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Showing 181 to 200 of 220 Records

• 1991 (5) TMI 40
  
  Issues Involved:
  1. Jurisdiction of the Commissioner of Income-tax under section 263 of the Income-tax Act.
  2. Adjustment of development rebate and relief under section 80J for the assessment year 1976-77.
  3. Deduction of the provision for gratuity.
  
  Detailed Analysis:
  
  Point No. 1: Jurisdiction of the Commissioner of Income-tax under section 263
  The first issue pertains to whether the Commissioner of Income-tax had jurisdiction under section 263 of the Income-tax Act to revise the order of the Income-tax Officer, especially since the order was scrutinized by the Inspecting Assistant Commissioner under section 144B. The Tribunal held that the assessment order in question is indeed an order passed by the Income-tax Officer, and thus, the Commissioner of Income-tax cannot be denied jurisdiction under section 263 on the ground that the assessment order was made based on the directions issued by the Inspecting Assistant Commissioner. The court concurred with this view, affirming that the final order passed by the Income-tax Officer does not cease to be an order passed by him and remains revisable by the Commissioner. This conclusion is supported by various precedents, including CIT v. Vithal Textiles [1989] 175 ITR 629 (MP) and CIT v. Christian Mica Industries Ltd. [1979] 120 ITR 627 (Cal). Consequently, the court answered question No. 1 in Income-tax Reference No. 417 of 1982 in the affirmative, against the assessee and in favor of the Revenue.
  
  Point No. 2: Adjustment of Development Rebate and Relief under Section 80J
  The second issue involves whether the adjustment of development rebate relating to the assessment year 1967-68 and the relief under section 80J relating to the assessment year 1971-72 could be allowed for the assessment year 1976-77. The court noted that from the assessment year 1967-68 till 1976-77, the assessee-company incurred only losses. Due to a change in the accounting year allowed by the Income-tax Officer, there was no previous year for the assessment year 1975-76, and the proceedings were closed as "N. A." (nil assessment). The crux of the issue was the interpretation of the words "immediately succeeding" in sections 33(2) and 80J(2). The court held that the words should be taken in their natural sequence without reference to a particular assessee or situation. Therefore, the 8th assessment year for the development rebate and the 4th assessment year for the section 80J relief would be 1975-76, not 1976-77. This interpretation was supported by the Madras High Court decision in Rockweld Electrodes India Ltd. v. CIT [1990] 185 ITR 62. Consequently, the court answered questions Nos. 2, 3, and 4 in Income-tax Reference No. 417 of 1982, and questions Nos. 1, 2, and 3 in Income-tax Reference No. 375 of 1985 in the affirmative, against the assessee and in favor of the Revenue.
  
  Point No. 3: Deduction of the Provision for Gratuity
  The third issue concerns the claim for deduction of the provision for gratuity. The assessee made a provision for payment of gratuity in the sum of Rs. 2,54,452, but the gratuity fund itself was created only on December 30, 1975, after the relevant previous year ended on September 30, 1975. The court noted that for the assessment year 1976-77, section 40A(7)(b)(i) alone is applicable, which requires the gratuity trust to be in existence during the relevant previous year. Since this was not the case, the assessee was not entitled to the deduction. The Tribunal's decision was upheld, and the court answered question No. 5 in Income-tax Reference No. 417 of 1982 in the affirmative, against the assessee and in favor of the Revenue. Similarly, question No. 4 in Income-tax Reference No. 375 of 1985 was answered against the assessee and in favor of the Revenue.
  
  Conclusion:
  All the questions referred to the court in Income-tax Reference No. 417 of 1982 and Income-tax Reference No. 375 of 1985 were answered against the assessee and in favor of the Revenue. A copy of the judgment will be forwarded to the Income-tax Appellate Tribunal, Cochin Bench.

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• 1991 (5) TMI 39
  
  The High Court of Punjab and Haryana ruled on the validity of gifts made from Hindu undivided family funds to daughters-in-law. The court referenced a similar case and answered questions in favor of the assessee, stating gifts were valid and not cross-gifts. The judgment was delivered by Judge S. S. Sodhi. (Case citation: 1991 (5) TMI 39 - Punjab and Haryana High Court)

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• 1991 (5) TMI 38
  
  Issues Involved:
  1. Entitlement to investment allowance u/s 32A of the Income-tax Act, 1961.
  2. Definition and scope of "industrial undertaking" under the Income-tax Act.
  3. Applicability of investment allowance to construction companies.
  
  Summary:
  
  1. Entitlement to Investment Allowance u/s 32A:
  The primary issue was whether the assessee, a company engaged in building contracts, is entitled to investment allowance u/s 32A of the Income-tax Act, 1961. The Income-tax Officer denied the relief on the grounds that the machinery was not installed in an "industrial undertaking" and the assessee was merely carrying out contracts for others. The Commissioner of Income-tax (Appeals) and the Tribunal both concluded that the assessee was entitled to the investment allowance, interpreting the scope of section 32A to include businesses engaged in construction.
  
  2. Definition and Scope of "Industrial Undertaking":
  The Tribunal found that the assessee was engaged in the production of reinforced concrete slabs and boulders used in construction activities, thus qualifying as an industrial undertaking. The Tribunal's finding that the assessee is engaged in the manufacture and processing of goods was not challenged by the Revenue through an appropriate question. The High Court upheld this view, stating that the term "industrial undertaking" should be construed in its popular sense and includes businesses involved in construction, manufacture, or production of articles or things.
  
  3. Applicability of Investment Allowance to Construction Companies:
  The High Court affirmed that the assessee, being a construction company involved in manufacturing and processing materials for its construction activities, qualifies as an industrial undertaking. The Court emphasized that the statutory language of section 32A(2)(b)(iii) is clear and should be interpreted broadly to include construction businesses. The Court referenced various judicial precedents and statutory interpretations to support this view, concluding that the assessee is entitled to investment allowance u/s 32A.
  
  Conclusion:
  The High Court answered the referred question in the affirmative, favoring the assessee and against the Revenue. The judgment confirmed that the assessee is entitled to investment allowance u/s 32A of the Income-tax Act, 1961, as the activities carried out by the assessee qualify it as an industrial undertaking.

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• 1991 (5) TMI 37
  
  Issues:
  Controversy over interest payment on excess advance tax paid.
  
  Analysis:
  
  The judgment delivered by the High Court of Punjab and Haryana revolves around the issue of interest payment on advance tax paid in excess of the determined tax amount. The case involved the assessee being required to pay advance tax for the assessment year 1974-75 in three instalments. The final assessment revealed an excess payment of tax, which was refunded along with interest. However, the Commissioner of Income-tax, through revisional jurisdiction, modified the interest payable on the excess amount, leading to a dispute. The key question referred to the court was whether the Appellate Tribunal erred in holding that the Commissioner lacked proper jurisdiction, rendering his order invalid.
  
  The Commissioner of Income-tax argued that interest is not payable if advance tax is paid after the due date specified in the Income-tax Act. Reference was made to an amendment in the Act, suggesting that interest on excess advance tax is only payable if paid before specified dates. However, judicial precedents and interpretations indicated that interest is payable if the entire advance tax amount is paid before the end of the financial year, regardless of due dates for instalments. The court highlighted that the concept of interest on advance tax is distinct from penalty provisions for delayed payments. Various High Courts, including Gujarat, Gauhati, Madhya Pradesh, Bombay, and others, have upheld the view that interest is payable if two conditions are met: full payment of advance tax and payment before the financial year end.
  
  The court also addressed the judgment of the High Court of Kerala, which was later reversed on appeal, emphasizing the settled legal position on interest payment. The argument based on the proviso to section 211 of the Act, added through an amendment, was dismissed as clarificatory in nature. Ultimately, the court ruled in favor of the assessee, holding that interest on excess advance tax should be paid if the specified conditions are met. The reference was answered in the negative, favoring the assessee and against the Revenue, with no costs awarded.

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• 1991 (5) TMI 36
  
  Issues Involved:
  The judgment concerns the assessee's claim for initial depreciation u/s 32(1)(vi) of the Income-tax Act, 1961, in relation to an electric generator installed for business purposes.
  
  Initial Depreciation Claim:
  During the assessment year 1976-77, the assessee installed an electric generator for its biscuit manufacturing business and claimed initial depreciation under section 32(1)(vi) of the Act. The claim was rejected by all authorities, leading to the question of whether the initial depreciation was allowable on the generator set installed for power generation for business use. The court held that the machinery or plant must be installed for the business of generation or distribution of electricity or any other form of power to qualify for initial depreciation u/s 32(1)(vi) of the Act. The court emphasized that the business itself must be of power generation or distribution for the claim to be valid.
  
  Interpretation of Statutory Provision:
  The court rejected the contention that since the generator was installed for electricity required by the business, it should qualify for depreciation. It emphasized the importance of interpreting statutes to give meaning to every word deliberately included by the Legislature. The court highlighted that the plain meaning of the words in section 32(1)(vi) required the business itself to be of power generation or distribution for the depreciation claim to be accepted.
  
  Conclusion:
  The court ruled in favor of the Revenue and against the assessee, stating that the claim for initial depreciation on the generator was rightly declined as the business was not related to power generation or distribution. The reference was answered accordingly, with no order as to costs.

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• 1991 (5) TMI 35
  
  Issues:
  Complaint dismissal under sections 277 and 278 of the Income-tax Act, 1961 based on reversal of finding by appellate authority.
  
  Analysis:
  The judgment delivered by the High Court of Punjab and Haryana concerned a complaint filed by the Income-tax Officer against a partnership firm and its partners under sections 277 and 278 of the Income-tax Act, 1961. The trial court had dismissed the complaint on the grounds that the finding of concealment of income by the concern had been reversed by the appellate authority. The Income-tax Officer appealed this decision in the High Court.
  
  During the hearing, the appellant's counsel argued that the result of proceedings before the Income-tax Tribunal should not bind the criminal court, emphasizing the need for independent judgment based on the evidence presented. However, the High Court rejected this argument, citing previous cases where relief by the Income-tax Department after the complaint did not render it an abuse of the criminal court's process. The court highlighted that in criminal cases, all elements of the offense must be established for conviction, and the court should consider the outcome of related proceedings under the Act.
  
  The court referred to sections 277 and 278 of the Income-tax Act, emphasizing the requirement of mens rea for prosecution under these sections. The court noted that the intention of the Legislature was clear in requiring proof of mens rea, indicating that prosecution should not automatically follow a false statement without considering the individual's intent. The judgment also cited a previous case where criminal proceedings were quashed based on the findings of the Tribunal regarding concealment of income.
  
  Regarding the delay in the case, the court considered the significant time lapse since the occurrence in 1974-75, the acquittal judgment in 1983, and the subsequent appeal. Citing a Supreme Court case, the High Court noted that inordinate delays could justify the termination of criminal proceedings. In this case, the delay of seventeen years from the occurrence and more than eight years from the acquittal judgment supported the trial court's decision to terminate the proceedings, which the High Court upheld, ultimately dismissing the appeal.

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• 1991 (5) TMI 34
  
  Issues:
  1. Controversy over the levy of capital gains tax on the value of route permits sold along with buses.
  2. Assessment of whether the sale consideration included the value of route permits.
  3. Determination of whether route permits are capital assets acquired free of cost.
  
  Analysis:
  The judgment pertains to a case involving the assessment year 1974-75, where a private limited company sold its fleet of buses along with 24 route permits to another company. The primary issue was the levy of capital gains tax on the value of route permits sold. The Income-tax Officer initially held that the entire price realized represented the sale price of buses, without attributing any value to the route permits. However, the Tribunal disagreed, stating that the route permits were acquired free of cost and no capital gain could be computed, further affirming the reasonableness of the value placed on them by the assessee.
  
  The court was presented with three questions for consideration. The first question revolved around whether the Appellate Tribunal was correct in deleting additions under section 41(2) of the Income-tax Act and capital gains made by the Income-tax Officer. The second question focused on whether the Tribunal was right in rejecting the Revenue's contention regarding the nature of the price payable under the agreement. The third question concerned the Tribunal's decision on the route permits being capital assets acquired free of cost.
  
  The Revenue argued that the sale consideration constituted profit within the purview of the Income-tax Act and was thus taxable. They contended that the cost of acquisition of route permits, even if nil, should be considered for capital gains tax. The court examined conflicting judicial opinions on the taxation of gains from the sale of route permits, citing relevant judgments from different High Courts and the Supreme Court.
  
  Ultimately, the court aligned with the view of the High Court of Kerala and the Supreme Court, holding that route permits acquired for the first time should be treated as self-generated assets not subject to capital gains tax. The judgment favored the assessee, ruling in their favor against the Revenue on all questions referred, emphasizing the interpretation of the Income-tax Act and relevant precedents.

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• 1991 (5) TMI 33
  
  Issues:
  1. Interpretation of the Benami Transactions (Prohibition) Act, 1988.
  2. Determination of whether the suit is maintainable under the Act.
  3. Consideration of whether issue No. 11 can be decided as a preliminary issue.
  4. Analysis of the applicability of sections 3 and 4 of the Act to the suit transaction.
  
  Interpretation of the Benami Transactions (Prohibition) Act, 1988:
  The plaintiff claimed title to a property purchased in the name of his wife, who later transferred it to another defendant. The defendants argued that the suit was not maintainable under the Benami Transactions (Prohibition) Act, 1988. The court analyzed sections 3(2) and 4 of the Act, concluding that the prohibition in section 3(1) did not apply to transactions by a person in the name of their wife or unmarried daughter. As a result, the court held the suit maintainable despite the prohibition in section 4 of the Act.
  
  Determination of Suit Maintainability:
  The court considered an application to try issue No. 11 as a preliminary issue under Order 14, rule 2 of the Code of Civil Procedure. It was argued that the issue was one of law and related to jurisdiction. However, the court found that issue No. 11 was not solely an issue of law, as it required evidence to rebut the statutory presumption under section 3(2) of the Act. Therefore, the court decided that all issues, including issue No. 11, should be disposed of simultaneously at the trial.
  
  Consideration of Preliminary Issue Decision:
  The court set aside the impugned order, ruling that issue No. 11 could not be decided as a preliminary issue. It was determined that the issue required a fresh consideration along with other issues during the trial. The court emphasized that the decision on issue No. 11 should not be influenced by previous views, allowing for a new interpretation based on the evidence presented.
  
  Applicability of Sections 3 and 4 of the Act:
  Arguments were presented regarding the applicability of sections 3 and 4 of the Act to the suit transaction. While one party contended that the provisions did not apply retrospectively, the court did not express an opinion on this matter. The court held that issue No. 11 should be reconsidered during the trial, leaving the determination of the applicability of the Act's provisions to be decided without prior influence.
  
  In conclusion, the court allowed the revision, directing that all issues, including issue No. 11, be decided afresh during the trial without being influenced by previous views.

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• 1991 (5) TMI 32
  
  Issues:
  1. Whether the Appellate Tribunal was right in law in confirming the deletion of capital gains inclusion in the total income of the assessee?
  2. Whether the Appellate Tribunal was right in law in allowing a further sum under section 35B of the Income-tax Act, 1961?
  
  Analysis:
  1. The case involved a dispute regarding the inclusion of capital gains in the total income of the assessee firm for the assessment year 1977-78. The assessee firm was sold as a going concern along with all its assets and liabilities, with the total sale consideration being Rs. 20,21,767.68. The Inspecting Assistant Commissioner determined the fair market value of the firm to be Rs. 69,27,000, resulting in capital gains of Rs. 32,10,140. However, the Commissioner of Income-tax (Appeals) and the Tribunal held that this addition was not taxable, citing the decision in K. P. Varghese v. ITO. The Supreme Court's ruling in K. P. Varghese clarified that the provisions of section 52(2) can only be invoked if the consideration for the transfer is understated by the assessee, which was not the case here. Therefore, the first question was concluded by this precedent, and no reference was necessary.
  
  2. The second issue pertained to the weighted deduction under section 35B of the Income-tax Act. The Tribunal had declined to refer this question, citing a previous decision. However, the court held that the Tribunal erred in not referring the question as it raised a legal issue. The assessee had claimed deductions under various heads related to exports, and the Tribunal allowed a portion of the additional claim as weighted deduction under section 35B. This decision raised a question of law, as confirmed by the court's judgment in CIT v. Bhagat Brothers. The court directed the Tribunal to draw up a statement of case and refer the second question for further consideration. The judgment partly allowed the petition and issued a mandamus to the Tribunal for the reference, with no order as to costs.

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• 1991 (5) TMI 31
  
  The High Court dismissed writ petitions challenging a Gift-tax notice issued to partners of a firm regarding a business sale. The court ruled that the petitioners have alternative remedies under the Gift-tax Act and must follow the appeal process instead of filing writ petitions. No costs were awarded.

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• 1991 (5) TMI 30
  
  Issues Involved:
  The main issue in controversy is the avoidance of the rigour of section 40A(3) of the Income-tax Act, 1961, in terms of rule 6DD of the Income-tax Rules, 1962, regarding cash payments made by the assessee.
  
  Assessment Year 1972-73:
  - The assessee, a registered firm dealing in ghee, sugar, and maida, purchased ghee worth Rs. 55,00,000 from Messrs. Amrit Banaspati Company, with Rs. 4,47,000 paid in cash on 15 occasions exceeding Rs. 2,500 each.
  - Explanation for cash payments was urgent demands by the supplier, not accepted by the Income-tax Officer, leading to inclusion of Rs. 4,47,000 in taxable income.
  
  Appellate Proceedings:
  - Appellate Assistant Commissioner agreed with the assessee, citing exceptional circumstances for cash payments due to urgent demands and non-charging of interest by the supplier.
  - Income-tax Appellate Tribunal reversed the Appellate Assistant Commissioner's findings, supporting the Income-tax Officer's view.
  
  Question Referred:
  - Whether the Tribunal was correct in holding that the respondent's case did not fall under the exception provided in clause (j) of rule 6DD of the Income-tax Rules, 1962.
  
  Rule 6DD and Circular No. 220:
  - Clause (j) of rule 6DD provides relief from section 40A(3) for payments not made by crossed cheque or bank draft due to exceptional circumstances.
  - Circular No. 220 outlines illustrative circumstances where rule 6DD(j) could apply, emphasizing the need for genuine transactions and identification of payees.
  
  Judicial Precedents:
  - Precedents like Navsari Waste Cotton Products v. CIT and Giridharilal Goenka v. CIT emphasize the importance of establishing the seller's identity and considering business expediency in applying rule 6DD(j).
  - Hasanand Pinjomal v. CIT highlights that practicability under rule 6DD(j) should be viewed from a businessman's perspective, considering business expediency.
  
  Conclusion:
  - The payments made in cash to Amrit Banaspati Company were found to fall within the exemption provided in clause (j) of rule 6DD, supported by the genuine nature of transactions and business expediency.
  - Distinction drawn from the precedent Hari Chand Virender Paul v. CIT, where different circumstances led to a different outcome, supports the assessee's position in this case.
  - Considering the settled legal position and the specific circumstances, the reference was answered in favor of the assessee, with no costs awarded.

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• 1991 (5) TMI 29
  
  Issues:
  Interpretation of sales tax liability for the assessment year 1975-76 based on demand notice received in 1974, applicability of Supreme Court judgments on sales tax liability, determination of when sales tax liability accrued, and the deductibility of sales tax liability in accounting for total income.
  
  Analysis:
  The case involved a reference under section 256(2) of the Income-tax Act, 1961, regarding the deduction of sales tax liability amounting to Rs. 2,21,386 for the accounting years ending December 31, 1970, and December 31, 1971. The dispute arose as the assessee claimed that the liability to pay sales tax only arose when demand notices were received in 1974 and 1975, while the Income-tax Officer contended that the liability accrued within the years of sale. The Appellate Assistant Commissioner allowed a deduction of Rs. 1,05,310, which was demanded during the relevant previous year, and disallowed the remaining amount. Both the assessee and the Department appealed this decision before the Tribunal.
  
  The Tribunal considered the unsettled nature of the law regarding sales tax payment on the products in question and held that the liability to pay sales tax arose when the demand notices were received by the assessee. The Tribunal supported the Appellate Assistant Commissioner's decision to allow the deduction of the sum demanded in the relevant previous year. The judgment referenced Supreme Court cases such as K. G. Khosla and Co. (P.) Ltd. [1966] 17 STC 473 and Binani Bros. (P.) Ltd. [1974] 33 STC 254 to establish the timeline of liability accrual based on sales and import transactions.
  
  The High Court affirmed the Tribunal's decision, emphasizing that the liability became real and enforceable when the demand notice was served by the Commercial Tax Officer during the relevant previous year. Citing the case of CIT v. Teesta Valley Co. Ltd. [1991] 187 ITR 657, the court concluded that the liability accrued when it became real and enforceable, aligning with the principles laid down in relevant judgments. The court answered the reference question in favor of the assessee, supporting the deduction of the sales tax liability demanded during the relevant previous year.
  
  In conclusion, the judgment clarified the timing of sales tax liability accrual, the impact of demand notices on liability enforceability, and the deductibility of sales tax in accounting for total income based on established legal principles and Supreme Court precedents.

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• 1991 (5) TMI 28
  
  Issues:
  1. Validity of notices issued under section 226(3) of the Income-tax Act, 1961.
  2. Effect of setting aside assessment orders on orders of attachment under section 226(3).
  
  Analysis:
  
  Issue 1: Validity of notices issued under section 226(3)
  The petitioner challenged the validity of the notices issued under section 226(3) on the grounds that the order dated February 3, 1978, addressed to the firm lapsed when the appeals filed by the defaulter were allowed and the assessment orders were set aside. The petitioner argued that he could not remit the amount held on behalf of the defaulter due to stay orders and instructions from the defaulter. The Income-tax Officer contended that the order of attachment remained valid even after the assessments were set aside, as fresh assessments were made resulting in a substantial tax demand. The court noted that there is no provision in the Act or Rules to keep an attachment order alive after the assessment giving rise to it is set aside. The court held that the order of attachment under section 226(3) ceases to be effective once the assessment is set aside, as the attachment has no independent existence without a valid assessment order.
  
  Issue 2: Effect of setting aside assessment orders on orders of attachment
  The court referred to the decision in ITO v. Seghu Buchiah Setty [1964] 52 ITR 538, which mandated serving a fresh demand notice if the tax assessed was reduced on appeal. The court highlighted that there was no similar provision in section 226. The court emphasized that the attachment order does not survive when the assessment order is set aside, even if a direction for a fresh assessment is given. The court concluded that the attachment order dated February 3, 1978, ceased to be effective when the assessment orders were set aside, and subsequent notices were invalid. The court quashed the order under section 226(3) dated December 26, 1988, as there was no valid attachment in force when the amount was paid to the defaulter.
  
  In conclusion, the court held that the notices issued under section 226(3) were invalid, and the order of attachment ceased to be effective once the assessment orders were set aside. The court quashed the impugned notice dated February 15, 1989, and the order under section 226(3) dated December 26, 1988. The writ petition was disposed of with no order as to costs.

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• 1991 (5) TMI 27
  
  Issues involved:
  The judgment involves the interpretation of the provisions of section 32(1)(vi) of the Income-tax Act, 1961, and the question of whether a claim not made before the Income-tax Officer can be raised in subsequent proceedings.
  
  Interpretation of Section 32(1)(vi):
  The assessee-petitioner filed a revision petition under section 264 of the Income-tax Act, 1961, seeking deduction under section 32(1)(vi) for a manufacturing plant installed in a small-scale unit. The revisional court initially declined to interfere, citing the precedent in Addl. CIT v. Gurjargravures P. Ltd. [1978] 111 ITR 1, emphasizing that claims not made before the Income-tax Officer cannot be raised later.
  
  Misappreciation of Legal Ruling:
  The petitioner contended that the revisional court misinterpreted the ruling in Addl. CIT v. Gurjargravures P. Ltd. [1978] 111 ITR 1 and failed to consider the material supporting the claim. The court highlighted the importance of having material on record to sustain a claim, as seen in previous legal precedents.
  
  Precedents and Legal Interpretation:
  Reference was made to the case of Subhash Chandra Sarvesh Kumar v. CIT [1981] 132 ITR 619, where it was clarified that if there is material supporting a claim, even if not formally made before the Income-tax Officer, the claim should be considered. Additionally, the ruling in Parekh Brothers v. CIT [1984] 150 ITR 105 emphasized that claims made in a revision application must be duly considered.
  
  Scope of Judicial Discretion:
  The judgment also discussed the scope of judicial discretion in admitting new grounds or evidence, as outlined in the case of Jute Corporation of India Ltd. v. CIT [1991] 187 ITR 688. It was emphasized that each case should be considered based on its own facts, and the Appellate Assistant Commissioner has the discretion to admit new grounds if satisfied with the reasons provided.
  
  Decision and Remand:
  The High Court found that the revisional court erred in dismissing the revision petition without examining the merits of the claim. The judgment was quashed, and the case was remanded back to the revisional court for a reconsideration of the claim in light of the legal discussions provided. No costs were awarded in this matter.

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• 1991 (5) TMI 26
  
  Issues Involved:
  1. Entitlement to investment allowance on additional liability due to exchange rate fluctuation.
  2. Requirement of creating an investment allowance reserve.
  
  Summary:
  
  Issue 1: Entitlement to Investment Allowance on Additional Liability Due to Exchange Rate Fluctuation
  The primary issue was whether the assessee was entitled to investment allowance on a sum of Rs. 4,04,741, which represented additional liability due to variation in the exchange rate related to foreign loan liability. The Tribunal held that the assessee was entitled to investment allowance and directed the Income-tax Officer to provide the assessee an opportunity to create a reserve before allowing the investment allowance. The court referenced previous judgments, including Union Carbide India Ltd. v. CIT [1981] 130 ITR 351 and CIT v. Bharat General and Textile Industries Ltd. [1986] 157 ITR 158, which established that additional liability due to exchange rate fluctuation should be added to the cost of acquisition of the asset, thus qualifying for investment allowance. The court reiterated that the provisions of section 43A of the Income-tax Act, 1961, apply in such cases, and any additional liability on the date of repayment due to exchange rate fluctuation should be capitalized.
  
  Issue 2: Requirement of Creating an Investment Allowance Reserve
  The second issue was whether the Tribunal was correct in directing the Income-tax Officer to allow the assessee an opportunity to create a reserve before granting the investment allowance. The court discussed the conditions u/s 32A(4)(ii) of the Income-tax Act, 1961, which require the creation of an "investment allowance reserve" equal to 75% of the investment allowance to be allowed. The court referenced the Supreme Court decision in Shri Shubhlaxmi Mills Ltd. v. Addl. CIT [1989] 177 ITR 193, which emphasized the necessity of creating such a reserve in the relevant previous year. However, the Finance Act, 1990, amended section 32A(4)(ii) retrospectively from April 1, 1976, allowing the reserve to be created in any previous year in respect of which the deduction is to be allowed or any earlier previous year not earlier than the year in which the asset was first put to use. The court found no infirmity in the Tribunal's direction to allow the assessee an opportunity to create the reserve, in line with the amended provisions.
  
  Conclusion:
  The court concluded that the assessee is entitled to investment allowance on the additional liability due to exchange rate fluctuation, provided the liability is capitalized on the date of actual payment. The Income-tax Officer is directed to allow the assessee an opportunity to create the necessary reserve for such additional sums eligible for investment allowance. There will be no order as to costs.

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• 1991 (5) TMI 25
  
  Issues:
  - Interpretation of the right of occupation granted by a company to the assessees.
  - Determination of whether the right of occupation constitutes an asset for wealth-tax assessment.
  - Assessment of the market value of the right of occupation.
  - Analysis of the legal definition of "assets" under the Wealth-tax Act.
  - Consideration of restrictions on the right of occupation in determining its market value.
  
  Interpretation of the Right of Occupation:
  The case involved two sisters who jointly acquired shares in a company, granting them the right to occupy a property in Bombay. The company required deposits and monthly compensation from the sisters for the occupation. The Wealth-tax Officer initially included the value of this right of occupation in the sisters' wealth. However, the Tribunal later held that the right was merely a leave and licence, not constituting substantial property, and upheld the deletion of its value in wealth-tax assessment.
  
  Definition of "Assets" and Market Value Assessment:
  The Revenue contended that the right of occupation in a prime Bombay location constituted valuable property and should be included in assessable wealth. The Tribunal's view that the right had no market value was challenged. The court analyzed the inclusive definition of "assets" under the Wealth-tax Act, emphasizing the broad concept of property. Referring to past judgments, the court concluded that the right of occupation, despite restrictions, was transferable for consideration and thus constituted an asset with market value, contrary to the Tribunal's decision.
  
  Legal Precedents and Relevance of Case Law:
  The court rejected the assessees' reliance on a Supreme Court judgment involving a tenant holding over, distinguishing it from the indefinite and transferable nature of the right of occupation in this case. The court emphasized that the restrictions on the right might affect valuation but did not negate its status as an asset. Ultimately, the court ruled in favor of the Revenue, holding that the right of occupation had market value and should be included in the assessable wealth of the assessees.
  
  Conclusion:
  The court's decision clarified that the right of occupation granted by the company to the assessees constituted an asset with market value, contrary to the Tribunal's finding. By interpreting the legal definition of "assets" broadly and considering the transferability of the right for consideration, the court held that the right of occupation should be included in the wealth-tax assessment. The judgment highlighted the importance of analyzing the specific terms and nature of rights granted in determining their status as assets for taxation purposes.

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• 1991 (5) TMI 24
  
  Issues Involved:
  The issue involves the correct interpretation of section 43B of the Income-tax Act, 1961, regarding the modification of an order under section 263 for the assessment year 1984-85 based on the decision of the Andhra Pradesh High Court in a specific case.
  
  Judgment Details:
  
  1. Facts and Assessment:
  The assessment for the year 1984-85 of the assessee-company was completed under section 143(3), where a current liability of Rs. 3,79,166 was shown in the balance-sheet, including amounts for various sales taxes. The sales tax realised from customers is considered part of sales turnover, which was not included in the reported turnover of Rs. 4,75,51,840, leading to underassessment.
  
  2. Commissioner's Action:
  The Commissioner found the assessment erroneous and prejudicial to Revenue's interests, initiating proceedings under section 263. The Commissioner held that the sums representing sales tax realised should be assessed as income, setting aside the assessment and directing a fresh assessment by the Income-tax Officer.
  
  3. Tribunal's Decision:
  The Tribunal, guided by the Andhra Pradesh High Court's decision and principles from relevant cases, modified the Commissioner's direction for a fresh assessment. The Tribunal considered the Supreme Court's decision in Kedarnath Jute Mfg. Co. Ltd. v. CIT and upheld the assessee's right to be heard.
  
  4. Court's Conclusion:
  The High Court, referencing a prior judgment, answered the reference question affirmatively, directing the Tribunal to decide the appeal based on established principles. The judges agreed on the decision, and no costs were awarded in the matter.
  
  This judgment clarifies the application of section 43B of the Income-tax Act, 1961, in assessing liabilities related to sales tax realisation, emphasizing the need for accurate turnover calculation and proper assessment procedures to ensure fairness and compliance with legal provisions.

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• 1991 (5) TMI 23
  
  Issues Involved:
  1. Validity of proceedings under Section 226(4) of the Income-tax Act without notice to the assessee.
  2. Ownership of the deposited amount and its appropriateness for tax recovery under Section 226(4) of the Income-tax Act.
  
  Issue-wise Detailed Analysis:
  
  1. Validity of Proceedings under Section 226(4) of the Income-tax Act Without Notice to the Assessee:
  
  The petitioner argued that the proceedings initiated by the Income-tax Department under Section 226(4) of the Income-tax Act were invalid due to the lack of notice. The petitioner relied on the case of National Textile Corporation Ltd. v. IAC of I.T. [1990] 181 ITR 351, which emphasized the necessity of notice under Section 226(3).
  
  However, the court differentiated between Sections 226(3) and 226(4) of the Act. Section 226(3) mandates a notice in writing by the Income-tax Officer to the person holding money for the assessee, allowing objections to be filed. Conversely, Section 226(4) permits the Income-tax Officer to apply directly to the court holding the money without requiring notice to the assessee. The court reasoned that judicial proceedings under Section 226(4) inherently provide an opportunity for the assessee to be heard, as the court must pass a judicial order after considering all parties involved. Thus, the court concluded that Section 226(4) does not necessitate a notice to the assessee.
  
  2. Ownership of the Deposited Amount and Its Appropriateness for Tax Recovery Under Section 226(4) of the Income-tax Act:
  
  The petitioner contended that the deposited amount under the High Court's order did not belong to them, and thus, could not be appropriated by the Income-tax Department. The petitioner cited cases such as Syed Khaja v. Raghavendra Rao [1976] 103 ITR 294 (AP) and State v. P. Topno, ITO [1959] 36 ITR 135 (Orissa) to support their claim.
  
  The court examined these cases and found them inapplicable. In the case of State v. P. Topno, ITO, the issue was related to proceedings under the Companies Act, which was not relevant in the present context. In Syed Khaja v. Raghavendra Rao, the court had ruled that the deposited amount, earmarked for a specific purpose, ceased to be the property of the petitioner. However, the present case differed as the amount was deposited under court orders without specific earmarking.
  
  The court then referred to the case of Sri Ramalingeswara Rice and Oil Mill Co. Ltd. v. Addl. ITO, AIR 1964 AP 74, which held that a deposited amount remains the property of the depositor until appropriated by a judicial order. The High Court's order on September 12, 1990, allowed half of the deposited amount to be withdrawn without security and the other half upon furnishing security. The court concluded that the amount allowed to be withdrawn without security belonged to the petitioner and could be appropriated by the Income-tax Department under Section 226(4). However, the amount requiring security did not belong to the petitioner until the security was furnished.
  
  Conclusion:
  
  The court dismissed the writ petition, ruling that the request made by the Assistant Commissioner of Income-tax under Section 226(4) of the Act was valid. The court held that the amount allowed to be withdrawn without security belonged to the petitioner and could be appropriated by the Income-tax Department. The amount requiring security would belong to the petitioner only after furnishing the security, at which point the Income-tax Department's request could be considered. The writ petition was dismissed with costs.

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• 1991 (5) TMI 22
  
  Issues:
  - Claim for interest under section 244(lA) of the Income-tax Act, 1961 on refunded surtax amount.
  - Rejection of the claim by the Assistant Commissioner of Income-tax.
  - Writ petition filed by the petitioners challenging the rejection.
  - Consideration of alternative remedy under article 226 of the Constitution of India.
  
  Analysis:
  The judgment delivered by the High Court of ALLAHABAD pertained to a case involving the Cawnpore Chemical Works (P.) Ltd., a private limited company, and its managing director. The company was assessed to surtax under the Companies (Profits) Surtax Act, 1964, for the years 1978-79 and 1979-80. Following regular assessments, the company became entitled to a refund, which was duly refunded. Subsequently, the company claimed interest under section 244(lA) of the Income-tax Act, 1961, on the refunded surtax amount. However, the claim was rejected by the Assistant Commissioner of Income-tax, leading to the filing of a writ petition (Writ Petition No. 1547 of 1990) by the petitioners. The court directed the authority to communicate the order disposing of the application to the petitioners within a specified time frame.
  
  The court, in its judgment, highlighted the principle that the existence of an alternative remedy is not an absolute bar to seeking relief under article 226 of the Constitution of India. However, it emphasized that the writ jurisdiction should not be used to bypass statutory procedures unless the statutory remedies are inadequate or ineffective. The court cited the case of Assistant Collector of Central Excise v. Dunlop India Limited to underscore that statutory remedies should be exhausted unless the situation falls within exceptional circumstances where bypassing statutory remedies is justified. In the present case, the court found that the petitioners had not shown that the statutory remedies available under the Surtax Act were inadequate or that the impugned order was ultra vires or lacked jurisdiction. The court concluded that the petitioners should pursue the statutory remedies available under the Companies (Profits) Surtax Act, 1964, for seeking redress.
  
  Ultimately, the court summarily rejected the writ petition, advising the petitioners to avail themselves of the alternative remedy under the Surtax Act. The court also directed that if the petitioners opt for the alternative forum, the authority concerned should decide the case expeditiously. The judgment underscored the importance of exhausting statutory remedies before seeking relief through extraordinary writ jurisdiction under article 226 of the Constitution of India.

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• 1991 (5) TMI 21
  
  Issues:
  Challenge to a complaint filed under sections 276C, 277, and 278B of the Income-tax Act, 1961.
  
  Analysis:
  The petitioners sought to quash a complaint alleging a fictitious liability to evade tax. The complaint stated that no SRP personnel were deployed at the factory, making the liability false. The petitioners argued jurisdictional issues based on subsequent developments, accounting principles, and lack of wilful tax evasion.
  
  The respondents contended that the complaint disclosed offenses under the Income-tax Act sections cited. They argued that delayed bills from the government did not invalidate the complaint and suggested producing bills for verification.
  
  The judge upheld the respondents' contentions. She found that the complaint was not without jurisdiction based on the facts presented. The mercantile accounting system's principles were discussed, emphasizing the disputed liability's basis in the complaint.
  
  The judge rejected the petitioners' argument regarding lack of wilful tax evasion due to the statutory presumption of a guilty mind under section 278E of the Act. The judge noted that previous cases cited by the petitioners did not consider this statutory provision.
  
  Regarding the petitioners' reliance on Madhavrao Jiwaji Rao Scindia's case, the judge clarified the test for quashing a criminal proceeding. She highlighted that the likelihood of conviction should be assessed based on the complaint's allegations, not the accused's defense.
  
  Ultimately, the judge dismissed the writ application, allowing the petitioners to raise their points before the Magistrate. The judge emphasized that the defense's strength should not be a general basis for quashing a complaint. The court's decision was based on the presented facts, and no costs were awarded.
  
  In conclusion, the judge rejected the petitioners' challenges to the complaint, emphasizing the importance of considering the complaint's allegations rather than the accused's defense when assessing the likelihood of conviction. The court upheld the complaint's validity and allowed the petitioners to address their concerns before the Magistrate.

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