1.   MOTHER DAIRY INDIA LTD.Vs. CIT, ITA NO. 1925/2010, Date of Decision: 30/01/2012, HIGH COURT OF DELHI

Issue: Whether tax was deducted at source on the payment of commission to agents/concessionaires, who sold milk and other products of the assessee from the booths owned by the assessee under Section 194H of the Act.

Held: The transaction between assessee and concessionaires is principle to principle basis not agent because the property in the goods is transferred and gets vested in the concessionaire at the time of the delivery then he is thereafter liable for the same and would be dealing with them in his own right as a principal and not as an agent of the Dairy. The clauses of the agreements show that there is an actual sale, and not mere delivery of the milk and the other products to the concessionaire. The concessionaire purchases the milk from the Dairy. The Dairy raises a bill on the concessionaire and the amount is paid for. The Dairy merely fixed the MRP at which the concessionaire can sell the milk. Under the agreement the concessionaire cannot return the milk under any circumstance, which is another clear indication that the relationship was that of principal to principal. Even if the milk gets spoiled for any reason after delivery is taken, that is to the account of the concessionaire and the Dairy is not responsible for the same.

Therefore tax was not deducted at source under Section 194H of the Act.

2.  VIRTUAL SOFT SYSTEMS LTD. Vs. CIT, ITA No. 216/2011, Judgment delivered on: 07.02.2012, HIGH COURT OF DELHI

In finance lease “lease equalization charge” as per ICAI Guidelines is allowable claim

The assessee received lease charges and claimed a reduction towards “lease equalization charges” on the ground that reduction was in accordance with the Guidance Note issued by the ICAI in respect of Accounting for Leases and the Accounting Standard AS-1 notified u/s 145 which mandated that the accounting policy of the assessee should represent a true and fair view. The AO & CIT (A) rejected the claim on the ground that it was a “notional charge” and that the accounting guidelines could not override the Act. The Tribunal allowed the claim. On appeal by the department, HELD dismissing the appeal:

As the method for accounting for lease rentals was based on the Guidance Note “Accounting For Leases” issued by the ICAI, the AO was not entitled to disregard the same. The Guidance Note reflects the best practices adopted by accountants the world over and the fact that it was not mandatory is irrelevant. The ICAI is recognized as the body vested with the authority to recommend Accounting Standards for ultimate prescription by the Central Government u/s 211(3C) of the Companies Act. Also AS-1 pertaining to Disclosure of Accounting Policies has mandatory status for periods commencing on or after 01.04.1991. The change by the assessee in the policy of accounting for leases had the imprimatur of the ICAI and so the AO was not entitled to disregard the books of accounts or the method of accounting for leases.

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 M/S TOPMAN EXPORTS Vs. COMMISSIONER OF INCOME TAX, SLP (C) NO. 26558 OF 2010, DATE OF JUDGMENT: 08/02/2012, SUPREME COURT OF INDIA

ISSUE:

Whether the entire amount received by an assessee on sale of the Duty Entitlement Pass Book (for short ‘the DEPB’) represents profit on transfer of DEPB under Section 28(iiid) of the Income Tax Act, 1961 (for short ‘the Act’) for the purpose of the computation of deduction in respect of profits retained for export business under Section 80HHC of the Act.

Held:

22. Where an assessee has an export turnover exceeding Rs.10 crores and has made profits on transfer of DEPB under clause (iiid) of Section 28, he would not get the benefit of addition to export profits under third or fourth proviso to sub-section (3) of Section 80HHC, but he would get the benefit of exclusion of a smaller figure from “profits of the business” under explanation (baa) to Section 80HHC of the Act and there is nothing in explanation (baa) to Section 80HHC to show that this benefit of exclusion of a smaller figure from “profits of the business” will not be available to an assessee having an export turnover exceeding Rs.10 crores. In other words, where the export turnover of an assessee exceeds Rs.10 crores, he does not get the benefit of addition of ninety per cent of export incentive under clause (iiid) of Section 28 to his export profits, but he gets a higher figure of profits of the business, which ultimately results in computation of a bigger export profit.

The High Court, therefore, was not right in coming to the conclusion that as the assessee did not have the export turnover exceeding Rs.10 crores and as the assessee did not fulfill the conditions set out in the third proviso to Section 80HHC (iii), the assessee was not entitled to a deduction under Section 80HHC on the amount received on transfer of DEPB and with a view to get over this difficulty the assessee was contending that the profits on transfer of DEPB under Section 28 (iiid) would not include the face value of the DEPB. It is a well-settled principle of statutory interpretation of a taxing statute that a subject will be liable to tax and will be entitled to exemption from tax according to the strict language of the taxing statute and if as per the words used in explanation (baa) to Section 80HHC read with the words used in clauses (iiid) and (iiie) of Section 28, the assessee was entitled to a deduction under Section 80HHC on export profits, the benefit of such deduction cannot be denied to the assessee.

AL-KABEER EXPORTS LIMITED Vs. COMMISSIONER OF INCOME TAX, S.L.P. (C) Nos. 33932-33933/2010, Date: 03/02/2012, SUPREME COURT OF INDIA

For s. 115JA/JB s. 80HHC deduction to be computed as per P&L Profits & not normal provisions

In computing “book profits” u/s 115JA & 115JB, the assessee claimed that the deduction admissible there under u/s 80HHC had to be computed on the basis of the “book profits” and not on the basis of the income computed under the normal provisions of the Act. This claim was upheld by the Tribunal   On appeal by the Revenue, the High Court   reversed the Tribunal. On appeal by the assessee, HELD reversing the High Court:

In view of this Court's Order in the case of Commissioner of Income-Tax vs. Bhari Information Technology Systems (P) Ltd. [S.L.P. (C) No.33750 of 2009], upholding the judgment of the Special Bench of Income Tax Appellate Tribunal in the case of Deputy Commissioner of Income Tax vs. Syncome Formulations (I) Ltd., reported in (2007) 106 ITD 193, the impugned judgment of the High Court is set aside and the judgments of the ITAT in these cases stand affirmed. The civil appeals filed by the assessee are, accordingly, allowed with no order as to costs.

The petitioner has filed application for registration to Director General of Income Tax (Exemptions) under section 10(23C)(iv) of the Income Tax Act,. The respondent dismissed the application on the ground that there was variation of administration expenses in all the three assessment years.

It was held that the principle of res judicata does not apply and for each period the question of grant of exemption has to be examined separately. The competent authority in the said case had brought on record evidence to show that the records and accounts were not properly maintained and were obviously subjected to manipulation which was decipherable. The reasons given by the respondent in the impugned order do not appear to us to be germane to the conclusion he has reached. As indicated the explanation/justification of the petitioner has not been considered. Keeping in view the aforesaid aspects we set aside the impugned order dated 30th April, 2009 and pass an order of remit and direct the respondent to decide the application for registration under Section 10(23C)(iv) afresh after giving hearing to the petitioner/authorized representative.

MOHAN MEAKIN LIMITED Vs. COMMISIONER OF INCOME TAX, ITA NO. 964/2009, DATE OF DECISION: 30/01/2012, HIGH COURT OF DELHI, SECTION: 41(1)

Issue:  “Whether ITAT was correct in law in deleting the addition made by the Assessing Officer on account of unclaimed credit balances written off by the assessee in its books of accounts for the year under consideration, invoking the provisions of Section 41(1) of the Income Tax Act.”

Held: Explanation 1 of Section 41(1) of I.T Act is applicable with effect from 1-4-1997. In the presents case the unclaimed credit balances written off by assessee in its books of accounts is belong prior to 1-4-1997. So the order of ITAT is upheld by High Court.

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A.O. made addition by invoking Sec. 69 of I.T. Act 1961, However amount of cash deposits in the Assessee bank account is of his brother. Assessee has acted as guardian only as non availability of KYC documents for opening bank account of his brother. Sattement on oath of the brother has been recorded by A.O. wherein the said fact has been accepted by the Brother. Still A.O. has made this addition. Any relevant n favourable case laws in this regard.