Monday, January 15, 2007

income tax decisions

  • Binding nature of High Court decisions : Hon’ble Allahabad High Court in the matter of Om Prakash Trivedi Vs. Union of India held that the order of the courts have to be accepted by the department in good spirit so that the faith of the public in administration is not jeopardised.  [287 ITR 11]
  • Reimbursement of expenses on salary of employee deputed by Non-Resident : Hon’ble Authorities for Advance Ruling in the matter of AP & S India Pvt. Ltd. has issued a ruling that where a Non Resident undertakes to supply technical services to a resident by deputing employee, whose salary is expected to be reimbursed by the resident to the Non-Resident, such payment by way of reimbursement constituted fee for technical services, for which tax is required to be deducted, since such tax is not spared either by the domestic law under section 9(1)(vii) or under the Double Taxation Avoidance Agreement. [287 ITR 421]
  • Income of employees deputed abroad by resident : Hon’ble Authority for Advance Ruling in the matter of British Gas India P. Ltd. has issued a ruling that salary income accrues where the service is rendered. Where a resident deputes his employees for service abroad for managing and promoting the interest of the group concerns, such salary income during their service abroad does not accrue in India, though they are borne on the pay-roll of the resident. If there is a Double Taxation Avoidance Agreement, exemption is available in the host country for short stay, where their salary is borne by a non-resident, who is not eligible for deduction of such salary from any income liable to tax in the host country. [287 ITR 462 ]
  • Dis allowance of expenditure cannot justify re-assessment notice in the absence of evidence : The Hon’ble Bombay High Court in the matter of Vijaya Kumar and Heera Khanwala HUF Vs. ITO held that power under section 147 and 148 are made for tracking income which has been omitted or under-stated. Wherein an item of expenditure has been allowed in the past years and there was no positive evidence to show that such allowance was erroneous, a reassessment notice to disallow such expenditure would not be justified. [287 ITR 443]  
  • A direction issued under section 142(2A) for special audit of accounts of assessee is not administrative in nature but it is quasi-judicial in nature and, thus, notice is to be given to assessee prior to ordering special audit. Rajesh Kumar Vs. DCIT [2006] 287 ITR 91 (SC)
  • When assessee purchased another house in wife’s name exemption under section 54 was available when income from house was assessed in assessee’s hand. CIT Vs. Natarajan [2006] 287 ITR 271 (Mad.)
  • If assessee chooses to be assessed as per Act, in preference over tax treaty, he cannot seek treaty protection in respect of MAT. Dresdner Bank AG Vs. ACIT [2006] 105 TTJ 149 (Mum.)
  • Where shares were purchased for trading and not earning dividend, section 14A could not be invoked to disallow expenses proportionate to incidental dividend income. Vidyut Investment Ltd. Vs. ITO [2006] 10 SOT 284 (Del.) 
  • Plot is integral part of house property without which property cannot be conveniently used and, thus, deduction under section 24(b) cannot be denied on ground that interest was paid on funds borrowed for acquisition of plot and not house property. ACIT Vs. Dr. Amrit Lal Adlakha [2006] 105 TTJ 271 (Asr.) 
  • Transaction between closely related persons such as father and son would fall outside scope of section 269SS. G. D. Subraya Sheregar Vs. ITO [2006] 10 SOT 378 (Bang.) 


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