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1983 (11) TMI 156
The appeal by the revenue against the order of the CIT (Appeals), Rajasthan-II, Jaipur for the asst. yr. 1974-75 was dismissed by the Appellate Tribunal ITAT Jaipur. The Tribunal found that the ITO did not correctly invoke the provisions of sec. 147 of the IT Act, 1961 as reasons for reopening the assessment were not recorded, making the notice u/s 148 invalid and bad in law. The addition made by the ITO was deleted.
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1983 (11) TMI 155
Issues Involved:
1. Validity of assessment and reassessment orders under the Income Tax Act and Wealth Tax Act.
2. Competency of Smt. Prabha Golecha to file returns and appeals on behalf of her missing husband, Shri Hem Chand Golecha.
3. Legality of the dismissal of appeals by the CIT(A) and CWT(A) based on procedural grounds.
4. Interpretation of the term "assessee" under Section 2(7) of the Income Tax Act.
5. Presumption of death under Section 108 of the Evidence Act.
Issue-Wise Detailed Analysis:
1. Validity of Assessment and Reassessment Orders:
The appeals concern three orders under the IT Act and two under the WT Act. The orders under the IT Act were passed under Sections 144 read with 147(a) and Section 146 for the assessment years 1977-78 and 1978-79. The WT Act orders pertain to the assessment years 1976-77 and 1977-78. The IAC (Assessment) issued notices under Sections 148, 139(2), and 142(1), but no returns were filed in response, leading to ex parte assessments under Section 144. The reassessment orders were challenged but dismissed by the CIT(A) and CWT(A) because they were not signed by Shri Hem Chand Golecha.
2. Competency of Smt. Prabha Golecha to File Returns and Appeals:
Smt. Prabha Golecha filed returns for the assessment years 1976-77 and 1977-78, asserting that her husband had been missing since July 7, 1976. The IAC (Assessment) did not accept these returns, arguing that she was not competent to file on behalf of her husband. The CIT(A) and CWT(A) dismissed the appeals on the grounds that they were not signed by Shri Hem Chand Golecha. The Tribunal, however, found that Smt. Prabha Golecha could file appeals as an "aggrieved assessee" under Sections 246 and 253 of the IT Act, given that she would be liable for the tax demands as a legal heir.
3. Legality of Dismissal of Appeals by CIT(A) and CWT(A):
The CIT(A) and CWT(A) dismissed the appeals in limine, citing that the forms of appeal, grounds of appeal, and verifications were not signed by Shri Hem Chand Golecha. The Tribunal disagreed, stating that the appeals were filed by Smt. Prabha Golecha, who was competent to do so. The Tribunal held that the defect in the title of the appeals was merely an irregularity, not an invalidity, and could be rectified.
4. Interpretation of "Assessee" under Section 2(7) of the IT Act:
The Tribunal examined whether Smt. Prabha Golecha could be considered an "assessee" under Section 2(7) of the IT Act. It concluded that since the tax demands from the reassessment orders would be recoverable from her and her sons as legal heirs of Shri Hem Chand Golecha, she qualified as an "assessee." The Tribunal referenced the Supreme Court's observation that an "aggrieved person" must be legally deprived of a benefit, which applied to Smt. Prabha Golecha.
5. Presumption of Death under Section 108 of the Evidence Act:
Smt. Prabha Golecha argued that under Section 108 of the Evidence Act, her husband should be presumed dead since he had not been heard from for seven years. However, the Tribunal noted that the appeals were filed before the seven-year period elapsed. Therefore, there was no presumption of death at the time of filing the appeals, and she could not act as a legal heir based on this presumption.
Conclusion:
The Tribunal allowed all the appeals, directing the CIT(A) and CWT(A) to order the appellant to correct the title defects in the forms of appeal and then dispose of the appeals on merits. The Tribunal also directed Smt. Prabha Golecha to amend the titles of her appeals within eight days to substitute her name for her husband's. If the defects were not rectified, the appeals would stand dismissed for non-prosecution.
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1983 (11) TMI 154
Issues Involved:
1. Competency of Smt. Prabha Golecha to file returns and appeals on behalf of her missing husband, Shri Hemchand Golecha.
2. Validity of the appeals filed by Smt. Prabha Golecha under the Income-tax Act and Wealth-tax Act.
3. Presumption of death under Section 108 of the Indian Evidence Act, 1872.
4. Definition and scope of 'assessee' and 'aggrieved assessee' under Sections 2(7), 246, and 253 of the Income-tax Act.
5. Procedural irregularity in the title of appeals and its impact on the validity of appeals.
Issue-wise Detailed Analysis:
1. Competency of Smt. Prabha Golecha to File Returns and Appeals:
The Tribunal examined whether Smt. Prabha Golecha was competent to file returns and appeals on behalf of her husband, Shri Hemchand Golecha, whose whereabouts have been unknown since 7-7-1976. The IAC (Assessment) had issued notices under various sections of the Income-tax Act and Wealth-tax Act to Shri Hemchand Golecha, but no returns were filed in response. Smt. Prabha Golecha filed returns on behalf of her husband, but they were not accepted as she was deemed not competent to file them without proper authorization or proof of her husband's death. The appeals filed by her were dismissed in limine by the Commissioner of Income-tax (Appeals) and the Commissioner of Wealth-tax (Appeals) on similar grounds.
2. Validity of Appeals Filed by Smt. Prabha Golecha:
The Tribunal considered the argument that Smt. Prabha Golecha could not file appeals without authorization from her husband or proof of his death. It was noted that no valid authorization was established, and the death of Shri Hemchand Golecha had not been proved. However, the Tribunal held that Smt. Prabha Golecha, being an 'assessee aggrieved' within the meaning of Sections 246 and 253, read with Section 2(7) of the Income-tax Act, was entitled to file appeals. The Tribunal emphasized that the tax demand arising from the assessments would be recoverable from her and/or her sons, making her an 'assessee' for all purposes.
3. Presumption of Death Under Section 108 of the Indian Evidence Act, 1872:
Smt. Prabha Golecha's representative argued that under Section 108 of the Indian Evidence Act, Shri Hemchand Golecha, who had not been heard for seven years, should be presumed dead. However, the Tribunal clarified that Section 108 only presumes death after seven years of being unheard, without specifying the exact date of death. Since the appeals were filed before the seven-year period elapsed, the presumption of death could not be applied retroactively to validate the appeals.
4. Definition and Scope of 'Assessee' and 'Aggrieved Assessee':
The Tribunal analyzed whether Smt. Prabha Golecha could be considered an 'assessee' and 'aggrieved assessee' under the Income-tax Act. It was concluded that she met the criteria as the tax demand would be enforced against her. The Tribunal cited the Supreme Court's observation in Adi Pherozshah Gandhi v. H. M. Seervai, stating that a 'person aggrieved' must be deprived of a benefit due to the order. Since the IAC's orders caused a legal grievance to Smt. Prabha Golecha, she was deemed an 'aggrieved assessee.'
5. Procedural Irregularity in the Title of Appeals:
The Tribunal addressed the issue of procedural irregularity, where the appeals were filed in the name of Shri Hemchand Golecha but signed by Smt. Prabha Golecha. It was held that this constituted an irregularity, not an invalidity. The Tribunal directed that the defect in the title should be corrected by substituting Shri Hemchand Golecha's name with Smt. Prabha Golecha's name within a specified period. The Tribunal emphasized that compliance with rule 45 was achieved as the appeals were signed by Smt. Prabha Golecha, who was competent to file them.
Conclusion:
The Tribunal concluded that the appeals were not invalid but suffered from a procedural irregularity that could be rectified. The Commissioner of Income-tax (Appeals) and the Commissioner of Wealth-tax (Appeals) were instructed to order the appellant to correct the title defects and then dispose of the appeals on merits. The Tribunal allowed all the appeals, directing the appellant to amend the titles within eight days from the receipt of the order, failing which the appeals would stand dismissed for non-prosecution.
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1983 (11) TMI 153
Issues:
- Validity of notice served under section 139(2) for assessment under section 144.
- Jurisdiction to challenge assessment validity based on notice service in different appeal sections.
- Competency of the person receiving the notice on behalf of the assessee.
- Interpretation of sections 146 and 246(c) regarding challenging notice service validity.
Analysis:
1. Validity of Notice under Section 139(2) for Assessment under Section 144:
The case involved an appeal by the revenue against an assessment order under section 144 for the assessment year 1977-78. The Commissioner (Appeals) held that the notice under section 139(2) was not properly served on the assessee, leading to the cancellation of the assessment order. The revenue contended that the assessee could not challenge the assessment validity based on notice service in the appeal under section 144. However, the Tribunal upheld the Commissioner's decision, emphasizing that proper service of the notice under section 139(2) is a condition precedent to the validity of the assessment. The Tribunal cited relevant case law, including Y. Narayana Chetty v. ITO, to support its conclusion.
2. Jurisdiction to Challenge Assessment Validity Based on Notice Service:
The Tribunal addressed the issue of jurisdiction to challenge the validity of the assessment based on notice service in different appeal sections. It clarified that if the assessee disputes the receipt of notice under section 139(2), the assessment's invalidity on this ground can only be challenged in the appeal filed against the order passed under section 144. The Tribunal relied on the decision in Jayanthi Talkies Distributors v. CIT to support this interpretation. It highlighted that the notice service is not a mere procedural requirement but a jurisdictional prerequisite for assessment validity.
3. Competency of the Person Receiving the Notice:
Another aspect considered was the competency of the person receiving the notice on behalf of the assessee. The Tribunal analyzed whether the individual who accepted notices in the past could be deemed an authorized agent of the assessee. Referring to Addl. CIT v. Prem Kumar Rastogi, the Tribunal concluded that merely accepting notices in the past does not establish authorization to receive notices on behalf of the assessee. Therefore, the Tribunal held that the person who received the notice was not competent to accept it on behalf of the assessee.
4. Interpretation of Sections 146 and 246(c) Regarding Notice Service Validity:
Regarding the interpretation of sections 146 and 246(c) in challenging notice service validity, the Tribunal clarified that the assessee can challenge the non-receipt of notice under section 139(2) in the appeal against the order passed under section 144. It distinguished between mitigating circumstances of defaults under section 146 and the challenge to notice service validity, emphasizing that the latter can be raised in the appeal under section 144. The Tribunal dismissed the revenue's appeals based on this interpretation and previous case law, including Jayanthi Talkies Distributors' case.
5. Conclusion:
In conclusion, the Tribunal upheld the Commissioner's decision to cancel the assessment order due to improper service of the notice under section 139(2). Consequently, all the appeals by the revenue against the orders under sections 144, 271(1)(a), and 273 were dismissed based on the findings related to notice service validity and jurisdiction to challenge assessment validity in different appeal sections.
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1983 (11) TMI 152
Issues:
1. Computation of deduction under section 80-J
2. Claim of higher depreciation on house properties
3. Deduction of stamp costs in executing a mortgage deed
4. Disallowance of miscellaneous expenditure
Computation of deduction under section 80-J:
The assessee claimed a deduction under section 80-J, arguing that the capital employed should include borrowed capital. However, the Commissioner (Appeals) rejected this claim based on the Madhya Pradesh High Court's decision that borrowed capital could not be treated as capital employed. The Tribunal upheld this decision, citing relevant case laws and amendments to section 80-J. Consequently, the claim for further deduction was rejected.
Claim of higher depreciation on house properties:
The assessee purchased properties on hire-purchase but was allowed depreciation only on the instalments paid until the end of the accounting year. The Tribunal disagreed with the department's view, stating that depreciation should be allowed once the legal title of the property vests in the assessee. Referring to a Supreme Court decision, the Tribunal held that the assessee was entitled to depreciation on the total cost of the property, including interest, and directed the ITO to allow depreciation on the full amount.
Deduction of stamp costs in executing a mortgage deed:
The assessee sought a deduction for stamp costs incurred in executing a mortgage deed related to a capital subsidy received from MPFC. The Commissioner (Appeals) denied the deduction, arguing that claiming both the subsidy and mortgage expenses would result in a double benefit. However, the Tribunal disagreed, likening the capital subsidy to a loan and citing precedents where expenses for obtaining loans were allowed as deductions. The Tribunal held that the assessee was entitled to the deduction for stamp costs.
Disallowance of miscellaneous expenditure:
A disallowance of Rs. 1000 from miscellaneous expenditure was made, which the Tribunal confirmed after hearing both parties. As a result, the appeal was partly allowed, with the disallowance of Rs. 1000 upheld.
In conclusion, the Tribunal addressed various issues related to deduction computation, depreciation claims, mortgage deed expenses, and miscellaneous expenditure disallowance, providing detailed analysis and legal reasoning for each decision rendered.
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1983 (11) TMI 151
The Appellate Tribunal ITAT Jabalpur allowed the assessee's miscellaneous application regarding the inclusion of amounts in the wealth tax assessments related to a property standing in the name of the assessee's wife. The Tribunal omitted a submission by the assessee that the property had been gifted to the wife, leading to a mistake in the records. The Tribunal changed a paragraph in its order to reflect that the amounts standing to the credit of the wife in the bank account were gifted and should not be included in the wealth tax assessments from the year 1971-72 onwards. The miscellaneous application was allowed.
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1983 (11) TMI 150
Issues:
1. Assessment of a resident registered firm for the assessment year 1978-79 involving two accounting periods.
2. Determination of whether there was a change in the constitution of the firm or a succession of a new firm.
3. Addition of Rs. 10,000 to the income of the firm based on estimated sales.
Analysis:
1. The appeal pertains to the assessment of a resident registered firm for the assessment year 1978-79, covering two accounting periods. The assessee filed returns for two periods, but a single assessment was framed for both periods, which was upheld by the ld. CIT(A). The issue revolved around whether there was a change in the constitution of the firm or a succession of a new firm. The assessee claimed it was a case of succession under section 188 of the IT Act, 1961, not governed by section 187(2) of the Act. The Tribunal noted the deed of dissolution and the new partnership deed. The ld. CIT(A) confirmed the ITO's decision, citing a discrepancy with the decision of another High Court. However, the Tribunal held in favor of the assessee, directing two separate assessments in line with the decision of the Hon'ble Madhya Pradesh High Court.
2. The second issue involved the addition of Rs. 10,000 to the firm's income, which was sustained by the ld. CIT(A) out of a larger addition made by the ITO. The ITO applied a GP rate of 20% on estimated sales for both periods, justifying the addition. The Tribunal found that since it was a case of two distinct firms for each period, the addition was not warranted. Additionally, the ITO's reference to the past accounts did not support the addition. The assessee presented a comparative chart of sales and GP data for previous years, highlighting favorable appellate orders. Relying on a previous ITAT decision, the Tribunal concluded that the addition was not justified, and the trading results declared by the assessee for both periods were acceptable.
3. In conclusion, the Tribunal allowed the appeal, setting aside the lower authorities' orders. The Tribunal directed the ITO to frame two separate assessments for the two accounting periods, as per the decision of the Hon'ble Madhya Pradesh High Court. The addition of Rs. 10,000 to the firm's income was deemed unwarranted, and the trading results declared by the assessee were accepted.
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1983 (11) TMI 149
Issues Involved:
1. Validity of the revised valuation report on the cinema building.
2. Duties and powers of the Valuation Officer (V.O.) under Section 16A of the Wealth Tax (W.T.) Act.
3. Powers of the V.O. to amend his valuation report under Section 35 of the W.T. Act.
4. Legality of the directions issued by superior authorities to the V.O.
Detailed Analysis:
1. Validity of the Revised Valuation Report on the Cinema Building:
The revenue contested the AAC's decision to invalidate the revised valuation report on the cinema building known as Alka Talkies and to adopt the initial valuation report. The initial valuation report was prepared by the departmental valuer and considered the property in the hands of the partners of M/s. Jaimal Singh & Sons. The initial valuation report allowed deductions for joint ownership, video piracy, and reproduction method. However, subsequent reports by the Valuation Officer (V.O.) revised these deductions, leading to higher valuations. The AAC found no mistakes in the initial report and held that the first report should be adopted by the WTO for assessment purposes. The tribunal upheld this decision, stating that the subsequent revisions were not legally valid.
2. Duties and Powers of the Valuation Officer (V.O.) under Section 16A of the Wealth Tax (W.T.) Act:
Section 16A outlines the duties and powers of the V.O. from the time he receives advice from the W.T.O. to determine the fair market value of the property. The V.O. can serve notices to the assessee to produce necessary documents, pass an order if the declared value is correct, and provide an opportunity for the assessee to object to the proposed valuation. After considering the objections, the V.O. must estimate the value of the property and send the order to the W.T.O., who will then complete the assessment based on this report. The tribunal emphasized that once the V.O. submits his report, he becomes functus officio and cannot cancel or recall his estimation.
3. Powers of the V.O. to Amend His Valuation Report under Section 35 of the W.T. Act:
Section 35 allows for the rectification of any mistake apparent from the record. The V.O. can amend his valuation report if it contains an obvious, glaring, and patent error. The tribunal noted that any amendment must be based on mistakes that are apparent from the record and not on long-drawn processes or opinions. The V.O. can only rectify his own orders and not those directed by superior authorities. The tribunal found that the subsequent revisions of the valuation report were not based on apparent mistakes but were influenced by directions from superior authorities, making them invalid.
4. Legality of the Directions Issued by Superior Authorities to the V.O.:
The tribunal examined the directions issued by the Superintending Engineer and the Chief Engineer, which led to the revised valuation reports. The tribunal held that the Act does not provide for rectification at the instance of administratively superior authorities. The directions from the Superintending Engineer and the Chief Engineer were outside their jurisdiction and invalid. The tribunal concluded that the V.O.'s initial report dated 28.6.1985 was the only legally valid report, and the subsequent reports dated 3.2.1986 and 22.12.1986 were not legally binding.
Conclusion:
The tribunal dismissed the appeals, upholding the AAC's decision to adopt the initial valuation report for the assessment purposes. The tribunal found that the subsequent revisions were not legally valid as they were influenced by directions from superior authorities, which were outside their jurisdiction. The initial report dated 28.6.1985 was deemed the only legally valid report, and the WTO should have adopted this report for completing the assessment.
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1983 (11) TMI 148
Issues:
1. Assessment of income under the head 'Income from other sources' or 'Income from house property.'
2. Determination of ownership of superstructure and its tax implications.
3. Assessment of rental income for property owned by the trust and the superstructure owned by the assessee.
4. Consideration of municipal taxes and deductions for repairs in the assessment.
Detailed Analysis:
1. The primary issue in this case is the assessment of income under the head 'Income from other sources' or 'Income from house property.' The Income Tax Officer (ITO) initially assessed an amount under 'Income from other sources,' considering lease rent received by the assessee. However, the assessee contended that the income should be assessed under 'Income from house property.' The Appellate Authority Commissioner (AAC) upheld the ITO's decision, leading to the appeal before the Appellate Tribunal.
2. The judgment delves into the determination of ownership of the superstructure and its tax implications. The Tribunal analyzed past legal precedents, including the case of CIT v. Madras Cricket Club, to establish that the assessee, by purchasing the superstructure, became the owner of it, even though it stood on land leased by the trust. This ownership distinction is crucial for assessing the income derived from the superstructure.
3. Another critical aspect addressed in the judgment is the assessment of rental income for the property owned by the trust and the superstructure owned by the assessee. The Tribunal determined the net rental income of the trust and allocated the income from the property and superstructure accordingly. The income from the trust's property was assessed under 'Income from house property,' while the income from the superstructure owned by the assessee was assessed under the same head.
4. Municipal taxes and deductions for repairs were also considered in the assessment process. The judgment specified that the assessee would pay municipal taxes as per the arrangement with Drill Rock Engg. Co. (P.) Ltd. Additionally, deductions for repairs were factored in, leading to the revised assessable income in the hands of the assessee. The final assessment was made under the head 'Income from house property,' with the revised income amount for each year replacing the initial assessment under 'Income from other sources.'
In conclusion, the Appellate Tribunal allowed the appeals raised by the assessee, accepting the contentions regarding the assessment of income under the appropriate head. The judgment provides a detailed analysis of the ownership structure, income allocation, and tax implications, ultimately leading to the revised assessment under the correct head of income.
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1983 (11) TMI 147
Issues Involved:
1. Nature of the amount received under a life insurance policy.
2. Share of the goodwill in three firms in which the deceased was a partner.
3. Valuation of fixed assets in various firms.
Issue-wise Detailed Analysis:
1. Nature of the Amount Received Under a Life Insurance Policy:
The primary question in both the appeals (by the accountable person and the department) revolves around the nature of the amount of Rs. 2,01,750 received under a life insurance policy taken by the deceased. The policy in question was a '20 years money back policy with profits (with the accident benefit)'. The policy stipulated that in case of the insured's death due to an accident, an additional sum equal to the sum assured would be paid to the nominee.
The accountable person argued that the policy was a personal accident policy and not a contract of indemnity, asserting that the policy money did not pass on the death of the deceased under section 5 of the Estate Duty Act, 1953. The Assistant Controller, however, held that sections 5 and 6 of the Act governed the money received under the policy, deeming it as property that passed on the death of the deceased.
The Appellate Controller, referencing the Madras High Court decision in M.Ct. Muthiah v. CED, concluded that the deceased had no estate vested in himself but had a right to dispose of the benefits arising under the policy. Thus, the money received from the LIC on the personal accident policy was deemed to pass under sections 6 and 15 but not aggregatable under section 34(3).
The Tribunal preferred the Madras High Court's view over the Gujarat High Court's decision in Bharatkumar Manilal Dalal's case, holding that the policy was a composite policy (life policy and accident benefit policy). The amount ascribed to the life policy was held to pass on the death of the deceased under section 14, while the accident benefit amount was deemed dutiable under sections 6 and 15 but not aggregatable under section 34(3).
2. Share of the Goodwill in Three Firms:
The deceased was a partner in three firms: Standard Tyres and Motors, Vijayawada; Khandari Tyres, Hyderabad; and Khandari and Company, Hyderabad. The question was whether the deceased's share in the goodwill of these firms passed under section 5 of the Estate Duty Act.
The Assistant Controller held that the two firms (Standard Tyres and Motors and Khandari Tyres) had goodwill, valuing it based on five years' income and deducting interest and remuneration. The Appellate Controller reduced the estimation, considering market competition, but upheld the existence of goodwill.
The Tribunal, referencing various court decisions, including the Supreme Court's ruling in Addanki Narayanappa v. Bhaskara Krishnappa, held that goodwill is an intangible asset of the firm. However, it was incorrect to value only the goodwill separately. The correct approach was to ascertain the share of the deceased in the net assets of the firms, including goodwill.
3. Valuation of Fixed Assets in Various Firms:
The Assistant Controller increased the value of fixed assets (sites and buildings) in the firms by one-third, considering market appreciation. The Appellate Controller modified this, adding one-fifth instead of one-third to the cost of construction estimated by the valuer.
The Tribunal upheld the Appellate Controller's approach, agreeing that the market value of these assets would be higher than their book values, especially given the appreciation in property values in cities like Hyderabad and Madras. The addition of one-fifth to the cost of construction was deemed justified.
Conclusion:
The Tribunal allowed both appeals in part, holding that the amount received under the life insurance policy was dutiable under sections 6 and 15 but not aggregatable under section 34(3). It also directed the Assistant Controller to ascertain the share of the deceased in the net assets of the firms, including goodwill, and upheld the valuation of fixed assets with the addition of one-fifth to the cost of construction.
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1983 (11) TMI 146
The appeal was against a penalty of Rs. 6,290 under section 140A(3) of the Income-tax Act, 1961 for the assessment year 1976-77. The penalty was cancelled as the refund due to the firm covered the self-assessment tax liability, and there was no attempt to deprive the revenue of legitimate dues. The appeal was allowed. (Case citation: 1983 (11) TMI 146 - ITAT HYDERABAD-B)
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1983 (11) TMI 145
Issues Involved:
1. Validity of the will executed on 1-1-1967 under Mohammedan law.
2. Validity of the oral gift (HIBA) made on 2-4-1970 under Mohammedan law.
3. Delivery of possession of the gifted property.
4. Applicability of gift-tax on the gifted property.
5. Valuation of the gifted property for estate duty assessment.
Issue-wise Detailed Analysis:
1. Validity of the Will Executed on 1-1-1967 Under Mohammedan Law:
The Appellate Controller concluded that the will executed on 1-1-1967 is not a valid will under Mohammedan law. This conclusion is based on the principle that a bequest to an heir is not valid unless other heirs consent to the bequest after the testator's death. Moreover, Mohammedan law restricts a person from bequeathing more than one-third of their estate by will without the consent of the heirs. The will in question did not meet these requirements, and it was also considered revoked by implication when the deceased made an oral gift of the same properties later. Thus, the will was deemed invalid.
2. Validity of the Oral Gift (HIBA) Made on 2-4-1970 Under Mohammedan Law:
The Appellate Controller found the oral gift (HIBA) made on 2-4-1970 to be valid under Mohammedan law. The conditions for a valid gift under sections 149 and 150 of Mohammedan law include (1) a declaration of gift by the donor, (2) acceptance of the gift by the donee, and (3) delivery of possession. The evidence presented, including affidavits and witness testimonies, supported that these conditions were met. The gift was declared, accepted, and possession was delivered as required by Mohammedan law.
3. Delivery of Possession of the Gifted Property:
The delivery of possession is crucial for the validity of a gift under Mohammedan law. The Appellate Controller noted that the possession of the agricultural lands was handed over to the donees, and this was supported by oral evidence and affidavits. Additionally, exceptions to the requirement of physical delivery of possession were considered, such as gifts between spouses and gifts from a father to minor children, where legal possession suffices. The delivery of possession was deemed valid in this case.
4. Applicability of Gift-Tax on the Gifted Property:
The Assistant Controller initially contended that the gift was not valid and thus subject to gift-tax. However, the Appellate Controller ruled that the oral gift was valid under Mohammedan law and, therefore, not subject to gift-tax. The gift was completed with the required delivery of possession, making it exempt from gift-tax as per the applicable legal provisions.
5. Valuation of the Gifted Property for Estate Duty Assessment:
The Assistant Controller had valued the land at Rs. 1,85,000 based on inquiries with the registration department. However, since the Appellate Controller found the oral gift to be valid, the value of the gifted agricultural lands (6 acres 15 guntas) was excluded from the estate duty assessment. The Tribunal upheld this valuation exclusion, agreeing with the Appellate Controller's decision.
Conclusion:
The Tribunal dismissed the department's appeal, upholding the Appellate Controller's order. The will dated 1-1-1967 was deemed invalid under Mohammedan law, and the oral gift made on 2-4-1970 was validated. Consequently, the value of Rs. 1,85,000 for the agricultural lands was excluded from the estate duty assessment.
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1983 (11) TMI 144
Issues:
Jurisdiction of the assessing officer under section 263 of the Income-tax Act, 1961 for the assessment year 1980-81.
Detailed Analysis:
1. Jurisdiction Transfer and Lack of Enquiry:
The appeal was filed against the Commissioner's order under section 263 of the Income-tax Act, 1961 for the assessment year 1980-81. The assessee filed a return of income before the ITO, not aware that the case had been transferred to another ITO. The Commissioner issued a notice to cancel the assessment, citing lack of jurisdiction and failure to vet incriminating materials seized during a raid. The Commissioner canceled the assessment due to jurisdictional issues and lack of proper enquiry, leading to the appeal.
2. Transfer of Jurisdiction and Valid Order:
The Tribunal noted that the Commissioner had the authority to transfer a case under section 127 of the Act, and once transferred, the previous ITO loses jurisdiction. The order transferring jurisdiction was valid, even if not received by the assessee. The Tribunal upheld the cancellation of the assessment by the Commissioner due to lack of jurisdiction, stating that the assessment had no legal effect.
3. Seized Materials and Prima Facie Enquiry:
The Tribunal considered the relevance of seized materials post the accounting year and the need for an enquiry before accepting the return under section 143(1). The Commissioner's apprehension of prejudice to revenue due to lack of enquiry was deemed justified. The Tribunal agreed that non-enquiry in a warranted case constitutes prejudice, citing precedents from various High Courts. The order under section 263 was upheld based on the lack of proper enquiry and potential revenue prejudice.
Conclusion:
The Tribunal dismissed the appeal, affirming the Commissioner's order under section 263 to cancel the assessment due to jurisdictional issues and failure to conduct a necessary enquiry. The decision was based on the valid transfer of jurisdiction, lack of proper vetting of seized materials, and the necessity for a prima facie enquiry to prevent revenue prejudice.
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1983 (11) TMI 143
Issues:
1. Validity of partial partition affecting the firm's income.
2. Interpretation of Section 171(9) of the IT Act regarding clubbing of incomes.
3. Applicability of Section 40(b) in disallowing interest deduction.
4. Comparison with relevant case laws for determining the treatment of interest amounts credited to minors.
Detailed Analysis:
1. The appeal involved the validity of a partial partition claimed by the assessee firm, impacting its income assessment for the year 1980-81. The dispute arose when the Income Tax Officer (ITO) disallowed a deduction of Rs. 12,758, treating the amounts credited to minor sons of partners as part of their capital and disallowing interest under Section 40(b). The ITO held the partial partition invalid under Section 171(9) of the IT Act, leading to the disallowance and inclusion of the amount in the firm's income.
2. The interpretation of Section 171(9) was crucial in determining the validity of the ITO's action. The appellant contended that Section 171(9) was a machinery provision and did not authorize the clubbing of incomes of separated coparceners. The argument focused on the distinction between family assessments and firm assessments, asserting that the disallowance in the hands of the joint family's Karta did not extend to the firm's income assessment. Reference was made to relevant case laws to support the contention that Section 171(9) did not apply to firm assessments under Sections 182 of the IT Act.
3. The application of Section 40(b) in disallowing the interest deduction was a key issue. The Tribunal analyzed the nature of the interest credited to the minor sons and concluded that they could be considered as creditors of the firm, not partners. This distinction was crucial in determining the applicability of Section 40(b) to the interest payments. The Tribunal's decision emphasized that the interest amounts credited to minors could not be disallowed as interest payments to partners under Section 40(b).
4. The Tribunal compared the facts of the case with relevant precedents, including a decision of the Andhra Pradesh High Court, to establish the treatment of interest amounts credited to minors post partial partition. The Tribunal differentiated the scenario before and after partition, emphasizing that after valid partition under Hindu law, the minors became creditors to the firm and not representatives of the joint family. This distinction led to the conclusion that the interest amounts should not be disallowed under Section 40(b) in the firm's assessment, as they were not payments to partners but to independent creditors. The Tribunal's decision aligned with previous orders and set aside the lower authorities' disallowance, allowing the appeal.
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1983 (11) TMI 142
Issues Involved:
1. Computation of relief under section 80J of the Income-tax Act, 1961.
2. Entitlement to investment allowance on various items of machinery, including motor cars and a diesel engine generator, and the adequacy of the investment allowance reserve created.
Issue-wise Detailed Analysis:
1. Computation of Relief Under Section 80J:
The first issue pertains to the computation of relief available to the assessee under section 80J of the Income-tax Act, 1961. The Income-tax Officer (ITO) computed the relief based on the retrospective amendment made by the Finance (No. 2) Act, 1980. The assessee challenged the validity of this retrospective amendment, but the Commissioner (Appeals) rejected the claim. The Tribunal noted that for the succeeding assessment years, a similar issue had arisen, and the Tribunal had followed the view approved by the Gujarat High Court in CIT v. Surat District Co-operative Milk Producers' Union Ltd., where the matter was restored to the first appellate authority for a fresh decision in conformity with any decision the Supreme Court may render on the point. Consequently, the Tribunal set aside the decision of the Commissioner (Appeals) and restored the matter to his file for a fresh decision in conformity with any Supreme Court decision on the issue.
2. Entitlement to Investment Allowance on Various Items of Machinery:
a. Motor Cars:
The assessee claimed investment allowance on motor cars, which was disallowed by the ITO on the ground that motor cars are road transport vehicles excluded from the benefit of investment allowance under proviso (b) to section 32A(1) of the Act. The Commissioner (Appeals) upheld this view, stating that motor cars are clearly road transport vehicles. The assessee argued that motor cars used for the company's purposes and not for hire or reward should not be classified as road transport vehicles. The Tribunal, however, agreed with the departmental representative that a motor car, as commonly understood, is a road transport vehicle regardless of whether it is used for hire or not. Therefore, the Tribunal held that motor cars are road transport vehicles and are not entitled to investment allowance.
b. Diesel Engine Generator:
The assessee also claimed investment allowance on a diesel engine generator. The ITO disallowed this claim because the investment allowance reserve created was insufficient, and the deficit was made good only in the accounts for the succeeding year. The Tribunal noted that the assessee had created an adequate reserve before the assessment was completed, as required by section 32A(4)(ii). The Tribunal referred to the decision of the Chandigarh Bench in Swastika Metal Works v. ITO, which allowed investment allowance as long as the statutory reserve was created before the assessment was completed. The Tribunal also considered the Explanation to section 32A(4), which permits the creation of a reserve in the accounts of the subsequent year under certain conditions. Since the assessee had claimed investment allowance in the return filed under section 139 and had created a reserve covering the investment allowance claimed, the Tribunal held that the assessee was entitled to the investment allowance on the generator. The ITO was directed to verify the correctness of all figures before granting the investment allowance on this asset.
Conclusion:
The appeal was allowed in part. The decision of the Commissioner (Appeals) regarding the computation of relief under section 80J was set aside and restored for a fresh decision in conformity with any Supreme Court decision. The Tribunal upheld the disallowance of investment allowance on motor cars but allowed the investment allowance on the diesel engine generator, subject to verification of figures by the ITO.
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1983 (11) TMI 141
Issues Involved:
1. Tax liability of the assessee trust for the assessment year 1976-77.
2. Inclusion of deferred dividends in the total income.
3. Applicability of Section 11 of the Income-tax Act, 1961.
4. Deductibility of certain expenses for the purposes of the trust.
Detailed Analysis:
1. Tax Liability of the Assessee Trust for the Assessment Year 1976-77:
The assessee, a trust created wholly for religious or charitable purposes, filed a return for the assessment year 1976-77, showing a total income of Rs. 51,920. The Income-tax Officer (ITO) assessed the income at Rs. 51,921, including gross dividends from Associated Cement Companies Ltd. (ACC). The assessee contended that there was no tax liability as the actual receipts were Rs. 38,362, and the amount spent for the purposes of the trust was Rs. 35,140.
2. Inclusion of Deferred Dividends in the Total Income:
The ITO included the gross dividends of Rs. 25,564 from ACC in the total income, despite part of the dividends being deferred and payable after the accounting period. The Tribunal noted that normally, deferred dividends would not be assessed in the year they were declared, as per Supreme Court judgments in J. Dalmia v. CIT and Ramesh R. Saraiya v. CIT. However, due to the Companies (Temporary Restrictions on Dividends) Amendment Act, the entire dividends were assessable in the year of declaration, as Section 4 of the Act deemed the whole dividend as includible, regardless of deferral.
3. Applicability of Section 11 of the Income-tax Act, 1961:
The primary issue was whether the assessee trust could claim exemption under Section 11. The Tribunal referred to the Andhra Pradesh High Court's decision in CIT v. Trustee of H. E. H. The Nizam's Supplemental Religious Endowment Trust, which clarified that income for the purposes of Section 11 should be based on the trust's accounts, except for income from business undertakings. The Tribunal concluded that since the trust's income was not from a business undertaking, the gross receipts of Rs. 38,361 from the trust's accounts should be considered.
4. Deductibility of Certain Expenses for the Purposes of the Trust:
The Tribunal examined the expenses of Rs. 35,140, which included scholarships (Rs. 21,600), disputed income-tax payments (Rs. 13,300), and other minor expenses. The Andhra Pradesh High Court had held that income-tax payments, though not directly for charitable purposes, were incidental to carrying out charitable purposes. Therefore, the tax payment of Rs. 13,300 was considered an application of income for charitable purposes. The total application of income was Rs. 35,140 out of Rs. 38,361, which did not fall short of the required 75% application for exemption under Section 11.
Conclusion:
The Tribunal concluded that the assessee trust was not liable to tax for the assessment year 1976-77. The appeal was allowed, and the entire income of the trust was deemed non-liable to tax, as the application of income for charitable purposes met the statutory requirements.
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1983 (11) TMI 140
Issues Involved:
1. Entitlement to depreciation on a godown.
2. Requirement of registration for transfer of immovable property.
3. Validity of the release deed.
4. Claim of additional depreciation under section 32(1)(iia) of the Income-tax Act, 1961.
Issue-wise Detailed Analysis:
1. Entitlement to Depreciation on a Godown:
The assessee, a registered firm, claimed depreciation on a godown valued at Rs. 80,000, which was allegedly taken over for business purposes. The Income Tax Officer (ITO) denied the claim, arguing that the godown's transfer from Laxmi Trading Co. to the assessee-firm was not evidenced by a registered instrument of transfer. The assessee contended that the property belonged to partner Shri Chandra Prakash Agarwal, who contributed it as capital to the firm. The Tribunal found that the property stood in the name of Shri Chandra Prakash Agarwal and was treated as the firm's property in its books, thus establishing the firm's ownership for depreciation purposes. The Tribunal cited the Allahabad High Court's decision in Addl. CIT v. U. P. State Agro Industrial Corpn. Ltd. [1981] 127 ITR 97, which held that possession coupled with payment of consideration was sufficient for depreciation entitlement even without a formal registered deed.
2. Requirement of Registration for Transfer of Immovable Property:
The Tribunal examined the necessity of a registered document for the transfer of immovable property. The first appellate authority had upheld the ITO's view that the dissolution deed indicated a sale of property from Laxmi Trading Co. to the assessee-firm, requiring registration. However, the Tribunal found that the property was treated as the firm's asset at a value of Rs. 80,000, and there was no bar to the allowance of depreciation. The Tribunal referred to various High Court decisions, including CIT v. Amber Corpn. [1974] 95 ITR 178 (Raj.), which held that such contributions or transfers did not require registration under the Indian Registration Act.
3. Validity of the Release Deed:
The revenue objected to the validity of the release deed dated 30-12-1979, arguing that it required registration. The Tribunal noted that the release deed narrated the properties as partnership property of Laxmi Trading Co., which were allotted to Shri Chandra Prakash Agarwal upon dissolution. The Tribunal found no conflict between the release deed and the dissolution deed, which described the devaluation of the property. The Tribunal concluded that the dissolution deed could not be read as an instrument of transfer and that the property belonged to the firm, allowing the depreciation claim.
4. Claim of Additional Depreciation under Section 32(1)(iia) of the Income-tax Act, 1961:
The assessee claimed additional depreciation of Rs. 972 on new machinery costing Rs. 19,435. The ITO overlooked this claim, and the first appellate authority justified the assessment order by stating that the prescribed particulars were not furnished. The Tribunal remitted this claim back to the ITO for fresh consideration in accordance with the law, as it was unclear what further particulars were required.
Conclusion:
The appeal was treated as allowed, with directions to the ITO to allow depreciation in accordance with the law after giving the assessee an opportunity and to reconsider the claim of additional depreciation.
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1983 (11) TMI 139
The Appellate Tribunal ITAT DELHI-D allowed the assessee's claim for bad debt of Rs. 10,296 related to Roshan Lal & Sons. The debt was considered bad during the relevant accounting year, and the Tribunal accepted the assessee's contention, allowing the reduction. The appeal was partly allowed.
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1983 (11) TMI 138
Issues:
1. Disallowance of travelling expenses under rule 6D(2) of the Income-tax Rules, 1962.
2. Disallowance of commission paid to agents for non-performance of certain duties.
Issue 1: Disallowance of Travelling Expenses
The appeal involved the disallowance of travelling expenses amounting to Rs. 3,456 by the Income Tax Officer (ITO) under rule 6D(2) of the Income-tax Rules, 1962. The Commissioner (Appeals) had allowed the expenses based on a decision of the Chandigarh Bench. The rule specified limits for expenditure incurred for business travel within India. The crux of the matter was whether the directors of the company, who were not employees, fell under the category of 'any other person' in clause (iii) of the rule. The Appellate Tribunal rejected the assessee's argument that directors should not be considered 'any other person' under the ejusdem generis principle, emphasizing that directors are distinct from employees. The Tribunal upheld the application of rule 6D(2) by the ITO, withdrawing the relief granted by the Commissioner (Appeals) and ruling in favor of the revenue on this ground.
Issue 2: Disallowance of Commission Paid to Agents
The second ground of appeal concerned the disallowance of a commission amounting to Rs. 23,520 paid to agents for the sale of drugs. The ITO disallowed one-third of the commission as two out of six specified duties were not performed by the agents. The Commissioner (Appeals), however, disagreed with the ITO's decision, stating that since the commercial services by the agents were not disputed and the commission payments were verifiable, there was no justification for upholding the disallowance. The Tribunal considered the terms of the agreement between the assessee and the agents, emphasizing that the agents were obligated to render all specified services. The Tribunal rejected the ITO's approach and upheld the payment of the full commission, noting that the agents had indeed rendered the agreed-upon services. Drawing on a Supreme Court decision related to managing agency commission, the Tribunal concluded that there was no basis for disallowing any part of the commission, ultimately ruling in favor of the assessee on this issue.
In conclusion, the Appellate Tribunal partially allowed the revenue's appeal, upholding the disallowance of travelling expenses under rule 6D(2) but rejecting the disallowance of commission paid to agents, emphasizing that the agents had fulfilled their obligations as per the agreement.
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1983 (11) TMI 137
The Appellate Tribunal ITAT DELHI-A dismissed the revenue's appeal regarding the deletion of interests charged under sections 139(8) & 217 of the Income-tax Act, 1961. The Appellate Asstt. Commissioner allowed the claim of the assessee as there was no specific order made for charging such interest. The Tribunal held that the ITO cannot charge interest without a specific order, as per a previous case. The appeal of the revenue was dismissed.
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