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Showing 81 to 87 of 87 Records
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1965 (12) TMI 7
Partition - business assets received - ready gold account was not kept separate. The closing balance each year in the gold account was worked out at the end of each year by taking all the debt and credit entries in the entire gold account and treating them as one - held that the sale of three patlas of gold amounted to business so that any excess of the sale proceeds over the cost price could represent the assessable profit
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1965 (12) TMI 6
Issues Involved:
1. Whether the sum of Rs. 2,20,000 received by the assessee was a capital receipt or a revenue receipt assessable to tax under the Income-tax Act.
Detailed Analysis:
1. Nature of the Sum of Rs. 2,20,000:
The primary issue was whether the sum of Rs. 2,20,000 received by the assessee as salami under a lease agreement was a capital receipt or a revenue receipt. The Income-tax Officer initially treated the amount as an advance payment of royalty, thus a revenue receipt subject to income tax. The Appellate Assistant Commissioner, however, deemed it a capital receipt, not taxable. The Appellate Tribunal, after remand and further investigation, concluded that the sum was an advance payment of royalty and thus a revenue receipt, taxable under the Income-tax Act.
2. Arguments and Precedents:
The assessee argued that the sum was a payment for mining rights for thirty years, hence a capital receipt. The assessee's counsel cited several precedents:
- Province of Bihar v. Maharaja Pratap Udai Nath Sahi Deo: Salami is not income as a matter of law, unless it can be shown as advance rent.
- Kamakshya Narain Singh v. Commissioner of Income-tax: Salami is a single payment for the acquisition of rights, thus a capital asset.
- Sindhurani Chaudhurani: Defined salami as a non-recurring payment prior to tenancy creation, a capital receipt.
- Chintamani Saran Nath Sah Deo v. Commissioner of Income-tax: Differentiated between revenue receipts for the use of capital assets and capital receipts for the realization of capital assets.
- Panbari Tea Co. Ltd.: Distinguished between the price for the right to enjoy property (capital) and periodic rent (revenue).
3. Tribunal's Findings and Comparison:
The Tribunal scrutinized the lease terms and other relevant transactions. They noted a significant increase in salami and a reduction in royalty rates compared to previous leases. For instance, the salami increased from Rs. 100 per acre in 1941 to Rs. 1,284 per acre in 1944, while the royalty decreased from 8 annas to 6 annas per ton. This pattern suggested that part of the future royalty was capitalized into the salami.
4. Assessee's Contentions:
The assessee contended that the reduction in royalty was due to the inclusion of both high-quality bauxite and lower-quality aluminous laterite in the lease, unlike the previous prospecting lease. However, the Tribunal found this explanation unconvincing, given the substantial overlap in the leased areas and the lack of justification for the reduced royalty.
5. Final Judgment:
The High Court agreed with the Tribunal that a significant portion of the salami was, in reality, an advance payment of royalty, thus a revenue receipt. However, it also acknowledged that a part of the sum was indeed a capital receipt. The Court estimated the capital receipt portion at Rs. 20,000, based on comparable leases, and concluded that the remaining Rs. 2,00,000 was a revenue receipt.
Conclusion:
The High Court reframed the question of law and answered that Rs. 20,000 of the Rs. 2,20,000 was a capital receipt, not taxable, while Rs. 2,00,000 was a revenue receipt, taxable under the Income-tax Act. The judgment was substantially in favor of the department, with costs awarded against the assessee.
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1965 (12) TMI 5
Issues Involved:
1. Whether the sum of Rs. 10,000 was a loss from business deductible in computing the total income of the assessee.
Detailed Analysis:
Issue 1: Whether the sum of Rs. 10,000 was a loss from business deductible in computing the total income of the assessee.
The primary question referred to the High Court was whether the sum of Rs. 10,000, which was robbed while in transit, could be considered a deductible business loss under section 10(1) of the Indian Income-tax Act, 1922.
Facts of the Case:
The assessee, engaged in the kirana business, sent Rs. 10,000 through an employee to pay a commission agent, Babulal Kharga. The money was robbed en route. Initially, the assessee claimed the amount as a bad debt but later argued it was a trading loss deductible under section 10(1) of the Act.
Tribunal's Findings:
The Tribunal accepted that the money was in transit and was robbed. However, it held that the loss was not deductible as the assessee exposed itself to the risk of robbery without proper protection and there was no business necessity for such exposure.
Assessee's Argument:
The assessee contended, citing Motipur Sugar Factory Ltd. v. Commissioner of Income-tax and Badridas Daga v. Commissioner of Income-tax, that the loss was incidental to the business and should be deductible. The loss was directly connected with the business operations.
Department's Argument:
The department argued that the Tribunal's finding on the robbery was erroneous and unsupported by evidence. Even if the robbery was accepted, it was not established that the loss was incidental to the business operations.
Precedents Cited:
1. Motipur Sugar Factory Ltd. v. Commissioner of Income-tax: Loss of money due to robbery while being transported for business purposes was held to be incidental to the business and deductible.
2. Badridas Daga v. Commissioner of Income-tax: Emphasized that the loss must spring directly from business operations and be incidental to it.
3. Commissioner of Income-tax v. Nainital Bank Ltd.: Loss by dacoity was held to be incidental to the banking business and deductible.
High Court's Analysis:
The High Court noted that the principles from the cited cases required the loss to be directly linked to and incidental to the business operations. The Tribunal's findings were insufficient to conclusively determine this. The High Court emphasized the need for clear findings on:
- Whether the loss occurred as alleged.
- Whether the money was in transit for business purposes.
- Whether it was customary to send money in such a manner.
Conclusion:
The High Court found the Tribunal's findings inadequate and referred the case back to the Tribunal to record clear findings on the above points. The expressions "incidental" and "relevant" in relation to losses must be connected to the operation to produce income, not necessarily the frequency or exposure to risk.
The case was remanded to the Appellate Tribunal for further findings to enable the High Court to determine the question of law involved.
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1965 (12) TMI 4
Issues:
1. Petition for mandamus directing Union of India to issue recognition to petitioners as engaged in specified industry for tax exemption.
2. Interpretation of statutory provisions regarding exemption from super-tax.
3. Distinction between Central Board of Direct Taxes and Central Government in issuing certificates.
4. Whether court has power to direct Central Government to issue a certificate.
Analysis:
1. The petitioners sought a mandamus to direct the Union of India to recognize them as engaged in the manufacture of specified articles for tax exemption. They applied to the Central Board of Revenue for recognition as a company engaged in the manufacture of bonded abrasives, including grinding wheels. The Central Board of Revenue, through its communication, declined the request for exemption under the Fifth Schedule of the Income-tax Act, 1961. The petitioners approached the court seeking a direction in this regard.
2. The court examined the relevant statutory provisions, specifically Section 99(1)(iv) and Rule 1(a)(1) of the Fifth Schedule. The satisfaction required for exemption under the Fifth Schedule was to be determined by the Central Government. The court emphasized that the application for a certificate was not made to the Central Government but to the Central Board of Revenue. As per the provisions, the satisfaction of the Central Government was a prerequisite for tax exemption, and since no application was made to the Central Government, the court could not issue a rule in this matter.
3. The court distinguished between the Central Board of Direct Taxes and the Central Government in the context of issuing certificates for tax exemption. The petitioner argued that the Central Board of Direct Taxes should be considered as the Central Government, but the court rejected this contention. The hierarchy of officers under the Income-tax Act indicated that the Central Government was the authority to be satisfied for issuing a certificate, not any other authority.
4. The court clarified that its power under Article 226 of the Constitution did not extend to directing the Central Government to issue a certificate. It stated that the court's role was to call upon the authority vested with a power to exercise it properly and decide on the merits. The court suggested that any future application by the petitioners to the Central Government should be disposed of within two months of receipt.
In conclusion, the court dismissed the petition, noting that the application was not made to the Central Government as required by the statutory provisions. The court clarified the limitations of its power in directing the Central Government and suggested a timeline for the Central Government to decide on any future application from the petitioners.
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1965 (12) TMI 3
Assessable profits of the assessee-company - inflation in the value of the opening stock - in the books of the vendor firm, the value of the stock-in-trade was shown at Rs. 1,77,285 as on the 31st July, 1956, while in the books of the assessee-company the value of the said stock-in-trade was shown at Rs. 2,10,285 - additions made by AO
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1965 (12) TMI 2
Issues Involved:
1. Validity of the notice under section 148 read with section 147(b) of the Income-tax Act, 1961.
2. Whether the Income-tax Officer had information justifying the reopening of the assessment for the year 1960-61.
3. Whether the action of the Income-tax Officer amounted to a mere change of opinion.
4. Relevance of the report dated July 8, 1964, to the assessment year 1960-61.
5. Allegation of mala fide intention behind issuing the notice.
Issue-wise Detailed Analysis:
1. Validity of the Notice under Section 148 read with Section 147(b):
The petitioner sought to quash the notice dated July 18, 1964, issued under section 148 read with section 147(b) of the Income-tax Act, 1961, for the assessment year 1960-61. The petitioner argued that the notice was invalid as there was no new information justifying the reopening of the assessment. The court held that the notice was valid as the Income-tax Officer had received new information in the form of a report dated July 8, 1964, which constituted a basis for a reasonable belief that income had escaped assessment.
2. Information Justifying Reopening of the Assessment:
The Income-tax Officer received new information in the form of a report from his ward inspector dated July 8, 1964. This report provided detailed insights into the working of the petitioner-company, including the allocation of expenses related to exempted and non-exempted income. The court found that these details were not available during the original assessment for the year 1960-61 and that the report constituted new information justifying the reopening of the assessment under section 147(b).
3. Mere Change of Opinion:
The petitioner argued that the action of the Income-tax Officer amounted to a mere change of opinion, which is not a valid ground for reopening an assessment. The court rejected this contention, stating that the details in the report dated July 8, 1964, were new information that was not available during the original assessment. Therefore, the reopening of the assessment was not due to a mere change of opinion but based on new information.
4. Relevance of the Report to the Assessment Year 1960-61:
The petitioner contended that the report dated July 8, 1964, was not relevant to the conditions prevailing during the assessment year 1960-61. The court found that the report was general in character and related to the overall working of the petitioner-company, which was consistent over the years. Therefore, the details in the report were relevant and could be applied to the assessment year 1960-61.
5. Allegation of Mala Fide Intention:
The petitioner alleged that the notice was issued with a mala fide intention to adopt a new basis of allocation of expenses for the earlier years. The court found no evidence to support this allegation. The court noted that the Income-tax Officer acted on the new information contained in the report dated July 8, 1964, and not merely on the principle of bifurcation approved by the Appellate Assistant Commissioner. Therefore, the initiation of proceedings under section 148 read with section 147(b) was not mala fide.
Conclusion:
The court held that the notice issued under section 148 read with section 147(b) was valid as it was based on new information obtained after the original assessment. The petition was rejected, and the petitioner-company was ordered to pay the costs of the petition.
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1965 (12) TMI 1
Issues:
Validity of service of notice under section 34 of the Indian Income-tax Act, 1922.
Analysis:
The case involved a question of whether the service of notice under section 34 on the assessee was invalid due to the notice not being affixed at any conspicuous place in the court-house or income-tax office. The Income-tax Officer had reason to believe that certain assets had escaped assessment and issued a notice for personal service on the assessee. The notice was tendered personally but declined by the assessee, leading to service by affixation on the door of the assessee's residence. The main argument by the assessee's counsel was that the service through affixation was invalid without a copy being affixed in the court-house or income-tax office. The counsel relied on the language of the Indian Income-tax Act and Code of Civil Procedure, contending that the term "court-house" should include the income-tax office. The counsel also referenced previous court decisions to support the challenge to the validity of the notice.
On the other hand, the respondents' counsel argued that procedural formalities for notice service should not be rigidly adhered to and are mandatory only to the extent necessary to inform the person being served. The counsel emphasized that affixation on the residence's door was effective, especially since the assessee had declined to receive the notice. Additionally, the counsel contended that the question referred was not limited to the scope of the Code of Civil Procedure and should be considered more broadly to determine the validity of the notice. References were made to various court decisions to support this argument.
The court held that the service of notice was valid, emphasizing that section 63 of the Indian Income-tax Act allows for service by post or as if it were a summons issued by a court. The court noted that the notice was issued within the prescribed time frame and the service through post was valid. The court rejected the argument that the question referred was limited to the Code of Civil Procedure, stating that the notice served by registered post was also valid. The court answered the question in the negative, ruling in favor of the revenue and awarding costs.
In conclusion, the court determined that the service of notice under section 34 was valid, rejecting the contention that affixation without a copy in the court-house or income-tax office rendered the notice invalid. The decision was based on the provisions of the Indian Income-tax Act and broader interpretations of the question referred, ultimately ruling in favor of the revenue.
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9911796707
