DIRECT TAXES

Tribunal
Aarti sathe, Deepak R. Shah, Haresh P. Shah, Paras S. Savla, Prem Chandra Tripathi, Rahul Hakani & renu chodhary 501 S. 2(24) : Income Non-occupancy Charges - Transfer Fee - Voluntary Contribution The receipt of non-occ upanc y c harges, transfer fee and voluntary contribution from its members by the Co-operative Housing Society is not taxable. ITO vs. Grand Pradi CHS Ltd. (Mum.)(2011) BCAJ Jan., 2011. P. 20 (Vol. 42B. Part 4. 436) 502 S. 2(24)(iv) : Income Benefit Shares - Though assessee shown as "owner" of Demat shares in depositorys books, if he shows to be mere "pledgee", there is no "benefit" under section 2(24)(iv) With respect to dematerialized shares, though sec tion 12 of the DP Act provides for the manner of creating a pledge, this is not the only method. Dematerialized shares continue to be "goods" and the law laid down in the Companies Act and the Sale of Goods Act for dec iding whether a sale of shares has taken place or not will c ontinue to govern; Though a person is shown as the beneficial owner in the register of a depository participant, this is not conclusive and he can show that he is not the beneficial owner of shares but only holds the shares as a Pawnee and as sec urity for repayment of debts due by the real beneficial owner; As a Pawnee / pledgee, the assessee does not have absolute rights over the shares. He c ould sell the security in a manner c ontemplated by law. In case the proceeds were greater than the amount due to him, he had to pay the surplus to the pawnor. Consequently, there was no "benefit" assessable under section 2(24)(iv). Jt. CIT vs. Mukesh D. Ambani (Mum.) Sourc e: www.itatonline.org 503 S. 4 : Capital or Revenue Receipt - Transfer or Assignment of Marketing Rights Noncompete Fee Amount rec eived on acc ount of transfer or assignment of marketing rights in exchange of sourc e of income is a capital receipt. Amount received as non-compete fee is a c apital rec eipt. Capital gains not taxable where c ost of acquisition not determined. BASF India Ltd. vs. Addl. CIT (2010) 6 ITR 156 (Mum.)(Trib.) 504 S. 4 : Income - Capital Receipt - Receipt for damage of Goodwill [S. 28(i)] If good will of the business is damaged on account of ac tion of supplier of goods and later on some compensation is awarded in lieu of that, it will fall in the same c ategory of loss to the source of income and consequently such a rec eipt will qualify to be c harac terized as a capital rec eipt. Inter Gold (India) (P) Ltd. vs. Jt. CIT (2010) 47 DTR 150 (Mum.)(Trib.) 505 S. 4 : AOP Rent Income - Joint Purchase of Land Assessee jointly with other 17 persons purc hased land, and Income was generated from plinth construc ted on said land. Held, that entire Rent cannot be assessed in status of

AOP, when Investments were from Individual sourc es, and the shares were definite and ascertainable. Also as Assessee was merely authorized to collect Rent cheques, and whic h were issued separately and in individual names, Rent Income c annot be taxed in Assessees hands as AOP. Daljit Singh vs. ITO (2010) 194 Taxman 16 (Chandigarh)(SMC) 506 S. 4 : Income Compensation on Termination of Licence Agreement Compensation received on premature termination of leave & lic ense agreement on acc ount of loss of rent is c hargeable to tax as revenue receipt. ACIT vs. Das & Co. (2010) 133 TTJ 542 (Mum.) 507 S. 4 : Income Forfeiture Of Security Deposit Forfeiture of security deposit is not c hargeable as revenue receipt as the deposit was in the nature of loan and in the c apital field. ACIT vs. Das & Co. (2010) 133 TTJ 542 (Mum.) 508 S. 5 : Income Accrual - Interest on RBI Bonds - Cash Basis Assessees were entitled to recognize the interest inc ome attributable to 8 % RBI Bonds on c ash basis to be reckoned at the time of redemption of the bonds. Assessing Officer was not justified in making addition on yearly accrual basis. K. Nagendrasa & Ors. vs. Dy. CIT (2010) 48 DTR 492 (Bang.)(Trib.) 509 S. 9(1)(i) : Income deemed to accrue or arise in India - Business Connection - Services rendered through Indian subsidiary Assessee a US c ompany, providing IT enabled servic es to its clients by assigning or sub c ontrac ting execution of the c ontrac ts to its wholly owned Indian subsidiary EFI and supplying the relevant software and data base to the later, free of charge, has business c onnec tion in India within the meaning of section 9(1)(i) as well as a PE in the form of EFI as per Art. 5 of the Indo-US DTAA. Profits attributable to the PE are to be worked out by applying the proportion of Indian assets, including EFIs assets, to the aggregate of global profits and reduc ing resultant figure by the assessed profits of EFI. EFunds Corporation vs. Asst. DIT (2010) 45 DTR 345 (Delhi)(Trib.) 510 S. 9(1)(i) : Income deemed to accrue or arise in India Compensation - Arbitration Award - International Taxation DTAA India-UK - (S. 90, Articles 5 & 7) The Assessing Offic er was of the view that compensation received under an award of Arbitration was taxable in India under sec tion 9(1)(i) of the Ac t, sinc e it was an inc ome deemed to ac crue or arise in India. Commissioner (A) upheld order of Assessing Offic er. It was held by the Tribunal that the c ompensation in question was not taxable as there was no PE in India in terms of Articles 5 of Indo-UK DTAA and the compensation awarded under arbitration award was not taxable in India. Gold Crest Exports vs. ITO (2010) 42 SOT 1 (Mum.) 511 S. 9(1)(vi) : Income from supply of shrink-wrapped software assessable as royalty - A tax-treaty can be unilaterally overridden Payment made for grant of lic enc e in respec t of Copy right by end user is taxable as

royalty as per sec tion 9(1)(vi). Domestic tax legislation to override treaty provisions in c ase of irreconc ilable c onflict. Microsoft Corporation vs. ITAT (2010) 47 DTR 65 / 134 TTJ 257 (Del) 512 S. 28(i) : Business Income - Services of Operating and Maintenance of power station Permanent Establishment DTAA - India-UK - (S. 9, 44AD, Articles 5, 7 and 13) Assessee entered into a c ontrac t with Spectrum Ltd., for rendering services of operating and maintenanc e of power station owned by it. Activity of operating of power station was treated by assessee as its business activity carried on through a projec t office in India, which in turn, c onstituted its permanent establishment in India in terms of Artic le 5 of IndoUK DTAA. Acc ording to assessee, income arising to it from said business activity was its business profit and was liable to tax on net basis. Income rec eived by assessee for executing works c ontrac t did not fall within definition of "fees for technical services" (FTS) under explanation 2 to section 9(1)(vii) nor as defined in Art. 13(4) of DTAA between India and UK. Moreover, sinc e assessee had not made available any technic al knowledge, skill, etc ., to spectrum within meaning assigned to FTS under Art. 13(4)(c ) of DTAA, it could not be taxed on gross basis and sec tion 44AD had no applic ation to facts of instant c ase, further more Article 13(4)(c) read with Article 26 of DTAA would not permit revenue authorities to discriminate against, a UK registered c ompany and ac cord it less favourable treatment than a domestic company and therefore section 44AD c ould not be invoked in assessees c ase. Rollys Roycee Industrial Power Ltd. vs. ACIT (2010) 42 SOT 264 / 6 ITR 722 (Trib.)(Delhi) 513 S. 10A : Free Trade Zone - Two Units Assessee having 3 STP units, suffered loss in 1 unit and had profit in other 2 units. Assessing Officer adjusted the loss against profit of other 2 units. Assessee c ontended that loss incurred in 1 unit be disregarded, and deduction under sec tion 10A be granted in respec t of profits of other 2 units. Held, if the loss making unit is independent, and ac tivities were not assoc iated with other 2 units, then loss from such unit was to be independently calculated, and c an not be adjusted against profit of other two units. T Gate Global Solutions Ltd. vs. ACIT (2010) 194 Taxman 83 (Bang.) 514 S. 10B : Exemption - Export Oriented Undertaking - Convertible Foreign Exchange Investment in equity shares In order to avail deduction under section 10B, sale proceeds must be received in c onvertible foreign exchange. Sale proceeds rec eived in c onvertible foreign exchange means "actual receipt" and not deemed rec eipt. Amount received by an assessee in form of investment in equity shares of a foreign company cannot be c onsidered to be received in form of c onvertible foreign exchange. ACIT vs. Bodhtree Consulting Ltd. (2010) 41 SOT 230 (Hyd.) 515 S. 10B : Exemption - Machinery previously used - Takeover of undertaking Assessee having used the machinery whic h was previously used by another c ompany prior to its transfer and takeover by the assessee, section 10B(9) is attracted to the fac ts of the case and therefore, assessee is not entitled to exemption under sec tion 10B for the asst year 2002-03 and 2003-04. However, assessee is entitled to exemption for Asst. Year 2004-05 as the provision contained in sec tion 10B(9) did not exist on the statute book in that year.

ITO vs. Heartland Delhi Transportation & Services (P) Ltd. (2010) 45 DTR 239 / 133 TTJ 682 (Del.)(Trib.) 516 S. 10B : Exemption - Delay in filing return [S. 139 (1)] Fourth proviso to section 10B(1), whic h prohibits deduction if the return is not furnished on or before the due date specified under sec tion 139(1), is direc tory and not mandatory therefore, relief can be granted by the appellate authority in case, there was genuine and valid reason for the marginal delay in filing of return. ACIT vs. Dhir Global Industrial (P) Ltd. (2010) 45 DTR 290 / 133 TTJ 580 (Delhi)(Trib.) 517 S. 10B : Exemption - Export Turnover - Foreign Expenditure for self purpose - Turnover retained abroad The assessee was engaged in the business of development of software by way of on site and off shore development and had a branch in USA for which separate accounts were maintained. The assessee c laimed deduc tion under section 10B in respect of the exports of software made. In computing the export turnover, the Assessing Officer held that the amount of ` 3.33 crores inc urred by the USA branc h constituted "expenses incurred in foreign exchange in providing tec hnic al services outside India" and had to be deducted from the export turnover as provided under section 10B. He also held that the turnover of the USA branc h to the extent of ` 15.14 c rores had to be reduc ed from the export profits as it had not been rec eived in convertible foreign exchange in India within the period specified in sec tion 10B(3). On appeal CIT(A) upheld the claim of assessee with regard to ` 15.14 crores while rejected the claim with regard to ` 3.33 c rores. The c ross appeals of the parties were referred to Special Bench. The Special Bench referrings the c irc ular No. 621 dated 19-12-1991 and 694 dated 23-11-1994 held that expenditure incurred on site abroad is eligible for deduction under section 10B. As regards the turnover of ` 15.14 retained abroad, one limb of the Government cannot be allowed to defeat the operation of other limb. While section 10B requires the foreign exchange to be brought to India within the prescribed period, the RBI permits the assessee to retain the said foreign exc hange abroad for spec ific purpose. RBI is the competent authority for section 10B as well. The result is that reinvestment of export earning is deemed to have been received in India and thereafter to have been repatriated abroad. (Principle in J. B. Boda & Co. (1998) 233 ITR 271 (SC) followed). Zylog Systems Ltd. vs. ITO (2011) 49 DTR 1 (Chennai)(Trib.)(SB) 7 STR (Trib) 348 / 128 ITD 105 (SB) (Trib) (Chennai) 518 S. 10(10C) : Exemption - Voluntary Retirement Scheme - (Rule 2BA) Claim for exemption under section 10(10C), c annot be denied on the ground that the sc heme of voluntary retirement framed by the employer is not in accordanc e with Rule 2BA. Pandya Vinodchandra Bhogilal vs. ITO (2010) 45 DTR 105 / 133 TTJ 253 (Ahd.)(Trib.) 519 S. 10(14) : Exemption - Special Allowance or Benefit MLA MP - Conveyance Allowance - Clerical Allowance - Telephone Allowance - Medical Expenditure - Constituency Allowance [S. 10(17)] Only those allowanc es are exempt which are spec ified in section 10(14), or sec tion 10(17), or in Rule 2BB. Conveyance allowance or clerical allowance rec eived by an MLA are exempt under section 10(14) r.w. Rule 2BB, subjec t to proof that the same were incurred in the performanc e of duties of the offic e. Telephone allowanc e and c onstituency allowanc e are not exempt under section 10(14), in the absenc e of specific

c lause in Rule 2BB(1). If the medical allowance is reimbursement of medic al expenditure exemption can be allowed and not otherwise, as it does not find plac e in Rule 2BB(1). M. Venkata Subbaiah vs. ITO (2010) 47 DTR 403 (Visakha)(Trib.) 520 S. 10(17A) : Exemption - Reward by Government Amount rec eived as reward by the informer from the Customs department is exempt under section 10(17A). ITO vs. Mariam Beevi & Ors. (2010) 46 DTR 229 (Chennai)(Trib.) 521 S. 11 : Charitable Trust Exemption Debenture - Bond [S. 13(1)(d)] Bond is covered by the expression "debenture" and therefore, investment in bonds of c ertain c ompanies by the assessee, a Charitable Trust did not amount to infringement of the provision of section 13(1)(d) and therefore, exemption under section 11 could not be denied on that ground. DIT vs. Shree Visheswar Nath Memorial Public Charitable Trust (2010) 46 DTR 49 (Del.) (Trib.) 522 S. 11 : Charitable Trust - Donations collected in a donation box - Corpus Donations collected by the assessee, in a donation box in the face of its appeal that the amounts so collected would be used for the construction of a building c an be considered as carrying spec ific directions for being used for construction of building and therefore, it is to be treated as donations toward c orpus as suc h amount did not c onstitute inc ome for the purpose of section 11/12. Shree Mahadevi Tirath Sharda Ma Seva Sangh vs. ITO (2010) 133 TTJ 57 (Chd.) 523 S. 11 : Charitable Trust Bar of Section 13(1)(d) Exemption under sec tion 11 c ould not be denied as there was no violation of provisions c ontained in sec tion 13(1)(d). Dy. CIT (Exemptions) vs. Help Age India (2010) 133 TTJ 590 (Del.) 524 S. 12AA : Charitable Trust Registration - Effective Date CIT having initially granted registration under section 12AA to the assessee w.e.f. 1st April 2007, later passed an order on an applic ation under section 154, granting registration w.e.f. 28th Feb., 2002, assessee was eligible to c laim benefits under section 11/12 for the year under c onsideration i.e. Asst. Year 2006-07. Shree Mahadevi Tirath Sharada Ma Seva Sangh vs. ITO (2010) 133 TTJ 57 (Chd.)(UO) 525 S. 12AA : Charitable Purpose University - Artificial Juristic Person [Ss. 2 (15), 2(31)] University, incorporated under Haryana Private Universities Act, 2006, is an artific ial juristic person within the meaning of term "person" under section 2(31)(vii), hence, it is entitled to make an application for registration under section 12AA. The objects of the university were granting fellowship, freeship, sc holarship, etc . to students belonging to weaker sections of society, it could be c onc luded that assessee was a charitable institution. O. P. Jindal Global University vs. CIT (2010) 127 ITD 164 (Delhi)

526 S. 12AA : Charitable or Religious Trust Registration - Mixed Objects The objec ts of the society were of religious and c haritable nature, it was still entitled to registration under section 12AA read with section 13(1)(b) of the Income Tax Ac t, 1961. Rehoboth Mission vs. DIT (Exemption) (2010) 42 SOT 149 (Hyd.) 527 S. 12AA(3) : Charitable or Religious Trust Registration - Power to cancel Registration Prospective - (S. 12A) Insertion of new clause in section 12AA(3) with effect from 1-6-2010, by which Commissioner has got power to c ancel registration granted earlier to assesseetrust under section 12A, is not applicable retrospectively and its operation has to be effective from date it was introduc ed and onwards. Merely by granting a registration under section 12A/12AA, a trust ipso fac to is not entitled to exemption prescribed under sec tion 11 and 12. Ajit Education Trust vs. CIT (2010) 42 SOT 415 (Ahd.) Editorial Note: Also see Bharati Vidyapeeth vs. ITO (2008) 119 TTJ 261 / 14 DTR 454 and Oxford Academy for Career Development vs. CCIT (2009) 315 ITR 382 (All) 528 S. 12AA : Charitable Trust - Registration Cancellation As per section 12AA(3), registration granted to any trust or soc iety under section 12AA(1)(b) c an be c ancelled only if the CIT is satisfied that the ac tivities of suc h trust or institution are not genuine or are not being carried out in acc ordance with the objects thereof; registration could not be cancelled under section 12AA(3) by merely reexamining the objects of the trust or society. Chaturvedi Har Prasad Educ ation Soc iety vs. CIT (2010) 134 TTJ 781 (Luc k.) 529 S. 14A : Business Expenditure Exempted Income Expenditure -incurred in relation to income not includible in total income - A disallowance has to be on the basis of nexus between income & expenditure & not on ad hoc estimate basis Rule 8D does not apply to A.Y. 2006-07. The assessee has urged that no expenditure has been identified to have been incurred to exempt income. Neither the Assessing Officer nor the CIT(A) has rebutted this submission. The Assessing Offic er made an ad hoc estimate whic h is not sustainable in the light of Hero Cycles. Acc ordingly, in view of Vegetable Produc ts 88 ITR 192 where it was held that if two c onstructions are possible, one favouring the assessee should be adopted, the prec edent laid down in Hero Cyc les should be followed. Minda Investments vs. Dy. CIT (ITAT Delhi) Source: www.itatonline.org Editorial Note : Continental Carriers Pvt. Ltd. vs. ACIT (ITAT Delhi) Sourc e: www.itatonline.org 530 S. 14A : Business Expenditure - Exempted Income - Expenditure incurred in relation to income not includible in total income - A disallowance of interest on borrowed funds on basis that assessee ought to have used own funds to repay loans & not invest in shares not sustainable In view of Godrej Boyce Mfg. Co. 328 ITR 81 (Bom.) Rule 8D is applic able only prospectively i.e. from A.Y. 2008-09 and not for earlier years. The fac ts showed that the assessee had made the investment in shares out of its own funds and the borrowed

funds were entirely utilized for the purpose of its business. The investment in shares in the c urrent year was made from a separate bank acc ount where the surplus funds generated in that year were deposited. The argument that the assessee c ould have utilized its surplus funds in repaying the borrowings instead of investing in shares and by not doing so, there was diversion of borrowed funds towards investment in shares to earn dividend income is not ac ceptable in view of CIT vs. Hero Cyc les Ltd 323 ITR 518 where it was held, distinguishing Abhishek Industries 286 ITR 1 (P&H), that if investment in shares is made by an assessee out of own funds and not out of borrowed funds, disallowance under sec tion 14A is not sustainable. Acc ordingly, the disallowanc e of interest on borrowed funds was deleted. Godrej Agrovet Ltd. vs. ACIT (ITAT Mumbai) Sourc e: www.itatonline.org 531 S. 14A : Business Expenditure Matters remanded back to Assessing Officer in light of later judgments In the light of Godrej & Boyce Mfg. Co. Ltd. (2010) 328 ITR 81 (Bom.) it was held that the plea of the assessee based on Minda Investments Ltd. that the disallowance should be deleted c annot be acc epted as in the later dec isions similar matters have been restored to the file of the Assessing Officer and ac cording to rule of precedence, later dec ision passed by similar strength of the Bench has to be followed in preference to the earlier decision. Continental Carriers Pvt. Ltd. vs. ACIT (ITAT Delhi) Source: www.itatonline.org 532 S. 14A : Business Expenditure - No Disallowance of Interest on borrowed funds if Assessing Officer does not show nexus between borrowed funds & tax-free investment No disallowance can be made under section 14A of interest on borrowed funds where in c ase of mixed funds, it is not possible to asc ertain whether the investment in tax free bonds is out of the assessees own funds, the source of investment in the tax free bonds is identified, and the Assessing Offic er failed to establish any nexus between the borrowed funds and the investments in the tax free bonds. As also the cash flow of the assessee was not seen. Therefore, the apportionment on a pro rata basis was improper in the absenc e of anything brought by the Assessing Officer to rebut the assessees stand that the investment in the tax free bonds had been made out of own funds (Minda Investments, Hero Cyc les 323 ITR 518 (P&H) and Winsome Textile Industries 319 ITR 204 (P&H) followed). Dy. CIT vs. Maharashtra Seamless Ltd. (ITAT Delhi) Source: www.itatonline.org Editorial Note : Continental Carriers Pvt. Ltd. vs. ACIT (ITAT Delhi) Sourc e: www.itatonline.org 533 S. 14A : Business Expenditure - Onus on Assessing Officer to show nexus between expenditure & tax-free income for disallowance Rule 8D It was held that Rule 8D r.w.s. 14A(2) can be invoked only if the Assessing Officer "having regard to the ac counts of the assessee, is not satisfied with the correctness of the claim of the assessee in respect of expenditure inc urred" in relation to tax-free income. The burden is on the Assessing Officer to establish nexus of expenses incurred with the earning of exempt inc ome, before making any disallowance under sec tion 14A. There cannot be any presumption that the assessee must have inc urred expenditure to earn tax free income. Dy. CIT vs. Jindal Photo Ltd. (ITAT Delhi) Source: www.itatonline.org

Editorial Note : Continental Carriers Pvt. Ltd. vs. ACIT (ITAT Delhi) Sourc e: www.itatonline.org 534 S. 14A : Business Expenditure - Exempted Income - Personal Tax Free Investments The assessee a stoc k broker & Member of BSE earned taxfree income by way of dividend, interest on RBI bonds and PPF interest. The assessee c laimed that no disallowance under section 14A c ould be made as no expenditure was inc urred by him to earn tax free inc ome as shares were in the Demat account for long time and dividend was automatic ally credited to bank acc ount. The Assessing Offic er disallowed ` 20,000/under section 14A. In appeal CIT(A) instead of examining the issue on fac tual basis directed the Assessing Offic er to apply Rule 8D. On appeal to the Tribunal, allowing the appeal held that disallowance under sec tion 14A cannot be made on investment being for personal purposes. Pawan Kumar Parmeshwarlal vs. ACIT Source: www.itatonline.org 535 S. 14A : Business Expenditure - Exempted Income Section 14A has no applic ation when the Investment is made, not for purpose of earning tax free income, but for meeting its statutory obligation of maintaining required SLR. The expenses incurred in investing in tax free bonds were held to be expenses for the purpose of business. State Bank of Travancore vs. ACIT (2010) 195 Taxman 47 (Cochin) 536 S. 15 : Salary MLA MP - Income from Other Sources - (S. 56) Remunerations received by the MLAs and MPs cannot be taxed under the head inc ome from salary but c an only be taxed under the head income from other sourc es. M. Venkata Subbaiah vs. ITO (2010) 47 DTR 403 (Visakha)(Trib.) 537 S. 23 : Income from House Property - Annual Value - Notional Interest -Interest free security deposit : Referred to Full Bench Whether notional interest on interest free sec urity deposit is to be taken in to c onsideration to arrive at the notional value of the property in all cases or only in some glaring cases where the sec urity deposit is c ompletely disproportionate to the ac tual c ontrac tual rent or whether even a huge interest free sec urity deposit c an be totally ignored while determining the "fair rent" of the property is rec ommended to be referred to a Full Bench. CIT vs. Moni Kumar Subba (2010) 45 DTR 25 / 235 CTR 132 (Delhi) Editorial Note: Matter which was pending before spec ial bench of Mumbai Tribunal in the matter of Trivoli has been withdrawn as the issue is subject of appeal before Bombay High Court. Source: www.itatonline.org 538 S. 23(1)(a) : Income from House Property Notional Interest on Deposit not included in Annual Value In view of Circular 204 dated 24.7.1976, the CBDT has acc epted that under sec tion 23(1)(a) the "sum for whic h the property might reasonably be expec ted to let from year to year" is the municipal valuation of the property. Thus notional interest on deposit not includible in Annual Value under section 23(1)(a) & 23(1)(b). The same view that the has been taken in CIT vs. Prabhabati Bansali 141 ITR 419 (Cal.) & M. V. Sonavala vs. CIT 177 ITR 246 (Bom.)

ITR 246 (Bom.) Dy. CIT vs. Reclamation www.itatonline.org Reality India Pvt. Ltd. (ITAT Mumbai) Source :

539 S. 24(b) : Income from House Property Interest - Construction of House Where the assessee filed returns of inc ome for two consec utive years, each categoric ally stating that the construc tion of the assessees residential house was yet to be c ompleted, interest on house loan under sec tion 24(b), could not be allowed. Ashok Kumar Modi vs. ITO (2010) 45 DTR 158 (Ctk.)(Trib.) 540 S. 28 : Business Income - Capital Gains - Sale of Shares - Large volume of purchase & sale of shares does not per se mean activity is business - (S. 45) While volume of transactions is an important indic ator of the intention of the assessee whether to deal in shares as trading asset or to hold the shares as investor, it is c ertainly not the sole criterion. The Assessing Officers c onclusion t hat since sale and purchase had been determined by the volatility in the market, the same is against the basic feature of investor is not based on sound rational reasoning. A prudent investor always keeps a watch on the market trends and, therefore, is not barred under law from liquidating his investments in shares. The law itself has rec ognized this fac t by taxing these transactions under the head "Short Term Capital Gains". If the Assessing Offic ers reasoning is acc epted, then it would be against the legislative intent itself; Some part of the STCG had arisen out the earlier investment which had been accepted as being on investment account. As the modus operandi of the assessee remained the same in regard to other shares purchased during the year, the assessees claim c ould not be negated only on the basis of frequency of the transac tion Dy. CIT vs. SMK Shares & Stock Broking (ITAT Mumbai) Sourc e: www.itatonline.org Editorial Note: Gopal Purohit (2010) 228 CTR 582 (Bom.), Sadhana Nabera (2010) 41 DTR 393 & Jayshree Pradip Shah ITA No. 3608/M/07, Asst. Year 2004-05, Bench J dt. 24-22010 (Mum.) considered. 541 S. 28 : Business Income Commission Addition as Undisclosed Income In c ases of suspicious transac tions, despite lac k of direc t evidence, tax evasion can be assumed on the basis of the material available on rec ord, surrounding circ umstanc es, human c onduc t and preponderance of probabilities. There is no presumption in law that the Assessing Offic er is supposed to discharge an impossible burden to assess the tax liability by direct evidence only and to establish the evasion beyond doubt as in criminal proceedings. Hersh Win Chadha vs. Dy. DIT (ITAT Delhi) Sourc e: www.itatonline.org 542 S. 28(i) : Business Income Capital Gains Shares - Short Period of holding shares does not per se suggest business activity - Share Broker - (S. 45) The intention with whic h an assessee starts his activity is the most important factor. If shares are purchased from own funds, with a view to keep the funds in equity shares to earn considerable return on acc ount of enhancement in the value of share over a period then merely because the assessee liquidates its investment within six months or eight months would not lead to the c onc lusion that the assessee had no intention to keep the funds as invested in equity shares but was actually intended to trade in shares. Mere intention to liquidate the investment at higher value does not imply that the intention was only to trade in security. However, it cannot be held that in all circumstanc es if assessee has used its own funds for share ac tivity then it would only lead to inference of

assessee has used its own funds for share ac tivity then it would only lead to inference of investment being the sole will have to be considered the assessee. However, if investment in shares then trade in shares; intention. In such c ircumstances, frequency of transactions to arrive at proper conclusion regarding the true intention of the assessee, on the other hand, borrows funds for making definitely it is a very important indicator of its intention to

On facts, the Assessing Offic er proceeded on the assumption that borrowed funds had been utilized for buying shares on the ground that funds were c ommon and could not be segregated. However, it was categoric ally pointed out before the CIT(A) that no part of the borrowed funds was utilized for ac quisition of shares on investment account. Nothing was brought on record by the department to controvert this fac t; ACIT vs. Vinod K. Nevatia (ITAT) (Mumbai) Source: www.itatonline.org 543 S. 28(i) : Business Income - Capital Gains - Transactions in Shares - (S. 45) Where the assessee had dealt in more than 300 scripts during the year and turnover of delivery based transactions is about ` 3,500 crores and the assessee had regularly dealt in purc hase and sales of shares with high frequency and volume with repetitive purchases and sales in the same sc ript, with no shares being held for more than one year, considering the entirety of fac ts and circ umstances, profit earned from delivery based transactions in shares was rightly treated as business income as declared earlier as against short term c apital gains claimed by the assessee. Wall Fort Financial Services Ltd. vs. Addl. CIT (2010) 134 TTJ 656 (Mum.) / 48 DTR 138 (Trib.)(Mum.) 544 S. 28(1) : Business Income - Capital Gains - Sale of Shares - Multiple orders for purchase/sale of shares may constitute one transaction - (S. 45) The Assessing Officer had not correctly c alc ulated the number of transactions because sometimes a single transaction is split by the computers trading of the stock exchanges into many smaller transactions but that does not mean that assessee has c arried so many transactions. If someone places an order for purc hase of 1000 shares and the same is executed by the elec tronic trading system of stock exc hange into 100 smaller transactions, it does not mean that 100 transac tions have been entered into. The assessee had c arried out only 31 purc hase and 25 sale transactions whic h cannot be said to be a great volume of transactions. At the end of the year, the assessee was holding shares worth ` 11.56 crores with a market value of `17.69 crores. If assessee was a trader, he would have definitely realized the huge profit of almost ` 6 c rores immediately and not c arried out the stoc k to the next year. The transactions in whic h no delivery was taken and it was settled in the same day appear to be c ases where the particulars were wrongly c arried out on behalf of the assessee by the broker & thats why assessee got them settled on the same day. The assessee has not borrowed any money and he was oc cupied full time in the business of garments. Mehal V. Shah vs. ACIT (Mumbai) (ITAT) Source: www.itatonline.org 545 S. 28(i) : Business Profession - Vocational Receipt [S. 56(2)(v)] Gift received from various donors by a prominent political figure c annot be taxed as amount received as profession or oc casion. As the CIT(A) held that the gift above ` 25000 was taxable under section 56(2)(v), gift below ` 25000 cannot be taxed as

income from profession or occ asion. Dy. CIT vs. Mayawati (2010) 42 SOT 59 (Delhi) 546 S. 28(i) : Business Loss - Deduction Cost of Construction - (S. 142A) Disallowanc e of expenditure as excess c ost, by adopting cost of construction estimated by DVO was held to be not justified, as there are no powers under section 142A(1) to estimate an amount of expenditure claimed as revenue expenditure. Aar Pee Apartments (P) Ltd. vs. ACIT (2010) 194 Taxman 66 (Delhi) 547 S. 28(i) : Business Loss - Deduction Deposit Stock Broker Deposit paid by Assessee stock broker, to ac quire membership c ard from Calc utta Stock Exchange, to carry on business of Trading, whic h was w/off as Business Loss, was held to be allowed on the ground that said deposit was a part of the business, and its a business loss. Parlight Securities Ltd. vs. ACIT (2010) 195 Taxman 15 (Ahd.) 548 S. 28(i) : Business Loss Diminution in the value of the Investment Assessee bank adopted NIL value in respec t of Investment in UTI, as per the requirement of the Banking Regulations Act, the resultant diminution in the value of the Investment was held to be a business loss. State Bank of Travancore vs. ACIT (2010) 195 Taxman 47 (Cochin) 549 S. 30 : Repairs - Lease Premises - Rent, Rates, Taxes Repair and Insurance for buildings Expenses incurred in c onnec tion with renovation of lease hold premises allowed as revenue expenditure. Dy. CIT vs. Lazard India (P) Ltd. (2010) 41 SOT 72 (Mum.) 550 S. 32 : Depreciation Plinth - Plant Plinth is entitled to Depreciation as plant and not as a building. Daljit Singh vs. ITO (2010) 194 Taxman 16 (Chandigarh)(SMC) 551 S. 32 : Depreciation Registration - User of Boring Machine Depreciation claim in respec t of new boring mac hine with supporting truck was denied as vehicle was registered with RTO on 28-3-2003 and permits for using it were issued on 31-3-2003, as observed that the vehic le was not ready for use. On facts Deprec iation was allowed, as Assessee brought on record that mac hine was assembled on 24-3-2009, and corresponding hiring inc ome rec eived from 25-3-2003 To 31-3-2003 were duly supported by bills, and amounts were received by c heques. Premkumari Bathla (Smt.) vs. ACIT (2010) 195 Taxman 37 (Jaipur) 552 S. 32(1)(iia) : Depreciation - Additional Depreciation - Production of ready mixed concrete Produc tion of ready mixed concrete amounts to manufac ture or production of goods and

the assessee is entitled to c laim additional depreciation under section 32 (1)(iia) on RMC mac hinery. YFC Projects (P) Ltd. vs. Dy. CIT (2010) 46 DTR 496 (Delhi)(Trib.) 553 S. 36(1)(vii) : Bad Debts - Money advanced to subsidiary - Business Expenditure [S. 36(2), 37(1)] Money advanc ed to the subsidiary was not a trading debt emerging from trading activity of assessee hence could not be allowed as deduction either under sec tion 36(2) or under section 37(1). VST Industries Ltd. vs. ACIT (2010) 41 SOT 415 (Hyd.) 554 S. 37(1) : Business Expenditure - Capital or Revenue - Design and Drawing Fee Expenditure incurred by the assessee on ac count of design and drawing fees paid to foreign tec hnic ian for imparting training to Indian tec hnic ians, relates to the process of manufacturing and for a tenure and the documents, designs and specifications whic h have been supplied by the licensor are only for facilitating the said purpose of manufacturing and therefore constitute revenue expenditure. CIT vs. Manjal Showa Ltd. (2010) 46 DTR 1 (Del.) 555 S. 37(1) : Business Expenditure - Foreign Income - Taxes not eligible for Deduction under section 37(1). Despite bar in DTAA, credit for State taxes to be given under section 91 in addition to Federal Taxes DTAA - India-USA [S. 40a(ii)] The claim of the assessee that it is entitled to tax credit under sec tion 90 & 91 in respect of the foreign taxes as well as a deduction under sec tion 37(1) is not justified and results in a double unintended benefit. The argument that if deduction under sec tion 37(1) is not granted, credit for foreign taxes should be granted under section 90 even in respec t of income eligible for deduction under sec tion 80HHE is not acc eptable bec ause this would be c ontrary to the language of the DTAA and result in an assessee getting refund of US taxes if he had no tax liability in India. The argument that sec tions 90 & 91 are confined to USA Federal taxes and not to USA State taxes and that therefore the bar in section 40(a)(ii) does not apply to USA State taxes is not acc eptable because any payment of Income-tax is an applic ation of inc ome as held in Inder Singh Gill 47 ITR 284. Further, the scheme of sec tions 90 & 91 does not discriminate between Federal taxes and State taxes and though the India-USA DTAA c onfines the credit only to Federal taxes, the assessee will be entitled to relief under section 91 in respect of both taxes as that will be more beneficial to the assessee vis-vis tax c redit under DTAA. Consequently, the bar against deduction in sec tion 40(a)(ii) will apply to USA State taxes as well though the assessee will be entitled to c redit in respect of USA State taxes. Dy. CIT vs. Tata Sons (2010) 48 DTR 321 / (2011) 43 SOT 27 / 135 TTJ (Trib) (Mum) 556 S. 37(1) : Capital or Revenue Expenditure - Termination of Agreement Assessee entered into an agreement for purc hase of property for infrastructural fac ilities for business, assessee terminated the agreement and paid compensation, payment to be treated as c apital in nature and not allowable as revenue expenditure. Sap Labs India Pvt. Ltd. vs. ACIT (2010) 6 ITR 81 (Bang.)(Trib.)

Sap Labs India Pvt. Ltd. vs. ACIT (2010) 6 ITR 81 (Bang.)(Trib.) 557 S. 37(1) : Business Expenditure - Capital or Revenue Expenditure - Expenditure onsite development Expenses inc urred onsite development of portal is revenue expenditure. ACIT vs. Jupiter Corporate Services Ltd. (2010) 6 ITR 264 (Ahd.)(Trib.) 558 S. 37(1) : Business Expenditure Penalty - Fine Payment for Settlement of Dispute for alleged infringement of patent - Explanation Payment made by the assessee on settlement of dispute with a company of USA being neither a fine or a penalty for a proved offence nor an amount paid for c ompounding of an offenc e but is merely a sum paid on settlement, where c harge against the assessee was denied and not proved, the same c annot be held to be an inadmissible deduction while determining the assessees income from business. Desiccant Rotors International (P) Ltd. vs. Dy. CIT (2010) 47 DTR 193 (Delhi)(Trib.) 559 S. 37(1) : Business Expenditure - Capital or Revenue - Purchase of Antivirus software Expenditure incurred on purchase of antivirus software is of revenue expenditure. Chambal Fertilisers & Chemic als Ltd. vs. ACIT (2010) Tax World. Dec ember Vol. XLIV. Part 6. P. 195 560 S. 37(1) : Business Expenditure - Payment to Trust for Opening and Running a school in the assessee company premises Payment made to a trust for opening a sc hool in the assessee companys premises was allowable as deduction since the amount was paid with the objec t of providing educ ation to the children of employees of assessee c ompany within the company premises itself and was necessitated for business purpose. Chambal Fertilisers & Chemic als Ltd. vs. ACIT (2010) Tax World. Dec ember Vol. XLIV. Part 6. P. 195 561 S. 37(1) : Business Expenditure - Capital or Revenue Non-compete Fees Non-compete fee paid by the assessee on acquisition of pharmaceutical business whic h c onstituted a new line of produc ts for the assessee is not allowable as a revenue expenditure in one go. The out go is to be treated as a deferred revenue expenditure and is allowable over a period of four years prorata starting from the relevant assessment year. Orc hid Chemic als & Pharmac euticals Ltd. vs. ACIT (2010) 48 DTR 441 (Trib.) (Chennai) 562 S. 37(1) : Business Expenditure - Licence to operate Telecommunication services - (S. 35AB) Payment made by the assessee for obtaining lic enc e for providing telecommunic ation servic es though for a period of 10 years, the licence fee was payable on yearly basis with right to lic ensor to terminate the licence and the lic enc e is non-exclusive, nontransferrable and it is open to the Government of India to grant similar licenses to other persons as well and therefore, the benefit of licence fee paid during the year endures only till the end of relevant financial year and does not extend to the subsequent year and hence, the lic enc e fee is not in the nature of c apital expenditure falling under section 35ABB, but the same is revenue in nature allowable under section 37(1).

Bharati Airtel Ltd. vs. ACIT (2010) 48 DTR 416 (Trib.)(Mum.) 563 S. 37(1) : Business Expenditure - Administrative Charges for obtaining loan Administrative c harges paid for obtaining loan are allowable as revenue expenditure in the year of payment, notwithstanding the fact that the assessee has treated this expenditure as deferred revenue expenditure in its books of ac count and benefit of loan would acc rue over a long period. ACIT vs. Tata Housing Development Co. Ltd. (2010) 48 DTR 452 (Trib.)(Mum.) 564 S. 37(1) : Business Expenditure - Contingent Expenditure A liability dependant on fulfillment of a c ondition can not be allowed as deduction unless the dependent c ondition is fulfilled during the relevant previous year. (i) On the fac ts of the case a mandatory provision for expenses, like for overhauling and hot section inspection charges for engine of aircraft in acc ordanc e with the provision of Airc raft Ac t, 1934 and Airc raft Rules, 1937 after the airc raft flew the required number of hours, was made and claimed as deduc tion under section 37(1) but the Assessing Offic er disallowed on the ground that it was contingent. On offered, the Honble bench held that the said expenses were allowable as the liability in praesnti though it had to be disc harged at a future date. It was further held that even if the date on whic h it was to be discharged was not certain that would not have any bearing. Asia Aviation Ltd. vs. ACIT (2010) 126 ITD 406 (Del.) 565 S. 40A(2) : Business Disallowance - Excessive Interest In the absence of any material to show that the payment of interest made by the assessee is in excess of fair market value, and keeping in view the c ase relied on by the Assessing Offic er, 18 percent rate of interest was c onsidered as reasonable, interest paid by the assessee at 7 to 18 percent to its sister c oncerns was wholly and exclusively laid out for the purpose of the business and henc e, the disallowance of interest under section 40A(2) is deleted. Bharati Airtel Ltd. vs. ACIT (2010) 48 DTR 416 (Trib.)(Mum.) 566 S. 40A(2)(b) : Business Disallowance Interest Assessing Officer disallowed the Interest paid to relatives @ 24% on the ground that interest paid to others was only @ 12%. The disallowanc e made under section 40A(2)(b) as excessive or unreasonable, was deleted on following grounds : a) Assessee has rec overed interest from Debtors @ 24%, and there was no loss of revenue to Assessee. b) The net interest was a credit figure, whic h was dec lared as inc ome. c ) In the past interest was paid @ 24% and no disallowanc es were made. Ram Avtar Garg vs. ITO (2010) 195 Taxman 61 (Jaipur) 567 S. 40A(3) : Business Disallowance - Cash Payments - Distributor for BSNL in its card division

During the year under consideration assessee made total purc hases of India Telephone c ards at ` 270.64 lakhs, of whic h ` 187.73 lakhs were by way of c ash purchases. Assessing Officer invoked provisions of section 40A(3) and disallowed 20% of impugned expenditure. CIT(A) upheld the disallowance. The Tribunal held that on facts, it was apparent that relationship between service provider i.e. BSNL and assesseedistributor was of principal and agent and income arising to assessee was in nature of commission or remuneration against services rendered, hence, disallowance under sec tion 40A(3) is not applicable. S. Rahumathulla vs. ACIT (2010) 127 ITD 440 (Kochin) 568 S. 40(a)(i) : Business Disallowance - Under Article 26(3) of India-USA DTAA payments to Non-Residents are equated with payments to Residents & so S. 40(a)(i) disallowance not valid Article 26(3) of IndiaUS DTAA protects interest of non-resident vis--vis residents. Thus payment to residents are equated with payment to non-residents .Thus in light of Art 26(3), no disallowance under section 40(a)(i) can be made even in case of payment to non resident. Herbal Life International (2006) 101 ITD 450 (Delhi) followed. Central Bank of India vs. Dy. CIT (ITAT) (Mum.) Sourc e : www.itatonline.org 569 S. 40(a)(i) : Business Disallowance - Reimbursement of Expenses - Interest payable outside India Where the assessee made payment to its parent c ompany in UK whic h was merely reimbursement of expenses and not in nature of interestroyalty, fees for technic al servic es or other sums chargeable under Ac t, no disallowance of said payment could be made while computing inc ome under head "profits and gains of business or profession" on the ground that no tax at source had been deducted. Dy. CIT vs. Lazard India (P) Ltd. (2010) 41 SOT 72 (Mum.) 570 S. 40(a)(ia) : Business Expenditure - Disallowance - Tax Deducted at Source - Truck Owners - (S. 194C) Considering the legal and fac tual findings recorded by the CIT(A) regarding there being no liability of the assessee to deduct tax under sec tion 194C from the payments made by it to different truck owners on the ground that each job undertaken by a truc k owner was a separate job for the same person, at different rates and terms, henc e the different jobs will not turn into single contract and thus there being no contract between the assessee and truck owners, there was no infirmity in the order of CIT(A) deleting the disallowance under sec tion 40(a)(ia). ITO vs. Indian Road Lines (2010) 45 DTR 49 (Asr.)(Trib.) 571 S. 40(a)(ia) : Business Expenditure Disallowance - Tax Deducted at Source Transportation of Goods - (S. 194C) Assessee a transport c ontrac tor herself having executed whole of the c ontrac t for transportation of goods by hiring truc ks from various truc k owners, it c annot be said that the payments made for hiring of vehic les fall in the category of payment to sub c ontrac tor and therefore, the assessee was not liable to deduc t tax at source as per the provision of sec tion 194C for the payments made to the truc k owners and the same c ould not be disallowed under section 40(a)(ia). Kavita Chug (Mrs) vs. ITO (2010) 45 DTR 146 (Kol.)(Trib.)

572 S. 40(a)(ia) : Business Expenditure Disallowance - Payment of tax deduction at source in next year Assessee having made all payments of TDS in respect of contract payments, interest, professional fees and commission for the Asst. Year 2005-06 after due date and in the financial year 2005-06, corresponding amounts are deduc tible in c omputing the inc ome of asst year 2006-07, in view of section 40(a)(ia). Payment of rent has been inserted in section 40(a)(ia) w.e.f. 1st April 2006 and therefore, assessee is entitled to deduc t the rental expenditure in c omputing the income of the relevant Asst. Year i.e. 2005-06, itself, even though payment of TDS was delayed. Uniword Telec om Ltd. vs. Addl. CIT (2010) 45 DTR 433 (Del.)(Trib.) 573 S. 40(a)(ia) : Business Expenditure - Reimbursement of Expenses When there is no element of income and the payment is only as a reimbursement of expenses incurred by the payee, then no disallowance c an be made under sec tion 40(a) (ia). Utility Powertec h Ltd. vs. ACIT (2010) TIOL 545 ITAT (Mum.) (BCAJ) (Nov., 2010) P. 22 [150 (2010) 42 B. BCAJ] 574 S. 40(a)(ia) : Business Expenditure - Accrued Prior to 10-9-2004 -Amendment to section 40(a)(ia) by Finance Act, 2010 Amendment to section 40(a)(ia) by the Financ e Ac t, 2010 which extends the time limit for all TDS payable throughout the year has been introduced as curative measure and therefore, would apply to earlier years also. Golden Stables Life Style Centre Pvt. Ltd. ITA Nos. 5145/Mum/2009 Benc h G dt. 30-92010. (2010) BCAJ Nov., 26 [155 (2010) 42-B.BCAJ] 575 S. 40(a)(ia) : Business Expenditure Disallowance - Tax Deduction at Source Interest Application in Form No. 13, 15G - (S . 194A) Disallowanc e under sec tion 40(a)(ia) of interest payments on which no TDS was deducted was sustainable, as merely filing of Form No. 13 by payee to their respective Assessing Officers c annot be c onstrued as an authorization to the assessee not to deduct tax for the interest due to them. No c opies of Form No. 15G were forthcoming to justify the assessees stand. Rajendra Kumar vs. Dy. CIT (2010) 46 DTR 363 (Bang.)(Trib.) 576 S. 40(a)(ia) : Business Expenditure - Fess for Technical Services - Transaction Charges paid to Stock Exchange - Tax deduction at Source Transaction charges paid by the brokers to the stock exchange were not for any servic es provided by the stock exc hange, hence, the provisions of section 40(a)(ia) were not attracted as no tax was required to be deducted. Wall Fort Financial Services Ltd. vs. Addl. CIT (2010) 134 TTJ 656 (Mum.) / 48 DTR 138 (Trib.)(Mum.) 577 S. 40(a)(ia) : Disallowance - Amendment by Finance Act, 2010 -Retrospective effect from the Asst. Year 2005-06 - TDS paid before due date of filing of return Amendment sec tion 40(a)(ia) by Financ e Ac t, 2010 is retrospective and applies from the day said sec tion was brought in to the statute book i.e. w.e.f. 1-4-2005, meaning

day said sec tion was brought in to the statute book i.e. w.e.f. 1-4-2005, meaning thereby, that even if the TDS was paid by due date for filing return of income, no disallowance under sec tion 40(a)(ia) c ould be made for any of the assessment years starting from assessment year 2005-06. Kanubhai Ramjibhai vs. ITO (2010) Chartered Acc ountants Assoc iation Ahmedabad, December, 2010 P. 411 (2011) 49 DTR 70 (Trib) (Mum) 578 S. 40(a)(ii) : Business Expenditure - Interest on delayed payment of withholding taxes to US Government - (S. 43B) Allowability of interest payable on delayed remittances of withholding taxes to US Government, which the assessee had deducted from the payments made to its employees in USA remanded to CIT for fresh consideration. Mascon Global Ltd. vs. ACIT (2010) 45 DTR 20 (Chennai)(Trib.)(TM) 579 S. 40(b)(v) : Business Disallowance - Interest salary paid to partner Partnership Resolution It was found from the records that there was indication as to when increase was agreed upon by partners in terms of partnership deed and further shares of each of the two partners after increase were not defined and same was not documented, whereas all the requirements were of vital importanc e for purpose of section 40(b)(v) and more over there was no evidenc e of any suc h resolution made by partners. Disallowance under section 40(b) was upheld. Dy. CIT vs. Raja & Co. (2010) 42 SOT 136 (Cochin) 580 S. 41(1) : Future Sales-tax Liability is paid, there is no "remission" Sales tax deferral Scheme There is no remission in case of payment of future sales tax liability. Two basic ingredients nec essary for application of s.41 are, First, the assessee should have obtained an allowance or deduction in respect of any loss, expenditure or trading liability and second, the assessee should have subsequently (i) obtained any amount in respec t of suc h loss or expenditure or (ii) obtained any benefit in respect of such trading liability by way of remission or c essation thereof; Sulzer India Ltd. vs. Jt. CIT (2010) 42 SOT 457 / 47 DTR 329 (Mum.)(Trib.)(SB) Sourc e: www.itatonline.org 581 S. 41(1) : Remission or Cession of Trading Liability - Loan waived [S. 28(iv)] Where capital assets are acquired by obtaining a loan and subsequently, loan amount is waived by other party, principal amount of loan waived by other party c annot be brought to tax under sec tion 28(iv) or under section 41(1). Dy. CIT vs. Logitronics (P) Ltd. (2010) 127 ITD 16 (Delhi) 582 S. 43(1) : Depreciation - Actual Cost - Foreign Exchange forward contract - (S. 43A) Where the foreign exc hange c ontrac ts were made by the assessee for the purpose of acquiring capital assets and the forward contracts were settled during previous year relevant to the assessment year under appeal, the claim of the assessee to adjust the loss on settlement being legitimate, the said loss needs to be added to the cost of the c oncerned capital assets as per sec tion 43A, and c onsequently, depreciation is to be allowed on the enhanced value of the capital assets.

JSW Steel Ltd. vs. ACIT (2010) 46 DTR 41 / 133 TTJ 742 (Bang.)(Trib.) 583 S. 43(5) : Speculation Loss - Derivatives Trading - (S. 73) Trading in derivatives cannot be c onsidered as a speculative transaction and therefore set off of loss of derivative trading against the profits of the share trading business was permissible. Dy. CIT vs. Paterson Sec urities (P) Ltd. (2010) 127 ITD 386 / 48 DTR 50 (Trib.)(Chennai) 584 S. 43(5)(d) : Loss - Speculation Business - Transaction in Derivatives Exchanges notified on 25-1-2006, transac tions carried out in previous year relevant to assessment year 2006-07, eligible for benefit of sec tion 43(5)(d), loss on derivative transactions to be set off against profit earned in purchase and sale of shares on derivative basis. No expenditure can be alloc ated towards speculative business. Seema Jain (Smt) vs. ACIT (2010) 6 ITR 488 (Delhi)(Trib.) 585 S. 43B : Business Expenditure Disallowance - Interest on arrear of SEBI Turnover Interest on SEBI turnover charges is of the same nature as tax, duty, cess or fees and acc ordingly will be allowed in acc ordance with section 43B when paid in current year. Wall Fort Financial Services Ltd. vs. Addl. CIT (2010) 134 TTJ 656 (Mum.) / 48 DTR 138 (Trib.)(Mum.) 586 S. 44AB : Audit Reports - Corporate Entity Corporate entity is single entity, assessee is not bound to file tax audit reports for eac h separate business. Rolls Royc e Industrial Power Ltd. vs. ACIT (2010) 6 ITR 722 (Trib.) / 42 SOT 264 (Trib.) (Delhi) 587 S. 44BB : Business of Exploration of Mineral Oils - (S. 9(1)(vii), 44D) Feasibility study on implementation of c yclic steam stimulation c arried out by the nonresident assessee in pursuance of a contract with ONGC was a study substantially and directly connected with the extraction of mineral oil, and therefore, receipt for suc h servic es are taxable under section 44BB and not under sec tion 9(1)(vii) r.w.s. 44D. ONGC as representative assessee of Alberta Research Council vs. Jt. CIT (2010) 46 DTR 21 / 133 TTJ 663 (Del.)(Trib.) 588 S. 45 : Capital Gains Business Income - Portfolio Management Scheme [S. 28(i)] The Tribunal has found that the lower authorities have taken into consideration only one fac tor i.e. Volume of transac tions and not other factors hence, the matter was set aside to decide a fresh. Sar Investment (P) Ltd. vs. Dy. CIT (2010) 40 SOT 566 (Ahd.) 589 S. 45 : Capital Gains - Cost of Acquisition - Tenancy Right [S. 55(2)] Assessee was in lawful possession of flat till issue of notice of evic tion and statutory tenant after termination of tenancy right. Cost of acquisition of tenanc y to be taken at nil.

nil. Praful Chandra R. Shah (Late) vs. ACIT (2010) 5 ITR 598 (Mum.)(Trib.) 590 S. 45 : Capital Gains - Cost of Acquisition - Surrender of Tenancy Right - Market value of tenancy right There is an important distinc tion between asset not having c ost of ac quisition and asset whose c ost of acquisition cannot be determined. Asset sold by the assessee was the property which was given to him on surrender of tenancy right. Cost of this asset is the market value of the tenancy right as on the point of time when it was surrendered. Balmukund P. Ac harya vs. ITO (2010) 45 DTR 281 / 133 TTJ 640 (Mum.)(Trib.) 591 S. 45 : Capital Gains - Undisclosed Income - Sale of Shares - (S. 69) Assessee having submitted c opies of the c ontrac t notes, sales bills statement of account and confirmation from the broker to substantiate the sale of shares sold by him, and the Assessing Officer having failed to establish that the assessee has introduc ed his own unaccounted money, in the shape of the sale proceeds of shares, the impugned inc ome disclosed by the assessee is chargeable to tax as capital gains and can not be treated as inc ome from undisclosed sources. Baijnath Agrwal vs. ACIT (2010) 133 TTJ 129 (Agra)(TM) 592 S. 45 : Capital Gains - Sale of land with trees and plants The assessee, a Chartered Ac countant by profession, sold land with trees and claimed ` 14.92 lakhs as expenses from the sale consideration of ` 10 lakhs as exempt agricultural income. The Assessee contented that the vendee had paid a sum of ` 10 lac s towards the total reimbursements of sale proceeds of the trees, plants and other existing crops and hortic ulture and it was inc luded in the total value. The Assessing Officer held that it was a c omposite sale along with the land. Hence, it could not be treated separately as agricultural inc ome. He made addition of ` 10,03,814/-. CIT(A) c onfirmed the assessment order. The Tribunal held that, although this amount was part of sale deed under which the land was sold, the part of sale proceeds was not agricultural income. Deduction was allowed on entire indexed cost of ac quisition. Abhinav Ajmera vs. ACIT (2010) 6 ITR 482 (Delhi)(Trib.) 593 S. 45 : Capital Gains Society - Income Ac cording to Circ ular 9, dt.25-03-1969, the legal ownership in flats vests in individual members and not in the co-operative soc iety. Flat owners have proportionate interest in land and building. Amount rec eived for permitting developer to construct additional area c annot be treated as inc ome of the society. Auro Ville Co-op Hsg. Soc. Ltd. vs. ACIT, ITA No.570/Mum/2008, dt.31-03-2010, Mumbai H Bench, BCAJ pg. 28, Vol. 42-B, Part 2, November 2010. 594 S. 45 : Capital Gains - Beneficial Ownership TDR - FSI Benefic ial ownership of the balance FSI and right to use TDR was that of the members of the society. The members transferred the rights and received consideration for suc h transfer ITO vs. Ashok Hindu Co-op Hsg. Soc. Ltd., ITA No.630/M/2006, dt.29-09-2008, Mumbai D Bench, BCAJ pg. 29, Vol. 42-B, Part 3, Dec ember 2010. 595 S. 45(2) : Capital Gains - Business Income - Sale of shares after conversion of

595 S. 45(2) : Capital Gains - Business Income - Sale of shares after conversion of investment into stock-in-trade Assessing Offic er having acc epted the genuineness of the transac tion in the year of purchase of shares or in the year of conversion of the same from investment into stoc kin-trade, he was not correct in examining the genuineness of the transaction in the subsequent year in whic h the shares were sold and assessing the surplus as business income. As per section 45(2), surplus is assessable as capital gains. ACIT vs. Tata Housing Development Co. Ltd. (2010) 48 DTR 452 (Trib.)(Mum.) 596 S. 45(4) : Capital Gains - Assets taken over by Partner - Expression "Otherwise" Assets taken over by a partner on dissolution of firm. Expression "otherwise" appearing in subsec tion(4) of section 45 has not to be read "ejusdem generies" with the expression "dissolution of a firm or other AOP". It has to be read with the words "transfer of a c apital asset by way of distribution of c apital asset". Therefore capital gain is c hargeable to tax on takeover of a c apital asset by a partner on dissolution of firm. ITO vs. International Rubber & Plastic s (2010) 48 DTR 219 (Trib.)(Chennai) 597 S. 48 : Capital Gains Computation - Market Value - Cost of Construction Assessee had sold land to the builderdeveloper. Only the c ost of c onstruction of proposed building allotted to the assessee in the ultimately construc ted area and not the market value of such share of construc ted area, has to be reckoned as c onsideration for the purpose of computation of capital gains. Dy. Direc tor of IT vs. G. Rahguram (2010) 46 DTR 136 (Hyd.) 598 S. 48 : Capital Gains Computation - Fair Market Value - Full Value of Consideration (Ss. 45, 50C, 55A) Under section 48 the full value of c onsideration is to be adopted for computing the c apital gains. Under section 50C, fair market value estimated by the registering authority is deemed to be full value of c onsideration, however, there is no provision in the Act under which the fair value market value assessed by the DVO is to be taken as full value of consideration, henc e the Assessing Offic er was not justified in adopting the fair value determined by the DVO as the full value of consideration for c omputing the income from c apital gains. ITO vs. Mohinder Nath Sehgal & Sons (2010) 46 DTR 238 (Chd.)(Trib.) 599 S. 48 : Capital Gains Chargeability - Transfer of right to acquire property - Nil cost of acquisition - (S. 45) Transfer of right to acquire property i.e. for giving up right to c laim spec ific performanc e did not attract capital gains as no cost of ac quisition was determinable. B. Ramakrishnaiah vs. ITO (2010) 46 DTR 406 (Hyd.)(Trib.) 600 S. 49(1)(iii) : Capital Gains Cost of Acquisition - Fair Market Value as on 1st April, 1981 - Sale of Land - Dismantling the Building [S. 48, 55(2)(b)] Though the assessee had sold land by sec ond sale deed after dismantling the building, the fair market value for the purpose of c omputation of c apital gain should be taken, of the land as well as the construction thereon since as on 1st April 1981, building was existing over the plot . Assessing Offic er was not justified in taking the fair market value of land only.

of land only. Subash Chand Kapoor vs. ITO (2010) 46 DTR 314 (Agra)(Trib.) 601 S. 50 : Capital Gains - Depreciable Assets - Block of Assets If after crediting sale proc eeds the written down value of bloc k is reduced, it cannot be taxed separately where sale proc eeds exc eeded the written down value of block, profit to be taxed as short term capital gains. Rolls Royc e Industrial Power Ltd. vs. ACIT (2010) 6 ITR 722 (Trib.) / 42 SOT 264 (Trib.) (Delhi) 602 S. 50B : Capital Gains - Slump Sale - Cost of Acquisition Assessee had sold entire undertaking with all its assets and liabilities together with lic ences, permits, approvals, registration, contracts employees and other c ontingent liabilities for a slump pric e, provisions of section 50B were applic able. VSAT Industries Ltd. vs. ACIT (2010) 41 SOT 415 (Hyd.) 603 S. 50B : Capital Gains - Slump Sale - Transfer of Business as going Concern - (Ss. 2(19AA), 2(42C), 50) Where a business as a going c onc ern is transferred including inventory, contrac t, license agreements, ac counts receivables, vendor lists etc ., same would fall within the definition of slump sale and is to be considered for c omputation of c apital gains in ac cordance with section 50B. Duchem Laboratories Ltd. vs. ACIT (2010) 134 TTJ 532 / 47 DTR 484 (Trib.)(Mum.) 604 S. 50C : Capital Gains - Stamp Valuation - Development Rights The assessee was c oowner of inherited property. He entered into an agreement with the developer for development of the property for a consideration of ` 63 lakhs and offered his share of the consideration to c apital gains. The Stamp valuing authority valued the property at ` 4.73 crores though the DVO valued it for ` 1.81 c rores. The Assessing Officer invoked the provision of section 50C and adopted the DVOs valuation for c onsideration. This was confirmed by the CIT(A). Before the Tribunal the assessee argued that there was a distinction between "rights in land and building" and "land and building" and the sec tion 50C did not apply to "rights" in land and building such as development rights. The Tribunal held that the argument that transfer of development rights does not amount to transfer of land or building and therefore, section 50C is not applicable is not ac ceptable bec ause under sec tion 2(47)(v) the giving possession in part performance of a c ontrac t as per section 53A of the Transfer of Property Act is deemed to be a "transfer". When the assessee received the sale consideration and handed over possession of the property vide the development agreement, the condition presc ribed in section 53A of the Transfer of Property Act is satisfied and under sec tion 2(47)(v) the transaction of transfer was completed. The fac t that the assessees name stands in the municipal records does not change the nature of transaction. Arif Akhatar Hussain vs. ITO (ITAT - Mumbai) Source: www.itatonline.org 605 S. 50C : Capital Gains - Stamp Valuation - Transaction of Sale of Property Prior to 1-42003 - Reference to DVO Provisions of sec tion 50C of the Act shall not be applic able in respect of transaction of sale of property entered into on or before 1-4-2003, c onsidering the theory of natural justic e and impossibility. Assessee has a right to challenge the valuation of property

justic e and impossibility. Assessee has a right to challenge the valuation of property under sec tion 50C(2), adopted by SVA and in that c ase Assessing Offic er should refer the matter to DVO. Ashutosh Bhargava, Gudda Godji (Jhunjhunu) vs. Dy. CIT (2010) Tax World Nov., 10 Vol. XlV Part-5 Page 173 (JAI.) 606 S. 50C : Capital Gains Stamp Valuation Reassessment - (S. 147) Addition made in re-assessment proceedings on the basis of valuation made by Stamp Duty Authorities on the purchaser, was deleted, as section 50C was applic able in case of seller of asset, following the dec ision in case of Rekhaben Rajendra Shah vs. ACIT [IT Appeal No. 3069 (Ahd.) of 2008 dt. 9-4-2010] ITO vs. Venu Proteins Industries (2010) 195 Taxman 14 (Ahd.) 607 S. 50C(2) : Capital Gains - Full Value of Consideration - Reference to Departmental Valuation Officer If the assessee is of the opinion that the valuation fixed by the registering authority is higher, the assessee c an request the Assessing Offic er to refer the matter to the Departmental valuation officer. The Tribunal held that the Assessing Officer is bound to refer the matter to the valuation officer. The matter was set aside to Assessing Officer to refer the matter to Departmental valuation officer. B. N. Properties Holdings P. Ltd. vs. ACIT (2010) 6 ITR 1 (Chennai)(Trib.) 608 S. 54 : Capital Gains - Long term Capital Gains - Profit on sale of property used for purchase of residence house - Interest free deposit Premises taken on lic ence under agreement for a period of two terms of eleven months against interestfree deposits, c annot be c onsidered as purchase of residential house, hence, exemption under section 54 is not eligible. Praful Chandra R. Shah (Late) vs. ACIT (2010) 5 ITR 598 (Mum.)(Trib.) 609 S. 54 : Capital Gains Exemption - Sale of house or land - Land appurtenant to the building : (S. 54) Assessee is entitled to exemption under sec tion 54 in respec t of capital gains on sale of the land appurtenant to the building. If such land is sold separately, after dismantling the existing building, what is sold is only land and hence, exemption under section 54 will not be allowable. Subhash Chand Kapoor vs. ITO (2010) 46 DTR 314 (Agra)(Trib.) 610 S. 54F : Capital Gains - Investment in Residential House - Full value of consideration - (S. 50C) For the purpose of deduc tion under section 54F full value of consideration shall be the value as spec ified in the sale deed for the purpose of c omputation of capital gains. Provision of section 50C can not be applic able as it contains only deeming provision. Full value of sale consideration as mentioned in other provisions of the Act is not governed by the meaning of full value of consideration as contained in section 50C of the Ac t. Gyan Chand Batra vs. ITO (2010) 45 DTR 41 / 133 TTJ 482 (JP)(Trib.) / (Tax World) Vol. XLIV P 89 (August, 2010) 611 S. 54F : Capital Gains Exemption - Purchase of Flat

Assessee had purchased a flat, prior to sale of land after demolition of building on the land and therefore neither proviso to section 54F(1) nor sec tion 54F(2) attracted and the assessee was entitled to exemption under section 54F. Subhash Chand Kapoor vs. ITO (2010) 46 DTR 314 (Agra)(Trib.) 612 S. 55A : Capital Gains - Reference to DVO Fair Market Value as on 1-4-1981 Fair market value of the property as on 1st April 1981, dec lared by the assessee as per Government registered valuers report being more than the fair market value as estimated by the DVO on referenc e by the Assessing Officer, the reference to the DVO is not valid and consequently, estimation of fair market value of property as made by the assessee is to be acc epted. Sarala N. Sakraney vs. ITO (2010) 46 DTR 208 (Mum.)(Trib.) 613 S. 56 : Income from Other Sources - Business Income - Gift received by Politicians - (S. 28) Gifts received by assessee, a politician, from numerous donors as a token of apprec iation of her reformative work for upliftment of Dalits without any perceptible or intended quid pro qua as evident from the affidavits of the donors are to be treated as personal gifts and not vocational or professional gifts and therefore all such gifts inc luding those upto ` 25,000 are to be considered under section 56(2)(v) and not under sec tion 28 and thus gifts up to ` 25,000 were not taxable. Dy. CIT vs. Mayawati (Ms.) (2010) 48 DTR 233 (Trib.)(Delhi) 614 S. 56 : Income from Other Sources - Interest Income - During Precommencement Period [S. 28(i), 37(1), 57 (iii)] Interest earned by the assessee c ompany by investing its surplus funds in deposits with banks and other c ompanies at the time when it was construc ting the building of the institute for conducting its main business activity is taxable as "inc ome from other sourc es". Since the business was yet to set up. The expenditure incurred on revenue acc ount cannot be allowed as business expenditure, however expenditure. But expenses if any incurred for earning interest income can be allowed. Whistling Woods International Ltd. vs. ITO (2010) 48 DTR 371 / (2011) 135 TTJ 28 (Trib.)(Mum.) 615 S. 68 : Cash Credits Gifts No relation No occasion Gift not genuine To prove the genuineness of gift, mere identification of gift amount through banking c hannels is not suffic ient, onus lies on the assessee to prove not only to establish identity of donor, but his c apacity to make gift and also the occ asion to make the gift. As the Donor refused to attend before the Assessing Officer, addition was justified under section 68. Asha M. Agarwal vs. ITO (2010) 41 SOT 30 (Mum.) 616 S. 68 : Cash Credits Gifts - Donor appeared in person Donor appeared in person before the Assessing Officer and confirmed making of gift and reason which persuaded him to make gift, he being friend of assessees father who helped him in past. Donor also proved the source of gift. Addition under sec tion 68 was deleted.

deleted. Avnish Kumar Singh vs. ITO (2010) 126 ITD 145 (Agra)(TM) 617 S. 68 : Cash Credits - Gift In order to establish that the money received by assessee to be a gift, it should be proved to be voluntary and at the instance of the donor out of love and affection. Gift being as per advice of donors brother-in-law and not voluntary out of love and affection, addition under sec tion 68 was sustainable. Vimaladevi S. Garg (Smt) vs. ITO (2010) 46 DTR 294 (Mum.)(Trib.) 618 S. 69 : Unexplained Investments - Remanding the matter back to Assessing Officer In the course of assessment proceedings the Assessing Offic er asked for the sourc e of investment of ` 8,64,670 in connection with supply of coal of 1408 MT on road permit. In reply assessee filed the affidavit of "H" (Coal lifting agent) and the copy of agreement executed between assessee and "H", who had deposited money with CCL on behalf of assessee. Not satisfied with the explanation, the Assessing Officer made addition under section 69. On Appeal CIT(A) deleted the addition. On appeal by the Department the Judic ial member remanded the matter bac k to Assessing Officer, whereas the Ac countant Member c onfirmed the order of Assessing Officer. On reference to third member it was held that the Judicial member was right in restoring the matter back to Assessing Officer for disposal afresh. ACIT vs. Kaycee Glass Works (2010) 127 ITD 109 (Agra )(TM) 619 S. 69 : Income from Undisclosed Source Addition Alleged bogus purchase - Non filing of confirmation - Certificate from Bank - (S. 145) Assessing Officer was not justified in making the disallowanc e of purc hases made by the assessee merely due to non filing of confirmation from suppliers especially when assessee has filed certific ate from the bank indicating the fac ts that cheques issued by it were c leared and no defec ts in the books of ac count was pointed out. YFC Projects (P) Ltd. vs. Dy. CIT (2010) 46 DTR 496 (Delhi)(Trib.) 620 S. 69 : Income from Undisclosed Source - Benefit of VDIS, 1997 Other than Declarant Gift from Declarant - (S. 68) Benefit of declarations made by ladies and minors under VDIS, 1997, is also available to a person other than the declarant to the extent of amount dec lared unlike the earlier sc hemes and therefore, gifts received by the assessee from three ladies by way of acc ount payee cheques out of the amounts declared by them under VDIS, 1997 whic h are supported by valid and subsisting c ertificates issued by the c ompetent authority (CIT) have to be ac cepted as genuine and c annot be treated as undisclosed income of the assessee. Dy. CIT vs. Mayawati (Ms.) (2010) 48 DTR 65 (Trib.)(Delhi) 621 S. 69C : Unexplained Expenditure Third Party Records - Purchases Additions under sec tion 69C for unac counted purc hases and for unexplained expenditure, c annot be made on basis of third parties records, when Assessee has not claimed said amounts as expenditure in its books. Held, sec tion 69C can be invoked only when Assessee has incurred expenditure for whic h he has no explanation or the explanation is not satisfactory.

he has no explanation or the explanation is not satisfactory. ACIT vs. Abhishek Exports (2010) 195 Taxman 59 (Ahd.) 622 S. 72(1) : Losses - Carry forward and set off of business losses - Remission or Cessation of Trading Liability [S. 41(1)] In order to allow business loss under sec tion 72(1)(i) condition is that assessee should c arry on business in year under appeal and it is only against profits of such business that brought forward loss can be set off. Where assessees profits were assessed under section 41(1) as business income, said profits did not represent profits and gains of any business carried on by assessee and therefore, brought forward business loss was not allowable against profits assessed under section 41(1). Karnataka Instrade Corporation Ltd. vs. ACIT (2010) 127 ITD 74 (Bang.) 623 S. 73 : Speculation Loss - Investment Co-Purchase and sale of Shares Loss arising on acc ount of purchase and sale of shares in another c ompany is to be treated as speculative loss in view of the clear provisions of Explanation to section 73. Centurion Investment & International Trading Co. (P) Ltd. vs. ITO (2010) 133 TTJ 803 / 46 DTR 177 (Del.) 624 S. 74 : Capital Gains - Capital Loss - Carried Forward and set off-Non-resident Claim of carry forward of capital loss brought from earlier years by the assessee, a c ompany, tax resident of Mauritius, could not be rejec ted by the Assessing Officer while making assessment of subsequent year on the ground that since the assessee c ompany was not liable to tax on the capital gains under Art. 13 of DTAA between India and Mauritius, such c apital loss was also exempt. Flagship Indian Investment Co. (Mauritius) Ltd. vs. ADIT (2010) 133 TTJ 792 / 46 DTR 166 (Mum.)(Trib.) 625 S. 80-IA : Deductions - Profits and Gains from Industrial Undertakings - Infrastructure Undertakings - Payment received for notional treatment Since the entire rec eipts whether of actual treatment or notional treatment of BMW (Bio Medical Waste treatment) by Munic ipal corporation of Greater Mumbai (MCGM), were flowing from contract entered into by assessee with MCGM and where hare direct relation with eligible enterprise it could be said that payment in respec t of notional treatment of BMW was derived from eligible undertaking and was eligible for deduction. ITO vs. E. A. Infrastructure Operations (P) Ltd. (2010) 41 SOT 268 (Mum.) 626 S. 80-IB : Deduction Manufacture - Potato Chips - Initial Year Conditions prec edent for allowability of deduc tion under section 80IB are to be examined in the initial year of the claim and if they are found to be satisfied the Assessing Officer c annot ignore that finding in the assessment of a subsequent year and take a different view. The Tribunal held that the CIT(A), was not justified in disallowing deduction under section 80IB on the ground that the manufacture and sale of dehydrated onion flakers and potato chips is not manufac ture or production of article or thing to be eligible to deduction under section 80IB. Janak Dehydration (P) Ltd. vs. ACIT (2010) 134 TTJ 1 (Ahd.)(UO) 627 S. 80-IB : Deductions - Profits and Gains from Industrial Undertakings Manufacturing -

627 S. 80-IB : Deductions - Profits and Gains from Industrial Undertakings Manufacturing Types of Sheets and Pre-engineering Building Material Assessee had employed hightec h sophistic ated machinery, e.g., for marking roof tops, it bought plain sheets and gave them curved and desired shape on cold rolled mill and thereafter, different engineering operations were carried on and thus, ultimately assessee gave tec hnic al inputs in respect of tensile strength, long durable service life and structural quality keeping factors like heat resistanc e operational requirement, energy c onsumption and environmental factors in mind. Similarly, for beams c olumns and rafters, assessee had used high duty shearing machine as against simple fabrication tools employed by others. It had autowelding machines which gave uniform welding and made all parts uniformly joining and bec oming one static body and ultimately improved its tensile strength. In view of above process, there was sea c hange from raw materials to finished produc ts, hence, the assessee could be said to be engaged in production or manufacture of an article or thing and entitled to deduction under section 80-IB. Steel Fab Building Systems vs. ITO (2010) 127 ITD 419 (Mum.) 628 S. 80-IB(10) : Deductions Profit derived from an Industrial Undertaking and building housing projects - Approval and completion of the project Stipulation for obtaining completion c ertificate should not be so interpreted to mean that an assessee can c laim exemption under sec tion 80-IB(10) only in the year of c ompletion of the whole of the housing projec t but the exemption could be c laimed, particularly, where the project stretc hes over a number of years and the assessee returns its inc ome based on perc entage completion method. Ramaniyam Castles (P.) Ltd. vs. ACIT (2011) 128 ITD 130 (Chennai) Editorial Note : B. T. Patte Enterprises, 28 (Pune) DTR 451 (Pune) Sr. No. 4/2009 dt. 306-2009 629 S. 80-IB(10)(b) : Deductions - Housing Projects - Area set apart for amenities In order to allow assessees c laim for deduc tion under sec tion 80IB(10)(b), area of one acre available for development of housing project includes area required to be set apart for amenities as per norms of corporation. Bunty Builders vs. ITO (2010) 127 ITD 286 (Pune) 630 S. 80P : Co-op. Societies - Deduction Rental Income Held, that onc e the Assessee societys claim u/s 80P in respect of primary ac tivity was denied, Assessee is not eligible for deduction under section 80P(2)(e) on its incidental Transport and Rental Inc ome. Muzaffar Nagar District Co-op. Development Federation Ltd. vs. ACIT (2010) 195 Taxman 46 (Delhi) 631 S. 88E : Rebate - No Tax Payable - Income set off against brought forward losses [S. 87(2)] Both the conditions of chargeability of inc ome to tax and liability to pay tax on transactions should c o-exist so as to bec ome eligible for relief under section 88E. STT paid by the assessee was not eligible for rebate under sec tion 88E where the inc ome from spec ulation business was fully set off against brought forward spec ulation losses and no income tax was payable in respect of such transac tions. Oasis Sec urities Ltd. vs. Dy. CIT (2010) 134 TTJ 649 / 47 DTR 218 (Mum.)

632 S. 90 : Double Taxation Relief DTAA - India-UK - Dividend Income -International Taxation If an assessee i.e. Resident of India, desires to get the tax credit in respec t of dividend income from a UK company available as per UK law, then he will be treated at par with resident of UK and amount rec eived by assessee would then be deemed to increase by 1/9th of dividend rec eived from UK company for purpose of taxation under Indian Inc ome Tax Act and tax credit can only be adjusted against his tax liability in India but he c annot claim refund, if any, in case his credit is more than his tax liability. ACIT vs. Homy N. J. Dady (2010) 41 SOT 239 (Mum.) 633 S. 90 : Double Taxation Relief - Permanent Establishment - Hiring Dipper Dredger DTAA - India-Netherlands - (S. 9(1)(i), 195, Art. 5, 6) Assessee hired a dipper dredger under an agreement from a Dutch c ompany and executed a dredging c ontract on its own utlising the said dipper dredger, the payment made by the assessee to the Dutc h c ompany was nothing but hire charges, and the dipper dredger which was leased to the assessee to be used under its direc tion, control and supervision can not be construed as PE of the Dutch c ompany and therefore, payment of hire charges made by the assessee to the foreign company is not liable to be taxed in India and assessee was not required to deduc t tax at sourc e under section 195. Dy. DIT vs. Dharti Dredging & Infrastructural Ltd. (2010) 46 DTR 1 / 133 TTJ 692 (Hyd.) (Trib.) 634 S. 90 : Double Taxation Relief - Permanent Establishment - Income deemed to accrue or arise in India - Business Connection - Services rendered through Indian Subsidiary DTAA India-USA - (S. 5(2), 9(1)(i), Art. 5, 7, 27) Assessee a US c ompany, providing IT enabled servic es to its clients by assigning or sub c ontrac ting execution of the c ontrac ts to its wholly owned Indian subsidiary EFI and supplying the relevant software and database to the latter free of c harge has business c onnec tion in India within the meaning of section 9(1)(i) as well as a PE in the form of EFI as per Art. 5 of the Indo-US DTAA, profits attributable to the PE are to be worked out by applying the proportion of Indian assets, including EFIs assets, to the aggregate of global profits and reduc ing resultant figure by the assessed profits of EFI. EFunds Corporation vs. Asst. DIT (2010) 45 DTR 345 (Delhi)(Trib.) 635 S. 90 : Double Taxation Relief - In absence of "thin capitalization rules", interest paid to shareholders for loans cannot be disallowed despite capital -Structure tax - Planning [S. 36(1)(iii)] In absenc e of "thin c apitalization Rule", interest c annot be disallowed by c harac terizing debt equity .Imposing of such rule on assessee in case where domestic companies are not subjec t to such rule will violate "non-discrimination" provisions under art 24 (5). Bexis Kier Dabhaol SA vs. DDIT (Mum.)(Trib.) Sourc e: www.itatonline.org 636 S. 92 : Transfer Pricing International Transaction - Arms Length Price If c ommercial transaction is at arms length, no transfer pric ing addition for non-c harging of interest on overdue debt. A c ontinuing debit balance is not an "international transaction" per se but is a "result" of the international transaction. Unlike a loan or borrowing, it is not an independent transac tion which can be viewed on standalone basis. What has to be examined is whether the commerc ial transac tion is at arms length. As also, when an ALP is made in respec t exc essive credit period allowed under the CUP

also, when an ALP is made in respec t exc essive credit period allowed under the CUP method, the c omparable has to be dues rec overable from a debtor and not a borrower. Nimbus Communication Ltd. vs ACIT (ITAT - Mumbai) Sourc e : www.itatonline.org 637 S. 92B : Transfer Pricing Adjustments Enterprise Level Profits -International Taxation TNMM does not permit the assessee or the Assessing Officer to c ompare enterprise level profits and make adjustments; TPOs order is set aside and the matter is restored to the Assessing Offic er for fresh adjudic ation. DCIT vs. Starlite (2010) 45 DTR 65 / 133 TTJ 425 (Mum.)(Trib.) 638 S. 92C : Transfer Pricing Computation - Arms Length Price - International Taxation For determining the ALP of international transactions with AEs, the TPO should work out the profit disclosed by the assessee on those receipts and compare the result with the c omparables of independent c ases, and in that exercise the domestic rec eipts are to be excluded for working out profit level indicator shown by the assessee in respect of the international transac tions. Dy. CIT vs. Startex Net Works (India) (2010) 45 DTR 1 (Del.)(Trib.) 639 S. 92C : Transfer Pricing - Arms Length Price - International Taxation - Operational Cost - Comparable Comparables of extreme c ases both on higher side and lower side to be avoided. Foreign exchange fluc tuations cannot be excluded. Inc ome tax refund cannot be included. Donations to be included. Compensation for termination of agreement to purchase property to be excluded. Shifting from one process to another in selection proc ess permissible. Sap Labs India Pvt. Ltd. vs. ACIT (2010) 6 ITR 81 (Bang.)(Trib.) 640 S. 92C : Transfer Pricing - Arms Length Price - International Taxation - Custom Valuation - Chapter X Data for c omparison to be data relating to year in which international transaction entered into. Exclusion of reimbursement of advertisement expenditure for determining profit level indic ator not proper. Advertisement expenditure of c omparables operating profits to be adjusted to bring it at par with tested party. Panasonic India Pvt. Ltd. vs. ITO (2010) 6 ITR 502 / 46 DTR 433 (Delhi)(Trib.) 641 S. 92C : Transfer Pricing - Associated Enterprise - Arms Length Price Proprietor of the foreign c onc ern being a relative of the two brothers who are controlling the assessee firm, cl. (j) of sec tion 92A(2) is applicable to the fac ts of the case and the said foreign concern constituted an AE of the assessee. Sinc e the word "or" is appearing between each sub clause of section 92A(2), the requirement of deeming provision is satisfied even if one of the sub c lauses is applic able. Items sold by the assessee to the AE not being comparable with the items sold to other enterprises, the GP rate of the sales made to other concerns cannot be applied for computation of ALP. ITO vs. V. Rajendra Exports (2010) 46 DTR 193 (JP)(Trib.) 642 S. 92C : Transfer Pricing Computation - Arms Length Price -Payments to personnel deputed by AE and Royalty As there was no reason for the TPO to hold that expenditure on the deputation of

As there was no reason for the TPO to hold that expenditure on the deputation of technical adviser ought to be incurred by AE and not by the assessee, and the fees paid for technology agreement was recovered by assessee from the AE, as part of sale price, such fee paid became revenue neutral, transactions were at ALP hence no addition was c alled for. On the fac ts, the CIT(A) has rightly deleted the addition of ` 43,68,838 made by the Assessing Officer, being the difference in the ALP on acc ount of royalty and payments to personnel deputed by AE. ACIT vs. Sona Okegawa Prec ision Forgings Ltd. (2010) 47 DTR 187 (Delhi)(Trib.) 643 S. 92C : Transfer Pricing Arms Length Price TNMM It is not ac ceptable that for purpose of c omputation of ALP, the assessee has the unfettered discretion to adopt the TNMM and the TPO is not entitled to rejec t that method without showing defic iencies / defects. Sec tion 92C r.w. Rule 10C requires the "most appropriate" method to be chosen from amongst those spec ified. The exercise of selecting the "most appropriate" method implies that the appropriateness of method is to be ranked in some order. Acc ordingly, it is open to the TPO to reject the TNMM and adopt the CUP method on the basis that the latter is "most appropriate" on the facts of the case. Serdia Pharmaceuticals www.itatonline.org (I) Pvt. Ltd. vs ACIT (ITAT Mumbai) Source:

644 S. 92C : Transfer Pricing - Computation of Arms Length Price - Adjustment on cess on royalty - Comparison Assessee having made payments of royalty to its foreign collaborator for importing the technology, research and development cess is payable by the assessee in terms of section 3(2) of Researc h and Development Cess Ac t, 1986 and therefore, no adjustment c an be made for the same in the computation of ALP on the basis that suc h c ess is payable by the foreign collaborator. When the terms and the basis of payment of royalty are materially different, the rate at whic h royalty is paid by the assessee to its foreign c ollaborator cannot be compared with the rates of royalty paid by other c ompanies and no adjustment is to be made. Kirloskar Ebara Punps Ltd. vs. Dy. CIT (2010) 48 DTR 348 (Trib.)(Pune) 645. S. 92C : Transfer Pricing Computation Comparables - TNMM The Tribunal held that in absence of allegation that the agreement approved by regulatory authority is a sham, the tax authority cannot disregard the same. For transfer pric ing analysis internal comparables are preferable over external comparables. While applying TNMM, only profits related to the transac tion with AEs should be compared and not profits of the company as a whole. Abhishek Auto Industries Ltd. vs. Dy. CIT (2010) TII 54 ITATDel-TP (2011) BCAJ Jan 21 (437) (2011 42B BCAJ) 646 S. 92C : Transfer Pricing -/+ 5% variation from ALP not available if only one price is determined The assessee undertook international transactions with associated enterprises for export pulses. The Assessing Offic er made a reference to TPO for determination of the ALP and c oncluded by adopting "CUP" method, that in six instanc es the pric e paid by the assessee was in exc ess of quotation in "Agriwatc h" database. In appeal the CIT(A) acc epted that in respect of the transac tion where the variation between the price paid and the price given in "Agriwatch" was less than 5%, no adjustment c ould be made though he confirmed other additions. On c ross appeal before the Tribunal it was held that

though he confirmed other additions. On c ross appeal before the Tribunal it was held that transfer pricing benefit under section 92C +5 % variation is not available if only one pric e determined. ACIT vs. UE Trade Corporation (India) Sourc e: www.itatonline.org 647 S. 92CA : Transfer Pricing - Computation of Arms Length Price - Outstanding more than six months Assessee c ompany having an AE in USA, entered into a produc t development services agreement and a professional services agreement, both separately, with its said AE. Assessing Officer made reference under section 92C to TPO. TPO has ac cepted prices in respect of transaction entered into between assessee and its AE as ALP compatible. However, TPO noticed that an amount of ` 5.52 crores belonging to assessee was outstanding for more than six months. She opined that by parking this huge amount at disposal of its AE, assessee was depriving funds otherwise available in its hands and adversely affecting its profitability. TPO has calculated interest on aforesaid amount and rec ommended Assessing Offic er to add interest in assessess taxable income. Assessing Officer made additions. Tribunal upheld the addition made by the Assessing Officer. Logix Mic ro Systems www.itatonline.org Ltd. vs. ACIT (2010) 42 SOT 525 (Bang) / Sourc e:

648 S. 92C(2) : Transfer Pricing - Computation of Arms Length Price - Applicability of Proviso - Difference up to 5 per cent Differential rate sales made to associated concern RG and other c onc erns is below 5 percent and therefore, the Proviso of section 92C(2), is not applic able. Ravi Kumar Rawat vs. ITO (2010) 47 DTR 470 (Trib.)(JP) 649 S. 92C : Transfer Pricing - Computation of Arms Length Price - Method of Computing Profit - Total Cost Margin under TNMM Assessee being engaged in rendering advertising services to its customers/AEs in c apacity of an agent rec eiving remuneration on the basis of fixed commission/charges based on the expenses or c ost incurred by it and recovering the payments made to third parties for rendering of advertisement space from the respec tive customers/AE. For determining the ALP, mark-up is to be applied to the cost inc urred by the Assessee in performing its agency function and not to the c ost of rendering advertising space to the AEs. Dy. CIT vs. Cheil Communic ations India (P) Ltd. (2010) 48 DTR 289 (Trib.)(Delhi) 650 S. 115JB : Company - Book Profit Interest - Retrospective Amendment - (S 234B) Assessee was not liable to pay interest under sec tion 234B on the incremental amount of tax computed under section 115JB which arose due to retrospective amendment in section 115JB requiring book profit to be increased by the provision for deferred tax. JSB Steel Ltd. vs. ACIT (2010) 46 DTR 41 (Bang.)(Trib.) 651 S. 115W : Fringe Benefits - Operation of Air transport service - Free and Concessional Tickets - Jurisdiction of Officer to conduct enquiry Assessee, who was engaged in operation of air transport servic es was liable to pay fringe benefit tax in respect amount paid to hotels to provide layover to its c rew members. Assessee is liable to pay fringe benefit tax in respect of per diem allowances paid to pilots. Assessee is also liable to pay fringe benefit tax in respect of free and c oncessional

pilots. Assessee is also liable to pay fringe benefit tax in respect of free and c oncessional tic kets provided to its staff. King Fisher Training & Aviation Servic es Ltd. vs. ACIT (2010) 41 SOT 279 (Bang.) 652 S. 115WB(2)(H) : Fringe Benefits - Repairs, Running, etc., of Motor Cars - Interest on loan Expenditure inc urred on payment of salary to driver is to be included in computing the expenses on running of car within the meaning of the provision of section 115WB(2)(H), however, the expenditure on payment of interest on loan taken for purchase of motor c ars cannot be included to compute fringe benefits. Brihan Maharashtra Sugar Syndic ate Ltd. vs. Dy. CIT (2010) 134 TTJ 98 / 46 DTR 157 / 46 DTR 157 (Pune)(Trib.) 653 S. 133A : Assessment Addition - Disclosure in the course of Survey Retraction Assessment - (S. 143) Assessee disc losed an amount of Rs 25 lakhs vide letter dated 11-2-2005, which was submitted after two months from the date of survey in the light of various doc uments and papers found at the time of survey. In the return of income the said amount was not disclosed. The Assessing Offic er rejected the book results and made addition of ` 25 lakhs. The Tribunal also confirmed the addition on the ground that it was not a c ase of the assessee that the assessee has wrongly understood the contents of the documents, burden on assessee to explain the c ontents of the documents as the assessee has not discharged the burden, addition was justified. Seasons Catering Services (P) Ltd. vs. Dy. CIT (2010) 127 ITD 50 (Delhi) 654 S. 133A : Survey - Addition on the basis of Statement - Cross Examination - (S. 131) Addition on the basis of admission during the survey without any supportive material not sustainable, further there was no substantive evidenc e on record except statement of assessee and third party in support of addition of ` 25 lakhs and ` 2.55 crores made by Assessing Officer for the Asst. Year 2007-08 and 2008-09 respec tively. Non providing of c ross examination of witness clearly constitutes infraction of the right conferred on the assessee and that vitiated the order of the assessment made against the assessee. B. Ramakrishnaiah vs. ITO (2010) 46 DTR 406 (Hyd.)(Trib.) 655 S. 133A : Survey Disclosure - Statement Confession made during survey cannot be the sole basis for making an addition, without c onsidering the explanation of assessee. Babulal Gangwal vs. Addl. CIT (2010) Tax World December, 10 Vol. XLIV, Part-6, P. No. 222 (Jaipur) 656 S. 142A : Estimation by Valuation Officer - Rejection of Books of Account - (S. 145) When books of acc ount are found to be correct and complete in all respects and no defects is pointed out therein, then addition on account of differenc e in cost of c onstruction of a building cannot be made even if a report from DVO is obtained with in the meaning of section 142A. Rajhans Builders vs. Dy. CIT (2010) 41 SOT 331 (Ahd.) 657 S. 143(2) : Assessment - Notice

In absenc e of any reference of the alleged first notic e under sec tion 143(2) in the order sheet and other abnormal circ umstanc es indicating absenc e of such notice, it c annot be acc epted that the said notice was issued and rec eived by the assessee, and the later notic e having been rec eived by her only after the statutory time-limit under section 143(2), the assessment was invalid. Order sheet is a very important rec ord. As the Assessing Offic er not rec orded in the order sheet and the Assessing Offic er is not able to show that the notice dt. 08-062006, was issued and served, it was to be held rec eived after statutory time limit under section 143(2) and was clearly time barred. Dy. CIT vs. Mayawati (Ms.) (2010) 48 DTR 233 (Trib.)(Delhi) 658 S. 143(3) : Assessment - Denovo Assessment - (S. 252) De-novo assessment pursuant to order of the Tribunal. The Assessing Officer enhanced the income. The Tribunal noted that it did not have power to enhance the assessment. In such situation, the order of the Tribunal restoring the matter to Assessing Officer c annot be c onstrued to grant power to include a totally new issue, which has effect of enhanc ing the income. What cannot be done direc tly, cannot be done indirectly also. ITO vs. Jabbal Woodc rafts India, ITA No. 803/D/2009, dt.24-09-2010, Mumbai D Bench, BCAJ pg 28, Vol. 42-B, Part 3, December 2010. 659 S. 144C : Reference to Dispute Resolution Panel Reasoned Order DRP while issuing direc tions under section 144C must not pass "laconic" orders but must deal with assessees objec tions. It was held in Sahara India (Farms) vs. CIT 300 ITR 403 (SC) that even "an administrative order has to be consistent with the rules of natural justic e". GAP International Sourc ing www.itatonline.org India Pvt. Ltd. vs. Dy. CIT (ITATDelhi) Source:

660 S. 145 : Method of Accounting Rejection of Books The rejec tion of books of Assessee firm engaged in business of builder - realtors, on ground that Assessee had not furnished quantitative particulars, no proper vouchers were available for expenses and labour payments were not supported by verifiable details, was held to be justified. It was observed that even when all payments were made by cheque and TDS was deducted on every payment to labourer, same c an not substitute the nec essity of maintaining records and evidenc es in a proper manner. Also the primary condition to be satisfied was that the working results reflected in the books must be verifiable and beyond dispute, even though the method of ac counting and method of rec ognition of income were acc eptable. ACIT vs. Skyline Builders (2010) 194 Taxman 61 (Cochin) 661 S. 145(3) : Accounts Rejection - Absence of Discrepancy - Accounts Audited Where the Assessing Officer has not pointed out any spec ific defect or discrepancy in the acc ount books maintained by the assessee whic h are duly audited by an independent Chartered Ac countant, there was no justific ation in rejecting the books of acc ounts and making the addition to the dec lared inc ome. CIT vs. Paradise Holidays (2010) 48 DTR 349 (Delhi)

CIT vs. Paradise Holidays (2010) 48 DTR 349 (Delhi) 662 S. 147 : Reassessment Jurisdiction - Second round of litigation before the Tribunal - (S. 253) The assessee in the first round of litigation did not raise the issue of reassessment, before the Tribunal although it was in appeal before the Tribunal on merits. The Tribunal held that, it is now well established that the issue of jurisdic tion of the authorities is fundamental and is like the root of the proceedings or matter. The matter had not reached the finality and the dispute or defect as regards the jurisdic tion got inbuilt in to the order and should, therefore always be subjec t matter for legal scrutiny, when questioned. After all the jurisdiction to authorities c annot be c onferred by ac ceptance or negligence of the parties to the dispute. It can always be agitated or questioned when the assessee gets some opportunity over the issue. In a way that issue is always open to challenge even if the round is sec ond or third. As long as the issue has not reac hed the finality, it is always open to question or c hallenge in judicial proceedings. Hemal Knitting Industries vs. ACIT (2010) 127 ITD 160 / 48 DTR 393 (Chennai)(TM) 663 S. 147 : Reassessment - Reason to Believe - Within four years Reassessment c ould be initiated within four years from the end of the relevant assessment year if the Assessing Offic er has reason to believe that the income has escaped assessment notwithstanding the fact that there was full disclosure of material fac ts on record. The assessee, in such cases, cannot defend the initiation of action on the ground that the material facts were disclosed on record and that the Assessing Officer must have or ought to have considered them during the original assessment. The powers to make assessment or reassessment, where the initiation has been made within four years from the end of the relevant assessment year, would be attrac ted even in c ases where there has been complete disc losure of material facts upon whic h a correct assessment might have been based in the first instance, and whether it is an error of fac t or law that has been discovered or found out justifying the belief required to initiate the proceedings Lakshmi Mac hine Works Ltd. vs. ACIT ( 2010) 126 ITD 343 (Chennai) 664 S. 148 : Reassessment - Not furnishing the recorded reasons before passing of the order Order held to be illegal - Set aside When a notic e is issued under section 148, first the assessee has to file the return of income and then ask for reasons rec orded for issue of suc h notice. Once assessee requests for supply of reasons recorded, the assessing officer bound to supply the same with in reasonable time. On the facts the assessing offic er completed the assessment under sec tion 143(3) / 147 without supplying the recorded reasons. As the assessing Officer has not followed the guidelines of the Apex c ourt in GKN Driveshafts (India) Ltd. vs. ITO (2003) 259 ITR 19 (SC), the assessment order said to be invalid and the matter is set aside. Bhabesh Chandra Panja vs. ITO (2010) 41 SOT 390 (Kol.)(TM) 665 S. 148 : Reassessment - Notice Mandatory - (S. 144) Where the Assessing Offic er is not satisfied with the return filed by the assessee, assessment cannot be made validly unless notic e under sec tion 143(2) is issued. Assessing Officer having tinkered with the return filed by the assessee without issuing notic e under sec tion 143(2), the assessment is invalid and void ab-initio, more so when the Assessing Officer had sufficient time to adhere to the mandatory requirement of servic e of notice under sec tion 143(2) as well as for completing the assessment after

servic e of notice under sec tion 143(2) as well as for completing the assessment after dismissal of the writ petition filed by the assessee. Dy. CIT vs. Mayawati (Ms.) (2010) 48 DTR 65 (Delhi)(Trib.) 666 S. 148 : Reassessment - Recording of Reasons Jurisdiction - (S. 292B) Reassessment made on the basis of notice under section 148 issued by an ITO who did not have jurisdiction over the assessee and non recording of reason by the Jurisdic tional ITO and fresh notice from the latter is not valid. Provision of sec tion 292B cannot be resorted to for c uring such a jurisdictional defect. ITO vs. Rajendra Prasad Gupta (2010) 48 DTR 489 (Trib.)(Jd.) 667 S. 153A : Search and Seizure - Assessment of any other person - (S. 153C) Seized documents not belonging to assessee, assessment not pending on date of search, original assessments not abated. Assessment under section 153A was set aside. Meghmani Orgaics Ltd. vs. Dy. CIT (2010) 6 ITR 360 (Ahd.)(Trib) 668 S. 153A : Search and Seizure - Assessment of Third Party - Neither books of account nor documents belonging to assessee was seized - (S. 153C) No amount of money, bullion, jewellery or other valuable article or thing or books of acc ount or doc uments seized belonged to assessee. Assessing Offic er does not assume jurisdiction for framing assessment under sec tion 153C. ACIT vs. Gambhir Silk Mills (2010) 6 ITR 376 (Ahd.)(Trib.) 669 S. 158B(b) : Block Assessment - Undisclosed Income - (S. 158BB) Search having not yielded any incriminating material in respect of ac commodation entry business allegedly carried on by the assessee, no undisclosed inc ome c ould be c omputed from this business merely on the basis of information received from the Sales Tax Department about turnover. Kulwant Singh vs. Dy. CIT (2010) 134 TTJ 129 (Del.)(UO) 670 S. 158BC : Search and Seizure Block Assessment Notice Limitation - (Ss. 143(2), 282) Issuanc e of notic e under section 143(2),is an essential requirement for making block assessment and such notice has necessarily to be issued within the time prescribed under proviso to section 143(2), since there is no c onclusive evidence that alleged notic e under section 143(2), on 16th May 2000, pursuant to the block return filed on 15th May 2000, as claimed by the revenue only notice was served on the assessee on 24th Dec ., 2001 which was time barred, the block assessment is quashed. Dy. CIT vs. National Refinery (P) Ltd. (2010) 134 TTJ 109 (Mum.)(Trib.) 671 S. 194A : Tax Deduction at Source - Interest other than interest on Securities - Business Expenditure Disallowance - Application in Form No. 13, 15G [S. 40(a)(ia)] Disallowanc e under sec tion 40(a)(ia) of interest payments on which no TDS was deducted was sustainable, as merely filing of Form No. 13 by payee to their respective Assessing Officers c annot be c onstrued as an authorization to the assessee not to deduct tax for the interest due to them. No c opies of Form No. 15G were forthcoming to justify the assessees stand.

Rajendra Kumar vs. Dy. CIT (2010) 46 DTR 363 (Bang.)(Trib) 672 S. 194A : Deduction of Tax at Source Bank Interest - Notional Provision for half yearly interest of Cumulative deposit - (S. 201) Bank making notional provision for half yearly interest on acc ount of c umulative deposit shown in general ledger reversed on next working day. Interest c redited to provisioning acc ount for mac romonitoring. Interest not due and payable on that day. Deduction of tax not obligatory. Bank of Maharashtra vs. ITO (2010) 6 ITR 824 (Trib.)(Ahd.) 673 S. 194C : Deduction of Tax at Source - Event Management - Contractual Service Professional Service Photography - (S. 194J) Job awarded by the assessee to other parties in performanc e of duty as event manager has to be treated as a contractor and not subc ontrac tor and provisions of section 194(C)(1) is applicable. Art work and photography will also be covered under sec tion 194C(1), same will not be treated as professional service. EMC vs. ITO (2010) 45 DTR 275 / 134 TTJ 198 (Mum.)(Trib.) 674 S. 194C : Deduction of Tax at Source - Payments to Contractors - Hiring of Vehicles - (S. 194-I) The assessee entered into agreements with various transport servic e providers. Under the agreements entered into, the service provider was to provide transport service at particular loc ations for transportation of assessees employees to different destinations and loc ations mentioned in the agreement. The transport service provider had to provide vehicles along with the requisite staff and relevant fac ilities, full maintenance and repairs of vehicles, etc . The assessee deduc ted the tax at source under section 194C, the Assessing Officer was of the view that the payments were covered under section 194I, The Tribunal held that the payment made by the assessee for hiring vehic les for transportation of its employees qualifies for TDS under section 194C and not under section 194-I. ACIT vs. Acc enture Services P. Ltd. (2010) TIOL 618 ITATMum. 295 / (2010) 42-B BCAJ (December 2010 P. 23) 675 S. 194C : Tax Deduction at Source Labour Charges Assessee paid labour c harges for loading, unloading, sorting, cleaning, transportation c harges on daily basis to representative of labourers. Held, that as the individual payments were not exc eeding presc ribed limit, Assessee was not liable to deduct TDS under section 194C. Dy. CIT vs. Laxmi Protein (Products) Pvt. Ltd. (2010) 195 Taxman 32 (Ahd.) 676 S. 194J : Deduction of Tax at Source - Professional Charges Salary - Payment to Doctors - (S. 192) Assessee hospital having engaged the services of doctors on the basis of agreements whereby the doc tors are free to treat the patients at the hospital at their own discretion and time, without any supervision and control of the assessee and they are not on the pay roll of PF payments, there is no element of employer and employee relationship and therefore, the doctors are to be treated as c onsultants and tax has to be deducted under section 194J from payments made to them and not under section 192. Dy. CIT vs. Yashoda Super Speciality Hospital (2010) 133 TTJ 17 (Hyd.)(UO)

Dy. CIT vs. Yashoda Super Speciality Hospital (2010) 133 TTJ 17 (Hyd.)(UO) 677 S. 194LA : Deduction of Tax at Source - Capital Gains - Capital Asset - Agricultural Land [S. 2(14)] Definition of agricultural land c ontained in section 2(14)(iii)(a) & (b) cannot be borrowed to influence definition of agric ultural land c ontained in Explanation to section 194LA. For the purpose of deducting tax at sourc e under section 194LA, it is Land Ac quisition Officer (LAO) who has to prima facie determine as to whether land acquired is agricultural land or not. Land Ac quisition Officer took prima facie view that land acquired by him was an agricultural land on the basis of entries in land revenue record, hence, he was justified in not deducting tax on c ompensation paid on acquisition of said land, trees, and houses standing thereon. Special Land Ac quisition Officer vs. ITO (2010) 42 SOT 9 (Ahd.) 678 S. 195 : Other Sums - Payments to Non-Resident - Foreign Artists - Reimbursement of Expenses - Though Foreign Artistes are chargeable to tax in India, their agents are not in the absence of a PE DTAA - India-UK As Colin Davie was not a performer, his inc ome was not c overed under Artic le 18 of the DTAA but was c overed by Article 7 and as the services were rendered outside India and there was no PE, the same was not assessable to tax in India. Even under the Ac t, by virtue of Carborandum Co. 108 ITR 335 (SC), Circ ular No. 17 of 1953 dated 17-7-1953 & Circular No. 786 dated 7-2-2000, commission paid to agents for services rendered outside India is not c hargeable to tax in India and there is no obligation to deduct tax under section 195; As regards payment made towards reimbursement of expenses, the law is well settled by virtue of Krupp UDHE Gmb-H 38 DTR 251 (Bom.) & Siemens AG 220 CTR 425 (Bom.) that the same is not c hargeable to tax and there was no obligation to deduct tax at source. ADIT vs. Wizcraft International Entertainment (ITAT Mumbai) (2011) 50 DTR 1 (Trib) (Mumbai) 679 S. 195 : Tax Deduction at Source - Payment to Non-resident - Purchase of Software Article 12 of DTAA - India-Singapore A c omputer software when put in to a media and sold becomes goods and, therefore, amount paid by the assessee to a Singapore c ompany towards purchase of software c annot be treated as royalty in India under Article 12 of DTAA between India and Singapore and assessee is not liable to deduc t tax at sourc e under section 195. Kansai Nerolac Paints Ltd. vs. Addl. Director of IT (2010) 134 TTJ 342 (Mum.) 680 S. 214(IA) : Advance Tax Refund - (S. 143(3)) Assessee entitled to rec eive interest under sec tion 214(IA), on difference between advanc e tax and assessed tax from the first day of assessment year till day of passing regular assessment under section 143(3). Dy. CIT vs. Simbholi Sugar Mills Ltd. (2010) 6 ITR 247 (Delhi)(Trib.) 681 S. 226 : Recovery - Ability to pay demand is no bar for grant on recovery The assessee filed a stay application before the Tribunal. The department opposed the stay by relying on the Supreme Court dec ision in the c ase of ACCE vs. Dunlop India (1985) 154 ITR 172 (SC), and c ontended that as paucity of funds had not been suffic iently demonstrated, for this reason alone stay should not be granted. The Tribunal

suffic iently demonstrated, for this reason alone stay should not be granted. The Tribunal rejec ted the contention of Departmental representative following B. N. Co. vs. Jt. CIT (2001) 71 TTJ 153 (Kol.) and further held that Supreme Courts observation in Dunlop c annot be interpreted to mean that the Tribunal is denuded of the powers to grant stay until c ase for financial stringency is successfully made out by the applic ant. Acc ordingly stay was granted till the disposal of appeal. KEC International Ltd. vs. ACIT (ITAT - Mumbai) Source: www.itatonline.org 682 S. 234A : Interest - Assessable as Permanent Establishment (PE) - (S. 234B) Inc ome of the assessee who are non residents being assessable in the hands of PEs the same cannot be held liable to TDS under sec tion 195 and therefore, assessees are not liable to pay interest under sec tion 234A and 234B. EFunds Corporation vs. ADIT (2010) 45 DTR 345 (Del.)(Trib.) 683 S. 234C : Interest - Capital Gains Accrual Amendment - Proviso Amendment of proviso to section 234C by the Finance (No. 2) Act, 1996 w.e.f. 1st April 1997, is c larificatory in nature and the same is to be applied retrospec tively. Where the assessee has paid taxes arising out of inc ome from long term capital gain as part of installments due after the date of sale of c apital asset, he could not be in default as stipulated under section 234C and therefore, levy of interest was not valid. Torrential Investments (P) Ltd. vs. ITO (2010) 133 TTJ 787 / 46 DTR 172 (Mum.)(Trib.) 684 S. 253(1) : Appellate Tribunal - Fixing the fees payable to Auditor [S. 142(2A)] In the absenc e of any specific provision empowering the Tribunal to hear appeal against fixation of audit fees payable to spec ial auditors appointed under section 142(2A), appeal filed by the assessee against the order under section 142(2D), is not maintainable. Sony Mony Electronic s Ltd. vs. Dy. CIT (2010) 45 DTR 431 / 121 TTJ 660 (Mum.)(Trib.) 685 S. 253(1) : Appellate Tribunal - Stay Application in Tribunal maintainable despite nonfiling of stay petition before lower authorities - Dispute Resolution Tribunal There is no merit in the argument of the department that the stay application should be rejec ted outright since the assessee has not moved any petition before the Revenue Authorities seeking stay of the demand. Seeking stay before the lower authorities is directory and not mandatory. DHL Express (India) P. Ltd. vs. ACIT (ITAT Mumbai) Sourc e: www.itatonline.org 686 S. 253(6) : Appellate Tribunal - Appeal Fees Benefit of "pauper provisions" under 33 of CPC is confined to the underprivileged class of public whic h does not have means to pay the costs of litigation. Assessee a lawyer, who is prac ticing before High Court, Debt recovery Tribunal and lower Courts does not fit in the c riterion of an indigent person in Expl. 1 to Rule 1 of order 33 and therefore, she is not entitled to protection of order 33. Appeals are dismissed for want of payment of appeal fees. Yashshree Yogesh Naik vs. Dy. CIT (2010) 45 DTR 249 / 133 TTJ 534 (Mum.)(Trib.) 687 S. 254 : Appellate Tribunal - Powers Rule 29 Additional claim for deduction of Bad Debt made by the Assessee at time of Assessment

Additional claim for deduction of Bad Debt made by the Assessee at time of Assessment proceedings on ground of arithmetical error while filing the Return, was rejec ted, by observing that Assessee has to file a separate Revised Return of Income to make suc h a c laim, relying on Supreme Courts decision in case of Goetze India Ltd. Assessee made a fresh claim before the Tribunal for a deduction of Bad Debt, and same was admitted, as all fac ts were on record before Assessing Officer. Further, observed that dec ision in case of Goetze (India) Ltd. did not in any way affect the powers of Tribunal to admit additional c laim / ground. Franco Indian Pharmaceuticals (P) Ltd. vs. ITO (2010) 195 Taxman 30 (Mum.) 688 S. 254(1) : Appellate Tribunal - Additional Grounds - Departmental Appeal - Contrary to finding of Assessing Officer (Income Tax Appellate Tribunal Rule 11) Department is not entitled to raise additional grounds c ontrary to finding of Assessing Officer. The duty of the learned Departmental representative is always confined to support the assessment order. He has widest power to argue on the matter involved in the appeal, but with the limitation that he cannot set up a new case contrary to the finding of the Assessing Officer. If suc h course is allowed, then it will amount to the learned departmental representative revising the assessment order under the grab of his arguments by usurping the power under section 263, which incidentally lies only in the domain of the commissioner, hence, additional oral ground was refused. ITO vs. M. M. Textiles (2010) 5 ITR 547 (Mum.)(Trib.) 689 S. 254(1) : Appellate Tribunal - Additional Evidence There is no need to make a formal application under rule 29 of the ITAT Rules for admission of the additional evidence. There is no error in the order of Ac countant member admitting the additional evidenc e and sending it to the CIT for examination and dec ision. Mascon Global Ltd. vs. ACIT (2010) 45 DTR 20 / 133 TTJ 257 (Chennai)(Trib.)(TM) 690 S. 254(1) : Appellate Tribunal - Additional Ground - Alternative Ground Alternative c ontentions raised by the assessee in the additional grounds of appeal before the Tribunal c laiming deduction of the impugned payment of non-c ompete fee as a deferred revenue expenditure over the period of agreement or deprec iation thereon in c ase the said fee is to be considered as giving rise to acquisition of an intangible asset are pure questions of law not requiring investigation of fresh facts and therefore, the additional grounds are admitted for adjudic ation. Orc hid Chemic als & Pharmac euticals Ltd. vs. ACIT (2010) 48 DTR 441 (Trib.)(Chennai) 691 S. 254(2) : Appellate Tribunal - Rectification of Mistakes - Direction is expunged - Cost of Trademark Direc tion given to the Assessing Offic er to assess the Capital Gain on transfer of trademark in question as short term capital gain if the same was registered with in six months being an unworkable direction in as much as the cost thereof has nowhere been determined nor it is determinable, an error has c rept in the order of the Tribunal and c onsequently the said direc tion is expunged. Trent Brands vs. ITO (2010) 133 TTJ 70 (Del.)(UO) Editorial Note:-. Refer Judgment of Tribunal (2010) 127 TTJ 65 (Delhi) (UO).

Editorial Note:-. Refer Judgment of Tribunal (2010) 127 TTJ 65 (Delhi) (UO).

692 S. 254(2) : Appellate Tribunal - Rectification of Mistakes - Retrospective basis on the retrospective amendment Provision for doubtful debts was c laimed as expenses while c omputing book profits under section 115JA. Assessing Officer passed order under sec tion 154 to inc lude the said amount. The Tribunal decided in favour of the Assessee relying on the Supreme Court dec ision of CIT vs. Ec hjay Forgins (P) Ltd. 251 ITR 15. Thereafter, Finance Act, 2009 made a retrospective amendment in section 115JA for inc luding provision for doubtful debts. The Department filed miscellaneous application u/s 254 to rectify the defec t based on retrospec tive amendment. The Tribunal dismissed the miscellaneous application, holding that there was no mistake on the date of passing the order. ACIT vs. GTL Ltd., MA No. 746/Mum/2009, dt. 10-3-2010, Mumbai G Benc h, BCAJ pg 27, Vol. 42-B, Part 2, November 2010. 693 S. 263 : Revision Non-examination of issue NonExamination of issue by Assessing Officer does not per se make assessment order prejudicial to interest of revenue for revision under section 263. On merits Tribunal held that disc harge of statutory function by ICAI does not amount to commerc ial or business activity and eligible for exemption under section 10 (23C) (iv) as also section 11 as educational institute. Institute of Chartered www.itatonline.org Acc ountants of India vs. DIT (Delhi)(Trib.) Source:

694 S. 263 : Revision Assessing Officer taking possible view - Housing Project - Commercial Construction [S. 80-IB(10)] The view that an element of c ommercial c onstruc tion per se would not vitiate the c laim of deduction under the pre-amended sec tion 80IB(10), is not only a possible view of the matter, it is a view adopted by the Special Bench of the Tribunal and therefore, assessment order allowing assesees claim for deduction under sec tion 80-IB(10) on residentialcum-commerc ial projec t cannot be said to be erroneous and prejudic ial order and cannot be revised under section 263. Anik Development Corporation vs. ACIT (2010) 134 TTJ 17 (Mum.)(UO) 695 S. 263 : Revision - Erroneous and Prejudicial Order - Lack of proper enquiry Order under sec tion 263 passed by the CIT setting aside the assessment order on the ground that the Assessing Officer has not made enquiries in respect of certain issues, without stating as to how the order of the Assessing Offic er is erroneous and prejudic ial to the interests of revenue cannot be sustained, more so when the issues pointed out by the CIT do not in fac t, merit further investigation. CIT vs. Leisure Wear Exports Ltd. (2010) 46 DTR 97 (Delhi) 696 S. 263 : Revision Enquiry Assessment Order was set aside by Commissioner on ground, that Assessing Offic er had made Assessment without making proper enquiry. Held, that when Assessing Offic er has spec ifically mentioned in the order that books of acc ounts alongwith Purchase / Sales, Invoic es, ledgers, Bank Ac counts were examined, verified and test checked, setting aside by Commissioner, in absence of any finding that

verified and test checked, setting aside by Commissioner, in absence of any finding that Assessing Offic ers order is factually inc orrec t, and not justified. Vijay Kumar Mehta vs. CIT (2010) 195 Taxman 63 (Patna)(SMC) 697 S. 271(1)(c) : Penalty Concealment - Search and Seizure - Revised Return Explanation 5 to section 271(1)(c) - (Ss. 132, 153A) As the assessee has filed the revised return subsequent to searc h and not disclosed the speculative profit in original return, assessee is not eligible for immunity as per explanation 5 to section 271(1)(c ) of the Inc ome tax Act. Ajit B. Zota vs. ACIT (2010) 40 SOT 543 (Mum.) 698 S. 271(1)(c) : Penalty Concealment - Making of a claim which is not sustainable in law Deduction under section 80HHC - Short Term Capital Loss A mere making of a claim, whic h is not sustainable in law, by itself, will not amount to furnishing of inaccurate particulars regarding inc ome of assessee. When assessee had furnished full details and particulars of its inc ome and it was under bonafide belief regarding allowability of claim penalty could not be levied. Hindalco Industries Ltd. vs. ACIT (2010) 41 SOT 245 (Mum.) 699 S. 271(1)(c) : Penalty Concealment Survey - Amount disclosed in the course of Survey - (S. 133A) In the course of survey, assessee dec lared unaccounted income of ` 32.84 lakhs, thereupon assessee filed his return of income wherein amount declared in survey was included. Assessing Officer completed assessment on basis of return of inc ome. He also levied the penalty under section 271(1)(c). The Tribunal held that since the Assessing Officer had ac cepted income dec lared in return of income, in view of aforesaid legal position, assessee c ould not be charged for any c ontumacious conduc t, therefore, the impugned penalty order was set aside. Dy. CIT vs. Satish B. Gupta (Dr.) (2010) 42 SOT 48 (Hyd.) 700 S. 271(1)(c) : Penalty Concealment - Search and Seizure - Return filed amount disclosed in the course of Search (Ss. 132(4), 153A) Assessee had made disclosure with referenc e to all the items of jewellery in a statement under sec tion 132(4) of the Ac t, and any variation in the value could be acc epted as a c ontinuation of statement under sec tion 132(4). As two view is possible. Penalty levied by the Assessing Officer was c anc elled. Dy. CIT vs. Avinash CH. Gupta (2010) 6 ITR 173 (Kol.)(Trib.) 701 S. 271(1)(c) : Penalty Concealment Depreciation - Finance Transaction - Not a genuine leasing transaction When a legal c laim is a made by an assessee it is obviously open to Assessing Officer to acc ept or reject interpretation canvassed by assessee but then it does not follow that when claim is rejected, it would imply that there has been a conc ealment of income on part of assessee so as to levy penalty under section 271(1)(c). Penalty levied on disallowance of claim of deprec iation on leasing of assets were deleted by the Tribunal. Industrial Development Bank of India Ltd. vs. Dy. CIT (2010) 42 SOT 325 (Mum.)

702 S. 271(1)(c) : Penalty Concealment - Recording of Satisfaction - Wrong Depreciation Due to bona fide mistake depreciation was claimed in reverse manner i.e., 50% on ` 6,35,492 and 100% on ` 4,25,79,639. Levy of penalty cannot be justified as there was no mala fide intention. On the facts as the Assessing Officer did not rec ord his satisfaction and did not initiate penalty at the time of assessment, levy of penalty was not justified. ACIT vs. Chambal Fertilizer & Chemic als Kota (2010) Tax World (November, 10) Vol. XLIV, Part-5. Page 188 703 S. 271D : Penalty - Cash Deposit - Money Lender - Reasonable Cause - (S. 269SS) Assessee money lender accepting cash deposits in violation of provision of section 269SS, has been deleted considering the nature of business, status of the depositors and necessity from the point of view of the assessee. P. Mallikharjuna Rao vs. Addl CIT (2010) 45 DTR 8 (Visakha)(Trib.) WEALTH TAX 704 S. 2(m) : Net Wealth - Debt Owned - Loans for Working Capital Loans obtained for working c apital against security of lands, is not debt incurred in relation to lands, hence can not be deducted while computing net wealth. There is marked differenc e between the two expressions "debt secured on property" and "debt incurred in relation to such property" used in the pre amended provisions of sec tion 2(m) (ii) of the Wealth Tax Ac t, 1957. It is not necessary that every debt secured on a property is a debt inc urred in relation to such property. Phoenix International Ltd. vs. Dy. CWT (2010) 5 ITR 787 (Delhi)(Trib.) 705 Wealth Tax Valuation - Immoveable Property - Gross Maintainable Rent -Market Rent Actual Rent - (Sch. III, Rules 3, 4, 5) Property in question being subjec t to Rent Control Act, and the "standard rent" thereof not being higher than the ac tual rent received which has been assessed by the IT authorities, valuation of property for wealth tax purpose is to be determined only on the basis of the actual rent received. Jt. CIT vs. Prayasvin B. Patel (2010) 46 DTR 52 (Ahd.)(Trib.) GENERAL LAW 706 Income Tax Appellate Tribunal - Appointment of Vice President of the ITAT is by meritbased selection and not seniority. No reservation for OBC Appointment to post of vice-President has to be made on basis of merit from amongst members by method of selec tion and not on basis of seniority. No reservation to be applied in case of appointment not by way of direct rec ruitment. Sunil Kumar Yadav vs. UOI & B. R. Mittal vs. UOI (CAT) Source: www.itatonline.org