Advanced Search Options
Case Laws
Showing 61 to 80 of 95 Records
-
1966 (10) TMI 35
Whether the estimate of the income of the assessee confirmed by the Income-tax Appellate Tribunal rests upon irrelevant considerations and the estimate is not made in accordance with law ?
Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was justified in sustaining both the additions of ₹ 41,142 as income from business and ₹ 7,000 as cash credits, and whether such addition does not result in double taxation ?
Held that:- Once the books of account of the assessees were rejected and the rate of gross profit earned by them was found unreliable, it was open to the Income-tax Officer to estimate the gross profit at a rate at which profit was earned in similar business by other merchants. We are unable to hold that the reasons recorded by the Tribunal in support of its order levying tax on profits computed on estimated turnover of ₹ 12 lakhs at the rate of 6.5 % were " irrelevant ".
The criticism made by the High Court that the Tribunal had " failed to perform its duty in merely affirming the conclusion of the Appellate Assistant Commissioner " is apparently unmerited. On the merits of the claim for exclusion of the amount of ₹ 7,000, there is no question of law which could be said to arise out of the order of the Tribunal. The assessees had credited Sampangappa with two sums of ₹ 6,000 and ₹ 1,000 in the months of November and December, 1950, respectively. It was clear that Sampangappa had not advanced at the material time any amount to the assessees. The explanation of the assessees was, therefore, untrue.
-
1966 (10) TMI 34
Whether the assessee is entitled to both parts of the relief contemplated under section 25(3) of the 1922 Act in respect of the foreign business at Penang, Ipoh and Kambar?
Whether the assessee was entitled to relief under section 25(3) of the 1922 Act with regard to the rental income from house properties owned by the foreign firm which was discontinued in the year of account?
Held that:- The High Court was in error in holding that the foreign business of the assessee was not charged under the provisions of the 1918 Act. The first question must, therefore, be answered in favour of the assessee and it must be held that the assessee is entitled to both parts of the relief contemplated under section 25(3) of the 1922 Act in respect of the foreign businesses at Penang, Ipoh and Kambar.
The assessee is entitled to relief under section 25(3) of the 1922 Act with regard to the rental income from the house properties owned by the foreign firm which was discontinued in the year of account. Appeal allowed.
-
1966 (10) TMI 33
Whether the profit of the bank on account of fluctuation of exchange arose in the course of trading operations of the bank or whether it was incidental to any such trading operation?
Held that:- The money changed its character of " stock-in-trade ". when it was " blocked " and " sterilised " and the increment in its value owing to the exchange fluctuation must be treated as a capital receipt. It has also been found by the Appellate Tribunal that the said amount of ₹ 3,97,221 was not utilised for internal banking operations within Pakistan and it is hence not possible to draw an inference that the bank realised any profit in the carrying out of its business. We accordingly hold that Mr. Hazarnavis is unable to make good his argument on this aspect of the case and the High Court was right in reaching the conclusion that the exchange difference of ₹ 1,70,746 was not assessable to income-tax. Appeal dismissed.
-
1966 (10) TMI 32
Whether, on the facts and in the circumstances of the case, the Deputy Commissioner of Agricultural Income-tax was right in holding that the applicants were liable to be assessed to agricultural income-tax on the entire income from the Dubarry Group of Estates for the agricultural season 1950-51?
Held that:- With regard to the crops, which had already been harvested, the High Court has held that they do not constitute the agricultural income of the assessee. In returning this answer, the High Court was perfectly correct. From those crops, the income accrued to the respondent because he had purchased the ready harvested crops. Income in respect of those crops was not, therefore, derived by the respondent by any agricultural operations carried on by the respondent, or by performance by the respondent of any process ordinarily employed by a cultivator to render the produce raised or received by him fit to be taken to the market, or by the sale by the respondent of produce raised or received by it. The crops, which had already been harvested, were raised and removed from the land by the vendor from whom the respondent purchased these crops. The sale price received by the vendor might have been treated as agricultural income of the vendor who had raised the crops and sold these harvested crops to the respondent. In no case, could this income received by the respondent by sale of harvested crops purchased by it in that condition be treated as agricultural income received by the respondent. The appeal dismissed.
-
1966 (10) TMI 31
Whether on a true interpretation of the various provisions of the Indian Income-tax Act, 1922, the Tribunal was correct in holding that speculation losses of the respondent-firm (assessee-firm) for the assessment years 1958-59 and 1959-60 should be set off against its speculation profit of ₹ 6,19,784 in its assessment for the assessment year 1960-61?
Held that:- Losses in speculative business are not to be taken into account when computing the total income, except to the extent to which they can be set off against profits from other speculative business. The first proviso, thus, clearly limits the applicability of the principal clause of section 24(1) ; and, when applied, it governs the manner in which the total income of the assessee is to be computed. In the case before us, the Income-tax Officer was clearly right in the assessment years 1958-59 and 1959-60 in not setting off the losses in the speculative business against the income earned in those years either from property or from ready business in kappas.
The only interpretation that can be placed on the words " any such loss " in this part of the second proviso is that this expression refers to the loss as determined for purposes of the principal clause of section 24(1) read with the first proviso, and, thus, does not comprise within it loss incurred in speculative business referred to in the first proviso. The fact that proviso (c) to section 24(2) envisages the existence of loss which has not been apportioned between the partners clearly strengthens our view that the second proviso to section 24(1) does not cover loss in speculative business, and, consequently, does not permit that loss to be apportioned between the partners. Thus, section 24(2) also leads to the same conclusion which we have arrived at above on the interpretation of the language of section 24(1).Appeal dismissed.
-
1966 (10) TMI 30
Whether, on the facts of this case, an order under section 23A for the assessment year 1949-50 was validly made in the case of this company to which the provisions of the Public Companies (Limitation of Dividends) Ordinance, 1948, applied on the date of the annual general meeting but to which the Act replacing the Ordinance ceased to apply within the period of 6 months referred to in section 23A(1) ?
Held that:- In the first place, the repeal of the Ordinance under section 13 of the 1949 Act is immaterial, for, as we have already stated, section 23A has created a fiction of distribution of the undistributed income as dividend and the section further states that it would be deemed as if it was distributed on the date of the annual general meeting. Since the notional distribution contemplated by section 23A of the Act is as if the notional distribution took place at the date of the annual general meeting, it is the law which prevailed as on the date of the annual general meeting which has to be taken into account in considering the issue as to the legal validity of the order made by the Income-tax Officer. In the second place, Mr. S. T. Desai is not right in his contention that the effect of section 13 of the 1949 Act is to obliterate the Ordinance completely from the statute book. Appeal dismissed.
-
1966 (10) TMI 29
Whether, on the facts and in the circumstances of the case, the sum of ₹ 75,000 or any part thereof could be treated as dividend under section 2(6A)(c) of the Indian Income-tax Act, 1922 ?
Held that:- We discharge the answer recorded by the High Court, and record the answer that "that part of ₹ 75,000 which bears the same ratio to ₹ 75,000 which the accumulated profits at the date of liquidation bore to the total assets of the company immediately before liquidation is dividend ". In the present case the Tribunal has not determined what part of ₹ 75,000 represents accumulated profits. But on the view we have taken of the true meaning of section 2(6A)(c) of the Act, the Tribunal was bound to do so. Appeal allowed in part
-
1966 (10) TMI 28
Whether, on the facts and circumstances of this case, the non-registration of the relinquishment deed can invalidate the transfer of the business assets to the new partnership ?
Can the registration application be rejected merely on the ground that the business assets were not legally transferred to the new partnership ?
Held that:- The deed of relinquishment, in this case, was in respect of the individual interest of the three Singhania Brothers in the assets of the partnership firm in favour of the Kamla Town Trust, and, consequently, did not require registration, even though the assets of the partnership firm included immovable property, and was valid without registration. As a result of this deed, all the assets of the partnership vested in the new partners of the firm.
A deed of relinquishment, or a deed of gift, differs from a deed of partition in which it is not possible to hold that the partition is valid in respect of some properties and not in respect of others, because rights of persons being partitioned are adjusted with reference to the properties subject to partition as a whole. In the case before us, therefore, the deed of relinquishment was valid at least in respect of movable properties, and the partnership seeking registration, thus, became owner of all the movable assets of the partnership in addition to having contributed a sum of ₹ 50,000 as capital investment in it. The Kamla Town Trust and Jhabbarmal Saraf constituted the partnership under a deed of partnership, which was properly executed, and, in these circumstances, the partnership that came into existence was clearly valid in law. There is, therefore, no force in this appeal
-
1966 (10) TMI 27
Whether, on the facts and circumstances of this case, the amount of ₹ 46,582 was a permissible deduction under section 10(2)(xv) of the Act was a mixed question of fact and law and the High Court was in error in not directing the Tribunal to state a case under section 66(2) of the Act?
Held that:- As submitted by learned counsel that the High Court was not right in holding that no question of law arose out of the order of the Tribunal and that the finding of the Tribunal that the payment was made for commercial considerations and not ex gratia was a pure finding of fact which could not be interfered with is to be accepted. The judgment of the High Court dated April 4, 1962, should be set aside. The High Court is directed to ask the Income-tax Appellate Tribunal to state a case on the following question of law and refer it under section 66(2) of the Act :
" Whether, on the facts and circumstances of the case, the sum of ₹ 46,582 was a permissible deduction under section 10(2)(xv) of the Income-tax Act in the assessment year 1954-55 ?"
After receipt of the reference the High Court should deal with it in accordance with law. Appeal allowed.
-
1966 (10) TMI 26
Whether the notice dated 23rd February, 1950, was validly issued under section 34 or not?
Whether the order of assessment dated 2nd May, 1956, made by the P.I.T.O. was barred by time?
Held that:- Since the case of the assessee was transferred to the P.I.T.O. at the stage when no proceeding was pending before the A.I.T.O., the P.I.T.O. became seized of the jurisdiction to take any proceedings against the assessee which the law permitted. It was clearly in exercise of this jurisdiction that the P.I.T.O. issued the subsequent notice dated 11th February, 1956. That notice was, therefore, competently issued by him and was also valid, because it was issued before the expiry of eight years from the end of the relevant assessment year 1947-48. The notice having been issued validly within the period of limitation permitted by section 34(3), the actual order of assessment could be made validly before the expiry of the period of one year from the date of the notice. The order of assessment dated 2nd May, 1956, was, Consequently, a valid order and was not barred by time.
In the circumstances, the answer returned by the High Court to the two questions referred to it has to be held to be incorrect. Both the questions have to be answered against the assessee and in favour of the Commissioner of Income-tax, so that the answer returned by the High Court to the two questions is set aside, the first question is answered in the affirmative, and the second in the negative. Appeal allowed.
-
1966 (10) TMI 25
Whether interest credited by the firm to the assessee's wife and minor children attributable to past profit accumulations only is includible in the assessment of the assessee under section 16(3)(a)(i) and (ii)?
Held that:- The facts show that the use of these moneys was allowed to the firm without asking for any interest, and it was only at a later stage that the three partners of the firm decided to give interest on these amounts. When the decision was taken to give interest, the nature of the funds did not change. They did not get converted into deposits or loans. They still remained accumulations belonging to a partner or persons admitted to the benefits of the partnership and allowed to be used by the firm. The interest also appears to have been allowed by the firm simply because these funds belonged either to a partner or to the minors who had been admitted to the benefits of the partnership. It is thus clear that the interest at least indirectly arose and accrued to the wife and the minor sons because of their capacity mentioned in section 16(3)(a)(i) and (ii) in the Income-tax Act. Appeal dismissed.
-
1966 (10) TMI 24
ITO made a reassessment to the best of his judgment u/s 23(4) of the IT Act, 1922, estimating the income of the assessee from the undisclosed business - tribunal is not justified in holding that ITO has made addition without any basis and arbitrarily
-
1966 (10) TMI 23
Assessee encashed 28 high denomination notes of Rs. 1,000 each - Whether there was material before the Tribunal to hold that whereas 22 high denomination notes out of a total of 28 high denomination notes could form part of the assessee`s cash balance, the remaining 6 high denomination notes could not form part of such balance - Held, no
-
1966 (10) TMI 22
Source of investment - assessee`s explanation was that he purchased the house benami for his wife and that the consideration of Rs. 14,500 was received by his wife from her widowed mother - this explanation was not found acceptable to the department - provisions of section 28(1)(c) were attracted
-
1966 (10) TMI 21
Issues: 1. Interpretation of clause (e) of the proviso to section 24(2) of the Indian Income-tax Act, 1922 regarding the entitlement of an unregistered firm to carry forward losses, including the share of losses of retiring partners.
Analysis: The case involved a reference under section 66(1) of the Indian Income-tax Act, 1922, regarding the entitlement of an unregistered firm, "The Bharat Engineering and Construction Company, Udipi," to carry forward losses, including the share of losses of two retiring partners. The firm had incurred losses in previous assessment years and earned profits in a subsequent year. The key question was whether the firm could set off its earlier losses against the profits earned in the subsequent year, considering the change in the firm's constitution due to the retirement of two partners.
The Income-tax Officer initially held that the firm could not carry forward the entire loss proportionate to the share of the retired partners. However, the Appellate Assistant Commissioner and the Income-tax Appellate Tribunal ruled in favor of the firm, allowing it to carry forward the entire loss despite the change in constitution. The Tribunal's decision was based on the interpretation that clause (c) of the proviso to section 24(2) did not control clause (e), which deals with the carry-forward and set-off of losses by a firm in case of a change in constitution.
The High Court analyzed the relevant provisions of the Income-tax Act, including sections 24, 26, and 16, along with the provisos. It emphasized that clause (e) of the proviso to section 24(2) was the crucial provision for determining the firm's entitlement to carry forward losses. The court clarified that clause (c) did not govern clause (e) and that the two clauses operated independently in different contexts. It highlighted that the focus should be on the firm as the assessee, not individual partners, in the case of an unregistered firm.
The court rejected the contention that the term "firm" in clause (e) referred only to registered firms, emphasizing that the term encompassed both registered and unregistered firms throughout the Income-tax Act. It relied on legal principles and authoritative sources to support its interpretation of the relevant provisions. Ultimately, the court held that the unregistered firm was not entitled to carry forward the entire loss, including the share of losses of the retiring partners, based on the provisions of clause (e) of the proviso to section 24(2).
In conclusion, the court answered the reference question by ruling that the unregistered firm was not entitled to carry forward the entire loss, including the share of losses of the retiring partners. The court also directed the assessee to pay the costs of the reference, including the advocate's fee.
-
1966 (10) TMI 20
Assessee filed a appeal against order of reassessment proceeding to AAC, which was pending. Assessee also filed writ petition in High Court - since applicant has appealed to the AAC, which appeal is not only pending, but the proceedings are being actively pursued and the petitioner says that he will continue to pursue it, he should not be allowed to pursue this application in the writ jurisdiction
-
1966 (10) TMI 19
Penal proceedings u/s 28(1)(c) - validity - assessee had manipulated the accounts - assessee himself admitted that if the loans were not entered in the books on the dates on which they were taken, there would be deficit cash balance which would fasify the book results - proceedings are valid
-
1966 (10) TMI 18
Issues: 1. Tax liability on commission earned by a non-resident under section 4(1)(a) of the Income-tax Act.
Analysis: The judgment by the Andhra Pradesh High Court dealt with the issue of tax liability on the commission earned by a non-resident firm acting as a sales agent for an Indian company. The non-resident firm was appointed as a selling agent based on a commission agreement with the Indian company. The Income-tax Officer assessed the non-resident firm under section 4(1)(a) of the Act, treating the commission as received in India. The Appellate Assistant Commissioner and the Tribunal upheld this assessment. The crucial point of contention was whether the commission should be deemed received in India or in the non-resident's home country at the time of remittance after obtaining a license.
The court referred to previous judgments involving similar scenarios where the receipt of money was determined based on the crediting of the amount in the books of the statutory agent. The court emphasized that the location of the statutory agent or the utilization of funds in India did not alter the fact that the commission was received by the non-resident firm in India upon crediting. The court rejected the argument that the money should be deemed received in the non-resident's home country, highlighting that the commission was payable out of sale proceeds received in India and credited to the non-resident's account by the Indian company.
The court cited previous judgments to support the principle that once the commission amount is credited in the agent's account, it is deemed received by the non-resident firm. The court clarified that the timing of remittance instructions did not affect the receipt of money, as the crucial factor was the crediting of the amount. The court concluded that the commission earned by the non-resident firm was liable to tax under section 4(1)(a) of the Income-tax Act, affirming in favor of the department with costs and advocate's fee.
-
1966 (10) TMI 17
Issues Involved:
1. Whether the sum of Rs. 26,713 was properly disallowed as a capital expenditure.
Detailed Analysis:
1. Nature of Expenditure: The primary issue was whether the expenditure of Rs. 26,713 incurred by the assessee, Mysore Kirloskar Limited, for acquiring "know-how" under a collaboration agreement with M/s. Alfred Herbert Ltd., was capital or revenue expenditure. The agreement involved transferring technical knowledge, manufacturing techniques, and other related information to the assessee for manufacturing specific types of lathes.
2. Agreement Terms: Under the agreement, Herbert was to provide manufacturing techniques, detailed drawings, material specifications, and parts lists. Additionally, Herbert was to supply patterns, jigs, fixtures, and special tools at agreed prices, and an employee from Herbert was to supervise the assessee's factory. The machines manufactured were to be sold under the trademark "HERBERT KIRLOSKAR."
3. Clause 12 Analysis: Clause 12 of the agreement was crucial, detailing the remuneration to Herbert for the "know-how" provided. It included an initial payment of pounds 1,000 for each type of machine and a 7.5% royalty on the invoice value of products sold. The payment structure indicated a lump sum for the technical knowledge and a running royalty for the use of patents and trademarks.
4. Tribunal's Findings: The Income-tax Appellate Tribunal concluded that the expenditure was capital in nature. They reasoned that the object of the expenditure was to obtain technical "know-how" for manufacturing new types of lathes, which constituted a new line of business for the assessee. The Tribunal emphasized that the expenditure provided an enduring benefit, as the technical knowledge would be useful for 15 years and beyond, thus fitting the criteria of capital expenditure.
5. Supreme Court Precedents: The judgment referenced the Supreme Court's decision in Assam Bengal Cement Co. Ltd. v. Commissioner of Income-tax, which distinguished between capital and revenue expenditure. The Court held that expenditure for acquiring an asset or advantage of enduring benefit is capital expenditure. This principle was reaffirmed in State of Madras v. G. J. Coelho.
6. Comparison with Other Cases: The Court compared the present case with other rulings, notably the House of Lords decision in Rolls-Royce Ltd. v. Jeffrey (Inspector of Taxes), which recognized "know-how" as a capital asset. The Court also distinguished this case from Commissioner of Income-tax v. Ciba Pharma Private Ltd., where the technical "know-how" was deemed revenue expenditure due to its short-term nature and relevance to day-to-day business operations.
7. Final Decision: The Court concluded that the "know-how" acquired by the assessee was a capital asset, as it was intended for manufacturing new types of machines and provided an enduring benefit. Consequently, the expenditure of Rs. 26,713 was correctly disallowed as capital expenditure.
Conclusion: The High Court upheld the decision of the Income-tax authorities, affirming that the expenditure in question was capital in nature. The assessee was ordered to pay the costs of the reference, with an advocate's fee of Rs. 250.
-
1966 (10) TMI 16
Issues: - Deductibility of dead rent paid for unworked coal fields as allowable deduction under section 10(2)(xv) of the Income-tax Act, 1922.
Analysis: The case involved a public limited company engaged in coal mining business, which acquired the business of another company and claimed deductions for dead rents paid in relation to unworked coal fields for several assessment years. The Income-tax Officer, Appellate Assistant-Commissioner, and the Tribunal disallowed the deductions, considering the payments as capital expenditure due to the unworked nature of the fields. The Tribunal's reasoning was that the payments were additional investments to retain lease rights until production commenced, thus constituting capital expenditure. However, the Tribunal's decision lacked a basis in principle or authority.
The Supreme Court's decisions in Pingle Industries Ltd. v. Commissioner of Income-tax and Abdul Kayoom v. Commissioner of Income-tax provided principles for distinguishing between capital and revenue expenditure. The court highlighted the difficulty in applying these principles to specific cases. In Gotan Lime Syndicate v. Commissioner of Income-tax, the court endorsed the test from Atherton v. British Insulated and Helsby Cables Ltd., emphasizing that expenditure made to create an enduring asset should be treated as capital. This test was also applied in Pingle Industries Ltd. case, leading to different outcomes based on the specific circumstances of each case.
In the present case, the company acquired assets including coal leases with annual dead rent payments linked to coal production. The court rejected the argument that the dead rent was capital expenditure, emphasizing the direct relation between the rent and coal extraction. The court dismissed the dissimilarities with the Gotan Lime Syndicate case regarding lease duration, asserting that the dead rent was deductible regardless of field productivity. The court viewed the dead rent as a necessary business expense related to obtaining raw material, not a payment for enduring benefit, thus allowing the deduction as revenue expenditure under section 10(2) of the Income-tax Act, 1922.
Therefore, the court ruled in favor of the assessee, permitting the deduction of dead rent as expenditure, contrary to the decisions of the lower authorities. The judgment clarified the distinction between capital and revenue expenditure in the context of dead rent payments for unworked coal fields, emphasizing the direct relationship between the rent and coal extraction for determining deductibility under the Income-tax Act, 1922.
|