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Showing 241 to 260 of 290 Records
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1990 (12) TMI 51
Issues Involved:
1. Whether the payment of £36,470 made by the assessee-company to the foreign party as consideration for the outright sale of drawings and design was 'royalty' exigible to tax u/s 9(1)(vi) of the Income-tax Act, 1961.
Summary:
Issue 1: Nature of Payment - Royalty or Outright Sale
The core issue was whether the payment of £36,470 made by the assessee-company to the foreign party for the outright sale of drawings and designs constituted 'royalty' under the Income-tax Act, 1961. The Income-tax Officer classified the payment as royalty u/s 9(1)(vi) and applied a 20% tax rate. However, the Commissioner of Income-tax (Appeals) and the Tribunal found that the transaction was an outright sale, not a royalty payment. The Tribunal emphasized that under clause 2 of article XIII of the Avoidance of Double Taxation Agreement between India and the U.K., such a transfer by outright sale cannot be termed as royalty. The Tribunal further noted that clause 3 of article XIII provides a different meaning to 'royalty' than Explanation 2 to section 9(1)(vi) of the Income-tax Act, 1961. Consequently, the provisions of the Double Taxation Agreement would prevail over the Act, as per Circular No. 333 of the Central Board of Direct Taxes dated April 2, 1982.
Issue 2: Precedence of Double Taxation Agreement Over Income-tax Act
The court addressed the contention that the Income-tax Act should prevail over the Double Taxation Agreement in case of inconsistency. The court held that the Agreement for Avoidance of Double Taxation, entered into u/s 90 of the Income-tax Act, must prevail over the Act's provisions. The court cited the notification enforcing the convention between India and the U.K. and the Andhra Pradesh High Court's decision in CIT v. Visakhapatnam Port Trust [1983] 144 ITR 146, which supported the precedence of the Agreement over the Act. The court concluded that the Agreement's specific provisions regarding 'royalty' would override the general provisions of the Income-tax Act.
Issue 3: Definition and Interpretation of 'Royalty'
The court examined the definition of 'royalty' in the Double Taxation Agreement, which includes payments for the use or right to use patents, trademarks, designs, models, plans, secret formulas, etc. The court noted that for a payment to be considered royalty, the owner must retain property rights and permit use. In this case, the foreign company did not retain any property rights in the designs and drawings, indicating an outright sale rather than a royalty transaction. The court referenced various judgments, including CIT v. Ahmedabad Manufacturing and Calico Printing Co. [1983] 139 ITR 806 and CIT v. Hindusthan General Electrical Corporation Ltd. [1971] 81 ITR 243, to support its interpretation.
Conclusion:
The court concluded that the payment of £36,470 was for an outright transfer of designs and drawings, not royalty. Thus, it was not taxable u/s 9(1)(vi) of the Income-tax Act, 1961. The question was answered in the affirmative and in favor of the assessee, with no order as to costs.
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1990 (12) TMI 50
Issues:
Detention under COFEPOSA Act, Competent Authority's notice under section 6(1) of the Act, Forfeiture of properties - immovable and movable.
Detention under COFEPOSA Act:
The appellant was detained under the Conservation of Foreign Exchange and Prevention of Smuggling Activities Act, 1974, making him an affected person under the Smugglers and Foreign Exchange Manipulators (Forfeiture of Property) Act, 1976. The Competent Authority issued a notice under section 6(1) of the Act regarding specific immovable and movable properties.
Forfeiture of Immovable Property (Item No. 1):
The appellant purchased a plot in 1963 and constructed a structure spending Rs. 17,000. Being an income-tax assessee since 1961-62, his income was assessed by the authorities. The appellant was involved in money-lending business and other activities, with assessments made under section 143(3) of the Income-tax Act. The court inferred that the appellant had a legal source of income to acquire the property, overturning the Competent Authority's decision.
Forfeiture of Immovable Property (Item No. 2):
The appellant claimed to have inherited the land where he constructed five shops in 1971 by spending Rs. 8,000. The Competent Authority did not dispute the inheritance claim but questioned the source of funds for construction. Considering the appellant's known legal sources of income and continuous business activities, the court reversed the Competent Authority's decision on this property.
Forfeiture of Movable Property (Item No. 3):
The appellant operated a business including money-lending since 1957, with an initial capital of Rs. 3,000 increasing to Rs. 20,000. The Competent Authority sought details on the source of the initial investment, which the appellant failed to provide. Despite the absence of account books, the appellant had been assessed for income tax since 1961-62. The court held that the appellant's long history as an income-tax assessee and the nature of his business activities supported the conclusion that he had a legal source of income for the investment made in 1957. Consequently, the court overturned the Competent Authority's decision on this movable property.
Conclusion:
The court allowed the appeal, setting aside the Competent Authority's order to forfeit the appellant's properties, based on the analysis and findings regarding each item of property.
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1990 (12) TMI 49
Issues:
Interpretation of Section 104 of the Income-tax Act, 1961 in relation to book profits and assessable income.
Analysis:
The judgment by the High Court of Allahabad involved a question raised by the Income-tax Appellate Tribunal regarding the applicability of Section 104 of the Income-tax Act, 1961. The case revolved around a private limited company, not substantially interested by the public, engaged in manufacturing sodium sulphate. The company faced reassessment under section 147 due to fictitious loans and unexplained share capital in its balance sheet. The Tribunal, in response to the company's objections, overruled them and levied additional tax. However, the Appellate Tribunal later allowed the company's appeal, quashing the order under section 104. The Tribunal's reasoning included that only book profits should be considered for section 104, not the assessed income, and strict compliance with the section is required due to its penal nature.
The judgment discussed the purpose of Section 104, which aimed to prevent tax avoidance by closely held companies accumulating profits without distributing dividends. It was noted that the actual profit determined on commercial principles should be considered, distinct from assessable income under the Act, as per Supreme Court precedent. The Court highlighted that the Tribunal's view that only business income is relevant for section 104 was erroneous and that there is no such limitation in the section. Additionally, the Court disagreed with the Tribunal's stance that unproved loans should not be treated as part of commercial profits, emphasizing that fictitious claims should not be rewarded.
Furthermore, the Court pointed out that other relevant considerations under section 104, such as smallness of profits or past losses, were not addressed in this case. Ultimately, the Court answered the question in favor of the Revenue, indicating that the company was liable for the additional tax under section 104. The judgment emphasized the importance of interpreting section 104 strictly and considering actual profits determined on commercial principles rather than just book profits or assessable income.
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1990 (12) TMI 48
Issues:
1. Valuation of the assessee's share in the let-out portion of the property.
2. Correct procedure for valuation and referral to a competent valuer for determining the assessee's share in a partnership firm.
Analysis:
1. The judgment addresses two questions referred by the Income-tax Appellate Tribunal regarding the valuation of the assessee's share in the let-out portion of the property. The court answered the first question in favor of the assessee based on previous decisions. The focus then shifted to the second question, emphasizing the correct valuation procedure for the assessee's share in partnership firms for multiple assessment years.
2. The case involved the valuation of the assessee's share in various partnership firms. The Wealth-tax Officer initially referred the valuation to the departmental Valuation Officer, who valued the assets of the firms. However, the Commissioner of Income-tax (Appeals) set aside this valuation and directed that the shares should be valued according to Wealth-tax Rules, specifically by a valuer competent to value shares in a partnership firm. This decision was challenged by both the assessee and the Revenue before the Income-tax Appellate Tribunal.
3. The Tribunal highlighted the need for different Valuation Officers for valuing different types of assets, as specified in the Wealth-tax Rules. It was noted that the valuation of shares in partnership firms requires a specific valuer, distinct from those valuing land, buildings, or other assets. The Tribunal directed that the valuation of the assessee's share in the partnership firms should be done by a valuer competent in valuing shares in partnership firms, as per the provisions of Rule 8A of the Wealth-tax Rules.
4. The court delved into the interpretation of Rule 8A and the qualifications of registered valuers for different types of assets. There was a debate regarding whether separate valuers should be appointed for different assets owned by a partnership firm. The court agreed with the Revenue's stance that assets like land, buildings, machinery, and business assets should be valued by distinct valuers as per their qualifications.
5. The judgment emphasized that the Wealth-tax Officer is not obligated to refer every asset of a partnership firm to a Valuation Officer. The decision to refer for valuation depends on the officer's assessment of the necessity. The court directed the Tribunal to reconsider the valuation process in line with the principles discussed in the judgment, ensuring the correct referral to a valuer competent in valuing shares in partnership firms.
6. In conclusion, the court answered the second question by providing guidance on the appropriate valuation procedure for the assessee's share in partnership firms. The Tribunal was instructed to pass suitable orders and give directions to the Wealth-tax Officer based on the principles outlined in the judgment. The wealth-tax reference was answered accordingly, with no costs imposed.
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1990 (12) TMI 47
Issues Involved:
1. Whether the agricultural income of the assessee-trust could be considered for the purposes of section 11(1) of the Income-tax Act, 1961.
Summary:
Issue 1: Consideration of Agricultural Income for Section 11(1) Purposes
The primary issue was whether the agricultural income of the assessee-trust could be considered for the purposes of section 11(1) of the Income-tax Act, 1961. The assessee, a trust assessed as an association of persons, derived income from various sources including agricultural land. The Income-tax Officer allocated the amount applied towards charitable/religious purposes between agricultural and taxable income in proportion to their respective amounts, as the assessee did not maintain separate accounts for these incomes. The Appellate Assistant Commissioner and the Tribunal disagreed with this approach, leading to the present reference by the Revenue.
Section 11(1) of the Act exempts income derived from property held under trust for charitable or religious purposes to the extent it is applied to such purposes in India. Section 10(1) excludes agricultural income from the total income. The court had to determine whether the Department could allocate the amount applied to charitable/religious purposes between agricultural and taxable income or if agricultural income should be excluded altogether.
The court observed that both sections 10 and 11 exclude certain types of incomes from the total income of a person. The exemption under section 11 is not absolute and is available only to the extent the income is applied for charitable or religious purposes in India. The court noted that the assessee had mixed both agricultural and non-agricultural incomes and spent amounts from this pool towards specified purposes. In the absence of separate accounts, the Income-tax Officer was justified in allocating the amount applied in proportion to the agricultural and non-agricultural income.
The court referred to various decisions, noting a conflict of opinion. It disagreed with the decisions cited by the assessee's counsel, stating that no provision of law is necessary for such apportionment. The Income-tax Officer must take a reasonable and realistic view, allocating the amount applied towards specified purposes in an appropriate proportion between agricultural and non-agricultural income.
Conclusion:
The question referred was answered in the negative, in favor of the Revenue and against the assessee. The court held that the Income-tax Officer was justified in allocating the amount applied towards charitable/religious purposes between agricultural and non-agricultural income. No costs were awarded.
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1990 (12) TMI 46
The High Court of Allahabad disposed of an application under section 256(2) of the Income-tax Act, 1961, made by the Revenue. The Tribunal referred questions 1 and 2 but declined to refer question 3, which was considered implicit in question 1. The application was accordingly disposed of with no costs.
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1990 (12) TMI 45
Issues Involved:
1. Applicability of Section 43B of the Income-tax Act, 1961, to unpaid Central sales tax.
2. Interpretation of statutory provisions and amendments related to Section 43B.
3. Retrospective application of the amendments to Section 43B.
Summary:
1. Applicability of Section 43B of the Income-tax Act, 1961, to unpaid Central sales tax:
The core issue was whether the Tribunal was justified in directing the Income-tax Officer not to add Rs. 1,01,174 u/s 43B of the Income-tax Act, 1961, as unpaid Central sales tax if it was not statutorily payable before the end of the accounting year. The Tribunal held that if the assessee paid the tax within the statutory period, even after the accounting year, it should not fall under the purview of Section 43B. The Tribunal remanded the matter to the Income-tax Officer to verify if the amount was statutorily payable before the end of the accounting year.
2. Interpretation of statutory provisions and amendments related to Section 43B:
Section 43B was introduced by the Finance Act, 1983, effective from April 1, 1984, to curb practices where taxpayers claimed deductions for statutory liabilities without actual payment. The section mandates that deductions for taxes or duties are allowed only in the year they are actually paid. The court examined the Bengal Finance (Sales Tax) Act, 1941, and related rules, which allow a dealer 30 days after the quarter's end to file returns and pay taxes. Therefore, if the last quarter ends on March 31, the dealer can pay the tax by April 30, which falls in the next accounting year. The court concluded that if the tax is paid within the statutory period, the deduction should not be denied.
3. Retrospective application of the amendments to Section 43B:
The Finance Act, 1987, introduced provisos to Section 43B, effective from April 1, 1988, allowing deductions if taxes were paid by the due date for filing returns. The Finance Act, 1989, further clarified that "any sum payable" means a sum for which liability was incurred in the previous year, regardless of the statutory payment date. The court held that these amendments were clarificatory and should be applied retrospectively from the assessment year 1984-85. The court emphasized that the amendments aimed to make the provisions workable and prevent the denial of deductions for taxes paid within the statutory period but after the accounting year.
Conclusion:
The court affirmed the Tribunal's decision, directing the Assessing Officer to verify the factual position and allow the deduction if the tax was paid within the statutory period. The question was answered in the affirmative and in favor of the assessee, with no order as to costs.
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1990 (12) TMI 44
Issues Involved:
1. Exemption from payment of income-tax.
2. Liability of directors or shareholders for the company's tax dues.
3. Validity and authenticity of the Sikkim State Income-tax Manual and related notifications.
4. Legislative competence of the Sikkim State Income-tax Manual.
5. Appointment of Income-tax Officers and appellate authorities.
6. Requirement of deposit for filing an appeal.
7. Assessment of companies under the Manual.
8. Limitation period for assessment.
9. Validity of the Sikkim (Collection of Taxes and Prevention of Evasion of Payment of Taxes) Act, 1987.
10. Repeal of Order No. 405/50 by the Recovery Act.
Detailed Analysis:
1. Exemption from Payment of Income-tax:
The petitioners claimed exemption under Notification No. 2/TIC dated February 16, 1974. However, the court noted that no specific order exempting the petitioner company from income-tax was produced. The notification required compliance with participation guidelines, which were not met by the petitioners. The court held that the exemption was not automatic and required a government order. The plea of discriminatory treatment was also rejected as steps were being taken to assess all companies not specifically exempted.
2. Liability of Directors or Shareholders:
The court held that the directors could be personally liable for the company's tax dues if the corporate veil was used to evade tax obligations. The distribution of almost the entire profit without making provision for tax was deemed fraudulent. Thus, the corporate veil was lifted, and the directors were held jointly and severally liable for the tax dues.
3. Validity and Authenticity of the Sikkim State Income-tax Manual and Notifications:
The petitioners argued that the Manual and notifications were not signed or approved by the Maharaja of Sikkim. The court found that the Manual was in force before the merger and continued to be valid under Article 371F(k) of the Constitution. The lack of publication did not render the laws inoperative.
4. Legislative Competence of the Sikkim State Income-tax Manual:
The petitioners contended that the Manual was not a valid law as income-tax falls under the Union List. The court rejected this argument, citing Article 371F(k), which allows pre-existing laws to continue until amended or repealed by a competent authority.
5. Appointment of Income-tax Officers and Appellate Authorities:
The court held that the State Government had the jurisdiction to appoint Income-tax Officers under the Manual. The expression "State Government" was reasonably interpreted to include the Finance Secretary as the appellate authority.
6. Requirement of Deposit for Filing an Appeal:
The court upheld the requirement of depositing 50% of the assessed tax amount as a pre-condition for filing an appeal, as stipulated in Notification No. 1220-200/IT and ST dated December 20, 1973. This condition was deemed to have the legal effect of amending the Manual.
7. Assessment of Companies under the Manual:
The court found that the definition of "person" in the Manual included companies, as they are associations of individuals. Thus, companies were eligible to be taxed under the Manual.
8. Limitation Period for Assessment:
The court held that there were no words of limitation in the Manual restricting assessment to the immediate previous year. The Manual allowed for the assessment of any previous year if it had not been assessed earlier.
9. Validity of the Sikkim (Collection of Taxes and Prevention of Evasion of Payment of Taxes) Act, 1987:
The court found that the Recovery Act was within the legislative competence of the State Legislature as it was incidental to the levy of income-tax, which the State was entitled to recover under the Manual.
10. Repeal of Order No. 405/50 by the Recovery Act:
The court declared that Order No. 405/50 stood repealed by the Recovery Act concerning the collection of taxes. The Recovery Act provided a more comprehensive and effective procedure for tax collection.
Conclusion:
The petition was dismissed except for the declaration that Order No. 405/50 stood repealed by the Recovery Act concerning tax collection. The court emphasized the need for the State to publish laws to ensure proper compliance.
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1990 (12) TMI 43
The High Court of Allahabad directed question No. 1 to be stated under section 256(2) of the Income-tax Act, as it was deemed sufficient. Questions 2 and 3 suggested by the assessee were considered argumentative and not necessary. The income-tax appeal was allowed with no costs.
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1990 (12) TMI 42
Issues:
Determining whether the property 'Grove Estate' belongs to the assessee-Hindu undivided family and if the income arising from it should be considered as the income of the Hindu undivided family for the assessment years 1975-76 and 1976-77.
Analysis:
The case involves a dispute over the ownership of the 'Grove Estate' purchased by Periannan and his brother Narayanan in 1973. The key question is whether the property is the joint family property of the assessee-Hindu undivided family or the self-acquired property of Periannan. The court referred to legal principles stating that property acquired with the aid of joint family assets is considered joint family property. In this case, the estate was purchased using funds withdrawn from ancestral properties, making it joint family property. The court highlighted that the property became part of the Hindu undivided family upon its creation with Periannan's marriage in 1974.
The court considered the argument that the funds used for purchasing the estate were debited to Sathappa Chettiar's account in the books of the Hindu undivided family after Periannan's marriage. However, the court rejected this contention, emphasizing that once the estate became the property of the Hindu undivided family, its character could not change. Therefore, the Tribunal's decision that the 'Grove Estate' belonged to the assessee-Hindu undivided family was upheld.
In conclusion, the court ruled in favor of the Revenue, stating that the 'Grove Estate' should be considered as belonging to the assessee-Hindu undivided family. The court awarded costs to the Revenue and set counsel's fee at Rs. 500.
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1990 (12) TMI 41
The High Court of Allahabad reviewed a case involving penalty levied under section 271(1)(c) of the Income-tax Act for an assessment year of 1966-67. The Tribunal canceled the penalty, citing precedents from the Punjab and Haryana High Court and the Delhi High Court. The High Court directed the Tribunal to reconsider the case in light of recent Supreme Court decisions explaining the effect of the Explanation to section 271(1)(c). The reference was returned to the Tribunal for further consideration.
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1990 (12) TMI 40
The High Court of Allahabad ruled in favor of the assessee, stating that their interest in the firm, M/s. Sheetalaya Cold Storage, was exempt under section 5(1)(xxxii) of the Wealth-tax Act, 1957. This decision was based on the precedent set in CWT v. Nisha Gupta [1981] UPTC 440, which classified cold storage as an industrial undertaking under the Act.
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1990 (12) TMI 39
The High Court of Allahabad reviewed a Tribunal order and directed the Tribunal to refer three questions of law regarding excusing delay in filing tax returns and penalties to the court under section 27(3) of the Wealth-tax Act. The application was allowed with no costs. (Case Citation: 1990 (12) TMI 39 - Allahabad High Court)
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1990 (12) TMI 38
Issues Involved:
The judgment involves the following issues:
1. Deduction of bank guarantee commission and office maintenance expenses.
2. Addition of interest on fixed deposit.
Issue 1: Deduction of Bank Guarantee Commission and Office Maintenance Expenses:
The assessee-company, incorporated under the Companies Act, 1956, entered into agreements for a vanaspati plant and coal agency. The company incurred expenses for bank guarantee commission, maintaining offices at Durgawati and Varanasi, and earned commission income from the coal agency. The Income-tax Officer disallowed these expenses as capital expenses. The company contended that the expenses were wrongly disallowed due to unity of control in the ventures. The court held that the bank guarantee commission was a capital expenditure as it was necessary for acquiring the plant, following the principle that all expenses to bring assets into existence are part of the asset's cost. The court disagreed with the view that the commission was a revenue expenditure, emphasizing the capital nature of expenses related to asset acquisition. Regarding office expenses, the court allowed them, considering the interconnection and unity between the ventures, leading to the conclusion that the expenses were revenue expenses.
Issue 2: Addition of Interest on Fixed Deposit:
The Tribunal added accrued interest on a deposit with Bank of Baroda as income, although the period of deposit and interest calculation were uncertain. The court held that since the interest amount was not determinable during the relevant periods, the addition of accrued interest as income was incorrect. The court ruled in favor of the assessee on this issue.
In conclusion, the court decided in favor of the Department regarding the bank guarantee commission but against the Department concerning the office expenses. The court ruled in favor of the assessee regarding the addition of interest on the fixed deposit. The judgment was delivered by G. G. Sohani and Gopichand Bharuka, and no costs were awarded.
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1990 (12) TMI 37
The High Court of Allahabad allowed the income-tax appeal in part and directed the Tribunal to address question No. 3 regarding the treatment of receipts from the supply of printed material as income without allowing deductions for expenses. The other questions were deemed factual and not referred.
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1990 (12) TMI 36
Issues Involved:
1. Validity of reopening the assessment u/s 147(b) of the Income-tax Act, 1961.
2. Eligibility of Hindu undivided family (HUF) for exemption u/s 54B(ii) of the Income-tax Act, 1961.
Summary:
1. Validity of Reopening the Assessment u/s 147(b):
The assessee, a Hindu undivided family, was initially granted exemption from capital gains u/s 54B(ii) of the Income-tax Act, 1961. However, based on an audit objection that the exemption u/s 54B(ii) is available only to individual assessees and not to HUFs, the Income-tax Officer reopened the assessment u/s 147(b) and withdrew the exemption. The Appellate Assistant Commissioner, following the Gujarat High Court decision in Kasturbhai Lalbhai v. R. K. Malhotra, ITO [1971] 80 ITR 188, held that an audit objection cannot constitute information within the meaning of section 147(b) and thus, the reopening was invalid. However, the Tribunal, referencing the Supreme Court's reversal in R. K. Malhotra, ITO v. Kasturbhai Lalbhai [1977] 109 ITR 537, upheld the reopening of the assessment as valid.
2. Eligibility of HUF for Exemption u/s 54B(ii):
The Tribunal initially held that the HUF was entitled to the benefit u/s 54B(ii) of the Act. However, the High Court examined whether the term "assessee" in section 54B includes HUFs. Section 54B was introduced by the Finance Act, 1970, and requires the capital asset (land) to have been used by the assessee or a parent of his for agricultural purposes in the two years preceding the transfer, and the assessee must purchase other land for agricultural purposes within two years after the transfer. The court noted that the term "assessee" in section 54B, when read in context, clearly indicates that it applies only to individual assessees and not to HUFs. The court reasoned that substituting "HUF" for "assessee" in the section would lead to absurd results, as the phrase "a parent of his" cannot logically apply to an HUF. The court also observed that while section 54(1) was amended to include HUFs, no such amendment was made to section 54B, indicating a legislative intent to exclude HUFs from its scope.
Conclusion:
The High Court concluded that the term "assessee" in section 54B applies only to individuals and not to HUFs. Therefore, the HUF is not entitled to the exemption u/s 54B(ii) of the Income-tax Act, 1961. The question referred to the court was answered in the negative and in favor of the Revenue. The Revenue was also entitled to costs of Rs. 500.
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1990 (12) TMI 35
The High Court of Allahabad directed the Tribunal to refer two questions under section 256(2) of the Income-tax Act, 1961. The questions relate to whether there should be two assessments for the assessee and the validity of not upholding the Commissioner's order under section 263. No appearance was made by the respondent in the case.
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1990 (12) TMI 34
Issues:
Interpretation of Income-tax Act - Toll tax collection - Corporation's income or State Government's income.
Analysis:
The judgment involved a common question of law regarding the nature of toll tax collection made by a Government company, referred to as the Corporation, during the assessment years 1977-78 and 1978-79. The Corporation collected tolls for bridges of the State Government under authorization. The Income-tax Officer treated the tolls as the Corporation's income, leading to an appeal by the Corporation to the Tribunal. The Tribunal analyzed various documents and concluded that the tolls collected were the income of the State Government, with only 15% being the Corporation's income for managing toll collection.
The Tribunal considered reports indicating that toll taxes were collected by the Corporation on behalf of the Bihar Government and that the Corporation was an agent entrusted with bridge construction and toll collection. The Tribunal also noted a notification transferring bridge toll collection to the Corporation. The Tribunal's decision was based on a thorough examination of statutory provisions, communications, and accounting practices.
The High Court analyzed the legal principles governing the determination of income nature, emphasizing that the actual character of a transaction prevails over the parties' labels. Referring to relevant case law, the Court highlighted that the substance of a transaction, not its name, is crucial. The Court examined the Indian Tolls Act, which authorizes the State Government to levy tolls and place collection under designated management. Therefore, the Corporation, acting as an agent under this Act, could not claim toll collection as its income.
Further, the Court discussed constitutional provisions stating that revenues received by the State Government form part of the Consolidated Fund of the State. This legal framework prevented the Corporation from claiming ownership over toll collections. The Court rejected the notion of overriding title, asserting that any presumption of the Corporation's ownership was legally impermissible.
Conclusively, the Court upheld the Tribunal's decision, ruling that toll collections were the State Government's income, not the Corporation's. The judgment favored the Corporation, answering the referred question in its favor. No costs were awarded in this case.
The Chief Justice concurred with the judgment, affirming the decision.
This detailed analysis of the judgment provides a comprehensive understanding of the legal issues, interpretations of relevant laws, and the reasoning behind the Court's decision.
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1990 (12) TMI 33
The High Court of Himachal Pradesh ruled in favor of the assessee, upholding the deductions claimed for damages for use and occupation of premises. The Appellate Tribunal erred in adding back the deducted amount to the total income. The deductions were found to be valid under section 37(1) of the Income-tax Act, and interest charges under sections 139, 215, and 217(1A) were not applicable.
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1990 (12) TMI 32
Issues Involved:
1. Whether unabsorbed depreciation carried forward from earlier years can be set off against the assessee's income of the relevant previous year even if the business to which such unabsorbed depreciation related did not exist during the year.
Issue-Wise Detailed Analysis:
1. Unabsorbed Depreciation Set-Off:
The primary issue in this case is whether the unabsorbed depreciation carried forward from earlier years can be allowed to be set off against the assessee's income of the relevant previous year, even if the business to which such unabsorbed depreciation related did not exist during the year. The Tribunal held that the unabsorbed depreciation could be set off, following the decision in CIT v. Kishanlal and Sons (Udyog) Pvt. Ltd. [1985] 154 ITR 735 (Cal).
Arguments and Counterarguments:
- Revenue's Argument: Mr. Sunil Mitra, representing the Revenue, argued that the decision in Kishanlal and Sons requires reconsideration in light of contrary decisions by the Bombay and Madras High Courts.
- Court's Response: The court was not persuaded by this argument. It reaffirmed the decision in Kishanlal and Sons, which held that Section 32(2) of the Income-tax Act, 1961, contains an independent provision for setting off unabsorbed depreciation carried forward from a preceding year. The deeming provision in the section must be given full effect, and it is not necessary for the business in respect of which depreciation was originally allowed to remain in existence in the succeeding year when set-off is claimed.
Contrasting Judgments:
- Bombay High Court in Hindustan Chemical Works Ltd. [1980] 124 ITR 561: Held that if the business does not exist during the relevant year, unabsorbed depreciation cannot be carried forward.
- Madras High Court in East Asiatic Co. (India) P. Ltd. v. CIT [1986] 161 ITR 135: Held that unabsorbed depreciation can only be carried forward if the business continues to exist in the succeeding year.
- Bombay High Court in Estate and Finance Ltd. [1978] 111 ITR 119: Held that unabsorbed depreciation can be set off against income in subsequent years even if the business has ceased to exist.
Supreme Court and Other High Courts:
- Supreme Court in CIT v. J. K. Hosiery Factory [1986] 159 ITR 85: Impliedly affirmed the decision in Estate and Finance Ltd., interpreting Section 32(2) in favor of the assessee.
- Gujarat High Court in CIT v. Deepak Textile Industries Ltd. [1987] 168 ITR 773: Held that unabsorbed depreciation can be set off against assessable income of a subsequent year, even if the business has ceased to exist.
Final Judgment:
The court, following its earlier decision in Kishanlal and Sons and the principles laid down by the Gujarat and Bombay High Courts, held that the unabsorbed depreciation could be set off against other income even if the business had discontinued. The question was answered in the affirmative and in favor of the assessee.
Leave to Appeal:
Mr. Mitra's oral prayer for leave to appeal to the Supreme Court was granted, considering that a certificate of fitness for leave to appeal had already been granted against a similar decision by the Andhra Pradesh High Court in Hyderabad Construction Co. Ltd. [1981] 129 ITR 81.
Costs:
The Revenue was ordered to pay the costs of the reference.
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