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1991 (1) TMI 105
Business Expenditure, Sales Tax, Special Provision Restricting Allowance ... ... ... ... ..... this section and we see no reason to disagree with the view which we have already taken. In our opinion, notice under section 154 was validly issued. It is not possible for us to agree with the contention of learned counsel for the petitioner that two views were possible. Two views may have been possible at the time when Explanation 2 had not been inserted but once Explanation 2 has been inserted with effect from April 1, 1984, the ambiguity, if any, stood removed. We find no jurisdictional error in the issuance of the notice under section 154. Further more, with regard to the interpretation of section 154 and the merits of the case, it is open to the petitioner to raise such contentions before the authority itself and we see no reason why the petitioner should be allowed to abandon the proceedings under the Act and be allowed to take recourse to the proceedings under article 226 of the Constitution. For the aforesaid reasons, this petition is dismissed. Petition dismissed.
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1991 (1) TMI 104
Firm, HUF, Total Income ... ... ... ... ..... ner s share in it goes to depress his share of income. Surely, therefore, salary is a different label for profits, in the context of a partner s remuneration ... Salaries are profits known by a different name and must be treated as such for taxation purposes... In view of the above position of law as laid down by the Supreme Court, it has to be held that the salary received by the husbands of the two assessees form part of their share income and, consequently, it is income arising to them directly from their membership of the firm. In these circumstances, the Tribunal rightly held that the salary paid to the husbands of the two assessees by the firm in pursuance of clause (8) of the deed of partnership should also be included in the assessments of the two assessees for the assessment year 1974-75. We, therefore, answer the question referred to us in the affirmative and against the assessees. The Revenue will be entitled to costs of these references. Counsel s fee is Rs. 500.
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1991 (1) TMI 103
... ... ... ... ..... the valuation of the shares, applying rule ID of the Rules, must be made on the basis of the value of the assets shown in the balance-sheet and adjustments made. We are unable to find from this decision anything in support of the stand of the assessee in this case, for, it is clearly stated that the arithmetic adopted in working out rule ID alone was in dispute and not any basic principle regarding either the provisions of the Act or the Rules or even the Companies Act, as here. We, therefore, hold that none of the decisions relied on by learned counsel for the assessee, in any manner, support the stand of the assessee and that the Tribunal was right in upholding the valuation of the shares held by the assessee, on the basis of the balance-sheet value of the assets arrived at after computing the depreciation adopting the straight-line method. We answer the question referred to us accordingly. The Revenue will be entitled to the costs of this reference. Counsel s fee Rs. 500.
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1991 (1) TMI 102
... ... ... ... ..... ve to be necessarily considered as affecting the present market value of the shares. In a decision of the Madras High Court in CWT v. S. Ram 1984 147 ITR 278, the Bench elaborately considered this question and held that the liability on actuarial basis cannot be ignored as a mere contingent liability. The value of the unquoted share will have to be ascertained under the break-up value method after deducting the provision for gratuity based on actuarial valuation from the value of the assets of the company. We are in respectful agreement with the above decision which again is based on the decision of the Supreme Court in Shree Sajjan Mills case 1985 156 ITR 585 referred to earlier. Any practical buyer of a share would not ignore the company s liability on an actuarial basis. This principle is now fairly well established. For the reasons stated above, the answer to the question referred to us has to be in the affirmative and against the Revenue. Reference answered accordingly.
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1991 (1) TMI 101
Borrowed Monies, Company, Surtax ... ... ... ... ..... is not varied. In reality, therefore, the liability of the company, when computed in Indian currency, will have to be arrived at by applying the existing foreign exchange rate as on the relevant date. Any other interpretation will lead to an absurd result. For example, if the borrowing is held to be crystallised in Indian currency, the repayment made by the company in the course of 4 or 5 years may wipe out the said outstanding in Indian rupee, though, in reality, the company still owes the foreign creditor. The view we have expressed above also finds support from a decision of the Bombay High Court in CIT v. National Rayon Corporation Ltd. 1986 160 ITR 723. In the said case, the Bombay High Court accepted the claim of the assessee that the assessee was entitled to add on the liability in Indian rupees by virtue of the liability incurred by the assessee on account of rupee devaluation. Consequently, our answers to the questions are in the affirmative and against the Revenue.
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1991 (1) TMI 100
Failure To Disclose Fully And Truly, Reassessment ... ... ... ... ..... y or investigation that is called for should be one by the Income-tax Officer. On the facts of the present case, it is clear that the information furnished by the petitioner in Part III of the returns was sufficient for the Income-tax Officer to enquire further into the matter and to take steps to include the income accruing to the minors in the assessment of the petitioner. This was a clear case of failure on the part of the Income-tax Officer rather than the assessee. I am, therefore, of the opinion that, on the facts of the case, the Income-tax Officer was not justified in reopening the assessment invoking section 147(a) of the Income-tax Act. The writ petition is, therefore, liable to be allowed. The writ petition is accordingly allowed and the notices as per annexures-F and G dated August 8, 1985 issued by the First Incometax Officer, Gulbarga, under section 148 of the Income-tax Act, 1961, are quashed. The petitioner to pay deficit court fee of Rs. 100 within two weeks.
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1991 (1) TMI 99
Income From Undisclosed Sources, Reference ... ... ... ... ..... l the three authorities have disbelieved the assessee s case and the statements of the alleged depositors and have included the said amount in the income of the assessee. We have seen the order of the Tribunal. It cannot be said that there is no material in support of the finding. They have referred to the relevant evidence carefully while recording a finding. The income-tax application is accordingly dismissed.
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1991 (1) TMI 98
Investment Allowance, Plant ... ... ... ... ..... ) of the Income-tax Act. If an item was machinery for the purpose of giving an allowance in respect of insurance or for repairs or in respect of normal depreciation, or for the purpose of the first paragraph of clause (vi), it was also machinery for the purpose of the second paragraph of clause (vi) and clause (via). In our view, tube-wells and weighing machines form part of the plant of the assessee in the production of paper. These are necessary in the various stages of production. It is not necessary that, to constitute plant, the asset should be directly engaged in the manufacture of articles. Having regard to the facts and circumstances of the case, we are of the view that the Tribunal fell in error in holding that the tube-well and weighing machines do not fall within the meaning of plant. For the reasons aforesaid, we answer this question in this reference in the negative and in favour of the assessee. There will be no order as to costs. SHYAMAL KUMAR SEN J. -I agree.
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1991 (1) TMI 97
Capital Gains, Law Applicable To Assessment, Loss ... ... ... ... ..... year 1961-62, the return of income has been filed after April 1, 1962, the assessment for that year shall be in accordance with the procedure specified in the 1961 Act. It is clear that the provision which will be applicable to the return of income filed after the commencement of the 1961 Act, is, the procedural part of the Act and not those parts of the Act which relate to the liability of the assessee. There is no provision in the Income-tax Act, 1961, which affects the right of the assessee to carry forward a loss arising under the head Capital gains under section 24(2B) of the Indian Income-tax Act, 1922. The computation of such loss, as we have said, whether under the Act of 1922 or the Act of 1961 is immaterial, as computation mainly pertains to the procedural part of the statute. For the reasons aforesaid, the question in this reference is answered in the negative and in favour of the assessee. There will be no order as to costs. BHAGABATI PRASAD BANERJEE J. -I agree.
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1991 (1) TMI 96
Reference, Wealth Tax ... ... ... ... ..... e Settlement Commission against which a special leave petition is said to have been filed by the Department before the Supreme Court has been Stayed or suspended by the Supreme Court. If so, the order of the Settlement Commission does not cease to be operative and effective. The Tribunal was right in following the order of the Settlement Commission. The applications are accordingly, dismissed.
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1991 (1) TMI 95
... ... ... ... ..... he income assessed was Rs. 1,36,561. This sum represented various expenses claimed by the assessee but disallowed by the Income-tax Officer. Proceedings for penalty under section 271 (1) (c) of the Income-tax Act were taken. The Inspecting Assistant Commissioner levied a penalty of Rs. 1,90,000 on the assessee. On appeal, however, the Tribunal found that no penalty was leviable inasmuch as there was no concealment of income or wilful negligence on the part of the assessee. It opined that certain expenses claimed by the assessee were disallowed by the Income-tax Officer which led to the difference between the income returned and the income assessed and that, in such circumstances, the penalty under section 271(1)(c) could not be levied. We see no reason to differ from the view taken by the Tribunal which is in accordance with the facts of the case. In the result, the reference is answered in the affirmative, that is, in favour of the assessee and against the Revenue. No costs.
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1991 (1) TMI 94
Firm, Total Income ... ... ... ... ..... ion 64(1) of the Act. On this principle of law, there can be no doubt, having regard to the clear language of section 64 of the Act. Mr. Chandrakumar then contended that the veil of trust should be lifted to find out the reality and if so it can be seen that, in reality, the minors are the beneficiaries who were admitted to the benefits of the partnership. We cannot agree with this contention because this contention implies suspicion about the genuineness of the trust. We do not find any factual foundation for any such suspicion. The burden is quite heavy on the Revenue to establish something as a fact, which otherwise is not found to be so. In other words, it is for the Revenue to conclusively establish that the trust should be ignored and the real partners are the minors by admitting them to the benefits of the partnership. Such a burden has not been discharged in this case. For the reasons stated above, our answer to the question is in the negative and against the Revenue.
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1991 (1) TMI 93
Business Expenditure, Expenditure On Litigation ... ... ... ... ..... the Company Law Board was an expenditure incurred wholly and exclusively for the purposes of the business of the assessee-company? 2. Whether, on the facts and in the circumstances of the case, the litigation expenses of Rs. 29,190 could be allowed as a business expenditure ? It is brought to our notice by counsel for the assessee that similar questions for the previous assessment year (1969-70) were referred to this court and have been answered in favour of the assessee in this court s decision in Rampur Distillery and Chemical Co. Ltd. v. CIT 1983 140 ITR 725. In this decision, it is held that the expenditure incurred by the assessee on litigation questioning the refusal of the extension of the term of managing agents is a permissible deduction. Since the decision is between the same parties and on similar issues, the same is binding upon us. Accordingly, the two questions are answered in the affirmative, that is in favour of the assessee and against the Revenue. No costs.
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1991 (1) TMI 92
... ... ... ... ..... t under section 41(2). The Tribunal held and, in our opinion rightly, that merely because there is difference between the returned income and assessed income, penalty ought not to be levied. Even with respect to the item of Rs. 7,300, the Tribunal has given a valid reason. It is true that the Tribunal has made certain observations with respect to burden of proof but they do not constitute the core of its reasoning. We are satisfied that the Tribunal s decision on merits is perfectly in order. It cannot be said that its decision is incorrect in law on any ground. Even the Explanation appended to section 271(1)(c) which was in force at the relevant time does not come to the rescue of the Revenue, for herein the several reasons given by the Inspecting Assistant Commissioner for imposing penalty have been clearly dealt with and negatived by the Tribunal. Accordingly, the question referred is answered in the affirmative, that is, in favour of the assessee and against the Revenue.
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1991 (1) TMI 91
Business Expenditure, Entertainment Expenditure ... ... ... ... ..... ding meals, etc., to the employees and that would be deductible expenditure. We do not, however, find any such plea having been put forward by the assessee before any of the three authorities under the Act. Mr. Jain argues further that the Tribunal in this case has merely followed the previous year s order and, therefore, what was good for the previous year, must equally hold good for this year. We called upon learned counsel to show whether such a plea was raised at least before the Income-tax Officer. He could not. Following the above decision, the question referred is answered in the negative, that is, in favour of the Revenue and against the assessee. There shall be no order as to costs.
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1991 (1) TMI 90
Company, Surtax ... ... ... ... ..... er can have only a limited application and the said principle can apply only in respect of matters considered and decided by the appellate authority and not matters falling outside its decision. It was made clear that the theory of merger was inapplicable in a case where the point in issue in suo motu revision was not the subject-matter of appeal before the appellate authority. In the light of the above Bench decisions of this court, we are of the view that the Appellate Tribunal was in error in holding that the order passed by the Commissioner of Income-tax under section 263 of the Income-tax Act, dated January 7, 1984, is improper, illegal or unauthorised. We, therefore, answer the question referred to this court in the affirmative, against the assessee and in favour of the Revenue. The reference is answered as above. A copy of this judgment under the seal of this court and the signature of the Registrar will be forwarded to the Income-tax Appellate Tribunal, Cochin Bench.
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1991 (1) TMI 89
Appeal To Tribunal, Limitation, Writ ... ... ... ... ..... far as his application for adjournment is concerned, the Tribunal has said that it is not found in the records and that the material produced by the petitioner does not establish that any such application was filed. Even if there is any defect in the order, it cannot certainly be characterised as a patent error. Thus, even if the ratio of the Bombay High Court decision referred to above is applied, this would not be a case for interference under article 226 of the Constitution of India. It may also be noticed that the application under section 254(2) of the Act was rejected as far back as on September 19, 1987 and this writ petition was filed on December 5, 1989, that is more than two years later. It is no explanation to say that the petitioner kept on filing consecutive applications under section 254(2) of the Act. He cannot unilaterally extend the time by filing such applications, not by the Act (sic). For the reasons stated above, the writ petition is dismissed. No costs.
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1991 (1) TMI 88
Payments In Cash ... ... ... ... ..... ourt will have to consider the meaning of a word in the manner it is understood generally by those who deal with the subject in question. Even when words are defined, the definition may not be applied having regard to the context in which the words are used. In the instant case, it is not necessary for the court to venture upon a detailed discussion on this question because, from the proved facts, it is clear that the amounts in question were paid by the assessee in the course of its business to acquire the assessee s stock-in-trade. In other words, the assessee was actually incurring a business expenditure while making the payments. The payments would fall within the concept of expenditure propounded by Sri Prasad on behalf of the assessee. If so, section 40A(3) would govern the situation directly. In view of the aforesaid conclusion of ours, the answer to the question will have to be necessarily in the affirmative and against the assessee. Reference is answered accordingly.
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1991 (1) TMI 87
Depreciation ... ... ... ... ..... vi) of the Indian Income-tax Act, 1922, provided for depreciation of machinery amongst other assets provided they were the property of the assessee . The said idea has been made clearer in section 32 of the 1961 Act which says that the machinery, etc., must be owned by the assessee . Be that as it may, the Supreme Court has recently construed the said word occurring in section 10(2)(vi) of the 1922 Act and held that depreciation under the said clause is admissible only where the assessee is the owner of the property. It was held inadmissible where the assessee owned only a part of machinery or other property in the case. In this case, the Tribunal has found that the buses were not owned by the assessee and so the Tribunal could not have taken into consideration the depreciation suffered by the buses while determining the net income of the assessee. The question referred is accordingly answered in the negative, i.e., in favour of the Revenue and against the assessee. No costs.
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1991 (1) TMI 86
Reference, Return ... ... ... ... ..... out by the Tribunal in its order under section 256(1), question No. 1 is based upon a wrong assumption of fact. The Tribunal never stated that since the return was not filed before the date of Ming or hearing of the application under section 146 of the Act, the order rejecting the said application is proper. What the Tribunal said was that the assessee could not assign any satisfactory explanation for not filing the return before the making of the assessment. Question No. 1 cannot, therefore, be referred. So far as question No. 2 is concerned it cannot be referred for more than one reason. Firstly, it does not arise from the order of the Tribunal, as pointed out by the Tribunal in its order under section 256(1) of the Act. Secondly, section 139(4) can have no conceivable application to the facts of this case when, admittedly, the return was not filed before the making of the assessment but was filed thereafter. The income-tax application is, accordingly, dismissed. No Costs.
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