HIGH COURT RULING - taxindiaonline.com

HIGH COURT RULING

2010-TIOL-279-HC-DEL-IT

Apollo Tyres Ltd Vs UoI (Dated : April 20, 2010)

Income Tax - Section 35(2AB) - Whether for seeking approval under section 35(2AB), agreement with the prescribed authority is sine qua non – Whether all kinds of expenditures are entitled for deduction under section 35(2AB) Petitioner is doing in-house research and is recognized by the Ministry of Science and Technology. It was granted approval by the Ministry in 2001 and the said approval was renewed up to 2004. Thereafter similar recognition has been given up-to 2010. On 21.08.2008, the petitioner moved an application before the income Tax Department wherein the petitioner sought an amendment in the approval granted to the in-house Research and Development units (R&D unit) under Section 35 (2AB) of the Income Tax Act. The petitioner mainly pleaded that the approval might be given effect from 1.4.2004 - petitioner also claimed that weighted deduction is available on all kinds of expenses and should not have been restricted to capital expenditure only. Revenue refused to grant approval from 1.04.2004. Petitioner filed writ petition

Also see analysis of the Order


DIT Vs Society For Worldwide Interbank Financial Telecommunications (Dated : April 13, 2010)

Income Tax - Sec 139, 143(2), 292B - whether notice issued before return is filed is valid

Assessee is a society - Revenue issues Sec 143(2) notice before return is filed - it is contended that there was a mistake in the notice which recorded a date prior to the date of return-filing - CIT(A) and Tribunal give the finding that the Sec 143(2) notice was issued before the date of filing return - held, provisions of Section 143(2) make it clear that the notice can only be served after the Assessing Officer has examined the return which is not the fact in this case - Revenue has not case - Revenue's appeal dismissed


CIT Vs Sudhir Sekhri (Dated : April 15, 2010)

Income tax - TDS - AO makes addition for discrepancy in the TDS certificates - alleges Assessee had shown lower figures of income - CIT(A) agrees with the AO but Tribunal deletes the same - held, no infirmity in the Tribunal's order as there was only discrepancy in the TDS certificates and not on the basis of any substantial evidence that the assessee had collected extra fabricating charges which were not accounted for - when the deductor has accepted that there was an error in pre-fed data in the computers and that is why this mismatch happened, there is no justification for additions - Revenue's appeal disallowed

2010-TIOL-276-HC-MAD-IT

M/s Valliammai Society Vs DGIT, Chennai (Dated : March 19, 2010)

Income Tax - Section 10(23C)(iv) - Petitioner is a society established with objects of setting up of educational institution - It has been granted approval under section 10(23C) (vi) from AY 1999-2000 to 2001-02 - Petitioner is searched by Revenue in 2004, but approval was granted to the petitioner for the years 2007-08 and 2008-09- After scrutiny of the seized records revenue rejects the approval for AY 2009-10 and also issued shows cause notice for cancellation of approval for AY 2007-08 and 2008-09 - writ petition - assessee argues that the seized material does not relate to any of the year, impunged in the writ, and the approval of section 10(23C)(vi) is to be looked into on the basis of current year affairs and not on the past conduct of the assessee - Revenue argues that the cancellation of approval is based on the incriminating material found as a result of search and the order of the ITAT wherein the ITAT has upheld the cancellation of approval for AY 2004-05 - Held that simply because the provisos to section 10(23C)(vi) make certain limitation regarding assessment years or the period within which the orders are to be passed, does not preclude the authority to test, as to whether the assessee continues to remain an educational society or not - hence the petition for AY 2009-10 is dismissed and the SCN are allowed to be proceeded. However, a liberty is granted to the assessee to rebut the presumption drawn against him on the basis of his previous conduct and seized material - All the petitions of the assessee are dismissed with a liberty to file evidence in support of his case in relation to AY 2007-08 and 2008-09


Lodhi Property Company Limted Vs Under Secretary (ITA-II) Department Of Revenue (Dated : April 16, 2010)

Income tax - Sec 119, 139 - whether CBDT has power to condone delay in filing return of income

Assessee's representative reaches Revenue Building to file return of income on the last date - it was last hour of return-filing - since the representative was sent from one room to another and by the time he reached the right counter, it was closed for the day he could not file the return - it was filed next day alongwith detailed letter seeking condonation of delay - AO passes assessment order with permission to carry forward loss declared - CIT invokes powers u/s 263 and sets aside the order as the delay was not condoned - Board passes non-speaking order rejecting the prayer for condonation of delay - held, it is already settled law that the Board has the powers u/s 119 (2) to condone the delay in the case of a return which is filed late and where a

claim for carry forward of losses is made - Assessee's writ is allowed


CIT Vs Housing & Urban Development Corporation Limited (Dated : April 15, 2010)

Income tax - Assessee is a canalising agency for Govt of India which enters into an agreement with a German agency for funding housing schemes for weaker sections - assessee as per the scheme loans out the funds to NGOs and others - earns interest - Revenue treats the same as taxable income - held, since the assessee never had the ownership of the funds and it was appointed only a canalising agency, interest income cannot be taxed in its hands - Revenue's appeal dismissed

2010-TIOL-270-HC-KAR-IT

Smt Vishalakshi Vs CIT, Bangalore (Dated : January 4, 2010)

Income tax - Sec 119, 10(10C) - condonation of delay - assessee seesk condonation of delay for filing revised return beyond due date - Revenue summarily rejects the same - held, Revenue needs to apply mind to the reasons leading to delay before it rejects it - Assessee's writ allowed


DIT, Bangalore Vs Smt Archana Satwalekar (Dated : February 8, 2010)

Income tax - AO makes addition for a sum admittedly claimed as a gift by the assessee from her parents - Tribunal allows the assessee's appeal - held, whether assessee's parents had this kind of tax paid money for giving gift or not all these issues are based on facts and Tribunal has accepted them - no question of law - Revenue's appeal dismissed


CIT Vs D D Axles Pvt Ltd (Dated : April 9, 2010)

Income tax - Sec 132, 158BC, 158BE - whether limitation of one year in cases of search is to be counted from the date of release order or the last panchnama drawn after the search and seizure effected

Assessee was searched and a panchnama drawn by the Revenue when books of accounts and other documents were seized - Revenue also passed a restraint order for an almirah which was further extended - another panchnama drawn and release order issued - computation of limitation - Revenue argues it is to be counted from the date of last panchnama when release order for the almirah was issued - Tribunal disagrees with the AO - held, the last panchnama was merely a release order for the almirah seized earlier - limitation is to be counted from the panchnama drawn for the seizure of documents - Revenue's appeal dismissed


CIT Vs Anil Kumar Sharma (Dated : February 24, 2010)

Income Tax - Section 263 - Whether CIT is justified in invoking jurisdiction u/s 263 The Assessee, an individual files return of income - AO after issuing notice u/s 143(2), calling for information, accepted the return of income submitted by the Assessee. CIT issued a notice u/s 263. The CIT noticed that one Person who had received compensation for the land had transferred 50% of such compensation to the Assessee at a sum of Rs 27,00,000/- only, whereas the compensation granted by the Supreme Court in relation to the said land was Rs 1.82 crore. It was further noticed by the CIT that the TDS deducted on the compensation had also been transferred by the said Person in the name of the Assessee. The CIT came to a conclusion that credit of TDS can be transferred mainly to a person who is acting as agent or representative of the entitled person, and that such issues had not been examined by the AO. The CIT, came to a conclusion that the order of the AO was erroneous and prejudicial to the interest of the Revenue and the assessment framed was reopened u/s 263. Before the Tribunal the Assessee's case was that the AO had examined every aspect and had applied his mind on all the facts before accepting the computation of income submitted by the Assessee and passing the assessment order. The Tribunal after examining the facts of the case observed that although it is not discernible from the assessment order whether the AO had applied his mind or not, but it was the prerogative of the AO to draft his order, and if he failed to record certain findings, the Assessee could not be penalized therefore and held that the Commissioner in proceedings u/s 263 also had all these details and material available before it, but had not been able to point out defects conclusively in the said material, for arriving at a conclusion that particular income had escaped assessment on account of non-application of mind by the AO. The Tribunal allowed the appeal of the Assessee and quashed the order of the Commissioner passed u/s 263.


M/s Valliammai Society Vs DGIT, Chennai (Dated : March 19, 2010)

Income Tax: - Section 10(23C (iv) - Petitioner is a society established with objects of setting up of educational institution - It has been granted approval under section 10(23C) (vi) from AY 1999-2000 to 2001-02 - Petitioner is searched by the department in 2004, however, approval was granted to the petitioner for the years 2007-08 and 2008-09- After scrutiny of the seized records revenue rejects the approval for AY 2009-10 and also issued shows cause notice(SCN) for cancellation of approval for AY 2007-08 and 2008-09 - Assessee filed writ petition and argues that the seized material does not relate to any of the year, impunged in the writ, and the approval of section 10(23C)(vi) is to be looked into on the basis of current year affairs and not on the past conduct of the assessee- Revenue argues that the cancellation of approval is based on the incriminating material found as a result of search and the order of the ITAT wherein the ITAT has upheld the cancellation of approval for AY 2004-05- Held that simply because the provisos to section 10(23C)(vi) makes certain limitation regarding assessment years or the period with in which the orders are to be passed, does not precludes the authority to test, as to whether the assessee continues to remain as an educational society or not hence the petition for AY 2009-10 is dismissed and the SCN are allowed to proceeds. However, a liberty is granted to the assessee to rebut the presumption drawn against him on the basis of his previous conduct and seized material- All the petitions of the assessee are dismissed with a liberty to file evidence in support of his case in relation to AY 2007-08 and 2008-09

2010-TIOL-265-HC-ALL-IT

Vishwanath Prasad Kumar Sarraf, Varanasi Vs CIT, Kanpur (Dated : April 5, 2010)

Income Tax - Section 147 - Reassessment after four years - Assessee is a firm engaged in the business of gold and silver ornaments for AY 1996-97 and 1997-98 - beside regular assessments, block assessments were also made by the department - In the appellate proceedings of block assessment the ITAT has deleted entire additions on the ground that these items are not subject matter of block since already disclosed in the return - After the deletion the AO reopened the assessment of these two years for the reasons mentioned in the judgment - Assessee files writ and argues that reassessment is initiated after the expiry of four years and hence it is incumbent on the AO to record a finding in the reasons that the income has escaped because the assessee has not disclosed the material facts truly and fully and in the case of assessee these findings are missing and hence the notices under section 148 may be quashed - Revenue argues that the income escaped has remained un-taxed in block assessment and in regular assessment therefore the AO has correctly initiated 147 - Held that the present case is re-opened after the expiry of four years and there is no finding of the AO that the assessee has not disclosed the material facts truly and correctly - Therefore, the action of the AO u/s 147 is without any jurisdiction as such the notices are quashed and writ of assessee is allowed.


Late Shri Ramakrishna Hegde Vs ACIT, Bangalore (Dated : March 1, 2010)

Income tax - capital gains - Assessee sells a flat in a metro - makes capital gains - claims deduction for sum spent on eviction of tenant - AO disallows - Tribunal agrees with the AO - held, it is a fact that a sum has been paid to the tenanct for evicting the flat but it is to be examined first that whether the evicting company can be treated as

a tenant - matter remanded


M/s Kas Movie Makers Pvt Ltd Vs CIT (Dated : April 19, 2010)

Income Tax - Section 80HHF - Assessee claimed to be engaged in the manufacturing of Television Films software - deduction u/s 80HHF - AO denied exemption on the ground that the assessee merely providing services to foreign entrepreneu r- CIT(A) allowed the appeal of the assessee observing that the assessee was producing and exporting films - ITAT after referring to the agreement held that the assessee is not entitled to deduction u/s 80HHF - Held that the first pre-requisite condition, for export or transfer out of India, of the prescribed software by an assessee is that the ownership or title in the software claimed to have been exported must necessarily vest in him. However, in the present case a perusal of the agreement shows that the assessee is not the owner of the software and hence the ITAT is correct in disallowing the exemption- Appeal of the assessee is dismissed.

2010-TIOL-259-HC-MUM-IT

CIT Vs M/s B N Exports (Dated : March 31, 2010)

Income Tax - Insurance Premium paid by a partnership firm on a Keyman Insurance Policy is allowed as expenditure for the firm - Clause 10D is not confined to a policy taken by a person on the life of an employee, but also extends to an insurance policy taken with respect to the life of another who is connected in any manner whatsoever with the business of the subscriber - A Keyman Insurance Policy is obtained on the life of a partner to safeguard the firm against a disruption of the business that may result due to the premature death of a partner. Therefore, the expenditure which is laid out for the payment of premium on such a policy is incurred wholly and exclusively for the purposes of business and allowed as expenditure.



Shri Jethmal Faujimal Soni Vs ITAT, Pune (Dated : April 12, 2010)

Income Tax - Third proviso to Section 254(2A) - Petitioner challenges the Constitutional validity of the third proviso inserted in Section 254(2A) by the Finance

Act of 2008 - Petitioner files stay petition before the ITAT for stay u/s 254(2A). ITAT grants stay for a period of six months. On the expiry of the period, Petitioner moves an application for the extension of the period of stay. The Tribunal extends the stay for a period of six months - Petitioner again moves an application for stay of extension - The Tribunal dismisses the application - The Tribunal observes that the case has been adjourned from time to time for no fault of the Assessee, but only in view of the fact that an identical issue pending before a Special Bench of the Tribunal. The Tribunal also observes that in view of the third proviso into Section 254(2A), it has no power to extend the stay beyond a period of 365 days - Held, the Tribunal is directed to dispose of the pending appeal within a period of four months from today. In view of the directions which have been passed as aforesaid, based on the statement of the Revenue, it is not necessary for the Court to deal with the constitutional validity of the third proviso to Section 254(2A). Petition disposed of.


M/s Das Cold Storage Vs ACIT (Dated : April 1, 2010)

Income Tax - Section 148 - Notice issued after recording reasons that though the petitioner had maintained books of account on mercantile basis, the rents for certain months were not disclosed - Held, in writ jurisdiction, the High Court can only examine whether there was material to issue notice u/s 148 - petitioner has admitted that it had maintained the books of account on mercantile basis. It is not in dispute that the rent for certain months, which had accrued were not disclosed. AO had adequate material to form the belief that income had escaped assessment for both the assessment years - Sec 148 notice sustained - Assessee's writ rejected


CIT, Mumbai Vs APAR Industries Limited (Dated : April 6, 2010)

Income tax – MAT credit available under Section 115JAA represents tax paid by the assessee before determination of the total income – The provisions of Section 140A , Section 143(1) and Section 234B ( 2) leave no manner of doubt that the payment of tax by the assessee under Section 115JA would, where an assessee is entitled to a credit under the provisions of Section 115JAA , have to be reckoned in computing the liability to pay interest under Section 234B . Undoubtedly, Explanation (1) to Section 234B defined the expression “assessed tax” to mean the tax on the total income determined under Section 143(1) or on regular assessment as reduced by the amount of tax deducted or collected at source. However, to read the provisions of Explanation (1) to Section 234B , in isolation, by ignoring the provisions of subsection (2) would obviously lead to an unintended consequence. The credit to which an assessee is entitled under Section 115JAA is in respect of tax which has been paid prior to the due date. Consequently, MAT credit available under Section 115JAA represents tax paid by the assessee before determination of the total income under Section 143(1) or the completion of a regular assessment, within the meaning of subsection (2) of Section 234B . Both the advance tax, or as the case may be, the component of MAT credit available under Section 115JAA are towards tax payable on assessment. The consequence of the interpretation which has been suggested by the Revenue would lead to unintended results. Even though there is no short fall on the part of an assessee, as in the present case, in the payment of tax, having due regard

to the advance tax paid, the tax deducted at source, and the MAT credit available under Section 115JAA , the Revenue would nevertheless assert that the assessee would be liable to pay interest under Section 234B only by reason of the fact that there is a short fall between the advance tax paid and the tax assessed beyond the extent specified in Section 234B . This would be unintelligible.

Forms do not override Legislation: A form provided by a rulemaking authority which is a delegate of the legislature cannot override a statutory provision. Forms are subservient to legislation. Forms are intended to facilitate the implementation of legislation. Forms cannot supplant legislation.


2010-TIOL-254-HC-AHM-IT

H K Buildcon Ltd Vs ITO (Dated : April 12, 2010)

Income Tax - Section 144, 148 - Assessee challenges the notice issued u/s 148 as well as re-assessment order framed u/s 144 r/w section 147- assessee submits that though the impugned notice has been issued within a period of four years from the end of the relevant year, yet the reasons recorded would indicate, when read in context of the record of original assessment proceedings, that the reassessment proceedings are based merely on a change of opinion without pointing out the escapement of income - AO is of the opinion that the method of accounting employed by the Assessee is to be given a go-bye and estimated profit has to be worked out by applying 10% rate to the value of work in progress - Held, there is nothing on record to show as to what income had escaped assessment for which the AO received information subsequently, either from external source, or from any other source. The ratio enunciated by the Apex Court in the case of CIT, Delhi v. Kelvinator would apply with all force - the reasons recorded themselves indicate that the successor AO has merely recorded a different opinion in relation to an issue to which the AO, who had framed the original assessment, had already applied his mind and come to the conclusion that the method of accounting employed by the assessee was correct and was not required to be disturbed. The notice issued u/s 148 quashed and set aside. Assessee's appeal allowed.


Eagle Fashion Pvt Ltd Vs DCIT (Dated : April 05, 2010)

Income Tax - Section 148 - assessee is engaged in the business of manufacture of yarn and cloth - claims deduction u/s 80IB, assessee does not file audit report with the return but files the same during the course of assessment proceedings u/s 143(3) - AO reopens assessment u/s 147 on the ground that substantial income has escaped assessment - Assessee files writ and argues that there is no failure on the part of assessee to disclose the material fact necessary and the assessment has been reopened alleging that the audit report was not annexed with the return and it is incumbent on the AO to specify that the income has escaped because the assessee has not disclosed the material facts truly and fully - Held that in the impugned case

previously an assessment had been made under sub-section (3) of section 143 for the relevant assessment year. There was no failure on the part of the assessee to make a return under section 139. In the circumstances, unless any income chargeable to tax has escaped assessment for the assessment year in question by reason of the failure on part of the assessee to disclose fully and truly all material facts necessary for his assessment for that assessment year, no action can be taken under section 147 of the Act after the expiry of four years from the end of the relevant assessment year - further held that it is well settled that before assuming jurisdiction under section 147 after the expiry of four years from the end of the relevant assessment year, the Assessing Officer must have reason to believe that the income of the assessee has escaped assessment and that such escapement is by reason of failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment. If either of these conditions is not fulfilled the notice is without jurisdiction. In the present matter the impugned notice fails to satisfy either of the conditions hence the notice is quashed - Writ of the assessee is allowed.


CIT Vs Auto Kashyap India Pvt Ltd (Dated : April 12, 2010)

Income Tax - Section 41 - One of the Directors of the Assessee Company, purchases spare parts from different parties, on credit, in his own name, since the creditors were personally known to him - assessee shows the outstanding credit balance in the books under the sub-head 'other supplier', of the main-head 'sundry creditors' - assessee transfers the credit balance to the Director's account - nomenclature of the aforesaid outstanding balance in the account of that Director changed from 'other suppliers' to that Director in the audited financial statement - AO is of the view that transfer of the account of sundry creditors by way of a book entry in the name of that Director constituted cessation of liability, which is taxable u/s 41 - CIT is of the view that after his death, the liability ceases to exist but did not say that mere transfer by way of book entry amounted to cessation of liability - Tribunal concludes that there is no cessation of any liability and in fact, the Assessee had actually discharged the liability at a future date, thereby questioning the very claim of cessation made by the department - Held, no benefit accrued to the Assessee by changing the nomenclature and, therefore, the outstanding credit balance cannot be deemed to be profit and gains of the business of the assessee company within the meaning of Section 41. Since the Tribunal has returned a finding of fact to the effect that there was no cessation of liability, no substantial question of law arises for consideration. Revenue's Appeal dismissed.

2010-TIOL-250-HC-UTTRANCHAL-IT

Ashok Kumar Jain Vs CIT, Dehradun (Dated : March 30, 2010)

Income Tax - Section 36(1)(vii), 254(4) - Certain incriminating documents, in the name of the Assessee and his children found during the course of a search - Some of the deductions claimed on account of bad debts - AO disallows the claim - CIT(A) allows Assessee's Appeal - Tribunal remands the matter to the AO to record a fresh finding as to the satisfaction of statutory conditions after examining seized record - Held, there is nothing in sub-section (4) of Section

254, on the basis of which, it can be inferred that the ITAT could not have remanded the matter for re-determination at the hands of the AO. The ITAT having been satisfied, that there was no sufficient material, documentary or otherwise, to support the conclusion recorded by the AO, as also on the basis of the further report sought by the CIT(A), , there was no other alternative with the ITAT but to remand the matter for adjudication to the AO with the clear direction that the issue should be re-determined keeping in mind the satisfaction of the statutory conditions. Assessee's Appeal dismissed.


CIT, Delhi Vs Modi Telecommunication Ltd (Dated : April 12, 2010)

Income tax - Sec 36(1)(vii) - Assessee is into the business of sale of pagers - sells some pagers on instalments - later pager prices crash - customers fail to make further payments - assessee claims deduction for bad debts - AO disallows - CIT(A) goes with the AO - Tribunal allows the assessee's appeal - held, after the amendment in 1989, the only legal requirement to claiming deduction for bad debts is to write off the same in the books of account - since the assessee has done it, Revenue has no case - Revenue's appeal dismissed


CIT, Mumbai Vs M/s Indian Rayon & Industries Ltd (Dated : March 25, 2010)

Income Tax - Section 37 - Payment of role over paid to banks in respect of repayment of principal amount of foreign exchange loans taken for capital investments - Tribunal decides the issue in favour of assessee ignoring the judgment of Apex Court in the case of Vadodara v. Elecon Engineering Co. Ltd ( 2010-TIOL-19-SC-IT ) where in similar type of payments were disallowed - Revenue's appeal allowed Income Tax - Section 41(1)- Cessation of liability - Assessee writes back unclaimed credit balance - AO invokes the provisions of section 41(1) - adds the same in the books - Tribunal deletes the addition - held, the principle that the expiry of the period of limitation prescribed under the Limitation Act would not extinguish the debt but, would only prevent the creditor from enforcing the debt, has been well settled. If that principle is to be applied, a mere entry in the books of account made unilaterally without any act on the part of the creditor will not entitle the debtor to say that the liability has been extinguished. Revenue's appeal dismissed


Gujarat Gas Financial Services Ltd Vs ITO (Dated : April 13, 2010)

Interest tax - Sec 4, 2(5A) - Special Bench rules interest on inter-corporate deposits is not an interest on loan or advance and therefore not includible in the chargeable interest - even interest from delayed payment from debtors is not interest on loans and hence not liable to tax - held, the Tribunal had initially decided the appeal under Interest Tax Act and thereafter also applied the same findings to appeal under the Income Tax Act - this led to a situation where depsite the provisions under both the statutes being different, the same yardstick and legal principles applied without realising the difference in language - since it is not clear from the order to what extent it is vitiated, the Special Bench order is set aside


CIT Vs M/s Scindia Investment Pvt Ltd (Dated : March 31, 2010)

Income tax - Sec 50(2) - Assessee is the owner of a hotel at Gwalior and another hotel in Pune - disposes off Pune-based hotel for certain consideration - buys office space in Mumbai and claims set off for the sum paid against the capital gains made from the sale of Pune property - AO disallows the set-off on the ground that the property sold and the property bought are not the same block of assets - Pune-one is a hotel and the the purchased one is an office space - CIT(A) disagrees with the AO - Tribunal confirms the CIT(A) order - held, since both the lower authorities have given findings of fact that although the assessee had a licence to run a hotel but the property was never used as hotel and therefore, both fall under the same set of block of assets - Revenue's appeal dismissed


M/s Prabhashankar Plaza Vs ITO, Bangalore (Dated : February 16, 2010)

Income Tax - Principle of mutuality - Assessee firm pools resources of all the partners and carries its business - firm owns building and the same rented to partners - claims the rental income as exempt, as per the principle of mutuality - AO taxes the income and denies the applicability of principle of mutuality - CIT (A) and ITAT confirm the order of the AO - On further appeal to High Court assessee argues that the partners have contributed to the businesses of firm and the profits arising out of such business are divided in respective shares and they do not deal with outsiders – High Court after perusing the agreements observes that the funds of the firm are also available to the outsiders - Held that the assessee firm is not governed by the principle of mutuality - Assessee's appeal dismissed


CIT Vs Smt Anju R Innani (Dated : April 5, 2010)

Income tax - Penalty - Sec 158BFA(2) - Assessee files return for block period - declares undisclosed income - assessment order passed u/s 158BC and penalty proceedings initiated - Assessee argues that she had complied with all the conditions prescribed in the first proviso to Section 158BFA - AO takes the view that the assessee had preferred an appeal against the block assessment order and one of the grounds of appeal was that the rate of tax on the capital gains included in the undisclosed income declared in the return of income for the block period, should be computed at 20% and not 60% - CIT(A) dismisses the appeal - Tribunal deletes the penalty on the ground that an appeal against the rate of tax will not fall within the ambit of clause (iv) of the first proviso - held, going by the substantive part of the sub-section 2 of Sec 158BFA, the Tribunal is not right in its view - case remanded to the Tribunal - Appeal disposed off in favour of Revenue


CIT Vs BMR & Associates (Dated : April 12, 2010)

Income tax - Sections 194 I, 194C, 40(a)(ia) - whether car lease rental is covered under Sec 194 I or 194C Assessee enters into a lease rental for hiring cars - AO says assessee made payments for transport contract covered under Sec 194C, and since the assessee fails to deduct tax at souce, the payment are disallowed u/s 40(a)(ia) - CIT(A) concludes that since it was an agreement only to provide the vehicles on lease, without driver and upkeep service, it cannot be said to be a contract for carrying goods or passengers - Tribunal agrees with the CIT(A) - held, no interference is called for - Revenue's appeal dismissed


CIT Vs Bhartesh Jain (Dated : April 6, 2010)

Income tax - Sec 68, 271(1)(c) - AO makes additions by treating business loss as speculation loss and two amounts as unexplained income under Sec 68 - Additions confirmed by the Tribunal - penalty proceedings initiated - Tribunal sets aside the same on the ground that the mere treatement of speculation loss as business loss does not call for penalty - secondly, the AO doubts the veracity of the two amounts but in view of the statements of the lender, bona fide cannot be doubted - held, these are findings of facts - no substantial question of law involved - Revenue's appeal dismissed


Hindustan Unilever Ltd Vs DCIT, Mumbai (Dated : April 1, 2010)

Income tax - writ - Sec 147, 10B, 54EC, Rule 8 - assessee is a large business group - has multiple types of business - files return and declares huge profit - also claims deduction for business loss from planation division under Rule 8 - AO allows the same - later invokes powers u/s 147 on four grounds namely the deeming provision of Rule 8 are applicable only in the case agricultural income and the claim of the assessee to set off 40 per cent. of the losses against normal business profits was not allowable; double deductions allowed to the assessee for the loss from planation business; benefits u/s 54EC wrongly allowed and no deduction is allowable for loss arising out of 100% EoU unit from the profit of other similar units as Sec 10B allows exemption, and once an income is exempted, there is no question of setting off the loss - writ filed - after hearing both parties the Bench held that, ++ once Rule 8 is invoked to segregate the agricultural and business income of the assessee which is taxable, the deduction for expenses or the losses has to be allowed as per the law - AO is not right in disallowing it; ++ allowing double deduction of losses from planation business is a clear cut case of computation error, and for rectifying such error AO can invoke powers u/s 154 - Since the assessee cannot be blamed for the error, the appropriate and reasonable use of law will be to invoke powers u/s 154 to rectify the error on record rather than invoke stringent powers u/s 147 - it is not required in this case; ++ from the facts it is clear that the assessee had long term capital gains which were invested in the tax-free bonds u/s 54EC within six months which is to be counted from the date of investments made and not from the date of certificate issued; and ++ AO is wrong in observing that the Sec 10B allows exemption to an income - After amendment in 2000, it is deduction, and once one of the units suffers loss, the same can be deducted from the profits from the entire business.


CIT, Mumbai Vs M/s Asian Star Co Ltd (Dated : March 18/19, 2010)

Income Tax - Section 80HHC, clause (baa) - Netting of interest - Assessee carries on business of export of cut and polished diamonds - deduction under Sec 80HHC - assessee excludes net interest while giving effect to the provisions of clause (baa) - Assessing officer is of the view that the gross receipts are required to be excluded - CIT(A) allows the appeal of the assessee - ITAT affirms the view of the CIT(A) - Before High Court the assessee relies on the judgment of Delhi High Court in the case of Shri Ram Honda Power Equipment reported ( 2007-TIOL-38-HC-DEL-IT ) - Held, the view of the Delhi HC is not correct in as much as Section 80HHC is a provision which is intended to provide an incentive for export and Parliament, has expressed a legislative intent to exclude items which were unrelated to export turnover from the computation of the deduction and the application of the formula, while excluding such items which are unrelated to export for the purposes of Section 80HHC, Parliament has taken due note of the fact that the exporter assessee would have incurred some expenditure in earning the receipts and that is why 10 percent of the total receipts are already being granted to the assessee and no further deduction is allowable. Bench further observes that once Parliament has legislated both in regard to the nature of the exclusion and the extent of exclusion it is not open to court to order otherwise. Revenue's appeal is allowed.


CIT, Mumbai Vs M/s Glenmark Pharmaceuticals Ltd (Dated : March 12, 2010)

Income Tax - Sec 194C - Assessee engaged in the business of manufacture and marketing of drugs and pharmaceutical products - During survey, it is found that the assessee is also procuring finished products from third parties - AO takes the view that the contact with the third parties is contract of 'Work' as such the assessee should have deducted TDS u/s 194C on the payment made to third parties - CIT(A) affirms the view of the AO - On further appeal by the assessee ITAT held that the contract with the third parties is a contract for ‘sale' and not for ‘work' and hence provisions of TDS are not applicable to the facts of the case - before High Court, Revenue contends that the third parties are doing work as per the direction of the assessee, hence the contract with the third parties is a contract for works and not for sale - held, the material required in the manufacture of the article or thing is obtained by the manufacturer from a person other than the assessee. The property in the articles passes upon the delivery of the product manufactured. Until delivery is made, the assessee has no title to the goods. The goods have an identifiable existence prior to delivery and hence the contract between the assessee and the third parties is a contract for sale and not for ‘work' hence the provisions of section 194C will not be applicable to the facts of the case. Revenue's appeal is dismissed.


Hari Om Jindal Vs CCIT, Bareilly (Dated : March 16, 2010)

Income Tax - Writ - Sections 271(1)(c), 273A, 273(2)(b) - Assessee moves an application for the wavier of penalty before the CIT as per the provisions of section 273A - CIT rejected the same on the ground that the Chief Commissioner did not approve - Assessee filed writ petition - Assessee argued that the CCIT had completely overlooked the report of the AO wherein it has been mentioned that the assessee has made the disclosure voluntary and paid taxes and interest thereon - further argued that the CCIT before refusing the approval could have granted an opportunity of being heard to the assessee since the refusal action is giving rise to civil consequences and in view of the decision of the Supreme Court in the case of Rajesh Kumar and Shara Airlines the action of CCIT is in violation of principle of natural justice - Held, while refusing the CCIT has completely overlooked the report of the AO - Therefore the order of the CIT based on the mechanical approval of CIT is not sustainable and the matter is restored to the file of the CIT for considering a fresh in accordance with law - in cases where CCIT wants to refuse the approval an opportunity should be granted to the suffering party in view of the decision of Apex Court - Assessee's appeal allowed


CIT, Bangalore Vs M/s Blend Well Bottles Pvt Ltd (Dated : February 17, 2010)

Income tax - Sec 32, 37 - Assessee is into IMFL business - its plant located in Punjab was closed for some time due to law and order problem - AO disallows depreciation on account of closure of the factory - CIT(A) and Tribunal find that it was a case of forced closure and allow benefits - held, since the closure was beyond the control and circumstances of the assessee, forced closure not to disentitle the assessee for claiming benefits available to regular business - Revenue's appeal dismissed


M/s Ranka Jewellers Vs Addll.CIT, Pune (Dated: March 26, 2010)

Income tax - Sec 263, 251, 142(2A), 158BC, 40A(3) - Assessee manufactures and trades in gold jewellery and silver articles - search & seizure - Special Audit carried out - block assessment completed - CIT invokes powers u/s 263 on two grounds namely during the course of the search and seizure action, documents which were seized revealed the purchase and sale of gold and silver jewellery which was not disclosed to the Department, and disallowance u/s 40A(3) to the extent of 20% of total purchases not made - assessee argues that application of Sec 40A(3) was looked into during the special audit and it was found to be not applicable in this case - CIT(A) requested for enhancement by the AO but ruled against - appeal filed before the Tribunal - held, since the Revenue has already resorted to remedy against the CIT(A) order by filing appeal, it cannot invoke revisionary powers u/s 263 for issues already decided by the CIT(A) u/s 251 - Order u/s 263 is not sustainable - Assessee's appeal allowed

2010-TIOL-230-HC-P&H-IT

M/s Porrits And Spencer (Asia) Ltd Vs CIT, Faridabad (Dated : March 31, 2010)

Income tax - Sec 73, 94(7) - Speculative loss - whether the assessee is entitled to claim set-off for speculative loss arising out of genuine transactions The assessee is a registered Company - a subsidiary of Porritts & Spencer Ltd. U.K. - engaged in manufacturing of engineered fabrics and industrial textiles - files its return of income on 30.12.1991 declaring an income of Rs. 2,93,17,260/- - assessee had purchased 25 lacs units of ‘US'64' of Unit Trust of India at the then prevalent market rate of Rs. 15/- per unit, for a total consideration of Rs. 3,75,00,000/- from ANZ Grindlays Bank, New Delhi. The units were purchased on credit for the purposes of making investment. The units were duly transferred by the UTI to the assessee-appellant on 30.5.1990. On 5.7.1990, the Board of Directors of the assessee-appellant decided for the sale of the units in question. On 6.7.1990, the assessee-appellant received the dividend of Rs. 45 lacs on the said units. On 20.7.1990, the ANZ Grindlays Bank debited the overdraft account of the assessee-appellant by Rs. 3,75,00,000/- i.e. the consideration at which the said units were sold by the bank to the assessee-appellant. The assessee claims deduction u/s 80M on the dividend and short-term capital loss - AO, CIT (A) and Tribunal take the view that the loss was not

allowable - they rely on McDowell vs. CTO ( 2002-TIOL-40-SC-CT ) - athough the transactions were genuine, the motive was not bona fide.


ICICI Prudential Life Insurance Company Ltd Vs ACIT, Mumbai (Dated : March 8/9, 2010)

Income tax - Writ - Sec 44, 147 - Assessee is in insurance business - registered with IRDA - declares NIL acturial loss in Form 1 but shows loss in policy holders account which is set off by transfer of funds from share holders account internally - AO raises queries - replies filed and assessment orders passed - after four years, reassessment initiated on the ground that the computation of income done by the assessee is confusing and misleading - Tribunal allows the assessee's appeal - CIT meanwhile invokes powers u/s 263 - held, there is nothing misleading as the deficit in the policy holders account was set off by an internal fund transfer from the surplus of share holders account and that is why the acturial loss was shown as NIL in Form 1 - all these facts were declared by the assessee and the reopening of the assessment does not fulfil the statutory conditions required for invoking Sec 147 - Assessee's petition allowed


CIT-3, Mumbai Vs M/s Reliance Industries Ltd (Dated : April 15, 2009)

Income tax - revenue vs capital receipt - assessee gets sales tax subsidy from State Govt for setting up unit in backward area to generate employment - Revenue treats it as revenue receipt - Special Bench treats it as capital receipt - held, if purpose test is applied to the facts of the case, it is on capital account



CIT, Mumbai Vs Alkesh K Patel (Dated : March 30, 2010)

Income tax - Sec 2(22)(e), 147, 271(1)(c) - Assessee is a partner in a real estate firm - the Firm gives some advances to a company in which the firm's partner was holding more than 25% equity - Private Ltd company gives part of the advances as loans to the assessee - AO processes the return u/s 143(3) but later invokes powers u/s 147 and makes addition for loans as deemed dividend u/s 2(22)(e) - also imposes penalty u/s 271(1)(c) - CIT(A) finds that it was a bona fide mistake as the assessee was not aware of the deemed dividend provisions and deletes penalty - Tribunal confirms the CIT(A) order - held, case remanded as the Tribunal failed to consider all the points raised by the AO in the

assessment order


CIT Vs Bilag Industries Pvt Ltd (Dated : March 30, 2010)

Income tax - Sec 234B, 234C, 154 - AO charges interest before allowing MAT Credit - CIT(A) partly grants relief - Tribunal sustains the CIT(A) order - held, Sec 154 can be invoked only for correcting mistake apparent - since Tribunal itself has noted that the issue is debatable, the same cannot be treated as mistake apparent - matter remanded to Tribunal for fresh consideration

2010-TIOL-223-HC-P&H-WT

M/s Rockman Cycle Industries Ltd Vs CWT, Ludhiana (Dated : January 13, 2010)

Wealth Tax – Agricultural land acquired for industrial purpose – the exclusion under Section 2(ea) of the Wealth Tax Act for two year period has to be reckoned from the date of acquisition of land, but not the date of granting permission for converting the land - The specific independent clause cannot possibly be remixed with other distinct exemption clauses as contemplated under section 2 (ea) and (b) of the Act. Possibly, the Court cannot substitute any other meaning to the clear and implicit legislative intent, until and unless there is any ambiguity in it and there is no such ambiguity in this respect.



CIT, Patiala Vs Mrs Kaija Karina Toor (Dated : February 4, 2010)

Income tax - Sec 140A(3) - penalty - assessee fails to pay self-assessment tax at the time of filing return - AO imposes penalty - CIT(A) deletes it on the ground that the assessee's bank account was attached at the time of filing the return and had enough money in the bank to pay the tax due - Revenue argues that the assessee had enough time to pay tax before the bank account was attached but she failed to pay - Tribunal goes with the CIT(A) order - held, no infirmity in Tribunal's order as the assessee had reasonable cause for failure to pay tax - Revenue's appeal dismissed


CIT, Mangalore Vs N Nagaraj Ballal (Dated : December 1, 2009)

Income tax - Sec 271(1)(c) - AO alleges assessee fails to reflect certain income and expenditure in its return - levies penalty on the ground of concealment of income - Tribunal disagrees - held, no infirmity in the Tribunal order based on the affidavit filed by the auditor of the assessee which states that the income and the expenditure pertained to the previous AY and not the current one and circumstances also prevented it from filing revised return - no concealment - Revenue's appeal dismissed


Dr Aswath N Rao Vs ACIT, Bangalore (Dated : February 23, 2010)

Income tax - Assessee is a cardiologist by profession - runs clinics at two places, fitted with sophisticated cardio equipments - since he does not find spare parts for the sophisticated machines in India whenever he goes to the USA, he buys second hand machines to use them as spare parts for the existing machines - claims deduction for the same as revenue expenditure - AO disallows on the ground that the equipment came to India only in the next AY - CIT(A) and also Tribunal reject the appeal - held, there is no dispute that the assessee has old and used machines installed in his clinics to provide professional service - since he does not find spare parts in India he imports old equipments which are used as spare parts - since the full payments were made in the relevant FY and the property right in the equipment transferred to the assessee, it makes no difference if the consignment reached India in the next year, and since the purpose is to use the same as spare parts it is allowable revenue expenditure - Assessee's appeal allowed


Gopal Das Khandelwal Vs UoI (Dated : March 30, 2010)

Income Tax - Recovery Proceedings u/s 226(3) - A search and seizure u/s 132 was conducted on the business and the residential premises of P who was the proprietor of a firm and was engaged in money lending business. During the aforesaid search jewellery worth Rs. 34.33 lakhs was seized. P on 16-09-03 applied for release of the aforesaid seized jewellery on the ground that the same belonged to third parties and was in custody of the firm as pawned articles. The CIT vide order dated 07-11-03 directed the assessing authority to release the same on Bank Guarantee of Rs. 34,00,000/- for a period of one year subject to renewal. P offered certain fixed deposits of the petitioners which were with the Bank as security for furnishing Bank Guarantee. Bank on the basis of the aforesaid fixed deposits belonging to the petitioners executed a deed of guarantee on 22-11-03 in favour of the CIT for an amount not exceeding Rs. 34,00,000/- for a period of one year only expiring on 21-11-04. The period of

the aforesaid guarantee was extended by one another year expiring on 21-11-05 and no further extensions or any fresh guarantee were given thereafter. P was subjected to block assessment u/s 158 BC and vide order dated 30-05-05 a tax liability of Rs. 8,82,236/- was determined. The AO accordingly vide notice dt 19-09-05 issued u/s 226 (3) of the Act directed the Bank to pay the aforesaid amount of tax with interest as part of the Bank Guarantee furnished by it. A sum of Rs. 10,08,476/- by encashing some of the fixed deposits was accordingly paid by the Bank. Thereafter without any further demand of any tax CIT issued directions u/s 281B/226(3) to the Bank for the attachment of the remaining fixed deposits under the Bank Guarantee to the extent of the balance amount of Rs. 24,91,298/-



CIT, Mumbai Vs Shri Charles M Correa (Dated : March 30, 2010)

Income tax - Sec 80-O - Whether payments received in convertible foreign exchange for providing architectural designs to non-residents are eligible for deduction u/s 80-O Assesee is an architect - enters into contracts with two architect firms in the USA and Canada - provide designs as per the contract - receives payments in convertible foreign exchange - claims deduction u/s 80-O - AO disallows on the ground that what the assessee provided was only professional service and there was no item which may be treated as IPR - CIT(A) disagrees with the AO and Tribunal confirms the CIT(A) order - held, since the assessee meets all the three conditions necessary for claiming Sec 80-O benefits - payments received from non-resident in forign exchange for services utilised outside India, deduction cannot be disallowed - Revenue's appeal dismissed


Smt S Nachiar Vs ITO, Chennai (Dated : March 12, 2010)

Income tax - Writ - Sec 148, 142(1) - Revenue issues re-assessment notice - assessee claims it was not served - AO issues Sec 142(1) notice - Assessee challenges legality of this notice in the absence of proper service of Sec 148 notice - AO passes ex parte order - revision petition u/s 264 dismissed - writ petition - held, in the view of the fact that the Sec 148 notice was not properly served, the entire proceedings get vitiated - Revenue's order set aside - Assessee's appeal allowed


CIT, Mumbai Vs Universal Medicare Pvt Ltd (Dated : March 22, 2010)

Income Tax Act – Section 2(22)(e) – Deemed Dividend - An amount of Rs.32,00,000/- was transferred from the bank account of a company CSPL to the account of the assessee - Mr. VT was a Director of CSPL, he also held over 10 % of the equity capital of CSPL and over 20% of the equity capital of the assessee – AO relying upon the provisions of section 2(22)(e) treated the amount of Rs.35,00,000/- as deemed dividend in the hands of the assessee – Assessee argued that : (i) for section 2(22)(e) to apply the amount ought to have been received as an advance or loan from a company to a concern in which the shareholder had substantial interest. This condition, according to the assessee, was not met since the amount was neither an advance nor a loan to the assessee but represented misappropriation of funds by the Vice President (Finance) (ii) (ii) even on the assumption that this was an amount advanced to the assessee by the CSPL, for the purposes of taxation a deemed dividend would be taxable in the hands of the shareholder and not the assessee to whom the payment was advanced


Director Of Income, MumbaiVs Krupp Udhe Gmbh (Dated : March 9, 2010)

Income Tax – Taxability of reimbursement of expenses - Assessee had entered into a contract with M/s. EID Parry for the supply of a compressor. The compressor was found to be in a damaged condition, the assessee therefore deputed two technicians from Germany to the establishment of EID Parry in India . EID Parry remitted an amount of DM202,433,37 comprising of (i) Inspection fees in the amount of DM 170,701.37 for technicians; and (ii) Reimbursement of expenses for air tickets for travel between Germany and India in the amount of DM 11,732


CIT, Mumbai Vs M/s KNR Patel (JV) (Dated : February 25, 2010)

Income tax - Sec 263, 80IA - AO allows Sec 80IA(4) benefits to the assessee - CIT invokes powers u/s 263 and holds that the assessee is not a developer as it has not invested its own funds and the investments were made by the NHAI - Tribunal sets aside the order - held, Tribunal's order is not sustainable as it has not dealt with the objections raised by the CIT that the assessee is not a developer in its own right as it did not use its own funds - Issue remanded


Aventis Pharma Ltd Vs ACIT, Mumbai (Dated : March 8, 2010)

Income Tax - Writ - Sec 143(3), 147, 148 - Assessee makes claims for long-term capital gains and depreciation on obsolete assets - re-assessment - AO makes disallowance on the ground that the 'tank land liability' was wrongly calculated and higher rate of depreciation claimed - Held that there is no new tangible material with the AO - it is a case of mere change of opinion, which is not permissible under section 147 read with 148 - Writ petition allowed


Purity Techtextile Pvt Ltd Vs ACIT, Mumbai (Dated : February 8, 2010)

Income Tax - Sections 80IB, 147, 148 - Assessee, a company, claims deduction u/s 80IB - Revenue allows deduction - subsequently AO reopens the assessment of AY 2003-04 and 2004-05, out of which AY 2003-04 was assessed under section 143(3), on the ground that the plan of building in which assesee operates was sanctioned way back in 1988 and the same premises was earlier used by some other party - it has been also alleged that the copy of plan was not filed in earlier assessment - Assessee objects - writ - argues before the HC that the information which is the basis of re-assessment was filed by the assessee in 1988, during the course of assessment and there is no new material with the AO - Held that the assessee has disclosed the primary facts truly and correctly and there is no new material with AO - Assessee's petition allowed


Paramount Health Services (TPA) Pvt Ltd Vs ACIT (Dated : March 25, 2010)

Income Tax Act – Stay of Demand - Despite an order of stay that was passed by the CIT (TDS) on 19-03-10 garnishee notices were issued on 22-03-10 for the entire demand of Rs.59.06 crore – High Court held that : ++ the impugned order shows that CIT(TDS) has rested his reasoning merely with the observation that the plea of the assessee is not acceptable and that the demands have to be realized forthwith for the current year. ++ Division Bench of High Court in the case of KEC International Limited v. B.R . Balakrishnan reported in 251 ITR 158(Bom) had laid down parameters to govern the manner in which applications for stay should be dealt with by adjudicating officers. ++ The CIT (TDS) is either ignorant of the law laid down by the High Court or has acted in breach of the principles enunciated in the judgment. In either view of the matter, the entire approach of the CIT (TDS) is thoroughly misconceived. ++ Division Bench in KEC's case has noted that in a large number of matters orders are passed perfunctorily by the department only with an idea of effecting recovery before March 31, though such orders could have been passed earlier in detail and after recording proper reasons.

++ As garnishee notices are set set aside and CIT(TDS) is directed to pass a fresh order as per law


CIT, Mumbai Vs M/s Essel Propack Ltd, Mumbai (Dated : March 22, 2010)

Income Tax Act – Payment of Royalty and Technical Services – Assesseehad entered into an agreement with a Mauritius company KMK under which the licensor granted to the assessee a non-exclusive licence, restricted to the Territory of India to manufacture and use tube-making machines and the tools and parts thereof with the right to register the licence. The licensor was a registered proprietor and beneficial owner of certain patents for manufacturing tube-making machines. Under the terms of the agreement, the assessee obtained a non-exclusive licence for a term of two years - AO was of the view that the payment of the royalty component was of a revenue nature and was an allowable expense under Section 37(1) but the lumpsum component of Rs.6.82 crores which was payable over a period of five years was of a capital nature because the assessee acquired an intangible asset in the form of technical know how – CIT(A) allowed the claim of the assessee – ITAT held that the rights acquired by the assessee were for a specific tenure and were not absolute. The assessee was not entitled to transfer the rights which it obtained under the licence and had a limited right to use the technical know how for manufacturing machines over a limited tenure – On revenue appeal High Court held that under the terms of the agreement, the assessee as a licensee obtained only a non-exclusive licence which was restricted to the Territory of India to manufacture and use tube-making machines. The proprietary rights in the patents continued to vest in the licensor. The term of the licence was five years. Having regard to these salient aspects of the agreement, the Tribunal was justified in coming to the conclusion that the assessee did not acquire an asset of a capital nature – High Court further held that the provisions of Section 32 were not attracted in this case.


CIT, Mumbai Vs M/s Development Credit Bank Ltd (Dated : February 26, 2010)

Income tax - Sec 263 - Assessee is a bank - claims depreciation on current investments in securities - AO sends queries to clarify and seeks details of investments treated as stock in trade, capital gains and also how depreication was calculated - allows depreciation on receiving detailed clarification - CIT invokes Sec 263 - Tribunal sets aside the CIT order - held, in view of the fact that the assessee had made detailed inquiry and then allowed depreciation, the CIT is not correct in holding that no inquiry was made - AO has not passed any order prejudicial to the interests of Revenue - Revenue's appeal dismissed


CIT Vs Sutlej Industries Ltd (Dated : March 15, 2010)

Income tax - Sec 244, 140A - refund - Assessee pays self-assessment tax in addition to TDS and advance tax - AO grants refund on self-assessment tax paid but declines to pay interest - CIT(A) agrees with the AO - Tribunal reverses CIT(A) order - held, when self-assessment tax is paid u/s 140A, the assessee is on principle entitled to interest as the self-assessment tax falls within the expression 'refund of any amount'. The computation of interest on self-assessment tax has to be in terms of Section 244A(1)(b), i.e., from the date of payment of such amount up to the date on which refund is actually granted. It is trite law that wherever the assessee is entitled to refund, there is statutory liability on the Revenue to pay the interest on such refund on general principles to pay the interest on sums wrongfully retained. Revenue's appeal dismissed


CCE, Chennai Vs M/s Subramanyan Construction P Ltd (Dated : February 22, 2010)

Income tax - Sec 143(3) - Assessee is in construction business - follows completed contract method of accounting - AO makes addition for incomple projects shown as work in progress in return - held, it is settled law that the assessee is free to follow the method of accounting of its choice as long as it is in harmony with the accounting principles - since the incomple projects are shown as work in progress the Revenue is not correct in making additions for the same - Revenue's appeal dismissed


CIT Vs M/s Veer Overseas Ltd (Dated : March 17, 2010)

Income tax - Sec 80HHC, 147, 148 - Assessee is an exporter - claims deduction u/s 80HHC on DEPB receipts - reassessment initiated after four years limitaion period - notice u/s 148 - Tribunal takes the view that the assessee had disclosed all facts before the AO and there is no concealment of facts - held, it is not a fit case for invoking Sec 147 - no substantial question of law involved - Revenue's appeal dismissed


Arthur Anderson & Co Vs ACIT (Dated : March 19, 2010)

Income tax - Writ - Sec 147, 244A, 220 - Assessee files return along with audited accounts and audit report u/s 44AB - discloses an interest income of Rs 4.91 Cr - in the computation of income assessee reduces an interest amount of Rs 50.14 lakhs -

further states that the interest income represents interest received u/s 244A, net of interest paid u/s 220 - AO raises query and seeks details - reassessment proceedings after four years u/s 147 - Assessee raises objections - Revenue takes the plea that since u/s 40(ii) the tax paid or payable is not admissible expenditure, the income assessable to tax has escaped untaxed - writ petition - held, the invocation of Sec 147(1) is not sustainable as the assessee has not only disclosed the entire facts in its return but also furnished detailed report in reply to the AO's query but the AO overlooked the same - Assessee's petition allowed


CIT Vs Lokmat Newspapers Pvt Ltd (Dated : February 16, 2010)

Income Tax - Explanation to section 73 - Deeming provision - During the course of AY, the assessee declares profit on the sale of shares and securities held as stock-in-trade and offers the same as speculation profit - sets off brought forwarded speculation loss with this profit - AO denies the set-off of loss on the ground that the since the profit of the assessee is related to delivery based transactions the same can be treated as business income and hence loss of speculative business cannot be set-off - CIT(A) affirms the order of the AO - Tribunal reverses the order - Revenue argues before the High Court that the case of the assessee falls under the ambit of explanation of section 73 and hence the order of the AO is required to be upheld - Held once the assessee is carrying on a speculation business and the profits and gains have arisen from that business during the course of the Assessment Year, the assessee is entitled to set off the losses carried forward from a speculation business arising out of a previous Assessment Year.


Skol Breweries Ltd Vs DCIT, Mumbai (Dated : March 8, 2010)

Income tax - Sec 147, 148 - AO passes assessment order u/s 143(3) - sends notice u/s 148 - assessee raises objections - AO passes reassessment order on certain grounds that certain income escaped assessment - held, the AO has clearly not applied its mind to the merit of objections raised by the assessee - since there is no fresh material in the hand of the AO, it is important that the AO disposes off the objections on merit - it is a case of change of opinion - case remanded to the AO for passing order on merits of the objections


M/s Satnam Overseas Limited & Another Vs ACIT (Dated : December 11, 2009)

Income Tax – Notices for re-assessment under Ss. 147 read with 148 of I T Act – When there is no new material coming to the notice of AO, no scope for re-opening of assessments – All aspects raised by AO in the notices for re-assessments ought to

have been considered during the course of assessments u/s 143(3) – Notices of re-assessment quashed – Costs of Rs. 25,000 for each Writ Petition imposed


Documents

HIGH COURT RULING - taxindiaonline.com