Income tax Case Laws

AMERICAN HOTEL & LODGING ASSOCIATION EDUCATIONAL INSTITUTE Versus CBDT & OTHERS - 2008 TMI - 4477 - SUPREME COURT OF INDIA

Income Tax - Appellant was a non-profit organization set up in USA. It had a branch office in India, to collect data and fees which was thereafter remitted to USA. It was allowed exemption u/s 10(22) upto 31.3.1998 before omission. Appellant made an application for exemption u/s 12(23C) but CBDT refused on the ground that the income is not being used in India. SC held that CBDT may put the condition as it may deem fit but can not reject the application on the ground that income is not applied in India.

COMMISSIONER OF INCOME-TAX Versus SHREE PIPES LIMITED - 2008 TMI - 4461 - RAJASTHAN HIGH COURT

Income Tax - Appellant, sick unit – under rehabilitation scheme, interest was waived by BIFR – assessee writes off its liability towards internet in account books & got deduction – AO is not justified in making additions considering it as cessation/remission of liabilities – AO is not justified in invoking sec. 41(1) – Tribunal was right in holding that section 41(1) can’t be invoked in respect of the amount which the assessee paid as commission and written off in the books of account of the profit & loss

COMMISSIONER OF INCOME-TAX Versus V. R. VENKATACHALAM - 2008 TMI - 4460 - MADRAS HIGH COURT

Income Tax - Documents seized from premises of assessee & his business associates – addition made to income of assessee as unexplained peak investment with the association of persons, viz., M.G. Enterprises - AO failed to correlate those documents to amount of addition - by relying on an affidavit of M.G. Enterprises, held that MGE alone was liable to explain the source & the addition made in the hands of the assessee has to be deleted – AO is directed to enquire against the AOP, who had denied the receipt

M. SHIVANNA AND ANOTHER Versus DEPUTY COMMISSIONER OF INCOME-TAX - 2008 TMI - 4459 - KARNATAKA HIGH COURT

Income Tax - Application, seeking stay of impugned demand notice was rejected – respondent being the statutory authority has to pass an order exercising the power, as envisaged under the statute & after affording reasonable opportunity to petitioners – held that quasi-judicial authorities has to proceed strictly in compliance with principles of natural justice & to pass a speaking order – impugned communications-cum-order can’t be sustained – rejection of application without assigning reason was not valid

COMMISSIONER OF INCOME-TAX Versus SANJAY K. SARAWAGI - 2008 TMI - 4458 - BOMBAY HIGH COURT

Income Tax - Appellant, Dept. is seeking condonation of 150 days in filing appeal – plea that delay was due to restructuring of the Department, is not a reasonable cause for delay – above is a routine and stereotype reason furnished by the Revenue in almost all the applications for condonation of delay though restructuring of the Department has actually taken place in the year 2001 whereas this appeal is filed in the year 2003 – merely on the ground of restructuring delay cannot be condoned

SHARDA CHITRA MANDIR Versus INCOME-TAX OFFICER - 2008 TMI - 4457 - ALLAHABAD HIGH COURT

Income Tax - Grant-in-aid received by the appellant to promote the construction of new and permanent cinema halls in backward areas as per the Government policy dated July 21, 1986 – revenue receipt or capital receipt– revenue plea that subsidy is post-construction, therefore, it should not be treated as capital receipt, is not acceptable – in view of decision in case of Kalpana Palace v. CIT [2005] 275 ITR 365, money received by the appellant will be treated to be capital receipt and not revenue receipt

POWER PETRO PRODUCTS LTD. Versus ASSISTANT COMMISSIONER OF INCOME-TAX - 2008 TMI - 4456 - MADRAS HIGH COURT

Income Tax - Cash credit – Assessing Officer was of the view that the assessee was not able to prove the genuineness of the deposit and brought the sum of Rs. 2,75,000 to tax – third party denied the payment made towards share capital – no material to prove the case has been placed by assessee – Tribunal has also confirmed the additionss – not find any question of law – appeal is dismissed

Commissioner of Income Tax, Hisar Versus Pandit Shanti Sarup - 2008 TMI - 4455 - HIGH COURT PUNJAB AND HARYANA

Income Tax - Interest on enhanced compensation would not accrue till the issue of enhanced compensation is finally decided - thereafter on attaining the finality of determination of enhanced compensation by the Court, the interest accrued to the assessee has to be spread over on an annual basis right from the date of delivery of possession till the date of the order of the court on the time basis – revenue’s appeal dismissed - no substantial question of law survives for our consideration

CIT` Versus TERNA SHETKARI SAHAKARI SAKHAR KARKHANA LTD. - 2008 TMI - 4454 - BOMBAY HIGH COURT

Income Tax - State Advise Price fixed by the State Govt. doesn’t contain any direction to deduct the cost of the binding materials from the SAP - rebate was not mandatory – It is not in dispute that the assessee has made payments to members and non members as per the SAP fixed by the State Govt., hence it cannot be said that the payments made was in excess of the Sugarcane (Control) Order & consequently making addition on that ground does not arise – revenue’s appeal dismissed

COMMISSIONER OF INCOME-TAX Versus MANJARA SHETKARI SAHAKARI SAKHAR KARKHANA LTD. - 2008 TMI - 4453 - BOMBAY HIGH COURT

Income Tax - Assessee, Co-operative Sugar Factory - assessee purchased sugarcane at a price fixed by the State Govt which was higher than statutory minimum price (SMP) – plea of revenue that differential amount between State govt. price & SMP is nature of distribution of profit, is not acceptable – assessee have to pay state advices price – Sec. 40A(2) not applicable to cooperative society - Khodki charges was not Bonus & these are incurred for the business purposes so allowable as business expenditure

COMMISSIONER OF INCOME-TAX Versus FEDERAL BANK LTD. - 2008 TMI - 4452 - KERALA HIGH COURT

Income Tax - Assessee, banking Co. – interest on govt. securities - Merely because the assessee has declared it as amount receivable in the course of time, it does not mean that interest on income had in fact accrued to the assessee – only real income is assessable under the Act - Though interest due or receivable is assessable under the mercantile system, since the interest on securities involved in this case, was neither received nor receivable during the previous year, such interest cannot be assessed

DR. MISS CHANDRAWATI Versus COMMISSIONER OF INCOME-TAX - 2008 TMI - 4451 - ALLAHABAD HIGH COURT

Income Tax - Applicant claimed depreciation on building of nursing home @ of 20 %., the rate applicable to a hotel as nursing home is providing lodging to the patients – held that nursing home could not be treated as a hotel allowed the depreciation only @ of 10 % - Tribunal has declined to permit the applicant to raise the additional ground. The discretion exercised by the Tribunal cannot be said to be based on irrelevant material or consideration, hence question no. 1 doesn’t arise

MIDLAND RUBBER AND PRODUCE COMPANY LTD. Versus STATE OF KERALA - 2008 TMI - 4445 - KERALA HIGH COURT

Income Tax - Loss was occasioned to petitioner due to damage to the stock of rubber latex & a claim for insurance was made in Nov. 1992 – insurance amount was received during the period of A.Y. 1994-95 – in view of section 4(2)(ii), contention raised by the petitioner that the amount received as insurance claim could be related only to 1992-93 and not to the agricultural income of 1994-95 is liable to be rejected – contentions raised by the petitioner are devoid of merits & they are accordingly rejected

ALL GUJARAT FEDERATION OF TAX CONSULTANTS AND OTHERS Versus UOI AND OTHERS - 2008 TMI - 4444 - GUJARAT HIGH COURT

Income Tax - Petitioner has prayed that not.762(E) dated May 14, 2007, introducing new forms for the purpose of filing tax returns be quashed & petitioners be permitted to file returns in “Saral” form – assessee contended that new forms are complicated - about 6,77,330 taxpayers out of about 25 lakhs, have already filed their returns so it is difficult to accept the contention of petitioner – dept is directed to accept the return forms which are submitted by the taxpayers, subject to the genuine difficulty

AAN AAM PROP. Versus COMMISSIONER OF INCOME-TAX - 2008 TMI - 4388 - PUNJAB AND HARYANA HIGH COURT

Income Tax - On receipt of information that income in the form of investment in construction of building and installation of plant and machinery had escaped assessment, a notice was issued to the assessee on February 14, 1980 - filed return on November 3, 1984 – allegation of escapement of income was found correct – delay of 56 months in filing return after the notice u/s 148 – assessee even did not respond to SCN issued u/s 271(1)(a) - penalty under section 271(1) (a) is imposable

Service Tax Case Laws

Service Tax - 2008 - TMI - 4479 - HIGH COURT OF GAUHATI - Applicability of Service Tax on the business of development and sale of immovable properties, i.e., real estates - whether the appellant has been working, as a "service provider", for those persons with whom the petitioner-company enters into agreements and constructs flats for the purpose of sale to those with whom such agreements are entered into - HC held that department is binding by the circular issued by board. HC further held that, the activity in question is not subject to service tax.

Service Tax - 2008 - TMI - 4478 - HIGH COURT OF ANDHRA PRADESH - Applicability of Service tax on Works Contract - Appellant sought to declare the circular no. 98/1/2008 St dated 4-1-2008 ultra virus the Finance Act, 1994. In the circular it is said that contracts executed prior to 1.6.2006 shall be taxable under the old respective categories. Appellant wants to pay tax on the works contract under the new provision 65(105)(zzzza) - HC has granted interim relief to the petitioner to pay service tax under new category subject to further orders.

Service Tax - 2008 - TMI - 4449 - CESTAT, Delhi - Applicability of Service Tax on services provided by private companies relating to generation, supply, distribution etc. on behalf of state power board (state governments, i.e. Madhya Pradesh Electricity Board) to the consumers - Demand was raised to the tune of Rs. 67,28,53,038/-. CESTAT has found that prima fascia the service is taxable under the category of "Business Support Service" and ordered to deposit Rs. 5 crore and stay granted for the balance demand from pre-deposit

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