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Income tax
Accident claim – M.V.Act- what is net salary or take home salary ?– Voluntary savings deductions can not be considered as expenses – While ascertaining salary, the trail court deducted various heads shown in the salary certificate like GPF, HRA and Income tax etc., – High court confirmed the same – Apex court held that except contribution towards Income Tax, the other voluntary contributions made by the deceased, which are in the nature of savings, cannot be deducted from the monthly salary of the deceased to decide his net salary or take home salary. = MANASVI JAIN … APPELLANT VERSUS DELHI TRANSPORT CORPORATION … RESPONDENTS = 2014 ( April.Part ) judis.nic.in/supremecourt/filename=41452
Accident claim – M.V.Act- what is net salary or take home salary ?- While ascertaining salary, the trail court deducted various heads shown in the salary certificate like GPF, HRA and Income tax etc., – High court confirmed the same – Apex court held that except contribution towards Income Tax, the other voluntary contributions made by the deceased, which are in the … Continue reading
Sec.271 of INCOME TAX ACT = The AO has to initiate penalty proceedings when he found difference between the reported and assessed income – No separate reasons not necessary to record whether to intiate proceedings or not – but the burden lies on the assessee to give suffcient reasons for show cause notice and the burden shift on the Ao then he has to given reasons for imposing penalty = MAK Data P. Ltd. … Appellant Versus Commissioner of Income Tax-II … Respondent = http://judis.nic.in/supremecourt/filename=40925
Sec.271 of INCOME TAX ACT = The AO has to initiate penalty proceedings when he found difference between the reported and assessed income – No separate reasons not necessary to record whether to intiate proceedings or not – but the burden lies on the assessee to give suffcient reasons for show cause notice and the burden … Continue reading
Hindu Succession Act, 1956-ss. 4, 8 and 19-Property of father who dies intestate-Whether devolves on son, who separated by partition from his father, in individual capacity or Karta of his HUF. Wealth Tax Act, 1957-ss. 3 and 4-Property inherited under s 8 Hindu Succession Act, 1956-Whether HUF or individual property. Income Tax Act, 1961/Income Tax Act, 1922-Income from as sets inherited by son from father-Whether assessable as individual income. HEADNOTE: Rangi Lal and his son Chander Sen constituted a Hindu undivided family. They had some immovable property and the family business. By a partial partition the HUF business was divided between the two and thereafter it was carried on by a partnership consisting of the two. The house property of the family continued to remain joint. The firm was assessed to income-tax as a registered firm and the two partners were separately assessed in respect of their share of income. The mother and wife of Rangi Lal having pre-deceased him, when he died he left behind him his only son Chander Sen and his grandsons. On his death there was a credit balance of Rs.1,85,043 in his account in the books of the firm. In the wealth tax assessment for the assessment year 1966-67, Chander Sen, who constituted a joint family with his own sons, filed a return of his net-wealth by including the property of the family which u on the death of Rangi Lal passed on to him by survivorship and, also the assets of the business which devolved upon him on the death of his father. The sum of R.S.. l ,85,0 13 standing to the credit of Rangi Lal was, however, not included in the net-wealth of the assessee-family. Similarly, in the wealth tax assessment for the assessment year 1967-68 a sum of Rs.1,82,742 was not included, in the net wealth of the assessee family. It was contended that these amounts devolved on Chander Sen 255 in his individual capacity and were not the property of the assessee family. The Wealth-tax officer did not accept this contention and held that these sums also belonged to the assessee-family. A sum of Rs.23,330 was also credited to the account of late Rangi Lal on account of interest accruing on his credit balance. In the proceedings under the Income Tax Act for the assessment year 1367-68 this sum was claimed as deduction on the same ground. The Income-tax officer disallowed the claim on the ground that it was a payment made by Chander Sen to himself. On appeal, the Appellate Assistant Commissioner of Income-tax accepted the assessee’s claim in full and held that the capital in the name of Rangi Lal devolved on Chander Sen in his individual capacity and as such was not to be included in the wealth of the assessee family. The sum of Rs.23,330 on account of interest was also directed to be allowed as deduction. The Income-tax Appellate Tribunal dismissed the appeals filed by the Revenue and its orders were affirmed by the High Court. On the question: “Whether the income or asset which a son inherits from his father when separated by partition should be assessed as income of the Hindu Undivided Family consisting of his own branch including his sons or his individual income”, dismissing the appeals and Special Leave Petition of the Revenue, the Court, ^ HELD: 1. The sums standing to the credit of Rangi Lal belong to Chander Sen in his individual capacity and not the Joint Hindu Family. The interest of Rs.23,330 was an allowable deduction in respect of the income of the family from the business. [268C-D] 2.1 Under s. 8 of the Hindu Succession Act, 1956, the property of the father who dies intestate devolves on his son in his individual capacity and not as Karta of his own family. Section 8 lays down the scheme of succession to the property of a Hindu dying intestate. The Schedule classified the heirs on whom such property should devolve. Those specified in class I took simultaneously to the exclusion of all other heirs. A son’s son was not mentioned as an heir under class I of the Schedule, and, therefore, he could not get any right in the property of his grandfather under the provision. [265F-G] 256 2.2 The right of a son’s son in his grandfather’s property during the lifetime of his father which existed under the Hindu law as in force before the Act, was not saved expressly by the Act, and therefore, the earlier interpretation of Hindu law giving a right by birth in such property “ceased to have effect”. So construed, s. 8 of the Act should be taken as a self-contained provision laying down the scheme of devolution of the property of a Hindu dying intestate. Therefore, the property which devolved on a Hindu on the death of his father intestate after the coming into force of the Hindu Succession Act, 1356, did not constitute HUF property consisting of his own branch including his sons. [265G-H; 266A-C] 2.3 The Preamble to the Act states that it was an Act to amend and codify the law relating to intestate succession among Hindus. Therefore, it is not possible when the Schedule indicates heirs in class I and only includes son and does not include son’s son but does include son of a predeceased-son, to say that when son inherits the property in the situation contemplated by s. 8, he takes it as Karta of his own undivided family. [267C-D] 2.4 The Act makes it clear by s. 4 that one should look to the Act in case of doubt and not to the pre-existing Hindu law. It would be difficult to hold today that the property which devolved on a Hindu under s. X of the Act would be HUF in his hand vis-a-vis his own son; that would amount to creating two classes among the heirs mentioned in class I, the male heirs in whose hands it will be joint Hindu family property and vis-a-vis sons and female heirs with respect to whom no such concept could be applied or contemplated. [267E-G] 2.5 Under the Hindu law, the property of a male Hindu devolved on his death on his sons and the grandsons as the grandsons also have an interest in the property. However, by reason of s. 8 of the Act, the son’s son gets excluded and the son alone inherits the properly to the exclusion of his son. As the effect of s. 8 was directly derogatory of the law established according to Hindu law, the statutory provisions must prevail in view of the unequivocal intention in the statute itself, expressed in s. 4(1) which says that to the extent to which provisions have been made in the Act, those provisions shall override the established provisions in the texts of Hindu Law. [264G-H; 265A-B] 2.6 The intention to depart from the pre-existing Hindu law was again made clear by s. 19 of the Hindu Succession Act which stated that 257 if two or more heirs succeed together to the property of an intestate, they should take the property as tenants-in- common and not as joint tenants and according to the Hindu law as obtained prior to Hindu Succession Act two or more sons succeeding to their father’s property took a joint tenants and not tenants-in-common. The Act, however, has chosen to provide expressly that they should take as tenants-in-common. Accordingly the property which devolved upon heirs mentioned in class I of the Schedule under s. 8 constituted the absolute properties and his sons have no right by birth in such properties. [266F-H] Commissioner of Income-tax, U. P. v. Ram Rakshpal, Ashok Kumar, 67 I.T.R. 164; Additional Commissioner of Income-tax, Madras v. P.L. Karuppan Chettiar, 114 I.T.R. 523; Shrivallabhdas Modani v. Commissioner of Income-Tax, M.P-I., 138 I.T.R. 673 and Commissioner of Wealth-Tax A.P. II v. Mukundgirji 144 I.T.R. 18, approved. Commissioner of Income-tax, Gujarat-l v. Dr. Babubhai Mansukhbai (Deceased), 108 I.T.R. 417, overruled.
published in http://judis.nic.in/supremecourt/imgst.aspx?filename=8997 PETITIONER: COMMISSIONER OF WEALTH TAX. KANPUR ETC. ETC. Vs. RESPONDENT: CHANDER SEN ETC. DATE OF JUDGMENT16/07/1986 BENCH: MUKHARJI, SABYASACHI (J) BENCH: MUKHARJI, SABYASACHI (J) PATHAK, R.S. CITATION: 1986 AIR 1753 1986 SCR (3) 254 1986 SCC (3) 567 1986 SCALE (2)75 CITATOR INFO : F 1987 SC 558 (10) RF 1991 SC1654 (27) … Continue reading
Gift under income tax – credit-worthiness of the donor = We find that it is not in dispute that the aforesaid two amounts have been deposited by the two partners in their capital account. The partners are income tax payee. They have explained the source as having received gift from various persons, who have also filed their Income Tax Returns and have been assessed accordingly. Merely because, the donors are weavers and they own only one loom would not make any difference. They have filed their Income Tax Returns and have also filed the return under the Gift Tax Act. They have paid the gift tax also. Assessment under the Gift Tax Act has also been made, though the assessments made were summary in nature. In the case of Anil Rice Mills (supra), this Court has held that the assessee can not be asked to prove the source of source or the origin of origin. Taking the various facts enumerated above, we are of the considered opinion that the Tribunal had erred in holding that the amount deposited by the two partners is liable to be added under section 68 of the Act on the ground that the gifts received by the respective partners from the various persons could not be explained as the credit-worthiness of the donors had not been established. The Tribunal had wrongly drawn an adverse inference upon the fact that the donors had filed their Income Tax Return for the Assessment Years 1988-89 to 1991-92 on a single day and further the return for the Gift Tax was filed on 25.08.1992, which was well within the due date. The appellant has explained the nature and source of the deposit and has discharged its burden. The order of the Tribunal on this ground therefore can not be sustained and is liable to be set-aside. The appeal succeeds and is allowed.
reported/published in http://elegalix.allahabadhighcourt.in/elegalix/WebShowJudgment.do HIGH COURT OF JUDICATURE AT ALLAHABAD Reserved Income Tax Appeal No. 71 of 2002 M/s. Zafa Ahmad & Company Versus The Commissioner of Income Tax, Varanasi *********************** Hon’ble R.K. Agrawal, J. Hon’ble B. Amit Sthalekar, J. (Delivered by R.K. Agrawal, J.) The present appeal has been filed under section 260A of the … Continue reading
Section 245: Set off of refunds against tax remaining payable: Where under any of the provisions of this Act, a refund is found to be due to any person, the Assessing Officer, Deputy Commissioner (Appeals), Commissioner (Appeals) or Chief Commissioner or Commissioner, as the case may be, may, in lieu of payment of the refund, set off the amount to be refunded or any part of that amount, against the sum, if any, remaining payable under this Act by the person to whom the refund is due, after giving an intimation in writing to such person of the action proposed to be taken under this section.” 20. From a reading of the above Section, it is crystal clear that the Assessing Officer, Deputy Commissioner (Appeals), Commissioner (Appeals) or Chief Commissioner or Commissioner, as the case may be, may, in lieu of payment of the refund, set-off the amount to be refunded or any part of that amount, against the sum, if any, remaining payable under the Act by the person to whom the refund is due, after giving an intimation in writing to such person of the action proposed to be taken under that Section. (emphasis supplied).On a perusal of the entire material documents including the impugned order, it is clearly evident that there is no intimation in writing to the petitioner-assessee before making such an adjustment of refund. No doubt, the respondent is empowered to make the adjustment of refund, but the same can be done only in the manner as contemplated under the provisions of the Act. It is conspicuous from the records that there is no intimation in writing to the petitioner before making such adjustment of refund. As the respondent has not followed the procedures prescribed under the provisions of the Act while adjusting the refund amount with the outstanding amount, the impugned order is vitiated in law and is liable to be set aside. For the foregoing reaasonings, the impugned order is set aside. The Writ Petition is allowed and the matter is remanded back to the respondent for compliance of Section 245 of the Act, and thereafter, the respondent is at liberty to adjust the refund amount payable to the petitioner with the amount payable for the respective assessment year, in accordance with law. Such an exercise shall be completed by the respondent within a period of four weeks from the date of receipt of a copy of this order. No costs. The Miscellaneous Petition is closed. Reported in/ published in http://judis.nic.in/judis_chennai/filename=41825
IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED: 30.4.2013 CORAM: THE HONOURABLE MR.JUSTICE V.DHANAPALAN W.P.No.8571 of 2013 & M.P.No.1 of 2013 M/s.Cognizant Technology Solutions India P. Ltd., 6th Floor, New No.165/Old No.110, Menon Eternity Building, St.Mary’s Road, Chennai-600 018 represented by its Director .. … Continue reading
The visa card carried a personal accident cover, with risk coverage of Rs.4 lakhs.= even though the visa card was issued, however till declaration of assignment was not filled in, the deceased cannot be regarded as their customer. Therefore the question of payment of any amount does not arise. ? = it is clearly stated that the card issued only with personal accident benefit and he is entitled to the amount for an accident on road or in air travel. Therefore on reading the instruction under “Insurance benefit on you card” it cannot be said that the benefit commences only after filling of declaration of assignment. The evidence put before us do not show that such a condition was put forth by the opponent that the benefit under the card will not be available unless declaration cum undertaking was filled in.”
NATIONAL CONSUMER DISPUTES REDRESSAL COMMISSION NEW DELHI REVISION PETITION NO. 1902 OF 2011 (Against the order dated 16.09.2010 in Appeal No.1297/2006 of the State Commission, Gujarat) Standard Chartered Bank 5th Floor, Sakar -3, Income Tax, Ashram Road Ahmedabad ……….Petitioner Versus Mr. Naran Bhai ShamjiBhai Bhandari R/o Tarwade, TA Distt. Amreli, Ahmedabad, Gujarat …..Respondent BEFORE HON’BLE MR. JUSTICE J. M. MALIK, PRESIDING MEMBER HON’BLE MR. VINAY KUMAR, MEMBER … Continue reading
Bail: Allegations against respondent no.1 that he had huge amount of unaccounted money, that documents recovered from his premises contained instructions issued by him for transfer of various amounts to different persons from the bank accounts held by him outside India and the said monies were the proceeds of crime and by depositing the same in his bank accounts, respondent no.1 had attempted to project the same as untainted money – Further allegation that the said amount ran into billions of dollars; that respondent no.1 had obtained at least three passports in his name by submitting false documents, making false statements and by suppressing the fact that he already had a passport; that Income Tax Department had for the Assessment Years 2001-02 to 2007-08 assessed his total income as Rs.110,412,68,85303/- – Investigations also revealed that he sold a diamond from the collection of Nizam of Hyderabad and routed the proceeds through his account in Bank in Switzerland to a Bank in United Kingdom – High Court allowed bail application of respondent no.1 – On appeal, held: There was no attempt on part of respondent no.1 to disclose the source of the large sums of money handled by him – The allegations may not ultimately be established, but the burden of proof that the said monies were not the proceeds of crime and were not tainted shifted to respondent no.1 u/s.24 of PML Act – The amount lying in the Swiss bank was not explained by respondent no.1 – He was also not able to establish that the sum of Rs.110,412,68,85303/- were neither proceeds of crime nor tainted property – Manner in which he procured three different passports in his name after his original passport was directed to be deposited in court also lend support to apprehension that if released on bail, he may abscond – Bail granted to Respondent no.1 cancelled – Prevention of Money Laundering Act, 2002 – s.4 – FEMA – Code of Criminal Procedure, 1973 – s.439. Bail – Application for cancellation of bail, and appeal against order granting bail – Distinction between. State of U.P. v. Amarmani Tripathi (2005) 8 SCC 21: 2005 (3) Suppl. SCR 454 – relied on. Sanjay Dutt v. State through CBI, Bombay (II) (1994) 5 SCC 410: 1994 (3) Suppl. SCR 263; Uday Mohanlal Acharya v. State of Maharashtra (2001) 5 SCC 453: 2001 (2) SCR 878 – referred to. Case Law Reference: 1994 (3) Suppl. SCR 263 referred to Para 17 2001 (2) SCR 878 referred to Para 17 2005 (3) Suppl. SCR 454 relied on Para 27 CRIMINAL APPELLATE JURISDICTION : Criminal Appeal No. 1883 of 2011. From the Judgment & Order dated 12.8.2011 of the High Court of Bombay i Criminal Bail Appliction No. 994 of 2011. A. Mariarputham, Rajiv Nanda, Revati Mohite, T.A. Khan, Anirudh Sharma, Anando Mukherjee, Harsh Parekh and B. Krishna Prasad for the Appellant. Ishwari Prasad A. Bagaria, Vijay Bhaskar Reddy, Santosh Paul, Uma Ishwari Bagaria, Arti Singh, Arvind Gupta, Mohita Bagati, Kamal Nijhawan and Asha Gopalan Nair for the Respondents.
REPORTABLE IN THE SUPREME COURT OF INDIA CRIMINAL APPELLATE JURISDICTION CRIMINAL APPEAL NO.1883 OF 2011 (Arising out of SLP(Crl.) No.6114 OF 2011) Union of India … Appellant Vs. Hassan Ali Khan & Anr. … Respondents O R D E R ALTAMAS KABIR, J. 1. Leave granted. 2. The Special Leave Petition out of which this … Continue reading
Voluntary Disclosure of the Income Scheme, 1997 : s.64(2)-Revocation of certificate-Search and seizure action against partners of firm-Income Tax authorities having already discovered assets declared in VIDS by assessee firm-Fact of search not disclosed in VIDS application-Certificate declared null and void-Writ Petition dismissed by High Court -Held: Though under Income Tax Act and VIDS, 1997 a firm and its partner may have to be treated differently, a firm is the conglomeration of its partners, and it is not a juristic person-On facts, disclosure made by firm related to some amount which had been disclosed by partner during search and seizure action-Even source of income was found to be the same-As income of firm vis-a-vis its partners have a direct correlation, while construing a statute granting immunity it should not be construed in such a manner so as to frustrate its object-Keeping in view the purport and object of 1997 Scheme, rule of purposive construction should be applied-Applying the principles underlying Article 136 and 142 of the Constitution, and having regard to nature of fraud practiced upon statutory authorities, no case made out for invoking jurisdiction under Article 136-Constitution of India, 1950-Arts. 136 and 142-Income Tax Act, 1961-Partnership Act, 1831-s. 19-Interpretation of Statutes-Purposive construction Interpretation of Statutes : Tax statutes-Circulars issued by Central Board of Direct Taxes-Held: May also be taken into consideration for purpose of construing the statute-Executive construction is ordinarily allowed to prevail and shall be binding on authorities under I.T. Act. Appellant-assessee, a partnership firm, made a voluntary disclosure, under the Voluntary Disclosure of the Income Scheme, 1997. The said declaration was accepted and a certificate was issued. However, by order dated 8.4.2003, the Commissioner of Income Tax declared the said certificate to be null and void u/s 64(2) of the Scheme, as the search and seizure action had been carried out in respect of the partners of the assessee relating to the assets declared by it in the VDIS application which had been discovered earlier by the Income Tax Department during the course of search and seizure action, but the assessee did not disclose this fact while filing the VDIS declaration. The writ petition filed by the assessee firm having been dismissed by the High Court, the firm filed the instant appeal. It was, inter alia, contended for the assessee-appellant that the firm for the purpose of applicability of provision of Income Tax Act being a distinct and separate entity vis-a-vis its partners, and there being no search and seizure of the premises of the firm, nor any warrant having been issued, the proceedings could not have been initiated for revoking the certificate issued under the VDI Scheme. =Dismissing the appeal, the Court HELD : 1.1. For the purpose of the application of the provisions of the Income Tax Act, 1961 and the Voluntary Disclosure of Income Scheme, 1997, a firm and its partner may have to be treated differently as a partner of a firm may have income other than his share of profits from the firm. [Para 17] [243-E] 1.2. It is, however, also well settled that fraud vitiates all solemn acts. Fraudulent actions shall render the act a nullity. It would be non est in the eyes of law. Acts of a firm vis-a-vis its partners, however, as is understood in common parlance or in terms of the provisions of the Partnership Act, 1932, in a case of this nature, may have to be taken into consideration for judging the validity of action. Under the Partnership Act, a partner represents a firm. He has an implied authority in terms of Section 19 thereof and thus, any action taken by a partner of a firm vis-a-vis. the firm, unless otherwise specific, binds the firm itself. It is one thing to say that for the purpose of invoking the provisions of the Income Tax Act and other taxation laws a firm and its partners are treated to be separate entities but while construing a statute involving immunity from certain penal actions, the provisions thereof should not ordinarily be judged on the touchstone of the provisions of the 1961 Act, only because the 1997 Scheme has a direct nexus therewith. The immunity granted pursuant to acceptance of a declaration made under the voluntary taxation scheme or Kar Vivad Samadhan Scheme, 1998 does not lead to a total immunity. Immunity granted under the Scheme has its own limitations. The Scheme must be applied only in the event the conditions precedent laid down therefore are applicable. [Para 19 and 20] [243-G-H; 244-A-C] State, CBI v. Sashi Balasubramanian & Anr., [2006] 10 SCALE 541 and Alpesh Navinchandra Shah v. State of Maharashtra and Ors., [2007] 2 SCC 777, relied on 1.3. In the instant case, a raid was conducted in the premises of the firm. Search warrant might have been issued in the name of a partner of the firm. The partner made certain statements. The search revealed some undisclosed income. The firm has a separate legal entity, it could have made a declaration, but it was done in respect of the same amount regarding the partner of the firm made disclosures. It is one thing to say that when a firm has concealed income, each partner need not make a declaration but it would be another thing to say that when a search has been made on the premises of the firm and the books of accounts of the firm are inspected, on the strength of a search warrant issued in the name of one of the partners thereof, a declaration can be made by the firm so as to cover the loopholes. In a case of this nature where fraud is alleged one cannot be oblivious of the fact that each firm acts through its partner. [Para 21] [244-D-G] 1.4. A firm is the conglomeration of its partners, and is not a juristic person. In the instant case, the purported disclosure made by the firm relates to the same amount which has been disclosed by the partner. Even the source of income was found to be the same. As the income of a firm vis-a-vis its partners have a direct co-relation, while construing a statute granting immunity, it should not be construed in such a manner so as to frustrate its object. Keeping in view the purport and object which the 1997 Scheme seeks to achieve, in the place of literal interpretation, the rule of purposive construction should be applied. [Para 21] [244-H; 245-A-B] Bombay Dyeing and Mfg. Co. Ltd. v. Bombay Environmental Action Group and Ors., [2006] 3 SCC 434 and National Insurance Co. Ltd. v. Laxmi Narain Dhut, [2007] 4 SCALE 36, relied on. Francis Bennion’s Statutory Interpretation, referred to. 2. Executive construction is ordinarily allowed to prevail and shall be binding on the authorities under the Act. A’ fortiori, clarificatory circulars issued by the Central Board of Direct Taxes may also be taken into consideration for the purpose of construction of the statute. [Para 18] [243-F] 3. In any event, it is not a fit case where this Court should invoke its extra-ordinary jurisdiction under Article 136 of the Constitution. It is now well settled that this Court does not exercise its jurisdiction only because it is lawful to do so. It, for the purpose of doing complete justice to the parties, not only may or may not interfere with the impugned judgment but also issue directions in terms of Article 142 of the Constitution. Applying these principles, and particularly having regard to the nature of fraud practiced upon the statutory authorities, no case has been made out for invoking our jurisdiction under Article 136 of the Constitution. [Para 23 and 24] Vimal Chandra, S. Dave, Neelam Kalsi, S.N. Singh, Pallavi Divekar for the Appellant. Amarjit Singh, Vikas Singh, ASGs., Neera Gupta and B.V. Balaram Das for the Respondents.
CASE NO.: Appeal (civil) 2696 of 2007 PETITIONER: Tanna and Modi RESPONDENT: C.I.T. Mumbai XXV and Ors. DATE OF JUDGMENT: 17/05/2007 BENCH: S.B. Sinha & P.K. Balasubramanyan JUDGMENT: JUDGMENT S.B. SINHA, J. 1. Leave granted. 2. Interpretation and application of the provisions of Voluntary Disclosure of Income Scheme falls for our consideration in this appeal … Continue reading
Income Tax Act, 1961: ss. 80P(2)(a)(i) and (iii) r/w ss.56 and 2(24)(i) – Deduction in respect of income of co-operative societies – `Profit and gains from business’ – Co- operative Society providing credit facilities to its members and marketing their agricultural produce – Surplus funds invested by Society in short term deposits – Interest earned thereon – HELD: Does not fall within the meaning of expression `profit and gains from business’ – Such interest income cannot be said to be attributable to the activities of the Society – The words `the whole of the amount of profits and gains of business’ attributable to one of the activities specified in s. 80)(2)(a) emphasise that the income in respect of which deduction is sought must constitute the operational income and not the other income which accrues to the Society – Therefore, the interest earned by the Society on short-term deposits of surplus cannot be said to be `income from business’, but is `income from other sources’ liable to tax u/s 56 and not entitled to deduction u/s 80P(2)(a). ss.148 and 151 – Issue of notice where income has escaped assessment – Sanction for – HELD: Tribunal being the final fact finding authority under the Act, having recorded a finding of fact that approval/sanction for re- opening of assessment in terms of s.148 r/w s.151 existed even prior to 31.5.2001, though written communication of sanction was received by Assessing Officer on 8.6.2001, there is no reason to interfere with the said finding given by Tribunal. ss.56 and 57 – `Income from other sources’ – Deductions towards cost of funds and proportionate administrative and other expenses, in respect of income by way of interest on deposits held with Scheduled Banks, bonds and other securities – HELD: The question involves applicability of ss. 56 and 57, but as it remained unanswered by authorities below, the question is remitted to High Court for consideration in accordance with law. The assessee, a co-operative society, engaged in the business of providing credit facilities to its members and marketing their agricultural produce, invested the surplus funds in short-term deposits with the Banks and in Government securities, and earned interest thereon. The assessee showed the said interest income under the Head “Income from business” but the Assessing Officer assessed it as “income from other sources” u/s 56 and held that the assessee would not be entitled to deduction u/s 80 P(2)(a) of the Income Tax Act. In the instant appeal filed by the assessee, the question for consideration before the Court was: Whether the interest income earned by the assessee- Society on surplus funds invested in short-term deposits would qualify for deduction as business income u/s 80P(2)(a) of the Income Tax Act, 1961? =Dismissing the appeals, the Court HELD: 1.1. An income which is attributable to any of the activities specified in s.80 P(2) of the Income Tax Act, 1961 would be eligible for deduction. In the instant case, the interest held not eligible for deduction u/s 80P(2)(a) is not the interest received from the business of the Society, namely, providing credit facilities to its members or marketing their agricultural produce. What is sought to be taxed u/s 56 of the Act is the interest income arising on the surplus, which surplus was not required for business purposes, and was invested in specified securities as `investment’. Assessee(s) markets the produce of its members whose sale proceeds at times were retained by it. Since the fund created by such retention was not required immediately for business purposes, it was invested in specified securities. Such interest income would come in the category of “Income from other sources” and, therefore, would be taxable u/s 56 of the Act, as rightly held by the Assessing Officer. [Para 10] [507-E; 506-G-H; 507-A-C] 1.2. The word “income” has been defined u/s 2(24)(i) of the Act to include profits and gains. This sub-section is an inclusive provision. The Parliament has included specifically “business profits” into the definition of the word “income”. Therefore, the Court is required to give a precise meaning to the words “profits and gains of business” mentioned in s.80P (2) of the Act. In the instant case, assessee-Society regularly invests funds not immediately required for business purposes. Interest on such investments, therefore, cannot fall within the meaning of the expression “profits and gains of business”. [Para 10] [507-E-G] 1.3. Further, assessee(s) markets the agricultural produce of its members. It retains the sale proceeds in many cases. It is this “retained amount” which was payable to its members, from whom produce was bought, which was invested in short-term deposits/securities. Such an amount, which was retained by the assessee-Society, was a liability and it was shown in the balance-sheet on the liability-side. Therefore, to that extent, such interest income cannot be said to be attributable either to the activity mentioned in s. 80P(2)(a)(i) or in s.80P(2)(a)(iii) of the Act. Therefore, looking to the facts and circumstances of the case, the Assessing Officer was right in taxing the said interest income, u/s 56 of the Act. [Para 10] [508-B-E] 1.4. To say that the source of income is not relevant for deciding the applicability of s. 80P of the Act would not be correct because weightage needs be given to the words “the whole of the amount of profits and gains of business” attributable to one of the activities specified in s.80P(2)(a) of the Act. The words “the whole of the amount of profits and gains of business” emphasise that the income in respect of which deduction is sought must constitute the operational income and not the other income which accrues to the Society. [Para 11] [509-C-E] 2. As regards validity of the notice u/s148 of the Act to re-open the assessment, it essentially concerns factual aspect. The Tribunal is the final fact finding Authority under the Act. It has given a finding of fact that though the written communication of the sanction, which has no prescribed format, was received by the Assessing Officer on 8th June, 2001 but, the approval/sanction for re-opening of assessment in terms of s. 148 of the Act read with s.151 existed even prior to 31st May, 2001. There is no reason to interfere with this finding of fact given by the Tribunal. [Para 13] [510-F-G] 3. In the instant matter, the question “Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the income by way of interest on deposits held with scheduled banks, bonds and other securities was chargeable to tax u/s 56 under the head `Income from other sources’ without allowing any deduction in respect of cost of funds and proportionate administrative and other expenses u/s 57”? advanced by the assessee(s) before the authorities below has remained un-answered. Since it involves interpretation of ss. 56 and 57 of the Act and applicability of the said sections to the facts of the instant case, the question is remitted to the High Court for consideration in accordance with law. [Para 14 and 15] [511-A-D] CIVIL APPELLATE JURISDICTION : Civil Appeal No. 1622 of 2010. From the Judgment & Order dated 30.9.2008 of the High Court of Karnataka Circuit Bench at Dharwad in ITA No. 1568 of 2005. WITH C.A. Nos. 1623, 1624, 1625, 1625, 1626, 1627, 1628 and 1629 of 2010. S. Ganesh, K.K. Chytanya, S. Sukumaran, Anand Sukmar and Meera Mathur for the Petitioner. Parag P. Tripathi, ASG, Naresh Kaushik, Kunal Bahrai, Arti Gupta, Mohd. Mannan and B.V. Balaram Das for the Respondent.
REPORTABLE IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION CIVIL APPEAL NO.1622 OF 2010 (Arising out of S.L.P. (C) No.7572 of 2009) M/s. The Totgars’ Cooperative Sale Society Limited …Appellant(s) Versus Income Tax Officer, Karnataka …Respondent(s) W I T H Civil Appeal No.1623/2010 @ S.L.P. (C) No.10489 of 2009 Civil Appeal No.1624/2010 @ S.L.P. … Continue reading
Income Tax Act, 1961 – Bengal Agricultural Income Tax Act, 1944 – s.8 – Tea – Composite business of growing and manufacturing tea – Income from – Taxability of – Held: Such income has to be assessed under 1961 Act – 40% of income assessed would be taxable under 1961 Act and 60% is treated as agricultural income and taxable under 1944 Act – Income Tax Rules, 1962 – r.8. The respondent-assessee was carrying on the composite business of growing and manufacturing tea. It was selling green tea leaves produced in the tea gardens which is agricultural produce and also manufacturing tea. A notice of demand was issued on assessee on the ground that the income from sale of green tea leaves was taxable as agriculture income under the Bengal Agricultural Income Tax Act, 1944. The assessee filed writ petition seeking cancellation of the notice of demand. The writ petition was disposed of by the Single Judge of High Court in terms of judgment of this Court in *Tata Tea Ltd case. The Division Bench of High Court while following the ratio of *Tata Tea Ltd. case directed the Assessing Officer to compute the tax on the income of assessee. It held that the income from `tea grown and manufactured’ should be assessed by the Assessing Officer under the Income Tax Act, 1961; that 40% of the income assessed shall be taxed under the 1961 Act and balance 60% shall be taxed under the 1944 Act by Agricultural Income Tax Officer on the basis of income assessed by the Assessing Officer under the 1961 Act; and the income derived from sale of green tea leaves is agricultural income and assessable under the 1944 Act. In appeal to this Court, assessee contended that the sale proceeds of green tea leaves should be treated incidental to business and its income should be computed under the provisions of the 1961 Act. =Disposing of the appeal, the Court HELD: 1.1. There is no dispute on the fact that from the income assessed, 60% is taxable by the State under the Bengal Agricultural Income Tax Act, 1944 and 40% is taxable by the Centre under the Income Tax Act, 1961. The object behind taxing the 60% and 40% share of the income assessed appears that there are common expenses on establishment and staff for two different activities that is tea grown and tea manufactured. There can be independent income from sale of green tea leaves and by sale of tea, that is, after processing of green tea leaves when green tea leaves become tea for use. Income from agriculture is taxable by the State and sale of tea after manufacturing is taxable by the Union of India as business income. To segregate income and expenses from two combined activities of assessee is not possible, but at the same time there cannot be two assessments of income by two different authorities. Therefore, there can be only one assessment of income from the tea business. [Paras 11, 12] [57-E-H, 58-A] 1.2 For the purpose of tax on agricultural income, the Agricultural Income Tax Officer will go by the assessment order made under the provisions of the 1961 Act and the contents of the assessment for the year made by the Assessing Officer under the 1961 Act shall be conclusive evidence of the contents of such order and he has to go by the assessment and tax only 60% income made under the assessment for the purpose of the 1944 Act. [Para 15] [59-E,F] 1.3 It is true that both rule 8 of the Income Tax Rules, 1962 and s.8 of the 1944 Act provide how the mixed income from the growing tea leaves and tea manufacturing can be taxed. Mixed income means the income derived by an assessee from the combined activities i.e. growing of tea leaves and manufacturing of tea. Therefore, for the purpose of computation of income under the 1961 Act, it should be the mixed income from `tea grown and manufactured’ by the assessee. [Para 19] [61-C,D,E] 1.4. If the income is by sale of green tea leaves by the assessee it cannot be called income assessable under the 1961 Act for the purpose of 40:60 share between the Centre and the State. In both the provisions i.e. rule 8 of the Income Tax Rules, 1962 and s.8 of the 1944 Act, the word used is income derived from the sale of `tea grown and manufactured’. The income from sale of green tea leaves is purely income from the agricultural product. There is no question of taxing it as incidental income of the assessee when there is a specific provision and authority to tax that income i.e. the State, under the 1944 Act. In this view of the matter, the agricultural income cannot be taxed under 1961 Act. [Paras 20, 21] [61-E,F,G] 2. It is also pertinent to mention that the Income Tax Officer has assessed the income of tea manufactured by the assessee from 1977-78 to 1980-81 to the tune of Rs.1,44,250/-, Rs.4,28,040/-, Rs.54,450/- and Rs.92,351/- respectively and income of the assessee from the sale of green tea leaves was more than Rs.10 lakhs in each accounting year (1977-78 and 1978-79). In this view of the matter, the income of the assessee from the sale of tea leaves can never be incidental to business. In a given case the assessee can process only 10% of green tea leaves and 90% of green tea leaves can be sold directly in the market. That income from sale of green tea leaves cannot be treated incidental to the business. In case the assessee directly sells the green tea leaves resulting into an income from agricultural products, it cannot be taken as incidental income to the business and whatever the income is derived from the sale of the green tea leaves can be assessed by the Agricultural Income Tax Officer under the 1944 Act. [Paras 22,23,24] [62-A,B,C,D,E] *Tata Tea Ltd. & Anr. v. State of West Bengal & Ors. (1988) Supp SCC 316 – relied on. 3. The Assessing Officer is directed to frame an assessment order in the case of the respondent assessee on the principle of law laid down by this Court in the case of *Tata Tea and followed by the Division Bench of the High Court in the impugned judgment, if not already made. [Paras 30, 31] [64-A-C] Parag P. Tripathi, ASG, Naveen Prakash, Shweta Garg, B.V. Balaram Das, H.K. Puri and Rajeev Sharma for the appearing Parties.
REPORTABLE IN THE SUPREME COURT OF INDIA CIVIL APPEALLTE JURISDICTION CIVIL APPEAL NO.8284-8285 of 2002 Union of India & Another .. Appellants Versus Belgachi Tea Co. Ltd. & Others .. Respondents WITH CIVIL APPEAL No.8283 of 2002. JUDGMENT Dalveer Bhandari, J. 1. These appeals are directed against the judgment of the Division Bench of the … Continue reading
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