INCOME TAX CASE LAWS( Sept 10 to Sept 14, 2012)

 ITAT, HC & SC rulings on Income tax laws (Sept 10 to Sept 14, 2012)  

1.      Conversion of interest dues payable to bank/FI into equity shares is not actual payment for section 43B purposes

Discharging a debt by giving away an asset such as securities is 'payment'. However, discharging a debt by issuing capital (shares) would not amount to payment.

Payment of interest by way of issue of shares doesn’t qualify for allowance under sec. 43B.  ([2012] 25 taxmann.com 267 (Kolkata – ITAT ruling))

2.     Collection of security deposit on leasing of cylinder for supply of LPG cannot be treated as trading receipts.

Refundable security from lease of cylinder is a liability and not a business income [2012] 25 taxmann.com 172 (HYD. – ITAT ruling)

3.     Where tax is deducted, though under wrong provisions of TDS, payment cannot be disallowed, when mistake was bonafide.

Cost of deduction of tax under wrong provision can’t be as deplorable as of non-deduction - [2012] 25 taxmann.com 171 (KOL. – ITAT ruling)

4.     'Willingness to perform' is the crux of section 53A of the TPA; and it needs to be satisfied for a transaction to fall within the scope of deemed transfer under section 2(47)(v) of the IT Act [2012] 25 taxmann.com 264 (HYD. – ITAT ruling)

5.     Where potential value of documentaries produced by assessee film company was estimated and shown as current assets in balance sheet and a corresponding capital reserve of equivalent amount was also created, said amount did not form income in hands of assessee.

Artificial reserve created on dressing up of dead stock as valuable stock isn’t taxable as ‘business income [2012] 25 taxmann.com 170 (DELHI – ITAT ruling)

6.     Interest under section 234B is not leviable where advance tax paid by assessee fell short on account of retrospective amendment

Delhi ITAT asserts Reliance’s ruling to confirm sales tax subsidy as a ‘capital receipt’ [2012] 25 taxmann.com 161 (DELHI – ITAT ruling)

7.     Where assessee through an agreement had sold his shares and received only a part of sale consideration during relevant year and balance was receivable in three succeeding years, whole of sale consideration was chargeable to tax in year of transfer of shares.

Capital gain chargeable to tax in year of transfer itself even if consideration is receivable in instalments [2012] 25 taxmann.com 157 (DELHI – ITAT ruling)

8.     Where as per collaboration agreement, company 'D' purchased land on assessee's behalf and in lieu of consideration paid by 'D' for purchase of land, its account was credited by assessee by way of journal entries, it was not a case of accepting loan or deposit by assessee from 'D' for purpose of imposing penalty under section 271D i.e. penalty for failure to comply with the provisions of Section 269SS(Mode of taking or accepting certain loans and deposits.

Mere book entries to recognize the liability can’t be treated as loans to impose sec. 271D penalty [2012] 25 taxmann.com 156 (DELHI – ITAT ruling)

9.     Tax is not to be deducted under section 194C where payment is made for supervising construction work of bridge simpliciter.

Supervising construction work not liable to section 194C[2012] 25 taxmann.com 244 (AGRA – ITAT Ruling).

10.   Texturing and twisting of polyester yarn amount to manufacture for purpose of deduction under section 80-IA [2012] 25 taxmann.com 266 (Supreme Court).

11.    Where assessee participated in the assessment proceedings and acquiesced to the jurisdiction of the Assessing Authority, there was no error in exercise of jurisdiction.

'Lack of jurisdiction' is baseless argument to challenge an assessment order when assessee accepted it in past [2012] 25 taxmann.com 265 (ALL. HC)

12.    Amount collected as 'contingent deposit' from leasing/hire purchase customers by assessee - NBFC with a view to protect itself from disputed sales-tax liability, was to be treated as income of assessee.

'Contingent deposits' received in leasing transactions are business incomes if not credited to earmarked bank A/c [2012] 25 taxmann.com 247 (Supreme Court)

13.   Huge profit can be earned by a new unit even within a fortnight when product is software - Software unlike other commodity can be produced within a few days; when software company already had strong customer base, earning of huge profit within 18 days could not be doubted.

[2012] 25 taxmann.com 246 (KAR. HC)

14.   DVO's valuation on reference can be adopted after considering assessee's objection - Though Assessing Officer has got power under section 142A to refer matter to DVO to estimate cost of construction, but same cannot be adopted without considering assessee's objection  [2012] 25 taxmann.com 245 (KAR.HC) 

 

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