|
Advanced Search Options
Case Laws
Showing 341 to 360 of 385 Records
-
1991 (1) TMI 45
The petitioner's account books seized under section 132 of the Income-tax Act in 1986 must be returned within 30 days. No extension orders were passed, and no counter-affidavit was filed by the respondents. The authority can take photostat copies if needed. The writ petition is disposed of with this direction.
-
1991 (1) TMI 44
The High Court of Allahabad dismissed the applications under sections 256(1) and 256(2) as the facts stated in the Tribunal's order were correct and identical issues had been previously adjudicated. The applications were dismissed.
-
1991 (1) TMI 43
Issues Involved:
1. Applicability of Section 10 of the Estate Duty Act.
2. Relief under proviso to Section 16 read with Sections 46(1) and 46(2) of the Estate Duty Act.
3. Inclusion of the lineal descendants' share under Section 34(1)(c) of the Estate Duty Act.
Issue-wise Detailed Analysis:
1. Applicability of Section 10 of the Estate Duty Act:
The Tribunal found that the deceased, Doraiswamy Chettiar, continued to remain in possession and enjoyment of the gifted properties till his death, which attracted Section 10 of the Estate Duty Act. The accountable person argued that Section 10 should not apply as the gifts were made when the deceased was the sole owner, and later, the properties were converted into joint family properties. However, the Tribunal concluded that the properties were initially separate and only later impressed with joint family character. The Tribunal held that the deceased, as the karta, was in possession of the properties and the income therefrom, and Section 10 of the Act contemplated only physical possession, not the capacity in which the deceased was in possession. The Tribunal's decision was upheld, citing the Supreme Court's ruling in CED v. Smt. Parvati Ammal, which clarified that the value of the entirety of the property would pass under Section 10 if the donor continued to benefit from the property. The court found no material to indicate that the donees assumed possession and enjoyment of the properties to the exclusion of the donor. Thus, the possession and enjoyment by the deceased till his death were attributable to the deeds of gift and leases, affirming the applicability of Section 10.
2. Relief under proviso to Section 16 read with Sections 46(1) and 46(2) of the Estate Duty Act:
The Tribunal found that no material was placed before it to show that the proviso to Section 16(1) of the Act stood attracted, and consequently, no abatement could have been made under Sections 46(1) and 46(2) of the Act. The accountable person's claim for exclusion of Rs. 5,000 under Section 9 of the Act and the value of the lineal descendants' share was also rejected. The court upheld the Tribunal's decision, noting the absence of evidence to support the accountable person's claims. Therefore, the Tribunal was justified in declining to give relief by applying the proviso to Section 16 read with Sections 46(1) and 46(2) of the Act.
3. Inclusion of the lineal descendants' share under Section 34(1)(c) of the Estate Duty Act:
The Tribunal upheld the accountable person's claim regarding the exclusion of the lineal descendants' share based on the decision in V. Devaki Ammal v. Asst. CED, which held Section 34(1)(c) of the Act as discriminatory and violative of Article 14 of the Constitution of India. The court affirmed the Tribunal's decision, stating that Section 34(1)(c) imposed a higher tax burden on coparceners who died leaving lineal descendants, making it discriminatory. Hence, the inclusion of the lineal descendants' share was not proper and should be excluded.
Conclusion:
The court answered all questions in favor of the Tribunal's findings. The applicability of Section 10 was affirmed due to the deceased's continued possession and enjoyment of the gifted properties. The Tribunal's decision to deny relief under Sections 46(1) and 46(2) was upheld due to the lack of supporting evidence. Lastly, the exclusion of the lineal descendants' share was validated, citing the discriminatory nature of Section 34(1)(c).
-
1991 (1) TMI 42
Issues Involved: Whether an internal telephone system in a factory qualifies as 'plant' for the purpose of investment allowance under section 32A of the Income-tax Act, 1961.
Summary:
The case involved a dispute regarding the classification of an internal telephone system in a factory as 'plant' for the purpose of investment allowance under section 32A of the Income-tax Act. The assessee, engaged in manufacturing electronic equipment, claimed investment allowance for the internal telephone system, which was initially denied by the original authority but later granted by the Commissioner (Appeals) and affirmed by the Appellate Tribunal. The main contention was whether the telephone system should be considered as 'plant' eligible for investment allowance.
The key legal provision in question was section 32A of the Income-tax Act, which allows for a deduction in respect of machinery or plant wholly used for business purposes. The definition of 'plant' under section 43 of the Act is inclusive and covers various items used for business or profession, including scientific apparatus.
The court considered precedents from other High Courts, such as the Himachal Pradesh High Court and the Bombay High Court, which had ruled in favor of treating internal telephone systems as plant eligible for development rebate. These decisions emphasized the essential function of the installation in the business process and its contribution to production efficiency.
The Gujarat High Court's interpretation of 'plant' as any article or object used in carrying on business, regardless of its size or value, was also cited. The court rejected the Revenue's argument that the installation should directly produce goods, emphasizing the wide scope of 'for the purpose of business' as explained by the Supreme Court in previous cases.
Ultimately, the court concluded that the internal telephone system in the factory qualified as 'plant' under section 32A and was eligible for the investment allowance. The decision was based on the broad interpretation of 'plant' and its role in facilitating business operations and efficiency. The reference was answered in favor of the assessee, rejecting the Revenue's contention.
-
1991 (1) TMI 41
Issues Involved:
1. Whether the sum of Rs. 25,000 received by the assessee for giving up a portion of his share in the goodwill of the firm constitutes capital gains subject to tax.
2. The nature and taxability of goodwill as a self-generated asset.
3. The applicability of various judicial precedents to the present case.
Issue-Wise Detailed Analysis:
1. Whether the sum of Rs. 25,000 received by the assessee for giving up a portion of his share in the goodwill of the firm constitutes capital gains subject to tax:
The assessee, a chartered accountant, was a partner in a firm where he initially held a 75% share in the profits, which was later reduced to 50%. In consideration of giving up a portion of his share in the goodwill of the firm, the assessee received Rs. 25,000 from the other two partners. The Income-tax Officer (ITO) argued that this amount constituted a transfer of a long-term asset and should be taxed under section 45 of the Income-tax Act, 1961. However, the Appellate Assistant Commissioner (AAC) and the Tribunal held that the amount received was for the relinquishment of a portion of the assessee's share in the goodwill, a self-generating asset, and thus no capital gains arose from this transfer.
2. The nature and taxability of goodwill as a self-generated asset:
The judgment emphasized that goodwill is a self-generating asset with no cost of acquisition. Goodwill, as defined under section 14 of the Indian Partnership Act, is part of the property of the firm and includes benefits arising from the firm's reputation and connections. The court noted that goodwill is inherently fluctuating and cannot be precisely valued at its inception. Given its nature, the court held that goodwill is a capital asset under section 2(14) of the Income-tax Act, but since it has no cost of acquisition, no capital gains tax could be levied on the amount received for its transfer.
3. The applicability of various judicial precedents to the present case:
The court reviewed several precedents to support its decision:
- Addanki Narayanappa v. Bhaskara Krishnappa: The Supreme Court held that a partner's interest in the partnership assets, including goodwill, is movable property and can be redistributed among partners without requiring registration of the transfer.
- Malabar Fisheries Co. v. CIT: The Supreme Court ruled that the distribution of assets upon the dissolution of a firm does not constitute a transfer of assets under section 2(47) of the Income-tax Act.
- Sunil Siddharthbhai v. CIT: The Supreme Court held that bringing personal assets into a partnership firm constitutes a transfer of capital assets, but this case was distinguished as it dealt with the transfer of personal assets, not the redistribution of partnership assets.
- CIT v. B. C. Srinivasa Setty: The Supreme Court concluded that the transfer of goodwill, a self-generated asset with no cost of acquisition, does not give rise to capital gains for tax purposes.
The court also addressed the Revenue's reliance on decisions under the Gift-tax Act, such as CGT v. V. A. M. Ayya Nadar and CGT v. P. Gheevarghese, noting that these cases involved a broader definition of "gift" and were not directly applicable to the issue of capital gains under the Income-tax Act.
Conclusion:
The court concluded that the sum of Rs. 25,000 received by the assessee for relinquishing a portion of his share in the goodwill of the firm did not constitute capital gains subject to tax. The Tribunal's decision to delete the sum from taxable capital gains was affirmed, and the question referred to the court was answered in the affirmative, against the Revenue. No order as to costs was made.
-
1991 (1) TMI 40
Issues Involved:
1. Deduction of gratuity liability
2. Classification of jeeps for depreciation
Deduction of Gratuity Liability:
The High Court of Madras addressed the issue of whether the assessee could claim a deduction for the incremental liability for gratuity pertaining to the accounting year relevant to the assessment year 1974-75. The court noted that the provision for gratuity should meet specific conditions u/s 40A(7) of the Income-tax Act, 1961. The court emphasized that gratuity is deductible only under certain circumstances, such as when it is paid or has become payable during the accounting year, or when a contribution is made towards an approved gratuity fund. Since the assessee had not complied with these conditions and had not made any provision for gratuity in its accounts, the deduction claimed was rightly disallowed. The court referred to previous judgments to support its decision and ruled in favor of the Revenue on this issue.
Classification of Jeeps for Depreciation:
The second issue involved determining whether jeeps are considered as motor cars for the purpose of depreciation. The court examined the proviso to section 43(1) of the Act, which sets limits on the cost of motor cars acquired within a specified period. The assessee argued that jeeps should not be classified as motor cars due to their specific usage and characteristics. However, the court disagreed with this argument, citing definitions from legal sources and previous case law. The court highlighted that both motor cars and jeeps share common features, such as being self-moving vehicles designed to carry passengers and propelled by internal power sources. Therefore, the court upheld the decision that jeeps are classified as motor cars for depreciation purposes. Consequently, the excess cost of jeeps over the specified limit was disallowed. The court ruled in favor of the Revenue on this issue as well.
In conclusion, the High Court of Madras answered both questions in the affirmative and against the assessee. The court held that the assessee was not entitled to claim the deduction for gratuity liability and that jeeps are classified as motor cars for depreciation purposes. The Revenue was awarded costs for the reference, with counsel's fee set at Rs. 500.
-
1991 (1) TMI 39
The petitioner purchased a property in an auction held by a civil court. The Tax Recovery Officer attached the property for arrears due from the firm. The court directed the Tax Recovery Officer to investigate the objections filed by the petitioner before proceeding with the sale of the property. The writ petition was disposed of with no costs.
-
1991 (1) TMI 38
Issues Involved:
1. Assessability of accrued interest on mortgage loans for the assessment years 1973-74 to 1975-76.
2. Deduction of Rs. 1,03,842 as a bad debt u/s 36(1)(vii) of the Income-tax Act, 1961, for the assessment year 1974-75.
Summary:
1. Assessability of Accrued Interest on Mortgage Loans:
The assessee, a money-lender following the mercantile system of accounting, had advanced loans on mortgages and consistently debited interest on an accrual basis up to the assessment year 1969-70. However, from the assessment year 1970-71 onwards, the assessee did not credit the accrued interest, citing doubtful realization. The Tribunal upheld the addition of accrued interest for the assessment year 1970-71, and the assessee accepted the additions for 1971-72 and 1972-73. For the assessment years 1973-74 to 1975-76, the Tribunal deleted the addition of accrued interest, stating there was no foreseeable prospect of recovery. The Revenue contended that under section 5(1)(b) of the Act, income that accrues or is deemed to accrue must be included in the total income, irrespective of recovery difficulties. The court held that under the mercantile system, interest income accrues when it becomes legally payable, and the difficulty of recovery does not negate accrual. The court referenced decisions in Kedarnath Jute Mfg. Co. Ltd. v. CIT, Morvi Industries Ltd. v. CIT, and State Bank of Travancore v. CIT, emphasizing that accrued income must be included in the total income. The court concluded that the Tribunal erred in deleting the accrued interest and answered the questions in favor of the Revenue.
2. Deduction of Rs. 1,03,842 as a Bad Debt:
The assessee wrote off Rs. 1,03,842 as a bad debt u/s 36(1)(vii) of the Act for the assessment year 1974-75, which was disallowed by the Income-tax Officer and affirmed on appeal. The Tribunal directed the exclusion of this amount. The court found that the Tribunal misdirected itself by assuming the mortgage and personal remedies were barred without sufficient basis. The Tribunal also failed to consider the value of the security and the payments made by the mortgagor. The court emphasized that the mere entry of write-off in the books is not conclusive and the onus is on the assessee to establish that the debt had become bad in the relevant year. The court referenced Chettinad Co. P. Ltd. v. CIT, highlighting that the satisfaction of the Income-tax Officer on evidence is necessary. The court concluded that the Tribunal did not consider all relevant materials and answered the questions in favor of the Revenue.
Conclusion:
The court ruled in favor of the Revenue on both issues, holding that the accrued interest on mortgage loans should be included in the total income for the assessment years in question and that the write-off of Rs. 1,03,842 as a bad debt was not justified based on the evidence presented.
-
1991 (1) TMI 37
The petitioner sought a writ to quash search proceedings and notices under section 132 of the Income-tax Act after cash was seized. The court dismissed the petition, stating the petitioner can raise issues in the appeal against the order passed under section 132(5). No costs were awarded.
-
1991 (1) TMI 36
Issues:
1. Allowability of weighted deduction under section 35B for expenditure on commission to overseas agents.
2. Jurisdiction of the Commissioner of Income-tax under section 263 to modify the assessment order.
3. Validity of the Tribunal's decision in canceling the Commissioner's order under section 263.
Analysis:
Issue 1:
The case involved a dispute regarding the allowance of weighted deduction under section 35B of the Income-tax Act, 1961, for the expenditure incurred by the assessee-company on payment of commission to overseas agents for export promotion. The Commissioner of Income-tax contended that the weighted deduction was wrongly allowed, leading to a show-cause notice under section 263. The Tribunal, after considering the facts, determined that the expenditure fell under section 35B(1)(b)(iv), making it allowable. The key contention was whether the commission paid to foreign agents qualified under the relevant clause of section 35B.
Issue 2:
The second issue revolved around the jurisdiction of the Commissioner of Income-tax under section 263 to modify the assessment order. The Commissioner held that the assessment order allowing the deduction was erroneous and prejudicial to the Revenue's interests, necessitating its withdrawal. However, the Tribunal disagreed and upheld the allowance based on the specific clause of section 35B. This raised the question of whether the Commissioner had rightfully assumed jurisdiction under section 263.
Issue 3:
Lastly, the Tribunal's decision to cancel the Commissioner's order under section 263 was challenged. The Tribunal's ruling in favor of the assessee was based on the interpretation that the expenditure, being commission paid to foreign agents for promoting business, fell within the scope of sub-clause (iv) of section 35B(1)(b). The Tribunal's decision to uphold the allowance and cancel the Commissioner's order was affirmed by the High Court, concluding that the expenditure was eligible for the weighted deduction under the specified provision.
In conclusion, the High Court upheld the Tribunal's decision, ruling in favor of the assessee on all three issues. The judgment clarified that the expenditure on commission to overseas agents for export promotion qualified for the weighted deduction under section 35B(1)(b)(iv). The Court found that the Commissioner had wrongly assumed jurisdiction under section 263, and the Tribunal's decision to cancel the Commissioner's order was deemed appropriate.
-
1991 (1) TMI 35
Issues:
1. Computation of time for filing an application under section 256(2) for reference to the High Court.
2. Justification of the Income-tax Appellate Tribunal's decision regarding the expenditure under section 35B of the Income-tax Act.
Analysis:
1. The judgment addresses the issue of the computation of time for filing an application under section 256(2) for reference to the High Court. The respondent argues that the application is time-barred as the order under section 256(1) was received by the Chief Commissioner of Income-tax on May 22, 1989. However, the petitioner contends that the limitation should be computed from the date when the order was received by the Commissioner of Income-tax, which was on August 14, 1989. The High Court clarifies that the Commissioner of Income-tax, who filed the application under section 256(1), is the relevant party for receiving the order, not the Chief Commissioner. The court emphasizes that the limitation period starts when the order is served on the Commissioner of Income-tax, and in this case, the petitioner correctly calculated the limitation period from the date of service on them.
2. The judgment also delves into the merits of the case concerning the interpretation of section 35B of the Income-tax Act. The petitioner questions the Income-tax Appellate Tribunal's decision on the expenditure incurred for the performance of a contract, arguing that it should be entitled to deduction under section 35B. The High Court acknowledges that questions of law arise regarding the justification of the Tribunal's decision and directs the Tribunal to state the case and refer the questions of law to the court for further examination. This issue highlights the importance of determining the eligibility of expenditures for deductions under specific provisions of the Income-tax Act, emphasizing the need for clarity and consistency in the application of tax laws.
-
1991 (1) TMI 34
Issues involved:
The issue involves determining whether income from interest on fixed and other deposits should be treated as income from 'Business' or 'Other sources', and whether revenue expenditure made in setting up a plant should be deducted from the same for the assessment year 1976-77.
Summary:
The assessee challenged the order before the Commissioner of Income-tax (Appeals), who rejected the claim stating that the income from interest on fixed deposits did not constitute a business activity. The Commissioner held that the expenditure incurred should be related to earning income from other sources. The Tribunal, however, considered the erection of the plant as a business activity and the interest income as arising from the utilization of commercial assets, thus categorizing it as business income. The Tribunal allowed the claim of business loss, emphasizing that disallowing it due to income being less than expenditure was illogical.
The Tribunal's decision was based on the finding that the assessee was indeed carrying on business activities and that the interest income was derived from the utilization of commercial assets. The Income-tax Officer had also allowed the expenditure incurred by the assessee, indicating a connection to carrying on business. Therefore, the interest income from fixed deposits was correctly assessed under the head "Business" according to the Tribunal's findings.
The High Court upheld the Tribunal's decision, affirming that the interest income should be assessed under the head "Business" based on the facts found by the Tribunal. The question in the reference was answered in the affirmative and in favor of the assessee, with no order as to costs.
Separate Judgment by BHAGABATI PRASAD BANERJEE J.:
Justice BHAGABATI PRASAD BANERJEE concurred with the decision and agreed with the reasoning provided in the main judgment.
-
1991 (1) TMI 33
Issues:
1. Computation of capital gains on the sale of properties.
2. Deductibility of certain payments made by the assessee.
3. Validity of expenses claimed by the assessee.
Analysis:
The judgment concerns the assessment year 1974-75, where the assessee, an individual, sold properties in Bangalore and claimed deductions in the computation of capital gains. The primary issue revolved around whether certain payments made by the assessee were deductible in determining the capital gains. The Income-tax Officer disallowed a portion of the claimed deductions, resulting in an aggregate capital gain of Rs. 43,119. The Appellate Assistant Commissioner upheld the decision, and the Tribunal affirmed it after examining the factual details related to the property transactions. The questions referred to the High Court involved the liability to capital gains, the deductibility of a specific payment, and the existence of an overriding title obliging the assessee to make a payment.
Regarding the deductibility of payments, the High Court analyzed the factual background of the property transactions. It was established that the payment of Rs. 40,000 made by the assessee to Moosa Haji Ahmed was not connected to the properties sold by the assessee. The court highlighted that the obligation to make this payment stemmed from the wife of the assessee, not the assessee himself. As a result, the payment did not form part of the cost of acquisition of the properties sold by the assessee, and hence, was not deductible in computing capital gains. The court emphasized that the assessee's obligation to pay was in fulfillment of his wife's obligation under a compromise decree related to a different property.
Furthermore, the court addressed the issue of expenses claimed by the assessee. It was noted that a portion of the claimed expenses was disallowed by the Income-tax Officer as it was incurred by the wife of the assessee in connection with litigation. The court found no error in this disallowance, as the expenses were not wholly and exclusively incurred in connection with the transfer of the capital asset. The High Court concurred with the Tribunal's decision, stating that all relevant facts were considered, and the claim made by the assessee could not be sustained. Consequently, the court answered all referred questions in the affirmative, against the assessee, and awarded costs to the Revenue.
In conclusion, the High Court's judgment clarified the deductibility of specific payments and the validity of expenses claimed by the assessee in computing capital gains from property transactions, ultimately upholding the tax treatment determined by the authorities and the Tribunal.
-
1991 (1) TMI 32
The High Court of Kerala ruled that subsidy received from the Central Government for setting up an industry in a backward area should not be deducted from the cost of assets for tax purposes. The court held that the subsidy is an incentive and not related to the cost of a particular asset. The decision favored the assessee, affirming their entitlement to depreciation, investment allowance, and other deductions without deducting the subsidy amount from the asset's cost.
-
1991 (1) TMI 31
The High Court of Karnataka ruled in favor of the assessee, citing a previous court decision. The questions referred under the Gift-tax Act were answered in the affirmative against the Revenue. The court held that there was no taxable gift due to the induction of a new partner and that valuation of the gift was not necessary.
-
1991 (1) TMI 30
Issues:
Interpretation of whether income-tax and wealth-tax liability on income and wealth disclosed voluntarily under the Voluntary Disclosure of Income and Wealth Ordinance, 1975, subsequent to the valuation date is an admissible deduction in computing the net wealth of the assessee for the assessment years 1968-69 to 1970-71.
Detailed Analysis:
The case involved a reference under section 27(3) of the Wealth-tax Act, 1957, regarding the deductibility of income-tax and wealth-tax liability on income and wealth disclosed voluntarily by the assessee under the Voluntary Disclosure of Income and Wealth Ordinance, 1975, for the assessment years 1968-69 to 1970-71. The Wealth-tax Officer had reopened assessments due to the disclosure made by the assessee, but did not allow the tax liabilities arising from the disclosure as deductions. The Appellate Assistant Commissioner allowed the claim, which was further upheld by the Appellate Tribunal, stating that such tax liabilities constituted a debt under the Wealth-tax Act, 1957.
A Division Bench of the Calcutta High Court had previously considered a similar question under the Voluntary Disclosure Scheme introduced by the Finance Act, 1965. The court held that the amount declared under the scheme had the liability to pay income-tax embedded in it on the valuation date, and the liability was deductible as a debt owed in computing the net wealth of the assessee. This decision was subsequently approved by the Supreme Court in a relevant case.
Additionally, the Kerala High Court had also held that the liability to pay income tax on concealed income disclosed under a voluntary disclosure scheme is deductible as a debt owed on the valuation date. The court noted that while there may be differences in the schemes' procedures, assessments, and penalties, the objective of both schemes was to encourage disclosure of concealed income and wealth for previous years.
Ultimately, the High Court of Calcutta held that there should be no distinction in principle regarding the deductibility of tax paid on voluntarily disclosed income, and if the assessee had discharged the tax liability under the Income-tax Act, such tax must be considered a debt owed on the respective valuation date. Therefore, the court concluded that the assessee was entitled to claim a deduction for the tax liability in respect of the disclosure made under the Voluntary Disclosure of Income and Wealth Act, 1976. The court answered the reference question in the affirmative and in favor of the assessee.
-
1991 (1) TMI 29
Issues:
Interpretation of the second proviso to section 23(1) of the Income-tax Act, 1961 regarding deduction for property used by a bank as raised in the assessment year 1982-83.
Analysis:
The case involved a dispute over the deduction claimed by the assessee under the second proviso to section 23(1) of the Income-tax Act, 1961 for the assessment year 1982-83. The Income-tax Officer rejected the claim as he deemed that the property was let out to a bank and not utilized for residential purposes. The Commissioner of Income-tax (Appeals) upheld this decision. However, the Tribunal ruled in favor of the assessee, stating that the property was recognized as a residential unit by the Calcutta Corporation and directed the deduction to be allowed.
The main contention revolved around the interpretation of the proviso to section 23(1) of the Act. The Revenue argued that the purpose of the proviso was to encourage the construction of residential units for actual residential use, not for commercial purposes. On the other hand, the assessee's counsel argued that as long as the construction is of a residential unit, its actual use for commercial purposes should not matter. The Tribunal considered various precedents and legislative provisions to reach its decision.
The legislative history of the concession provided under the second proviso was examined to understand the intent behind its introduction. The amendments over the years aimed to encourage the construction of residential units, particularly for low and middle-income groups. The Tribunal emphasized the importance of the property being used as a residential unit to qualify for the deduction under the proviso.
Precedents from different High Courts were cited to support both sides of the argument. The Kerala High Court emphasized the separate annual value requirement for a residential unit. The Madras High Court held that the deduction applies to residential units, not the entire building. The Andhra Pradesh High Court ruled that the concession is available as long as the units let out are residential, irrespective of the tenant's use.
Ultimately, the Calcutta High Court held that the benefit under the second proviso to section 23(1) could only be availed if the building was actually used for residential purposes. The nature of the building's use, whether by the owner or tenant, determined the eligibility for the deduction. The Court clarified that a residential unit must be used as a residence to qualify for the concession, distinguishing between owner-occupied and tenant-occupied units.
In conclusion, the Court ruled against the assessee, stating that the property let out to the bank was not constructed as a residential unit and therefore did not qualify for the deduction under the proviso. The judgment favored the Revenue, emphasizing the importance of actual residential use for claiming the deduction.
The judgment was delivered by Judges Bhagabati Prasad Banerjee and Ajit Kumar Sengupta of the High Court of Calcutta.
-
1991 (1) TMI 28
Issues:
Assessment of bonus payment exceeding provision made in the earlier year under the mercantile system of accounting.
Analysis:
The case involved a limited company following the mercantile system of accounting that acquired another company's Indian undertaking. The assessee made a provision for bonus in one year but the actual payment exceeded the provision in the subsequent year. The Income-tax Officer disallowed the excess payment, stating it related to the earlier year. The Commissioner of Income-tax (Appeals) deleted the addition, and the Tribunal upheld the decision. The main question was whether the excess payment of bonus should be allowed as a deduction in the assessment year 1979-80. The Tribunal justified the allowance of the excess payment as a business expense. The High Court analyzed the situation, referring to a Supreme Court case where a similar deduction was allowed for a sales tax liability. The Court found that the assessee's failure to make a suitable provision for bonus did not disentitle them from claiming a deduction for the discharged liability. The Court emphasized that the liability for bonus was statutory, and the assessee's explanation for the discrepancy was accepted by the authorities. The Court concluded that the assessee was entitled to the deduction for the bonus payment, which was statutorily payable for the employees taken over from the acquired company.
Conclusion:
The High Court, comprising Judges Shyamal Kumar Sen and Ajit Kumar Sengupta, ruled in favor of the assessee, allowing the deduction for the excess bonus payment. The Court found that the assessee's explanation for the discrepancy in the provision for bonus was acceptable, and the liability for bonus was statutory. The decision aligned with previous legal precedents, including a Supreme Court case, supporting the allowance of deductions for statutory liabilities. Consequently, the Court answered the question in the reference in the affirmative, in favor of the assessee, with no order as to costs.
-
1991 (1) TMI 27
Issues Involved:
1. Whether the fixed deposits were transferred to the shareholders.
2. Whether the interest income from the fixed deposits should be assessed in the hands of the assessee as a trustee for the shareholders.
Issue-Wise Detailed Analysis:
1. Whether the fixed deposits were transferred to the shareholders:
The Tribunal held that the fixed deposits were not transferred to the shareholders. The assessee, a company engaged in the fishery business, made a fixed deposit of Rs. 4,20,000 on October 18, 1977, with the United Bank of India. Subsequently, the term deposit was reinvested in 84 term deposits of Rs. 5,000 each. The Income-tax Officer assessed the interest income of Rs. 31,105 after deducting expenses, as the term deposits were not actually transferred to the shareholders. The Commissioner of Income-tax (Appeals) upheld this, stating that the assets were not transferred in specie and thus taxable in the hands of the assessee under section 60 of the Income-tax Act, 1961.
The Tribunal agreed with the authorities below, noting that the bank was only requested to credit the monthly interest to certain savings bank accounts held by different shareholders. The letters and certificates did not show that these term deposits were transferred to the shareholders. The Tribunal concluded that the mere physical handing over of term deposit receipts to shareholders did not amount to a transfer.
2. Whether the interest income from the fixed deposits should be assessed in the hands of the assessee as a trustee for the shareholders:
The Tribunal did not find it necessary to address the alternative argument that the assessee was a trustee for the shareholders. However, the High Court considered this issue in detail. The High Court noted that the facts were not in dispute and reviewed the relevant documents, including the indenture made between the liquidator and a shareholder, which recorded the transfer of term deposit receipts. The court cited Section 130(1) of the Transfer of Property Act, which states that the transfer of an actionable claim is effected by the execution of an instrument in writing signed by the transferor. The court also referred to several precedents, including decisions from the Madras High Court and Assam High Court, which supported the view that an assignment becomes effective upon execution and does not require a particular form of writing or acceptance by the transferee.
The High Court concluded that the fixed deposit receipts were indeed made over to the shareholders, supported by resolutions for distribution and intimation to the bank. The court held that the term deposit receipts were physically handed over to shareholders who were entitled to the interest. Therefore, the interest on the fixed deposits could not be considered the income of the company in liquidation. The company in liquidation was merely a trustee for the shareholders, and the interest income should be assessed as the income of the beneficiaries, not the trustee.
Judgment:
The High Court answered the first question in the negative and in favor of the assessee, indicating that the fixed deposits were transferred to the shareholders. The second question was answered in the affirmative and in favor of the assessee, stating that the interest income should be assessed in the hands of the beneficiaries (shareholders) and not the trustee (company in liquidation). There was no order as to costs.
-
1991 (1) TMI 26
Issues involved: Interpretation of Explanation 2 to section 73 of the Income-tax Act, 1961 regarding disallowance of claimed loss by the assessee.
Summary:
The High Court of Karnataka addressed the issue of whether the loss claimed by the assessee could be disallowed under Explanation 2 to section 73 of the Income-tax Act, 1961. The assessee, a private limited company, purchased shares of another company but later sold them at a loss, which was claimed as a short-term capital loss. The assessing authority treated this loss as speculation loss due to the objects in the memorandum of association of the assessee-company. However, the Commissioner of Income-tax (Appeals) found that the transaction was not speculative as the shares were acquired for investment purposes to help a sister concern. The Appellate Tribunal, disagreeing with the Commissioner, held that the purchase of shares was a speculative venture, applying the Explanation to section 73 to curb attempts to reduce profits through share transactions.
The High Court disagreed with the Tribunal's reasoning, emphasizing that a dealer is also interested in profit-making and that the purchase of shares could have been to aid a related company's development. The court analyzed the provisions of section 73 and the definition of "business," highlighting that a single transaction may not always constitute a business venture. Referring to previous case law, the court emphasized the need to examine the nature of speculative transactions to determine if they constitute a business. It was concluded that unless conclusively established as a speculative venture, a transaction should not be deemed speculative solely based on subsequent tax benefits. Therefore, the court ruled against the Revenue, stating that the transaction in question was not a speculative venture, and the claimed loss should not be disallowed under Explanation 2 to section 73 of the Income-tax Act, 1961.
....
|
9911796707
