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Showing 61 to 80 of 94 Records
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1967 (3) TMI 34
Capital gains - information in possession of ITO - reason to believe - It is not a case of change of opinion on the part of the ITO - it is a clear case of the ITO having received information through the judgment of the Tribunal that this amount should be treated as capital gains
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1967 (3) TMI 33
Issues:
- Interpretation of section 45 of the Indian Income-tax Act, 1922 regarding default in tax payment.
- Whether the petitioner's attempts to remit funds from Ceylon to India were bona fide.
- Validity of the attachment of properties in India by the revenue authorities.
Analysis:
The judgment addressed the interpretation of section 45 of the Indian Income-tax Act, 1922, in the context of tax payment default. The petitioner argued that due to laws in Ceylon restricting remittance of funds to India, he should not be considered a defaulter under the Act. Section 45 provides exceptions for cases where remittance is prohibited or restricted. The petitioner contended that his efforts to remit funds were genuine, citing correspondence with Ceylon's exchange control authorities. However, the court found that the petitioner's attempts were not sufficient to establish a bona fide effort to remit funds, as evidenced by a brief and inconclusive response from the Ceylon authorities. The court noted that the petitioner failed to prove that the prohibition or restriction in Ceylon was the sole reason for non-remittance, leading to a dismissal of the writ petitions.
The judgment delved into the petitioner's history of unsuccessful attempts to secure remittance in previous cases, emphasizing the need for genuine efforts to satisfy tax obligations. Despite the absence of fraud or collusion, the court found the petitioner's recent attempt lacked completeness and sincerity. The court cited a precedent to highlight that negligence or failure to obtain permits does not excuse non-remittance if not due to prohibition or restriction. The court concluded that the petitioner's actions did not meet the standard of a bona fide attempt to remit funds, thus rejecting the argument that he should be exempt from default under section 45.
Regarding the validity of the attachment of properties in India by the revenue authorities, the court allowed the petitioner a six-month period to provide conclusive proof of the prohibition or restriction preventing fund remittance from Ceylon to India. If the petitioner fails to establish this to the satisfaction of the revenue within the specified timeframe, the revenue authorities are permitted to proceed with further recovery proceedings by selling the attached properties. The judgment highlighted the importance of substantiating claims of prohibition or restriction in the context of tax obligations and property attachment.
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1967 (3) TMI 32
Reasonable opportunity of being heard - section 33B - natural justice - CIT had not given a reasonable opportunity of being heard to the petitioner, therefore, the Commissioner had acted without jurisdiction and this is a fit case where a writ or appropriate order must issue to give relief to the petitioner
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1967 (3) TMI 31
Issues Involved:
1. Characterization of the payment of Rs. 1,00,000 to Subbiah.
2. Determination of whether the payment was compensation for loss of employment or salary under section 7 of the Income-tax Act, 1922.
3. Applicability of section 18(2) of the Income-tax Act, 1922, regarding tax deduction at source.
Issue-wise Detailed Analysis:
1. Characterization of the Payment of Rs. 1,00,000 to Subbiah:
The petitioner, Indian Overseas Bank Ltd., Madras, made a payment of Rs. 1,00,000 to Subbiah upon his joining as the general manager, as per an agreement dated April 11, 1945. The payment was made to compensate Subbiah for the loss of pensionary benefits he would have received from his former employer, Imperial Bank of India. The agreement stipulated that Subbiah would serve for seven years, and the payment would become his absolute property upon completion of the term or under certain conditions such as incapacitation or termination by the bank.
2. Determination of Whether the Payment was Compensation for Loss of Employment or Salary under Section 7 of the Income-tax Act, 1922:
The court had to decide whether the payment was compensation for loss of employment or salary. The petitioner contended that the payment was compensation for Subbiah's loss of employment with the Imperial Bank and not salary under section 7. The revenue argued that the payment was related to Subbiah's employment with the petitioner and should be considered salary.
The court rejected the contention that the payment was compensation for loss of employment, noting that such compensation requires the presence of an employer-employee relationship, termination of such employment, and a payment related to this loss. Since there was no prior employment relationship between Subbiah and the petitioner, the payment could not be considered compensation for loss of employment.
3. Applicability of Section 18(2) of the Income-tax Act, 1922, Regarding Tax Deduction at Source:
The court then examined whether the payment constituted salary under section 7. It was noted that the payment was partly for acquiring Subbiah's services and partly for retaining him for seven years. The court determined that part of the payment was capital expenditure for procuring services, while the other part was an addition to salary for future services.
The court estimated that Rs. 50,000 of the payment was capital expenditure and the remaining Rs. 50,000 was salary. Consequently, the petitioner should have deducted tax on the Rs. 50,000 considered as salary under section 18(2).
Conclusion:
The court quashed the Income-tax Officer's order to the extent that it related to the Rs. 50,000 considered as capital receipt. The Commissioner's order was similarly quashed in part. The Income-tax Officer was directed to recompute and make a modified tax demand based on this judgment. The petition was allowed in part, with no order as to costs.
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1967 (3) TMI 30
Issues Involved:
1. Whether the loss of Rs. 4,80,988 arising from the sale of shares was deductible from the profits of the company.
2. Whether the transaction of purchasing and selling shares was a trading transaction or a capital transaction.
Issue-wise Detailed Analysis:
1. Deductibility of Loss from Profits:
The primary issue was whether the loss of Rs. 4,80,988 incurred by the assessee-company from the sale of shares was deductible from its business income. The company argued that the loss was a revenue loss and should be deductible. However, the Income-tax Officer, Appellate Assistant Commissioner, and the Income-tax Appellate Tribunal all rejected this claim, holding that the loss was a capital loss and not deductible from revenue income. The Tribunal specifically noted that the shares were held as investments and not as stock-in-trade, and thus the loss was capital in nature.
2. Nature of the Transaction:
The Tribunal and the lower authorities examined whether the transaction of purchasing and selling shares was a trading transaction or a capital transaction. The Tribunal concluded that the transaction was not in the nature of trade but was an investment. Several factors supported this conclusion:
- The purchase of shares was not in line with a scheme of profit-making but was intended for enjoying a steady dividend income.
- The transaction was a solitary instance in the company's history.
- The shares purchased were non-participating preference shares, typically bought for safe investment rather than for speculative gain.
- The shares were purchased and sold within the Dalmia-Jain group of companies, indicating an investment rather than a business transaction.
Arguments and Counterarguments:
- The company argued that the buying and selling of shares was part of its business activities and thus the loss should be considered a trading loss. The company relied on the Privy Council decision in Griffiths v. J. P. Harrison (Watford) Limited, which suggested that the intention to make a fiscal advantage does not negate trading.
- The department countered that the transaction was not an ordinary business activity but an isolated investment transaction. The Tribunal's findings were supported by evidence and no error of law was committed.
Judicial Precedents and Principles:
The judgment referred to various judicial precedents and principles to determine whether a transaction is in the nature of trade or investment:
- The distinction between trading and investment was discussed with reference to Konstam's Treatise on Income Tax.
- The Supreme Court's observations in Kishan Prasad and Co. Ltd. v. Commissioner of Income-tax and Commissioner of Income-tax v. Kasturi Estates Private Ltd. emphasized that the nature of the transaction, rather than the company's capacity, determines whether it is a trade.
- The Tribunal considered the company's memorandum of association, which allowed both trading and investment in shares, but concluded that the transaction in question was an investment.
Conclusion:
The High Court agreed with the Tribunal's conclusion that the transaction was an investment and not a trading activity. Consequently, the loss was a capital loss and not deductible from the company's business income. The question referred to the court was answered in the negative, meaning the Tribunal did not misdirect itself in law in its finding. The parties were ordered to bear their own costs.
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1967 (3) TMI 29
Income from immovable properties forming part of the assets of the assessee-firm falls properly to be assessed u/s. 9(1) of the IT Act, 1922, in the hands of the firm and not u/s. 9(3) of the said Act in the hands of the respective partners of the firm
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1967 (3) TMI 28
Issues:
Deduction of brokerage amount in computation of profits under section 41(2) of the Income-tax Act.
Analysis:
The judgment pertains to a reference under section 256(1) of the Income-tax Act, 1961, regarding the deduction of brokerage in the computation of profits under section 41(2). The assessee, who had wound up her lorry business, claimed a deduction of Rs. 4,350 as brokerage paid during the sale of lorries. The Income-tax Officer added the depreciation amount to her income, which was contested by the assessee. The Appellate Assistant Commissioner allowed a reduced deduction, but the Income-tax Appellate Tribunal overturned this decision, leading to the reference to the High Court.
The court examined the provisions of section 41(2) in comparison to the previous law under section 10(2)(vii) of the Act of 1922. The section deals with the treatment of assets sold after depreciation has been allowed. The court emphasized that the surplus realized from the sale is deemed as business income to the extent of depreciation allowed previously. The judgment highlighted that the surplus is a capital receipt, not business income, and the deduction of brokerage under section 37 does not apply unless the receipt is considered a business income.
Referring to the Supreme Court's decision in Commissioner of Income-tax v. Bipinchandra Maganlal & Co. Ltd., the court reiterated that the surplus from the sale of assets is a capital receipt, not a business income. The court rejected the argument that the Explanation to section 41(2) creates a complete fiction of the sale process being part of business activity, including brokerage as a business expenditure. The court emphasized that the purpose of the Explanation is to give effect to the main fiction of treating surplus as business income.
Regarding the interpretation of "price for which it is sold," the court agreed with the Tribunal that it refers to the gross price, not the net price after deductions like brokerage. The judgment concluded that the assessee was not entitled to the deduction of Rs. 4,350 in the computation of profits under section 41(2) of the Income-tax Act. The court held the decision against the assessee, emphasizing that the surplus from the sale of assets is a capital receipt, not business income, and the deduction of brokerage does not apply in this context.
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1967 (3) TMI 27
Issues Involved:
1. Whether the partnership should have been registered by the income-tax authorities under section 26A of the Indian Income-tax Act, 1922.
2. Whether the finding of the Tribunal that the firm was not genuine was based on any material or evidence.
Issue-wise Detailed Analysis:
1. Whether the partnership should have been registered by the income-tax authorities under section 26A of the Indian Income-tax Act, 1922:
The case revolves around Sarwan Singh, who was initially assessed as an individual up to the assessment year 1957-58. On April 4, 1957, he divided his capital among himself and his three sons, and a partnership deed was executed on April 8, 1957. The firm applied for registration under section 26A for the assessment year 1958-59. Subsequently, after Dalip Singh left the partnership, a new deed was drawn up on July 23, 1958, and registration was sought for the assessment year 1959-60.
The Income-tax Officer refused registration, suspecting the division of capital and the partnership formation to be a made-up affair. The Appellate Assistant Commissioner allowed the appeals, directing the firm's registration for both years. However, the Appellate Tribunal reversed this decision, doubting the genuineness of the firm.
2. Whether the finding of the Tribunal that the firm was not genuine was based on any material or evidence:
The Tribunal's finding was based on three considerations:
- The promissory notes betrayed the assessee's case.
- The books of accounts showed Sarwan Singh obtained money due to his son and used it for his own house repairs, indicating the profits were not enjoyed by the alleged partners.
- The perusal of account books by the Tribunal proved the Income-tax Officer rightly doubted the firm's genuineness.
The High Court scrutinized these considerations:
- The Tribunal did not clarify how the promissory notes betrayed the assessee's case, nor did it provide reasons for this inference.
- The Tribunal's conclusion that the firm was not genuine based on account books lacked specific reasons or identification of false entries.
- The Tribunal's approach seemed biased due to the close family relationship among partners, leading to suspicion and surmises.
The High Court emphasized that the Tribunal must provide clear reasons for its findings and not base decisions on suspicions or irrelevant considerations. It cited Supreme Court precedents, underscoring that findings should not be influenced by irrelevant material or prejudice.
Conclusion:
The High Court concluded that the Tribunal's finding lacked legal evidence and was influenced by irrelevant considerations. It held that the Tribunal erred in law by reversing the Appellate Assistant Commissioner's order. The answer to the question of law referred was in the affirmative, indicating that the partnership should have been registered by the income-tax authorities under section 26A.
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1967 (3) TMI 26
Issues:
Validity of partnership for opium business under Income-tax Act
Analysis:
The case involved a partnership formed for an opium business, seeking registration under the Income-tax Act. The partnership agreement explicitly stated that all seven partners would engage in the sale of opium and poppy heads. The Income-tax Officer initially rejected registration, citing that all partners were involved in the business, despite the opium contracts being in the name of only two partners. The Appellate Assistant Commissioner overturned this decision, but the Appellate Tribunal, after examining a partner, reinstated the Income-tax Officer's order. The Tribunal found that non-licensee partners were conducting the business, contrary to the Punjab Excise Act.
The main question referred to the Tribunal was whether the partnership was validly constituted for registration under the Income-tax Act. The judgment discussed the partnership agreement, emphasizing that all partners were actively involved in the opium business, with no indication of any sleeping partner. Reference was made to a previous court decision that registration should be declined if a licensee formed a partnership post obtaining the license. The judgment highlighted the legal requirements under the Opium Act and Rules, indicating that a partnership could only conduct opium sales if a license was obtained in the partnership's name.
The judgment also analyzed arguments presented by the counsel for the assessee, challenging the previous court decision. The counsel argued that there was no legal prohibition against forming a partnership for opium sales and that certain rules allowed licensees to conduct sales through approved representatives. Reference was made to a Madhya Pradesh High Court decision on partnership legality under the Motor Vehicles Act, but the judgment differentiated the circumstances of the present case. Ultimately, the court upheld the previous decision, emphasizing that the partnership was structured to violate opium laws and hence ineligible for registration under the Income-tax Act.
In conclusion, the court answered the referred question negatively, following precedents and emphasizing that the partnership's formation contravened legal requirements, rendering it ineligible for registration. The judgment also noted that the previous decision did not require reconsideration by a larger bench, leaving the parties to bear their own costs. Judge P. C. Pandit concurred with the decision, and the question was answered in the negative.
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1967 (3) TMI 25
Held that assessee-company, which was established in 1924, can not be entitled to the five years' tax holiday provided in s. 45(d) of the WT Act, 1957, in respect of the new section started by it in August, 1955, for the manufacture of worsted wool yarn
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1967 (3) TMI 24
In computing the income from business assessable u/s. 10, the loss in speculative transactions either in whole or to the extent of the other business income, could not be set off against other business income having regard to the proviso to s. 24(1)
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1967 (3) TMI 23
Issues Involved:
1. Agreement to pay excess profits tax.
2. Estoppel regarding excess profits tax liability.
3. Jurisdiction under Section 111 of the Cochin Income-tax Act.
4. Validity of demand notices.
5. Refund of Rs. 16,650 with interest.
Detailed Analysis:
1. Agreement to Pay Excess Profits Tax:
The primary issue was whether the plaintiffs' father had agreed to pay excess profits tax in addition to income-tax. Both the trial court and the High Court found that there was no such agreement. The judgment states, "No writing is produced in support of this contention." Furthermore, the notification from the Government of India dated May 20, 1951, did not mention excess profits tax or Excess Profits Tax Officers. Consequently, it was held that it is not proved that the plaintiffs' father had agreed to pay excess profits tax.
2. Estoppel Regarding Excess Profits Tax Liability:
The defendant argued that the plaintiffs were estopped from denying their liability to pay excess profits tax. However, the court found no force in this plea. The judgment notes, "Apart from the fact that in the letter dated August 19, 1953, the plaintiff's father did not contest his liability to pay excess profits tax, no fact has been brought to our notice which could sustain the plea of estoppel." Furthermore, in a letter dated August 25, 1953, the plaintiffs' father explicitly stated that no excess profits tax was due.
3. Jurisdiction Under Section 111 of the Cochin Income-tax Act:
The defendant contended that the suit was barred by Section 111 of the Cochin Income-tax Act, which prohibits any suit to set aside or modify any assessment made under the Act. However, the court found this point to be without substance, stating, "No prayer was made in the suit for setting aside any assessment." The suit was to determine whether the plaintiffs' father had agreed to pay excess profits tax and whether the department had jurisdiction to appropriate payments made towards income-tax to excess profits tax. The court concluded that such a suit lies wholly outside the scope of Section 111.
4. Validity of Demand Notices:
The High Court had upheld the trial court's findings but revised the assessment orders indirectly, declaring the demand notices valid for Rs. 21,884.81. The Supreme Court found this erroneous, stating, "We are unable to appreciate how the assessment orders can be revised except under the provisions of the Income-tax Act." The court held that neither the counsel for the defendant nor the High Court has the power to revise any assessment order, thereby setting aside the High Court's finding that the demand notices were valid to the extent of Rs. 21,884.81.
5. Refund of Rs. 16,650 with Interest:
The plaintiffs sought a refund of Rs. 16,650 with interest. The High Court had denied this refund. However, the plaintiffs' counsel stated that applications for refund had been filed and not disposed of yet, and thus did not press for a decree for the refund. The Supreme Court did not find it necessary to address this point further.
Conclusion:
- Civil Appeal No. 100 of 1966 (by the plaintiffs) was allowed in part, setting aside the High Court's validation of the demand notices to the extent of Rs. 21,884.81.
- Civil Appeal No. 101 of 1966 (by the defendant) was dismissed, upholding the trial court's and High Court's findings that there was no agreement to pay excess profits tax, no estoppel, and that the suit was not barred by Section 111 of the Cochin Income-tax Act.
- Costs were awarded to the plaintiffs in the Supreme Court, with one hearing fee for both appeals.
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1967 (3) TMI 22
High Court has exceeded its jurisdiction under s. 66 - High Court should have called for a supplementary statement under s. 66(4) of the IT Act and not gone into the facts itself and come to the conclusion that the ITO was right in holding that a pilot plant had been set up by the assessee, which became the starting point of the enterprise - Appeal of revenue allowed - Case remanded
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1967 (3) TMI 21
Bad debts - Tribunal held that the amount was not advanced in the course of money-lending business and that the debt had become bad prior to the year of account - there was any material on which the Tribunal could arrive at the finding that the debts had become bad prior to the year of account in question - assessee's appeal dismissed
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1967 (3) TMI 20
Whether after partition of the family an order of assessment could be made by the Income-tax Officer?
Held that:- The statement of the case by the Tribunal is incomplete in that the Tribunal has not set out its conclusion on a material issue of fact. We are also of the opinion that the question referred by the Tribunal should be refrained as follows :
" Whether in the circumstances of the case, the assessment was validly made on the assessee in the status of a Hindu undivided family ? "
The judgment of the High Court is set aside and the case is remanded to the High Court. Appeal allowed by way of remand.
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1967 (3) TMI 19
Additional depreciation on two reconditioned machines imported by the Appellant - whether two reconditioned machines purchased by the appellant are new machines within the meaning of s. 10(2)(via) of the IT Act and whether the appellant is entitled to depreciation under that sub-section - Appeal allowed - Case remanded
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1967 (3) TMI 18
Issues:
Interpretation of trust deed clauses for tax exemption under Income-tax Act, 1922.
Analysis:
The judgment concerns a trust deed dated April 4, 1936, settling properties for specific purposes and appointing trustees. The deed outlined provisions for the administration and utilization of income from the properties. The trustees claimed tax exemption for certain portions of the income under section 4(3)(i) of the Indian Income-tax Act, 1922. The Income-tax Officer partially accepted the claim, taxing the unspent balance of income from certain properties. The Appellate Assistant Commissioner upheld this decision, but the Tribunal later reversed it, emphasizing that accumulations of income for trust purposes do not disqualify a trust as a public charitable trust. The Income-tax Commissioner sought a reference to the High Court regarding the exemption question.
The Tribunal was asked to interpret clause 13(b) of the trust deed, specifically concerning the utilization of income shares for charitable purposes. The High Court initially declined to direct the Tribunal to submit a statement of case related to a portion of the income from certain properties. However, the Supreme Court found that a legal question arose from the Tribunal's interpretation of the trust deed directions, particularly in clause 13(b). The Court criticized the High Court's failure to direct the submission of a statement of case related to the disputed portion of income from the properties.
The judgment highlighted a previous High Court decision regarding the interpretation of investments in property under the trust deed. The High Court's view was that such investments were accumulations meant to benefit the charitable purposes outlined in the deed, potentially qualifying for tax exemption under the Income-tax Act. The Supreme Court refrained from expressing an opinion on the correctness of this judgment but emphasized that the High Court's role was to determine if a legal question arose from the Tribunal's order, not to decide the final outcome of the case.
Ultimately, the Supreme Court set aside the High Court's order and directed the submission of a statement of case to address the question of whether a specific share of income from properties in schedules B and C was exempt from income tax liability under section 4(3)(i) of the Indian Income-tax Act, 1922. The Court made no ruling on costs for the appeal.
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1967 (3) TMI 17
Application of the assessee firm for registration under s. 26A - Whether the order cancelling renewal of registration was proper and justified - Held, no - appeal of assessee must therefore be allowed and the order passed by the High Court set aside
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1967 (3) TMI 16
Whether the reassessment under section 34 of the Act is valid in law ?
Held that:- The High Court was in error in holding that a finding or direction by an appellate authority in an order relating to assessment of one year may warrant the avoidance of the bar of limitation under section 34(1) of the Act against initiation of proceedings for assessment for another assessment year against the same assessee or against another assessee.
The Appellate Assistant Commissioner may hold, on the evidence, that the income shown by the assessee was not the income for the relevant year and thereby exclude that income from the assessment of the year under appeal. The finding in that context is that the income did not belong to the relevant year. He may incidentally find that the income belonged to another year, but that is not a finding necessary for, the disposal of an appeal in respect of the year of assessment in question. Thus a finding within the second proviso to section 34(3) must be necessary for giving relief in respect of the assessment of the year in question. Appeal allowed.
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1967 (3) TMI 15
Whether Appellate Tribunal was justified in holding that the gain of Rs. 49,400 made by the sale of 200 shares of Radha Films Limited was a venture in the nature of trade and whether the said amount of gain was of a 'capital nature' or an 'income from business' taxable under the Indian Income-tax Act - SC remand the case to HC with the direction that the High Court do refer the case to the Tribunal for recording its supplementary statement
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