to find whether firm was genuine – Failure to produce partners of firm on demand by ITO – firm held not genuine.Frontier Construction Vs CIT (Gau) 221 ITR 878

51

One partner acting as consultant, not contributing capital, not taking interest in the business, not entitled to share in profits / losses, paid fixed commission and to be indemnified against claim for damage - No genuine firm CIT Vs Ravi Constructions (AP) 169 ITR 662

The execution of a partnership deed is not by itself a talisman which can entitle a firm to be registered - There must be circumstances and facts to who that it had come into existence and that it had carried on business.CIT Vs S.S.A.M. Shanmugha Nadar Financing Corpn. (Mad) 141 ITR 656

No business carried on – No partnership firm.Sudarshan & Company Vs CIT (Mys) 89 ITR 85CIT Vs Ferozepur Ice Manufacturers’ Association (P&H) 84 ITR 607

Letting out building & collecting rent do not amount o carrying on of business, but are only incidental to ownership – No valid partnership – assessed as AOP.CIT Vs Phabiomal & Sons (AP) 158 ITR 773CIT Vs Veerabhadra Industries (AP) 240 ITR 5Ramniklal Sunderlal Vs CIT (Bom) 36 ITR 464

Partnership formed with object of purchasing lottery tickets and sharing prize money – No business was carried on.CIT Vs S. Mariappan (Mad) 238 ITR 826State Abkari Act prohibiting licensee from selling or otherwise transferring his license – Licensee entering into partnership – Partnership not valid CIT Vs Narayanan & Co.(Ker-FB) 223 ITR 209, 234 ITR 133Biharilal Jaiswal etc. Vs CIT (SC) 217 ITR 746Motilal Chunilal Vs CIT (SC) 234 ITR 472

Gold Control Act prohibits transfer of license – Dealing in Gold by firm on the basis of license obtained by partner – Partnership not valid.CIT Vs Koonan’s Jewellery (Ker) 226 ITR 588

Only salary actually paid or provided in accounts can be allowed as deduction and not the maximum limit worked out as per sec. 40(b)Sri Balaji Agencies Vs ITO (ITAT, Chennai) 106 ITD 419

52

TRUST

Amendment to Trust deed has no retrospective effect.Bhriguraj Charitable Trust Vs CIT (Del) 228 ITR 50

For 80G registration, Trust should qualify for exemption u/s 11.Mundakapadam Mandirams Society (Ker) 258 ITR 395

Assessee Trust not carrying out any charitable activity but using funds for construction of shopping complex – Renewal of 80G approval rejected by CIT.Madani Musafir Khamar Welfare Society Vs CIT & Anr. (Patna) 264 ITR 481

Donation to charitable trust – Trust for religious purposes also – Trustees could spend the entire income of trust for religious purpose – Donation to such trust not entitled to 80G deduction.Upper Ganges Sugar Mills Ltd Vs CIT (SC) 227 ITR 578 Arsha Vijnana Trust Vs D.P. Sharma, DIT(Exemptions ) (AP) 295 ITR 437

Charitable Trust – Income used for religious purpose, temple construction – CIT denies renewal of recognition.KirtichandTarawati Charitable Trust Vs DIT (Exemption) & Ors. (Del) 232 ITR 11

Trust for propagation of a particular religion – Not a public charitable Trust.M.P. Santhivarma Jain Vs State of Kerala & Anr. (Ker) 265 ITR 385

Trust created by members of family for upkeep of temples - Not public trust.Kizhakke Kovilakam Trust Vs ACIT (Ker) 256 ITR 238

Sole beneficiary is minor – As per Trust deed, he is not entitled to any income when he is a minor – Assessment on Trust u/s 164(1) upheld.ITO Vs Sheetal Sunder Trust (ITAT, Bang) 96 ITD 128

Trust not specifying shares of beneficiaries – Subsequent rectification deed specifying shares – Does not relate back – Prior to rectification, trust assessable as discretionary TrustRanga rao Lottery Agencies Vs CIT (MP) 287 ITR 542 Option to assess trust or beneficiary directly.CIT Vs Bharti Devi Sarabhai (SC) 231 ITR 526CIT Vs Dr. Anand Sarabhai Trust (SC) 231 ITR 524

When Assessing Officer assessed Trust, in fact, it was made on Trustees who were representing beneficiaries as representative assessees u/s 160(1)(iv) – Sec.

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161(1A) overrides provisions of Sec. 166—It was the duty of Assessing Officer to tax the right person – Hence eventhough assessments were made on beneficiaries on the basis of return filed by Trustees on behalf of beneficiaries, Assessing Officer can assess the right person i.e., Trustees as representative assessee on whole of income consisting of profits & gains of business at maximum marginal rate.DCIT Vs Manilal Bapalal Family Benefit Trust (ITAT, Mad) 66 ITD 179

Business carried on in terms of Trust deed – Tribunal correct in holding that trustees were not assessable as AOP.CIT Vs K. Shyamaraju (Trustees) & Ors. (Kar) 189 ITR 392As per Trust deed, Trustees had no discretion with regard to choice of beneficiary – all assets held by them were meant to be held solely for benefit of one solitary beneficiary – Maximum marginal rate applicable.CIT Vs Saroja Raman & T.G. Ranjini Trust (Mad) 104 Taxman 163.

Trust deed named grand daughter of author of Trust as beneficiary entitled to Trust income on attaining majority – Not attained majority – Hence payment was left to absolute discretion of trustees, beneficiary is unknown and share indeterminate – Tax at maximum rate.Anasuya Muthanna Vs CIT (Mad) 232 ITR 561

Since rights of beneficiaries to get corpus of trust fund come into existence only on a future date, interest of beneficiaries is indeterminate or unknown – contingent – Sec. 21(4) of WT Act attracted –Interest of beneficiaries to be assessed.A.V. Reddy Trust & Ors. Vs CWT (SC) 240 ITR 409

Will comes into operation on the death of testator and not “in presenti” - Since the deed came into effect on the date of execution, it is not Will – Since only 10% income went to the benefit of relatives and balance went to charitable purposes, it cannot be said to be solely for the benefit of relatives.Not covered by provisions (ii) & (iii) to 164(1)- To be taxed at 65%.Chintamani Ghosh Trust Vs CIT (All) 222 ITR 578

Trust deriving income from business – assessment to be made in the hands of trustee.CIT Vs Manoranjitham Thanga Maligai Trust (Mad) 260 ITR 143

Trust created by or on behalf of minor without prior sanction of Civil Court – Not a valid Trust.T.A.V. Trust Vs CIT (SC) 236 ITR 788

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Distribution received by beneficiary from various discretionary trust can be assessed in the hands of beneficiary.CIT Vs Anand Sarabhai Trust (SC) 231 ITR 524

Amount collected in the name of God / deities, but utilized for benefit of family concerns – Trust to be assessed as AOP at maximum marginal rate.ITO Vs Shri Radha Dharmarth Trust (ITAT, Del) 66 ITD 253

Not only objects of trust, but application of its income for charitable purposes, is also important.Al Madeena Charitable Trust Vs ACIT (ITAT, Coch) 76 ITD 214

Even prior to amendment in 1972, under Sec. 12(1) voluntary contribution themselves were taxable if they were not applied solely for charitable or religious purposes.R.B. Shreeram Religious & Charitable Trust Vs CIT (SC) 233 ITR 53

Local authority constituted for planned development of State – For carrying out its objects, assessee is acquiring lands at nominal rates and selling the same after developing it to general public at higher rates – Assessee is not allotting houses to poor masses free of cost – Objects not of charitable nature but more of commercialised nature involving profit motivePunjab Urban Planning & Development Authority Vs CIT ( ITAT, Chd ) 103 TTJ 988Income to be arrived at in a commercial manner without classification under various heads.CIT Vs Rao Bahadur Calavala Cunnan Chetty Charities (Mad) 135 ITR 485

Amount credited to the account of beneficiaries cannot be treated as loan – Interest paid to such beneficiaries cannot be allowed as deduction.Arun Family Trust Vs CIT (Guj) 165 Taxman 15

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EXEMPTION

Registration of a Trust u/s 12A is a condition precedent to claim exemption u/s 11 & 12U.P. Forest Corporation Vs DCIT (SC) 297 ITR 1

Charitable Trust carrying on educational activities – But not conducting any courses in formal education – Not affiliated to / registered by any authority – No exemption.Saurashtra Education Foundation Vs CIT (Guj) 273 ITR 139Bihar Institute of Mining & Mine Surveying Vs CIT (Pat) 208 ITR 608

Assessee conducting examinations for recruitment to various public sector banks – Income earned not exempt u/s 10(22)Institute of Banking Personnel Selection Vs ADIT (ITAT, Mum) 67 ITD 160

Exemption u/s. 10(22) – Assessee granting scholarships to deserving Parsi students – Not entitled for exemption.CIT Vs Sorabji Nusserwanji Parekh (Guj) 201 ITR 939

Assessee running hospital, income of which is exempt u/s 10(22) – Interest income from banks, UTI, gift shop income etc. not entitled to exemption.National Health & Education Society Vs ADIT (Exemption) (ITAT, Mum) 70 ITD 330

Trust advanced money to a company in which trustees were Directors – Advance was for construction of hospital but amount not utilized during relevant accounting year – Amount not entitled to exemption.CIT Vs V.G.P. Foundation (Mad) 262 ITR 187

Huge sums of money advanced to company having substantial interest in Trust – No interest charged nor adequate security taken – violation u/s 13(3) – Denial of exemption upheldKanahya Lal Punj Charitable Trust Vs DIT (Exem) (Del) 297 ITR 66

Property of trust let out at meager rent to a firm in which one of the trustees is partner – No exemption.Ram Bhawan Dharamshala Vs State of Rajasthan (Raj) 258 ITR 725

Trust – Payments made to interested persons – No exemption.CIT Vs Nagarathu Vaisiyargal Sangam (Mad) 246 ITR 164

Refrigerator purchased by Trust and placed in residence of managing trustee till trust buildings were ready – No exemption to Trust.Agappa Child Centre Vs CIT (Ker) 226 ITR 211

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Object to conduct stock exchange – No prohibition against declaration of dividends to share holders or dealing with its profits in any manner it liked – No exemption.Delhi Stock Exchange Association Ltd. Vs CIT (SC) 225 ITR 235Bihar State Forest Department Corporation Vs CIT (Pat) 224 ITR 757

Donation received from associated companies used for the benefit of children of Trustees – No exemption u/s 11Concast (India) Educational Trust Vs ITO (ITAT, Bom) 57 ITD 599

A part of Trust income was being used directly or indirectly for benefits of its founder and Managing Director – No exemption u/s 11 or 10(22).Skin Institute & Public Services Charitable Trust Vs ADIT (Exemption) (ITAT, Del) 65 ITD 125Chandrika Educational Trust Vs CIT (Ker) 139 CTR 96

Charitable and non-charitable objects – Trustees can apply income to any of these objects – No exemption u/s 11.Daulat Ram Public Trust Vs CIT (Del) 244 ITR 514

Manner in which trust property was to be utilized, not indicated in trust deed – Not entitled to exemption.Assembly Rooms Vs CIT (Mad) 241 ITR 76

Proviso to Sec. 13 of IT Act and Sec. 21A of WT Act lays down that exemption will not be denied if part of the income is applied for benefit of a person referred to in Sec. 13(3), if such use or application is in compliance to mandatory terms of Trust which is created before 1.4.62 – Mandatory terms should have existed before 1.4.62 – Subsequent amendment of Trust deed imposing such a term – No exemption.CIT Vs Rattan Trust (SC) 227 ITR 356

Certain amount set apart as provision was not actually applied for charitable purposes – Not entitled to exemption u/s. 11.Nachimuthu Industrial Association Vs CIT (SC) 156 CTR 187

Trust must be for public benefit – Only those subscribing to fund continuously or their dependents eligible to benefit in this case – Benefit conferred is not public but private – Not entitled to exemption.CIT Vs BEL Employees Death Relief Fund and Service Benefit Fund Association (Kar) 225 ITR 270.CIT Vs ITI Employees Death and Superannuation Relief Fund) (Kar) 234 ITR 308

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Interest on investments received by Trust would not be covered by principle of mutuality – not entitled to exemption.CIT Vs ITI Employees Death and Superannuation Relief Fund (Kar) 234 ITR 308

Surplus earned by organizing exhibition, is business income – No separate books for this business, but can be deciphered from common books of the institution →not amount to 11(4A) Indian Machine Tools Mfrs. Association Vs ADIT (Exemption) (ITAT, Mum) 70 ITD 304.

Rent received from exhibition hall hiring, meeting hall hiring, parking fee – Income from business.Visveswaraya Ind. Res. Dev. Centre Vs DCIT (ITAT, Mum) 59 ITD 156

Since assessee could not prove that donors were able to give direction before / at time of donation to corpus funds nor assessee was maintaining separate accounts for this purpose, Assessing Officer was right in denying exemption.Shri Digambar Jain Naya Mandir Vs ADIT (ITAT, Cal) 70 ITD 121

Donation sent to assessee Trust with specific directions to be spent on organizing ‘kisan rally’ - To be treated as income of assessee.Khemraj Nemichand Shrishrimal Charitable Trust Vs CIT (MP) 231 ITR 43Trust founded by members of family – Income earned by Trust from family concern in AY 80-81 but given to trust only in 1984 – Sums remained with firm – Not used for charitable purposes – No exemption.CIT Vs Muthoottu Charitable Trust (Ker) 227 ITR 203

Chit business carried on by Trust was not in the course of actual carrying out the primary purpose of the trust – No exemption u/s 11.Dasa Balinjika Seva Sangam Vs CIT (Mad) 240 ITR 863

Deemed income u/s 11(3) – not eligible for accumulation for further period The Trustees, The B.N. Gamadia Parsi Hunnarshala Vs ADIT (Exemption) (ITAT, Mum) 77 TTJ 274

If the surplus is a regular feature and is a result of intentional charging of abnormal high fee not commensurate with the expenditure, exemption u/s 10(22) cannot be allowedACIT Vs Bal Bharti Nursery School (ITAT, All) 82 ITD 71All India Personality Enhancement & Cultural Centre for Scholars, AIPECS Society Vs DCIT (ITAT, Del) 91 ITD 240

Objective of Trust is carrying on business of race club and scientific breeding of horses – Registration refusedHyderabad race Club Vs CIT (AP) 153 ITR 521

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When the assessee collects money over and above the fees prescribed by the Government, it amounts to selling the education and the element of charity no longer remain in the activities of the assessee – Not eligible for exemptionVodithala Education Society Vs ADIT (Exem) 2008-TIOL-139-ITAT-HYD

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CLUBBING OF INCOME

Inclusion of income of minor child from firm – Parent need not be a partner.CIT Vs Dhanushkodi (Mad) 252 ITR 794

Clubbing of income of minor with that of father eventhough source of investment is not from father.Chandrakala Bai Naila Vs CIT (MP) 178 ITR 341CIT Vs Bajrangal (AP) 176 ITR 334CIT Vs Chinabai M. Modi (Guj) 69 ITR 76CIT Vs K.R. Natarajan (Mad) 236 ITR 402P. Alwarsamy Vs CIT ( Mad ) 98 Taxman 19CIT Vs S.J.S. Selvalakshmi Ammal (Mad) 240 ITR 934CIT Vs P. Murugesan (Mad) 245 ITR 301CIT Vs Pelleti Sridevamma ( SC ) 216 ITR 826

Inclusion of income of minor child from firm – father need not have any income.CIT Vs Krishna Iyer (Decd) (Mad) 249 ITR 498

Property given by an oral gift by a Mohammedan to his wife out of natural love and affection is not for adequate consideration or under an agreement to live apart. Hence Sec. 64 applicable – Clubbing.N.P. Syed Sadique JT 1998(8) SC 32 (105 Taxman (Mag) 81)

Assets transferred to wife – Capital Gains derived by wife by selling the assets – to be clubbed in the hands of assessee, husband.Sevantilal Maneklal Sheth Vs CIT (SC) 68 ITR 503

Transfer of house property by assessee to his wife – 64(1)(iv) attracts – clubbing .Syed Sadique & Ors Vs CIT (SC) 239 ITR 263

Income of step-child can be clubbed u/s.64(1)(iii).CIT Vs Abdul Rahim Khan M. Pathan (Guj) 243 ITR 409

Cash transferred to wife – amount invested in firm – income from firm was includible in the Total Income of husbandKaushalyabai Vs CIT (MP) 238 ITR 1008H.P. Dandiwala Vs CIT (All) 231 ITR 281

Clubbing of income of spouse / minor child – No separate deduction u/s.80L for clubbed income.ITO Vs Yogi H. Aggarwal (ITAT, Mum) 96 ITD 288

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Assessee routed certain sales through a sister concern to make that concern earn profit – Actual delivery made by assessee directly to ultimate purchaser – Sister concern situated in the same premises, has no godown, incurred no freight and transportation charges – colourable device – Profit shown to have been earned by sister concern assessed in the hands of assessee.Bansal Ispat (Lucknow)(P) Ltd. Vs ACIT (ITAT, All) 61 ITD 246

Assessee managing affairs of firm – Benami of assessee – Income to be included in the hands of assesseeCIT Vs G.M. Dharia ( Kar ) 243 ITR 104Assessing giving gifts to wife – wife invested this amount in firm A – Later on, wife withdrew the amount from firm A and invested it in firm B in which assessee is a partner – Clubbed in the hands of ‘a’ u/s.64(1)CIT Vs Harkishdas (MP) 228 ITR 289

Assessee purchased lease rights of a firm for 5 years – sold within 5 months to minor grand daughter – Took back on lease – assessee did not work – sham transaction – income of minor grand daughter clubbed with assessee as benami.G. Krishnammal Vs DCIT (ITAT, Mad) 66 ITD 83

Cross-gifts to be included for clubbing purposes.CIT Vs C.M. Kothari (SC) 49 ITR 107Om Dutt Vs CIT (P&H) 277 ITR 63

Finding that firm’s business was actually being conducted by another firm – Firm was not genuine Oswal Trading Co. Vs CIT (MP) 233 ITR 385

Firm carrying on money lending business – Three ladies closely related to partners of the firm forming another firm for carrying on similar business – Finding that business was actually carried on by original firm – Partnership formed by ladies not genuine – Clubbing of income of both firm.Sri Krishna Finance Corporation Vs CIT (AP) 169 ITR 611

Spouse must have technical or professional qualification and income must be solely attributable to the application of his / her technical or professional knowledge and experience – Otherwise, income to be clubbedJ.M. Mokashi Vs CIT (Bom) 207 ITR 252

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INCOME – CHARGEABILITY AND COMPUTATION

HEAD OF INCOME

Under which head, the transaction to be assessed ?

RECEIPT OF INTEREST

Interest earned before commencement of business on short term deposit with banks out of term loan secured from financial institutions - Other Sources Tuticorin Alkali Chemicals and Fertilizers Limited Vs CIT (SC) 227 ITR 172CIT Vs Petrofils Co-operative Ltd. (Guj) 241 ITR 139CIT Vs Cochin Ship Yard Ltd. (Ker) 158 CTR 208CIT Vs Rassi Cement Ltd (AP) 232 ITR 554South India Shipping Corporation Vs CIT ( Mad ) 240 ITR 24CIT Vs Kisan Sahakari Chini Mills ( All ) 280 ITR 617Chandpur Sugar Co. Ltd. Vs CIT ( All ) 280 ITR 612Bokaro Steel Ltd. Vs CIT (Patna) 170 ITR 545CIT Vs Coromandel Cements Ltd, (SC) 234 ITR 412CIT Vs Autokast Ltd. (SC) 248 ITR 110Consolidated Fibres & Chemicals Ltd. Vs CIT (Cal) 273 ITR 353

Interest earned on short term deposits of share capital – Other sources income – cannot be set off against interest paid on capital borrowed for setting up industry.Eskayef Ltd. Vs DCIT (ITAT, Bang) 71 ITD 419Godavari Fertilizers and Chemicals Ltd,. Vs CIT (AP) 198 ITR 388CIT Vs Hindustan Electro Graphites Ltd. (MP) 177 ITR 465CIT Vs Tamil Nadu Industrial Development Corpn. Ltd. (Mad0 189 ITR 670CIT Vs New Central Jute Mills Co. Ltd. (Cal) 118 ITR 1005CIT Vs V.P. Gopinathan (SC) 248 ITR 449CIT Vs Manipur Spinning Mills Corpn. Ltd. (Gau) 226 ITR 551

Money lying idle deposited in Bank – Interest – Other Sources.Collis Line P. Ltd. Vs CIT (Ker) 135 ITR 390Traco Cable Co. Ltd. Vs CIT (Ker) 72 ITR 503Madhya Pradesh State Industries Copn. Ltd. Vs CIT (MP) 69 ITR 824CIT Vs Cochin Refineries Ltd (Ker) 154 ITR 345CIT Vs L and T McNeil Ltd. (Bom) 202 ITR 662IAC Vs S.Khushwant Singh (ITAT, Del) 18 ITD 540CIT Vs Monarch Tools (Mad) 260 ITR 258CIT Vs Assam Plantation Crops Dev. Corpn. Ltd. (Gau) 221 ITR 392

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Interest on debentures issued by co-operative land mortgage bank – Assessable as income from Other Sources.CIT Vs Lakshmi Vilas Bank Ltd.(Mad) 234 ITR 796

Unpaid sale consideration – can be treated as loan – interest accruing thereon – Income from other sources.Mount Stuart Tea Estate & Amar Coffee Plantation Vs CIT (Mad) 239 ITR 489

Taking FDRs and pledging them as securities for taking loans are two separate transactions – FDRs pledged as securities in bank for taking loans for business – Interest on such FDRs is Income from Other SourcesDCIT Vs Allied Construction (ITAT, Del-SB) 105 ITD 1

RECEIPT OF RENT

Assessee is the proposed purchaser of property – Rent received before actual purchase of property – Other Sources income.Peninsular Plantations Ltd. Vs CIT (Ker) 227 ITR 490

Income from letting out kutcha plinths on open land to FCI – Income from other sourcesGowardhan Das & Sons Vs CIT (P&H) 288 ITR 481

Income from leasehold property, without raising a structure thereon – Income from Other Sources.CIT Vs Supreme Credit Corporation Ltd. (Cal) 230 ITR 700

Letting out of premises to different tenants and collection of rent – Not business activity – Only house property income.CIT Vs Indian Metal & Metallurgical Corporation (Mad) 215 ITR 424Shambu Investment P. Ltd. Vs CIT (SC) 263 ITR 143Indian Overseas Bank Vs CIT (Mad) 246 ITR 206CIT Vs Chennai Properties & Inv. Ltd. (Mad) 274 ITR 117

Owner of the property – Income from letting out will fall under House Property income.CIT Vs Podar Cement P. Ltd. & others (SC) 226 ITR 625S.G. Mercantile Corporation (P) Ltd. Vs CIT (SC) 83 ITR 700D.R. Puttanna & Sons (P) Ltd. Vs CIT (Kar) 162 ITR 468

Owner of property is liable to House Property income – It does not depend on the power of the owner to let the property as also not depend on the capacity of the owner to receive the rent.D.M. Vakil Vs CIT (Bom) 14 ITR 298Indian City Properties Ltd. Vs CIT (Cal) 55 ITR 262East India Housing and Land Dev. Trust Ltd. Vs CIT (SC) 42 ITR 49

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A single act of constructing a godown and letting it out year after year – Not a business.CIT Vs Veerabhadra Industries (AP) 240 ITR 5

If bifurcation of rent and service charges is there in lease deed itself, assess rent as House Property income and service charges as income from other sources.CIT Vs Sankaranarayana Hotels (P) Ltd. (Kar) 201 ITR 138

Business premises sub-leased to bank – Merely because advancement of loan by that Bank to the firm is mentioned in the same agreement, it cannot be said that activity of leasing was closely connected with loan – Rental income is income from House Property.CIT Vs Arvindkumar Odhavji (Bom) 213 ITR 551

Godown rent received was incidental to contract business – Not property income.Mercantile and Marine Services Vs CIT (Ker) 233 ITR 257

Letting out godowns and factories – Rental income is House Property income.Narayandas Kishandutt Vs CIT (MP) 149 ITR 636Property under mortgage – owner derives some benefit from property – Annual value liable to taxS. Ujjannappa Vs CIT (Kar) 255 ITR 455

Sale of flat to Non-Resident having not materialized due to refusal by Reserve Bank of India – Flat let out – House property income.Pragati Construction Co. Vs DCIT (ITAT, Del) 60 ITD 541

Lights, fans, partitions, Lifts etc. are part and parcel of building – income from letting out – House Property income.ACIT Vs Farida Begum Tazudeen (ITAT, Mad) 63 ITD 298Neelam Cable Mfg. Co. Vs ACIT (ITAT, Del) 63 ITD 1

Assessee is owner of building on leasehold land – Income from House Property eventhough letting out is an objective of company.Maharashtra Fert. & Chem Vs CIT (Bom) 150 ITR 317Tinsukia Development Corporation Ltd. Vs CIT ( Cal ) 120 ITR 466CIT Vs Mithila Properties Publication & Contractor Enterprises P. Ltd. ( Pat ) 228 ITR 713

License fee received for allowing film shooting – House Property income.B.M. Chinai Vs ITO (ITAT, Mum) 63 ITD 77

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Construction of hotel not completed during the year nor hotel business commenced – Rental income received from property assessable under “ Income from House Property ”CIT Vs Hotel Ratanada International P. Ltd. (Raj) 293 ITR 557

Assessee engaged in development, construction, sale and lease of immovable property – Properties treated as stock-in-trade – Rental income earned is business income.CIT Vs Neha Builders P. Ltd. (Guj) 296 ITR 661

RECEIPTS DURING DISCONTINUANCE OF BUSINESS

No purchase and sale after certain date and employees discharged- Mere realization and payment for some time – Discontinuance of businessGhanshyam Das Gangadhar Vs CIT (Pat) 19 ITR 349

When assessee’s business has come to a close or when the assessee let out the assets with the intention of closing the business, the property which at one time was a commercial asset would cease to be so and the income from letting out of such an asset would not be business income.New Savan Sugar & Gur Refining Co. Ltd. Vs CIT (SC) 74 ITR 7Metal Products of India Vs CIT (P&H) 293 ITR 618 After discontinuing business, machinery and vehicles let to sister concerns - Hire charges received is income from other sources – Let out property with amenities – Air conditioning charges received is income from other sources.Express News papers Pvt. Ltd. Vs CIT (Mad) 227 ITR 325Madras Silk & Rayon Mills P. Ltd. Vs ITO & Anr.(Mad) 262 ITR 122 – rental income

from factory building.

Assessee not carrying on any business during the year – lease rent of machinery – Other Sources income.CIT Vs K. Narendra (Del) 246 ITR 579

Business closed and quarters attached to factory let out – Rental income – Not business income.CIT Vs Ramdas & Sons (Patna) 236 ITR 786; 225 ITR 416The Saswad Mali Sugar Factory Limited Vs CIT (Bom) 236 ITR 706

Narain Swadeshi Weaving Mills Vs Comm. Of Excess profits Tax (SC) 26 ITR 765 (Plant & Machinery let out)

Universal Plast Limited etc. Vs CIT (SC) 237 ITR 454

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OTHER RECEIPTS

Mutual concern – Income from swimming pool and stadium – use by members and outsiders – income to be assessed as “Business income” and not “Income from House Property”CIT Vs National Sports Club of India (Del) 230 ITR 777 pp.780

Sale of water from well – Well was not appurtenant to building – Income from sale of water – Income from ‘O.S’.M. Ramalakshmi Reddy Vs CIT (Mad) 232 ITR 281

Lottery agent receiving 10% as bonus on prize won on tickets sold by him – Bonus dependent on winning of ticket – Not business income but lottery income.CIT Vs C. Krishnan (Mad) 228 ITR 557CIT Vs Lachman Das Veerabhander (SC) 247 ITR 810 Jackpot winnings

Assessee retiring from partnership – Compensation received for goodwill – Income from Other SourcesCIT Vs Nijrang Specific family Trust (Guj) 287 ITR 148

Income realized from display of hoardings on top of building – Other Sources income.Mukherjee Estate (P) Ltd. Vs CIT (Cal) 244 ITR 1

Business in tea – Assessee holding shares in the companies and having 100% share holding in subsidiary – Dividends received not business income unless holding of shares incidental to assessee’s tea business.Brooke Bond and Co. Ltd. Vs CIT (SC) 162 ITR 373

Insurance business - Profits and gains to be computed as per rule in I Schedule –Sec.28 to 43B are not applicable – No 35B deduction.CIT Vs Hero Cycles P. Ltd. (SC) 228 ITR 463

Profits of mutual Life insurance company taxable – Appreciation in value of securities shown in Balance Sheet to be included in surplus – Income Tax paid by Company on behalf of shareholders – not deductible.Bombay Mutual Life Assurance Society Ltd. Vs CIT (Bom) 20 ITR 189

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In terms of agreement, assessee advanced interest free loan to a borrower at his request on condition that loan amount should be utilized to purchase shares of a particular company, and that 50 % of the dividend income as and when received, to be paid to the assessee – Since assessee was not shareholder, any amount received from borrower could not be treated as dividend and not eligible for exemption u/s 115 O – Receipt should be assessed as Business income. Rasoi Trading & Agencies (P.) Ltd. (ITAT, Mum) 101 ITD 399

Purchase of refrigerator under scheme under which purchaser given scratch card – Assessee winning car from this – Winnings from lotteryD.N. Thakur Vs ITO (ITAT, Chd) 292 ITR (AT) 382

SALE OF LAND

When a person acquires land with a view to selling it later, after developing it, he is carrying on activity resulting in profit and the activity can only be described as a business venture.Raja J. Rameswar Rao Vs CIT (SC) 42 ITR 179

Joint purchase of land by 4 persons and joint sale thereof – Land fit only for house sites – Adventure in the nature of trade.Smt. Parvathi Devi & Ors. Vs CIT (AP) 164 ITR 675

Purchase of large plot of land with a dilapidated building – sale after converting into smaller plots – No evidence that purchase of land made with intention to re-sell – Profit assessable as capital gain.CIT Vs Mohammed Mohideen (Mad) 176 ITR 393

Sale of land after plotting – Business ventureCIT Vs R. Ramaiah & ors. (Kar) 146 ITR 39P. Kannan Vs CIT (Kar) 154 ITR 441Indramani Bai & Another Vs Addl. CIT (SC) 200 ITR 594Addl. CIT Vs Chikkaveerayya Lingaiah (Kar) 164 ITR 41Raja Rameswara Rao Bahadur Vs CIT (AP) 32 ITR 552; (SC) 42 ITR 179G. Venkataswami Naidu & Co. Vs CIT (SC) 35 ITR 594.

Agriculturist purchasing lands in a series of transactions and selling them within a reasonably short period – adventure in the nature of trade.Hemchand Hirachand Shah Vs CIT ( Guj ) 206 ITR 55

Land purchased had potentiality of being developed into building site – No agricultural operations were carried out on land by the assessee – Adventure in the nature of trade.Badrilal Bholaram Vs CIT (MP) 139 ITR 207

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CIT Vs B. Narasimha Reddy (Kar) 150 ITR 347CIT Vs M. Krishna Rao (AP) 120 ITR 101Sawandas Devram Vs CIT (MP) 150 ITR 576

SALE OF SHARES

Cumulative effect of all factors to be seen – It is Business income if in earlier years, sale of shares treated as business of assessee - Nothing on record to show that purchase of shares was for non-commercial purposes Purchase of shares not for getting controlling interest of company - Shares sold within a short period - Manner in which shares are shown in the Balance sheet is not conclusiveCIT Vs Karam Chand Thapar & Bros P. Ltd. (SC) 176 ITR 535New Era Agencies Pvt. Ltd. Vs CIT (SC) 68 ITR 585CIT Vs Amalgamations P. Ltd. (Mad) 108 ITR 895

Magnitude of purchase and sale of shares shows that it is business incomeRaja Bahadur Visheshwara Singh & Ors. Vs CIT (SC) 41 ITR 685

Dealing in shares authorized by Article of Association of Company – Business incomeDalmia Cement ltd. Vs CIT (Pat) 12 ITR 50

Memorandum of Association of Company did not authorize purchase and sale of shares – Purchased shares to get controlling interest of company – Capital Gains arises on transferKishan Prasad & Co. Ltd. Vs CIT (SC) 27 ITR 49

Purchase and sale of shares a solitary transaction – No dividend received – Capital gains arises on transferCIT Vs Jagarnath Prasad Chhawchharia (Pat) 176 ITR 217

Annual report of company shows investment in shares is for capital appreciation – Capital gains arises on transferIndia Nut Co. Ltd. Vs CIT (Ker) 39 ITR 234

Shares were never treated as stock-in-trade – held for earning dividend only – Transfer results in Capital Gains onlyCIT Vs N.S.S. Investments (P.) Ltd. (Mad) 277 ITR 149Vr. Kr. S. Firm Vs CIT (Mad) 61 ITR 661

It is not established that assessee was holding shares as stock-in-trade – Therefore shares held as investment – Dividend income is income from Other Sources. Holding of investments by itself is not business.CIT Vs West Coast Electric Supplies Corporation Ltd. (Mad) 243 ITR 565.

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Purchase & sale of shares in a Private Company within a short period – Adventure in the nature of trade.V. Amirtham Ammal Vs CIT (Mad) 74 ITR 739Burnside Investment & Holdings Ltd Vs CIT (ITAT, Mad) 61 ITD 501

Sale of shares of subsidiary company – Capital gains arisesCIT Vs Calcutta Discount Co. (P.) Ltd. ( Cal) 162 ITR 680

Shares purchased with borrowed funds – sale made not to liquidate debts and proceeds were kept in bank – Adventure in the nature of trade.CIT Vs Sutlej Cotton Mills Supply Agency Ltd (SC) 100 ITR 706Atlas Corporation Vs ITO (ITAT, Bom) 57 ITD 139Neerja Birla Vs ACIT (ITAT, Mum) 66 ITD 148

SALE OF OTHER ASSETS

Purchase of silver bars when prices were going to rise due to war and sales made at rising levels – Adventure in the nature of trade.Tribhuvandas Vallabhdas Vs CIT (Bom) 61 ITR 518Wisdom Vs Chamberlain (CA) 74 ITR 306

Rosewood trees after felling were dressed and sold - Assessee not a dealer in trees - isolated transaction - capital gains only and not businessC.G. Thimmaiah Vs CIT (Kar ) 148 ITR 741

Import of 4 Cement Plants – Intention of re-sale was there – Adventure in the nature of tradeDalmia Cement Ltd Vs CIT (SC) 105 ITR 633

Transactions of acquiring leases and granting sub-leases of coal mines, were in the nature of trading - Salami received is revenue receipt.Karanpura Development Co. Ltd. Vs CIT (SC) 44 ITR 362

Purchased mortgage decree – As a result of execution proceedings, realized excess money-Business profit.Jaldu Manikyala Rao Vs CIT (Mad) 28 ITR 220, 54 ITR 409.

Assessee took over the liability to pay the shareholders of a company controlled by him knowing that claims will not be made by the share holders – Adventure in the nature of trade – Business income.R. Dalmia Vs CIT (Del) 137 ITR 665

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Assessee advancing money to another to further litigation with a condition that in case of borrower succeeds, the assessee should get a share in the proceeds – Business.Goyaprasad & Chotey Lal, IN RE (All) 3 ITR 177

Computation of Income under various heads

SALARY INCOME.

RECEIPTS - WHETHER SALARY ?

Salary received by persons covered by Portuguese Civil Code – No over-riding title – To be assessed in the hand of employee only.CIT Vs Modu Timblo (Bom) 206 ITR 647

Commission received from employer in addition to salary – Assessable as salaryCIT Vs Bijai Kishore Kapoor (Orissa) 202 ITR 129CIT Vs R. Rajendran (Mad) 260 ITR 476CIT Vs T. Abdul Wahid & Co. (Mad) 243 ITR 467

Amount spent on purchase of deferred annuity policy for benefit of employee – profit in lieu of salary.CIT Vs P. Jaiswal (Del) 252 ITR 453

Assessee an architect was Managing Director of Company – under agreement with company, he received monthly payment in addition to salary as compensation for refraining from doing practice independently - Part of salary.P.M. Thackar Vs ACIT (ITAT, Bang) 62 ITD 160

Managing Director subject to control of Board of Directors – Remuneration received is alary.CIT Vs M.S.P. Rajes (Kar) 202 ITR 646

Assessee, Director in company – Debit balance in books of Company against assessee –income.CIT Vs Tara Singh (Del) 233 ITR 669

Shares allotted to Director by the company – Benefit / Perquisite – Part of salary.D.M. Neterwalla Vs CIT (Bom) 122 ITR 880

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Voluntary retirement – compensation received – Leave encashment – Profit in lieu of salary u/s 17(3)G.N. Badami Vs CIT (Mad) 240 ITR 263P. Arunachalam Vs CIT (Mad) 241 ITR 827

Member of HUF joining partnership – Member given salary for managing the firm – salary is individual income of member.CIT Vs Trilok Nath Mehrotra (SC) 231 ITR 278Mathur Prasad Vs CIT (SC) 60 ITR 428 salary is income of HUFM.D. Dhanwatey Vs CIT (SC) 68 ITR 385

Ex-gratia payment on account of long service received at the time of retirement – Profit in lieu of salary u/s 17(3)V.R. Ganti Vs CIT (AP) 216 ITR 48Balchand K. Vora Vs ITO (ITAT, Mum) 71 ITD 380J.K. Helene Curtis Ltd. Vs CIT (Bom) 236 ITR 403

House Rent Allowance received by employees who occupy their own houses – Not exempt Value of encashment of leave salary by employees who continue in employment – Assessable as profit in lieu of salary.Patil Vijayakumar & Ors. Vs Union of India & Anr. (Kar) 151 ITR 48CIT Vs V. Karthikeyan (Mad) 239 ITR 815CIT Vs K. Balasubramaniam (Bom) 238 ITR 785

Company making advances to Directors – Non-charging of interest on debit balances in running account of Directors – constitutes perquisites.CIT Vs V.M. Salgoacar and Brothers P. Ltd. (Kar) 198 ITR 738CIT Vs C. Kulandaivelu Konar (Mad) 100 ITR 629CIT Vs Gurdial Singh (Del) 100 Taxman 507

Interest at a concessional rate for house building or interest subsidy on house building loan taken from LIC/HDFC – Taxable perquisite u/s 17(2)(iv)P. Bhavani Shankar & Ors. Vs CIT & Ors. (Mad) 242 ITR 152

Accommodation hired by employer and given to employees at lesser rent – Perquisite.All India Union Bank Officers Federation Vs UBI & Ors. (Mad) 155 CTR 28

Partner using residential premises, car & telephone belonging to firm – value of benefits assessable as perquisites.V.P. Warrier Vs CIT (MP) 181 ITR 303

Tax paid by employer on behalf of assessee – Is a perquisite taxable.

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T.P.S. Scott & Ors. Vs CIT (Del) 232 ITR 475S. Takenaka Vs CIT (Kar) 237 ITR 112

Expenses on medical treatment of assessee met by employer, is perquisite.DCIT Vs P.G. Shanbagh (ITAT, Hyd) 54 ITD 417

Director – received no salary but only rent free accommodation – Perquisite – taxable.Lakshmipat Singhania Vs CIT (All) 93 ITR 162

Air fare provided to Supervisors – Benefit to employee – Perquisite.Clouth Gummiwerke Aktiengesellschaft Vs CIT (AP) 238 ITR 861

Flat received from employer at a cost very much below market value – Difference is perquisite u/s 17(2)(iii)M.M. Ratnam Vs ITO (ITAT, Mumbai-TM) 62 ITD 21

Personal expenses on credit card of director, paid by company – LIC premium of director paid by company – Assessable as income of directorRavi Prakash Khemka Vs CIT (Mad) 295 ITR 33

DEDUCTIONS

Getting salary from more than one employer during accounting year – Not entitled to separate standard deduction in respect of each source.CIT Vs B.D. Pandey (All) 231 ITR 259CIT Vs U. Mohan Rao (Mad) 227 ITR 72

Vehicle provided by employer for official and personal use – Full standard deduction cannot be claimed.CIT Vs Viji S.(Mad) 238 ITR 483

Receipt of salary from firm – No standard deduction CIT Vs K.V. Ramalingam Chettiar (Mad) 249 ITR 674

Arrears of salary received compulsorily credited to Provident Fund – cannot be spread over u/R 21A.Kerala Electricity Officers Federation & Ors. Vs CBDT & Ors. (Ker) 279 ITR 482

Incentive Bonus to LIC Dev. Officers- Part of salary – No deduction other than standard deductionK.A. Choudhary Vs CIT (AP) 183 ITR 29 ITO Vs P.M. Suthar (ITAT, Ahd-TM) 53 ITD 1CIT Vs M..D. Patil (Kar) 229 ITR 71

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CIT Vs Shiv Raj Bhatia (Raj) 227 ITR 7CIT Vs G.S. Jhamal (MP) 227 ITR 219CIT Vs S.L. Singhal (P&H) 238 ITR 170CIT Vs Govind Chandra Pani (Orissa) 213 ITR 783

80CCA Deposit made by availing loans – Not deductible from salary income – It should be from income chargeable to tax.Inder Madhok Vs ITO (ITAT, Del) 24 ITD 93Arun Kumar Jain Vs ITO (ITAT, Chd) 70 ITD 115S.K. Jain Vs DCIT (ITAT, All) 65 TTJ 741CIT Vs Abraham George (Ker) 242 ITR 171ITO Vs Ranjan Kumar Dasgupta (ITAT, Cal) 25 ITD 104

EXEMPTIONS

Individual having specialized knowledge in extraction of mineral oil who was employed in a managerial capacity – No exemption 10 (5B)John A. Sayre, IN RE (AAR) 236 ITR 652

Living allowance to foreign technicians u/s 10(14) – Incurring of expenditure to be proved.CIT Vs Bellien Michael Andresmant & Ors (AP) 237 ITR 479CIT Vs Arthur Fuchs (Pat) 202 ITR 656

Employee of foreign company working in India as part of collaboration agreement – Pocket allowance paid to employee by Indian Company – Salary – No 10(14) exemptionAlessandro Constantini Vs CIT (Guj) 226 ITR 883CIT & Anr. Vs Sedco Forex Intl. Drilling Co. Ltd. (Uttaran) 264 ITR 320 off period

allowance.

House Rent Allowance not exempt where assessee occupying house belonging to HUF and not paying any rent for AY 76-77 onwards – Sec. 10(13A)CIT Vs D. Lakshminarayanaswamy (Mad) 238 ITR 976

Employee received gratuity in an earlier year from a former employer – receives gratuity again from another employer – ceiling limit of 30,000 u/s 10(10) will be reduced by exemption granted earlier.CIT Vs N.J. Pavri (Bom) 237 ITR 472

Fixed sum received as Leave Travel Concession – Not exempt u/s 10(5).Dr. Reddy Laboratories Ltd. Vs ITO (ITAT, Hyd) 58 ITD 104

Fixed sum received as conveyance allowance – Not exempt u/s 10(14).

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Dr. Reddy’s Laboratories Ltd. Vs ITO (ITAT, Hyd) 58 ITD 104

Fixed medical reimbursement on the basis of self declaration – Not exempt.Dr. Reddy Laboratories Ltd. Vs ITO (ITAT, Hyd) 58 ITD 104

Generation incentive paid by DESU to its employees under a scheme – No approval by Central Government – No Sec. 10(17B) exemption.Rajinder Tiku Vs ITO (ITAT, Del) 59 ITD 410

Pilot of Indian Airlines – Various allowances received – AO restricted exemption to 30,000 u/s 10(14)(ii)Capt. Harminder Singh Vs ITO (ITAT, Del) 62 ITD 78

Voluntary Retirement Scheme not approved prior to date of retirement of assessee – No exemption u/s 10(10C)Jodhraj Singh Vs Union of India & Ors. (Del) 234 ITR 871

Daily allowance received as Director of company – Not exempt u/s 10(14).Madhavrao J. Scindia Vs CIT (Bom) 243 ITR 683

“Termination of service” can take place either by resignation or dismissal or compulsory retirement or on attaining superannuation.CIT Vs J. Visalakshi (Mad) 206 ITR 531Dearness allowance to be included in salary while working out House Rent Allowance exemption.Industrial Finance Corpn.(I) Ltd. Vs ITO (ITAT, Coch) 72 ITD 449

Conveyance allowance granted to LIC Officers – not for expenses wholly exclusively incurred for expenses of office – Not exempt u/s.10(14) .LIC Class-I Officers (Bombay) Association Vs LIC of India (Bom) 229 ITR 510ITO Vs L.N. Goswami (ITAT, Cal) 8 ITD 661

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HOUSE PROPERTY INCOME

RENT RECEIVED / RECEIVABLE - HOW MUCH ?

Ejection suit filed against tenant – Rent not being collected – Owner of property liable to be assessed on annual value of property.Swaika Oil and Produce Co. P. Ltd. Vs CIT (Cal) 201 ITR 520

Let out property – Fair rental value can be determined u/s 23(1)(a) by ITOCIT Vs G. Ramesan (Ker) 241 ITR 426CIT Vs Johny Joseph (Ker) 241 ITR 423N. Nataraj Vs DCIT (Mad) 266 ITR 277

Property let out for less than standard rent – Annual Letting Value is standard rent.CIT Vs Parasmal Chordia (Mad) 233 ITR 147Visveswaraya Ind. Res. Dev. Centre Vs DCIT (ITAT, Mum) 59 ITD 156

Sec.23(3) applies only when such a house is in occupation of assessee, owner.DCIT Vs A.K. Ganju (ITAT, Del) 88 ITD 311

Surcharge on Municipal tax collected by assessee from its tenants – Part of Annual Value.ACIT Vs Poddar Projects Ltd. (Kol) 92 ITD 468

Property owned by partner, used in firm’s business – Annual letting value is rent for the purpose of house Property income.CIT VS K.N. Guruswamy(Kar) 146 ITR 34

Building let out to sister concerns / related parties – Annual Letting Value is fixed at 8% of cost.Emtici Engineering Limited Vs ACIT (ITAT, Ahd) 58 TTJ 27

Suit for recovery of enhanced rent pending – Both parties agreed for enhanced rent – Annual Letting Value on the basis of enhanced rent.Vijay Pal Singh Vs ITO (ITAT, Del) 62 ITD 23

Assessee company purchased a property – Divided it into 17 stalls and allotted to its members – Subsequently entered into tripartite agreement with its members and a bank as per which said stalls were given to bank on lease for a consideration of Rs. 7 per sq. ft. out of which Rs 1 was to be paid to assessee company for meeting municipal charges and maintenance expenses and Rs. 6 to

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be paid to the members. Assessee liable to pay House property income at the rate of Rs. 7 per sq. ft.ITO Vs Janta Bazar & Stores (P.) Ltd. (ITAT, Mum) 110 ITD 331

Increase of rent with retrospective effect under compromise settlement with tenant – Assessable as arrears of rentB.M. Gupta & Sons (HUF) Vs ACIT (Del) 299 ITR 410

IN WHOSE HANDS ?

Land taken on lease by 9 persons – Amount contributed in specific ratio – constructed godown – Income from lease of godown – House Property income – To be taxed on Co-owners u/s 26CIT Vs Baba Estates (Mad) 244 ITR 413

Contribution of capital by partners in the form of land – No document evidencing Registration of transfer by partner in favour of partnership under Registration Act. – Transfer not genuine – Land does not become property of firm.CIT Vs Kashiram Ramgopal Agencies (Gau) 231 ITR 10

Firm transferring its immovable property to partners without a registered deed – Transfer is invalid – Rental income from property to be assessed in the hands of firm.CIT Vs Palaniappa Enterprises (Mad) 234 ITR 635Jansons Vs CIT (Kar) 154 ITR 432Ram Narain & Brothers Vs CIT (All) 73 ITR 423S.N. Syed Mohammed Saheb & Bros. Vs CIT (Ker) 68 ITR 791

Purchase of properties in joint names of partners with funds of firm – Properties treated as that of firm right from inception and depreciation claimed on it – Income from properties treated as firm’s income and divided among partners – Properties cannot be transferred to partners by book entries of firm – Income from property cannot be assessed as that of AOP but belong to firm.Abdul Kareemia & Bros Vs CIT (AP) 145 ITR 442

A gift by a Mohammedan to his wife in lieu of the dower debt after marriage is sale of property – such a transfer has to be made by a registered instrument if value of immovable property is more than Rs.100.CIT Vs Syed Saddique Imam and others (Patna)111 ITR 475, 117 ITR 62

Under Mohammedan Law, lady cannot make family settlement on her self-acquired property – Property continues to belong to assessee.CIT Vs Bibijan Begum (Gau) 221 ITR 836

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Flats transferred to vendees, but registration not completed – Vendees are owners – House Property income chargeable.CIT Vs Suresh Amichand Shah (HUF) (Guj) 240 ITR 291

DEDUCTIONS

Only deductions specified in Sec. 24 are allowable.ITO Vs B.N. Mathur IITAT, Del) 30 ITD 9ITO Vs Chunilal Jain (ITAT, Gau) 60 TTJ 448Piccadily Holiday Resorts Ltd Vs DCIT (ITAT, Del) 94 ITD 267 (brokerage paid )

Deduction of interest on borrowed capital – Assessee to prove nexus with acquisition / construction / reconstruction / repair / renewal of property.CIT Vs Four Fields (P) Ltd. (P&H) 231 ITR 262K. Sunandamma Vs CIT (Kar) 164 ITR 446CIT Vs Indramani Devi Singhania (All) 189 ITR 124

Advance received for delivery of flat – Failure to deliver and interest paid – capital not borrowed for construction of property – Not deductible.Akash & Ambar Trust Vs CIT (Cal) 268 ITR 93

Only interest on capital / mortgage / charge is deductible from House Property income – Not interest on interest i.e., compound interest. Shew Kissen Bhatter Vs CIT (SC) 89 ITR 61

Interest paid on a mortgage created to secure unpaid consideration for the purchase of the property could not fall u/s 24(1)(iv) or (vi) –K. Govinda Bhatt Vs CIT (Mad) 235 ITR 528

Borrowed money utilized for paying a tenant, for handing over possession of property or for surrendering tenancy right – Interest on such loan not allowable as deductionACIT Vs Virender Singh (ITAT, Del) 104 ITD 365

Agreement to sell property – Property in occupation of agreement holder and owner not receiving rent – Owner voluntarily foregoing rent – No vacancy allowance.CIT Vs Dhun D. Dalal (Mad) 233 ITR 143

Vacancy allowance – Property must be vacant during a part of the year and not for the entire year.CIT Vs Pradeepkumar M. Shah (Ker) 130 ITR 118Mangaldas H. Verma Vs CIT (Bom) 124 ITR 185

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Estate Duty payable, not an annual charge – Interest on ED payable, not deductible.K. Sunandamma Vs CIT (Kar) 164 ITR 446

Partition creating only life interest to karta – During subsistence of his life interest, karta to pay annual charge to his sons and wife – Amount so paid by Karta, not allowable as creation of charge was voluntary.CIT Vs Late Sohanlal ( by L/H ) (Del) 257 ITR 242CIT Vs Satyanarayana Sikaria (Gau) 238 ITR 855

Building not in habitable condition – No need to determine Annual Letting Value – No House Property income – No need to consider municipal tax paid, insurance paid etc., as deduction.Liquidator of Mohamudabad Properties P. Ltd. Vs CIT (SC) 124 ITR 31

Property vested in deity –Expenses on puja of itself – Not deductible –Any expenditure incurred by an owner on itself or himself or any obligation of the owner to incur certain expenditure on itself or himself could not form part of any annual charge of the property.CIT Vs Saradeswar Siva Linga (Cal) 140 ITR 953

As per lease agreement, lessees were to carry out day-to-day repairs – No deduction to lessor on account of repairs.A.K. Mahindra Vs ITO (ITAT, Del) 44 ITD 430

Deduction u/s 24 on account of repairs has to be made after allowing rebate u/s 23(2)(i)CIT Vs J.V. Gupta & Sons (HUF) (Del) 241 ITR 861

Municipal tax pertaining to an earlier year, demand for which was also made before commencement of accounting year – Not deductible.Industrial Consulting Bureau (P) Ltd. Vs CIT (Bom) 239 ITR 151

Damages recovered by tenant by way of adjusting from rent payable- Not deductible.ITO Vs Purushottam Lal Roongata Family Welfare Trust (ITAT, Jaipur-SB) 58 ITD 19

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BUSINESS INCOME

REVENUE / CAPITAL RECEIPTS

RECEIPTS - WHETHER INCOME ?

Assessee a priest – amount received for performing mass – Receipts for vocation – Income.Father Epharam Vs CIT (Ker) 176 ITR 78Acharya D.V. Pande Vs CIT (Guj) 56 ITR 152

Teaching of ‘vedanta’ is a vocation – value of car given by disciples is income of ‘a’ from carrying on a profession.Addl. CIT Vs Ram Kripal Tripathi (All) 125 ITR 408, 163 ITR 716

Prize won in photography contest by a professional photographer –income.CIT Vs Avinash Pasricha (Del) 251 ITR 360

Winnings from races and other games of any sort – Prize received in Car rally – is income.CIT Vs G.R. Karethikeyan (SC) 201 ITR 866

Architect – submission of plan for proposed building – Prize won – Revenue receipt.Parelkar, Gore & Parpia Vs CIT (Bom) 34 ITR 312

Winning from Caption contest – taxable K.P.K. Ghouse Vs CIT (All) 268 ITR 260

Winning from Sikkim Lottery – taxable Mahaveer Kumar Jain Vs CIT (Raj) 277 ITR 166

Winnings from Sales promotion Schemes – TaxableD.N. Thakur Vs ITO (ITAT, Chd) 105 ITD 692

Cloth dealer receiving gifts from supplier as incentive – taxable as revenue receiptBoeing v. CIT (Mad) 250 ITR 667

Even if receipt is casual and non-recurring nature, since it arose from the exercise of his profession, it was part of income.Sushil C.Sen, IN RE (Cal) 9 ITR 261

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Assessee, selling agent of lottery ticket – Purchased tickets to earn commission – Expenses incurred is business expenditure – Lottery prize received is business income.Mysore Sales International Limited Vs CIT (Kar) 117 ITR 64

Amount withdrawn from National Savings Scheme – TaxableJai Pal Sharma Vs ITO (ITAT, Del) 72 ITD 485

Dealer in shares – shares in one company valued at cost and held as stock-in-trade – Exchange for shares in another company – Difference between book value of original shares and market value of new shares – Taxable as business profit.Orient Trading Co. Ltd. Vs CIT (SC) 224 ITR 371Alpana Piramal Vs ITO (ITAT, Mum) 76 ITD 375Business of shares and debentures – Detachable warrants received is stock-in-trade and profit on sale of it, is taxable income.J.T. Holdings (P) Ltd Vs ITO (ITAT, Mum) 89 ITD 569

Transaction in exchange traded derivatives – Life of short deviation – business income.Morgan Stanley & Co. Intl. Ltd., IN RE (AAR) 272 ITR 416

Amount received by partner on dissolution of firm –A part is income and balance towards capitalCIT Vs M. Uttama Reddy (Mad) 148 ITR 580Sukhbir Prasad Vs CIT (P&H) 144 ITR 437

Assessee erstwhile partner – receiving amounts for work done by firm when it existed – Revenue receiptsCIT Vs J.H. Tarapore (Mad) 257 ITR 305

Distributor & exhibitor of films – Assessee entering into partnership agreements for raising finance for its business – Assessee selling its interest in firm – Assessee in reality sold its rights to exhibit films for un-expired period of contracts – Amount received was revenue receipt.CIT Vs Manoranjan Pictures Corporation (P) Ltd. (Del) 228 ITR 202

Cash incentive received against exports – income – CIT Vs Maya J. Daryani (Del) 231 ITR 554CIT Vs Smarts P. Ltd. ( Del ) 233 ITR 243

Profit on sale of license – business income in view of retrospective amendment to sec.28.R.J. Wood & Co. (P) Ltd. Vs CIT (Del) 99 Taxman 309Gedore Tools P. Ltd. Vs CIT (Del) 238 ITR 268; Cashmere Woollen & Silk Mills Vs CIT (Del) 238 ITR 1026

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Premium earned on sale of import entitlements – Income.Raunaq International Vs CIT (Del) 231 ITR 106CIT Vs Rajasthan Udyog (Raj) 225 ITR 468CIT Vs Emeey Stone Mfg. Co. (Raj) 225 ITR 480Khandelwal Ferro Alloys Ltd. Vs CIT (Bom) 186 ITR 111Industrial Cables (India ) Ltd. Vs CIT (P&H) 156 CTR 185

Sums realized from Textile Commissioner in lieu of surrender of import entitlements – Revenue receipt.Swadesh Cotton Mills Co. Ltd. Vs CIT (SC) 233 ITR 199

Buses transferred by transport company to its Director and a person who had substantial interest in Company at prices much below market value – Difference between fair market value of buses and prices paid are assessable as income in the hands of those individualsCIT Vs S. Varadarajan (Mad) 224 ITR 9

When property is purchased from a debtor in satisfaction of debt – To the extent the purchase price exceeds principal, represents realization of interest - Is Income - Expenses incurred towards completing title, entering into possession etc. of this property are not deductible expenses.Lachhmandas Brij Ballabh Das, IN RE (All) 10 ITR 186

Embezzlement by employee allowed as business loss – subsequent recovery is income.Union Bank of Bijapur and Sholapur Ltd., IN RE (Bom) 10 ITR 21

Immovable Property acquired by amalgamating company from its debtors transferred to assessee – Such Immovable Property constituted stock-in-trade of assessee – Profits from sale of property assessable as business income.L.M. Devare, Liquidator of Bank of Karand Ltd. Vs CIT (Bom) 234 ITR 813

Mining Lease – Minimum royalty is like annual guarantee – income.Royalty received is income Raja Bahadur Kamakshya Narain Singh of ramgarh Vs CIT (PC) 11 ITR 513

Assessee has no right in products specified in agreement and there were no fetters on him on use of technical know-how or knowledge – amount received is not Capital receiptV.C. Nannapeni Vs ACIT (ITAT, Hyd) 94 ITD 309

Deposits received from customers not claimed by them – claim barred by limitation – unclaimed balance transferred to P&L a/c. - Income. French Motor Car Co. Ltd. Vs DCIT (ITAT, Cal) 68 ITD 176CIT Vs India Co.(P) Ltd.(Mad) 139 CTR 315

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CIT Vs T.V. Sundaram Iyengar and Sons Ltd. (SC) 222 ITR 344 - This decision will take Precedence over Sugauli Sugar Works (SC) 236 ITR 518 since decision by a larger Bench

CIT Vs Sundaram Industries Limited (Mad) 253 ITR 396

Unclaimed balances written off and credited to General Reserve - income CIT Vs Aries Advertising P. Ltd. (Mad) 255 ITR 510

Transfer fees charged by co-operative housing society on some members transferring their plots – No mutuality exists – taxable incomeHatkesh Co-operative Housing Society Ltd Vs ITO (ITAT, Mum) 60 ITD 662

Co-operative Society – Flat owners Association – putting surplus funds in Bank deposits – interest earned – No mutuality – taxable incomeSom Vihar Apt. Owners Housing Maintenance Society Ltd. Vs DCIT (ITAT, Del) 60 ITD 392

Interest income on surplus funds borrowed for construction – Hire charges received from hiring assets – Transferred to capital Work In Progress – Still revenue receipt –Taxability of income does not depend upon its destination - Trial run of plant – Power generated was sold – Revenue receiptDCIT Vs Karnataka Power Corporation (ITAT, Bang) 67 ITD 391

Co-operative Housing Society granting leases to its members - Agreement shows that on transfer of lease, member has to pay a portion of excess received to the society – Amount received by society is revenue receipt.CIT Vs Presidency Co-operative Housing Society Limited (Bom) 216 ITR 321

Difference in opening balance not properly explained – incomeSamaiya Steel Industries (ITAT, Jab) 104 Taxman (Mag) 305

Interest awarded under Motor Vehicles Act is revenue receipt.Kailash Narain Gupta Vs CIT (Raj) 225 ITR 921

Commission received on real estate transaction – Business income.CIT Vs Assam Hard Board Limited (Gau) 224 ITR 318

Assessee obtaining contract for supply of commodities to military – Contract transferred / sub let to third party – consideration received for the same is revenue in nature – Income in the year of receipt.N.R. Sirker Vs CIT (Gau) 111 ITR 281

Additional quota of free sugar given by Government – Amount received on sale – revenue receiptCIT Vs Kisan Sahkari Chini Mills Ltd. (All) 284 ITR 418

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Sugar industry – Amount realised on account of Cane Development Fund – IncomeCIT Vs Shri Bhogawati Sahakari Sakhar Karkhana Ltd. (Bom) 283 ITR 374

Income from Sale and lease of horses – business income.M. Ct. Muthiah Vs CIT (Mad) 260 ITR 629, (Mad) 259 ITR 194

Assessee carrying on activity of maintenance of horses with object of earning income by letting out and sale of horses in a systematic and organized manner over a period of time – Income from horses is business income – Horses are stock-in-trade – Closing stock of horses to be valued at market valueACIT Vs S. Pathy (HUF) (ITAT, Chennai) 100 ITD 53

Possession of plot of land transferred and transferees even making constructions thereon – Dominion over property passing on to transferees – Amount received as advances or earnest money – Revenue receiptCIT Vs Dhir & Co. Colonisers P. Ltd. (P&H) 288 ITR 561

Stock found at the time of search less than stock as per books – difference represents suppressed sales – GP on such sales Janta Tiles Vs ACIT (ITAT, Pune) 66 TTJ 695

Interest on molasses storage fund - income CIT Vs Madurantakam co-op sugar Mills Ltd.(Mad) 263 ITR 388

Foreign travel expenses of wife of Director met by company – income of wife of DirectorCIT Vs Surekha P. Kothari (Mad) 267 ITR 406

Sale consideration of earth removed from own land – Revenue receipt.CIT Vs E.M. Johny (Ker) 279 ITR 34

Amount embezzled by assessee from employer – is income eventhough there is a subsequent agreement to return the moneyCIT Vs Troilakya Chandra Bora (Gau) 261 ITR 299

Assessee paid certain sums to his advocate with a stipulation in agreement that if arbitration award was not in favour of assessee, then advocate should refund amount of advance – Arbitration award on 30-01-90 whereby claim of assessee was dismissed – Advocate declined to refund money – Assessee files suit against him – income of assesseeS.A. Builders Ltd Vs ACIT (ITAT, Chd) 86 ITD 58

Assessee advances loan to firm on interest –Assessee stopping charging of interest from 1.4.64 – Debtor also not crediting interest to assessee’s a/c. –

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Assessee filing suit for recovery of amount with interest – Interest accrued to assessee even after 1.4.64.Addl. CIT Vs Swadeshi Cloth Dealers (All) 187 ITR 620

Interest on advance-tax paid to assessee – Interest reduced subsequently – Amount received earlier does not lose its character of income.CIT Vs Syndicate Bank (Kar) 159 ITR 464Tamil Nadu Industrial Investment Corpn. Ltd. Vs DCIT (Mad) 270 ITR 566

Mercantile system of accounting – interest on sticky advances – Accrues as income Karnataka State Finance Corporation Vs CIT (Kar) 242 ITR 623

Surplus due to re-valuation of Indian Rupee – Revenue receiptsKhandelal Brothers P. Ltd. Vs CIT (Cal) 117 ITR 452 Essar Steel Ltd. Vs DCIT (ITAT, Ahd-TM) 97 ITD 125Oil & Natural Gas Corporation Ltd. Vs DCIT (ITAT, Del-SB) 83 ITD 151IRCON International Ltd. Vs DCIT (ITAT, Del) 74 ITD 117Sujata Grover Vs DCIT (ITAT, Del) 74 TTJ 347

Nature of transaction in the hands of the payer is not relevant to decide the nature of receipt in the hands of the payeeCIT Vs Harjivandas Vithaldas (Guj) 60 ITR 613Vithaldas Thakordas Vs CIT (Bom) 14 ITR 822

Wholly-owned subsidiary company of assessee in Saudi Arabia went into liquidation – Assessee transferred its shares and got Saudi Riyals and suffered loss which was treated as capital loss – During the year, assessee repatriated Saudi Riyals and earned profit due to exchange rate difference in the period – Revenue receiptsReliance Energy Ltd. Vs DCIT (ITAT, Mum) 103 ITD 223

Collection of statutory dues

Excise duty payable by manufacturer – Part of turnover of manufacture.McDowell and Co. Ltd. Vs Commercial tax Officer (SC) 154 ITR 148

ST collected is part of trading receipts.Chowringhee Sales Bureau (P) Ltd. Vs CIT (SC) 87 ITR 542CIT Vs E.A.E.T. Sundararaj (Mad) 99 ITR 226Sinclair Murray & Co. P. Ltd. Vs CIT (SC) 97 ITR 615Addl. CIT Vs T. Nagi Reddy (SC) 202 ITR 253CIT Vs Western India Sales & Services (Pat) 204 ITR 329Food Specialities Ltd. Vs ACIT (ITAT, Del) 54 ITD 352CIT Vs Ahmedabad Eagle Engg. (P) Ltd. (Guj) 154 CTR 546Jonnalla Narasimharao & Co. & Anr. Vs CIT (SC) 200 ITR 588

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Amount realized as excise duty from customers on sale of poppy seeds as part of price of goods - Are trading receipts assessable to tax.Jagdish Prasad Nigam Vs CIT & Ors. (All) 228 ITR 112

ST, excise duty etc. collected from customers – Did not pay to Government – Kept by assessee as deposit - income of assesseeCIT Vs Southern Explosives Co.(M ad) 242 ITR 107 CIT Vs National Engg. Co. (Madras) P. Ltd.. (Mad) 251 ITR 764CIT Vs A.R.A.S. P.V. & P.V. ( Mad ) 263 ITR 616

Collections made, but proceedings pending - whether income ?

Excise duty collected from customers – separately accounted – Kept with Bank as fixed deposit – Later, assessee lost in Supreme Court – Excise duty collected is part of trading receipts – Bank guarantee furnished is not deductible expense.ACIT Vs Krishna Textiles (ITAT, Ahd) 59 ITD 523

Excise duty collected from customers and kept in a separate account – Assessable as trading receipt – Not deductible since not paid during the yearCIT Vs Ideal Sheet Metal Stampings and Pressing P. Ltd. (Guj) 290 ITR 295

Assessee collected caution money from lessees towards Sales Tax liability subject to same being refunded to lessees in case Court held that lease transactions were not subject to Sales Tax – Trading receipt – Liability is contingent – Sales Tax not paid to Government – 43B applied.Sriram Transport Finance Co. Ltd. Vs ACIT (ITAT, Mad) 63 ITD 336

Security Deposit collected by assessee towards bottles – part of sale consideration – eventhough it is credited in separate L/F “empty bottles return deposit a/c”.Punjab Distilling Industries Ltd. Vs CIT (SC) 35 ITR 519

Excess over authorized price of sugar, collected by assessee – Litigation over authorized price pending before Supreme Court – Excess collected is income.CIT Vs K.C.P. Limited (AP) 216 ITR 602UP State Agro Industrial Corporation Vs Addl. CIT (SC) 201 ITR 707

Amount deducted by Society by way of “deposit” from price of sugarcane payable to producer members, to be adjusted towards losses, repayment of loan etc. of the Society – Is revenue receipt. Entry in account books or name given is not determinative.CIT Vs Bazpur co-operative Sugar Factory Ltd. (SC) 172 ITR 321

85

Assessee was permitted to charge only Rs.11.70 per bag – On appeal, High Court as an interim measure permitted to charge Rs. 13 per bag and excess over Government rates to be deposited in bank in the name of D.C. during pendency of petition – said sum is trading receipt of assessee and is income.CIT Vs Mangat Ram Hazari Lal (P&H) 221 ITR 797

Luxury tax collected but not paid – income Pandyan Hotels Ltd Vs CIT (Mad) 266 ITR 172

Interest, guarantee commission and commitment charges kept in suspense a/c – income.CIT Vs Tamil Nadu Industrial Investment Corpn. Ltd,.(Mad) 240 ITR 573

Acquisition of electrical undertaking – Profits chargeable in the year of receipt – Pendency of arbitration proceeding will not affect accrual of income.CIT Vs United Provinces Electric Supply Co. (SC) 244 ITR 764

Compensation received

Two groups of shareholders holding substantial shares of a company – Managing Director who belonged to one group retired prematurely as a result of agreement whereby his group sold its shares to rival group – Compensation received is business income u/s 28(ii)(a)CIT Vs D.R. Sondhi (Del) 248 ITR 695

Assessee received certain sums from foreign companies for agreeing to vote in a particular manner in those companies – taxable Steri Mould (P) Ltd. Vs DCIT (ITAT, Del) 88 ITD 78

Business rival paying money to assessee to keep off competition – Business income – Not casual and non-recurring receipt.Ram Kumar Agarwalla & Bros. Vs CIT (SC) 63 ITR 622CIT Vs Mineral Mining Co. Pvt. Ltd. (Mad) 194 ITR 258K. Ramasamy Vs CIT (Mad) 261 ITR 358Chemplant Engineers (P) Ltd. Vs CIT (Mad) 234 ITR 23

Compensation for loss of earnings – Revenue receiptCIT Vs Manna Ramji & Co. (SC) 86 ITR 29Indo Foreign Traders (P) Ltd. Vs CIT (Mad) 166 ITR 308Bishmbhar Nath Swaroop Narain Vs CIT (All) 119 ITR 681

Compensation received for termination of managing agency business –Payment in relation to the business – Revenue receiptChidambaram Mulraj & Co. P. Ltd. Vs CIT (SC) 102 ITR 7CIT Vs Gangadhar Baijnath (SC) 86 ITR 19

86

J.R. Kimtec & Sons Vs CIT (AP) 115 ITR 190Pierce Leslie & Co. Ltd. Vs CIT (Mad) 38 ITR 356Gillanders Arbuthnot & Co. Ltd. Vs CIT (Cal) 46 ITR 847; (SC) 53 ITR 283CIT Vs Karamchand Thapar & Bros (P) Ltd. (Cal) 67 ITR 705R.V. Lakshmiah Naidu & Co. Vs CIT (Mad) 48 ITR 661CIT Vs Best and Co.(Pvt) Ltd. (SC) 60 ITR 11Development of Industries (India) P. Ltd. Vs CIT (Cal) 68 ITR 310

In the course of business, contract was entered upon – Compensation received for its termination is revenue receipt. Payments made in settlement of rights under a trading contract – Trading receiptsCIT Vs Rai Bahadur Jairam Valji & others (SC) 35 ITR 148CIT Vs Siewart & Dholakia P. Ltd. (Cal) 95 ITR 573CIT Vs South India Pictures Ltd. (SC) 29 ITR 910CIT Vs Travancore Rubber & Tea Co. Ltd. (Ker) 221 ITR 585

Business of manufacturing on contract basis as job work – termination of contract – compensation received - Revenue receipt.Elegant Chemicals Enterprises (P) Ltd. Vs ACIT (ITAT, Hyd) 91 ITD 85

Correspondence between parties indicate that the sum received was by way of compensation for loss of business in some locations – Assessee continuing business in other places – No permanent cessation of business – No part of profit making apparatus of assessee extinguished – Revenue receiptCIT Vs All India Films Corporation (Del) 297 ITR 358

Lump sum consideration received by managing agents for reduction of remuneration in future – only a commuted amount – Revenue receipt.M.E.R. Malak Vs CIT (Nag) 29 ITR 238Break-down of machinery – incurred repairs – received insurance money –surplus arising is income A.T.E.(P) Ltd. Vs ACIT (ITAT, Mum) 68 ITD 18CIT Vs Needle Industries (India) Ltd (Mad) 245 ITR 556 (loss of raw material-

insurance receipt)

Amount received for training skilled personnel and sharing customer data base – Revenue receiptIBM India Ltd. Vs CIT(Appeals) (ITAT, Bang) 105 ITD 1

Assessee doing manufacturing and sale of Coca-Cola –destruction of bottles – compensation received – Revenue receiptCIT Vs Sri Krishna Bottlers P. Ltd. (AP) 274 ITR 11

Lumpsum amount received for allowing a company to exclusively use its trade mark in certain territories without parting with the trade mark.- Revenue receiptCIT Vs I. Miller & Co. Ltd (Mad) 246 ITR 316

87

Contract for supply of commodity – Agreement providing for minimum quantum of purchase – Payment to be made for shortfall – Amount received towards shortfall is revenue receiptEastern Air Products P. Ltd. Vs CIT (MP) 290 ITR 562

Contract of sale of goods – amount received on breach of contract – revenue receiptCIT Vs State Trading Corpn. Of India Ltd (Del) 247 ITR 114

Interest on delayed payment of compensation / unpaid price – IncomeTiruchirapalli Co-op. Marketing Society Ltd Vs CIT (Mad) 247 ITR 830

Assessee bank in course of its business purchased securities for its constituents on receiving margin money – subsequent default by constituents and margin money forfeited – Business income of assesseeCIT Vs Lakshmi Vilas Bank Limited (SC) 220 ITR 305 Mesne profits awarded by Court for wrongful possession – income – Accrues when actually quantified.P. Mariappa Gounder Vs CIT (SC) 232 ITR 2 Sushil Kumar & Co. Vs JCIT (ITAT, Kol-SB) 88 ITD 35

Salami received in lieu of rent – Revenue receiptB.R. Associated Vs CIT (AP) 236 ITR 465

Compensation received by contractor – interest for delayed payment – revenue receiptK.S. Krishnamurthy Vs CIT (Mad) 241 ITR 186

Compensation received for cancellation of a sale deed by which assessee received a property – Casual & non-recurring receipt u/s 10(3)Gynendra Bansal Vs ACIT (ITAT, Del) 86 ITD 421

Assessee’s Power of Attorney holder misusing Power of Attorney and doing business – On compromise paid certain sum to assessee – Revenue receipt – taxableCIT Vs Deepak Kumar Agarwal (Mad) 244 ITR 448Damages paid by lessee for occupation of property after the period of lease – Revenue receiptS. Kempadevamma Vs CIT (Mad) 251 ITR 871

Sharebroker – holds talks with a non-resident company to set up Joint Venture Company – Non-resident company withdrew and paid a lumpsum – Revenue receipt

88

Sunil M. Shah Vs ACIT 2007-TIOL-425-ITAT-MUM

Assessee director of a company received amount from a foreign company in lieu of a composite agreement for sale of his shareholding and signing of a non-compete clause – Assessee is not owner of business – No question of loss of profit apparatus – Revenue receiptRohitasava Chand Vs DCIT 2007-TIOL-252-ITAT-DEL

Assessee getting into a contract for development of a large plot of land and construction of flats and factory complex – After the work gets underway, the contract is terminated and assessee is paid compensation – Revenue receiptAnsal Properties & industries Ltd. Vs DCIT 2007-TIOL-349-ITAT-DEL

Non-compete fee received for restrictive covenanat – Transfer between two sister concerns – Assessee does not have exclusive expertise in the business transferred – payment for sharing customer database and sharing of trained employees – Revenue receiptACIT Vs Helios & Matherson Information Technology Ltd. 2008-TIOL-200-ITAT-MAD

Diversion by over-riding title

Diversion by over-riding title – testsVibhuti Glass Works Vs CIT (SC) 177 ITR 439

Sugar Factory – part of price of molasses set apart under Molasses Control Order to a specific fund to be utilized for erection of adequate storage facilities – Assessee did not lost title to fund – Amount not diverted by over-riding title – Amount set apart assessable as trading receipt.Jiwaji Rao Sugar Co.Ltd. Vs CIT (MP) 176 ITR 182CIT Vs Bhopal Sugar Industries Ltd. (MP) 233 ITR 429

Assessee was allowed retail margin of Re.1 per bottle of liquor sold and against which it was to construct fly-over and pedestrian facilities as directed by DDA – Assessee created ‘transportation infrastructure utilization fund’ during the year instead of actually constructing the same – No diversion by over-riding title - To be included in income of assesseeDelhi Tourism & Transport Dev. Corpn. Ltd. Vs DCIT (ITAT, Del) 54 TTJ 316

Obligation to transfer part of net profit to reserve fund – No diversion by overriding title – Not deductible.CIT Vs Jodhpur Co-operative Marketing Society (Raj) 275 ITR 372

Amount set apart by co-operative society as capital contribution redemption fund – No diversion by over-riding title – Not deductible.

89

Colaba Central Co-operative Consumers’ Wholesale and Retain Stores Ltd. Vs CIT (Bom) 229 ITR 209

Dividend used to finance research activity of company – No diversion by over riding title.CIT Vs Warner Lambert Co. Ltd. (Bom) 233 ITR 429

Race Club – License fees, fines etc. credited to benevolent fund created by club – No diversion by over riding titleCIT Vs Madras Race Club (Mad)255 ITR 98

Assessee inheriting assets and liabilities on his father’s death – Overdraft taken by assessee’s father for paying tax liabilities and Overdraft was secured by assessee’s father by pledge of shares with bank – interest on Overdraft paid by assessee is not deductible from dividend earned on shares pledged – No diversion by over riding title.CIT Vs Mathubhai C. Patel (SC) 238 ITR 403

Assessee transferred certain amounts to general reserve in accordance with sec. 205(2A)- No diversion by over riding title – Not deductible.Seshasayee Paper Boards Ltd. Vs CIT (Mad) 237 ITR 488

Statutory contribution of portion of profit of assessee Co-operative society to Education Fund – only application of income – not deductible.CIT Vs South Arcot District Co-operative Supply & Marketing Society (Mad) 127 ITR 467

Tariff & Dividend reserve, Development reserve and Contingency reserve created by an Electric Supply Company – not deductible.Vellore Electric Corpn. Ltd. (SC) 227 ITR 557Kumbakonam Rural Electric Cooperative Society Ltd. Vs JCIT( ITAT, Chennai ) 101 ITD 46Crediting amounts to Statutory Reserve Fund under provisions of Multi-State Co-operative Societies Act – No diversion by over-riding titleNational Heavy Engg. Co-operative Ltd. Vs DCIT (ITAT, Pune) 105 ITD 485

Assessee charged 3 paise per unit of electricity supplied to consumers and transferred it to a special appropriation account created for financing a power project – No diversion by over riding title – Part of incomeReliance Energy Ltd. Vs DCIT (ITAT, Mum) 103 ITD 223

90

DEEMED INCOME U/S 41(1)

Assessee collecting amounts from purchasers towards possible liability to sales-tax – Amounts collected deposited with the Government – Assessee was allowed deduction – Provisions relating to liability to sales-tax struck down by High Court – Assessee obtaining refund of sales tax paid – Such refund is income liable to tax.CIT Vs Thirumalaiswamy Naidu and sons (SC) 230 ITR 534 Talbros Automotive Components Vs ACIT (ITAT, Del) 56 ITD 312CIT Vs Marikar (Motors) Ltd. (Ker) 129 ITR 1

Central Excise duty refund is assessable u/s 41(1) even when the payment was not claimed as expenditure in the earlier years.M/s Mysore Thermo Electric (P)Ltd. Vs CIT (Kar) 221 ITR 504Jayant Silk Mills (P) Ltd. Vs ITO (ITAT, Ahd) 59 TTJ 377

Deduction allowed in respect of PF liability – Assessee objected such contribution by means of writ petition – Writ petition allowed by order passed on ‘x’ date – Appeal against decision barred by time - Dismissal of petition for condonation of delay – No effective appeal against order dated ‘x’ - Remission of liability took place on ‘x’ date .P.P.M.S. Nagarathinam Vs CIT (Mad) 178 ITR 304

Excise duty refund – 41(1) applicableB.V. Aswathiah and Brother Vs CIT (Kar) 198 ITR 108Polyflex (India) P. Ltd. Vs CIT (SC) 257 ITR 343

Refund of Excise levy as “litre fee” – 41(1) applicable.K.G. Subramanyam Vs CIT (Kar) 195 ITR 199

Assessee maintains accounts on mercantile basis – Date of accrual of the right to receive the amount is material and not the date of actual payments by the Government to assessee – Date of order of Supreme Court – Income accrued on that date – Assessable in that year.Motilal Ambaidas Vs CIT (Guj) 108 ITR 136CIT Vs Kabbur Brothers (Kar) 128 ITR 43

Amount allowed as deduction in earlier year – shown as income in P&L a/c. by assessee in a subsequent year – Profit u/s 41(1).CIT Vs Haryana Co-operative sugar Mills Ltd. (P&H) 154 ITR 751ACIT Vs Cutch Oil & Allied Industries P. Ltd. (ITAT, Ahd) 58 ITD 1

Refund of kist – Revenue receiptCIT Vs Lakshmamma (Mys) 52 ITR 789

91

Sales Tax refund obtained after re-constitution of firm – No change in identity of assessee – includible as income of re-constituted firm.CIT Vs Chandajee Khubajee & Co. (AP) 143 ITR 365CIT Vs Wockahardt Pvt. Ltd. (Bom) 215 ITR 793 – firm taken over by company

Benefit by way of remission received need not be in cash – Provision made for interest payable later on got reduced on settlement – 41(1).Express Newspapers P. Ltd. Vs CIT (Mad) 227 ITR 325

41(1) – system of accounting followed, is not relevant – 41(1) can be applied only when the refund is actually received.Travancore Chemical & Mfg. Co. Ltd. Vs CIT (Ker) 237 ITR 821Refund of Customs duty– Accrued in the year in which Customs Department dropped the proceedings eventhough SLP was pending before Supreme Court.DCIT Vs Walker Anjaria & Sons (P) Ltd,.(ITAT, Ahd) 56 ITD 151

Assessee provided import duty at Rs. 825/MT – Dispute – Government issued Notification dated 19.12.85 and paid duty at 550/MT – Circular issued on 10.2.86 – Demand notice pursuant to notification issued on 13.10.86 – Remission of liability in AY 87-88 i.e. when demand notice in pursuance of notification and circular issued.Indian Express (Madurai) (P) Ltd. Vs DCIT (ITAT, Mad) 68 ITD 374

Transfer of unclaimed amounts to P&L a/c. – Chargeable u/s 41(1).Indian Motor Transport Co. Vs CIT (All) 114 ITR 677

Unclaimed liabilities written back and credited to P & L a/c. Taxable u/s 41(1) – Decision of Supreme Court in TVS to be followed in preference to Sagauli Sugar.DCIT Vs Eicher Goodearth (ITAT, Del) 72 ITD 360

Refund from Electricity Board – Chargeable u/s 41(1) irrespective of the object of such refund.CIT Vs Vispro Foundry Engineers (P) Ltd. (Mad) 245 ITR 21

Assessee collected excess levy sugar price in respect of earlier years in terms of earlier order of High Court and showed same alongwith interest thereon, as liability in the Balance sheet – Government issued notification on 22-2-95 re-fixing the price – Cessation of liability in A.Y. 1995-96Ugar Sugar Works Ltd. Vs JCIT (ITAT, Pune) 104 ITD 141

Unclaimed credit liability – Liability barred by limitation and no possibility of any claim in future – Remission or cessation of liability – Falls u/s 41(1)Distinctive Properties & Leasing Ltd. Vs ITO (ITAT, Del) 1 SOT 460

92

Subsidy received

Refund of sales tax, subsidies on Power consumed and exemption from payment of water charges etc. – Amounts received were production incentives and operational subsidies and not capital subsidies – Subsidy payments were revenue in nature.Sahney Steel and Press Works Ltd. Vs CIT (SC) 228 ITR 253.Dhrangadhra Chemical Works Ltd. Vs CIT (Bom) 106 ITR 473 ( on production )CIT Vs Rajaram Maize Products (SC) 251 ITR 427CIT Vs Ponni Sugars & Chemicals Ltd. (Mad) 260 ITR 605 (Purchase tax subsidy) CIT Vs S. Kumars Tyre Mfg. Co. (Mad) 266 ITR 325.

Sales tax subsidy quantified at percentage of fixed capital investment – revenue receiptCIT Vs Abhishek Industries Ltd. (P&H) 286 ITR 1

Sales tax subsidy – revenue receiptCIT Vs Varinder Agro Chemicals Ltd. (P&H) 290 ITR 147

received from SIPCOT by way of reimbursement of revenue expenditure – Revenue receipt.Sree Ayyanar Spinnign & Weaving Mills Limited Vs CIT (Mad) 240 ITR 106

Subsidy received from Race Club for horse expenses, is incomeM.A.M. Ramaswamy Vs CIT (Mad) 245 ITR 478

Incentive from Government in the form of levy free sugar quota and excise duty concession on condition that surplus income thus generated be utilized for loan repayment – Revenue receipt.Chengalrayan Co-operative Sugar Mills Ltd. Vs DCIT (ITAT, Mad) 65 ITD 475

Grants received from Government for trading – Revenue receipt.CIT Vs Steel Authority of India Ltd. (Del) 263 ITR 211

Film subsidy granted by State Government – Assessable as income.CIT Vs Udaya Pictures (P) Ltd. (Ker) 225 ITR 394CIT Vs Navodaya (Ker) 225 ITYR 399Jagapathy Art Pictures Vs CIT (Mad) 240 ITR 625

Subsidy to cinema owner by way of adjustment of entertainment tax – Revenue receipts.Mudit Refrigeration Industries (P) Ltd. Vs ACIT (ITAT, All) 84 ITD 289

After construction of cinema house, received subsidy from Government on the condition that cinema house would run for 3 years – Revenue receipt.ITO Vs Shreejee Chitra Mandir (ITAT, Indore ) 97 ITD 66

93

Received subsidy from Government on account of sale of fertilizers at subsidized rates – Assessing Officer held certain portion of production / sale of fertilizers as bogus and reconstructed trading account – Amount of subsidy referable to such bogus production and sale, were retained in the total income – Assessee claimed that if production and sale is disallowed, then subsidy referable to such sale is refundable to Government and hence not part of total income – Subsidy, though illegally earned, is income of the assessee during the year – Deduction can be allowed only when a liability to repay such subsidy arises in futureHarshavardhan Chemicals & Minerals Ltd. Vs ACIT (ITAT, Jodh) 101 ITD 66

When income accrues ?

Assessee entered into a collaboration agreement with ‘M’ – Agreement did not subsist due to disputes and received compensation – Revenue receipt – settlement on 22.11.91 – income accrued in FY 92-93S. Kumars Tyre Mfg. Co. Ltd. Vs DCIT (ITAT, Indore) 61 ITD 326

Later events cannot affect the earlier nature of a receipt as also its quantum.CIT Vs Syndicate Bank (Kar) 159 ITR 464

Assessee follows mercantile system – Rate of interest originally agreed was 15% - After accounting year was over, debtor made a request to reduce interest to 9% and assessee agreed to it – Hence 15% interest accrued to assessee and to be taxed accordingly at 15%.ACIT Vs Vidhata Textiles (P) Ltd. (ITAT, Mum) 70 ITD 357

Assessee follows mercantile system – income accrues in the year and subsequent relinquishment or waiver after expiry of accounting year was of no consequence.Growth Leasing Finance Ltd. Vs ITO (ITAT, Ahd) 66 ITD 67Saraswathi Insurance Co. Ltd. Vs CIT (Del) 252 ITR 430.JCIT Vs Video Electronics Ltd. ( ITAT, Del ) 99 ITD 342IAC Vs Tamilnadu Handloom Dev. Corpn. (ITAT, Chennai) 67 ITD 132

Vast land purchased – divided into plots – sold all but one plot – Argument that adventure will terminate only after all plots are sold – unjustified.P.M. Mohammed Meerakhan Vs CIT (SC) 73 ITR 735Tirath Ram Ahuja (P) Ltd. Vs CIT (Del) 103 ITR 15Estate Investment Co. Ltd. Vs CIT (Bom) 121 ITR 580

Compulsory acquisition of land – interest on enhanced compensation awarded by Court accrues year after year.CIT Vs Mumtaz Yarud Dowla Waqf (AP) 234 ITR 6

94

Rama Bai Vs CIT (SC) 181 ITR 400

Mercantile system – Right to receive cash incentive accrued only when assessee filed its claim for it.CIT Vs Punjab Bone Mills (P&H) 232 ITR 795 affirmed in 251 ITR 780 (SC)

Advance remuneration received on completion of assignment, is income even before the bill was passed – Bill submission is relevant.CIT Vs Shaik Md. Rowther Shipping & Agencies (P) Ltd. (Mad) 246 ITR 161

In Mercantile system, profit arises / accrues on the date of transaction. The “receipt” of income refers to the first occasion when the recipient gets the money under his own control.Keshav Mills Ltd. Vs CIT (SC) 23 ITR 230

When moneys were credited in the a/c of NRE company in the books of assessee – it should be treated as “received” by NRE Company And deposited with assessee.Raghava Reddi & Anr. Vs CIT (SC) 44 ITR 720Standard Triumph Motor Co. Ltd. vs CIT (SC) 201 ITR 391

Service charges receivable by assessee under an agreement constituted income of assessee for that year irrespective of the fact that the amount has not been allowed as a deduction in the assessment of payer company.CIT Vs Shah Construction Co. Ltd. (Bom) 230 ITR 51

Assessee contractor claimed ‘Project completion Method’ – Rejected u/s 145(2) – income accrues every year – Profit rate at 25% on total receipts – Receipt of ‘on money’ was there in all the years.Param Anand Builders (P)Ltd. Vs ITO (ITAT, Mum) 59 ITD 29Uttam Singh Duggal & Co. P. Ltd. Vs CIT (Del) 127 ITR 21CIT vs Nandram Himatram (Ori) 103 ITR 433

Contractor – claim of completed contract method – as per contract, assessee entitled to receive payment by 31.3.83 – vested right arose on that day eventhough some payments were received subsequently – assessable in AY 83-84IAC Vs Punj & Sons (ITAT, Del) 56 ITD 281

Finance income / interest in relation to Hire Purchase agreements recognized by assessee on the basis of sums of digits (SOD) method in its books of a/c represented real income accrued to assessee and which having been apportioned from amount of EMI also represented income received / receivable in relevant accounting year.DCIT Vs Nagarjuna Invesment Trust Ltd. (ITAT, Hyd-SB) 65 ITD 17

95

Assessee leased out distribution of rights of a film produced by it for 5 years for 70 lakhs as total consideration – Received entire amount as interest free deposit to be adjusted in 5 years as per lease agreement- Entire amount is income in this year and not proportionate amount.Francis Joseph Vs ITO (ITAT, Mad) 64 ITD 456G. Krishnammal Vs DCIT (ITAT, Mad) 66 ITD 83R.V. Pandit Vs ACIT (ITAT, Mum) 70 ITD 1,CIT Vs G.S.R. Krishnamurthy (Mad) 262 ITR 393P.L. Ganapathi Rao Vs CIT (AP) 285 ITR 501

Royalty receivable by assessee for leasing out dubbing rights of movie accrued to assessee on the date of agreement where the offer and acceptance was completed on that date and substantial consideration was paid.Lakshmi Narayana Films Vs CIT (Mad) 244 ITR 344

Foreman of chit –Mercantile system – commission accrues on date of each auction and not on completion of chit period.Shriram Chits and Investments Vs ACIT (ITAT,Chennai-SB) 263 ITR (AT) 65

Assessee company in the business of disbursing housing loans – Administration and service charges deducted at the time of loans disbursement – Income accrues at this stage.Kerala Urban Dev. Fin. Corn Ltd. Vs CIT (Ker) 266 ITR 245

Mercantile – Income from lease of horses – Income accrues in the year of auction.M. Ct. Muthiah Vs CIT (Mad) 260 ITR 629

Mercantile - Development agreement – consideration to be received in 6 instalments and interest to be paid in case of default – when default is committed by the other party, interest accrues to assessee.Naik Wvg. Mills Vs ITO (ITAT, Pune) 74 ITD 401

Interest on IDBI Bonds – Discounted interest received for entire period – Assessable in the year of receipt.EID Parry (I) Ltd. Vs CIT (Mad) 258 ITR 404CIT Vs A.R. Santhanakrishnan (Mad) 256 ITR 187

Mercantile – coffee sold to coffee Board – Excess received in subsequent year – Accrues in year of sale.Bism Field A Estate Vs IAC & Ors. (SC) 248 ITR 341

96

Pending Litigation - Whether income accrued ?

Mercantile system – Amount awarded as compensation – Litigation regarding quantum of compensation – Court allowing assessee to receive part amount on execution of bank guarantee – Interest on amount accrued to assesseePateshwari Electrical and Associated Industries P. Ltd. Vs CIT (All) 287 ITR 165

Interest on enhanced compensation awarded by Court – Appeal pending in Supreme Court – Assessing Officer need not wait for final disposal of case by Supreme Court – Assessee can claim refund if Supreme Court later on reverses order.CIT Vs M. Sarojini Devi (AP) 250 ITR 759

Loss of goods claimed as deduction – Insurance claim made, accrued to assessee during the F.Y. – subsequent non-acceptance of claim by Insurance company not relevant.JCIT Vs Deva Singh Sham Singh (ITAT, Asr) 95 ITD 235.

Assessee follows mercantile system – compensation provided in managing agency agreement – termination in 1951 – income of AY 51-52 eventhough issue was pending in Court and assessee received it only in 1955.CIT Vs Chunilal V. Mehta & Sons P. Ltd. (SC) 82 ITR 54.

Mercantile System – Arbitration award confirmed by High Court decree on 30.3.79 – Accrues on that date.CIT Vs Highway Construction Co.(P) Ltd. (Gau) 223 ITR 32

Mesne Profit accrues to assessee only when trial court determines the amount.P. Mariappa Grounder Vs CIT (SC) 232 ITR 2

Not maintaining books – Won lottery prize in 1983 – in a suit filed by assessee, court stayed disbursement of prize – prize disbursed in Oct.,'87 – assessable in AY 88-89.ACIT Vs M. Ramachandran (ITAT, Mad) 74 ITD 385

Mercantile system – Royalty receipt as per agreement – dispute pending before arbitrator – Income accrued.ACIT Vs FGP Ltd. 2007-TIOL-426-ITAT-MUM

97

DEDUCTIONS

BAD DEBTS

Assessee supplying goods to Government Departments – Non-payment due to paucity of allocated budget – Not bad debtSouth India Surgical Co. Ltd. Vs ACIT (Mad) 287 ITR 62Dhall Enterprises and Engineers P. Ltd. Vs CIT (Guj) 295 ITR 481

Judgment of assessee should reveal irrecoverability of debt from angle of debtor and not on ability of assessee to recover same CIT Vs Coates of India Ltd. (Cal) 232 ITR 324Industrial Cables (I) Ltd. Vs ACIT (ITAT, Chd) 97 ITD 267

Assessee waiving a portion of amount due from debtor – Not bad debt, but trading loss – can be allowed only in the year in which waiver took place.Devi Film P. Ltd. Vs CIT (Mad) 75 ITR 301

Amount written off in P&L a/c. – But no corresponding credit entry in the account of debtor – Bad debt not allowable Jubilant Organosys Vs CIT (All) 265 ITR 420

Amount to be actually written off – Making provisions is not sufficient.CIT Vs Micromax Systems P. Ltd. (Mad) 277 ITR 409Concepta Cables Ltd. Vs Addl. CIT (ITAT, Mum) 101 ITD 143

Amount advanced proving irrecoverable – Debt subsequently utilized to acquire shares of debtor company – sale of shares at a loss – Notional interest on advance not deductible as bad debt.Aspinwall & Co. Travancore Ltd. Vs CIT (Ker) 230 ITR 587West Bengal Financial Corpn. & Anr. Vs CIT (Cal) 263 ITR 332

Assessee, partner of a firm – Her share of profit in the firm and interest on accumulated profits were credited to a current account – This sum was written off as bad debt – Not deductibleT. Seetha Vs CIT (Mad) 244 ITR 404

Assessee took over all assets and liabilities of RHPB - He debited to P&L a/c, the stock of yarn given to various weavers of RHPB – No justification to write off inventory in an arbitrary manner.Rajasthan State Handloom Dev. Corpn. Ltd. Vs DCIT (ITAT, Jp) 64 ITD 356

98

Nothing to show that amount written-off was taken into account in computing income. – Parties making counter-claims against each other – Bad debt disallowedIndian Express (Madurai )(P) Ltd. Vs DCIT (ITAT, Mad) 68 ITD 374

Debtor company was taken over by Government – Assessee did not proceed against such debtor company – Writing off is premature.Rallis India Ltd. Vs CIT (Cal) 246 ITR 170

Sugar Mill purchased in auction – Authorised Controller appointed by Government, running sugar mill – Assessee advanced money for running this and received back sale proceeds – shortfall is not bad debt or business expenditure.Cawnpore Sugar Works Ltd. Vs CIT (All) 243 ITR 345Amount advanced to sister concerns is not in the course of money lending business – Not deductible.Binodiram Balchand & Co. Vs CIT (MP) 251 ITR 819Greaves Ltd. Vs CIT (Bom) 251 ITR 190Vijayakumar Mills Ltd. Vs CIT (Mad) 247 ITR 176 –advance not for business

purposes.

Provision for NPA claimed as bad debt – disallowed u/s 143(1)(a) – upheldT.N. Power Finance & Infrastructure Dev. Corpn. Ltd. Vs CIT ( Mad ) 280 ITR 491

Before writing off of debt, assessee must honestly form an opinion that the debt has become badCity Financial Retail Services India Ltd. Vs ACIT 2008-TIOL-05-ITAT-MAD

99

DEPRECIATION

When not allowable ?

Capital expenditure for scientific research allowed as deduction u/s 35 – No depreciation allowable on same assets – Double deduction not allowed in respect of same outgoing, unless clearly expressed.Escorts Ltd. & Anr. Vs Union of India & Ors. (SC) 199 ITR 43Union Carbide India Ltd Vs CIT (Cal) 203 ITR 584CIT Vs International Instruments (P) Ltd. (Kar) 144 ITR 936Shaw Wallace & Co. Ltd. Vs ACIT (ITAT, Kol) 86 ITD 315Tube Investments of India Limited Vs CIT (Mad) 260 ITR 94

Sham transaction – No identification of machinery – No depreciationAvasarala Automation Ltd Vs JCIT (Kar) 266 ITR 178,Mid East Portfolio Management Ltd. Vs DCIT ( ITAT, Mum-SB ) 87 ITD 537

Lease agreement was not genuine and assessee was not owner of asset – No depreciationIndian Management Advisors and Leasing P. Ltd. Vs CIT (Del) 289 ITR 179

Financing business camouflaged as Leasing business – No depreciation Gowri Shankar Finance Ltd. Vs CIT (Kar) 248 ITR 713I.C.D.S. Ltd. Vs CIT (Kar) 291 ITR 18

Stallions & Mares are not plant – No depreciation allowableCIT Vs Nadir Rashid (MP) 227 ITR 727CIT Vs Ruia Stud & Agricultural Farms P. Ltd. (Bom) 240 ITR 312

Farm assets used for purpose of growing sugarcane. – No depreciation allowable from non-agricultural income.Arooran Sugars Ltd Vs CIT (Mad) 239 ITR 16

Identity of an asset is not lost in ‘block of assets’ concept – Depreciation on car relating to personal use can be disallowed.Singla Agencies Vs ACIT (ITAT, Chd) 60 ITD 410Sushil Kumar Jalani Vs ACIT ( ITAT, Jodh ) 108 ITD 613

No depreciation on guest house.CIT Vs Ponni Sugars & Chemicals Ltd (Mad) 260 ITR 605Britannia Industries Ltd Vs CIT (SC) 278 ITR 546

A non-qualified asset cannot be granted depreciation only because it was eligible for depreciation in earlier years and formed part of block of assetsACIT Vs Jagdish C. Sheth ( ITAT, Mum ) 101 ITD 360

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Amount given to retiring partners as goodwill – Not intangible asset u/s 32(1)(ii) – No depreciation.Bharatbhai J. Vyas Vs ITO (ITAT, Ahd) 97 ITD 248

Depreciation not allowable on cost of landCIT Vs Alps Theatre (SC) 65 ITR 377

No depreciation on land – Where composite price is mentioned, bifurcate it as price of land and buildingCIT Vs Hoogly Mills Co. Ltd. (SC) 287 ITR 333

No depreciation on route permitsAnna Transport Corporation Ltd. & Anr. Vs CIT (Mad) 215 ITR 800

No depreciation on Stock Exchange membership card till A.Y. 1998-99Vyomit Shares, Stocks & Investments (P.) Ltd. Vs DCIT (ITAT, Mum) 106 ITD 408

For claiming depreciation, description of assets to be made available by assessee – During search assessee disclosed certain income and claimed this as investment in plant and machinery, but failed to furnish necessary particulars of such assets – Depreciation claim rejectedDCIT Vs Sheth & Sura Engg. (P.) Ltd. (ITAT, Pune-TM) 110 ITD 39

No depreciation on non-compete feeA.B. Mauria India P. Ltd. Vs ACIT 2008-TIOL-107-ITAT-MAD

Owner

Ownership of asset is a must – Assets transferred to assessee in April 1972 – Sale deed executed in March, 1977 – Assessee not owner of asset in A.Y. 1973-74 – Not eligible for depreciation.CIT Vs A.B.C. India Limited (Gau) 226 ITR 733CIT Vs Bharath Gold Mines Limited (Kar) 192 ITR 639Tamil Nadu Civil Supplies Corporation Ltd. Vs CIT (Mad) 228 ITR 399CIT Vs Tamil Nadu Agro Industries Corporation (Mad) 192 ITR 108Ramkumar Mills P. Ltd. Vs CIT (Kar) 180 ITR 464CIT Vs O.P. Monga (Bom) 162 ITR 224

Trust using assets in its possession for purpose of business – Trust not legal owner of assets – Not entitled to depreciation.Parthas Trust Vs CIT (Ker) 169 ITR 334

Hire purchase agreement provides option to assessee to purchase machinery on the expiry of 3 years, if installments regularly paid – on expiry of 3 years,

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assessee claimed depreciation without paying entire price – Assessee not became owner – depreciation disallowed.Changanlal Automobiles Vs CIT (Raj) 156 ITR 58

Hire Purchase – as per agreement if entire installments due including interest, is paid before a particular date→ assessee becomes owner – Then only depreciation is allowableDCIT Vs M.K. Jinachandran (Ker) 205 ITR 328Sardar Tara Singh Vs CIT (MP) 47 ITR 756

Financial lease – Lessor is not owner of asset – No depreciation to lessorJ.M. Share & Stock Brokers Vs DCIT (ITAT,Mum) 109 ITD 329

Used for business

Car confiscated by Customs authorities – No depreciation allowable – It cannot be treated as ‘sold’ also.Cement Agencies Ltd. Vs CIT (Bom) 146 ITR 136

Factory under lock-out throughout 2 previous years – Plant and Machinery not used for a single day during the period – No depreciation.CIT Vs Oriental coal Co. Ltd. (Cal) 206 ITR 682

Machinery should be “actually used” in the previous year –“Kept ready for use” not sufficient.CIT Vs Jiwaji Rao Sugar Co. Ltd. (MP) 71 ITR 319CIT Vs J.K. Transport (MP) 231 ITR 798CIT Vs Maps Trans. & Travels (Mad) 260 ITR 655Dineshkumar Gulabchand Agarwal Vs CIT & Anr. (Bom) 267 ITR 768CIT Vs Air Travel Enterprises (India) Ltd. (Ker) 265 ITR 537-contract carriage

permit obtained in subsequent year only – No depreciationDCIT Vs Yellamma Dasappa Hospital (Kar) 290 ITR 353

There should be actual use of asset to be eligible for depreciation – Not put to use because of strike / lock out – No depreciationACIT Vs Rishiroop Polymers (P) Ltd. (ITAT, Mum) 102 ITD 128

To claim write off of discarded / obsolete plant and machinery u/s 32(1)(iii), said plant and machinery must have been used during such yearAllied Electronics and Magnetics Ltd. Vs DCIT (Del) 160 Taxman 325

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Rate

Partition and false ceiling fall under “Fittings”CIT Vs Indian Metal & Metallurgical Corporation (Mad) 141 ITR 40

Roads and drains – Eligible for depreciation at the rate of buildingsCIT Vs Hindustan Aeronautics Ltd. (Kar) 185 ITR 155CIT Vs Gwalior Rayon Silk Mfg. Co. Ltd. (SC) 196 ITR 149

Hotel & Theatre building – Not plantCIT Vs Anand Theatres (SC) 244 ITR 192CIT Vs Abad Hotels India P. Ltd. (SC) 251 ITR 204CIT Vs Adyar Gate Hotel Ltd (Mad) 252 ITR 129S.P. Jaiswal Estates Pvt. Ltd. Vs CIT (Cal) 209 ITR 307

Building used in poultry business to house cages for fowls – Not factory building.Siddharth Agencies Vs CIT (Mad) 244 ITR 826CIT Vs Henly Farm (Bom) 160 CTR 46CIT Vs Shivalik Poultries (P & H) 274 ITR 529

Hospital not a welfare centre – depreciation at 10% onlyCIT Vs Upasana Hospital & Nursing Home (Ker) 251 ITR 104

Hospital – only part of building such as operation theatre, x-ray room etc., treats as plant.CIT Vs Ganga R. Mohan (Ker) 259 ITR 661.

Hotel furniture cannot be treated as plant – Furniture costing ≤ Rs.5000 - not entitled for 100% depreciationCIT Vs Vrindavan Hotels P. Ltd. (Ker) 262 ITR 402

Electrical fittings and installations of call bell, indicators etc. - Not plant – only 10% depreciation.CIT Vs Hoecht Dyes and Chemicals P. Ltd. (Bom) 240 ITR 1

A pontoon is not a ship- No higher rate of depreciation,Gammon India Ltd. Vs CIT (Bom) 228 ITR 691

Jeeps are to be classified as motor cars for allowing depreciation.Crompton Engineering Co. Ltd Vs CIT (Mad) 193 ITR 483Commissioner of Agrl. IT Vs Good Hope Plantations (Ker) 170 ITR 173

A Tractor is not basically used for transportation of goods or passengers on roads – it is a machinery used for tilling of agricultural land

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CIT Vs U.P. Paschimi Kshetriya Vikas Nigam Ltd. (All) 264 ITR 273

Tippers are not “road transport vehicles” even though it is termed so in Motor Vehicle Act.CIT Vs Progressive Engg. Co. (AP) 230 ITR 729

Rigs and compressor mounted on motor lorry – Not an integral part of lorry – Not entitled to depreciation at higher rate.CIT Vs Popular Borewell Service and others (Mad) 194 ITR 12

Entire Plant & Machinery not exposed to corrosive substance – so entire machinery not entitled to 15% depreciation.CIT Vs Sal Udyog Ltd. (MP) 230 ITR 192

Iron, Lead and Copper are not corrosive chemicals – Machinery coming into contact with corrosive chemicals is only entitled to higher rate of depreciation.Gwalior Sugar Co.(P) Ltd. Vs CIT (MP) 178 ITR 415

Amount of hire charges of vehicles received is very nominal and hence it cannot be construed that these vehicles were used for the running on hire – The main use is for the business and occasional hiring does not disturb the classification for depreciation.CIT Vs Manjeeth Stone Co. (Raj) 190 ITR 183Veeneer Mills Vs CIT (Kar) 201 ITR 764

40% depreciation is allowable only when assessee is carrying on the business of running trucks on hire and not when trucks are used for transporting assessee’s own goods.CIT Vs Anupchand & Co. (MP) 239 ITR 466

Assessee leasing out vehicles on monthly rent to different concerns – Depreciation only at general rate and not 40%.Soma Finance & Leasing Co. Ltd. Vs CIT (Cal) 244 ITR 440

Drilling machinery used in digging bore wells – No higher depreciation.CIT Vs Tamil Nadu Agro Industries Corpn. (Mad) 192 ITR 108

Manufacture of insulated cables and wires – Plant not manufacturing rubber and plastic goods – No special rate of depreciation.CIT Vs Falcon Wires (P) Ltd (Mad) 123 ITR 427

Only electric generator run on wind energy is eligible for 30% depreciation – not other generators.Kansal Woollen & Hosiery Mills (P) Ltd Vs CIT (P & H) 237 ITR 93CIT Vs Anang Polyfit P. Ltd. (Guj) 267 ITR 266

104

Paper copier, water cooler in service station / godown, electrical installation in canteen, air-conditioning machine – no additional depreciation.Voltas Ltd. Vs DCIT (ITAT, Mum) 64 ITD 232

Hot mixing plant and paver finishing machine for road construction – Not earth moving machines – No 30% depreciation.CIT Vs Utkarsh Builders (Guj) 264 ITR 697

Rate of depreciation available on the first day of the assessment year is the applicable rate – Rate is not retrospective in operationAndhra Cements Co. Ltd. Vs CIT (AP) 232 ITR 364CIT Vs N. Sathyanathan & Sons (P) Ltd. (Mad) 242 ITR 514Sundaram Finance Ltd. Vs CIT (Mad) 250 ITR 86

UPS is not an integral part of computer – No higher rate of depreciationNestle India ltd. Vs DCIT (ITAT, Del) 111 TTJ 498

Cost for the purpose of depreciation

Assets of firm taken over by assessee Company – Assets revalued and depreciation claimed on enhanced value – Not allowedCIT Vs Poulose and Mathen (Pvt) Ltd. (Ker) 236 ITR 416

If circumstances exist showing that a fictitious price has been put on the asset or there is collusion between the vendor and assessee and there has been inflation / deflation of value for ulterior purposes, it is open to ITO to reject price and ascertain the actual cost.JCIT Vs Mahindra Sona Ltd (ITAT, Mum) 96 ITD 303Guzdar Kajibra Coal Mines Ltd Vs CIT (SC) 85 ITR 599

Premium paid on leasehold land – Not includible in cost of building constructed thereon for allowance of depreciation.CIT Vs Heredilla Chemicals Limited (Bom) 225 ITR 532

Interest paid to partners and expenses connected with dealings in raw-materials – No nexus with setting up of business or installation of machinery – Capitalization not possible – No depreciation on this.CIT Vs Bharat Agrico Co. (Pat) 233 ITR 643

Foreign buyer gave assessee certain interest free loans for purchase of machinery but subsequently converted it as gift – Cost to be reduced by such grant.Rashi Leathers (P) Ltd. Vs CIT (Mad) 240 ITR 702

105

Future interest payable on loans availed for purchase of machinery – cannot be capitalized for claiming depreciation.CIT Vs Textool Co. Ltd. (Mad) 263 ITR 523

Interest paid under deferred schemes for purchase of Plant & Machinery – cannot be treated as part of actual cost – Depreciation & Investment allowance not allowable on thisCIT Vs L.G. Balakrishnan & Bros Ltd. (Mad) 247 ITR 131CIT Vs Tractors and Farm Equipments Ltd. (Mad) 294 ITR 163

Depreciation – Actual cost – conditional subsidy received from Rajasthan Government under the subsidized Housing Scheme for Industrial Workers shall be reduced from the cost u/s 43(1) and depreciation to be worked out on the reduced amountAssociated Stone Industries Kota Ltd. Vs CIT (Raj) 215 ITR 226

Purchase of hotel - amount paid as retrenchment compensation to workers of previous owner – Depreciation not allowable on this amount.CIT Vs Sea Lord Hotel P. Ltd. (Ker) 245 ITR 601

Dissolution of firm – amount paid by continuing partners to retiring partner – Not part of cost of acquisition of asset of old firm for depreciation purpose.CIT Vs Theatre Sri Rangaraja (Mad) 260 ITR 453

After insertion of Expl. o section 43(6), actual cost of block of assets to be WDV of the assets of amalgamating company – unabsorbed depreciation cannot be added back to the cost of such assetsEID Parry (I) Ltd. Vs DCIT 2008-TIOL-208-ITAT-MAD

106

DISALLOWANCE OF EXPENDITURE

Capital expenditure - Some instances

Laying of factory roads – capital expenditure CIT Vs Pandian Chemicals Ltd (Mad) 233 ITR 497

Securities purchased at price with reference to actual value as well as interest accrued till date of purchase – Entire consideration paid is capital expenditure – No part can be treated as revenue expense and deduct from interest received.Vijaya Bank Limited Vs Addl. CIT (SC) 187 ITR 541

Loss incurred in premature encashment of cash certificate for paying off debt to Bank – Capital loss.Krishna Chandra Dutta (Cookme) Pvt. Ltd. Vs CIT (Cal) 204 ITR 23CIT Vs South Arcot Dist cooperative Supply & Marketing Society (Mad) 127 ITR 467

Capital expenditure need not result in creation of intended asset – Expenses for boring tube well – water obtained not suitable – capital expense.Shree Digvijay Woollen Mills Ltd. Vs CIT (Guj) 204 ITR 398

Business commences only when production commences – Interest paid till that time is capital expenditure.K. Sampath Kumar Vs CIT (Mad) 158 ITR 25

Expenditure incurred till commercial production starts – capital expenditure.Orient Cosmetics Ltd. Vs DCIT (ITAT, Mad) 74 ITD 135

Expenses incurred before trial-run of factory – Capital ExpenditureCIT Vs Saurashtra Cement & Chemical Industries Ltd (Guj) 127 ITR 47Madras Fertilizers Ltd. Vs CIT (Mad) 209 ITR 174

Premature termination of agency – outgoing agent not held to be inefficient or negligent – compensation paid – capital expenditureJ.K. Cotton Manufactures Ltd Vs CIT (SC) 101 ITR 221

Chit loss not allowable as business expenditure.Soda Silicate and Chemical Works Vs CIT (P & H) 179 ITR 588

Construction of temporary sheds in a leased (2 year) property – capital expenditure.Uttar Bharat Exchange Ltd. Vs CIT (Punj) 55 ITR 550

Assessee running Sugar Mill leasing out land to housing board for construction of staff quarter for factory – Building to remain property of housing board – assessee incurred expenditure towards part of the cost of construction – an

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advantage of enduring nature derived by assessee eventhough it is not the owner – Capital expenditure.Raza Buland Sugar Co. Ltd Vs CIT (All) 122 ITR 817

Investment by assessee in acquisition of shares with ultimate purpose of merging ‘S’ company with itself→capital investment – Loss arising from writing off such amount in its books →capital expenditure.APS Star Industries Ltd. Vs DCIT (ITAT, Ahd) 86 ITD 182

Assessee engaged in business of manufacturing & marketing of soft drinks as licensee – Licensor withdrawing from Indian market – value of stock of bottles – capital loss.CIT Vs Soft Beverages (P) Ltd. (Mad) 245 ITR 194

Agreement with film producers for reproduction of film songs – Ascertained sum paid at the time of entering into contract – capital expenditure.CIT Vs M. Subramaniam (Mad) 272 ITR 525

Purchase of entire business – Gratuity liability of transferor discharged by assessee – capital expenditure.Sree Akilandeswari Mills Pvt. Ltd. Vs DCIT (Mad) 274 ITR 1

Assessee entering into agreement for acquiring mining lease – Assessee not operating mines in relevant accounting year – Liquidated damages paid to owners of mines – Capital expenditure.Salgaonkar Mining Industries Vs CIT (Bom) 228 ITR 183

Legal and professional charges incurred in connection with merger of company is capital expenditureTriveni Engineering Works Ltd (Del) 232 ITR 639

Amount paid for acquisition of goodwill – capital expenditure R.V. Pandit Vs ACIT (ITAT, Mum) 70 ITD 1

License fee paid to Government for construction and working of distillery – capital expenditureMohand Meakin Breweries Ltd Vs CIT (HP) 227 ITR 878

Legal expenses incurred by assessee relating to payment of additional compensation in respect of the land acquired by it – capital expenditure.Ambica Mills Ltd Vs CIT (Guj) 235 ITR 264

Betterment charges – capital expenditureVikram Mills Ltd. Vs CIT ( Guj ) 242 ITR 290

108

Advance lease rent for mining paid for entire period of lease in the form of a deposit which was adjustable against stipulated monthly rent – Capital ExpenditureAditya Minerals (P) Ltd Vs CIT (SC) 239 ITR 817Enterprising Enterprises vs DCIT (Mad) 268 ITR 95CIT Vs Kattabomman Transport Corp. Ltd.(Mad) 268 ITR 507

Contribution to building fund of stock exchange – Capital expenditure.Mahesh B. Shah Vs ACIT (Ker) 238 ITR 130JCIT Vs Master capital Services Ltd (ITAT, Chd) 88 ITD 496JCIT Vs Peerless Securities Ltd (ITAT, Kol-SB) 103 ITD 349 Development Fees

to become member

Litigation & others expenses for recovering sale consideration of factories - Capital expenditure.Dalmia Dairy Industries Ltd Vs CIT (Del) 241 ITR 9

Assessee encroached land – compromise order of High Court – Assessee paid consideration and got land – capital expenditure.Sandvik Asia Ltd Vs DCIT (ITAT, Pune) 71 ITD 217

Dismantling of building in order to construct a hotel – Dismantling expenditure is capital exp.Lake Palace Hotels & Motels P. Ltd. Vs CIT (Raj) 213 ITR 735

Sum paid in consideration of relinquishment by legal heirs of deceased partners – of right and title to goodwill – Payment for acquisition of a capital asset – capital expenditure.Mehra Khanna & Co. Vs. CIT (Id) 250 ITR 436

Supplier paying damages to assessee for delay in delivery within time – Supplier requesting for refund of damages – Assessee refunding such amount – Amount returned capital in natureMahanagar Telephone Nigam ltd., IN RE (AAR) 286 ITR 211

Legal expenses for purchase of firm – incurred by the purchasing partners – personal expenses – Not deductibleMangalore Ganesh Beedi Works (Kar) 264 ITR 142

Expenses on acquiring computer software – capital expenditure.CIT Vs Arawali Constructions Co.(P) Ltd (Raj) 259 ITR 30Maruti Udyod Ltd. Vs DCIT (ITAT, Del) 92 ITD 119JCIT Vs India Equipment Leasing Ltd. (ITAT, Chennai) 296 ITR (AT) 177Amway India Enterprises Vs DCIT (ITAT, Del-SB) 111 ITD 112

109

Standing trees not stock-in-trade – Expenses incurred to obtain title over such asset – Not revenue Expenditure.ITO Vs Tropical Timbers (ITAT, Bang) 62 ITD 147

Interest paid on unexpired hire purchase period – capital expenditure.CIT Vs Sharpedge Ltd. (Del) 249 ITR 319

Fee paid to obtain new permits – capital exp.Erode Transports (P) Ltd Vs CIT (Mad) 71 ITR 283

Expenditure for acquisition of leasehold right for sugar factory – capital expenditure.Gobind sugar MIlls Ltd Vs CIT (SC) 232 ITR 319Universal Capsules (P) Ltd Vs DCIT (ITAT, Mum) 76 ITD 403

Assessee acquired ERP business software with unlimited user license – capital expenditureEscorts Ltd. Vs ACIT (ITAT, Del) 104 ITD 427

Assessee entered into a license agreement with SAP for a period of 25 years for use of a software – Capital expenditureSudarshan Chemical Industries Ltd. Vs ACIT (ITAT, Pune) 110 ITD 171

Land taken on lease for 99 years – Premium on leasehold land paid in addition to rent, is capital expenditureJCIT Vs Mukund Ltd. (ITAT, Mum-SB) 106 ITD 231

Amount paid towards institutional membership of club – Capital expenditureFramatone Connector OEN Ltd. Vs DCIT (Ker) 294 ITR 559

Amount paid towards foreclosure of lease agreement – Capital expenditureAztec Software & Technology Services Ltd. Vs ACIT ( ITAT, Bang-SB) 107 ITD 141 Expenses in connection with acquiring new asset / setting up of new project / business

Building tax paid is capital expenditure.Continental Tourist Home Vs CIT (Ker) 234 ITR 65Michael Joseph & Co. Vs CIT (Ker) 225 ITR 786

Premises taken on lease – amount paid to previous tenant to vacate premises – capital expenditure.Chloride India Ltd Vs CIT (Cal) 130 ITR 61

Salami / Commissions paid for renting office premises – Not rent – Capital expenditure

110

Bharat Steel Tubes Ltd. Vs CIT (Del) 252 ITR 622

Expenses Incurred in completing title of property purchased and entering into possession after sale is absolute – capital expenditure.Lachhman Das Bigballabh Das , IN RE (All) 10 ITR 186Sankranti Agarbathi Co. Vs DCIT (Kar) 243 ITR 712

Litigation expenses to enforce right to obtain title to land – Not revenue exp.Rajasthan Construction Co.(P) Ltd. Vs CIT (Bom) 148 ITR 61V. Jaganmohan Rao & Ors. Vs CIT (SC) 75 ITR 373

Legal expenses for sale of shares and acquisition of investment – Registration Expenses of sale deed – Capital expenditureRaza Sugar Co. Ltd. Vs CIT (Del) 130 ITR 421CIT Vs Malabar Building Products Ltd (Ker) 251 ITR 487

Fluctuation in exchange rate of currency – Extra amount payable for purchase of machinery – capital expenditure – 43AAshok Textiles Limited Vs CIT (Ker) 178 ITR 94CIT Vs Renusagar Power Co. Ltd. (All) 236 ITR 177CIT Vs Windsor Foods Limited (Guj) 235 ITR 249Beco Engineering Co. Ltd. Vs CIT ( P & H) 236 ITR 344CIT Vs Bharat General & Textile Industries Ltd. (Cal) 157 ITR 158CIT Vs Hindustan Aluminium Corpn Ltd (Bom) 207 ITR 670Mihir Textiles Ltd Vs CIT (Guj) 225 ITR 327New India Industries Vs CIT (Guj) 152 CTR 4Union Carbide India Ltd Vs CIT (Cal) 203 ITR 584Gnanambika Mills Ltd. Vs CIT (Mad) 232 ITR 434Siemens India Ltd. Vs CIT (Bom) 226 ITR 801

Amount paid towards bank guarantee commissions and expenditure incurred in obtaining L.C. – Necessary to bring machineries into existence and to put them in working condition – Forms integral part of payment of cost price of machineries which are capital assets – capital ExpenditureCIT Vs Vallabh Glass Works Ltd. (Guj) 137 ITR 389CIT Vs Travancore Cochin Chemicals Ltd (Ker) 99 ITR 24

Engineers of company sent on tour to select proper machinery for expansion of business – Machinery purchased soon after – Travelling expenses is capital expenses.Dalmia Dadri Cement Co. Ltd. Vs CIT (P&H) 77 ITR 405CIT Vs Belapur Co. Ltd. (Bom) 161 ITR 516CIT Vs L.G. Balakrishnan (Mad) 95 ITR 284Cooper Engineering Ltd. Vs CIT (Bom) 135 ITR 597Bharat Forge Ltd Vs DCIT (ITAT Pune) 53 ITD 575Amount spent on project report – capital expenditure.Triveni Engineering Works Ltd Vs CIT (Del) 232 ITR 639

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General Sales Ltd Vs ACIT (ITAT, Del) 59 TTJ 489 Feasibility report CIT Vs Ambica Mills Ltd (Guj) 236 ITR 921

Expenditure incurred to commence production of new article –Capital expenditure.E.I.D. Parry (India) Ltd Vs CIT (Mad) 257 ITR 253MAC Industrial Products Ltd. Vs ACIT ( ITAT, Chennai – TM ) 101 ITD 191

Expenditure in connection with exploring feasibility of setting up new business venture – Not allowed.Tradewings Ltd. Vs CIT (Bom) 185 ITR 267Saraswathi Industrial Syndicate Limited Vs CIT (P&H) 84 ITR 544

Assessee intending to set up manufacturing unit in Malaysia – Not part of existing business – Travel expenses incurred is capital expenditure.McGaw Ravindra Laboratories (India) Ltd Vs CIT (Guj) 210 ITR 1002Hyderabad Allwyn Metal Works Ltd. Vs CIT (AP) 98 ITR 555

Interest paid on delayed payment of security deposit for National Stock Exchange membership – Capital ExpenditureCFL Securities Ltd. Vs DCIT (ITAT, Mum) 110 ITD 611

Interest paid on capital borrowed for setting up of a new unit – Capital expenditureCIT Vs Vardhman Polytex Ltd. (P&H) 299 ITR 152

Loss of Capital

Irrecoverable advance to lessor – capital loss – not deductibleHasimara Industries Ltd. Vs CIT (SC) 230 ITR 927, 231 ITR 842South Eastern Coal Fields Limited Vs JCIT (ITAT, Nag) 85 ITD 608

“Loss of capital” and “Capital loss” different.J.P. Srivatsava & Sons Vs CIT (All) 86 ITR 730CIT Vs Chidambaranatha Mudaliar (Mad) 240 ITR 552

Capital loss – Must arise out of transactions mentioned in Sec.2(47) – Machinery blown of storm and lying unused – Loss not allowable u/s 45Darjeeling Consolidated Tea Co. Ltd. Vs CIT (Cal) 183 ITR 493

Amount deposited in a company could not be recovered as company was wound up – loss of capital – cannot be adjusted against capital gains CIT Vs R. Chidambaranatha Mudaliar (Mad) 240 ITR 552Grindwell Norton Ltd. Vs DCIT ( ITAT, Mumbai-TM) 91 ITD 412

112

Agreement to purchase cinema theatre – compensation paid on failure to complete agreement – capital expenditure.CIT Vs Jaipur Mineral Development Syndicate (Raj) 216 ITR 469

Amount advanced to a contractor for construction of cold storage plant – Work could not be executed and part of the advance could not be recovered – Capital lossKwality Fun Foods & Restaurants (P.) Ltd. Vs DCIT ( ITAT, Chennai ) 108 ITD 274

Assessee Purchased a sugar mill in auction, which was, however, managed by an authorized controller appointed by Govt. due to certain legal issues – Assessee advances amounts to him to run the mill and received sale proceeds resulting in a shortfall – it is not bad debt or business expenditure – Loss of capitalCawnpore Sugar Works Ltd Vs CIT (All) 243 ITR 345

Assessee entering into contract for purchase of machinery – Cancellation of contract – cancellation charges – Loss of capitalPatel Brass Works Vs CIT (Guj) 286 ITR 598

Agreement for sale of property – Payment of earnest money by assessee – Forfeiture of earnest money on default by purchaser – Is loss of capital.CIT Vs Sterling Investment Corporation Limited (Bom) 123 ITR 441

Assessee, film distributor making advance payment to film producer for getting distribution rights of a particular film – Payment for acquiring a capital asset – Irrecoverability leads to capital loss – Not deductible as a business loss.CIT Vs Sembi Traders (Mad) 221 ITR 410

Write-off of debts due from erstwhile partners – Not revenue loss – No capital loss also since there is no transferJCIT Vs Rasi Silks ( ITAT, Chennai ) 97 ITD 58

Loss on account of revaluation in value of investments in shares – No transfer of capital assets – No capital gains / lossIndustrial Finance Corporation of India Ltd. Vs JCIT (ITAT, Del) 99 ITD 639Chettinad Company P. Ltd, Vs CIT (Mad) 147 ITR 724Assessee-bank invested in Government Securities – No loss arises on revaluation of such securities.Bank of Rajasthan Ltd. Vs IAC (ITAT,Jp) 68 ITD 69ACIT Vs B.N. Rathi Securities Ltd.(ITAT, Hyd) 71 ITD 31

Assessee having shares of ACIL – Liabilities of ACIL far exceeded its assets – Company not dissolved and still continue to exist, only certain undertaking was

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taken over by Government – Assessee wrote off value of shares and claimed capital loss – Not correctBharat Hari Singhania (HUF) Vs ACIT (ITAT, Cal) 58 ITD 189Kerala Small Industries Dev. Corpn. Ltd Vs CIT (Ker) 270 ITR 452

Advance paid for construction of cold storage – Work not done and part advance not recoverable – Loss of capitalKwality Fun Foods and Restaurants P. Ltd. Vs DCIT (ITAT,Chennai) 295 ITR (AT) 291

Deposit made by assessee as share application money – Shares not allotted – Requested to consider it as loan – Writing off as bad debt lateron – Not allowable – Loss of capitalDCIT Vs Kanchanjungha Advertising P. Ltd. 2008-TIOL-159-ITAT-DEL

Non-competition fee paid

Expenditure to prevent trading competition – Manufacturing cement – lease of limestone quarries – Annual payment to lessor to prevent lessor from granting similar rights in neighbouring quarries – Capital expenditure.Assam Bengal Cement Co. Ltd. Vs CIT (SC) 27 ITR 34 Hewlett Packard Indust. Ltd. Vs DCIT (ITAT, Del) 85 ITD 455

Amount paid to competitor to withdraw – capital expenditure.Beharilal Beni Prasad Vs CIT (Punj) 35 ITR 576

Payment to eliminate competition – Assessee to pay specified sum every month for 5 years – Rival firm not to exhibit films during that period – Capital expenditureGrover Soap Pvt. Ltd. Vs CIT (MP) 221 ITR 299Neel Kamal Talkies Vs CIT (All) 87 ITR 691Gujarat Mineral Development Corporation Ltd Vs CIT (Guj) 143 ITR 822CIT Vs Hindustan Pilkington Glass Works (Cal) 139 ITR 581DCIT Vs Saraf Chemicals Ltd. (ITAT, Mum) 102 ITD 356

Re-organization of business in same group- Consideration paid for closure of one particular type of business by another company – Enduring advantage – Capital expenditureLucent Technologies Hindustan Ltd. Vs JCIT (ITAT, Bang) 106 TTJ 205

One partner agreeing to pay certain sums to other partners – payment to acquire the right to conduct the business and not for the purpose of producing profits in the conduct of business – capital expenditure.Ramji Das Jain & Co. IN RE (Lahore) 13 ITR 430CIT Vs Sangham Enterprises (AP) 240 ITR 13

114

Compensation paid for acquiring assets, Goodwill and to avoid competition in trade – expenses to acquire enduring benefit – Capital Expenditure.Tamil Nadu Dairy Dev. Corpn. Ltd Vs CIT (Mad) 239 ITR 142TI Diamond Chain Ltd. Vs CIT (Mad) 274 ITR 59

Payment made to Ex-Managing Director not to carry on any competitive business for 5 years – capital expenditure.Chelpark Company Limited Vs CIT (Mad) 191 ITR 249

Payment for technical know-how / royalty

Issue of shares to foreign company in consideration for supply of know-how - Value of shares does not represent expenditure of company – Not deductible as revenue expenditure.CIT Vs Eimco K.C.P. Limited (Mad) 147 ITR 603

Publisher of books – Royalty on net sales paid to party for obtaining recognition of education department – Capital expenditure.CIT Vs Naya Sahitya (Del) 84 ITR 567

Collaboration agreement for 5 years which can be extended – Another company transferring to assessee technical know-how and right to use its trade mark – amount paid is capital expenditure even when the payment is linked to turnover / productionTransformers & Switchgear Ltd. Vs CIT (Mad) 103 ITR 352CIT Vs Polyformalin (P) Ltd (Ker) 161 ITR 36Fenner Woodroffee & Co. Ltd Vs CIT (Mad) 102 ITR 665

Assessee company taking over sole selling agency acquired by firm – Payment of royalty @ 75% of profits to firm in consideration of assignment of agency – capital expenditure.CIT Vs Jalan Trading Co. P. Ltd. (SC) 155 ITR 536M.K. Brothers P. Ltd. Vs CIT (SC) 86 ITR 38.

Lump sum payment for acquiring technical know-how for manufacturing textile machinery – Capital expenditure - Sec. 35AB applies & not Sec. 37(1).APS Star Industries Ltd. Vs DCIT (ITAT, Ahd) 86 ITD 182

Non-resident rendering technical service to Indian company – Agreement for payment of fees in India Rupees – Loss on account of exchange fluctuation while remitting fees abroad – Not deductible.CIT Vs Phillips Petroleum International Corporation (Del) 272 ITR 355

Amount paid to licensor for supply of technical know-how – capital expenditure.

115

Jyoti Electric Motors Ltd Vs CIT (Guj) 237 ITR 280

Technical know-how acquired – New process – Totally new products –Capital Expenditure.Voltas Ltd Vs DCIT (ITAT, Mum) 64 ITD 232

Collaboration agreement – Grant of technical aid for setting up factory and right to sell products – Foreign Company agreeing not to manufacture similar products in India or give rights for manufacture to others – Exclusive and enduring advantage –Capital expenditure.Southern Switch Gear Ltd. Vs CIT & Anr. (SC) 232 ITR 359

Collaboration agreement between assessee and foreign company – Composite payment for supply of technical know-how and services for setting up plant and manufacture of products – No embargo on manufacture even after expiry of agreement – Enduring benefit to assessee – Payment partly capital expenditure.Jonas Woodhead & Sons (India) Ltd. Vs CIT (SC) 224 ITR 342

Technical know-how for setting up a new plant for manufacture of a new product with imported machinery – Capital expenditure.CIT Vs W.S. Insulators of India Ltd (Mad) 243 ITR 348

Assessee agreeing to supply know-how in consideration of royalty – No evidence for joint venture – Loss and expenses relating to Malaysian company not deductibleParry Confectionary Ltd. Vs CIT (Mad) 244 ITR 834

Replacement / Repairs

Reconstruction of damaged plant – Design & capacity of plant changed – Capital Expenditure.Prestige Foods Ltd Vs DCIT (ITAT, Indore ) 61 ITD 390

Expenses for constructing a new toilet and pantry – capital expenditure.M.N. Dastur & Co. Ltd Vs DCIT (ITAT, Bang) 62 ITD 113

Electrical transformers installed in textile processing mill – Independent instruments CIT Vs J.K.K. Textile Processing Mills (Mad) 242 ITR 165CIT Vs Saraspur Mills Ltd (Guj) 254 ITR 522 – Exhaust fans

116

Fishing Boats fitted with imported engines with higher HP – No finding that engines needed repairs or replacements – Renewal resulted in enduring advantage – expenditure not revenue in nature.CIT Vs Neroth Oil Mill o. Ltd. (Ker) 140 ITR 173

Renovation of theatre to make the halls more attractive and comfortable – replacement of furniture, sanitary fittings, electrical installation etc. – capital expenditure.Humayun Properties Ltd Vs CIT (Cal) 44 ITR 73Ballimal Naval Kishore & Anr. Vs CIT (SC) 224 ITR 414

Expenditure for purchase of furniture and racks for replacement – capital expenditure.Delhi Cloth & General Mills Co. Ltd. Vs Addl. CIT (Delhi) 160 ITR 857

Expenditure Incurred for purchasing generator is capital exp.Nuchem Plastic Ltd Vs DCIT (ITAT, Delhi) 44 TTJ 261

Amount spent in replacing electric control panel – capital expenditure.DCIT Vs S.T.N. Textiles Ltd (Ker) 257 ITR 161

Replacement of an existing compound wall – capital exp.Senapathy Synams Insulations (P) Ltd. Vs CIT (Kar) 248 ITR 656

Installation of new cement mill technology superior to old mills discarded – Not current repairs CIT Vs Madras Cements Ltd (Mad) 255 ITR 243

If there has been a wear and tear on an item over a number of years and ultimately they were replaced –Not current repairs – Marbling done in administrative block – not current repairs u/s.30(a)(ii)Modi Spinning & weaving Mills Co. Ltd. Vs CIT (Del) 200 ITR 544

Expenditure incurred on leasehold premises by way of LAN equipment, Access Control System, electrical work, Interior work, Furniture & fittings etc. – Not revenue expenditureACIT Vs E.I. Dupont India Ltd. (ITAT, Del) 107 ITD 63

Textile mill – replacement of worn out ring frames – Not current repairs – Not revenue expenditureCIT Vs Saravana Spinning Mills P. Ltd. (SC) 293 ITR 201

117

Share issue expenses

Expenditure in connection with additional issue of shares – Expenditure directly related to expansion of capital base – is capital expenditureBrooke Bond India Ltd. Vs CIT (SC) 225 ITR 798Punjab State Industrial Development Corporation Ltd Vs CIT (SC) 225 ITR 792Shree Ram Mills Ltd. Vs CIT (Bom) 195 ITR 215CIT Vs Motor Industries Co. Ltd. (Kar) 229 ITR 137 - issue of right sharesVazir Sultan Tobacco Co. Ltd. Vs CIT (AP) 174 ITR 689Alembic Glass Industries Ltd Vs CIT (Guj) 202 ITR 214CIT Vs Sesa Goa ( India ) Ltd. ( Bom ) 282 ITR 197 Bonus share issue Ashima Syntex Ltd. Vs ACIT ( ITAT – SB, Ahd ) 100 ITD 247 Wholly convertible

debentures

Capital expenditure even if such share issue was to maintain capital base as per FERA requirementEskayef Ltd Vs DCIT (ITAT, Bom) 71 ITD 419Union Carbide India Ltd Vs CIT (Cal) 203 ITR 584Avery India Ltd Vs CIT (Cal) 199 ITR 745CIT Vs Commonwealth Trust Ltd. (Ker) 167 ITR 365

Expenses on issue of partly convertible debenture – capital expenditure.Banco Products (India) Ltd Vs DCIT (ITAT, Ahd) 63 ITD 370Network Ltd vs DCIT (ITAT, Del-TM) 84 ITD 67

Expenditure on issue of share certificate, bond etc. as a consequence of amalgamation of companies – capital exp.CIT Vs Official Liquidator of Ahmedabad Mfg. & Calico Prg. Co. Ltd. (Guj) 244 ITR 156

Legal and professional charges incurred in connection with merger of company – Not deductibleTriveni Engg. Works Ltd. Vs CIT (Del) 232 ITR 639

No set off of interest income earned on short-term deposits of share application money against share issue expenses since share issue expenses are Capital in natureEicher Motors Ltd. Vs DCIT (ITAT, Indore) 94 Taxman (Mag) 316D.S.J. Communications Ltd. Vs ACIT (ITAT, Mum) 10 SOT 390

Liability only contingent – Not deductible

State Government Transport undertaking – Amounts contributed to statutory insurance fund for making payments to third parties - Provision was to meet a contingent liability – Not deductible.

118

CIT Vs Pallavan Tansport Corporation Limited (Mad) 230 ITR 288

Liability to contribute to expenditure of marriage of daughters of employees – Contingent liabilityElgin Mills Co. Ltd. Vs CIT (All) 288 ITR 85

Show-cause notice received from Excise Department regarding payment of Excise Duty – assessee denying liability – No provision made in its accounts – Not deductible.Indian Smelting & Refining Co. Ltd. Vs CIT (SC) 248 ITR 4Standard Mills Co. Ltd. Vs CIT (Bom) 229 ITR 366

Differential excise duty – Not statutory liability of assessee – Provision made – contingent liability onlyPeico Electronics and Electricals Ltd. Vs CIT (Cal) 201 ITR 477

No accrual of liability in this year – Only estimate made - contingent liabilityRajasthan State Mines and Minerals Ltd. Vs CIT (Raj) 208 ITR 1010T.N. Small Industries Dev. Corpn. Vs CIT (Mad) 242 ITR 122

Assessee committing breach of contract – Matter referred to arbitration and award passed – Liability to pay damages accrued only on passing of award and not on date of breach of contract.Asuma Cashew Company Vs CIT (Ker) 182 ITR 175CIT Vs Grand Cashew Corporation (Ker) 182 ITR 216CIT Vs Ganesh Stores (MP) 162 ITR 493CIT Vs Roberts McLean & Co. Ltd. (Cal) 111 ITR 489

Funds credited every year by employer to ‘Gratuity Reserve Fund’ – only contingent liability.CIT Vs Indian Metal & Metallurgical Corpn. (Mad) 51 ITR 240

Dispute regarding contractual liability – only contingent liability.Alembic Chemical Works Ltd. Vs DCIT (Guj) 266 ITR 47

Putting aside of money in “Annuity Schemes” which may become expenditure on the happening of an event, is not expenditure - only contingent liability – Not deductible.Indian Molasses Co. (Pvt.) Ltd. Vs CIT (SC) 37 ITR 66

Provision made for Sales Tax for non-receipt of declaration forms in cases where sales were effected against such forms – contingent liability only.Hiundustan Lever Ltd. Vs IAC (ITAT, Bom) 58 ITD 555

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Voluntary Retirement Scheme of assessee company – According to this, Part I of payment to be made before end of accounting year and Part II ten months after date of retirement – Part II liabilities, though determined, is only a contingent liability.DCIT Vs Associated Capsules (P) Ltd. (ITAT, Mum) 71 ITD 20

Warranty provision made in respect of after-sales service which depends on uncertain future events – contingent liability.ITO Vs EMCO Transformers Ltd. (ITAT, Bom) 32 ITD 260Srinivasa Computers Ltd. Vs ACIT (ITAT, Chennai) 107 ITD 357CIT Vs Rotork Controls India Ltd. (Mad) 293 ITR 311 Land taken by assessee from Government – Estimated interest on cost of land – contingent liability – Not deductibleTamil Nadu Small Industries Dev. Corpn. Ltd. Vs CIT (Mad) 242 ITR 122

Provision for payment of retrenchment compensation – is in the nature of doubtful contingent liability – Not allowable.Chandamama Publications Vs CIT (Mad) 176 ITR 321

Contribution made to Contingency Reserve created under Electricity ( Supply ) Act – Assessee has control over such funds – Contingent liabilityKumbakonam Rural electric Co-operative Society Ltd. Vs JCIT (ITAT, Chennai) 101 ITD 46

Liability whether accrued during the year ?

Mercantile system – liability of custom duty accrued in the year of import – entries in books of account and date of demand notice not relevant.CIT Vs Century Enka Ltd. (Cal) 239 ITR 804

Eventhough statutory liability to pay cess arose in A.Y. 80-81 when Government passed ordinance, it became real and enforceable only in A.Y. 83-84 i.e., when collector demanded it – Hence deductible in A.Y. 83-84 only.CIT Vs Padmavati Raje Cotton Mills Ltd. (Cal) 203 ITR 375

Mercantile system – Penalty imposed in A.Y. 79-80 for infraction of Customs Act and assessee paid the same – Order of penalty set-aside in 1982 – It “relates back” to date of levying penalty – Penalty stood wiped out in A.Y. 79-80 itself – Deduction not allowable in A.Y. 79-80.Assam Roller Flour Mills Vs CIT (Raj) 227 ITR 43

Mercantile System – Sales made in accounting period – Sales Tax paid in later year – Not deductible in later year.Haji Lal Mohd. Biri Works vs CIT (SC) 224 ITR 591CIT Vs Ambur Co-operative Sugar Mills Ltd (Mad) 240 ITR 828

120

Mercantile system - claimed Sales Tax liability on turnover though not debited to P&L a/c. nor charged from customers nor paid to Government – Not allowable.CIT Vs Assam Roller Flour Mills (Raj) 226 ITR 876

Sales Tax – charge to tax arises in the year of sale / transfer – Additional liability to Sales Tax arises in the year in which assessment made and demand raised – In Mercantile System of accounting, liability can be claimed only in the above mentioned mannerAvery India Ltd. Vs CIT (Cal) 199 ITR 745

During accounting year 69-70 relevant to A.Y. 70-71 an ordinance has been issued which made it obligatory for employers to set aside certain amount for payment as gratuity for its employees – Assessee, instead of debiting said liability relating to A.Y. 70-71 and earlier years in AY 70-71, debited the same in AY 71-72 – Not allowable.K.J. Francis Vs CIT (SC) 236 ITR 308

Mercantile system – Liability for damages arising in F.Y. 1989-90 – Proceedings against liability – Not relevant – Amount not deductible in subsequent yearCIT Vs Southern Cables and engineering Works (Ker) 289 ITR 167

Mercantile system – Liability to electricity tariff through obligatory by contract, is a statutory liability accruing simultaneously with the taxable event, even though the assessee might dispute the liability – Since assessee did not make provisions for stayed portion in respective years, not deductible in the subsequent year.Sarvaraya Textiles Ltd Vs DCIT (ITAT, Hyd) 54 ITD 542Hukumchand Jute & Industries Ltd. Vs CIT (Cal.) 241 ITR 517Delhi Tourism & T.D.C. ltd. vs CIT (Del) 285 ITR 114 Electricity Company – Mercantile system – statutory “consumers rebate reserve fund” not created and liability disputed – Dispute settled in 72-73 and reserve created for that year and earlier years – Reserve now created for earlier years not deductible.South Madras Electric Supply Corporation Ltd. Vs CIT (Mad) 240 ITR 503.

Amount paid for acquisition of technical know-how – collaboration agreement subject to approval by Government of India – No liability accrues till date of approval of agreement.CIT Vs John Fowler (India) Ltd. (Bom) 239 ITR 312

121

Payment under collaboration agreement (which is subject to Government approval ) – payment only upto the period for which Government approved, is deductible.Dorr-Oliver (India) Ltd. Vs CIT (Bom) 234 ITR 723

Mercantile System - cannot claim deduction of payment for technical know-how where the liability had accrued in an earlier year – Cash system cannot be followed for one transaction alone – Provisions of FERA has nothing to do with accrual of liability which arose under the terms of contract with the foreign contractor.CIT Vs Super Scientific Clock Co. (Guj) 238 ITR 731

Mercantile – Accrual of liability – Time of accrual – amount payable as commission to non-resident – liability accrued – permission of RBI to be taken before payment, is not relevant.Bhai Sundas Dass & Sons Co. P. Ltd. Vs CIT (Del) 259 ITR 33

As per agreement, sales commission is payable only on realization of full price – even if assessee follows mercantile system, it is not allowable in the year of sale and only in the year of realization of full price.Concord Controls Vs ITO (ITAT, Del) 57 TTJ 143

Loss by theft in 1987 – Insurance claim rejected in Feb., '90 – Loss allowable in AY 90-91Gulati Saree Centre Vs ACIT (ITAT, Chd-SB) 71 ITD 73

Mercantile – Provision for reduction in contract price by ½% per week of delay, as per contract terms –No demand against assessee – No determination of damages by any adjudicatory forum – Mere entries in books as compensation payable – Not an accrued liability.CIT Vs Seshasayee Industries Ltd. (Mad) 242 ITR 691

Assessee cannot claim expenditure by way of gratuity which might have been claimed in earlier years – Expenditure must be claimed in the year in which liability arisesMysore Tobacco Co. Ltd. Vs CIT (Kar) 115 ITR 698

Damages for breach of contract – contract providing for arbitration – damages were unliquidated in the accounting year – not deductible till the quantum is fixed in arbitrationN. Sundareswaran Vs CIT (Ker) 226 ITR 142CIT vs Bharat Fire Bricks & Pottery Works (P) Ltd. (Cal) 202 ITR 821Navjivan Roller Flour & Pulse Mills Ltd. Vs DCIT (ITAT, Ahd) 73 ITD 265

122

Disputed liability for additional ground rent – contractual nature – Deductible in the year of settlement of dispute.CIT Vs Purushotham Gokuldas (Ker) 237 ITR 115

Contractual liability crystallized only when assessee agreed to make payment and not earlier i.e., when dispute is settled.CIT Vs Oriental Motor Car Co.(P) Ltd. (All) 124 ITR 74.CIT Vs Purushotham Gokuldas (Ker) 237 ITR 115Alembic Chemical Works Ltd. Vs DCIT (Guj) 266 ITR 47

Mercantile system – contractual liability – Liability accrues on the date when arbitrator’s award was made rule of Court and not on the date when arbitrator passed the awardDCIT Vs Indag Rubber Ltd. (ITAT, Del) 98 ITD 218

Mercantile system – Liability for increase in rates and royalty in relation to gas supply – Higher price demanded by supplier finally upheld by Supreme Court – Liability accrued during the year when supply of gas was received – Deduction allowable in respective years.DCIT vs Jayant Paper Mills Ltd. (ITAT, Ahmedabad) 41 ITD 153

High Court enhancing rate of interest payable during 21.2.43 to 21.2.63 vide order dated 5.9.72 – Extra interest accrued only in AY 73-74RSH Verma and M. Kanhaiyalal Vs CIT (MP) 234 ITR 702

Proper method of deduction of debenture premium payable at end period of debenture is pro rata method i.e., by spreading extra premium over all years occupied between date of issue and redemption.H.P. Financial Corpn. Ltd. Vs CIT (HP) 232 ITR 158National Engg. Industries Ltd. Vs CIT (Cal) 236 ITR 577Madras Industrial Investment Corpn. Ltd. Vs CIT (SC) 225 ITR 802

Chit fund company – Mercantile system – Prized subscriber – Net dividend or loss to be reckoned in the year of auctionBilahari Investments P. Ltd. (Mad) 288 ITR 39

Time of accrual of liability – Difference between pooled price and retention price payable to Government – Assessee contesting liability for A.Y. 1981-82 – Demand stayed by order of Court – No accrual of liability – not deductible in A.Y. 1981-82Synbiotics Ltd. Vs CIT (Guj) 288 ITR 572

Assessee paid certain amount of bottling fee pertaining to earlier years on account of High Court judgement – During pendency of appeal against this decision, claimed deduction – Disallowed since liability not finally settled

123

Udaipur Distillery Co. Ltd. Vs JCIT (ITAT, Jodh) 100 ITD 422

Project Completion Method – Interest identifiable with a project be allowed only when that project is completed and income offered for taxWall Street Constructions Ltd. & Anr. Vs JCIT (ITAT, Mum-SB) 101 ITD 156

Assessee stood as guarantor for loans taken by subsidiary company – subsidiary company going into liquidation – Loss deductible in the year in which final payment was received from liquidator.CIT Vs Amalgamations P. Ltd. (SC) 226 ITR 188

Assessee collecting Sales Tax and keep it in separate account – Not credited in P&L a/c. – Liability not admitted in Return – Amount not paid to Sales Tax Department and demand not created – Sales Tax liability not allowable deduction.CIT Vs Assam Roller Flour Mills (Raj) 226 ITR 876

In respect of debentures issued with a right of repurchase, liability for payment of premium accrues at the time of payment only – In respect of debentures redeemable after expiry of 7 years, liability for payment of premium was incurred in the year of allotment and discounted value thereof is deductible.Mahindra & Mahindra Ltd. Vs DCIT (ITAT, Mumbai-TM) 61 ITD 129

Expenses on acquisition of distribution rights of feature film – Original agreement in 1974 for acquisition of right – Modification of agreement in 1978 for sharing overflow profits for unexpired period of contract – payment of lump sum advance – Not entirely deductible in that year – Amortise over the period of contract.CIT Vs Prakash Pictures (Bom) 260 ITR 456

Embezzlement – Loss must be deemed to have occurred when embezzlement was discovered.CIT Vs Shree Shew Shakti Mills (P) Ltd. (Cal) 239 ITR 129

Liability for compensation did not accrue on the closing date of the accounting year - Amount paid subsequent to that date but before finalization of the balance sheet - Not deductible expenditure as liability did not accrue during the accounting year - Assessee argued that as per AS-4, all liabilities accruing till the date of approval of balance sheet to be provided in accounts - Argument not maintainable to compute taxable income as per I.T. Act.M.S. Raju Vs DCIT (AP) 298 ITR 373

124

EXPENSES NOT DEDUCTIBLE

General

Contributions towards gratuity and superannuation funds, which were not approved in the previous year – Not deductibleSony India P. Ltd. Vs CIT (Del) 285 ITR 213

Contributions to recognized provident fund of assessee’s holding company – Not deductible.CIT Vs Mica Trading Corporation of India (Patna) 229 ITR 268

Assessee not having approved Gratuity Fund – Gratuity liability not deductible.CIT Vs Petroleum and Minerals P. Ltd. (Bom) 187 ITR 560CIT Vs Orient Pharma P. Ltd. (Mad) 241 ITR 259

Gratuity – conditions in 40A(7) must be fulfilled – only incremental liability relating to accounting year allowable.Tuttapullum Estates Vs CIT (Mad) 191 ITR 131CIT Vs N. Radha Bai (Ker) 180 ITR 429Shree Sajjan Mills Ltd. Vs CIT & Anr.(SC) 156 ITR 585

Provision made for gratuity – Not deductibleCIT Vs Loyal Textiles Ltd (Mad) 231 ITR 573

Only contributions towards recognized Provident Fund or approved Superannuation Fund or approved Gratuity Fund or as required by any law are allowable as deduction u/s 40A(9)Raasi Cement Ltd. Vs CIT (AP) 275 ITR 579Aspinwall and Co. (Travancore) Ltd. Vs DCIT (Ker) 295 ITR 553

Contribution to Education Trust of company - Not allowable - Sec. 40A(9) applies.Alfa laval India Ltd. Vs DCIT (ITAT, Pune) 298 ITR (AT) 333

Moneys received from persons for allotment of shares remaining with company without shares being allotted – Amounts to deposit - 15% of interest payable on such deposits to be disallowed u/s 40A(8).J.J. Foams (P) Ltd. Vs CIT (Del) 229 ITR 590

Dividends paid on preference shares – Not deductibleKirloskar Electric Co. Ltd. Vs CIT (Kar) 228 ITR 676

Company Law Board refusing sanction for remuneration of Managing Director – Company paid compensation in lieu of remuneration – Not deductible.

125

CIT Vs N.C. John & Sons Ltd (Ker) 226 ITR 934CIT Vs India Cements Limited (Mad) 241 ITR 62

Assessee Company paying remuneration in excess of ceiling to Directors of subsidiary company – Not deductible.CIT Vs Amalgamations Pvt. Ltd. (SC) 226 ITR 188

Catalyst purchased by assessee became obsolete – Deduction can be claimed only when the catalyst is sold or disposed off.CIT Vs Heredilla Chemicals Ltd. (Bom) 225 ITR 532Under deed of retirement, continuing partners making payments to outgoing partner in lieu of their right, title and interest in firm including its assets and goodwill – Not deductible.CIT Vs Standard Maltings and Allied Products Corpn(Guj) 226 ITR 1R.V. Pandit Vs ACIT (ITAT, Mum) 70 ITD 1

Assessee is hire purchase financier – Hire purchasers making default in payment to assessee. – Assessee taking repossession of vehicles – Loss on revaluation of vehicles not allowable deduction.Motor & General Sales (P) Ltd. Vs CIT (All) 226 ITR 137

Assessee paying recoverable bonus in 1971 – In 1973 decided not to recover such amount – No evidence that sum paid to employees was loan. – Not allowable as bad debt / business loss / expenditure in AY 74-75.CIT Vs Wheel & Rim Co. of India Ltd. (Mad) 225 ITR 648

Donation to political party by Company – No specific clause in memorandum and articles of association authorizing such gift – Donation not exempt.CIT Vs T.V. Sundaram Iyengar & Sons Ltd. (Mad) 238 ITR 666

Element of inflation in purchase price for certain purchases – recomputed by taking average price for the year.J.R. Solvent Industries (P) Ltd. Vs ACIT (ITAT, Chd –TM) 68 ITD 65

35CCA approval withdrawn – No exemption to donations made to that society.T.M. Yusuf Vs ITO (ITAT, Mad) 64 ITD 84

Commission payments permissible under the Companies Act cannot be allowed unless it is admissible under IT Act – Payment not proved for commercial expediency / business interest – Not allowable.Punjab Breweries Ltd Vs ACIT (ITAT, Chd-TM) 67 ITD 107

Articles distributed to customers (who are members of assessee association ) as sales incentive – Indirect distribution of profits among members – Expenditure not deductible.Salem District Lorry Owners Association Vs CIT (Mad) 242 ITR 458

126

Excise contract - Raid expenses – not deductibleCIT Vs A.J. Shetty & Co. P. Ltd,. (Kar) 255 ITR 180

Building not ready to be put to use for business – Rent paid not allowableJainsons Vs ACIT (ITAT, Del) 76 ITD 51

Goodwill amount payable by incoming partner, but firm paying interest on Goodwill liability to outgoing partner – Not deductible.CIT Vs Rajkumar Dipchand Phade (Bom) 249 ITR 520

Loss on chits not allowable as business expenditureSoda Silicate and Chemical Works Vs CIT (P&H) 179 ITR 588

Every loss is not so deductible unless it is incurred in carrying out the operation of the business and is incidental to the operation.CIT Vs Nainital Bank Ltd. (SC) 55 ITR 707CIT Vs Textool Co. Ltd. (Mad) 135 ITR 200

Company – Misappropriation by Director –No material to show company was unaware of misappropriation or had taken steps to recover amount - Not allowable as business exp.Yoosuf Sagar Abdulla & Sons (P) Ltd. Vs CIT (Ker) 185 ITR 371CIT Vs Ashwani Kumar Liladhar (All) 225 ITR 576

Embezzlement by employee – Reasonable prospect of recovery of embezzled amount – Loss cannot be allowed.Canara Sales Corporation Limited Vs CIT (Kar) 176 ITR 340North Arcot District Co-operative Supply & Marketing Society Ltd. Vs CIT (Mad) 230 ITR 33Associated Banking Corporation of India Limited Vs CIT (SC) 56 ITR 1

Cessation of business transactions – collection of outstanding dues does not amount to carrying on business – Disallowance of part of salary to employee justified –Assessee had not taken steps for recovery of interest from the parties – Assessee claimed deduction on account of waiver of interest - Deduction claimed disallowed.P.V. Gajapathy Raju Vs CIT (Mad) 176 ITR 238CIT Vs Lahore Electric Supply Co. Ltd. (SC) 60 ITR 1

Disallowance in R. 6D not restricted to traveling expenses alone – Includes hotel expenses also.R.K. Swamy Advertising Associates Vs CIT (Mad) 220 ITR 507

Assessee carrying on trading in typewriter and servicing of typewriters – No evidence that both activity formed one single business – Retrenchment

127

compensation paid on closure of servicing Department - not allowable from income of other business.India Manufacturers (Madras) P. Ltd. Vs CIT (Mad) 155 ITR 774Jay Shree Tea & Industries Limited Vs ACIT (ITAT, Cal) 63 ITD 260Venkatesa Colour Works Vs CIT (Mad) 108 ITR 309Coimbatore Premier Corpn. (P) Ltd. Vs CIT (Mad) 244 ITR 445Binani Printers (P) Ltd. Vs CIT (Cal) 143 ITR 338

Taxing authorities have right to consider whether expenditure was excessive.Steel Containers Limited Vs CIT (Cal) 112 ITR 995Lakshminarayan Madan Lal Vs CIT (SC) 86 ITR 439Swadeshi Cotton Mills Co.Ltd. Vs CIT (SC) 63 ITR 57Lakshmiratan Cotton Mills Co. Ltd. Vs CIT (SC) 73 ITR 634Amritlal & Co. Pvt. Ltd. Vs CIT (Bom) 108 ITR 719

If business discontinued or creased to exist, salary paid subsequently to maintain staff – not deductibleInderchand Hari Ram Vs CIT (All) 23 ITR 437

Expenses on guest house – Depreciation, rent, repairs - not allowableBritannia Industries Ltd Vs CIT (SC) 278 ITR 546

Received loan from employee –employee died – Dispute between assessee and employee’s wife who carried away books of a/c – Arbitration – Assessee repaid that amount and retrieved books of a/c. – Not allowable deduction.Rao Narain Singh v. CIT (Raj) 250 ITR 838

128

CASH PAYMENTS FALLING U/S 40 A(3)

Explanation of assessee that parties insisted on cash payment – No evidence placed to Corroborate this – Payments made not allowable deduction.S. Venkata Subba Rao Vs CIT (AP) 173 ITR 340 CIT Vs Padmavathi Raje Cotton Mills Limited (Cal) 239 ITR 355CIT Vs Bansidhar Jalan & Sons (Cal) 184 ITR 264

Benefit of Rule 6DD(j) not available to assessee after A.Y. 1996-97 – 20% expense to be disallowedR.S. Nayyar Vs JCIT (ITAT, Pune) 290 ITR(AT) 371

Assessee had bank account in the same place of customers-No reason to issue bearer chequesLate Smt. Jyoti Chellaram Vs CIT (AP) 173 ITR 358 Evershine Platters Vs CIT (All) 295 ITR 349

Payment for purchase of goods covered by 40A(3)Hari Chand Virender Paul Vs CIT (P&H) 140 ITR 148

Not merely genuineness of transaction, but existence of circumstances warranting cash payment to proveAssociated Engg. Enterprise Vs CIT (Gau) 216 ITR 366

Even if transaction is entered in the books of other party, unavoidable circumstances to be provedCIT Vs Assam Tribune (Gauhati) 221 ITR 488

It would amount to defeating objective of enactment, if claim allowed on the basis of transaction is genuine, identity of party established etc.T.G. Mutha Vs ITO (ITAT, Pune) 54 ITD 460

In interpreting a taxing statute, the court cannot be oblivious of the proliferation of black money which is under circulation in our country. Any restraint intended to curb the chances and opportunities to use or create black money should not be regarded as curtailing freedom of trade or business Attar Singh Gurmukh Singh etc Vs ITO (SC) 191 ITR 667 (pp.673)

Running account for commission in the books – Payments made out of them in excess of 2500 in cash at various points – 40A(3) appliesPorwal Udyog (India) Vs CIT (MP) 135 ITR 591

Assessee showed a certificate from the other party – This is not sufficientNarayan Bijoy Kumar Vs CIT (Pat) 163 ITR 695

129

Rule 6DD(f) applies only to grower or producer of forest produce – Not to supplier of agricultural commodities.CIT Vs Pehlaj Rai Daryanmal(All) 190 ITR 242Ideal Tannery Vs CIT (All) 117 ITR 34

Payment before delivery of goods – Covered by Sec.40A(3) - If no exceptional circumstances existed, liable to be disallowed u/s.40A(3)Vijay Kumar Ajith Kumar Vs CIT (All) 191 ITR 391

Payment for purchases made 6-7 days after transaction..Naghi Lal Vs CIT (Raj) 167 ITR 139Assessee must produce confirmatory letter from other party as proof for insisting cash paymentAggarwal Steel Traders Vs CIT ( P & H ) 250 ITR 738

Making payment on bank holidays do not ipso facto permit assessee to make cash payments.Jai Talkies Vs ITO (ITAT, Del) 57 TTJ 745

To consider the disallowance u/s 40A(3), total bill amount is to be taken and not the cost of each individual item mentioned in the billAddl. CIT Vs Shree Shanmuga Gunny Stores (Mad) 146 ITR 600

Exception under Rule 6DD(l) only to an agent of assessee and not to the employee of assesseeDCIT Vs Vijaykumar Rameshchand & Co. ( ITAT, Pune ) 108 ITD 626

130

DEDUCTION U/S 35D

Expenses on quality control, foreign trade periodicals, advertisement, samples, export promotion commission – No 35DKansal Woollen & Hosiery Mills (P) Ltd Vs CIT (P&H) 237 ITR 93

Tribunal cannot include items not enumerated in sec. 35D.CIT Vs Ennar Steel & Alloy (P) Ltd. (Mad) 261 ITR 347

35D(3) – Expl. (6) – Issued share capital is share capital + share premium a/c. only – Reserves & Surplus a/c. not to be considered.JCIT Vs Sirhind Steel Ltd. (ITAT, Ahd) 97 ITD 502

To avail deduction u/s 35D, industrial undertaking must be engaged in some manufacturing, producing or processing activityLIC Housing Finance Ltd. Vs DCIT (ITAT, Mum) 105 ITD 86

Deduction u/s 35 D available only if it is before commencement of business or in connection with extension of the industrial undertaking or setting up a new industrial undertakingHero Honda Motors Ltd. Vs JCIT (ITAT, Del) 103 ITD 157 D.S.J Communications Ltd. Vs ACIT (ITAT, Mum) 10 SOT 390

Expenditure incurred on issue of debentures, the proceeds of which were used for expansion of industrial undertaking – Assessee claimed that expenditure corresponding to “ non-convertible ” part of debenture is revenue expenditure – Not correct – If it falls under the specific provisions of sec. 35D, then sec. 37 will not applyShree Synthetics Ltd. Vs CIT & Anr. (MP) 205 CTR 386

Assessee in the business of construction of buildings – Not an industrial undertaking – section 35D will not applyAnsal Housing & Construction Ltd. Vs DCIT 2008-TIOL-191-ITAT-DEL

131

DISALLOWANCE OF EXPENSES WHERE TAX NOT DEDUCTED

Interest paid to foreign banker without deducting tax at source – Sec. 40(a)(i) applies – disallowance upheldCIT Vs C.C.C. Holdings (Mad) 260 ITR 433

Interest on un-paid purchase price paid to foreign concern without deduction of tax at source - Sec. 40(a)(i) applies – disallowance upheldCIT Vs Vijay Ship Breaking Corpn. & ors. (Guj) 261 ITR 113

Fee for technical services paid to non-resident without deduction of tax at source and without making application u/s 195(2) - Sec. 40(a)(i) applies – disallowance upheldHNS India VSAT INC Vs DDIT (ITAT, Del) 95 ITD 157

Sec. 40(a)(i) covers both revenue expenditure and capital expenditureSPACO Carburettors (I) Ltd. Vs ACIT (ITAT, Mum) 3 SOT 798

Payment made to foreign supplier of plant and machinery for oil drilling – TDS applicable for the whole payment – Assessee cannot decide tax liability of its customer – Sec. 40(a)(i) applies for such paymentsFrontier Offshore Explration (India) Ltd. Vs DCIT 2007-TIOL-192-ITAT-MAD

132

DISALLOWANCE U/S 43 B

Incentive bonus not actually disbursed – Disallowed under section 43BCIT Vs Kisan Sahkari Chini Mills Ltd. (All) 284 ITR 418

Disputed amount of excise duty secured by bank guarantee – Not equivalent to actual payment to revenue – Not deductibleMugat Dyeing and printing Mills Vs ACIT (Guj) 290 ITR 282

Interest on arrears of Sales tax is part of tax – Disallowance of such interest payable u/s 43B upheldShree Digvijay Cement Co. Ltd. Vs CIT (Guj) 289 ITR 250Shree Pipes Vs DCIT (Raj) 289 ITR 154 Provident fund contributions prior to A.Y. 2004-05 made before filing return but after the date prescribed in statute – Not deductible – Amendment not retrospectiveCIT Vs Synergy Financial Exchange Ltd. (Mad) 288 ITR 366

Disallowance of contribution of PF / Welfare Fund not paid within due date under respective legislation – Disallowable u/s.43B.Hitech (India) P. Ltd. Vs Union of India & Ors. (AP) 227 ITR 446The Kerala State Financial Enterprises Ltd. Vs CIT (Ker) 225 ITR 999CIT Vs South India Corporation Ltd. (Ker) 242 ITR 114CIT Vs Madras Radiators & Pressings Ltd. (Mad) 264 ITR 620

Royalty to Government, is a tax – unpaid liability disallowable u/s.43BGorelal Dubey Vs CIT (SC) 248 ITR 3Grasim Industries Ltd. Vs DCIT (ITAT, Mum) 64 TTJ 357

Cess payable for consumption of water in factories under Water (Prevention and Control of Pollution) Cess Act, 1977 – 43B applicable.CIT Vs Orient Paper and Industries Limited (Cal) 214 ITR 473

Import duty & excise duty element in closing stock has to be deducted from actually paid sum – only balance is deductible u/s.43B.Lakhanpal National Ltd. Vs ITO (Guj) 162 ITR 240Hindustan Computers Ltd. Vs ITO (ITAT, Del) 29 TTJ 358Berger Paints India Ltd. Vs CIT (ITAT, Cal) 44 ITD 573

Interest due to IDBI falls under 43B.DCIT Vs KSIDC (ITAT, Cochin) 53 TTJ 401

133

Interest payable to financial institutions, agreed to convert said interest amount to loan – 43B deduction available only if sum physically paid and not on constructive payment.Kalpana Lamps & Components Ltd Vs DCIT (Mad) 255 ITR 491Eicher Motors Limited Vs CIT (ITAT, Indore) 69 ITD 177Vinir Engineering P. Ltd. Vs DCIT (ITAT, Bang) 91 ITD 184ACIT Vs Mugat Dyeing & Printing Mills ( ITAT, Ahd-TM ) 87 ITD 215 – Providing

bank guarantee does not amount to actual payment

Hotel receipts tax collected, but not paid as that Act was withdrawn – Trading receipt liable for asst. – Deduction allowable only when ‘a’ pays it into Govt. / refund to customers.CIT vs. Hotel Srilekha (P) Ltd. (Mad) 250 ITR 57

Advance excise duty paid – Not deductible u/s.43BDCIT Vs CWC Wines (P) Ltd. (SB, Hyd) 89 ITD 1Maruti Udyog Limited Vs DCIT (ITAT, Del) 92 ITD 119

Sales Tax deferment scheme – State Govt. to pass necessary amendment to Sales Tax Act – Otherwise not deductible as amount actually not paid.CIT Vs Devendra Udhyog (Raj) 264 ITR 701

PF, ESI – Amendment to allow payment made upto due date of filing R/I – Not retrospective operationJCIT Vs Swarup Vegetable Products Industries Ltd. (ITAT, Del) 96 ITD 468CIT Vs Synergy Financial Exchange Ltd. (Mad) 288 ITR 366

SEBI turnover charges – hit by sec. 43BITO Vs Sureshchand Jain ( ITAT, Mum ) 100 ITD 435

Failure by assessee to deposit employee’s contribution to Provident Fund deducted from salaries – 43B will applyThe Assam Tribune Vs CIT (Gau) 285 ITR 452

Un-expired Modvat Credit available to an assessee on last day of previous year would not be eligible for deduction u/s 43BDCIT Vs Glaxo Smithkline Consumer Healthcare Ltd. (ITAT,Chd-SB) 107 ITD 343

134

Excess payments to relatives etc. u/s 40 (A) (2)

Commission paid to wife of partner (50% share) – wife neither educated nor trained to carry on her business – Test of commercial expediency not satisfied – Part of commissioner disallowed.Ganesh Soap Works Vs CIT (MP) 161 ITR 876Anandji Shah Vs CIT (Ker) 181 ITR 171ACIT Vs Ives Drugs (India)(P)Ltd. (ITAT, Indore) 59 ITD 625 – salary to relativeK.R. Motilal Vs CIT (Mad) 240 ITR 810– salary to relative

Expenses incurred on account of transportation of bricks through outside agencies was very low when compared to that of Director’s trucks – 40A(2) rightly invokedITO Vs Mansi Sales (P) Ltd. (ITAT, Jp) 54 ITD 346

Payment to relatives – Reasonableness has to be proved by assessee and not by Department .Nund & Samont Co. P. Ltd. Vs CIT (SC) 78 ITR 268

135

EXPENSES NOT FOR THE PURPOSE OF BUSINESS

Burden on assessee to prove that expenses were laid out wholly and exclusively for purposes of business.Goodlas Nerolac Paints Ltd. Vs CIT (Bom) 137 ITR 58Andrew Yule & Co. Ltd. Vs CIT (Cal) 49 ITR 57Assam Pesticides & Agro Chemicals Vs CIT (Gau) 227 ITR 846Indian Express (Madurai) (P) Ltd. Vs DCIT (ITAT, Mad) 68 ITD 374

Amount donated to charitable Trust created by assessee and utilized for rehabilitation of earthquake victims – Expenditure not deductibleMalayala Manorama Co. Ltd. Vs CIT (Ker) 284 ITR 69

Donation to Chief Minister’s Relief Fund – No evidence for benefit to assessee – not deductible.CIT Vs Industrial Dev. Corporation of Orissa Ltd. (Ori ) 249 ITR 401

Assessee had not been able to establish business purpose for performing poojas throughout the year and constructing temple in the business premises – Expenses disallowedACIT Vs Maharashtra Metal Powers Ltd. (ITAT, Nag) 102 ITD 214

Nexus to business to be proved by assessee – Contribution to Basket Ball Association, Noon meal centers etc. disallowedTamil Nadu Minerals Ltd Vs JCIT (ITAT, Chennai) 95 ITD 294

Donation to Political Party – Absence of link between donation & business of assessee – Not deductibleDelhi Cloth & General Mills Co. Ltd. Vs Addl. CIT (Del) 160 ITR 857

Commission paid to agents – No evidence to prove commission agents rendered services to assessee – No deductionCIT Vs McDowell and Co. Ltd. (Kar) 291 ITR 107

Furnishing guarantee not in assessee’s line of business – No consideration received for giving guarantee – Loss incurred on transaction of guarantee not allowable as bad debt or business loss.CIT Vs T.N. Krishnaswami (Mad) 150 ITR 365

Assessee stood as guarantor of a company – Suffered loss by repaying a loan taken by company – capital loss – not deductible.Brij Mohan Laxmi Narain Vs CIT (Punj) 36 ITR 147

Guaranteeing of loan of selling agent, was not a part of assessee’s business – Loss arising out of same is not deductible.CIT Vs Birla Bros P. Ltd. (SC) 77 ITR 751

136

Assessee doing money lending business – Partial partition in HUF where assessee is a member – As per that assessee has to pay certain sum to two firms in which other family members are partners – Firm made debit in its book – Interest paid to those firms not deductible from income of assessee –CIT Vs Krishnadas Govindas (Guj) 242 ITR 443

Trust for welfare of dealers – Trustees given discretion to spend money – Assessee has no liability to donate money to trust – No direct and immediate benefit to assessee by payment of sum to trust – Not deductible.CIT Vs Dynavision Ltd. (Mad) 265 ITR 289Assessee took over another Company (SVR) – Raw materials & finished goods were in fact purchased and possession taken over in subsequent year – As per accounts, assessee did not carry on any manufacturing / trading activity during the year→ Reimbursement of expenses to SVR was not assessee’s liability – Expenses claimed for period prior to commencement of manufacturing not admissible.H&R Aromatics (P) Ltd. Vs ACIT (ITAT, Ahd) 56 TTJ 636

Gifts on occasion of marriages in the families of business associates – Not for business - Not deductible.CIT Vs Jeevandas Laljee & Sons (Mad) 245 ITR 719

Expenditure on products manufactured and marketed by subsidiary company not allowable since no nexus with assessee’s business Aqua Minerals (P) Ltd. Vs DCIT (ITAT, Ahd) 96 ITD 417

Pooja Expenses, salary to poojari, stock exchange listing fees, expenses incurred in refreshment to visitors – Not business expenses.Sangameshwar Coffee Estates Ltd. Vs State of Karnataka (Kar) 160 ITR 203

Burden on assessee to prove that the expenditure was for business purposes – mere existence of agreement not sufficientCIT Vs Premier Breweries Ltd. ( Ker ) 279 ITR 51

Assessee received sum from its client for investment in securities – Assessee advanced it to brokers who mis- appropriated it – Assessee refunded money to its client – Not operational loss of assesseeABN Amro Bank N.V. Vs ADIT ( ITAT , Kol-TM ) 97 ITD 1

Payment for Garba festival - Not allowable deductionACIT Vs E.I. Dupont India Ltd. (ITAT, Del) 298 ITR (AT) 296

137

EXPENSES NOT PROVED BY ASSESSEE

Full details of expenses and all evidences not available - No adverse remark by auditors –No disallowance in the past – still disallowance can be made.Goodyear India Ltd. Vs ITO (ITAT, Del) 66 TTJ 164

Deduction claimed in respect of presentation articles and other trade expenses –No details furnished – Disallowed.T.V. Sundaram Iyengar & Sons Ltd. Vs CIT (Mad) 241 ITR 420

Litigation expenses – Burden on assessee to substantiate factum of expenditure and also its permissibility.Annamma Alexander Vs CIT (Ker) 176 ITR 229CIT Vs S. Devaraj (Mad) 73 ITR 1

EXPENSES ON EXEMPTED INCOME

Since dividend received is exempt, no expenses relating to it, is allowable. Eventhough the company paid Tax on distributed profits, still it is exempt income in the hands of assessee recipientHarish Krishnakanth Bhatt Vs ITO ( ITAT, Ahd ) 91 ITD 311Everplus Securities & Finance Ltd. Vs DCIT (ITAT, Del) 101 ITD 151Mohanlal M. Shah Vs DCIT (ITAT, Mum) 105 ITD 669

Sec. 14A is applicable even in respect of incomes which are excluded from total income by virtue of Chapter VI-APunjab State Co-op. Milk Producer Federation Ltd. Vs ITO (ITAT, Chd) 104 ITD 408

Since income being not taxable, loss incurred in such activity could not be set off against income from other headsCIT Vs S.S. Thiagarajan (Mad) 129 ITR 115

Unless and until nexus is established between the borrowed funds and income of the assessee, deduction of interest paid on borrowed funds would not be allowed against income – Assessee borrowed funds to make investments in firm as his capital – As per partnership deed, he was not entitled to any interest on his capital balance and whatever remuneration was earned by him, was on account of services rendered by him for firm – Interest on loan not allowableD.J. Mehta Vs ITO (ITAT, Mum) 104 ITD 527

CIT(A) and ITAT can invoke sec. 14A in relation to A.Y. 2001-02 and earlier years if issue arising before it requires adjudication by reference to section 14A.Aquarius Travels (P) Ltd. Vs ITO (ITAT, Del-SB) 111 ITD 53

138

Money borrowed for investment in shares – Interest on such borrowals to be deducted from dividend income before exempting the same from total incomeDCIT Vs Jindal Equipment Leasing & Consultancy Ltd. 2007 TIOL-396-ITAT-DEL

INFRACTION OF LAW

Redemption fine paid to Central Excise department for release of confiscated goods – Not allowableCIT Vs Jayaram metal Industries (Kar) 286 ITR 403P. Soman Vs ITO (ITAT, Coch) 111 ITD 24

Business of goldsmith – Loss on account of confiscation of Gold by Customs – Not deductible.Ishwar Das Alias Ishwar Lal Sindhi Vs CIT (All) 244 ITR 146ITO Vs Laxmi Prasad (ITAT, Pat –TM) 63 ITD 166

Loss arising on confiscation of gold – Not deductible since smuggling was not a business of assessee.Kasturi Lal Dhir Vs ITO (ITAT, Asr) 71 ITD 187

Redemption fine paid u/s. 125 of Customs Act – No deduction.Jain Exports (P) Ltd. Vs DCIT (ITAT, Del) 68 ITD 126

Assessee committing default in delivering “levy rice” – Loss due to confiscation of rice – Not deductible as business loss or exp.Sri Satyanarayana Rice Mill Vs CIT (AP) 155 ITR 676

Assessee allowed to cut blazes on trees for collecting resin – Penalty levied for putting blazes on trees not allotted to him – Not deductible.Khushal Eingh Subash Chander Vs CIT (HP) 228 ITR 608Baldev Singh Kanwar Vs CIT (P&H) 145 CTR 131

Fines in respect of municipal traffic offence - Not deductible.CIT Vs Jaipur Golden Trnasport (Del) 226 ITR 399

Penalty for delayed payment of Sales Tax – No deduction.CIT Vs Bharat Steel Tubes Ltd. (Del) 226 ITR 750Swadeshi Cotton Mills Co.Ltd. Vs CIT (SC) 233 ITR 199CIT Vs Jamiyatrai Rajpal (MP)232 ITR 437

Theft of electricity – Amount payable to Electricity Board not allowable since it is against public policy.Mittal Castings Ltd. Vs DCIT (ITAT, Delhi) 62 TTJ 591

139

Fines and Penalties – Damages for late payment of Provident Fund – Not deductible CIT Vs A. Albuquerque and Sons (Kar) 198 ITR 609Hasimara Industries Ltd. Vs CIT (Cal) 200 ITR 659Organics Chemical Industries (SC) AIR 1979 SC 1803Maddi Venkataraman and Co. (P) Ltd. Vs CIT (SC) 229 ITR 534 →FERA violationRotec Textile Mills Ltd. Vs CIT (Del) 226 ITR 485CIT Vs Bharath Plywood & Timber Products (P) Ltd. (Ker) 233 ITR 315

Provision requiring banks to maintain certain percentage of assets and file returns thereof – shortfall – penal interest paid u/s 24 of Banking Regulation Act - Interest not compensatory – not deductible –CIT Vs Syndicate Bank (Kar) 261 ITR 528ANZ Grindlays Bank Vs DCIT (ITAT, Del) 88 ITD 53

Illegal business – Expenses incurred in giving bribe – Not deductible.CIT Vs Saucer Liquor Traders (MP) 222 ITR 33Statutory impost – only that part which is compensatory to be allowed as deduction – scheme of statute to be allowed.Prakash Cotton Mills P. Ltd. Vs CIT (SC) 201 ITR 684Haji Aziz & Abdul Shakoor Bros Vs CIT (SC) 41 ITR 350Malwa Vanaspati & Chemical Co. Vs CIT (SC) 225 ITR 383

Compounding fee paid for violation of building construction – Not deductibleCIT Vs Mamta Enterprise (Kar) 266 ITR 356

Amount paid to drop pending proceedings by Anti Corruption Unit - Not deductible.J.K. Cotton Spinning & Weaving Mills Co.Ltd. Vs CIT (SC) 64 ITR 444

Bribes to RTO staff and policemen – Expenditure not verifiable, illegal – Not deductible.Gwalior Road Lines Vs CIT (MP) 234 ITR 230

Payment against public policy – unlawful activity – Not deductibleJhai Narain Trades Vs DCIT (ITAT, Cochin) 63 TTJ 318Soni Hinduji Kushalji & Co. Vs CIT (AP) 89 ITR 112Ralson (India) Ltd. Vs DCIT (ITAT, Del) 60 TTJ 451 – Payment to terroristG.A. Vasant Vs CIT (Mad) 265 ITR 481Balarghat Trnasport Co. Ltd. Vs ACIT (ITAT, Cal) 63 TTJ 302Gabdulal Tulsiram, IN RE (All) 21 ITR 330

Certain goods given to depositors at the time of accepting deposits – Such schemes are prohibited by law – Cost of such goods not deductibleCIT Vs Manjit Singh Sachdev (Kar) 285 ITR 359

140

Amounts paid by way of damages on breach of contract – cannot be treated as loss arising out of speculative transaction.CIT Vs Rajmohan Cashews Ltd. (Ker) 187 ITR 670Baldev Singh Kanwar Vs CIT (P&H) 145 CTR 131

Expenditure laid out for carrying on business in contravention of law, not deductible.Raj Woollen Industries Vs CIT (Punj) 43 ITR 36

Construction business – Penalty levied for exaggerated measurement – To be disallowedTam Tam Pedda Guruva Reddy Vs JCIT (Kar) 291 ITR 44

INTEREST ON BORROWED CAPITAL – WHETHER ALLOWABLE ?

Borrowing must be for purpose of business – amount borrowed had not been used for purpose of business but for advancing money to managing Director without interest – Disallowance of interest justified.Highways Construction Co. Pvt. Ltd. Vs CIT (Gau) 199 ITR 702CIT Vs M.S. Venkateswaran (Mad) 222 ITR 163Madhav Prasad Jatia Vs CIT (SC) 118 ITR 200 CIT Vs Gopikrishna Muralidhar (AP) 47 ITR 469CIT Vs India Silk House (Mad) 152 ITR 79K. Somasundaram & Brothers Vs CIT (Mad) 238 ITR 939Marolina & Sons Vs CIT (All) 129 ITR 475Tirupathi Trading Co Vs CIT (Cal) 242 ITR 13CIT Vs Indian Express Newspapers (Madurai) P. Ltd. (Mad) 238 ITR 70Debikay Information Technology Ltd Vs ACIT (ITAT, Del) 61 TTJ 709CIT Vs Sujanni Textiles (P) Ltd. (Mad) 225 ITR 560CIT Vs H.R. Sugar Factory (P) Ltd. (All) 187 ITR 363

Assessee firm having several transactions with proprietary concerns of partner – interest paid on outstanding balance – not deductible in view of section 40(b)Shakuntala Industries Vs CIT (Raj) 216 ITR 507

Company borrowing monies and paying interest thereon - Company making advances to directors – interest referable to this is disallowed under section 40A(5).CIT Vs V.M. Salgaocar and Borthers Pvt. Ltd. (Kar) 198 ITR 738

Interest on money borrowed – Assessee to establish that borrowal was for business purposes.Mir Mohd. Ali Vs CIT (Mad) 38 ITR 413CIT Vs P. Ganu Rao and Sons (Mad) 185 ITR 324

141

Interest paid by partners on amount overdrawn from firm –Not interest on borrowed Capital – Not deductible u/s 36 or 67(3) as the same was not used for earning profitsC. Bhaskaran Nair Vs CIT (Ker) 185 ITR 15

Amount borrowed by firm utilized by partners for construction of a house owned by them – interest paid to bank not deductible u/s 36(1)(iii) or 67(3) from share of profit of firm.ITO Vs Anna Masu Deokar (ITAT, Pune -TM) 60 ITD 19

Deduction not available in respect of interest paid on loan obtained subsequently for discharging liability of interest free loans obtained earlier for payment of taxesAbdulhussain G.Tambawala Vs CIT (Bom) 234 ITR 258

Borrowed money used for paying tax – Interest not deductibleKishinchand Chellaram Vs CIT (Bom) 114 ITR 654

Expenditure on maintenance of race horses can be set off only against “income from races”.CIT Vs M.A. Chidambaram (Mad) 243 ITR 260

Borrowed money capitalized in books – treated as part of actual cost of machinery –No deduction of interest u/s.36(1)(iii)J.C.T. Ltd Vs ACIT (ITAT, Cal) 65 ITD 169Assessee borrowed money and deposited the same with firm – subsequently firm dissolved and taken over by partner-company – In lieu of interest in firm, assessee was allotted shares in company - Amounts borrowed were utilized in discharge of partner’s liability and there was nothing to show that those amounts were available for acquisition of shares of company nor same was utilized in business of firm, hence interest paid is not deductible as expenses.K. Rama Mohan Rao Vs CIT (AP) 241 ITR 107

Purchase of shares with a view to acquire controlling interest in company – object was not to earn dividend – Interest on loan taken to purchase shares not deductible.CIT Vs Amritaben R. Shah (Bom) 238 ITR 777

142

PERSONAL EXPENSES

Expenditure met by company on foreign education expenses of son of directors – Not allowableMac Explotec P. Ltd. Vs CIT (Kar) 286 ITR 378Intersil India Ltd. Vs Addl. CIT (ITAT, Mum) 101 ITD 85Silicon (India) Ltd. Vs DCIT (Mad) 295 ITR 422

Expenses on education abroad of son (also a partner) of a partner – Not allowableK. Subramaniam Bros v. CIT (Mad) 250 ITR 769S.N. Naik Vs ACIT (ITAT, Pune ) 104 ITD 516

Amount spent for education of close relatives of Directors – Not deductible.Ekay Rubber Co. Pvt. Ltd. Vs CIT (Del) 263 ITR 521

Exp. on foreign tour of wife of director of assessee company – No evidence to show expenditure incurred for business – Not deductible Harsons Malayalam Ltd. Vs DCIT (ITAT, Coch) 60 ITD 306D.B. Madan Vs CIT (Mad) 261 ITR 193CIT Vs Shahibog Entrepreneurs P. Ltd. (Guj) 215 ITR 810Eskayef Ltd. Vs DCIT (ITAT, Bang) 71 ITD 419CIT Vs T.S. Hajee Moosa & Co.(Mad) 153 ITR 422Bombay Mineral Supply Vs CIT (Guj) 153 ITR 437CIT Vs Bhor Industries P. Ltd. (Bom) 284 ITR 319

Medical expenses of advisor to company met by company as decided by Board of Directors – Not deductible.CIT Vs TIAM House Service Ltd. (Mad) 243 ITR 695

Dispute relating to proprietorship of business and sharing of profits – Legal expenses incurred not incidental to business – not allowed.Buland Sugar Co.Ltd. Vs CIT (Del) 130 ITR 434

Telephone expenses attributed to personal use of telephone – Not allowed.P. Navinkumar & Co. Vs ITO (ITAT, Ahd) 62 TTJ 620

LIC premium paid on policy taken for Managing Director - Not wholly and exclusively for business purposes – Not deductible.Meattles Ltd. Vs CIT (Del) 68 ITR 79

When personal expenses on car disallowed u/s 38(2) an equal proportion of depreciation on car can also be disallowed.Gulati Saree Centre Vs ACIT (ITAT, Chd –SB) 71 ITD 73CIT Vs K.L. Bhasin & Co (Pat) 158 ITR 623

143

CIT Vs Chitram & Co. (P) Ltd. (Mad) 191 ITR 96

Exp. for erecting a gate and statute of founder Director in Municipal garden – not deductible exp.Saru Smelting & Refining Corpn. (P) Ltd. Vs CIT (All) 116 ITR 766

Expenditure on garden maintenance, depreciation on garden building – Not advertisement – Not deductibleCIT Vs Jaipur Udyog Ltd. ( Raj ) 272 ITR 349

Insurance against loss of personal luggage, accident, sickness etc. of Director – Insurance premium not business exp.Rajasthan Construction Co.(P) Ltd. Vs CIT (Bom) 148 ITR 61

144

TAX PAYMENTS AND INTEREST RELATING TO IT

Interest paid for late payment of IT – Not deductibleSaraspur Mills Ltd. Vs CIT (Guj) 226 ITR 533CIT Vs Chennai Properties & Investment Ltd. (Mad) 239 ITR 435, 239 ITR 480

Interest on overdraft taken for payment of IT – not deductibleEast India Pharmaceutical Works Ltd. Vs CIT (SC) 224 ITR 627H.H. Maharaja Martand Singh Judeo Vs CIT (MP) 239 ITR 404

Wealth Tax charged on company by virtue of Finance Act, 83 not deductible from income.Bachhraj Factories Ltd. Vs ACIT (ITAT, Bom) 56 ITD 225

Earned income in foreign country – Tax paid to foreign Government – Not allowable deduction.South India Shipping Corporation Vs CIT (Madras) 240 ITR 24K.E.C. Internatinal Vs ITO (ITAT, Mum) 63 ITD 278Kirloskar Electric Co. Ltd. Vs CIT (Kar) 228 ITR 676

Interest paid / payable to I.T. Department not allowable as deduction against interest received from it.Wolkam India Ltd. Vs DCIT (ITAT, Jp) 65 TTJ 68.

Interest levied for failure to deduct or pay tax ( advance / regular ) - not allowable deduction.Ferro Alloys Corporation Ltd. Vs CIT (Bom) 196 ITR 406

IT liability of old firm taken over by assessee – Not deduction.CIT Vs Hyderabad Race Club (AP) 249 ITR 391

VDIS - Tax paid in instalments with interest – Interest not deductible as business expenditure or as interest on borrowed capital.Bharat Commerce and Industries Ltd. Vs CIT (SC) 230 ITR 733CIT Vs International Instruments (P) Ltd.(Kar) 144 ITR 936 ( 220(2) interest)

Company – Surtax not deductibleCIT Vs Motor Industries Co.Ltd. (Kar) 229 ITR 137

Interest, Bank commission, guarantee fee etc. connected with IT payment not deductible.Modi Spinning & Weaving Mills Co. Ltd. Vs CIT (Del) 200 ITR 544

Assessee paying IT on behalf of its employees – Assessee bound to deduct tax at source from salary as it is not tax-free salary- IT paid claimed as deduction from business – Not allowable.Flour and Ford Ltd. Vs CIT (MP) 140 ITR 648

145

Assessee, a 100% subsidiary of a Japanese company took employees of parent company on deputation – Those employees received salary and perquisites from Japanese company – Assessee paid them incentives in the form taxes payable by them in respect of salary earned by them in India – No agreement for such payment – Not deductible as expenditure of assessee companyMarubeni India (P.) Ltd. Vs JCIT (ITAT, Del) 101 ITD 437

Land & building purchased by assessee – agreement between vendor & Revenue whereby vendor agreed to pay extra Capital Gains tax – Assessee voluntarily paying such tax – Not includible in the cost of asset for depreciation Purpose - Not deductible as business expenses.Kumudam Printers P. Ltd. Vs CIT (Mad) 226 ITR 680

201(1A) interest not deductible as business expenditureABN Amro Bank Vs JCIT ( ITAT , Kol-TM ) 97 ITD 1

146

METHOD OF ACCOUNTING

General

Accountancy – Practice of – cannot over ride Sec. 56 or any provisions of I.T. Act.M/s. Tuticorin Alkali Chemicals & Fertilizers Ltd. Vs CIT (SC) 227 ITR 172

The matter of taxability cannot be decided on the basis of the entries which the assessee may choose to make in his accounts, but has to be decided in accordance with the provisions of law.CIT Vs Mogul Line Limited (Bom) 46 ITR 590Sutlej Cotton Mills Ltd. Vs CIT (SC) 116 ITR 1

Principles of commercial accounting should be applied in ascertaining Profits & Gains.CIT Vs U.P. State Industrial Development Corporation (SC) 225 ITR 703

Assessee following one method in accounts and a different method for tax purpose only – claim for loss based on notional valuation of stock-in-trade only for tax purposes – can be rejected. Fact that defective method of valuation of stock had been accepted in earlier years – not a ground for not rejecting it in a later year.CIT Vs UCO Bank (Cal) 200 ITR 68CIT Vs British Paints India Ltd. (SC) 188 ITR 44United Bank of India Vs DCIT (ITAT, Cal) 68 ITD 332ACIT Vs B.N. Rathi Securities Ltd. (ITAT, Hyd) 71 ITD 31

It is the duty of ITO to consider whether income can be properly deduced from accounts – even if method of accounting is regularly followed, ITO can reject it on the above ground. CIT Vs Sarangpur Cotton Manufacturing Co. Ltd. (PC) 6 ITR 36Sundaram & Co. Ltd. Vs CIT (Mad) 36 ITR 162

Same system to be adopted for receipts and payments.G. Padmanabha Chettiar & Sons Vs CIT (Mad) 182 ITR 1ITO Vs Saurashtra Investments (P) Ltd (ITAT, AHD) 50 TTJ 319, DCIT Vs KSIDC Ltd. (ITAT, Coch) 53 TTJ 401

Mercantile System for purchases & other expenses – cash system for sales – unrealized sales amounts put in suspense a/c –Assessing Officer rejected the method.Amulya Oils & Chemicals Vs DCIT (ITAT, Hyd) 57 ITD 50

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Income tax is an annual tax – Accounts maintained should reflect profits of each year.Sri Subhdeodas Jalan Vs CIT (Pat) 26 ITR 617

Mere fact that assessment order for this year / earlier years showed the system of accounting as ‘cash’ or ‘mercantile’ is not the deciding factor – ITO has to determine the method of accounting based on entries in books of accounts.Walliawarum Plantations Vs Agrl. IT & STO (Ker) 237 ITR 325

Where an assessee is following Project Completion Method of accounting, interest identifiable with a project should be allowed only in the year when project is completed and income from that project is offered for taxationWall Street Construction Ltd. Vs JCIT (ITAT, Mum-SB) 101 ITD 156

The Income Tax Act is an independent code in itself. Total income or loss to be computed has to be in accordance with the provisions of the I.T. Act. The norms and various procedures prescribed by the Reserve bank of India to its subsidiary or scheduled banks is in order to regulate effectively conduct the business and to control the mandatory aspect of the companyBank of Rajasthan Vs IAC (ITAT, Jaipur) 68 ITD 69

The term “accrual” of income used in the companies Act, as explained in the various Accounting Standards and as understood for the purposes of taxation laws in certain circumstances may have different meanings depending on the purpose of legislation, the context in which such expression has been used and on the interpretation of the terms of relevant contracts. For tax purposes, the accrual or receipt of income in the relevant previous year will have to be determined in consonance with the ambit of taxable income as per sec. 5 of the I.T. actDCIT Vs Nagarjuna Investment Trust Ltd. (ITAT, Hyd-SB) 65 ITD 17

Guidelines issued by RBI are not binding for Income Tax assessment purposesNew India Industries Vs ACIT (ITAT, Del-SB) 18 SOT 51

Hybrid system of accounting not possible after 1.4.1997 – Non-Banking Finance Company – Interest accrues on assets classified as Non-Performing Assets and is assessable – RBI Guidelines not applicable for computation of income under I.T. Act.Hire purchase transaction – Sum of Digits method is applicable for computation of incomeJCIT Vs India Equipment Leasing Ltd. (ITAT,Chennai) 111 ITD 37

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Sale of time share units – Sale proceeds assessable as income of the year of receiptSterling Holiday Resorts (India) Ltd. Vs ACIT (ITAT, Chennai) 111 ITD 116

Guidelines issued by the institute of chartered Accountants of India cannot override the provisions of I.T. ActAlagendran finance Ltd. Vs ACIT 2007-TIOL-164-ITAT-MAD

149

REJECTION OF BOOKS AND ESTIMATION OF INCOME

Rejection of Books – Absence of vouchers /quantitative tally of stock – Profit can be estimated by ITO.S.N. Namasivayam Chettiar Vs CIT (SC) 38 ITR 579Avadesh Pratap Singh Abdul Rahman & Bros Vs CIT (All) 210 ITR 406Dhondiram Dalichand Vs CIT (Bom) 81 ITR 609Punjab Trading Co. Ltd. Vs CIT (Punj) 53 ITR 335Ram Chandra Singh Ramnik Lal Vs CIT (Pat) 42 ITR 780Bhai Sunder Das Sardar Singh (P) Ltd Vs CIT (Del) 84 ITR 106Raza Textiles Ltd. Vs CIT (All) 86 ITR 673Royal Medical Hall Vs CIT (AP) 46 ITR 748

Excessive Wastage claimed by assessee – Addition on estimate basis upheld.Vijayakumar Mills Ltd Vs CIT (Mad) 194 ITR 197.

No day to day stock account – No details of purchase or sales –Rejection of accounts justifiedShakthi Rice & General Mills Vs ITO (ITAT, Asr) 63 TTJ 428CIT Vs Pareck Brothers (Patna) 167 ITR 344Ratanlal Omprakash Vs CIT (Ori) 132 ITR 640Chhabildas Tribhuvandas Shah & Others Vs CIT (SC) 59 ITR 733

Transport business – income returned lower than preceding year –Receipts shown in account books not verifiable – Counterfoils of tickets not available – Accounts audited – Rejection of account and estimation of income on the basis of mileage justified.Sohanlal G. Sanghi Vs CIT (MP) 114 ITR 272

Retail sale of country liquor – sales not vouched, quantitative tally not made – Books rejected – Estimated sales at 2.5 times of license fee and net profit at 5% of sales – upheld.Badri Prasad Bhagwandas & Co. Vs CIT (MP) 82 Taxman 109

Income estimated – All deductions deemed to have been taken into account while making estimate.Indwell Constructions Vs CIT (AP) 232 ITR 776Saraya Engineering Works Vs CIT (All) 168 ITR 455Assessing Officer Vs Pooja Construction Co. (ITAT, Amritsar) 69 ITD 147

Finding that books of accounts were not reliable – Estimate based on a slip of paper – Assessment justified.Vazhakala Estate Vs CIT (Ker) 210 ITR 451.

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Profit estimated based on another person’s business of similar kind in same area in an earlier year-Lal Chand Walaiti Ram Vs CIT ( P&H) 111 ITR 224Bharat Milk Products Vs CIT (All) 128 ITR 682CIT Vs K.Y. Pilliah & Sons (SC) 63 ITR 411Tahilram Vs ITO (ITAT, Ahmedabad) 229 ITR (AT) 34

Detection of sales for 19 days not entered in accounts books – can form basis for estimating escaped turnover for whole year.Commissioner of Sales Tax Vs H.M. Esufali H.M. Abdulali (SC) 90 ITR 271

Net income on arrack @ 2.25 per litre estimated.Muvattupuzha Liquors Vs ITO (ITAT, Cochin) 54 TTJ 489Estimate on the basis of income disclosed by assessee to bank for succeeding year – valid.CIT Vs Bhadra Enterprises (Ker) 228 ITR 717.

Books of accounts were correct and complete in preceding years is not a conclusive proof for they are correct and complete in subsequent years also. Assessee’s claim that it was its prerogative to maintain books of accounts in a manner that it liked, cannot be accepted. Corroborative and contemporaneous evidences destroyed – AO rejected books – Sharp decline in GP from 11.7% to 5.99% - AO made flat addition of 5% to sales.DCIT Vs Samir Diamonds Exports (P) Ltd. (ITAT, Mum) 71 ITD 75

Investigation conducted in one year disclosed manipulation of accounts - sales in a restaurant – same ratio of suppression can be extended to earlier years also.Overseas Chinese Cuisine (India) Pvt. Ltd. Vs ACIT (ITAT, Bom – TM) 56 ITD 67

Assessee failed to prove genuineness of purchase by producing the suppliers – purchases and transportation charges disallowed – GP addition justified.Vijay Proteins Ltd Vs ACIT (ITAT, Ahd), 58 ITD 428

Construction work – Profit estimated at 25% - spread it in all assessment years under consideration – ‘On money’ assessed on the basis of admissions by employees and a Director.Param Anand Builders (P) Ltd. Vs ITO (ITAT, Mum) 59 ITD 29

Assessment on the basis of figure of circulation given by audit bureau of circulation – valid.Thanthi Trust Vs CIT (Mad) 242 ITR 250.

Amount discovered during search surrendered as un-accounted sales – Rejection of accounts and estimate of income.Action Electricals Vs DCIT (Del) 258 ITR 188

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Omission of a part of transaction in the books, is a serious defect – Books lose their sanctity – While rejecting books of accounts, no need to specifically invoke 145(2) in the order.Wall Stree Construction Ltd. Vs DCIT (ITAT, Mum-TM) 87 ITD 47

Contractors – Rejection of books of accounts upheldRam Chandra Singh Ramnik Lal Vs CIT (Pat) 42 ITR 780Bhai Sunder Dass Sardar Singh (P) Ltd. Vs CIT (Del) 84 ITR 106Dwarka Prasad Bajaj Vs CIT (Cal) 181 ITR 277Arihant Builders, Developers & Investors (P.) Ltd. Vs ACIT (ITAT, Indore-SB) 106 ITD 10

152

CLOSING STOCK VALUATION

Assessee changed method of valuation of closing stock – No adjustment in opening stock (which is closing stock of preceding year) is possible.Radharani Tea & Estates (P) Ltd. Vs DCIT (ITAT, Cal) 61 TTJ 177Melmould Corpn. Vs CIT (Bom) 202 ITR 789CIT Vs Corporation Bank Limited (Kar) 174 ITR 616CIT Vs Mopeds India Ltd (AP) 173 ITR 347

Valuation of closing stock – Direct cost method – Include expenses on salaries, employee welfare, rates and taxes, insurance, Building & machinery repairs etc.Sutlej Cotton Mills Ltd Vs ACIT (ITAT, Del) 62 TTJ 786

Discrepancy in stock statement given to bank and that declared in accounts – Addition on the basis of stock statement given to bank upheldRecon Machine Tools P. Ltd. Vs CIT (Kar) 286 ITR 637

No item-wise tally of sales to purchase – closing stock to value at average of value of opening stock and purchases during the year.ACIT Vs Gopaldas Vallabhdas (ITAT, Ind) 59 TTJ 768

Liability incurred for payment of excise duty can be added to value of closing stock if such liability was deducted for computing profit.CIT Vs English Electric Co. of India Ltd. (Mad) 243 ITR 512.

Stock at beginning of year, valued at cost price – same method to be followed subsequently.Chouthmal Golapchand, IN RE (Cal) 6 ITR 733

Assessee cannot change its method of valuing closing stock, which was followed for many years.Harinagar Sugar Mills Ltd. Vs CIT (Bom) 207 ITR 901.

Only when closing stock is brought into trading account, profits can be correctly ascertained.Chainrup Sampatram Vs CIT (SC) 24 ITR 481

Death of a partner – Firm stood dissolved – closing stock to be valued at market price.CIT Vs Paranjothi Nadar (Mad) 155 CTR 73

Dissolution of firm – value of stock at market value.A.L.A. Firm Vs CIT (SC) 189 ITR 285Popular workshops Vs CIT (Ker) 166 ITR 348Lenses Centre Vs ITO (ITAT, Hyd-SB) 60 ITD 11

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Popular Automobiles Vs CIT (Ker) 179 ITR 632CIT Vs Nathulal Jawarchand (MP) 227 ITR 251

Assessee valuing stock only at actual cost of raw materials and not taking into account overhead charges – Not correct mode of valuation – Assessing Officer entitled to add overhead charges – If method of accounting, eventhough consistently followed, does not disclose true and proper income, Assessing Officer is entitled to adopt appropriate computation to determine true income.CIT Vs British Paints India Limited (SC) 188 ITR 44

Closing stock valuation on the basis of Accounting Standards issued by the institute of Chartered Accountants, upheldCollector of Central Excise Vs Dai Ichi Karkaria Ltd. (SC) 156 CTR 172

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CAPITAL GAINS

WHETHER CAPITAL GAIN ARISES?

Transfer – lease of land - surrender of lease amounts to transfer – capital gains arise.CIT Vs Pramia Engg. Pvt. Ltd,. (Cal) 202 ITR 298Anand Bala Bhushan Vs CIT (All) 217 ITR 144

Land developed into building plots –Lease of plot for 99 years – Premium received for lease – Capital Gains tax leviable.R.K. Palshikar (HUF) Vs CIT (SC) 172 ITR 311

Granting of sub-lease of immovable property amounts to transfer – Gains assessableCIT Vs Sujatha Jewellers (Mad) 290 ITR 631

Conveyance of property for less than market value – Difference between price paid and market value taxed under GT Act – Does not debar assessment of capital gains under I.T. Act.CIT Vs Shyam Narain Mehrotra (Cal) 122 ITR 313

Compensation received on transfer and relinquishment of tenancy right is liable to Capital Gains Amora Chemicals (P) Ltd. Vs ACIT (ITAT, Ahd) 60 ITD 18CIT Vs D.P. Sandu Bros. Chembur (P) Ltd. (SC) 273 ITR 1

Compensation received on surrender of monthly tenancy of property – Capital Gains arises after AY 95-96 CIT Vs B.K. Roy P. Ltd (Cal) 248 ITR 245

Compulsory acquisition of land – solatium awarded in addition to compensation – solatium to be taken into account in calculating capital gains.CIT Vs K.C. Mahajan (P&H) 234 ITR 235

Payments made to builders for booking 2 flats – cancelled – surrender of rights in those flats – received excess money – Capital Gain arisesJagdish Chander Malhotra Vs ITO (ITAT Del) 64 ITD 251

Right to obtain conveyance of immovable property is a “capital asset” – Assignment of such right is “transfer” – Gains arising is capital gains.CIT Vs Tata Services Ltd. (Bom) 122 ITR 594K.R. Sivnath Vs ACIT (Mad) 268 ITR 436CIT Vs Laxmidevi Ratani (MP) 296 ITR 363

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Assessee, tenant, vacated premises he was holding on rent and got right to possess a floor space of 15000 sq.ft. in new building - As per this agreement, he paid Rs. 1200 pm for 20 months – conversion of tenancy right to floor space in new building – No Capital Gain arise – Transfer of floor space in new building – Capital Gains arises; cost of this asset is 20 x 1200ACIT Vs G.D. Thirani (ITAT, Cal) 70 ITD 148

On partition of HUF, assessee got business of Kerosene dealership – sold – AY 91-92 – transfer of goodwill – Capital gains ariseITO Vs Prabhatkumar Agarwal (ITAT, Ind) 69 ITD 224Assessee’s brothers had allowed assessee to use and occupy a property in an unrestricted manner during her lifetime – However, subsequently her brothers wanted to sell this property and assessee received certain amount as compensation – Capital gains arises on this receiptNargis A. Irani Vs ITO (ITAT, Pune) 102 ITD 297

Jewellery disclosed in Balance Sheet was not found in full at the time of search – AO can presume that the balance jewellery was sold – Capital Gains arise Pooja Bhat Vs ACIT (ITAT, Mum) 73 ITD 205

Transfer of membership of stock exchange – Net consideration received is Capital GainsSatya Narain Modani Vs ITO & Anr.(Raj) 272 ITR138R.M. Valliappan Vs ACIT (ITAT, Chennai-SB) 103 ITD 63

Membership of stock exchange put on sale through nomination – Capital Gain arises.Upend M. Dalai Vs DCIT (ITAT, Mum) 89 ITD 629

Amount shown as received towards transfer of technical know-how and non-competition fee –Assessing Officer held it as sham and treated it as consideration for transfer of goodwill – Capital Gains arises.Indo tech Electric Co. Vs DCIT ( ITAT, Chennai ) 99 ITD 325

Assessee obtaining dealership of petrol – Transferred it to a company – capital gains arises – consideration is market value of shares received.A.S. Bhargava Vs CIT (Del) 88 ITR 14

Registered patent of technical know-how is capital asset – Transfer of this will lead to capital gains.Albright & Wilson Ltd. Vs (ITAT, Bombay) 8 ITD 57

Gains attributable to transfer of bus route permits are taxable.A.N. Transports Vs CIT (Ker) 185 ITR 134

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Grant of mining lease at a premium – Amounts to transfer of capital asset – Capital Gains arise - B.C. Sreenivasa Shettty decision distinguished A.R. Krishnamurthy & Anr. Vs CIT (SC) 176 ITR 417

Business sold as a going concern by a firm – Principle of mutuality does not apply – Surplus is liable to tax – Actual cost less WDV→41(2) & any surplus over actual cost is Capital Gains.Pandit Lakshmikanta Jha Vs CIT (SC) 75 ITR 790CIT Vs B.M. Kharwar (SC) 72 ITR 603CIT Vs Artex Manufacturing Co. (SC)227 ITR 260CIT Vs Saraswathi Talkies (AP) 234 ITR 756Chandra Kantha Ind Vs CIT (All) 138 ITR 168

Assessee firm transferring its business to a company as going concern – Partners of transferor-firm are the promoter-directors of transferee-company – In addition to the value of net assets, assessee receiving amount towards transfer of technical know-how and non-compete fee – Treated as transfer of Goodwill and Long-term Capital gains assessed.Indo Tech Electric Co. Vs DCIT (ITAT, Chennai) 99 ITD 325

If assessee has attributed specific price / cost to each asset, it is not a case of slump sale – Capital gains arises – Applicability of sec. 50Essar Steel Ltd. Vs DCIT (ITAT, Ahd-TM) 97 ITD 125CIT Vs Artex Manufacturing Co. (SC)227 ITR 260Anand Electric Co. Ltd. Vs CIT (Bom) 237 ITR 587Premier Automobiles Ltd. Vs ITO & Anr. (Bom) 264 ITR 193Kuttukaran Machine Tools Vs CIT (Ker) 264 ITR 305L.H. Sugar Factories Ltd. Vs ACIT (ITAT, Luck) 86 TTJ 1012Mahindra Sintered Products Ltd. Vs DCIT (ITAT, Mum) 95 ITD 380Kishorchand K. Bansal Vs DCIT (ITAT, Ahd) 80 ITD 585

Assets of HUF were taken over by partnership formed by members of HUF – amounts to transfer of assets CIT Vs P.K. Ramaswamy Raja (Mad) 223 ITR 324

Firm stood dissolved on account of death of a partner – Business continued by a newly constituted firm – Amounts to transfer.South India Steel Rolling Mills Vs CIT (SC) 224 ITR 654

Assessee converted certain shares into stock-in-trade at market value – Then contributed this to a firm as initial capital – Subsequently, within 3-4 years withdrew a substantial amount from that firm – Colourable device to convert asset into money – Capital Gains arisesRahul Kumar Bajaj Vs ITO (ITAT, Nag – SB) 64 ITD 73

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Assessee entering into partnership with a company in which her husband was a Director –Bringing in land as her capital – Retiring from firm and get shares of company – No genuine firm – Sham transaction – Device to avoid capital gains – Sec. 45 attracted.Nayantara G. Agarwal Vs CIT (Bom) 207 ITR 639Jamnalal Sons Vs IAC (ITAT, Bom) 29 ITD 164

Assessee transferred her shares in firm and received cash and share in a property from other partners – Liable to Capital Gains in respect of consideration received including share in value of property after deducting original cost of sharesKusumben Kantital Shah Vs ITO (ITAT Ahd) 56 ITD 476

Partner contributed his building and land to the firm – Exclusive interest of partner in personal asset get reduced to shared interest – There is transfer of assetsCIT Vs A.C. Mahesh (Mad) 239 ITR 616

Sale of immovable property by partner to firm – sale consideration credited to capital account of partner – Capital Gains arisesCIT Vs R. Rangaswamy Naidu (Mad) 224 ITR 113

On dissolution of assessee-firm, AO applying sec. 45(4) adopted market value of house property and after allowing deduction for cost of building and deduction u/s. 48 determined the Long Term Capital Gains – assessee’s case was that since partners continued to hold the building as joint owners, there was no transfer and 45(4) not applicable – Capital Gains arises to firm u/s 45(4)Swamy Studio Vs ITO (ITAT, Mad) 66 ITD 276Gandamal & Sons Vs ACIT ( ITAT, Pune ) 101 ITD 368Suvardhan Vs CIT (Kar) 287 ITR 404

Auction of property of firm on dissolution pursuant to court compromise decree – Distribution of sale proceeds – Capital Gain arisesCIT Vs Saraswathi Talkies (AP) 234 ITR 756

Firm – transfer of immovable property to partners – No written documents and no registration – transfer not validCIT Vs S. Rajamani & Thangarajan Industries (Mad) 141 ITR 668

Transfer of assets by firm to partners as well as partner to firm – Capital Gains arisesCIT Vs A.N. Naik Associates (Bom) 265 ITR 346

Conversion of proprietary business to business of firm – Revaluation of assets of erstwhile sole proprietor – Provision for withdrawal of such funds and actual

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withdrawal in a short period – transaction aimed at evading Capital Gains – taxable S.V. Kumaragurupasamy Vs CIT (Mad) 260 ITR 127

Amalgamation of companies – consideration received must be shares only – Composite consideration received on amalgamation of companies – 47(vii) exemption not available.CIT Vs Gautam Sarathai Trust (Guj) 173 ITR 216

Amount received from amalgamated Company in lieu of shares held in amalgamating compant→Extinguishment of rights→Capital Gain arisesShishir Kumar R. Mehta Vs CIT (Mad) 154 CTR 70

Reduction of share capital of company – Distribution of assets which can be correlated with accumulated profits, is dividend in the hands of shareholders – distribution over and above accumulated profits, is capital receipts in the hands of shareholders and if it is in excess of cost of acquisition of such shares, capital gains arises in the hands of shareholdersCIT Vs G. Narasimhan (SC) 236 ITR 327

Agricultural lands received on liquidation of company by shareholders – assessable u/s 46(2)CIT Vs N. Bhagavathy Ammal (Mad) 240 ITR 451

Assessee obtained an immovable property from a company on reduction of latter’s share capital – He sold that property – cost of property for Capital Gain computation is equivalent capital reduced by company in lieu of said property given to assessee.S. Rangarajan vs CIT(Mad) 241 ITR 593

Reduction of share capital resulting in release of assets attract capital gains in the hands of share holders – surplus resulting from surrender of shares in a company – Capital Gains arisesCIT Vs P.P. Thomas (Ker) 235 ITR 191CIT Vs G. Narasimhan (SC) 236 ITR 327Kartikeya V. Sarabhai Vs CIT (SC) 142 CTR 150

Reduction in face value of shares amounts to extinguishment of rights in shares – amount received on such reduction are taxable as Capital Gains.Kartikeya V. Sarabhai vs CIT (SC) 228 ITR 163

Acquisition by assessee of irredeemable preference shares of a company in exchange of equity shares consequent to capital restructuring of the company – transfer – Capital Gain ariseCIT Vs Santosh L. Chowgule (Bom) 234 ITR 787

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Redemption of preference shares – Transfer – Difference between purchase price paid by assessee and price at which redeemed by company is Capital Gains.Anarkali Sarathai Vs CIT (SC) 224 ITR 422

Assessee, father and son converting their shares into stock-in-trade – Forming new company completely owned and controlled by them and transferring these shares to that company – capital gains arisesR. Krishnaswamy Vs CIT (Mad) 261 ITR 623

Assessee transferred shares which were already pledged in part performance of its liabilities – What assessee transferred was the residuary rights in such shares, cost of which was not ascertainable – No capital loss arises.DCIT Vs Bijal Investment Co. (P) Ltd. (ITAT, Ahd ) 108 ITD 432

Company on liquidation – agricultural lands of company received by shareholders on distribution of assets – Capital gains arises for shareholdersN. Bhagavathy Ammal vs CIT & Anr.(SC) 259 ITR 678

Redemption of capital investment bonds after maturity is a transfer – Capital Gains arisesPerviz Wang Chuk Basi Vs JCIT (ITAT, Mum) 102 ITD 123

Assessee converted investments into stock-in-trade by a journal entry – Sec. 45(2) applies and difference is Capital gains / Loss and not Business profit / lossACIT Vs Claridges Investments & Finances (P.) Ltd. (ITAT, Mum) 18 SOT 390

160

CLAIM OF TRANSFER OF AGRICULTURAL LAND

Agricultural lands within municipal limits – Population of entire municipality to be considered and not that of any area / villageCIT Vs Pyare Lal (Del) 231 ITR 785

Land not agricultural though entered in the revenue record as agricultural.Sarifabibi Mohammed Ibrahim and others Vs CIT (SC) 204 ITR 631

Sale proceeds of agricultural land - Liable to capital gains tax if in Municipality.CIT Vs K. Unnikrishnan (Ker) 229 ITR 574Singhai Rakesh Kumar Vs Union of India & Ors. (MP) 227 ITR 81G.M. Omer Khan Vs Addl. CIT (SC) 196 ITR 269CIT Vs J. Narayana Murthy (AP) 228 ITR 99Union of India & Ors. Vs S. Muthyam Reddy (SC) 240 ITR 341CIT Vs Gemini Pictures Circuit P. Ltd. (SC) 220 ITR43CIT Vs Shiv Chand Satnam Paul (P&H) 231 ITR 663CIT Vs Daulet Ram Chhog Mal (P&H) 233 ITR 137CIT Vs B.S. Rajendrappa & Others (Kar) 162 ITR 666

Agricultural land –Burden of proof is on assessee to show that it was agricultural land – Forest lands acquired with the intention of extending plantation – No agricultural operation carried out – Transfer of land lead to capital gains.Kalpetta Estates Limited Vs CIT (Ker) 185 ITR 318

Evidence showing that no agricultural operations were carried out on land – Land not agricultural – liable to capital gains.Fazalboy Investment Co.Ltd. Vs CIT (Bom) 176 ITR 523

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WHEN CAPITAL GAIN ARISES ?

Sale during the year – Capital Gains taxable during that year eventhough dispute on sale price is still pending.CIT Vs Rohtak Textile Mills Ltd, (Del) 138 ITR 195

Compulsory acquisition of land – Gains chargeable in the year of acquisition – Enhanced compensation chargeable in the year of receipt irrespective of appeal pending ion Court – Interest on enhanced compensation accrues in the year in which matters reach finalityDCIT Vs Padam Prakash (HUF) (ITAT, Del-SB) 104 ITD 1DCIT Vs Bhim Singh Lather (ITAT, Del-TM) 99 ITD 46Catherine Thomas Vs DCIT (ITAT, Coch) 111 ITD 132

Agreement of sale executed on 1.5.62 and possession delivered to vendor on same date – Document registered on 8.6.79 – Registration of document relates back to date on which agreement of sale executed.M. Syamala Rao Vs CIT (AP) 234 ITR 140

Possession of property given and consideration received – transfer complete – Registration of sale deed not necessaryCIT Vs Rajasthan Mirror Mfg. Co.(Raj) 260 ITR 503D. Kasturi Vs CIT (Mad) 251 ITR 532

Agreement with builder – Part performance – Capital Gains arises though Registration was done only subsequently.Rubab M. Kazerani Vs JCIT (ITAT, Mum-TM) 91 ITD 429Lalitha Ramaswamy Vs ITO (ITAT, Mum) 75 ITD 293

Joint Development agreement – Deemed transfer under section 53A of the Transfer of property Act – Section 2(24) applies – There is a written agreement – When limited / irrevocable Power of Attorney is given to developer, transfer takes placeChaturbhuj Dwarakadas Kapadia Vs CIT (Bom) 260 ITR 491Dyaneshwar N. Mulik Vs DCIT (ITAT, Pune) 98 TTJ 179Jasbir Singh Sarkaria IN RE (AAR) 294 ITR 196

Owner of land enters into an agreement to sell all development rights to a developer – Neither entire plot was transferred nor consideration estimated in agreement was obtained – Transfer had taken place in stages – Capital Gains to be worked out on basis of sale consideration actually received during the year in respect of portion of land transferred in that year only.Shiva Co-operative Housing Society Ltd. Vs DCIT (ITAT, Mum) 70 ITD 8CIT Vs K. jeelani Basha (Mad) 256 ITR 282 Transfer of immovable proper by partner to firm – Registration necessary.

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CIT Vs TMB Mohd. Abdul Khaer (Mad) 166 ITR 207

Transfer of immovable proper by firm to partners – Registration necessary.CIT Vs Dadha & Co. ( Mad ) 142 ITR 792CIT Vs N. Gnanamani (Mad) 163 ITR 313CIT Vs Palaniappa Enterprises (Mad ) 150 ITR 237

Firm is not an independent entity – Partners are real owners of assets of firm. Transfer of assets by firm to partners on dissolution of firm - No registration required.N. Khadervali Saheb & Anr. v. N.Gudu Sahib (Decd) & Ors. (SC) 261 ITR 1Assessee firm dissolved on 06.04.89 – In AY 91-92 there was distribution of capital assets among partners – Capital Gains assessed u/s.45(4) in AY 91-92 in the status of AOPKothari Vora Associates Vs ACIT (ITAT, Pune) 57 ITD 171

Date of transfer is date of notification in acquisition caseG.M. Omer Khan Vs Addl. CIT (SC) 196 ITR 269

Compulsory acquisition of land invoking urgency provisions u/s.17 of Land Acquisition Act, 1894 – Land vested with Govt. on expiry of 15 days after issue of notice – 80% compensation given in Y.E.31.03.86 – Capital Gains arises in AY 86-87Alexander George Vs ITO (ITAT, Coch) 67 ITD 334

Compulsory acquisition of land – Transfer takes place when Govt. taken possession of landBuddaiah Vs CIT (Kar) 155 ITR 277CIT Vs Sheggy Abdulla (Ker) 243 ITR 792CIT Vs Shiv Chand Satnam Paul (P&H) 229 ITR 745CIT Vs Sutodh Kumar Jain (MP) 221 ITR 802B.C. Gupta and Sons Ltd. Vs CIT (Gau) 221 ITR 53Dollar Company Vs CIT (Mad) 107 ITR 280

Compulsory acquisition – Transfer takes place on “date of publication or notification”.Jeejeebhai Shinde Vs CIT (MP) 144 ITR 693

Goodwill arising on transfer of business is assessable under the head “Capital gains” and method of accounting followed by assessee is irrelevant to decide the year of taxability of this item.DCIT Vs Samta Marine Kakinada (ITAT, Mum) 18 SOT 335

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WHETHER SHORT-TERM / LONG TERM CAPITAL GAINS?

Transfer of capital asset – whether Long Term or Short Term ? – Depends on law as on the date of transfer.CIT Vs Nirmal Textiles (Guj) 224 ITR 378

Allotment of land to assessee under lease-cum-sale agreement in 1972 – sale deed executed in favour of assessee in 1982 – Transfer of property in 1983 – Short Term Capital GainsCIT Vs V.V. Mody (Kar) 218 ITR 1CIT Vs D.A. Irani (Bom) 234 ITR 850

Sale of land and building – Land held for more than 3 years and building less than 3 years – bifurcate gains into Short Term & Long TermCIT Vs Lakshmi B. Menon (Ker) 264 ITR 76CIT Vs Citi Bank (Bom) 261 ITR 570

Building obtained on lease for 99 years – Sub-lease of building within 3 years – Excess received over cost of acquisition assessable as short term capital gainsG. Seetha Kamrajj Vs CIT (AP) 284 ITR 54 Assessee enters into purchase agreement, pays entire sum and take possession of property and get Power of Attorney from vendor – transfer the property within one year – Short Term Capital GainsAssam Vegetable & Oil Products Ltd. Vs CIT & Anr (Gau) 264 ITR 47

Held shares in a company by virtue of which right of occupancy in a flat was obtained – sold these shares after 25 months – Short Term Capital GainsITO Vs Nayana K. Shah (ITAT, Mum) 74 ITD 419.

Conversion of debentures into shares – sale within 12 months of conversion – Short Term Capital GainsA. Ghosh Vs CIT (Cal) 141 ITR 45CIT Vs Santosh L. Chowgule (Bom) 234 ITR 787

Assessee becomes owner of shares only when share certificates are issued by the company specifying the distinctive numbers and not when the share application money was paid by assesseeZubin George Vs CIT (Ker) 265 ITR 683

Date from which bonus shares are held –From date of issue only and not earlier to it – Bonus shares sold within 1 year of allotment – Short Term Capital GainsCIT Vs Chumtal Khushaldas (Guj) 93 ITR 369

Debentures converted to shares & sold within 1 year – Short Term Capital Gains

164

A. Ghosh Vs CIT (Cal) 141 ITR 45

Assessee entered into an agreement for purchase of 3 shops on 1-11-1990 - On 15-12-1995, assessee agreed to sell these shops under construction to IDBI – Finally sale deed was executed on 12-05-1998 whereby possession was directly given by owner to IDBI – It is deemed that assessee obtained possession of this property on 12-05-1998 and transferred the same to IDBI on the same day – Short term capital gains arises in A.Y. 1999-00Mangala Dilip Sable Vs JCIT (ITAT, Pune) 104 ITD 204100% dep. Block – Though balance WDV is NIL, still the Block exists and sale of such assets will result in Short Term Capital GainUlka Advertising (P) Ltd. Vs DCIT (ITAT, Mum) 94 ITD 282

Asset used in business and claimed depreciation – discontinuance of business – assets let out – subsequently sold assets – Sec. 50 applies – Short Term Capital GainsChhabria Trust Vs ACIT (ITAT, SB, Mum) 87 ITD 181

165

COMPUTATION

Immovable Property of assessee mortgaged to State for kist payment – Government selling property – dues realized and balance paid to assessee – Capital Gains on total sale price.CIT Vs Attili N. Rao (SC) 252 ITR 880

Money received from prospective buyer for settling a claim of another party – Part of sale considerationCIT Vs Bradford Trading co. P. Ltd,(Mad) 261 ITR 222

Exchange of shares – Market value of shares received to be considered to arrive at the Sale considerationOrient Trading Co. Ltd. Vs CIT (SC) 224 ITR 371

Capital Gains on the basis of sale agreements seized during search and confirmed by others in the transaction P. Govindaswamy Vs CIT (ITAT, Mad-TM) 72 ITD 57

Sale of shares at a price higher than market value for getting controlling interest – Not relevant – Capital Gains to compute at sale priceVenkatesh & ors. Vs CIT (Mad) 243 ITR 367

Transfer of property by firm to partners – cost shown in books is the transfer consideration, not market value.CIT Vs Haridoss Purushothamdoss (Mad) 234 ITR 711

Firm received capital gains – only firm can claim deduction u/s 48(2) and not the partners to whom share of such profit was allotted toS.M. Sundaram Vs ACIT (ITAT, Mad) 84 ITD 199

Purchase of shares at par – Gift of shares to AOP with option to revoke gift after 74 months and value excluded from net wealth – Revocation of gift and sale thereafter – Assessee’s right of revocation during subsistence of gift having NIL value, cost of asset is NIL – No cost deductible in computing capital gainsJayakumar B. Patil Vs DCIT (ITAT, Pune) 290 ITR(AT) 163

Debentures converted to shares & sold within 1 year – Cost of acquisition of such shares – price which debenture would have fetched in open market on the date of conversionA. Ghosh Vs CIT (Cal) 141 ITR 45

Subsequent issue of bonus shares to be taken into account to reduce cost of acquisition of original sharesSumanth Ramanujam & Anr. Vs CIT (SC) 248 ITR 818

166

Assessee obtained warrants by virtue of his holdings of Bonds in the company – Sec. 55(2)(aa) – Original cost of shares could not be spread over for working out the cost of acquisition of warrantsBharat S. Shah Vs JCIT (ITAT, Mum) 101 ITD 200

Shares in amalgamated company received by share holders of amalgamating company – transfer – cost to be taken as cost of shares in amalgamating companyCIT Vs Grace Collis (SC) 248 ITR 323Capital Gains computation – value as on 1.4.81 – value declared for WT purpose can be takenD.N. Prasanna Kumar Vs ACIT (ITAT, Bang) 60 ITD 109

Assessee purchasing agricultural Land and selling it for non-agricultural purpose - Actual cost of acquisition to be considered and not notional cost on conversion to non-agricultural purposeMeccane Industries Ltd. Vs CIT (Mad) 254 ITR 175

Individual throwing property into hotch pot of HUF – sale of property by family – cost of property to family is cost to individual.CIT Vs S. Krishnamurthy (Mad) 152 ITR 669

Capital assets in respect of which depreciation has been obtained – option of substituting fair market value as on prescribed date is not available to such a person – Sec.50(1) applicable.Commonwealth Trust Limited Vs CIT (SC) 228 ITR 1

Advance money received on earlier occasion not refunded – Property not sold also – Reduce it from cost of assets Smitha N. Shah Vs JCIT (ITAT, Mum) 94 ITD 492

On money received in respect of property assessed as income from Other Sources in earlier years – sale of property – no evidence for refund of on-money – not deductible while computing capital gainsVijendra Manjunath Shenai Vs CIT (Bom) 260 ITR 176

Interest for defaulted payment of Royalty not deductible while computing Capital Gains – Interest on delayed payment of unearned increase to Government - not deductible in Capital Gains computation.Industrial Credits and Development Syndicate Vs CIT (Kar) 251 ITR 720Sita Nanda Vs CIT (Del) 251 ITR 575

Gift of property to assessee by her father – suit by third party claiming title to property compromised by assessee paying Rs.7000 – Amount paid is not cost of acquisition or cost of improvement –Improvement of title to asset is different

167

from improvement to asset itself –Amount paid is not deductible while computing capital gains on sale of property.CIT Vs V. Indira (Mad) 119 ITR 837

Urban land tax and Corporation tax paid by vendor – Not deductible in the Capital Gains computationCIT Vs Sas Hotel (P) Ltd. (Mad) 246 ITR 729

Sale of Property – Amount embezzled by person who assisted in sale – Not deductible Naozar Chenoy Vs CIT (AP) 234 ITR 95

Estate Duty paid is not part of cost of acquisition of property / cost of improvement Discharge of mortgage created after acquisition of property – not deductible from Capital Gains .CIT Vs S.R.V. Press & Publications (P) Ltd. (Ker) 241 ITR 626RM. Arunachalam etc. Vs CIT (SC) 227 ITR 222CIT Vs N. Vajrapani Naidu (Mad) 241 ITR 560V.S. M.R. Jagadishchandran (Decd) by LRs Vs CIT (SC) 227 ITR 420G.D. Apte Vs ITO (ITAT, Pune) 57 ITD 378Assessee firm purchasing land by utilizing capital contributed by partners – Interest on capital paid to partners does not increase cost of acquisition of asset – not deductible – Capital GainsM.L.G. Enterprises Vs CIT (Kar) 167 ITR 11V. Mahesh, ITO Vs Vikram Sadananda Hoskote (ITAT, Mum) 18 SOT 130

Payment made by assessee to tenant in regard to surrender of Tenancy right – Is not expenditure incurred in connection with compulsory acquisition.CIT Vs R. Ranga Setty (Kar) 159 ITR 797L.M. Patel & B.M. Patel Vs ACIT (ITAT, Ahd) 76 ITD 247

Retrenchment compensation paid to ex-employees on sale of business assets – Not deductible u/s 48(1)CIT Vs Radio Talkies (Bom) 238 ITR 872

Assessee allowed his brother to stay with him – sold Flat – amount paid to brother to vacate Flat – not deductible – Not a family arrangement .ITO Vs Narendra S. Kapadi (ITAT, Mumbai) 58 ITD 329

Assessee got property by will – As per will Rs. 30,000 paid to sisters – This is not deductible from Capital Gains computed.Rugmani Varma Vs CIT (Mad) 222 ITR 357 Amount misappropriated by Power of Attorney holder – not an expenditure incurred in connection with the transfer—No deduction from Capital Gains

168

G.Y. Chenoy Vs CIT (AP) 148 CTR 106

Partition of HUF consisting of assessee, wife and 2 sons – assessee and wife got one property – sale of such property – amount paid to son for acquiring his share of interest – not deductible from sale proceeds ITO Vs Lalitaben Hariprasad Shah (ITAT, Ahd) 64 ITD 25

Retirement of partner from firm – partner received amount considering the assets and liabilities of firm – partner claiming capital losses on the ground that he suffered losses in firm for several years prior to retirement – Not allowableSiddharth Mehta Holding P. Ltd. Vs CIT (Mad) 260 ITR 286

Ancestors of assessee were allotted lands by Portuguese administration – Occupancy rights allotted to assessee under 1971 regulation is equivalent to ownership rights – Sale of such occupancy rights – Capital gains arisesVijaysinh R. Rathod Vs ITO (ITAT, Ahd-SB) 106 ITD 153

Agreement for purchase of a flat entered into on 16-03-1981 – But construction of flat was completed only in 1988 and possession was handed over then only – Flat became property of assessee only in 1988 and hence assessee cannot take market value as on 01-04-1981 as cost of the assetDCIT Vs Kishgore Kanungo (ITAT, Mum) 102 ITD 437

Assessee, coparcenor of HUF got a property on partition of HUF in F.Y. 1991-92 – HUF in turn got possession of this asset only in 1988 – hence no need to take market value as on 01-04-1981 as cost and instead give indexation from Financial year 1991-92 onwards in view of Expl. (iii) to sec. 48DCIT Vs Kishgore Kanungo (ITAT, Mum) 102 ITD 437

To arrive at the value as on 1-4-1981, taking the market value on any date after 1-4-1981 and applying cost inflation index in a reverse manner, is not correct methodHiralal Lokchandani Vs ITO (ITAT, Kol-SB) 106 ITD 45

169

EXEMPTIONS

54 Exemption – New asset sold within 3 years of purchase – exemption withdrawn.CIT Vs P.K. Raghavan Nair (Ker) 224 ITR 404

Property received on partial partition of HUF – sold within 2 years- No 54 exemptionsCIT Vs M.K. Pushpraj Singh & Anr. (MP) 148 CTR 375

Transfer of residential property and purchase of another residential property – Exemption from tax on capital gains. - Land transferred to his wife by assessee- construction of house in such land by assessee –compulsory acquisition of such land & house – compensation awarded separately for land & house – capital gains of wife assessable in the hands of husband u/s 64 – Capital gains to wife did not arise from transfer of house property – Not entitled to exemption u/s 54 in respect of capital gains arising from acquisition of land of wife.T.N. Vasavan Vs CIT (Ker) 197 ITR 163

Sec. 54 deduction – Occupation of the property must be as owner – Property occupied for part of two year period as a leave and license basis and for other part as owner – No exemption u/s 54.Hameed Jaffery Vs CIT (Bom) 227 ITR 724CIT Vs Gopaldas Hansrajani (Bom) 239 ITR 523

Building was not worth occupying – No 54 exemptionD.P. Mehta Vs CIT (Del) 251 ITR 529

Land with building existed – Transfer to developer for construction of a new building - Demolition of old building – Consideration meant only for land – gains assessable as Long Term Capital gains on land alone – [ This principle can be applied to deny deduction under section 54 as the property transferred is only land as evident from the intention of parties ]CIT Vs Union Co. (Motors) Ltd. (Mad) 283 ITR 445

Property in legatee vests as soon as assent of executor is granted, which may be express or implied – Mutation not done by Land Revenue authorities is not relevant – Assessee is owner of property – 54F claim not allowable since already owns a propertyV.K.S. Bawa Vs ACIT ( ITAT, Del ) 53 ITD 232.

Investment in specified assets u/s 54E within 6 months of date of transfer of assetJyotindra H.Shodhan vs ITO (ITAT, Ahd-SB) 87 ITD 312

170

Sums paid to tenants to vacate property – Not purchase consideration –Not eligible for 54FDCIT Vs Uday S. Kotak (ITAT, Mum) 96 ITD 177

54F claim – investment in new asset should be in the name of assessee.ITO Vs Prakash Timaji Dhanjode (ITAT, Nagpur) 81 TTJ 694Ram Kishan Vs ITO 2007-TIOL-178-ITAT-DEL

Mere addition to old building does not amount to construction of new house – No 54F deductionCIT Vs V. Pradeep Kumar (Mad) 290 ITR 90Apply 54E after 48(2) deduction.CIT Vs V.V. George (Ker) 227 ITR 893

Apply 54E before setoff of losses under section 70Investment Corpn. Of India Limited vs DCIT (ITAT, Mum) 70 ITD 55

Exemption u/s 54 / 54F is allowable in respect of one residential house onlyITO Vs Sushila M. Jhaveri (ITAT, Mum-SB) 107 ITD 327

171

INCOME FROM OTHER SOURCES

CASH CREDITS

Credits in the name of third parties – Assessee must prove identity of credits, capacity of creditor to advance money and genuineness of transaction Shankar Industries Vs CIT (Cal) 114 ITR 689Nanak Chandra Laxman Das Vs CIT (Cal) 140 ITR 151Hari Chand Virender Paul Vs CIT (P&H) 140 ITR 148CIT Vs Biju Patnaik (SC) 160 ITR 674ITO Vs Skyjet Aviation (P) Ltd.(ITAT, Ahd-TM) 71 ITD 95CIT Vs Precision Finance P. Ltd. (Cal) 208 ITR 465Oriental Wire Industries (P) Ltd. Vs CIT (Cal) 131 ITR 688Malabar Agricultural Co.Ltd. Vs CIT (Ker) 229 ITR 548Roshan De Hatti Vs CIT (SC) 107 ITR 938C. Kant & Co. Vs CIT (Cal) 126 ITR 63Bharati P. Ltd. Vs CIT (Cal) 111 ITR 951Dhanalakshmi Steel Re-rolling Mills Vs CIT (AP) 228 ITR 780Prakash Textile Agency Vs CIT (Cal) 121 ITR 890Northern Bengal Jute Trading Co.Ltd. Vs CIT (Cal) 70 ITR 407

Cash credit in books of account of HUF – Assessable u/s 68 in the hands of HUF and not in the hands of members of HUF in whose name the credit stands.Munshi Ram Vs CIT (P&H) 126 ITR 663

Firm’s books showing cash credit in names of partners – No satisfactory explanation –will be deemed to be income of firm.CIT Vs Shiv Shakthi Timbers (M.P) 229 ITR 505Anand Ram Rita Vs CIT (Tahiti) 223 ITR 544Shanta Devi Vs CIT (P&H) 171 ITR 532DCIT Vs Punjab Kirana Bhandar (ITAT,Jp.) 64 ITD 92CIT Vs Kishorilal Sontishilal (Raj) 216 ITR 9Hardwarmal Onkarmal Vs CIT (Pat) 102 ITR 779

Cash credit can be assessed even when business income is estimated.Ratanchand Dipchand Vs CIT (MP) 38 ITR 188Kale Khan Mohammed Hanif Vs CIT (SC) 50 ITR 1CIT Vs Maduri Rajaiahgari Kistaiah (AP) 120 ITR 294CIT Vs Devi Prasad Viswanath Prasad (SC) 72 ITR 194D.C. Auddy & Bros. Vs CIT (Cal) 28 ITR 713S. Kumaraswami Reddiar Vs CIT (Ker) 40 ITR 590

Cash credit on first day of accounting year – Cane be assessed u/s 68CIT Vs Ashok Timber Industries (Cal) 125 ITR 336Basantipur Tea Co. (P) Ltd. Vs CIT (Cal) 180 ITR 261

172

Where any sum is found credited in the books of the assessee for any previous year it may be charged to Income Tax as the income of the assessee for that previous year if the explanation offered by assessee about the nature and source thereof is, in the opinion of the Assessing Officer, not satisfactory.Sumati Dayal Vs CIT (SC) 214 ITR 801Vasantibai N. Shah Vs CIT (Bom) 213 ITR 805Sreelekha Banerjee & Ors. Vs CIT (SC) 49 ITR 112

Mere filing of Income Tax file number not enough to prove genuineness of cash credit.CIT Vs Korlay Trading Co.Ltd. (Cal) 232 ITR 820Cash credit can be assessed even if transaction is through cheques.CIT Vs Precision Finance P. Ltd. (Cal) 208 ITR 465K.C.N. Chandrasekhar Vs ACIT (ITAT, Bang) 66 TTJ 355CIT Vs United Commercial & Industrial Co.(P) Ld. (Cal) 187 ITR 596

Sec. 68 applicable even to share application money.CIT Vs Sophia Finance Limited (Del) 205 ITR 98CIT Vs Active Traders P. Ltd. (Cal) 214 ITR 583CIT Vs Nivedan Vanijyya Ltd. (Cal) 263 ITR 623CIT Vs Bhagwati Jewels Ltd. (Del) 201 ITR 461CIT Vs Prateek Finance & Investment Co.Ltd,. (Del) 215 ITR 272

Summons sent to 4 creditors returned unserved – one creditor denied transaction – Assessee not discharged his onus Sushilkumar Jaiswal Vs ITO (ITAT, Del ) 59 TTJ 18CIT Vs S. Kamaraja Pandian (Mad) 150 ITR 703Traders & Traders Vs CIT (Mad) 236 ITR 269

No evidence on record to show that cash credit was covered by intangible additions made for earlier year – Addition upheld.CIT Vs Manick Sons (SC) 74 ITR 1

Encashment of high denomination notes – Plea of “cash in hand” rejected – no evidence to show reason for keeping such high cash – withdrawal of smaller amount of cash from business contradicts this argument.Sreelekha Banerjee & Ors Vs CIT (SC) 49 ITR 112Sovachand Bai Vs CIT (SC) 34 ITR 650

Assessee must establish nexus between credits and amount disclosed under VDISRadio Instruments Associates (P) Ltd. Vs CIT (AP) 166 ITR 718CIT Vs Assam Cold Storage Co. (Gau) 204 ITR 540Jamnaprasad Kanhaiyalal Vs CIT (SC) 130 ITR 244Radhey Shyam Tibrewal Vs CIT & Ors.(SC) 145 ITR 186ITO Vs Ratanlal (SC) 145 ITR 183

173

Partnership deed executed on 1.3.77 – Business of trading started on 1.4.77 – Cash credits on 31.3.77 assessable in the hands of firm.CIT Vs Bhadra Enterprises (Ker) 228 ITR 645

Mere furnishing of returns under Amnesty Scheme by creditors cannot absolve assessee from discharging its burden of proving genuineness of cash credits and capacity of creditors u/s 68.Prabhu Dayal Lallu Ram Vs ITO (ITAT, Del) 63 TTJ 557

Source of source not proved - addition of cash credit upheld.ACIT Vs Dhanalaxmi Steel Re-rolling Mills (ITAT, Hyd) 57 ITD 361Pradip Kumar Loyalka Vs ITO (ITAT, Pat-TM) 63 ITD 87

Sec. 68 does not confine to cash entries in books.V.I.S.P (P) Ltd. Vs CIT (MP) 265 ITR 202

Confirmation of letters filed in respect of some creditors – None were produced for examination – Did not ask Assessing Officer to issue notice u/s 131 – Cash transaction –creditors not Income Tax payers – confirmation letter says “out of past savings” – Addition upheld.S. Punjabi Vs ACIT (ITAT, Mad) 62 TTJ 749

Addition u/s 68 - No books maintained – Tribunal can sustain the addition u/s 69P.V. Ajay Narayan Vs ITO (ITAT, Bang) 57 TTJ 159

Cash credit in books of accounts seized u/s 132 – Presumption u/s 132 (4A) does not absolve assessee of explaining source of cash credit.Daya Chand v. CIT (Del) 250 ITR 327

Cash receipts entered in note book / rough cash book found during the course of survey – Sec. 68 applies.Haji Nazir Hussain & Co. Vs ITO (ITAT, Del-TM) 91 ITD 42

Since assessee had furnished her statement of affairs, addition of gifts received during the year can be made under section 68 or 69Naushaba Rana Vs ACIT (ITAT,Del) 109 ITD 288

174

DEEMED DIVIDEND

Loan to share-holder who had substantial interest by company in which public were not substantially interested and which had accumulated profits – Notional divided u/s 2(22)(e).P. Sarada Vs CIT (SC) 229 ITR 444Hyderabad Chemical Products (P) Ltd. Vs ITO (ITAT, Hyd) 72 ITD 323

Loan advanced to a shareholder re-paid within 23 days – still deemed dividendWalchand & Co. Ltd. Vs CIT (Bom) 100 ITR 598

Deemed dividend – Loan taken from closely held company where assessee is a shareholder – Commercial profits upto the day of distribution to be computed to see accumulated profits.Sujatha Venkateswaran Vs ACIT (ITAT, Mad) 61 ITD 485

“Person with substantial interest in the company” – Shares held on his own behalf as well as guardian of minor children to be taken into account to determine total number of shares in Company.CIT Vs T.P.S.H. Sokkalal (Mad) 236 ITR 981

Deemed dividend – advance to shareholder for building construction to be taken on lease by company – advance to be set off against future rent – taxableCIT Vs P.K. Abubucker (Mad) 259 ITR 507

Deemed dividend – Building materials advanced to shareholder for construction – advance to be set off against purchase consideration when the company buys some flats from assessee – Value of advance in kind taxableM.D. Jindal vs CIT (Cal) 164 ITR 28

Company advancing large amount to low-paid employee – Employee advancing loan to assessee, the Managing Director of the said company – deemed dividend to assesseeL. Alagusundaram Chettiar Vs CIT (SC) 252 ITR 893

Assessee deposited 1 lakh with Company in which he was a Director – Company advanced 3 lakhs loan to mother and sisters of assessee – They in turn, advanced it to assessee and assessee deposited the same with Company – subsequently Company wrote off loans to mother and sisters – Colourable device – Income of assessee u/s 2(24)(iv)CIT Vs S. Kannan (Kar) 118 CTR 318

175

Common shareholder in two companies – Assessee company received loan from the other company – To the extent of accumulated profits therein, it is deemed dividendDCIT Vs Oscar Investments Ltd. (ITAT, Mum) 98 ITD 339

176

INTEREST RECEIPTS

Interest earned on short term deposits of share capital – Other sources income – cannot be set off against interest paid on capital borrowed for setting up industry.Eskayef Ltd. Vs DCIT (ITAT, Bang) 71 ITD 419Godavari Fertilizers and Chemicals Ltd,. Vs CIT (AP) 198 ITR 388CIT Vs Hindustan Electro Graphites Ltd. (MP) 177 ITR 465CIT Vs Tamil Nadu Industrial Development Corpn. Ltd. (Mad0 189 ITR 670CIT Vs New Central Jute Mills Co.Ltd. (Cal) 118 ITR 1005CIT Vs V.P. Gopinathan (SC) 248 ITR 449CIT Vs Manipur Spinning Mills Corpn. Ltd. (Gau) 226 ITR 551

Seized pronotes show interest payment – Evidence from payee shows interest payment – Interest on pronotes assessed as O.S.CIT Vs Southern Shipping Co.(P) Ltd. (Mad) 241 ITR 464

Compulsory acquisition of land – interest on delayed compensation – Revenue receipt.Bikram Singh & ors. Vs Land Acquisition Collector & Ors. (SC) 224 ITR 551

Assessee contractor – Arbitrator awards additional sum for extra work done – Interest on such award upto date of payment – Revenue receipt.CIT Vs Malik Construction Co.(All) 238 ITR 450

Interest earned on REC Bonds not admitted by assessee as income on the ground that REC Bonds were obtained out of special fund created out of remittances of interest payable by assessee to REC – Since Bonds were issued in the name of the assessee, assessee is the owner of such assets and interest income earned by itKumbakonam Rural Electric Co-operative Society Ltd. Vs JCIT (ITAT, Chennai) 101 ITD 46

Share application money received was deposited in bank – Interest earned on this cannot be set off against expenditure ( including interest paid ) relating to the public issue of sharesD.S.J. Communications Ltd. Vs ACIT (ITAT, Mum) 10 SOT 390

177

UNEXPLAINED INVESTMENT

Onus of proving source of an asset is on assessee – if assessee disputes liability to tax, he has to prove it.Roshan Di Hatti Vs CIT (SC) 107 ITR 938

Valuation certificate produced by assessee before LIC authorities can be used for making addition to cost of construction – Payment to labourers outstanding for a long time, cannot be accepted.G. Amirudhan Vs ACIT (ITAT, Cochin) 60 TTJ 49

Unexplained gold seized from assessee’s premises – Unless cogent evidence is adduced by assessee, it would have to be presumed that the articles recovered from his premises belonged to him and they were acquired in the year in question and they represented the concealed income of the year in question itself justifying an addition u/s 69A.CIT Vs K.I. Pavunny (Ker) 232 ITR 837Udaichand Megaji Vs CIT (Kar) 150 ITR 39, Garibdas Chandrika Prasad Vs CIT (MP) 230 ITR 771ITO Vs B.N. Mathur (ITAT, Del) 30 ITD 9CIT Vs K.T.M.S. Mohamood (Mad) 228 ITR 113Jewelleries House Vs ACIT (ITAT, Bom) 57 ITD 544Ramakant Umashankar Khetan Vs ACIT (ITAT, Nag) 66 TTJ 378

Finding that secret business had been conducted and assessee had invested an amount in it – Assessable u/s 69.Himmatram Laxminarain Vs CIT (P&H) 161 ITR 7

Registration not necessary for changing ownership of motor vehiclePanna Lal vs. Chand Lal (Sc) AIR 1980 SC 871Aliyar Kunju v. Subail Khan (Ker) KLT 268Kunjuraman vs. Saramma (Ker) KLT 742M. Swaminathan vs. C.K. Jayalakshmi Amma (1989) 66 Comp. Cases 503DCIT Vs Mahadeo R. Mahadik (ITAT, Pune) 66 ITD 558

Partner making deposit in firm on first day of existence - No explanation for source-To assess in the hands of partner as unexplained investment.Surendra Mohan Seth Vs CIT (All) 221 ITR 239

Intangible addition made in form of enhanced business profit estimated by rejecting books of account cannot be treated as source of unexplained investment.Vijay Gupta Vs ACIT (ITAT, Gauhati) 58 TTJ 542

178

Unexplained credit and entries of like amount in the “Haste Khate’ – Theory of peak credit could not be applied – All credits addedJhamatmal Takhatmal Kirana Merchants Vs CIT (MP) 152 CTR 311

Unexplained expenses on daughter’s marriage – claim that assesssee’s mother met the same was not proved – Addition upheld.Babu Ram Vs ACIT (ITAT, Del) 59 TTJ 105

Cash found in the possession of assessee – Burden on assessee to prove that he is not the owner of cashSukh Ram Vs ACIT (Del) 285 ITR 256 Reference to valuation Officer made u/s 131 is valid in view of Sec. 142ADCIT Vs Shubham Industries (ITAT, Luck-TM) 104 ITD 126Unaccounted purchases – Unexplained investment for the same – Assessee’s claim that goods were received on credit and hence no unexplained investment, is not acceptable – 2% of total value of unrecorded purchases treated as investment keeping in view the time taken for settling accounts with creditors.Ram Piyare Satish Kumar & Ors. Vs ITO (ITAT, Del) 59 TTJ 352

Difference in cost of construction – unaccounted investment - Possibility of earning income in that Financial Year is not relevant.Chetna Enterprises Vs ITO (ITAT, Pat-TM) 63 ITD 257

Difference in value of closing stock in seized loose papers as against books of accounts – unexplained Asset.Harishchand & Brothers Vs ITO (ITAT, Jp) 64 ITD 331

Cash seized from assessee’s business premises – Argument that it represented private transactions of some employees, not proved – Addition upheld Associated Stone Industries (Kotah) Ltd. Vs DCIT (ITAT, Jp) 68 ITD 312

Source of loan advanced to son, explained for the first time before ITAT – cannot be accepted.Baldev Krishan Kapoor Vs ACIT (ITAT, Chd-TM) 68 ITD 37

For determination of investment in land, value adopted by stamping authorities is no evidence.Mustaq Ahmed & Ors. Vs ACIT (ITAT, Jp) 66 TTJ 305

Burden of proof to show that articles found in possession of person did not belong to him, is on that personCIT Vs Jayalakshmi Devarajan (Ker) 286 ITR 412

Unexplained money found during search – Part explained as belonging to widowed daughter→rejected because her source of income is meager – Part

179

claimed to be of friend, rejected because this fact was not mentioned in 132(5), was a claim after 2 years, friend had two bank accounts and no necessity for keeping the cash with assessee was established.Govindram M. Oberoi Vs ITO (ITAT, Pune-TM) 57 TTJ 1

DEDUCTIONS AND EXEMPTIONS

General aspects

To claim exemption, duty of assessee to substantiate it with records and evidencesCIT Vs R. Venkataswamy Naidu (SC) 29 ITR 529Gopi Ram Lila Vs CIT (Raj) 225 ITR 320

Burden of proving the necessary facts to claim exemption, is on assessee – which was not established at any stage of the proceedings – Hence assessee not entitled to the deduction claimed.CIT Vs Calcutta Agency Limited (SC) 19 ITR 191

No need to give deduction, if not claimed before Assessing Officer.CCIT & Anr Vs Machine Tools Corporation of India Ltd (Kar) 201 ITR 101

Relief available in initial Assessment Year and four immediately succeeding Assessment Years – change in accounting year of assessee - No computation period for one Assessment Year – Relief not to be extended for one more Assessment Year.CIT Vs Covelong Beach Hotel (India) Ltd, (Mad) 262 ITR 544Kar Mobiles Ltd. Vs CIT (Ker) 229 ITR 701Premier Cable Co. Ltd. Vs CIT (SC) 237 ITR 202

Sharing the cost of employees with sister concerns not amounting to engaging required number of employeesTamil Nadu Chlorates Vs JCIT (ITAT, Chennai) 98 ITD 1

Audit report must be filed along with Return – Filing during assessment proceedings is not sufficient.CIT Vs Jaideep Industries (P&H) 180 ITR 81

Audit Report filed after assessment – Deduction not availableCIT Vs Mahalakshmi Rice Factory (P&H) 294 ITR 631

80G donation in kind do not qualify for deductions.H.H. Sri Rama Verma Vs CIT (SC) 187 ITR 308CIT Vs Sohan Lal Singhania (All) 235 ITR 616

180

Assessee’s establishment did not exist in backward area but some work was done at site of customers in backward area – No 80HH deduction.Indocan Engg. Systems (P) Ltd. Vs DCIT (ITAT, Pune) 60 ITD 649

80HHD – Tour operators – Amount paid to hotels to be excluded from gross receipts in foreign exchange as well as total business receiptsDCIT Vs Lotus Trans Travels (P) Ltd. (ITAT, Delhi) 98 ITD 115

80HHD – Profit of all approved hotels to be calculated together and not individual hotel-wise.JCIT Vs ITC Ltd. (ITAT, Kol-SB) 299 ITR(AT) 341

80HH & 80-I – Assessee to maintain separate books of accounts, P&L a/c. and Balance sheet for each unit.Bongaigaon Refinery & Petro Chemical Ltd. Vs DCIT (ITAT, Gau) 68 ITD 531CIT Vs Essar Bulk Carriers Ltd. (Mad) 238 ITR 186

Gutka containing tobacco is “ tobacco preparation ” within the meaning of Item No. 2 of XI Schedule – Not eligible fore deductionDhariwal Industries Ltd. Vs ACIT (ITAT, Pune-SB) 111 ITD 379

Assessee was not providing telecommunication facilities directly to end user but was providing services of international communication to other providers of basic telecommunication services – Assessee cannot be considered as provider of basic telecommunication services – Not eligible for deduction under section 80IA(4C)Videsh Sanchar Nigam Ltd. Vs ACIT (ITAT, Mum-SB) 111 ITD 190

Assessee engaged in business of supplying, installing, testing, commissioning and maintaining cranes at Port and not in business of developing, maintaining and operating a port – Not eligible for 80 IB deduction.DCIT Vs ABG Heavy Industries Ltd. (ITAT, Mum) 107 ITD 287

80 IA (2)(ii) – Ratio of cost of old machinery to cost of total machinery has to be examined with reference to the first year of formation of a company – If such ratio is more than the prescribed limit in the first year, assessee not eligible for deduction even if in subsequent year the ratio went below the prescribed limitGhodavat Pan Masala ( India ) (P.) Ltd. Vs JCIT ( ITAT, Pune ) 108 ITD 603 80 IA – Excess cash found during survey offered for tax – Assessee could not prove that the said cash represents unaccounted income derived from the eligible business – 80 IA claim disallowed since nexus not proved.Sushil Kumar Jalani Vs ACIT ( ITAT, Jodh ) 108 ITD 613

181

80 IA(4) – Assessee operates and maintains a power plant set up by another company – Assessee only a service contractor – falls under “works contract” – Not eligible for deductionCovanta Samalpatti Operating P. Ltd. Vs ACIT 2008-TIOL-289-ITAT-MAD

80 IA(9) restriction - First compute the eligible deduction u/s 80 IA and deduct the same from profits and gains before computing deduction u/s 80 HHCACIT Vs Rogini Garments ( ITAT, Chennai –SB ) 108 ITD 49

80 IB – Construction of shops or commercial place cannot be considered as housing project for 80 IB purposes – Housing project was approved by local authority as residential-cum-commercial project – No 80 IB deductionLaukik Developers Vs DCIT ( ITAT, Mum) 105 ITD 657 80IB(10) – Size of plot of land on which housing project is built should have a minimum area of 1 acre on actual basis and not on notional basisOm Engineers & Builders Vs ITO (ITAT,Pune) 109 ITD 235

80L - Interest paid by land acquisition authorities not eligible Ram Charan Vs ACIT (ITAT, Del) 58 ITD 131

80 L - Fixed Deposits belong to firm - Partner not entitled to deduction u/s 80L from his share of interest earned on Fixed Deposit by firm.CIT Vs Mandakini M, Jog (Bom) 241 ITR 6

80 M- Dividend should be declared and distributed before the due date of filing of returnDelhi Tourism & T.D.C. Ltd. Vs CIT (Del) 285 ITR 114

80 RR - Radio programme and cricket commentary on TV not eligibleHarsha Bhogle Vs Assessing Officer (ITAT, Mumbai) 86 ITD 71480 RRA – Person has to be physically present outside India while rendering serviceK.R. Pradeep Vs CBDT (Del) 282 ITR 526

80 U – Not entitled if his permanent physical disability has no effect of reducing his capacity to engage in a gainful employment / occupationK.S. Srinivasan Vs CIT (Mad) 234 ITR 267

80 V not allowable when public deposits were utilized for payment of Income taxCIT Vs Albright Morarji & Pandit Ltd. (Bom) 154 CTR 455

80 V – Nexus between borrowings and payment of taxes, is to be established by assessee for eligible for 80 V deduction.Hindustan Cocoa Products Ltd. Vs CIT (Bom) 236 ITR 140

182

Repayment of loan taken subsequent to purchase of property and its occupation by assessee, for addition and alteration in building – Not eligible for rebate u/s 88Ashok Kumar Saxena Vs ACIT (ITAT, Del) 96 Taxman (Mag) 103

To claim rebate u/s 88(2)(xv) assessee should be either shareholder of company / member of Co-operative Society.Sandeep S. Shah Vs ITO (ITAT, Mad) 73 ITD 313

Since interest received is not derived from the industrial undertaking, it is taken out from the profits before computing the deduction u/s 10A – At that time assessee asked for deduction of the interest paid by it on borrowings ie. netting – Not allowed since such interest paid was already allowed as deduction in the Profit & Loss account.Procon Systems P. Ltd. Vs CIT (Mad) 296 ITR 636

Income surrendered during survey operations as stock difference / unaccounted investments – Not eligible for special deductions like under section 80 HHCSarla Handicrafts P. Ltd. Vs Addl. CIT (P&H) 296 ITR 94

Only Net income eligible

Unabsorbed losses, depreciation and development rebate of earlier years to be set off before allowing deduction under Chapter VI.CIT Vs Kotagiri Industrial Co-operative Tea Factory Ltd. (SC) 224 ITR 604Distributors (Baroda) Pvt. Ltd. Vs Union of India & ors.(SC) 155 ITR 120CIT Vs Sea Hawk (I) P. Ltd (Cal) 75 Taxman 381H.H. Sri Rama Varma Vs CIT (SC) 205 ITR 433,ACIT Vs Mysore Exports Ltd. (ITAT, Bang) 55 ITD 263Cambay Electric Supply Industrial Co. Ltd. Vs CIT (SC) 113 ITR 84CIT Vs Veeraraghava Textiles P. Ltd. (Mad) 234 ITR 529CIT Vs Madras Motors (P) Ltd. (Mad) 150 ITR 150CIT Vs Agenda Textiles (Raja) 225 ITR 516CIT Vs M.K. Raja Consultants (P) Ltd. (Mad) 239 ITR 232Telecommunications Consultants India Ltd. Vs DCIT (ITAT, Del) 71 ITD 287CIT Vs Bengal Assam Steamship Company Limited (Cal) 155 ITR 26Synco Industries Ltd. Vs Assessing Officer (SC) 299 ITR 444

Chapter VI deduction cannot exceed Total Income.Orient paper Mills Ltd. Vs CIT (Cal) 158 ITR 695Sync Industries Ltd. Vs DCIT (ITAT, Mum) 73 ITD 339

No Chapter VI deduction when gross total income is negative figure.Murugappa & Sons Vs CIT (Mad) 178 ITR 410

183

CIT Vs S. Zoroster & Co. (Raj) 179 ITR 416

Deduction under Chapter VI only from net incomeMotilal Pesticides (I) (P) Ltd. Vs CIT (SC) 243 ITR 26

80HH - Losses in two units & profit in one unit – set off loss before computing 80HH CIT Vs Sundaravel Match Industries (P) Ltd. (Mad) 245 ITR 605CIT Vs Macmillan Co. of India Ltd. (Mad) 243 ITR 403

80-I – On net profit as per computation in Income Tax assessment and not on commercial profits – compute net income from each undertaking.HMT Limited Vs DCIT (ITAT, Bang) 58 ITD 73

80-IA(7) – Profit of new undertaking to be computed as if it is the only business right from its inception and set off earlier year’s loss and depreciation against current year’s income Addl. CIT Vs Ashok Alco Chem Ltd. (ITAT, Mum) 96 ITD 160Prasad productions (P) Ltd. Vs DCIT (ITAT, Chennai ) 98 ITD 212ACIT Vs Goldmine Shares & Finance P. Ltd. 2008-TIOL-220-ITAT-SB-AHD

80-I – Apportion administrative expenses also to find out proportionate income earned by newly established industrial undertaking.Food Specialities Ltd Vs ACIT (ITAT, Del) 54 ITD 352

Before deducting 80-I, reduce 32A deductions from gross total income.CIT Vs Rajasthan Co-operative Spg. Mills Ltd. (Raj) 225 ITR 574CIT Vs Albright Morarji & Pandit Ltd.(Bom) 236 ITR 914DCIT Vs Sangrur Vanaspati Mills Ltd. (ITAT, Chd) 56 ITD 168

80HH deduction to be computed after granting 35B deduction.CIT Vs Synthetic Stones (Raja) 157 CTR 594

80 HH, 80 IA, 80 IB - Allow depreciation first ( whether it was claimed by assessee or not ) before computing the eligible profits for deduction under these sectionsVahid Paper Converters & Ors. Vs ITO & Ors. (ITAT, Ahd-SB) 98 ITD 165Scoop Industries P. Ltd. Vs ITO (Bom) 289 ITR 195

Loss in new industrial undertaking – 80-J deduction not allowed. CIT Vs Siddaganga Oil Extractions Pvt. Ltd,. (Kar) 201 ITR 968CIT Vs H.M.T. Ltd, (Kar) 203 ITR 811CIT Vs Visakha Industries Ltd. (AP) 251 ITR 471

80-M deduction to be calculated on net dividend income only, not on gross.

184

CIT Vs Maganlal Chhaganlal (P) Ltd. (Bom) 236 ITR 456CIT Vs Chemical Holdings Ltd. (Mad) 249 ITR 540

80 I – Set off loss in other units against the income from eligible units and compute deduction only on the net incomeCIT Vs RPG Telecom Ltd. (Kar) 292 ITR 355

“Derived from” meaning of

Different from “Attributable to” – Earning of income must be directly connected to manufacture or processing of goods.India Leather Corporation P. Ltd. Vs CIT (SC) 227 ITR 552

Interest on IDBI deposits – Not profits ‘derived from’ business.Associated Flexibles & Wires (P) Ltd. Vs DCIT (ITAT, Pune) 70 ITD 374

Interest on surplus funds deposited with bank – No 80 HHE deductionTech Books Electronics Services (P.) Ltd. Vs Addl. CIT (ITAT, Delhi) 100 ITD 125

80 I – Interest from trade debtors – Not eligibleNirma Industries Ltd. Vs ACIT (ITAT, Ahd – SB) 95 ITD 199

Interest on deposits with Electricity Board made out of statutory compulsion – Interest not profit “derived from” industrial undertaking – No 80HHPandian Chemicals Ltd. Vs CIT (SC) 262 ITR 278 CIT Vs N.S.C. Shoes (Mad) 258 ITR 749 – Interest on Bank guaranteeIndian Aluminium Co. Ltd. Vs CIT (Cal) 122 ITR 660Ponds Exports Ltd. (ITAT, Mad) 58 ITD 417 – No 10A exemption

Company engaged in distribution of electricity for which Electricity Supply Act is applicable - Contingency Reserve Fund deposited in securities as per such Act - Interest earned not derived from the industrial undertaking - No 80 I deductionAddl. CIT Vs Vellore Electric Corporation Ltd. (Mad) 119 ITR 523

Profit from sale of import entitlement, export house premium & duty drawback – Not derived from industrial undertaking – No 80-HH / 80I / 80IA deduction.CIT Vs Sterling Foods (SC) 237 ITR 579CIT Vs A.M. Moosa (Ker) 237 ITR 867Fenner (India) Ltd. Vs CIT (Mad) 239 ITR 480CIT Vs Viswanathan & Co. (Mad) 261 ITR 737CIT Vs J.B. Exports Ltd. (Del) 286 ITR 603A.M. Moosa, Bharat Sea Foods Vs CIT (Ker) 224 ITR 735CIT Vs Jameel Leathers & Uppers (Mad) 246 ITR 97Liberty India Vs CIT (P&H) 293 ITR 520Paramount Impex Vs CIT (P&H) 165 Taxman 181

185

CIT Vs Lukhwinder Singh (P&H) 165 Taxman 587ITO Vs Ultimate Fashion Makers Ltd. 2007-TIOL-478-ITAT-DELGrover International Vs ACIT 2008-TIOL-290-ITAT-DEL

Service charges for erection and commissioning of machinery – Not eligible for 80 I / 80 IA deductionKirloskar Electrodyne Ltd. Vs DCIT (ITAT, Pune-SB) 87 ITD 264ACIT Vs Intelligent Microsystems (P) Ltd. 2008-TIOL-25-ITAT-MAD

80HH – Profit on sale of assets not income from industrial undertaking –Not eligible.North East Gases (P) Ltd. Vs CIT (Gau) 139 CTR 501

Transport subsidy received from Government – Not profit from industrial undertaking – No 80HH.CIT Vs Andaman Timber Industries Ltd. (Cal) 242 ITR 204JCIT Vs Sidheshwari Paper Udyog Ltd. (ITAT, Del –TM) 94 ITD 187Income from sale of scrap – Insurance money received – No 80HH deduction.Pandian Chemicals Limited Vs CIT (Mad) 270 ITR 448Commission received, interest on temporary deposit, interest on chit deposit, interest on adv-tax – No 80E & 80J – Income not from priority industries.CIT Vs Rane (Madras) Ltd. (Mad) 238 ITR 377CIT Vs Paras Oil Extraction Ltd. (MP) 230 ITR 266

Lease of entire undertaking to another at annual rent – Lease amount not profits “derived” from industrial undertaking – relief not available. CIT Vs Cement Distributors Limited (Del) 208 ITR 355

Income from lorry hire, weighment charges etc. cannot be included in income computation for 80HH deduction.CIT Vs Siddaganga Oil Extractions Pvt. Ltd,. (Kar) 201 ITR 968CIT Vs H.M.T. Ltd,. (Kar) 203 ITR 811

Compensation on account of breach committed by supplier and purchaser in performance of contract – No 80 HH & 80J.CIT Vs Alpine Solvex Ltd. (MP) 276 ITR 92

Profit derived from business of trading of products of other concerns – Not entitled to deduction u/s 80 IA since such profit not derived from industrial undertaking.Liberty Shoes Ltd. Vs CIT (P&H) 293 ITR 478

186

Whether Manufacturing / Industrial Undertaking

Contractors constructing dam / building / bridge etc. – No manufacturing of article or thingBuilders Association of India Vs Union of India & ors. (SC) 209 ITR 877.CIT Vs N.C. Budharaja & Co. (SC) 204 ITR 412CIT Vs Shah Construction Co.Ltd. (Bom) 230 ITR 51CIT Vs P.D. Agarwal & Co.(MP)) 226 ITR 924Badshah Construction Co. (P) Ltd. Vs CIT (MP) 223 ITR 512CIT Vs Highway Construction Co.(P) Ltd. (Gau) 223 ITR 32CIT Vs Oricon Pvt. Ltd. (Bom) 176 ITR 407

Building / Flat constructed – is neither manufactured nor produced.CIT Vs Sunidhi Properties (Cal) 230 ITR 157Continental Constructions Ltd. Vs CIT (Del) 185 ITR 178Ahuja Kashyap (P) Ltd. Vs CIT (Del) 99 Taxman 99

Construction of canal – Not manufacturing / production of article CIT Vs G. Harishchandra Reddy & Co. (Mad) 239 ITR 737

80 HHA - Pressure piling for construction – No manufacturing CIT Vs M.S.J. Construction P. Ltd. (MP) 245 ITR 475

Quarrying stones in its constructions business – Not industrial undertaking.Bhagat Construction Co. Pvt. Ltd. Vs CIT (Del) 232 ITR 722

Firm engaged in construction of overhead tanks – Not an industrial undertaking CIT Vs Agarwal Borthers (MP) 228 ITR 144 Activity of erecting a boiler at a site by assembling the parts manufactured and supply by another company – No manufacturing.CIT Vs Babcock & Wilcox of India Ltd. (Cal) 241 ITR 583

Assessee engaged in business consultancy & data processing through computers – Not an industrial undertaking.CIT Vs R. Shroff Consultants P. Ltd. (Bom) 238 ITR 1018

Sorting out different varieties of cotton, pressing cotton into bales, covering it with hessian cloth and tightening it by iron hoops – Not manufacturing.Gattu Malliah Sons Vs ITO (ITAT, Hyd) 60 ITD 131Sattu Mallaiah Sons Vs ITO (ITAT, Hyd) 57 TTJ 312

Heating raw bitumen to obtain solid bitumen – No manufacturing activity CIT Vs Sri Meenakshi Asphalts (Mad) 266 ITR 626

187

Shoes got manufactured from cobblers on piece rate basis – They are not employees of assessee – No manufacturing. No industrial undertaking.Liberty Group Marketing Division Vs ACIT (ITAT, Del) 61 TTJ 566Liberty Group Marketing Division Vs ACIT (ITAT, Del) 61 TTJ 566CIT Vs A.R. Balaraman (Mad) 242 ITR 470

Job work undertaken to make case-sets for watches by welding of glass and case – No manufacturing.P.A. Time Industries Vs DCIT ( ITAT, Chd ) 101 ITD 132

Making Photostat copies with Xerox machine – not manufacturing.CIT Vs B.N.B. Enterprises (Mad) 242 ITR 439Modi Xerox Ltd. Vs DCIT (ITAT, Del) 67 ITD 252Ship-breaking did not involve manufacturing activity.ACIT Vs Trilok Ship breaking Ltd. (ITAT, Mum) 66 ITD 114DCIT Vs Apollo Vikas Steels (P) Ltd (ITAT, Ahd) 60 TTJ 767

Conversion of spirit into IMFL – No manufacturing.Shaw Scott Distilleries (P) Ltd. Vs ACIT (ITAT, Cal-SB) 76 ITD 89

Rereading of tyres – No manufacturing CIT Vs Vijaya Retreaders (Ker) 253 ITR 53CIT Vs Sundaram Industries Limited (Mad) 253 ITR 396

Cutting and polishing of uncut raw diamonds – No manufacturing CIT Vs Gem India Mfg. Co (SC) 249 ITR 307Pink Star Vs DCIT (ITAT, Mum) 72 ITD 137

Conversion of large mass of quartz into smaller dimensions – No manufacturing ACIT Vs G.T.C. Enterprises (ITAT, Chennai) 87 ITD 188

Mining of limestone and marble blocks and cutting and sizing them – No manufacturingLucky Minmat Pvt. Ltd. Vs CIT (SC) 245 ITR 830

Excavating and breaking boulder stones from stone quarries and supplying same for construction work – No manufacturing.ACIT Vs Saket India (P) Ltd. (ITAT, Del) 68 ITD 270

Improving marketability of article does not constitute manufacture / production. Sizing and Washing of ore does not constitute manufacture / production.V.M. Salgaocar Bros (P) Ltd Vs CIT (Kar) 217 ITR 849

Grinding soap-stones and minerals – Not Manufacturing.CIT Vs Premier General Traders P. Ltd. (Bom) 242 ITR 654

Chopping, cutting, polishing and sizing granite – Not manufacture / processing

188

Hind Nippon Rural Industries P. Ltd Vs CIT (Kar) 201 ITR 588CIT Vs Vijay Granite P. Ltd (Mad) 267 ITR 606

Breaking of boulders into small stones or bajri – No manufacturingITO Vs Jitendra Stone Crushing Co. (ITAT, Chd) 105 ITD 52

Assessee purchasing granite blocks made to specifications stated by the assessee – Granite blocks manufactured by employing a contractor –No quarrying done by assessee – Processing done by seller – works effected by assessee is marginal – Main business of assessee was export of stones – No manufacturing or processing of goods.Hind Nippon Rural Industries P. Ltd. Vs CIT (Kar) 201 ITR 581

Cutting photographic colour paper in jumbo rolls into flats and rolls of small sizes in dark air-conditioned dust proof room with the help of slitting machines –No manufacturing / production.India Cine Agencies Vs CIT (Mad) 261 ITR 491CIT Vs Computer Graphics Ltd. (Mad) 285 ITR 84

Electricity is not article or thing – No 80 HH deduction for A.Y. 1996-97Tamil Nadu Chlorates Vs JCIT (ITAT, Chennai) 98 ITD 1Blending different kinds of tea – No manufacture or production of an article or thing D.D. Shah & Bros Vs Union of India & Anr. (Raj) 283 ITR 486

Cold storage – No processing activity.State of Rajasthan Vs Rajasthan Ice & Cold Storage (SC) 264 ITR 158CIT Vs Pawansut Cold Storage (P) Ltd. (Patna) 225 ITR 51CIT Vs Kissan Friends Ice Factory & Cold Storage (P&H) 234 ITR 400Mittal Ice & Cold Storage Vs CIT (MP) 159 ITR 18Patti Durga Cold Storage Vs ITO (Cal-SB) 18 ITD 132Delhi Cold Storage (P) Ltd. Vs CIT (SC) 191 ITR 656

80 J - Flight Kitchen preparing food packets – No manufacturing Inidia Hotels Co.Ltd. & Ors. Vs ITO & Ors. (SC) 245 ITR 538

Preparation of biscuits & sweet meats – Not manufacturingCWT Vs P. Devasahayam (Mad) 236 ITR 885

Production of Mineral water – No manufacturing.Acqua Minerals (P) Ltd. Vs DCIT (ITAT, Ahd) 96 ITD 417

Hotel – Not an industrial undertaking – Not manufacturing article CIT Vs Hotel Ayodya (Kar) 2o1 ITR 1002CIT Vs Casino (P) Ltd.(Ker) 91 ITR 289S.P. Jaswal Estates P. Ltd. Vs CIT (Cal) 209 ITR 307Fariyas Hotels P. Ltd. Vs CIT (Bom) 211 ITR 390

189

CIT Vs Buhari Sons Pvt. Ltd. (Mad) 144 ITR 12 CIT Vs Woodlands Hotel P. Ltd (Kar) 233 ITR 224

Assessee engaged in transportation of goods by trucks – Not industrial undertaking.Agro Cargo Transport Ltd. Vs CIT (Mad) 236 ITR 1000

Activity of tapping and vending toddy does not involve manufacture or production of an article or thing.Sri Ranganatha Enterprises Vs CIT (Kar) 232 ITR 568

Diagnostic Centre is engaged in diagnosis of ailments of human body – Does not produce goods when exposing fitness by use of scanner J.M.D. Medicare Ltd. & Anr. Vs Union of India (Cal) 232 ITR467Insight Diagnostic & Onchological Research Institute P. Ltd Vs DCIT (Bom) 262 ITR 41

Manufacturing & sale of aluminium articles – Not a priority industry.Jeewanlal Ltd. Vs CIT (Cal) 142 ITR 448

Peeling & Freezing of Shrimps / processing of fish – No manufacturing.CIT Vs Relish Foods (SC) 237 ITR 59Golden Hind Shipping (India) P. Ltd. Vs CIT (Del) 240 ITR 324CIT Vs Poyilakada Fisheries P. Ltd. (Ker) 240 ITR 445CIT Vs Sterling Foods (Bom) 213 ITR 851CIT Vs Oceanic Products Exporting Co. (Ker) 219 ITR 293CIT Vs George Maijo (Mad) 250 ITR 440

Roasting and grinding of chicory roots into chicory powder – no manufacturing.Sacs Eagles Chicory Vs CIT (SC) 255 ITR 178

Curing coffee not amount to manufacturing CIT Vs Aspinwall & Co. Ltd (Ker) 227 ITR 916

Tendu leaves – Activities to make it soft, not processing.Natwarlal Vs Union of India (MP) 233 ITR 490Sagarmal Agarwal Vs Union of India & Ors. (Ori) 238 ITR 989North Koel Kendu Leaves and Mahulam leaves Vs Union of India & Ors. (Patna) 228 ITR 630Abdul Sattar Vs Union of India & Ors. (MP) 230 ITR 163

Chilly & Chilly products are essentially same commodity – No manufacturingNampudhiris Pickle Industries (Ker) 1993 KLJ (Tax cases ) 198

Poultry farming – Hatchery – not industrial undertaking – No manufacturing activityCIT Vs Deejay Hatcheries (Bom) 211 ITR 652Indian Poultry Vs CIT (MP) 230 ITR 909

190

CIT Vs Venkateswara Hatcheries (P) Ltd. (SC) 237 ITR 174

Electroplating – Not manufacture / production of article or thing.CIT Vs Hindustan Metal Refining Works (P) Ltd. (Cal) 128 ITR 472Titanor Components Ltd Vs DCIT (ITAT, Del) 72 ITD 514

Welding of glass and watch case – No manufacturing activityP.A. Time Industries Vs DCIT (ITAT, Chd) 101 ITD 132

Dyeing, scouring, singering or otherwise furnishing or processing of fabrics do not amount to manufacture or production of textiles.CIT Vs Veena Textiles P. Ltd. (Mad) 155 ITR 794CIT Vs S.S.M. Furnishing Centre (Mad) 155 ITR 791CIT Vs Anjani Kumar & Co. P. Ltd.(Raj) 227 ITR 786CIT Vs United Bleachers Ltd. (Mad) 152 CTR 335ACIT Vs Varma Mukherji (P) Ltd.(ITAT, Mum) 61 ITD 462

Printing of manufacturer’s name on pharmaceutical capsules does not amount to processing of goods.CIT Vs Western India Pharmaceutical Services P. Ltd. (Bom) 230 ITR 96

Pasteurisation of milk – No manufacturing.Kanyakumar Dist. Co-op. Milk Supply Producers Union Ltd Vs ITO (ITAT, Mad) 56 ITD 80B.G. Chitale Vs DCIT 2008-TIOL-241-ITAT-SB-PUNE

Filling of mushroom powder in gelatine capsules to make it fit for marketing – No manufacturing or production of any commercially distinct commodity – No 80 IB deductionDXN Herbal Mfg. (India)(P.) Ltd. Vs ITO (ITAT, Chennai) 110 ITD 99

Whether New Industrial Undertaking

Assessee is publisher of books – Earlier years, printing done in other places – New press installed in this year – This is a case of re-construction of an already existing business – No deduction.CIT Vs Naya Sahitya (Del) 84 ITR 567

Undertaking established must be a newly established industrial undertaking and not that the undertaking is a new undertaking to the person acquiring the same from another.Khoday Industries P. Ltd. Vs CIT (Kar) 163 ITR 646

80 I - Assessee purchased certain old and new machinery and started production of an item in 1988 – In subsequent year, some more Plant & Machinery purchased and started production of some other items also - Industrial

191

undertaking came into existence in 1988 itself and in that year cost of old plant exceeded 20% of total Plant & Machinery and hence not eligible for 80-I.JCIT Vs Nalco Chemicals (I) Ltd. (ITAT, Kol) 97 ITD 348

Investment made for new Plant & Machinery, buildings, furniture etc. – common pipeline, common boiler house, common purchase of raw materials and sale of finished products by old and new units – One license and one electricity bill for both units – Deployment of workers common. Common catering facility and common workshop – New unit not a new industrial undertaking.Periyar Chemicals Ltd. Vs CIT (Ker) 226 ITR 467

Improvement brought out in an existing system cannot be construed as setting up of a new undertaking – Assessee commissioned two telecommunication earth stations during the year – this is only improvement in existing system and for up-grading its services – Not setting up of new industrial undertaking.Videsh Sanchar Nigam Ltd. Vs CIT ( ITAT, Mum-SB) 111 ITD 190

192

Sec. 80HHC

Export through Export House – Manufacturer is not exporter.Minerals and Metal Trading Corporation Vs R.C. Mishra & ors.(SC) 201 ITR 851

No disclaimer certificate produced from Export House – No 80HHCCIT Vs Sea Pearl Industries (Ker) 238 ITR 551ITO Vs Rifox Engg. India (P) Ltd, (ITAT, Pune) 57 ITD 466

Goods not crossed Indian Border – No 80HHC deductionIndian Delco (P) Ltd Vs DCIT (ITAT, Del) 59 ITD 268

Articles supplied from Germany to Poland – No “export out of India” – No deduction u/s 80HHCDhall Enterprises and Engineers P. Ltd. (Guj) 295 ITR 481

Journal published & sold abroad – Advertisement charged received abroad in foreign currency - not part of export turnoverDiamond World Vs CIT (Raja) 267 ITR 466

Before calculating deduction u/s 80 HHC, reduce profits by the deduction u/s 80 I and 80 G granted alreadyVijay Sehgal (HUF) Vs ACIT (ITAT, Asr) 100 ITD 560

Amount surrendered by assessee after survey operations and disclosed as excess stock – Burden on assessee to prove amount represented export profit – No 80 HHC deduction on such income unless that burden is dischargedNational Legguard Works Vs CIT(Appeals) (P&H) 288 ITR 18

CIT decline to grant further extension of time for bringing sale proceeds to India - upheld.D.B. Exports (India) Vs CIT (P&H) 231 ITR 836

Profit from export of granites – No 80HHC deduction.Stonecraft Enterprises Vs CIT (SC) 237 ITR 131

Proviso to 80HHC(3) applies only to exporters and not to supporting manufacturers Asvini Cold Storage (P) Ltd Vs ACIT (ITAT, Mad) 63 TTJ 474.

No 80HHC deduction on profits exempted u/s 10ASamtex Fashions Limited Vs ACIT (ITAT, Del) 92 ITD 535

Brought forward unabsorbed depreciation of earlier years to be deducted from profits of the year before calculating deduction u/s 80 HHC

193

80HHC (a)+(b)+(c) – If one figure is negative, set off the same against +ve figures.IPCA Laboratories Ltd. Vs DCIT (SC) 266 ITR 521Rohan Dyes & intermediates Ltd. Vs CIT (Bom) 270 ITR 351A.M. Moosa, Bharat Sea Foods Vs CIT (Ker) 272 ITR 29Maruti Udyog Ltd. Vs JCIT (ITAT, Delhi) 100 ITD 113CIT Vs Shirke Construction Equipment Ltd. (SC) 291 ITR 380Asvini Cold Storage P. Ltd. Vs CIT (Mad) 290 ITR 183CIT Vs Sharon Veneers P. Ltd. (Mad) 294 ITR 18

Profit should be derived from business activities related to exportCIT Vs V.T. Joseph (Ker) 225 ITR 731ACIT Vs Subhadra Ravi Karunakaran (ITAT, Cochin) 61 TTJ 55780HHC deduction only after setting off unabsorbed depreciation of earlier years – If it was made otherwise, it is a mistake apparent from record.Arco Spun Silk Mills (P) Ltd Vs ITO (ITAT, Bang) 66 ITD 19Asvini Cold Storage (P) Ltd. Vs ACIT (ITAT, Mad) 63 TTJ 474,

80HHC to be granted before computing net income and apportionment made between agricultural & non-agricultural income.Warren Tea Limited & Anr Vs Union of India & Ors. (Cal) 236 ITR 492CIT Vs C.W.S. (India) Ltd. (Ker) 246 ITR 278

After excluding premium of export license, export subsidy & duty draw-back no profit from export business – No 80HHCKrislar Diesel Engines (P) Ltd Vs ACIT (ITAT, Mad) 74 ITD 414

80 HHC(3) applies only where there are export and local trading of goods and not in a situation where there is export of goods but the local activity of the business is non-trade. No 80HHC deduction when there is loss from export activity.Ashwin Kumar Consultants (P) Ltd. Vs DCIT (ITAT, Del) 47 ITD 1Jayantilal J. Soni Vs ITO (ITAT, Ahd) 63 TTJ 661

80HHC – where profit element of domestic turnover is included, turnover element of such items also needs to be included in total turnover.JCIT Vs Virudhunagar Textile Mills Ltd. (ITAT, Chennai) 97 ITD 306

Interest on FD – Not to be included in profits for 80HHC computation - Processing charges collected – Not to be included in turnover and profit for 80HHC computation.T.C. Usha Vs DCIT (ITAT, Coch) 70 ITD 279Berlia & Co. Vs ACIT (ITAT, Cochin) 67 ITD 347K. Ravindranathan Nair Vs DCIT (Ker) 262 ITR 669Urban Stanislaus Co. Vs CIT (Ker) 263 ITR 10Naniji Topamnbhai & Co. Vs ACIT (Ker) 243 ITR 192CIT Vs Shradha Industries (Mad) 294 ITR 617

194

Dollar Apparels Vs ITO (Mad) 294 ITR 484

Interest on IDBI deposit (made to claim 32AB deduction) not derived from industrial undertaking – no 80HHC deduction.Associated Flexibles & Wires (P) Ltd. Vs DCIT (ITAT, Pune) 70 ITD 374

Service charges received from export house – not part of sale consideration, but ‘other income’ for deducting 90% from profits of the business as per Expl. (baa) to sec. 80HHC.Asvini cold storage (P) Ltd. Vs ACIT (ITAT, Mad) 63 TTJ 474.

80HHC Expl. (baa) – Gross receipts to be excluded not “net” receipt.CIT Vs V. Chinnapandi ( Mad ) 282 ITR 389Chowdhary Garments Vs DCIT ( ITAT, Mum ) 86 ITD 779CIT Vs Liberty Footwear Company (P&H) 287 ITR 339

80HHC Expl. (baa) – Profit of business does not include dividend income.Sudarshan Chemical Industries Ltd. Vs DCIT (ITAT, Pune) 60 ITD 629Liberty Footwear Co. (P&H) 283 ITR 398 – Machinery hire charge & bldg. rent

If rent, interest, charges etc. assessed as “Income from Other Sources” no need to deduct 90% of it from business profits – Otherwise deduct 90% of gross receipts – 80HHC Expl. (baa)K.S. Cubbish Pillar & Co.(India) P. Ltd. Vs CIT (Mad) 260 ITR 304Assessee having exports as well as locales of commodity exported as well as other commodities – turnover of other commodities (non-export) not to be included in total turnover.CIT Vs Madras Motors Ltd. (Mad) 257 ITR 60

Assessee having export & domestic trade-accounts kept separately – still 80HHC(3)(b) applies.CIT Vs Parry Agro Industries Limited (Ker) 257 ITR 41CIT Vs Rather Brothers (Mad) 254 ITR 656 – opposite view 3(b) cannot be invoked

80 HHC computation – Total turnover refers to turnover of business and not turnover of sale and purchase of goodsCIT Vs Sharda Gum and Chemicals (Raj) 288 ITR 116

Cash assistance received is not part of export turnover for 80 HHC purposeKhan International Exports P. Ltd. Vs CIT (All) 280 ITR 165

Indirect costs – 10 % of earnings from export incentives not deductible as expensesCIT Vs Hero Exports (P&H) 292 ITR 571

195

Processing charges received – Exclude from profits under cl. (baa) and include it in total turnoverCIT Vs K. Ravindranathan Nair (SC) 295 ITR 228

Stock surrendered during survey – Not entitled for proportionate deduction u/s 80HHC as there is no evidence to indicate that such income originated from businessNational Legguard Works Vs CIT (P&H) 200 Taxation 243

Receipt on transfer of DEPB - No expenditure incurred by assessee - entire receipt to be treated as profitEastman Industries Ltd. Vs DCIT (ITAT, Del) 110 TTJ 798

80HHC – fifth proviso – word ‘or ’ has been intentionally used between clauses (a) and (b). This cannot be substituted with the word ‘ and ’.Mehta Mfrs. Vs ITO (ITAT, Mum) 110 ITD 1

Turnover of an export oriented unit whose income is exempt under section 10B cannot be included in turnover for 80 HHC calculationACIT Vs Mahavir Spg. Mills Ltd. (ITAT, Chd) 110 ITD 211

Unrealised sale proceeds cannot be excluded from total turnover for 80HHC computationACIT Vs Ishar International (ITAT, All) 111 ITD 232

If gains arising from fluctuation of foreign exchange form part of profit of the business for the purpose of computation of deduction under section 80 HHC, the same will definitely form part of total turnover for that computationB S & B Safety Systems India Ltd. Vs DCIT 2008-TIOL-55-ITAT-MAD

196

Sec. 80 O

Approval of agreement by Central Government / Board is mandatory condition – specific approval needed – when approval refused no deduction u/s 80 O allowable.CIT Vs Phalton Sugar Works Ltd. (Bom) 191 ITR 403

80 O deduction only on net amount after deducting expenses. Tata Unisys Ltd. Vs DCIT (ITAT, Bom) 58 ITD 334,CIT Vs Asian Cable Corpn Ltd. (Bom) 262 ITR 537Petroleum India International Vs DCIT (ITAT, Mum-SB) 71 ITD 31CIT Vs M.N. Dastur & Co. (P) Ltd. (Cal) 159 CTR 417, 243 ITR 10CIT Vs M.K. Raju Consultants (P) Ltd. (Mad) 239 ITR 232ACIT Vs Abcon Engineering & Systems P. Ltd. (Kar) 287 ITR 201

80 O – Deduction to be given only of percentage of income actually received in India in convertible foreign exchange.CIT Vs Indus Services Limited (Cal) 230 ITR 328

Supply of particulars / biodata of various Indians willing to work abroad and their selection/recruitment in India – No 80-O deduction.ITO Vs Vivek Prabhakar Kunte (ITAT, Bang) 92 ITD 71

Packing & Moving services – Not professional service – No 80-OACIT Vs P.N. Writer & Co. (Mum) 94 ITD 446

Services by way of sourcing, negotiating, quality controlling and shipping logistics in the capacity as buying agent of foreign enterprise – No 80 O deductionV. Elangovan Vs DCIT (ITAT, Chennai) 97 ITD 187

80 O – Services must be rendered outside IndiaAnand & Anand Vs CIT (Del) 286 ITR 432Searle (India) Ltd. Vs CBDT & Anr. (Bom) 145 ITR 673Kamkap (India) Vs DCIT (ITAT, Pat) 67 ITD 237

197

Sec. 80 P

Apex Society for Coir Marketing - Not entitled to special deduction u/s 80P(2)(a)(ii)CIT Vs Quilon Central Coir Marketing Co-operative Society Ltd. (Ker) 229 ITR 348CIT Vs Virudhunagar Co-operative Marketing Society Limited (Mad) 255 ITR 538

80P deduction not available to an apex society extending credit facility to a member of member society.U.P. Co-operative Cane Union Federation Ltd. Vs CIT (SC) 237 ITR 574

Income of Co-operative society from manufacturing sugar out of sugarcane purchased from its members, non-members and another co-operative Society – No 80P(2)(a)(iii) deduction.Karnal Co-op. Sugar Mills Ltd. Vs CIT (P&H) 253 ITR 659

Interest on security deposit with agent – Not exempt u/s 80PCIT Vs U.P. Co-operative Federation Ltd. (SC) 176 ITR 435

Reserve fund of Apex Bank invested in Government securities under instructions of the State Government – This cannot be utilized as working capital – No 80P deduction.DCIT Vs Gujarat State Co-op. Bank Ltd. (ITAT, Ahd) 66 ITD 386Madhya Pradesh Co-op. Bank Ltd Vs Addl. CIT (SC) 218 ITR 438Bihar State Co-operative Bank Ltd. Vs CIT (Pat) 33 ITR 137

Sales on credit to other co-operative Societies – Interest earned is not entitled to special deduction u/s 80PCIT Vs Kerala State Co-op Marketing Fed. Ltd. (Ker) 234 ITR 301

Co-operative society carrying on business of processing cloth – Activity of providing credit facility to its members is ancillary –No 80P(2)(a)(i) deduction.Yashwant Co-op. Processors Ltd. Vs ITO (ITAT, Pune) 57 ITD 393

Selling of goods on credit to members – does not amount to provision of credit facilities – No 80P(2)(a)(i) deduction.Kerala Co-operative Consumers Federation ltd. Vs CIT (Ker) 170 ITR 455

House rent and locker rent received – No 80P deduction.CIT Vs Jila Sahakari Kendriya Bank Maryadit (MP) 225 ITR 421DCIT Vs Gujarat State Co-operative Bank Limited (ITAT, Ahd) 66 ITD 386

Compensation received by Co-operative Bank for use of guest house – No 80P deduction.Jalgon District Central Co-operative Bank Ltd. Vs ITO (ITAT, Pune) 70 ITD 290

198

Labour contract co-operative society – Major contribution of labour from non-members – No deduction u/s 80P(2)(a)(vi)Assessing Officer Vs Ganesh Co-op(L&C) Society Ltd. (ITAT, Asr) 67 ITD 436Drill Well Associates Co-op. Society Ltd .Vs ITO (ITAT, Ahd) 73 ITD 240

Dividend earned on shares – Not a part of banking activities – No 80P(2)(a)(i) deductionJME Employees Co-operative Credit & Thrift Society Ltd. Vs ITO (ITAT,Jp) 73 ITD 296

Assesee Co-operative Society, members not consuming articles such as coal & diesel supplied by assessee – Not a consumer Co-operative Society – No deduction u/s 80P(2)©(i).Tamil Nadu Brick & Tile Manufacturing Ind. .Service Co-op. Society Vs CIT & Ors. (Mad) 265 ITR 332

Co-operative Society purchasing auto-rickshaws & selling them to members under Hire Purchase agreement – cannot be treated as providing credit facilities – No 80P(2)(a)(i) deduction.Madras Auto Rickshaw Drivers Co-op. Society Vs CIT (SC) 249 ITR 330.

Service charges received from members for arranging loans – No 80P(2)(a) deduction.CIT Vs Anakapalli Co-op Marketing Society Limited (AP) 245 ITR 616

Co-operative Society for running Sugal Mill – Production not started – No 80P deduction.Karnal Co-op. Sugar Mills Ltd. Vs CIT (P&H) 233 ITR 531

80P(2)(d) – Computation – When composite account maintained for expenses incurred for earning the taxable as well as exempt income, bifurcate expenses to find out net income earned from each activity.CIT Vs Rajasthan Rajya Sahkari Upbhokta Sangh Ltd. (Raja) 215 ITR 448Lahaul Potato Growers Co-op. Marketing Society Ltd. Vs CIT (HP) 232 ITR 718

80P(2)(e) – Consumer co-operative society – Purchasing supplies from FCI to be sold at fixed price – Commission earned not entitled to deduction.CIT Vs Udaipur Shahkari Upbhokta Thok Bhandar Ltd. (Raj) 295 ITR 164

199

EXEMPTIONS U/S 10

Reward received by an informant is not award – No exemptionM.K.S. Mohd. Aboobacker Saheb vs CWT ( Mad ) 242 ITR 319

Providing technical and marketing support to distributors and customers – Not a technician – Sec. 10(5B) exemption not availableABC, IN RE (AAR) 242 ITR 698

Indian National acquiring citizenship – Wife and children living in India – Assessee having properties in India & Staying in India – No exemption in respect of NRE a/c.CIT Vs K. Ramullan (Ker) 226 ITR 264

10(20) exemption – State Road Transport Corporation not a local authority – Not eligible for exemptionU.P. State Road Transport Corporation Vs CIT (All) 286 ITR 350Calcutta State Transport Corporation Vs CIT (SC) 219 ITR 515

10(20) exemption – Agricultural produce Marketing Committee – Not a local authority – Not eligible for exemptionAgricultural Produce Market Committee, Azadpur Vs CIT & Anr. (Del) 205 CTR 1

10(20) exemption - Authority for planned development of industrial areas and promotion of industries and matters relating to – Not a local authority – Not eligible for exemptionAdityapur Industrial Area Development Authority Vs Union of India & Ors. (SC) 283 ITR 97

10(20) exemption – Forest corporation is not a local authority - Not eligible for exemptionCIT Vs U.P. Forest Corporation (SC) 230 ITR 945

Assessee, a company registered under Companies Act – Not an authority constituted under any law – No exemption 10(20A)Sharda Sahayak Samadesh Kshettra Vikas Nigam Ltd. Vs CIT (All) 244 ITR 364

Trust established with the aim of imparting education –Educational institution not established – Income of trust spent in providing scholarships and financial assistance to students – Trust not entitled to exemption u/s 10(22).CIT Vs Sorabji Nusserwanji Parekh (Guj) 201 ITR 939

10(22) exemption – Assessee should establish that it is engaged in some educational activity not for profit – Mere publication of books not sufficient.Oxford University Press Vs CIT (SC) 247 ITR 658CIT Vs Assam State Book Production and Publication Corp. Ltd. (Gau) 288 ITR 352

200

10(23C) – Income must be applied for educational purposes in India – If application of income is in U.S.A., no exemption allowableAmerican hotel and Lodging Association Educational Institute Vs CBDT (Del) 289 ITR 46

10(23G) – Debt Syndication fee and Debenture Trust fee are not interet accrued on loans and advances – No exemptionInfrastructure Development Finance Co. Ltd. Vs ACIT 2007-TIOL-188-ITAT-MADAssessee union was formed to protect interests of truck owners – No 10(24) exemption.Sumerpur Truck Operators Union Vs ITO (ITAT, Jodh) 89 ITD 89Income from housing schemes for promotion of backward classes and other categories – Not exempt from tax u/s 10(26B)Harijan Evam Nirbal Varg Avas Nigam Ltd. Vs CIT (All) 229 ITR 776

10(29) - Income from property, Interest on loans and advances to staff, interest on belated refund, Bank interest – No 10(29) exemption.DCIT Vs Tamil Nadu Warehousing Corporation (ITAT, Mad) 84 ITD 51

State Warehousing Corpn. – Income from procurement of grains for FCI / State Government, Miscellaneous income, interest on Fixed Deposits – No 10(29) exemption.Orison State Warehousing Corporation Vs CIT (SC) 237 ITR 589

10(29) - Only the amount received for services rendered in respect of goods stored in assessee’s godown exempt u/s 10(29) and no other receiptsCIT Vs Karnataka State Warehousing Corporation Ltd. (Kar) 185 ITR 25

10(29) - Income from trading of wheat not incidental to warehousing activity –No exemption u/s 10(29)Haryana Warehousing Corpn. Vs DCIT (ITAT, Del) 61 ITD 420

10(33) – Deemed dividend not exemptITO Vs Kalyan Gupta 2007-TIOL-248-ITAT-MUM

10A - Interest not profit “derived from” industrial undertaking – No exemptionPonds Exports Ltd. Vs ITO (ITAT, Mad) 58 ITD 417 CIT Vs Menon Impex (P) Ltd. (Mad) 259 ITR 403

10B unit – Set off the brought forward loss and depreciation of the 10B unit against the income of 10B unit during the year – Only the balance income, if any, is eligible for 10B exemptionCIT Vs Himatasingike Seide Ltd. (Kar) 286 ITR 255

10B – Interest income not eligibleOrchid Chemicals & Pharmaceuticals Ltd. Vs JCIT (ITAT, Chennai) 97 ITD 277

201

ABI Showtech (I) Ltd. 2007-TIOL-203-ITAT-MAD

10B - Amendment with effect from 01-04-1999 extending benefit for 10 years is only to new units established from that date and not to old units, who already availed the 5 year exemption – No extension of period allowedTata Tea :Ltd. Vs JCIT (ITAT, Kol) 87 ITD 351

Insurance claim received on goods damaged in transit – Not derived from export oriented undertaking – No 10B exemptionSrinivasa Cystine Ltd. Vs JCIT (ITAT, Hyd) 92 ITD 460

10B deduction eligible only when the 100% Export oriented unit manufactures / produces any article or thing or computer software. Unpolished furniture / handicrafts purchased and then subjected to grinding, surface smoothening, chemical treatment, drying, heating, polishing etc. – No manufacturing activity – No 10B deduction.Kwal Pro Exports Vs ACIT (ITAT, Jodh) 110 ITD 59 Assessee advanced interest free loan to a party to purchase certain shares with a condition that 50% of dividend received to be transferred to assessee – Assessee is not owner of shares and amount received by him is not dividend so as to get exemption u/s 115 ORasoi Trading & Agencies (P.) Ltd. Vs ITO ( ITAT, Mum ) 101 ITD 399

202

AGRICULTURAL INCOME

Income from sale of shade trees in agricultural land – taxable.Emerald Valley Estates Ltd. Vs CIT (Kar) 222 ITR 799Travancore Tea Estates Co.Ltd. Vs CIT (Ker) 93 ITR 314

Oil extracted from eucalyptus leaves is not an agricultural produce – Eucalyptus leaves have a market.CIT Vs Stanes Amalgamated Estates Limited (Mad) 232 ITR 443

Activity of tapping and vending toddy does not constitute agricultural operation – Not agricultural income.Sri Ranganatha Enterprises Vs CIT (Kar) 232 ITR 568

Income from coconut thope is non-agricultural in natureS. Arunachala Nadar Vs CIT (Mad) 252 ITR 734 –.

Income from sale of assets, excess liability written off and miscellaneous receipts –connection with tea business not established – 100% taxable.CIT Vs Bansidhar Sewbhagovan and Co. (Gau) 233 ITR 651CIT Vs Tamil Nadu Forest Plantation Corpn (Mad) 248 ITR 331

Profit on sale of cooly lines situated in agricultural land – Capital Gains arisesClen Leven Estates Ltd. Vs CIT (Ker) 91 ITR 391

Only income from basic operations of cultivating land and require the expenditure of human skill and labour on land →Ag.incomeCIT Vs Raja Benoy Kumar Sahar Roy (SC) 32 ITR 466CIT Vs Maddi Venkatasubbayya & another (Mad) 20 ITR 151

Income from sale of forest trees – Not agricultural incomeRamakrishna Deo Vs CIT (SC) 35 ITR 312Raja Mustafa Ali Khan Vs CIT (Privy) 16 ITR 330Beohar Singh Raghubir Singh Vs CIT (Nag) 16 ITR 433

Part of profit arising from purchase and sale of plants is not agricultural income eventhough such plants are maintained in nursery for some time.Sudisha Farm Nursery Vs ITO (ITAT, Del) 88 ITD 638

Sale of milk from cows – Not agricultural income.CIT Vs R. Venkataswamy Naidu (SC) 29 ITR 529

Assessee received dividend income from a company of which 60% income is agricultural income.- Dividend is not agricultural income.

203

Bacha F. Guzdar Vs CIT (SC) 27 ITR 1Raja Bahadur Vishveshwara Singh Vs CIT (Pat) 26 ITR 573

Sale of cocoons – Not agricultural income.K. Lakshmanan & Co. & Anr. Vs CIT (SC) 239 ITR 597.

Agricultural lands in Municipality is ‘capital asset’ – Population of the Municipality as a whole to be considered G.M. Omer Khan Vs Addl. CIT (SC) 196 ITR 269

Sec.2(14) (iii) – “jurisdiction of a municipality” means territorial jurisdiction.Heminder Kumari Vs ACIT (ITAT, Del) 57 ITD 409

When assessee entered into an agreement to sell land to a developer for developing as house sites and applied for approval of lay-outs – Land is no longer agricultural land.Davendra Pal Singh Vs CIT (All) 243 ITR 127

Income from crop of fruits from land situated within municipal limits and not assessed to land revenue or local rate is not agricultural income.Anand Bala Bhushan Vs CIT (All) 217 ITR 144

Finding that agricultural income had been inflated – No proof regarding source of income – Income assessable as income from Other Sources.Gopi Ram Lila Vs CIT (Raj) 225 ITR 320Ridhkarandas Poonamchand Bhura Vs CIT (MP) 231 ITR 604

Assessee sold rubber estate – Extension of time for payment of sale consideration was granted to vendee on condition of vendee paying certain amount towards loss of agricultural income – Sum so received is not agricultural income.Malabar Industrial Co. Ltd. Vs CIT (SC) 243 ITR 83

Income from fishing over land covered by water - Not agricultural income.Karra Jayabhyarathi Vs ITO (ITAT, Hyd) 96 ITD 414CIT Vs V.T.S. Sevuga Pandia Thevar ( Mad ) 1 ITR 78

Dealer in timber – Not engaged in agricultural operations – Purchased rubber trees for felling – Sale of latex till felling of trees – not agricultural incomeBharat Timber Trading Co. Vs CIT (Kar) 296 ITR 676

204

PROCEDURAL ASPECTS

FILING OF RETURNS AND ASSESSMENT

Deduction claimed after return filed – No revised return filed – Assessing Officer cannot entertain the claimGoetze (India) Ltd. Vs CIT (SC) 284 ITR 323

Return filed below the taxable limit was to be treated as an invalid return and proceedings taken on the basis of above return has to be treated as null & void.Babu Ram Vs ACIT (ITAT, Del) 59 TTJ 105

Return of Income not accompanied by proof of payment of 140A – defect not cured eventhough sufficient opportunities given by Assessing Officer – Return treated as invalid and non-est – subsequently no prayer for condonation of such delay can be made before CIT since Assessing Officer only has such power.Sudhir Sareen Vs CIT & Anr. (Del) 239 ITR 440

Return filed without enclosing 44AB Audit report – InvalidH.P. State Forest Corporation Limited Vs DCIT (HP) 231 ITR 556

Return filed without signature and verification of assessee – Not a valid return.Khialdas & Sons Vs CIT (MP) 225 ITR 960

Return of a company not signed and verified by its Managing Directors was an invalid return in the absence of any explanation indicating that he was prevented from signing and verifying the return for unavoidable reasonsNational Insurance Co. Ltd. Vs CIT (Cal) 213 ITR 862

Even if assessment is cancelled / annulled – No need to refund advance-tax and self-assessment tax – see Sec. 240Saurashtra Cement and Chemicals Industries Ltd Vs ITO (Guj) 194 ITR 659S. Sundaram Vs ITO (Kar) 163 ITR 662Chandra Mohan Vs Union of India & Ors. (MP) 241 ITR 484Saraya Sugar Mills Ltd Vs ITO & Ors. (All) 226 ITR 475E. Philip Joseph Vs ITO & Ors. (Ker) 234 ITR 846 CIT Vs Shelly Products & Anr.(SC) 261 ITR 367

Return filed u/s 139(4) – Not entitled to file revised return.Kumar Jadish Chandra Sunhat Vs CIT (SC) 220 ITR 67CIT Vs Jota Dillon (P&H) 231 ITR 102D. Georama Vs ACIT (ITAT, Bang) 66 ITD 552

205

No revised return can be filed subsequent to filing of return u/s 148CIT Vs Banshidhar Jalan & Ors. (Cal) 207 ITR 488ACIT Vs Cavinkare P. Ltd. 2007-TIOL-363-ITAT-MAD

Revised return can be filed u/s 139(5) only if there is omission or wrong statement in the original return – After filing of original return, a resolution was passed to change the method of valuation of closing stock – Not a reason to file revised returnGolden Insulation and Engineering Ltd. Vs CIT (Del) 165 Taxman 105 Issue of notice u/s 143(2) – Reasons need not be furnishedN.R. Paper and Board Ltd. & Ors. Vs DCIT (Guj) 234 ITR 733CIT Vs K. Unnikrishnan (Ker) 229 ITR 574Bandi Co-operative Labour & Construction Society Vs CIT (P&H) 300 ITR 107

After issue of intimation u/s 143(1)(a) notice u/s 143(2) can be issuedKamal Textiles Vs ITO & Ors. (MP) 189 ITR 339CIT Vs R.G. Umaranee (Mad) 262 ITR 507

After granting refund u/s 143(1)(a), notice u/s 143(2) can be issuedArihant Builders Developers & Investors (P.) Ltd. Vs ACIT (ITAT, Ind.-SB) 106 ITD 10

Time limit for issue of 143(2) does not apply to return filed in response to 148 Chandra Bhan Bansal Vs DCIT (ITAT, Agra) 79 ITD 639

Effect of retrospective amendment to sec. 148 by Finance Act, 2006 – Return filed pursuant to notice under section 148 on 16.07.1998 – Notice under section 143(2) on 16.10.1999 – Not barred by limitationCIT Vs C. Malathy (Mad) 294 ITR 532

Assessee participating in reassessment proceedings – Failure to consider objection to 148 notice and failure to issue notice under section 143(2) – Reassessment order not void but irregular – Matter remitted to assessing OfficerAreva T & D India Ltd. Vs ACIT (Mad) 294 ITR 233

Incentive in Samman Patra Scheme that their cases will not be subject to scrutiny for 3 years - Not absolute exemption - Issue of notice u/s 143(2) validMalu Khan Mahendra Singh Yasin Khan Vs DCIT (Raj) 298 ITR 16

142(2A) can be directed even on 44AB audit cases.Pani Devi Vs Union of India & Ors. (Raj) 245 ITR 798

Intimation issued under section 143(1)(a) is not an order of assessmentCIT Vs Omprakash Bagria (HUF) (MP) 287 ITR523

206

Assessment order should be issued so as to be beyond control of I.T. authorities before prescribed period.Commissioner of Agrl. IT Vs Kappumalai Estate (Ker) 234 ITR 187CIT Vs Sree Narayana Chandrika Trust (Ker) 212 ITR 456

Assessment of share income of one partner in a firm, stayed by Supreme Court – Consequent delay in assessment of another partner – Assessment not barred by limitation.Vijaypat Kailashpat Singhania Vs S.B. Sharma, WTO & Ors.(Bom) 216 ITR 410

Period during which stay order was in operation to be excluded for computing period of limitation for making order of assessment / re-assessmentAuto and Metal Engineers & ors. Vs Union of India & Ors.(SC) 229 ITR 399Thanthi Trust Vs CIT (Mad) 242 ITR 250

Corrigendum to an order should be passed and communicated to assessee within period of limitation prescribed for passing main order.Sanco Trans Ltd. Vs ACIT (ITAT, Mad) 61 ITD 317When there is a doubt as to which person amongst the two was liable to be assessed, parallel proceedings may be taken against both and alternative assessments may also be framedCIT Vs Durgawati Singh (All) 234 ITR 249

Tribunal remitting the matter to Assessing Officer only on certain specific points – Assessment not fully set-aside de novo – Two year limitation period specified in sec. 153(2A) not applicableBasu Distributors P. Ltd. Vs ITO (Del) 292 ITR 29

207

BEST JUDGEMENT ASSESSMENT

Best judgement assessment – So long as the estimate made by Assessing Officer is not arbitrary and has nexus with the facts discovered, the same cannot be questioned. Assessing Officer is the best judge of the situation.CIT Vs Rayala Corporation (P) Ltd. (Mad) 215 ITR 883

Failure to maintain Stock register – Genuineness of purchase not proved beyond doubt – There is always some degree of guess work in best judgement assessmentKachwala Gems Vs JCIT (SC) 288 ITR 10 Assessment u/s 144A –Opportunity to be heard not given to assessee – Assessment was not void – Assessment could be set-aside and fresh assessment made.Bhagwat Prasad Vs CIT (All) 232 ITR 480

Powers of IAC u/s 144A are wider and he can give a direction on matters not covered by draft assessment order.Bhagwat Prasad Vs CIT (All) 232 ITR 480

Best judgement asst – since no compliance to notice u/s 148 & 142(1) – Tribunal should not have cancelled assessment.CIT Vs P.P. Khader Haji (Ker) 234 ITR 461

Failure to get accounts audited u/s 142(2A) – Best judgement assessment valid.Swadeshi Polytex Ltd. Vs ITO (All) 127 ITR 287

208

RE-OPENING OF ASSESSMENT ( SEC. 147/148 )

REASONS FOR RE-OPENING – GENERAL

Failure to disclose fully and truly material facts – Belief of ITO that income had escaped assessment – sufficiency of reasons for forming the belief is not for the Court to judge.Phool chand Bajrang Lal and another Vs ITO & Anr. (SC) 203 ITR 456Raymond Woollen Mills Vs ITO & Anr. (SC) 236 ITR 34S. Narayanappa & others Vs CIT (SC) 63 ITR 219

“Information” for re-opening - explained Kalyanji Mavji & Co. Vs CIT (SC) 102 ITR 287

When there is no discussion on the issue in the assessment order and no details were called for by the Assessing Officer or filed by the assessee on the issue, no finding either positive or negative was arrived at during the course of the original assessment proceedings – hence there is no question of change of opinionKalyanji Mavji & Co. Vs CIT (SC) 102 ITR 287Ess Kay Engineering Co. (P) Ltd. Vs CIT (SC) 247 ITR 818Revathy C.P. Equipments Ltd. Vs DCIT & Ors. (Mad) 241 ITR 856A.L.A. Firm Vs CIT (Mad) 102 ITR 622ITO Vs Purushottam Das Bangur & Anr. (SC) 224 ITR 362Family of V.A.M. Sankaralinga Nadar Vs CIT (Mad) 48 ITR 314

Charitable Trust – Assessment granting exemption – subsequent information about violation of sec. 11 – Reassessment valid.Sreenarayana Chandrika Trust Vs CIT (Ker) 224 ITR 445Chandrika Educatinal Trust Vs CIT (Ker) 224 ITR 453

Failure to comply with Rule 1D for valuation of shares – Re assessment valid.N.J. Mathew Vs CIT (Ker) 231 ITR 37

Finding that income from liquor business had escaped assessment – re-assessment proceedings were valid.Pradeep Kumar Har Saran Lal Vs Assessing Officer (All) 229 ITR 46

Failure to disclose cessation of purchase tax liabilities – Re-opening valid.Mohammed K.S. Vs CIT (Ker) 228 ITR 591

On survey, it was found that wastage claimed was excessive – Re-opening on that ground is valid.Chennai Murasu (P) Ltd. Vs CIT (Mad) 239 ITR 269

209

Assessee filing revised return showing more income – Issue of 148 valid.Sukhlal Bhanwarlal (HUF) Vs CIT (MP) 226 ITR 513

Partners introduced capital and there were credits during the period – Matter required to the examined – 148 valid.Kohinoor Enterprises Vs ITO & Ors. (MP) 226 ITR 88

Depreciation allowed in original assessment – subsequent discovery that purchase of machinery might not be genuine – 147 valid Raunaq Finance Ltd Vs JCIT (Raj) 272 ITR 210Finding that investments had been made by assessee and that it had highly inflated its income from agriculture – 148 valid.Gopi Ram Lila Vs CIT (Raj) 225 ITR 320Muljimal N. Raghavanshi Vs CIT (Bom) 225 ITR 586Sukhlal Bhanwarlal (HUF) Vs CIT (MP) 226 ITR 513

Mother fails to include income of minor in her return – 147 validCIT Vs A.S. Rukmani Ammal (Mad) 260 ITR 391

148 on the basis of seized records, is valid – Assessee failed to explain entries in seized books – addition valid.Amrithlal Agarwal Vs ACIT (ITAT, Cal) 64 ITD 7

Change of opinion comes to rescue of assessee only when Assessing Officer has taken one of permissible views at the time of original proceedings - A wrong application of law cannot be held as permissible view and that can always be changed for appreciating law. – Granting deduction u/s 80HHB was the issue before CIT(A) – Subsequently Assessing Officer re-opened on genuineness of the principle amount of contract on which 80HHB deduction was claimed – No doctrine of mergerSom Dutt Builders (P) Ltd. Vs DCIT ( ITAT, Kol ) 98 ITD 78

In the original assessment order, deduction under section 80 HHC was worked out without considering Expl (baa) – Reopening to consider the Expl. (baa) held valid since no change of opinionJCIT Vs S.C. Chemicals (ITAT, Ahd) 99 ITD 41

Deduction u/s 80 P claimed on gross income instead of on net income – Reopening valid as income escaped assessmentACIT Vs Tamil Nadu Silk Producers Federation Ltd. (ITAT, Chennai) 105 ITD 623

Incorrect determination of investment allowance to be carried forward to subsequent assessment years – Escapement of income – Even if income was computed u/s 115 JJCIT Vs D.C. Polyster (P) Ltd. (ITAT, Mum) 102 ITD 394

210

Finding during investigation that depreciation was claimed on non-existent assets – Re-opening justified.Usha Beltron Ltd. Vs JCIT & Ors. (Pat) 162 CTR 232Gruh Finance Limited Vs JCIT (Guj) 243 ITR 482

148 can be issued on the basis of information in a non-est return – Non-est return is not a bar to issue 148 notice.Rajasthan State Handloom Dev. Corpn, Ltd. Vs DCIT (ITAT, Jp) 64 ITD 356

Where it was discovered that assessee was charging fiscal duties and direct manufacturing costs to its P&L a/c, but did not include these elements in its closing stock - re-opening u/s 147(a) valid.Raymond Woollen Mills Ltd Vs ITO & Ors. (SC) 236 ITR 34

Assessee incorrectly shown unsecured advances though they had been adjusted against bills – 148 valid.P.K. Haldar & Co. Vs CIT & Ors. (Pat) 237 ITR 317

From AY 89-90 onwards reopening can be done if AO had reason to believe that income escaped assessment eventhough there was no failure on the part of assessee.Rakesh Aggarwal Vs ACIT (Del) 225 ITR 496Praful Chunilal Patel Vs M.J. Makwana, ACIT (Guj) 236 ITR 832

Assessee cannot take shelter under plea that return did not require a particular fact to be set out, and therefore, failure to disclose facts would provide immunity to assessee from any notice u/s.148.Revathy C.P. Equipment Ltd Vs DCIT & Ors. (Mad) 241 ITR 856Precot Mills Ltd. Vs CIT & Anr. (Mad) 273 ITR 347 Distinguishes Fenner India

decision of Madras High CourtR.K. Malhotra, ITO Vs Kasturbhai Lalbhai (SC) 109 ITR 537Indo-Aden Salt Mfg. & trading Co. (P) Ltd. Vs CIT (SC) 159 ITR 624

Mercantile system – Liability claimed and allowed in original assessment – Failure to disclose that liability pertains to earlier year – Re-opening after four years upheldCIT Vs Kerala State Cashew Development Corporation Ltd. (Ker) 286 ITR 553

Failure to disclose material facts necessary for assessment – General principles applicable to 147(a) – Failure to disclose the fact that there was a discrepancy between the value of stock disclosed to the Bank and the value shown in the

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accounts – No satisfactory explanation regarding discrepancy – re-assessment valid .Dhansiram Agarwalla Vs CIT (Gau) 201 ITR 192

Mere production of account books or other evidence before ITO is not sufficient – Notice of reassessment on grounds that there had been undervaluation of closing stock and excessive allowance of development rebate – Notice valid.Vardhman Spinning and General Mills Ltd. Vs IAC & Ors. (P&H) 229 ITR 277Markanda Vanaspathi Mills Ltd. Vs DCIT ( ITAT, Del ) 62 ITD 263Bhushan Industrial Co. (P) Ltd. Vs ACIT ( ITAT, Chd ) 68 ITD 195

Failure to disclose fully and truly material facts – facts which could have been found by ITO by further probing – 147 valid.Indo-Aden Salt Mfg.& Trading Co. P. Ltd. Vs CIT (SC) 159 ITR 624R.B. Bansilal Abirchand Firm Vs CIT (SC) 70 ITR 74

Re-opening after 4 years – Omission or failure on the part of the assessee – Subsequent to scrutiny assessment, Contradiction discovered between tax audit report and return of income regarding date of acquisition of goodwill – Reopening upheld.Piaggio Vehicles P. Ltd. Vs DCIT (Bom) 290 ITR 377

Re-opening after 4 years – Omission or failure on the part of the assessee – Subsequent to scrutiny assessment, it was found that part of the expenses relate to the house used by Dy. Chairman of the company for personal use – Sec. 40A(5) was not applied earlier – Omission / failure by assessee – Re-opening validSouth India Corporation Agencies P. Ltd. Vs CIT (Mad) 147 CTR 476

Before according sanction by CIT / DCIT for re-opening, no need to give opportunity of hearing to assessee.S. Narayanappa & others Vs CIT (SC) 63 ITR 219148 – reasons recorded in the report sent by Assessing Officer to CIT to obtain sanction is the most relevant record.Equitable Investment Co. (P) Ltd. Vs ITO & Ors. (Cal) 174 ITR 714Stock Exchange, Ahmedabad Vs ACIT (Guj) 227 ITR 906

Petitioner challenged 148 notice on the ground that deduction u/s.80HHC had already been examined by CIT(A) and merged with this order. – Since notice was issued in an entirely different context which was not examined earlier by CIT(A), notice valid.Venus Industrial Corporation Vs ACIT (P&H) 236 ITR 742Som Dutt Builders (P) Ltd. Vs DCIT ( ITAT, Kol ) 98 ITD 78

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Original return filed with income below taxable limit – Department treated it as non-est u/s 139(1) – Reassessment initiated u/s 147(a) – valid – In the reasons recorded for issuing 148, some facts were recorded wrongly – 148 is valid.Babu Ram Vs ITO (ITAT, Del) 90 TTJ 332

Amalgamation of companies – Benefit of carry forward and set off of unabsorbed depreciation wrongly allowed – Notice under section 148 within 4 years – validACIT Vs Apollo Hospital Enterprises Ltd. (Mad) 300 ITR 167

Specification of size of land, which is a condition for claiming deduction under section 80 IB, not mentioned in the return, but the information was available in the annexure to return – Not sufficient – Amounts to failure to disclose material facts necessary for assessment – Re-opening after 4 years upheldGirilal & Co. Vs S.L. Meena, ITO (Bom) 300 ITR 432

INFORMATION FROM OTHER OFFICES

Assessment on the basis of report of Registered Valuer – Subsequent report of District Valuation Officer estimating cost of constructions at a higher figure – constitutes “information” for reopening u/s 147.Chetna Enterprises Vs ITO (ITAT, Pat-TM) 63 ITD 257Amrut Talkies Vs ITO (Kar) 150 ITR 386Shashi Jain Vs ITO & Anr. (All) 228 ITR 682CWT Vs V. Cletus Vincent (Ker) 213 ITR 14Karni Singh Ji of Bikaner Vs DCIT & Anr. (Del) 237 ITR 505

Communication received by Assessing Officer in discharge of official duties – information for issue of 147 notice.Srinivasa Khandasari Udyog Vs ITO (ITAT, Bang) 56 ITD 146ITO Vs Purushottam Das Bangur & Anr. (SC) 224 ITR 362Elphinstone Picture Palace Vs Union of India & Anr. (Pat) 74 ITR 115H.A. Nanji & Co. Vs ITO (Cal) 120 ITR 593Sohan Singh Vs CIT (Del) 158 ITR 174 Rattan Gupta Vs CIT (P&H) 234 ITR 220

Letter of Wealth Tax Officer assessing donee about higher valuation of gifted property constitute information for re-opening under Gift Tax Act.CGT Vs Susheela Shanmugasundaram (Mad) 242 ITR 176

Letter of CIB wing constitute material for reopeningITO Vs Gurinder Kaur (ITAT, Del) 102 ITD 189

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INFORMATION FROM PROCEEDINGS OF OTHER YEARS

Valuation report for a subsequent year –information for re-opening.K.G. Kemptex & Anr. Vs WTO (Kar) 146 ITR 611

147 notice based on assessment of subsequent assessment year is valid even if appeal is pending from such assessmentAnusandhan Investments Ltd. Vs M.R. Singh (Bom) 287 ITR 482

Information obtained in assessment proceedings of a subsequent year – 147 valid.Raymond Woollen Mills Limited Vs ITO & Anr. (SC) 236 ITR 34K.R. Venkatesan Vs WTO & Ors. (Mad) 237 ITR 293Revathy C.P. Equipments Limited Vs DCIT & Ors. (Mad) 241 ITR 856Claggett Brachi Co. Ltd. Vs CIT (SC) 177 ITR 409Kalyanji Mavji & Co. Vs CIT (SC) 102 ITR 287Virudhnagar Co-operative Milk Supply Society Ltd. Vs CIT (Mad) 183 ITR 545Ropar District Co-operative Milk Producers Union Ltd. Vs CIT (P&H) 165 Taxman 477

INFORMATION FROM OTHER PROCEEDINGS

Re-opening on the basis of Wealth Tax assessment for subsequent year – validMuljimal N. Raghavanshi Vs CIT (Bom) 225 ITR 586Baldevraj Sitaram Malhotra (HUF) Vs ITO (ITAT, Pune-SB) 58 ITD 35- Disclosed in

the Wealth Tax return for same years – still reopening is valid.

ITO can initiate reassessment proceedings on the basis of declaration made under VDIS, 1976.Vasantibai N. Shah Vs CIT (Bom) 213 ITR 805

Re-opening WT assessment on the basis of findings in IT assessment – validJ.K. Charitable Trust Vs WTO & Ors. (All) 139 CTR 114

Affidavit by assessee’s daughter in a different proceeding showing that assessee had made a gross understatement of expenditure incurred in daughter’s marriage – 147 valid.Jagan Nath Singhal Vs DCIT & Anr. (P&H) 242 ITR 554

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INFORMATION FROM AUDIT

Audit report regarding omission by Assessing Officer – subsequent correspondence with assessee and investigations – Issue of 147 subsequently, is valid.Teekoy Rubbers (India) Limited Vs CIT (Ker) 181 ITR 387Renusagar Power Co. Ltd. Vs ITO & Anr. (All) 117 ITR 719M.A. Chidambaram Vs CIT (Mad) 216 ITR 175Tube Suppliers Limited Vs CIT (Mad) 216 ITR 596CIT Vs First Leasing Co. of India Ltd. (Mad) 241 ITR 248

Position of law pointed out by Internal Audit Party – Re-opening on that basis is valid.CIT Vs P.V.S. Beedies P. Ltd. (SC) 237 ITR 13

REOPENING ON THE BASIS OF COURT DECISIONS

Judgements that are relevant but not considered at time of original assessment – would constitute information u/s 147(b)CIT Vs Novapon India Limited (AP) 236 ITR 746

Decision of Supreme Court would constitute information for re-opening – Fact that decision of Supreme Court was pronounced after issue of notice would not render notice invalid.Chandi Ram Vs ITO & Anr. (Raj) 225 ITR 611State Bank of Mysore Vs IAC (ITAT, Bang ) 63 ITD 307Beverley Estates Limited Vs CIT (Mad) 117 ITR 302Maharaj Kumar Kamal Singh Vs CIT (SC) 35 ITR 1

Officer not considering High Court decision though available at time of original assessment – Re-opening to consider the same – valid.A.L.A. Firm Vs CIT (SC) 189 ITR 285ITO Vs Saradbhai M. Lakshmi & Anr. (SC) 243 ITR 1Madras Race Club Charitable Trust Vs CIT (Mad) 245 ITR 240

ITO re-opening assessment in view of opinion of Tribunal in other cases – Valid.CIT Vs Raghunath Poddar (Cal) 96 ITR 316

Orders of AAC / ITAT constitutes information for re-opening u/s.147Manaklal Porwal Vs CIT (Raj) 155 ITR 648CIT Vs Makhan Singh (Raj) 154 ITR 121Kumar Engineers Vs CIT (P&H) 223 ITR 18

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RE-OPENING ON THE BASIS OF COURT DIRECTION - EXTENDED PERIOD AVAILABLE

Extended period for re-opening - when the re-assessment made in consequence of and to give effect to finding or direction contained in appellate order CIT Vs Amy Colabawala (Ker) 243 ITR 19N.K.T. Sivalingam Chettiar Vs CIT (SC) 66 ITR 586Hungerford Investment Trust Ltd. Vs ITO & Ors. (SC) 231 ITR 175CIT (Deputy) Vs Spences Hotel P. Ltd. (Kar) 289 ITR 145

Addition made in Block assessment and similar addition was not made in regular assessment – ITAT deleted addition in block assessment but held that Assessing Officer is free to take recourse in regular assessment – Re-opened regular assessment – No time limit will applyHanemp Properties (P.) Ltd. Vs ACIT ( ITAT, Del ) 101 ITD 19

Finding by Tribunal that income was earned by co-owners and could not be assessed as AOP – ITO initiating 148 action based on that observation – Sec. 150 applicable – No bar of limitation.CIT Vs Amy Colabawala ( Ker ) 243 ITR 19

Reassessment to give effect to finding or direction in an order of Court in Land Acquisition proceedings – Bar of limitation will not apply.K.M. Sharma Vs ITO & Ors. (Del) 221 ITR 202Assessment in pursuance of directions issued by Court / tribunal – Section 150(1) applies – Re-opening not time barredACIT Vs Rajendra Kumar 2008-TIOL-278-ITAT-DEL

SERVICE OF NOTICE U/S 147

Simultaneous notice u/s 147 to AOP & member permissible – Notice served on AOP through member is valid.R.Dalmia Vs Union of India & Ors. (Del) 84 ITR 616

No standard form is prescribed for a notice u/s 148 – Notice u/s 148 served on an AOP and addressed to 8 persons who also well understood that it was meant for them, is a valid notice.Sardar Harvinder Singh Sehgal & Ors. Vs ACIT & Ors. (Gau) 227 ITR 512Rama Boiled Modern Rice Mill Vs ITO (ITAT, Hyd) 97 ITD 379

148 notice served on a person who normally received the notices on behalf of assessee though not specifically authorized – validly served.A.K.M . Govindaswamy Chettiar & Ors. Vs ITO (Mad) 244 ITR 559

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Retrospective amendment to sec. 148 omitting words “not being less than 30 days:” – validM. Srinivasalu Vs Union of India & Ors. (Kar) 239 ITR 282

148 notice issued within limitation period – served subsequent to expiry date of limitation – Assessment valid.New Bank of India Limited Vs ITO (Del) 136 ITR 679Indra Chand Jain Vs DCIT (ITAT, Del) 59 TTJ 699R.K. Upadhyaya Vs. Shanabhai P. Patel (SC) 166 ITR 163

OTHER ISSUES RELATING TO RE-ASSESSMENT

ITO can bring to tax any income which escaped assessment and not only items which led to issuance of notice u/s.148. Matters attaining finality in original assessment – assessee cannot dispute.CIT Vs Sun Engineering Works P. Limited (SC) 198 ITR 297CIT Vs N. Krishnan (Ker) 233 ITR 646V. Jaganmohan Rao & Ors. Vs CIT (SC) 75 ITR 373CIT Vs Standard Motor Products of India Ltd. (Mad) 142 ITR 877CIT Vs B. Nagi Reddy (Mad) 144 ITR 62CIT Vs Ram Kishan Leela (Raj) 295 ITR 525

Once reassessment proceedings has resulted in reassessment, the original assessment order can no longer survive.CIT Vs K. Kesava Reddiar (Ker) 178 ITR 457Kerala Kaumudi (P) Ltd. Vs CIT (Ker) 181 ITR 30CIT Vs American President Lines Ltd. (Bom) 194 ITR 571

Pursuant to re-assessment proceedings, additions made in original assessment does not get effacedN.M. Vishwanathan Vs CIT (Kar) 286 ITR 487

Eventhough loans were accepted in original assessment, after re-opening onus is again on assessee to prove the same.K.M. Sadhukhan & Sons (P)Ltd. Vs CIT (Cal) 239 ITR 77

Assessee cannot claim deduction neither claimed nor allowed in original assessment during the course of re-assessment proceedings.India Forge & Drop Stampings Limited Vs CIT (Mad) 233 ITR 112Chettinad Corporation P. Ltd. Vs CIT (SC) 200 ITR 320

Provision of Sec. 147 as amended w.e.f. 1.4.89 have retrospective effect in respect of assessments already completed for which limitation period for re-opening has not expired.Indra Chand Jain Vs DCIT (ITAT, Del) 59 TTJ 699DCIT Vs Kelvinator of India (ITAT, Del) 67 ITD 213

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On ultimate analysis, no addition was made in respect of issues on which 148 was issued – still 147 upheld.Poonam Rani Singh Vs DCIT (ITAT, Del) 97 ITD 390DCIT Vs Alok Banerjee (ITAT, All) 111 ITD 339

Reason to believe can emanate from facts already on record – AO issued 154 notice & dropped – Still 147 can be issued.WTO Vs Aditya Narula (ITAT, Cal) 68 ITD 61Rama Boiled Modern Rice Mill Vs ITO (ITAT, Hyd) 97 ITD 379

143(2) proceedings pending – 148 issued – Permissible.Deepak Kumar Poddar Vs Union of India & Ors. (Pat) 224 ITR 95

Though the first notice u/s 148 was without any basis and proceedings were dropped, a fresh notice u/s. 148 backed by reasons, is valid.Kohinoor Enterprises Vs ITO & Ors. (MP) 226 ITR 88CIT Vs N. Jayaprakash (Ker) 285 ITR 369Srinivasa Computers Ltd. Vs ACIT (ITAT, Chennai) 107 ITD 357

Return not filed – Non compliance with notices issued u/s 139(2) and 142(1) - assessment closed as Nil Assessment and not communicated to assessee - Again 148 issued – valid.CIT Vs Indo Marine Agencies (Kerala) P. Ltd. (Ker) 279 ITR 372

ITAT set-aside assessment to ITO to decide on one issue – when proceedings are pending, Assessing Officer issued 148 on another issue – valid.ACIT Vs Sachdeva & Sons (ITAT, Asr) 97 ITD 425.

Availability of other routes like rectification / revision is not a bar to issue 148.CIT Vs First Leasing Co. of India Limited (Mad) 241 ITR 248Salem Provident Fund Society Ltd. Vs CIT (Mad) 42 ITD 547

Sections 148 and 153A operate in different fields – Notice under section 148 for an A.Y. not falling within the six year period provided under section 153A – validRamballabh Gipta Vs ACIT (MP) 288 ITR 347

Issue of 147 held valid even when time to issue 143(2) was there.Punjab Tractors Ltd. Vs DCIT (P&H) 254 ITR 242Sri Krishna Mahal Vs ACIT (Mad) 250 ITR 333

Intimation u/s.143(1)(a) not an assessment – Addition made u/s 143(1)(a) deleted by CIT(A) – Failure to issue 143(2) not material - 148 issued - validPradeep Kumar Har Saran Lal Vs Assessing Officer (All) 229 ITR 46 Bharat V. Patel Vs Union of India (Guj) 268 ITR 116MTNL Vs Chairman, CBDT & Anr. (Del) 246 ITR 173–Poonam Rani Singh Vs DCIT (ITAT, Del) 97 ITD 390

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ACIT Vs Rajesh Jhaveri Stock Brokers P. Ltd. (SC) 291 ITR 500

Letter of CIT with a direction to issue notice for re-assessment and take proceedings in accordance with law – Only a reminder of statutory duty – Assessing Officer independently applying mind to facts, recording prima facie belief and reasons therefore before issuing notice – Valid noticeCIT Vs Abdul Khader Ahamed (Ker) 285 ITR 57

Validity of re-opening does not depend upon quantum of finally assessed incomeJCIT Vs D.C. Polyster (P) Ltd. (ITAT, Mum) 102 ITD 394ITO Vs Gurinder Kaur (ITAT, Del) 102 ITD 189

Where assessee was aware of reasons for re-opening, non-communication of reasons not fatal – Where assessee had complied with notice u/s 148 reassessment proceedings cannot be struck down on the basis of assessee’s claim that she did not receive the 148 noticeITO Vs Gurinder Kaur (ITAT, Del) 102 ITD 189

Where notice issued by ACIT in a case where there was no assessment earlier u/s 143(3), no need to obtain sanction of JCIT before issue of notice u/s 148ITO Vs Gurinder Kaur (ITAT, Del) 102 ITD 189

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APPEAL BEFORE CIT(A) / ITAT – LAW AND PROCEDURE

ADMISSION OF ADDITIONAL EVIDENCE

Order of AAC show that not even an iota of additional evidence was produced before him in support of the assessee’s case that there was improper service of notice on him – Failure of assessee to follow requirements of R. 46A – AAC justified in not considering additional evidence.C.Unnikrishnan Vs CIT (Ker) 233 ITR 485

The mere fact that the evidence sought to be produced is vital and important does not provide a substantial cause to allow its admission at the appellate stage, especially when the evidence was available to the party at the initial stage and had not been produced by him.CIT Vs Jaipur Udyog Ltd. (Raj) 227 ITR 345Velji Deoraj & Co. Vs CIT (Bom) 68 ITR 708Jyotsna Suri Vs DCIT (ITAT, Del) 61 ITD 139A.K. Babu Khan Vs CIT (AP) 102 ITR 757DCIT Vs Vira Construction Co.(ITAT, Mum TM) 61 ITD 33Ram Prasad Sharma Vs CIT (All) 119 ITR 867

For admitting additional evidence, Tribunal has to follow Rules 29, 30 & 31Roshal Di Hatti Vs CIT (SC) 107 ITR 938

Third Member cannot consider fresh evidenceDCIT Vs B.P. Agarwalla & Sons Ltd. (ITAT, Kol-TM) 86 ITD 219

Application must be made for admission of additional evidence, with reasonsBimal Kumar Anant Kumar Vs CIT (All) 288 ITR 278

No reason for not producing the additional evidence before the lower authorities – Application for admission rejectedN.B. Surti Family Trust Vs CIT (Guj) 288 ITR 523Ranjit Kumar Choudhury (Gau) 288 ITR 179

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ADMISSION OF ADDITIONAL / NEW GROUNDS

Question of law can be raised afresh before ITAT.National Thermal Power Co. Ltd. Vs CIT (SC) 229 ITR 383

Claim for relief not made before ITO – No material on record supporting such claim – Tribunal cannot direct ITO to examine claim on merits.CIT Vs G.S. Rice Mills (All) 136 ITR 761

Tribunal has power to permit additional grounds to be raised before it.Ahmedabad Electricity Co. Ltd. Vs CIT (Bom) 199 ITR 351CIT Vs Bengal Jute Mills Co. Ltd. (Cal) 165 ITR 631

Additional ground – Appellant to satisfy Tribunal about existence of good reason for omission of such ground in original appeal memo – Failure of assessee to give any reason – Additional ground could not be entertained.Batliboi & Co. Ltd. Vs DCIT (ITAT, Mum) 67 ITD 397S. Kumars Tyre Mfg. Co. Ltd. Vs DCIT (ITAT, Indore) 61 ITD 326

In assessee’s appeal, ITAT can allow Department to raise new ground and remand matter to ITO for enquiry and action.Hukumchand Mills Ltd. Vs CIT (SC) 63 ITR 232

Tribunal can allow Department to raise a new contention before it for the first time.D.M. Neterwalla Vs CIT (Bom) 122 ITR 880CIT Vs Gilbert & Barker Mfg. Co. ( Bom ) 111 ITR 529N.P. Saraswathi Ammal & ors. Vs CIT ( Mad ) 138 ITR 19

Tribunal was competent to allow Department to urge that interest was leviable u/s 215 eventhough interest u/s 217 was levied in assessment orderAssam Carbon Products Ltd. Vs CIT (Gau) 140 CTR 30

Tribunal should not treat the additional grounds as additional appeal and reject it on the ground of delay, more so when the additional ground did arise from the facts already on record.National Newsprint & Paper Mills Ltd. Vs CIT (MP) 141 CTR 485

No time limit or rigid rule for filing additional grounds, if appeal is filed in time.Shilpa Associates Vs ITO (Raj) 263 ITR 317

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AGREED ADDITION

No appeal lies against agreed additions.Rameshchandra & Co Vs CIT. (Bom) 168 ITR 375Ramanlal Kamdar Vs CIT (Mad)108 ITR 73Mahesh B, Shah Vs CIT (Ker) 238 ITR 130

Penalty imposed on the basis of agreement between assessee and Department – No appeal lies against this.Banta Singh Kartar Singh Vs CIT (P&H) 125 ITR 239India Sea Foods Vs CIT (Ker) 114 ITR 124Indira Chemical Agency Vs CIT (Mad) 119 ITR 569

Authorised Representative making agreement with Assessing Officer – Binding on assessee.Jayasree Chit Funds & Services (P) Ltd. Vs CIT (Kar) 127 ITR 740Turner Morrison & Co. Ltd. Vs Hungerford Investment Trust Ltd. (SC) 85 ITR 607 pp.609 – principle laid down

Assessment completed on the basis of return filed by assessee – Assessee cannot raise any question of limitation.C.I. Haleema Vs State of Kerala (Ker) 152 CTR 154

When there is controversy between the parties, the statement made by the judge should be accepted as final and conclusive. If the assessee has any objection, he has to immediately file a review petition before the same authorityReal Food products (P) Ltd. Vs ITAT (AP) 229 ITR 351

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CONDONATION OF DELAY

High Court’s order against the assessee later on reversed by Supreme Court – since High Court judgement was against the assessee it did not file appeal, but when SC decision came in its favour, it decided to file appeal – This is a reasonable cause for condonation of delay. But when assessment order was passed and limitation to file appeal over, even HC order was not there – Hence there is no reasonable cause for delay in filing appeal.State of Andhra Pradesh Vs Venkataramana Chuduva & Muramura Merchant & Anr.(AP) 159 ITR 59.

Condonation of delay – Party has to show reason for delay on the last day of limitation period and thereafter for each day thereafter – Condonation is not a matter of right – Court has to exercise the discretionary jurisdiction.Rankak & Ors, Vs. Rewa Coalfields Ltd. AIR 1962 SC 361JCIT Vs Tractors & Farm Equipments Ltd. (ITAT, Chennai-TM) 104 ITD 149

Liberal approach to be taken in respect of appeals by DepartmentCollector Land Acquisition Vs Mst. Katiji (SC) 167 ITR 471State of Haryana Vs Chandra Mani 1996 AIR SC 1623G. Ramegowda, Major Vs Special Land 1988 AIR SC 897 Time taken to obtain certified copy of order can be excluded for computing period of limitation for filing appeal.ITO Vs Meghalaya Bonded Warehouse (Gau) 60 ITD 219

Delay in filing the appeal – cause for delay – whether the appellant has acted with reasonable diligence in the prosecuting of his appeal – to be looked into.Brij Inders Singh v. Kanshi Ram AIR 1917-PC-156Baroda Rayon Corpn. Ltd. (Guj) 87 STC 266M. Krishna Rao D. Phalke vs. Trimbak AIR 1938 Nag. 156Baldeo Lal Roy vs. State of Bihar (1960) 11 STC 104 (Pat)

INHERENT POWERS

Appellate authority has the jurisdiction as well as the duty to correct all errors in the proceedings under appeal and to issue, if necessary, appropriate directions to the authority against whose decision the appeal is preferred to dispose of the whole or any part of the matter afresh, unless forbidden from doing so by the statuteKapurchand Shrimal Vs CIT (SC) 131 ITR 451

CWT (A) can direct Assessing Officer to make revaluation after referring to valuation officer if Assessing Officer has made valuation without any such reference.

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CWT Vs Prasad Productions (P) Ltd (Mad) 259 ITR 88

CIT(A) can examine all matters covered by the assessment orders and even can correct the assessment in respect of all such matters to the prejudice of assessee.Indermal Natwarlal Vs CIT (MP) 166 ITR 494

Appeal to AAC – Power to make further enquiry and receive additional evidence – Restrictions placed on production of additional evidence by assessee only – Would not affect powers of AAC to call for production of document or examination of witness to enable him to dispose off appeal – power conferred on AAC is quasi-judicial. – Failure of AAC to exercise discretion judicially and arbitrary refusal to make enquiry in a case where circumstances demand – Action of AAC would be open to correction by higher authority.Prabhavathi S. Shah Vs CIT (Bom) 231 ITR 1

Revenue raising preliminary point that Assessing Officer committed an error in making the assessment – Tribunal accepting this point and remanding matter to Assessing Officer for fresh assessment – Valid even if fresh assessment result in enhance of Total Income.Bhavna Chemicals Ltd. Vs CIT (SC) 231 ITR 507

Tribunal is final fact-finding authority – Is under a legal obligation to record correct finding of fact – Difficulty in recording correct finding of fact on account of contradictions in factual position – Tribunal has power to remand matter to lower authority to state correct facts.CIT Vs Manohar Glass Works (All) 232 ITR 302Kapurchand Shrimal Vs CIT (SC) 131 ITR 451

Tribunal’s proceedings of remand are wide and inclusive of issuing direction to lower authority to consider any issue on the basis of facts collected on enquiry.Thanthi Trust Vs ACIT (Mad) 238 ITR 117

ITAT/AAC has power to assess an income under a different head.Sneh Lata Vs CIT (All) 61 ITR 139Steel Containers Limited Vs CIT (Cal) 112 ITR 995

Facts necessary for considering the claim, is before Tribunal – Absence of specific appeal or cross appeal would not prevent Tribunal from granting relief.CIT Vs S. Vijayalakshmi (Mad) 242 ITR 46

CIT(A) can validly issue directions to treat a part of the amount as income in next year, which is not in appeal before him.DCIT Vs S. Man Mohan Singh (ITAT, Del) 63 TTJ 491

CIT(A) has all powers of Assessing Officer eventhough power to set-aside was removed in 2001.

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Tolin Rubbers (P) Ltd. Vs CIT (Ker) 264 ITR 439

JURISDICTION

There is no inherent right of appeal – It is to be specifically conferred by the statute providing for an appeal.Caltex Ore Refining (India) Ltd. Vs CIT (Bom) 202 ITR 375.

Appeal for revision to CIT and appeal to AAC on same issue – order passed in revision by CIT – ITO’s order merged in order of CIT – Appeal to AAC rendered incompetent.CIT Vs Eurasia Publishing House (P) Ltd. (Del) 232 ITR 381

The right of appeal is not an inherent right – It is a statutory right – No appeal lies against order u/s 197(3)CIT Vs Garware Nylons Limited (Bom) 212 ITR 242

Instruction fixing monetary limit of Rs.1 lakh for filing appeal before ITAT came into force only from 1.4.2000→Not applicable for Assessment Years prior to that.CIT Vs Kodanand Tea Estates Co. (Mad) 275 ITR 244

Chartered Accountant’s certificate specifying that tax at a particular rate is required to be deducted by assessee from a particular remittance to a non-resident – Not an appealable orderMahindra & Mahindra Ltd. Vs Addl. DIT (ITAT, Mum) 106 ITD 521

No appeal lies against determination of interest u/s 244(1A)CIT Vs H.V. Mirchandani (Kar) 161 ITR 800

Objection to the order of transfer of a case cannot be raised in appeal before CIT(A) / ITATJaswinder Kaur Koover Vs CIT(A) (P&H) 291 ITR 80

Waiver of interest by CCIT – In the consequential order passed by Assessing Officer, interest u/s 244A not granted – No appeal liesITO Vs A.J. Dhanapal (ITAT, Chennai) 99 ITD 317

Levy of interest u/s 220(2) – Not appealableCIT Vs Suresh Gokuldas (Mad) 229 ITR 721ANZ Grindlays Bank PLC Vs CIT (Cal) 241 ITR 269

Levy of interest u/s 158BFA – Not appealableKandabai S. Baldawa & Ors. Vs DCIT (ITAT, Pune) 81 TTJ 953

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Losses for each year has to be determined separately. If assessee has any objection against it, he has to make appeal for the year in which loss occurred. Assessee cannot claim in a subsequent year (when profit was made), to determine loss for an earlier year and set off against current year’s profit.CIT Vs Dalmia Cement (Bharat) Ltd.(SC) 216 ITR 79

ITAT directing CIT(A) to record a finding on one issue – CIT(A)’s power is limited to that issue alone.Baldev Sing Giani Vs CIT (P&H) 248 ITR 266

Question raised before ITAT but not decided by it, is question arising out of the order of ITAT.CIT Vs Anaimugan Transports (P) Ltd. (1995) (Mad) 215 ITR 553Alternate contention not raised before Assessing Officer & CIT(A) – ITAT cannot entertain it.C.K. Gopinathan Vs CIT (Ker) 260 ITR 213

Claim for exemption not made before ITO – No material on record supporting such claim – AAC cannot entertain such claim in appeal proceedings.Addl. CIT Vs Gurjargravures P. Ltd. (SC)111 ITR 1CIT Vs G.S. Rice Mills (All) 136 ITR 761

CIT can grant relief only to the extent it was declined by lower authority.Punjab Feed Mills Vs ITO (P&H) 228 ITR 386

Tribunal is not competent to determine whether provisions violate articles of constitution.Taylor Instrument Co.(India) Limited Vs CIT (Del) 232 ITR 771

Jurisdiction of AAC is strictly confined to assessment order of each year under appeal – No power is conferred to make an order or issue directions in respect of an Assessment Year which is not subject matter of appeal.ITO Vs Muralidhar Bhagwan Das (SC) 52 ITR 335 (5 Judges)CIT Vs Manik Sons (SC) 74 ITR 1CIT Vs T.P.S.H. Selva Saroja (Mad) 244 ITR 671Pt. Hazarilal Vs ITO (All) 39 ITR 265R.H. Dave Vs CIT (Cal) 140 ITR 1035Gundathur Thimmappa & Sons Vs CIT (Mys) 70 ITR 70Consolidated Coffee Limited Vs ITO (Kar) 155 ITR 729CIT Vs Rafiulla Tea and Industries (P) Limited (Gau) 234 ITR 433

Tribunal has no power to reduce penalty to a figure lower than minimum prescribed by statute.CIT Vs J Stead and Co. P. Ltd. (Mad) 234 ITR 730

Assessee cannot take contradictory stand before Tribunal & High Court

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D.M. Neterwalla Vs CIT (Bom) 122 ITR 880

Jurisdiction of Tribunal is restricted to the subject matter of appeal which is stated in original Grounds of Appeal and additional Grounds of Appeal – It is not open to raise any ground which would work adversely to the appellant and pass on order which makes his position more worse.J.K. Bankers Vs CIT (All) 94 ITR 107Jayakumar B. Patil Vs DCIT ( ITAT, Pune ) 108 ITD 439

Original assessment proceedings not stand merged in reassessment proceedings – Appeal filed in Tribunal about original assessment are not infructious – Even if addition was made on some issue in reassessment proceedings ITAT should examine it when appeal against original assessment comes up.M.R. Raghuram (HUF) Vs ACIT (ITAT, Bang) 62 ITD 94

In the proceedings before ITO for making fresh assessment pursuant to directions in appellate order, only such issues can be agitated which have not attained finality – Remand by IAC to verify cash credits, ITO could not decide the issue of validity of reassessment.Murlidhar Bhagwandas Vs CIT (Bom) 149 CTR 425/234 ITR 548Sudershan Kumar Vs ITO (ITAT, Asr-TM) 62 ITD 243M.S.P. Senthilkumar Vs CIT (Mad) 241 ITR 502Territorial jurisdiction of ITO – Objection not raised before ITO within one month of filing of return – Not maintainableGrindlays Bank Vs CIT (Cal) 193 ITR 457

Respondent before Tribunal, though he may not have appealed, may support order appealed against on any of grounds decided against him by first appellate authority.CIT Vs BPL Systems & Projects Limited (Ker) 227 ITR 779Travancore Chemical & Mfg. Co. Ltd. Vs CIT (Ker) 226 ITR 429

Power of Tribunal is restricted to the subject matter of appeal aloneKanpur Industrial Works Vs CIT (All) 59 ITR 407V. Ramaswamy Iyengar & Anr. Vs CIT (Mad) 40 ITR 377Hukumchand Mills Ltd. Vs CIT (SC) 63 ITR 232

POWER OF ENHANCEMENT

CIT(A) is duty bound to exercise his power of ‘enhancement’ either suo moto or on motion by Assessing Officer – If Assessing officer made such a request and CIT(A) failed to make enhancement nor even mention about such request in his order, Assessing Officer can file appeal on this issue before ITAT.Popular Automobiles Vs CIT (Ker) 187 ITR 86

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AAC entitled to direct additions in respect of items of income not considered by ITO.CIT Vs Nirbheram Daluram (SC) 224 ITR 610

No discussion about commission income in assessment order – But mentioned it in office note appended to it – CIT(A) has jurisdiction to make enhancement on that issue.Eskayef Ltd Vs DCIT (ITAT, Bang) 71 ITD 419

Enhancement by CIT(A) without giving notice to assessee – Procedural irregularity – Tribunal justified in remanding case of CIT(A).Pranakrishna Swain Vs CWT (Orissa) 187 ITR 143

AAC has all plenary powers which AO is having.Jute Corporation of India Limited Vs CIT (SC) 187 ITR 688

No notice by CIT(A) was necessary to assessee before enhancement as income computed did not exceed income determined by Assessing Officer.CIT Vs T. Namberumal Chetty & Sons ( Mad ) 1 ITR 32Sukhdev Singh Vs DCIT (ITAT, Chd) 95 Taxman (Mag) 116

No statutory notice prescribed u/s 251(2) – If assessee is made aware of proposed action of enhancement of income, explanation obtained and considered, then enhancement is proper.Honda Siel Cars India Ltd. Vs ACIT (ITAT, Del) 109 ITD 1

PROCEDURE

Order of ITAT without giving reasons – Not valid CIT Vs Nirmal Liquors (Ker) 190 ITR 636Kundanmal Kothari (HUF) Vs CIT (Gau) 93 Taxman 620CIT Vs Hazari Mal Kuthiala & Co. (P&H) 226 ITR 424

Tribunal to consider carefully all the evidence and the arguments raised by the parties and give a well reasoned order.J. Bheemananda Gupta Vs ACIT (Kar) 250 ITR 537ITO Vs K. Ambaji Rao (Kar) 250 ITR 277ACIT Vs Gautam Investments (P) Ltd. (Kar) 250 ITR 324CIT Vs Palwal Co-operative Sugar Mills Ltd. (P&H) 284 ITR 153Vipul Fashions P. Ltd. Vs ACIT (Guj) 284 ITR 332CIT Vs Mandsaur Ferro Alloys Ltd. (MP) 296 ITR 176

Intervention application – only for addressing arguments – Order cannot be passed in favour of intervenor.Saraswathi Industrial Syndicate Limited Vs CIT (SC) 237 ITR 1

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Where ITAT comes across any case law after the hearing is over and opines that such decision has an impact over the issue in question, it is the primary and legal duty of ITAT to repost the case of hearing and get views of the counsels of both sides – Principles of ‘res judicata’ is strictly not applicable if there are sufficient facts, circumstances or materials to justify a different decision in the case of same assessee on same issue. Tribunal need not follow the ratio laid down in its earlier orders, if certain judicial precedents which were not brought to its notice earlier or provisions of law or correct interpretation of law came to its knowledge subsequently.Sriram Transport Finance Co. Ltd. Vs ACIT (ITAT, Mad) 70 ITD 406

Unless order of a Bench is signed by all members constituting it and it is dated, it is not an order of Tribunal.ITAT v. V.K. Agarwal (SC) 235 ITR 175

Appeal filed on 3.2.92 – Amended provision (1.4.89) apply – CIT held appeal not maintainable u/s 249(4)(a).Khushmanlal Hiralal Kansara Vs ACIT (ITAT, Ahd ) 57 ITD 531

Tax on admitted income to be paid before filing of appeal before CIT(A)S. Alagarswamy Vs ITO (Mad) 296 ITR 43

When there is no unanimity among members of Tribunal in identifying points of difference to be referred to Third Member, President shall identify such issues and appoint Third Member.Chetna Enterprises Vs ITO (ITAT, Pat-TM) 63 ITD 257

AO levied interest u/s 217 under 154 proceedings – Assessee filed two appeals i.e. against 143(3) & 154 orders – CIT(A) passed common order – Both orders merged together – Department challenging deletion of interest levy in appeal against 143(3) order – valid.ACIT Vs B.N. Rathi Securities Limited (ITAT, Hyd) 71 ITD 31

ITAT – Appeal filing fee is on the basis of income computed by Assessing Officer and not on the basis of income subsequent to CIT(A) passing the order.Kothari Departmental Stores (P) Ltd. Vs A.O. (ITAT, Jodh-TM) 96 ITD 142ITAT – Appeal filing fee for 271(1)( c) penalty - on the basis of assessed income.Bidyut Kumar Sett Vs ITO (ITAT, SB-Kol) 92 ITD 148

No power to entertain additional ground before Third Member after conclusion of hearing by Division Bench.Rameshwar Soni Vs ACIT (ITAT, Jodhpur) 279 ITR (AT) 60, 97 ITD 127

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Third Member can consider additional evidence only if it was tendered before the Original benchIchalkaranji Co-op. Spinning Mills Ltd. Vs DCIT (ITAT, Pune-TM) 102 ITD 177

Reference to Third member – No intervenor allowed at that stageSaipem S.P.A. Vs DCIT (ITAT, Delhi) 86 ITD 572

President, ITAT can suo moto or on request from any party, can constitute Special benchC. Ramaiah Reddy Vs ACIT (ITAT, Bang-SB) 87 ITD 439

Once President constituted a Special bench, even if request for withdrawal of appeal is made subsequently by the party, the proceedings will continueArihant Builders, Developers & Investors (P) ltd. Vs ACIT (ITAT, Ind-SB) 106 ITD 10

Appellate authority can permit assessee or revenue to withdraw appeal if opposite party is not objecting and if appellate authority is judicially satisfiedM. Loganathan Vs ITO (ITAT, Chennai ) 99 ITD 246

Senior Vice-President (Finance) of a company is not authorized to sign return and appeal forms – Resolution of Board of directors of assessee company authorizing its Senior Vice-President (Finance) to do certain acts on behalf of assessee, cannot prevail over the statutory provisions mandating compliance by specified persons to initiate valid proceedings before CIT(A) in terms of Rule 45 read with section 140(c)Gold Stone Exports Ltd. Vs ACIT (ITAT, Hyd) 104 ITD 15

Assessee, a non-resident company is represented by Indian collaborator, a Public Sector Undertaking – Permission of Committee on Disputes not required to pursue the appeal.CIT Vs Combustion Engineering Inc. USA (Mad) 295 ITR 70

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REVISION BY CIT UNDER SECTION 263

CIT has powers to initiate proceedings u/s 263 in respect of issues not touched upon by CIT(A) in his appellate orders.CIT Vs Jayakumar B. Patil (SC) 236 ITR 469CIT Vs Shri Arbuda Mills Ltd (SC) (1996) 231 ITR 50CIT Vs Hotel Rama (P) Ltd (Kar) 99 Taxman 256G. Ramesan Vs CIT (Ker) 226 ITR 305CIT Vs Paushak Ltd. (Guj) 227 ITR 216Yashodhan Industrial Investment Co. Ltd. Vs ITO (ITAT, Bom- TM) 46 ITD 80CIT Vs Technico Enterprise Pvt. Ltd. (Cal) 206 ITR 36Ritz Ltd. & Anr. Vs Union of India & Ors. (Bom) 184 ITR 599

Issue before CIT(A) was quantification of 80-I deduction. CIT can revise u/s 263 on the question of eligibility of 80-I deduction.Modi Xerox Ltd. Vs DCIT (ITAT, Del) 67 ITD 252

CIT(A) decided issue on 214 interest – CIT can pass order u/s 263 on rate of interest.Machino Techno Sales (P) Ltd. Vs DCIT (ITAT, Cal) 59 ITD 303

During pendency of appeal before IAC, CIT can revise order of ITO.CIT Vs Eimco KCP Ltd. (Mad) 147 ITR 603CIT Vs Subarna Plantation & Trading Co. Ltd. (Cal) 238 ITR 319

Dismissal of appeal as not competent – No merger – Revision can be madeMansarovar Investments Ltd. Vs CIT (Del) 287 ITR 137

If appeal filed before CIT(A) on any issue, CIT cannot revise that order u/s 264 –whatever be the issue.Hindustan Aeronautics Ltd Vs CIT (SC) 243 ITR 808

After filing 264 application before CIT, assessee cannot agitate the issue again in appeal before ITAT.M. Narasimha Rao Vs ITO (ITAT, Hyd) 57 ITD 228

Valuation report called for by ITO – Assessment completed before receipt of valuation report – assessment is erroneous – valuation report forms part of assessment record – CIT can revise assessment order on the basis of valuation report.CIT Vs S.M. Oil Extraction P. Ltd. (Cal) 190 ITR 404CIT Vs Shree Manjunatheswara Packing Products & Camphor Works (SC) 232 ITR 53

Assessment without proper enquiry – Erroneous and prejudicial to revenue – CIT can revise it u/s 263.CIT Vs Pushpa Devi (Patna) 173 ITR 445

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Addl. CIT Vs Mukur Corporation (Guj) 111 ITR 312Swarup Vegetable Products Industries Ltd Vs CIT (All) 187 ITR 412Thalibai F. Jain & others Vs ITO & Anr. (Kar) 101 ITR 1Tejinder Singh Makker Vs ACIT (ITAT, Mum-TM) 61 ITD 57Rampyari Devi Saroogi Vs CIT (SC) 67 ITR 84CIT Vs McMillan & Co.(SC) 33 ITR 182,Lajja Watsinghal Vs CIT (All) 226 ITR 527Gee Vee Enterprises Vs Addl. CIT & Ors. (Del) 99 ITR 375D&H Secheron Electrodes Ltd Vs DCIT (ITAT, Indore) 70 ITD 214Jai Bharat Tanners Vs CIT (Mad) 264 ITR 673Ashok Leyland Ltd. Vs CIT ( Mad ) 260 ITR 599Arvee International Vs Addl. CIT ( ITAT, Mum ) 101 ITD 495Colorcraft Kashmira Ceramic Compound Vs ITO (ITAT, Mum) 105 ITD 599CIT can pass 263 order even on debatable issuesJehan Numa Palace Hotel (P) Ltd Vs CIT (ITAT, Indore) 70 ITD 552D&H Secheron Electrodes Ltd Vs DCIT (ITAT, Indore) 70 ITD 214

Revision on the basis of subsequent decision of Supreme Court – Held validVijay Kiran Hotels (P) Ltd. Vs CIT (P&H) 196 Taxation 336Simran farms Ltd. Vs CIT (MP) 300 ITR 270

Sec. 263 can be applied to cancel an assessment so as to make assessment in the hands of another person, who actually earned income.Tara Devi Aggarwal Vs CIT (SC) 88 ITR 323

Payment to institution for rural development – approved by Govt. – Deduction granted u/s 35CCA – Subsequent withdrawal of approval – assessment erroneous and prejudicial to revenue – CIT justified in setting aside.CIT Vs Bankam Investment Ltd. (Cal) 208 ITR 208

Order u/s 263 can be passed on order u/s 143(1)(a)CIT Vs Shri Mahasastha Pictures (Mad) 263 ITR 304CIT Vs Chidambaram Constructions (Mad) 261 ITR 754

Proceedings u/s 147 initiated – Later on dropped – CIT can revise this order u/s 263.P.K. Fabrics Vs ACIT (ITAT, Asr) 67 ITD 326Exports India Vs CIT (Del) 246 ITR 1New Jagat Textile Mills P. Ltd. Vs CIT ( Guj ) 282 ITR 399 [139(2) notice issued &

dropped]

Order passed u/s 184 (7) can be revised u/s 263.CIT Vs Nitya Nand Devkinandan (SC) 227 ITR 154CIT Vs Jagdish Chand Walia & Co. (P&H) 144 CTR 127

Order u/s 263 valid against order u/s 195(2)Board of Control for Cricket in India Vs DIT(Exemption) (ITAT, Mum) 96 ITD 263

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Waiver of interest u/s 139(8)/215/217 without explaining reasons – Can be revised u/s 263.B.P. Ganapathy Vs ITO (ITAT, Mad) 74 ITD 392

Failure of ITO to levy interest u/s 215 – CIT justified in passing order u/s 263.Sudarsan Trading Co. Ltd. Vs CIT (Mad) 215 ITR 245.

Non-initiation of penalty proceedings - revision validCIT Vs Associated contractors Corporation (All) 275 ITR 123CIT Vs Surendra Prasad Agarwal (All) 275 ITR 113

Penalty proceedings dropped by ITO – CIT can again initiate penalty proceeding u/s 263 – Another 2 year period will be available to ITO to pass penalty order.CIT Vs Sara Enterprises (Mad) 224 ITR 169CIT Vs Braj Bhushan Cold Storage (All) 275 ITR 360

Revision of Gift Tax order on the basis of valuation report obtained under Wealth Tax Act – justified.CGT Vs O.E. Arumugha Mudaliar (Mad) 237 ITR 789

CBDT Instruction says that international transactions exceeding Rs. 5 crores to be referred to Transfer pricing Officer – Failure by Assessing Officer to make such reference – CIT can pass order u/s 263Ranbaxy Laboratories Ltd. Vs Addl. CIT (ITAT, Del) 299 ITR (AT) 175

Conclusions of Assessing Officer not in conformity with his findings - CIT can revise u/s 263 .Nirvan Prints Vs ACIT (ITAT, Ahd) 63 TTJ 13

Deduction proposed to be disallowed by ITO in draft assessment order – but allowed in assessment order pursuant to directions by IAC – CIT can revise such an order.CIT Vs Sigma Paints Limited (Bom) 238 ITR 705

CIT(A) remanded the matter to Assessing Officer – Fresh order passed by Assessing Officer – CIT can revise it u/s 263.CIT Vs Maqbool Alam & Co. (Pat) 231 ITR 77

Original order by Assessing Officer – Revision by CIT – Again order passed by Assessing Officer without making enquiries – Again CIT can pass order u/s 263.Gujarat Forgings (P) Ltd. Vs ITO (ITAT, Ahd) 56 ITD 208.

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CIT(A) decided the same issue in earlier years - Assessing Officer passed order in this year following the same line – No appeal in this year – CIT can revise u/s 263ITO Vs Vanaz Engineers (P) Ltd (ITAT, Pune) 70 ITD 525

Jurisdictional High Court decision in favour of assessee – Appeal pending before Supreme Court – Action u/s 263 possible if AO followed the High Court decision.Hindustan Tin Works Ltd. Vs DCIT (ITAT, Del) 92 ITD 101

CIT can invoke sec. 263 on the basis of a proposal from Assessing Officer – Even if action u/s 147 is possible, CIT can invoke sec. 263.Apollo Tyres Ltd Vs ACIT (ITAT, Del) 65 ITD 263

Assessment order passed under section 143(3) - Notice u/s 154 issued by Assessing Officer but dropped – CIT can still pass order under section 263 since powers under sections 154 and 263 operates in different fields.CIT Vs Ralson Indsutries Ltd. (SC) 288 ITR 322

Assessment order passed under direction by Inspecting Assistant Commissioner – Time limit for completing assessment is extended by 180 days – Limitation of 2 years to pass order u/s 263 is from date of such order.Cheran Engineering Corpn Ltd. Vs CIT (Mad) 238 ITR 892.

CIT need not state in express words that order sought to be revised is erroneous and prejudicial – if it is evident on perusal of order, CIT’s jurisdiction u/s 263 is valid.Hooghly Mills Ltd. Vs ACIT (ITAT, Cal) 71 ITD 264.

CIT made definite findings in Revision order – Assessing Officer passed order to give effect to that – No appeal lies against Assessing Officer’s order – Assessee should have filed appeal against order u/s 263. Hardillia Chemicals Ltd. Vs CIT (Bom) 221 ITR 194WTO Vs Jaswant Singh (ITAT, Jp) 64 ITD 339

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RECTIFICATION UNDER SECTION 154 & 254(2)

Four years from the order sought to be amended – order does not mean original order – Application within four years of order rectifying the assessment order.Hind Wire Industries Limited Vs CIT (SC) 212 ITR 639Waldies Limited Vs CIT (SC) 223 ITR 163Salem Co-operative Spg. Mills Limited Vs CIT (Mad) 230 ITR 139

Order of assessment does not merge in rectification order – date of original order would be starting point for limitation.Kothari Industrial Corporation Limited v. Agrl .ITO (Kar) 230 ITR 306

Application for rectification within time – ITAT not passing order within 4 years – application cannot be rejected on the ground of limitation.CWT Vs Malabar & Pioneer Hosiery P. Ltd. ( Ker ) 280 ITR 260Harshavardhan Chemicals & Minerals Limited Vs Union of India & Anr. (Raj) 256 ITR 767Arvindbhai H. Shah Vs ACIT (ITAT,Ahd-SB) 91 ITD 101 – opposite view

Mistake must be obvious and patent – Not something which can be established by a long drawn process of reasoning on points on which there may be two opinions.T.S. Balaram, ITO Vs Volkart Brothers & others (SC) 82 ITR 50

Tribunal passed order u/s 256(1) – No order u/s 254(2) possible on this.CIT Vs ITAT (All) 227 ITR 443

Order passed u/s 254(2) cannot be further rectified by 254(2). When once a Miscellaneous Petition has been rejected, another Miscellaneous Petition against the same order containing same matter cannot be entertained.Poonam Kumari Vs ITO (ITAT, All) 59 ITD 106CIT & Anr. Vs ITAT & Anr. (Ori) 196 ITR 640

Application to recall order rejected by Tribunal – Subsequent recalling of order is not valid since it amounts to review of earlier orderCIT Vs Kamal Bhai Ismailji (All) 288 ITR 297

Even after High Court decided the appeal us 260A(1) as not maintainable, rectification by ITAT u/s 254(2) is possibleDCIT Vs Electropack (ITAT, Ahd-TM) 94 ITD 227

Once High Court has dismissed the appeal, ITAT cannot further rectify the order u/s 254(2) since its order got merged with that of High CourtBhawan Va Path Nirman (Bohra) & Co. Vs ACIT (ITAT, Jodh-TM) 101 ITD 101

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Application for rectification under section 254(2) signed by Department Representative – Not relevant – Duty of Tribunal to rectify mistakeCIT Vs ITAT (Ker) 289 ITR 191DCIT Vs Maruti Textiles (P) Ltd. (ITAT, Ahd) 66 TTJ 575P. Kuttikrishna Nair Vs. ITAT & Anr. (Mad) 34 ITR 540 – DR can file MP

Tribunal has inherent power to rectify mistakes in its order – Incorrect recording of facts – can be rectified.CIT Vs Mool Chand Shyam Lal (All) 273 ITR 160

Order of Tribunal founded on mistaken assumption of facts – Mistake apparent from earlier orders of ITAT – Rectification of mistake possible.Neeta S. Shah & Ors. Vs CIT (Kar) 191 ITR 77CIT Vs Electronic Research Ltd. & Anr. (Kar) 262 ITR 361Champa Lal Chopra Vs State of Rajasthan (Raj) 257 ITR 74CIT Vs U.P. Shoe Industries (All) 235 ITR 663

Overlooking mandatory provision of law is a mistake which can be rectified.Addl. CIT Vs India Tin Industries (P) Ltd. (Kar) 166 ITR 454ITO Vs Asok Textiles Limited (SC) 41ITR 732CIT Vs Peirce Leslie & Co. Limited (Mad) 227 ITR 759

Retrospective amendment – Appellate Assistant Commissioner entitled to rectify earlier assessment within period of limitation.J.M. Bhatia, Appellate Assistant Commissioner of Wealth tax & Ors. Vs J.M. Shah (SC) 156 ITR 474CIT Vs R.M. and company (AP) 148 ITR 353CWT Vs Kamala Ganapathi Subramaniam (Mad) 127 ITR 175IAC of Agricultural Income Tax & Anr. V.M. Ravi Namboodiripad (SC) 96 ITR 73CWT Vs S.A.P. Annamalai (Mad) 141 ITR 578M.K. Venkatachalam, ITO & Anr. Vs Bombay Dyeing & Mfg. Co. Ltd. (SC) 34 ITR 143Mysore Cements Limited Vs Deputy Commissioner of Commercial Taxes (Kar) 116 CTR 284M. Srinivasalu Vs Union of India & ors. (Kar) 239 ITR 282GTC Industries Ltd. Vs DCIT (ITAT, Mum-TM) 104 ITD 86

To give effect to an existing decision of Supreme Court / Jurisdictional High Court or to apply a subsequent decision of Supreme Court / Jurisdictional High Court - 154 can be made.Standard Radiators Vs CIT (Guj) 165 ITR 178Sirsa Industries Vs CIT (P&H) 147 ITR 238Mysore Cements limited Vs Dy. Com. of Commercial Taxes (Kar) 116 CTR 284 JCIT Vs Miltons Ltd. (ITAT, Mum) 106 ITD 478S.A.L. Narayana Row Vs Model Mills Nagpur Ltd. (SC) 64 ITR 67Surat Textile Mills Ltd. Vs CIT (Guj) 80 ITR 1Parshuram Pottery Works Co. Ltd. Vs D.R. Trivedi, WTO (Guj) 100 ITR 651Dr. Rajah Sir M.A. Muthiah Chettiar (Decd) by LR Vs CIT (Mad) 238 ITR 505N.C.R. Rajagopala Chettiar Vs ITO (Mad) 67 ITR 210

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Walchand Nagar Industries Vs V.S. Gaitonde, ITO (Bom) 44 ITR 260CIT Vs Sri. Ramakrishna Motor Transport (AP) 144 ITR 797CIT Vs East India Cold Storage (P) Ltd. (Cal) 218 ITR 668B.V.K. Seshavataram Vs CIT (AP) 210 ITR 833CWT Vs Poonamchand D. Shah & Ors. (Bom) 197 ITR 276CED Vs Madhusudan Das Malpani (MP) 208 ITR 745CIT Vs Arun Luthra (P&H) 252 ITR 76Kil Kotagiri Tea and Coffee Estates Co. Ltd. Vs ITAT (Ker) 174 ITR 579CIT Vs Alankar Borewells (Mad) 177 CTR 560Southern Industrial Corpn. Ltd. Vs CIT (Mad) 258 ITR 481M.K. Kuppuraj Vs ITO & Anr. (Mad) 211 ITR 853Mettur Chemical and Industrial Corporation Ltd. Vs CIT (Mad) 110 ITR 822Bhauram Jawahirmal Vs CIT (All) 121 ITR 487Dinosaur Steels Ltd. Vs JCIT (Mad) 288 ITR 476Himachal Pradesh Financial Corporation Vs CIT (HP) 233 ITR 450

Not following decision of jurisdictional High Court, is a mistake apparent from record – Fact that other High Courts have taken a contrary view, not relevantCIT Vs Ram Lal Babulal (P & H) 234 ITR 776CIT Vs Sunil Kumar (Raj) 212 ITR 238

Conflicting decision by Benches of Tribunal but decision of a High Court on subject – question was not debatable.CWT Vs Labh Kavar Bai (Mad) 236 ITR 872Manarkattu Bros (P) Ltd. Vs CIT (Ker) 227 ITR 586

A point on which more than one High Court holds a unanimous view – not debatable issue CIT Vs Peirce Leslie & Co. Ltd. (Mad) 227 ITR 759

Decision of High Court of different jurisdiction not binding on Tribunal – No rectification possible.CIT Vs Vardhman Spinning (P&H) 226 ITR 296

Tribunal has to consider with due care all material facts and evidence in favour of and against the assessee and record its finding on all the contentions raised. It is the duty of the Tribunal to reopen an appeal, if it finds that it has omitted to deal with an important ground or an important argument urged by the parties.Modu Timblo Vs ITO (ITAT, Pune) 53 ITD 53Mohan Meakin Limited Vs ITO (ITAT, Del-TM) 89 ITD 179Hansa Agencies (P) Ltd. Vs IAC (ITAT, Asr) 71 ITD 359

Assessee filed Miscellaneous Petition before Tribunal that each and every paper submitted and case law cited had not been discussed elaborately – When Tribunal stated that there has been examination of facts as well as arguments put forth by rival parties, it is not necessary or imperative on the part of

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Tribunal to give additional or separate reasons if Tribunal is in agreement with reasons given by lower authorities.V.T. Somasundaram Vs ITO (ITAT, Chennai) 70 ITD 398

ITAT has no power to review its order – Only mistake apparent from record can be corrected – Failure of Tribunal to consider arguments is not an error apparent from record.CIT Vs Ramesh Electric and Trading Co.(Bom) 203 ITR 497ITO Vs. ITAT (Patna) 229 ITR 651 Dharamchand Surana Vs ITO (ITAT, Mad-TM) 61 ITD 115 Homi Mehta & Sons (P) Ltd. Vs DCIT (ITAT, Mum) 63 ITD 15

Announcement by Tribunal in open court constitutes its order – Written order contrary to announcement - mistake - can be rectified.CIT Vs G. Sagar Suri & Sons (Del) 185 ITR 484

If a document was not considered by Assessing Officer & CIT(A) and was not produced before ITAT in appeal, it cannot be said that order of ITAT contains a mistake since it does not discuss such document.CIT Vs Suman Tea & Plywood Industries (P) Ltd (Cal) 226 ITR 34

Counsel of assessee not raising particular issue at time of hearing by oversight – Files Miscellaneous Petition contending laches of counsel should not make a litigant suffer – Issue deemed to have been decided against assessee or presumed that same not pressed before Tribunal.Joseph Kuruvilla Vs CIT (Ker) 234 ITR 55

There is no invariable rule of law that, to constitute an “error apparent from the record”, the error must be apparent from the record of the proceedings against the assessee himself.Devendra Prakash Vs ITO (All) 72 ITR 151Record for the purpose of 154(1) is the record available to the authorities at the time of initiation of 154 proceedings and not merely the Miscellaneous Record for that year alone.CIT Vs M.R.M. Plantations (P) Ltd.(Mad) 240 ITR 660CIT Vs Aruna Luthra (P&H) 252 ITR 76

Wrong quoting of Section can be rectified u/s 154.VR. C. RM. Adaikkappa Chettiar Vs CIT (Mad) 78 ITR 285

Charging of interest u/s 234 A is mandatory – Failure to charge it in the case of a belated return is a mistake apparent from record – Rectifiable u/s 154ACIT Vs Santosh Kumar Soni (ITAT, All) 57 ITD 220

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Capital gains from depreciable assets – Assessing Officer in his original assessment gave the assessee the option for Fair Market Value as on 1.1.1954 – Later, revised this by invoking sec. 154 – Held valid.CIT Vs Pierce Leslie & Co. Ltd. (Mad) 227 ITR 759

Deduction u/s 80M made before setting off losses – Mistake apparent from record.CIT Vs Mcleod & Co. Ltd. (Cal) 134 ITR 674

80-I deduction worked out without considering current depreciation, brought forward depreciation and brought forward investment allowance – After introduction of Sec. 80AB, this is mistake apparent.Hargovind International Ltd. Vs ACIT (ITAT, Nag) 69 ITD 1

80 HHC computation – Deduct unabsorbed brought forward depreciation from profits of business – can be done u/s 154Maruti Udyog Ltd. Vs JCIT ( ITAT, Del ) 100 ITD 113Fertilizers & Chemicals Travancore Ltd. Vs ACIT (ITAT,Cochin) 109 ITD 56

Mistake in computation of WDV can be corrected u/s 154 - No increase in demand / decrease in refund – only change is carried forward depreciation – No need to give notice to assessee – If assessee knows about the proceeding and Assessing Officer discussed with assessee, no need to give separate notice.Maharana Mills (Pvt) Ltd. Vs CIT (SC) 36 ITR 350

ITO has power to rectify a mistake in order levying penalty.Henri Isidore Vs CIT (Mad) 240 ITR 247

Failure to give an opportunity of being heard before passing order u/s 260(1) – Mistake apparent from record.Hansa Agencies (P) Ltd. Vs IAC (ITAT, Asr) 71 ITD 359

ITNS-50 containing adjustments / calculation of tax is part of assessment order – can be rectified u/s 154Hindustan Lever Ltd. Vs DCIT (ITAT, Mum) 68 ITD 85

In AY 83-84, Assessing Officer came to the finding that unexplained investment in building, to be spread over for 4 years – ITAT upheld this view – omitted to make addition in AY 86-87 – Mistake apparent from record.Upasana Hospital & Nursing Home Vs ACIT (ITAT, Coch) 60 TTJ 660

MAT credit adjustment cannot be made u/s 154Smruthi Organics Ltd. Vs DCIT ( ITAT, Pune ) 101 ITD 205

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Return of Income filed belatedly – Assessing Officer allowed carry forward of loss – can be rectified u/s 154ACIT Vs Electrical Transformer Co. (ITAT, Ind) 70 ITD 48

Computation of 80J under appeal – AAC passed order in favour of assessee – ITO can lateron disallow 80J on some other ground viz., non-furnishing of audit report – u/s 154CIT v. B.L. Murarka (Raj) 250 ITR 714

While giving effect to the order of CIT(A), only issues decided in appeal will merge – Assessing Officer can pass 154 on other issues Maruti Udyog Ltd. Vs JCIT ( ITAT, Del ) 100 ITD 113

Return of income filed processed u/s 143(1) – Then assessee moved 154 claiming higher depreciation on account of re-fixing WDV of earlier years – Assessing Officer does not have any power to make adjustments to returned income – Hence 154 not possibleChoice Aquaculture (P) Ltd. Vs ITO ( ITAT, Ahd ) 100 ITD 143

Rectification u/s 154 can be done if there is a mistake apparent from records – Whose mistake is immaterialContainer Corporation of India Ltd. Vs DCIT (ITAT, Del) 92 ITD 333

No party appearing before Tribunal should suffer on account of mistake committed by Tribunal – Failure to consider decision of co-ordinate bench cited by assessee – Is a mistake which can be rectified u/s 254(2).Honda Siel Power Products Ltd. Vs CIT (SC) 295 ITR 466

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SPECIAL PROVISIONS FOR ASSESSMENT

MINIMUM ALTERNATE TAX U/S 115 J, 115JA & 115JB

Interest under section 234A, 234B & 234C can be levied when income is computed under section 115JACIT Vs Geetha Ramakrishna Mills P. Ltd. (Mad) 288 ITR 489Jindal Thermal Power Co. Ltd. Vs DCIT (Kar) 286 ITR 182JCIT Vs Mohan Exports India Ltd. (ITAT, Del) 101 ITD 478 115-J – P & L a/c to be prepared following corporate accounting method. Sudharshan Chemical Industries Ltd. (ITAT, Pune) 60 ITD 629

115J – book profit – Expenses relating to earlier year, debited to P&L a/c. to be added back.CIT Vs Krishna Oil Extraction Ltd. (MP) 232 ITR 928J.K. Cotton Spg. & Wvg. Mills Co. Ltd. Vs ACIT (ITAT, All) 60 ITD 99Sree Rajendra Mills Ltd. Vs DCIT (ITAT, Mad) 63 TTJ 697ITO Vs Kanchanganga Estates (P) Ltd. (ITAT, Mum) 63 TTJ 553

Tax on distributed income levied under section 115 O – Add to book profitsDCIT Vs Dhanalakshmi Paper Mills Ltd. (ITAT, Chennai) 105 ITD 123

Interest payable to Customs / Excise department, in relation to certain levies challenged by assessee before High Court and are pending – are contingent liability –claims disallowed while computing income u/s 115J.Sutlej Cotton Mills Ltd. Vs ACIT (ITAT, Cal -SB) 45 ITD 22CIT Vs Essorpe Mills Ltd (Mad) 265 ITR 637

Provision for bad & doubtful debts – amounts not written off in P& L a/c. – Not ascertained liability – Includible in book profit.DCIT Vs Beardsell Ltd. (Mad) 244 ITR 256

Consequent upon Management’s decision stated in Circular dated 13.4.89, Company paid a certain amount representing dues to employees in respect of prior period and claimed deduction in AY 89-90 – Liability accrued only on 13.4.89 & in the AY 89-90 it is contingent liability – Increase book profits by said amount – 115J explanation cTata Yodogawa Ltd. Vs DCIT (ITAT, Pat) 56 ITD 194

Deduction to be allowed of either business loss or unabsorbed depreciation, whichever is less, in comparison to total of unabsorbed depreciation and business loss.

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CIT Vs Adoon Electronics P. Ltd,. (MP) 232 ITR 528

Depreciation must be worked out as per provisions of companies Act.CIT Vs Vandana Rolling Mills Ltd. ( MP ) 234 ITR 693

P&L a/c. of Company does not show details of depreciation – Such P&L a/c. approved by CA & Directors – after that, assessee cannot claim deduction of depreciation in 115JA calculation. Decision of Supreme Court in Apollo Tyres Ltd. Vs CIT ( 255 ITR 273 ) is equally applicable to assessee also.DCIT Vs Thangavel Spinning Mills Ltd. (ITAT, Chennai) 97 ITD 262

Brought forward Written down value, unabsorbed depreciation etc. to be adjusted against normal profits and only balance if any can be carried forward even when 115J is applied.Karnataka State Small Industries Dev. Corpn. Ltd. Vs CIT (SC) 258 ITR 770Suryalatha Spinning Mills Ltd. & Anr. Vs Union of India & Anr. (AP) 223 ITR 713Shriram Transport Finance Co. Ltd,. Vs ACIT (ITAT, Mad) 70 ITD 406Pennar Steels Ltd Vs DCIT (ITAT, Hyd) 60 ITD 1

Carried forward loss cannot be adjusted against the 30% book profit arrived u/s 115J.Lallacherra Tea Co.(P) Ltd. Vs CIT (Gau) 239 ITR 611

115JA – Tax at normal rate – even if it fully comprises of Long Term Capital Gains, don’t apply Sec.112 & tax at 20% Nafab India (P) Ltd. Vs DCIT (ITAT, Del) 92 ITD 343

Amount transferred from revaluation reserve to profit & Loss appropriation account – Hit by proviso to Cl. (i) of Expl. To sec. 115J(1A) and could not be reduced from net profit while computing book profitsSterling Steels & Wires Ltd. Vs DCIT (P&H) 271 ITR 260DCW Ltd. Vs DCIT (ITAT, Mum) 77 ITD 462Birla Jute & Industries Ltd. Vs DCIT (ITAT, Cal) 85 ITD 400Southern Petro Chemical industries Vs DCIT (ITAT, Chennai) 93 TTJ 161

115JB clearly states that the expression “loss brought forward” does not include depreciation and that the net profit of the current year is to be reduced by the lesser of the two. Reduction made to book loss or depreciation in any particular year must form the basis for computation of MAT liability for the subsequent year. Rashtriya Ispat Nigam Ltd. IN RE (AAR) 285 ITR 1

Surcharge leviable on the tax payable u/s 115JAEscapade Resorts (P.) Ltd. (ITAT, Cochin) 107 ITD 323

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During the year assessee changed method of calculating depreciation and claimed extra depreciation as arrears of past years, being the difference between the two methods – Claim of arrears added back to the book profit – upheldGilt Pack Ltd. Vs Union of India (MP) 163 Taxman 331

243

BLOCK ASSESSMENT UNDER CHAPTER XIV-B

Question of legality and validity of search cannot be examined by CIT(A) / ITATPromain Ltd. Vs DCIT (ITAT, DeI-SB) 95 ITD 489M.B. Lal Vs CIT (Del) 279 ITR 298C. Ramaiah Reddy Vs ACIT (ITAT, Bang-SB) 87 ITD 439Gaya Prasad Pathak Vs ACIT (MP) 290 ITR 128

Requirement of goods or assets under section 132A is prior to the initiation of Block assessment proceedings – Not subject to appeal proceedings before ITAT Jageshwar Rosin & Turpentine Factory Vs ACIT (ITAT, Del) 100 ITD 399

154 to 158 BC – Appeal lies before CIT(A) and not directly before ITATPradeep Singh Vs DCIT (ITAT, Del) 93 ITD 514

Search during 29-6-98 to 5-8-98 - Last panchanama drawn on 5-8-98 ie. within 60 days of initiation of search – Limitation of two year period would come to an end on 30-08-2000 – No ulterior motives could be attributed to the authorities in failing to seize the books of accounts and instead passing a restraint order – The authorities went through the books and seized only those documents that were necessary, rather than seizing all the books and documents – The authorities could not be faulted for following a less drastic procedure VLS Finance Ltd. Vs CIT (Del) 289 ITR 286 Block period includes period upto the date of commencement of searchCIT Vs Don Bosco Card Centre (Ker) 289 ITR 329 Block assessment and regular assessments are for different purposes – No double assessment N.R. Paper and Board Ltd & Ors. Vs CIT (Guj) 234 ITR 733Malayil Bankers Vs ACIT (Ker) 236 ITR 869DCIT Vs Shaw Wallace & Co. Ltd. (Cal) 248 ITR 81

Do Block Assessments before regular assessment & make all necessary additions – in regular assessment, returned income to be accepted u/s 143(1)Shaw Wallace & Co. Ltd. Vs ACIT (Cal) 238 ITR 13

Even if search is held illegal, material seized can be used against assessee in assessment proceedingsPooran Mal Vs Director of Inv. & ors. (SC) 93 ITR 505

Statement u/s 132(4) can be used for Block Assessment – DDIT(Inv) can refer valuation of properties to Valuation Cell

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Prasanchand Surana Vs ACIT (ITAT, Hyd) 76 ITD 423

Limitation starts from ending of month of completion of search T.O. Abraham & Co. & Anr. Vs ADIT(Inv.) & Ors. (Ker) 238 ITR 501 Promain Ltd. Vs DCIT (ITAT, Del – SB) 95 ITD 489G. Ramaiah Reddy Vs ACIT (ITAT, Bang-SB) 87 ITD 439

No time limit for issuing 158BD noticeVijay Sehgal (HUF) Vs ACIT (ITAT, Asr) 100 ITD 560Khandubbhai Vasanji Desai & ors. Vs DCIT (Guj) 236 ITR 73

Limitation will start from the date on which the direction to get the accounts audited, was received by the assessee and not from the date when it was issued by the Assessing OfficerA.P. Shanmugharaj Vs DCIT (ITAT, Chennai) 99 ITD 278

CIT need not give opportunity of being heard to assessee before approval u/s 158BG Rishabchand Bhansali Vs DCIT (Kar)267 ITR 577Sakthivel Bankers Vs ACIT (Mad) 255 ITR 144Kailash Moudgil Vs DCIT (ITAT, Del-SB) 72 ITD 97

Applicability of section 158BD – Assessee residing with parents – Search in the case of parents – Some shares recovered at search belong to assessee – JustifiedManish Maheshwari Vs ITAT (MP) 289 ITR 324

Search in the name of husband – Bank account in the name of wife discovered – Husband’s assessments pending – 158 BD notice to wife valid.T.S. Sujatha Vs Union of India & Anr.(Ker) 239 ITR 488.

158BD – not a separate & independent proceeding – Part of search operations – No separate jurisdictional facts need to be establishedPriya Blue Industries P. Ltd. Vs CIT (Guj) 251 ITR 615Premjibhai & sons Vs CIT (Guj) 251 ITR 625Rushil Industries Ltd Vs Harsh Prakash (Guj) 251 ITR 608

Search warrant not in the name of assessee – But assessee’s premises were searched and books / documents were seized – Assessment to be made u/s 158BDACIT Vs Vinod Goel (ITAT, Asr) 111 ITD 70

Return filed u/s 139(4) after search – Returned income cannot be adjusted while computing total undisclosed income u/s 158BBP.K. Kaliannan & ors. Vs ACIT (ITAT, Mad) 68 ITD 401B. Noorsingh Vs Union of India & Ors. (Mad) 249 ITR 378M.R. Singhal Vs ACIT (P&H) 290 ITR 162

245

Due date of filing return not expired on the date of search – Investments detected during the course of search not recorded in the books of accounts – Undisclosed income for the Block periodDCIT Vs H.V. Shantharam (Kar) 261 ITR 435

Search on a name-lender who provided accommodation entries – Sensing damages on account of such search, assessee disclosed income in its regular return in relation to his transactions with such name-lender – Since assessee filed regular return disclosing such income only after the search on the name-lender, no advance tax was paid in time and such undisclosed income is not recorded in the books of before search, it forms part of undisclosed income to be assessed for the Block period.Raghav Bahl Vs DCIT (ITAT, Del) 111 ITD 174

When loss declared in the regular return stands reduced on account of search and Block assessment, there is undisclosed income – it can be brought to tax u/s 113Fenoplast Ltd. Vs ACIT (ITAT, Hyd-TM) 82 ITD 178

Set off of brought forward business loss or depreciation is allowable only in regular assessment and not in the Block assessment.E.K. Lingamurthy Vs Settlement Commission ( I.T. & W.T. ) ( Mad ) 293 ITR 76

No write-off of debts in the books of account till the date of search – Assessee cannot claim bad debts since the entries were not written off during the Block periodKashmir Trading co. Vs DCIT (Raj) 291 ITR 228

When undisclosed income by itself is discernible from seized materials, there is no need for Assessing Officer to find out corresponding assets / expenses. In a case where a regular pattern of suppression is established, lawful presumption is that there is suppression for whole of the block period.Estimation of income possible - Block Asst.S., Surendranath Reddy Vs ACIT (ITAT, Hyd) 72 ITD 205Khopade Kisanrao Manikrao .Vs ACIT (ITAT, TM - Pune) 74 ITD 25Rajnik and Co Vs ACIT (AP) 251 ITR 561Rajendra Kumar Lahoty Vs DCIT (Raj) 266 ITR 621

Cash credits can be assessed in Block Assessment.CIT Vs Ajay Kumar Sharma (Raj) 259 ITR 240CIT Vs Elegant Homes P. Ltd (Raj) 259 ITR 232Cas Card Finance Ltd. Vs ACIT (ITAT, TM, Ahd) 84 ITD 1

Disallowance under section 40A(3) can be made in Block assessment.M.G. Pictures (Madras) Ltd. Vs ACIT (Mad) 263 ITR 83

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Entries in diary can be primary evidence for Block AssessmentRati Ram Gotewala Vs DCIT (ITAT, Del) 89 ITD 14

No evidence regarding agricultural operations carried out, details of sale bills of agricultural produce, evidence for agricultural expenses not produced – estimate of agricultural income in Block assessment upheld V.D. Vachham (HUF) Vs ACIT (ITAT Ahd) 86 ITD 652

During the course of search, certain material or evidence is found that may lead to a legitimate enquiry into genuineness of a transaction – Undisclosed income detected thereon – Block assessment provisions will applyNapar Drugs (P.) Ltd. Vs DCIT (ITAT, Delhi-TM) 98 ITD 285

Deemed dividend can be assessed in Block assessment CIT Vs Mukundray K. Shah (SC) 290 ITR 433

Block assessment – No evidence of expenditure – Disallowance of expenditure on estimate basis - justifiedM.R. Singhal Vs ACIT (P&H) 290 ITR 162Bansal strips (P.) Ltd. & Ors. Vs ACIT (ITAT, Del) 99 ITD 177

Cash seized by CBI requisitioned by I.T. Department under section 132A after the close of Block period – Unexplained cash in Block periodSukh Ram Vs ACIT (ITAT, Del) 99 ITD 417

Estimate of income based on statement recorded during search and documents seized – Valid procedure in Block assessmentHotel Kumar Palace Vs CIT (P&H) 283 ITR 110

Assessment u/s 158 BC to be made both on the basis of result of search as well as such post-search enquiry and other proceedings that are in nature of a logical consequence of evidence found as a result of searchMange Ram Mittal Vs ACIT (ITAT, Del-SB) 103 ITD 389

Long-term capital gains included in Block assessment – Tax at 60 %Parshuram D. Patil Vs ACIT (ITAT, Mum-TM) 102 ITD 241

Surcharge leviable on the tax on undisclosed income in block assessment – Proviso to sec. 113 is clarificatory in natureCIT Vs Suresh N. Gupta (SC) 297 ITR 322

Block assessment – Issue of notice is not a precondition as in the case of reassessment but only a matter of procedure – Non-mentioning of Block period, section under which notice was issued, date of furnishing block return etc. not fatal – Notice protected by section 292BShirish Madhukar Dalvi Vs ACIT (Bom) 287 ITR 242

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No prior notice required before invoking 158 BD – 158 BC notice is sufficient in 158BD cases – No need to mentioned 158BD in the notice – No requirement of recording satisfaction to invoke 158BDL Saroja Vs ACIT (ITAT, Mad) 76 ITD 344CIT Vs Indore Constructions P. Ltd (MP) 279 ITR 545Mahesh Kumar Batra Vs JCIT (ITAT, Asr-SB) 95 ITD 152

158 BC notice – Non-mention of status and non-description of Block period – Notice not invalidChandra Bhan Vs ACIT ( ITAT, Agra ) 98 ITD 6

Block Assessment – Notice format issued by Department is not statutory, even a letter will doK. Eswarappa Vs DCIT (ITAT, Chennai) 89 ITD 228

Block assessment – 143(2) notice need not be issued within 12 months of filing of Block return Nawal Kishore & Sons Jewellers Vs DCIT (ITAT, Lucknow-SB) 87 ITD 407Vijay Kapoor Vs DCIT (ITAT Pune) 86 TTJ 1079A.P. Shanmugharaj Vs DCIT ( ITAT, Chennai ) 99 ITD 278

Block assessment proceedings start from the date of search – order for special audit made before issue of 158BC notice – validB.N. Reddy Vs ACIT (Kar) 284 ITR 245

158 BFA Penalty – definition of “undisclosed income” in 158 B(6) applies and not Expln. 5 to 271(1( c)Kay Cee Electricals vs DCIT (ITAT, Del) 87 ITD 35

Piecemeal declaration of income during the course of assessment proceedings – 158BFA(2) penalty liableDCIT Vs Spark Electro Communication Systems ( ITAT, Mum ) 98 ITD 237

Block assessment completed within 6 months from the issue of notice under section 158BC – After adjusting tax, excess amount was refunded to assessee – No interest payable to assesseeDCIT Vs M. Bansilal Jain (ITAT, Chennai) 99 ITD 8

Block assessment – Assessing Officer gets jurisdiction upon conduct of search – Issue of 158BC notice is part of procedure – Defect in notice does not invalidate block assessment – 15 days time not granted to file block return – Curable irregularityKrishna Verma Vs ACIT (ITAT, Del-SB) 107 ITD 1

Interest u/s 158BFA is mandatory - No appeal lies against such levy

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Kandabai S. Baldawa (ITAT, Pune) 81 TTJ 953

Appeal against 158BFA interest maintainable only if assessment is challengedSk. Muneer Sk. Mannu Choudhary Vs DCIT (Bom) 300 ITR 216

Income detected during survey succeeded by search on the same day – Survey proceedings lost its identity and merged with search proceedings – Undisclosed income for Block assessmentACIT Vs Mangaram Chaudhary (HUF) 2008-TIOL-177-ITAT-HYD

249

INTERNATIONAL TAXATION ISSUES

General

115E -‘Investment income’ does not include Short Term capital gains - Not eligible for concessional tax rate.Sunderdas Haridas Vs ACIT (ITAT, Mum) 67 ITD 89

No immunity from tax to a sovereign unless specifically grantedDCIT Vs Royal Jordan Airlines ( ITAT, Del-SB) 98 ITD 1

Even in absence of any business connection, non-resident assessee’s receipt on account of technical services rendered to Indian party outside India would be covered u/s 9(1)(vii).SNC/ACRES Vs DCIT (ITAT, Del) 57 ITD 419

Providing Medical services to foreigners in India – Giving information regarding such services to foreign insurance companies – Preparing report about patients – Not technical / professional service.East West Rescue (Pvt) Ltd Vs DCIT (ITAT, Del) 89 ITD 259

Gross dividend and interest income accrued in foreign countries to be taxed without deducting therefrom TDS by foreign Govt.CIT Vs United India Insurance Co. Ltd. ( Mad ) 243 ITR 114Madhavrao J. Scindia Vs CIT (Bom) 243 ITR 683

Assessee took contract for levying pipeline to transport natural gas – 44BB does not apply.ARB Inc. Vs JCIT (ITAT, Del) 93 ITD 520

Foreign tax credit cannot exceed IT payable in India.JCIT Vs Digital Equipments India Ltd. (ITAT, Mum) 94 ITD 340

Assessee won Sikkim State Lottery prize – Sikkim Government made TDS – Prize money taxable under IT Act – No double taxation exemption.N. Manonmani Vs ITO (ITAT, Mad) 58 ITD 53

Non-resident rendering technical service to Indian company – Agreement for payment of fees in Indian Rupees – Loss on account of foreign exchange fluctuation while remitting fees abroad – Loss not deductible.CIT Vs Phillips Petroleum International Corpn (Del) 272 ITR 355

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Double Taxation relief – The requirement is that the income must have been taxed outside India and the same income must have been subjected to tax in India – No need to give relief in respect of income eligible for deduction u/s 80 RRACIT Vs S.S. Murthy (AP) 169 ITR 686CIT Vs K.L. Parekh (Raj) 208 ITR 965CIT Vs M.A. Mois (AP) 210 ITR 284

In addition to taxability of dependent agent in respect of remuneration earned by him in accordance with the domestic law, he is also liable to be taxable in India on the profits attributable to the foreign enterprise having Permanent t Establishment, of which he is acting as dependent agentDDIT Vs Set Satellite (Singapore) (Pte.) Ltd. (ITAT, Mum) 106 ITD 175

Payment of interest by P.E. of a foreign enterprise to its head office / other branches outside India – Not deductible as expenseABN Amro Bank N.V. Vs ADIT ( ITAT, Kol-SB ) 97 ITD 89

Income Tax paid at foreign ports is not deductible u/s 37 – it is only application of profitsCIT Vs Kerala Lines Ltd. (Mad) 201 ITR 106Kirloskar Electric Co. Ltd. Vs CIT (Kar) 228 ITR 676Wipro Information Technology Ltd. Vs DCIT (ITAT, Bang) 88 TTJ 778

No need of having separate Permanent Establishment in respect of each source of income, in the year of receiptVan Oord Dredging & Marine Contractors BV Vs DDIT (ITAT, Mum) 105 ITD 97

Assessee rendered supervisory services for a period of more than 6 months at installation site of SAIL where installation work was carried out by Indian contractors – Assessee had Permanent Establishment in India and income to be computed under Article 7 of DTAA – Sec. 44D appliesSteel authority of India Ltd. Vs ACIT (ITAT, Del) 105 ITD 679

Assessee entered into an agreement with an American company for setting up power plant in India – Total consideration payable was bifurcated as (a) for supply of equipment and essential parts, (b) for technical services, and (c) for start up services and turnkey responsibility – Amount paid towards technical services and start up services etc. to be treated as fee for technical services u/s 9(1)(vii) and as fees for included services under Article 12(4)(b) of DTAA – Same was chargeable to tax in India – The said services were not ancillary and subsidiary of the supply of equipments made by it since the services were in respect of equipments supplied by other parties alsoJindal Tractebal Power Co. Ltd. Vs DCIT (ITAT, Bang) 106 ITD 227

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Assessee not non-resident in nine our of ten proceeding years and was in India for more than 729 days in the proceeding 7 years – Resident of India – Salaries earned abroad were taxable in IndiaSankar Narayan Das Vs ADIT (ITAT, Kol) 101 ITD 95

Not ordinarily resident - Bureau Chief of Japanese Broadcasting Corporation at New Delhi - Functions entailing gathering of news in South Asia - Travel outside India for purpose of main functions as Bureau Chief at New Delhi - Salary for period outside India - Accrued in India - taxable in India.ACIT Vs Hiromi Hirose (ITAT, Delhi) 111 ITD 9

Non-Resident company send its employees to India as deputationists in the employment of Indian Company - The deputationists have lien on their employment with NR - As long as this lien remains, NR retains control over the deputationists’ terms and employment - Deputationists lend their experience to Indian Co. in India as an employee of NR as he retains his lien - Hence there is service PE under Art. 5(2)(l).In the case of Service PE, TNMM is the appropriate method since it apportions total operating profit on the basis of sales, costs, assets etc.- Under Art. 7(1), profit of PE is determined as if it is an independent enterprise - Once TP analysis is undertaken and the mark up fixed by the assessee was accepted by the Department, no further income to be attributed to the P.E. – This equates arms length analysis with attribution of profits - Data to be examined in each case - If TP analysis does not reflect the functions performed and the risks assumed by the enterprise, there is need to attribute profits to PE for those functions / risks that have not been considered. Morgan Stanley & Co. Inc. Vs DIT (Int. Taxation) (SC) 292 ITR 416

A banking company based at Korea had a branch in India – Tax was levied at rates applicable to Non-resident companies – Discrimination clause in article 25 of Indo-Korean DTAA not applicableChohung Bank Vs DDIT (ITAT, Mum) 102 ITD 45

Before a case is referred to Transfer Pricing Officer (TPO) for computation of Arms Length Price, Assessing Officer need not demonstrate that any one or more of circumstances set out in Sec. 92C(3) are satisfied – Assessing Officer is not required to record his opinion / reason before seeking approval of CIT u/s 92CA(1) – Before referring to TPO, Assessing Officer need not give opportunity of being heard to the assessee.Aztec Software & Technology Services Ltd. Vs ACIT (ITAT, Bang-SB) 107 ITD 141

Salary in Indian Rupees received in India – Services rendered in Norway for period exceeding 182 days – Income taxable in India & Norway – Individual

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not claiming that he was taxed in Norway – No relief from Indian tax available under DTAAS. Mohan, IN RE ( AAR ) 294 ITR 177

Reference to Transfer Pricing Officer under Instruction No. 3/2003 is mandatory in nature.Initial burden on assessee to prove that international transaction was carried out at arm’s length price – he cannot take a stand that such data cannot be called for or insisted upon from taxpayerCargill India (P.) Ltd. Vs DCIT (ITAT, Del) 110 ITD 616

If an enterprise has a certain amount of space at its disposal which is used for business activities, it is sufficient to constitute a place of business – No formal legal right to use that place is required – PE can exist when an enterprise illegally occupied a certain location where it carried on its businessRolls Royce PLC Vs DCIT 2007-TIOL-408-ITAT-DEL

Article 25.2 of DTAA with USA – Tax credit method to be followed and not income exemption method – Income earned by branch at USA to be included in Total income under section 5(1)©ITO Vs Data Software Research Co. P. Ltd. 2008-TIOL-09-ITAT-MAD

Since the Indo-Canadian DTAA is based on the UN Model Convention and not OECD Model, not only the profits as attributable to the PE is txable, but even the profit attributable to the sales in the other Contracting State of same and similar kind as sold through that PE are also taxable – In view of Cl.(b) of sub-Article (1) of Article 7 of DTAA, no part of the profit for the execution of the project can be excluded while computing the profitSNC Lavlin / Acres Inc Vs ACIT 2007-TIOL-310-ITAT-DEL

Assessee has PE in India and has business connection with Indian company – Assessee entered into contract for supply, erection, commissioning and performance test of machinery with Indian company – One single indivisible / composite contract as per the initial tender and pricing negotiations – lateron split into 4 different contracts as per the request of assessee – income from all 4 contrcts assessable in IndiaAnsaldo Energia SPA Vs ACIT 2007-TIOL-152-ITAT-MAD

ACCRUAL OF INCOME IN INDIA Downloading of information of beneficiaries and printing cheque / drafts on banks in India and forwarding them to beneficiaries – Income deemed to accrue in India .UAE Exchange centre LLC, IN RE (AAR) 268 ITR 9

Local paid agent for collecting information and submitting tenders and signing contracts on behalf of non-resident – Amounts to business commission earned in India

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Surton Corpn., IN RE (AAR) 268 ITR 156.

Non-resident company leased out transponder capacity to TV channel companies and was broadcasting various programmes in India via its satellite. Amount received is Royalty taxable in India u/s.9(1)(vi).Asia Satellite Telecommunications Co. Ltd. Vs DCIT (ITAT, Del) 85 ITD 478.

Amounts paid for preparatory studies in foreign country – Services to be utilized in India – Explanation to Sec. 9 – Such amounts would be deemed to accrue / arise in India – No difference between fees for engineering services and amounts paid as living allowance and travel allowance.Steffen, Robertson and Kirsten Consulting Engineers and Scientists, IN RE (AAR) 230 ITR 206

Company formed for generation and sale of electricity – Agreement with Non-resident Company for help in raising finance – Non-resident company giving advice regarding processing of loans – Success fees paid to non-resident – Fee for technical services u/s 9(1)(viii)(b).G.V.K. Industries Limited & Anr. Vs CIT & Anr. (AP) 228 ITR 564

Assessee, a foreign company supplied a machine to BHEL – Such machine got damaged before installation – Send its engineer to repair & supervise installation – amount actually paid to its engineer plus tax liability, is income of assessee which accrued in India.CIT Vs Cross Fraser Division By agent BHEL (Mad) 244 ITR 654

Fee paid to foreign company for service of engineers for supervising erection of project – Taxable - Airfare of engineers paid by Indian Company – Is perquisite & taxable – Income Tax paid by Indian company – To be included in gross .Clouth Gummiwerke Aktiengeselis Schaft Vs CIT (AP) 238 ITR 861

Consideration for construction and assembly itself is only exempt under Expln. 2 to Sec. 9(1)(vii) and not for its supervision – If a receipt satisfies 9(1)(vii) Expln. 2, it has to be treated as fee for technical services irrespective of the fact that it has a relation to the supply of plant and equipment.ITO Vs SMS Scholemann Siemag Aktiengesellschaft (ITAT, Hyd) 57 ITD 254

German Company undertaking electrical contract work for Indian company - Payments received separately for preparing drawings and documents – Fees for technical services – taxable.A.E.G. Aktien Aktiengesllschaft Vs CIT (Kar) 267 ITR 209

Supervision of construction, commissioning, arranging for practical experience of Indian technicians – These are management services - taxable in India.

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Haldor Topsoe Vs DCIT (ITAT, Mum) 59 ITD 313

Fee for rendering technical services – No need to establish existence of business connection – Assessee company agent of non-resident u/s 163(1)( c) – No time limit prescribed for passing order u/s 163(2) -Payments fall within Sec. 9(1)(vii)(b).Central Mine, Planning & Design Institute Limited Vs DCIT (ITAT, Pat) 67 ITD 195

Mobilization fee and operating charges separately indicated in agreement – Expenses incurred by assessee for transporting rigs from Portugal to India – ONGC paid fixed mobilization fees – Assessee claims it as only reimbursement of expenses→ Not correct – Said amount is part of gross receipts u/s 44BB - Boat & helicopter charges withheld by ONGC from payment not to be deducted from contract receipts u/s 44BB.Sedco Forex International Drilling Inc. Vs DCIT ( ITAT, Del ) 72 ITD 415

Sec. 44BB – Presumptive tax – Prospecting, extraction or production of mineral oils – Re-imbursement of freight and transportation charges includible in receipts for computing income.CIT Vs Halliburton Offshore Services Inc (Uttar) 300 ITR 265

Sec. 44BB – Presumptive tax – Prospecting, extraction or production of mineral oils – Amount received on account of spare parts includible in receipts for computing income.CIT Vs B.J. Services Co. (Uttar) 300 ITR 392

Royalty received from non-resident who is having 25% equity capital in Indian Company – There was business connection between assessee and Indian Company – Royalty taxable in India.CIT Vs Ruti Machinery Works Ltd. (Mad) 243 ITR 442

License to resident to use software developed by non-resident on its server platform – License fee paid to non-resident is royalty and fee for technical services – Taxable in India – Monthly payments made are liable for TDSIMT Labs (India) P. Ltd., IN RE (AAR) 287 ITR 450 Under an agreement, assessee was given non-exclusive right to use know-how. Assessee cannot assign any rights of such know-how to anyone else – Not outright purchase of know-how but only right to use know-how for which royalty was paid – Such receipt of royalty in India is taxable in IndiaDCIT Vs All Russia Scientific Research Institute of Cable Industry ( ITAT, Mum ) 98 ITD 69

Providing access to internet based air cargo portal outside India – Indian subscribers paying fees for access and use of portal for booking cargo with

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airlines, training subscribers and help connected therewith – Fee arises in India – Royalties and fee for technical services – taxable in India – TDS applicableCargo Community Network Pte. Ltd., IN RE (AAR) 289 ITR 355

There was service agreement and Technical support agreement between NTPL and cellular operators which supported assessee’s activity – Business connection u/s 9(1)(i) – Assessee projected itself in India through NTPL – 20% of net profit in Indian sales attributable to Permanent Establishment.Motorola Inc Vs DCIT (ITAT, Del-SB) 95 ITD 269

Food and wine show in India – Commission earned by agent outside India from work done abroad for participation in show in India – Agent’s right to receive commission arises in India – taxable in India – TDS to be madeRajiv Malhotra, IN RE (AAR) 284 ITR 564

Non-resident promoting enterprises in hotels and conducting international advertising etc. for a chain of hotels – Contract with resident Indian company for participation in promotion programmes of marketing business providing advertisements in magazines and newspapers etc. outside India – Indian company to pay percentage of gross revenue by way of reimbursement expenses – Payment received from Indian company taxable as “ fees for rendering technical services ”International Hotel Licensing Co. S.A.R.L., IN RE (AAR) 288 ITR 534

Though the agreement provided for delivery of machinery, equipments and instruments etc. f.o.b. European Port and the sale of the machinery must be deemed to have taken place outside the country, a combined reading of the two agreements establishes that there was real and intimate connection between the assessee and the non-resident within the taxable territories and this relationship amounted to a business connection through or from which income accrued or arose to the non-resident. It is not as if there was a stray or isolated transactionBharat Heavy Plates & Vessels Ltd. Vs Addl. CIT (AP) 119 ITR 986

Non-resident – Business connection – Technical assistance and consultancy service rendered by foreign company by installation of plant, etc. by deputing personnel – Income received by it attributable to its activity in IndiaSkoda Exports Vs Addl. CIT (AP) 143 ITR 452

Shares held in Indian company by Non-resident individual was transferred to non-resident company – Capital gains accruing is taxable in India – Transferee is representative of assessee for paying tax on capital gains.

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Triniti Corporation, IN RE (AAR) 295 ITR 258

Bare-boat charter and demise agreement in respect of ship owned by non-resident – Option to buy vessels not exercised till end of financial year – Payment of hire charges to owner – Not income from plying ships in international traffic but payment for use of ship ie. equipment – Hire charges taxable in India as royalty.West Asia Maritime Ltd. Vs ITO (ITAT, Chennai) 297 ITR (AT) 202

Shipping Corporation entering into Time Charter agreements with foreign shipping companies – Exclusive berthing facility at ports guaranteed for ships of such companies – Amounts to Permanent Establishment – Payment made is for use of ship and is royalty liable for Tax Deduction at SourcePoompuhar Shipping Corporation Ltd. Vs ITO (ITAT, Chennai) 109 ITD 226

TAX DEDUCTION AT SOURCE

Subsidiary and integral transactions have to take colour from Principal transactions.Hindalco Industries Ltd. Vs ACIT (ITAT, Mum) 94 ITD 242

Deduct tax from entire sum paid or credited and not merely income component – of the sumAssiciated Cement Co. Ltd. Vs CIT (SC) 201 ITR 435Anglo Indian Jute Mills Co. Ltd. Vs Dutt (Cal) 30 ITR 525Ray and Co. (India) Pvt. Ltd. Vs Mukherjee, ITO (Cal) 36 ITR 365

Payment to non-resident – If no application made by payer to Assessing Officer, Tax Deduction at Source must be on gross sum, irrespective of the income part therein.Transmission Corporation of A.P Ltd & Anr. Vs CIT (SC) 239 ITR 587DCIT Vs Mayurika S. Poddar (ITAT, Mum) 59 TTJ 372Czechoslovak Ocean Shipping International Joint Stock Co. & Anr. Vs ITO (Cal) 81 ITR 162 Cheminor Drugs Ltd. Vs ITO (ITAT, Hyd) 76 ITD 37Poompuhar Shipping Corporation Ltd. Vs ITO (ITAT,Chennai) 109 ITD 226West Asia Maritime Ltd. Vs ITO (ITAT, Chennai) 111 ITD 155

Payment in kind to non-resident – TDS provisions applicableKanchanganga Sea Food Ltd. Vs CIT (AP) 265 ITR 644

Tax Deduction at Source on salaries – Employer is responsible – No arrangement or agreement privately arrived at between employer & employee can affect / modify the statutory liability.John Patterson & Co.(India) Ltd. Vs ITO & Ors. (Cal) 36 ITR 449

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Assessee agreed to pay tax-free salary to employees and assessee was liable to pay tax on such tax-free salary – Amount of tax payable has also to be treated as part of salary and TDS to be made out of that. If assessee failed to deduct tax on that part, interest leviable u/s 201(1A).British Airways Vs CIT (Cal) 193 ITR 439Asian Dev. Service Vs CIT (Ker) 239 ITR 713

Tax Deduction at Source applicable on Transport contractors also.CBDT Vs Cochin Goods Transport Association (Ker) 236 ITR 9093Birla Cement Works Vs CBDT & Ors. (Raj) 139 CTR 540

Landing fee and parking fee for aircrafts amounts to rent for 194 I purposesUnited Airlines Vs CIT (Del) 287 ITR 281

Assessee sold its products through distributors by paying commission – liable to make TDS.Hindustan Coca Cola Beverages (P) Ltd. Vs ITO (ITAT, Jp) 97 ITD 105

Assessee engaged in business of providing cellular mobile phone services – Sold SIM and pre-paid cards to its franchisees at a fixed rate below market price for onward sale to the ultimate customers – the margin was commission payments _ tax deductibleACIT Vs Bharti Cellular Ltd. (ITAT, Kol) 105 ITD 129

License holders purchasing country liquor from Government distilleries and selling it to retail shops – Tax Collection at Source compulsoryRudra & Co. & Ors. Vs Union of India (HP) 233 ITR 66S.K.G. Sugar Ltd Vs CIT & Anr. (Pat) 236 ITR 338

Assessee having whole sale business in liquor – Has to collect tax including excise duty, cost of label etc. plus surcharge on sales to retailers.S.K.G. Sugar Ltd. Vs CIT & Anr.(Patna) 236 ITR 338

Amount described in lease agreement as security deposit – Agreement providing for reduction of security deposit every month by amount of rent payable – Security deposit was in effect advance rent – Tax to be deducted at source on entire security depositCIT Vs Reebok India Company (Del) 291 ITR 455

Loans taken in individual capacities by the Directors – Cheques taken by them in the name of company and transferred to their accounts – Repayment of loan and interest also routed through the company – Company bound to deduct tax at source when it is paying interest to the creditor.CIT Vs Century Building Industries P. Ltd. (SC) 293 ITR 194

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Liability to deduct tax, when interest is credited to books.Southern Brick Works Ltd. Vs CIT (Mad) 146 ITR 479ITO Vs D. Manoharlal Kothari (Mad) 236 ITR 357

Interest paid on credit purchases overdue for payment – TDS provisions applicable on such interest.A&M Agencies Vs CIT (Mad) 101 Taxman 655

Tax Deduction at Source to be made on gross interest and not on net interest payable after mutual set off between parties.CIT Vs S.K. Sundararamier & Sons (Mad) 240 ITR 740

Assessee engaged in providing financial service including fund management – obligation on part of assessee to deduct tax on interest payment in view of 2(28A)Viswapriya Financial Services & Secuties Ltd. Vs ITO (ITAT, Mad) 60 ITD 401

Original order u/s 201 r.w.s. 194 B set-aside by CIT(A) in 1989 to be redone – Fresh order passed in 1995 - valid.Instalment prize scheme – Lucky draw every month – winner need not pay balance instalments→Lottery scheme – 194B applicable.Lakshmi Ganeswara Enterprises & Financiers Vs ITO (ITAT, Hyd) 72 ITD 295

Compensation on acquisition of land – Duty of Land Acquisition Officer to deduct tax at source if amount paid after 01-10-2004 exceeds the prescribed limit – If tax not to be deducted, assessee to produce necessary certificate from Assessing Officer.Nalini Vs Deputy Collector, Land Acquisition (Ker) 294 ITR 423

Compensation awarded by Motor Accidents Claims Tribunal – Tax to be deducted at sourceUnited India Insurance Co. Ltd. Vs Mitaben Dharmeshbhai Shah & Ors. (Guj) 269 ITR 63New India Assurance Co. Ltd. Vs Mani & Ors. (Mad) 270 ITR 394

Purchase of ship for breaking up – Usance interest paid to Non-resident – Tax to be deducted at source.CIT Vs Vijay Ship Breaking Corporation (Guj) 261 ITR 113

Appointing Lead Manager to GDR issue – commission received is for technical services – liable for tax deduction at sourceRaymond Ltd. Vs DCIT (ITAT, Mum) 86 ITD 791

US Company to deliver technical designs / plan for use in India and to ensure that the plan is strictly executed in India – Technical Services – Tax Deductible at Source.

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Gentex Merchants (P) Ltd Vs DDIT (ITAT, Kol) 94 ITD 211

Payment to expatriate technicians by foreign employers having Permanent Establishment in India, on account of remuneration for services rendered in India – liable to tax – TDS apply.Pride Foramer S.A. Vs ACIT (ITAT, Del) 97 ITD 86

Failure to deduct tax – Levy of interest is mandatory – Payment of tax subsequently by recipient is not relevant.CIT Vs Rathi Gum Industries (Raj) 213 ITR 98,CIT Vs Dhanalashmy Weaving Works ( Ker ) 245 ITR 13Bennet Coleman & Co. Ltd. Vs V.P. Damle, ITO & Ors. (Bom) 157 ITR 812Pentagon Engg. Pvt. Ltd. Vs CIT (Bom) 212 ITR 92CIT Vs Prem Nath Motors (P) Ltd. (Del) 253 ITR 705CIT Vs Ramesh Enterprises (Mad) 250 ITR 464 – recipient filed loss return – not

a reasonable consideration.Jubilee Investments & Industries Ltd. Vs ACIT (Cal) 238 ITR 648ITO Vs Kodaikanal Finance Ltd.(ITAT, Mad) 55 ITD 480Thai Airways International Ltd. Vs ACIT ( ITAT, Del ) 98 ITD 123 - 201(1A) interest

even when no recovery u/s 201Hindustan Coca Cola Beverage P. Ltd. Vs CIT (SC) 293 ITR 226ACIT Vs Adani Exports Ltd. (ITAT,Ahd-TM) 109 ITD 101

Failure to make TDS u/s 194A – 201 (1A) interest valid – Since the finding of Assessing Officer that assessee has committed default has become final, it is not permissible to reopen the issue of liability either of payer or payee.Quilon Sea foods Vs Tax Recovery Officer (Ker) 155 CTR 533

271C penalty initiated on 6.1.97 – Order passed on 31.7.97 – Not time barredMitsui & Co. Ltd. Vs DCIT (ITAT, Del) 65 TTJ 1

272A(2) penalty for non-filing of Form No.26A leviable eventhough TDS was made and paid to Government.Shah Traders Vs DCIT (ITAT, Pat) 56 ITD 33

Failure due to oversight or preoccupation – Not a reasonable cause.SBI capital markets Ltd. Vs DCIT (ITAT, Bom) 57 ITD 72

Failure to deposit TDS- Liable to penalty u/s 221 irrespective of whether interest was paid or not.Jubilee Investments & Industries Ltd. Vs ACIT (Cal) 238 ITR 648

197A default – 272A(2)(f) penalty for default in submitting copy of each declaration separately.Escorts Employees Ancillary Ltd. Vs CIT (ITAT, Del-TM) 74 ITD 1

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Payment to sub-contractor – No exemption certificate produced – Liable to deduct tax – Liable to file TDS return u/s 206 even when no Tax was deducted at source – Penalty leviable – Any partner is principal officer of a firm.ACME Construction Co. Vs DCIT (ITAT, Pat) 68 ITD 1

Failure to make TDS from remuneration paid to Directors and interest credited in ‘interest payable’ a/c. – Prosecution of Director –principal officer – Expln. to 194A(1) is clarificatory & retrospective in operation.ITO Vs D. Manoharlal Kothari (Mad) 236 ITR 357

ACIT (TDS) has jurisdiction over TDS matters.Jubilee Investments & Industries Ltd. Vs ACIT (Cal) 238 ITR 648Mittal Steel Ltd. Vs ACIT & Anr. (Kar) 240 ITR 707

‘SE’ was authorized person at Chandrapur to make TDS and remit the same (eventhough H.O. of company is at Mumbai & assessed there) – ITO Chandrapur has jurisdiction to levy 201(1A) interest.ITO Vs Supdtg. Engr, O&M Division, MSEB(ITAT, Nag) 63 ITD 49

A trust cannot be treated as an individual and as such is not exonerated from requirement of sec.194A.ITO Vs Subhash Metal Industries (ITAT, Bom) 44 ITD 677

Even if assessee wins in appeal no need to refund TDS for which certificate already issued to payee.Samcor Glass Ltd. Vs ACIT (ITAT, Del) 94 ITD 202

Credit for foreign tax can be allowed to the extent of foreign tax liability in India to NIL and no refund out of that.JCIT Vs Digital Equipments India Ltd. (ITAT, Mum) 94 ITD 340

Credit for Tax Deducted at Source can be given only to the extent of proportionate income offered for assessmentPardeep Kumar Dhir Vs ACIT (ITAT, Chd-TM) 107 ITD 118

Failure to deduct tax – No mens rea required for penalty – Payment of tax by recipient does not absolve the deductorKanha Vanaspati Ltd Vs ACIT 2007-TIOL-400-ITAT-DEL

Assessee enters into agreement with non-resident company for supply of design, drawings and consultancy for development of automobile engines – As per the agreement, assessee to re-imburse expenses of personnel of non-resident company coming to India for imparting technical expertise to assessee’s staff – Eventhough non-resident does not have any PE in India, since the agreement was entered into for rendering technical services and services of the experts

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were requisitioned in that connection, payment of re-imbursement also liable for TDSAshok Leyland Ltd. Vs DCIT 2008-TIOL-205-ITAT-MAD

SBI was managing and clearing cheques through MICR centre by rendering managerial service which falls within the definition of technical services – payment made to SBI is liable for TDSCanara Bank Vs ITO 2008-TIOL-205-ITAT-AHD

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INTERESTS UNDER I.T. ACT

Charge of interest not appealable unless assessee not liable to levy at all.Central Provinces Mabgabese Ore Co. Ltd Vs CIT (SC) 160 ITR 961

Accrual of 220(2) interest is automatic – No opportunity to be given before levy.J. Jayalalitha Vs CIT & Ors. (Mad) 244 ITR 74

Addition deleted by CIT(A) – Later on addition upheld by ITAT – Demand notice got revived – 220(2) interest from original order.Super Spinning Mills Ltd. Vs CIT & Anr. (Mad) 244 ITR 814

One addition in original assessment order set-aside by Tribunal – 220(2) interest to be charged from date of original order itself.B. Indira Rani Vs CIT & Ors. (Ker) 237 ITR 20K. Venugopalan Nambiar Vs CIT ( Ker ) 231 ITR 607

Interest levied u/s.220(2) – Not appealableANZ Grindlays Bank PLC Vs CIT (Cal) 241 ITR 269

234 B & 234 C are compensatory in nature – Provisions are valid.Dr. S. Reddappa & Ors. Vs Union of India & Ors. (Kar) 232 ITR 62Nemi Chand Jain & Ors. Vs Union of India & Ors. (MP) 234 ITR 764CIT Vs R. Ramalingan (Ker) 241 ITR 753

Interest u/s.234A, 234B and 234C – mandatory – No right to be heard before imposition of interest.Union Home Products Ltd & Ors. Vs Union of India & Ors.(Kar) 215 ITR 758CIT Vs Anjum M.H. Ghaswala & ors. (SC) 252 ITR 1

234B interest can be levied upto date of 143(1) and thereafter be increased if 143(3) order is passed subsequently.Travancore Titanium Products Ltd. Vs DCIT (ITAT, Coch) 57 ITD 16Grasim Industries Limited Vs DCIT (ITAT, Mum) 64 TTJ 357ACIT Vs Telsa Transformers (P) Ltd. (ITAT, Indore) 72 ITD 459Hindustan Sanitary Engineers Vs ITO (ITAT, Asr) 95 ITD 226 – upto the date ofregular assessment.

Failure to charge 234A interest – Mistake apparent from record – 154 possible.ACIT vs Santosh Kumar Soni (ITAT, All) 57 ITD 220

When profit computed u/s.115J, interest u/s 234B, 234C can be charged.Sutlej Cotton Mills Ltd. Vs ACIT (ITAT, Cal-SB) 45 ITD 22

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Beta Naphthol P. Ld. Vs DCIT (ITAT, Ind) 50 TTJ 375Assam Bengal Carriers Ltd. Vs CIT (Gau) 239 ITR 862ACIT Vs B.N. Rathi Securities Ltd. (ITAT, Hyd) 71 ITD 31CIT Vs Holiday Travels P. Ltd. (Mad) 263 ITR 307

Tax liability increased on account of Retrospective amendment – 234B leviable.ACIT Vs Prime Securities Ltd. (ITAT, Mum) 95 ITD 249

For levying 234 B interest, no need to pass speaking orderCIT Vs Computer Graphics Ltd. (Mad) 285 ITR 84

Assessing Officer accepting delayed return as one filed in response to notice under section 148 – Liability to 234 interest arisesCIT Vs Kalpaka Transport Co. Ltd. (Ker) 287 ITR 15

So long as a final order u/s.132(5) is not passed, ITO cannot release a portion of seized money nor can he direct that the seized money be adjusted towards the existing liability of advance tax – 234 B & 234C leviable irrespective of seized cash lying with Department.Ramjilal Jagannath & Ors. Vs ACIT (MP) 241 ITR 758

Sec. 234D is in operation from 1-6-2003 ie. if regular assessment is made on or after 1-6-2003, 234D interest to be charged irrespective of assessment year and irrespective of the date of granting refundSigma Aldrich Foreign Holding Co. Vs ACIT (ITAT, Bang) 104 ITD 95 Amount of TDS though deducted not paid to Central Government – No interest u/s 244A in respect of such amountsACIT Vs Shri Digvijay Cement Co. Ltd. (ITAT, Rajkot) 104 ITD 185

Refunds arose out of assessment u/s 172(7) r.w.s. 143(3) – No interest u/s 244(1A)Lloyd Triestino Vs DCIT (ITAT, Mum) 70 ITD 33

On date of regular assessment, self assessment tax loses its identity and assumes character of tax paid as per Demand Notice u/s 156 – 244A interest from date of assessment order till date of actual refund and not from date of payment self assessment tax.Dhanvi Trading & Investment (P) Ltd. Vs Assessing Officer (ITAT, Ahd) 72 ITD 245Sutlej Industries Limited Vs ACIT (ITAT, Del) 86 ITD 335

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PENALTIES UNDER I.T. ACT

271(1)(C)

Reassessment proceedings – Imposition of penalty for concealment in original proceeding.CIT Vs Angara Satyam (AP) 37 ITR 230C.V. Govindarajulu Iyer Vs CIT (Mad) 16 ITR 391Dayabhai Girdharbai Vs CIT (Bom) 32 ITR 677Arunachalam Chettiar 6 ITC 58CIT Vs Gopal Krishna Singhania (All) 89 ITR 27K.C. Mukherjee & Anr. Vs CIT (Pat) 37 ITR 224Malbary & Bros Vs CIT (Bom) 44 ITR 674

Cash credits discovered in accounts – Assessee agreeing to inclusion of such credits in assessment – onus shifts to assessee in penalty proceedings to show that amount was not concealed income.Western Automobiles (India) Vs CIT (Bom) 112 ITR 1048 CIT Vs W.J. Walker and Co. (Cal) 117 ITR 690CIT Vs Prathi Hardware Stores (Orissa) 203 ITR 641Lenses centre Vs ITO (ITAT, Hyd) 49 TTJ 21CIT Vs Jamnadas & Co. (Guj) 210 ITR 218CIT Vs Ganpatrai Gajanand (Orissa) 108 ITR 403New Vijay Agency Vs ACIT (ITAT, Mad) 74 ITD 504Addl. CIT Vs Bhoopathy (Mad) 113 ITR 188Durga Timber Works Vs CIT (Del) 79 ITR 63

If the assessee failed to give accurate particulars as to his income, he can be found to be acting dishonestly – cash credit assessed – Penalty upheld.CIT Vs Drapco Electric Corporation (Guj) 122 ITR 341Mohan Ram Ram Kumar Vs CIT (All) 59 ITR 135

Sec. 68 is deeming provision – Still penalty is leviableChuharmal Vs CIT ( SC ) 172 ITR 250CIT Vs Aboo Mohmed ( Kar ) 160 CTR 128

Unexplained investment – Deemed to be income for the purpose of levying penalty – If no satisfactory explanation regarding investment, penalty leviable.Loknath Chowdhary Vs CIT (Cal) 155 ITR 291Rahmat Development & Engineeing Corporation Vs CIT (Cal) 130 ITR 602

Concealment of income – revised return filed – penalty valid.CIT Vs Haji P. Mohammed (Ker) 132 ITR 623Mahavir Metal Works Vs CIT (P&H) 92 ITR 513ACIT Vs Dr. S.N. Gupta (ITAT, Del) 56 ITD 440

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Calicut Trading Co. Vs CIT (Ker) 178 ITR 430, Ramachandra D. Thakur (HUF) Vs ITO (ITAT, Mum) 61 ITD 279B. Indira Rani Vs ITO (ITAT, Coch) 66 ITD 311Addl. CIT Vs Bhartia Bhandar (MP) 122 ITR 622C.E. Baily Vs DCIT (ITAT, Del) 66 ITD 1Badri Prasad Om Prakash Vs CIT (Raj) 163 ITR 440S.R. Arulprakasam Vs Prema Malini Vasan, ITO (Mad) 163 ITR 487F.C. Agarwal Vs CIT (Gauhati) 102 ITR 408CIT Vs J.K.A. Subramania Chettiar (Mad) 110 ITR 602CIT Vs K. Mahim (Ker) 149 ITR 737, 232 ITR 115Sivagaminatha Moopanar & Sons Vs CIT (Mad) 52 ITR 591Ravi & Co. Vs ACIT (Mad) 271 ITR 286Burden of proof – Assessee filing revised returns showing much larger income – Not able to establish inadvertent mistake or omissions in original returns – Penalty justifiedG.C. Agarwal Vs CIT (SC) 186 ITR 571

Addition based on estimate – concealment penalty can be leviedAddl. CIT Vs Chandrakantha and another (MP) 205 ITR 607Addl. CIT Vs Lakshmi Industries and cold storage Co. Ltd. (All) 146 ITR 492Sushil Kumar Sharad Kumar Vs CIT (All) 232 ITR 588CIT Vs Md. Warasat Hussain (Patna) 171 ITR 405A.M. Shah & Co. Vs CIT (Guj) 238 ITR 415CIT Vs Krishnaswamy and Sons (Mad) 219 ITR 157CIT Vs Swarup Cold Storate & General Mills (All) 136 ITR 435CIT Vs Chandra Vilas Hotel (Guj) 291 ITR 202

Survey of business premises – impounding of books of a/c - assessee agreeing to assessment – imposition of penalty valid –CIT Vs C. Ananthan Chettiar (Mad) 273 ITR 401CIT Vs K. A. Sampath Reddy (Kar) 197 ITR 232Biland Ram Hargan Das Vs CIT (All) 171 ITR 390Banaras Chemical Factory Vs CIT (All) 108 ITR 96CIT Vs Popular Lunghi Co. (Mad) 238 ITR 229LMP Precision Engg. Co. Ltd,. Vs DCIT (ITAT, Ahd) 64 ITD 42P.C. Joseph & Bros. Vs CIT ( Ker ) 240 ITR 818M.S. Mohammed Marzook Vs ITO ( Mad ) 283 ITR 254CIT Vs Dr. A. Mohammed Abdul Khader ( Mad ) 260 ITR 650CIT Vs Mahabit Prasad Bajaj (Jhar) 298 ITR 109M.N. Rajaraman Vs DCIT 2008-TIOL-293-ITAT-MAD

Revised return filed after books were impounded – penalty upheld CIT Vs A. Sreenivasa Pai (Ker) 242 ITR 29

Amount requisitioned u/s 132A – No immunity under amnesty – Amount included in return, but no proof of source of acquisition of that asset – 271(1)(c) leviableCIT v. Aboo Mohmed (Kar) 250 ITR 313

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Cash seized by Police authorities – surrender of amount for assessment – penalty leviableCIT Vs Mohd Mohtram Farooqui (Raj) 259 ITR 132

Search and seizure – Discovery of concealed income during search – Return not filed on time and tax not paid on time in respect of such income – 271(1)© penalty upheldSurender Paul Vs CIT (P&H) 287 ITR 223Ashok Kumar Gupta Vs CIT (P&H) 287 ITR 376CIT Vs R. Kesavan Nair (Ker) 287 ITR 276

“Voluntarily” means out of free will without any compulsion - criteria for deciding – If Department has incriminating material with regard to disclosed income, disclosure is not voluntary and vice versa –K.L. Swamy Vs CIT (Kar) 239 ITR 386 – search in third party’s premisesBhairav Lal Verma Vs Union of India (All) 230 ITR 855M. Sajjanraj Nahar & Ors. Vs CIT ( Mad ) 283 ITR 230

Admission of assessee during assessment regarding concealment – No independent enquiry to prove concealment necessary in penalty proceedings.H.V. Venugopal Chettiar Vs CIT (Mad) 153 ITR 376Simply because assessee agreed to addition of concealed income after detection thereof and filed return in response to notice u/s 148 offering additional income, assessee cannot escape from 271(1)( c ) penalty.P.C. Joseph & Bros Vs CIT (Ker) 240 ITR 818

Penalty leviable on agreed additionsPolo Singh & Co. Vs CIT ( Del ) 98 ITR 564CIT Vs Krishna & Co. ( Mad ) 120 ITR 144CIT Vs Dr. R.C. Gupta & Co. ( Raj ) 122 ITR 567Mirzapur Construction Company Vs CIT ( All ) 122 ITR 828Union Engineering Co. Vs CIT ( Ker ) 122 ITR 719ITO Vs Leela Mammen ( ITAT, Cochin ) 63 TTJ 252Jaswant Rai & Another Vs CBDT & Ors. ( Del ) 133 ITR 19CIT Vs Gates Foam & Rubber Co. ( Ker ) 91 ITR 464CIT Vs P.B. Shah & Co. (Pvt. ) Ltd. ( Cal ) 113 ITR 587Rathnam & Co. Vs IAC ( Mad ) 124 ITR 376ACIT Vs S.M. Kannappa Automobiles (P) Ltd. ( ITAT, Bang ) 72 ITD 474

Letter of assessee saying “penalty may not be levied” – Not an understanding that penalty will not be levied – Penalty can be levied.Anand Liquors Vs CIT (Ker) 232 ITR 35CIT Vs D.K,.B and Co. (Ker) 243 ITR 618Rathnam & Co. Vs IAC (Mad) 124 ITR 376

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Income claimed in Part III of Return and claimed to be exempt as prize money – claim held as false – 271(1)( c) levy valid.CIT Vs Abdulgafur Ahmed Wagmar (Guj) 199 ITR 827Dr. K.D. Arora Vs CIT (Patna) 162 ITR 481Lal Chand Gopal Das Vs CIT (All) 48 ITR 324V.P. Samtani Vs CIT (Cal) 140 ITR 693

Mere disclosure of receipts as cash credits in Part III of return – still concealment is there.CIT Vs Vidyagauri Natverlal & Ors. (Guj) 238 ITR 91

Deliberate under valuation of stock – Penalty upheld Sree Nithyakalyani Textiles Ltd. Vs DCIT ( Mad ) 282 ITR 154

Failure to disclose interest received u/s 244A – Penalty upheldThirupathy Kumar Khemka Vs CIT (Mad) 291 ITR 122

Failure to declare in accounts receipt of amount from Haryana State Agricultural Marketing Board - Not a bonafide mistake - Showing lower receipt of income itself proves concealment - penalty upheld.Sandeep Kumar Garg and co. Vs ITO (P&H) 298 ITR 106

Wrong claim of deduction towards payment of housing loan interest – penalty upheldITO Vs Mool Chand Gupta (ITAT, Del) 110 ITD 89

Bogus claim of depreciation on non-existing assets – Withdrawal of claim in revised return filed after search – penalty upheldCRN Investments P. Ltd. Vs CIT (Mad) 300 ITR 342

Declaring value of jewellery in Wealth Tax return at a very low figure – concealment penalty leviable ACWT Vs Lata Rani Mehta (ITAT, Del) 69 ITD 173Discrepancies in closing stock and accounting , low Gross Profit – when confronted, assessee agreed for addition of Rs. 30,000 on the condition that no penalty be levied – 271(1)(c ) penalty levied – upheldIndia Ceramic Corporation (ITAT, Del) 93 Taxman (Mag) 83

Failure to disclose capital gains in original as well as revised returns – concealment penalty leviable eventhough it was disclosed in the second revised return.CIT Vs Sova Bajoria (Cal) 232 ITR 202

Assessee failed to produce purchase & sale register and stock register – Failed to furnish particulars of brokers through whom alleged bogus purchases made – Concealment penalty valid.

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Beena Metals Vs CIT (Ker) 240 ITR 222

Wrong claim of depreciation will amount to furnishing of inaccurate particulars.ITO Vs Geep Industrial Syndicate Ltd. (ITAT, All) 23 ITD 448

Depreciation and Investment Allowance claimed in respect of machinery – Machinery not reaching assessee’s premises before close of accounting year – Assessee later withdrawing claim – Penalty upheldCIT Vs Sree Valliappa Textiles (Kar) 294 ITR 322

False inflation of expenses/any deductible item for computing income – falsity of entries - Penalty levied.CIT Vs Gates Foam and Rubber Co. (Ker) 91 ITR 464Anand Liquors Vs CIT (Ker) 232 ITR 35ACIT Vs Mcleod Russel (I) Ltd. (ITAT, Kol) 101 ITD 39

Agricultural income boosted up – Colourable device – Penalty leviable.CIT Vs Ramanujam Thampi & Ors. (Ker) 233 ITR 521

Addition on account of low withdrawal for household expenses –Concealment penalty upheld.Sushil Kumar Sharad Kumar (All) 232 ITR 588

Difference in cost of construction of building treated as unexplained investment - 271(1)(c ) penalty leviable.Loknath Chowdhury Vs CIT (Cal) 155 ITR 291Rahmat Development & Engineering Corporation Vs CIT (Cal) 130 ITR 602

Failure to disclose share of spouse and minor children in firm - amounts to concealment.CIT Vs P.K. Kochammu Amma Peroke (SC) 125 ITR 624ITO Vs C.V. Hakkapakki (ITAT, Bang) 64 ITD 467

If an assessee consciously conceals income arising u/s 41, Penalty leviable.Hindustan Tools Mfg. Co. Vs CIT (P&H) 102 ITR 174CIT Vs Aya Singh Ishar Singh (P&H) 92 ITR 182

Assessee admitting income from lorries in earlier year – No income shown in subsequent year – claims that lorries were sold – Permits continue in assessee’s name – Assessee cannot show that lorries were sold – Penalty valid.CIT Vs Mir Mohamed Ali (Mad) 128 ITR 215

Notice u/s 17 issued and service attempted – service avoided by assessee – Return filed thereafter – Not “voluntary and in good faith”.Ram Lal Sunaja Vs CWT & Anr. (All) 224 ITR 109

269

Penalty leviable on additions which was neither disclosed in 273A petition or Return of Income nor any explanation given.M.Ethirajan Vs ACIT (ITAT, Mad) 65 ITD 87

80J claim made in 72-73 and allowed – In that process, made that year as initial year as per 80J(1) – Again claim made wrongly in AY 80-81 – Filed inaccurate particulars – penalty leviable.ACIT Vs Hindustan Conductors (P) Ltd. (ITAT, Mum) 58 ITD 410

Assessee following mercantile system – Failure to include accrued interest in returns – No evidence to show change in method of accounting or interest did not accrue – Penalty validJames Finlay & Co. Ltd. Vs CIT (Cal) 144 ITR 423

Share income from firm not disclosed in Return of Income – Penalty upheldMotilal Vs CIT (Raj) 82 Taxman 102

Assessee collected sales tax – Did not pay it – Did not show in accounts - Penalty upheldCIT Vs Bassein Metals P. Ltd (Bom) 263 ITR 518

Capital Gains on sale of land – claim of agricultural land disproved – revised return filed – penalty leviable Sanjay D. Gupta Vs ACIT (ITAT, Mum) 90 ITD 776

Non-receipt of income maneuvered by assessee – Failure to disclose such income – Penalty leviable.Bhagirath Kanoria Vs CIT (Cal) 122 ITR 728

Sales to sister concerns at lower prices – Sham transaction – 271(1)( c)Patel Chemical Works Vs ITO (ITAT, Ahd) 74 ITD 322

Amount shown as advance towards supply of goods –No evidence that goods were delivered – penalty validMohan Gupta Vs ACIT (Raj) 274 ITR 179

Assessee showing share income from firm – firm not genuine – Penalty validR.K. Bhargawa Vs CIT (Raj) 274 ITR 287

Vacant land – Not used in business - No evidence that assessee bonafide believed land not taxable – Penalty upheldV.G. Paneerdas & Co. P. Ltd. Vs CWT (Mad) 284 ITR 444

No evidence to show that there was reasonable cause for non-disclosure of income Mani Joseph Vs State of Kerala (Ker) 230 ITR 843

270

Contractor obtaining amount with interest thereon from PWD under decree – failure to disclose interest – Penalty imposed – subsequently setting aside of order awarding interest - not a valid reason for non-disclosure – Levy of Penalty upheldPadam Kumar Jain Vs CIT (Patna) 230 ITR 766Explanation introduced w.e.f. 1.4.64 places onus on assessee of proving that understatement of income was not on account of any fraud or gross / willful neglect on his part.Addl. CIT Vs Quality Sweet House (All) 130 ITR 309Banaras Textorium Vs CIT (All) 169 ITR 782 pp.793CIT Vs Zeekoo Shoe Factory (All) 127 ITR 837 pp.841

Even where the incorrectness of the return is claimed due to want of care on the part of the assessee and there is no reasonable explanation for such want of care – infer deliberateness and treat as a false return.Cement Marketing Company of India Ltd. Vs assistant Commissioner of Sales Tax & Ors. (SC) 124 ITR 15A.M. Shah & Co. Vs CIT (Guj) 238 ITR 415

If the assessment order became final, it was binding on both parties and neither party could seek to reopen it in a penalty proceeding.Bharat Rice Mill Vs CIT (All) 278 ITR 599S.S. Ratanchand Bholanath Vs CIT (MP) 210 ITR 682CIT Vs Ram Niwas Agarwal (All) 125 ITR 432

Assessee did not furnish any Explanation in respect of entries in duplicate set of books – 271(1)(c ) levy upheld.Mandli Hanumanthappa Setty Vs ITO (ITAT, Bang) 30 ITD 480

Mere offering explanation, is not sufficient – Explanation to be substantiated by cogent and reliable evidence.CIT Vs Lalchand Trath Ram (P&H) 225 ITR 675

Finding by Tribunal in assessment proceedings that assessee had income from undisclosed sources and that it had concealed its sales – concealment penalty leviable.CIT Vs Somnath Oil Mills (Guj) 214 ITR 32

Representative assessee is liable for penaltyPratap Chandra & Ors. Vs ITO & Ors.(All) 100 ITR 551 Receiver of HUFSunita Gupta Vs ACIT (All) 136 ITR 672 Rep. of minorCIT Vs R. Srinivasan (Mad) 228 ITR 214 Rep. of minorRani H.R. Laxmi (Estate) Vs CWT (Pat) 228 ITR 372 ExecutorACIT Vs Nageshwar Prasad (ITAT, Pat-TM) 63 ITD 29 -legal heirTapati Pal Vs CIT (Cal) 241 ITR 468-legal heir.

271

Assessing Officer observed in penalty order “while granting spread over, CIT has directed that penalty proceedings should be initiated’ – This was not direction of CIT but approval of some action proposed by Assessing Officer – Proceedings are valid & was based on Assessing Officer’s satisfaction – concealment penalty levied.Nirmal Udyog Co. Vs ACIT (ITAT, Mum –TM) 65 ITD 73

Assessee himself admitted concealment by filing revised return – Details of how un- accounted income was generated, not furnished – He cannot plead that income was offered to purchase peace – There is no estoppel or agreement against a statute.S. Sivakumar Vs ACIT (ITAT, Mad) 64 ITD 149

When assessee approaches CIT u/s 273A, he does not dispute his liability to pay the penalty, all he wants is a reliefKherunnissa Allibhai Vs CIT (Guj) 113 ITR 443Ichhabai Panchal Vs CWT (Cal) 137 ITR 232Jyoti Steels Vs CIT (All) 166 ITR 558

Non-disclosure of pendency of appeal while applying for waiver u/s 273A – CIT partly waived penalty u/s.273A – appeal before ITAT not maintainableKaveri Wines Vs ACIT (ITAT, Bang) 66 TTJ 349

No need to specify in the notice that penalty invoked under Explanation to section 271(1)©K.P. Madhusudhanan Vs CIT (SC) 251 ITR 99.

Immunity from penalty – Diaries and Kucha books – Not books of accounts maintained in ordinary course of business – Penalty leviableSheraton Apparels Vs ACIT (Bom) 256 ITR 20Dr. T.P. Kulkarni Vs DCIT (ITAT Mum) 86 ITD 696

Mentioning of the words “ penalty proceedings initiated separately ” in assessment order is sufficient for invoking penal actionM. Sajjanraj Nahar & Ors. Vs CIT ( Mad ) 283 ITR 230Nainu Mal Het Chand Vs CIT (All) 294 ITR 185

Effect of sec. 275(a)(i) – meaning of “ completed ” – Assessment order passed on 28-03-1982 which was set aside on appeal and matter remanded – Consequential order passed on 14-03-1986 – Order of penalty on 16-03-1988 – Not barred by limitationCIT Vs Santosh Mahey (P&H) 293 ITR 573

272

271 B

Absolute failure to get accounts audited – Penalty leviable.Accounts got audited belatedly – 44AB – Penalty leviableBangalore Steel Distributors Vs ITO (ITAT, Bangalore) 49 ITD 668ACIT Vs Gayathri Traders (ITAT, Hyd-SB) 58 ITD 121C. Ramaswamy Vs ITO (ITAT, Mad) 63 TTJ 647

No limitation period for initiation of 271B penalty proceedings.ITO Vs Rama Medical Stores (ITAT, All) 59 ITD 110Bharat Construction Co. Vs ITO (MP) 153 CTR 414Gokal Chand Shammi Kumar Vs ITO (ITAT, Asr) 67 ITD 425ACIT Vs Madan Roller Flour Mills (ITAT, Asr) 71 ITD 274

271B Penalty – Six month period of limitation runs from the date of initiation of penalty proceedingsCIT Vs Tam Tam Pedda Guruva Reddy (Kar) 287 ITR 72

271B penalty not based on assessed tax – Hence setting aside of assessment will not automatically cancel penalty.U.P. Nalkoop Nigam Limited Vs DCIT (ITAT, All) 71 ITD 395

Applicability in the case of commission agents – explained.Abhay Kumar & Co. Vs Union of India & Ors. (Raj) 164 ITR 148

Turnover of head office & branches to be taken together to see whether it exceeded 40 lakhs or not.ITO Vs Rama Medical Store (ITAT, All) 59 ITD 110

Builder – Advance received from customers for booking flats is Turnover.DCIT Vs Gopal Kishan Builders (ITAT, Luck) 91 ITD 124

Extension of time for filing return is independent of filing of audit report u/s 44AB – Independent reason to be shown.ACIT Vs Madan Roller Flour Mills (ITAT, Asr) 71 ITD 274

Dispute between Directors – Not a reasonable causeShri Swastik Steels P. Ltd. Vs ACIT (Bom) 264 ITR 447

Delay in appointment of statutory auditors by Government as per Companies Act – not a reasonable cause for delay.DCIT Vs Bihar State Leather Dev. Corpn. P. Ltd. (ITAT, Pat) 58 ITD 276U.P. Nalkoop Nigam Ltd. Vs DCIT (ITAT, All) 71 ITD 395

273

271 D, 271 E, 271G

Imposition of fine equal to amount of loan / deposit received in cash.R.A. Varma, ACIT Vs Laxmi Induction & Ors. (Guj) 216 ITR 555Mehta Vegetables P. Ltd. Vs Union of India & Anr. (Raj) 235 ITR 425Narsingh Ram Ashok Kumar Vs Union of India & Anr. (Pat) 234 ITR 414Chamundi Granites P. Ltd. Vs DCIT (Kar) 239 ITR 694Dhanji R. Zalte Vs ACIT (Bom) 265 ITR 204 ADIT Vs A.B. Shanthi (SC) 255 ITR 258

Distinction between “Loan” & “Deposit” explained.A.M. Shamsudeen Vs Union of India & Ors. (Mad) 244 ITR 266

271D applies to share application money also.Bhalotia Engineering Works P. Ltd. Vs CIT (Jharkand) 275 ITR 399

Genuineness of loan / deposit – not a criteria – Urgency not proved – Penalty upheld.Thenamal Chharjjer Vs JCIT (ITAT, Chennai) 96 ITD 210ITO Vs Sunil M. Kasliwal (ITAT, Pune-TM) 94 ITD 281

Period of limitation starts from initiation of penalty proceedings by JCITDewan Chand Amrit Lal Vs DCIT ( ITAT, Chd – SB ) 98 ITD 200

271G penalty – Satisfaction need not be recorded before initiation of proceedingsCargill India (P.) Ltd. Vs DCIT (ITAT, Del) 110 ITD 616

140A(3)

Assessee engaged in heavy construction work and was short of liquid funds – Not a reasonable cause – Penalty upheld.Bhauram Jodhraj Properties (P) Ltd. Vs CIT (Gau) 108 I TR 305V. Govinda Chetty Vs CIT (Mad) 231 ITR 615

274

OTHER TAXES

EXPENDITURE TAX

Room charges cannot be divided among number of persons who occupied it.H.P. Tourism Dev. Corpn. Vs Union of India & Ors. (HP) 238 ITR 38

FRINGE BENFIT TAX

Non-resident employer – Transportation cost incurred in bringing non-resident employees to place of work in India and back to their foreign residence – LiableR & B Falcon (A) Pty. Ltd., IN RE (AAR) 289 ITR 369

Non-resident organization carrying on charitable, scientific and educational activities in India – Having branch office in India – Fringe benefits provided to employees – organization liable to payPopulation Council Inc., IN RE (AAR) 286 ITR 243

INTEREST TAX

Bank advancing credit to exporters – Interest charged at lower rate – loss covered by export subsidy from RBI – Such subsidy also part of interest levy and chargeable to interest tax.State Bank of Indore Vs CIT (MP) 270 ITR 336

Interest tax – Chargeable Interest to be considered on accrual basis.Kerala St. Ind. Dev. Corp. Ltd. Vs CIT (Ker) 246 ITR 330

Interest tax – Interest tax collected from customers forms part of chargeable interest.Punjab National Bank Vs CIT (ITAT, Del) 95 ITD 217 distinguished Bank of

Madura decision of Madras High Court

Interest tax – Interest on inter-corporate deposits – chargeable.Bajaj Auto Holdings Limited Vs DCIT (ITAT, Mum) 95 ITD 356

Overdue interest on demand bills – Chargeable interestState bank of Mysore Vs CIT (Kar) 175 ITR 607

275

WEALTH TAX

Taxable Assets

Motor cars includes JeepsCWT Vs Karnataka Minerals & Mfg. Co. Ltd. (Kar) 287 ITR 411

Share in property not specified – Income from property assessed as AOP -Value of share in property includible in Net WealthCWT Vs J.K. Srivastava ( All ) 280 ITR 470

Mohamedan Law – Gift of residential house by husband to wife in discharge of dower debt – Transfer not effected by registered instrument but orally – Gift is not complete – Income from gifted property is to be included in total income of husband.Syed Sadique Imam and others Vs CIT (Patna) 117 ITR 62

Amount standing to credit in compulsory deposit a/c is an asset – includible in net wealth.V.M. Rao Vs CWT (Mad) 229 ITR 813A.H. Dalmia & Ors. Vs CWT (Del) 232 ITR 921

Assets exempt u/s 5 must be included in net wealth of firm and then apportioned among partners.C WT Vs T.S. Sundaram ( SC ) 237 ITR 61

Subsidy received form Government part of net wealth.A.M. Moosa Vs CWT (Ker) 225 ITR 391

Amendment to 2(ea) (i) and (ii) constitutionally valid.K.V. Sathyanarayana Raju Vs Union of India & Anr. (Kar) 240 ITR 912

Land acquired by Government – Right to receive compensation is an assetCWT Vs U.C. Mehatb (SC) 231 ITR 501Khorshed Shapoor Chenai Vs Assistant Controlloer of Estate Duty (SC) 122 ITR 21

Decree is an asset for Wealth Tax purpose.Mary Koshy & ors. Vs CWT (Ker) 232 ITR 81

Valuation by adopting average as per Rent capitalization method and Land and Building method – validCWT Vs Taraben R. Patel (Kar) 198 ITR 657

Temporary retirement from firm –ownership of Goodwill not given up – Annual payment was not an “annuity” – value of assessee’s share in Goodwill of firm is includible in net wealth.

276

Paramanandbhai Patel Vs CWT (MP) 177 ITR 339

Assessee legal owner of property – To include asset in Net Wealth.Nawab Sir Mir Oman Ali Khan Vs CWT (SC) 162 ITR 888

Right to net income of Trust fund for life – Right is not “annuity” & is taxable.CWT Vs P.K. Banerjee (SC) 125 ITR 641CWT Vs Her Highness Maharani Gayatri Devi of Jaipur (SC) 82 ITR 699

Coffee points is an asset to be included in Net Wealth.G.M. Gopalakrishna Vs WTO (Mys) 51 ITR 575Land treated as stock-in-trade – some land sold subsequently – Therefore land not appurtenant to building – taxable asset as urban land.Binny Ltd. Vs ACWT (ITAT, Chennai) 96 ITD 500

Even if asset is incapable of being sold, interest has to be valued.Binny Ltd. Vs ACWT (ITAT, Chennai) 96 ITD 500

Vacant land – Urban Land Ceiling Act – Land deemed to have acquired by Government once notification issued u/s 10(3) of Ceiling Act – Till such notification, arrive at market value.CWT Vs Sri Srikantadatta Narasimharaja Wadiyar (Kar) 279 ITR 226

Assessee, member of co-operative housing society, was allotted flat by society against his contribution – Possession of flats was given to him on 2.5.91 i.e., after valuation date of 31.3.90. - Assessee to be considered as deemed owner of flat u/s.4(7)ACWT Vs Sundeep Chilangia (ITAT, Cal) 59 ITD 145Lloyds Realty Ltd. Vs DCIT (ITAT, Mum) 90 ITD 710

On death of a Hindu widow, her interest doesn’t cease or merge in coparcenor property.Sulochanaben Narottambhai (ITAT, Ahd) 107 Taxman (Mag) 130

Land & Building taken by assessee-company on 98 years lease – Asset includible in Net Wealth.Tulsidas V. Patel (P) Ltd. Vs WTO (ITAT, Mum) 65 ITD 287

Sale deed not executed and registered by lesser in favour of lessee – Lessor is owner – Includible in Net WealthNu Stores (P) Ltd.Vs ACIT (ITAT, Cal) 59 ITD 150

Lessee put up construction on leased land – owner – Includible in Net WealthACWT Vs Anupam Pictures (P) Ltd. (ITAT, Cal) 60 ITD 640

277

Assessee company let out factory sheds – Rental income assessed under the head ‘Business’ –To be included in net wealth.T.P. Roy Choudhury & Co. Ltd. Vs DCWT (ITAT, Cal) 69 ITD 135

Jeeps owned by company should be treated as motor cars for the purpose of Sec.40(3)(vii) of Fin.Act,83.Southern Roadways Limited Vs CWT (Mad) 251 ITR 213

Wealth Tax – No exclusion of stock-in-trade for AY 84-85 – Assessee is a dealer in motor cars – Wealth Tax leviable.CWT Vs Reliance Motor Co. Ltd. (Mad) 260 ITR 571

Wealth Tax –Sec. 40(3)(vi) – Assessee letting out its commercial complex – Wealth Tax leviable.CWT Vs Asoka Betelnut Co. P. Ltd. (Mad) 260 ITR 573CWT Vs Fagun Estates P. Ltd. (Mad) 272 ITR 472 –even part of building let out

Wealth Tax – Sec. 40(3)(vi) – Assessee leased out buildings and lessee using building as warehouse –No exemption.CWT Vs Indian Warehousing Ind. Ltd. (Mad) 269 ITR 203

Stock-in-trade assessable to Wealth Tax for AY 84-85 to 88-89.CWT Vs B.R. Theatres and Industrial concerns P. Ltd. (Mad) 272 ITR 177

AY 98-99 – Assessee company owned flats exclusively for residential purpose of its employees – Assets. Floatglass India Ltd. Vs ACWT (ITAT, Mum) 89 ITD 542

EXEMPTIONS

Assessee, partner in firm engaged in construction of buildings – Not manufacture or processing of goods – Not entitled to 5(1)(xxxi) exemption.Shantaben Chinubhai Vs CWT (Guj) 196 ITR 44

Exemption of residential house – Only if it is habitable condition.CWT Vs K.B. Pradhan (Ori) 130 ITR 393

Agricultural land exemption – Verify whether land was actually put to agricultural use – Mere recording in Revenue records is not sufficient.CWT Vs Officer in-charge (Court of Wards) Paige (SC) 105 ITR 133Controller of Estate Duty Vs V. Venugopala Varma Rajah (SC) 105 ITR 593CWT Vs T.N.K. Govindaraju Chettiar & Ors. (Mad) 149 ITR 588CWT Vs Nathmal Jalan (Pat) 224 ITR 175

278

WT exemption for ‘industrial undertaking’ – Assessee should himself be engaged in the manufacture or processing of Goods and not through agents.CWT Vs V.O. Ramalingam (Mad) 216 ITR 566CWT Vs Shanti Devi (P&H) 234 ITR 81

Factory land & Building owned by firm – Partner not entitled to exemption u/s.5(1)(iv)Prakash Chand Modi Vs CWT (Raj) 225 ITR 541

Part of a palace let to tenants and rent received – Exemption available only in respect of portion occupied by Ruler – 5(1)(iii)Mohammed Ali Khan & Ors. Vs CWT (SC) 224 ITR 672

Sec.5(1)(xxxi) – Expln.2 – Gas is a source of power and not power itself –Distribution of gas cylinders – Not industrial undertaking.CWT Vs V. Saraswathi (Mad) 142 CTR 175

Land purchased a few months before return, by an Non-Resident Indian – Exemption u/s.5(1)(xxxiii) not allowable.Dr. V. P. Gopinathan Vs WTO (ITAT, Cochin) 54 TTJ 688

Cups & Trophies – Not works of art – No exemption u/s.5(1)(xii)M.A. Chidambaram Vs CWT (Mad) 239 ITR 371

Second lot of shares issued by company is not part of initial issue of equity share capital – No deduction u/s.5(1)(xx)Kamala Kumari Vs CWT (P&H) 222 ITR 827

Discretion of trustee to use the property for social, cultural and allied purposes – No exemption u/s.5(1)(i) of WT Act.CWT Vs Gangabai Charities (Mad) 236 ITR 735CWT Vs Lallubhai Gordhandas Charitable Trust (Guj) 239 ITR 448 held more than

5% of share capital of two companies in which persons referred in 13(3) had substantial interest.

Additional Wealth Tax on urban land – Exemption available only if assessee carry on business on such urban land – Land owned by HUF and business done by firm consisting of coparcenors of HUF – no exemption available.CWT Vs P.S. Swaminathan (HUF)(Mad) 240 ITR 163

“One house” – Part of building can also be treated as one houseManoharkumar R. Bhansali Vs ITO (ITAT, Mum) 91 ITD 493

279

Assets acquired by Non-Resident Indian, returned to India to reside permanently – Exemption u/s.5(1)((xxxiii) not available to HUF.V.E. Periannan Vs CWT (Mad) 240 ITR 723

Firm purchasing gray cloth and getting it converted to cloth through outside agencies and selling it – Not an industrial undertaking.CWT Vs Mohinibai Kanaiyalal (Guj) 240 ITR 636

Conversion of agricultural land to residential site allowed by revenue authorities – Land ceased to be agricultural eventhough agricultural operations were done on such land.WTO Vs Rameshwarlal Purohit (ITAT, Indore ) 56 ITD 323

Flats leased out – Not used for own business purpose – Value of said flats not excluded.ACWT Vs Mexin Meticaments (P) Ltd (ITAT, Bom) 61 ITD 209

WT – Sec.40(3) of Finance Act 83 – closely held company – Running Hospital – No exemption .CWT Vs Cosmopolitan Hospitals (P) Ltd.(Ker) 265 ITR 312.

5(1)(i) exemption available only if charitable work carried out in India, irrespective of the situs of property.Trustees of H.E.H. The Nizam’s Pilgrimage Money Trust Vs CIT (SC) 243 ITR 676

Wealth Tax – exemption – Cinema theatre is not a “house”CIT Vs Jai Kishan Gupta (All) 264 ITR 482

Building under construction – Not entitled for exemptionCWT Vs Cadmach Machinery Co. P. Ltd. (Guj) 295 ITR 307CWT Vs Giridhar G. Yadalam (Kar) 163 Taxman 372

VALUATION

Rule 1BB is procedural – Applicable to all pending proceedings.CWT Vs Sharwan Kumar Swarup and Sons (SC) 210 ITR 886Bharath Hari Singhania & Ors. Vs CWT & ors. (SC) 207 ITR1

ITAT can direct AAC to refer question of valuation to Valuation Officer u/s 16ARaja Baldeodas Birla Santatikosh Vs CWT (Cal) 189 ITR 613

For Wealth Tax purpose, value of machinery as per books can be taken eventhough Written Down Value is lesser.CWT Vs Ajit Mills Ltd,. (Guj) 55 ITR 556

280

Valuation of motor cars for wealth-tax purpose – Take insured value instead of Written Down Value.Samrath Knitters (P) LTD Vs DCWT (ITAT, Mum) 60 ITD 657

Sch. III – service charges to be included in rentH.M. Punwani Vs ACWT (ITAT, Cal) 61 ITD 203

Method of accounting has no relevance in determining value of assets, which is to be determined by adopting “market value”.Trilok Chandra Seth Vs Union of India & Anr. (All) 244 ITR 658

Order of District Valuation Officer binding on Assessing Officer .Gulab Singh Vs ACIT (ITAT Del) 89 ITD 510

Reference to valuation officer u/s 16A can also be made in the case of reassessment u/s 17Union of India & Ors. Vs Vijaya Raje (MP) 235 ITR 380

Prices paid within a reasonable time in bona-fide transactions of purchase / sale of lands acquired on adjacent lands – basis for valuation- Multiple of 12.5 times is reasonable.Special Land Acquisition Officer Vs P. Veerabhadrappa and others (SC) 154 ITR 190Wenger & Co. and others Vs District Valuation Officer & Ors. (Del) 115 ITR 648CWT Vs Taraben R. Patel & Ors. (Kar) 198 ITR 657

No evidence about rent payable – land & building method can be adopted to value property.Pratipal Kaur Vs IAC (All) 145 ITR 19

If there are more than one valuation of the same property, the one which is reasonable and near to the correct value , having regard to all the relevant facts and circumstances of the case, should be accepted. V.C. Ramachandran Vs CWT (Kar) 126 ITR 157

Valuation of interest – Balance sheet method not binding and conclusive – Book value far below market value – WTO can refer valuation to Valuation OfficerJuggilal Kamlapat Bankers and another Vs WTO & Ors. (SC) 145 ITR 485

Average of rental method and land and building method can be adopted.S. Neelaveni Vs CWT (Kar) 125 ITR 665U.N.V. Pratap Vs CWT (AP) 170 ITR 461

Rent capitalization method to be adopted when there is no other method.K. Bhoomiamma and another Vs Controller of Estate Duty (Kar) 115 ITR 703

Sch. III is procedural.

281

Govind Hari Singhania Vs ACWT (All) 194 ITR 474

10% reduction for co-ownership of propertyCWT Vs K.N. Nagabhusan Setty (HUF) (Kar) 156 ITR 484

Valuation cannot go lesser than what was valued by assessee.CWT Vs Dilip Kumar Singhania (Gau) 226 ITR 16Parvatibai K. Tiwari (Bom) 168 ITR 219

Even in cases where the asset to be valued has no real market, Assessing Officer has to fix a notional market value – The principles that are ordinarily applied in the case of non-fiscal statutes like the Land Acquisition Act cannot be applied mechanically to cases arising under fiscal Acts.CWT Vs Sara Varghese (Ker) 187 ITR 450

Reference to Valuation Officer can be made without giving assessee an opportunity of being heard and without disclosing reasons therefore.Prem Hotel Vs ITO (J & H) 93 Taxman 237

Reference to valuation officer can be made even where assessee did not file return of incomeCWT Vs Anil Tayal (HUF) (P&H) 285 ITR 243

LIABILITIES NOT DEDUCTIBLE

Income Tax & Wealth Tax liabilities are not debt owed in relation to taxable assets – Not deductible from taxable wealthACWT Vs Selvi J. Jayalalitha ( ITAT, Chennai ) 99 ITD 377

Rule 1D – advance-tax paid and shown on assets side of Balance Sheet is to be deducted from excess provision for taxation shown on liabilities side.CWT Vs N. Krishnan (Kar) 162 ITR 309

Arrears of dividend on cumulative preference shares – No statutory liability to pay dividend compulsorily on preference shares – Not debt owed.CWT Vs Gwalior Rayon Silk Mfg. (Wvg) Co. Ltd. (MP) 131 ITR 140

Liabilities not shown in Balance Sheet, Profit & Loss a/c., or Director’s report – not to be allowed.A. Sivasailam Vs CWT (Mad) 228 ITR 322

Income Tax, Wealth Tax, & Gift Tax liabilities as finally assessed, though after valuation date is deductible.CWT Vs K.S.N. Bhatt (SC) 145 ITR 1

Debts secured / relating to exempted assets – Not deductible.

282

Jiwan Lal Virmani Vs CWT (All) 66 ITR 338D. Basappa Vs CWT (Kar) 160 ITR 826CWT Vs Premnarayan Gaig (MP) 134 ITR 315CWT Vs Narayandas J. Hemani (MP) 143 ITR 87Rajkumar Singh Kasliwal Vs CWT (MP) 143 ITR 597CWT Vs K.S. Vaidyanathan (Mad) 153 ITR 11

Agricultural Income tax not deductible.CWT Vs Banwarilal Chowkhani (Gau) 144 ITR 84

Share application money received is not debt owedWinner Estates (P) Ltd. Vs DCIT (ITAT, Del) 91 ITD 431

Proposed dividend not a debt owed on valuation date.Kesoram Industries & Cotton Mills Ltd. Vs CWT (SC) 59 ITR 767CWT Vs Vikram Swarup (Cal) 224 ITR 698

Liabilities incurred to pay Income Tax – Not allowable.Bharat R. Shah Vs ACWT (ITAT, Mum) 63 ITD 315

Gratuity liability to employees not deductible as debt since liability did not crystallize on valuation date. It will crystallize only when employee retires.CWT Vs Ajit Mills Ltd. (Gau) 55 ITR 556Standard Mills Co. Ltd. Vs CWT (SC) 63 ITR 470Bombay Dyeing & Mfg. Co. Ltd. Vs CWT (SC) 93 ITR 603CWT Vs K. Gopinathan Nadir (Ker) 103 ITR 23P. Astrakhan Pillar Vs CWT (SC) 199 ITR 7

Assessee disputed customs duty rate and obtained stay from recovery – Hence it is only a contingent liability – Not deductible from net wealth eventhough allowed as a deduction in IT proceedings.- Interest on such disputed liability is also not deductible.ACIT Vs Ratanlal Didwania ( ITAT, Madras ) 70 ITD 253