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Mepco Industries Ltd. v CIT, 185 Taxman 409 (SC)
S. 154 : A.Y. 1993-94 and 1994-95 : Assessee received power subsidy for two years which it initially offered as revenue receipt in its return of income. Thereafter, it sought revision of assessment orders contending that subsidy amount was capital receipt. Commissioner allowed revision petitions. Subsequently, in case of Sahney Steel, 228 ITR 253 (SC),Supreme Court held that incentive subsidy was a revenue receipt. Following said judgment, Commissioner passed an order of rectification on the ground that power subsidy given to assessee was admissible only after commencement of production and consequently it constituted operational subsidy and not capital subsidy. It was held that in each case one has to examine nature of subsidy and this exercise cannot be undertaken under section 154. Hence Commissioner is not justified in invoking s. 154 and holding subsidy in question to be revenue in nature.
CIT v AlomExtrusions Ltd., 185 Taxman 416 (SC)
S. 43B : It was held that the deletion of second proviso to s. 43B by Finance Act, 2003 is curative in nature and hence it is retrospective and would operate w.e.f. 1-4-1988 when the first proviso cameto be inserted.
DIT (IT) v Oman International Bank SAOG, 184 Taxman 314 (Bom)
S. 36(1)(vii) : After amendment to s. 36(1)(vii) it is neither obligatory nor is there any burden on assessee to prove that debt written off by himis indeed a bad debt as long as it is bonafide and is based on commercial wisdomor expediency.
CIT v Kings Exports, 318 ITR 100 (P&H)
S. 36(1)(vii), 14A : A.Y. 2005-06 : The assessee was engaged in manufacture and export of engineering goods. The AO disallowed assessee’s claim for bad debts u/s. 36(1)(vii) on the ground that claim for bad debts would be hit by s. 14A since assessee had claimed deduction u/s. 80HHC. Itwas held that the expenditure incurred fromexport incomecouldnot be held to be for earning income which did not form part of total income. S. 80HHC deals with deduction of the element of profit from export from taxable income. Therefore claimof bad debts could not be disallowed.
CIT v Estel Communications P. Ltd., 318 ITR 185 (Del)
S. 9(1)(vii) : The assessee provided internet access of a certain bandwidtth to its subscribers, and levied a charge for the services rendered to its subscribers in India. The main server, on the basis of which the internet services are provided, is located in USA. Payment to US company for provision of bandwidtth is not a technical service u/s. 9(1)(vii)of the Act and hence assesseewas not liable to deduct tax at source.
CIT v Arthur Andersen and Co., 318 ITR 229 (Bom)
Reimbursement of expenses: Assessee, a firm of Chartered Accountant, claimed deduction for certain sumfor A.Y. 1997-98.Whenmatter was remanded back, the AO has disallowed expenditure of 20%. CIT(A) has deleted the disallowance and ITAT has upheld the order passed by CIT(A). Deduction was again denied in the A.Y. 1998-99. It was held that revenue is precluded from raising the issue in A.Y. 1998-99 since they have not challenged the order for A.Y. 1997-98 and also not shown any valid cause for reconsideration.
CIT v Ajanta Pharma Ltd., 318 ITR 252 (Bom)
S. 115JB, 80HHC : A.Y. 2001-02 : MAT companies are entitled to the same deduction of export profits u/s 80HHC as any other company involved in export in terms of s. 80HHC(1B). Hence, even for computing book profits u/s. 115JB, percentage of export earnings deductible u/s. 80HHB(1B) to be taken into account.
Mittal Court Premises Co-operative Society Ltd. v ITO, 184 Taxman 292 (Bom)
S. 4 : Assessee, a co-operative commercial society, has received a transfer fee and non occupancy charges from incoming/ existingmembers. As per the bye laws of the society,even if receipt was issued in the name of transferee, it was in the nature of admission fee which could be appropriated only on transferee being admitted and surplus could be disposed off in favour of members only for objects which they would specify. Hence transfer fee would be governed by the principle of mutuality and not exigible to tax.
Similarly since the object of contribution in form of non occupancy charges was for the purpose of increasing society’s fund, which could be used for the object of society, non occupancy charges were also not taxable.
United Exports v CIT, 185 Taxman 374 (Del)
S. 40A(2) : It was held that provisions of s. 40A(2) do not apply to trade discount as trade discount is not an expenditure which is incurred or with respect to which a payment is made. Assesse was engaged in the business of exporting rice. It had claimed certain amount of trade discount allowed to its sister concern at the rate of 11 percent. The AO allowed only 3 percent of trade discount against 11 percent. CIT(A) allowed 8 percent but Tribunal had reduced the same at 5 percent. It was held that when out of total domestic sales of 13 cr., sale made to sister concern was 11 cr., this clearly justifies the trade discount of 11 percent to sister concern.
CIT vWhirlpool of India Ltd., 185 Taxman 387 (Del)
S. 37(1) : Assessee company was engaged in rendering financial services. Hence it was possible to say that business was set up when Directors were appointed staff such as regional and branch manager was appointed and their salaries were paid, computers were acquired and installed and company was ready to commence business. Accordingly expenses incurred after set up of business cannot be disallowed.
Tribunal Decision
DCIT v Munjal J. Shah, 318 ITR (AT) 417 (Mum)(SB)
Capital gain : Cost of acquisition :A.Y. 2004-05 : When assessee acquired assets by transaction which was not regarded as transfer (Gift), for the purpose of working out indexed cost, the cost inflexion index for the year in which asset was acquired by the previousowner should be considered.
Shree Capital Services Ltd. v ACIT, 318 ITR (AT) 1 (Kol)(SB)/ 121 ITD 498 (Kol)(SB)
S. 43(5) : Transaction in which contract for purchase and sale of commodity is settled otherwise than by actual delivery. S. 43(5) was brought on the statute when there was no concept of trading in derivative. Hence, when underlying asset of any derivative is shares and stock, the treatment given such derivative should be similar to stock and securities. Therefore, derivative will also fall within the meaning of “commodity” used in s. 43(5). Amendment by Finance Act 2005, providing that transaction of trading in derivative not to be deemed speculative transaction, cannot be considered as clarificatory in nature.Hence loss in transaction in derivative for the period prior toamendment is a speculative loss.
Topman Exports v ITO, 318 ITR (AT) 87 (Mum)(SB)
S. 80HHC, 28(iiia) to (iiie) : A.Y. 2002-03, 2003-04 : Under the foreign trade policy, there is a requirement of making an application, and mere export will not automatically entitle toDEPB credit/ duty drawback. Though exporter does not purchase DEPB credit from market by incurring cost, the face value of DEPB credit, at the time of making an application, results in accrual of income u/s.
28(iiib). Whereas only profit element on sale of DEPB credit, and not the entire sale proceeds, is covered u/s. 28(iiid). Further, the export incentives, though strictly going by the meaning of expression “derived from”, are not to form part of the profits derived fromsuch exports under sub-section (1), are considered for computation by virtue of sub-section (3) readwithExplanation.
Further, face value of DEPB credit should not be reduced from the purchase cost but is a separate income u/s. 28(iiib), which accrues at the time of making an application.
However, profit on subsequent sale ofDEPBcredit is independent transaction unrelated to export, though face value of DEPB credit is profits from export business. Hence sale proceeds of DEPB credit will form part of total turnover but not export turnover (as not realized in convertible foreign exchange).
State Bank of Travancore v ACIT, 318 ITR (AT) 171 (Cochin)
S. 14A : Bank subscribing to tax free bonds and instruments not for earning tax free income but for meeting its statutory obligation of maintaining statutory liquidity ratio.Therefore the expenses were incurred not for earning tax free income but for maintaining required statutory liquidity ratio. Tax free interestwas only an incidence on fulfillment of the statutory liquidity ratio requirements. Hence section 14A has no application.
Pacific Internet (India) P. Ltd. v ITO, 318 ITR (AT) 179 (Mum)
S. 9, 194J : A.Y. 2003-04 to 2005-06 : It was held that the payments made to MTNL and VSNL for using bandwidtth and network infrastructure could not be said to be technical services within themeaning of s. 194J read with Explanation 2 to clause (vii) of s. 9(1).
InderlockHotelsPvt. Ltd. v ITO, 318 ITR(AT) 234 (Mum)
S. 50C : When sale of flats is treated as business income, provisions of s. 50C is not applicable .
Kotak Securities Ltd. v ACIT, 318 ITR (AT) 268 (Mum)
A.Y. 2005-06 : The membership card of BSE is a capital asset which confers right to trade on the floor of the exchange and when acquired by the assessee such right which is an intangible asset, would fall within the parameters of s. 32(1)(ii) of the Act and hence assesseewould be entitled to claimdepreciation thereon.
ACIT v Travancore TitaniumProducts Ltd., 121 ITD 513 (Cochin)
S. 5: Assessee company, owned by Govt. of Kerala, had advanced loan to another Govt.company on such terms and conditions, which were to be decided by the Govt. of Kerala.
AO found that assessee has neither charged any interest nor was there any waiver of interest. He held that interest amount should be deemed to have accrued to assessee. It was held that unless and until terms and conditions of advance were known and agreed between parties through Govt. of Kerala, assessee could not acquire any right to receive interest hence no incomewould accrue by way of interest.
KalyanMemorial & Charitable Trust v ACIT, 121 ITD 525 (Agra)(TM)
S. 68 : In the course of assessment proceedings, AO has added certain cash credits to assessee’s income for want of credit worthiness and genuiness of creditors. It wasseen that assessee had brought on record P.A. numbers of all creditors, their copies of bank accounts as well as proof of filing returns of income for year under consideration and for preceding years. Hence initial burden u/s. 68 is held to be discharged and thereupon burden shifted on revenue to show that what was stated or explained by assessee was not correct state of affairs. Accordingly additionsmade by authoritieswas deleted.
ITOv PIC (Gujarat) Ltd., 121 ITD 87 (Ahd)
S. 139 rws 68 : Assessee had furnished its return of income on estimated basis based on unaudited accounts, where in it had declared certain loss. AO treated this return as defective return and issued notice requiring assessee to rectify the defect within 15 days. Assessee has furnished written request requestingAOto extend timefor rectifying defects by twomonths. Thereupon assessee removed defect within twomonths and filked revised return showing loss. Such revised retun was processed u/s. 143(1) and refundwas issued to assessee. Later AO in a proceedings u/s. 143(3) has rejected claim of loss on the ground that the original return was defective and since such defects were not removed within 15 days the same could not be taken into account. According to AO assessee’s request for extension of time had been rejected. It was held that even if request was rejected, the order of rejection was not intimated to the assessee and hence original return was a valid return and accordingly revised returnwas also valid.
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