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Showing 61 to 80 of 103 Records
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1971 (3) TMI 43
Whether it was legal for the Tribunal to work out unaccounted-for stocks pledged with the bank as on 8th April, 1957, with the assessee's stocks as obtaining on 8th April, 1957 - discrepancy between the stock book and goods pledged with bank - whether only the stock on last day of the accounting year should be considered in determination of suppressed income - fact that assessee itself had tabulated its stock as on next day (8th April, 1957) after the accounting year was immaterial for determining the suppressed profit for the relevant accounting period - question referred to us in the negative and in favour of the assessee
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1971 (3) TMI 42
Return of income for the assessment year 1961-62 was filed beyond the time limits and the assessment was completed after 1st April, 1962 - section 271 of the 1961 Act will apply to the present case because the assessment was completed after 1st of April,1962 - There is no warrant for holding that part of the penalty would be under the 1922 Act and part under the 1961 Act - provision of section 271 of the Act of 1961 will apply mutatis mutandis to proceedings relating to penalty initiated in accordance with section 297(2)(g) of that Act
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1971 (3) TMI 41
Issues Involved:
1. Assessability of interest on a mortgage in the assessment year 1962-63.
2. Basis of taxation (accrual vs. receipt) for the interest income.
3. Applicability of the rule of estoppel in changing the method of assessment.
4. Provisions under section 13 of the Indian Income-tax Act, 1922, and section 145 of the Income-tax Act, 1961.
5. Avoidance of double taxation.
Detailed Analysis:
1. Assessability of Interest on a Mortgage in the Assessment Year 1962-63:
The primary issue was whether the interest amount of Rs. 32,273 was assessable in the assessment year 1962-63. The Hindu undivided family (HUF) of Rattan Chand Dhawan had advanced money on a mortgage in 1944, accruing interest at 5% per annum. This interest was not recorded in any regular books of account and was only assessed for income-tax in the years 1959-60, 1960-61, and 1961-62 on an accrual basis. The Tribunal had directed that the entire amount of Rs. 40,529 should be assessed on a cash basis in the year of receipt, excluding Rs. 8,250 already taxed on an accrual basis in previous years.
2. Basis of Taxation (Accrual vs. Receipt) for the Interest Income:
The assessee contended that the interest should be taxed on an accrual basis, as it had been in the previous years. The Tribunal, however, decided that the most equitable, reasonable, and certain method of assessment in this type of case was the cash basis, citing simplicity and certainty. The Tribunal's decision was influenced by the fact that the assessee did not maintain any regular books of account.
3. Applicability of the Rule of Estoppel in Changing the Method of Assessment:
The assessee argued that the department could not switch from the accrual basis to the receipt basis after having taxed the interest on an accrual basis in prior years. The court referred to the decision in Commissioner of Income-tax v. Jug Sah Muni Lal Sah, where it was held that once a method of taxation is adopted, the department cannot change it arbitrarily. The court held that the rule laid down in Jug Sah Muni Lal Sah's case applied, and the department could not switch to a receipt basis to cover its own default.
4. Provisions Under Section 13 of the Indian Income-tax Act, 1922, and Section 145 of the Income-tax Act, 1961:
The court compared section 13 of the 1922 Act and section 145 of the 1961 Act. Both sections allow the Income-tax Officer to determine the method of accounting if the method employed by the assessee does not properly reflect income. However, the court noted that the Income-tax Officer did not proceed under section 144 of the 1961 Act, which would allow for an assessment if the accounts were not correct or complete. Instead, the officer merely changed the method of accounting, which was deemed inappropriate.
5. Avoidance of Double Taxation:
The Tribunal had mentioned an "unwritten law of taxation" that no income could be doubly taxed. The court pointed out that section 5, Explanation 2, of the 1961 Act explicitly prevents double taxation by stating that income already included on an accrual basis cannot be taxed again on a receipt basis.
Conclusion:
The court concluded that the interest should not be taxed on a receipt basis in the assessment year 1962-63, as it had already been taxed on an accrual basis in prior years. The question referred to the court was answered in the negative, favoring the assessee and against the department. The court also noted the difficult nature of the question and decided that there would be no order as to costs.
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1971 (3) TMI 40
Whether interest earned by a minor on a sum deposited by him with a firm to the benefits of which he has been admitted and in which his father is a partner, is liable to be included in the income of his father by virtue of section 64(ii) of the Income-tax Act, 1961 – question is answered in the affirmative, that is, in favour of the department and against the assessee
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1971 (3) TMI 39
Assessee urged that there was no ground for applying the proviso to section 13 inasmuch as the records maintained by the assessee were complete and free from defect, and there was no justification for making any addition either for shortage of yarn or for shortage of cloth - hold that there was no material on the record for concluding that there was an undisclosed shortage in the production of yarn, but in regard to the production of cloth there was material on the record for not accepting the shortage disclosed by the assessee, and we further hold that in estimating the shortage in the production of cloth the Tribunal adopted a reasonable basis
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1971 (3) TMI 38
Whether Tribunal was bound to hold that the business at Lahore and Barabanki did constitute the same business so as to justify the allowance of Rs. 40,000 as interest - Tribunal has specifically held that the activities at Barabanki and Lahore were quite diverse and distinct and there was no interconnection, interlacing or interdependence between the two businesses - Since the businesses were held to be separate and there was no interconnection, the interest paid on liability of the other business which was transferred to the second business could not be claimed as a deduction
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1971 (3) TMI 37
Issues Involved:
1. Grounds for reopening the assessment under Section 147 of the Income-tax Act, 1961.
2. Proper service of notice under Section 148 of the Income-tax Act, 1961, within the prescribed time.
Issue-Wise Detailed Analysis:
1. Grounds for Reopening the Assessment under Section 147 of the Income-tax Act, 1961:
The petitioner challenged the reopening of the assessment for the year 1947-48, arguing that there were no valid grounds for such action. The reasons for reopening were scrutinized, revealing that the Income-tax Officer had noted several bank transactions and fixed deposits that were not disclosed initially. The firm had obtained large credits from banks against these deposits, which were not traceable to any genuine persons. The Income-tax Officer believed these amounts represented undisclosed income, justifying the reopening under Section 147(a). The court held that there were reasonable grounds for the Income-tax Officer to believe there was non-disclosure of primary facts affecting the assessment. The court emphasized that in a writ petition under Article 226, it is not the sufficiency but the existence of reasonable grounds that is scrutinized. The court cited relevant Supreme Court decisions to support this view and concluded that the reopening was justified, dismissing the petitioner's first contention.
2. Proper Service of Notice under Section 148 of the Income-tax Act, 1961, within the Prescribed Time:
The petitioner contended that the notice under Section 148 was not served properly within the prescribed period, which is a condition precedent for initiating proceedings. The court examined the service attempts made by the Income-tax Department, including personal service attempts and affixation of the notice at the business premises. The court reviewed the reports of the inspector who attempted the service and concluded that reasonable and diligent efforts were made to serve the notice. The court held that the cumulative effect of these attempts constituted proper service in compliance with Order 5, Rule 17 of the Code of Civil Procedure. The court also addressed the argument that the notice was ultimately received by registered post on April 3, 1964, but maintained that service must be within the prescribed time. The court distinguished this case from others where service was deemed improper and concluded that the service was valid. Additionally, the court noted that questions of limitation should generally be decided by the income-tax authorities and not in writ petitions unless undisputed facts clearly show improper service.
Conclusion:
Both contentions raised by the petitioner were dismissed. The court found that there were reasonable grounds for reopening the assessment and that the notice under Section 148 was properly served within the prescribed time. The application was dismissed, the rule nisi discharged, and any interim orders vacated. The court allowed a six-week stay of operation of the order, which would not prevent the respondent from proceeding with penalty actions.
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1971 (3) TMI 36
Issues Involved:
1. Set-off of unabsorbed losses from previous years.
2. Interpretation of amendments to Section 24(2) of the Indian Income-tax Act, 1922.
3. Retrospective application of legislative amendments.
Issue-wise Detailed Analysis:
1. Set-off of Unabsorbed Losses from Previous Years:
The primary issue was whether the assessee was entitled to set off the unabsorbed loss of Rs. 15,50,187 from the assessment year 1950-51 against the business income of the assessment year 1960-61. The Income-tax Officer initially set off the unabsorbed losses of 1956-57 and 1957-58 against the business income but did not consider the loss from 1950-51. The Appellate Assistant Commissioner confirmed that losses could not be carried forward for more than 8 years, as per the amendments.
2. Interpretation of Amendments to Section 24(2) of the Indian Income-tax Act, 1922:
The Tribunal examined the amendments made to Section 24(2) by the Finance Acts of 1955 and 1957. The original provision allowed losses to be carried forward for six years. The Finance Act of 1955 introduced changes, permitting losses from 1949-50 onwards to be carried forward indefinitely, subject to specific restrictions. However, the Finance Act of 1957 amended this, restricting the carry-forward period to 8 years. The Tribunal held that the law applicable to the assessment year 1960-61 was the amended law as it stood on April 1, 1960, which included the 8-year restriction.
3. Retrospective Application of Legislative Amendments:
The Tribunal and the High Court both addressed the issue of whether the amendments had retrospective effect. The Tribunal concluded that the amendments were not retrospective but were applicable to the assessment year 1960-61. The High Court supported this view, citing that the carry-forward and set-off of losses are part of the assessment process, which should be governed by the law as it stands in the assessment year. The Court referenced the decision in Helen Rubber Industries Ltd v. Commissioner of Income-tax, emphasizing that the assessment must be made according to the law of the assessment year, not the year the losses occurred.
The High Court further elaborated on the concept of retrospectivity, noting that a statute is not retrospective merely because it affects existing rights or draws on past events. The Court cited Lord Goddard C.J.'s observations in In re A Solicitor's Clerk, which clarified that a statute enabling future disqualification based on past actions is not retrospective if it does not void past actions or impose penalties for them.
Conclusion:
The High Court concluded that the assessee was not entitled to set off the unabsorbed loss of Rs. 15,50,187 from the assessment year 1950-51 against the business income of the assessment year 1960-61. The amendments introduced by the Finance Act of 1957, restricting the carry-forward of losses to 8 years, were applicable. Therefore, the Tribunal's decision was upheld, and the question was answered in the negative, in favor of the department. The assessee was ordered to pay the costs of the reference.
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1971 (3) TMI 35
"Whether, on the facts and in the circumstances of the case, the Tribunal was right in cancelling the penalty of Rs. 8,732 imposed on the assessee?" - Section 271(1)(i) lays down that the penalty must be computed at a sum equal to two per cent. of the tax for every month during which the default continued, but not exceeding in the aggregate fifty per cent. of the tax. No date has been fixed from which the computation must be effected. The rate of tax has to be applied in respect of the entire period of the default, and it is immaterial that some part of that period falls before April, 1962.
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1971 (3) TMI 34
In the instant case we find that while dividing the properties between the various partners, the arbitrators valued them and after distributing them they made adjustments in the shares by directing the partner receiving property of a higher value to pay actual monetary compensation to the partner receiving property of lower value. In view of the principles laid down in the Supreme Court case mentioned above, it is clear that the actual cost of the oil mill to the assessee should be considered to be Rs. 9,50,000 and not what it was to the original firm, Kishan Lal Matrumal, at the time of its acquisition.
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1971 (3) TMI 33
The Tribunal has found that the department has not succeeded in positively establishing that the assessee had concealed the particulars of its income or deliberately furnished inaccurate particulars thereof. It has observed that the assessments proceeded on the basis of estimates and inferences and that the existence of the income had not been established beyond reasonable doubt. Upon this ground it has found that the provisions of section 28(1)(c) are not attracted - Answered in favor of assessee.
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1971 (3) TMI 32
Issues:
Validity of charitable trust created by settlor and disallowance of interest payment by assessee.
Completion of transfer and delivery of possession by settlor to trustees of the trust.
Analysis:
The judgment pertains to a reference arising from the assessment of a Hindu undivided family for the year 1961-62, involving the creation of a charitable trust by the settlor, Hari Bux Rai, and the disallowance of interest payment by the assessee. The Tribunal focused on the three certainties required for a charitable trust: declaration of trust binding on settlor, setting apart definite property, and statement of trust objects. It was found that while the trust deed was executed and registered, the property was not clearly specified, leading to doubts on divestment of beneficial interest by the settlor. The Tribunal emphasized the insufficiency of cash balance in the firm to cover the trust amount, citing precedent cases like Hanmantram Ramnath v. CIT.
The judgment highlighted the trust deed's specifics, indicating the settlor's intention to create a trust for educational or hospital purposes. Despite the Tribunal's concern over cash availability in the firm, the court referenced various cases affirming valid gifts through book entries, even when cash delivery was not immediate. Notably, the court distinguished the present case from Hanmaniram v. Ramxath, emphasizing the settlor's clear intention to create a valid trust, leading to the conclusion that a valid charitable trust was indeed created by Hari Bux Rai. Consequently, the disallowance of interest payment by the assessee was deemed incorrect.
Regarding the second issue on completion of transfer and delivery of possession to trustees, the court did not provide a specific answer as the assessee did not press for it. The judgment concluded with the assessee being awarded costs and counsel fees, signifying the resolution of the primary issue concerning the validity of the charitable trust and interest disallowance.
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1971 (3) TMI 31
Issues:
Registration of a firm under section 26A of the Indian Income-tax Act, 1922 based on the partnership deed validity and the total number of partners involved.
Analysis:
The case involved a question of whether an assessee-firm, as constituted by a partnership deed dated July 2, 1954, was entitled to registration under section 26A of the Indian Income-tax Act, 1922. The Income-tax Officer initially refused registration, citing that the partnership included more than 20 partners, making it illegal under section 4 of the Indian Companies Act. However, the Appellate Assistant Commissioner overturned this decision, stating that the total number of partners was only 18, making the partnership valid for registration.
Upon further appeal by the Income-tax Officer, the Appellate Tribunal examined the partnership deed and found that all 18 partners had signed the deed in their individual capacity, with no indication of representation for joint Hindu families. The Tribunal noted specific clauses in the deed emphasizing individual capacity and continuity of the partnership despite changes in partners. Relying on the Supreme Court precedent in Agarwal and Co. v. Commissioner of Income-tax, the Tribunal concluded that the partnership agreement did not contravene the law and the registration could not be refused based on the total number of partners.
The Tribunal's decision was upheld by the High Court, emphasizing that the partnership deed clearly outlined the individual capacity of the partners without any representation for joint Hindu families. As only 18 individuals were involved in the partnership, the registration could not be denied on the grounds of illegality. The Court answered the question in favor of the assessee, affirming their entitlement to registration and awarding costs.
In conclusion, the judgment highlighted the importance of the partnership deed in determining the validity of a firm for registration under the Income-tax Act. By focusing on the individual capacity of partners as specified in the deed, the Court upheld the legality of the partnership and granted registration to the assessee firm.
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1971 (3) TMI 30
Issues:
1. Whether the loss suffered by the assessee was speculation loss?
2. If the loss was speculation loss, whether it could be set off against profits earned in non-speculation business?
Analysis:
The High Court of Allahabad heard a case where the Income-tax Appellate Tribunal referred questions of law at the instance of the Commissioner of Income-tax, Lucknow. The first question was whether the loss of Rs. 38,026 suffered by the assessee was speculation loss, and the second question was regarding the set off of this loss against profits earned in non-speculation business. The assessee dealt in oil and oil-cakes, purchasing in bulk and selling wholesale and partly retail. Due to unfulfilled contracts, a loss of Rs. 38,026 arose, claimed by the assessee as liquidated damages. The Income-tax Officer and the Appellate Assistant Commissioner denied setting off these losses against non-speculation business profits. However, the Tribunal deemed the losses as speculation losses, citing a previous court decision. The department then sought the court's opinion on these questions.
Regarding the first issue, the court found that the transaction leading to the loss was settled without actual delivery, falling under speculative transactions as per Explanation 2 to section 24(1) of the Income-tax Act, 1922. Therefore, the loss incurred by the assessee was classified as speculation loss. Moving on to the second issue, the court referred to a Supreme Court decision in Commissioner of Income-tax v. Jagannath Mahadeo Prasad, which stated that speculative losses cannot be set off against profits from other business activities in the same year for income computation purposes under section 10(1) of the Indian Income-tax Act. Consequently, the court answered the first question affirmatively and the second question negatively. The Commissioner of Income-tax was awarded costs, along with counsel's fee, both assessed at Rs. 200.
In conclusion, the judgment clarified that the loss suffered by the assessee was indeed speculation loss and could not be set off against profits from non-speculation business activities based on relevant legal provisions and court precedents.
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1971 (3) TMI 29
It was for the Income-tax Officer to show by clear evidence that the assessee could be reasonably said to have wilfully concealed material particulars of his income - Tribunal was not right in imposing penalty under section 28(1)(c) of the Income-tax Act, 1922
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1971 (3) TMI 28
Whether the Commissioner of Income-tax was competent to take proceedings under section 33B and to pass an order under section 33B - If, yes, whether the order passed by the Commissioner of Income-tax under section 33B was a valid and proper order - Tribunal is right in holding that the order of the Commissioner of Income-tax under section 33B was fully within his competence and was a valid and proper order
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1971 (3) TMI 27
Transfer of property to wife and after ten years to minor sons - Whether in accordance with the provisions of section 16(3)(a)(iv) the income from the property can be properly included in the computation of the assessee's total income of the previous years
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1971 (3) TMI 26
Estate Duty Act, 1953 - Property Passing On Death - gifts of a part of the running business or the amounts lying to the credit of the donor in the firm - held that what was gifted was subject to the rights of the firm and the donees took such possession of the gifted property as it was capable of - merely because those properties continued to be used for the purposes of the business of the firm, did not detract from the retention of those properties by the donees to the complete exclusion of the donor
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1971 (3) TMI 25
Gift Tax Act, 1958 – Whether the act of throwing self-acquired property by the assessee into common hotchpotch of the Hindu undivided family with the intention of abandoning their rights in that property amounted to a gift within the meaning of the term 'gift' as defined in the Gift-tax Act, 1958 – Question is answered in the negative
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1971 (3) TMI 24
Royalty paid on net sales to party for obtaining recognition of Himachal Pradesh Education Department to become able to sell its text books in the territory of Himachal Pradesh - amount spent helped assessee in expansion of business so it was capital in nature and not allowable under section 10(2)(xv) of the Indian Income-tax Act, 1922
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