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1991 (12) TMI 44
Issues Involved: The legality of the Income-tax Appellate Tribunal's decision to recall its order under section 254(2) of the Income-tax Act, 1961 in a case involving disallowance of expenditure claimed by the assessee and imposition of penalty under section 271(1)(c).
Background Facts: The assessee, a company, was assessed for the assessment year 1980-81 and claimed payment of Rs. 2,26,039 under the head "Salary and wages". The Assessing Officer disallowed Rs. 78,500 due to lack of details on payments to temporary workers. The Commissioner of Income-tax (Appeals) upheld the disallowance to Rs. 52,000 and cancelled the penalty imposed. The Tribunal later reversed these decisions based on non-production of relevant documents and lack of supporting material.
Tribunal's Decision and Recall: The Tribunal recalled its order based on the assessee's application under section 254(2), citing mistakes in non-production of documents and lack of specifying penalty computation rate. The Revenue challenged this recall, arguing that the Tribunal exceeded its powers under section 254(2).
Legal Analysis: The High Court analyzed the limited scope of section 254(2) for rectifying mistakes apparent from the record. It emphasized that recalling an order under section 254(2) is impermissible and only allowed in specific circumstances as per the Income-tax (Appellate Tribunal) Rules, 1963. The Court found that the Tribunal's decision to recall the order was not justified as the documents were indeed not produced by the assessee, as evidenced by the letter dated October 27, 1981.
Conclusion: The High Court held that the Tribunal was not justified in recalling its order under section 254(2) and quashed the order in Miscellaneous Application No. 14/CTK of 1990. The writ application was successful, and no costs were awarded.
Separate Judgment: Justice S. K. Mohanty concurred with the decision.
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1991 (12) TMI 43
Appeal To Tribunal ... ... ... ... ..... C). Therefore, the exercise of power under section 254(2) in such a case would be inappropriate. The so-called mistakes highlighted by the assessee in its application for rectification related to certain alleged erroneous conclusions. The conclusions may be inappropriate, but they per se do not constitute mistakes apparent from the record. They are not obvious, patent, but require detailed and critical appreciation of factual disputes. The Tribunal was, therefore, not justified in recalling its order. Consequently, we vacate the order dated December 13, 1990 (annexure-1). It is brought to our notice that as a sequel to the said impugned order, a fresh order has been passed by the Tribunal on May 10, 1991, vide annexure-2. In view of our conclusion that the order of recall is interdicted, the subsequent order dated May 10, 1991 (annexure-2) cannot also be maintained. In the result, annexures-1 and 2 are quashed. Writ application is allowed. No costs. S. K. MOHANTY J.-I agree.
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1991 (12) TMI 42
Business, Business Income, Revision ... ... ... ... ..... x Appellate Tribunal was not justified in holding that the requirements for invoking the powers under section 263 by the Commissioner of Income-tax were not satisfied for the assessment year 1980-81. Counsel for the assessee submitted that the second question is covered by the order of this court in CIT v. Sahney Steel and Press Works Ltd. 1985 152 ITR 39. He submitted that the decision may require reconsideration. Admittedly, the Supreme Court has admitted a civil appeal against that decision and the matter is pending before that court. Counsel for the Revenue also brought to our notice the fact that a large number of reference applications and referred cases have been disposed of on the basis of Sahney s case 1985 152 ITR 39 (AP) and it is not desirable that the matter is reopened at this distance of time. We agree with these submissions and, therefore, answer the second question in favour of the Revenue and against the assessee. Parties will suffer their respective costs.
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1991 (12) TMI 41
Export Market Development Allowance, Weighted Deduction ... ... ... ... ..... ----------------------------------------- Sl. No. Item Assessment Assessment year year 1976-77 1977-78 ------------------------------------------------------------------------------------------------------------------------------------------------- 1. Packing and forwarding 1,26,000 2,39,728 expenses 2. Insurance 6,166 22,763 3. Audit fees 2,500 2,500 4. Postage, telegram and 11,102 20,473 telephone 5. Travelling, etc. 26,596 30,566 6. Printing and stationery 3,692 8,648 7. Advertisement 23,311 29,065 8. Salaries, wages and bonus 14,811 12,229 9. Miscellaneous charges 27,237 45,645 ------------------------------------------------------------------------------------------------------------------------------------------------- In the result, the question referred, to us for our opinion and as modified by us, in respect of the above items in the foregoing paragraphs is answered in the affirmative and against the assessee. Reference answered accordingly with no order as to costs.
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1991 (12) TMI 40
Issues: The judgment involves issues related to the application by the Commissioner of Income-tax under section 256(2) of the Income-tax Act, 1961, regarding the deletion of addition under section 41(2) of the Income-tax Act, 1961, on the grounds of business transfer and profits arising from the sale of branches.
Issue 1 - Addition under section 41(2): The assessee, a publishing house, sold branches as going concerns. The Income-tax Officer added a sum as profit under section 41(2), which was confirmed by the Commissioner of Income-tax. However, the Tribunal allowed the second appeal, stating that section 41(2) was not attracted as the entire business activity of each branch was sold for a slump price, following the decision in CIT v. Mugneeram Bangur and Co. [1965] 57 ITR 299. The Tribunal concluded that the excess amount was a capital gain, not business profit.
Issue 2 - Applicability of section 41(2) to profits from branch sales: The Tribunal held that the provisions of section 41(2) were not applicable to tax the profits arising from the sale of branches, as the sale was of the concern as a whole for a slump price, aligning with the decision in CIT v. Mugneeram Bangur and Co. [1965] 57 ITR 299. The Tribunal emphasized that the excess amount from the sale was a capital gain chargeable to tax, not business profit.
Issue 3 - Interpretation of Board's Circular and agreements: The Tribunal relied on the Board's Circular No. 23-D (XXIII-6) of 1965, which clarified the taxability of surplus amounts from the sale of a business as a going concern. The Revenue contended that each branch did not have independent goodwill and the sales were not of going concerns as a whole for a slump price. However, the Tribunal rejected these contentions, emphasizing that the sales were of the entire branch business as a whole, as indicated in the agreements and supported by the Supreme Court decision in CIT v. Mugneeram Bangur and Co. [1965] 57 ITR 299.
The Tribunal correctly concluded that no question of law arose for reference, rejecting the application by the Commissioner of Income-tax.
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1991 (12) TMI 39
Issues involved: Deduction of interest levied under section 220(2), section 215, and section 201(1A) under section 37 of the Income-tax Act, 1961 for the assessment year 1976-77.
Summary:
The court was asked to consider whether the claim for deduction of interest levied under various sections of the Income-tax Act as business expenditure under section 37 was rightly rejected. The amounts in question were Rs. 6,03,168 under section 220(2), Rs. 1,38,506 under section 215, and Rs. 66,590 under section 201(1A). The Income-tax Officer, Commissioner, and Tribunal had all rejected the claim, leading to the reference to the court.
The court noted that previous decisions, including Aruna Mills Ltd. v. CIT and CIT v. Ghatkopar Estate and Finance Corporation (P) Ltd., had consistently held that such interest payments were not allowable under section 37. This view was also supported by the Delhi High Court in Bharat Commerce Industries Ltd. v. CIT and the Kerala High Court in Federal Bank Ltd. v. CIT. The assessee's counsel acknowledged that there was no decision taking a contrary view.
The reference was made due to a pending special leave petition before the Supreme Court, but the court saw no reason to delay its decision. Consequently, the court recorded the answer in the affirmative, affirming that the interest payments were not deductible under section 37. No costs were awarded in this matter.
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1991 (12) TMI 38
Interest On Borrowed Capital ... ... ... ... ..... allowable as a deduction in the computation of his income from business including his share income from the firm. It may also be observed that the interest paid being an expenditure, and expended by the assessee wholly and exclusively for the purpose of the business as indicated above, it shall also be allowable as a deduction from the income chargeable under the head Profits and gains of business or profession as, under section 37 of the Act, which is the residuary section, even if it is held that the amount borrowed in the instant case does not strictly fall under section 36(1)(iii) on the ground that the money borrowed for the purpose of renovation of the business asset, namely, the shop premises, might not in the strict sense be capital borrowed . In the light of the foregoing discussion, we answer the question referred by the Tribunal in the affirmative that is in favour of the assessee and against the Revenue. We make no order as to costs. J. M. SRIVASTAVA J.-I agree.
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1991 (12) TMI 37
Attributable To Such Activities, Co-operative Society, Exemptions ... ... ... ... ..... e carried on by the society either independently or in addition to activities specified in clause (a) or clause (b). In the instant case, the society is engaged in carrying on the business of banking which is an activity specified in clause (a). In addition thereto, it also carried on the activity of constructing and letting out house property and derived profits and gains therefrom. Such a case will clearly fall within the ambit of clause (c) of section 8OP(2) and the society would be entitled to get deduction from the profits and gains attributable to such activity to the extent of Rs. 20,000. Clause (f) has no application to such a case. We are, therefore, of the opinion that the Tribunal was right in holding that the assessee was entitled to deduction under clause (c) of section 80P(2) of the Act. Accordingly, the question referred to us is answered in the affirmative, i.e., in favour of the assessee and against the Revenue. No order as to costs. D. N. BARUAH J.-I agree.
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1991 (12) TMI 36
Export Market Development Allowance, Weighted Deduction ... ... ... ... ..... red was not incurred in India, it is required to be considered for weighted deduction. In our opinion, therefore, the Tribunal was wrong in disallowing the assessee s claim for weighted deduction for the expenditure incurred by way of analysis charges. In the result, we answer the question which is referred to us in the negative and against the assessee in so far as items of expenditure other than analysis charges are concerned. We answer the question in the affirmative and against the Revenue in so far as the analysis charges are concerned. In other words, the assessee is entitled to weighted deduction under section 35B of the Act in respect of analysis charges of Rs. 9,633 incurred in the assessment year 1973-74, Rs. 7,175 in the assessment year 1974-75 and Rs. 79,316 in the assessment year 1975-76. The assessee s claim for weighted deduction in respect of the rest of the items of expenditure shall stand disallowed. Reference answered accordingly with no order as to costs.
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1991 (12) TMI 35
Export Market Development Allowance, Weighted Deduction ... ... ... ... ..... incurred in India, do not qualify for the relief under section 35B(1)(a). It may be pointed out that, in the appeals before the Tribunal also, learned counsel for the assessee fairly conceded that the assessee was not entitled to claim relief under section 35B except in respect of three items of expenditure, namely, (1) telegram charges (foreign), (2) telephone charges (foreign), and (3) telex charges (foreign). So far as remaining items of expenditure are concerned, the assessee s claim was not seriously pressed. In view of the concession made by learned counsel for the assessee, the assessee is not entitled to claim weighted deduction in respect of the items of expenditure other than those in respect of which the assessee s claim has been allowed. In the light of the above discussion, the questions which have been referred to us, for our opinion, shall have to be answered in the affirmative and against the assessee. Reference answered accordingly with no order as to costs.
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1991 (12) TMI 34
... ... ... ... ..... hin the expression growing crops in section 5(1)(viii)(a) of the Act ? Though the references were received in this court as far back as September 29, 1981, and the assessee had been served in the references, till this date the assessee had not taken steps to prosecute the references. Not even vakalat had been filed on behalf of the assessee, though 10 years have elapsed. Indeed, it is seen from the record of the proceedings that the matter had been posted before the Deputy Registrar of this court on three occasions and time had been granted. Despite that, the assessee had not taken any steps so far. Under these circumstances, we are constrained to return the references unanswered.
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1991 (12) TMI 33
Export Market Development Allowance, Weighted Deduction ... ... ... ... ..... re incurred for such services. The mere fact that, under the terms of the contract, the assessee permitted the foreign buyer to make payment for the goods supplied on the arrival of the steamer would not show that the assessee had performed some services for the buyer outside India. It is as a result of the mode of payment of the price of the goods accepted by the assessee under the terms of the contract that it incurred the expenditure of Rs. 2,26,093. In our opinion, therefore, as rightly held by the Tribunal and the authorities below, the expenditure in question does not fall under sub-clause (viii) of clause (b) of section 35B(1) of the Act which would entitle the assessee to claim export markets development allowance or, in other words, weighted deduction in respect of the said expenditure. For the aforesaid reasons, we answer the question which has been referred to us in the affirmative and against the assessee. Reference answered accordingly with no order as to costs.
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1991 (12) TMI 32
Search And Seizure ... ... ... ... ..... there are prima facie materials for the alleged commission of cognizable offences under section 4 of the 1978 Act and under section 420 of the Code. Worthy it is to note here that even a subscriber in a money circulation scheme, apart from a promoter, is a particeps criminis and this will be crystal clear by a cursory perusal of the salient provisions adumbrated in section 3 of the 1978 Act, which prescribes No person shall promote or conduct any prize chit or money circulation scheme, or enrol as a member to any such chit or scheme, or participate in it otherwise, or receive or remit any money in pursuance of such chit or scheme. The further agonising factor to be taken note of here is that if the alleged offences are proved in the trial, there is a plausibility of the seized amounts being confiscated while passing a final order under section 452, Criminal Procedure Code. For the above reasons, both these petitions, which deserve to be dismissed, are accordingly dismissed.
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1991 (12) TMI 31
Accounting, Interest On Borrowed Capital ... ... ... ... ..... d. s case 1971 82 ITR 363, that a deduction may be allowed in respect of a statutory or other liability even if no provision is made for it in the accounts. Before completion of the assessment by filing a revised return, the assessee had indicated its liability and had claimed deduction. Merely because the resolution in question was adopted after the close of the accounting year, it cannot be a ground for disallowing a claim legally made, since the liability had already accrued because the mercantile system of accounting was followed by the assessee. The receipt has been taxed in the hands of the holding company also as observed by the Tribunal. Our answer to the question referred, therefore, is that the Tribunal was justified in holding that the assessee s claim relating to payment of interest was to be allowed for the assessment year 1978-79. The question is answered in the affirmative, in favour of the assessee and against the Revenue. No costs. S. K. MOHANTY J. -I agree.
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1991 (12) TMI 30
Depreciation, Investment Allowance ... ... ... ... ..... the cost of any asset of the assessee. It was given as an incentive for setting up industrial units in a backward areas. The subsidy went to augment the capital resources of the industry in question. Clause (1) of section 43 has no application to the subsidy. The inevitable conclusion is that the formula contained for grant of subsidy is merely a measure for determining the amount of subsidy. After all, some measure was required to be adopted for determining the amount of subsidy and the cost of fixed asset was taken for the purpose of determining the amount at a particular percentage thereof. The Tribunal has, therefore, rightly held that the subsidy received by the assessee-company should not be deducted from the value of the assets to arrive at the actual cost for the purpose of allowing depreciation and investment allowance. The question referred to us is answered in the affirmative, in favour of the assessee and against the Revenue. No costs. S. K. - MOHANTY J. -I agree.
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1991 (12) TMI 29
Issues involved: Assessment of weighted deduction under section 35B(1)(b) of the Income-tax Act, 1961 for insurance and port fees for the assessment year 1978-79.
Summary: The High Court of Gujarat considered a case where a registered partnership firm claimed weighted deduction for insurance and port fees under section 35B(1)(b) of the Income-tax Act, 1961 for the assessment year 1978-79. The Commissioner of Income-tax challenged the assessment made by the Income-tax Officer, leading to an appeal before the Income-tax Appellate Tribunal.
The Tribunal ruled in favor of the assessee, stating that two views on the matter were possible, and therefore, the Commissioner could not invoke section 263 of the Act. The Revenue appealed this decision, leading to two questions being referred to the High Court for opinion.
Regarding the first question on the allowability of the claims under section 35B, the High Court cited a previous decision and ruled against the assessee. For the second question, the High Court disagreed with the Tribunal's view that the Commissioner could not invoke section 263 based on the debatable nature of the issue. The High Court clarified that the Commissioner can revise an order if deemed erroneous and prejudicial to the Revenue, even in cases of debate.
The High Court concluded by answering both questions against the assessee, emphasizing the Commissioner's authority to revise orders under section 263, even in debatable situations.
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1991 (12) TMI 28
Export Market Development Allowance, Weighted Deduction ... ... ... ... ..... h the distribution, supply or provision of the goods, etc., outside India (b) expenditure wherever incurred for the carriage of the goods to their destination outside India and (c) expenditure incurred to insure the goods while in transit. Learned counsel for the assessee relied upon the observations in Aiyar s Income Tax Act, 2nd Edition, p. 544. This does support learned counsel, but for the reasons already stated by us, we are unable to agree with the meaning of the section as given in this book. We fully agree with the view taken by the Madhya Pradesh High Court. We, therefore, hold that the assessee is not entitled to weighted deduction on the expenditure which it has incurred for carriage and insurance of the goods exported. In other words, we confirm the view taken by the Tribunal. We, therefore, answer both the questions which have been referred to us for our opinion in the affirmative and against the assessee. Reference answered accordingly with no order as to costs.
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1991 (12) TMI 27
Appeal To Tribunal, Export Market Development Allowance, Weighted Deduction ... ... ... ... ..... ribunal. We find no material to interfere with the decision taken by the Tribunal. The assessee has not been able to show any material on record which would warrant interference of this court as far as this item of expenditure is concerned. Therefore, we confirm the view taken by the taxing authorities. In view of the aforesaid discussion, we decide question No. 1 in the affirmative and against the assessee. In so far as the second question is concerned, it will not detain us any longer as it is directly covered by the Full Bench decision of this court in the case, of CIT v. Cellulose Products of India Ltd. 1985 151 ITR 499. The view taken by the Tribunal is fully justified and as it is in consonance with the ratio of the decision of the Full Bench of this court, it is not necessary to enter into the factual aspects in greater detail. In the result, we answer question No. 2 in the affirmative and against the assessee. Reference answered accordingly, with no order as to costs.
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1991 (12) TMI 26
Exemptions, Wealth Tax ... ... ... ... ..... rom April 1, 1980, and it did not have retrospective effect, it serves as legislative exposition of the import of section 64(1) and (i). The Karnataka High Court has discussed this in greater detail. In the aforesaid judgments, after making reference to two earlier decisions of the Supreme Court in support of this view, it has been held that subsequent legislation may be looked at in order to see what is the proper interpretation to be put upon the earlier Act where the earlier Act is obscure or ambiguous or readily capable of more than one interpretation. The result of the above discussion is that question No. 1 is answered in the affirmative and, in view of the said answer to question No. 1, question No. 2 does not arise and we further add that the Wealth-tax Officer was right in allowing the benefit of exemption to the assessee who are partners in the firm qua their respective shares in the immovable property owned by the firm under section 5(1)(iv) of the Wealth-tax Act.
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1991 (12) TMI 25
Issues involved: The judgment addresses the issue of whether salary and wages amounting to Rs. 18,813, relating to earlier years, were allowable as a deduction in the assessment year 1974-75.
Details of the Judgment:
The dispute arose from the assessee's claim for deduction of Rs. 18,813 for extra salary and wages paid to employees in the relevant year. The Income-tax Officer disallowed the claim, stating that the amount related to earlier years and should have been provided for in those years. The Appellate Assistant Commissioner accepted the assessee's contention that the disputes regarding the payment were settled only in the relevant year, allowing the deduction. The Tribunal, relying on Supreme Court decisions, concluded that the amount could be deducted in the relevant year as it was quantified and ascertained then, dismissing the Department's appeal.
The High Court upheld the Tribunal's decision, citing the Supreme Court case of CIT v. Swadeshi Cotton and Flour Mills Pvt. Ltd., which emphasized that the liability to pay accrues when disputes are settled. The Court noted that the liability to pay the extra salaries only materialized when the Assistant Labour Commissioner passed the order, making the deduction legitimate in the relevant year.
The Court distinguished other cases cited by the Revenue, emphasizing that in the present case, the liability became quantified only after the Assistant Labour Commissioner's decision. It reiterated that in the mercantile system, deductions can only be made when the liability to pay accrues and becomes ascertained.
In conclusion, the Court answered the question in favor of the assessee, allowing the deduction of Rs. 18,813 in the relevant assessment year. The assessee was awarded costs amounting to Rs. 250.
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