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Case Laws
Showing 261 to 280 of 699 Records
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1966 (9) TMI 34
Whether the expenses of ₹ 20,035 incurred in the assessment year 1949-50 and ₹ 5,912 (relating to the assessment year 1950-51) being the cost paid to Government as directed by the Privy Council were expenses incurred in the ordinary course of business and allowable as deductions ?
Held that:- Expenditure incurred to resist in a civil proceeding the enforcement of a measure--legislative or executive--which imposes restrictions on the carrying on of a business, or to obtain a declaration that the measure is invalid would, if other conditions are satisfied, be admissible, in our judgment, under section 10(2)(xv) as a permissible deduction in the computation of taxable income.
The appeals are therefore allowed in favour of assessee.
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1966 (9) TMI 33
Whether the Income-tax Appellate Tribunal had evidence or material for the finding that there was deliberate fabrication of the accounts by the assessee-company in order to claim the loss in the return and the imposition of penalty upon the company under section 28(1)(c) of the Act is proper and valid ?
Whether in view of the finding of the Tribunal, in the appeal against the assessment, that the transaction was not a trading transaction of the company, the company could be made liable for penalty under section 28(1)(c) of the Act ?
Held that:- The question on which a reference to the High Court was sought was a limited question and the Tribunal declined to refer the question because it did not arise out of its order, the question not having been raised before or decided by the Tribunal. The question sought to be raised before the High Court in a reference under section 66(2) was not an aspect of a question raised before the Tribunal : it was a new question which was never raised before the Tribunal. The High Court was, therefore, right in rejecting the prayer for an order under section 66(2) of the Act. Appeal dismissed.
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1966 (9) TMI 32
The Supreme Court dismissed the appeal of a public limited company regarding the disallowance of a deduction claimed for compensation paid for breach of contracts related to the purchase of textile machinery. The court held that the payment was a capital expenditure to avoid unnecessary investment in assets, not for the purpose of earning profits, and therefore not eligible for deduction under the Income-tax Act. The decision was based on the nature of the payment and previous legal precedent.
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1966 (9) TMI 31
Whether, on the facts and in the circumstances of the case, the amount of ₹ 25,700 paid by the assessee by way of penalty to the Government of Orissa shall be an admissible deduction under section 10(1) of the Income-tax Act, 1922 ?
Held that:- What the appellant had claimed was that, in the computation of profits and gains of business, profession or vocation under section 10(1) of the Act, this amount should be deducted, which was intended to mean that this amount should not be included in the computation of the profits and gains of the business. The word " deduction " appears to have been used by the appellant as well as by the Tribunal only because the dispute related to a sum which had been deducted by the Government of Orissa as a penalty from the amount due to the appellant for the supplies made by him in pursuance of the agreement. The High Court, therefore, in answering the question referred to it, should not have gone into the question of the applicability of section 10(2)(xv) of the Act at all, and should have confined itself to deciding whether this amount deducted from the claims of the assessee by the Government of Orissa was liable to be excluded when computing the income under section 10(1) of the Act. The decision given by the High Court is, therefore, liable to be quashed and a direction is necessary to the High Court to answer the question really referred to it. Appeal allowed.
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1966 (9) TMI 30
Whether the sum of ₹ 1,11,090 paid as remuneration to the five directors of the assessee-company during the relevant previous year was an expenditure incurred wholly and exclusively for the purpose of the business under section 10(2)(xv) of the Income-tax Act ?
Held that:- The payment of the commission was made to the directors for extra-commercial reasons and was not wholly and exclusively made for the purpose of the business. the expenditure was not incurred wholly and exclusively for the purposes of the business of the appellant-company thus the appellant was not entitled to claim deduction of this expenditure under section 10(2)(xv) of the Income-tax Act. Appeal dismissed.
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1966 (9) TMI 29
Issues:
Interpretation of section 10 of the Estate Duty Act regarding the inclusion of gifted property in the computation of the deceased's estate.
Detailed Analysis:
The judgment involves a dispute regarding the inclusion of a gifted property in the estate left by the deceased under the provisions of section 10 of the Estate Duty Act. The deceased had transferred a portion of his capital to his sons, who later became partners in the firm. The accountable persons contended that the deceased did not retain any interest in the gifted amount or profits, while the tax authorities argued that the gifts should be considered as property passing on the deceased's death.
The Assistant Controller of Estate Duty held that the amount transferred by the deceased to his sons constituted gifts and should be included in the estate. The Appellate Controller and the Tribunal also upheld this view, relying on previous case law. However, the Tribunal emphasized that the deceased had not received any benefit from the gifted property, as it was proportionate to the money invested, and the sons were independent partners in the firm.
The Tribunal's decision was subsequently rectified, increasing the amount to be included in the estate. The reference to the High Court under section 64(1) of the Act sought clarification on whether the increased sum should be part of the deceased's estate. The High Court analyzed the provisions of section 10, emphasizing the requirement that the donor must not retain any benefit from the gifted property for it to be included in the estate.
The Court noted that the gifts in question were shares in an existing firm, and the profits were being paid to the donees since the gifts were made. It concluded that the deceased did not retain any benefit from the gifted property, as the donees had legal possession and management of the assets. Therefore, the Court held that the gifted property did not fall within the scope of section 10 of the Act, and the increased sum should not be included in the computation of the deceased's estate.
In conclusion, the High Court ruled in favor of the accountable persons, stating that the sum in question should not be included in the estate left by the deceased. The Court awarded costs to the assessee and clarified the interpretation of section 10 in the context of gifted property and estate duty computation.
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1966 (9) TMI 28
Undisclosed profit - In the return filed by assessee showed a loss and after making certain adjustments the registered accountant of the assessee admitted a loss - held that there was no material for the Tribunal to come to the conclusion that the sum of Rs. 8,050 was an undisclosed profit and assessable as such in her account
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1966 (9) TMI 27
Issues Involved:
1. Validity of the partnership between Anoop Kunwar and Jugraj.
2. Interpretation of "possessed" under Section 14(1) of the Hindu Succession Act.
3. Determination of Anoop Kunwar's interest in the family properties.
4. Applicability of Section 3(2) of the Hindu Women's Right to Property Act, 1937.
Issue-wise Detailed Analysis:
1. Validity of the Partnership between Anoop Kunwar and Jugraj:
The primary question for decision was whether the partnership formed between Anoop Kunwar and her adopted son Jugraj was valid and should be granted registration under Section 26A of the Indian Income-tax Act, 1922. The Tribunal had previously reversed the Appellate Assistant Commissioner's order, which had affirmed the Income-tax Officer's rejection of the registration application. The Tribunal directed that the firm be registered, leading to this reference at the instance of the Commissioner.
2. Interpretation of "Possessed" under Section 14(1) of the Hindu Succession Act:
Section 14(1) of the Hindu Succession Act states that any property possessed by a female Hindu shall be held by her as full owner and not as a limited owner. The court had to determine whether "possessed" referred to physical possession or possession in law. The term "possessed" has been interpreted broadly in numerous decisions, including the Supreme Court's ruling in Kotturswami v. Veeravva, where it was held that "possessed" means the state of owning or having in one's hand or power, including both actual and constructive possession.
3. Determination of Anoop Kunwar's Interest in the Family Properties:
The court examined whether Anoop Kunwar had an independent share in the family properties or merely an interest as a member of a Hindu undivided family. Upon the death of her husband Seshmull on September 15, 1955, Anoop Kunwar obtained the same interest in the family properties as her husband had. With Jugraj's adoption, it was deemed that there were two coparceners in the family at the time of Seshmull's death, each holding a half share. The share of Seshmull devolved on Anoop Kunwar, and she became the full owner of that interest on June 17, 1956, when the Hindu Succession Act came into force.
4. Applicability of Section 3(2) of the Hindu Women's Right to Property Act, 1937:
The court considered the rights obtained by Anoop Kunwar under Section 3(2) of the Hindu Women's Right to Property Act, 1937. Although she initially had only a life interest in the property, Section 14(1) of the Hindu Succession Act transformed this limited estate into an absolute estate. The court noted that the estate obtained by a Hindu widow under Section 3(2) of Act 18 of 1937 is a statutory estate, defined and fixed, unaffected by subsequent births or deaths in the family.
Conclusion:
The court concluded that Anoop Kunwar had a definite interest of her own in the partnership assets when she and Jugraj entered into the partnership on September 5, 1959. Therefore, the partnership was valid, and the Tribunal was right in holding that registration should be granted to the firm. The assessee was entitled to the costs of this reference, with an advocate's fee of Rs. 250.
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1966 (9) TMI 26
Issues:
Interpretation of section 139(1) and 139(2) of the Income-tax Act, 1961 regarding the timeline for filing income tax returns and the authority of the Income-tax Officer to demand returns.
Analysis:
The writ petition involved a dispute between Messrs. Tarzan Hosiery Private Limited and the Income-tax Officer of District I(B) Ward of Kanpur regarding the filing of income tax returns for the assessment year 1964-65. The petitioner received a notice under section 139(2) of the Income-tax Act, 1961, requiring the filing of a return by July 25, 1964, which the petitioner failed to meet due to a denied extension request. The petitioner argued that they were entitled to file the return by September 30, 1964, as per section 139(1) and that the demand by the respondent was illegal.
The High Court analyzed the provisions of section 139(1) and 139(2) to determine their interplay. It was held that these two subsections deal with distinct aspects of return submission: sub-section (1) imposes an obligation to file a return within a specified time, while sub-section (2) empowers the Income-tax Officer to demand a return before the end of the assessment year. The court found no conflict between these provisions and concluded that both should operate simultaneously.
Moreover, the court examined section 139(7), which allows for a return under sub-section (2) to be demanded and furnished before the return under sub-section (1) is due. The petitioner's argument that this provision was only for exceptional cases was dismissed, and the court emphasized that sub-section (7) applies beyond those specific circumstances.
The judgment also addressed practical difficulties that could arise if sub-section (2) were interpreted to operate only after the period prescribed by sub-section (1). The court highlighted that such an interpretation could lead to anomalous situations, indicating that the framers of the Act did not intend such outcomes.
Regarding the petitioner's claim of a potential infringement of article 14 of the Constitution due to discrimination by the Income-tax Officer, the court held that the provisions of section 139 apply uniformly to all assessees without discrimination. While acknowledging the possibility of individual cases of unfair discrimination, the court found no evidence of such discrimination in the present case.
Ultimately, the High Court dismissed the writ petition, ruling that sub-section (2) of section 139 can be exercised at any time during the relevant assessment year, not solely after the expiry of the period prescribed by sub-section (1). The court also rejected the contention that sub-section (2) infringes article 14 of the Constitution, concluding that the petition failed and should be dismissed with costs.
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1966 (9) TMI 25
Additions - Income-tax Officer as well as the Appellate Assistant Commissioner had rejected the books maintained by the assessee - held that there was no material for the Tribunal to apply the proviso to section 13 and to add the sum as income
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1966 (9) TMI 24
Issues Involved:
1. Validity and legality of the notice under section 148 of the Income-tax Act, 1961.
2. Competence and jurisdiction of the Income-tax Officer to reopen the assessment under section 147(a) of the Income-tax Act, 1961.
3. Alleged failure or omission by the petitioner to disclose material facts necessary for assessment.
Issue-wise Detailed Analysis:
1. Validity and legality of the notice under section 148 of the Income-tax Act, 1961:
The petitioner challenged the notice dated February 22, 1966, issued by the Income-tax Officer under section 148 for reopening the assessment for the year 1961-62. The petitioner argued that the conditions precedent for issuing such a notice, as stipulated under section 147, were not satisfied. The court examined whether the Income-tax Officer had valid grounds for believing that income had escaped assessment due to the petitioner's failure to disclose material facts.
2. Competence and jurisdiction of the Income-tax Officer to reopen the assessment under section 147(a) of the Income-tax Act, 1961:
The petitioner contended that the Income-tax Officer lacked the jurisdiction to reopen the assessment because the conditions under section 147(a) were not met. The court noted that section 147(a) requires two conditions: (1) the Income-tax Officer must have reason to believe that income chargeable to tax has been under-assessed, and (2) this under-assessment must be due to the assessee's omission or failure to disclose fully and truly all material facts necessary for the assessment. The court emphasized that these conditions are mandatory for the Income-tax Officer to exercise jurisdiction.
3. Alleged failure or omission by the petitioner to disclose material facts necessary for assessment:
The Income-tax Officer argued that the petitioner failed to disclose the sale of property, the purchase price, the fair market value as on January 1, 1954, and the expenses incurred in the sale. The court examined the petitioner's disclosure history, including wealth-tax returns and the wealth-tax clearance certificate obtained at the time of the sale. The court found that the petitioner had disclosed all relevant facts to the officer dealing with both wealth-tax and income-tax assessments, who was the same individual, Mr. N. C. Khasnabis. The court concluded that the officer had been aware of all material facts, and the current officer's different opinion on valuation did not constitute grounds for reopening the assessment.
Conclusion:
The court held that the conditions under section 147(a) were not satisfied, as there was no failure or omission by the petitioner to disclose material facts. Consequently, the Income-tax Officer lacked the jurisdiction to reopen the assessment. The rule was made absolute, and the notice under section 148 was quashed. There was no order as to costs.
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1966 (9) TMI 23
Issues:
Interpretation of the second proviso to section 24(1) of the Indian Income-tax Act, 1922 regarding the set-off of losses from an unregistered firm against income from other sources.
Detailed Analysis:
The case involved a question on whether the assessee's claim to set off his share of the loss from an unregistered firm against his income from other sources was rightly disallowed under the second proviso to section 24(1) of the Income-tax Act. The assessee, an individual, was a partner in an unregistered firm and claimed to set off his share of loss amounting to Rs. 50,587 against his income from salary, property, and dividends. However, the Income-tax Officer, the Appellate Assistant Commissioner, and the Tribunal refused this claim, citing that the loss from the unregistered firm could only be set off against the firm's income, profits, and gains, not against the partners' income.
The interpretation of the second proviso to section 24(1) was a crucial aspect of the case. The provision stated that where the assessee is an unregistered firm, any loss shall be set off only against the income of the firm, not against the partners' income. The court emphasized that the expression "where the assessee is an unregistered firm" in the proviso restricts the set-off of losses under the general rule of section 24(1) to only the income of the unregistered firm, excluding the partners' income.
The court rejected the argument presented by the assessee's counsel, emphasizing that the requirement of being an unregistered firm, as specified in the second proviso, must be fulfilled for the loss set-off. The court highlighted that allowing partners of unregistered firms to claim set-off against their individual income would defeat the purpose of the proviso and lead to confusion between different capacities and entities. The court also referred to previous judgments and legal interpretations to support its decision, including the observations of the Supreme Court and decisions from other High Courts.
Ultimately, the court answered the question in the affirmative, affirming that the assessee's claim for set-off against income from other sources was rightly disallowed under the second proviso to section 24(1) of the Income-tax Act. The judgment concluded with no order as to costs, and both judges concurred with the decision.
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1966 (9) TMI 22
The High Court of Kerala allowed the appeal, setting aside the penalty order for non-payment of certain amounts covered by earlier penalty orders due to the distinction between tax and penalty under the Income-tax Act. The court upheld its previous decisions in similar cases and did not agree with the interpretation of the Allahabad High Court. No costs were awarded. (Case citation: 1966 (9) TMI 22 - KERALA High Court)
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1966 (9) TMI 21
The High Court of Patna ruled in favor of the assessee, Rohtas Industries Limited, allowing the deduction of Rs. 9,062 for expenses incurred in a patent rights infringement case. The expenditure was deemed deductible under section 10(2)(xv) of the Indian Income-tax Act as it was incurred exclusively for business purposes. The judgment was made in Tax Case No. 12 of 1965, with no order for costs.
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1966 (9) TMI 20
Issues:
1. Dispute over the valuation of a house property for wealth tax purposes.
Analysis:
The case involved a dispute regarding the valuation of a house property for wealth tax assessment purposes. The assessee had purchased a property in 1955, but due to a legal dispute with an occupant claiming to be the second wife of the original owner, the assessee could not take possession or derive any benefits from the property. The Wealth-tax Officer valued the property at Rs. 70,000, considering the fair market value, which was contested by the assessee. The Appellate Assistant Commissioner viewed the legal ownership as conditional due to the ongoing legal dispute and considered the amount paid by the assessee as an advance, restricting the property value to Rs. 25,000. The Appellate Tribunal acknowledged the dispute but upheld the assessment, estimating the fair market value at Rs. 50,000 due to various considerations, including the presence of the objecting party and difficulties in obtaining vacant possession.
The main legal question before the court was whether the inclusion of the property at its fair market value for wealth tax assessment was justified. The court, in its judgment, emphasized that the ownership of the property was not in dispute between the assessee and the Wealth-tax Officer. Despite the ongoing legal dispute with the occupant, the court held that as long as the assessee claimed ownership, the property's market value had to be considered for wealth tax calculation. The court rejected the assessee's request to keep the assessment proceedings in abeyance, stating that there was no provision in the Wealth-tax Act to support such a request. Ultimately, the court concluded that the inclusion of the property's fair market value in the net wealth of the assessee was justified and in accordance with the law, ruling against the assessee and ordering them to pay the costs of the department.
In conclusion, the judgment resolved the dispute over the valuation of the house property for wealth tax purposes, affirming the inclusion of the property's fair market value in the net wealth assessment of the assessee despite the ongoing legal dispute over ownership.
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1966 (9) TMI 19
Assessee entered into a contract for supply of coal to Japan - commission paid - There was nothing by way of advantage of any enduring benefit in that transaction; neither the assessee obtained any monopoly rights nor any abnormal concessions in regard to the supply of coal in that country or to their purchasers - entire commission is allowable as a deduction under s. 10(2)(xv)
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1966 (9) TMI 18
Payment was made to compensate a person for cancellation of a contract - not affect the trading structure of the assessee`s business - termination of the contract was normal incident of the business and that such cancellation left the assessee free to carry on his trade freed from the contract terminated - so it was a revenue recipt - assessable to tax
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1966 (9) TMI 17
Assessee produced vanaspati vegetable oil. Their directors and principal officers were prosecuted - held that sum incurred in defending the criminal proceedings against the company and its officers was a permissible deduction for the purpose of computing the profits and gains of the assessee`s business
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1966 (9) TMI 16
Issues:
1. Treatment of a cash credit as income of the assessee for taxation in the year 1947-48.
Analysis:
The judgment pertains to a case under section 66(2) of the Income-tax Act, 1922, where the main issue was whether the sum of Rs. 18,005 credited to the assessee's account should be treated as income liable for taxation in the assessment year 1947-48. The assessee, a partner in a firm, explained that the cash credit was from the sale of gold ornaments brought from Rangoon due to enemy action. However, the Income-tax Officer, Appellate Assistant Commissioner, and Tribunal rejected the explanation, deeming the amount as income from an undisclosed source. The Tribunal found that the source and nature of the cash credit were not satisfactorily proven by the assessee, leading to the question of whether the authorities were justified in inferring it as assessable income.
The judgment discusses precedents such as Mithoo Lal Tek Chand v. Commissioner of Income-tax, emphasizing that the period between the credit entry and the commencement of the accounting year is not determinative of whether the sum is income. It cites Govindarajulu Mudaliar v. Commissioner of Income-tax, highlighting that if the source and nature of a cash credit are not satisfactorily proved, the Income-tax Officer can infer it as assessable income. The judgment also refers to Devi Prasad Vishwanath Prasad v. Commissioner of Income-tax, where the inclusion of unexplained cash credit in total income was discussed. The Supreme Court's stance in A. Govindarajulu Mudaliar's case established that the burden of proving the source of a cash credit lies with the assessee, and in the absence of such proof, it can be treated as taxable income.
Further, the judgment addresses the contention that the burden of proof may shift if the source of the receipt is disclosed by the assessee, as seen in Parimisetti Seetharamamma v. Commissioner of Income-tax. However, it clarifies that the onus remains on the assessee to satisfactorily prove the source and nature of the receipt. Ultimately, the court upholds the Tribunal's decision, stating that the inference drawn regarding the cash credit being income from an undisclosed source was legally sound. The judgment concludes by answering the question in the affirmative, holding the assessee liable for costs and counsel's fee.
In conclusion, the judgment delves into the burden of proof regarding cash credits, the authority of income-tax officers to draw inferences, and the significance of disclosing the source of receipts in determining assessable income. The decision underscores the principles established in previous cases and affirms the Tribunal's finding that the cash credit in question constituted income from an undisclosed source, justifying its inclusion in the assessment for the relevant year.
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1966 (9) TMI 15
Issues:
Assessment of share income from partnership firms, rectification of assessment orders, treatment of share income as unearned income, jurisdiction under sections 154 and 155 of the Income-tax Act, 1961.
Analysis:
The judgment revolves around the assessment of the assessee's share income from three partnership firms for the years 1958-59, 1959-60, and 1960-61. Initially, the Income-tax Officer accepted the share income as returned by the assessee subject to rectification later. However, upon completion of assessments of the firms, it was found that the assessee's share of profit needed revision. The Income-tax Officer, under sections 154 and 155 of the Income-tax Act, 1961, issued notices to rectify the share income by including the correct share as determined in the firms' cases. The issue arose when the Income-tax Officer treated the enhanced share income as unearned income, contrary to the original assessments where it was considered earned income.
The Appellate Assistant Commissioner upheld the Income-tax Officer's orders, stating that the character or nature of income can be corrected under section 154, and the legislature intended to allow such corrections. The Appellate Tribunal, however, disagreed, emphasizing that section 155 applies to amend completed assessments of partners and does not allow for changing the character of income. The Tribunal held that the Income-tax Officer should have acted under section 155 instead of section 154.
The High Court, in its analysis, clarified that the Income-tax Officer's action should have been under section 155, as it deals with amending completed assessments of partners. The Court highlighted that section 155 does not permit rectification of mistakes apparent from the record but focuses on amending assessments under specific circumstances. Therefore, the Income-tax Officer was not justified in treating the share income as unearned under section 155. The Court ruled in favor of the assessee, stating that the Income-tax Officer's treatment of the income as unearned was not permissible under section 155.
In conclusion, the High Court's judgment focused on the correct application of sections 154 and 155 of the Income-tax Act, 1961, in rectifying assessment orders and emphasized that section 155 does not allow for changing the character of income in completed assessments of partners. The Court's decision favored the assessee, ruling that the Income-tax Officer was not justified in treating the share income as unearned under section 155.
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