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Case Laws
Showing 281 to 292 of 292 Records
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1990 (9) TMI 12
Issues Involved:
1. Whether the interest of Rs. 24,500 paid to the Provident Fund Commissioner on account of delayed payment of provident fund was allowable as business expenditure.
Issue-wise Detailed Analysis:
1. Nature of Payment: Interest or Damages
- The court noted that the question was not well-worded as the assessee did not pay interest but damages under section 14B of the Employees' Provident Funds and Miscellaneous Provisions Act, 1952. The Tribunal recorded that the amount was paid as damages for the default in the payment of the provident fund contribution, not as interest. The Tribunal concluded that the payment was by way of penalty and, therefore, not allowable as business expenditure.
2. Assessee's Argument:
- The assessee's counsel argued that the payment was by way of interest and thus allowable as business expenditure. Several decisions were cited to support this contention.
3. Revenue's Argument:
- The Revenue's counsel cited the Supreme Court's decision in Organic Chemical Industries v. Union of India, which considered the nature of damages under section 14B of the Employees' Provident Funds and Miscellaneous Provisions Act, 1952. It was argued that damages being penal in nature could not be allowed as business expenditure.
4. Supreme Court's Precedent:
- The court referred to Mahalakshmi Sugar Mills Co. v. CIT, where the Supreme Court held that interest on arrears of sugarcane cess was not a penalty but an accretion to the cess. However, the court distinguished this case from the present one, noting that under section 14B, the authority is empowered to recover damages for default in payment, which is synonymous with failure to pay.
5. Nature of Damages under Section 14B:
- The Supreme Court in Organic Chemicals held that damages under section 14B are a penalty for breach of statutory obligation and serve both as a penalty and compensation for loss suffered by employees. The court emphasized that the term "damages" in section 14B must be understood in the context of the statutory scheme and is related to the employer's default.
6. Other Judicial Decisions:
- The court reviewed several decisions, including those from the Rajasthan High Court and the Allahabad High Court, which distinguished between interest and damages. The consistent view was that damages under section 14B are penal and not compensatory.
7. Conclusion:
- The court concluded that the payment made by the assessee, although termed as interest, represented damages under section 14B and thus could not be allowed as a deduction. The expression "damages" in section 14B is a penalty for the employer's default in fulfilling statutory obligations.
Final Judgment:
- The court answered the question in the affirmative, in favor of the Revenue and against the assessee, holding that the interest paid to the Provident Fund Commissioner on account of delayed payment was not allowable as business expenditure. There was no order as to costs.
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1990 (9) TMI 11
Issues:
1. Interpretation of section 11(1A) of the Income-tax Act, 1961 regarding exemption on capital gains.
2. Application of Circular No. F.180/54/72-IT(A1) on investments in fixed deposits as utilization of net consideration for acquiring capital assets.
3. Consideration of loans advanced from income of fixed deposits as acquisition of capital assets.
4. Relevance of previous judgments in similar cases on the interpretation of section 11(1A).
Analysis:
The case involved a reference under section 256(1) of the Income-tax Act, 1961 for the assessment year 1982-83. The primary issue was whether the assessee-trust was entitled to exemption under section 11(1A) in relation to the capital gains arising from the sale of gold. The assessee claimed that the net consideration from the sale was deposited in a fixed deposit with a bank and utilized for acquiring a new capital asset, thus qualifying for the exemption.
The Income-tax Officer did not accept the assessee's contention as the sale proceeds were lent on interest to other concerns and subsequently used for giving a loan to another entity. The Appellate Assistant Commissioner allowed the exemption following a precedent set in a previous case. The Tribunal also upheld this decision, leading to an appeal by the Revenue challenging the exemption granted to the assessee.
During the hearing, the Revenue's counsel highlighted Circular No. F.180/54/72-IT(A1), which stated that investments in fixed deposits for a certain period could be considered as utilization of net consideration for acquiring a capital asset under section 11(1A). The counsel also referred to a previous judgment where advances of loans were not equated with acquisition of capital assets.
In light of the arguments presented and the lack of clarity regarding whether the loans were advanced from the income of fixed deposits or the net consideration was invested in fixed deposits, the High Court declined to answer the questions in the reference. The matter was remanded to the Tribunal for rehearing, with directions to consider the circular and previous judgments in deciding the appeal. The parties were granted an opportunity to provide fresh evidence during the rehearing process.
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1990 (9) TMI 10
Issues:
1. Whether commission paid to a broker for letting out a house is an admissible deduction as collection charges under section 24(1)(viii) of the Income-tax Act, 1961 for the assessment year 1967-68.
Comprehensive Analysis:
The case involved a reference under section 256(1) of the Income-tax Act, 1961, regarding the deductibility of commission paid to a broker for letting out a house as collection charges. The assessee claimed a deduction of Rs. 15,000 paid as brokerage for letting out a property, which was disallowed by the income-tax authorities. The Tribunal, on second appeal, allowed the claim, stating that such expenditure falls within the statutory limit of six per cent and is an admissible deduction under section 24(1)(viii) of the Act.
During the hearing, the counsel for the Revenue argued against allowing brokerage as a deduction under the head "Income from house property." However, the counsel for the assessee relied on a Delhi High Court decision, contending that as long as the expenditure is within the statutory limit, it should be allowed, irrespective of its nature. The High Court considered these arguments and analyzed the provisions of section 24(1)(viii) which allow deductions for sums spent to collect rents, not exceeding six per cent of the annual value of the property.
The court emphasized that expenditure for collecting rents may include various expenses, such as paying commission to a broker to secure fair rent for the property. It was noted that the nature and character of the expenditure should determine its eligibility as a collection charge. As long as the expenditure is within the prescribed ceiling, whether incurred by appointing an employee or paying a broker, it should not be disallowed. In this case, since the expenditure was within the permissible limit, the court held in favor of the assessee, allowing the deduction of the brokerage amount.
In conclusion, the High Court answered the reference question affirmatively, stating that as long as the expenditure is within the statutory limit of section 24(1)(viii), it should be allowed as a deduction for collection charges. The judgment was agreed upon by both judges, and no costs were awarded in the matter.
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1990 (9) TMI 9
Issues:
1. Interpretation of the terms 'salary' and 'perquisite' under section 40A(5) of the Income-tax Act, 1961.
2. Allowability of deduction for salary and perquisites paid to a managing director pending approval by the Central Government.
Analysis:
Issue 1: Interpretation of 'salary' and 'perquisite' under section 40A(5)
The case involved determining whether cash allowances should be considered as part of salary for the purpose of computing disallowance under section 40A(5) of the Income-tax Act, 1961. The Income-tax Officer initially included cash allowances as perquisites, but the Commissioner of Income-tax (Appeals) disagreed, stating that they were not perquisites. The Tribunal sided with the assessee, considering cash allowances as part of salary. The High Court noted that the definition of 'salary' under Explanation 2 of section 40A(5) includes any amounts received by an employee from the employer arising from the employment relation, which would encompass cash allowances. Citing a similar decision by the Kerala High Court, the High Court concluded that cash allowances received by an employee should be treated as part of the salary. The court answered the first question in the affirmative, against the Revenue.
Issue 2: Allowability of deduction for managing director's salary pending approval
The second question revolved around the disallowance of the salary and perquisites paid to a managing director due to lack of approval by the Central Government. The Income-tax Officer disallowed the remuneration, but the Commissioner of Income-tax (Appeals) directed verification of the actual amount paid and restricted the disallowance accordingly. The Tribunal allowed the actual salary paid for services rendered by the managing director to be deducted under section 37 of the Act. The High Court referred to a previous decision and emphasized that remuneration for services rendered by an employee, even if the appointment was not approved, cannot be denied. Therefore, the High Court agreed with the Tribunal's decision to allow the actual salary paid to the managing director. The second question was answered in the affirmative and in favor of the assessee.
In conclusion, the High Court ruled in favor of the assessee on both issues, emphasizing the inclusion of cash allowances in the definition of 'salary' and allowing the deduction for the managing director's salary despite pending approval. The judgment was delivered by Judges Ajit Kumar Sengupta and Bhagabati Prasad Banerjee of the High Court at Calcutta.
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1990 (9) TMI 8
Whether, on the facts and in the circumstances of the case, the Tribunal was justified in disallowing the interest payable under the U. P. Sugarcane Purchase Tax Act, 1961, for the assessee's failure to pay the cane cess and purchase tax - held that Interest paid on delayed payment of cane cess and purchase tax is allowable as a business expenditure.
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1990 (9) TMI 7
Applicability of Section 171 of the Income-tax Act - Status of a Hindu undivided family -Partition of the Hindu undivided family - Actual physical division of the property - Agreement between the members of the joint family effecting partition or decree of the court - Validity of the Income-tax Officer's Assessment rejecting the claim for partition - HELD THAT:- The Legislature has assigned a special meaning to "partition" under section 171 Explanation with a view to safeguard the interest of the Revenue. Any assessee claiming partition of the Hindu undivided family must prove the disruption of the status of Hindu undivided family in accordance with the provisions of section 171, having special regard to the Explanation. The assessee must prove that partition effected by agreement or through a court's decree was followed by actual physical division of the property. In the absence of such proof, partition is not sufficient to disrupt the status of Hindu undivided family for the purpose of assessment of tax. Under the Hindu law, members of a joint family may agree to partition of the joint family property by a private settlement, agreement, arbitration or through court's decree. Members of the family may also agree to share the income from the property according to their respective shares.
In the instant case, there was no dispute that, prior to the assessment year 1967-68, the assessment was made on the Hindu undivided family of which the respondent was a member. The respondent, for the first time, raised the plea of partition and disruption of Hindu undivided family in the proceedings for the assessment years 1967-68, 1968-69 and 1969-70. There was no dispute before the Income-tax Officer that there had been no physical division of the properties by metes and bounds and, therefore, the Income-tax Officer was justified in holding that the status of Hindu undivided family had not been disrupted, and the income derived from the properties for the purposes of assessment continued to be impressed with the Hindu undivided family character. The High Court, in our opinion, committed an error in quashing the order of the Income-tax Officer. In the result, we allow the appeals and set aside the order of the High Court and dismiss the writ petition filed by the respondent. There will be no order as to costs.
Appeals allowed.
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1990 (9) TMI 6
Issues Involved:
1. Jurisdiction of the Appellate Assistant Commissioner to entertain additional grounds in an appeal.
2. Correct interpretation of Section 251(1)(a) of the Income-tax Act, 1961.
3. Conflict between judicial precedents on the powers of the Appellate Assistant Commissioner.
4. Entitlement of the assessee to claim a deduction for purchase tax liability not initially claimed before the Income-tax Officer.
Issue-wise Detailed Analysis:
1. Jurisdiction of the Appellate Assistant Commissioner to entertain additional grounds in an appeal:
The primary issue was whether the Appellate Assistant Commissioner (AAC) had the jurisdiction to entertain an additional ground of appeal that was not raised before the Income-tax Officer (ITO). The AAC allowed the assessee to raise an additional ground claiming a deduction of Rs. 11,54,995 for purchase tax liability. The Tribunal, however, held that the AAC had no jurisdiction to entertain such additional grounds, relying on the decision in Addl. CIT v. Gurjargravures P. Ltd. [1978] 111 ITR 1.
2. Correct interpretation of Section 251(1)(a) of the Income-tax Act, 1961:
Section 251(1)(a) of the Income-tax Act confers wide powers on the AAC, including the power to confirm, reduce, enhance, or annul the assessment, and to set aside the assessment and remit the case for fresh assessment. The judgment emphasized that the AAC's powers are coterminous with those of the ITO, meaning the AAC can do what the ITO can do and also direct the ITO to do what he has failed to do. The court observed that there is no statutory provision in the Act that restricts the AAC from entertaining additional grounds in an appeal.
3. Conflict between judicial precedents on the powers of the Appellate Assistant Commissioner:
The court noted the conflicting views in judicial precedents. In CIT v. Kanpur Coal Syndicate [1964] 53 ITR 225, a three-Judge Bench held that the AAC has plenary powers in disposing of an appeal, which are coterminous with those of the ITO. However, in Addl. CIT v. Gurjargravures P. Ltd. [1978] 111 ITR 1, a two-Judge Bench held that the AAC had no power to entertain new grounds not raised before the ITO. The court clarified that the decision in Gurjargravures was based on the specific facts of that case and did not overrule the broader principle established in Kanpur Coal Syndicate.
4. Entitlement of the assessee to claim a deduction for purchase tax liability not initially claimed before the Income-tax Officer:
The court examined whether the assessee was entitled to claim a deduction for purchase tax liability, which was not initially claimed before the ITO. The assessee had not claimed the deduction initially as it believed it was not liable to pay the tax. However, upon being assessed for the purchase tax, the assessee raised the claim before the AAC. The court held that since the tax liability was admitted and supported by the decision in Kedarnath Jute Mfg. Co. Ltd. v. CIT [1971] 82 ITR 363, the AAC was justified in allowing the deduction.
Conclusion:
The Supreme Court held that the Appellate Assistant Commissioner has the jurisdiction to entertain additional grounds in an appeal, provided such grounds could not have been raised earlier or became available due to a change in circumstances or law. The court found that the Tribunal and the High Court erred in their interpretation of the AAC's powers and set aside their decisions. The matter was remitted to the Tribunal to consider the merits of the deduction permitted by the AAC, with the option to remand the case to the AAC for rehearing if necessary. The appeal was disposed of with no order as to costs.
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1990 (9) TMI 5
Assessee purchased securities - It is contended that the price paid for the securities was determined with reference to their actual value as well as the interest which had accrued on them till the date of purchase - amounts claimed by the assessee as deduction are not shown to have been expended for the purpose of realising the interest and are, therefore, not allowable as deductible expenditure.
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1990 (9) TMI 4
Donations in Kind to Charitable Institution - benefit of section 80G of the Income-tax Act, 1961, in respect of the donations - After the insertion of the Explanation 5, there cannot be any doubt that, for purposes of claiming deduction, only cash amounts which may have been donated would be taken into account. No doubt this provision is not retrospective in nature; none the less it indicates the legislative intent behind section 80G(2)(a) even prior to its amendment.
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1990 (9) TMI 3
Whether, the preservation by refrigeration in cold storage of potatoes is a 'process' ordinarily employed by a cultivator within the meaning of sections 2(1)(b)(ii) and 2(1)(b)(iii) of the Income-tax Act, 1961 - Tribunal is directed to state a case and refer the above question of law for the opinion of the High Court
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1990 (9) TMI 2
Explanation To section 271(1)(c) - assessee filed revised returns disclosing larger incomes - assessee not discharged onus of proof - penalty was justified - High Court's decision that difference between tax on income returned in original returns and tax on assessed incomes, should be the amount of tax evaded, is totally justified
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1990 (9) TMI 1
Whether, on the amalgamation of the Indian Sugar Company with the appellant-company, the Indian Sugar Company continued to have its identity and was alive for the purposes of section 41(1) of the Act?
Held that:- Appeal allowed. When two companies amalgamate and merge into one, the transferor-company loses its entity as it ceases to have its business. However, their respective rights and liabilities are determined under the scheme of amalgamation but the corporate entity of the transferor-company ceases to exist with effect from the date the amalgamation is made effective. We agree with the Tribunal's view that the amalgamating company ceased to exist in the eye of law and therefore, the appellant was not liable to pay tax on the amount of ₹ 58,735. Thus set aside the order of the High Court and answer the question in favour of the assessee and against the Revenue.
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