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Showing 261 to 280 of 354 Records
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1990 (8) TMI 94
Issues:
1. Interpretation of section 37(3A) of the Income-tax Act regarding advertisement expenditure.
2. Application of section 37(3D) of the Act in determining a new industrial undertaking.
Analysis:
The judgment delivered by the High Court of Karnataka involved the interpretation of sections 37(3A) and 37(3D) of the Income-tax Act, 1961. The petitioner, an assessee, contested the disallowance of advertisement expenditure related to a new product named "Torino." The petitioner argued that the expenditure should be allowed under section 37(3A) due to investments in new machinery and capital goods, qualifying as a new industrial undertaking under section 37(3D). However, the court noted that the exception in section 37(3D) applies to new undertakings, and the petitioner, an established company, did not qualify as a new undertaking. The court emphasized that the mere investment in new machinery does not transform an old undertaking into a new one under section 37(3D). As all authorities, including the Tribunal, upheld the disallowance based on this factual finding, the court concluded that no legal question arose for reference under section 256(2) of the Act.
In essence, the court held that the petitioner's status as an old, established company precluded it from claiming the benefits of a new industrial undertaking under section 37(3D) of the Act. The court emphasized that the exception in section 37(3D) is reserved for newly established undertakings, and the petitioner's investment in machinery did not alter its existing status. Therefore, the disallowance of the advertisement expenditure was deemed appropriate, as supported by the factual findings upheld by all relevant authorities.
Ultimately, the court dismissed the petitioner's petition under section 256(2) of the Income-tax Act, 1961, as no legal question meriting consideration for reference to the court arose from the case. The judgment reaffirmed the principle that the exception under section 37(3D) applies to new industrial undertakings, and investments in machinery alone do not qualify an established company as a new undertaking under the Act.
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1990 (8) TMI 93
Issues:
Whether the addition made on the basis of an agreement with an unauthorized person is valid under section 288 of the Income-tax Act, 1961.
Analysis:
The judgment concerns the assessment year 1977-78, where an addition of Rs. 1,00,000 was made to the trading results of a registered firm. The dispute arose as the financial adviser, Mr. T. K. Gopalan Nair, allegedly agreed to the disallowance without proper authorization from the firm. The Commissioner of Income-tax (Appeals) initially deleted the addition, citing unjustified grounds. However, the Revenue contended that the addition was based on the agreement and should not have been overturned. The Appellate Tribunal found that Mr. T. K. Gopalan Nair was not authorized to act on behalf of the firm under section 288 of the Income-tax Act. The Tribunal concluded that any agreement made by an unauthorized person is not binding on the assessee. Since there was no written authorization proving Mr. Nair's authority, the addition was deemed unauthorized. The Tribunal dismissed the Revenue's appeal, leading to the reference of the question of law to the High Court.
The High Court analyzed section 288 of the Income-tax Act, which requires written authorization for representation. As a fact-finding authority, the Court upheld the Tribunal's findings that Mr. Nair was not authorized by the firm and no written authorization existed. The absence of any documentation proving Mr. Nair's authority rendered the agreement invalid and unenforceable against the firm. The Court affirmed that the Appellate Tribunal was justified in ruling that the assessee was not bound by the unauthorized agreement for the addition of Rs. 1,00,000. Consequently, the Court answered the question in favor of the assessee and against the Revenue. The judgment will be forwarded to the Income-tax Appellate Tribunal, Cochin Bench for further action.
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1990 (8) TMI 92
The High Court of Orissa allowed the payment of Rs. 9,000 as remuneration to the karta of three Hindu undivided families who managed a partnership firm. The Income-tax Officer had disallowed the salary, but the Tribunal ruled that there is no legal bar to such payment. The Court agreed with the Tribunal, stating that in the absence of any prohibition in the law, remuneration to the karta can be allowed if it is reasonable and not disbelieved. The judgment favored the assessees.
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1990 (8) TMI 91
The High Court of Delhi dismissed the petition regarding the taxation of interest on fixed deposit on accrual or cash basis for the assessment year 1978-79. The fixed deposit matured in 1977, and tax was paid on receipt basis, which was accepted by the assessee. No reference was deemed necessary as the issue had become academic. No costs were awarded.
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1990 (8) TMI 90
The High Court of Orissa ruled that the income of minor sons from a firm can be assessed in the hands of their father even if the father has no income of his own. The Tribunal's conclusion was not justified, and the decision was based on a previous ruling by the Madhya Pradesh High Court. The judgment was in favor of the Department.
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1990 (8) TMI 89
Issues:
Challenge to the legality and validity of orders passed by the Commissioner of Income-tax under sections 264 and 273A of the Income-tax Act.
Analysis:
The petitioner, a dissolved partnership firm, challenged the orders passed by the Commissioner of Income-tax for the assessment year 1983-84. The petitioner filed a revised return showing additional income, leading to a penalty under section 271(1)(c). The petitioner did not appeal but filed a revision petition under section 264 and an application under section 273A. The Commissioner rejected both petitions, prompting the petitioner to approach the High Court under article 226 of the Constitution of India.
The petitioner's counsel argued that the concealment of income was detected during a search in June 1982, but the assessment proceedings were for the year 1983-84. The Commissioner failed to consider the correct legal position and wrongly applied provisions that did not exist at the material time. The counsel contended that the revised return was filed before assessment proceedings, indicating a bona fide mistake and justifying the challenge to the penalty under section 271(1)(c).
On the other hand, the Department's counsel argued that the orders under sections 264 and 273A were not appealable, and the Commissioner's decision was based on valid reasons. However, the High Court found that the Commissioner did not properly exercise jurisdiction under section 273A. The High Court highlighted that the Commissioner failed to consider relevant facts and legal provisions, leading to the quashing of the order under section 273A and directing the Commissioner to reconsider the petitioner's application under that section.
The High Court concluded that the impugned order under section 273A was quashed, and the Commissioner was directed to review the application afresh. The Court made the rule absolute in favor of the petitioner, excluding the order under section 264, and made no order as to costs.
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1990 (8) TMI 88
The petitioner sought reference on whether a claim for damages was allowable as incidental to business. The court held that the claim arose from a business transaction and was therefore allowable. The application was dismissed.
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1990 (8) TMI 87
The High Court of Kerala ruled that a cooperative society is not entitled to claim exemption under section 80P(2)(c) of the Income-tax Act for income derived from letting out a portion of a building. This decision was based on a previous court ruling that such income is considered rental income and not profits and gains of an activity carried out by the society. The Income-tax Appellate Tribunal's decision was upheld in favor of the Revenue.
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1990 (8) TMI 86
Issues:
Reopening of assessment under section 147(a) of the Income-tax Act, 1961 based on non-disclosure of material facts by the assessee.
Analysis:
The judgment pertains to two references under section 256(1) of the Income-tax Act, 1961, addressing the issue of whether non-disclosure by the assessee regarding the nature of investments would justify reopening of assessment under section 147(a) of the Act. The case involved assessments for the years 1962-63 and 1963-64 where the assessee had invested in a partnership firm without explaining the sources of the investments. Notices were issued for reopening the assessments based on non-disclosure of income items. The Income-tax Officer and the Appellate Assistant Commissioner treated the undisclosed investments as income and taxed them. The Tribunal, however, held that there was no non-disclosure of material facts, rendering the notice under section 147(a) invalid.
In the assessment for the year 1962-63, the assessee failed to disclose the investment in the partnership firm, leading to a lack of clarity on the sources of the investment. On the other hand, for the year 1963-64, the assessee disclosed the source of income invested in the partnership but did not provide details of the amount invested. The crux of the issue revolved around whether the assessee had disclosed all material facts as required under the law.
The learned Advocate-General representing the Department argued that mere mention of being a partner in the firm without disclosing the investment amount did not constitute disclosure of material facts. It was contended that the Income-tax Officer had the jurisdiction to reopen the assessment under section 147(a) based on non-disclosure. The court emphasized that the disclosure of all material facts is essential for the Income-tax Officer to exercise power under section 147(a) and that the determination of material facts depends on the specific circumstances of each case.
The court clarified that while source of income is a material fact that must be disclosed, inferential facts need not be disclosed by the assessee. In the case of the year 1963-64, since the source of income was disclosed, the Tribunal's decision to allow the appeal was deemed correct. However, for the year 1962-63, the non-disclosure of being a partner in the firm was considered a material fact, justifying the reopening of assessment under section 147(a).
In conclusion, the court ruled in favor of the assessee for the year 1963-64, where the source of income was disclosed, and against the assessee for the year 1962-63 due to the non-disclosure of being a partner in the firm. The judgment highlighted the importance of disclosing all material facts to enable proper assessment under the Income-tax Act, 1961.
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1990 (8) TMI 85
The High Court of Rajasthan ruled that gratuity liability cannot be deducted while valuing unquoted shares for wealth tax purposes. The decision was based on a previous unreported judgment and rejected the argument that gratuity should be considered an ascertained liability. The court held that provision for gratuity is contingent and not deductible, following the principle applied to company cases. The judgment favored the Department and denied the deduction of gratuity.
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1990 (8) TMI 84
The High Court of Delhi disposed of the petition regarding the valuation of a house, allowing the petitioner to apply for revival if the house value is revised. The valuation of shares quoted on the Bombay Stock Exchange was accepted based on a Central Board of Direct Taxes Circular, considering the distance between Bombay and Delhi. The court viewed the valuation of shares as a question of fact in the present case.
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1990 (8) TMI 83
The High Court of Orissa upheld the addition of Rs. 53,500 as income from undisclosed sources in a case involving a Hindu undivided family. The court found that the money used to purchase land by the two sons came from joint family funds, despite the sons' claims of individual ownership. The court held that the sons failed to provide clear evidence to support their claim, leading to the conclusion that the funds were undisclosed income. The Tribunal's decision to sustain the addition was deemed justified.
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1990 (8) TMI 82
The High Court of Orissa ruled that while valuing a deceased partner's interest in a partnership firm, assets cannot be revalued separately from the balance-sheet value. The decision favored the assessee. (Case citation: 1990 (8) TMI 82 - Orissa High Court)
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1990 (8) TMI 81
Issues Involved:
1. Whether the petitioners, as partners of the firm, can be prosecuted u/s 276B read with section 278B of the Income-tax Act, 1961, for failure to deduct and remit tax.
2. Interpretation of "person responsible for paying" u/s 204(iii) and "principal officer" u/s 2(35) of the Income-tax Act.
3. Applicability of section 278B regarding offences by companies to the partners of a firm.
4. Adequacy of allegations in the complaint to sustain prosecution.
Summary:
Issue 1: Prosecution of Partners u/s 276B read with section 278B
The petitioners, who are partners of the firm, are being prosecuted for failing to deduct and remit tax deducted at source u/s 194A of the Income-tax Act. The prosecution is based on the allegation that they were in charge of and responsible for the conduct of the business of the firm.
Issue 2: Interpretation of "Person Responsible for Paying" and "Principal Officer"
The court examined the terms "person responsible for paying" u/s 204(iii) and "principal officer" u/s 2(35) of the Income-tax Act. It was held that if the payer is a company, the company itself, including the principal officer, is liable. The partners of the firm do not fall within this category unless served with a notice by the Income-tax Officer indicating his intention to treat them as the principal officer.
Issue 3: Applicability of Section 278B to Partners
The court noted that u/s 278B, the prosecution must prove that the petitioners were in charge of and responsible for the conduct of the business of the firm. The Supreme Court's rulings in analogous cases under the Prevention of Food Adulteration Act were cited, emphasizing that mere allegations without specific details of the partners' roles are insufficient for prosecution.
Issue 4: Adequacy of Allegations in the Complaint
The court found that the complaint merely repeated the statutory language without providing specific details about the roles and responsibilities of the petitioners. Citing Supreme Court precedents, the court held that such general allegations are inadequate to sustain prosecution. The court emphasized that the prosecution must provide clear averments regarding the active role and extent of liability of each partner.
Conclusion:
The court concluded that the prosecution against the partners is not sustainable due to the lack of specific allegations and details in the complaint. The proceedings in C.C. Nos. 968, 969, 970, and 971 of 1986 were quashed to the extent they relate to the petitioners.
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1990 (8) TMI 80
The High Court of Orissa dismissed an application under section 256(2) of the Income-tax Act, 1961, regarding the classification of rental income from buildings owned by an unregistered firm engaged in the kendu leaf trade. The Tribunal held that the rental income was not from house property since the business was not closed. The Tribunal's decision was upheld, stating that nationalisation of the kendu leaf trade did not mean the business was closed. The application for reference under section 256(1) was refused, and no costs were awarded.
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1990 (8) TMI 79
Issues:
1. Deductibility of ex gratia payment made in excess of statutory limit of 20% bonus.
2. Nature of payment of Rs. 3,31,900 as production incentive and its deductibility.
Analysis:
1. The case involved the deduction of an ex gratia payment of Rs. 17,13,893 made by a public limited company to its employees, which was in excess of the statutory limit of 20% bonus. The Income-tax Officer disallowed this amount, considering it as an expenditure relating to a prior period. However, the Commissioner of Income-tax (Appeals) held it to be a customary payment not covered by the Payment of Bonus Act and allowed the deduction. The High Court, referring to previous decisions, emphasized that any payment representing bonus should meet the conditions of reasonableness based on employee pay, business profits, and industry practice. The Court found the Appellate Tribunal's decision erroneous as it did not consider whether the ex gratia payment satisfied these conditions, leading to a negative answer in favor of the Revenue.
2. The second issue pertained to a payment of Rs. 3,31,900 classified as a production incentive. The Appellate Tribunal considered it as additional wages, allowing its deduction. However, the High Court found this decision lacking as the nature of the payment was not conclusively determined. The absence of the relevant agreement and failure to consider the Payment of Bonus Act's provisions led the Court to conclude that the Tribunal's decision was based on conjecture. Consequently, the Court ruled against the assessee and in favor of the Revenue, directing the Tribunal to reevaluate the nature of the payment and its deductibility under the Income-tax Act and Payment of Bonus Act.
In conclusion, the High Court's judgment addressed the deductibility of both an ex gratia payment exceeding the statutory bonus limit and a payment labeled as production incentive. The Court emphasized the need for payments to meet specified criteria for deduction under the Income-tax Act, highlighting the importance of considering employee pay, business profits, and industry practices. The Court directed the Tribunal to reassess both payments to determine their eligibility for deduction based on the relevant legal provisions.
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1990 (8) TMI 78
The High Court of Orissa held that interest received by a company from fixed deposits is not considered business income. The Tribunal's decision was affirmed, stating that the investment in banks was not the main business of the company. The Income-tax Officer treated the interest as income from other sources, and the matter is pending before the Income-tax Appellate Tribunal. The court's decision will not influence the pending dispute. The answer to the question is affirmative.
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1990 (8) TMI 77
Issues Involved:
1. Demand of interest u/s 215 of the Income-tax Act, 1961.
2. Demand of interest u/s 220(2) of the Income-tax Act, 1961.
3. Maintainability of the writ petition.
Summary:
1. Demand of Interest u/s 215 of the Act:
The assessee challenged the demand of interest amounting to Rs. 6,44,055 for the period April 1, 1981, to June 30, 1982, u/s 215 of the Act. The assessee argued that the entire advance tax was paid before the end of the financial year, i.e., by March 31, 1981, and that the mere delay in payment by the specified dates in section 211 should not attract interest u/s 215. The court noted the preponderance of judicial authority supporting the assessee's view, citing various High Court judgments that payments made within the financial year should be considered as advance tax payments. Consequently, the court quashed the demand of interest u/s 215, stating that the demand was not sustainable as the payment made on March 13, 1981, was treated as part of the advance tax by the Department in earlier notices.
2. Demand of Interest u/s 220(2) of the Act:
The assessee contested the demand of Rs. 4,98,488 for the period October 29, 1984, to July 29, 1988, u/s 220(2) of the Act, arguing that there was no notice of demand that remained unpaid for 35 days. The court referred to the Kerala High Court's judgment in K. P. Abdul Kareem Hajee v. ITO, which held that an assessment order remains provisional during the appeal period and becomes final upon the appellate authority's decision. The court concluded that the original demand notice, which lay in abeyance, stood revived upon the Tribunal's final order. The court rejected the argument that the demand could not be in operation until the Tribunal's order, stating that the provisions of section 220(2) were attracted. The court also clarified that the levy of interest is compensatory, not penal. Thus, the demand u/s 220(2) was sustained.
3. Maintainability of the Writ Petition:
The Department argued that the writ petition was not maintainable due to the availability of an alternative remedy. The court noted that no appeal is provided against a notice of demand u/s 156 of the Act and that the challenge was confined to the demand of interest, not the assessment itself. Citing the Supreme Court's decision in Central Provinces Manganese Ore Co. Ltd. v. CIT, the court held that the writ petition was maintainable as no statutory appeal was available against such an order demanding interest. The court emphasized that the question of alternative remedy is a matter of discretion and not a rule of thumb.
Conclusion:
The writ petition was allowed partly. The demand of interest u/s 215 was quashed, while the demand u/s 220(2) was sustained. The parties were left to bear their own costs.
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1990 (8) TMI 76
Issues:
Interpretation of deduction for bonus paid in excess of the maximum under the Income-tax Act, 1961.
Analysis:
The judgment pertains to a case where the Income-tax Appellate Tribunal referred a question of law to the High Court regarding the entitlement of the assessee to claim deduction for bonus paid in excess of the maximum under the Income-tax Act, 1961. The respondent, a public limited company engaged in the manufacture and sale of roofing tiles and bricks, paid bonus exceeding 20% of the salary, which is the maximum payable under the Payment of Bonus Act. The assessing authority disallowed the excess amount, but the Commissioner of Income-tax (Appeals) reversed this decision. Subsequently, the Appellate Tribunal allowed the full deduction of the excess bonus as it was considered a customary bonus. However, the High Court found that the Tribunal had erred in not considering the provisions of section 36(1)(ii) of the Income-tax Act, which require scrutiny of any bonus paid in excess of the statutory limit. The court emphasized that the Tribunal must reevaluate the matter in light of previous decisions on bonus payments.
The High Court highlighted that previous decisions, such as CIT v. P. Alikunju, M. A. Nazir, Cashew Industries [1987] 166 ITR 611, CIT v. Kumar Industries [1990] 183 ITR 156, and CIT v. Kerala Agro Industries Corporation [1990] 183 ITR 197, have established that payments under the Payment of Bonus Act are generally deductible. However, any amount exceeding the statutory limit must be examined under section 36(1)(ii) of the Act. The court criticized the Tribunal for overlooking these legal principles and emphasized the need for a fresh assessment by the Tribunal. The High Court reframed the question posed by the Tribunal to clarify that it concerns the deduction of bonus paid in excess of the maximum limit under the Income-tax Act, not the minimum. Consequently, the High Court directed the Income-tax Appellate Tribunal to reconsider the matter and make a fresh decision based on the legal precedents discussed.
In conclusion, the High Court ruled that the Tribunal's decision to allow the full deduction of the excess bonus without considering the statutory provisions was erroneous. The court emphasized the importance of adhering to the legal framework governing bonus payments and directed the Tribunal to reexamine the case in accordance with established legal principles. The judgment serves as a reminder of the need for meticulous consideration of statutory provisions and legal precedents in tax matters to ensure consistent and lawful outcomes.
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1990 (8) TMI 75
Issues Involved:
1. Whether the subsidy received from the Rubber Board is to be treated as revenue derived from land and exigible to agricultural income-tax or as a capital receipt not exigible to agricultural income-tax.
2. Whether the expenditure incurred on ammonia gas for conservation of latex is to be allowed to the full extent or restricted with reference to the income derived in a particular accounting year.
Issue-wise Detailed Analysis:
1. Treatment of Subsidy from Rubber Board:
The Tribunal applied the Supreme Court's ratio in V. S. S. V. Meenakshi Achi v. CIT [1966] 60 ITR 253 and held that subsidies received from the Rubber Board are exigible to tax as revenue receipts. The petitioner contended that this view was incorrect, arguing that the circumstances in Meenakshi Achi's case were different. The petitioner cited the Full Bench decision of the Kerala High Court in CIT v. Ruby Rubber Works Ltd. [1989] 178 ITR 181, which held that subsidies received from the Rubber Board are not includible in taxable agricultural income. The petitioner also referenced the Division Bench of the Karnataka High Court, which similarly held that subsidies from the Rubber Board are not agricultural income derived from land and thus not exigible to agricultural income-tax.
The court examined the relevant clauses in the Development Replanting Subsidy Scheme and sections of the Tamil Nadu Agricultural Income-tax Act, 1955. The court noted that the Full Bench of the Kerala High Court distinguished Meenakshi Achi's case based on the facts and the scheme's provisions, concluding that the replantation subsidy is not a revenue receipt and cannot be included in the computation of profits or income of the assessee. The court agreed with this view, stating that the subsidies are not meant to swell the profits of the assessees but to encourage replanting of old and uneconomic plantations.
2. Expenditure on Ammonia Gas for Conservation of Latex:
The Tribunal upheld the Agricultural Income-tax Officer's decision to disallow a portion of the expenditure on ammonia gas, arguing that the expenditure was excessive compared to the previous year without a corresponding increase in income. The petitioner argued that the accounts were accepted by the officer and that under section 5(e) of the Act, no condition of proportionality to income is prescribed.
The court referred to the decisions in Kil Kotagiri Tea and Coffee Estates Co. Ltd. v. Government of Madras [1974] 96 ITR 165 and Puthutotam Estates (1943) Ltd. v. State of Tamil Nadu [1984] 148 ITR 341, which elucidated the scope of section 5(e). These decisions clarified that section 5(e) covers a wide range of expenses related to the land, not just those directly incurred for deriving agricultural income. The court concluded that the disallowance of a portion of the expenditure on ammonia gas was not justified as the expenditure falls under section 5(e).
Conclusion:
The court found that the subsidies received from the Rubber Board should not be treated as revenue receipts and are not exigible to agricultural income-tax. Additionally, the court held that the disallowance of a portion of the expenditure on ammonia gas for conservation of latex was not justified under section 5(e) of the Act. Consequently, the tax cases were allowed, with no order as to costs.
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