ITAT DECISION

Issue: Taxability of Interest Income u/s 56
DCIT, circle, Bulandshahr v. Allied construction {105 ITD
1 (Delhi-SB)}
The firm received interest on FDR placed with the bank.
The FDR was placed out of surplus business fund of the
firm. Further, the FDR was pledged with the bank for
availing loan for the business purpose. Hence, the firm
offered interest income as business income. Dept did not
accept the contention of the assessee and taxed it as
income from other sources. The tribunal also endorsed
the view of Department in as much as the source of
interest income was FDR with bank which is different
from business receipt. It was further decided that taking
FDR and pledging them for business loan are two
different transactions. Hence, Interest income on FDR
was considered as income from other sources.
Issue: Re-opening Proceedings
S.K. Jain v. Deputy commissioner of gift Tax Spl. Range,
Bhilai{105ITD205(Nag)}
In this case, the department collected some information
at the back of the assessee and used it for reopening of
gift tax assessment proceedings. The Tribunal decided
that department has right to re-open the case even if the
information is collected through illegal means by them. It
was decided that truth of affair and not manner of getting
material is to be taken note of in case of reopening the
cases.
Issue: Capital receipt.
JCIT, Spl Range-1 v. Kwality Café & Restaurant (P) Ltd
{105 ITD 169 (Chd)}
In this case, the company sold its right to use trade mark
and manufacturing facilities. The company offered capital
gain on surrender of trade mark as long term capital gain
and certain portion of consideration as capital receipt not
liable for taxation . It took the view that it lost income
earning apparatus. The Department taxed it as a revenue
receipts. However, the Tribunal accepted assessee's
contention and held that loosing a source of income in the
case of a person, who is not in a business of buying and
selling of business, would amount to transfer of a capital
assets and compensation received therefore clearly falls
within the ambit of a capital receipt.
Issue: Deduction u/s80HHC
Brook Crompton Greaves Ltd., v. ITO Ward 1,
Ahmednagar {105 ITD 146(Pune)}
The Tribunal decided that unabsorbed depreciation / loss
of earlier years need to be reduced from the income of
current year to determine the business income for
computation of deduction u/s 80HHC.
It was also decided that CIT (A) has power to enhance the
income on the issue which was not the subject matter of
appeal before him if the A.O. has overlooked any aspect
relating to the assessment. Therefore, one needs to be
careful before filing appeal to CIT (A) since it will open
entire case even the issue is not agitated before CIT (A).
Issue: Deduction u/s 35D
LIC Housing Finance Ltd., v.DCIT Spl. Range 36, Mumbai
{105 ITD 86(Mum)}
It was decided that if company wants to claim deduction
for preliminary expenses after it commence business; it
can be claimed only by industrial undertaking and that
too, after fulfilling condition of extension of undertaking
or setting up of new undertaking. Therefore, one has to
be careful while claiming deduction u/s35D i.e. public
issue expenses, expenses for increase of authorized
capital.
Issue: Allowability of Expenses u/s37 (1) & MAT
u/s 115JA
IBM Ltd., v. CIT (Appeals)-I {105 ITD 1(Bang)}
In this case it was decided that liability to pay warrant is
not contingent liability. It arises no sooner sales are
effected and therefore, it is to be allowed in the year of
sale of products.
As regards purchase of application software, it was
decided that purchase of application software in the
course of business, which merely enabled to carry on
business operation efficiently and smoothly even though
it gives enduring benefit, would be considered as revenue
expenditure.
The tribunal held that in case provision for doubtful debts
are made in the books, the deduction thereto would be
available in the computation of book profit for the
provision of MAT in view of the fact that such provisions
are not made for meeting and liability, it simply reduce
the assets. Hence, such provisions are deductible for
computation of book profits under the provisions of MAT.
Issue: Un-explained cash credit u/s 68.
Davinder Singh v. ACIT Circle-III, Ferozepur {104 ITD
325 (ASR)}
In this case, it was decided that if any credit found unexplained
by the assessee, the same would be hit by the
provisions of section 68 of the Act. It is not necessary that
only cash receipt on credit side ought to be considered. It
was held that it covers all credits loan, trade credits and
also other receipts be that of cash or kind. Therefore, one
need to be careful while showing creditors which are not
verifiable, the same may be subjected to tax u/s 68 of the
Act.
Issue: Statement recorded u/s 132(4).
Ms. Aishwarya K. Rai v. DCIT, Central circle2, Mumbai
{104 ITD 166(MUM) (TM) }
In this case, if any person makes any disclosure on the
day of search u/s132 (4) of the Act and thereafter during
the post search operation, he makes statement u/s131
denying the confession made earlier , the disclose will not
have any evidentiary value in the assessment . The A.O.
must have conclusive evidence , other than the mere
disclosure , that assessee has undisclosed income. This
judgment will come to rescue in those case where
department merely extract disclosure and makes
addition solely on the basis thereof.