Hello friends as requested to me i m hereby uploading some of the PCC june papers with there suggested answers (other papers would also be uploaded by 1st week of october)
1.Audit paper (click below to download)
option 1. http://groups.google.co.in/group/ca_taxmannindia/web/audit%20jun2009%20pcc.pdf?hl=en
option 2. http://rapidshare.com/files/284520143/audit_jun2009_pcc.pdf
2.law paper (click below to download)
option 1 http://groups.google.co.in/group/ca_taxmannindia/web/law%202009%20PCC.pdf?hl=en
option 2 http://rapidshare.com/files/284520284/law_2009_PCC.pdf
3.tax paper (click below to download)
option 1. http://groups.google.co.in/group/ca_taxmannindia/web/tax%20jun09%20pcc.pdf?hl=en
option 2. http://rapidshare.com/files/284520451/tax_jun09_pcc.pdf
posted at www.taxmannindia.blogspot.com
Thursday, September 24, 2009
Announcement for panel for outsourcing of work of Technical Scrutiny of Balance Sheets - (23-09-2009)
The Institute has received an Office Memorandum (OM) from the Ministry of Corporate Affairs. As per the OM , the Registrar of Companies will prepare a panel of professionals for Technical Scrutiny of Balance Sheets filled by the Companies for the State concerned.
posted at www.taxmannindia.blogspot.com
The Scheme of outsourcing the work will be for the financial year 2009-10. The details of the Scheme specifying the eligibility criteria, mode of application, Procedure to be followed by the ROC for outsourcing of work, is provided in the Office Memorandum issued by the Ministry.
The Institute of Chartered Accountants of India while appreciating the initiative taken by the Ministry for ensuring good corporate governance and transparency for safeguarding the interest of the shareholders, creditors and the economy as a whole wishes to provide professional expertise of its members to the Registrar of Companies. For the purpose, it has been decided to prepare a panel of the members of the Institute and send the same to the Ministry.
Procedure for Registration for the empanelment:
Members holding Certificate of Practice and intending to empanel themselves in their individual capacity may submit their Empanelment Form by e-mail and also in physical copy at the address mentioned below. After verification, the same will be included in the panel and forwarded to the Ministry of Corporate Affairs.
For any further clarification, the members can contact:
Secretary, Corporate Laws Committee
The Institute of Chartered Accountants of India
ICAI Bhawan, Indraprastha Marg
New Delhi-110002
Tel. No. 011-30110471
posted at www.taxmannindia.blogspot.com
REPRESENTATION MADE FOR EXTENSION OF DUE DATE FOR FILING THE RETURN OF INCOME - (23-09-2009)
Due to the fact that most of the establishments are virtually closed on account of festivals of Durga Pooja, Navratra’s and Dussehra, representations were received from members all over the country posing the difficulties faced by them in preparing and filing the return of income by due date. Hence, ICAI has made a representation to the Chairman, CBDT requesting him to extend the due date for filing the return of income u/s 139 (1) of the Income Tax Act, 1961 suitably.
Further, ICAI has also suggested CBDT to request the Assessing Officers not to fix the cases near to the last date of filing return of income and where the cases are already fixed up the same may be adjourned to some later date. This request has been made since it has been noticed that a large number of cases have been fixed up by the Assessing Officers near to the last date of filing return of income which becomes burdensome for the assessees.
Sources:ICAI
posted at www.taxmannindia.blogspot.com
Further, ICAI has also suggested CBDT to request the Assessing Officers not to fix the cases near to the last date of filing return of income and where the cases are already fixed up the same may be adjourned to some later date. This request has been made since it has been noticed that a large number of cases have been fixed up by the Assessing Officers near to the last date of filing return of income which becomes burdensome for the assessees.
Sources:ICAI
posted at www.taxmannindia.blogspot.com
Notification No. 68, dated 15-9-2009 Section 35(1)(ii) of the Income-tax Act, 1961 - Scientific Research Expenditure - Approved Scientific Research Associations/Institutions
Section 35(1)(ii) of the Income-tax Act, 1961 - Scientific Research Expenditure - Approved Scientific Research Associations/Institutions
Notification No. 68, dated 15-9-2009
It is hereby notified for general information that the organization Sri Aurobindo Society, Kolkata has been approved by the Central Government for the purpose of clause (ii) of sub-section (1) of section 35 of the Income-tax Act, 1961 (said Act), read with Rules 5C and 5E of the Income-tax Rules, 1962 (said Rules), from Assessment year 2009-2010 onwards in the category of 'other Institution', partly engaged in research activities subject to the following conditions, namely:-
(i) The sums paid to the approved organization shall be utilized for scientific research;
(ii) The approved organization shall carry out scientific research through its faculty members or its enrolled students,
(iii) The approved organization shall maintain separate books of accounts in respect of the sums received by it for scientific research, reflect therein the amounts used for carrying out research, get such books audited by an accountant as defined in the explanation to sub-section (2) of section 288 of the said Act and furnish the report of such audit duly signed and verified by such accountant to the Commissioner of Income-tax or the Director of Income-tax having jurisdiction over the case, by the due date of furnishing the return of income under sub-section (1) of section 139 of the said Act;
(iv) The approved organization shall maintain a separate statement of donations received and amounts applied for scientific research and a copy of such statement duly certified by the auditor shall accompany the report of audit referred to above.
2. The Central Government shall withdraw the approval if the approved organization:-
(a) fails to maintain separate books of accounts referred to in sub-paragraph (iii) of paragraph 1; or
(b) fails to furnish its audit report referred to in sub-paragraph (iii) of paragraph 1; or
(c) fails to furnish its statement of the donations received and sums applied for scientific research referred to in sub-paragraph (iv) of paragraph 1; or
(d) ceases to carry on its research activities or its research activities are not found to be genuine; or
(e) ceases to conform to and comply with the provisions of clause (ii) of sub-section (1) of section 35 of the said Act read with rules 5C and 5E of the said Rules.
[F.No. 203/6/2009/ITA-II]
posted at www.taxmannindia.blogspot.com
Notification No. 68, dated 15-9-2009
It is hereby notified for general information that the organization Sri Aurobindo Society, Kolkata has been approved by the Central Government for the purpose of clause (ii) of sub-section (1) of section 35 of the Income-tax Act, 1961 (said Act), read with Rules 5C and 5E of the Income-tax Rules, 1962 (said Rules), from Assessment year 2009-2010 onwards in the category of 'other Institution', partly engaged in research activities subject to the following conditions, namely:-
(i) The sums paid to the approved organization shall be utilized for scientific research;
(ii) The approved organization shall carry out scientific research through its faculty members or its enrolled students,
(iii) The approved organization shall maintain separate books of accounts in respect of the sums received by it for scientific research, reflect therein the amounts used for carrying out research, get such books audited by an accountant as defined in the explanation to sub-section (2) of section 288 of the said Act and furnish the report of such audit duly signed and verified by such accountant to the Commissioner of Income-tax or the Director of Income-tax having jurisdiction over the case, by the due date of furnishing the return of income under sub-section (1) of section 139 of the said Act;
(iv) The approved organization shall maintain a separate statement of donations received and amounts applied for scientific research and a copy of such statement duly certified by the auditor shall accompany the report of audit referred to above.
2. The Central Government shall withdraw the approval if the approved organization:-
(a) fails to maintain separate books of accounts referred to in sub-paragraph (iii) of paragraph 1; or
(b) fails to furnish its audit report referred to in sub-paragraph (iii) of paragraph 1; or
(c) fails to furnish its statement of the donations received and sums applied for scientific research referred to in sub-paragraph (iv) of paragraph 1; or
(d) ceases to carry on its research activities or its research activities are not found to be genuine; or
(e) ceases to conform to and comply with the provisions of clause (ii) of sub-section (1) of section 35 of the said Act read with rules 5C and 5E of the said Rules.
[F.No. 203/6/2009/ITA-II]
posted at www.taxmannindia.blogspot.com
Notification No. 69, dated 15-9-2009 Section 35(1)(ii) of the Income-tax Act, 1961 - Scientific Research Expenditure - Approved Scientific Research Associations/Institutions
Section 35(1)(ii) of the Income-tax Act, 1961 - Scientific Research Expenditure - Approved Scientific Research Associations/Institutions
Notification No. 69, dated 15-9-2009
It is hereby notified for general information that the organization Sastra University, Chennai has been approved by the Central Government for the purpose of clause (ii) of sub-section (1) of section 35 of the Income-tax Act, 1961 (said Act), read with Rules 5C and 5E of the Income-tax Rules, 1962 (said Rules), from Assessment year 2009-2010 onwards in the category of 'other Institution', partly engaged in research activities subject to the following conditions, namely:-
(i) The sums paid to the approved organization shall be utilized for scientific research,
(ii) The approved organization shall carry out scientific research through its faculty members or its enrolled students:
(iii) The approved organization shall maintain separate books of accounts in respect of the sums received by it for scientific research, reflect therein the amounts used for carrying out researcl get such books audited by an accountant as defined in the explanation to sub-section (2) of section 288 of the said Act and furnish the report of such audit duly signed and verified by such accountant to the Commissioner of Income-tax or the Director of Income-tax having jurisdiction over the case, by the due date of furnishing the return of income under sub-section (1) of section of the said Act;
(iv) The approved organization shall maintain a separate statement of donations received and amounts applied for scientific research and a copy of such statement duly certified by the auditor shall accompany the report of audit referred to above
2. The Central Government shall withdraw the approval if the approved organization:-
(a) fails to maintain separate books of accounts referred to in sub-paragraph (iii) of paragraph 1: or
(b) fails to furnish its audit report referred to in sub-paragraph (iii) of paragraph 1; or
(c) fails to furnish its statement of the donations received and sums applied for scientific research referred to in sub-paragraph (iv) of paragraph 1; or
(d) ceases to carry on its research activities or its research activities are not found to be genuine; or
(e) ceases to conform to and comply with the provisions of clause (ii) of sub-section (1) of section 35 of the said Act read with rules 5C and 5E of the said Rules.
[F.No. 203/58/2009/ITA-II]
posted at www.taxmannindia.blogspot.com
Notification No. 69, dated 15-9-2009
It is hereby notified for general information that the organization Sastra University, Chennai has been approved by the Central Government for the purpose of clause (ii) of sub-section (1) of section 35 of the Income-tax Act, 1961 (said Act), read with Rules 5C and 5E of the Income-tax Rules, 1962 (said Rules), from Assessment year 2009-2010 onwards in the category of 'other Institution', partly engaged in research activities subject to the following conditions, namely:-
(i) The sums paid to the approved organization shall be utilized for scientific research,
(ii) The approved organization shall carry out scientific research through its faculty members or its enrolled students:
(iii) The approved organization shall maintain separate books of accounts in respect of the sums received by it for scientific research, reflect therein the amounts used for carrying out researcl get such books audited by an accountant as defined in the explanation to sub-section (2) of section 288 of the said Act and furnish the report of such audit duly signed and verified by such accountant to the Commissioner of Income-tax or the Director of Income-tax having jurisdiction over the case, by the due date of furnishing the return of income under sub-section (1) of section of the said Act;
(iv) The approved organization shall maintain a separate statement of donations received and amounts applied for scientific research and a copy of such statement duly certified by the auditor shall accompany the report of audit referred to above
2. The Central Government shall withdraw the approval if the approved organization:-
(a) fails to maintain separate books of accounts referred to in sub-paragraph (iii) of paragraph 1: or
(b) fails to furnish its audit report referred to in sub-paragraph (iii) of paragraph 1; or
(c) fails to furnish its statement of the donations received and sums applied for scientific research referred to in sub-paragraph (iv) of paragraph 1; or
(d) ceases to carry on its research activities or its research activities are not found to be genuine; or
(e) ceases to conform to and comply with the provisions of clause (ii) of sub-section (1) of section 35 of the said Act read with rules 5C and 5E of the said Rules.
[F.No. 203/58/2009/ITA-II]
posted at www.taxmannindia.blogspot.com
HIGH COURT OF PUNJAB AND HARYANA Charge of Wealth-tax and assets subject to such charge
Charge of Wealth-tax and assets subject to such charge
The land which falls within the exception of ‘urban land’ would have to be excluded from the ambit and scope of expression ‘urban land’ and, such land would not be covered by the expression ‘assets’ as defined in section 2(ea) of the Wealth-tax Act, 1957; consequently, such land would not be treated as net wealth of an assessee for the purposes of provisions of the Act.
HIGH COURT OF PUNJAB AND HARYANA
Amrit Lal Jindal & Sons (HUF)
v.
ITO
WTA No. 12 of 2009 (O&M)
September 15, 2009
RELEVANT EXTRACTS:
** ** ** ** ** ** ** ** ** ** ** **
9. In the backdrop of the aforementioned factual matrix, the assessee-appellant has filed the instant appeals raising the following substantial questions of law for determination of this Court:-
“(i)Whether on the facts and circumstances of the case, the Ld. ITAT has erred in law in modifying its earlier order Annexure A-5 by passing orders Annexure A-11 and A- 12,when the matter relating to date of acquisition of property measuring 78 Kanal 1 Marla and the date on which the Right to receive compensation accrued to the assessee, was a debatable issue? (ii)Whether on the facts and circumstances of the case, the acquisition proceedings in the present case were initiated on 15.7.1992 when the Resolution was passed by Improvement Trust and alternatively on 22.7.1994, 29.7.1994 or 5.8.1994,when the Notifications as such were published in the Official Gazette of Punjab Govt.? Therefore, the Ld. ITAT has erred in law to hold that the proceedings of acquisition were initiated in 1997.
(iii)Whether on the facts and circumstances of the case, the right to receive compensation is vested in the owner of the property on the date of passing of the Resolution by Improvement Trust or its vests on the date of notification in the Official Gazette or on the date when the property is actually acquired?
(iv) Whether on the facts and circumstances of the case, the Ld. ITAT has erred in law in upholding the order of the lower authorities, whereby the entire chunk of land measuring 106 Kanal 15 Marla was included in the urban land as defined in Section 2(ea)of the Act ibid, when no construction activity was possible on the land under the provisions of local Acts of Punjab as in force during those assessment years and also after the passing of the Resolution by the Improvement Trust before 31.3.1993?
(v)Whether the Ld. ITAT has erred in law in accepting the application for rectification filed by the Department that land measuring 78 Kanal 1 Marla was includible in the net wealth of the assessee, when the Department has not challenged the finding of the 1 st Appellate Authority to the extent that it was only a right to receive compensation as no construction activity was possible on that land during the impugned assessment year.
13. It would first be appropriate to answer question Nos.(ii),(iii) and (iv)first because all the questions are inter-connected. Accordingly, we proceed to answer these questions jointly. One of significant issue which permeate all the questions is the date on which the assessee became disentitled to raise construction on the acquired land by virtue of acquisition of land by Improvement Trust, Sangrur .Would it be the date when the Trust has passed the resolution for framing the scheme or the date when declaration is made under Section 36 of the 1922 Act (which is equivalent to Section 4 of the Land Acquisition Act,1894).The answer to the aforesaid question would depend upon the possibility of the assessee to raise construction by erecting or re-erecting the building. In that regard it would be necessary to read the provisions of the 1922 Act. Chapter IV of the 1922 Act, from Sections 22 to 24 deals with various types of Schemes and the matter which are required to be provided for, mode and manner of framing of the scheme leading to the sanctioning of the same by the Government under Section 42. If any of the schemes as contemplated by Sections 23,24,25,26,27 and 28 is framed then the owner of the land is covered by the Scheme and could be refused permission to raise construction by virtue of the provisions made in Section 31 of the 1922 Act,which reads thus:
“31.Prohibiting of building beyond a street alignment.-
(1) In the locality comprised in a scheme under this Act, no person, shall, except with the written permission of the Trust, erect , reerect, add to or alter any building so as to make the same project beyond a street alignment or building line duly prescribed by the Trust.
(2)In the locality comprised in a development scheme or an expansion scheme, if any person desires to erect, re-erect, add to or alter any building on his land so as to make the same project beyond a street alignment or a building line duly prescribed by the Trust, he shall apply to the Trust for permission to do so, and if the Trust refuses to grant permission to such person according to his application, and does not proceed to acquire such land within one year from the date of such refusal, it shall pay reasonable compensation to such person for any damage or loss sustained by him in consequence of such refusal.”
14 .A perusal of the aforesaid section shows that there is express prohibition of building. According to sub-section (1)of Section 31 of the 1922 Act in the locality comprised in a scheme framed under this Act no person is permitted to erect and re-erect, add to or alter any building so as to make the same project beyond a street alignment or building line duly prescribed by the trust. According to sub-section (2)of Section 31 of the 1922 Act in the locality comprised in a development scheme or an expansion scheme, if any person keen to erect, re-erect, add to or alter any building on his land so as to make the same project beyond a street alignment or a building line duly prescribed by the Trust then he has to obtain specific permission from the Trust. The definitions of ‘street ’,‘alignment ’ and ‘building alignment ’ are available in Section 2(3)&(4)of the 1922 Act. It is matter of common knowledge that when an Improvement Trust frames a scheme as contemplated by various sections to which reference has been made in the preceding paras then intimation in that regard is sent to the other local bodies including the Municipal Committee, Municipal Corporation and Notified Area Committee. Such local bodies are debarred from sanctioning a site plan in respect of the area covered by the scheme . Accordingly it follows that erection, re-erection addition or alteration of any building on the land by the owner is prohibited as no person is entitled to erect or re-erect, add to or alter any building so as to allow the same project beyond a street alignment or building line prescribed by the Trust. It is Improvement Trust alone which could exercise power in respect of area covered by the Scheme. If the owner is permitted to raise construction beyond building line prescribed by the Trust then it would simply interfere with the scheme prepared by the Trust. Therefore it has to be concluded that the provisions come into force when the resolution by the Trust is passed. It is also well known that no site plan is ever sanctioned by the Trust if the land is under a Scheme. The declaration made under Section 36 of the 1922 Act may come much later. What calls for our specific notice in this regard is the peculiar provision which is distinct from the provisions of the Land Acquisition Act,1894. Sections 22 to 24 of the 1922 Act deals with the framing, processing and sanctioning of various schemes such as improvement, land building, development, extension and housing accommodation scheme etc. The provisions made in Sections 22 to 35 of the 1922 Act have nothing to do with the acquisition of the land till the notification is issued under Section 36 of the 1922 Act. After the scheme is framed by the Trust the same is forwarded to the Government for according sanction by following the procedure as per the provisions of Sections 36,38 and 42 of the 1922 Act. It is well settled that no agency of State including the Trust has power to acquire the land. The power of acquisition vests with the Government although the land is acquired for the purposes of scheme framed by the Trust. In that regard reliance may be placed on the judgment of Hon’ble the Supreme Court rendered in the case of Nagpur Improvement Trust v.Vithal Rao,AIR 1973 SC 689 .Therefore it is evident from the peculiar provisions of Sections 22 to 35 of the 1922 Act that the right of the owner to erect or re-erect add to or alter any building is clogged by prohibition.
16 .In view of the aforesaid discussion it is established that the date of resolution for framing the scheme would be the relevant date which in the present case is 15.7.1992.
Re:Question Nos.(i)and (v)
17.The question then is whether the property under the scheme since 15.7.1992 would be exigible to wealth-tax. The answer lies in Sections 2 and 3.Chapter II of the Act is titled as ‘Charge of Wealth-tax and assets subject to such charge ’ .In the present case, we are concerned with assessment years 1993-94,1994-95 and 1995-96.Section 3(2)of the Act is the charging section which provides that subject to other provisions of the Act, wealth-tax has to be charged for every assessment year commencing on and from April 1,1993 in respect of the net wealth on the corresponding valuation date of every individual HUF and company at the rate of one per cent of the amount by which the net wealth exceeds 15 lacs rupees. Section 2(e)of the Act defines the expression ‘assets ’ ,which includes property of every description, movable or immovable but does not include what is specifically excluded in that definition. Section 2(ea)of the Act defines ‘assets’ in relation to the assessment year commencing from April 1,1993 and/or subsequent assessment years. The ‘urban land ’ is included in the definition of ‘assets’ .However, clause (b)of the explanation to Section 2 (ea)of the Act elaborates what is ‘urban land ’ and which landed property is not to be included and covered by that expression. It would be necessary to read the aforesaid provisions, which reads thus:
“2(ea)“assets ” ,in relation to the assessment year commencing on the 1 st day of April,1993,or any subsequent assessment year, means-
(i)to (iv)xxx xxx xxx
(v)urban land;
(vi)xxx xxx xxx
Explanation 1.-For the purposes of this clause,-
(a)xxx xxx xxx
(b)“urban land ” means land situate-
(i)in any area which is comprised within the jurisdiction of a municipality (whether known as a municipality, municipal corporation, notified area committee, town area committee, town committee, or by any other name)or a cantonment board and which has a population of not less than ten thousand according to the last preceding census of which the relevant figures have been published before the valuation date; or (ii)in any area within such distance, not being more than eight kilometers from the local limits of any municipality or cantonment board referred to in sub-clause (i),as the Central Government may, having regard to the extent of, and scope for, urbanisation of that area and other relevant considerations, specify in this behalf by notification in the Official Gazette, but does not include land on which construction of a building is not permissible under any law for the time being in force in the area in which such land is situated or the land occupied by any building which has been constructed with the approval of the appropriate authority or any unused land held by the asses see for industrial purposes for a period of two years from the date of its acquisition by him or any land held by the assessee as stock-in-trade for a period of three years from the date of its acquisition by him;” (emphasis added)
18.The aforesaid provision in italics were added by the Finance Act,1993 and was made applicable from April 1,1993.As already noticed, the relevant assessment years in the present case are 1993-94,1994-95 and 1995-96.On a bare reading of the aforesaid provisions it becomes evident that the definition of ‘urban land ’ does not envelop that land on which construction of a building is not permissible under any law for the time being in force in the area where the land is situated or the land occupied by any building which has been constructed with the approval of the appropriate authority or to any unused land held by an assessee for an industrial purpose for a period of two years from the date of application. The assessee in the present proceedings has claimed the benefit of the provisions to the extent that the land cannot be regarded as ‘urban land ’ because no construction was permissible on the land in question at the relevant time relating to the assessment years 1993-94 and onward .Accordingly, the land which falls within the exception would have to be excluded from the ambit and scope of expression ‘urban land ’ and, therefore, such land would not be covered by the expression ‘assets ’ as defined in Section 2(ea)of the Act .As a result of the aforesaid bare provision that such land would not be treated as net-wealth of an assessee for the purposes of provisions of the Act. In some- what similar circumstances a Division Bench of Delhi High Court in the case of Commissioner of Wealth-tax v. D.C.M. Ltd.,[2007 ]290 ITR 615 (Delhi),has taken the view that once no construction is permissible in law then such land would not be ‘urban land ’ .Therefore, it would not be included in the expression ‘assets’. Accordingly, it has been held that such land would not be exigible to wealth-tax.
19 .The aforesaid discussion makes it clear that once the land could not be covered by definition of expression ‘assets ’ then it would not be exigible under the Act. The question then is whether the Tribunal has validly exercised the power of rectification under Section 35(e)of the Act. The opening words in Section 35(1)of the Act are ‘With a view to rectifying any mistake apparent from the record ’.Similar expression has been used in Section 154 of the Income-tax Act,1961.The aforesaid provision came up for consideration before Hon’ble the Supreme Court in the well known case of T.S.Balaram v. M/s Volkart Brothers,AIR 1971 SC 2204 .In the concluding para 8 of the judgment their Lordships ’ have observed as under:-
“8.From what has been said above,it is clear that the question whether S.17 (i)of the Indian Income-tax Act,1922 was applicable to the case of the first respondent is not free from doubt. Therefore the Income-tax Officer was not justified in thinking that on that question there can be no two opinions. It was not open to the Income-tax Officer to go into the true scope of the relevant provisions of the Act in a proceeding under section 154 of the Income-tax Act,1961.A mistake apparent on the record must be an obvious and patent mistake and not something which can be established by a long drawn process of reasoning on points on which there may conceivably be two opinions. As seen earlier, the High Court of Bombay opined that the original assessments were in accordance with law though in our opinion the High Court was not justified in going into that question. In Satyanarayan Laxminarayan Hegde v. Mallikarjun Bhavanappa Tirumale,(1960)1 S.C.R.890=(AIR 1960 S.C.137)this Court while spelling out the scope of the power of a High Court under Art.226 of the Constitution ruled that an error which has to be established by a long drawn process of reasoning on points where there may conceivably be two opinions cannot be said to be an error apparent on the face of the record. A decision on a debatable point of law is not a mistake apparent from the record-see Sidhramappa v. Commr. of Income-tax, Bombay, (1952)21 ITR 333 =(AIR 1952 Bom 287).The power of the officers mentioned in S.154 of the Income-tax Act,1961 to correct "any mistake apparent from the record "is undoubtedly not more than that of the High Court to entertain a writ petition on the basis of an "error apparent on the face of the record". In this case it is not necessary for us to spell out the distinction between the expressions "error apparent on the face of the record" and "mistake apparent from the record". But suffice it to say that the Income-tax Officer was wholly wrong in holding that there was a mistake apparent from the record of the assessments of the first respondent.”
** ** ** ** ** ** ** ** ** ** ** **
posted at www.taxmannindia.blogspot.com
The land which falls within the exception of ‘urban land’ would have to be excluded from the ambit and scope of expression ‘urban land’ and, such land would not be covered by the expression ‘assets’ as defined in section 2(ea) of the Wealth-tax Act, 1957; consequently, such land would not be treated as net wealth of an assessee for the purposes of provisions of the Act.
HIGH COURT OF PUNJAB AND HARYANA
Amrit Lal Jindal & Sons (HUF)
v.
ITO
WTA No. 12 of 2009 (O&M)
September 15, 2009
RELEVANT EXTRACTS:
** ** ** ** ** ** ** ** ** ** ** **
9. In the backdrop of the aforementioned factual matrix, the assessee-appellant has filed the instant appeals raising the following substantial questions of law for determination of this Court:-
“(i)Whether on the facts and circumstances of the case, the Ld. ITAT has erred in law in modifying its earlier order Annexure A-5 by passing orders Annexure A-11 and A- 12,when the matter relating to date of acquisition of property measuring 78 Kanal 1 Marla and the date on which the Right to receive compensation accrued to the assessee, was a debatable issue? (ii)Whether on the facts and circumstances of the case, the acquisition proceedings in the present case were initiated on 15.7.1992 when the Resolution was passed by Improvement Trust and alternatively on 22.7.1994, 29.7.1994 or 5.8.1994,when the Notifications as such were published in the Official Gazette of Punjab Govt.? Therefore, the Ld. ITAT has erred in law to hold that the proceedings of acquisition were initiated in 1997.
(iii)Whether on the facts and circumstances of the case, the right to receive compensation is vested in the owner of the property on the date of passing of the Resolution by Improvement Trust or its vests on the date of notification in the Official Gazette or on the date when the property is actually acquired?
(iv) Whether on the facts and circumstances of the case, the Ld. ITAT has erred in law in upholding the order of the lower authorities, whereby the entire chunk of land measuring 106 Kanal 15 Marla was included in the urban land as defined in Section 2(ea)of the Act ibid, when no construction activity was possible on the land under the provisions of local Acts of Punjab as in force during those assessment years and also after the passing of the Resolution by the Improvement Trust before 31.3.1993?
(v)Whether the Ld. ITAT has erred in law in accepting the application for rectification filed by the Department that land measuring 78 Kanal 1 Marla was includible in the net wealth of the assessee, when the Department has not challenged the finding of the 1 st Appellate Authority to the extent that it was only a right to receive compensation as no construction activity was possible on that land during the impugned assessment year.
13. It would first be appropriate to answer question Nos.(ii),(iii) and (iv)first because all the questions are inter-connected. Accordingly, we proceed to answer these questions jointly. One of significant issue which permeate all the questions is the date on which the assessee became disentitled to raise construction on the acquired land by virtue of acquisition of land by Improvement Trust, Sangrur .Would it be the date when the Trust has passed the resolution for framing the scheme or the date when declaration is made under Section 36 of the 1922 Act (which is equivalent to Section 4 of the Land Acquisition Act,1894).The answer to the aforesaid question would depend upon the possibility of the assessee to raise construction by erecting or re-erecting the building. In that regard it would be necessary to read the provisions of the 1922 Act. Chapter IV of the 1922 Act, from Sections 22 to 24 deals with various types of Schemes and the matter which are required to be provided for, mode and manner of framing of the scheme leading to the sanctioning of the same by the Government under Section 42. If any of the schemes as contemplated by Sections 23,24,25,26,27 and 28 is framed then the owner of the land is covered by the Scheme and could be refused permission to raise construction by virtue of the provisions made in Section 31 of the 1922 Act,which reads thus:
“31.Prohibiting of building beyond a street alignment.-
(1) In the locality comprised in a scheme under this Act, no person, shall, except with the written permission of the Trust, erect , reerect, add to or alter any building so as to make the same project beyond a street alignment or building line duly prescribed by the Trust.
(2)In the locality comprised in a development scheme or an expansion scheme, if any person desires to erect, re-erect, add to or alter any building on his land so as to make the same project beyond a street alignment or a building line duly prescribed by the Trust, he shall apply to the Trust for permission to do so, and if the Trust refuses to grant permission to such person according to his application, and does not proceed to acquire such land within one year from the date of such refusal, it shall pay reasonable compensation to such person for any damage or loss sustained by him in consequence of such refusal.”
14 .A perusal of the aforesaid section shows that there is express prohibition of building. According to sub-section (1)of Section 31 of the 1922 Act in the locality comprised in a scheme framed under this Act no person is permitted to erect and re-erect, add to or alter any building so as to make the same project beyond a street alignment or building line duly prescribed by the trust. According to sub-section (2)of Section 31 of the 1922 Act in the locality comprised in a development scheme or an expansion scheme, if any person keen to erect, re-erect, add to or alter any building on his land so as to make the same project beyond a street alignment or a building line duly prescribed by the Trust then he has to obtain specific permission from the Trust. The definitions of ‘street ’,‘alignment ’ and ‘building alignment ’ are available in Section 2(3)&(4)of the 1922 Act. It is matter of common knowledge that when an Improvement Trust frames a scheme as contemplated by various sections to which reference has been made in the preceding paras then intimation in that regard is sent to the other local bodies including the Municipal Committee, Municipal Corporation and Notified Area Committee. Such local bodies are debarred from sanctioning a site plan in respect of the area covered by the scheme . Accordingly it follows that erection, re-erection addition or alteration of any building on the land by the owner is prohibited as no person is entitled to erect or re-erect, add to or alter any building so as to allow the same project beyond a street alignment or building line prescribed by the Trust. It is Improvement Trust alone which could exercise power in respect of area covered by the Scheme. If the owner is permitted to raise construction beyond building line prescribed by the Trust then it would simply interfere with the scheme prepared by the Trust. Therefore it has to be concluded that the provisions come into force when the resolution by the Trust is passed. It is also well known that no site plan is ever sanctioned by the Trust if the land is under a Scheme. The declaration made under Section 36 of the 1922 Act may come much later. What calls for our specific notice in this regard is the peculiar provision which is distinct from the provisions of the Land Acquisition Act,1894. Sections 22 to 24 of the 1922 Act deals with the framing, processing and sanctioning of various schemes such as improvement, land building, development, extension and housing accommodation scheme etc. The provisions made in Sections 22 to 35 of the 1922 Act have nothing to do with the acquisition of the land till the notification is issued under Section 36 of the 1922 Act. After the scheme is framed by the Trust the same is forwarded to the Government for according sanction by following the procedure as per the provisions of Sections 36,38 and 42 of the 1922 Act. It is well settled that no agency of State including the Trust has power to acquire the land. The power of acquisition vests with the Government although the land is acquired for the purposes of scheme framed by the Trust. In that regard reliance may be placed on the judgment of Hon’ble the Supreme Court rendered in the case of Nagpur Improvement Trust v.Vithal Rao,AIR 1973 SC 689 .Therefore it is evident from the peculiar provisions of Sections 22 to 35 of the 1922 Act that the right of the owner to erect or re-erect add to or alter any building is clogged by prohibition.
16 .In view of the aforesaid discussion it is established that the date of resolution for framing the scheme would be the relevant date which in the present case is 15.7.1992.
Re:Question Nos.(i)and (v)
17.The question then is whether the property under the scheme since 15.7.1992 would be exigible to wealth-tax. The answer lies in Sections 2 and 3.Chapter II of the Act is titled as ‘Charge of Wealth-tax and assets subject to such charge ’ .In the present case, we are concerned with assessment years 1993-94,1994-95 and 1995-96.Section 3(2)of the Act is the charging section which provides that subject to other provisions of the Act, wealth-tax has to be charged for every assessment year commencing on and from April 1,1993 in respect of the net wealth on the corresponding valuation date of every individual HUF and company at the rate of one per cent of the amount by which the net wealth exceeds 15 lacs rupees. Section 2(e)of the Act defines the expression ‘assets ’ ,which includes property of every description, movable or immovable but does not include what is specifically excluded in that definition. Section 2(ea)of the Act defines ‘assets’ in relation to the assessment year commencing from April 1,1993 and/or subsequent assessment years. The ‘urban land ’ is included in the definition of ‘assets’ .However, clause (b)of the explanation to Section 2 (ea)of the Act elaborates what is ‘urban land ’ and which landed property is not to be included and covered by that expression. It would be necessary to read the aforesaid provisions, which reads thus:
“2(ea)“assets ” ,in relation to the assessment year commencing on the 1 st day of April,1993,or any subsequent assessment year, means-
(i)to (iv)xxx xxx xxx
(v)urban land;
(vi)xxx xxx xxx
Explanation 1.-For the purposes of this clause,-
(a)xxx xxx xxx
(b)“urban land ” means land situate-
(i)in any area which is comprised within the jurisdiction of a municipality (whether known as a municipality, municipal corporation, notified area committee, town area committee, town committee, or by any other name)or a cantonment board and which has a population of not less than ten thousand according to the last preceding census of which the relevant figures have been published before the valuation date; or (ii)in any area within such distance, not being more than eight kilometers from the local limits of any municipality or cantonment board referred to in sub-clause (i),as the Central Government may, having regard to the extent of, and scope for, urbanisation of that area and other relevant considerations, specify in this behalf by notification in the Official Gazette, but does not include land on which construction of a building is not permissible under any law for the time being in force in the area in which such land is situated or the land occupied by any building which has been constructed with the approval of the appropriate authority or any unused land held by the asses see for industrial purposes for a period of two years from the date of its acquisition by him or any land held by the assessee as stock-in-trade for a period of three years from the date of its acquisition by him;” (emphasis added)
18.The aforesaid provision in italics were added by the Finance Act,1993 and was made applicable from April 1,1993.As already noticed, the relevant assessment years in the present case are 1993-94,1994-95 and 1995-96.On a bare reading of the aforesaid provisions it becomes evident that the definition of ‘urban land ’ does not envelop that land on which construction of a building is not permissible under any law for the time being in force in the area where the land is situated or the land occupied by any building which has been constructed with the approval of the appropriate authority or to any unused land held by an assessee for an industrial purpose for a period of two years from the date of application. The assessee in the present proceedings has claimed the benefit of the provisions to the extent that the land cannot be regarded as ‘urban land ’ because no construction was permissible on the land in question at the relevant time relating to the assessment years 1993-94 and onward .Accordingly, the land which falls within the exception would have to be excluded from the ambit and scope of expression ‘urban land ’ and, therefore, such land would not be covered by the expression ‘assets ’ as defined in Section 2(ea)of the Act .As a result of the aforesaid bare provision that such land would not be treated as net-wealth of an assessee for the purposes of provisions of the Act. In some- what similar circumstances a Division Bench of Delhi High Court in the case of Commissioner of Wealth-tax v. D.C.M. Ltd.,[2007 ]290 ITR 615 (Delhi),has taken the view that once no construction is permissible in law then such land would not be ‘urban land ’ .Therefore, it would not be included in the expression ‘assets’. Accordingly, it has been held that such land would not be exigible to wealth-tax.
19 .The aforesaid discussion makes it clear that once the land could not be covered by definition of expression ‘assets ’ then it would not be exigible under the Act. The question then is whether the Tribunal has validly exercised the power of rectification under Section 35(e)of the Act. The opening words in Section 35(1)of the Act are ‘With a view to rectifying any mistake apparent from the record ’.Similar expression has been used in Section 154 of the Income-tax Act,1961.The aforesaid provision came up for consideration before Hon’ble the Supreme Court in the well known case of T.S.Balaram v. M/s Volkart Brothers,AIR 1971 SC 2204 .In the concluding para 8 of the judgment their Lordships ’ have observed as under:-
“8.From what has been said above,it is clear that the question whether S.17 (i)of the Indian Income-tax Act,1922 was applicable to the case of the first respondent is not free from doubt. Therefore the Income-tax Officer was not justified in thinking that on that question there can be no two opinions. It was not open to the Income-tax Officer to go into the true scope of the relevant provisions of the Act in a proceeding under section 154 of the Income-tax Act,1961.A mistake apparent on the record must be an obvious and patent mistake and not something which can be established by a long drawn process of reasoning on points on which there may conceivably be two opinions. As seen earlier, the High Court of Bombay opined that the original assessments were in accordance with law though in our opinion the High Court was not justified in going into that question. In Satyanarayan Laxminarayan Hegde v. Mallikarjun Bhavanappa Tirumale,(1960)1 S.C.R.890=(AIR 1960 S.C.137)this Court while spelling out the scope of the power of a High Court under Art.226 of the Constitution ruled that an error which has to be established by a long drawn process of reasoning on points where there may conceivably be two opinions cannot be said to be an error apparent on the face of the record. A decision on a debatable point of law is not a mistake apparent from the record-see Sidhramappa v. Commr. of Income-tax, Bombay, (1952)21 ITR 333 =(AIR 1952 Bom 287).The power of the officers mentioned in S.154 of the Income-tax Act,1961 to correct "any mistake apparent from the record "is undoubtedly not more than that of the High Court to entertain a writ petition on the basis of an "error apparent on the face of the record". In this case it is not necessary for us to spell out the distinction between the expressions "error apparent on the face of the record" and "mistake apparent from the record". But suffice it to say that the Income-tax Officer was wholly wrong in holding that there was a mistake apparent from the record of the assessments of the first respondent.”
** ** ** ** ** ** ** ** ** ** ** **
posted at www.taxmannindia.blogspot.com
ITAT, AGRA BENCH Sustainability of addition merely made on basis of presumption
Sustainability of addition merely made on basis of presumption
Mere possession of currency notes with the assessee cannot prove that payments were actually made by him particularly in the circumstances when he is claiming otherwise and to substantiate such claim the evidence is produced.
ITAT, AGRA BENCH (THIRD MEMBER) AGRA
Prakash Motwani
v.
ITO
ITA NO. 48/Agr./2005
June 11, 2009
RELEVANT EXTRACTS:
** ** ** ** ** ** ** ** ** ** ** **
1. There being difference of opinion between the Members, the following questions were referred for the opinion of the Third Member:-
1. Whether, in the given facts and circumstances of the case, addition of Rs. 2,95,000/- on account of alleged undisclosed advance is justified or not ?
2. Whether, in the given facts and circumstances of the case, addition of Rs. 1,00,000/- for alleged unexplained stock found during the survey is justified or not?
3. Whether, since learned JM has admitted the quantum addition, the corresponding penalty levied u/s 271(1)(c) is to be cancelled/ deleted, or in view of the finding of the Ld. AM, the same has to be kept in abeyance?”
17. I have carefully considered the rival submissions in the light fothe material placed before us. No doubt that the possession of three currency notes with the assessee has raised a presumption that the amount stated on those currency notes was paid by the assessee to the said Shri Shankar Lai. However, the same was a rebuttable presumption. The assessee has explained that these payments were made by the assessee subsequent to the date of survey i.e.., on 17th September, 2002, 28th September, 2002 and 30th September, 2002. The source of the said payments have been explained by the availability of cash in the books of account upon realization of sale value of closing stock. To corroborate such explanation the assessee has submitted the books of account. If there was any doubt regarding production of books of account before the Assessing Officer during the course of assessment proceedings, the said doubt has been removed by the assessee as during the course of remand proceedings the books were produced before the A.O. To corroborate the explanation the assessee has further produced Shri Shankar Lai twice who has confirmed to have received those payments as per version of the assessee. No concrete material has been brought on record by the revenue to suggest that the explanation of the assessee and the statement of Shri Shankar Lai was incorrect. It has not been brought on record that what was claimed to be paid by the assessee on subsequent dates were actually not paid on those dates. Mere possession of currency notes with the assessee cannot prove that payments were actually made by the assessee particularly in the circumstances when the assessee is claiming otherwise and to substantiate such claim the evidence is produced.
18. In these circumstances, I am of the opinion that the Assessing Officer had made the addition of Rs.2,95,000/- to the income of the assessee simply on the basis of presumptions by discarding the evidence produced by the assessee in the shape of books of account and also by producing Shri Shankar Lai before the A.O. for his examination. Similarly, the CIT (A) has upheld the addition simply on the basis of presumptions. I am in agreement with the findings of Ld. Judicial Member that the addition has been upheld by simply on the basis of presumption and assessee has been able to establish that payments were made subsequently from the date of survey. Therefore, Ld. Judicial Member is right in holding that such addition could not be made to the income of the assessee.
19. Now, coming to the second addition, i.e., the addition of Rs.1 lac, I have carefully gone through the relevant portion of remand report of the A.O. which has been reproduced in the order of the CIT (A) in para 6.2. It is observed by the A.O. that the assessee has filed the quantitative chart of stock which contained the name of the item, its quantity, MRP rate, value in rupees, purchase rates and sale price, the page number of the cash book on which it is entered, purchase voucher no. and date and sale memo No. and date. The A.O. has reconciled such stock which, according to him, tallied with the vouchers found except few items which are for a consolidated sum of Rs.21,334/-. It is further reiterated by the A.O. that MRP and the cost value varies in between 18 to 33%. If it is a verified fact by the A.O. that the MRP and the cost value is generally varying between 18 to 33%, then 25% as variable cannot be considered to be incorrect. Therefore, after hearing both the parties and after considering both the orders of Ld. Judicial Member and Ld. Accountant Member, I am of the opinion that 25% variable should be adopted. Therefore, Ld. Judicial Member was right in holding that the Assessing Authority should compute the closing stock of the assessee on the basis of 25% variable.
20. On the third question, which relates to levy of penalty u/s 271(1)(c), I observe that the said issue cannot be decided unless the decision on addition is taken. Now, the fate of additions has to be decided in accordance with my above order and it will be in the interest of justice if the parties are given opportunity to argue this issue after the finalization of the quantum. Therefore, I am of the opinion that the issue of levy of penalty can be decided by the Division Bench after giving effect to this order with regard to quantum proceedings. The Division Bench, if it thinks proper can dispose of penalty appeal by giving hearing to the parties on the date when the effect is, given to this order with regard to quantum proceedings. With these observations I answer to the third question in the manner aforesaid.
** ** ** ** ** ** ** ** ** ** ** **
posted at www.taxmannindia.blogspot.com
Mere possession of currency notes with the assessee cannot prove that payments were actually made by him particularly in the circumstances when he is claiming otherwise and to substantiate such claim the evidence is produced.
ITAT, AGRA BENCH (THIRD MEMBER) AGRA
Prakash Motwani
v.
ITO
ITA NO. 48/Agr./2005
June 11, 2009
RELEVANT EXTRACTS:
** ** ** ** ** ** ** ** ** ** ** **
1. There being difference of opinion between the Members, the following questions were referred for the opinion of the Third Member:-
1. Whether, in the given facts and circumstances of the case, addition of Rs. 2,95,000/- on account of alleged undisclosed advance is justified or not ?
2. Whether, in the given facts and circumstances of the case, addition of Rs. 1,00,000/- for alleged unexplained stock found during the survey is justified or not?
3. Whether, since learned JM has admitted the quantum addition, the corresponding penalty levied u/s 271(1)(c) is to be cancelled/ deleted, or in view of the finding of the Ld. AM, the same has to be kept in abeyance?”
17. I have carefully considered the rival submissions in the light fothe material placed before us. No doubt that the possession of three currency notes with the assessee has raised a presumption that the amount stated on those currency notes was paid by the assessee to the said Shri Shankar Lai. However, the same was a rebuttable presumption. The assessee has explained that these payments were made by the assessee subsequent to the date of survey i.e.., on 17th September, 2002, 28th September, 2002 and 30th September, 2002. The source of the said payments have been explained by the availability of cash in the books of account upon realization of sale value of closing stock. To corroborate such explanation the assessee has submitted the books of account. If there was any doubt regarding production of books of account before the Assessing Officer during the course of assessment proceedings, the said doubt has been removed by the assessee as during the course of remand proceedings the books were produced before the A.O. To corroborate the explanation the assessee has further produced Shri Shankar Lai twice who has confirmed to have received those payments as per version of the assessee. No concrete material has been brought on record by the revenue to suggest that the explanation of the assessee and the statement of Shri Shankar Lai was incorrect. It has not been brought on record that what was claimed to be paid by the assessee on subsequent dates were actually not paid on those dates. Mere possession of currency notes with the assessee cannot prove that payments were actually made by the assessee particularly in the circumstances when the assessee is claiming otherwise and to substantiate such claim the evidence is produced.
18. In these circumstances, I am of the opinion that the Assessing Officer had made the addition of Rs.2,95,000/- to the income of the assessee simply on the basis of presumptions by discarding the evidence produced by the assessee in the shape of books of account and also by producing Shri Shankar Lai before the A.O. for his examination. Similarly, the CIT (A) has upheld the addition simply on the basis of presumptions. I am in agreement with the findings of Ld. Judicial Member that the addition has been upheld by simply on the basis of presumption and assessee has been able to establish that payments were made subsequently from the date of survey. Therefore, Ld. Judicial Member is right in holding that such addition could not be made to the income of the assessee.
19. Now, coming to the second addition, i.e., the addition of Rs.1 lac, I have carefully gone through the relevant portion of remand report of the A.O. which has been reproduced in the order of the CIT (A) in para 6.2. It is observed by the A.O. that the assessee has filed the quantitative chart of stock which contained the name of the item, its quantity, MRP rate, value in rupees, purchase rates and sale price, the page number of the cash book on which it is entered, purchase voucher no. and date and sale memo No. and date. The A.O. has reconciled such stock which, according to him, tallied with the vouchers found except few items which are for a consolidated sum of Rs.21,334/-. It is further reiterated by the A.O. that MRP and the cost value varies in between 18 to 33%. If it is a verified fact by the A.O. that the MRP and the cost value is generally varying between 18 to 33%, then 25% as variable cannot be considered to be incorrect. Therefore, after hearing both the parties and after considering both the orders of Ld. Judicial Member and Ld. Accountant Member, I am of the opinion that 25% variable should be adopted. Therefore, Ld. Judicial Member was right in holding that the Assessing Authority should compute the closing stock of the assessee on the basis of 25% variable.
20. On the third question, which relates to levy of penalty u/s 271(1)(c), I observe that the said issue cannot be decided unless the decision on addition is taken. Now, the fate of additions has to be decided in accordance with my above order and it will be in the interest of justice if the parties are given opportunity to argue this issue after the finalization of the quantum. Therefore, I am of the opinion that the issue of levy of penalty can be decided by the Division Bench after giving effect to this order with regard to quantum proceedings. The Division Bench, if it thinks proper can dispose of penalty appeal by giving hearing to the parties on the date when the effect is, given to this order with regard to quantum proceedings. With these observations I answer to the third question in the manner aforesaid.
** ** ** ** ** ** ** ** ** ** ** **
posted at www.taxmannindia.blogspot.com
ITAT, AGRA BENCH Requirement of section 68 of IT Act, 1961 to prove identity, creditworthiness and genuineness of cash credits
Requirement of section 68 of IT Act, 1961 to prove identity, creditworthiness and genuineness of cash credits
When the particulars regarding income-tax assessments and bank account of creditors have been filed then initial burden has to be held to be discharged by the assessee and then the burden shifts on the Revenue to show that what is stated or explained by the assessee is not satisfactory.
ITAT, AGRA BENCH (THIRD MEMBER) AGRA
Kalyan Memorial & Charitable Trust
v.
ACIT
ITA NO. 233/Agr./2006
May 20, 2009
RELEVANT EXTRACTS:
** ** ** ** ** ** ** ** ** ** ** **
17. I have carefully considered the rival submissions. I have also carefully gone through the orders of learned Judicial Member and Accountant Member and also the impugned assessment order & order of CIT (A). So far as it relates to the evidences submitted by the assessee to prove the cash credits, there is no dispute that the same were placed on record. The evidences, as discussed above, are in the shape of confirmations, copies of bank accounts, and acknowledgements of Income-tax returns filed for the preceding 4 to 5 years in the case of each creditor. In all the confirmations, the P.A. Number has been mentioned alongwith the address of the creditor. It is not the case of the AO that the P.A. Number given on the confirmations does not found place in the Income-tax records of the respective creditors. It is also not the case of the AO that the copies of bank account which have been given to substantiate the cash credit are not the copy of bank account of the creditors. If it is so, the AO could have verified either from the Income-tax record or from the record of bank to establish that such creditor was unidentifiable and the addresses given by the assessee were not correct addresses. From the entire assessment order, it cannot be made out that at any moment, ^ie AO had asked the assessee to produce the creditors. It is only stated that the summons issued to the creditors could not be served and therefore, the assessee was required to submit evidences to substantiate the cash credits found in its books of accounts in respect of these creditors. Each of the creditors was having substantial opening credit balance in the books of the assessee which has also been confirmed in the confirmations filed before the AO. Unless it is established that the creditor is not found at the P.A. Number given by him and the bank account of the creditor does not reveal the correct position, it cannot be presumed that the credit in the books of assessee is non-genuine.
18. According to section 68 where any sum is found credited in the books of assessee maintained for any previous year, and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the sum so credited may be charged to Income-tax as the income of the assessee for that previous year. Therefore, according to the requirement of section 68, the sum credited in the books of accounts can be considered to be the income of the assessee in a case where the assessee does not offer any explanation or the explanation offered by him, in the opinion of AO, is not satisfactory.
19. Now the explanation of the assessee in the present case is that all these creditors are Income-tax assessees and their P.A. Numbers have been given alongwith their copy of bank account as well as proof of filing returns of income for the year under consideration as well as preceding years. Whether by filing these evidences, it can be said that the assessee had discharged the initial burden laid upon him u/s. 68. Certainly, when the particulars regarding Income-tax assessments and bank account have been filed then initial burden has to be held be discharged and then the burden shifts on the Revenue to show that what is stated or explained by the assessee is not satisfactory. No material, whatsoever, has been brought on record by the department to show that what was explained by the assessee, was not a correct state of affairs. If any sum is found credited in the accounts of the creditors, then the creditors may be examined so as to explain the credit. So far as the source of deposit in the account of the assessee is concerned, the assessee can be considered to have explained by bringing the material on record in the shape of confirmations, bank account and Income-tax Numbers of that person. This proposition is supported by the decision of Hon'ble Supreme Curt in the case of CIT vs. Orissa Corporation (supra). It has also been so held by Gujrat High Court in the case of DOT vs. Rohini Builders (supra) that where the assessee had given the proof regarding identity of the creditors and the amounts were received by account payee cheques. P.A. / GIR numbers were also given and it was held that initial burden of proving the credit was discharged. It was also held that the sources of credit need not to be proved.
20. The reliance by the Id. CIT(A) on the decision in the case of CIT vs. Precision Finance Ltd. (supra) is misplaced, as in the said case enquiry was made by the department through Inspector which revealed that the creditors were not round at the Income-tax files which were mentioned by the assessee and also the creditors were not found at the addresses given. It was found that the identity of the creditors was not established. I lowever, in the present case, it is not the case of the AO that the creditors are not found in the record of revenue at the P.A. Numbers given by the assessee.
21. Similarly, in the case of CIT vs. United Commercial Co. Ltd. (supra) relied upon by the Id. CIT(A), the creditors have confessed before the AO and confirmatory letters filed by them were found to be collusive, fictitious and false. Thus, it was held that mere confirmation and the fact that the transaction was made through bank account, do not establish their genuineness. In the present case, there is no confession of the creditors and the confirmatory letters are also not found to be collusive, fictitious and false.
22. As against this, the judgment of Hon'ble M.P. High Court in the case of CIT vs. Barjatiya Children Trust (supra) relied upon by the Id. AR clearly supports the case of the assessee. In that case, it was held by the Tribunal that where the amount was mentioned in the balance sheet of the creditor, the AO should have taken pain to examine the Income-tax file of the creditor, but instead he chose the easier way of ordering the production of the creditor, which was not found appreciable by the Tribunal. The production of cash creditor was observed to be insisted upon only when the genuineness of the transaction could not be established with the help of documents and the records of Income-tax Department itself. Such observations of the Tribunal were upheld. '
23. In view of the above discussion, I concur with the finding of the learned Judicial Member that ample evidences were produced by the assessee to discharge the initial burden. The AO has not brought any material on record to show that the explanation filed by the assessee was, in any manner, unsatisfactory. The evidences filed by the assessee remain un-rebutted. Therefore, the addition could not be made u/s. 68 of the Act and the learned Judicial Member was right in holding that the addition was liable to be deleted.
** ** ** ** ** ** ** ** ** ** ** **
posted at www.taxmannindia.blogspot.com
When the particulars regarding income-tax assessments and bank account of creditors have been filed then initial burden has to be held to be discharged by the assessee and then the burden shifts on the Revenue to show that what is stated or explained by the assessee is not satisfactory.
ITAT, AGRA BENCH (THIRD MEMBER) AGRA
Kalyan Memorial & Charitable Trust
v.
ACIT
ITA NO. 233/Agr./2006
May 20, 2009
RELEVANT EXTRACTS:
** ** ** ** ** ** ** ** ** ** ** **
17. I have carefully considered the rival submissions. I have also carefully gone through the orders of learned Judicial Member and Accountant Member and also the impugned assessment order & order of CIT (A). So far as it relates to the evidences submitted by the assessee to prove the cash credits, there is no dispute that the same were placed on record. The evidences, as discussed above, are in the shape of confirmations, copies of bank accounts, and acknowledgements of Income-tax returns filed for the preceding 4 to 5 years in the case of each creditor. In all the confirmations, the P.A. Number has been mentioned alongwith the address of the creditor. It is not the case of the AO that the P.A. Number given on the confirmations does not found place in the Income-tax records of the respective creditors. It is also not the case of the AO that the copies of bank account which have been given to substantiate the cash credit are not the copy of bank account of the creditors. If it is so, the AO could have verified either from the Income-tax record or from the record of bank to establish that such creditor was unidentifiable and the addresses given by the assessee were not correct addresses. From the entire assessment order, it cannot be made out that at any moment, ^ie AO had asked the assessee to produce the creditors. It is only stated that the summons issued to the creditors could not be served and therefore, the assessee was required to submit evidences to substantiate the cash credits found in its books of accounts in respect of these creditors. Each of the creditors was having substantial opening credit balance in the books of the assessee which has also been confirmed in the confirmations filed before the AO. Unless it is established that the creditor is not found at the P.A. Number given by him and the bank account of the creditor does not reveal the correct position, it cannot be presumed that the credit in the books of assessee is non-genuine.
18. According to section 68 where any sum is found credited in the books of assessee maintained for any previous year, and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the sum so credited may be charged to Income-tax as the income of the assessee for that previous year. Therefore, according to the requirement of section 68, the sum credited in the books of accounts can be considered to be the income of the assessee in a case where the assessee does not offer any explanation or the explanation offered by him, in the opinion of AO, is not satisfactory.
19. Now the explanation of the assessee in the present case is that all these creditors are Income-tax assessees and their P.A. Numbers have been given alongwith their copy of bank account as well as proof of filing returns of income for the year under consideration as well as preceding years. Whether by filing these evidences, it can be said that the assessee had discharged the initial burden laid upon him u/s. 68. Certainly, when the particulars regarding Income-tax assessments and bank account have been filed then initial burden has to be held be discharged and then the burden shifts on the Revenue to show that what is stated or explained by the assessee is not satisfactory. No material, whatsoever, has been brought on record by the department to show that what was explained by the assessee, was not a correct state of affairs. If any sum is found credited in the accounts of the creditors, then the creditors may be examined so as to explain the credit. So far as the source of deposit in the account of the assessee is concerned, the assessee can be considered to have explained by bringing the material on record in the shape of confirmations, bank account and Income-tax Numbers of that person. This proposition is supported by the decision of Hon'ble Supreme Curt in the case of CIT vs. Orissa Corporation (supra). It has also been so held by Gujrat High Court in the case of DOT vs. Rohini Builders (supra) that where the assessee had given the proof regarding identity of the creditors and the amounts were received by account payee cheques. P.A. / GIR numbers were also given and it was held that initial burden of proving the credit was discharged. It was also held that the sources of credit need not to be proved.
20. The reliance by the Id. CIT(A) on the decision in the case of CIT vs. Precision Finance Ltd. (supra) is misplaced, as in the said case enquiry was made by the department through Inspector which revealed that the creditors were not round at the Income-tax files which were mentioned by the assessee and also the creditors were not found at the addresses given. It was found that the identity of the creditors was not established. I lowever, in the present case, it is not the case of the AO that the creditors are not found in the record of revenue at the P.A. Numbers given by the assessee.
21. Similarly, in the case of CIT vs. United Commercial Co. Ltd. (supra) relied upon by the Id. CIT(A), the creditors have confessed before the AO and confirmatory letters filed by them were found to be collusive, fictitious and false. Thus, it was held that mere confirmation and the fact that the transaction was made through bank account, do not establish their genuineness. In the present case, there is no confession of the creditors and the confirmatory letters are also not found to be collusive, fictitious and false.
22. As against this, the judgment of Hon'ble M.P. High Court in the case of CIT vs. Barjatiya Children Trust (supra) relied upon by the Id. AR clearly supports the case of the assessee. In that case, it was held by the Tribunal that where the amount was mentioned in the balance sheet of the creditor, the AO should have taken pain to examine the Income-tax file of the creditor, but instead he chose the easier way of ordering the production of the creditor, which was not found appreciable by the Tribunal. The production of cash creditor was observed to be insisted upon only when the genuineness of the transaction could not be established with the help of documents and the records of Income-tax Department itself. Such observations of the Tribunal were upheld. '
23. In view of the above discussion, I concur with the finding of the learned Judicial Member that ample evidences were produced by the assessee to discharge the initial burden. The AO has not brought any material on record to show that the explanation filed by the assessee was, in any manner, unsatisfactory. The evidences filed by the assessee remain un-rebutted. Therefore, the addition could not be made u/s. 68 of the Act and the learned Judicial Member was right in holding that the addition was liable to be deleted.
** ** ** ** ** ** ** ** ** ** ** **
posted at www.taxmannindia.blogspot.com
Thursday, September 17, 2009
Taxpayers breathe easy after clarifications
Taxpayers breathe easy after clarifications
Some serious concerns on various issues relating to TDS, capital gains, taxing of insurance proceeds, NRIs and sunset provisions, which were raised by TOI’s Taxing Times columnist Mukesh Patel in the series under ‘Cracking the Code’ were deliberated at an interactive session on Saturday. Taxpayers heaved a sigh of relief after clarifications came from Joint secretary, Tax Policy and Legislation, Union Ministry of Finance, Arbind Modi. Here is how ambiguities were sorted out...
Concern: Current area and sector based tax incentives under Section 80 of the I-T Act will be continued under DTC only if the unit is operational by 31-3-2010.
Clarification: The benefit under the new Code will be allowed to all units operational by 31-3-2011.
Concern: Profit-linked incentives may not be available to current units to the same extent under the new Code for the unexpired period under the I-T Act.
Clarification: Deduction of profits, if available at 100% or the appropriate percentage, will be granted as such, under the principle of grandfathering for such unexpired period.
Concern: DTC drafting suggests that the benefit of Double Tax Avoidance Agreement (DTAA) would not be available at the time of TDS.
Clarification: There should be no apprehension in this regard. Such benefit will be duly allowed.
Concern: Under the scheme for presumptive taxation, there is no provision to allow deduction for partner’s interest or remuneration.
Clarification: This deduction will be duly provided for.
Concern: Valuation of assets under Wealth-tax may lead to litigation.
Clarification: Wealth-tax will be levied on assets, valuation of which will be done only at cost and not at market value.
Concern: The provision to tax ‘any sum received under a life insurance policy’ would mean that even the principal amount of premiums paid will become liable to Income-tax.
Clarification: DTC draft will be suitably amended, since the intent is to tax only the bonus received on maturity. Concern: No provision under DTC for filing declaration for no TDS in case of interest income, if the taxpayer does not have taxable income.
Clarification: Point well taken. Necessary provision will be made for such declarations as currently prevailing in form 15G and 15H.
Concern: No threshold limit (currently Rs.20,000) provided in regard to TDS from payment of professional fees.
Clarification: Suitable threshold limit will be duly provided under DTC.
Concern: Harsh consequences to arise on account of the new provision prescribing 10% TDS in respect of payments of ‘any other income.’ Clarification: This provision will be dropped.
Concern: Gains Tax on capital market gains will have a dampening effect. Clarification: If the sale consideration of any capital asset is rolled over by way of deposit in the new ‘Capital Gains Savings Scheme’ (CGSS) within 60 days, there will be no tax liability. Such deposit balance in CGSS can be invested in any fresh investment in debt or equity instruments as will be announced under the Scheme. Thus, as long as the gains are continued to be rolled over, there will be no effective tax liability. On the basis of the EET model, tax will get attracted only on withdrawal of any amount from the CGSS.
Concern: Drafting of the Code suggests that NRIs will not enjoy the benefit of even the minimum exemption limit of Rs.1,60,000 in respect of interest income and capital gains proposed to be taxed at the flat rate of 20% and 30%.
Clarification: this is not our intent. Hence, suitable amendment will be made to provide that NRIs will be taxed in the same tax slabs and as applicable to resident Indians.
This is a forwarded message received from deepak shah.
posted at www.taxmannindia.blogspot.com
Some serious concerns on various issues relating to TDS, capital gains, taxing of insurance proceeds, NRIs and sunset provisions, which were raised by TOI’s Taxing Times columnist Mukesh Patel in the series under ‘Cracking the Code’ were deliberated at an interactive session on Saturday. Taxpayers heaved a sigh of relief after clarifications came from Joint secretary, Tax Policy and Legislation, Union Ministry of Finance, Arbind Modi. Here is how ambiguities were sorted out...
Concern: Current area and sector based tax incentives under Section 80 of the I-T Act will be continued under DTC only if the unit is operational by 31-3-2010.
Clarification: The benefit under the new Code will be allowed to all units operational by 31-3-2011.
Concern: Profit-linked incentives may not be available to current units to the same extent under the new Code for the unexpired period under the I-T Act.
Clarification: Deduction of profits, if available at 100% or the appropriate percentage, will be granted as such, under the principle of grandfathering for such unexpired period.
Concern: DTC drafting suggests that the benefit of Double Tax Avoidance Agreement (DTAA) would not be available at the time of TDS.
Clarification: There should be no apprehension in this regard. Such benefit will be duly allowed.
Concern: Under the scheme for presumptive taxation, there is no provision to allow deduction for partner’s interest or remuneration.
Clarification: This deduction will be duly provided for.
Concern: Valuation of assets under Wealth-tax may lead to litigation.
Clarification: Wealth-tax will be levied on assets, valuation of which will be done only at cost and not at market value.
Concern: The provision to tax ‘any sum received under a life insurance policy’ would mean that even the principal amount of premiums paid will become liable to Income-tax.
Clarification: DTC draft will be suitably amended, since the intent is to tax only the bonus received on maturity. Concern: No provision under DTC for filing declaration for no TDS in case of interest income, if the taxpayer does not have taxable income.
Clarification: Point well taken. Necessary provision will be made for such declarations as currently prevailing in form 15G and 15H.
Concern: No threshold limit (currently Rs.20,000) provided in regard to TDS from payment of professional fees.
Clarification: Suitable threshold limit will be duly provided under DTC.
Concern: Harsh consequences to arise on account of the new provision prescribing 10% TDS in respect of payments of ‘any other income.’ Clarification: This provision will be dropped.
Concern: Gains Tax on capital market gains will have a dampening effect. Clarification: If the sale consideration of any capital asset is rolled over by way of deposit in the new ‘Capital Gains Savings Scheme’ (CGSS) within 60 days, there will be no tax liability. Such deposit balance in CGSS can be invested in any fresh investment in debt or equity instruments as will be announced under the Scheme. Thus, as long as the gains are continued to be rolled over, there will be no effective tax liability. On the basis of the EET model, tax will get attracted only on withdrawal of any amount from the CGSS.
Concern: Drafting of the Code suggests that NRIs will not enjoy the benefit of even the minimum exemption limit of Rs.1,60,000 in respect of interest income and capital gains proposed to be taxed at the flat rate of 20% and 30%.
Clarification: this is not our intent. Hence, suitable amendment will be made to provide that NRIs will be taxed in the same tax slabs and as applicable to resident Indians.
This is a forwarded message received from deepak shah.
posted at www.taxmannindia.blogspot.com
Download your E-return acknowledgement-sent from the CPC bangalore
Friends
Now you can Download your E-return acknowledgement which is sent from the CPC bangalore
As people facing problem after enclosing wrong e-mail id in there income tax return while e-filling.
Now the department has started also uploading the ITR V acknowledgement "sent by the department thru mails at the individuals email id" at the income tax india e-filling site.
Now you can download the acknowledgement by following this route:
1. Login in the IT dept website
2.Then go to "MY ACCOUNTS"
3.now click on "E-Filling processing status"
as you click this you will see that it is said "ITR V received"
now click on ITR V received and you can easily download it.
posted at www.taxmannindia.blogspot.com
Now you can Download your E-return acknowledgement which is sent from the CPC bangalore
As people facing problem after enclosing wrong e-mail id in there income tax return while e-filling.
Now the department has started also uploading the ITR V acknowledgement "sent by the department thru mails at the individuals email id" at the income tax india e-filling site.
Now you can download the acknowledgement by following this route:
1. Login in the IT dept website
2.Then go to "MY ACCOUNTS"
3.now click on "E-Filling processing status"
as you click this you will see that it is said "ITR V received"
now click on ITR V received and you can easily download it.
posted at www.taxmannindia.blogspot.com
ICWAI council approved CAS 7 & CAS 8
Central Council of the ICWAI has approved on 12th September 2009 the Cost Accounting Standards on Employee Cost (CAS-7) and Cost of Utilities (CAS-8).
The same have been hosted on the website of the ICWAI.
Final Cost Accounting Standard on Employee Cost (CAS-7).
http://www.icwai.org/icwai/docs/CASB/CAS7.pdf
Final Cost Accounting Standard on Cost of Utilities (CAS-8).
http://www.icwai.org/icwai/docs/CASB/CAS8.pdf
posted at www.taxmannindia.blogspot.com
The same have been hosted on the website of the ICWAI.
Final Cost Accounting Standard on Employee Cost (CAS-7).
http://www.icwai.org/icwai/docs/CASB/CAS7.pdf
Final Cost Accounting Standard on Cost of Utilities (CAS-8).
http://www.icwai.org/icwai/docs/CASB/CAS8.pdf
posted at www.taxmannindia.blogspot.com
Resigned Members & Members who retired before 3.6.2009 can practice before the ITAT
M/s Concept Creations vs. ACIT (ITAT Delhi Special Bench)
Resigned Members & Members who retired before 3.6.2009 can practice before the ITAT
Vide Notification dated 3rd June 2009, Rule 13E was inserted in the Income Tax Appellate Tribunal Members (Recruitment and Conditions of Service) Rules, 1963 to provide that “The President, the Senior Vice-President, the Vice-President and the Members of the Tribunal shall not practice before the Tribunal after retirement from the service of the Tribunal”. The Special Bench had to consider whether the said Notification applied to Members who resigned / retired before the date of issue of the said Notification and allied issues. HELD:
(1) The argument of the Ministry of Law & Justice that the ITAT could not go into interpretation of Rule 13E is not acceptable because in accordance with the duty of the Tribunal to give a proper hearing to the parties, the Tribunal has inherent jurisdiction to consider whether the parties who are appearing before it are properly entitled under the law to make appearance;
(2) On the question whether Rule 13E can apply to Members who have “resigned” from service, Rule 13E is confined to “retirement”. There is a well known difference between “retirement” and “resignation”. While ‘resignation’ is a deliberate act of relinquishment of service, ‘retirement’ is an event that takes place on attaining superannuation;
(3) The Resigned Members were appointed on a “temporary” basis and were subject to a “probation” period. The said Members had resigned during the probation period, much before their confirmation. Such Members who had resigned and terminated their contract of employment with the Government before confirmation cannot be said to hold any post and there is no question of any conditions of services being applicable to them after resignation. They cannot be treated as having been “retired” from service for purposes of Rule 13E and were not disqualified from appearing before the ITAT;
(4) As regards Members who retired on superannuation, while in respect of CESTAT, a legislative amendment was made in the Customs Act, in relation to the ITAT, a “risky route” of amending the “conditions of service” was adopted. Though the object with which the Notification is issued i.e. to bring in reformatory steps to uphold the dignity of the Institution and to free it from charges of bias in discharge of its judicial function is laudable, it should be seen whether the means by which it is sought to be achieved stands the test of law. Rule 13E goes beyond the conditions of service. Earlier s. 288 (3) (omitted w.e.f 1.10.1984) had imposed a similar bar and its’ validity had been upheld by Court. The larger public interest which the legislature envisaged while dropping the provision that already existed cannot merit ignorance merely because the executive authority felt otherwise, perhaps wiser than the higher wisdom of the Parliament. Thereafter, the same object was sought to be enforced by an amendment to the pension rules which prohibited CG employees from appearing before the same income tax authorities to which they belonged while they were in service. This provision was struck down by the apex court in R. Kapoor A 1987 SC 415 as being unconstitutional and invalid. As a result of this legislative exercise, now it is difficult to say that identical provision under conditions of service can still pass the test of validity in the eyes of law. The interpretation of the Supreme Court in connection with the Pension Rules cannot merit ignorance or be slighted merely because the executive’s attempt in bringing Rule 13E is in the direction of bringing some reformative provisions to free the judiciary from the charges of bias in their judicial functions. The executive if permitted in this manner will only set naught the judicial interpretation rendered by the highest court of the land and also bypass the higher wisdom of Parliament. One must be conscious of the fact that limited ban of two years on retired income tax employees was not approved by the Supreme Court. It is difficult to imagine or accept that the present Notification which under the garb of conditions of service seeks to enforce a life ban of ex-members will receive judicial sanction in the background of R. Kapoor’s case; (Clarified that nothing was held about the legislative competence of the President to make the Rules in the manner it is done);
(5) On a plain reading of Rule 13E, it is prospective and applies only to Members who were in service as of 3.6.2009 or who join service thereafter. It has no application to Members who retired prior to that date.
posted at www.taxmannindia.blogspot.com
Resigned Members & Members who retired before 3.6.2009 can practice before the ITAT
Vide Notification dated 3rd June 2009, Rule 13E was inserted in the Income Tax Appellate Tribunal Members (Recruitment and Conditions of Service) Rules, 1963 to provide that “The President, the Senior Vice-President, the Vice-President and the Members of the Tribunal shall not practice before the Tribunal after retirement from the service of the Tribunal”. The Special Bench had to consider whether the said Notification applied to Members who resigned / retired before the date of issue of the said Notification and allied issues. HELD:
(1) The argument of the Ministry of Law & Justice that the ITAT could not go into interpretation of Rule 13E is not acceptable because in accordance with the duty of the Tribunal to give a proper hearing to the parties, the Tribunal has inherent jurisdiction to consider whether the parties who are appearing before it are properly entitled under the law to make appearance;
(2) On the question whether Rule 13E can apply to Members who have “resigned” from service, Rule 13E is confined to “retirement”. There is a well known difference between “retirement” and “resignation”. While ‘resignation’ is a deliberate act of relinquishment of service, ‘retirement’ is an event that takes place on attaining superannuation;
(3) The Resigned Members were appointed on a “temporary” basis and were subject to a “probation” period. The said Members had resigned during the probation period, much before their confirmation. Such Members who had resigned and terminated their contract of employment with the Government before confirmation cannot be said to hold any post and there is no question of any conditions of services being applicable to them after resignation. They cannot be treated as having been “retired” from service for purposes of Rule 13E and were not disqualified from appearing before the ITAT;
(4) As regards Members who retired on superannuation, while in respect of CESTAT, a legislative amendment was made in the Customs Act, in relation to the ITAT, a “risky route” of amending the “conditions of service” was adopted. Though the object with which the Notification is issued i.e. to bring in reformatory steps to uphold the dignity of the Institution and to free it from charges of bias in discharge of its judicial function is laudable, it should be seen whether the means by which it is sought to be achieved stands the test of law. Rule 13E goes beyond the conditions of service. Earlier s. 288 (3) (omitted w.e.f 1.10.1984) had imposed a similar bar and its’ validity had been upheld by Court. The larger public interest which the legislature envisaged while dropping the provision that already existed cannot merit ignorance merely because the executive authority felt otherwise, perhaps wiser than the higher wisdom of the Parliament. Thereafter, the same object was sought to be enforced by an amendment to the pension rules which prohibited CG employees from appearing before the same income tax authorities to which they belonged while they were in service. This provision was struck down by the apex court in R. Kapoor A 1987 SC 415 as being unconstitutional and invalid. As a result of this legislative exercise, now it is difficult to say that identical provision under conditions of service can still pass the test of validity in the eyes of law. The interpretation of the Supreme Court in connection with the Pension Rules cannot merit ignorance or be slighted merely because the executive’s attempt in bringing Rule 13E is in the direction of bringing some reformative provisions to free the judiciary from the charges of bias in their judicial functions. The executive if permitted in this manner will only set naught the judicial interpretation rendered by the highest court of the land and also bypass the higher wisdom of Parliament. One must be conscious of the fact that limited ban of two years on retired income tax employees was not approved by the Supreme Court. It is difficult to imagine or accept that the present Notification which under the garb of conditions of service seeks to enforce a life ban of ex-members will receive judicial sanction in the background of R. Kapoor’s case; (Clarified that nothing was held about the legislative competence of the President to make the Rules in the manner it is done);
(5) On a plain reading of Rule 13E, it is prospective and applies only to Members who were in service as of 3.6.2009 or who join service thereafter. It has no application to Members who retired prior to that date.
posted at www.taxmannindia.blogspot.com
Companies Bill, 2009-Place your suggestions here
Dear Member,
Sub: Companies Bill, 2009
As you are aware, the Companies Bill, 2009 has been introduced in Lok Sabha on 3rd August, 2009.
The new Bill proposes to open up new avenues for the professionals especially Chartered Accountants and at the same time casts a lot of responsibility on them for conduct of affairs of the companies.
Appreciating the need of the hour and in view of the importance of the Bill, the Corporate Laws Committee has formed study groups at National level, Regional level and Branch level to consider the provisions of Companies Bill in depth. The suggestions emanating there from shall be forwarded to the Ministry of Corporate Affairs by making a suitable representation.
You are requested to kindly give your valuable suggestions/views/comments on the Bill and send the same to the Corporate Laws Committee at corporatelaws@icai.in latest by 25th September, 2009. A copy of the Bill is placed on the website of the Institute at http://www.icai.org/resource_file/17166companies_bill_2009.pdf
With kind regards,
Yours faithfully,
Secretary,
Corporate Laws Committee
posted at www.taxmannindia.blogspot.com
Sub: Companies Bill, 2009
As you are aware, the Companies Bill, 2009 has been introduced in Lok Sabha on 3rd August, 2009.
The new Bill proposes to open up new avenues for the professionals especially Chartered Accountants and at the same time casts a lot of responsibility on them for conduct of affairs of the companies.
Appreciating the need of the hour and in view of the importance of the Bill, the Corporate Laws Committee has formed study groups at National level, Regional level and Branch level to consider the provisions of Companies Bill in depth. The suggestions emanating there from shall be forwarded to the Ministry of Corporate Affairs by making a suitable representation.
You are requested to kindly give your valuable suggestions/views/comments on the Bill and send the same to the Corporate Laws Committee at corporatelaws@icai.in latest by 25th September, 2009. A copy of the Bill is placed on the website of the Institute at http://www.icai.org/resource_file/17166companies_bill_2009.pdf
With kind regards,
Yours faithfully,
Secretary,
Corporate Laws Committee
posted at www.taxmannindia.blogspot.com
ITAT, DELHI C BENCH: Assumption of jurisdiction under section 263 of IT Act, 1961 on ground of inadmissible allowance of depreciation on goodwill
Assumption of jurisdiction under section 263 of IT Act, 1961 on ground of inadmissible allowance of depreciation on goodwill
Even if an asset is described as goodwill but it fits in the description of section 32(1)(ii), depreciation is to be granted on the same; the true basis of depreciation allowance is the character of the asset and not it’s description.
ITAT, DELHI C BENCH, NEW DELHI
Hindustan Coca Cola Beverages Pvt. Ltd.
v.
DCIT
ITA No. 1884.Del/06
August 25, 2009
RELEVANT EXTRACTS:
** ** ** ** ** ** ** ** ** ** ** **
5. We find that, as noted by the learned Commissioner in page 7 in the impugned order, the audit report has made following disclosure below the computation of depreciation on goodwill:
“Goodwill of the company comprises of (a) payment for the marketing and trading reputation, trading style and name, marketing and distribution territorial know how, including information of consumption patterns and habits of consumers in the territory, and (b) the difference between the consideration paid for business and value of tangible assets.
The management is of the view that the amounts referred to in (a) above assists in planning production schedules and difference referred to in (b) above represents the value of various contracts and agreements acquired by the company. This being a valuable commercial asset similar to other intangibles mentioned in the definition of the block of assets, is eligible to depreciation. Accordingly, depreciation on goodwill payments after 1.4.98 has been calculated as per Section 32 of the Income Tax Act, 1961"
<
6. The matter did not rest at filing of this justification itself. Vide letter dated 15th September 2003, the Assessing Officer did raise a query on the admissibility of the above claim. His specific question was as follows:
You have claimed that the goodwill acquired by you was eligible for depreciation being in the nature of knowhow and depreciation was allowable on the same. Please justify your claim.
7. In response to the aforesaid question, the assessee, vide letter
dated 8th January 2004, had submitted as follows:
Goodwill is the consideration paid to various bottlers for marketing and trading reputation, trading style and name, marketing and distribution territorial knowhow and information of territory. It includes knowhow related to acquired business, customer database, distribution network, contracts and other commercial rights.
Intangible assets like knowhow, patents, copyrights, trademarks, licences, franchises or any other business or commercial rights of similar nature, acquired after 1.4.1998, are eligible for depreciation.
Your assessee has, accordingly, claimed depreciation on goodwill acquired after 1.4.98
8. In the backdrop of the above facts, the first thing that we need to examine is whether or not a claim of depreciation on, what is termed as goodwill in the books of accounts but is stated to be in the nature of covered by the scope of 'any other business or commercial rights of similar nature (i.e. 'know how, patent, copyrights, trade marks, licences, franchises)' referred to in the definition of block of assets, is admissible at all. It is after all the very foundation of learned Commissioner's case that such a claim is a patently inadmissible claim. We find help and guidance from Tribunal's decision in the case of Skyline Caterers Pvt Ltd Vs ITO (116 ITD 348). In this case, the assessee had shown goodwill of Rs 25 lakhs but claimed depreciation on the ground that "the payment under the head goodwill in the books of accounts represented the rights acquired by the assessee under the contract acquired by the assessee which amounted to commercial rights and, therefore, the depreciation was allowable under section 32". This claim did not find favour with the Assessing Officer or with the Commissioner (Appeals) but when the matter travelled to the Tribunal, Tribunal, inter alia, observed that "There is no dispute to the legal proposition that nomenclature given to the entries in the books of accounts is not relevant for ascertaining the real nature of the transaction, as held by the Hon'ble Supreme Court in the case of Kedarnath Jute Mfg Co Ltd Vs CIT (82 ITR 363)" and proceeded to ascertain the true nature of the asset by reference to the agreement between the parties. As a result of the exercise thus conducted by the Tribunal, the grievance of the assessee against disallowance of depreciation was partly upheld but that is not really relevant for our purposes; what is relevant for our purposes at present is the Tribunal's finding that depreciation on what is termed as goodwill is not a patently inadmissible claim. We also share this perception. One cannot proceed on the basis, as the learned Commissioner has chosen to proceed, that once an amount is described as goodwill in the books of accounts, depreciation thereon as an intangible asset can not be admissible on the same. It is also important to bear in mind that it not plainly on perusal of an assessment order that the Commissioner exercise his powers under section 263; he must examine the entire records of proceedings. Learned Commissioner must therefore take into account all the material facts on record which are of relevance. As for learned Departmental Representative's reliance on the decision of Ahmedabad C bench of this Tribunal in the case of Bharatbahi J Vyas Vs ITO (97 ITD 248), that is a case in which Tribunal gave a categorical finding that the goodwill was paid only for retirement of a partner and "without acquisition of any intangible asset as contemplated under section 32(1) (ii)". The facts of the present case, in which the payment is made towards business acquired on slump price and a part of the price so paid is allocated to the intangible assets covered under the head 'goodwill', are materially different and have no resemblance to the case before the Ahmedabad bench. The allocation of amount paid as a slump price is not in dispute and the fact that a part of consideration represents consideration for rights, as detailed in the audit report notes extracted above, is also not in disputed. The case of the Commissioner mainly is that depreciation is not admissible on goodwill but the fact the accounting treatment of a payment per se cannot govern its treatment in the income tax proceedings. Even if an amount is termed as 'Goodwill' in the books of accounts but it is a business or commercial rights in the nature of know how, patent, copyrights, trade marks, licences, franchises, the claim of depreciation is indeed admissible thereon. It is not that 'goodwill' is specifically excluded from the intangible assets eligible for depreciation, and, therefore, even if an asset is described as goodwill but it fits in the description of Section 32(l)(ii), depreciation is to be granted on the same; the true basis of depreciation allowance is the character of the asset not it’s description. Learned Departmental Representative has also justified the action of the learned Commission by arguing that necessary enquiries were not made, but then, as is held by Hon’ble Punjab and Haryana High Court in the case of CIT v. Jagadhari Electric Supply & Industrial Co (140 ITR 490), while examining the validity of a revision order under section 263, Tribunal cannot substitute the ground on which the Commissioner has based his order. The very foundation of learned Commissioner’s order is thus devoid of leally sustainable merits.
** ** ** ** ** ** ** ** ** ** ** **
posted at www.taxmannindia.blogspot.com
Even if an asset is described as goodwill but it fits in the description of section 32(1)(ii), depreciation is to be granted on the same; the true basis of depreciation allowance is the character of the asset and not it’s description.
ITAT, DELHI C BENCH, NEW DELHI
Hindustan Coca Cola Beverages Pvt. Ltd.
v.
DCIT
ITA No. 1884.Del/06
August 25, 2009
RELEVANT EXTRACTS:
** ** ** ** ** ** ** ** ** ** ** **
5. We find that, as noted by the learned Commissioner in page 7 in the impugned order, the audit report has made following disclosure below the computation of depreciation on goodwill:
“Goodwill of the company comprises of (a) payment for the marketing and trading reputation, trading style and name, marketing and distribution territorial know how, including information of consumption patterns and habits of consumers in the territory, and (b) the difference between the consideration paid for business and value of tangible assets.
The management is of the view that the amounts referred to in (a) above assists in planning production schedules and difference referred to in (b) above represents the value of various contracts and agreements acquired by the company. This being a valuable commercial asset similar to other intangibles mentioned in the definition of the block of assets, is eligible to depreciation. Accordingly, depreciation on goodwill payments after 1.4.98 has been calculated as per Section 32 of the Income Tax Act, 1961"
<
6. The matter did not rest at filing of this justification itself. Vide letter dated 15th September 2003, the Assessing Officer did raise a query on the admissibility of the above claim. His specific question was as follows:
You have claimed that the goodwill acquired by you was eligible for depreciation being in the nature of knowhow and depreciation was allowable on the same. Please justify your claim.
7. In response to the aforesaid question, the assessee, vide letter
dated 8th January 2004, had submitted as follows:
Goodwill is the consideration paid to various bottlers for marketing and trading reputation, trading style and name, marketing and distribution territorial knowhow and information of territory. It includes knowhow related to acquired business, customer database, distribution network, contracts and other commercial rights.
Intangible assets like knowhow, patents, copyrights, trademarks, licences, franchises or any other business or commercial rights of similar nature, acquired after 1.4.1998, are eligible for depreciation.
Your assessee has, accordingly, claimed depreciation on goodwill acquired after 1.4.98
8. In the backdrop of the above facts, the first thing that we need to examine is whether or not a claim of depreciation on, what is termed as goodwill in the books of accounts but is stated to be in the nature of covered by the scope of 'any other business or commercial rights of similar nature (i.e. 'know how, patent, copyrights, trade marks, licences, franchises)' referred to in the definition of block of assets, is admissible at all. It is after all the very foundation of learned Commissioner's case that such a claim is a patently inadmissible claim. We find help and guidance from Tribunal's decision in the case of Skyline Caterers Pvt Ltd Vs ITO (116 ITD 348). In this case, the assessee had shown goodwill of Rs 25 lakhs but claimed depreciation on the ground that "the payment under the head goodwill in the books of accounts represented the rights acquired by the assessee under the contract acquired by the assessee which amounted to commercial rights and, therefore, the depreciation was allowable under section 32". This claim did not find favour with the Assessing Officer or with the Commissioner (Appeals) but when the matter travelled to the Tribunal, Tribunal, inter alia, observed that "There is no dispute to the legal proposition that nomenclature given to the entries in the books of accounts is not relevant for ascertaining the real nature of the transaction, as held by the Hon'ble Supreme Court in the case of Kedarnath Jute Mfg Co Ltd Vs CIT (82 ITR 363)" and proceeded to ascertain the true nature of the asset by reference to the agreement between the parties. As a result of the exercise thus conducted by the Tribunal, the grievance of the assessee against disallowance of depreciation was partly upheld but that is not really relevant for our purposes; what is relevant for our purposes at present is the Tribunal's finding that depreciation on what is termed as goodwill is not a patently inadmissible claim. We also share this perception. One cannot proceed on the basis, as the learned Commissioner has chosen to proceed, that once an amount is described as goodwill in the books of accounts, depreciation thereon as an intangible asset can not be admissible on the same. It is also important to bear in mind that it not plainly on perusal of an assessment order that the Commissioner exercise his powers under section 263; he must examine the entire records of proceedings. Learned Commissioner must therefore take into account all the material facts on record which are of relevance. As for learned Departmental Representative's reliance on the decision of Ahmedabad C bench of this Tribunal in the case of Bharatbahi J Vyas Vs ITO (97 ITD 248), that is a case in which Tribunal gave a categorical finding that the goodwill was paid only for retirement of a partner and "without acquisition of any intangible asset as contemplated under section 32(1) (ii)". The facts of the present case, in which the payment is made towards business acquired on slump price and a part of the price so paid is allocated to the intangible assets covered under the head 'goodwill', are materially different and have no resemblance to the case before the Ahmedabad bench. The allocation of amount paid as a slump price is not in dispute and the fact that a part of consideration represents consideration for rights, as detailed in the audit report notes extracted above, is also not in disputed. The case of the Commissioner mainly is that depreciation is not admissible on goodwill but the fact the accounting treatment of a payment per se cannot govern its treatment in the income tax proceedings. Even if an amount is termed as 'Goodwill' in the books of accounts but it is a business or commercial rights in the nature of know how, patent, copyrights, trade marks, licences, franchises, the claim of depreciation is indeed admissible thereon. It is not that 'goodwill' is specifically excluded from the intangible assets eligible for depreciation, and, therefore, even if an asset is described as goodwill but it fits in the description of Section 32(l)(ii), depreciation is to be granted on the same; the true basis of depreciation allowance is the character of the asset not it’s description. Learned Departmental Representative has also justified the action of the learned Commission by arguing that necessary enquiries were not made, but then, as is held by Hon’ble Punjab and Haryana High Court in the case of CIT v. Jagadhari Electric Supply & Industrial Co (140 ITR 490), while examining the validity of a revision order under section 263, Tribunal cannot substitute the ground on which the Commissioner has based his order. The very foundation of learned Commissioner’s order is thus devoid of leally sustainable merits.
** ** ** ** ** ** ** ** ** ** ** **
posted at www.taxmannindia.blogspot.com
ITAT, DELHI BENCH ‘H’ : Allowability of exemption under section 54F of IT Act, 1961 qua purchase of second plot of land appurtenant to first plot
Allowability of exemption under section 54F of IT Act, 1961 qua purchase of second plot of land appurtenant to first plot
There is no rider under section 54F that no deduction would be allowed in respect of investment of capital gains made on acquisition of land appurtenant to the building or on the investment on land on which building is being constructed.
ITAT, DELHI BENCH ‘H’ : NEW DELHI
Addl. CIT
v.
Narendra Mohan Uniyal
ITA No. 1624 /Del/2009
August 31, 2009
RELEVANT EXTRACTS:
** ** ** ** ** ** ** ** ** ** ** **
9. Provisions of Section 54F which deal with provisions of Capital gain on transfer of certain capital assets not to be charged in case of investment in residential house, read as under:-
54f. (1) [Subject to the provisions of sub-section (4). where, in the case of an assessee being an individual or a Hindu undivided family], the capital gain arises from the transfer of any long-term capital asset, not being a residential house (hereafter in this section referred to is the original asset), and the assessee has, within a period of one year before or (two years] after the date on which the transfer took place purchased, or has within a period of three years after that date constructed, a residential house (hereafter in this section referred to as the new asset), the capital gain shall be dealt with in accordance with the following provisions of this section, that is to say,.......................................................... "
10. It is crystal clear from the plain reading of Section 54 & 54F that exemption is allowable in respect of amount invested in the construction of a residential house. There is no rider u/s 54F that no deduction would be allowed in respect of investment of capital gains made on acquisition of land appurtenant to the building or on the investment on land on which building is being constructed. When the land is purchased and building is constructed thereon, it is not necessary that such construction should be on the entire plot of land, meaning thereby a part of the land which is appurtenant to the building and on which no construction is made, there is no denial of exemption on such investment. Therefore, the contention of the learned DR that there is a distinction with respect to investment in appurtenant land as per Section 54 and 54F is not tenable at all. In the instant case, there is no dispute to the fact that investment of capital gains was made within the statutory period and moreover within the same financial year. Another plot of land which was purchased by the assessee was adjacent to the plot already purchased during the relevant year itself out of capital gains. Only because construction was made on the first plot of land, he exemption claimed in respect of investment made in adjacent plot of land cannot land the exemption claimed in respect of investment made in adjacent plot of land cannot be declined when all the other conditions as stipulated u/s 54F are being satisfied. While dealing with the objection of the AO, the CIT (A) has categorically given a finding that the land so purchased was one piece of plot having area of 2000 sq.mtr. Both these plots were having 1000 sq.mtr. of land. Both the plots formed part of one residential unit and are contiguous and adjoining to each other. The comments of the AO to the effect that exemption u/s 54F is eligible only for construction of house is not tenable insofar as even cost of land forming part of the residential unit on which no construction is done is also, eligible for exemption u/s 54F. Thus, the cost of vacant land appurtenant to and forming part of the residential unit is to be considered for claim of exemption u/s 54F even if no construction has been done on the appurtenant land. The provisions of Section 54 clearly provide for exemption if the net consideration received as a. result of transfer of any capital asset, other than a residential house, is invested in the purchase or construction of a residential house. The new residential house is not debarred from having a land appurtenant to any size and it is also not the case of the AO that the land appurtenant to the building is not entitled to exemption u/s 54F. Had it been a case of land not appurtenant to the building so constructed, then the contention of the AO to the effect that investment of capital gains made in the second plot which is not appurtenant to the building so constructed is not eligible for exemption, can be favourably accepted. The case law cited by the learned DR in the case of Zaibunnisa Begun (supra) is entirely on different facts insofar as the appurtenant land was not used by the assessee for any other purposes. On the contrary, the expression “land appurtenant” in section 54 of the Act was held to be construed in a broad and non-technical sense and it was held that the meaning given to that expression in other Acts should be irrelevant. The Hon’ble Jurisdictional High Court in the case of Sunita Aggarwal (supra) has observed that while claiming exemption under section 54, the property though purchased from two different persons by virtue of four different sale instances in the shape of four different parcels, constitutes one single residential unit of the assessee.
11. In view of the above discussion and keeping in view the detailed observation made by the CIT (AP at paragraphs 4,5 and 6, we can safely conclude on proper appreciation of material available on record that the property purchased by the assessee was a single unit and was being used for residential purposes, therefore investment made in respect of both the plots was eligible for claim of exemption u/s 54F. We, therefore, uphold the order of CIT (A) and dismiss the appeal filed by the Revenue. As the cross-objection are basically in support of the CIT (A)’s action, we allow the cross-objection in terms indicated hereinabove.
** ** ** ** ** ** ** ** ** ** ** **
posted at www.taxmannindia.blogspot.com
There is no rider under section 54F that no deduction would be allowed in respect of investment of capital gains made on acquisition of land appurtenant to the building or on the investment on land on which building is being constructed.
ITAT, DELHI BENCH ‘H’ : NEW DELHI
Addl. CIT
v.
Narendra Mohan Uniyal
ITA No. 1624 /Del/2009
August 31, 2009
RELEVANT EXTRACTS:
** ** ** ** ** ** ** ** ** ** ** **
9. Provisions of Section 54F which deal with provisions of Capital gain on transfer of certain capital assets not to be charged in case of investment in residential house, read as under:-
54f. (1) [Subject to the provisions of sub-section (4). where, in the case of an assessee being an individual or a Hindu undivided family], the capital gain arises from the transfer of any long-term capital asset, not being a residential house (hereafter in this section referred to is the original asset), and the assessee has, within a period of one year before or (two years] after the date on which the transfer took place purchased, or has within a period of three years after that date constructed, a residential house (hereafter in this section referred to as the new asset), the capital gain shall be dealt with in accordance with the following provisions of this section, that is to say,.......................................................... "
10. It is crystal clear from the plain reading of Section 54 & 54F that exemption is allowable in respect of amount invested in the construction of a residential house. There is no rider u/s 54F that no deduction would be allowed in respect of investment of capital gains made on acquisition of land appurtenant to the building or on the investment on land on which building is being constructed. When the land is purchased and building is constructed thereon, it is not necessary that such construction should be on the entire plot of land, meaning thereby a part of the land which is appurtenant to the building and on which no construction is made, there is no denial of exemption on such investment. Therefore, the contention of the learned DR that there is a distinction with respect to investment in appurtenant land as per Section 54 and 54F is not tenable at all. In the instant case, there is no dispute to the fact that investment of capital gains was made within the statutory period and moreover within the same financial year. Another plot of land which was purchased by the assessee was adjacent to the plot already purchased during the relevant year itself out of capital gains. Only because construction was made on the first plot of land, he exemption claimed in respect of investment made in adjacent plot of land cannot land the exemption claimed in respect of investment made in adjacent plot of land cannot be declined when all the other conditions as stipulated u/s 54F are being satisfied. While dealing with the objection of the AO, the CIT (A) has categorically given a finding that the land so purchased was one piece of plot having area of 2000 sq.mtr. Both these plots were having 1000 sq.mtr. of land. Both the plots formed part of one residential unit and are contiguous and adjoining to each other. The comments of the AO to the effect that exemption u/s 54F is eligible only for construction of house is not tenable insofar as even cost of land forming part of the residential unit on which no construction is done is also, eligible for exemption u/s 54F. Thus, the cost of vacant land appurtenant to and forming part of the residential unit is to be considered for claim of exemption u/s 54F even if no construction has been done on the appurtenant land. The provisions of Section 54 clearly provide for exemption if the net consideration received as a. result of transfer of any capital asset, other than a residential house, is invested in the purchase or construction of a residential house. The new residential house is not debarred from having a land appurtenant to any size and it is also not the case of the AO that the land appurtenant to the building is not entitled to exemption u/s 54F. Had it been a case of land not appurtenant to the building so constructed, then the contention of the AO to the effect that investment of capital gains made in the second plot which is not appurtenant to the building so constructed is not eligible for exemption, can be favourably accepted. The case law cited by the learned DR in the case of Zaibunnisa Begun (supra) is entirely on different facts insofar as the appurtenant land was not used by the assessee for any other purposes. On the contrary, the expression “land appurtenant” in section 54 of the Act was held to be construed in a broad and non-technical sense and it was held that the meaning given to that expression in other Acts should be irrelevant. The Hon’ble Jurisdictional High Court in the case of Sunita Aggarwal (supra) has observed that while claiming exemption under section 54, the property though purchased from two different persons by virtue of four different sale instances in the shape of four different parcels, constitutes one single residential unit of the assessee.
11. In view of the above discussion and keeping in view the detailed observation made by the CIT (AP at paragraphs 4,5 and 6, we can safely conclude on proper appreciation of material available on record that the property purchased by the assessee was a single unit and was being used for residential purposes, therefore investment made in respect of both the plots was eligible for claim of exemption u/s 54F. We, therefore, uphold the order of CIT (A) and dismiss the appeal filed by the Revenue. As the cross-objection are basically in support of the CIT (A)’s action, we allow the cross-objection in terms indicated hereinabove.
** ** ** ** ** ** ** ** ** ** ** **
posted at www.taxmannindia.blogspot.com
ITAT, DELHI BENCH ‘B’ : Allowability of change of method of valuation of closing stock
Allowability of change of method of valuation of closing stock
The change of method of valuation of the closing stock is allowed if such change is bona fide and the assessee has proper reasons for such change.
ITAT, DELHI BENCH ‘B’ : NEW DELHI
Charchit Agarwal
v.
ACIT
ITA Nos. 3132 to 3137/Del/2008
August 28, 2009
RELEVANT EXTRACTS:
** ** ** ** ** ** ** ** ** ** ** **
9. Section 153A(1) contains non-obstante clause and hence provisions of this section will over-ride the provisions of section 139, section 147, section 148, section 149, section 151 and section 153 of the Act. Under section 153A(1) the assessing officer is empowered is empowered to issue notices to the assessee searched for a period of six year sin order to assess the income on the basis of material found during the course of search. The second proviso to section 153A(1) provides that the assessment or reassessment, if any, relating to any assessment year falling within the period of six assessment years referred to in section 153A(1) pending on the date of initiation of search u/s 132 or making of requisition u/s 132A as the case may be shall abte. Therefore after initiation of search no assessment in respect of pending assessment shall be made and Assessing Officer is empowered to issue notice u/s 153A to assess or re-assess the total income of six assessment years immediately preceding assessment year relevant to the previous year in which such search was conducted or requisition was made. The assessee had valued the closing stock for assessment year 2000-01 to 2005-06 on average cost method which has resulted in reduction of taxable income in all the years ranging from Rs. 9875 in assessment year 2001-02 to Rs. 9,00,797 in assessment 2005-06. The contention of the assessee that in the case of jewelers, it is impossible to value the closing stock on the basis of market cost as the items of closing stock cannot be identified with reference to various purchases made during the year. However, the fact remains that the assessee had been valuing the closing stock at “cost” as certified by tax auditors. It is a fact that all the assessee are required to maintain the stock registers during the course of normal business activities. It is not difficult to identify the items purchased, the date of purchase and their costs. Hence we do not find any substance in the argument of the assessee that it is impossible to value the closing stock at “actual cost” particularly in view of the fact that the assessee had been valuing the closing stock at cost price from very beginning of the business.
10. Moreover, the change of method of valuation of the closing stock is allowed in such change is bonafide and the assessee has proper reasons for such change. The conclude proceedings cannot be reopened on the ground that the assessee had incorrectly valued the closing stock in those years. The assessee had filed returns of income for all the six assessment years u/s 139 (1). The assessments or reassessments cannot be made in these years by invoking the provisions of section 147 after initiation of search proceedings in view of second proviso to section 153A(1) of the Act. From the facts given above it is clear that the assessee had changed the method of valuation of the closing stocks for all assessment years to reduce the profits and hence the change in the method of valuation is not bona fide. As regards the contention of the assessee that it is impossible to value the closing stock at cost price in the case of jewelers, this is a sweeping generalization without having any material on records to prove. The assessee had not filed any evidence to support its contention and hence deserves to be rejected.
** ** ** ** ** ** ** ** ** ** ** **
posted at www.taxmannindia.blogspot.com
The change of method of valuation of the closing stock is allowed if such change is bona fide and the assessee has proper reasons for such change.
ITAT, DELHI BENCH ‘B’ : NEW DELHI
Charchit Agarwal
v.
ACIT
ITA Nos. 3132 to 3137/Del/2008
August 28, 2009
RELEVANT EXTRACTS:
** ** ** ** ** ** ** ** ** ** ** **
9. Section 153A(1) contains non-obstante clause and hence provisions of this section will over-ride the provisions of section 139, section 147, section 148, section 149, section 151 and section 153 of the Act. Under section 153A(1) the assessing officer is empowered is empowered to issue notices to the assessee searched for a period of six year sin order to assess the income on the basis of material found during the course of search. The second proviso to section 153A(1) provides that the assessment or reassessment, if any, relating to any assessment year falling within the period of six assessment years referred to in section 153A(1) pending on the date of initiation of search u/s 132 or making of requisition u/s 132A as the case may be shall abte. Therefore after initiation of search no assessment in respect of pending assessment shall be made and Assessing Officer is empowered to issue notice u/s 153A to assess or re-assess the total income of six assessment years immediately preceding assessment year relevant to the previous year in which such search was conducted or requisition was made. The assessee had valued the closing stock for assessment year 2000-01 to 2005-06 on average cost method which has resulted in reduction of taxable income in all the years ranging from Rs. 9875 in assessment year 2001-02 to Rs. 9,00,797 in assessment 2005-06. The contention of the assessee that in the case of jewelers, it is impossible to value the closing stock on the basis of market cost as the items of closing stock cannot be identified with reference to various purchases made during the year. However, the fact remains that the assessee had been valuing the closing stock at “cost” as certified by tax auditors. It is a fact that all the assessee are required to maintain the stock registers during the course of normal business activities. It is not difficult to identify the items purchased, the date of purchase and their costs. Hence we do not find any substance in the argument of the assessee that it is impossible to value the closing stock at “actual cost” particularly in view of the fact that the assessee had been valuing the closing stock at cost price from very beginning of the business.
10. Moreover, the change of method of valuation of the closing stock is allowed in such change is bonafide and the assessee has proper reasons for such change. The conclude proceedings cannot be reopened on the ground that the assessee had incorrectly valued the closing stock in those years. The assessee had filed returns of income for all the six assessment years u/s 139 (1). The assessments or reassessments cannot be made in these years by invoking the provisions of section 147 after initiation of search proceedings in view of second proviso to section 153A(1) of the Act. From the facts given above it is clear that the assessee had changed the method of valuation of the closing stocks for all assessment years to reduce the profits and hence the change in the method of valuation is not bona fide. As regards the contention of the assessee that it is impossible to value the closing stock at cost price in the case of jewelers, this is a sweeping generalization without having any material on records to prove. The assessee had not filed any evidence to support its contention and hence deserves to be rejected.
** ** ** ** ** ** ** ** ** ** ** **
posted at www.taxmannindia.blogspot.com
ITAT, DELHI BENCH ‘B’ NEW DELHI Special Bench of ITAT on interpretation of Rule 13E inserted in ITAT Members (Recruitment & Conditions of Service) Rules, 1963 vide Notification No. GSR 389E, dated 3-6-2009
Special Bench of ITAT on interpretation of Rule 13E inserted in ITAT Members (Recruitment & Conditions of Service) Rules, 1963 vide Notification No. GSR 389E, dated 3-6-2009
The members of the ITAT who retire on or after 3-6-2009, even if otherwise qualified to practice under section 288 of the Income-tax Act, 1961, would still be debarred to appear and argue before the Tribunal, in the light of Rule 13E; persons who have resigned from service prior to the date of Notification in question, without any retirement benefits would not be covered by said notification; the Notification does not apply to members who are appointed on a temporary basis and resign from service without being confirmed during probation period.
ITAT, DELHI BENCH ‘B’ NEW DELHI (SPECIAL BENCH)
Concept Creations
v.
Addl. CIT
ITA No. 3370/Del/08
September 15, 2009
posted at www.taxmannindia.blogspot.com
The members of the ITAT who retire on or after 3-6-2009, even if otherwise qualified to practice under section 288 of the Income-tax Act, 1961, would still be debarred to appear and argue before the Tribunal, in the light of Rule 13E; persons who have resigned from service prior to the date of Notification in question, without any retirement benefits would not be covered by said notification; the Notification does not apply to members who are appointed on a temporary basis and resign from service without being confirmed during probation period.
ITAT, DELHI BENCH ‘B’ NEW DELHI (SPECIAL BENCH)
Concept Creations
v.
Addl. CIT
ITA No. 3370/Del/08
September 15, 2009
posted at www.taxmannindia.blogspot.com
ITAT, MUMBAI BENCH ‘A’, Determination of nature of renovation expenses incurred on a leased premises
Determination of nature of renovation expenses incurred on a leased premises
In order to claim deduction of an expenditure as revenue which otherwise gives enduring advantage, the onus is on assessee to prove that the ownership of the property even during subsistence of lease, vests with the lessor and the assessee enjoyed the benefit of reduced license fee.
ITAT, MUMBAI BENCH ‘A’, MUMBAI
The Living Room Designers
v.
ITO
ITA No. 996/Mum/2008
August 31, 2009
RELEVANT EXTRACTS:
** ** ** ** ** ** ** ** ** ** ** **
12. Broadly, if an expenditure gives the assessee an enduring advantage, the same has to be treated as a capital expenditure. Similarly if an expenditure is incurred on a leased premises and the agreement speaks of handing over possession of the property to the original owner as-it-is, without any benefit or without any right to retain the improvements made to the existing premises, such expenditure may be treated as revenue in nature since the assessee cannot be said to be having any enduring advantage out of such expenditure. Courts have also highlighted subtle difference between replacement and renovation. A wall or roof, which is already in existence, is given further support no new asset can be said to have come into existence but if a new floor is constructed thereon or an altogether change brought out to the existing premises it can be treated as capital expenditure.
13. In the case of Balimal Naval Kishore vs. CIT 224 ITR 414 the Apex Court observed that a total renovation of the theatre and the expenditure incurred for that purpose by purchasing new machinery, new furniture, new sanitary fittings and new electrical wiring, cannot be said to qualify as "current repairs" but has to be treated as capital in nature.
14. However, in the case of CIT vs. Madras Auto Service (P) Ltd. 233 ITR 468 the Apex Court, while deciding Civil Appeal relevant for the assessment year 1968-69, observed that an expenditure incurred on renovation of leasehold building has to be treated as revenue in nature. In that case, the assessee had obtained premises on lease for a period of 39 years and as per the terms and conditions of the lease the assessee had the right to demolish the existing premises and appropriate to itself of the material thereof without paying to the lessors any compensation and construct a new building thereon to suit the purpose of their business. The lessee was required to pay rent of Rs.1000/- per month for the first 15 years with slight increase from time to time thereafter. The lease deed further provided that the new construction shall, right from the commencement of the work, be the property to the lessors. The lessee was not entitled, under any circumstances, for any compensation whatsoever on account of its putting-up the new construction in the place of the old. Acting under the lease deed the assessee invested a sum of Rs. 1,62,835/- on construction of a new building on the said land and claimed it as business expenditure or as extra rent for the lease. In the backdrop of these facts, the Apex Court laid emphasis on the following principle "if what is got rid of by a lump-sum payment is an annual business expense chargeable against revenue, the lump-sum payment should equally be regarded as a business expense." The Apex Court further noticed that right from the inception the building was of the ownership of the lessor and thus the assessee did not acquire any capital asset. The only benefit, which the assessee derived by spending the money, was that it got a lease of a new building at a low rent, thus saving considerable revenue expenditure, for the next 39 years. Therefore, the expenditure was considered as a revenue expenditure.
15. In the case of Bigjo's India Ltd. vs. CIT (2007) 293 ITR 170 (Delhi), the HonTDle Delhi High Court was concerned with the assessment year 1998-99 wherein the assessee incurred certain expenditure on account of repair and. maintenance of air-conditioners etc., and the same was claimed as revenue expenditure by placing reliance upon the decision of the Apex Court in the case of Madras Auto Services (supra). The Hon’ble High Court observed that the decision of the Apex Court is distinguishable on facts inasmuch as the Apex Court was concerned with a situation where the constructed portion would be in the ownership of the lessor and on account of the expenditure incurred the assessee had benefit of reduced payment of license-fee whereas, in the instant case the assessee had enduring benefit ; By virtue of incurring huge expenditure on purchase of timber, plywood and by building new shaft it is not shown that the assessee had enjoyed any revenue benefit in lump-sum and thus it was treated as capital expenditure.
16. In the case of CIT vs. HEDGE consultancy (P) Ltd. 127 Taxman 597 the assessee converted the godown premises into office by renovating it. The Hon’ble Bombay High Court observed that the asset created by spending the said amount did not belong to the assessee but the assessee got the business advantage of using modern business premises at low rent, thus saving considerable revenue expenditure for a considerably long period and hence the expenditure character of revenue expenditure. Similarly the other case law relied upon by the assessee were also decided under the peculiar facts of each case.
17. As could be noticed from the above referred Judgments, in order to claim deduction of an expenditure which otherwise gives enduring advantage, the onus is on assessee to prove that the ownership of the property even during subsistence of lease, vests with the lessor and the assessee enjoyed the benefit of reduced license-fee. In the instant case, however, the lease agreement was not placed on record and it was not shown as to what is the revenue advantage, over a period of time, the assessee obtained by incurring the huge expenditure. It is also not known as to whether the ownership of the items replaced and/or affixed to the property would automatically become the property of the lessor. On the contrary, some of the expenditure such as carpet purchase etc., indicate that it has nothing to do with the property and, upon termination of lease, even if there is a condition of surrender of the property on as-is-where is condition, certain items such as carpet, ladder, glass etc., need not be handed-over to the lessor. Out of the total expenditure of approximately Rs. 12 lakhs on the same property, the assessee treated a sum of Rs. 3 lakhs as capital in nature which is specifically connected to the civil work and carpentry work. If there is a clause in the lease deed, as in the case of Madras Auto Service (supra), with regard to lessor's right over the constructed portion of the building, the assessee would have claimed a sum of Rs. 3 lakhs also as revenue expenditure but such sum having been not declared as revenue expenditure, it shows that expenditure incurred on the renovation has given the assessee an enduring benefit and the ownership of the renovated items would not per se become the property of the lessor. Such being the case it is difficult to conceive that items like carpet etc., would fall in the category of items which are considered in the case of Madras Auto Service (supra). In particular, the assessee has not placed any material, either before the tax authorities or before us to show that the lump-sum payment in the form of renovation expenses has benefited the assessee in the form of reduction in the revenue expenditure over a period of years by virtue of low rentals or otherwise. Under these circumstances we do not find any merit in the argument advanced by the learned counsel appearing on behalf of the assessee. In the absence of any material to contradict the findings of the learned CIT (A) we reject ground Nos. 1 and 2 of the assessee and uphold the Order of the learned CIT (A).
** ** ** ** ** ** ** ** ** ** ** **
posted at www.taxmannindia.blogspot.com
In order to claim deduction of an expenditure as revenue which otherwise gives enduring advantage, the onus is on assessee to prove that the ownership of the property even during subsistence of lease, vests with the lessor and the assessee enjoyed the benefit of reduced license fee.
ITAT, MUMBAI BENCH ‘A’, MUMBAI
The Living Room Designers
v.
ITO
ITA No. 996/Mum/2008
August 31, 2009
RELEVANT EXTRACTS:
** ** ** ** ** ** ** ** ** ** ** **
12. Broadly, if an expenditure gives the assessee an enduring advantage, the same has to be treated as a capital expenditure. Similarly if an expenditure is incurred on a leased premises and the agreement speaks of handing over possession of the property to the original owner as-it-is, without any benefit or without any right to retain the improvements made to the existing premises, such expenditure may be treated as revenue in nature since the assessee cannot be said to be having any enduring advantage out of such expenditure. Courts have also highlighted subtle difference between replacement and renovation. A wall or roof, which is already in existence, is given further support no new asset can be said to have come into existence but if a new floor is constructed thereon or an altogether change brought out to the existing premises it can be treated as capital expenditure.
13. In the case of Balimal Naval Kishore vs. CIT 224 ITR 414 the Apex Court observed that a total renovation of the theatre and the expenditure incurred for that purpose by purchasing new machinery, new furniture, new sanitary fittings and new electrical wiring, cannot be said to qualify as "current repairs" but has to be treated as capital in nature.
14. However, in the case of CIT vs. Madras Auto Service (P) Ltd. 233 ITR 468 the Apex Court, while deciding Civil Appeal relevant for the assessment year 1968-69, observed that an expenditure incurred on renovation of leasehold building has to be treated as revenue in nature. In that case, the assessee had obtained premises on lease for a period of 39 years and as per the terms and conditions of the lease the assessee had the right to demolish the existing premises and appropriate to itself of the material thereof without paying to the lessors any compensation and construct a new building thereon to suit the purpose of their business. The lessee was required to pay rent of Rs.1000/- per month for the first 15 years with slight increase from time to time thereafter. The lease deed further provided that the new construction shall, right from the commencement of the work, be the property to the lessors. The lessee was not entitled, under any circumstances, for any compensation whatsoever on account of its putting-up the new construction in the place of the old. Acting under the lease deed the assessee invested a sum of Rs. 1,62,835/- on construction of a new building on the said land and claimed it as business expenditure or as extra rent for the lease. In the backdrop of these facts, the Apex Court laid emphasis on the following principle "if what is got rid of by a lump-sum payment is an annual business expense chargeable against revenue, the lump-sum payment should equally be regarded as a business expense." The Apex Court further noticed that right from the inception the building was of the ownership of the lessor and thus the assessee did not acquire any capital asset. The only benefit, which the assessee derived by spending the money, was that it got a lease of a new building at a low rent, thus saving considerable revenue expenditure, for the next 39 years. Therefore, the expenditure was considered as a revenue expenditure.
15. In the case of Bigjo's India Ltd. vs. CIT (2007) 293 ITR 170 (Delhi), the HonTDle Delhi High Court was concerned with the assessment year 1998-99 wherein the assessee incurred certain expenditure on account of repair and. maintenance of air-conditioners etc., and the same was claimed as revenue expenditure by placing reliance upon the decision of the Apex Court in the case of Madras Auto Services (supra). The Hon’ble High Court observed that the decision of the Apex Court is distinguishable on facts inasmuch as the Apex Court was concerned with a situation where the constructed portion would be in the ownership of the lessor and on account of the expenditure incurred the assessee had benefit of reduced payment of license-fee whereas, in the instant case the assessee had enduring benefit ; By virtue of incurring huge expenditure on purchase of timber, plywood and by building new shaft it is not shown that the assessee had enjoyed any revenue benefit in lump-sum and thus it was treated as capital expenditure.
16. In the case of CIT vs. HEDGE consultancy (P) Ltd. 127 Taxman 597 the assessee converted the godown premises into office by renovating it. The Hon’ble Bombay High Court observed that the asset created by spending the said amount did not belong to the assessee but the assessee got the business advantage of using modern business premises at low rent, thus saving considerable revenue expenditure for a considerably long period and hence the expenditure character of revenue expenditure. Similarly the other case law relied upon by the assessee were also decided under the peculiar facts of each case.
17. As could be noticed from the above referred Judgments, in order to claim deduction of an expenditure which otherwise gives enduring advantage, the onus is on assessee to prove that the ownership of the property even during subsistence of lease, vests with the lessor and the assessee enjoyed the benefit of reduced license-fee. In the instant case, however, the lease agreement was not placed on record and it was not shown as to what is the revenue advantage, over a period of time, the assessee obtained by incurring the huge expenditure. It is also not known as to whether the ownership of the items replaced and/or affixed to the property would automatically become the property of the lessor. On the contrary, some of the expenditure such as carpet purchase etc., indicate that it has nothing to do with the property and, upon termination of lease, even if there is a condition of surrender of the property on as-is-where is condition, certain items such as carpet, ladder, glass etc., need not be handed-over to the lessor. Out of the total expenditure of approximately Rs. 12 lakhs on the same property, the assessee treated a sum of Rs. 3 lakhs as capital in nature which is specifically connected to the civil work and carpentry work. If there is a clause in the lease deed, as in the case of Madras Auto Service (supra), with regard to lessor's right over the constructed portion of the building, the assessee would have claimed a sum of Rs. 3 lakhs also as revenue expenditure but such sum having been not declared as revenue expenditure, it shows that expenditure incurred on the renovation has given the assessee an enduring benefit and the ownership of the renovated items would not per se become the property of the lessor. Such being the case it is difficult to conceive that items like carpet etc., would fall in the category of items which are considered in the case of Madras Auto Service (supra). In particular, the assessee has not placed any material, either before the tax authorities or before us to show that the lump-sum payment in the form of renovation expenses has benefited the assessee in the form of reduction in the revenue expenditure over a period of years by virtue of low rentals or otherwise. Under these circumstances we do not find any merit in the argument advanced by the learned counsel appearing on behalf of the assessee. In the absence of any material to contradict the findings of the learned CIT (A) we reject ground Nos. 1 and 2 of the assessee and uphold the Order of the learned CIT (A).
** ** ** ** ** ** ** ** ** ** ** **
posted at www.taxmannindia.blogspot.com
Thursday, September 10, 2009
ITAT, ‘C’ BENCH, MUMBAI Taxability of loan liability in hands of borrower when unilaterally written off by lender
Taxability of loan liability in hands of borrower when unilaterally written off by lender
Remission of a debt by the lender which was not claimed and allowed as a deduction to the borrower in any manner in any earlier previous year cannot be brought to tax either under section 41(1) or under section 28(iv) of Income-tax Act, 1961.
ITAT, ‘C’ BENCH, MUMBAI
Cipla Investments Ltd.
v.
ITO
ITA No. 1996/Mum/2008
August 28, 2009
RELEVANT EXTRACTS:
** ** ** ** ** ** ** ** ** ** ** **
9. We have considered the issue. As the facts indicate the holding company has advanced funds to the assessee company in 1998 which was received as share application money, later on transferred to unsecured loan. The amounts were utilised in investments and the incomes thereon were offered under the head 'capital gains' and not as 'business income'. As rightly held by the CIT(A), provisions of section 41(1) invoked by the A.O. does not apply. For attracting the provisions of section 41(1) the first requisite condition to be satisfied is that the assessee should have got the deduction or benefit or allowance in respect of loss, expenditure or trading liability incurred by it and consequently, during any previous year the assessee should have received any amount in respect of such loss, expenditure or trading liability by way of remission or cessation thereon. The remission would become income only when the assessee has claimed deduction earlier. In the instant case the assessee has not got any deduction on account of acquisition of capital assets as the same has been reflected in the Balance Sheet and not in the P 8s L Account and hence, applicability of provisions of section 41(1) are not there. The CIT(A)'s order to that extent is correct both on facts and on law. However, the wrongly invoked the provisions of section 28. We are not sure how the provisions of section 28 will apply. It is the contention of the assessee that the assessee has not done any trading activity nor shown any income as business income on the investments made. The findings of the CIT(A) that the amount was received in the course of its business is against his findings given while considering the addition under section 41(1). The assessee's business activity may comprise investment in shares and securities, but as far as computation of income is concerned the profit and loss in that transactions are said to be under the head 'capital gains' but not as 'business income', hence, the gain earned by the assessee in the course of business in investment and advance of loans is in the capital field but cannot be on the revenue field. As rightly held by various decisions above, remission of a debt by the holding company which was not claimed and allowed as a deduction in any manner in any earlier previous year could not be brought to tax either under section 41(1) or under section 28(iv). There is no benefit or perquisite arising to the assessee in this regard. Moreover, the assessee has to write off the amount in the books of account and the amount was still outstanding at the end of the year. As rightly pointed out by the learned counsel the decision of the Hon'ble Bombay High Court in the case of Solid Containers Ltd. (supra) does not apply to the facts of the case and moreover similar to the decision of the Hon'ble Bombay High Court in the case of Mahindra and Mahindra Ltd. vs. CIT 261 ITR 501. The loans availed for acquiring the capita asset, i.e. shares, when waived cannot be treated as assessable income for invoking the provisions of section 28. Since the original receipt was undoubtedly on account of capital nature, its waiver does not have the quality of changing the same into a revenue receipt. In view of these facts and also the various principles laid down in the case law relied upon by the learned counsel, we are of the opinion that the learned CIT(A) erred in treating the amount as taxable income in the hands of the assessee under section 28 of the Act. On the facts of the case, we are of the opinion that the provisions of section 28 does not apply and the amount is not taxable under the provisions of the Act. Accordingly the assessee’s grounds are allowed. Assessing Officer is directed to deleted the amount.
** ** ** ** ** ** ** ** ** ** ** **
Just click here to view digest of all case laws
http://taxmannindia.blogspot.com/search/label/Case%20Laws
posted at www.taxmannindia.blogspot.com
Remission of a debt by the lender which was not claimed and allowed as a deduction to the borrower in any manner in any earlier previous year cannot be brought to tax either under section 41(1) or under section 28(iv) of Income-tax Act, 1961.
ITAT, ‘C’ BENCH, MUMBAI
Cipla Investments Ltd.
v.
ITO
ITA No. 1996/Mum/2008
August 28, 2009
RELEVANT EXTRACTS:
** ** ** ** ** ** ** ** ** ** ** **
9. We have considered the issue. As the facts indicate the holding company has advanced funds to the assessee company in 1998 which was received as share application money, later on transferred to unsecured loan. The amounts were utilised in investments and the incomes thereon were offered under the head 'capital gains' and not as 'business income'. As rightly held by the CIT(A), provisions of section 41(1) invoked by the A.O. does not apply. For attracting the provisions of section 41(1) the first requisite condition to be satisfied is that the assessee should have got the deduction or benefit or allowance in respect of loss, expenditure or trading liability incurred by it and consequently, during any previous year the assessee should have received any amount in respect of such loss, expenditure or trading liability by way of remission or cessation thereon. The remission would become income only when the assessee has claimed deduction earlier. In the instant case the assessee has not got any deduction on account of acquisition of capital assets as the same has been reflected in the Balance Sheet and not in the P 8s L Account and hence, applicability of provisions of section 41(1) are not there. The CIT(A)'s order to that extent is correct both on facts and on law. However, the wrongly invoked the provisions of section 28. We are not sure how the provisions of section 28 will apply. It is the contention of the assessee that the assessee has not done any trading activity nor shown any income as business income on the investments made. The findings of the CIT(A) that the amount was received in the course of its business is against his findings given while considering the addition under section 41(1). The assessee's business activity may comprise investment in shares and securities, but as far as computation of income is concerned the profit and loss in that transactions are said to be under the head 'capital gains' but not as 'business income', hence, the gain earned by the assessee in the course of business in investment and advance of loans is in the capital field but cannot be on the revenue field. As rightly held by various decisions above, remission of a debt by the holding company which was not claimed and allowed as a deduction in any manner in any earlier previous year could not be brought to tax either under section 41(1) or under section 28(iv). There is no benefit or perquisite arising to the assessee in this regard. Moreover, the assessee has to write off the amount in the books of account and the amount was still outstanding at the end of the year. As rightly pointed out by the learned counsel the decision of the Hon'ble Bombay High Court in the case of Solid Containers Ltd. (supra) does not apply to the facts of the case and moreover similar to the decision of the Hon'ble Bombay High Court in the case of Mahindra and Mahindra Ltd. vs. CIT 261 ITR 501. The loans availed for acquiring the capita asset, i.e. shares, when waived cannot be treated as assessable income for invoking the provisions of section 28. Since the original receipt was undoubtedly on account of capital nature, its waiver does not have the quality of changing the same into a revenue receipt. In view of these facts and also the various principles laid down in the case law relied upon by the learned counsel, we are of the opinion that the learned CIT(A) erred in treating the amount as taxable income in the hands of the assessee under section 28 of the Act. On the facts of the case, we are of the opinion that the provisions of section 28 does not apply and the amount is not taxable under the provisions of the Act. Accordingly the assessee’s grounds are allowed. Assessing Officer is directed to deleted the amount.
** ** ** ** ** ** ** ** ** ** ** **
Just click here to view digest of all case laws
http://taxmannindia.blogspot.com/search/label/Case%20Laws
posted at www.taxmannindia.blogspot.com
ITAT, DELHI BENCH ‘G’ NEW DELHI Ascertainment of head under which loss claimed by assessee from share transaction is to be assessed
Ascertainment of head under which loss claimed by assessee from share transaction is to be assessed
Where the intention of the assessee-company was to purchase and hold the shares of group companies as investment, the loss arising from transactions in the said shares was assessable under the head “income from other sources”
ITAT, DELHI BENCH ‘G’ NEW DELHI
Goswami Credits & Investment Ltd.
v.
JCIT
ITA No. 1720 to 1722/D/2003
July 25, 2008
RELEVANT EXTRACTS:
** ** ** ** ** ** ** ** ** ** ** **
9. We have considered the rival submissions and also perused the relevant material on record. The main issue involved in these appeals is whether the loss shown by the assessee is assessable under the head "income from business "as claimed by the assessee company or under the head "income from other sources" as held by the authorities below. In order to decide this issue,' it has to be ascertained as to whether the relevant shares were purchased and held by the assessee company as its investment or as stock in trade. In this regard, the Id. Counsel for the assessee has laid great emphasis on the nature of the assessee company being an investment company. In our opinion, this fact alone is not sufficient to establish that the relevant shares were purchased and held by it as stock in trade. What is relevant in this context is the intention of the assessee company to hold the said shares and such intention, as rightly contended by the Id. DR before us, is to be gathered from the conduct of the assessee as well as the treatment given by it in the books of accounts. In this regard, it is observed that the said shares were treated as investment by the assessee company in its books of accounts as investment at least in the previous year relevant to AY 1996-97. No doubt, the said treatment was sought to be changed by the assessee company by showing that the said shares have been converted from investment to stock in trade in the previous year relevant to AY 1997-98. However, the said change in the treatment to the relevant shares given by the assessee company again, in our opinion, was not sufficient to support its case keeping in view all the facts of the case including especially the conduct of the assessee. First of all, it is noted that in the previous year relevant to AY 1996-97, the assessee company had sold some of the said shares and the profit arising from such sale was declared by ii as short term capital gain which clearly shows its intention to hold the said shares as investment and not stock in trade. Secondly, even if the shares were claimed to be converted from investment to stock in trade in the pervious year relevant to AY 1997-98 as per the treatment given in its books of accounts and such treatment continued to remain the same in AY 1998-99. the same - were valued at cost which as commented by the auditors in their report was not in accordance with accounting standard issued by the Institute of Chartered Accountants of India. Even in the notes to accounts for that year (copy placed at page no. 21 of the assessee's paper book), a following note was given as note no. 4:-
"the company has during the year classified its investments to stock in trade at cost. Such reclassification at cost is not in consonance with the accounting standard on accounting for investment issued by the Institute of Chartered Accountants of India consequent to which loss for the year has been understated by Rs. 1014 lakhs".
10. As is clearly evident from the aforesaid note given in the notes to accounts of the assessee company, the conversion of shares from investment into stock in trade was claimed to be made without complying with the mandatory accounting standard inasmuch as the valuation thereof was not done as per the said standard. This vital aspect of the matter clearly supports the case of the Revenue that the change in the accounting treatment given by the assessee company by converting the shares into stock in trade was only for the purpose of claiming the loss as business loss and the same therefore cannot be relied upon to say that the real intention of the assessee was to hold the said shares as stock in trade in a real sense. Moreover, as pointed out by the Id. DR on the basis of the pattern of sale and purchase of the said shares by the assessee company during the years under consideration, the investment in the shares of other group companies was static and even the few transactions of sale of the said shares were made to the other group companies. As observed by the Id. CIT(A) in his impugned order, there was a failure on the part of the assessee company to establish that the said shares were held by it in order to acquire a controlling interest in the other group companies and the Id. Counsel for the assessee has not been able to make out such a case even before us. Keeping in view all these facts of the case, we find it difficult to accept the stand of the assessee company that the relevant shares were held by it as stock in trade during the ordinary course of its business and the transactions in those shares constituted its business. On the other hand, the intention of the assessee company as is evident from its conduct as well as the accounting treatment given, in our opinion, was to acquire and hold the said shares as investment and the loss arising therefrom thus was rightly held as chargeable to tax under the head "income from other sources".
11. In the case of Dr. P. Vadamalayan v/s. CIT (supra) cited by the Id. Counsel for the assessee, it was no doubt held by the Hon'ble Madras High Court that the term "business" as used in the fiscal statute cannot ordinarily be understood in its etymological sense and the definition of "business" being an inclusive definition it is indicative of extension and expansion and not restriction. However, as further clarified by their Lordships, an activity can be termed as "business" giving such a wide connotation only when it is really a commercial activity. In this context, a reference can usefully be made to the another judgement of Hon'ble Madras High Court in the case of Janab Abubucker Sait v/s. CIT (Supra) cited by the Id. Counsel for the assessee wherein it was held that one of the essential elements in an adventure in the nature of trade is the intention to trade and such intention must be present at the time of purchase. It was also held that if however the subject of transaction is normally used for investment such as land, houses, shares etc., an admitted intention to sell such subject matter on the arrival of suitable reselected time does not always warrant a definite conclusion that the transaction is in the nature of trade. As already observed by us, the intention of the assessee company in the present case, having regard to all the facts and circumstances including the conduct of the assessee, was to purchase and hold the shares of group companies as investment and going by the static manner in which the said shares were held, it cannot be said that the transactions in the said shares constituted the business activity of the assessee company.
13. Keeping in view the reasons given above, we are of the view that the shares of other group companies were held by the assessee as investment and the loss arising from the transactions in the said shares was assessable under the head “income from other sources” as rightly held by the authorities below. In that view of the matter, we uphold the impugned order of the Id. CIT (A) confirming the action of AO in disallowing the claim of the assessee for carry forward of the said loss as a business loss.
** ** ** ** ** ** ** ** ** ** ** **
Just click here to view digest of all case laws
http://taxmannindia.blogspot.com/search/label/Case%20Laws
posted at www.taxmannindia.blogspot.com
Where the intention of the assessee-company was to purchase and hold the shares of group companies as investment, the loss arising from transactions in the said shares was assessable under the head “income from other sources”
ITAT, DELHI BENCH ‘G’ NEW DELHI
Goswami Credits & Investment Ltd.
v.
JCIT
ITA No. 1720 to 1722/D/2003
July 25, 2008
RELEVANT EXTRACTS:
** ** ** ** ** ** ** ** ** ** ** **
9. We have considered the rival submissions and also perused the relevant material on record. The main issue involved in these appeals is whether the loss shown by the assessee is assessable under the head "income from business "as claimed by the assessee company or under the head "income from other sources" as held by the authorities below. In order to decide this issue,' it has to be ascertained as to whether the relevant shares were purchased and held by the assessee company as its investment or as stock in trade. In this regard, the Id. Counsel for the assessee has laid great emphasis on the nature of the assessee company being an investment company. In our opinion, this fact alone is not sufficient to establish that the relevant shares were purchased and held by it as stock in trade. What is relevant in this context is the intention of the assessee company to hold the said shares and such intention, as rightly contended by the Id. DR before us, is to be gathered from the conduct of the assessee as well as the treatment given by it in the books of accounts. In this regard, it is observed that the said shares were treated as investment by the assessee company in its books of accounts as investment at least in the previous year relevant to AY 1996-97. No doubt, the said treatment was sought to be changed by the assessee company by showing that the said shares have been converted from investment to stock in trade in the previous year relevant to AY 1997-98. However, the said change in the treatment to the relevant shares given by the assessee company again, in our opinion, was not sufficient to support its case keeping in view all the facts of the case including especially the conduct of the assessee. First of all, it is noted that in the previous year relevant to AY 1996-97, the assessee company had sold some of the said shares and the profit arising from such sale was declared by ii as short term capital gain which clearly shows its intention to hold the said shares as investment and not stock in trade. Secondly, even if the shares were claimed to be converted from investment to stock in trade in the pervious year relevant to AY 1997-98 as per the treatment given in its books of accounts and such treatment continued to remain the same in AY 1998-99. the same - were valued at cost which as commented by the auditors in their report was not in accordance with accounting standard issued by the Institute of Chartered Accountants of India. Even in the notes to accounts for that year (copy placed at page no. 21 of the assessee's paper book), a following note was given as note no. 4:-
"the company has during the year classified its investments to stock in trade at cost. Such reclassification at cost is not in consonance with the accounting standard on accounting for investment issued by the Institute of Chartered Accountants of India consequent to which loss for the year has been understated by Rs. 1014 lakhs".
10. As is clearly evident from the aforesaid note given in the notes to accounts of the assessee company, the conversion of shares from investment into stock in trade was claimed to be made without complying with the mandatory accounting standard inasmuch as the valuation thereof was not done as per the said standard. This vital aspect of the matter clearly supports the case of the Revenue that the change in the accounting treatment given by the assessee company by converting the shares into stock in trade was only for the purpose of claiming the loss as business loss and the same therefore cannot be relied upon to say that the real intention of the assessee was to hold the said shares as stock in trade in a real sense. Moreover, as pointed out by the Id. DR on the basis of the pattern of sale and purchase of the said shares by the assessee company during the years under consideration, the investment in the shares of other group companies was static and even the few transactions of sale of the said shares were made to the other group companies. As observed by the Id. CIT(A) in his impugned order, there was a failure on the part of the assessee company to establish that the said shares were held by it in order to acquire a controlling interest in the other group companies and the Id. Counsel for the assessee has not been able to make out such a case even before us. Keeping in view all these facts of the case, we find it difficult to accept the stand of the assessee company that the relevant shares were held by it as stock in trade during the ordinary course of its business and the transactions in those shares constituted its business. On the other hand, the intention of the assessee company as is evident from its conduct as well as the accounting treatment given, in our opinion, was to acquire and hold the said shares as investment and the loss arising therefrom thus was rightly held as chargeable to tax under the head "income from other sources".
11. In the case of Dr. P. Vadamalayan v/s. CIT (supra) cited by the Id. Counsel for the assessee, it was no doubt held by the Hon'ble Madras High Court that the term "business" as used in the fiscal statute cannot ordinarily be understood in its etymological sense and the definition of "business" being an inclusive definition it is indicative of extension and expansion and not restriction. However, as further clarified by their Lordships, an activity can be termed as "business" giving such a wide connotation only when it is really a commercial activity. In this context, a reference can usefully be made to the another judgement of Hon'ble Madras High Court in the case of Janab Abubucker Sait v/s. CIT (Supra) cited by the Id. Counsel for the assessee wherein it was held that one of the essential elements in an adventure in the nature of trade is the intention to trade and such intention must be present at the time of purchase. It was also held that if however the subject of transaction is normally used for investment such as land, houses, shares etc., an admitted intention to sell such subject matter on the arrival of suitable reselected time does not always warrant a definite conclusion that the transaction is in the nature of trade. As already observed by us, the intention of the assessee company in the present case, having regard to all the facts and circumstances including the conduct of the assessee, was to purchase and hold the shares of group companies as investment and going by the static manner in which the said shares were held, it cannot be said that the transactions in the said shares constituted the business activity of the assessee company.
13. Keeping in view the reasons given above, we are of the view that the shares of other group companies were held by the assessee as investment and the loss arising from the transactions in the said shares was assessable under the head “income from other sources” as rightly held by the authorities below. In that view of the matter, we uphold the impugned order of the Id. CIT (A) confirming the action of AO in disallowing the claim of the assessee for carry forward of the said loss as a business loss.
** ** ** ** ** ** ** ** ** ** ** **
Just click here to view digest of all case laws
http://taxmannindia.blogspot.com/search/label/Case%20Laws
posted at www.taxmannindia.blogspot.com
ITAT, CHANDIGARH BENCH (A) Allowability of interest on borrowed funds advanced by assessee-company to its subsidiary without interest
Allowability of interest on borrowed funds advanced by assessee-company to its subsidiary without interest
Where funds have been advanced by the assessee to its subsidiary company on the ground of commercial expediency, the assessee would be entitled to claim deduction of interest on borrowed loans.
ITAT, CHANDIGARH BENCH (A)
Industrial Cables (India) Ltd.
v.
Addl. CIT
ITA No. 237/Chandi/2008
November 28, 2008
RELEVANT EXTRACTS:
** ** ** ** ** ** ** ** ** ** ** **
8. We have considered the, rival submissions, perused the material on record. In the instant case, rehabilitation scheme was sanctioned by the BIFR on 05.07.2001, A copy of the summary record of the proceedings of the hearing held on 5.7.2001 before BIFR- have been placed in the Paper Book. It h«as been held in the aforesaid proceedings para 22 as under:
"22. After hearing the submissions and no carefully considering the observations made 'by alt in today's hearing and the material on record,, the Bench sanctioned the scheme u/s 18(4) of the Act and the Sanctioned Scheme will come into force with immediate effect.'
9. It is thus evident from the above that, BIFR sanctioned the scheme under section 18(4) of the Act and the Sanctioned Scheme came into force with immediate effect. A copy of the sanctioned scheme has also been placed in the Paper Book at pages 25 to '56. Form. The perusal of the scheme, it is seen that the appellant company was to provide promoters contribution of 'a sum of Rs. 3,50,00,000/- to its subsidiary' Company, namely, M/s Haryana telecom Ltd. In fact, the scheme;' also provides in para 6.2 as under:
"d) The company shall satisfy MA that the physical progress and all aspects of cost of the scheme/means 0f finance of the scheme is complied with as per schedule. To this end, the company shall furnish to MA such information and data as may be required by it at quarterly intervals. Any financial shortfall arising out of the delayed implementation of the schedule or for any other reason shall be met by the company/promoters without, any recourse to FI/Banks or seeking any further reliefs/concessions including margin money from them .than what ha already been provided for in the Scheme within a period not exceeding three months."
10. It is therefore, clear that, the assessee was obliged to provide funds to the subsidiary company under a rehabilitation scheme sanctioned by BIFR. In other words, these funds were provided by the assessee to its subsidiary company, namely M/s Haryana Telecom Ltd., as per the scheme for rehabilitation sanctioned by the BIFR. Obviously, the appellant can be said to have a deep interest in the rehabilitation of the business of the subsidiary company. Ostensibly, the funds have been put to use by the subsidiary for its business. It is thus a case where funds have been advanced by the assessee to its subsidiary company on grounds of commercial expediency. In somewhat similar situation, Apex Court in S. A. Builders (supra) observed as under:
"We wish to make it clear that it is not our opinion that in every case interest on borrowed loan has to 'be allowed if the assessee advances it to a sister concern: It all depends on the facts and circumstances of the respective case. For instance, if the directors of the sister concern utilize the amount advanced to it by the assessee for their personal benefit, obviously it cannot be said that such money was advanced as measure of commercial expediency. However, money can be said to be advanced to a sister concern for commercial expediency in many other circumstances (which need not be enumerated here). However, where it is obvious that a holding company has a deep interest in its subsidiary, and 'hence .if the, holding company advances borrowed money to a subsidiary and the same is used by the subsidiary for some business purposes, the assessee would, in our opinion, ordinarily be entitled to deduction of interest on its borrowed loans."
11 From the aforesaid, it is safe to deduce that, all that is required to be seen is whether the money has been advanced by the assessee on grounds . of commercial expediency or-not? If it is so, then no disallowance of interest is tenable and the assessee would be entitled claim deduction of interest on borrowed loans. In the instant case, as is evident from the facts stated above, it is a case where funds have been advanced by the assessee to its subsidiary company on the ground of commercial expediency. It may be relevant to state here that, this fact was duty stated before Assessing Officer, as would be evident from the reply filed before Assessing Officer dated 9-10-2007 as under:-
"A sum of Rs. 3,47,00,000/- was advanced to Haryana Telecom Ltd. Rohtak on various dates as per. details attached. Haryana Telecom Ltd.-is a ... subsidiary 6f Industrial Cables[(I} Ltd.. IT was declared sick as per Sick 'Industrial'. Companies Special Provisions Act, 1985 vide Board for Financial & Industrial Reconstruction (BIFR} order dated 28-06-1999. The amount under reference was paid by Industrial Cables (India) Ltd. in pursuance of order of BIFR vide their order dated 27-08-2001 as promoter's contribution for rehabilitation scheme of Haryana Telecom Ltd. reference may be made to para 3.0 of the order dated 27-08-2001. In view of the fact stated above, no interest-free advance has been made to a subsidiary company, but the amount has been paid under legal obligation in view of the order of BIFR. Moreover, as aforesaid. Haryana Telecom Ltd. is a subsidiary of you 're. assessee company and the amount has been paid in addition to the order of BIFR for commercial expediency and, as such, is fully covered by the judgement of the apex court in the case of SA Builders vs. CIT, 288 1TR 1. Copies of orders of BIFR referred to above are enclosed."
12. Infact, this submission was also reiterated before Commissioner (Appeals). However, both the authorities below overlooked the above factual position and, held the disallowance of the interest to be tenable. We are of the respectful opinion that, judgment of jurisdictional High Court in the case of the appellant for assessment years 1991-92, 1992-93, 1993-94 and 1996-97 are no doubt binding but only when the facts of the case of the appellant in the instant year and, those years are identical. In the present case, it is undisputed that the money has been advanced by the assessee company under a sanctioned scheme of BIFR and it is a case where money had been advanced on the ground of commercial expediency. It is not a case and nor it can be held that, the money had been advanced by the assessor for non-business, purposes. In fact, there is no such finding either by Assessing Officer or CIT(A) so as to enable us to conclude that money had been diverted for non-business purposes. On the contrary, mechanical reliance on the judgment of the Hon’ble jurisdictional High Court is also not a correct way of following the judgement of the Hon’ble Punjab and Haryana High Court in the case of the appellant for assessment year 1995-96, wherein the judgment of the Hon’ble Punjab and Haryana High Court in the case of the appellant in ITA No. 88 of 2004 dated 28-3-2006 was not followed and, it was held as under:-
"We may notice that although the principle of consistency is applicable and the decision on the issue having been taken in favour of the assessee for the previous year the same has to be followed, but each assessment year being an independent one, in view of conscious judgment of this Court on the issue after referring to, other judgments and in absence of any direct judgment of the Hon'ble Supreme Court, we are of the view that the earlier order of this Court dismissing appeal of the revenue in limine cannot be taken to be conclusive."
** ** ** ** ** ** ** ** ** ** ** **
Just click here to view digest of all case laws
http://taxmannindia.blogspot.com/search/label/Case%20Laws
posted at www.taxmannindia.blogspot.com
Where funds have been advanced by the assessee to its subsidiary company on the ground of commercial expediency, the assessee would be entitled to claim deduction of interest on borrowed loans.
ITAT, CHANDIGARH BENCH (A)
Industrial Cables (India) Ltd.
v.
Addl. CIT
ITA No. 237/Chandi/2008
November 28, 2008
RELEVANT EXTRACTS:
** ** ** ** ** ** ** ** ** ** ** **
8. We have considered the, rival submissions, perused the material on record. In the instant case, rehabilitation scheme was sanctioned by the BIFR on 05.07.2001, A copy of the summary record of the proceedings of the hearing held on 5.7.2001 before BIFR- have been placed in the Paper Book. It h«as been held in the aforesaid proceedings para 22 as under:
"22. After hearing the submissions and no carefully considering the observations made 'by alt in today's hearing and the material on record,, the Bench sanctioned the scheme u/s 18(4) of the Act and the Sanctioned Scheme will come into force with immediate effect.'
9. It is thus evident from the above that, BIFR sanctioned the scheme under section 18(4) of the Act and the Sanctioned Scheme came into force with immediate effect. A copy of the sanctioned scheme has also been placed in the Paper Book at pages 25 to '56. Form. The perusal of the scheme, it is seen that the appellant company was to provide promoters contribution of 'a sum of Rs. 3,50,00,000/- to its subsidiary' Company, namely, M/s Haryana telecom Ltd. In fact, the scheme;' also provides in para 6.2 as under:
"d) The company shall satisfy MA that the physical progress and all aspects of cost of the scheme/means 0f finance of the scheme is complied with as per schedule. To this end, the company shall furnish to MA such information and data as may be required by it at quarterly intervals. Any financial shortfall arising out of the delayed implementation of the schedule or for any other reason shall be met by the company/promoters without, any recourse to FI/Banks or seeking any further reliefs/concessions including margin money from them .than what ha already been provided for in the Scheme within a period not exceeding three months."
10. It is therefore, clear that, the assessee was obliged to provide funds to the subsidiary company under a rehabilitation scheme sanctioned by BIFR. In other words, these funds were provided by the assessee to its subsidiary company, namely M/s Haryana Telecom Ltd., as per the scheme for rehabilitation sanctioned by the BIFR. Obviously, the appellant can be said to have a deep interest in the rehabilitation of the business of the subsidiary company. Ostensibly, the funds have been put to use by the subsidiary for its business. It is thus a case where funds have been advanced by the assessee to its subsidiary company on grounds of commercial expediency. In somewhat similar situation, Apex Court in S. A. Builders (supra) observed as under:
"We wish to make it clear that it is not our opinion that in every case interest on borrowed loan has to 'be allowed if the assessee advances it to a sister concern: It all depends on the facts and circumstances of the respective case. For instance, if the directors of the sister concern utilize the amount advanced to it by the assessee for their personal benefit, obviously it cannot be said that such money was advanced as measure of commercial expediency. However, money can be said to be advanced to a sister concern for commercial expediency in many other circumstances (which need not be enumerated here). However, where it is obvious that a holding company has a deep interest in its subsidiary, and 'hence .if the, holding company advances borrowed money to a subsidiary and the same is used by the subsidiary for some business purposes, the assessee would, in our opinion, ordinarily be entitled to deduction of interest on its borrowed loans."
11 From the aforesaid, it is safe to deduce that, all that is required to be seen is whether the money has been advanced by the assessee on grounds . of commercial expediency or-not? If it is so, then no disallowance of interest is tenable and the assessee would be entitled claim deduction of interest on borrowed loans. In the instant case, as is evident from the facts stated above, it is a case where funds have been advanced by the assessee to its subsidiary company on the ground of commercial expediency. It may be relevant to state here that, this fact was duty stated before Assessing Officer, as would be evident from the reply filed before Assessing Officer dated 9-10-2007 as under:-
"A sum of Rs. 3,47,00,000/- was advanced to Haryana Telecom Ltd. Rohtak on various dates as per. details attached. Haryana Telecom Ltd.-is a ... subsidiary 6f Industrial Cables[(I} Ltd.. IT was declared sick as per Sick 'Industrial'. Companies Special Provisions Act, 1985 vide Board for Financial & Industrial Reconstruction (BIFR} order dated 28-06-1999. The amount under reference was paid by Industrial Cables (India) Ltd. in pursuance of order of BIFR vide their order dated 27-08-2001 as promoter's contribution for rehabilitation scheme of Haryana Telecom Ltd. reference may be made to para 3.0 of the order dated 27-08-2001. In view of the fact stated above, no interest-free advance has been made to a subsidiary company, but the amount has been paid under legal obligation in view of the order of BIFR. Moreover, as aforesaid. Haryana Telecom Ltd. is a subsidiary of you 're. assessee company and the amount has been paid in addition to the order of BIFR for commercial expediency and, as such, is fully covered by the judgement of the apex court in the case of SA Builders vs. CIT, 288 1TR 1. Copies of orders of BIFR referred to above are enclosed."
12. Infact, this submission was also reiterated before Commissioner (Appeals). However, both the authorities below overlooked the above factual position and, held the disallowance of the interest to be tenable. We are of the respectful opinion that, judgment of jurisdictional High Court in the case of the appellant for assessment years 1991-92, 1992-93, 1993-94 and 1996-97 are no doubt binding but only when the facts of the case of the appellant in the instant year and, those years are identical. In the present case, it is undisputed that the money has been advanced by the assessee company under a sanctioned scheme of BIFR and it is a case where money had been advanced on the ground of commercial expediency. It is not a case and nor it can be held that, the money had been advanced by the assessor for non-business, purposes. In fact, there is no such finding either by Assessing Officer or CIT(A) so as to enable us to conclude that money had been diverted for non-business purposes. On the contrary, mechanical reliance on the judgment of the Hon’ble jurisdictional High Court is also not a correct way of following the judgement of the Hon’ble Punjab and Haryana High Court in the case of the appellant for assessment year 1995-96, wherein the judgment of the Hon’ble Punjab and Haryana High Court in the case of the appellant in ITA No. 88 of 2004 dated 28-3-2006 was not followed and, it was held as under:-
"We may notice that although the principle of consistency is applicable and the decision on the issue having been taken in favour of the assessee for the previous year the same has to be followed, but each assessment year being an independent one, in view of conscious judgment of this Court on the issue after referring to, other judgments and in absence of any direct judgment of the Hon'ble Supreme Court, we are of the view that the earlier order of this Court dismissing appeal of the revenue in limine cannot be taken to be conclusive."
** ** ** ** ** ** ** ** ** ** ** **
Just click here to view digest of all case laws
http://taxmannindia.blogspot.com/search/label/Case%20Laws
posted at www.taxmannindia.blogspot.com
Subscribe to:
Posts (Atom)
