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1991 (11) TMI 23
... ... ... ... ..... e) failed to appear before him pursuant to the notice issued under section 143(2). The service was effected on the applicant by resorting to affixation. The dispute was carried in appeal to the Appellate Assistant Commissioner, who dismissed the appeal. Then the dispute was further carried to the Tribunal which too decided the appeal ex parte. None of the questions raised by the assessee in this application relates to the merits of the case. All the questions set out in the application raise the controversy whether or not service was properly effected. Nothing has been said that there was violation of any provision of the law while resorting to service by affixation. The Tribunal recorded the finding of fact that service was properly effected on the assessee by affixation and, when he failed to appear, the ex parte order was rightly passed by the Income-tax Officer. This is a finding of fact. In our opinion, no question of law arises. Therefore, the application is dismissed.
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1991 (11) TMI 22
... ... ... ... ..... inanciers was a separate, independent and genuine entity, it was legally correct for the Tribunal to say that the payment made to the said entity on the credit balance as undisputedly appearing in their account to the extent of Rs. 51,920 represented payments made to the partners and as such the sum of Rs. 51,920 was disallowable under section 40(b) of the Income-tax Act, 1961 ? The application is, accordingly, allowed.
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1991 (11) TMI 21
... ... ... ... ..... t in confirming the order of the Deputy Commissioner (Appeals ) on the point of value of land at the rate of Rs. 2.80 per square yard ? The second question framed in the application stresses only one aspect of the first question. It is hence not necessary to call for any statement on that question. We, accordingly, direct the Income-tax Appellate Tribunal to state the case and refer the aforesaid question for our opinion. There will be no order as to costs.
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1991 (11) TMI 20
... ... ... ... ..... he construction of the house by the two brothers. A certain diary was seized in which some entries relating to the construction of the house were found. On the basis of those entries, a higher investment was assessed by the Department, but the Tribunal accepted the case of the assessee considering the report of the approved valuer, the entries made in the diary seized by the Department and other relevant materials. From these, it appears that no question of law arises and a pure finding of fact was recorded by the Tribunal regarding the investment made towards the construction of the house. Therefore, the application fails and is dismissed.
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1991 (11) TMI 19
Income From Undisclosed Sources ... ... ... ... ..... d circumstances, the Commissioner has held that the assessee had completely failed to disclose the actual amount of expenditure incurred for the transportation of coal during the relevant assessment years 1980-81 and 1981-82. He has further observed that this was done deliberately to conceal the actual profit earned by the assessee. This finding has not been demonstrated to be vitiated by any error much less one apparent on the face of the record. There is no merit in this petition and the same is dismissed summarily.
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1991 (11) TMI 18
Issues involved: Dismissal of appeal by Income-tax Appellate Tribunal without affording proper opportunity for hearing; Jurisdiction of the Tribunal to rehear the appeal.
In the case, the petitioner, a partnership firm engaged in the business of purchase and sale of arrack and Indian-made foreign liquor, filed an appeal before the Commissioner of Income-tax (Appeals) against an assessment order for the year 1983-84. The Tribunal dismissed the appeal ex parte after the petitioner's advocate's junior's request for adjournment was rejected. The Tribunal's decision adversely affected the firm and its partners, breaching the principle of "audi alteram partem." The High Court held that the Tribunal's action was in violation of natural justice principles as the firm was not given an effective opportunity to present its case.
Regarding the jurisdiction of the Tribunal to rehear the appeal, the High Court referred to a previous case where it was established that setting aside an ex parte order to provide an opportunity for the aggrieved party to be heard is not the same as a review. The Court emphasized that the power to rehear an appeal is inherent in the Tribunal and not a review of its earlier decision. Therefore, the High Court quashed the orders and directed the Tribunal to restore the appeal and dispose of it afresh, ensuring the appellant a reasonable opportunity to be heard. Depending on the result of the appeal, fresh assessment orders were to be passed on the share income of the partners of the firm by the respective Income-tax Officers.
The High Court concluded by disposing of the original petitions in the mentioned terms and directed the issuance of a copy of the judgment to the parties.
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1991 (11) TMI 17
Deduction For Payment From Foreign Government, Deduction U/S 80-O ... ... ... ... ..... sk. The imparting of training to the Nigerian personnel by the assessee would seem to us more appropriately to be the imparting to them of information concerning industrial knowledge and skill. The information that is conveyed by the assessee to the Nigerian personnel is so conveyed for use in Nigeria in the manufacture and sale of products under the agreement. In our view, therefore, the provisions of section 80-0 in this behalf are complied with. In the result, the appeal by the Revenue (W. A. No. 2137 of 1990 ) fails and is dismissed. The appeal by the assessee (W. A. No. 2082 of 1990 ) succeeds. The judgment and order under appeal, in so far as it holds that the Board was right in refusing to grant approval for the deduction under section 80-O of the fees received by the assessee under the agreement for the training of Nigerian personnel in India, is set aside. Consequently, the petition is made absolute as prayed. Orders on the appeals accordingly. No orders as to costs.
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1991 (11) TMI 16
Firm Registration ... ... ... ... ..... alid partnership has not come into existence. Shri N. P. Gupta, learned counsel for the assessee, has contended that the firm has operated for about three months in this year and thereafter she has contributed Rs. 70,000 in the subsequent year. Mr. Gupta has submitted that, in the present case, the question of interpretation of the clauses of the partnership deed and the provisions of the Income-tax Act is required in the sense that, if a partner has not contributed any capital but has undertaken liability for losses, still whether it could be said that a genuine partnership has come into existence or not. The assessment of partners was completed in respect of their share income from the firm. We are of the opinion that a question of law does arise and, therefore, we direct the Income-tax Appellate Tribunal to prepare the statement of case and refer the above questions for decision to this court within four months from the date of receipt of this order. No order as to costs.
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1991 (11) TMI 15
Business Expenditure, Liability For Excise Duty ... ... ... ... ..... deduction for the assessment year 1975-76. It is, therefore, not correct to contend that since the goods were not manufactured during the relevant previous year, the assessee was not entitled to the deduction of excise duty. Since the excise duty became real and enforceable inasmuch as the goods were cleared during the relevant previous year and the show cause-cum-demand notice was also issued to the assessee during the same relevant previous year, although it may be that the assessee disputed the duty when the goods were manufactured or produced and, accordingly, moved the High Court, and the goods became non-dutiable with effect from January 5, 1981, the demand, although earlier disputed, became real and enforceable and the Tribunal was right in allowing the deduction in the previous year in question. For the reasons aforesaid, we answer the reframed question 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 (11) TMI 14
Bad Debt, Business Income ... ... ... ... ..... of Rs. 74,633 out of advances received by the assessee-company during the course of its business received in the earlier years and credited in the profit and loss account in the relevant previous year is the income of the assessee-company. In view of the above, we direct the Income-tax Appellate Tribunal to refer the following two questions of law which arise out of the order of the Tribunal (1) Whether, on the facts and in the circumstances of the case, the Tribunal was justified in law in holding that the debts aggregating to Rs. 8,04,199 had become bad during the relevant previous year and the assessee had validly written them off ? (2) Whether the balance of Rs. 74,633 out of advances received by the assessee-company during the course of its business received in the earlier years and credited in the profit and loss account in the relevant previous year is the income of the assessee-company ? The reference application is, accordingly, partly allowed. No order as to costs.
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1991 (11) TMI 13
... ... ... ... ..... , to be clubbed along with the income of the respective assessees in the light of the decision reported in Chaturbhujdas Karnani v. CIT 1958 34 ITR 553 (Bom). In the light of the above discussion, I agree with the judgment of my learned brother, Kochu Thommen J. (as he then was) and answer question No. 3 in the affirmative, in favour of the Revenue and against the assessee. In the light of the answer to question No. 3, I agree that it is unnecessary to answer questions Nos. 1 and 2. Therefore, I decline to answer questions Nos. 1 and 2. In the result, according to the majority view, question No. 3 is answered in the affirmative, in favour of the Revenue and against the assessee, leaving questions Nos. 1 and 2 unanswered as, in the light of the answer to question No. 3, answer to questions Nos. 1 and 2 became unnecessary. A copy of this judgment under the seal of this court and the signature of the Registrar will be forwarded to the Income-tax Appellate Tribunal, Cochin Bench.
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1991 (11) TMI 12
Company, Other Reserves, Share Premium, Surtax ... ... ... ... ..... um Oil Co. 1966 59 ITR 685, at page 694, the Supreme Court observed The High Court was, therefore, right in holding that the account Capital surplus brought in in the balance-sheet represents premium realised from the issue of its shares within the meaning of rule 3, or in the alternative, represents reserves not allowed in computing the profits.. . The alternative finding of the Supreme Court supports the view taken by the Tribunal. We are, therefore, of the opinion that the share premium representing the difference between the book value and the par value arising on amalgamation of a few other companies with the assessee-company would be a reserve as shown in item No. (3) under the head Reserves and Surplus in Part I of the Sixth Schedule to the Companies Act and, therefore, it was not hit by Explanation 2 to rule 2. We, accordingly, answer both the questions 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 (11) TMI 11
Double Taxation Agreement Between India And U.K., Renewal ... ... ... ... ..... as been specifically made clear that the discharged certificate of deposit will not be accepted for renewal unless an application in the prescribed form of the Housing Development Finance Corporation filled in properly and completed in all respects is submitted along with the old certificate of deposit. Thus it is only on the fresh application that a new contract of deposit is created. In our opinion, on a true and proper interpretation of article 12(2) of the said convention when the deposits have been renewed after the coming into force of the aforesaid convention, such renewal amounted to a fresh deposit and, therefore, the deposit was first created after the coming into effect of the Convention of Double Taxation Avoidance Agreement and accordingly the provisions of article 12(2) will apply. For the reasons aforesaid, 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 (11) TMI 10
Business Expenditure, Depreciation, Extra Shift Depreciation Allowance, Foreign Exchange ... ... ... ... ..... sion of this court in the case of CIT v. Motor Industries Co. Ltd. 1988 173 ITR 374. In so far as the question relates to depreciation for technical documentation is concerned, it is covered by the judgment of the Supreme Court in Scientific Engineering House P. Ltd. v. CIT 1986 157 ITR 86. Having regard to these judgments, the second question, as it is agreed, is to be answered in the affirmative and in favour of the assessee and it is so answered. The third question to be answered reads thus Whether, on the facts and in the circumstances of the case, the assessee was entitled to depreciation on the extra expenditure incurred on account of fluctuation in foreign exchange rate which was capitalised? This question, it is agreed, is covered by the judgment of this court in the assessee s own case, Hindustan Machine Tools Ltd. (No. 3) v. CIT 1989 175 ITR 220, and, following that judgment, it has to be answered in the affirmative and in favour of the assessee. It is so answered.
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1991 (11) TMI 9
Business Expenditure, Company ... ... ... ... ..... e strategic target may not be, however, the practical aim in a year or years. Further, profit is a perpetual variable, an immeasurable uncertainty profit or loss depends on various factors. There may be huge profit in one year and similarly a huge loss in another. No part of the remuneration or salary can be disallowed merely on the ground that the company has suffered a huge loss in an accounting year. It cannot be said that the provisions of section 40(c) authorise the taxing authorities to vary the remuneration With every fluctuation of profit to which profit elementally is prone to. Having regard to all the facts and circumstances of this case, we are of the view that the Tribunal s findings that the salaries paid to the four directors were excessive are perverse. We accordingly, answer questions Nos. 1, 3 and 4 in the negative and question No. 2 in the affirmative and all in favour of the assessee. There will be no order as to costs. BHAGABATI PROSAD BANERJEE J.-I agree.
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1991 (11) TMI 8
Business Expenditure, Firm, Interest Paid By Firm To Partner ... ... ... ... ..... which a stranger could have done. If a joint Hindu family, through the agency of its karta, can enter into contractual relations either with a stranger or even with an individual coparcenar in respect of his separate property and also with a firm, there cannot be any reason why a karta, although a partner of a firm representing his undivided family cannot invest his separate property in that firm and earn interest therefrom which he could have easily done by investing it in another firm where he is not a partner. For the reasons aforesaid, the first question in this reference is answered in the affirmative and in favour of the assessee. The second question is answered by saying that Explanation 2 to section 40(b) is clarificatory in nature and will govern the assessment year in question and as such the Tribunal was justified in deleting the addition of interest paid to the partners in their individual capacity. There will be no order as to costs. SHYAMAL KUMAR SEN J.-I agree.
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1991 (11) TMI 7
Reference To Valuation Officer, Wealth Tax ... ... ... ... ..... cation fails and is dismissed. The copy of the affidavit in opposition is not traceable in the records before me and accordingly a photostat copy handed over by Mr. Shome shall be countersigned by the court officer and kept on the record. It is made clear that whatever has been said in this matter has been said only with regard to the propriety of the exercise of jurisdiction by the Wealth-tax Officer in the matter of reference of the valuation to the Valuation Officer. The Valuation Officer shall be completely free to accept or not to accept the report of Dr. Ashoke Nain and the Valuation Officer shall deal with all other contentions of the assessee as well as of the Department as may be put forward by them and the valuation matter shall be thus disposed of in accordance with law and all the points in that regard are kept open. A prayer for stay has been made and opposed. I do not think that this case calls for a stay as only the process of assessment is now being made free.
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1991 (11) TMI 6
Issues Involved: 1. Deduction of premium payable on redemption of debentures. 2. Capital expenditure for increase in authorized capital. 3. Disallowance of expenditure on repairs and insurance of cars u/s 37(3A).
Summary:
Issue 1: Deduction of Premium Payable on Redemption of Debentures The primary question was whether the premium payable at the time of redemption of debentures is an allowable revenue expenditure and if so, whether the whole of it or only one-seventh thereof can be allowed as a deduction in the assessment year in question. The Tribunal held that the expenditure should be allowed as a revenue deduction over the period of the debentures, i.e., seven years, and allowed one-seventh in the assessment year involved. However, the High Court concluded that the liability to pay the premium arises only at the expiry of the seventh year from the date of allotment and is contingent upon the debentures not being repurchased by the company. Therefore, no portion of the debenture premium is deductible in the year under reference. The court emphasized that in the mercantile system of accounting, the entire revenue expenditure should be allowed in the year in which the liability is incurred, not spread over multiple years.
Issue 2: Capital Expenditure for Increase in Authorized Capital The assessee paid Rs. 59,940 as a fee for increasing its authorized capital, which was disallowed as capital expenditure by the Inspecting Assistant Commissioner (Assessment) and upheld by the Commissioner of Income-tax (Appeals) and the Tribunal. The High Court confirmed this decision, citing precedents that expenses incurred in connection with the issue of additional equity shares or preference shares are capital expenditures and not deductible as revenue expenditures.
Issue 3: Disallowance of Expenditure on Repairs and Insurance of Cars u/s 37(3A) The assessee contended that the expenditure on repairs and insurance of cars should not be considered for disallowance u/s 37(3A). The Tribunal upheld the disallowance, but the High Court disagreed, stating that such expenditures fall under section 31, not section 37. Section 37(3A) applies only to expenditures covered under section 37, not those under sections 30 to 36. Therefore, the expenditure on repairs and insurance of motor cars cannot be disallowed u/s 37(3A). The High Court answered this question in the negative and in favor of the assessee.
Conclusion: - No portion of the debenture premium is deductible in the assessment year in question. - The fee for increasing authorized capital is a capital expenditure and not deductible. - Expenditure on repairs and insurance of cars is not subject to disallowance u/s 37(3A) and is allowable under section 31.
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1991 (11) TMI 5
Assessment Year, Income Tax Act, Question Of Law, Set Off, Unabsorbed Depreciation ... ... ... ... ..... matter back to the Income-tax Officer with a direction to examine the issue in the light of the aforesaid decision. On a second appeal preferred by the Department against the remand order, the Tribunal came to the conclusion that there was no alternative to the Income-tax Officer than to allow the unabsorbed depreciation. The appeal of the Department was unsuccessful. The Department filed an application under section 256(1) on the ground that the Department had not accepted the correctness of the said decision and that a special leave petition had been filed before the Supreme Court against the said judgment. We have heard Shri Chandurkar, learned standing counsel for the Department. He fairly brought to our notice a recent decision of the Supreme Court in the case of Garden Silk Weaving Factory v. CIT 1991 189 ITR 512 recording approval to the aforesaid decision. Under the circumstances, we see no reason to entertain this application. It is dismissed without issuing notice.
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1991 (11) TMI 4
Gift Tax Act, Quoted Equity Shares ... ... ... ... ..... fresh assessment of the value of the shares on the basis of the yield method. The Commissioner of Gift-tax ultimately accepted the valuation of the assessee adopted on the yield method. Against that order, a second appeal was filed by the Department which was dismissed on the ground that the point stood directly concluded by the Bombay High Court in the case of Seth Hemant Bhagubhai Mafatlal v. N. Rama Iyer, GTO 1983 144 ITR 737, which, to some extent, is based upon the decision of the Supreme Court in CGT v. Smt. Kusumben D. Mahadevia 1980 122 ITR 38. In view of the undisputed position that the companies were going concerns not ripe for liquidation and there were no exceptional circumstances about them, the ratio of the Bombay High Court decision clearly applied. Under the circumstances, rightly has the Tribunal refused to make a reference on the ground of existence of the above binding decisions. These applications are, therefore, dismissed summarily without issuing rule.
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