SOME RECENT REPORTED DECISIONS OF HIGH COURT & ITAT – FAVOUR OF REVENUE ( reported in 2007 & 2008 )

HOUSE PROPERTY INCOME

When assessee’s business has come to a close or when the assessee let out the assets with the intention of closing the business, the property which at one time was a commercial asset would cease to be so and the income from letting out of such an asset would not be business income.

Metal Products of India Vs CIT (P&H) 293 ITR 618

Rent from hotel which was used for business does not mean rental income is business income – no commercial exploitation of property by the assessee

Keyaram hotels P. Ltd. Vs ACIT (Mad) 300 ITR 118

BUSINESS INCOME – RECEIPTS

Excise duty collected from customers and kept in a separate account – Assessable as trading receipt – Not deductible since not paid during the year

CIT Vs Ideal Sheet Metal Stampings and Pressing P. Ltd. (Guj) 290 ITR 295

Contract for supply of commodity – Agreement providing for minimum quantum of purchase – Payment to be made for shortfall – Amount received towards shortfall is revenue receipt

Eastern Air Products P. Ltd. Vs CIT (MP) 290 ITR 562

Correspondence between parties indicate that the sum received was by way of compensation for loss of business in some locations – Assessee continuing business in other places – No permanent cessation of business – No part of profit making apparatus of assessee extinguished – Revenue receipt

CIT Vs All India Films Corporation (Del) 297 ITR 358

Assessee follows mercantile system – income accrues in the year and subsequent relinquishment or waiver after expiry of accounting year was of no consequence.

H.P. Mineral & Ind. Development Corporation Vs CIT (HP) 302 ITR 120

BUSINESS INCOME – EXPENDITURE

Disputed amount of excise duty secured by bank guarantee – Not equivalent to actual payment to revenue – Not deductible

Mugat Dyeing and printing Mills Vs ACIT (Guj) 290 ITR 282

Financing business camouflaged as Leasing business – No depreciation

I.C.D.S. Ltd. Vs CIT (Kar) 291 ITR 18

Commission paid to agents – No evidence to prove commission agents rendered services to assessee – No deduction

CIT Vs McDowell and Co. Ltd. (Kar) 291 ITR 107

Construction business – Penalty levied for exaggerated measurement – To be disallowed

Tam Tam Pedda Guruva Reddy Vs JCIT (Kar) 291 ITR 44

Warranty provision made in respect of after-sales service which depends on uncertain future events – contingent liability.

CIT Vs Rotork Controls India Ltd. (Mad) 293 ITR 311

Amount paid towards institutional membership of club – Capital expenditure

Framatone Connector OEN Ltd. Vs DCIT (Ker) 294 ITR 559

Assessee supplying goods to Government Departments – Non-payment due to paucity of allocated budget – Not bad debt

Dhall Enterprises and Engineers P. Ltd. Vs CIT (Guj) 295 ITR 481

Assessee had bank account in the same place of customers-No reason to issue bearer cheques

Evershine Platters Vs CIT (All) 295 ITR 349

Expenditure met by company on foreign education expenses of son of directors – Not allowable

Silicon ( India) Ltd. Vs DCIT (Mad) 295 ITR 422

Transport business - Not maintaining books - Income computed u/s 44AE - Assessee not entitled to set off unabsorbed depreciation.

DCIT Vs Sunil M. Kankariya (ITAT, Pune) 298 ITR (AT) 205

Liability for compensation did not accrue on the closing date of the accounting year - Amount paid subsequent to that date but before finalization of the balance sheet - Not deductible expenditure as liability did not accrue during the accounting year - Assessee argued that as per AS-4, all liabilities accruing till the date of approval of balance sheet to be provided in accounts - Argument not maintainable to compute taxable income as per I.T. Act.

M.S. Raju Vs DCIT (AP) 298 ITR 373

Payment to relatives – Reasonableness has to be proved by assessee and not by Department .

Nund & Samont Co. P. Ltd. Vs CIT (SC) 78 ITR 268

CIT Vs NEPC India Ltd. (Mad) 303 ITR 271

Assessee changed method of valuation of closing stock – No adjustment in opening stock (which is closing stock of preceding year) is possible.

CIT Vs George Oakes Ltd. (Mad) 303 ITR 357

No details of services rendered by selling agent – No confirmation of any arrangement between parties – No longstanding relationship between assessee and selling agent – Commission payments disallowed.

Schneider Electric India Ltd. Vs CIT ( Del) 304 ITR 360

Deduction u/s 35 – Scientific research should be related to the business of the assessee

CIBA India P. Ltd. Vs ITO (ITAT, Mumbai) 305 ITR(AT) 75

Mercantile system – Lease agreement requiring lessee to make payment in March preceeding financial year in which asset is to be used – Amounts to pre-paid expenses – Not deductible since no liability accrued during the year

DCIT Vs FAG Bearings India Ltd. (ITAT, SB-Ahd) 306 ITR(AT) 60

Advance Sales Tax paid – Not deductible u/s 43B r.w.s. 29 & 37(1)

CIT Vs Kerala Solvent Extractions Ltd. (Ker) 306 ITR 54

Borrowed capital utilized to buy agricultural land – Interest not deductible

Punjab Auto Industries P. Ltd. Vs CIT (All) 306 ITR 149

Application of sec. 14A – Even if assessee is involved in the business of trading of shares, sec. 14Aplies – it overrides all other sections allowing deductions – Rule 8D is retrospective in operation.

ITO Vs Daga Capital Management Pvt. Ltd. (ITAT, SB-Mum) 2008-TIOL-509-ITAT-MUM-SB

Mere addition to old building does not amount to construction of new house – No 54F deduction

CIT Vs V. Pradeep Kumar (Mad) 290 ITR 90

Joint Development agreement – Deemed transfer under section 53A of the Transfer of property Act – Section 2(24) applies – There is a written agreement – When limited / irrevocable Power of Attorney is given to developer, transfer takes place

Jasbir Singh Sarkaria IN RE ( AAR) 294 ITR 196

Right to obtain conveyance of immovable property is a “capital asset” – Assignment of such right is “transfer” – Gains arising is capital gains.

CIT Vs Laxmidevi Ratani (MP) 296 ITR 363

J.K. Kashyap Vs ACIT ( Del) 302 ITR 255

Dissolution of firm consisting of two partners – One partner taking over land and factory and continuing business – Amounts to transfer u/s 2(47)(vi) – Capital Gains arises u/s 45(4)

CIT Vs Southern Tubes (Ker) 306 ITR 216

Building was not worth occupying – No 54 exemption

Rajesh Surana Vs CIT (P&H) 306 ITR 368

54F claim – investment in new asset should be in the name of assessee.

Jai Narayan Vs ITO (P&H) 306 ITR 335

Kiran Nagji Nisar Vs ITO (ITAT, Mum) 300 ITR (AT) 286

Fraction entitlement of shares is capital asset – amount received on sale proceeds liable to Capital gains without any cost – part of bonus entitlement.

OTHER SOURCES INCOME

Income from stock Appreciation Rights (SAR) received from a holding company based upon financial performance – taxable eventhough assessee is an employee of the subsidiary – It is not necessary to have employer – employee relationship to tax remuneration for services rendered as salary – All employee related benefits received from other than employer is taxable under Other Sources.

Sumit Bhattacharya Vs ACIT (ITAT, Mum) 300 ITR (AT) 347

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Purchase of refrigerator under scheme under which purchaser given scratch card – Assessee winning car from this – Winnings from lottery

D.N. Thakur Vs ITO (ITAT, Chd) 292 ITR (AT) 382

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Income earned by fraudulent means / cheating – can be assessed as income of the assessee

CIT Vs K. Thangamani (Mad) 2009-TIOL-48-HC-MAD-IT

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A mere identification of the donor and showing the movement of the gift amount through banking channels is not sufficient to prove the genuineness of the gift. Amount received by Swamiji in the exercise of his vocation is his income and does not belong to the Trust – Burden lies on assessee to prove a particular receipt is exempt.

Swami Premananda Vs DCIT (Mad) 2009-TIOL-53-HC-MAD-IT

EXEMPTIONS & DEDUCTIONS

80 I – Set off loss in other units against the income from eligible units and compute deduction only on the net income

CIT Vs RPG Telecom Ltd. (Kar) 292 ITR 355

Profit derived from business of trading of products of other concerns – Not entitled to deduction u/s 80 IA since such profit not derived from industrial undertaking.

Liberty Shoes Ltd. Vs CIT (P&H) 293 ITR 478

Profit from sale of scrap and waste materials to be excluded from profits of the business under cl. (baa) to sec. 80 HHC

CIT Vs Shiva Distilleries (Mad) 293 ITR 108

Interest on FD – Not to be included in profits for 80HHC computation

CIT Vs Shradha Industries (Mad) 294 ITR 617

Dollar Apparels Vs ITO (Mad) 294 ITR 484

Articles supplied from Germany to Poland – No “export out of India” – No deduction u/s 80HHC

Dhall Enterprises and Engineers P. Ltd. (Guj) 295 ITR 481

80P(2)(e) – Consumer co-operative society – Purchasing supplies from FCI to be sold at fixed price – Commission earned not entitled to deduction.

CIT Vs Udaipur Shahkari Upbhokta Thok Bhandar Ltd. (Raj) 295 ITR 164

Income surrendered during survey operations as stock difference / unaccounted investments – Not eligible for special deductions like under section 80 HHC

Sarla Handicrafts P. Ltd. Vs Addl. CIT (P&H) 296 ITR 94

Assessee having total turnover exceeding Rs. 10 crores – Condition precedent – Assessee to opt either for duty drawback or DEPB – Assessee not having any duty drawback – Not exercising option – Not entitled to 80HHC deduction on profits of DEPB sale.

Shivnath Rai Harnarain ( India) Ltd. Vs DCIT (ITAT, Del) 304 ITR (AT) 271

10A - Interest not profit “derived from” industrial undertaking – No exemption

India Comnet International Vs ITO (Mad) 304 ITR 322

No specific claim for exemption under sec. 10A in original return – Assessee cannot make such claims in re-assessment proceedings

Sella Synergy ( India) Ltd. Vs ACIT (ITAT, Chennai) 304 ITR (AT) 366

Pasteurisation of milk – No manufacturing.

B.G. Chitale Vs DCIT (ITAT, SB-Pune) 305 ITR(AT) 81

10B – Brought forward losses required to be set off against business profits before computing deduction u/s 10B

Sword Global (I) P. Ltd. Vs ITO (ITAT, Chennai) 306 ITR(AT) 286

80IB deduction – duty drawback received is not eligible, Sakthi Footwear Vs DCIT (Mad) 2008-TIOL-508-HC-MAD-IT,Dealer in timber – Not engaged in agricultural operations – Purchased rubber trees for felling – Sale of latex till felling of trees – not agricultural income

Bharat Timber Trading Co. Vs CIT (Kar) 296 ITR 676

Amount described in lease agreement as security deposit – Agreement providing for reduction of security deposit every month by amount of rent payable – Security deposit was in effect advance rent – Tax to be deducted at source on entire security deposit

CIT Vs Reebok India Company ( Del) 291 ITR 455

Compensation on acquisition of land – Duty of Land Acquisition Officer to deduct tax at source if amount paid after 01-10-2004 exceeds the prescribed limit – If tax not to be deducted, assessee to produce necessary certificate from Assessing Officer.

Nalini Vs Deputy Collector, Land Acquisition (Ker) 294 ITR 423

Tribunal remitting the matter to Assessing Officer only on certain specific points – Assessment not fully set-aside de novo – Two year limitation period specified in sec. 153(2A) not applicable

Basu Distributors P. Ltd. Vs ITO ( Del) 292 ITR 29

ITO can bring to tax any income which escaped assessment and not only items which led to issuance of notice u/s.148. Matters attaining finality in original assessment – assessee cannot dispute.

CIT Vs Ram Kishan Leela (Raj) 295 ITR 525

Incentive in Samman Patra Scheme that their cases will not be subject to scrutiny for 3 years - Not absolute exemption - Issue of notice u/s 143(2) valid

Malu Khan Mahendra Singh Yasin Khan Vs DCIT (Raj) 298 ITR 16

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Issue of notice u/s 143(2) – Reasons need not be furnished

Bandi Co-operative Labour & Construction Society Vs CIT (P&H) 300 ITR 107

For levying 234 B interest, no need to pass speaking order

CIT Vs Computer Graphics Ltd. (Mad) 285 ITR 84

CIT Vs Vijay Yarn and Textiles P. Ltd. (P&H) 303 ITR 219

Appeal by Department against annulment of assessment – Mere pendency of appeal would not mean pendency of assessment proceedings – Reassessment initiated during pendency of appeal is valid

Ajai Verma (All) 304 ITR 30

Assessment can be made undersec. 153A even if no material found during search

Shivnath Rai Harnarain ( India) Ltd. Vs DCIT (ITAT, Del) 304 ITR (AT) 271

Shyam Lata Kaushik Vs ACIT (ITAT, Del) 114 ITD 305

Huge sums of money advanced to company having substantial interest in Trust – No interest charged nor adequate security taken – violation u/s 13(3) – Denial of exemption upheld

Kanahya Lal Punj Charitable Trust Vs DIT (Exem) ( Del) 297 ITR 66

Trust for providing accommodation in religious places to pesons of a particular community – Not entitled to registration

Shri Dhakad Samaj Dharamshala Bhawan Trust Vs CIT (MP) 302 ITR 321

Addition based on estimate – concealment penalty can be levied

CIT Vs Chandra Vilas Hotel (Guj) 291 ITR 202

Failure to disclose interest received u/s 244A – Penalty upheld

Thirupathy Kumar Khemka Vs CIT (Mad) 291 ITR 122

Depreciation and Investment Allowance claimed in respect of machinery – Machinery not reaching assessee’s premises before close of accounting year – Assessee later withdrawing claim – Penalty upheld

CIT Vs Sree Valliappa Textiles (Kar) 294 ITR 322

Bogus claim of depreciation on non-existing assets – Withdrawal of claim in revised return filed after search – penalty upheld

CRN Investments P. Ltd. Vs CIT (Mad) 300 ITR 342

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Unexplained investment – Deemed to be income for the purpose of levying penalty – If no satisfactory explanation regarding investment, penalty leviable.

Loknath Chowdhary Vs CIT (Cal) 155 ITR 291

Rahmat Development & Engineeing Corporation Vs CIT (Cal) 130 ITR 602

CIT Vs Rattam Singh Grewal (P&H) 304 ITR 75

Admission of assessee during assessment regarding concealment – No independent enquiry to prove concealment necessary in penalty proceedings.

DDIT Vs Chirag Metal Rolling Mills Ltd. (MP) 305 ITR 29.