Tuesday, September 3, 2013

INCOME TAX CASE LAWS

INCOME TAX REPORTS (ITR)--PRINT AND ONLINE EDITION
ONLINE EDITION
SUBJECT INDEX TO CASES REPORTED
HIGH COURTS
Advance tax --Excess advance tax paid--Interest--Advance tax in excess of minimum alternate tax credit--Interest payable under section 244A--Income-tax Act, 1961, s. 244A-- CIT v . Bharat Aluminium Co. Ltd. (Delhi) . . . 286
Business expenditure --Performance guarantee--Non-performance of contract--Encashment of bank guarantee--Compensatory in nature not penal--Deductible--Income-tax Act, 1961, s. 37(1)-- CIT v . Neo Structo Construction Ltd .
(Guj) . . . 300
Mutual concern --Principle of mutuality--Members’ club--Contribution from members invested in fixed deposit--Interest from such deposit--Mutuality principle not attracted--Income-tax Act, 1961-- CIT v . Dehradun Club Ltd.
(Uttarakhand) . . . 296
Non-resident --Income deemed to accrue or arise in India--Meaning of business connection--Non-resident company having liaison office in India arranging for manufacture in India for export--No part of income accrued or arose in India--Income-tax Act, 1961, ss. 5, 9(1)(i)-- CIT v . Nike Inc. (Karn) . . . 274
Precedent --Effect of Supreme Court decision in CIT v. Tulsyan NEC-- CIT v . Bharat Aluminium Co. Ltd. (Delhi) . . . 286
Res judicata --Not applicable to income-tax proceedings-- CIT v . Dehradun Club Ltd. (Uttarakhand) . . . 296
PRINT EDITION
ITR Volume 356 : Part 4 (Issue dated : 2-9-2013)
SUBJECT INDEX TO CASES REPORTED IN THIS PART
SUPREME COURT
Income-tax --General principles--Compartmentalisation of income under various heads and computation--To be strictly in accordance with scheme of Act-- T. K. Ginarajan v . CIT . . . 618
Salary --Perquisite--Definition--Exhaustive--Incentive bonus paid by employer--Expenses incurred for generating business--Not certified by employer as reimbursement of actual expenses incurred in performance of duty--Is salary and taxable--Income-tax Act, 1961, ss. 2(24), 10(14), 16, 17-- T. K. Ginarajan v . CIT . . . 618
HIGH COURTS
Appeal to Appellate Tribunal --Powers of Tribunal--Power to admit additional evidence--Objection to material must be raised before Tribunal-- CIT v . Vijayawada Bottling Co. Ltd. (AP) . . . 625
Appeal to High Court --Competency of appeal--Law applicable--Effect of insertion of section 268A with retrospective effect from 1-4-1999--Tax effect less than minimum prescribed by CBDT--Appeal not competent--Income-tax Act, 1961, s. 268A-- CIT v . Dr. Ashok Kumar Shukla (All) . . . 697
----Territorial jurisdiction of High Court--Order passed within territorial jurisdiction of High Court--High Court could hear appeal from such order--Income-tax Act, 1961, s. 260A--Code of Civil Procedure, 1908, s. 20-- CIT v . Shree Ganapati Rolling Mills P. Ltd . (Gauhati) . . . 586
Best judgment assessment --Law applicable--Effect of amendment of section 144 w.e.f. 1-4-1989--Prior to 1-4-1989 in case of voluntary return best judgment could be made only after notice under section 139(2)--Income-tax Act, 1961, ss. 139(2), 144--Circular No. 281 dated 22-9-1980-- CIT v. Bake Food Products P. Ltd . (AP) . . . 690
Business expenditure --Disallowance--Ceiling on expenditure--Hotel expenses of employee--Daily allowance granted to employee has same character as hotel expenses for purposes of section 37(3A) to (3D)--Income-tax Act, 1961, s. 37--Income-tax Rules, 1962, r. 6D-- Novopan India Ltd . v . CIT (AP) . . . 580
----Disallowance--Entertainment expenditure--Expenditure incurred on employees who had accompanied visitors to assessee concern--Expenditure constituted entertainment expenditure--Disallowance of part of expenditure--Justified--Income-tax Act, 1961-- CIT v .ING Vysya Bank Ltd . (Karn) . . . 532
Business loss --Banking company--Loss on revaluation of securities--Assessee describing securities as permanent assets--Loss not in stock-in-trade--Loss not deductible--Income-tax Act, 1961-- CIT v . ING Vysya Bank Ltd . (Karn) . . . 532
Capital gains --†Transfer†meaning of --Firm owning land--Reconstitution of firm and addition of new partners--Reduction in shares of erstwhile partners--No transfer of capital asset--Capital gains did not arise on reduction of share of partners--Income-tax Act, 1961, ss. 2(47), 45-- CIT v . P. N. Panjawani (Karn) . . . 676
Capital or revenue receipt --Decision of Supreme Court that dharmada collected from purchasers and deposited in a separate account not a revenue receipt--Finding of Tribunal that assessee failed to show contribution on regular basis to institutions--High Court holding finding of Tribunal purely related to appreciation of evidence not giving rise to question of law--High Court not laying down law contrary to ruling of Supreme Court--Reference to Full Bench uncalled for--Income-tax Act, 1961-- Lilasons Breweries Ltd. v .CIT [FB] (MP) . . . 671
Circulars --Binding on income-tax authorities-- CIT v . Bake Food Products P. Ltd. 
(AP) . . . 690
Depreciation --Investments held as stock-in-trade--Assessee entitled to value investments at cost price or market value, whichever is lower--Entitled to depreciation--Income-tax Act, 1961-- CIT v . Vijaya Bank (Karn) . . . 578
Fringe benefits tax --Reassessment--Scope of Chapter XII-H--Special provisions including for reassessment of fringe benefits escaping assessment--Reassessment under general provisions not permissible in case of fringe benefits tax--Income-tax Act, 1961, ss. 147, 148, Chap. XII-H-- CIT v . P. G. Foils Ltd . (Guj) . . . 594
Intercorporate dividends --Special deduction under section 80M--Disallowance of part of special deduction on ground of expenditure--No evidence of expenditure--Disallowance not justified--Income-tax Act, 1961, s. 80M-- CIT v . ING Vysya Bank Ltd. 
(Karn) . . . 532
Interest on borrowed capital --Loan by assessee to subsidiary company--Finding that loan was not from borrowed capital--Interest deductible--Income-tax Act, 1961, s. 36(1)(iii)-- CIT v. Vijayawada Bottling Co. Ltd . (AP) . . . 625
Interpretation of taxing statutes --External aids can be used-- CIT v . Vijayawada Bottling Co. Ltd . (AP) . . . 625
Investment allowance --Condition precedent--Manufacture or production of article or thing--Milk products made from milk amounts to production--Machinery used in manufacture of milk products--Entitled to investment allowance--Income-tax Act, 1961, s. 32A-- CITv. Vizag District Milk Producers Co-op. Union Ltd. (AP) . . . 612
----Law applicable--Effect of insertion of Explanation to item 5 in Eleventh Schedule w.e.f. 1-4-1988--Amendment not retrospective--Machinery used in manufacture of aerated water with synthetic essence--Entitled to investment allowance prior to 1-4-1988--Income-tax Act, 1961, s. 32A, Sch. XI-- CIT v. Vijayawada Bottling Co. Ltd. (AP) . . . 625
Offences and prosecution --Refund certificate in fictitious names--Prima facie evidence that offence has been committed--Prosecution will not be quashed--Income-tax Act, 1961--Code of Criminal Procedure, 1973, ss. 397, 401-- Hema Mohnot v . State by Chief Commissioner (Administration) (Mad) . . . 602
Penalty --Concealment of income--Claim to deduction of expenditure based on decision of Supreme Court--Expenditure offered thereafter for assessment by filing revised statement--Not a case of filing inaccurate particulars--No case for levy of penalty--Income-tax Act, 1961, s. 271(1)(c)-- CIT v. Shriram Properties and Constructions (Chennai) Ltd. (Mad) . . . 700
----Concealment of particulars of income--Assessing Officer originally of impression that cash deposit made by assessee on single day but later finding deposit spread over twelve months--Assessee filing revised profit and loss account statement showing net profit being five per cent. before completion of assessment and agreeing to addition of three per cent.--Case of estimation of income--Imposition of penalty not warranted--Income-tax Act, 1961, s. 271(1)(c)-- CIT v . P. Rojes (Mad) . . . 703
----Loans in cash exceeding specified limit--Assessee building properties--Earnest money returned to parties in cash reflected in balance-sheet--Not loan or deposit--Penalty could not be imposed--Income-tax Act, 1961, s. 271E-- CIT v . Madhav Enterprise Pvt. Ltd. (Guj) . . . 588
Precedent --Effect of Supreme Court decision in Amit Kapoor v. Ramesh Chander [2012] 9 SCC 460-- Hema Mohnot v. State by Chief Commissioner (Administration) (Mad) . . . 602
Reassessment --Notice--Notice not served to the name of principal officer of assessee-company but issued to company without mentioning “Pvt. Ltd.†as a suffix--Not a case of misnomer or misdescription of parties which makes entire proceedings null and void--Income-tax Act, 1961, ss. 147, 148-- CIT v. Jagat Novel Exhibitors P. Ltd .
(Delhi) . . . 559
----Notice--Validity--Issues examined in original assessment--Notice of reassessment in respect of such issues--Not valid--Income-tax Act, 1961, ss. 147, 148-- CIT v . P. G. Foils Ltd. (Guj) . . . 594
Reference --Finding of fact by Tribunal--Normally binding on High Court--Income-tax Act, 1961, s. 256-- CIT v . Vijayawada Bottling Co. Ltd . (AP) . . . 625
Search and seizure --Block assessment--Assessment of third person--Difference between section 158BC and section 158BD--No warrant of authorisation in name of assessee--Search of business premises of assessee in consequence of search of third person--Order of assessment passed under section 158BC--Not valid--Not a defect curable under section 292B--Order passed after period of limitation laid down in section 158BC--Order not valid--Income-tax Act, 1961, ss. 158BC, 158BD-- V. Ramaiah v . CIT 
(Mad) . . . 646
----Block assessment--Undisclosed income--Addition of amount without affording opportunity to assessee to be heard--Not valid--No proof by Revenue that transaction was benami--Addition on ground of benami--Not valid--Income-tax Act, 1961-- V. Ramaiah v . CIT(Mad) . . . 646
Valuation of stock --General principles--Method of valuation adopted by assessee and accepted by Revenue for several years--Securities classified in accordance with Reserve Bank of India circular--Not relevant--Assessee’s valuation to be accepted--Income-tax Act, 1961-- Karnataka Bank Ltd. v . Asst. CIT (Karn) . . . 549

SECTIONWISE INDEX TO CASES REPORTED IN THIS PART
Code of Civil Procedure, 1908 :
S. 20 --Appeal to High Court--Territorial jurisdiction of High Court--Order passed within territorial jurisdiction of High Court--High Court could hear appeal from such order-- CIT v . Shree Ganapati Rolling Mills P. Ltd . (Gauhati) . . . 586
Code of Criminal Procedure, 1973 :
Ss. 397, 401 --Offences and prosecution--Refund certificate in fictitious names--Prima facie evidence that offence has been committed--Prosecution will not be quashed-- Hema Mohnot v . State by Chief Commissioner (Administration)
(Mad) . . . 602
Income-tax Act, 1961 :
S. 2(24) --Salary--Perquisite--Definition--Exhaustive--Incentive bonus paid by employer--Expenses incurred for generating business--Not certified by employer as reimbursement of actual expenses incurred in performance of duty--Is salary and taxable-- T. K. Ginarajan v . CIT (SC) . . . 618
S. 2(47) --Capital gains--†Transfer†meaning of --Firm owning land--Reconstitution of firm and addition of new partners--Reduction in shares of erstwhile partners--No transfer of capital asset--Capital gains did not arise on reduction of share of partners-- CIT v . P. N. Panjawani (Karn) . . . 676
S. 10(14) --Salary--Perquisite--Definition--Exhaustive--Incentive bonus paid by employer--Expenses incurred for generating business--Not certified by employer as reimbursement of actual expenses incurred in performance of duty--Is salary and taxable-- T. K. Ginarajan v . CIT (SC) . . . 618
S. 16 --Salary--Perquisite--Definition--Exhaustive--Incentive bonus paid by employer--Expenses incurred for generating business--Not certified by employer as reimbursement of actual expenses incurred in performance of duty--Is salary and taxable-- T. K. Ginarajan vCIT (SC) . . . 618
S. 17 --Salary--Perquisite--Definition--Exhaustive--Incentive bonus paid by employer--Expenses incurred for generating business--Not certified by employer as reimbursement of actual expenses incurred in performance of duty--Is salary and taxable-- T. K. Ginarajan vCIT (SC) . . . 618
S. 32A --Investment allowance--Condition precedent--Manufacture or production of article or thing--Milk products made from milk amounts to production--Machinery used in manufacture of milk products--Entitled to investment allowance-- CIT v. Vizag District Milk Producers Co-op. Union Ltd. (AP) . . . 612
----Investment allowance--Law applicable--Effect of insertion of Explanation to item 5 in Eleventh Schedule w.e.f. 1-4-1988--Amendment not retrospective--Machinery used in manufacture of aerated water with synthetic essence--Entitled to investment allowance prior to 1-4-1988-- CIT v. Vijayawada Bottling Co. Ltd. (AP) . . . 625
S. 36(1)(iii) --Interest on borrowed capital--Loan by assessee to subsidiary company--Finding that loan was not from borrowed capital--Interest deductible-- CIT v. Vijayawada Bottling Co. Ltd . (AP) . . . 625
S. 37 --Business expenditure--Disallowance--Ceiling on expenditure--Hotel expenses of employee--Daily allowance granted to employee has same character as hotel expenses for purposes of section 37(3A) to (3D)-- Novopan India Ltd . v . CIT
(AP) . . . 580
S. 45 --Capital gains--†Transfer†meaning of --Firm owning land--Reconstitution of firm and addition of new partners--Reduction in shares of erstwhile partners--No transfer of capital asset--Capital gains did not arise on reduction of share of partners-- CIT v . P. N. Panjawani (Karn) . . . 676
S. 80M --Intercorporate dividends--Special deduction under section 80M--Disallowance of part of special deduction on ground of expenditure--No evidence of expenditure--Disallowance not justified-- CIT v . ING Vysya Bank Ltd. (Karn) . . . 532
Chap. XII-H --Fringe benefits tax--Reassessment--Scope of Chapter XII-H--Special provisions including for reassessment of fringe benefits escaping assessment--Reassessment under general provisions not permissible in case of fringe benefits tax-- CIT v . P. G. Foils Ltd . (Guj) . . . 594
S. 139(2) --Best judgment assessment--Law applicable--Effect of amendment of section 144 w.e.f. 1-4-1989--Prior to 1-4-1989 in case of voluntary return best judgment could be made only after notice under section 139(2)--Circular No. 281 dated 22-9-1980-- CIT v.Bake Food Products P. Ltd . (AP) . . . 690
S. 144 --Best judgment assessment--Law applicable--Effect of amendment of section 144 w.e.f. 1-4-1989--Prior to 1-4-1989 in case of voluntary return best judgment could be made only after notice under section 139(2)--Circular No. 281 dated 22-9-1980-- CIT v. Bake Food Products P. Ltd . (AP) . . . 690
S. 147 --Fringe benefits tax--Reassessment--Scope of Chapter XII-H--Special provisions including for reassessment of fringe benefits escaping assessment--Reassessment under general provisions not permissible in case of fringe benefits tax-- CIT v . P. G. Foils Ltd . (Guj) . . . 594
----Reassessment--Notice--Notice not served to the name of principal officer of assessee-company but issued to company without mentioning “Pvt. Ltd.†as a suffix--Not a case of misnomer or misdescription of parties which makes entire proceedings null and void-- CIT v. Jagat Novel Exhibitors P. Ltd . (Delhi) . . . 559
----Reassessment--Notice--Validity--Issues examined in original assessment--Notice of reassessment in respect of such issues--Not valid-- CIT v . P. G. Foils Ltd.
(Guj) . . . 594
S. 148 --Fringe benefits tax--Reassessment--Scope of Chapter XII-H--Special provisions including for reassessment of fringe benefits escaping assessment--Reassessment under general provisions not permissible in case of fringe benefits tax-- CIT v . P. G. Foils Ltd . (Guj) . . . 594
----Reassessment--Notice--Notice not served to the name of principal officer of assessee-company but issued to company without mentioning “Pvt. Ltd.†as a suffix--Not a case of misnomer or misdescription of parties which makes entire proceedings null and void-- CIT v. Jagat Novel Exhibitors P. Ltd . (Delhi) . . . 559
----Reassessment--Notice--Validity--Issues examined in original assessment--Notice of reassessment in respect of such issues--Not valid-- CIT v . P. G. Foils Ltd.
(Guj) . . . 594
S. 158BC --Search and seizure--Block assessment--Assessment of third person--Difference between section 158BC and section 158BD--No warrant of authorisation in name of assessee--Search of business premises of assessee in consequence of search of third person--Order of assessment passed under section 158BC--Not valid--Not a defect curable under section 292B--Order passed after period of limitation laid down in section 158BC--Order not valid-- V. Ramaiah v . CIT (Mad) . . . 646
S. 158BD --Search and seizure--Block assessment--Assessment of third person--Difference between section 158BC and section 158BD--No warrant of authorisation in name of assessee--Search of business premises of assessee in consequence of search of third person--Order of assessment passed under section 158BC--Not valid--Not a defect curable under section 292B--Order passed after period of limitation laid down in section 158BC--Order not valid-- V. Ramaiah v . CIT (Mad) . . . 646
S. 256 --Reference--Finding of fact by Tribunal--Normally binding on High Court-- CIT v . Vijayawada Bottling Co. Ltd . (AP) . . . 625
S. 260A --Appeal to High Court--Territorial jurisdiction of High Court--Order passed within territorial jurisdiction of High Court--High Court could hear appeal from such order-- CIT v . Shree Ganapati Rolling Mills P. Ltd . (Gauhati) . . . 586
S. 268A --Appeal to High Court--Competency of appeal--Law applicable--Effect of insertion of section 268A with retrospective effect from 1-4-1999--Tax effect less than minimum prescribed by CBDT--Appeal not competent-- CIT v . Dr. Ashok Kumar Shukla (All) . . . 697
S. 271(1)(c) --Penalty--Concealment of income--Claim to deduction of expenditure based on decision of Supreme Court--Expenditure offered thereafter for assessment by filing revised statement--Not a case of filing inaccurate particulars--No case for levy of penalty--CIT v. Shriram Properties and Constructions (Chennai) Ltd.
(Mad) . . . 700
----Penalty--Concealment of particulars of income--Assessing Officer originally of impression that cash deposit made by assessee on single day but later finding deposit spread over twelve months--Assessee filing revised profit and loss account statement showing net profit being five per cent. before completion of assessment and agreeing to addition of three per cent.--Case of estimation of income--Imposition of penalty not warranted-- CIT v . P. Rojes (Mad) . . . 703
S. 271E --Penalty--Loans in cash exceeding specified limit--Assessee building properties--Earnest money returned to parties in cash reflected in balance-sheet--Not loan or deposit--Penalty could not be imposed-- CIT v . Madhav Enterprise Pvt. Ltd. (Guj) . . . 588
Sch. XI --Investment allowance--Law applicable--Effect of insertion of Explanation to item 5 in Eleventh Schedule w.e.f. 1-4-1988--Amendment not retrospective--Machinery used in manufacture of aerated water with synthetic essence--Entitled to investment allowance prior to 1-4-1988-- CIT v. Vijayawada Bottling Co. Ltd.
(AP) . . . 625
Income-tax Rules, 1962 :
R. 6D --Business expenditure--Disallowance--Ceiling on expenditure--Hotel expenses of employee--Daily allowance granted to employee has same character as hotel expenses for purposes of section 37(3A) to (3D)-- Novopan India Ltd . v . CIT
(AP) . . . 580


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