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2009 (4) TMI 111 - HC - Income TaxComputation of Income Doctor s Profession - Disallowance of expenses IVP as a Capital Assets Ignorance of Decisions of Supreme Court If market value is zero, can it be constituted as Capital Goods Regarding claim of expenses, tribunal rejected the claim for the reason that the claim was made for the first time before the Tribunal and the assessee never raised the issue in assessment before the officer or in first appeal before the first appellate authority Regarding IVP, tribunal rejected the claim by holding that IVP is nothing but a deposit with the Post Office which entitles the assessee to a specific rate of interest on compoundable basis and assessee can encash the deposit only for the maturity value which is pre-determined HC uphold the decisions of ITAT and dismissed the appeal - Government security is not comparable to IVPs
Issues Involved:
1. Disallowance of claim for expenses on salaries, staff, and depreciation. 2. Classification of Indira Vikas Patras (IVPs) as capital assets. 3. Assessment of interest on IVPs on an accrual basis. 4. Levy of interest under Section 234B for non-payment of advance tax. Detailed Analysis: 1. Disallowance of Claim for Expenses on Salaries, Staff, and Depreciation: The assessee's claim for deduction on salary paid to doctors, staff, and depreciation was rejected by the Tribunal on the grounds that the claim was made for the first time before the Tribunal and was not raised during the assessment or in the first appeal. The Tribunal relied on the Supreme Court's decision in National Thermal Power Co. Ltd. v. CIT (229 I.T.R. 383), which allows a new legal issue to be raised if facts are available on record. Since the facts about remuneration and depreciation were not on record, the Tribunal declined the claim. The Court upheld this decision, stating that the assessee, who returned income on an estimation basis without maintaining books of accounts, cannot claim such deductions at a later stage. The Tribunal's estimation of professional income already included overhead expenditure, covering all eligible deductions. 2. Classification of IVPs as Capital Assets: Questions 2 to 6 addressed whether IVPs are capital assets. The Tribunal assessed IVPs as unexplained investments and rejected the claim that IVPs are capital assets, stating that IVPs are deposits with the Post Office entitling the holder to a specific interest rate. The Tribunal noted that IVPs have no market value and cannot be treated as bonds or capital assets. The Court agreed, emphasizing that IVPs are deposits with pre-fixed interest rates and maturity values, not capital assets. The Tribunal's decision to treat IVPs as deposits and not capital assets was upheld. 3. Assessment of Interest on IVPs on an Accrual Basis: Questions 7 to 9 pertained to whether interest on IVPs should be assessed on an accrual basis or on receipt (maturity). Rule 8(3) of the IVP Rules, 1986, mandates annual accrual of interest for tax purposes. The Court upheld this rule, stating that it binds all depositors, including the assessee. The Court rejected the argument that IVP Rules should not apply to the Income Tax Act, emphasizing that the rules are not inconsistent with the Act. The Court also noted that the assessee, who did not maintain books of accounts, could not claim assessment on a cash basis. The Tribunal's decision to assess interest on an accrual basis was upheld. 4. Levy of Interest Under Section 234B for Non-Payment of Advance Tax: Questions 10 and 11 challenged the levy of interest under Section 234B. The Tribunal upheld the levy in principle, remanding the matter for recomputation of the actual interest liability. The Court noted that Sections 234A, 234B, and 234C are mandatory and do not require the assessing officer to explicitly state the interest charge in the assessment order. The Court cited the Supreme Court's decision in Kalyan Kumar Ray v. CIT (191 I.T.R. 654), which allows the calculation of tax payable to be done separately. The Tribunal's decision to uphold the interest levy and remand for recomputation was affirmed. Conclusion: The appeals filed by the assessee were dismissed, with the Court upholding the Tribunal's decisions on all issues, including the disallowance of expense claims, classification of IVPs, assessment of interest on an accrual basis, and the levy of interest under Section 234B.
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