Taxation In India

TAXATION IN INDIA : some landmark cases and judgements  by : DR. T.K. JAIN AFTERSCHO☺OL centre for social entrepreneurship sivakamu veterinary hospital road  bikaner 334001 rajasthan, india FOR – CSE & PGPSE STUDENTS (CSE & PGPSE are free online programmes open for all, free for all) mobile : 91+9414430763 5 DECEMBER 09 www.afterschool.tk 1 My word..... Ours is a great country with immense entrepreneurial potential. However, our legal system and taxation system is so cumbersome that our creativity and talent is wasted / unnecessarily diverted in these sectors. I wish that these are simplified so that an ordinary entrepreneur can understand these without help from any expert. I wish that more people should become entrepreneurs, rather than  becoming an expert in avoiding taxation. Let us wish that some  person should simplify our taxation system. I have h ave tried to simplify Indian legal system and taxation system for Indian entrepreneurs –   but it is so complicated that even if you simplify it, it will remain complicated. An ordinary Indian entrepreneur wishes to to remain an honest entrepreneur and contribute to the development d evelopment of nation, but our systems and processes force him to adopt unfair means .. 5 DECEMBER 09 www.afterschool.tk 2 First step ... - read it Download the following material and read it  before you read this presentation : http://www.livrosdeamor.com/doc/28597434/Income-Tax- 5 DECEMBER 09 www.afterschool.tk 3 K. Lakshmansa & Co. v. CIT (1981) Is rearing silk worms agriculture : a farmer  grew mulberry leaves and fed the same to silkworm, it was held that the income derived from rearing of silk-worms was not agricultural income because the silk cocoons produced by silk-worms did not bear any character of an agricultural produce or as a marketable form of  mulberry leaves. 5 DECEMBER 09 www.afterschool.tk 4 CIT v. Kamakshya Narain Singh (1948) interest on arrears of rent payable in respect of  agricultural land is not agricultural income  because the source of income (interest) is not from land but it is from rent which is a secondary source of income and is taxable under income from other sources. 5 DECEMBER 09 www.afterschool.tk 5 Mustafa Ali Khan v. CIT Is every land agricultural land? : Unless there is some measure of cultivation of  the land, some expenditure of skill and labour  upon it, it cannot be said to be used for  agricultural purposes within the meaning of the Act. 5 DECEMBER 09 www.afterschool.tk 6 Triveni Engg. Works Ltd. v. C.I.T. (Delhi) 1985 Appreciation in the value of foreign currency held on capital account is not treated as Income 5 DECEMBER 09 www.afterschool.tk 7 Egyptian Hotels Ltd. v. Mitchell What is the place of business ? : It is not where the directors have power to do, but where from they actually do, that is of importance in determining the question of the place where the control is exercised. 5 DECEMBER 09 www.afterschool.tk 8 C.I.T. v. Ramakrishna Deo (1959) In case of exempted income, the assssee has to  prove that his income falls under Section 10. (sec. 10 is about exempted incomes ) 5 DECEMBER 09 www.afterschool.tk 9 C.I.T. v. B. Gopalkrishna Murthy (1971) The payment of gratuity by the Life Insurance Corporation of India under the Staff  Regulations is wholly exempt from tax under  Section 10(10), as the object and purpose of  the gratuity scheme of the Life Insurance Corporation of India and the Revised Pension Rules of the Central Government are the same 5 DECEMBER 09 www.afterschool.tk 10 Digvijay Woollen Mills Ltd. v. Mahendra Prataparai Buch (1980) wages of fifteen days or seven days (for the calculation of gratuity), as the case may be, will be calculated by dividing the monthly wages last drawn by 26, i.e. maximum number  of working days in a month 5 DECEMBER 09 www.afterschool.tk 11 Gestetner Duplicators (P) Ltd. v. C.I.T. (1979) Salary for sec. 10(10AA) for the purpose of  encashment of earned leave means, Basic salary and includes dearness allowance if terms of employment so provide. It also includes commission based on fixed percentage of  turnover achieved by an employee as per terms of contract of employment 5 DECEMBER 09 www.afterschool.tk 12 Addl. C.I.T. v. A.K. Mishra Any special allowance in cash or the value of any benefit granted by the employer to an employee with the specific object of enabling the employee to meet the expenses incurred  by him in the performance of the duties of his office or  employment of profit, is exempt from tax to the extent to which such expenses are actually incurred for that purpose. This allowance may include TA, CA etc., but it does not include entertainment allowance, perquisites and the allowance to meet personal expenses like. City Compensatory Allowance 5 DECEMBER 09 www.afterschool.tk 13 CIT v. Tejaji Farasram Kharawalla Ltd. (1968) Out of the special allowances received by the employee, if any surplus remains in the hands of the assessee out of a lump sum paid to him  by the employer for the purpose, the surplus would be taxable in the hands of the assessee as income. (sec. 10 (14)) 5 DECEMBER 09 www.afterschool.tk 14 C.I.T. v. Mehar Singh Sampuran Singh Chawla (1973)  No tax exemption is available for surrender of  salaries. If this surrender of salary represents a donation for charitable purpose, the employee may qualify for deduction from gross total income under Section 80G 5 DECEMBER 09 www.afterschool.tk 15 Reade v. Brearley (1933) Is fictional salary taxable : when there is only  book entries and no money is actually paid to employeethe fictional salary would not be taxable 5 DECEMBER 09 www.afterschool.tk 16 Brooke Bond Employees Union v. Union of India (1989) Dearness allowance is taxable as part of salary only when form part of retirement benefit otherwise not 5 DECEMBER 09 www.afterschool.tk 17 M.C. Muthanna v. CIT (1989) Interest income in excess of permissible limit (i.e. @12%) credited to the P.F. account of an employee, is to be treated as ‘Salary’ for   purposes of Sections 15 and 16 5 DECEMBER 09 www.afterschool.tk 18 Kashi Pd. Kataruka v. C.I.T. (1975) For annual value of House property, we have to find fair rent. The fair rent arrived at for this  purpose would be normally based upon various circumstances such as local conditions, demand for houses in that locality,valuation by the local authority etc., etc. However, if the fair  rent of the property is fixed under the Rent Control Act of the State concerned, it shall be taken into account. 5 DECEMBER 09 www.afterschool.tk 19 M.V. Sonavala v. CIT (1989) Income from house property has to be computed on the basis of sum for which  property might reasonably be let out from year  to year and not at amount received by assessee as actual compensation or rent 5 DECEMBER 09 www.afterschool.tk 20 CIT v. K.K. Dhanda (HUF) (1989) Loss relating to self-occupied house property could be set off against income from other  sources 5 DECEMBER 09 www.afterschool.tk 21 CIT v. Smt. Sreelekha Banerjee (1989) In determining annual value of house  propoerty salary paid to caretaker cannot be taken into account 5 DECEMBER 09 www.afterschool.tk 22 C.I.T. v. L. Kuppu Swamy Chettiar (1981) If tax on property is enchanced with retrospective effect by municipal or local authorities and the enhanced tax relating to the  prior year is demanded during the assessment year, the entire demand is deductible in the assessment year  5 DECEMBER 09 www.afterschool.tk 23 Clive Buildings Cola Ltd. v. CIT (1989) fire tax, conservancy tax, education, water tax, etc. levied by any municipality or local authority & actually paid in respect of any house property are allowed as deductible taxes 5 DECEMBER 09 www.afterschool.tk 24 C.I.T. v. Dewan Chand Dholan Das (1981) A partnership firm using its own building for  the residence of its partners cannot claim the concessions in respect of self-occupied residential house 5 DECEMBER 09 www.afterschool.tk 25 D.R. Sunder Raj v. C.I.T. (1979) Concessions of self occupied property are not available in a case where the assessee lets out his house to his employer and employer allots the same to the assessee for his residential  purposes. In such a case, the assessee occupies the house not as an owner but as a sub-tenant of his employer  5 DECEMBER 09 www.afterschool.tk 26  Nathmal Bankat Lal Parikh and Company v. C.I.T. (1980) Replacement of an old diesel engine by a new engine in a motor van used for business  purposes was done with a view to preserve and maintain the asset in existence and, as no enduring benefit was derived by the assessee, the expenditure was allowed under Sec. 31 as normal repairs and maintenance expenditure. 5 DECEMBER 09 www.afterschool.tk 27 C.I.T. v. Alps Theatre (1967) When we talk of depreciation allowed under  sec. 32, building refers only to the superstructure and not the land on which it is erected 5 DECEMBER 09 www.afterschool.tk 28 C.I.T. v. Kalyani Spinning Mills Ltd. (1981) Depreciation under sec. 32 is available on Roads to residential quarters for employees at the rates applicable to first class building 5 DECEMBER 09 www.afterschool.tk 29 Following have been held to be  plant : 1. In a hotel, pipe and sanitary fittings : C.I.T. C.I.T. v. Taj Mahal Hotel (1971) 2. In an electric supply company, mains service lines and switch gears : C.I.T. v. Warner Hindustan Limited 3. Well. 4. for manufacturer of oxygen, gas-cylinder for storing gas. 5. Technical know-how in the form of blue prints, instruction, technical manuals. C.I.T. v. Festo Elgi Pvt. Ltd. (1981) . 6. Thermocole insulation. (C.I.T. v. Yamuna Cold Storage (1981) ) 7. Data Processing Machines. C.I.T. v. I.B.M. World Trade Corporation (1981) 5 DECEMBER 09 www.afterschool.tk 30 Challapali Sugar v. C.I.T. (1973) interest paid on the loan taken for purchase of   plant / machinery upto the date of  commencement of production will be capitalised and treated as part of the actual cost of the plant on which depreciation and investment deposit benefits will be allowed. 5 DECEMBER 09 www.afterschool.tk 31 Shree Vallabh Glass Works Ltd. v. C.I.T. (1981)  preliminary expenses of revenue nature necessary for putting plant and machinery in working condition are part of actual cost of   plant and machinery. 5 DECEMBER 09 www.afterschool.tk 32 P. Alikunju M.A. Nazeer Cashew Industries v. CIT (1987) Capital gain on Compulsory acquisition and capital gain (sec. 54D) : running of a lodge’ can also be said to be an ‘industrial undertaking’ within the meaning of Section 54D. 5 DECEMBER 09 www.afterschool.tk 33 Durga Narain Singh v. CIT (1947) Rent as agricultural income : recipient of rent or revenue should be the owner of the land. The expression revenue is used in the broader  sense of: return, yield or income, and not in the sense of land revenue. 5 DECEMBER 09 www.afterschool.tk 34 C.I.T. v. Pangal Vittal Nayak & Co. Pvt. Ltd. (1969) If an assessee earns commission on speculative transactions, he is not entitled to set-off under  section 70 against speculative loss as there is no element of speculation in the commission 5 DECEMBER 09 www.afterschool.tk 35 C.I.T. v. Handicraft Handloom Export Corporation (1982) Under section 70, if loss incurred by a wholly owned subsidiary company is reimbursed by the holding company, the subsidiary company cant carry forward and set-off the loss. Loss of  subsidiary cant be set off with profit of holding company. 5 DECEMBER 09 www.afterschool.tk 36 Dwarkadass Leeladhar v. CIT (1963)  Normal losses cant be set off by someone else other than assessee. However, exceptions are : accumulated business loss of an amalgamating company under Section 72A & the share of  loss of partnership taken over by one of its  partners can be set-off by the partner  5 DECEMBER 09 www.afterschool.tk 37 Keshrichand Bhanabhai v. CIT (1951) 20 ITR 201 (Bombay) However, loss incurred by HUF cannot be carried forward and set-off after its partition against income of firm formed thereafter by certain coparceners 5 DECEMBER 09 www.afterschool.tk 38 Union of India v. Gosalia Shipping (P) Ltd. (113 ITR 307 (S.C.) ) As per sec. 172, Ships have to pay tax @ 7.5% on carriage, before they leave a port from India. However, no tax is payable, if a nonresident company hires a ship from another  non-resident and loads the ship with own goods in India, neither the owner of the ship nor the lessee receives any amount on account of the carriage of the goods.(Section 172(2)) 5 DECEMBER 09 www.afterschool.tk 39 Commissioner of Income-tax v. Kashi Nath & Co. (1988) Commissioner of Income tax can give best  judgement assessment as per sec. 142 and revise assessment as per sec. 263, but this  power of revision is quasi-judicial in character. He must give reasons in support of his conclusion that the assessment order is erroneous 5 DECEMBER 09 www.afterschool.tk 40 Download more resources http://www.esnips.com/web/onlinespeeches 5 DECEMBER 09 www.afterschool.tk 41 Download resources on entrepreneurship entrepreneurship http://www.esnips.com/web/bikanersocial123 http://www.esnips.com/web/pgpsepresentations http://www.esnips.com/web/audiobikaner  http://www.esnips.com/web/entrepreneurship-art http://www.esnips.com/web/ONLINESPEECH http://www.esnips.com/web/entrepreneurship-ca http://www.esnips.com/web/AUDIOBIKANER1 http://www.esnips.com/web/communication-skil 5 DECEMBER 09 www.afterschool.tk 42 DOWNLOAD MORE RESOURCES... http://www.esnips.com/web/afterschoool/ http://www.esnips.com/web/afterschool http://www.esnips.com/web/AUDIOLECTURE http://www.esnips.com/web/pgpsestudymaterial http://www.esnips.com/web/inspiringlectures123 http://www.esnips.com/web/fleshquizesforcs123 5 DECEMBER 09 www.afterschool.tk 43 Download more resources http://www.esnips.com/web/GREATFLASHQU http://www.esnips.com/web/AUDIOBIKANER1 http://www.esnips.com/web/ONLINESPEECH http://www.esnips.com/web/audiobikaner  5 DECEMBER 09 www.afterschool.tk 44 Download more material... http://www.livrosdeamor.com/doc/13094880/Economic http://www.livrosdeamor.com/doc/23407782/26-july-E http://www.livrosdeamor.com/doc/23393466/10-July-E http://www.livrosdeamor.com/doc/6584113/Business-E http://www.livrosdeamor.com/doc/6683895/Economics http://www.livrosdeamor.com/doc/14676180/Accounti 5 DECEMBER 09 www.afterschool.tk 45 http://www.livrosdeamor.com/doc/27851096/Economic http://www.livrosdeamor.com/doc/6583898/5-July-Eco http://www.livrosdeamor.com/doc/14646951/Accounti http://www.livrosdeamor.com/doc/14646963/Accounti http://www.livrosdeamor.com/doc/14633486/ACCOU http://www.livrosdeamor.com/doc/14646994/Accounti 5 DECEMBER 09 www.afterschool.tk 46 Download more material .... http://www.livrosdeamor.com/doc/14646947/Accounti http://www.livrosdeamor.com/doc/14676195/Accounti http://www.livrosdeamor.com/doc/14676185/Accounti http://www.livrosdeamor.com/doc/14630181/Accounti http://www.livrosdeamor.com/doc/27183173/World-Wi 5 DECEMBER 09 www.afterschool.tk 47 THANKS.... 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TAXATION IN INDIA

:
some landmark cases and judgements
by :
DR. T.K. JAIN
AFTERSCHO☺OL
centre for social entrepreneurship
sivakamu veterinary hospital road
bikaner 334001 rajasthan, india
FOR – CSE & PGPSE STUDENTS
(CSE & PGPSE are free online programmes
open for all, free for all)
mobile : 91+9414430763
5 DECEMBER 09 www.afterschool.tk 1
My word.....
Ours is a great country with immense entrepreneurial potential.
However, our legal system and taxation system is so cumbersome
that our creativity and talent is wasted / unnecessarily diverted in
these sectors. I wish that these are simplified so that an ordinary
entrepreneur can understand these without help from any expert. I
wish that more people should become entrepreneurs, rather than
becoming an expert in avoiding taxation. Let us wish that some
person should simplify our taxation system. I have tried to simplify
Indian legal system and taxation system for Indian entrepreneurs –
but it is so complicated that even if you simplify it, it will remain
complicated. An ordinary Indian entrepreneur wishes to remain an
honest entrepreneur and contribute to the development of nation, but
our systems and processes force him to adopt unfair means ..
5 DECEMBER 09 www.afterschool.tk 2
First step ... - read it

Download the following material and read it
before you read this presentation :
http://www.livrosdeamor.com/doc/28597434/Income-Tax-L

5 DECEMBER 09 www.afterschool.tk 3
K. Lakshmansa & Co. v. CIT
(1981)
Is rearing silk worms agriculture : a farmer
grew mulberry leaves and fed the same to silk-
worm, it was held that the income derived from
rearing of silk-worms was not agricultural
income because the silk cocoons produced by
silk-worms did not bear any character of an
agricultural produce or as a marketable form of
mulberry leaves.
5 DECEMBER 09 www.afterschool.tk 4
CIT v. Kamakshya Narain Singh
(1948)

interest on arrears of rent payable in respect of
agricultural land is not agricultural income
because the source of income (interest) is not
from land but it is from rent which is a
secondary source of income and is taxable
under income from other sources.

5 DECEMBER 09 www.afterschool.tk 5
Mustafa Ali Khan v. CIT

Is every land agricultural land? :
Unless there is some measure of cultivation of
the land, some expenditure of skill and labour
upon it, it cannot be said to be used for
agricultural purposes within the meaning of the
Act.

5 DECEMBER 09 www.afterschool.tk 6
Triveni Engg. Works Ltd. v.
C.I.T. (Delhi) 1985

Appreciation in the value of foreign currency
held on capital account is not treated as Income

5 DECEMBER 09 www.afterschool.tk 7
Egyptian Hotels Ltd. v. Mitchell

What is the place of business ? : It is not where
the directors have power to do, but where from
they actually do, that is of importance in
determining the question of the place where the
control is exercised.

5 DECEMBER 09 www.afterschool.tk 8
C.I.T. v. Ramakrishna Deo (1959)

In case of exempted income, the assssee has to
prove that his income falls under Section 10.
(sec. 10 is about exempted incomes )

5 DECEMBER 09 www.afterschool.tk 9
C.I.T. v. B. Gopalkrishna Murthy
(1971)

The payment of gratuity by the Life Insurance
Corporation of India under the Staff
Regulations is wholly exempt from tax under
Section 10(10), as the object and purpose of
the gratuity scheme of the Life Insurance
Corporation of India and the Revised Pension
Rules of the Central Government are the same

5 DECEMBER 09 www.afterschool.tk 10
Digvijay Woollen Mills Ltd. v.
Mahendra Prataparai Buch (1980)

wages of fifteen days or seven days (for the
calculation of gratuity), as the case may be,
will be calculated by dividing the monthly
wages last drawn by 26, i.e. maximum number
of working days in a month

5 DECEMBER 09 www.afterschool.tk 11
Gestetner Duplicators (P) Ltd. v.
C.I.T. (1979)

Salary for sec. 10(10AA) for the purpose of
encashment of earned leave means, Basic
salary and includes dearness allowance if terms
of employment so provide. It also includes
commission based on fixed percentage of
turnover achieved by an employee as per terms
of contract of employment
5 DECEMBER 09 www.afterschool.tk 12
Addl. C.I.T. v. A.K. Mishra

Any special allowance in cash or the value of any benefit
granted by the employer to an employee with the specific
object of enabling the employee to meet the expenses incurred
by him in the performance of the duties of his office or
employment of profit, is exempt from tax to the extent to
which such expenses are actually incurred for that purpose.
This allowance may include TA, CA etc., but it does not
include entertainment allowance, perquisites and the allowance
to meet personal expenses like. City Compensatory Allowance

5 DECEMBER 09 www.afterschool.tk 13
CIT v. Tejaji Farasram
Kharawalla Ltd. (1968)

Out of the special allowances received by the
employee, if any surplus remains in the hands
of the assessee out of a lump sum paid to him
by the employer for the purpose, the surplus
would be taxable in the hands of the assessee
as income. (sec. 10 (14))

5 DECEMBER 09 www.afterschool.tk 14
C.I.T. v. Mehar Singh Sampuran
Singh Chawla (1973)

No tax exemption is available for surrender of
salaries. If this surrender of salary represents a
donation for charitable purpose, the employee
may qualify for deduction from gross total
income under Section 80G

5 DECEMBER 09 www.afterschool.tk 15
Reade v. Brearley (1933)

Is fictional salary taxable : when there is only
book entries and no money is actually paid to
employeethe fictional salary would not be
taxable

5 DECEMBER 09 www.afterschool.tk 16
Brooke Bond Employees Union v.
Union of India (1989)

Dearness allowance is taxable as part of salary
only when form part of retirement benefit
otherwise not

5 DECEMBER 09 www.afterschool.tk 17
M.C. Muthanna v. CIT (1989)

Interest income in excess of permissible limit
(i.e. @12%) credited to the P.F. account of an
employee, is to be treated as ‘Salary’ for
purposes of Sections 15 and 16

5 DECEMBER 09 www.afterschool.tk 18
Kashi Pd. Kataruka v. C.I.T.
(1975)
For annual value of House property, we have
to find fair rent. The fair rent arrived at for this
purpose would be normally based upon various
circumstances such as local conditions,
demand for houses in that locality,valuation by
the local authority etc., etc. However, if the fair
rent of the property is fixed under the Rent
Control Act of the State concerned, it shall be
taken into account.
5 DECEMBER 09 www.afterschool.tk 19
M.V. Sonavala v. CIT (1989)

Income from house property has to be
computed on the basis of sum for which
property might reasonably be let out from year
to year and not at amount received by assessee
as actual compensation or rent

5 DECEMBER 09 www.afterschool.tk 20
CIT v. K.K. Dhanda (HUF)
(1989)

Loss relating to self-occupied house property
could be set off against income from other
sources

5 DECEMBER 09 www.afterschool.tk 21
CIT v. Smt. Sreelekha Banerjee
(1989)

In determining annual value of house
propoerty salary paid to caretaker cannot be
taken into account

5 DECEMBER 09 www.afterschool.tk 22
C.I.T. v. L. Kuppu Swamy
Chettiar (1981)

If tax on property is enchanced with
retrospective effect by municipal or local
authorities and the enhanced tax relating to the
prior year is demanded during the assessment
year, the entire demand is deductible in the
assessment year

5 DECEMBER 09 www.afterschool.tk 23
Clive Buildings Cola Ltd. v. CIT
(1989)

fire tax, conservancy tax, education, water tax,
etc. levied by any municipality or local
authority & actually paid in respect of any
house property are allowed as deductible taxes

5 DECEMBER 09 www.afterschool.tk 24
C.I.T. v. Dewan Chand Dholan
Das (1981)

A partnership firm using its own building for
the residence of its partners cannot claim the
concessions in respect of self-occupied
residential house

5 DECEMBER 09 www.afterschool.tk 25
D.R. Sunder Raj v. C.I.T. (1979)

Concessions of self occupied property are not
available in a case where the assessee lets out
his house to his employer and employer allots
the same to the assessee for his residential
purposes. In such a case, the assessee occupies
the house not as an owner but as a sub-tenant
of his employer
5 DECEMBER 09 www.afterschool.tk 26
Nathmal Bankat Lal Parikh and
Company v. C.I.T. (1980)

Replacement of an old diesel engine by a new
engine in a motor van used for business
purposes was done with a view to preserve and
maintain the asset in existence and, as no
enduring benefit was derived by the assessee,
the expenditure was allowed under Sec. 31 as
normal repairs and maintenance expenditure.
5 DECEMBER 09 www.afterschool.tk 27
C.I.T. v. Alps Theatre (1967)

When we talk of depreciation allowed under
sec. 32, building refers only to the super-
structure and not the land on which it is erected

5 DECEMBER 09 www.afterschool.tk 28
C.I.T. v. Kalyani Spinning Mills
Ltd. (1981)

Depreciation under sec. 32 is available on
Roads to residential quarters for employees at
the rates applicable to first class building

5 DECEMBER 09 www.afterschool.tk 29
Following have been held to be
plant : -
1. In a hotel, pipe and sanitary fittings : C.I.T. v. Taj Mahal Hotel (1971)
2. In an electric supply company, mains service lines and switch gears :
C.I.T. v. Warner Hindustan Limited
3. Well.
4. for manufacturer of oxygen, gas-cylinder for storing gas.
5. Technical know-how in the form of blue prints, instruction, technical
manuals. C.I.T. v. Festo Elgi Pvt. Ltd. (1981) .
6. Thermocole insulation. (C.I.T. v. Yamuna Cold Storage (1981) )
7. Data Processing Machines. C.I.T. v. I.B.M. World Trade Corporation
(1981)

5 DECEMBER 09 www.afterschool.tk 30
Challapali Sugar v. C.I.T. (1973)

interest paid on the loan taken for purchase of
plant / machinery upto the date of
commencement of production will be
capitalised and treated as part of the actual cost
of the plant on which depreciation and
investment deposit benefits will be allowed.

5 DECEMBER 09 www.afterschool.tk 31
Shree Vallabh Glass Works Ltd.
v. C.I.T. (1981)

preliminary expenses of revenue nature
necessary for putting plant and machinery in
working condition are part of actual cost of
plant and machinery.

5 DECEMBER 09 www.afterschool.tk 32
P. Alikunju M.A. Nazeer Cashew
Industries v. CIT (1987)

Capital gain on Compulsory acquisition and
capital gain (sec. 54D) : running of a lodge’
can also be said to be an ‘industrial
undertaking’ within the meaning of Section
54D.

5 DECEMBER 09 www.afterschool.tk 33
Durga Narain Singh v. CIT (1947)

Rent as agricultural income : recipient of rent
or revenue should be the owner of the land.
The expression revenue is used in the broader
sense of: return, yield or income, and not in the
sense of land revenue.

5 DECEMBER 09 www.afterschool.tk 34
C.I.T. v. Pangal Vittal Nayak &
Co. Pvt. Ltd. (1969)

If an assessee earns commission on speculative
transactions, he is not entitled to set-off under
section 70 against speculative loss as there is
no element of speculation in the commission

5 DECEMBER 09 www.afterschool.tk 35
C.I.T. v. Handicraft Handloom
Export Corporation (1982)

Under section 70, if loss incurred by a wholly
owned subsidiary company is reimbursed by
the holding company, the subsidiary company
cant carry forward and set-off the loss. Loss of
subsidiary cant be set off with profit of holding
company.

5 DECEMBER 09 www.afterschool.tk 36
Dwarkadass Leeladhar v. CIT
(1963)

Normal losses cant be set off by someone else
other than assessee. However, exceptions are :
accumulated business loss of an amalgamating
company under Section 72A & the share of
loss of partnership taken over by one of its
partners can be set-off by the partner

5 DECEMBER 09 www.afterschool.tk 37
Keshrichand Bhanabhai v. CIT
(1951) 20 ITR 201 (Bombay)

However, loss incurred by HUF cannot be
carried forward and set-off after its partition
against income of firm formed thereafter by
certain coparceners

5 DECEMBER 09 www.afterschool.tk 38
Union of India v. Gosalia
Shipping (P) Ltd. (113 ITR 307
(S.C.) )
As per sec. 172, Ships have to pay tax @ 7.5%
on carriage, before they leave a port from
India. However, no tax is payable, if a non-
resident company hires a ship from another
non-resident and loads the ship with own
goods in India, neither the owner of the ship
nor the lessee receives any amount on account
of the carriage of the goods.(Section 172(2))
5 DECEMBER 09 www.afterschool.tk 39
Commissioner of Income-tax v.
Kashi Nath & Co. (1988)
Commissioner of Income tax can give best
judgement assessment as per sec. 142 and
revise assessment as per sec. 263, but this
power of revision is quasi-judicial in character.
He must give reasons in support of his
conclusion that the assessment order is
erroneous

5 DECEMBER 09 www.afterschool.tk 40
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http://www.livrosdeamor.com/doc/13094880/Economics
http://www.livrosdeamor.com/doc/23407782/26-july-Ec
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http://www.livrosdeamor.com/doc/6584113/Business-Ec
http://www.livrosdeamor.com/doc/6683895/Economics-
http://www.livrosdeamor.com/doc/14676180/Accountin

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http://www.livrosdeamor.com/doc/27851096/Economics
http://www.livrosdeamor.com/doc/6583898/5-July-Econ
http://www.livrosdeamor.com/doc/14646951/Accountin
http://www.livrosdeamor.com/doc/14646963/Accountin
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http://www.livrosdeamor.com/doc/14676195/Accountin
http://www.livrosdeamor.com/doc/14676185/Accountin
http://www.livrosdeamor.com/doc/14630181/Accountin
http://www.livrosdeamor.com/doc/27183173/World-Wid

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