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Showing 201 to 216 of 216 Records

• 1983 (7) TMI 16
  
  Issues Involved:
  1. Constitutionality of Section 140A(3) of the Income-tax Act, 1961.
  2. Justifiability of the penalty imposed under Section 140A(3) for non-payment of self-assessed tax within the stipulated time.
  
  Issue-wise Detailed Analysis:
  
  1. Constitutionality of Section 140A(3) of the Income-tax Act, 1961:
  The petitioner argued that Section 140A(3) was ultra vires as it violated Article 19(1)(f) of the Constitution of India and was not saved by Article 19(5). The petitioner relied on the decision of the Madras High Court in Sali Maricar v. ITO, which held that the penalty under Section 140A(3) was confiscatory and an unreasonable restriction on the right to property.
  
  However, the court noted that the provisions of Article 19(1)(f) were deleted by the Constitution (Forty-fourth Amendment) Act, 1978, but since the writ petition was filed in 1974, the rights available prior to the amendment would still apply. The court then examined the validity of Section 140A(3) and observed that other High Courts, including Andhra Pradesh, Calcutta, Madhya Pradesh, and Jammu and Kashmir, had dissented from the Madras High Court's view. These courts held that the penalty provision was a measure to ensure compliance with tax payment and was not confiscatory. The court agreed with these views, stating that the penalty was intended to secure compliance with tax obligations and was not an unreasonable restriction on the right to retain income.
  
  2. Justifiability of the Penalty Imposed under Section 140A(3):
  The petitioner contended that the penalty should not have been imposed as the company was under the control of the State Government, managed by an IAS Officer, and the non-payment was not due to contumacious conduct or dishonest intention. The Tribunal rejected this contention, stating that the company did not provide a satisfactory explanation for the delay.
  
  The court referred to the Supreme Court's decision in Hindustan Steel Ltd. v. State of Orissa, which held that penalty for failure to carry out a statutory obligation is quasi-criminal and should not be imposed unless the conduct was contumacious or dishonest. The court noted that the Tribunal failed to consider the explanation provided by the company regarding the State Government's control and the administrator's role. The court emphasized that the Income-tax Officer (ITO) must exercise discretion reasonably and consider all circumstances before imposing a penalty.
  
  The court concluded that the Tribunal did not adequately consider the company's explanation and remanded the case to the Tribunal for a fresh decision on the imposition of the penalty, directing it to take into account all the facts and circumstances.
  
  Conclusion:
  The writ petition was partly allowed. The order of the Income-tax Appellate Tribunal dated March 31, 1973, was set aside, and the case was remanded to the Tribunal for a fresh decision on the penalty, considering all relevant facts and circumstances. The parties were directed to bear their own costs.

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• 1983 (7) TMI 15
  
  Issues involved:
  The issues involved in the judgment are:
  1. Validity of transfer of shares pertaining to 'sick mills' to a finance company and entitlement to loss on such transfer.
  2. Sustainability in law of the transfer of shares as movable property without entry in the company's share registers.
  
  Issue 1: Validity of transfer of shares:
  The assessee sold shares of a sick mill to a finance company at a nominal rate, which was considered as a capital loss. The Income Tax Officer (ITO) deemed the sale as a sham transaction due to the low value of the shares and lack of entry in the share certificate register. Consequently, the ITO rejected the claim for adjustment of capital loss against capital gains. On appeal, the Appellate Authority Commissioner (AAC) agreed with the ITO that without entries in the share registers, the sales cannot be considered complete. However, the Tribunal, relying on a Supreme Court decision, held that ownership of shares had transferred to the finance company, even without registration in the company's books, allowing the assessee to claim the capital loss.
  
  Issue 2: Sustainability of transfer without entry in share registers:
  The Revenue contended that a transfer of shares is incomplete until registered in the company's share registers, citing legal precedents. The Revenue argued that the transferee only has an equitable right until registration, and cannot become the legal owner without entry in the register. However, the Tribunal's decision was supported by a Supreme Court ruling which emphasized that if all formalities between the transferor and transferee are completed, the transfer is considered valid even without registration in the company's books. In the present case, the transfer forms were signed and handed over to the transferee, who sought registration, but the company's registers were not immediately available. The court upheld the Tribunal's decision based on the Supreme Court precedent, dismissing the Revenue's petition.
  
  The judgment clarifies that a transfer of shares can be valid even without immediate registration in the company's books, as long as all formalities between the transferor and transferee are completed. The decision emphasizes the importance of ownership transfer based on legal principles rather than mere entry in the share registers.

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• 1983 (7) TMI 14
  
  Issues:
  1. Validity of reassessment under section 147(b) of the Income Tax Act.
  2. Jurisdiction of the Income Tax Officer (ITO) to reopen assessment.
  3. Exemption under section 54 of the Income Tax Act for Hindu Undivided Family (HUF).
  4. Rectification of Tribunal's order based on subsequent Supreme Court decision.
  5. Failure to raise jurisdiction issue before the Tribunal.
  
  Analysis:
  
  The judgment concerns a dispute over the reassessment of an assessee under section 147(b) of the Income Tax Act. The assessee had initially claimed and received an exemption from capital gains tax under section 54 of the Act for the assessment year 1972-73. However, the Income Tax Officer (ITO) later reopened the assessment based on information that the exemption was not available to a Hindu Undivided Family (HUF). The assessee challenged the reassessment on jurisdictional and merit grounds before the Appellate Assistant Commissioner (AAC), who upheld the reassessment's validity but granted relief under section 54.
  
  The Revenue appealed the AAC's decision to the Tribunal, which upheld the exemption's availability to an HUF. Subsequently, the assessee sought a rehearing based on a Supreme Court decision that stated the audit party's opinion on a legal question cannot justify reassessment under section 147(b). The Tribunal rejected the assessee's request for rectification, emphasizing that the jurisdiction issue was not addressed during the appeal proceedings.
  
  The High Court observed that since the assessee did not challenge the jurisdiction issue before the Tribunal, there was no mistake apparent from the record warranting rectification. The Court noted that the Tribunal's order was proper and declined to direct a reference, ultimately dismissing the petition without costs.
  
  In conclusion, the judgment underscores the importance of raising jurisdictional issues during appeal proceedings and highlights the limitations on seeking rectification based on subsequent legal developments. The Court's decision affirms the Tribunal's ruling and emphasizes the need for parties to address all relevant issues at the appropriate stages of the legal process.

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• 1983 (7) TMI 13
  
  Issues Involved:
  1. Whether the document dated February 11, 1969, executed by the assessee is a gift deed or a will.
  2. Whether the vested interest created in favor of the assessee's daughters and grandchildren is subject to gift-tax.
  3. Interpretation of Section 5(1)(viii) and (x) of the Gift-Tax Act, 1958.
  4. Applicability of Section 122 of the Transfer of Property Act.
  
  Detailed Analysis:
  
  1. Nature of the Document: Gift Deed or Will
  The primary issue revolves around the classification of the document dated February 11, 1969. The assessee executed a registered document in favor of his wife, granting her a life estate without any power of alienation, with the properties to be enjoyed by her jointly with him. The document further provided that his daughter and grandchildren would take their respective properties as absolute owners after the lifetime of the assessee and his wife. The Tribunal initially held that the document indicated a present interest in favor of the daughters and grandchildren, thus classifying it as a gift deed. However, the court found that the document did not transfer any present interest to the daughters and grandchildren, and the vesting of interest was intended to take effect only after the lifetime of the assessee and his wife. Therefore, the document was deemed to be a will and not a gift deed.
  
  2. Vested Interest and Gift-Tax
  The court examined whether the vested interest created in favor of the daughters and grandchildren was taxable under the Gift-Tax Act. It was noted that the life interest created in favor of the wife was exempt under Section 5(1)(viii) of the G.T. Act. The court concluded that the vested interest in favor of the daughters and grandchildren would only take effect after the lifetime of the assessee and his wife, thus not constituting a present gift. Consequently, the document could not be treated as a settlement deed for the purposes of gift-tax.
  
  3. Interpretation of Section 5(1)(viii) and (x) of the G.T. Act
  Section 5(1)(viii) and (x) of the G.T. Act exempts gifts made to a spouse up to a maximum of Rs. 50,000 and gifts made under a will, respectively. The court clarified that a combined reading of these clauses indicates that gifts to a spouse, whether under a gift deed or a will, are not taxable, with the value restriction applying only to gift deeds. In this case, the life interest granted to the wife was valued at Rs. 57,360, which, according to the GTO's assessment, was completely exempt from gift-tax.
  
  4. Applicability of Section 122 of the Transfer of Property Act
  The court discussed the applicability of Section 122 of the Transfer of Property Act, which defines a gift as a transfer of property made voluntarily and without consideration. The court observed that the document in question did not create any present interest in favor of the daughters and grandchildren, and there was no acceptance of the gift by them. Therefore, the provisions of Section 122 were not attracted, reinforcing the classification of the document as a will rather than a gift deed.
  
  Conclusion:
  The court concluded that the document dated February 11, 1969, is to be treated as a will concerning the daughters and grandchildren of the assessee. The life interest created in favor of the wife was within the exempt limit prescribed under Section 5(1)(viii) of the G.T. Act. Consequently, the assessee was not liable to gift-tax. The court answered the question in the affirmative and against the Revenue, ordering the Revenue to pay the costs of the assessee, fixed at Rs. 500.

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• 1983 (7) TMI 12
  
  Issues: Calculation of penalty under the Income-tax Act, 1961 for assessment year 1966-67 based on the provisions in force prior to April 1, 1968.
  
  Analysis:
  
  The case involved a reference under s. 256(1) of the Income-tax Act, 1961, by the Income-tax Appellate Tribunal, Patna Bench "B", for an opinion on the correct calculation of penalty under the Act in force prior to April 1, 1968. The assessee, a Hindu Undivided Family (HUF), derived income from various sources, including commission from the Government as its grain stockist. The Income Tax Officer (ITO) assessed the commission received by the assessee as income, which was confirmed by the Appellate Assistant Commissioner (AAC). Subsequently, the Income-tax Appellate Tribunal was approached for the levy of penalty as the amount exceeded Rs. 1,000.
  
  The issue in contention was whether the quantum of penalty should be calculated based on the provisions of the Act in force prior to April 1, 1968. The Income-tax Appellate Tribunal held that while the penalty was justified, the quantum was excessive. The Tribunal accepted the assessee's submission that the penalty should be calculated based on the pre-April 1, 1968, provisions of the Act. However, the High Court disagreed with this interpretation, citing established legal precedents and the Explanation to s. 271(1)(c) which applied to cases where returns were filed after April 1, 1968.
  
  The High Court emphasized that the Explanation clause to s. 271(1)(c) governed cases where the returned income was less than 80% of the assessed income due to the assessee's gross or wilful neglect. The Court referred to relevant legal decisions, including Brij Mohan v. CIT, and held that the Tribunal erred in applying the law in force prior to April 1, 1968. The Court concluded that the Tribunal was incorrect in law in its calculation of the penalty based on the pre-April 1, 1968, provisions.
  
  In the final judgment, the Court decided in favor of the Revenue and against the assessee, ruling that the Tribunal's approach to the penalty calculation was incorrect. The Court also noted that the issue of expenditure incurred by the assessee in earning revenue was not within the scope of the reference. As a result, no costs were awarded in the case.

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• 1983 (7) TMI 11
  
  Issues Involved:
  1. Whether the deceased was under an obligation to maintain his mother after becoming a sanyasi.
  2. Whether the settlement deed executed by the deceased in favor of his mother was supported by consideration in money or money's worth.
  3. Whether the settlement deed operated as a gift under Section 9 of the Estate Duty Act, 1953.
  
  Detailed Analysis:
  
  1. Obligation to Maintain Mother After Becoming a Sanyasi:
  The primary issue was whether the deceased, after becoming a sanyasi, had any obligation to maintain his mother. The court examined various legal texts and precedents to address this issue. According to Mayne's Hindu Law and Mulla's Hindu Law, a person who enters a religious order severs his connection with his natural family, leading to civil death. This civil death implies that neither the sanyasi nor his natural relatives can inherit each other's properties. The court also referred to the Supreme Court's ruling in Krishna Singh v. Mathura Ahir, which stated that a Sudra could become a sanyasi if established by usage, and such a person must show absolute abandonment of worldly possessions.
  
  In this case, the court concluded that once the deceased became a sanyasi, he ceased to have any obligation to maintain his mother. This conclusion was based on the principle that civil death severs all familial ties and obligations.
  
  2. Consideration in Money or Money's Worth:
  The next issue was whether the settlement deed executed by the deceased in favor of his mother was supported by consideration in money or money's worth. The accountable person contended that the settlement was made in discharge of the deceased's obligation to maintain his mother. However, the court found that since the deceased had undergone civil death by becoming a sanyasi, he had no such obligation. Therefore, the settlement deed could not be considered as supported by any consideration in money or money's worth.
  
  3. Settlement Deed as a Gift Under Section 9 of the Estate Duty Act:
  The final issue was whether the settlement deed operated as a gift under Section 9 of the Estate Duty Act, 1953. The court examined the provisions of the Act and the relevant legal principles. Section 9 of the Act deals with the inclusion of gifts made within two years prior to the deceased's death in the principal value of the estate. Since the settlement deed was executed within two years before the deceased's death and was not supported by consideration, it was deemed a gift.
  
  The Tribunal had previously held that the settlement deed was a gift and included the value of the settled property in the principal value of the estate. The court agreed with this view, stating that the settlement deed was not supported by consideration and thus fell within the mischief of Section 9 of the Act.
  
  Conclusion:
  The court answered the referred question in the affirmative, concluding that the deceased was not under an obligation to maintain his mother after becoming a sanyasi, and the settlement deed executed by him was not supported by consideration in money or money's worth, thereby operating as a gift under Section 9 of the Estate Duty Act, 1953. The Tribunal's decision to include the value of the settled property in the principal value of the estate was upheld. The Revenue was awarded costs from the accountable person, with counsel's fee fixed at Rs. 500.

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• 1983 (7) TMI 10
  
  Issues involved: Assessment of undisclosed income, levy of penalty under section 271(1)(c) of the Income-tax Act, 1961.
  
  Assessment of Undisclosed Income:
  The assessee, engaged in shroff shop and pawnbroking, undertook reconstruction of his residential house during 1968-1970 without disclosing the cost of reconstruction during original assessment for 1971-72. Subsequent wealth-tax proceedings revealed undervaluation of the house, prompting reassessment. The Inspector estimated reconstruction cost at Rs. 98,000, higher than the admitted Rs. 50,000. The Income Tax Officer (ITO) added Rs. 18,000 for each of the three years under "Business income" due to non-disclosure and initiated penalty proceedings.
  
  Levy of Penalty:
  The ITO imposed a penalty of Rs. 18,000 for 1971-72, which was reduced to Rs. 15,000 by the Appellate Authority Commissioner (AAC). The Tribunal upheld the penalty citing conscious concealment of income by the assessee, who then sought reference on various legal questions. The Tribunal found that the assessee admitted to suppressing income of Rs. 15,000 for 1971-72, which was not retracted during penalty proceedings.
  
  Judgment:
  The High Court dismissed the petition, upholding the Tribunal's decision. It emphasized that the Department could rely on the assessee's admission of non-disclosure unless retracted, especially when there was inconsistency in statements between original and reassessment stages. The Court rejected the argument that an independent inquiry was necessary for establishing wilful non-disclosure, stating that the Department could act on materials gathered during assessment if the assessee did not challenge them. The Court agreed with the Tribunal's findings, concluding that no reference to the Court was warranted, and dismissed the petition without costs.

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• 1983 (7) TMI 9
  
  Issues Involved:
  1. Legitimacy of the seizure of gold ornaments under Section 66 of the Gold (Control) Act, 1968.
  2. Entitlement of the petitioner to the return of gold ornaments seized during a raid under Section 132(1) of the Income-tax Act, 1961.
  
  Issue-Wise Detailed Analysis:
  
  1. Legitimacy of the Seizure of Gold Ornaments under Section 66 of the Gold (Control) Act, 1968:
  
  The petitioner, an assessee under the Wealth-tax Act, 1957, owned 150 tolas of gold ornaments, which were regularly declared and assessed in her wealth-tax returns. During a search under Section 132(1) of the Income-tax Act, 1961, conducted on August 23, 1979, the gold ornaments belonging to the petitioner, her husband, and her mother-in-law were seized. The Income-tax Officer, after verifying the wealth-tax records, ordered the release of 150 tolas of gold ornaments to the petitioner and 200 tolas to her mother-in-law.
  
  Despite the order, the gold ornaments were not released due to discrepancies in the lists submitted by the petitioner. Additionally, the authorities under the Gold (Control) Act, 1968, were contemplating seizing the gold ornaments upon their release. The petitioner argued that under Section 16 of the Gold (Control) Act, 1968, she was not required to submit a declaration for owning 150 tolas of gold ornaments, as the total weight of gold ornaments possessed by her family did not exceed 4,000 grams.
  
  The court examined Section 66 of the Gold (Control) Act, 1968, which allows seizure if there is a reasonable belief that the provisions of the Act have been or are being contravened. The court referred to precedents, including Calcutta Discount Co. Ltd. v. ITO and Collector of Customs v. Nathella Sampathu Chetty, to emphasize that "reason to believe" must be based on relevant and not extraneous reasons. The court concluded that there was no reasonable belief that the provisions of the Act were contravened, as the total weight of gold ornaments owned by the petitioner and her husband was less than 4,000 grams. Therefore, the authorities under the Gold (Control) Act, 1968, had no jurisdiction to seize the gold ornaments.
  
  2. Entitlement of the Petitioner to the Return of Gold Ornaments Seized During a Raid under Section 132(1) of the Income-tax Act, 1961:
  
  The petitioner filed S.B. Civil Writ Petition No. 951 of 1981, seeking the release of the gold ornaments seized during the raid. Despite an order by the Income-tax Officer on November 16, 1979, and an interim order by the court on July 13, 1981, the gold ornaments were not returned to the petitioner. The Income-tax Officer argued that the petitioner had not explained the discrepancies in the lists submitted, which delayed the return of the ornaments.
  
  The court noted that the Income-tax Officer had already verified the wealth-tax records and found the petitioner's declaration to be correct. Therefore, there was no justification for retaining the gold ornaments. The court directed the Income-tax Officer to deliver the gold ornaments to the petitioner as per the order dated November 16, 1979.
  
  Conclusion:
  
  S.B. Civil Writ Petition No. 1492 of 1981 was allowed, and the authorities under the Gold (Control) Act, 1968, were restrained from seizing the petitioner's 150 tolas of gold ornaments. S.B. Civil Writ Petition No. 951 of 1981 was also allowed, directing the Income-tax Officer to deliver the gold ornaments to the petitioner. The parties were ordered to bear their own costs.

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• 1983 (7) TMI 8
  
  The High Court directed the Income-tax Appellate Tribunal to submit a supplementary statement of the case regarding the exemption of income from commission and subsidies under section 80P(2)(a)(i) of the Income-tax Act, 1961. The Tribunal was instructed to determine the source of the income and provide findings before answering the questions referred. The Tribunal was given four months to submit the supplementary statement.

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• 1983 (7) TMI 7
  
  Issues Involved:
  1. Depreciation and development rebate on the cost of roads.
  2. Development rebate on the enhanced cost of plant and machinery due to devaluation.
  3. Computation of disallowable perquisites under section 40(a)(v).
  4. Calculation of capital employed for purposes of section 80J.
  5. Written down value for the purpose of rule 19A(2)(i).
  
  Detailed Analysis:
  
  1. Depreciation and Development Rebate on the Cost of Roads:
  The court addressed whether roads within the factory premises should be treated as "plant" or "building" for the purpose of allowing depreciation and development rebate. The Tribunal had held that the roads should be treated as "plant." The court agreed, stating that the term "plant" includes items used for business purposes, and roads within the factory premises, essential for transporting raw materials, qualify as "plant." The court concluded that roads are integral to the factory's functioning and thus should be treated as "plant" for depreciation and development rebate purposes.
  
  2. Development Rebate on Enhanced Cost Due to Devaluation:
  The court examined whether the increased cost of machinery due to the devaluation of the Indian rupee should be considered for development rebate. The ITO had allowed this increased cost for depreciation but not for development rebate. The court held that the actual cost includes all expenditures necessary to bring the asset into existence and in working condition, including the increased cost due to devaluation. The court concluded that the increased liability due to devaluation should be included in the actual cost for both depreciation and development rebate.
  
  3. Computation of Disallowable Perquisites under Section 40(a)(v):
  The court evaluated whether perquisites related to employees whose salary is exempt from tax under section 10(6)(vii) should be excluded in computing disallowable perquisites. The Tribunal had affirmed that such perquisites should be excluded. The court agreed, stating that the salary of foreign technicians, being exempt from tax, should not be considered in calculating disallowable perquisites. The court upheld the Tribunal's view and concluded that perquisites for employees with tax-exempt salaries should be excluded from disallowable perquisites.
  
  4. Calculation of Capital Employed for Purposes of Section 80J:
  The court considered whether liabilities should be deducted from assets employed in the undertaking as provided under rule 19A and whether the average capital employed should be taken into account. The Tribunal had followed the Calcutta High Court's decision, which held that liabilities need not be deducted and the average capital employed should be considered. The court agreed, declaring rule 19A ultra vires to the extent it prescribes a different mode of calculating capital employed. The court concluded that liabilities should not be deducted, and the average capital employed should be used for section 80J purposes.
  
  5. Written Down Value for Rule 19A(2)(i):
  The court addressed whether the "written down value" in rule 19A(2)(i) should be taken as defined in section 43(6) of the I.T. Act. The Tribunal had rejected the assessee's contention that the written down value should be as per the books of account. The court agreed with the Tribunal, stating that the written down value should be calculated using the "diminishing value method" as per section 43(6), which is more scientific and accurate for ascertaining profits and gains from business. The court concluded that the written down value should be determined as per section 43(6) and not the method adopted by the assessee in its accounts.
  
  Conclusion:
  - Depreciation and Development Rebate on Roads: Treated as "plant."
  - Development Rebate on Enhanced Cost Due to Devaluation: Allowed.
  - Disallowable Perquisites under Section 40(a)(v): Excluded for tax-exempt salaries.
  - Calculation of Capital Employed for Section 80J: Liabilities not deducted; average capital employed considered.
  - Written Down Value for Rule 19A(2)(i): As per section 43(6), not the assessee's accounts.
  
  All questions except the third question in R.C. No. 82 of 1978 were answered in favor of the assessee.

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• 1983 (7) TMI 6
  
  Issues:
  1. Computation of relief under section 80J of the Income-tax Act for assessment years 1968-69 and 1969-70.
  2. Entitlement to deduction under section 35A of the Income-tax Act for the assessment year 1969-70.
  
  Analysis:
  
  Issue 1: Computation of relief under section 80J:
  The assessee raised a question regarding the computation of relief under section 80J of the Income-tax Act for the assessment years 1968-69 and 1969-70. The contention was based on whether the liabilities should be deducted while calculating the relief. The court referred to rule 19A of the Income-tax Rules, which provides for the exclusion of borrowed money and debts from the computation of capital. The court analyzed a previous decision where it was held that borrowed money could be considered as part of the capital employed. However, the court noted that not all liabilities can be automatically treated as part of the capital employed. The nature of the debt or liability must be assessed to determine if it has contributed to the augmentation of capital. As the authorities had not investigated the nature of the liabilities incurred by the assessee, the court concluded that further examination was needed. The Tribunal was directed to reevaluate the case and determine if the liabilities in question had indeed augmented the capital. Therefore, the question regarding the computation of relief under section 80J remained unanswered pending further investigation.
  
  Issue 2: Entitlement to deduction under section 35A:
  The assessee claimed a deduction under section 35A of the Income-tax Act for the assessment year 1969-70, relating to a payment made to a foreign company for technical know-how. The Income-tax Officer allowed a partial deduction, but the Appellate Assistant Commissioner and the Tribunal denied the deduction entirely. The court observed that for claiming the benefit under section 35A, the assessee needed to show that the payment was for acquiring patent rights or copyrights. The agreement between the assessee and the foreign company did not indicate the acquisition of patent rights or copyrights. As such, the court agreed with the lower authorities that the assessee was not entitled to the relief under section 35A as there was no evidence of acquiring patent rights or copyrights. Therefore, the court answered the question in the negative and against the assessee, denying the deduction under section 35A.
  
  In conclusion, the judgment addressed the issues raised by the assessee regarding the computation of relief under section 80J and entitlement to deduction under section 35A. The court directed further investigation into the nature of liabilities for the computation of capital under section 80J, while denying the deduction under section 35A due to the lack of evidence of acquiring patent rights or copyrights.

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• 1983 (7) TMI 5
  
  Issues:
  1. Deductibility of expenditure for maintaining goodwill and reputation under section 10(2)(xv) of the Indian Income-tax Act, 1922.
  
  Analysis:
  The case involved a question of law regarding the deductibility of an expenditure of Rs. 95,868 incurred for maintaining the goodwill and reputation of the assessee-company under section 10(2)(xv) of the Indian Income-tax Act, 1922. The Tribunal referred the question to the High Court, which led to subsequent applications and appeals. The Commissioner of Income-tax sought to challenge the Tribunal's conclusion on the basis of evidence and the proper allowance of the expenditure as a revenue deduction.
  
  The Supreme Court highlighted the background of the case involving irregularities by the company's directors and officials, leading to expenses incurred for legal advice and rectification measures. The Tribunal's decision to allow the expenditure as incurred for maintaining goodwill and reputation was questioned for lack of complete information and evidence regarding the nature of work done by the solicitors. The Court emphasized the need for a comprehensive statement of facts to justify the Tribunal's conclusion.
  
  The Appellate Assistant Commissioner and the Tribunal had differing views on the deductibility of the expenditure. The Appellate Assistant Commissioner contended that the expenses were not legitimate business expenses incurred wholly and exclusively for business purposes, citing irregularities detected by auditors. In contrast, the Tribunal held that the expenditure was incurred to maintain goodwill and reputation, essential for the company's business as managing agents, and thus allowable as a proper revenue deduction.
  
  In light of the discrepancies and incomplete information, the Court directed the Tribunal to examine the bills submitted by the solicitors to differentiate expenses related to irregularities and fictitious transactions from those incurred for legitimate business purposes like board reconstruction and managing director appointments. The parties were given the opportunity to provide further evidence on these points for a comprehensive assessment.
  
  Ultimately, the Court disposed of the case with directions for the Tribunal to ascertain the facts related to the expenses, ensuring only allowable deductions were considered. The judgment emphasized the importance of complete and clear documentation to support decisions on deductibility under the Income-tax Act.
  
  Judge R. N. Pyne concurred with the decision, leading to the final disposition of the case with no order as to costs.

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• 1983 (7) TMI 4
  
  Issues Involved:
  1. Whether the donation of shares by one charitable trust to another amounts to application of income for charitable purposes u/s 11(1)(a) of the Income-tax Act, 1961.
  2. Whether the assessee applied sufficient percentage of its income to qualify for exemption u/s 11.
  
  Summary:
  
  Issue 1: Donation of Shares as Application of Income
  The primary issue was whether the donation of shares by one charitable trust to another constitutes the application of income for charitable purposes within the meaning of section 11(1)(a) of the Income-tax Act, 1961. The Income-tax Officer initially found that the assessee had not applied sufficient income towards charitable purposes, leading to a tax liability. The Appellate Assistant Commissioner and the Tribunal, however, held that the donation of shares valued at Rs. 30,000 should be considered as application of income for charitable purposes. The High Court, upon review, disagreed with this interpretation, stating that the income must be applied in the year it is received to qualify for exemption. The Court emphasized that the language of section 11 requires the actual application of income received in the relevant year for charitable purposes, and not from accumulated income of previous years.
  
  Issue 2: Application of Sufficient Percentage of Income
  The Court examined whether the assessee applied at least 75% of its income for charitable purposes to qualify for exemption u/s 11(1)(a). The assessee argued that the shares donated were purchased from accumulated income of earlier years, and thus should be considered as application of income. The Court rejected this argument, clarifying that the exemption is limited to the income actually applied in the relevant year. The Court further noted that section 11(1)(a) permits accumulation of only 25% of the income or Rs. 10,000, whichever is higher, and any excess accumulation disqualifies the income from exemption. The Court concluded that the assessee did not meet the conditions laid down in section 11(1)(a) as the income of the relevant year was not applied for charitable purposes.
  
  Conclusion:
  The High Court held that the donation of shares valued at Rs. 30,000 did not amount to the application of the income of the trust for charitable purposes in the year under consideration. The question was answered in the affirmative and in favor of the Revenue, with no order as to costs.

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• 1983 (7) TMI 3
  
  Issues Involved:
  1. Entitlement to exemption u/s 11 of the Income-tax Act for the assessment years 1963-64 to 1968-69 and 1969-70 to 1972-73.
  2. Taxability of any portion of the income u/s 28(iii) of the Income-tax Act for the above assessment years.
  
  Summary:
  
  Issue 1: Exemption u/s 11 of the Income-tax Act
  
  The assessee, South Indian Photographic Company and Allied Trades Association, claimed exemption u/s 11 on the grounds that it is a non-profit organization devoted to the advancement of an object of general public utility. The Income-tax Officer denied this claim, but the Tribunal later held that the company is entitled to exemption u/s 11 to the extent the income was applied for charitable purposes in India. The Tribunal directed the Income-tax Officer to ascertain the extent of income applied to charitable purposes for each assessment year and provide the necessary relief.
  
  The High Court examined whether the objects of the company are for the advancement of general public utility not involving the carrying on of any activity for profit. The court noted that the company's memorandum of association includes objects such as promoting commerce, art, science, and protecting the interests of photographic and allied traders. The court found that the company's income and property are solely applied for the promotion of its objects and not for profit distribution among its members.
  
  Citing precedents like *In re The Trustees of the Tribune*, *Sole Trustee, Loka Shikshana Trust*, and *CIT v. Federation of Indian Chambers of Commerce and Industry*, the court concluded that the company's activities align with the definition of "charitable purpose" u/s 2(15). Therefore, the company is entitled to exemption u/s 11.
  
  Issue 2: Taxability u/s 28(iii) of the Income-tax Act
  
  The Tribunal held that the provisions of section 28(iii) are not attracted in this case. The High Court agreed, noting that the company is a non-profit body with objects of general public utility and does not carry on any activity for profit. The court referenced the decision in *CIT v. South Indian Film Chamber of Commerce*, which held that income derived from services rendered to members is not liable to be taxed u/s 28(iii).
  
  Conclusion:
  
  The High Court answered the first question in the affirmative, confirming the company's entitlement to exemption u/s 11, and the second question in the negative, ruling that no portion of the income is liable to be taxed u/s 28(iii). The Revenue was directed to pay the costs of the assessee-company.

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• 1983 (7) TMI 2
  

  Best judgment assessment - If for a frivolous reason, the chartered accountant declines to undertake the audit of the appellant`s accounts, obviously the appellant could not be held responsible - section 144(b) is not applicable - best judgment` assessment made by ITO was set aside

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• 1983 (7) TMI 1
  

  A transaction cannot be described as a `speculative transaction` within the meaning of sub-s. (5) of s. 43, IT Act, 1961, where there is a breach of the contract and on a dispute between the parties damages are awarded as compensation by an arbitration award - hence, Tribunal was right in confirming the order of the AAC that the loss suffered by the assessee was not a loss incurred in a speculative transaction within the meaning of s. 43(5)

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