Saturday, April 14, 2007


  • Interest on borrowed capital for investment in shares: In an interesting decision, Hon’ble Allahabad High Court in the matter of CIT Vs. Gorawara Plastics & General Industries Pvt. Ltd. held that dividend income received by the assessee is in fact not exempted but the instance of tax has been shifted from the shareholders to the company. Ultimately it is the income of the shareholders, which is being assessed either in his own hands or in the hands of the company. The contention of the department that the dividend income is exempted from tax and therefore no expenditure can be allowed against that income is without any substance. [789 ITR 224]
  • Trust for un-borne child is a valid trust: Hon’ble Allahabad High Court in the matter of CWT Vs. Rakesh Mohan held that a trust in favour of an unborne child was a valid trust in existence even if the basic conditions of Section 6 of the Indian Trust Act, 1882 were not satisfied. [289 ITR 308].
  • Hon’ble ITAT Delhi Bench in the matter of Samaj Kalyan Parishad Vs. Income Tax Officer held that if profit of business carried on by trust are used for charitable objects then it can be stated that activity carried on by trust is not guided solely by a profit motive. [105 ITD 29]. 
  • Hon’ble ITAT Amritsar Bench in the matter of Pyramid Software & Technologies held that Expression ‘reason to believe’, as used in section 147, does not mean ‘reason to suspect’ and it requires higher level of evidence and material than requirement of ‘satisfaction’ of Assessing Officer, which essentially means that material, which comes to notice of Assessing Officer, must be definite, specific and direct and not unspecific or vague. [105 ITD 305]
  • Tax ability of Scholarship received by son from Employer: Hon’ble Allahabad High Court in the matter of CIT Vs. B. L. Garg held that the amount of scholarship were received by the assessee’s son and not by the assessee, the amounts were exempted u/s 10(16) and not taxable in the hands of the assessee u/s 17(2)(iii)(c) of the Income Tax Act. [289 ITR 218].  


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