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Showing 221 to 233 of 233 Records
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1986 (4) TMI 13
Issues Involved:
The judgment involves the interpretation of provisions under section 80P(2)(iii) of the Income-tax Act, 1961 and section 43(2) of the Madhya Pradesh Co-operative Societies Act, 1960.
Interpretation of Section 80P(2)(iii) of the Income-tax Act, 1961:
The assessee, a co-operative marketing society, claimed relief under section 80P(2)(iii) for income derived from marketing agricultural produce of its members. However, based on precedents, the court held that income from purchase of paddy and sale of rice was not exempt under this section. The court referred to previous decisions to support this conclusion.
Deduction under Section 43(2) of the Societies Act:
The assessee claimed deduction of Rs. 1,66,763 as a reserve credited under section 43(2) of the Societies Act. The Tribunal initially disallowed this deduction, but the court disagreed. It emphasized that the reserve fund created under section 43(2) is statutory and controlled by the Registrar, not the assessee. The court applied principles from previous cases to support the deduction claim, stating that if the amount is diverted under statutory provisions, it does not constitute income and can be deducted as business expenditure.
Legal Principles and Precedents:
The court relied on legal principles established in cases like Poona Electric Supply Co. Ltd. v. CIT and CIT v. Travancore Sugars and Chemicals Ltd. to support the deduction claim. It emphasized that statutory deposits, like the reserve fund in this case, which the assessee does not control, can be considered deductible under relevant sections of the Income-tax Act, 1961.
Decision and Conclusion:
The court answered the questions of law as follows:
- Question (i) was answered in favor of the Revenue, stating that the activity of purchasing paddy, milling it, and selling it did not amount to marketing agricultural produce under section 80P(2)(iii) of the Income-tax Act, 1961.
- Question (ii) was answered in favor of the assessee, allowing the deduction of Rs. 1,66,763 required to be transferred to the reserve fund under section 43(2) of the Societies Act as a business expenditure or having been diverted by an overriding title. No costs were awarded in this reference.
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1986 (4) TMI 12
Issues Involved:
1. Whether the sum of Rs. 22.5 lakhs receivable by the assessee from the U.K. company with reference to the Baroda Refinery project was of the character of income.
2. Whether Rs. 22.5 lakhs credited to the profit and loss account of the assessee for the previous year ended September 28, 1968, accrued as income of the assessee during the previous year.
Summary:
Issue 1: Character of the Sum of Rs. 22.5 Lakhs
The High Court considered whether the sum of Rs. 22.5 lakhs receivable by the assessee from the U.K. company with reference to the Baroda Refinery project was of the character of income. The assessee, a wholly-owned subsidiary of Stewarts & Lloyds Ltd. of London, entered into a contract with the Indian Oil Corporation and incurred a loss of Rs. 57.85 lakhs. The U.K. company resolved to indemnify the assessee up to Rs. 25 lakhs without any legal obligation. The Income-tax Officer treated the sum as a revenue receipt, but the Appellate Assistant Commissioner and the Tribunal held it was a casual and windfall gift, not income. The Tribunal emphasized that the payment was not attributable to any legal obligation or custom, and the receipt lacked the character of income. The High Court affirmed this view, noting that the payment was benevolent and constituted a gesture of goodwill, not a trading or revenue receipt. The Court cited the Supreme Court's decision in India Discount Co. Ltd.'s case, emphasizing that a receipt not regarded as income in law cannot be treated as such merely due to its erroneous credit in the profit and loss account.
Issue 2: Accrual of Income
The High Court also examined whether Rs. 22.5 lakhs credited to the profit and loss account of the assessee for the previous year ended September 28, 1968, accrued as income during that year. The Tribunal found that the actual payment was received by the assessee from the U.K. company during the years 1969 to 1972. The resolution dated January 28, 1967, indicated an intention to make the payment over two years after ascertaining the loss. The Tribunal held that no right to receive the amount accrued during the relevant accounting year, and the erroneous credit in the profit and loss account did not alter this position. The High Court accepted this finding, referencing the Supreme Court's decision in E. D. Sassoon & Company Ltd.'s case, which stated that the accrual of income does not depend on the accounts of the assessee. The Court concluded that no income had accrued to the assessee during the relevant period and answered the question in the affirmative, in favor of the assessee.
Conclusion:
The High Court answered both questions in the affirmative and in favor of the assessee, holding that the sum of Rs. 22.5 lakhs was not of the character of income and did not accrue as income during the relevant accounting year. There was no order as to costs.
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1986 (4) TMI 11
Issues Involved:
1. Whether the royalty paid by the assessee to foreign collaborators contains any element of capital nature.
2. Whether the amount representing sales tax could be treated as assessee's income under the mercantile system of accounting.
3. Whether the Tribunal was justified in bifurcating the expenditure of royalty into revenue and capital expenditure.
4. Whether the assessee could withdraw the claim of extra shift allowance before the Income-tax Officer.
Summary:
Issue 1: Nature of Royalty Payment (Assessee's Question and Revenue's Question 2)
The core question was whether the royalty of Rs. 3,09,991 paid by the assessee contained any element of capital nature. The Tribunal had bifurcated the royalty payment into 2/3rds revenue expenditure and 1/3rd capital expenditure. The court held that the entire sum paid as royalty was revenue expenditure. The court reasoned that the payments were made for profit-earning activities and did not result in an enduring benefit to the assessee. The court also found no basis for the bifurcation by the Tribunal. Thus, the entire sum of Rs. 3,09,991 was allowable as revenue expenditure.
Issue 2: Sales Tax as Income (Revenue's Question 1)
The question was whether the amount of Rs. 80,688 representing sales tax could be treated as the assessee's income in the assessment year in question. The court held that since the assessee follows the mercantile system of accounting and did not deposit the sales tax sums in the Government treasury during the relevant year, it must be deemed to be the income of the assessee. This view was supported by the Supreme Court's decision in Sinclair Murray and Co. P. Ltd. v. CIT and the court's own decision in CIT v. Motipur Sugar Factory (P.) Ltd.
Issue 3: Withdrawal of Extra Shift Allowance Claim (Revenue's Question 3)
The court addressed whether the assessee could withdraw the claim of extra shift allowance before the Income-tax Officer. The assessee, through its counsel Mr. Dinesh Vyas, conceded that it did not intend to contest the matter and accepted the correctness of the Income-tax Officer's order. The court, therefore, refused to answer this question and directed that the order of the Income-tax Officer should be considered effective.
Conclusion:
1. The royalty payment of Rs. 3,09,991 was entirely revenue expenditure and allowable as such.
2. The amount of Rs. 80,688 representing sales tax was deemed to be the income of the assessee.
3. The Tribunal's bifurcation of the royalty expenditure was not justified.
4. The assessee's concession regarding the extra shift allowance was accepted, and the court refused to answer this question.
The references were thus disposed of, with no order as to costs.
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1986 (4) TMI 10
The High Court of Patna ruled in favor of the assessee, Sarbamangala Devi, and Dr. P. R. Chakarvarty, regarding the exemption of pranamis under section 10(3) of the Income-tax Act, 1961 for the assessment years 1967-68 to 1971-72. The Tribunal's decision was upheld, and each assessee will bear their own costs.
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1986 (4) TMI 9
The High Court of Patna ruled in favor of the assessee, Dr. P. R. Chakravarty, stating that the receipts of pranamis were casual and non-recurring, and therefore exempt under section 10(3) of the Income-tax Act, 1961. The decision was based on previous court rulings. Each party will bear their own costs.
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1986 (4) TMI 8
Issues:
1. Whether the assessee corporation qualifies as an authority constituted under any law for the marketing of commodities.
2. Whether the income of the corporation from letting of godowns and/or warehousing is exempt from tax under section 10(29) of the Income-tax Act, 1961.
Analysis:
The High Court of Rajasthan addressed a reference made by the Income-tax Appellate Tribunal regarding the assessment years 1969-70 and 1970-71. The Income-tax Officer initially disallowed exemption under section 10(29) of the Income-tax Act, 1961, for the income from letting of godowns and/or warehouses. However, the Appellate Assistant Commissioner allowed the exemption in favor of the assessee. Subsequently, the Income-tax Appellate Tribunal upheld the Appellate Assistant Commissioner's decision, leading to reference applications by the Revenue before the Tribunal.
The Court noted that various High Courts, including Allahabad, Punjab and Haryana, Gujarat, Karnataka, and Delhi, had held that warehousing corporations constituted under the Warehousing Corporations Act are authorities for marketing of commodities, making their income from letting of godowns and warehouses exempt under section 10(29) of the Income-tax Act. On the other hand, the Revenue relied on Calcutta High Court decisions, which were deemed distinguishable.
The central issue revolved around the interpretation of the term "authority" under section 10(29). The Court emphasized that for the provision to apply, the body must be constituted under a law and exist for marketing commodities. It concurred with the view of the aforementioned High Courts, distinguishing the Calcutta decisions based on the nature of the entities involved. The Court held that a body constituted under law for marketing commodities qualifies as an authority under section 10(29) and is entitled to exemption on income from letting of godowns and warehouses.
In conclusion, the Court ruled in favor of the assessee, affirming that the corporation was an authority constituted under the Warehousing Corporations Act for marketing commodities, and its income from letting out godowns was exempt from tax under section 10(29) of the Income-tax Act. The parties were directed to bear their own costs.
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1986 (4) TMI 7
Issues Involved:
1. Whether the Tribunal was justified in holding that the provisions of section 271(1)(c) were attracted and in applying the provisions of section 153(1)(b) of the Income-tax Act, 1961, thereby holding that the assessment was not time-barred.
2. Whether the Tribunal was justified in holding that the assessee had concealed the income relating to the sum of Rs. 1,14,092 and the provisions of section 271(1)(c) were clearly attracted.
Summary:
Issue 1: Application of Section 271(1)(c) and Section 153(1)(b)
The Tribunal held that the assessee filed a disclosure petition only after the concealment was discovered by the Department through a survey, and the assessee did not file revised returns declaring the correct income. The Tribunal concluded that the provisions of section 271(1)(c) were clearly attracted, and thus, the period for completing the assessment would be eight years under section 153(1)(b). However, the High Court found that the Tribunal's findings were contrary to the evidence on record. The High Court noted that the Income-tax Officer (ITO) did not initiate any proceeding within the normal period of limitation of four years and only initiated proceedings after the period had expired. The High Court held that the ITO could not extend the period of limitation under section 153(1)(b) without initiating proceedings within the normal period and without recording a finding of concealment supported by materials on record within that period. Therefore, the assessment was barred by limitation, and question No. 1 was answered in the negative and in favor of the assessee.
Issue 2: Concealment of Income
The High Court observed that the assessee had filed the return for the assessment year 1962-63 on July 30, 1962, and the survey report by the Inspector of Income-tax did not allege any concealment of income. The High Court also noted that the disclosure petition filed by the assessee on May 19, 1967, did not admit that the peak credit was the concealed income for the assessment year 1962-63. The Tribunal's findings that the disclosure petition was not filed voluntarily and that the assessee had concealed the income were not supported by the evidence on record. The High Court concluded that the Tribunal was not justified in holding that the assessee had concealed its income, and question No. 2 was answered in the negative and in favor of the assessee.
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1986 (4) TMI 6
Issues Involved:
1. Legality of proceedings initiated under section 147(a) of the Income-tax Act.
2. Justification for adding Rs. 89,000 as income from undisclosed sources.
3. Applicability of the Explanation to section 271(1)(c) of the Income-tax Act.
4. Relevance of the date of satisfaction for penalty proceedings.
5. Burden of proof in penalty proceedings under section 271(1)(c).
Issue-wise Detailed Analysis:
1. Legality of Proceedings Initiated under Section 147(a):
The court addressed whether the reassessment proceedings initiated under section 147(a) of the Income-tax Act were legal and valid. It was held that the reassessment proceedings were indeed legal and valid, confirming that income had escaped assessment due to the omission on the part of the assessee to disclose true facts at the time of the original assessment. This was upheld based on the findings in CIT v. Bihar Cotton Mills Ltd. [1986] 160 ITR 275 (Pat).
2. Justification for Adding Rs. 89,000 as Income from Undisclosed Sources:
The court examined whether the Tribunal was justified in concluding that Rs. 89,000 should be added as the assessee's income from undisclosed sources. It was found that the cash credits of Rs. 89,000 were not genuine, and the addition as income from undisclosed sources in the assessment year 1958-59 was upheld. The Tribunal's decision was based on the fact that the assessee failed to prove the genuineness of the cash credits, which were considered secret profits from the business.
3. Applicability of the Explanation to Section 271(1)(c) of the Income-tax Act:
The court deliberated on whether the penalty proceedings should be governed by the law as it existed at the time of the original assessment or by the law in force when the reassessment was completed. The majority opinion, led by Uday Sinha J., held that the penalty proceedings should be governed by the law as it existed on the date of satisfaction of the assessing officer, i.e., March 17, 1971. This included the application of the Explanation to section 271(1)(c), which shifts the burden of proof to the assessee to show that the failure to return the correct income did not arise from any fraud or gross or willful neglect.
4. Relevance of the Date of Satisfaction for Penalty Proceedings:
The court considered whether the penalty should be imposed based on the law in force at the time of the original return or at the time of the reassessment. The judgment emphasized that the relevant date for the imposition of penalty is the date when the assessing officer reaches satisfaction that there has been concealment of income. This principle was reinforced by the Supreme Court decisions in Jain Brothers v. Union of India [1970] 77 ITR 107 and Smt. Maya Rani Punj v. CIT [1986] 157 ITR 330, which held that the law prevailing at the time of the assessing officer's satisfaction governs the penalty proceedings.
5. Burden of Proof in Penalty Proceedings under Section 271(1)(c):
The court analyzed the burden of proof in penalty proceedings under section 271(1)(c). It was held that the Explanation to section 271(1)(c) shifts the burden to the assessee to prove that the failure to return the correct income did not arise from any fraud or gross or willful neglect. The Tribunal's decision to cancel the penalty was overturned, as the assessee failed to discharge this burden. The facts collected during the assessment proceedings indicated that the assessee had concealed income, and the absence of new material in the penalty proceedings did not negate this finding.
Conclusion:
The Tribunal's decision to cancel the penalty of Rs. 15,000 imposed under section 271(1)(c) was found to be incorrect. The penalty proceedings were to be governed by the law as it existed on the date of the assessing officer's satisfaction, which included the application of the Explanation to section 271(1)(c). The assessee failed to discharge the burden of proof, leading to the conclusion that there was concealment of income. The question was answered in favor of the Revenue and against the assessee.
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1986 (4) TMI 5
The High Court of Madhya Pradesh allowed an application under section 256(2) of the Income-tax Act, 1961, directing the Income-tax Appellate Tribunal to refer a question of law regarding exemption under section 80L for interest earned by a firm on bank deposits held in its name.
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1986 (4) TMI 4
The High Court of Calcutta remanded the case to the Tribunal for further proceedings under section 260(1) of the Income-tax Act based on a previous decision involving the same assessee. The Tribunal will take additional evidence and provide both parties with a reasonable opportunity to be heard. No costs were awarded.
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1986 (4) TMI 3
Issues Involved:
1. Whether the consideration for goodwill amounting to Rs. 71,918 received by the assessee was assessable as capital gains.
2. Whether the sale deed included the sale of goodwill.
3. Whether goodwill is considered a capital asset under section 45 of the Income-tax Act.
4. Whether self-generated goodwill is liable to be taxed as capital gains.
Issue-wise Detailed Analysis:
1. Whether the consideration for goodwill amounting to Rs. 71,918 received by the assessee was assessable as capital gains:
The Tribunal held that the value of the consideration received by the assessee for the transfer of goodwill was not liable to capital gains tax under section 45 of the Income-tax Act. The Tribunal observed that the capital value of goodwill is charged to wealth-tax under the Wealth-tax Act, 1957, and it would be unfair to levy another tax calling it capital gains tax on the same value of the goodwill in the same assessment year merely because the goodwill had been transferred for a consideration.
2. Whether the sale deed included the sale of goodwill:
The sale deed did not explicitly mention the sale of goodwill. The Appellate Assistant Commissioner, however, treated the amount as being on account of goodwill of the shop "New Chaibasa Cycle Stores". A letter dated May 26, 1971, showed an offer of Rs. 73,000 on account of goodwill, including quota rights from certain manufacturers and suppliers of cycles and cycle parts. The Tribunal, however, did not apply itself to the question of whether there was a transfer of goodwill or not but accepted it as such.
3. Whether goodwill is considered a capital asset under section 45 of the Income-tax Act:
The Tribunal's view that tax on capital gains was not attracted to the transfer of goodwill was not sound. Reference was made to Artex Manufacturing Co. v. CIT [1981] 131 ITR 559 (Guj), where it was held that if there is any surplus in the sense of excess of the consideration for the transfer of the business over the cost of acquisition of the business, there would be capital gain taxable in the hands of the assessee. The Supreme Court in CIT v. Mugneeram Bangur and Co. [1965] 57 ITR 299 also laid down that where there is a slump transaction, anything apart from the value of the stock-in-trade must be taxed as a capital gain.
4. Whether self-generated goodwill is liable to be taxed as capital gains:
The Appellate Assistant Commissioner and the Tribunal both held that the goodwill was self-generated and therefore not liable to capital gains tax. This position aligns with the Supreme Court's ruling in CIT v. B. C. Srinivasa Setty [1981] 128 ITR 294, where it was held that goodwill generated in a newly commenced business cannot be described as an "asset" within the terms of section 45 of the Act and therefore its transfer does not give rise to a capital gain for the purposes of income-tax.
Separate Judgments Delivered:
Uday Sinha J.:
Held that the Tribunal was not justified in holding that the consideration for goodwill amounting to Rs. 71,918 received by the assessee was not a capital gain assessable to tax. He emphasized that goodwill is a capital asset and should be taxed under section 45 of the Income-tax Act.
Nazir Ahmad J.:
Disagreed with Uday Sinha J., holding that the Tribunal was justified in law in holding that the consideration for goodwill amounting to Rs. 71,918 received from the vendee by the assessee was not a capital asset and as such is not assessable to capital gains tax. He emphasized that the goodwill was self-generated and therefore not taxable under section 45 of the Act.
G. G. Sohani C. J.:
Agreed with Nazir Ahmad J., concluding that the Tribunal was right in holding that the consideration for goodwill amounting to Rs. 71,918 received by the assessee from the vendee was not liable to be taxed as capital gains under section 45 of the Act. He emphasized that the question of the correctness of the Tribunal's finding that the amount represented the value of the goodwill was not before the court.
Order of the Court:
In accordance with the opinion of the majority, the answer to the question referred to the court by the Tribunal is in the affirmative and against the Revenue. The consideration for goodwill amounting to Rs. 71,918 received by the assessee was not a capital asset assessable to capital gains tax.
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1986 (4) TMI 2
Penalty imposed against the petitioner by the Wealth-tax Officer at the rate of I per cent. of the total wealth assessed for every month of default and out of seven months' default, the penalty imposed was for four months equal to Rs. 6,784 - held that imposition of penalty does not violate fundamental rights - hence rate of penalty is constitutionally valid
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1986 (4) TMI 1
Amounts received by the assessee as an office bearer of religious faith - since the assessee has used the same for his personal use and for his business, it is taxable - It is also not to be treated as casual income - Whether the Tribunal was right in finding that the amount of Rs. 5,85,637 are receipts of a casual and non-recurring nature not arising from business or the exercise of a profession or occupation within the meaning of section 10(3) - Held, no
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