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MonthlyDigestofCaselaws(October2011) http://www.itatonline.org1

MONTHLYDIGESTOFCASELAWS(OCTOBER2011)

(JournalsReferred:ACAJ/BCAJ/BLR/CITC/CTR/DTR/ITD/ITR(Trib.)/ITR/SOT/SSC/TTJ/TLR

/Taxman/Taxation

/Tax

World,

www.itatonline.org)

S.4:Income CapitalreceiptBusinessincome Capitalgains.(S.28(i),45).

Assessee,administratorof theestateofdeceased,havingpurchased the right to receive the sale

proceedsoftheestatebyenteringintoanindenturewiththe legateeonaccountofclosepersonal

relationswith her and not for overriding commercial considerations. The transaction cannot be

construedasanadventure inthenatureoftrade.Thesaidreceiptcannotbetaxedevenascapital

gainsastheestatecontinuedtobetheownerofthepropertiesandassuchpaymentdidnotresult

inextinguishmentofassesseesrighthencetherewasnotransferofanycapitalasset.(A.Y.200405).

DyCITvNusliNevilleWadia(2011)61DTR218/141TTJ521(Mum)(Trib).

S.4: IncomeMethodofAccountingNPAs.

Income fromnonperformingassetsshouldbeassessedoncashbasisandnotonmercantilebasis

despiteoftheassesseemaintainingaccountsonmercantilebasis.

CITv.CanfinHomesLtd.(2011)201Taxman273(Kar.)(HighCourt).

S.5:Income Accrual Advancefromcustomerstowardsbookingofcruisetickets.

AssesseebeingengagedinthebusinessoftravelagencyasarepresentativeofRCCLbookingstickets

forthelatter'scruiseandentitledtobasecommissionof25%onallbookingsasperthetermsofthe

agreementbetweentheparties,thecommissionaccruestotheassesseewiththebookingoftickets

againstfullpaymentasperthemercantilesystemofaccountingfollowedbyhim;however,assessee

isentitledtocreditof10%onaccountoftravelagentscommissionwhichispayablebyhim.

CITv.

Gautam

R.

Chadha

(2011)

62

DTR

58

(Delhi)

(High

court)

S.5: IncomeAccrual Fixeddepositsinbanks Interest

Assesseesocietyheld fixeddeposits inbanks foratermexceedingmorethanoneyear. Ithadnot

shown any interest income from said FDsduringprevious yearon ground that income from FDs

wouldbeofferedtotaxonitsreceiptonmaturityonbasisofTDScertificate issuedbybank.Itwas

heldthattheassesseewasnotliabletodeclareinterestincomeaccruedbutnotdueintherelevant

assessmentyearasthesaidsumwasnotacknowledgedbybankorbytheassessee.(A.Y.200708).

PuriDistrictCoop.MilkProducersUnionLtd.v.ITO(2011)132ITD127(Cuttack)(Trib).

S.9(1): IncomedeemedtoaccrueorariseinIndiaPermanentEstablishment DTAAIndia

UK.

[Art.

5]

AssesseewasBritishCompany. Itsuppliedcertainpartsandequipmentsto Indiancustomers.RRIL

wasassessees100%subsidiarysetupinIndiathroughwhichitcarriedoutmarketingandsellingof

goodstoIndiancustomers.A.O.afterholdingRRILasPEoftheassessee,attributed100%ofprofits

earned from sale of goods to Indian customers to activities carried on in India. The Tribunal

restricted such attribution to35% holdings that profits attributed tomanufacturing activity and

researchanddevelopmentactivities, i.e.50%and15%,respectivelyhadtobeexcluded.Assessee

filedappealbeforetheHighCourtcontendingthatnetresearchanddevelopmentexpensesshould


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alsobereducedwhilecomputingoperatingprofits;andthatTribunalhadnotconsideredobjections

anddocumentsfiledby itonaspectofPEproperlyand,therefore,mattershouldberemandedfor

reconsideration.Heldthatexpensesonresearchanddevelopmentwerealreadytakencareofwhen

remunerationat

rate

of

35%

was

attributed

to

marketing

activities

in

India

on

which

global

profits

wasapportioned.FromtheorderoftheTribunalitwasclearthatwhileholdingthatRRILconstituted

PEof assessee, ithad undertaken critical analysisofmaterialon record includingobjections and

documentsfiledbytheassesseeandthereforetherewasnoreasontoremandthecasebacktothe

Tribunal.

RollsRoycePlcv.DIT(Internationaltaxation)(2011)202Taxman309(Delhi)(HighCourt)

S.9 (1) (i) : Incomedeemed to accrueorarise in India Factof OfficePEunderArticle5(2)

irrelevant if there isno ConstructionSitePEunderArticle5(3) DTAA IndiaNetherlands.

[Art.5(3),5(2)]

Theassesseehada siteorproject in India.UnderArticle5 (3)of the treaty, sucha siteor

projectisaPEonlyifitcontinuesforaperiodofmorethansixmonths.Astheassesseescontract

wascompleted

in

two

months,

there

was

no

PE

under

Article

5(3).

The

argument

that

the

Mumbai

officewasaPEunderArticle5(2)isnotacceptablebecausewhileArticle5(2)isageneralprovision,

Article5(3)isaspecificprovisionwhichprevailsoverArticle5(2).

CITv BKI/HAMv.o.f.(Uttarakhand)(HighCourt)(www.itatonline.org)

S.9(1)(vi): IncomedeemedtoaccrueorariseinIndiaRoyalty Software.

Considerationreceivedbytheapplicant,aSriLankanCompany, from ICEL forgiving ittherightto

useitscopyrightedsoftwareanduseitforlattersownpurposeswheneverandwhereverneededby

it istaxable inIndiaasroyaltyundercl.(v)ofExpln.2ofS.9(1)(vi)aswellasunderArt.12.2ofthe

IndoSriLankaDTAAandconsequently,provisionofwithholdingtaxu/s195isapplicable.

MillenniumITSoftwareLtd.,InRe(2011)62DTR1/338ITR391(AAR)

S.9(1): IncomedeemedtoaccrueorariseinIndiaPermanentestablishment Royaltyandfees

fortechnicalservicesDTAA India USA.(S.9(1)(vii)&90).

In thecontractof thekindundertakenby theassessee, if there isacompositeconsideration, the

samecanbeconvenientlysegregated indifferentcomponents. If theprofits fromsupplycontract

are held to be taxable separately, as the supply is amilestone in thewhole contract, then the

treatment meted out to profits on sale of equipment and consideration received for supply of

software will have to be different, as the two assets are of different nature involving different

profitabilities.TheA.O.bifurcated intheratioof30 :70.Astheassesseewasunwillingtogivethe

detailsthebifurcationmadebytheA.O.wasjustified.

RaytheonCompanyv.DCIT(2011)62DTR1(Del)(Trib)

S.9(1)

(vii)

:Income

deemed

to

accrue

or

arise

in

India

Installation

project

Permanent

establishmentDTAAIndiaSingapore.(Art5.3)

Four installation projects undertaken by the applicant, a Singaporean company, in India requires

settingup, fitting,placing andpositioningprojects coveredunderArt5.3of the IndoSingapore

DTAA, and all these projects being independent projects with no interconnection and

interdependenceamongstthem.ItcannotbesaidthattheapplicanthasaPermanentestablishment

intermsofart5.2oftheDTAAprovidedthatthedurationofeachoftheprojectsdoesnotexceed


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183days inone financialyearandtherefore, incomeearnedbytheapplicantform itsactivitiesof

executionoftheinstallationprojectisnotliabletotax inIndia.

TiongWoonProject&ContactingPteLtd(2011)61DTR337(AAR)/338ITR386(AAR)

S.10(23C)(via): ExemptincomesHospitalApplicationBeyondtime.

Application u/s 10(23C)(via) filed beyond time. Accounts not maintained properly. No evidence

regarding activities. Registration u/s 80G and exemption u/s 12A in prior years not conclusive.

Rejectionofapplicationwasjustified.

All India J.D.EducationalSocietyv.DirectorGeneralof income tax(exemptions) (2011)338 ITR

218(Delhi)(HighCourt).

S.10A:Exemptincomes Freetradezone CompetentauthorityFEMA RBI.

TheassesseemadeanapplicationtotheRBIon7102004seekingextensionoftimeforrealisation

of the export proceeds. The RBI granted approval in realisation of exports proceeds but said

approvalwasissuedinthecontextoftheprovisionsoftheFEMAandtherewasnoformalapproval

wasgrantedbytheRBIundersection10A.TheTribunalheldthatoncetheassesseehadappliedfor

extensionandhadcompletedalltheformalitiesandinresponsetheRBIhadtakentheremittances

onrecord,thennon issuanceofformal letterofapprovalbytheRBIcouldnotbeheldagainstthe

assessee, it must be held that the extension had been granted in substance and therefore the

benefitofsection10Ahadtobeallowed.ThecourtupheldtheorderoftheTribunal.(A.Y.200405).

CITvMorganStanleyAdvantageServices(P)Ltd(2011)202Taxman40(Bom)(HighCourt).

S.10A: Exemptincomes FreetradeZone Convertibleforeignexchange Localsales.

Section 10A provides for exemption only on profits derived on export proceeds received in

convertible foreign exchange.Benefit cannotbe extended to local salesmadebyunits in special

EconomicZone,whetheraspartofdomestic tariffarea salesoras interunitsaleswithinzoneor

unitsin

other

Zones.

(A.Y.

2004

05).

CITvElectronicControls&DischargeSystems(P)Ltd(2011)202Taxman33(Ker)(HighCourt).

S. 10A : Exempt incomes Free Trade Zone ExportOriented UndertakingExemptions under

sections10A,10B continue to exemptprofits& so lossofotherunits (eligible&noneligible,

includingB/floss)notliableforsetoffagainstsections10A,10Bprofits.

TwoissueswherebeforetheHighCourtforAY200102&onwards,(i)Whetherthelossincurredby

anoneligibleunit&(ii)whetherthebroughtforwardunabsorbed loss&unabsorbeddepreciation

oftheeligibleunithastobesetoffagainsttheprofitsoftheeligibleunitbeforeallowingdeduction

u/s10A/10B.

Heldthat(a)S.10Aallowsdeductionfromthetotal income.Thephrasetotal income ins.10A

meansthetotal incomeoftheSTPunitandnottotal incomeoftheassessee.Consequently,s.10Adeductionhastobegivenbeforecomputingtheprofits&gainsofbusinessunderChapterIV.

Thoughs.10Awasamendedtomakeitadeductionprovision,itcontinuestoremaininChapterIII

andwas notmoved to Chapter VIA. The result is that even now s. 10A is in the nature of an

exemptionprovisionandtheprofitsoftheeligibleunithavetobedeductedatsourcelevelanddo

notenterintothecomputationofincome.


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ofpropertybywayofcomplexactivities,therentincomederivedasownerofpropertybeassessed

as`IncomefromHouseProperty.

RomaBuilders(P)Ltd.v.Jt.CIT(2011)131ITD91/60DTR231(Mum)(Trib.)

S.28(1):BusinessincomeGiftsfromdevoteesonbirthdayVocationProfessionCapitalreceipt.

Assessee as religious head was not performing any religious rituals for his devotees for

consideration. He was doing charitable work and spiritualisation for benefit of mankind. Gift

receivedbyassessee fromdevoteesoutofnatural loveandaffection.Receiptcannotbe taxedas

incomefromanyvocationorprofession.

CITvGopalaNaickerBangarue(2011)Tax.L.R.686(Mad)(HighCourt).

S.32: DepreciationRate PrintersUPS.

PrintersandUPSfallwithintheclassofcomputerperipheralsandtherefore,eligiblefordepreciation

attherateof60%.

Haworth

(India)

(P)

Ltd.

v.

Dy.

CIT

(2011)

140

TTJ

446

(Delhi.)

(Trib).

S.32: Depreciation ComputerPeripheralsIntegralParts

Computer peripherals like printers scanners, servers, UPS, etc., form integral part of computer

systemonwhichhigherdepreciationof60%isallowable.[A.Y.200506]

ITOv.OmniGlobeInformationTechnologiesIndia(P)Ltd(2011)131ITD280(Delhi)(Trib).

S.35E:Deductionforexpenditureonprospectingetc,forminerals.

Wheretheassesseeincurredaloss,thedeductionundersection35Eisnotavailable.(A.Ys1997,98

&200001to200405).

SingareniColliweriesCompanyLtdvAsstCIT(2011)141TTJ593(Hyd)(Trib)

S.36(1)(ii): Businessexpenditure BonusorCommission CommissioninlieuofDividend.

Paymentofcommissiontodirectorsowningentirecapitalwerepaidcommissionfortheirhardwork

notallowedasitwaspaidinlieuofprofitordividendasitwasrevealedthattheprofitearnedwas

due to improved market conditions and not because of any extra services were rendered for

improvingtheperformanceofthecompany.

DalalBroachaStockBroking(P.)Ltdv.Addl.CIT131ITD36(Mum.)(SB)(Trib)

S.36(1)(iii): Businessexpenditure Interestpayableonloans.

Theassesseewasinthebusinessoftradinginsharesandhadclaimedinterestonloansobtainedfor

business. The shareshadbeen shownunder Investments in itsbooksand hence theAssessing

Officerdisallowed interestonborrowings. Itwasheld that treatment inbookswasnotconclusive

andgiven

the

nature,

volume

of

the

assessees

business,

it

was

clear

that

the

assessee

was

trading

in

sharesandhenceinterestcouldnotbedisallowed.

CITv.AravindPrakashMalpani(2011)200Taxman41(Kar.)(Mag.)(HighCourt)

S.37(1): BusinessExpenditureExpendituretoprocurerawMaterial.

Expenditure incurred for the purpose of procuring the rawmaterial in thermal power station is

allowableexpenditure.

ACITv.ChettinadCementCorporationLtd.(2011)140TTJ100(Chennai)(Trib)


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S.37(1): BusinessExpenditure Brokenperiodinterest.

Brokenperiodinteresthastobeallowedifthesecuritieswereheldascurrentassets.

Jt.CIT

v.

Dena

Bank

(2011)

139

TTJ

81

(Mum.)

(Trib)

S.37(1):Businessexpenditure Capitalorrevenue Leaserentof99years.

Lease rentofRs.48,02,616/ paid toG.I.D.C forperiodof99 yearsheld tobe revenue innature.

Registrationof leasedeed isnot relevant fordeciding the issueofcapitalor revenue.HighCourt

confirmedtheorderoftribunal.

DY.CITvSunPharmaceuticalsIndLtd(2011)224Taxation456(Guj)(HighCourt).

S.37(1):Businessexpenditure Capitalorrevenue Softwareusage.

Softwareusageandproductdevelopmentexpenses incurredbytheassesseecompanyengaged in

internetrelatedservicesareallowableasrevenueexpendituretotheextentthesameareroutine

andperiodicexpensesnotresultingincreationofnewassets.(A.Y.200506).

DyCITvRediffComIndiaLtd(2011)61DTR426/47SOT310(Mum)(Trib).

S.37(1):Businessexpenditure Foreigntourexpenses.

Foreigntravelexpensesofdoctorpartnerforobtainingthe latest informationonthetechnological

advancements,concerningdentalimplantsareallowableasbusinessexpenditure.(A.Y200405)

DyCITvB2CImplants(2011)141TTJ638(Mum)(Trib).

S.37(1):Businessexpenditure Expenditureonforeigneducationofdirectorbeingsonofthe

majorshareholder.

Wheretheassesseecompanywasnotabletosubstantiatethatsendingofthedirectorfortraining

abroadwasforthebenefitofthebusinessoftheassessee,theexpensesincurredforforeigntraining

werenot

allowable

in

the

hands

of

assessee

company.

VisheshEntertainmentLtdvs.ACIT(2011)60DTR284(Mum)(Trib.)

S.37(1) : BusinessExpenditureCapitalorRevenueExpenditure Expenditureon Application

Software revenueinnature

The expenditure incurred for the purpose of installation of Oracle software for financial

accounting, inventoryandpurchaseheldtoberevenue innatureas itdidnotresult increationof

newassetoranewsourceof income.Thetestofenduringbenefit isnotacertainoraconclusive

test.Whatisrequiredtobeseenistherealintentandpurposeoftheexpenditureandwhetherthe

expenditureresultsincreationoffixedcapitalfortheassessee.Expenditureincurredwhichenables

theprofitmakingstructuretoworkmoreefficientlyleavingthesourceoftheprofitmakingstructure

untouched isexpense inthenatureofrevenueexpenditure.Testofenduringbenefitoradvantage

collapses insuch likecasesespecially incaseswhichdealwithtechnologyandsoftwareapplication

whichdonot in anymanner supplant the sourceof incomeor added to the fixed capitalof the

assessee

Followed:AlembicChemicalWorksCoLtdvCIT(1989)177ITR377(SC).

CITvAsahiIndiaSafetyClassLtd.(Delhi)(HighCourt)(www.itatonline.org)

S.37(1): BusinessExpenditureBenefittootherpersonNowrittenagreement.


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Iftheexpenditureisincurredforthepurposeofassesseesbusinessthennopartofthesamecanbe

disallowed merely because some other person has benefited out of the same, and there is no

writtenagreementwiththepayee/recipient.

CITv.

Agra

Beverages

Corp

Pvt.

Ltd.

(2011)

200

Taxman

43

(Delhi)

(Mag.)

(High

Court)

S.37(1): BusinessExpenditureGlowsignboards.

Expenditureincurredonglowsignboardsforpurposeofadvertisementbytheassessee isrevenue

expenditure.

CITv.OrientCeramics&IndustriesLtd.(2011)200Taxman64(Delhi)(Mag.)(HighCourt).

S.37(1): BusinessExpenditureForeignToursExpansionofexistingproject.

Expenditureincurredbytheassesseeonforeigntoursofitspersonnel,inconnectionwithexpansion

ofexistingprojectiseligiblefordeductionasrevenueexpenditure.

CITv.J.K.SyntheticsLtd.(2011)200Taxman101(Delhi)(Mag.)(HighCourt)

S. 40(a) (i) :Amounts not deductible NonResident Certificate by a Chartered Accountant

Deductionoftaxatsource.(S.195).

Acertificateissuedbyacharteredaccountantcannotbeaconclusivedeterminationoftaxabilityof

income in thehandsof the recipient.Questionof taxability in thehandsof the recipient remains

open and the assessee continues to have obligation to file all the relevant details, enabling

determinationofsuchliability,beforetherevenueauthorities.MatterwasremittedtotheAssessing

Officertoexaminethetaxabilityofthepaymentsinthehandsofrecipients,onmerits.(A.Y.200506).

DyCITvRediffComIndiaLtd(2011)61DTR426/47SOT310(Mum)(Trib).

S.40(a) (ia) :AmountnotdeductibleShortDeductionofTaxat sourceNodisallowance for

shortdeductionTDSdefault.

Whereit

is

acase

of

short

deduction

of

payment

as

against

non

deduction

of

TDS,

disallowance

u/s

40(a)(ia) couldnotbemade. ThoughS.40(a)(ia)provides foradisallowance ifamounts towards

rent, etc have been paidwithout deducting tax at source. It does not apply to a case of short

deduction of tax at source. As the assessee had deducted u/s 194C, itwas not a case of non

deductionofTDS.IfthereisashortfallduetodifferenceofopinionastowhichTDSprovisionwould

apply, the assesseemaybe treatedasadefaulteru/s201butnodisallowance canbemadeu/s

40(a)(ia).[Chandabhoy&Jassobhoy(ITATMumbai)followed]

DCITvS.K.Tekriwal(Kolkata)(ITAT)(www.itatonline.org)

S.40(a)(ia):Amountsnotdeductible Deductionoftaxatsource RetrospectiveAmendment.

WheretheassesseeactedbonafideinconformitywiththeprovisionofActandthelegalpositionin

not

deducting

tax

at

source,

retrospective

amendment

could

not

make

him

liable

and

therefore

no

disallowanceunders.40(a)(ia)wascalledfor.

SterlingAbraiveLtdv.ACIT(2011)57DTR361(Mum)(Trib)

S.40(b):AmountsnotdeductibleFirmPartnerInterestSalary.(S.28(i),29,32145).

Assessee partnership firm paid interest to partners on their capital account and claimed the

deduction. Assessing officer held that as the assessee has not claimed depreciation in books of

account however claimed depreciation in the computation, he reworked the capital balances of


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partnersby reducing the cumulative amountofdepreciation therefrom and allowed the interest

computedonsuchreducedcapitalbalances.TheTribunalheldthat intermsofsection40(b),read

withsection28(i)and29AssessingOfficerisnotentitledtodisallowpaymentofinteresttopartners

byre

working

capital

account

balances

of

partners.

(A.Ys

1999

2000

&

2002

03).

SwarajEnterprisesvITO(2011)132ITD488(Visakhapatanam)(Trib).

S.40(b)(v):AmountnotdeductiblePartnershipDeedmustquantifyorlaydownthemannerof

quantifyingremunerationtopartners

S.40(b) (i) to (v)whichprescribe theconditions fordeductionof remunerationpaid toapartner

requires that thepaymentshouldbeauthorizedby,andbeinaccordancewith the termsof the

partnershipdeed.Thismandatesthatthequantumofremunerationorthemannerofcomputing

thequantumofremunerationshouldbestipulated inthepartnershipdeedandshouldnotbe left

undetermined,undecidedortobedeterminedordecidedonafuturedate;

SoodBrij&AssociatesvCIT(Delhi)(HighCourt)(www.itatonline.org)

S.40(b)

(v)

:Amounts

not

deductible

Interest,

Salary,

etc.

paid

by

firm

to

partner.

Section40(b)(v)doesnotlaydownthatremunerationpayabletopartnershouldbefixedormethod

ofremunerationshouldbeprovidedforinthepartnershipdeed.Allthatthesaidsectionprovidesis

that iftheremunerationpaidtopartner is inaccordancewiththepartnershipdeedanddoesnot

exceed the aggregate amount laid down in the said section, then the same shall be eligible for

deduction.Circularno.739whichstatesthatamountofremunerationshouldbeprovidedforinthe

deed,cannotoverridethestatutoryprovisionsandmustyieldtothesubstantiveprovisions.

DurgaDassDevkiNandanv.ITO(2011)200Taxman318(HP)(HighCourt).

S.40A(2):Amountsnotdeductible Purchasetransactionfromassociateconcerns.

Assessing Officer did not call upon the assessee to furnish any evidence regarding purchase

transactionfrom

associate

concern,

no

disallowance

could

be

made

applying

provisions

of

section

40A(2)(b),whentherewerenocommentsuponthematerialplacedbeforehimduringthecourse

ofremandproceedings. (A.Y200405)

DyCITvB2CImplants(2011)141TTJ638(Mum)(Trib).

S.40A(2):AmountsnotdeductiblePaymentofinteresttoassociatedconcern.

Obtaining the unsecured loan @ 11% from associated concern was commercially expedient as

assessee could earn more income from such borrowed funds and secured loans were neither

availableeasilynortheywereenoughtocaterthebusinessneedsoftheassesseeasitdidnothave

enough security and/or provision of guarantee for obtaining such loan and therefore no

disallowanceu/s40A(2)wascalledfor.

Addl.CITvReligareFinvestLtd.(2011)62DTR46(Delhi)(Trib).

S.41(1):Profitschargeabletotax Businessincome Remissionofliability Unclaimedbalances.

Theassesseewasashippingagentprovidingservicestoshipsandactedasoffshorerepresentative.

During the course of its business, the assessee was required tomake deposits on behalf of its

customersonvariousaccountswiththeMumbaiPortTrust.Afterrecoveringthecharges,Mumbai

PortTrustusedtorefundtheamountswhich inturn,wereadmittedlyreturnedbytheassesseeto

itsprincipalasandwhendemanded.Therefundofamount lyingwiththeassessee formorethan


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S.72 :Carryforwardandsetoff SpeculationbusinessDerivatives Samebusiness.(S.43(5),73,

263).

Lossfrom

trading

in

derivatives

treated

as

speculation

loss

in

earlier

years

carried

forward.

The

said

loss canbe set off against the profit from samebusiness. i.e. allowable against theprofit from

trading in derivatives after amendment. Revision order of commissioner under section 263was

quashedonmerit.(A.Y200607).

GajendraKumarT.AgrwalvITO(2011)11ITR 640(Mum)(Trib).

S.73:Lossinspeculationbusiness Billsrediscountingbusiness Saleandpurchaseofshares.

Assesseewasmainlydoingbusinessofbilldiscounting/rediscounting,undercontractualobligation

betweentheassesseeandpartiestothebills.Billswererediscountedandplacedonlyascollateral

security.TheTribunalheldthatactivityofbillsrediscountingwouldamounttograntingofloansand

advancesandaccordingly,Explanationtosection73wouldnotbeapplicable,hencelossonaccount

ofsaleandpurchaseofsharescouldnotbetreatedasspeculation losses,thoughtheobjectclause

ofmemorandum

of

Association

showed

that

advancing

the

money

was

only

ancillary

object.(A.Y.199697).

MomayaInvestments(P)LtdvITO(132ITD604(Mum)(Trib).

S.80HHC: DeductionExportProfitofBusinessForpurposeofS.115JA/JBdeductiontobe

computedasperP&Lprofitandnotnormalprovisions.

Thedeductionu/s80HHCistobeworkedoutnotonthebasisofregularincometaxprofitsbutithas

tobeworkedoutonthebasisoftheadjustedbookprofits inacasewheres.115JA isapplicable.

Accordingly,thedeductionclaimedbytheassesseeu/s80HHC&80HHEhastobeworkedoutonthe

basisofadjustedbookprofitu/s115JAandnotonthebasisoftheprofitscomputedunderregular

provisionsoflawapplicabletocomputationofprofitsandgainsofbusiness.

Viewof

Special

Bench

in

DCIT

vSyncome

Formulations

106

ITD

193

upheld.

CITv.BhariInformationTechSystems(SupremeCourt)(www.itatonline.org)

S.80IA:Deduction Industrialundertaking Setoffof Carryforwardlosses.

Aftersetoffofcarried forward losses, the incomeof theassessee for theA.YwasRs.14,57,200/

while the profit from industrial undertaking were Rs 98.43 lacs . The Tribunal restricted the

deductiontoRs14,57,200.TheHighcourtupheldtheorderofTribunal(A.Y.199697).

CITvTridossLaboratoriesLtd(2011)224Taxation382(Bom)(HighCourt).

S.80IB: Deduction Profits&GainsfromIndustrialUndertakingsProduction

Theword production iswider in scope than manufacture andwould include byproducts and

otherresidualproductsresultingduringthecourseofmanufacture.Hencetheactivityofconverting

boulder into grits/stone chips/powder may not be manufacturing but would amount to

production and therefore the assessee would be entitled to deduction u/s. 80IB on the said

activity.

CIT v.Mallikarjun Georesources Associates (2011) 201 Taxman 86 (Uttarakhand) (Mag.) (High

court)


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S. 80IB : Deduction Profits&Gains from IndustrialUndertakings Refund of Excise Duty

Transportsubsidy.

RefundofExciseDutyhasadirectnexustothemanufacturingactivityoftheassesseeandhencethe

samequalifies

for

deduction

under

section

80

IB.

Transport subsidy & Interest Subsidy Transport & Interest Subsidies received by the assessee,

cannot be said to be derived from the industrial activity and the same would not qualify for

deductionundersection80IB.

CITv.MeghalayaSteelsLtd.(2011)201Taxman135(Gau.)(Mag)(HighCourt)

S.80IB(10): DeductionHousingprojects OwnershipofLand.

When the assessee has taken possession of land after the payment of full consideration and

developed it, theassesseehas fulfilledall the conditions laiddown in section80IB(10), therefore

entitledtodeductionundersection80IB.

ACITv.C.Rajini(Smt)(2011)140TTJ218(Chennai)(Trib)

S.92C:AvoidanceoftaxTransferpricingComputationofArmsLengthPrice.

The High Court made certain observations on merits, while remanding the matter to the TPO,

virtuallyconcludingthematter.TheTPOwasdirectedtoproceedwiththematteruninfluencedby

theobservations/directionsgivenbytheHighCourt.

MarutiSuzukiIndiaLtd.v.Addl.CIT[2011]335ITR121(SC)

S.115AD:ForeignInstitutionalInvestorsShorttermcapitallossfromexchangetradedderivative

transactions.(S.43(5)

Sec.43(5)hasnoapplicationtoFIIsinrespectof`securitiesasdefined inExplanationtoS.115AD,

incomefromwhosetransferisconsideredasshorttermorlongtermcapitalgain.Inthefactsofthe

case,IncomefromderivativetransactionsresultingintolossofRs.12.27croreswastobeconsidered

asshort

term

capital

loss

on

the

sale

of

securities

which

is

eligible

for

adjustment

against

short

term

capitalgainsarisingfromthesaleofsharesandnotspeculationloss.

LGAsianPlusLtdv.ACIT (2011)60DTR159(Mum)(Trib.)

S.115J : CompanyBookProfitsUnabsorbeddepreciation Brought forward losses. (Companies

ActS.205).

Assessee hasshownlossofRs16,48,74,073/ intheprecedingyearandclaimeddepreciationofRs

13,85,66,473/ forthesaidprecedingyear.Oncethebroughtforward isarrivedataftertakinginto

account thedepreciation,itistheamount ofdepreciationwhichislessthantheloss,istobesetoff

intermsofclause(iv)ofexplanationtosection115J forcomputingthebookprofit.(A.Y.199091)

PeicoElectronics&ElectricalsLtdvCIT(2011)61DTR401(Cal)(HighCourt).

S.115JA:CompanyBookprofits Company PriorperiodexpensesProvisionforbadanddoubtful

debt.(S.115JB).

Priorperiodexpenditureandanyprovision forbadanddoubtfuldebt,cannotbedeductedwhile

computingbookprofitundersections115JA,115JB.(A.ys1997,98&200001to200405).

SingareniColliweriesCompanyLtdvAsstCIT(2011)141TTJ593(Hyd)(Trib).

S.115JA: Company BookProfits ProvisionforBadDebt.


12/19


Whileworkingoutbookprofit,provisionforbaddebthastobeaddedbacktothenetprofitunder

section115JAExpl.(g).

ACITv.ChettinadCementCorporationLtd.(2011)140TTJ100(Chennai)(Trib)

S.115JB:CompanyBookProfitsPowerofAssessingOfficer.

Once theaccounts including theprofitand lossaccountarecertifiedby theauthoritiesunder the

CompaniesAct ,1956, it isnotopen to theAssessing Officer to contend that theprofitand loss

accounthasnotbeenprepared inaccordancewith theprovisionsofCompaniesAct ,1956.Hence

theTribunalwasright indeletingtheadditionof1.98CroresmadebytheAssessingOfficerwhile

computingthebookprofitsundersection115JB.

CITvAdbhutTradingCoPvtLtd(2011)338ITR94(Bom)(HighCourt).

S.132 : Search and SeizureAuthorisationu/s132(1)Noticeu/s131(1A) afterwarrantu/s

132(1)

Section131(1A) isonly an enabling sectionand itdoesnot in anymanner effect the search and

seizureoperation carried on under 132. For the purpose ofjudging the actionof the concerned

authority with respect to search and seizure, S.132 alone has to be considered. S. 132 is an

independentcodeitself.Materialscollectedbeforesearchshowedthatofficerconcernedcouldhave

reason tobelieve that the petitionerwere in possession ofmoney, bullion etc.,wholly or partly

undisclosedincomeorassetandthereforetherewasreasontobelievewithinmeaningofS.132(1).

Further,after searchand seizureoperation, thepoweru/s131(1A)cannotpossiblybe invoked in

viewofitsplainlanguageandifthepowerisinvoked,itwillnotinanymanneraffectthevalidityof

thesearchandseizureoperation.S.131(1A)and132shouldbeinterpretedharmoniously.

V.S.Chaudan(Dr)&Anr.vDIT(Inv)(2011)62DTR67(All)(HighCourt).

S.132: SearchandSeizureWarrantofAuthorisation

Theopinion

or

the

belief

so

recorded

must

clearly

show

whether

the

belief

falls

under

clause

(a)

or

(b)or(c)ofsection132(1)oftheAct.Thesatisfactionnoteshoulditselfshowtheapplicationofmind

and the formationofopinionby theofficerordering thesearch. Inorder tojustify theaction the

authoritymusthave relevantmaterialson thebasisofwhichhecan formanopinion thathehas

reasontobelievethatactionagainstapersonu/s132oftheActisneeded.Thebeliefshouldnotbe

basedonsomesuspicionordoubt.

VisaComtradeLtd.vUOI(2011)338ITR343(Orissa)(HighCourt)

S. 144C : Dispute Resolution Panel Power to enhance Confined to issues raised in draft

assessmentorder Futurelossesallowableasdeduction

U/s144C(5),theDRPcan issuedirectionsonly inrespectoftheobjectionsraisedbytheassessee

and the objections are to be in terms of the variation proposed in the draft order. S. 144C (8)

restrictsthe

powers

of

the

DRP

to

confirm,

reduce

or

enhance

the

variations

proposed

in

the

draft

assessmentorder.Hence,theDRPsdirectionshavetobewithreferencetotheobjectionstothe

variationsproposedinthedraftorder.(GEIndiaTechnologyCentrevs.DRP(Kar)followed);

As regards the deduction for future losses,Accounting StandardAS7 requires expected loss

(difference between probable contract costs and contract revenues) to be recognised as an

expenseimmediatelyirrespectiveofwhetherworkhascommencedandthestageofcompletionof

activity. Accordingly, estimated or foreseeable losses are allowable as a deduction. (Jacobs

EngineeringPrivateLtd(ITATMumbai)&MazagaonDock29SOT356followed).


13/19


DredgingInternationalNVvADIT(Mumbai)(ITAT)(www.itatonline.org)

S.147:ReassessmentNoticeu/s142(2)

Thereis

no

requirement

of

notice

u/s

143(2)

in

the

case

of

reassessment

u/s

147

CITv.MadhyaBharatEnergyCorpn.Ltd.(2011)62DTR37(Delhi)(HighCourt)

S.147:ReassessmentBeyondfouryearsRetrospectiveamendmentS.80HHC

Duringthecourseofassessmentproceedings forA.Y.200102&200203,assesseesclaim for

deduction u/s 80HHC was allowed. After the expiry of four years from the end of relevant

assessment year an amendment to S. 80HHCwas broughtwith retrospective effect from 0104

1998.Itwasadmittedpositionthattheconditionswerenotthereinatthetimeoffilingofreturnnor

at the time oforiginal assessments.A.O. issued noticeu/s 148. The Tribunal, on examination of

materialonrecord,concludedthatalltherelevantfactswereavailableonrecordandthatitcannot

besaidthatassesseehadfailedtodisclosefullyandtrulyallmaterialfacts,andthusnoreopening

couldbedone.Held that, theTribunal rightlyconcluded thatproviso to section147couldnotbe

invokedmerely

because

there

was

an

amendment

in

future

which

was

introduced

retrospectively

andcoveredperiodinquestion,andthusTribunalorderhastobeconfirmed.

CITv.GaneshRiceMills(2011)202Taxman96(All)(HighCourt)(Mag)

S.147:ReassessmentIncomeescapingassessment.

Duringthesearchnobooksofaccountordocumentsormoneyorbullionorjewelleryoranyother

valuablearticlesor thingswere found. Itwasasolitarystatementoftheassessee,which toowas

retractedimmediatelythereafter.Furthermore,apartfromthestatementtherewerenoparticulars

coming forward namely who were the dummy subscribers, whether shares from the socalled

dummysubscribersweretransferredinthenameoftheassesseeorassesseeremainedthebenami

ownerthereofandwasinthecontrolandpossessionsofthoseshares,etc.Nosuchquestionswere

evenput

by

the

A.O.

to

the

assessee

after

recording

the

statement.

Thus

the

only

material

for

issuanceofnoticeu/s148wasthestatementrecordedu/s132(4).Evenifthestatementwastobe

believed, thatwouldhavebeen thebasis for issuing thenotice forA.Y.19951996andnotA.Y.

19941995.ItwasmerelyafigmentofimaginationonthepartoftheCIT(A)thatstatementshould

notbebelievedtotheextentthatthatcashwaspaidinthecurrentfinancialyeari.e. 19941995as

normallysuchcashispaidatthetimeofpurchaseofsharesbythesocalleddummysubscribers.It

wasnotevenrecordedinthereasonstobelievebytheA.O.ThereforetheorderoftheCIT(A)on

thataspectwasclearlyerroneousandjustifiablysetasidebytheTribunal.

CITv.BelaJain(Smt)(2011)202Taxman90(Delhi)(HighCourt)(Mag)

S.158BC:BlockofassessmentSearchandSeizureValidity Jointwarrant.

Warrantofauthorizationissuedinthenamesofthreecompaniesincludingassessee,separatedonly

byacomma

without

the

word

and

between

companies

is

not

awarrant

in

the

joint

names

of

three

companiesand,therefore,theblockassessmentorderframedintheindividualnameoftheassessee

companywasnotinvalid.

RadanMultimediaLtdvs.DCIT(2011)58DTR129(Mum)(Trib).

S.168: ExecutorsIncomeAdministrator(S.4.)

Amount receivedby theadministrator (Assessee)ondistributionoutof theaccumulated fundsof

theestateofthedeceasedinhiscapacityasatransfereeofthelegateesinterestwasnottaxablein


14/19


hishands,sincetheassesseehadonlyacquiredtherightstosaleproceedsofthepropertiesandthe

estatewascontinuingandwasbeingadministeredbytheassessee,hecouldnotbetreatedasthe

residuelegatee.(A.Y.200405).

DyCIT

vNusli

Neville

Wadia

(2011)

61

DTR

218(Mum)

(Trib)

/141

TTJ

521(Mum).

S.194A :Deductionoftaxatsource Interestotherthan interestonsecurities Reimbursement

Commission Interest(S.28A).

Assesseecompanyutilizedunspentcreditlimitofothercompanyforimportinggoodsforwhichbank

chargedinterest,whichwaspaidbysaidcompanyonbehalfofassessee.Assesseereimbursedsuch

amountofinteresttosaidcompany.Itclaimedthatinrealityitpaidcommissiontothatcompanyfor

utilising itsunspentcredit limitandtherefore,provisionsofsection194Awerenotapplicable.The

courtheldthatamountpaidbytheassesseewouldclearlycomewithinthedefinitionof interest

under section 2 (28A) and assesseewas liable to deduct TDS from the said amount in terms of

section194A.(A.Y.200203)

BhuraExportsLtdvITO(2011)202Taxman88(Cal)(HighCourt).

S.194H:Deductionoftaxatsource Commission DiscountFranchisee.

Franchiseeactsonbehalfoftheassesseeforsellingstartuppackandprepaidrechargecouponsto

the customers of assessee and all the trappings of liability as agent, of the franchisee towards

assesseesubsistandthereforediscount giventothefranchiseewas infactcommission,subjectto

TDSundersection194H.(A.Y.200304 and200405).

BharatiCellularLtdvAsstCIT(2011)61DTR225(Cal)(HighCourt).

S.194J: DeductionofTaxSource TransactionchargespaidtoBSE feesfortechnicalservices

In the instant case, there is direct linkage between the managerial services rendered and the

transaction charges levied by the stock exchange. The BOLT system provided by the BSE is a

completeplatform

for

trading

in

securities.

A

stock

exchange

manages

the

entire

trading

activity

carried on by its members and accordingly renders managerial services. Consequently, the

transaction charges constituted fees for technical servicesu/s194J and the assesseeought to

havedeductedTDS.However,on facts,because from1995 to2005no taxwasdeductedandno

objectionwasraisedbytheAOandbecausefromAY200607onwardstheassesseehaddeducted

TDS,therewasabonafidebeliefthatnoTDShadtobededucted,hencenodisallowanceu/s40(a)(i)

canbemadeforAY200506.

CITvKotakSecuritiesLimited(Bombay)(HighCourt)(www.itatonline.org)

S.195:DeductionoftaxatsourceOthersumsNonresidentIncomedeemedtoaccrueorarise in

IndiaBusinessinformation.(S.201).

TheassesseehadimportedbusinessinformationreportsfromDunandBrandstreet,USAandmade

remittancesin

respect

thereof

without

deducting

tax

at

source.

The

Assessing

Officer

held

that

the

assesseewas liable todeduct taxatsource.Tribunal setaside theorderofAssessingOfficer.The

Courtheld that theAuthority forAdvanceRulingshadheld that the saleofbusiness information

reports by the subsidiaries of Dun and Brand Street,USA in Spain, Europe and the U.K. to the

assesseedidnotattracttheprovisionsofsection195.ThoughthedecisionoftheAuthoritywasnot

bindinginthepresentcase,sincethedecisionofAuthorityrelatedtothesamebusinessinformation

reportsimportedbytheassesseeandnofaultinthedecisionoftheAuthoritywaspointedout,the

decisionoftheTribunalwasaffirmed.


15/19


DirectorofIncomeTaxvDunandBrandStreetInformationServicesIndiaP.Ltd(2011)338ITR95

(Bom)(HighCourt).

S.201

:Consequence

of

failure

to

deduct

or

pay

Assessee

in

default

Deduction

of

tax

at

source

Limitation.

When therewasnoperiodof limitation fixed forexercisingpowerunder section201at relevant

pointof time, there isnoquestionof invokinga reasonableperiodof limitation forapplying the

provisionofsection201.(A.Y.200203).

BhuraExportsLtdvITO(2011)202 Taxman88(Cal)(HighCourt).

S.220:Whentaxpayableandwhenassesseedeemedtobeindefault Collectionand recoveryof

taxWaiverofinterest.

Petitionforwaiverofinterestundersection220(2)canbefiledevenafterinteresthasbeenpaidby

theassessee.(A.Y.199394).

JewellersOmPrakashvChiefCIT(2011)202Taxman71(Delhi)(HighCourt).

S.234B:Interest Bookprofit Company.(S.234C).

Interest is chargeable under sections 234B, 234Con failure to pay advance tax in respectof tax

payableundersections115JA/115JB. (A.Ys199798&200001to200405).

SingareniColliweriesCompanyLtdvAsstCIT(2011)141TTJ593(Hyd).

S.244A: InterestonrefundsAdjustmentofamountseized.

Afterasearchconductedatassesseespremises, itfiled itsreturnof income.However, itfailedto

payselfassessmenttaxdueasperreturnandrequestedauthoritiestoadjustamountoftaxdueout

of amount seized from its office and its chairman. Subsequently, assessment order came to be

passed making assessment at a lesser amount and, consequently, assessee became entitled to

refund.Held

that,

clause

(b)

of

S.244A

was

attracted

and

assessee

was

entitled

to

refund

with

interest.

CITv.IslamicAcademyEducation(2011)202Taxman276(Kar)(HighCourt).

S.245R : Procedureonreceiptofapplication AdvanceRulings PendencyofproceedingsNotice

undersections.143(2)and147.

Noticesundersection143 (2)and147havingbeen issuedtotheapplicantbythetime it filedthe

applicationundersection245Qseekingrulingonthequestionastowhethertheamountsreceived

bytheapplicantare liabletotax inIndiaundertheprovisionsoftheIncomeTaxAct,thequestion

raisedistheveryquestionpendingadjudicationbeforetheAssessingOfficer sofarasthatparticular

incomeisconcernedandtherefore,applicationisliabletoberejectedunderprovisotosection245R

(2).

SepcoIIIElectricPowerConstructionCorporation(2011)243CTR529/61DTR49/202Taxman149

(AAR).

S.246A: AppealableOrdersCommissioner(Appeals)Taxdeterminedaspersection246(1)(a)

Reliefinrespectofundersection90orsection91

Section246A(1)(a)covers issueofnotallowingreliefinrespectofwithholdingtaxundersection90

orsection91.


16/19


CapgeminiBusinessServices(India)Ltd.v.Dy.CIT(2011)131ITD396(Mum.)

S.251:PowersofCommissioner(Appeals)Newclaim Nonfilingofrevisedreturn.

Whenthe

assessee,

during

the

course

of

assessment

claimed

the

cost

of

acquisition

of

the

capital

assetasperthevaluationreportstatingthefairmarketvalueason1stApril1981,theAOshould

haveentertainedthesaidclaimandCIT(A)alsoerredinnotconsideringtheclaim,whichisalegally

permissibleclaim.

GopiS.Shivnani(Mrs)v.ITO(2011)57DTR18 /139TTJ308(Mum)(Trib)

S.251: PowersoftheCommissioner(Appeals)Omissiontoclaiminthereturn.

Wheretheassesseehadnotclaimeddeductionu/s80IBinthereturnofincomeandfactsrelatingto

thatdeductionhavealsonotbeenshowntobeexistingonrecord,CITwasnotjustifiedindirecting

theA.O.toconsidertheclaiminaccordancewithlaw.

ACITv.ParabolicDrugsLtd.(2011)62DTR73(Delhi)(Trib)

S.254(1): Ordersof AppellateTribunalDutyofTribunal.

ItisthedutyoftheTribunaltofollowdecisionofjurisdictionalHighCourt.TribunalcannotholdHigh

Courtdecisionerroneousbecauseitdidnotconsiderrelevantprovision.

NationalTextileCorporationLtd.(M.P.)v.CIT(2011)338ITR371(MP)(HighCourt)

S.254(1): OrdersofAppellateTribunalPowers PowerofEnhancement.

The arrears of rent & damages received by the assessee were claimed as not taxable by the

assessee,being capital receiptswhereas theDepartment contended that the samewere taxable,

beingonrevenueaccount.TheTribunalremandedthematterbacktoconsiderwhetherthesame

couldamounttoCapitalGains,beingreceivedforsurrenderoftenancy.Itwasnoteventhecaseof

theDepartment that thesewere capitalgains. Itwasheld that theTribunalcannotenhance the

scopeof

the

appeal

by

adjudicating

on

grounds

not

raised

by

the

Appellant.

JasmineCommercialsLtd.v.CIT(2011)200Taxman338(Cal.)(HighCourt)

S.254(2) :OrdersofAppellateTribunalRectificationofmistakesPowers Jurisdictionof Income

taxAppellateTribunal,whichoriginallyheardmatter,torecallitsorder

TheTribunalomittedtoconsideranissue.AMiscellaneousapplicationwasmovedseekingtorecall

theorder.Thetribunalrecalledtheorderandregistrywasdirectedtofixtheappealasfarasground

regarding rent receiptwas concerned. Assessee moved instant application seeking admission of

additional ground that reopening was bad in law. Held that the statute permits bench, which

originallyheardthematter,torecallitsorderinitsentiretyortorecallinalimitedwayortopassa

corrigendumorcorrectcertain mistakesapparentfromrecordandbenchhasnojurisdictiontogo

into otherissuesotherthanonewhichwasrecalled.Hence,Assesseewasnotentitledtoraiseany

additionalground.(A.Y.19992000).

TokhemEnterprisesvITO(2011)132ITD375(Mum)(Trib).

S.254(2): OrdersofAppellateTribunal Rectification ofmistakes RevieworRecalloftheorder.

Tribunalcannotrecall itspreviousorderunlesstherearemanifesterrorswhichareobvious,clear

andselfevident.

SudhakarM.Shettyv.ACIT(2011)139TTJ687(Mum.)(Trib)/58DTR289


17/19


S.260A:Appeal HighCourtTaxeffectlessthan4LakhsReferencereturnedunanswered.

In view of Instructionno 2/2005 dated24102005 , issued byCBDT, ithas tobe directed that

wherevertax

effect

is

less

than

4lakhs

,department

should

not

file

appeal

under

section

260A,

unlessquestionof law involvedorraised inappeal isofrecurringnature which istobesettledby

HighCourt.

CITvVitesseeTradingLtd(2011)202Taxman242(Bom)(HighCourt).

S.260A:AppealHighCourtCondonationofDelayHugeStakes.

When huge stakes are involved, the High Court should not dispose of the appeals fled by the

Department merely on the ground of delay. High Court may consider imposing costs on the

Departmentforthedelayanddecidetheappealonmerit.

CITv.WestBengalInfrastructureDevelopmentFinanceCorpn.Ltd.(2011)56DTR351(SC)

S.

263

:

Revision

of

orders

prejudicial

to

revenue

Two

views

One

of

the

possible

view.

WheretheAssessingOfficerhastakenoneofthepossibleviewswhichresulted in lossofrevenue,

theordercannotbetreatedaserroneousandtheCommissionercannot invokejurisdictionunder

section263.

CITv.KelvinatorofIndiaLtd.(2011)201Taxman88(Delhi)(Mag.)(HighCourt).

S. 271D : Penalty Loan or deposit Income offered by Director Entry in books of account of

Companybyjournalentry.(S.269SS).

ThepremisesofK,adirectoroftheassesseecompanyweresearchedbytheIncomeTaxAuthorities.

Duringthecourseofsearch,incriminatingdocumentsregardingunaccountedexpenditure incurred

byKwereseized.Intheproceedingsinitiatedundersection153C,Kofferedfortaxtheundisclosed

expenditure incurred by him for and on behalf of the company for construction activities.

Accordinglyjournal

entries

were

passed

in

the

books

of

the

company.

Assessing

Officer

was

of

the

opinion that the assessee has violated section 269SS and accordingly levied the penalty but the

Tribunaldeleted.HighCourtconfirmedtheorderofTribunal.

CITvMottaConstructionP.Ltd(2011)338ITR66(Bom)(HighCourt).

S.271G:Penalty TransferPricing NoPenaltyforfailuretorespondtoomnibusnotice

S.271Gauthorizesthelevyofpenaltyiftheinformation/documentsprescribedbys.92D(3)arenot

furnished. Rule 10D prescribes a voluminous list of information and documents required to be

maintainedand it isonly inrarecasesthatallclauseswouldbeattracted.Someofthedocuments

maynotbenecessary incaseofsomeassessees.Before issuinganoticeu/s92D(3),theAOhasto

applyhismindtowhatinformationanddocumentsarerelevantandnecessaryfordeterminingALP.

Anoticeu/s92D(3)isnotroutineandcannotbecasuallyissuedbutrequiresapplicationofmindto

consider thematerialon record andwhat further informationon specificpoints is required.Thenoticecannotbevagueorcallforunprescribedinformation.

DCITvLeroySomer&Controls(India)(P)Ltd.(Delhi)(ITAT)(www.itatonline.org)

S.281:Certaintransferstobevoid RecoveryoftaxSaleandattachmentofpropertyofassessee

indefault.


18/19


Property transferredbyassesseeduringpendencyof recoveryproceedings, canbe attachedand

soldwithout filingsuit,assection281statutorilydeclaringsuchtransferasvoidprovides forsuch

mode.Noticetotransfereeisinvariablynotnecessarybeforetakingsuchaction.

KarnailSingh

vUOI

(2011)

Tax.L.R.

648

(P&

H).(High

Court).

Interpretations.

PrecedentDecisionofjurisdictionalHighCourtBindingnature

Tribunalhas to follow thedecisionof thejurisdictionalHighCourtwithoutmakinganycomment

uponthesaiddecision,it isnotpermissiblefortheTribunaltosidetrackand/orignorethedecision

of thejurisdictional high courton the ground that itdidnot take into consideration aparticular

provisionoflaw.

DeputyCommissionerof IncomeTaxv.GujaratAmbujaCementsLtd (2011)57DTR179 (Mum.)

(Trib.)

Precedent AdvanceRulings.

DecisionofAuthorityonsimilarfactsinrespectofsamesubjectmattercanbefollowed.

DirectorofIncomeTaxvDunandBrandStreetInformationServicesIndiaP.Ltd(2011)338ITR95(

Bom)(HighCourt).

GiftTax.

S.4 :DeemedgiftTransferofassetswithoutconsiderationTransferofsharesofcompany from

onegrouptoanother.(S.5(1)(xiv).

Theassesseecompanywasmanagedbytwogroupsofshareholders,KandP.Disputescroppedup

regardingtheentitlementtothesumofRs80Lakhsreceivable fromS forthesaleofsurplusFSI.

According to the decreeof court, theK group transferred all its shares in the assessee to the P

group.Intheannualaccounts,thevalueofthepropertiesalienatedtotheKgroupwasshownatRs

35Lakhs.

The

Assessing

Officer

held

that

the

assessee

had

gifted

Rs

35

lakhs

without

any

considerationand such amountwas exigible to gift tax.Theorderwas confirmedbyCIT(A) and

Tribunal.OnreferencetheCourtheld that theKgrouphadrelinquishedandwaived itsright, title

andinterestinthepropertyandalsotheconsiderationwhichtheassesseewastoreceiveoutofthe

landtransactionandinlieuthereofitgotpropertiesfreefromallliabilitiesonownershipbasis.The

consideration was the transfer of property in favour of K group. The consideration for the

transactioncouldbespeltoutfromtheawardofthearbitrator.Therewasnogiftexigibletotax.

PananlalSilkMillsPLtdvCGT(2011)338ITR1(Bom)(HighCourt).

Editorial. Judgement ofMumbai Tribuanl Panalal SilkMills Pvt. Ltd vDCIT (1993) 44 ITD (458)

reversed.

WritPetitions:

WritMaintainability FoundationalFactstobeEstablished.(Article226)

Where the foundational factshad tobe established, the assesseeoughtnot tohave filed awrit

petition.

CocaColaIndiaInc.v.Addl.CIT&Ors.[2011]336ITR1(SC)

ServiceTaxActivationofSIM


19/19


Theamountreceivedbythecellularcompanyfrom itssubscriberstowardsSIMcardsformspartof

thetaxablevalue for levyofservicetax,asSIMcardsareneversoldasgoods independentofthe

services provided and therefore, the valueof the taxable service is calculatedon the gross total

amountreceived

by

the

operator

from

the

subscribers.

IdeaMobileCommunicationsLtd.v.CCEC(2011)59DTR209(SC).

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