ONLINE EDITION
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Business expenditure --Setting up and commencement of business--Expenditure incurred
relating to setting up of inland clearance depot, container freight station and
warehousing
complex--Projects under construction--Assessee capitalizing all
direct and indirect expenses including finance cost incurred for development of
project--Business not set up and ready for commencement of
business--Expenditure debited to profit and loss account cannot be allowed as
deduction--Income-tax Act, 1961, s. 28-- Horizon
Infrastructure Ltd. v. Deputy CIT (Mumbai) . . . 455
Company --Book
profits--Computation under section 115JB(2) to be made without resorting to
computation as contemplated under section 14A read with rule 8D--Income-tax
Act, 1961, s. 115JB-- Horizon Infrastructure Ltd. v.
Deputy CIT (Mumbai) . . .
455
Dividend --Deemed
dividend--Deeming fiction--Onus on assessee to demonstrate by cogent evidences
that receipt of loan or advances for business purposes--Income-tax Act, 1961,
s. 2(22)(e)-- Empee Holdings Ltd. v. Deputy CIT (Chennai) . . . 473
Income --Disallowance
of expenditure relating to exempt income--Where there is no exempt income, no
disallowances can be made in respect of expenditure incurred in relation to
exempt income--Only investments which yield exempt income needed to be considered--Recomputation
of expenses incurred in relation to exempt income required--Matter
remanded--Income-tax Act, 1961, s. 14A--Income-tax Rules, 1962, r. 8D-- Horizon Infrastructure Ltd. v. Deputy CIT (Mumbai) . . . 455
Reassessment --Income
escaping assessment--Primary facts stated by assessee in original assessment
found false--Assessing Officer mentioning details of report of Investigation
Wing as well as information received from Central Bureau of
Investigation--Statement of donors denying donation--Statement of entry
operator confirming accommodation entries--Statement of chartered accountant of
assessee--Reassessment valid--Income-tax Act, 1961, ss. 147, 148-- Brijbasi Education and Welfare Society v. Addl. CIT (Delhi) . . . 500
----Notice within four years--Proviso to section
147 not applicable--Assessing Officer not enquiring about loan or advance
between assessee and its subsidiary company--Assessee not furnishing details of
loan transactions between itself and its subsidiary during course of original
assessment proceedings--Assessing Officer not forming any opinion on
chargeability to tax of loans and advances as deemed dividend--Not a case of
change of opinion--Reassessment valid--Income-tax Act, 1961, ss. 147, 148-- Empee Holdings Ltd. v. Deputy CIT (Chennai) . . . 473
Capital gains --Exemption--Transfer
or capital asset and purchase or construction of residential house within
prescribed period--Developer not delivering possession and assessee unable to
complete construction within prescribed period--Delay in construction not
attributable to assessee--Assessee making full payment to developer more than
deduction claimed by assessee--Entitled to exemption--Income-tax Act, 1961, s.
54F-- Abodh Borar v. ITO (Delhi) . . . 30
----Long-term capital gains--Full value of consideration--Payments of
higher stamp duty by vendee not affecting any rights of assessee--Sale
consideration disclosed jointly by assessees far more than value adopted for
purpose of stamp duty--No addition to be made in hands of assessees on account
of long-term capital gains--Income-tax Act, 1961, s. 50C-- Smt.
Mahinabanu Nainabanu Sipai (Jadeja) v. Deputy CIT (Ahd) . . . 32
Cash credit --Amounts credited in
bank statement not credited in books of account--No cash deposits recorded in
books of account of assessee--Transactions outside books of account--Addition
in respect of cash deposits in bank account unsustainable--Income-tax Act,
1961, s. 68-- Smt. Asha Sanghavi v. ITO (Visakhapatnam) . . .
17
----Unsecured loans--Assessing Officer duty bound to investigate
creditworthiness of creditors or subscriber, verify identity of subscribers,
and ascertain whether transaction genuine or bogus entries of name
lenders--Addition without issuing summons to lenders--Assessing Officer not
making further enquiries on her own--Assessee discharging primary onus to prove
identity of depositors, genuineness of transactions and creditworthiness of depositors--Treating
deposits as anonymous donations unlawful--Income-tax Act, 1961, s. 68-- Deputy
CIT (Exemption) v. Ram Nath Memorial Trust Society (Delhi) . . . 27
Charitable purpose --Exemption--Voluntary
contribution--Application of income--Whether contribution received for
construction of building from students as voluntary contribution for corpus of
trust--To be examined--Income-tax Act, 1961, s. 11-- Indian Education
Society v. ITO (Delhi) . . . 21
Penalty --Concealment of
income--Furnishing inaccurate particulars of income--Assessee declaring
long-term capital loss in return and providing all relevant information to
Assessing Officer--Department finding assessee’s share in property less but
claiming higher ratio of sale consideration--Bona fide clerical mistake on part
of assessee and explained before Assessing Officer as well--Returned income
accepted and no loss to Revenue--Not a case of concealment of income or
furnishing inaccurate particulars of income--Penalty not leviable--Income-tax
Act, 1961, s. 271(1)(c)-- Anil Gupta v. Asst. CIT (Delhi) . .
. 22
----Concealment of income--Furnishing inaccurate particulars of
income--Assessing Officer must record conclusive finding whether penalty was
for furnishing inaccurate particulars of income or for concealment of
income--Assessing Officer cannot use phrase that “penalty is being imposed for
furnishing inaccurate particulars or concealment of income”--Income-tax Act,
1961, s. 271(1)(c)-- Divyesh Chhanganlal Patel v. ITO (Ahd) .
. . 19
----Concealment of income--Furnishing inaccurate particulars of
income--No mala fide intention in assessee to make erroneous claim when it
filed return at such huge figure--Assessee disclosing all facts and not
challenging addition after decision of Commissioner (Appeals)--Penalty to be
calculated on addition under section 35D and rest confirmed--Income-tax Act,
1961, s. 271(1)(c)-- Omni Lens P. Ltd. v. Deputy CIT (Ahd) . .
. 28
Reassessment --Exemption--Educational
institution--Assessee complying with specific query raised in original
assessment to substantiate its claim that it exists solely for educational
purpose and substantively financed by Government--No new material in possession
of Assessing Officer to form belief by reason of non-disclosure truly and fully
of all material facts necessary for assessment--Reopening on basis of Revenue
audit objection not constituting information--Change of opinion--Reassessment
not valid--Income-tax Act, 1961, ss. 147, 148-- Sanatan Dharam Shiksha
Samittee v . ITO (Exemption) (Delhi) . . . 25
----Validity--Additions made in reassessment order of items other than
those mentioned in reasons for reopening--Additions of items mentioned in
reassessment notice deleted in appellate order--No addition on account of items
recorded in reasons in existence--Additions on account of other items do not
survive--Reassessment not valid--Income-tax Act, 1961, ss. 147, 148-- Naresh
Kumar Garg v. Asst. CIT (Delhi) . . . 18
----Validity--Item of income on which reassessment proposed not added
but another deduction disallowed--Impermissible--Income-tax Act, 1961, ss. 147,
148-- Vibhut Builders and Engineering P. Ltd. v. ITO (Delhi) .
. . 24
Business expenditure --Capital
or revenue expenditure--Recruitment and training expenses--Revenue
expenditure--Income-tax Act, 1961, s. 37-- Samsung India Electronics P.
Ltd. v. Addl. CIT (Delhi) . . . 145
----Disallowance--Payments liable for deduction of tax at
source--Amounts voluntarily disallowed and offered to tax--Impact of write back
in books for current year to be reversed--Assessee entitled to
deduction--Income-tax Act, 1961, s. 40(a)(ia)-- Samsung India
Electronics P. Ltd. v. Addl. CIT (Delhi) . . . 145
----Loss on account of exchange difference or marked to market losses as
on date of balance-sheet--Not a notional or contingent
loss--Allowable--Income-tax Act, 1961, s. 37-- Samsung India
Electronics P. Ltd. v. Addl. CIT (Delhi) . . . 145
Depreciation --Uninterrupted power
supply systems--Vital component of computer system--Entitled to depreciation at
sixty per cent.--Income-tax Act, 1961, s. 32-- Samsung India
Electronics P. Ltd. v. Addl. CIT (Delhi) . . . 145
Exemption --Export--Relocation of unit from
one place to another in order to meet shortage of space and to effect expansion
of business--Not splitting or reconstruction of existing business--Entitled to
exemption--Income-tax Act, 1961, s. 10A-- Samsung India Electronics P.
Ltd. v. Addl. CIT (Delhi) . . . 145
International transactions --Transfer
pricing--Arm’s length price--Advertising, marketing and promotion expenses--No
understanding or arrangement or action in concert inferable from terms of
marketing development fund agreement--No international
transaction--International transaction cannot be presumed to exist merely on
basis of bright line of expenditure incurred by comparable companies--Assessee
bearing full risks and rewards of manufacturing and selling its goods in Indian
market--Brand promotion cannot be taken to be for benefit of associated
enterprise--Income-tax Act, 1961, s. 92B-- Samsung India Electronics P.
Ltd. v. Addl. CIT (Delhi) . . . 145
----Transfer pricing--Difference between price recorded in books and
arm’s length price determined less than 5 per cent.--Transfer pricing
adjustment not warranted--Functions, assets and risks manifested in terms of
scale, size, head-count, presence of valuable intangibles--Relevant
considerations to be taken into account--Suitable adjustments for differences
in working capital allowable--Working capital adjustment allowable in software
segment under transactional net margin method--Reimbursements received by
assessee from its associated enterprise under marketing development fund
agreement--To be taken into account both as operating income as well as
operating expenditure while computing net profit margin under transactional net
margin method analysis--Transfer pricing adjustment to be confined to
adjustments to proportionate value of international transactions with
associated enterprises--Income-tax Act, 1961, s. 92B-- Samsung India
Electronics P. Ltd. v. Addl. CIT (Delhi) . . . 145
----Transfer pricing--Transactional net margin method--Comparable
companies--Assessee’s manufactured goods in the category of finished
goods--Component manufacturer--Companies having more than 15 per cent. related
party transactions--Companies functionally dissimilar--Company’s net profit
margin not possible to determine--Extrapolated results not drawn from published
quarterly results but derived on proportionate basis from two overlapping
years’ financials--Company’s accurate segmental results not available--Product
profile of company dissimilar to that of assessee--Functional assets and risks
profile of company dissimilar to that of assessee--Absence of segmental
margins--Company’s annual report not containing segmental bifurcation of
profitability between technical support segment and software segment--Company
not providing bifurcation of profitability between hardware and software
development--Company consistently held incomparable on account of peculiar
facts surrounding its history--Not to be selected as comparables--Income-tax
Act, 1961-- Samsung India Electronics P. Ltd. v. Addl. CIT (Delhi)
. . . 145
S. 10A --Exemption--Export--Relocation
of unit from one place to another in order to meet shortage of space and to
effect expansion of business--Not splitting or reconstruction of existing
business--Entitled to exemption-- Samsung India Electronics P. Ltd. v.
Addl. CIT (Delhi) . . . 145
S. 32 --Depreciation--Uninterrupted
power supply systems--Vital component of computer system--Entitled to
depreciation at sixty per cent.-- Samsung India Electronics P. Ltd. v.
Addl. CIT (Delhi) . . . 145
S. 37 --Business expenditure--Capital
or revenue expenditure--Recruitment and training expenses--Revenue
expenditure-- Samsung India Electronics P. Ltd. v. Addl. CIT (Delhi)
. . . 145
----Business expenditure--Loss on account of exchange difference or
marked to market losses as on date of balance-sheet--Not a notional or
contingent loss--Allowable-- Samsung India Electronics P. Ltd. v. Addl.
CIT (Delhi) . . . 145
S. 40(a)(ia) --Business
expenditure--Disallowance--Payments liable for deduction of tax at
source--Amounts voluntarily disallowed and offered to tax--Impact of write back
in books for current year to be reversed--Assessee entitled to deduction-- Samsung
India Electronics P. Ltd. v. Addl. CIT (Delhi) . . . 145
S. 92B --International
transactions--Transfer pricing--Arm’s length price--Advertising, marketing and
promotion expenses--No understanding or arrangement or action in concert
inferable from terms of marketing development fund agreement--No international
transaction--International transaction cannot be presumed to exist merely on
basis of bright line of expenditure incurred by comparable companies--Assessee
bearing full risks and rewards of manufacturing and selling its goods in Indian
market--Brand promotion cannot be taken to be for benefit of associated
enterprise-- Samsung India Electronics P. Ltd. v. Addl. CIT (Delhi)
. . . 145
----International transactions--Transfer pricing--Difference between
price recorded in books and arm’s length price determined less than 5 per
cent.--Transfer pricing adjustment not warranted--Functions, assets and risks
manifested in terms of scale, size, head-count, presence of valuable
intangibles--Relevant considerations to be taken into account--Suitable
adjustments for differences in working capital allowable--Working capital
adjustment allowable in software segment under transactional net margin
method--Reimbursements received by assessee from its associated enterprise
under marketing development fund agreement--To be taken into account both as
operating income as well as operating expenditure while computing net profit margin
under transactional net margin method analysis--Transfer pricing adjustment to
be confined to adjustments to proportionate value of international transactions
with associated enterprises-- Samsung India Electronics P. Ltd. v.
Addl. CIT (Delhi) . . . 145
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