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1991 (12) TMI 24
... ... ... ... ..... Hindu undivided family, but once an order has been passed, the recognition of severance is granted by the Income-tax Department, and clause (3)of section 25A will have no application. Under the circumstances, it was impermissible for the Commissioner of Income-tax to go behind the order passed under section 171 of the Income-tax Act. Even if the partial partition is ignored and treated as nonest, income derived from the property of the larger Hindu undivided family could not be added in the individual income of Maganlal. Under the circumstances, the Tribunal has rightly held that the order passed by the Commissioner of Income-tax in revisional jurisdiction under section 263 of the Income-tax Act could not be sustained. No referable question of law arises out of the above order passed by the Tribunal and hence the application under section 256(1) of the Income-tax Act was rightly rejected. In the result, these applications are dismissed. Rule discharged. No order as to costs.
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1991 (12) TMI 23
Aggregation Under Estate Duty, Deductions In Estate Duty, Estate Duty, Mitakshara HUF, Provision
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1991 (12) TMI 22
Issues Involved: 1. Legislative competence of Parliament to tax agricultural income. 2. Characterization of compensation received on compulsory acquisition of agricultural land. 3. Taxability of interest paid on compensation for compulsory acquisition of land.
Summary:
Legislative Competence of Parliament to Tax Agricultural Income: The petitioners challenged the vires of section 2(14)(iii) of the Income-tax Act, arguing that Parliament is not competent to legislate on agricultural income, which falls under entry 46, List II of Schedule VII of the Constitution. The court held that Parliament is competent to define "agricultural income" for the purpose of the Constitution and the Income-tax Act. It was concluded that the taxation of capital gains from agricultural land that has lost its agricultural characteristics falls within Parliament's legislative competence.
Characterization of Compensation Received on Compulsory Acquisition of Agricultural Land: The court examined whether compensation received on compulsory acquisition of agricultural land is a capital asset within the meaning of section 2(14) of the Act and whether profits and gains arising therefrom are taxable. It was held that such compensation is a capital asset and not agricultural income, thus taxable under the Income-tax Act. The court distinguished between compensation paid under the Land Acquisition Act and the Requisition and Acquisition of Immovable Property Act, concluding that both are taxable as capital gains.
Taxability of Interest Paid on Compensation for Compulsory Acquisition of Land: The court considered whether interest paid on compensation for compulsory acquisition of land is "income" and therefore taxable. It was held that interest under sections 28 and 34 of the Land Acquisition Act is not compensation but is paid for the delayed payment of compensation, making it a revenue receipt liable to tax under the Income-tax Act. The court cited precedents like Dr. Shamlal Narula v. CIT and T. N. K. Govindaraju Chetty v. CIT to support this view.
Additional Observations: The court noted that interest received should be spread over all the years from the date it became due for the purpose of income-tax assessment, as indicated by the Supreme Court in Rama Bai v. CIT and K. S. Krishna Rao v. CIT. The Land Acquisition Collector is justified in deducting income-tax on interest payable to landholders under section 194A of the Act. The petitions were dismissed, and the impugned notices were held valid, with the court emphasizing that the income accrued as interest should be spread over the relevant accounting years for assessment purposes.
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1991 (12) TMI 21
Depreciation, Income, Scientific Research Expenditure ... ... ... ... ..... uires to be considered in the light of the circular/instruction. The Tribunal had no opportunity to consider the case in the light of this circular and instruction. Under the circumstances, we are of the view that the question as to whether the assessee is entitled to the benefit of the circular and the instruction also requires to be considered afresh. We, therefore, decline to answer this question also. As regards questions Nos. 3 and 4, the decision of the Tribunal is L) based on the facts found by the Tribunal. The findings, it cannot be said, are perverse because they are based on materials. If that be the position, these questions must be said to be questions of fact. In other words, these questions in fact do not arise for consideration. The questions are, accordingly, answered in favour of the Revenue. A copy of the judgment under the seal of this court and the signature of the Registrar will be forwarded to the Income-tax Appellate Tribunal, Cochin Bench, forthwith.
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1991 (12) TMI 20
Issues involved: Prosecution under section 278B of the Income-tax Act, 1961 for failure to deduct income tax at source and contravention of section 194C.
The judgment involved the prosecution of a company and its directors for an offence under section 278B of the Income-tax Act, 1961 for failure to deduct income tax at source as required by section 194C. The complaint alleged that the company got contract work done without deducting income tax and depositing it in the Government account. The Chief Judicial Magistrate initially discharged all accused, but the Additional Sessions Judge set aside the order and remanded the case for further inquiry against the company and its directors. The challenge was against the order of the Additional Sessions Judge.
The legal provisions under section 194C of the Act require deductions to be made from payments to contractors and sub-contractors. The definition of "person responsible for payment" under section 204 is crucial, as it includes the payer or the company itself as the principal officer. The absence of appointment of a principal officer by the Assessing Officer raises questions regarding the liability of directors for the company's default in deducting income tax.
The judgment analyzed the significance of section 276B, which penalizes failure to deduct or pay tax without reasonable cause or excuse. The prosecution needed to establish the absence of reasonable cause for the default, and the burden of proof shifted to the accused to show reasonable cause. The judgment highlighted the importance of proving the lack of reasonable cause for the offence under section 276B.
The judgment also discussed relevant case laws such as Smt. Kamla Vati v. CIT and Balakrishnan Managing Director, Terelac Furnaces Pvt. Ltd. to emphasize the importance of mens rea and reasonable cause in tax-related offences. Ultimately, the court quashed the impugned orders of the Additional Sessions Judge and accepted all the criminal miscellaneous petitions, stating that the prosecution against the directors was not valid without the appointment of a principal officer by the Assessing Officer.
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1991 (12) TMI 19
Company, Surtax ... ... ... ... ..... even though the assessee had failed to claim the exemption. The Supreme Court observed that it found no basis for the assumption in the statement of case drawn up by the Tribunal. As we have mentioned, in the statement of case, the Tribunal has said that the Commissioner had held, that the debentures represented borrowings from various financial institutions they were borrowed for the creation of a capital asset in India and the redemption of the loans was to be within a period of not less than seven years. The Tribunal proceeded upon this finding of fact and, agreeing with the Commissioner, held that the claim of the assessee tinder rule 1(v) was acceptable. In the circumstances, we do not think that the matter requires to be remanded to the Income-tax Officer to enable him to consider whether the requirements of rule 1(v) have been met. In the result, the question posed to us is answered in the affirmative and in favour of the assessee. There shall be no order as to costs.
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1991 (12) TMI 18
Unexplained Asset ... ... ... ... ..... earch. It is seen from the order of the Tribunal that the assessee had satisfactorily explained that the jewellery belonged to her mother who died in 1979 and that they had been kept with the brother of the assessee till such time as they were handed over to her and the omission on the part of the assessee to include the value of the jewellery in her wealth tax returns was only on account of its custody with the brother of the assessee. Therefore, according to the Tribunal, nothing turned on the omission on the part of the mother of the assessee to mention it in her will. The Tribunal, on the facts and circumstances of the case, had arrived at the conclusion that the explanation of the assessee is reasonable and acceptable and that, therefore, there was no justification for the addition of Rs. 91,950 under section 69A of the Income-tax Act. We are satisfied that no referable question of law arises out of the order of the Tribunal. The tax case petition is dismissed. No costs.
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1991 (12) TMI 17
Export Market Development Allowance, Weighted Deduction ... ... ... ... ..... eduction under section 35B of the Act on (i) Transport charges Rs. 24,232, (ii) Insurance Rs. 12,827, and (iii) Shipping and forwarding charges Rs. 39,638 ? The expenditure which the assessee has incurred would fall under sub-clause (iii) of section 35B(1)(b) since this expenditure is in connection with distribution or supply of the goods exported. The said provision, however, makes it clear that expenditure incurred in India or the expenditure incurred on the carriage of the goods exported to their destination outside India or on the insurance of such goods while in transit would not qualify for weighted deduction. In view of this clear position, the assessee s claim cannot be sustained. In our opinion, the Tribunal and the taxing authorities were right in rejecting the assessee s claim. In the result, the question, which has been referred to us for our opinion 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 16
Supreme Court ... ... ... ... ..... UD(1) of the Act specifically states that no order for the purchase by the Central Government shall be made after the expiration of a period of two months from the end of the month in which the abovesaid statement was received by the appropriate authority. Even taking into account the statement in Form No. 37-1 that was submitted for the second time on July 23, 1990, the said period of two months expired by September 22, 1990, itself. The writ petition was filed only subsequently in October, 1990. If at least the writ petition was filed prior to the expiry of the said period and this court had granted stay of further proceedings within the said two months period, it can be argued that further time should be granted by the court when it disposes of the writ petition. But, that is not the case here. Therefore, this last argument also cannot be entertained. In the result, the writ appeal is dismissed. However, in the circumstances of the case, there will be no order as to costs.
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1991 (12) TMI 15
Estate Duty, Gift ... ... ... ... ..... er on, on the dissolution of the firm, he had taken over all the assets and liabilities of the erstwhile firm of K.V.G.S. and Co. and had received the rents therefrom and there was thus no exclusion of the deceased, as a donor, by the settlees. We, therefore, agree with the conclusion of the Tribunal and answer the second question referred to us in the affirmative and against the accountable person. Regarding the third question, in view of the answer to the second question, it would follow that the value of the agricultural lands settled in favour of Sri P.S. Srinivasa Iyer, father-in-law of the deceased, who was one of the five settlees from the deceased and who died on June 2, 1967, would be includible in the principal value of the estate of the deceased and not in that of late P.S. Srinivasa Iyer. We, therefore, answer the third question in the affirmative and in favour of the Controller of Estate Duty. The parties are directed to bear their own costs in these references.
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1991 (12) TMI 14
Rent Control, Tenanted Property, Wealth Tax ... ... ... ... ..... d that the Valuation Officer would have to estimate the value in conformity with rule 1BB. In our view, rule 1BB is as much binding on the Departmental Valuation Officer acting under section 16A as it is on the Wealth-tax Officer. There is no diminution in the authoritative value of the rule simply by reason of the valuation of an asset being referred to the Valuation Officer. Because of rent control, the tenanted property cannot be valued otherwise than by the yield method; the Valuation Officer cannot depart from the said principle. It is not within the authority of the Valuation Officer to ignore the decisions of High Courts. It is not that, by virtue of the matter being referred to him, the Valuation Officer can sit in appeal over such decisions of High Courts. This view has been taken earlier by this court in Aditya Narain Roy v. CWT 1990 183 ITR 175 (Cal). We, therefore, answer the question in the affirmative and in favour of the assessee. SHYAMAL KUMAR SEN J. I agree.
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1991 (12) TMI 13
Business Expenditure ... ... ... ... ..... ITR 267, held that the Commissioner of Income-tax (Appeals) was perfectly justified in allowing the excise duty liabilities for the assessment years in question. The Tribunal confirmed the order of the Commissioner of Income-tax (Appeals). It is this order of the Tribunal which gives rise to the proposed common question of law. It is not in dispute that this question is now concluded by the decision of this court in the case of CIT v. Century Enka Ltd. 1981 130 ITR 267. As a matter of fact, a similar question regarding deductibility of excise duty where the assessee challenged the levy of such duty came up for consideration before this court in 1. T. Reference No. 28 of 1991 in the case of CIT v. India Foils Ltd. 1993 200 ITR 259, where the judgment was delivered on November 28, 1991. Following the aforesaid decisions, we answer the question in this reference in the affirmative and in favour of the assessee. There will be no order as to costs. SHYAMAL KUMAR SEN J. -I agree.
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1991 (12) TMI 12
New Industrial Undertaking ... ... ... ... ..... fice and the amount sent to the branch unit. On the other hand, in the present case, the Tribunal has found that, out of the funds borrowed by the assessee, a sum of Rs. 7,16,672 was transferred to the distillery. Hence, the amount borrowed by the head office has direct nexus to the amount sent to the branch. Shri Gulati then also relied on CIT v. Kamani Engineering Corporation Ltd. 1986 161 ITR 473 (Bom). This authority merely reiterates the principle laid down in the case of Indian Oil Corporation Ltd. v. S. Rajagopalan, ITO 1973 92 ITR 241 (Bom) which has already been discussed above. The circular of the Board is also merely a reiteration of the principle laid down in the case of Indian Oil Corporation Ltd. v. S. Rajagopalan, ITO 1973 92 ITR 241 (Bom). For the reasons mentioned above, we answer the question referred for our opinion in the negative, i.e., against the assessee and in favour o the Revenue. The Revenue will be entitled to its costs which we assess at Rs. 250.
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1991 (12) TMI 11
... ... ... ... ..... hat the assessee had reasonable and sufficient cause for non-filing of the return up to December 31, 1976, in respect of the assessment year 1974-75, but that thereafter, there was no such excuse available for the assessee. Admittedly, the return had been filed in February, 1977, and, under those circumstances, the Tribunal was quite justified in restricting the levy of penalty for a period of one month. The conclusion so arrived at by the Tribunal is essentially one of fact and no referable question of law can be stated to arise in respect of that. With reference to the second question, we find, on a careful consideration of the order of the Tribunal, that it does not arise out of its order. We, therefore, dismiss this petition. No costs.
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1991 (12) TMI 10
Business Expenditure, Disallowance, Income From Undisclosed Sources ... ... ... ... ..... ons of rule 6B of the Income-tax Rules, 1962 ? In our opinion, questions Nos. 1, 3 and 5 are questions of fact. As far as questions Nos. 1 and 3 are concerned, similar questions were sought to be raised in 1. T. C. No. 2 of 1988, but the said I. T. C. was dismissed by this court. As far as question No. 5 is concerned, the finding of the Income-tax Officer was that this expense of Rs. 7,012 is with regard to the giving of items like sarees, etc., to persons who visit the factory under the direction of the management. Rule 6B applies only in the case of presentation of articles by way of advertisement. It was not claimed by the assessee that items which were presented were by way of advertisement. This being so, rule 6B does not apply and the Tribunal s finding was, therefore, correct. Question No. 5 also need not be referred. For the aforesaid reasons, we direct the Tribunal to refer questions Nos. 2 and 4 to this court as the same are questions of law. No orders as to costs.
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1991 (12) TMI 9
Export Market Development Allowance, Weighted Deduction ... ... ... ... ..... er freight are concerned, they are part of transport expenses and such expenses are not allowable under section 35B of the Act as held by us today (December 5, 1991) in almost an Identical matter (Income-tax Reference No. 95 of 1982) Isabgul Export Corporation v. CIT 1993 200 ITR 797. As regards expenditure relating to octroi expenses, it also does not fall in any one of the clauses of section 35B of the Act. Therefore, the assessee is not entitled to claim any such allowance under section 35B of the Act, Thus, considering the facts and circumstances of the case, we are of the opinion that the assessee is not entitled to claim by way of weighted deduction on any of the aforesaid items of expenditure under section 35B of the Act and the Tribunal was justified in rejecting the claim of the assessee on the aforesaid items of expenditure. In the result, the question 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 8
Aggregation Under Estate Duty, Deductions In Estate Duty, Estate Duty, Mitakshara HUF, Provision
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1991 (12) TMI 7
Business Expenditure, Expenditure On Advertisement ... ... ... ... ..... to proportion the payment to capacity to pay and thus to arrive in the end at a more genuine equality. Having regard to the guidelines prescribed by the apex court, I do not think that any of the complaints raised by the petitioner can be upheld. It appears to me that the impugned sub-sections only purport to group all advertisements under one head and have prescribed a uniform allowance or disallowance. The petitioner cannot attack the validity only from the angle of the products manufactured by him and on the ground that the sub-section benefits certain other manufacturers while it does not benefit him. It would not be proper to invalidate a provision of law in the manner sought to be urged by the petitioner. Further, the Karnataka High Court has upheld the validity of the very same sub-section and I am in agreement with the views expressed by the Karnataka High Court. Consequently, the writ petition fails and it is dismissed. There will, however, be no order as to costs.
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1991 (12) TMI 6
Export Market Development Allowance, Weighted Deduction ... ... ... ... ..... cision of this court delivered today, i.e., December 5, 1991, in the case of Isabgul Export Corporation v. CIT 1993 200 ITR 797, in Income-tax Reference No. 95 of 1982. In so far as expenditure relating to item No. 7, i.e., membership fees, is concerned, we may mention that it does not fall in any of the subclauses of section 35B(1)(b) of the Act. As regards item No. 8 as aforesaid, relating to bank commission, we may say that it is also not allowable for weighted deduction and it is also covered by our decision rendered today in Income-tax Reference No. 94 of 1982 (Isabgul Export Corporation v. CIT 1994 205 ITR 227 (Guj)). In the above facts and circumstances, we are of the clear opinion that the Tribunal was justified in disallowing the claims made by the assessee on the aforesaid items of expenditure. In the result, the reference is required to be answered in favour of the Revenue and against the assessee. The reference is answered, accordingly, with no order as to costs.
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1991 (12) TMI 5
Export Market Development Allowance, Weighted Deduction ... ... ... ... ..... India in connection with the supply or distribution of goods would not be, admissible for weighted deduction under sub-clause (iii) of section 35B(1)(b). The Tribunal was, therefore, right in reversing the view of the Commissioner and holding that the said expenditure did not qualify for weighted deduction under section 35B. So far as expenditure of Rs. 88,855 incurred for payment of interest and bank charges is concerned, it does not fall under any of the subclauses of clause (b) of section 35B(1). The assessee would be entitled to weighted deduction under section 35B(1)(a) only if the expenditure is of the nature referred to in clause (b) of section 35B(1). The Tribunal was therefore, right in holding that the said expenditure also did not qualify for weighted deduction under section 35B. In the result, we answer the question which has 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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