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Special bench order Gist: Rajesh Kr. Drolia 

“1. Whether Ld. CIT(A) erred in law as well as in fact in allowing deduction u/s. 80-IB to the assessee on the income earned from ‘job work’ which comprises of repairs and
maintenance? 2. Whether Ld. CIT(A) erred in law as well as in fact in treating the income from repairing and maintenance at par with the income from manufacturing for the purpose of Sec.80-IB?” 


held: The assessee is earning job work charges as well as repairs and maintenance, which are included in job work charges, no doubt it is established that there is commercial connection between profits earned on account of repairs and maintenance and the industrial undertaking but for that source of profit is not directly from industrial undertaking. The business of industrial undertaking had directly to yield that profit to claim deduction u/s. 80-IB of the Act. Hence, our answer to first question referred is that the assessee is entitled for deduction u/s. 80-IB on income earned from job work charges but excluding repairs and maintenance charges. Our answer to second question referred is that the income from repair and maintenance cannot be treated at par with the income from manufacturing for the purposes of deduction u/s. 80-IB of
the Act.

VIZAG BENCH ITAT on Partnership firm (retirement) K. Koteswara Rao In the light of above proposition of law, if the facts of the case are examined, we would find even on merit, the amount received by the assessee is on account of relinquishment of his share in goodwill acquired by the educational institution over a period of time. Therefore, the amount received by the assessees towards goodwill is not chargeable to tax. Moreover, there is no specific assertion in the MOU or anywhere else that this amount was given towards the non-competition fees. Therefore, we are of the view that assessing officer has taken a one of the plausible view for which the assessment order cannot be revised by the CIT after treating it to be erroneous and prejudicial to the interest of the revenue. We therefore, set aside the order of the CIT referred: In the case of ITO Vs. Amitabh Singh 16 SOT 453, the Tribunal has held that the amount credited to the capital account of the assessee partner on account of goodwill and received by him on his retirement from the firm is
not taxable as capital gains as the goodwill was acquired by the firm over a period of time and all along it continued to belong to the firm and there was no transfer of any goodwill by the assessee to the firm.;In the case of CIT Vs. L. Lingmallu Raghukumar 247 ITR 801, their
Lordship of the apex court have held that on retirement of assessee partner from the firm there was no element of transfer of interest in partnership asset by the retiring partner to the continuing partners and amount received by him was not assessable to capital gains.

HELD:Therefore, the amount received by the assessee is on account of relinquishment of his share in goodwill acquired by the educational institutions over a period of time in favour of surviving partners and as such the same is not chargeable to tax

Delhi Bench ITAT Shri Hardarshan Singh, Delhi bench ITAT 40(a)(ia) TDS Dis allowance  : Freight /transport cases (194C)

He is also entering into arrangements for transportation of goods through  vehicles of other transport companies. The dispute relates to the latter business. The case of the assessee had been that in this business, he is not carrying on the work of transportation of goods and, therefore, the provision contained in section 194 C is not applicable to him. However, the finding of the AO is that the assessee has been carrying on this business also in respect of which he is liable to deduct tax at source from the payments made to other transporters. He has not deducted the tax at source on payment made to such transporters. Therefore, the expenditure incurred in this behalf is liable to be disallowed under the provision contained in section 40(ia). In order to illustrate his point , he directed the assessee to file a revised profit and loss account including the receipts and expenditure from this business in the profit and loss account. Such an
account was furnished, which shows that the income from lorry booking amounting to Rs. 8,51,43,744/- and booking commission of Rs. 26,02,032/-. 
Coming to the merits of the case, it is submitted that the assessee owns and operate four trucks for transportation of goods. These trucks are not adequate in number to meet the market requirement. Therefore, he arranges trucks of other transport companies for carriage of goods for which he receives commission from them. This commission income is credited to profit and loss account. In respect of this income, the assessee does not undertake the business of carriage of goods and no work is performed by him. The bills are prepared in a manner that net
commission income becomes payable by the actual transporter to the assessee. To support this contention, reliance has been placed on bills prepared and accounted for in the books It is also submitted that the only activity carried on by the assessee was to act as an intermediary between the customer and Delhi Assam Roadways Corporation Ltd., for which he received
commission of Rs. 2,100/-. No other work has been done by the assessee except bringing the two parties together. He did not make any payment to the aforesaid roadways corporation for transportation of goods. Such payment was made by the customer. Thus, there was no liability on assessee for deduction of tax at source 

HELD:According to us, it cannot be said that assessee really entered into the contract of transportation of goods. He merely acted as an intermediary. Thus, the facts seem to be similar to the facts in the case of Grewal Brothers (supra) although the provisions of Partnership Act make the position of law some what messy. In the case of Cargo Linkers, the assessee acted as an intermediary between the exports and the airlines. It received the amount from the exporter and handed over the same to the airline, who paid commission. These facts are also nearer to the facts of the case at hand. Accordingly, following this decision, it is held that the assessee was not liable to deduct tax at source. In view thereof, no addition could have been made u/s 40(ia). Thus, ground no. 1 is allowed.  
 
 
Shri R.K. Upadhyay has relied upon judgments in Raghu Raj Pratap Singh v. Asst. CIT (All) (2008) 307 ITR 450 (All) and Madhupuri Corporation v. Prabhat Jha, Deputy Director of
Income Tax (Investigation) 2002 (256) ITR 498 (Guj), in support of the legal issues.

We have gone both the decisions and find that whereas the judgment in Raghu Raj Pratap Singh (supra) related to the validity of search and seizure and the recovery of materials from
the bank, the judgment in Madhupuri Corporation (supra) rendered by the Gujarat High Court, relates to the retention of the seized documents and books and accounts beyond the statutory
period of 15 days. The Gujarat High Court held that such illegality would not vitiate the evidence collected during such search. We are informed by Shri R.K. Upadhyay, that the judgment in
Smt. Vandana Verma's case (supra) has been challenged in the Supreme Court by the revenue in Special Leave Petition (Civil) No. 18366 of 2010 (C.I.T. vs. Vandana Verma) in which notices
have been issued and thereafter fresh steps were directed to be taken up on 4.8.2011 fixing 15.9.2011. In the instance case before us in pursuance to the warrant of authorisation issued by the DIT (Investigation)/Kanpur, search and seizure operations under Section 132 (1) of the Income Tax Act, 1961were carried on 6.9.2006 at the residential premises of Shri
Ashok Chawla, Smt. Madhu Chawla and Shri Anuj Chawla at 42 S.C. Basu Road, Allahabad as well as the locker No. 301 with Punjab National Bank, Chowk, Allahabad and also a survey u/s
133-A was conducted in the case of Chawla Mill Store (Prop. Shri Ashok Chawla) 1 S.C., Basu Road, Allahabad and in shop No. 58 at 45, V.N. Marg, Allahabad. As per provisions of Section 153A(b), the assessment of six preceding assessment years (block period) was required to be made from the search. Accordingly, notices were issued to the assessees. The A.O. passed separate assessment orders for Ashok Chawla and Smt. Madhu Chawla. We do not find that the Tribunal has committed any error in law in relying upon the judgment in Smt. Vandana Verma's case (supra) in which it was held that where the search operations are carried
out in the joint names, the individual assessment could not have been made. The Court has given reasons to reach to such conclusion. They have held that in case, the authorizing authority had information in his possession in consequence of which he had
reason to believe that Mudit Verma and Vandana Verma though living in a single premises as husband and wife, possessed undisclosed assets including income separately, then, he might
have issued warrant of search individually for conducting the search as both Mudit Verma and Vandana Verma are assessed to income tax in their individual capacity. When warrant of
authorization was issued in the joint names it was not open for the assessing authority to assess Smt. Vandana Verma on the basis of the assets and documents seized during the course of search in pursuance of the warrant of authorization which was in the joint names, and that too by invoking the provisions of Chapter XIV-B in an individual capacity. She could be assessed jointly only as AOP of BOI as per the definition of the word "person" under the Income Tax Act.
Since the questions raised in these appeals are covered by the Division Bench judgment of this case in Smt. Vandana Verma's case and with which we respectfully agree, we need not to decide
them all over again. The Income Tax Appeals are accordingly dismissed. We make it
clear that it will be open to the assessing authority to make assessment orders in respect of the assessees who have been assessed separately as AOP/BOI.

 
 
Petitioner :- Dr. Roop Respondent :- Commissioner, Income Tax, Meerut & Others All High COurt SEARCH CASE

The legal position with regard to disclosure of the satisfaction note has been considered by this Court in several decisions beginning from Dr. Nand Lal Tahliani Vs. CIT 170 ITR 592 (Alld) to City Montessory School (Regd) Vs. Union of India & Ors. (Writ Petition No.2818 (MB) of 2000
along with two other connected petitions in 2007. The consistent view taken is that the material on the basis of which warrant of authorisation under Section 132 was issued and the search and seizure operations were carried out should be disclosed to the assessee unless privilege is
claimed.

We find that none of the grounds, taken in the affidavit of Shri Umesh Takyar, Deputy Director of Income Tax (Investigation)-I, Meerut in support of the application under Section 123 of the Evidence Act, is relevant for claiming privilege. The confidentiality of the information by
itself cannot be a ground to claim privilege. The claim of the department, that the authorisation is highly confidential and its revelation to the assessee or to general public may prove detrimental to the potential information given as well as the department, by itself cannot be a
ground to claim privilege of the documents. The satisfaction has to depend upon the material on which it is based, the disclosure of which will bring it within the grounds mentioned in Section 123. We have already discussed the case law in this regard in our order dated
4.5.2011 and do not find that the application is founded on any of the ground on which such privilege can be claimed.The application is accordingly rejected.

So far as question of validity of search and seizure is concerned, since we have rejected the application for claiming the privilege, for disclosing the satisfaction note and warrant of authorisation, for conducting searches, the petitioner along with his counsel will be permitted inspection these documents produced in the Court and kept in the sealed cover in the custody of the Registrar General. The inspection will be carried out in presence of the counsel for the department. Learned counsel for petitioner may make an appropriate application to the Registrar General along with the certified copy of this order for inspection of the documents, and thereafter may make appropriate representation to the Court, for fixing a date for hearing. 

Case :- INCOME TAX APPEAL No. - 134 of 2008 Petitioner :- The Commissioner Of Income Tax Respondent :- Dr.Rakesh GuptA All High Court

"Whether on the facts and in the circumstances of the case, the Hon'ble
ITAT was right in coming to the conclusion that there was no proper service
of notice u/s 148 of the I.T.Act in the case, particularly when the other
documents i.e. intimation under section 143(1) and challan has been served
upon the assesses on the same address on which notice u/s 148 was issued...

....The assessee had denied the service of notice as well as despatch of the same at proper address of the assessee. Despite this, the assessing officer made no effort to find the correct address from his own record nor from the bank in which the account opening address given is
different than the address on which the notice was sent. The notice under Section 148 of the Act, on a later date, is shown to have been served on the Chartered Accountant of the assessee, Sri Alok Farsaiya. The Tribunal has held that this cannot be taken as proper service of notice on the assessee....

The point in issue is covered by the Division Benches of this Court in (1) Madan Lal Agarwal v. Commissioner of Income-Tax, Kanpur reported in  (1983) 144 ITR 745, (2) Y. Narayana Chetty and another v. Income-Tax Officer, Nellore, and others reported in (1959) 35 ITR 388 and (3) P.N. Sasikumar and others v. Commissioner of Income-Tax reported in (1988) 170 ITR 80. In all these cases it was held that a notice under Section 148 is a condition precedent or a matter of jurisdiction to the validity of any assessment order to be passed under Section 147 of the Act. If no such notice is issued or if the notice issued is invalid or not in accordance with the law or
is not served on the proper person in accordance with law, the assessment would be illegal and without jurisdiction 


M/s. Balarampur Chini Mills Ltd Kol ITAT Rule 8D Section 14A

8. Here in the present case, there is no linkage or nexus between the funds borrowed by
assessee and the impugned investments, hence, no interest expenditure can be disallowed by mechanically applying the Provisions of Rule 8D of the Rules
. The assessee has explained that the share capital and reserves, that is its own funds, were utilised for the purpose of investment in shares for earning dividend income and this has not been negated by lower authorities i.e. neither CIT(A) nor AO. The assessee has explained each and every investment with sources of funds and its utilization as well as opening application of funds and closing application of funds as noted above. It is an admitted position in law that expenditure can be disallowed U/s.14A of the Act if and only if it is incurred in relation to income which does not
form part of total income. From the facts of the present case, it is clear that there is no link
with expenditure for earning of dividend income incurred by the assessee and once the facts are clear, no disallowance can be made by invoking rule 8D of the Rules
Neither the AO nor CIT(A) has recorded any finding that having regard to the account of the assessee, they are not satisfied with the correctness of the claim of expenditure made by assessee or the claim made by assessee that no expenditure has been incurred in relation to income which do not form part of the total income under the Act for the relevant assessment year. In the absence of any such finding, facts of the present case shows that the investment in shares was made out of own capital employed and not from borrowed funds, no disallowance on account of interest expenditure can be made by invoking rule 8D of the Rules. Accordingly, in the given facts and circumstances, we delete the addition and allow this issue of assessee’s appeal
.

Himachal Pardesh High Court in case of   Smt.Jasbir Kaur Bhatia ( in both cases)
 Date of decision: 12.08.2011

“Whether on the facts and in the circumstances of the case, the ITAT was correct in cancelling the assessment of gift made u/s 15(3) read with Section 16(1) of the Gift-tax Act on the ground that the notice issued u/s 16(1) of the Act had not been issued to all the legal heirs of the assessee and was not in conformity with section 19 of the Act, and was therefore defective, illegal and without jurisdiction?” The only question which arises is whether it is necessary to issue notice to all the legal heirs and in case notice is not issued to the legal heirs, are the entire assessment proceedings vitiated or not.

The legal position is clear that the legal heir to whom notice has been issued cannot challenge the validity of the re-assessment proceedings on the ground that notice has not been issued to all the legal hairs. Therefore, the order of the Tribunal is set-aside and it is held that the assessee is liable to the extent of the estate inherited by her from her mother to pay the amount of tax, interest etc. assessed as being payable by her mother. It is made clear that she will be liable to pay this amount only out of the estate inherited from her mother and not out of the gifted property. As far as the other legal heirs are concerned we may make it clear that this order does not bind them and the revenue can initiate appropriate proceedings in
accordance with law if so permissible at this stage to recover the amount.
 
 
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Internal auditor hyderabad