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2000 (12) TMI 104
The High Court of Judicature at Madras heard a case regarding Modvat credit on inputs received under an endorsed invoice. The Court directed the Tribunal to refer the question of extending Modvat credit when the endorsement is not prescribed under Rule 57G(3) of the Central Excise Rules, 1944. The Tribunal was instructed to send a statement of the case and relevant materials for consideration.
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2000 (12) TMI 103
Whether the products,de-oiled rice bran extraction, niger seed extraction of topioca chips and sesame seed extractions are only ingredients of animal feed and not 'animal feed' by themselves falling under Tariff Heading No. 21 of the Second Schedule to the Customs Tariff Act, 1975?
Held that:- While it is true that the decision in Sun Exports Corporation's case [1997 (7) TMI 117 - SUPREME COURT OF INDIA] delved into animal feed but by reason of the factual situation as noticed the same is clearly distinguishable and, in fact, does not lend any assistance in the matter in issue.
It is on this perspective it cannot but be held that the oil cakes and rice bran as exported by the respondents cannot thus be termed to be animal feed warranting invocation of Heading 21 of the export tariff under the Customs Act. The judgment of the Tribunal cannot be faulted in any way. Appeal dismissed.
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2000 (12) TMI 102
The Supreme Court dismissed the appeals after considering the arguments presented by the Revenue and affirmed the decisions of the Tribunal and the High Court. No costs were awarded.
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2000 (12) TMI 101
Supreme Court dismissed civil appeal by Revenue as they did not challenge earlier judgment in another case. Declined to consider correctness of High Court decision. No costs awarded.
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2000 (12) TMI 100
Whether the life interest of the assessee added by the Wealth-tax Officer in accordance with rule 1B of the Wealth-tax Rules, 1957 ?
Held that:- As has been noted, it was agreed by learned counsel appearing on behalf of both the assessee and the Revenue before the High Court that rule 1B was not workable in the circumstances of the present case, which is clearly correct for it is applicable only to an income-yielding life interest. It is, therefore, difficult to see how it can now be argued on behalf of the assessee that rule 1B was correctly applied. In any event, we are in agreement with the High Court, and indeed, with the Tribunal before it, that even if rule 1B did not apply, the said life interest, if an asset, had still to be valued and be included in the wealth of the assessee, which is what section 7 required. In the absence of a rule which can apply to the valuation of a particular asset, that asset must be valued in the ordinary way, by determining what it would fetch if it were sold in an assumed market ; the value being what an assumed willing purchaser would pay for it. This is how the said life interest must be assessed, upon the assumption that the assessee's personal right to reside in the property during his life time is saleable.
For the reason aforestated, the judgment and orders under challenge are set aside. The question aforequoted is answered in the negative and in favour of the Revenue. The said life interest shall now be valued for each of the assessment years in question in the manner set out above.
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2000 (12) TMI 99
Whether the application in Form No. 10 under rule 17 of the Income-tax Rules, 1962, could be filed even after the assessment is completed ?
Whether the Income-tax Rules could not fix any time limit for submitting an application in Form No. 10 under rule 17 of the Income-tax Rules, 1962 ?
Held that:- It is abundantly clear from the wording of sub-section (2) of section 11 that it is mandatory for the person claiming the benefit of section 11 to intimate to the assessing authority the particulars required, under rule 17 in Form No. 10 of the Rules. If during the assessment proceedings, the Assessing Officer does not have the necessary information. question of excluding such income from assessment does not arise at all. As a matter of fact, this benefit of excluding this particular part of the income from the net of taxation arises from section 11 and is subjected to the conditions specified therein. Therefore, it is necessary that the assessing authority must have this information at the time he completes the assessment.
In the case in hand it is evident from the records of the case that the respondent did not furnish the required information till after the assessments for the relevant years were completed. In the light of the above, we are of the opinion that the stand of the Revenue that the High Court erred in answering the first question in favour of the assessee is correct, and we reverse that finding and answer the said question in the negative and against the assessee. In view of our answer to the first question, we agree with Mr. Verma that it is not necessary to answer the second question on the facts of this case.
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2000 (12) TMI 98
Issues Involved: 1. Whether an assessment made under section 147 of the Income-tax Act, 1961, can be considered a "regular assessment" for the purpose of section 139(8) of the Act. 2. Whether interest can be charged for default in filing a return under section 139(8) in an assessment made under section 147.
Issue-wise Detailed Analysis:
1. Definition of "Regular Assessment":
The primary issue in this case revolves around the interpretation of "regular assessment" as defined under section 2(40) of the Income-tax Act, 1961. The court examined whether an assessment made under section 147, which deals with income escaping assessment, qualifies as a "regular assessment" for the purposes of section 139(8).
The court referred to section 2(40) which defines "regular assessment" as an assessment made under sub-section (3) of section 143 or section 144. Section 143 outlines the procedure for assessment based on a return filed under section 139 or in response to a notice under section 142(1). Section 144 deals with best judgment assessment in cases where the assessee fails to file a return or comply with notices.
2. Applicability of Section 139(8) to Assessments under Section 147:
The court analyzed whether the provisions of section 139(8), which imposes interest for late filing of returns, apply to assessments made under section 147. Section 139(8) imposes simple interest at 15% per annum from the date immediately following the specified date to the date of furnishing the return or the date of completion of the assessment under section 144.
The court noted that Explanation 2 to section 139(8) states that an assessment made for the first time under section 147 shall be regarded as a regular assessment for the purposes of this sub-section. This explanation was introduced by the Taxation Laws (Amendment) Act, 1984, effective from April 1, 1985. The court had to determine whether this explanation was clarificatory or amendatory.
Clarificatory Nature of Explanation 2:
The court held that if Explanation 2 is construed as clarificatory, it would apply to the assessment year 1984-85. The court emphasized that section 147, which deals with income escaping assessment, should be read in conjunction with section 148, which mandates the issuance of a notice before making an assessment, reassessment, or recomputation under section 147. The court concluded that an initial assessment made under section 147, where the assessee furnishes a return in response to a notice under section 148, qualifies as a "regular assessment" under section 2(40).
Relevant Case Law:
The court reviewed several high court decisions to support its interpretation. In K. Gopalaswami Mudaliar v. Fifth Addl. ITO [1963] 49 ITR 322 (Mad), it was held that an initial assessment made under section 147 is a regular assessment. Similarly, the Delhi High Court in National Agricultural Co-operative Marketing Federation of India Ltd. v. Union of India [1981] 130 ITR 928, and a Full Bench of the Kerala High Court in Lally Jacob v. ITO [1992] 197 ITR 439, took the view that an assessment made for the first time under section 147 is a regular assessment.
Contrary Views:
The court also considered contrary views from the Gauhati High Court in CIT v. Triple Crown Agencies [1993] 204 ITR 377, and the Punjab and Haryana High Court in CIT v. Sushma Saxena (Smt.) [1997] 223 ITR 395, which held that an assessment or reassessment under section 147 is not a regular assessment. However, the Supreme Court disagreed with these views, stating that they were not correct in law.
Conclusion:
The court concluded that an initial assessment under section 147 is a "regular assessment" for the purposes of section 139(8), and therefore, interest can be charged for default in filing a return under section 139(8) in such assessments. The Explanation 2 to section 139(8) is merely clarificatory and applies to the assessment year 1984-85. Consequently, the appeal filed by the assessee was dismissed with costs.
Final Judgment:
The appeal filed by the assessee was dismissed, affirming that the assessment made under section 147 is a "regular assessment" and interest under section 139(8) can be charged in such cases.
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2000 (12) TMI 97
Whether the loan redemption reserve amount to Rs. 1 crore is a reserve and not a provision and is to be included in the computation of capital for the purpose of surtax ?
Held that:- The aspects taken into consideration by the Tribunal and affirmed by the High Court that there was no stipulation by the Government for creation of loan redemption reserve ; that the assessee had not kept to the schedule for repayment; that the assessee, on its own volition, had created a loan redemption reserve by making appropriation of profit of Rs. 10 lakhs each year beginning from 1970; that the total reserve amounting to Rs. 100 lakhs remained undisturbed till the year 1987 and in the year 1988 the same was transferred to general reserve and that the balance-sheet showed that the amounts credited to the "loan redemption reserve" were not invested outside the company but remained internally invested, on the facts found, were not relevant for determining as to whether the amount was an asset or provision. As held in Vazir Sultan's case [1981] 132 ITR 559 (SC), the true nature and character of an appropriation has to be determined with reference to the substance of the matter, one must have regard to the intention with which and the purpose for which the appropriation has been made, such intention and purpose being gathered from the surrounding circumstances. Vazir Sultan's case [1981 (9) TMI 105 - SUPREME Court) also holds that if any retention or appropriation of a sum falls within the definition of "provision" it can never be a reserve but it does not follow that if the retention or appropriation is not a "provision" it is automatically a reserve. The fact that the amount has been set apart for redeeming liabilities makes it obvious that the intention is for clearing liabilities and not acquiring an asset. Bearing in mind these aspects, it is clear that the amount in question cannot be regarded as a "reserve". It has to be regarded as a "provision". Clearly the amount was set apart to meet a loan liability. It may also be noticed that the amount set apart is less than the respondent's liabilities. It cannot be regarded as an asset. The decision in Vazir- Sultan's case was not correctly appreciated by the High Court. In this view, the questions deserve to be answered in the negative.
For the aforesaid reasons, we allow the appeal and answer the questions in the negative, that is, in favour of the Revenue and against the assessee,
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2000 (12) TMI 96
The High Court of Kerala allowed an application by the Commissioner of Income-tax, Trivandrum to correct a direction in a judgment by substituting "Tax Recovery Officer" for "Department" in paragraph 18. The correction was made based on a previous Supreme Court judgment specifying the role of the Tax Recovery Officer in using procedures under the Travancore Income-tax Act.
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2000 (12) TMI 95
Issues involved: The judgment covers the interpretation of section 80-O of the Income-tax Act, 1961, in relation to the exemption on gross receipts versus net income and the disallowances of consultation fees and commission paid to the managing director.
Interpretation of Section 80-O: The reference was made by a Division Bench to interpret the scope and ambit of section 80-O of the Income-tax Act, 1961, in light of conflicting views. The dispute related to the assessment years 1968-69 to 1971-72. The Revenue argued that the decision in Marketing Research Corporation's case was applicable, while the assessee contended that the context of section 80-O was different. The court examined the provisions of section 80AB and 80-O to determine the correct application.
Section 80AB and 80-O Comparison: Section 80AB deals with deductions in computing total income, while section 80-O pertains to deductions in respect of certain incomes. The court highlighted the significance of the non obstante clause in section 80AB, which gives overriding effect in case of conflict with other provisions. The court referred to previous judgments to emphasize the application of section 80AB in determining deductions under section 80-O.
Application of Section 80AB to Section 80-O: The court cited the case of Motilal Pesticides (I) Pvt. Ltd. where it was observed that section 80AB mandates deductions from net income rather than gross income. The court also referred to H. H. Sir Rama Varma's case, stating that section 80AB was enacted to declare the law as it always stood regarding deductions under Chapter VI-A. Consequently, the court concluded that the mode of computation under section 80AB must be applied to calculate incentives under section 80-O.
Conclusion and Disposal: The court answered the reference by affirming the application of section 80AB to section 80-O for computing deductions. The matter was directed to be placed before the Division Bench for further proceedings and disposal on the merits.
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2000 (12) TMI 94
Issues: Assessment conducted ex parte due to non-appearance of the assessee, Jurisdiction of the revisional authority under section 264 of the Income Tax Act, Violation of principles of natural justice in the revisional process.
Analysis: 1. The High Court examined a case where the assessee was assessed for the assessment year 1992-93 ex parte as they failed to appear despite notices. The court found no procedural impropriety in this ex parte assessment.
2. The assessee had appealed against the assessment order, but later withdrew the appeal to file a revisional application. The High Court scrutinized the revisional authority's order challenged by the assessee, focusing on whether the authority properly exercised jurisdiction under section 264 of the IT Act.
3. The petitioner argued that they were unable to appear before the authority due to illness and employee misconduct, denying them the opportunity to be heard. The court acknowledged the argument but emphasized that the revisional authority should have independently assessed the legality and validity of the assessing authority's order.
4. While the court refrained from directly evaluating the legality of the assessing officer's order, it highlighted the importance of the revisional authority ensuring compliance with natural justice principles. The court noted that the revisional authority failed to address crucial legal aspects beyond the non-appearance issue.
5. The respondents contended that the revisional authority's decision was justified as the petitioner repeatedly ignored AO notices. However, the court disagreed, stating that the revisional authority must examine the legality and validity of the order, especially when issues of natural justice are raised.
6. The court emphasized that the revisional authority should have independently assessed the legality of the assessing officer's order based on available materials. Since the revisional authority failed to do so, the court intervened using its writ jurisdiction to set aside the revisional order and instructed a re-examination within the legal framework.
7. Consequently, the court directed the revisional authority to re-evaluate the matter within the specified legal parameters, excluding the non-appearance issue. The authority was given a deadline of 8 weeks to complete the re-examination after notifying the assessee or their representative.
8. The court clarified that if the assessee or their representative fails to appear despite notice, the revisional authority can proceed with the matter in their absence following due legal procedures. The writ petition was disposed of with no cost orders issued.
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2000 (12) TMI 93
Issues involved: 1. Commissioner's refusal to exercise revisional jurisdiction u/s 264 for assessment year 1991-92. 2. Commissioner's refusal to condone delay in filing revision petition u/s 264 for assessment year 1995-96.
Regarding assessment year 1991-92: The Commissioner rightly declined to exercise revisional jurisdiction u/s 264 as per the precedent set in Reiter Machine Works Ltd. v. CIT [1999] 240 ITR 531, which states that revision cannot be done if an appeal has already been filed against the order. Since an appeal had been preferred for the assessment year 1991-92, the Commissioner correctly refused to revise the assessment order.
Regarding assessment year 1995-96: The revision was sought for taxing the sum of Rs. 4,57,100 as accrued interest received by the assessee on Candoubles. The delay in filing the revision petition was from the expiry of one year from the assessment order date to September 27, 1999, which was not properly explained by the Commissioner. The assessee claimed that the need for revision arose after realizing the correct tax treatment of the amount received. The delay, according to the assessee, should be computed from the date of receiving the certified copy of the appeal dismissal order, not earlier.
The discretion to condone the delay should consider the merits of the revision petition. In cases where the assessee's right to refund is clear, a liberal view should be taken. The Act should not enable the State to retain money erroneously collected as tax. The authority's discretion should protect the just interests of the assessee, and the Revenue's role is to enforce the Act justly, not adversarially. In this case, the impugned order for the assessment year 1995-96 was set aside, and the matter was remitted back to the Commissioner for fresh consideration in accordance with law.
The writ petitions were allowed in part, with no costs incurred.
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2000 (12) TMI 92
Issues: Interpretation of section 214 of the Income-tax Act, 1961 regarding the payment of interest on advance tax.
Analysis: The High Court of Delhi was presented with a question referred by the Income-tax Appellate Tribunal regarding the correctness of charging interest under section 214 on a delayed payment of advance tax. The assessee, a private limited company, had filed its return for the assessment year 1975-76 and claimed interest under section 214 as the advance tax paid was in excess of the tax payable. The Income-tax Officer disallowed this claim as the last instalment of advance tax was paid late. The Appellate Assistant Commissioner allowed the claim, and the Tribunal upheld this decision, emphasizing the plain reading of section 214. The Revenue contended that any payment made beyond the stipulated date does not qualify for interest under section 214.
The court analyzed the relevant provisions of the Income-tax Act, specifically sections 207 to 213, which deal with advance payment of tax. It was noted that these sections encompass various aspects of advance tax payment, including the computation of tax payable, due dates for instalments, and deferment of payment. The court referred to a previous judgment by the Full Bench of the Andhra Pradesh High Court, which clarified the interpretation of sections 207 to 213 in relation to section 214. The court agreed with this interpretation, emphasizing that the reference in section 214 to sections 207 to 213 includes all provisions related to advance tax payment, not just section 211. Therefore, the court held that interest is payable on the excess amount of advance tax paid during the financial year, even if the instalments were not strictly paid as per section 211.
In conclusion, the court answered the question referred in the affirmative, favoring the assessee and ruling against the Revenue. The judgment clarified the interpretation of section 214 and affirmed that interest under this provision is payable on advance tax paid in excess of the tax liability, even if the instalments were not paid strictly in accordance with section 211.
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2000 (12) TMI 91
Issues: 1. Appropriation of seized amount by Revenue until order under section 132(5) of the Income-tax Act, 1961. 2. Legality of search and seizure under section 132(1)(c) of the Act and subsequent orders under section 132(5) and 132(12) of the Act.
Analysis: 1. The first issue revolves around the temporary appropriation of rupees six lakhs seized by the Revenue during a search operation until an order under section 132(5) of the Income-tax Act, 1961, was passed. The petitioner argued that the Revenue had no authority to take the money temporarily without a specific order. However, the court held that the expression "seizure" empowers the Revenue to remove the money from the place where it was seized as a consequence of the search. The court emphasized that the Assessing Officer has the discretion to decide whether to physically remove the money or issue an order under sub-section (5) of section 132 of the Act. The judgment highlighted scenarios where physical removal of money serves the Revenue's interests, concluding that there was no legal impediment for the Revenue to appropriate the seized money temporarily.
2. The second issue concerns the legality of the search and seizure under section 132(1)(c) of the Act and subsequent orders under section 132(5) and 132(12) of the Act. The court examined the counter-affidavit filed by the Revenue and found that the search was conducted in compliance with the requirements of section 132 of the Act. No grounds were presented to challenge the search or seizure. Additionally, the court reviewed the orders passed by the Assessing Officer and the Commissioner of Income-tax under sub-sections (5) and (12) of section 132, respectively. Both orders were deemed legal, with the Assessing Officer finding the petitioner guilty of undisclosed income and allowing the money to be retained with the Revenue. The Commissioner of Income-tax also upheld these findings. Consequently, the court dismissed both writ petitions, concluding that there was no merit in the challenges raised.
In conclusion, the judgment addressed the issues of temporary appropriation of seized money by the Revenue and the legality of search and seizure actions under the Income-tax Act, 1961. The court clarified the powers of the Revenue in seizing and temporarily holding money, emphasizing the discretion of the Assessing Officer. Furthermore, the court found the search and subsequent orders to be legally sound, dismissing the writ petitions.
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2000 (12) TMI 90
Issues involved: Appeal u/s 260A of the Income-tax Act, 1961 against the order of the Income-tax Appellate Tribunal, Delhi, dated August 31, 1999, on questions of law related to handing over of books of account, lawful satisfaction, requirement of recording satisfaction in writing, opportunity of hearing, validity of handing over documents, reliability of affidavits, and assessment of income.
Handing over of Books of Account: The search conducted in the premises led to seizure of documents related to the appellant, handed over to the Assessing Officer for assessment u/s 158BD. The appellant's argument that the material was handed over beyond the prescribed 15 days was dismissed, emphasizing that the provision aims to aid the Assessing Officer, not the assessee.
Lawful Satisfaction and Recording Requirement: The Deputy Commissioner was found to have sufficient satisfaction for handing over the books, with no specific requirement in section 158BD for written recording of such satisfaction. The court clarified that the satisfaction under section 158BD is an administrative order, not a quasi-judicial one.
Opportunity of Hearing and Valid Handover: There is no need to provide an opportunity of hearing before recording satisfaction u/s 158BD, as the assessee is entitled to a hearing before assessment. The books of account and documents were considered validly handed over to ensure a correct assessment of the appellant's income.
Reliability of Affidavits and Assessment: The Tribunal found certain amounts unexplained and added them to the appellant's income, despite affidavits and explanations provided by the appellant. The Tribunal's detailed analysis and findings were upheld, emphasizing that the court cannot interfere with findings of fact in the appeal.
Judgment and Dismissal: The appeal was dismissed based on the Tribunal's findings, distinguishing a previous Supreme Court decision where cash credits were explained. The court concluded that there was no merit in the appeal, upholding the Tribunal's decision.
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2000 (12) TMI 89
Issues Involved: 1. Quashing of the order passed by the Commissioner of Income Tax (CIT) under Section 80HH(2)(a) of the Income Tax Act, 1961. 2. Quashing of the assessment order passed by the Joint Commissioner of Income Tax (Jt. CIT) under Section 143(3) of the Income Tax Act, 1961. 3. Validity of the reasons assigned by the CIT for refusing to grant further extension of time under Section 80HHC(2)(a) of the Act. 4. Interpretation of Section 80HHC(2)(a) concerning the extension of time for bringing sale proceeds into India. 5. Examination of whether the CIT's decision was arbitrary and lacked application of mind.
Detailed Analysis:
1. Quashing of the Order Passed by the CIT under Section 80HH(2)(a): The petitioner sought quashing of the order dated December 22, 1998, passed by the CIT, Jalandhar, under Section 80HH(2)(a) of the Income Tax Act, 1961. The petitioner had applied for extensions to bring the sale proceeds of exported goods into India, which were granted partially by the CIT. The CIT refused further extensions beyond November 30, 1997, citing that the assessment was likely to become time-barred and that sufficient time had already been granted. The court found these reasons extraneous and irrelevant, emphasizing that the CIT failed to consider whether the delay was due to reasons beyond the petitioner's control. The court declared the CIT's order illegal and directed the CIT to extend the period up to September 30, 1998.
2. Quashing of the Assessment Order Passed by the Jt. CIT under Section 143(3): The petitioner also challenged the assessment order dated December 10, 1998, passed by the Jt. CIT under Section 143(3) of the Act, arguing that it was based on the patently illegal order of the CIT. The court did not directly quash the assessment order but implied that if the assessment adversely affected the petitioner, they could seek appropriate legal remedies.
3. Validity of the Reasons Assigned by the CIT for Refusing Further Extension: The CIT's refusal to grant further extension was primarily based on two reasons: that sufficient time had already been granted and that the assessment could not be kept pending indefinitely. The court found these reasons to be extraneous and irrelevant, emphasizing that the CIT did not apply his mind to whether the delay was due to reasons beyond the petitioner's control. The court highlighted that the extensions could be granted up to two years from the end of the assessment year, and the petitioner had received the sale proceeds before this period expired.
4. Interpretation of Section 80HHC(2)(a) Concerning Extension of Time: Section 80HHC(2)(a) allows an assessee to claim deductions if the sale proceeds of exported goods are brought into India within six months from the end of the previous year or within such further period as the CIT may allow for reasons beyond the assessee's control. The court interpreted this provision to mean that the CIT must exercise this power reasonably and fairly, recording reasons in writing. The court emphasized that the CIT's discretion is not unbridled and must be exercised in a manner consistent with the legislative intent to encourage exports.
5. Examination of Whether the CIT's Decision was Arbitrary and Lacked Application of Mind: The court found that the CIT's decision was arbitrary and lacked application of mind. The CIT failed to consider whether the reasons for the delay were beyond the petitioner's control and did not provide valid reasons for refusing further extensions. The court emphasized that the CIT's power to grant extensions should be exercised reasonably, and the refusal in this case was unjustified.
Conclusion: The court allowed the writ petition, quashed the CIT's order, and directed the CIT to extend the period under Section 80HHC(2)(a) up to September 30, 1998. The petitioner was granted all consequential benefits, and if the assessment had been completed adversely affecting the petitioner, they were free to seek appropriate legal remedies.
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2000 (12) TMI 88
Issues involved: The issues involved in the judgment are the challenge to the order of the Income-tax Appellate Tribunal regarding the disallowance of deductions under section 80HHC of the Income-tax Act, 1961 for counter sales claimed by the assessee, and the interpretation of Explanation (aa) to section 80HHC regarding what constitutes "export out of India."
Assessment Year 1996-97: The assessee, a registered firm engaged in manufacturing and exporting precious stones, handicrafts, and jewelry, filed its return for the assessment year 1996-97 declaring income and claiming deductions under section 80HHC. The Assessing Officer disallowed the deduction claimed on counter sales, assessing the total income differently. The Commissioner of Income-tax (Appeals) upheld the disallowance, stating that counter sales did not qualify for relief under section 80HHC. The Income-tax Appellate Tribunal allowed the assessee's appeal, directing the Assessing Officer to treat counter sales as sales eligible for deductions under section 80HHC.
Interpretation of Explanation (aa) to section 80HHC: Explanation (aa) stipulates that certain transactions shall not be considered as "export out of India." The Income-tax Appellate Tribunal relied on decisions from the Allahabad High Court and the Income-tax Appellate Tribunal Bench at Jaipur to interpret this provision. The Allahabad High Court held that for a transaction to not be considered an export out of India, it must meet specific conditions related to the location of the transaction and customs clearance.
Judicial Precedents and Interpretation: The judgment referenced cases such as Ram Babu and Sons v. Union of India and Anil Exports Jaipur v. ITO to support the interpretation of Explanation (aa). The Allahabad High Court's decision emphasized that the involvement of customs clearance is crucial in determining whether a transaction qualifies as an export out of India. The Supreme Court rejected a special leave petition related to the Ram Babu and Sons case.
Application of Legal Principles: In a separate case, CIT v. Silver and Art Palace, a similar issue arose where the Commissioner of Income-tax modified an assessment order to withdraw a deduction claimed under section 80HHC. The Income-tax Appellate Tribunal's decision to allow the deduction was upheld, emphasizing the importance of customs clearance in determining export transactions. The High Court concluded that the Tribunal's decision was correct based on the facts of the case.
Conclusion: The High Court dismissed the income-tax appeal challenging the Income-tax Appellate Tribunal's order, stating that the Tribunal did not err in extending the benefit of deductions under section 80HHC to the assessee for counter sales to foreigners. The Court found no merit in the Revenue's arguments and upheld the Tribunal's decision, emphasizing the significance of customs clearance in determining export transactions. The appeal was dismissed with no order as to costs.
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2000 (12) TMI 87
Issues Involved: 1. Entitlement to Deduction u/s 80HH and 80-I: - Whether the assessee was entitled to claim 40% of the profit as deduction (20% u/s 80HH and 20% u/s 80-I) despite the provisions of section 80HH(9) which prioritize deductions under section 80HH.
2. Remand by Tribunal: - Whether the Tribunal was right in remanding the matter back to the Assessing Officer for re-examination in light of accounting standards.
Summary of Judgment:
1. Entitlement to Deduction u/s 80HH and 80-I: The court examined the interplay between sections 80HH and 80-I of the Income-tax Act, 1961. The Department contended that section 80HH(9) mandates that deductions under section 80HH should be given priority before any deduction under section 80-I, thereby restricting the quantum of deduction under section 80-I. The Department argued that the legislative intent was to limit the total deductions when both sections apply, as highlighted by the introduction of the bracketed portion in section 80HH(9) by the Finance (No. 2) Act, 1980.
Conversely, the assessee argued that section 80HH(9) only sets a priority for deductions and does not affect the quantum of deductions under section 80-I. The assessee emphasized that section 80-I was reintroduced with a different structure focusing on profit-based deductions, unlike the earlier capital-employed based deductions under section 80J. The court agreed with the assessee, noting that section 80HH(9) refers to priority and not to the quantum of deduction. The court upheld the Tribunal's decision, affirming that the assessee could claim deductions under both sections without reducing the quantum of deduction under section 80-I.
The court referenced the case of *J. P. Tobacco Products Pvt. Ltd. v. CIT [1998] 229 ITR 123* to support its conclusion. The court ruled in favor of the assessee, allowing the claim for 40% deduction (20% u/s 80HH and 20% u/s 80-I).
2. Remand by Tribunal: The court addressed the issue of the Tribunal remanding the matter back to the Assessing Officer. The Tribunal had remanded the case for re-examination due to the lack of particulars and directed the Assessing Officer to consider the issue in light of accounting standards, particularly alternative II. The court agreed with the Tribunal's decision, emphasizing the necessity of remanding the matter for a detailed examination. The court reframed the question as whether the Tribunal was right in remanding the matter back to the Assessing Officer and answered it in the affirmative, in favor of the assessee.
Conclusion: The appeal was disposed of with no order as to costs, and the issuance of a certified copy was expedited.
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2000 (12) TMI 86
Issues Involved: 1. Authority of the Assessing Officer to proceed under section 142(1) of the Income-tax Act, 1961, after an order under the Kar Vivad Samadhan Scheme (KVSS). 2. Scope and interpretation of the Kar Vivad Samadhan Scheme. 3. Determination of "disputed income" and "disputed tax" under the KVSS. 4. Finality and conclusiveness of the designated authority's order under the KVSS. 5. Impact of pending determinations on the KVSS settlement.
Detailed Analysis:
1. Authority of the Assessing Officer to Proceed Under Section 142(1): The primary issue is whether the Assessing Officer was authorized to proceed under section 142(1) of the Income-tax Act, 1961, for the assessment year 1992-93 after an order was passed under the KVSS on January 19, 1999, determining the total income of the assessee-petitioner at Rs. 33,65,298. The court had to consider the scope of the Kar Vivad Samadhan Scheme in this context.
2. Scope and Interpretation of the Kar Vivad Samadhan Scheme: The court examined various sections of the KVSS, particularly sections 87, 88, 90, and 94, to understand the scheme's scope. The scheme is primarily a recovery-based initiative aimed at unlocking large amounts locked up in litigation and addressing the fiscal deficit. The court noted that the scheme involves two stages: the initial stage to ascertain the maintainability of a declaration and the second stage to calculate the disputed income and the amount payable.
3. Determination of "Disputed Income" and "Disputed Tax": The court analyzed the definitions of "disputed income" and "disputed tax" under sections 87(e) and 87(f). "Disputed income" is defined as the whole or part of the total income relatable to the disputed tax, while "disputed tax" refers to the total tax determined and payable but remaining unpaid as of the declaration date. The court emphasized the importance of the words "determined" and "payable" in section 87(f) and the phrase "so much of the total income" in section 87(e).
4. Finality and Conclusiveness of the Designated Authority's Order: The petitioner argued that once the designated authority determined the disputed income and the amount payable under the KVSS, the assessment for the entire year was settled, making the order conclusive. However, the court found that the designated authority's order was limited to the scope of the KVSS and did not cover heads of income that were not adjudicated upon by the Assessing Officer.
5. Impact of Pending Determinations on the KVSS Settlement: The court noted that certain heads of income, including bad debts, income from house property, capital gains, and disallowance under rule 6D, were still pending determination by the Assessing Officer. The court concluded that the KVSS settlement did not cover these heads, and the Assessing Officer was entitled to proceed with their determination. The court rejected the petitioner's contention that the scheme would become unworkable if the Department's view was accepted.
Conclusion: The court found merit in the Department's contentions and held that the Assessing Officer was authorized to proceed with the determination of the pending heads of income. The court emphasized that the KVSS was a recovery-based scheme aimed at settling tax disputes quickly and that the designated authority's order under the scheme was limited to the heads of income that were determined and payable as of the declaration date. The writ petition was dismissed, and the rule was discharged with no order as to costs.
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2000 (12) TMI 85
The Delhi High Court ruled on the classification of expenditure for technical know-how as capital or revenue. The Tribunal determined it to be capital expenditure, to be added to the cost of the company's business asset on a pro rata basis. The Court directed the Assessing Officer to determine the amount to be added to the cost of plant and machinery. The reference was disposed of without being answered.
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