Contents A-5 U.K. BHARGAVA RAKESH BHARGAVA

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1 Contents A-5 FOUNDER EDITOR U.K. BHARGAVA EDITOR RAKESH BHARGAVA HONY. COORDINATING EDITORS DR. VINOD K. SINGHANIA AND VINAY JAIN Taxman weekly comes in Eight volumes. Annual Subscription : Rs for Eight volumes for the year Single copy is Rs. 150 only. Back years volume Rs. 500 per volume for paper back and add Rs. 75 per volume for Hard case binding. Taxman weekly is published on every Saturday. NON-RECEIPT OF PART MUST BE NOTIFIED WITHIN 60 DAYS OF THE DUE DATE. Editor does not necessarily agree with the views expressed in magazine section of Taxman weekly. Material published in this part is the exclusive copyrighted property of Taxman and cannot be reproduced or copied in any form or by any means without written permission of publisher. This publication is sold with the understanding that authors/editors and publishers are not responsible for the result of any action taken on the basis of this work nor for any error or omission to any person, whether a purchaser of this publication or not. All disputes are subject to jurisdiction of the Delhi High Court. Address your editorial and subscription correspondence to Taxmann Allied Services (P.) Ltd., 59/32, New Rohtak Road, New Delhi Printed and Published by Amit Bhargava on behalf of Taxmann Allied Services (P.) Ltd. and Printed at Tan Prints (India) Pvt. Ltd., 44 Km. Mile Stone, National Highway, Rohtak Road, Village Rohad, Distt. Jhajjar (Haryana) and Published at 59/32, New Rohtak Road, New Delhi Editor : Rakesh Bhargava Phone : Fax : sales@taxmann.com ISSN : MODE OF CITATION [2015] 229 Taxman...(...) TOTAL PAGES [140] C ONTENTS STATUTES q CIRCULARS - Section 234A of the Income-tax Act, Interest, chargeable as - Chargeability of interest under section 264A on self-assessment tax paid before due date of filing of return of income - DRAFT CIRCULAR NO. 2/2015 [F.NO. 385/03/2015-IT(B), DATED Section 276C, read with section 276D of the Income-tax Act, Offences and prosecution - Wilful attempt to evade tax, etc. - Vigorous and pro-active measures taken by Income-tax Department to expedite investigations in cases of Indians holding undisclosed foreign accounts/ assets abroad - PRESS RELEASE, DATED q NOTIFICATIONS - Section 10(23A) of the Income-tax Act, Exemptions - Professional associations - Notified association - NOTIFI- CATION NO.4/2015 [F.NO. 196/36/2013-ITA.I]/SO 199(E), DATED body or authority - NOTIFICATION NO. 5/2015 [F.NO.196/ 28/2013-ITA.I]/ SO 200(E), DATED body or authority - NOTIFICATION NO. 6/2015 [F.NO.196/ 21/2013-ITA.I]/ SO 201(E), DATED body or authority - NOTIFICATION NO. 7/2015 [F.NO.196/ 16/2014-ITA.I]/ SO 202(E), DATED body or authority - NOTIFICATION NO. 8/2015 [F.NO.196/ 1/2013-ITA.I]/ SO 203(E), DATED Section 90 of the Income-tax Act, Double taxation agreement - Agreement for avoidance of double taxation and prevention of fiscal evasion with foreign countries - South Africa - Amendment in Notification No. GSR 198(E), TAXMAN q FEBRUARY 21 - FEBRUARY 27, 2015 u 7

2 A-6 Contents dated NOTIFICATION NO.10/2015-FT&TR-II [F.NO.500/144/2005-FTD-II], DATED Section 120(1) and (2) of the Income-tax Act, Income-tax authorities - Jurisdiction of - Corrigenda to Notification No. 50/2014 [F. No. 187/38/2014 (ITA.I)]/SO 2752(E), dated NOTIFICATION NO. 12/2015 [F.NO.187/38/2014 (ITA.I)], DATED TAX REPORTS : TABLE OF CASES u Amolak Singh Kumar & Sons v. CIT (Punj. & Har.) 182 u Asstt. CIT v. VXL India Ltd. (Guj.) 199 u Bertha T. Almeida v. ITO (Bom.) 159 u Bhaktiprasad Nagori Timber & Plywood (P.) Ltd. v. Asstt. CIT (Guj.) 203 u Black Pearl Hotels (P.) Ltd. v. Dy. CIT (Kar.) 155 u Chandan Gupta v. CIT (Punj. & Har.) 173 u CIT v. Annapoorneswari Trust (Kar.) 202 u CIT v. Govindbhai Mamaiya (SC) 138 u CIT v. Lovish Oberoi (Delhi) 197 u CIT v. Mahavir Plantations (P.) Ltd. (Ker.) 160 u CIT v. Newanagar Co-operative Bank Ltd. (Guj.) 201 u CIT v. Peria Karamalai Tea & Produce Co. Ltd. (Mad.) 200 u CIT v. Pyramid Timber Associates (P.) Ltd. (Kar.) 174 u CIT v. R.H.L. Profiles Ltd. (All.) 180 u CIT v. Shri Gopal Gram Seva Sahakari Mandli Ltd. (Guj.) 166 u CIT v. Shriram Investments (Firm) (Mad.) 179 u CIT v. Sincere Construction (All.) 186 u CIT v. Sudheer Baliga (B.) (Kar.) 185 u CIT v. Suraj Agro Infrastructure (India) (P.) Ltd. (Mad.) 191 u CIT v. Taikisha Engineering India Ltd. (Delhi) 143 u CIT v. Virendra Behari Agrawal (All.) 193 u Dalmia Cement (Bharat) Ltd. v. CIT (Delhi) 170 u Eskay K n IT (India) Ltd. v. Dy. CIT (Bom.) 204 u Essar Projects (India) Ltd. v. Union of India (Bom.) 162 u Herald Publications (P.) Ltd. v. CIT (Bom.) 103 u Housing & Urban Development Corporation Ltd. v. Addl. CIT (Delhi) 157 u Oracle India (P.) Ltd. v. Dy. CIT (Delhi) 177 u Sathyanarayanan (S.) v. Asstt. CIT (Mad.) 168 u Shakti LPG Ltd. v. ITO (AP) 164 u Shyam Bidi Works v. CIT (All.) 188 u Sri Saleswara Industries Mahajanahalli v. ITO (Kar.) 195 u Union of India v. Agarwal Iron Industries (SC) 124 u Union of India v. Nathamuni (T.) (SC) 129 u United Breweries Ltd. v. Asstt. CIT (Kar.) 113 u Vision Corporation Ltd. v. Jt. CIT (Guj.) 184 TAXMAN q FEBRUARY 21 - FEBRUARY 27, 2015 u 8

3 Contents A-7 SUBJECT INDEX APPELLATE TRIBUNAL n Appeals to - Condonation of delay - Where assessee s parents died even before passing order of Commissioner (Appeals), delay of 715 days in filing appeal before Tribunal could not be condoned - Amolak Singh Kumar & Sons v. CIT (Punj. & Har.) 182 n Order of - Opportunity of hearing - In absence of mala fide intention on part of assessee to remain absent at time of hearing of appeal, impugned order passed by Tribunal dismissing assessee s appeal ex parte was to be set aside after imposing reasonable cost upon assessee - Vision Corporation Ltd. v. Jt. CIT (Guj.) 184 ASSESSMENT n Time-limit for completion of reassessment - Applicability of - Where on basis of available evidence appellate authorities came to conclusion that assessment order was passed after period of limitation, no substantial question of law arises for consideration - CIT v. Sincere Construction (All.) 186 ASSOCIATION OF PERSON n Assessable as - Co-inheritors - Co-inheritors having not formed an AoP as per their volition, cannot be assessed as AoP - CIT v. Govindbhai Mamaiya (SC) 138 BAD DEBTS - Method of writing off - Once amount of bad debt is debited to profit and loss account and simultaneously reduced from asset side, same is to be allowed; it was not necessary for assessee to close individual account of each of its debtors in its books - CIT v. Newanagar Co-operative Bank Ltd. (Guj.) 201 BLOCK ASSESSMENT IN SEARCH CASES n Procedure for - Scope of - Where certain unaccounted stock was noticed in survey commenced prior to search, could not be subject matter of block assessment proceedings - CIT v. B. Sudheer Baliga (Kar.) 185 BUSINESS EXPENDITURE n Allowability of - Expansion of business - Where expenditure incurred by assessee for expansion of business had no nexus with business carried on by assessee, same was not allowable under section 37(1) - United Breweries Ltd. v. Asstt. CIT (Kar.) Loss of goods in transit - Where assessee incurred trading loss due to loss of goods in transit in normal course of business and had written off said loss in its books, assessee was eligible for deduction of said loss - CIT v. Pyramid Timber Associates (P.) Ltd. (Kar.) Royalty - Reassessment - Where assessee-company claimed royalty paid to its parent company as revenue expenditure and same was examined and accepted by Assessing Officer during original proceedings and no new fact was emerged from re-examination of existing document, re-opening of assessment could not be permitted - Oracle India (P.) Ltd. v. Dy. CIT (Delhi) 177 TAXMAN q FEBRUARY 21 - FEBRUARY 27, 2015 u 9

4 A-8 Contents BUSINESS INCOME n Chargeable as - Lease rent - Where a company was permitted to commercially exploit property belonging to assessee and to use facilities thereon supplied by assessee, income received by assessee would constitute its business income - Black Pearl Hotels (P.) Ltd. v. Dy. CIT (Kar.) Trees of spontaneous growth - There can be no business income from cutting trees of spontaneous growth in tea garden and using wood for own consumption - CIT v. Peria Karamalai Tea & Produce Co. Ltd. (Mad.) 200 CAPITAL GAINS n Computation of - Sale consideration - In view of market value of property at Rs lakh, assessee s admission of receipt of Rs. 65 lakh as sale consideration was to be upheld - Sri Saleswara Industries Mahajanahalli v. ITO (Kar.) 195 n Transfer - Lands and building - Where developer took possession of assessee s land and started development work, said transaction was to be treated as transfer of right in property covered under section 2(47)(v) - Bertha T. Almeida v. ITO (Bom.) 159 n Year in which assessable - Interest on enhanced compensation - Interest on enhanced compensation has to be taxed in year of receipt; it is not to be spread over years on accrual basis - CIT v. Govindbhai Mamaiya (SC) 138 CASH CREDIT - Share transactions - Where assessee could not explain receipt of alleged share transactions profits credited in his bank accounts, then sale proceeds had to be added as income of assessee under section 68 - Chandan Gupta v. CIT (Punj. & Har.) Gift - Where assessee explained source of loan taken from his minor sons being amount gifted to them by their uncle, since assessee s brother categorically denied making any gift, amount in question was rightly added to assessee s taxable income - CIT v. Virendra Behari Agrawal (All.) 193 CHARITABLE OR RELIGIOUS TRUST n Registration of - Denial of registration - Merely because some amendments were carried out in trust deed, registration could not be denied, particularly when objects of trust were fulfilled - CIT v. Annapoorneswari Trust (Kar.) 202 CIRCULARS & NOTIFICATIONS - Notification No. SRO/992, dated Circular No. 793, dated Circular No. 10, dated CIVIL CONSTRUCTION BUSINESS - Applicability of - Where Assessing Officer computed gross profit rate of assessee at 25 per cent of gross receipts without any justification, Tribunal was justified in adopting gross profit rate of 8 per cent as mentioned in section 44AD even though turnover of assessee was in excess of Rs. 40 lakh - CIT v. Lovish Oberoi (Delhi) 197 TAXMAN q FEBRUARY 21 - FEBRUARY 27, 2015 u 10

5 Contents A-9 DEDUCTION OF TAX AT SOURCE n Rent - Plant and machinery - Where assessee made payment to a factory for use of its plant and machinery on monthly production basis, it was not liable to deduct TDS under section 194-I - CIT v. R.H.L. Profiles Ltd. (All.) 180 DEDUCTIONS n Income of co-operative societies - Computation of deduction - Where assessee-co-operative society claimed exemption under notification No. SRO/992, dated of Income-tax Act, 1922, which was repealed by Income-tax Act, 1961, claim of assessee was to be decided according to section 80P - CIT v. Shri Gopal Gram Seva Sahakari Mandli Ltd. (Guj.) 166 n Profits and gains from infrastructure undertakings - Number of workers - Sweeper, peons, manager, clerk do not work or participate in manufacturing process; hence, they need to be excluded from number of employees to find out eligibility in terms of section 80-IA - Herald Publications (P.) Ltd. v. CIT (Bom.) Infrastructure undertakings - Where under lease agreement port authorities could repossess infrastructure facility, assessee would be entitled for deduction under section 80-IA even though assets were not transferred to Government - CIT v. Suraj Agro Infrastructure (India) (P.) Ltd. (Mad.) 191 EXPENDITURE INCURRED IN RELATION TO INCOME NOT INCLUDIBLE IN TOTAL INCOME - Rule 8D - It is only when voluntary disallowance made by assessee under section 14A is found to be unsatisfactory on examination of accounts, that Assessing Officer is entitled and authorised to compute deduction under rule 8D - CIT v. Taikisha Engineering India Ltd. (Delhi) 143 GUEST HOUSE EXPENSES - Rents/repairs - Expenses incurred in issue of debentures could be allowed as revenue expenditure - Asstt. CIT v. VXL India Ltd. (Guj.) 199 INCOME n Accrual of - Exchange rate fluctuation - Where assessee, an exporter, was following mercantile system of accounting, gain on account of foreign exchange difference on outstanding export bills would accrue to assessee when it became entitled to receive sale consideration in foreign exchange irrespective of time of receipt - CIT v. Mahavir Plantations (P.) Ltd. (Ker.) 160 n Chargeable as - Builders, in case of - Where assessee received overhead expenses in construction of community centre only and not to residential quarters in project undertaken by assessee, overhead expenses were taxable only in respect of community centre - Housing & Urban Development Corporation Ltd. v. Addl. CIT (Delhi) 157 n Deemed to accrue or arise in India - In view of order passed in case of Vodafone India Services (P.) Ltd. v. UOI [2014] 50 taxmann.com 300 (Bom.) shortfall in amounts received on issue of shares to non-resident AE s when compared to that receivable on basis of ALP, along with interest on above shortfall could not be brought to tax - Essar Projects (India) Ltd. v. Union of India (Bom.) Business profits - Payment made to US firm for installation of machinery would be liable to deduction of tax at source there being no severality of sale and installation components and payee being not covered by section 195(1) - Shakti LPG Ltd. v. ITO (AP) 164 TAXMAN q FEBRUARY 21 - FEBRUARY 27, 2015 u 11

6 A-10 Contents INCOME ESCAPING ASSESSMENT - In absence of any ascribed incriminating material found during search, Assessing Officer could not resort to reassessment beyond period of limitation as provided under section Eskay K n IT (India) Ltd. v. Dy. CIT (Bom.) 204 INTEREST ON BORROWED CAPITAL - For the purpose of business - Where borrowed amount was invested in shares and debentures for purpose of business, interest paid thereupon would be allowed as deduction under section 36(1)(iii) - CIT v. Shriram Investments (Firm) (Mad.) 179 INCOME-TAX ACT, Section 2(47) Section 4 138, Section 5 138, Section 9 162, Section 12A Section 14A Section 28(i) 155, Section 36(1)(iii) Section 36(1)(vii) Section 37(1) 113, 174, 177, Section 37(4) Section 44AD Section Section , Section Section 69B Section 80-IA 103, Section 80P Section Section , Section Section Section 158BC Section 194-I Section Section Section 271(1)(c) 168 METHOD OF ACCOUNTING n Estimation of income - Profits estimated in previous years is a safe guide for estimation of profits for assessment year in question for estimating turnover since business activity conducted by assessee remains same - Shyam Bidi Works v. CIT (All.) 188 TAXMAN q FEBRUARY 21 - FEBRUARY 27, 2015 u 12

7 Contents A-11 - Gross profit - Where Tribunal without assigning any cogent reasons reversed finding of Commissioner (Appeals) that revenue had not produced material in support of its claim that assessee had shown lesser gross profit, matter was to be re-adjudicated - Bhaktiprasad Nagori Timber & Plywood (P.) Ltd. v. Asstt. CIT (Guj.) 203 PENALTY n For concealment of income - General/Second penalty - Where penalty was imposed after determination of disputed issue in appeal without going into issue whether Assessing Officer had reserved his right to proceed under section 271(1)(c) relating to aforesaid issue in appeal, matter was to be remanded - S. Sathyanarayanan v. Asstt. CIT (Mad.) 168 PREVENTION OF CORRUPTION ACT, 1988 n Investigation - Persons authorised to investigate - Where no case of prejudice or miscarriage of justice by reason of investigation by Sub-Inspector of Police was made out, permission granted by Magistrate to investigate complaint against income-tax authority by Sub-Inspector was allowable - Union of India v. T. Nathamuni (SC) 129 PREVENTION OF CORRUPTION ACT, Section SEARCH AND SEIZURE - Reason to believe - Where High Court had not tried to see reasons recorded or scrutinized file to find out whether authority had formed opinion on basis of acceptable materials or not before quashing search and seizure order of revenue, matter was to be remanded back - Union of India v. Agarwal Iron Industries (SC) 124 UNDISCLOSED INVESTMENT - Advance money - Where in search it was disclosed that assessee-company advanced money to its sister concern but same was not shown in its balance sheet, said advance was to be treated as unexplained investment - Herald Publications (P.) Ltd. v. CIT (Bom.) 103 UNEXPLAINED INVESTMENTS - Import licence - Where assessee claimed that it had earned through assignment of import license but revenue found that assessee itself imported goods and sold same in open market, reopening and additions were to be sustained - Dalmia Cement (Bharat) Ltd. v. CIT (Delhi) 170 WORDS AND PHRASES - Expression premises and buildings occurring in sections 30 and 32 and expression residential accommodation including any accommodation in the nature of guest house occurring in sub-sections (3), (4) and (5) of section MAGAZINE : FEATURES u Concession on question of law not binding either on the assessee or on the Income-tax Department//S. Krishnan 7 u Power of AO to reject books of account - An inside into//ram Avatar Bajaj 15 TAXMAN q FEBRUARY 21 - FEBRUARY 27, 2015 u 13

Contents A-5. q CIRCULARS

Contents A-5. q CIRCULARS Contents A-5 FOUNDER EDITOR U.K. BHARGAVA EDITOR RAKESH BHARGAVA HONY. COORDINATING EDITORS DR. VINOD K. SINGHANIA AND VINAY JAIN Taxman weekly comes in Eight volumes. Annual Subscription : Rs. 6500 for