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Summary of DT Additional Case Laws for Nov2011 |
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Shree Balaji Alloys v. CIT 2011 (J&K)
Assessee received Excise Duty refund & interest subsidy in pursuance of the New Industrial Policy in J&K. These were not granted for creation of new assets and the incentives would be available only on commencement of commercial production. HC observed that these were NOT THE SOLE CRITERIA for determining the nature of subsidy.
The fact that such incentives were PROVIDED TO ACHIEVE A PUBLIC PURPOSE should also be considered & hence, such subsidy could not be construed as operational incentive for the assessee.
Hence, such incentives are capital receipts not liable to tax. |
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Joseph George and Co. v. ITO 2010 (Kerala)
Receipts from lodging business will be chargeable to tax under the head Profit & Gain from Business or Professional. However, letting out of its building to the bank on long-term lease will be RENTAL INCOME to be assessed as Income from House Property. |
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1. CIT v. Yamaha Motor India Pvt. Ltd. 2010 (Delhi)
Issue – Whether depreciation is allowable on WDV of ENTIRE Block which includes some discarded machines & hence, cannot be put to use during the relevant previous year.
Decision – "Used for the purpose of the business" in Sec 32 in respect of discarded machineries would mean the use in business in earlier financial years. Hence, the depreciation can be claimed provided the block continues to exist in the relevant previous year. |
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1. CIT v. Yamaha Motor India Pvt. Ltd. 2010 (Delhi)
Issue – Whether depreciation is allowable on WDV of ENTIRE Block which includes some discarded machines & hence, cannot be put to use during the relevant previous year.
Decision – "Used for the purpose of the business" in Sec 32 in respect of discarded machineries would mean the use in business in earlier financial years. Hence, the depreciation can be claimed provided the block continues to exist in the relevant previous year. |
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B. Raveendran Pillai v. CIT 2011 (Kerala)
Assessee purchased a Hospital which was running in the same building, in the same town, in the same name for several years. Previous owners transferred the right TO USE THE NAME & the goodwill to the assessee. Assessee derived benefit of retention of continued trust of the patients of previous owners. Thus, it was paid for ACQUIRING BUSINESS AND COMMERCIAL RIGHT and comparable with trade mark, franchise, copyright etc. referred to in Sec 32(1)(ii). Hence, depreciation is allowable on such goodwill being a commercial right. |
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Federal Bank Ltd. v. ACIT 2011 (Kerala)
There is no ground to treat the communication devices (e.g. EPBAX & Mobile Phones) as Computers. Hence, Communication devices are not entitled to higher depreciation at 60%. |
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CIT v. Priya Village Roadshows Ltd. 2011 (Delhi)
Assessee, engaged in running cinemas, incurred expenditure towards architect's fee for examining the technical viability of proposal for takeover of cinema theatre & converts it into multiplex theatre (for existing business with a common administration and common fund). This project was dropped due to lack of financial & technical viability. The expenditure were of REVENUE NATURE as there in no creation of new asset.
HC says that the relevant factor is whether or not a new business / asset comes into existence. |
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Echjay Forging Ltd. v. ACIT 2010 (Bom.)
The company incurred expenditure on higher education of the director's son abroad be claimed as business expenditure u/s 37 on the contention that he was appointed as a trainee in the company under "Apprentice Training Scheme", where there was no proof of existence of such scheme. There was no nexus between the education expenditure incurred abroad for the director's son and the business of the assessee company. Therefore, the aforesaid expenditure was not deductible. |
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Iskraemeco Regent Ltd. v. CIT 2011 (Mad.)
The Company took loan for purchase of Capital Asset. The waiver of a portion of principal of the loan would not amount to remission of trading liability to attract the provisions of Section 41(1).
Such waiver will also not be treated as benefit ARISING OUT OF BUSINESS for the purpose Sec 28 (iv). |
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1. Global Geophysical Services Ltd., In re 2011 (AAR)
The Seismic Data (in processed form) is used to create highly accurate images of the earth’s sub-surface which in turn are used by the exploration and production companies (like ONGC, Cairn Energy) for locating potential oil and gas reserves based upon the geology observed.
The said activities and services of the applicant clearly fall within the description of Section 44BB. |
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DIT v. DSD NoeII GmbH 2011 (Delhi)
The assessee is a German Company providing engineering and technical services for various turnkey projects eligible for PRESUMPTIVE TAXATION SCHEME u/s 44BBB. Assessee fulfils all the conditions of Sec.44BBB(1) & thus, the provision of Sec 28 to 44AA would not be applicable for computation of business income and a sum equal to 10% of the amount paid or payable to the assessee would be deemed as its business income.
The assessing officer CANNOT bring to tax the actual profit as per books of accounts, even if the same is higher than 10% of receipts which are deemed to be the profit u/s 44BBB in case of foreign company engaged in turnkey project. |
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CIT v. Smt. K. G. Rukminiammma 2011 (Kar.)
Builder, on his own expenses, constructed eight flats on the land of the assessee & handed over four flats to the assessee. The assessee will be entitled to get exemption u/s 54 in respect of ALL FOUR FLATS as all these flats are situated in the same residential building & hence, will constitute A SINGLE RESIDENTIAL HOUSE for the purpose of Sec 54.
[Same Judgement was given in Anand Basappa 2009 (Kar.) ] |
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CIT v. Parle Plastics Ltd. 2011 (Bom.)
The factors to be considered for determining "substantial part of the business", for the purpose of Sec 2(22), are –
*Major Part that constitutes majority of the whole
*Substantial Part of Turnover
*More than 50% of Total Profit
*Percentage of Manpower used
*Capital Employed for specific division
*Substantial part of total assets
In this case, 42% of the total asset of the lending company, were deployed by it by way of loans and advances to the assessee which could not be regarded as dividend u/s 2(22). |
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CIT v. Chiranjjeevi Wind Energy Ltd. 2011 (Mad.)
Different parts procured, could not be treated as a windmill individually. After ASSEMBLY of these different parts, they got TRANSFORMED into an ultimate product, known as Windmill. Thus, such an activity would amount to MANUFACTURE as well as PRODUCTION of a thing or article to qualify for deduction u/s 80-IB.
Reference :
1. India Cine Agencies v. CIT 2009 (SC) : Test of activity of 'Manufacture' = NEW and DIFFERENT goods should emerge having DISTINCTIVE NAME, USE AND CHARACTER.
CIT v. Sesa Goa Ltd. 2004 (SC) : The word 'Production / Produce' means bringing into existence new goods by a process, which MAY or MAY NOT AMOUNT TO MANUFACTURE. It also covers all the by-product, intermediate products and residual products, which emerge in course of manufacture of goods. |
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Praveen Soni v. CIT 2011 (Delhi)
An Assessee, not claiming deduction u/s 80-IB in initial years, CAN CLAIM SAID DEDUCTION FOR THE REMAINING YEARS DURING THE PERIOD OF ELIGIBILITY, if the conditions are satisfied. (Because there is no such condition in Sec 80-IB.) |
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