RECENT DECISIONS OF THE INCOME TAX APPELLATE TRIBUNAL
K.S. SATISH
Chartered Accountant, Mysore
CAPITAL RECEIPT
The Mumbai `I' Bench has in Prism Cement Ltd. v. JCIT (2006) 101 ITD 103 (Mum) taken the view that advance amount received on account of issue of non-convertible debentures forfeited due to non-payment of call money is a capital receipt and cannot also be treated as income under section 41(1).
TRADING LOSS
In Minda (HUF) Ltd. v. JCIT (2006) 101 ITD 191 (Del), the Delhi `A' Bench held that write off of amounts advanced by the assessee to vendors for supply of raw materials which became irrecoverable due to non-supply of materials or supply of defective materials was allowable as trading loss under section 37(1) as the advances were totally connected with the business activities of the assessee.
NOT REVENUE EXPENDITURE
Expenditure incurred by the assessee-company on the issue of convertible debentures is not allowable as revenue expenditure since raising of funds by issue of convertible debentures amounts to raising of capital by ultimately converting debentures into equity shares and it is not a borrowing or a loan ruled the Ahmedabad `B' Bench (Special Bench) in Ashima Syntex Ltd. v. ACIT (2006) 100 ITD 247 (Ahd) (SB).
BAD DEBT
The Mumbai `H' Bench (Special Bench) has in DCIT v. Oman International Bank SAOG (2006) 100 ITD 285 (Mum) (SB) expressed the view that under section 36(1)(vii) as amended from 1.4.1989, assessee would be entitled to deduction of bad debt on mere writing off the debt in the books of account and it is not necessary for the assessee to prove that such debt has become bad.
YEAR OF DEDUCTION
Where the assessee is following project completion method of accounting, interest on borrowed capital identifiable with that project should be allowed as deduction in the year in which the project is completed and income from that project is offered for taxation held the Mumbai `F' Bench (Special Bench) in Wall Street Construction Ltd. & Anr. v. JCIT (2006) 102 TTJ (Mum) (SB) 505.
PRESUMPTIVE INCOME
The Cochin Bench has in DCIT v. C.P. Kunhimohammed (2006) 102 TTJ (Coch) 502 taken the view that an assessee cannot choose to apply the provisions of section 44AE in respect of some lorries and opt for regular assessment on the basis of books of account maintained in respect of the remaining lorries.
SPECULATIVE LOSS
In AMP Spg. & Wvg. Mills (P) Ltd. v. ITO (2006) 100 ITD 142 (Ahd) (SB), the Ahmedabad Bench (Special Bench) has ruled that the loss incurred by the assessee-company, a dealer in shares, from sale of shares allotted to it in a public issue is a speculative loss in view of the Explanation to section 73.
STATUS
Where the agricultural land inherited by the assessees, three brothers, from their father was acquired by the Government, interest on additional compensation received by them is chargeable to tax in their hands in individual status and not in the status of Association of Persons since they had no mutual intention to acquire land or any intention to sell it or to earn profit held the Rajkot Bench in ITO v. Govindbhai Mamaiya & Ors. (2006) 102 TTJ (Rjt) 712.
PENALTY
In Sonu Liquor Traders v. DCIT (2006) 100 ITD 455 (Nag) where the Assessing Officer pointed out to the assessee, a dealer in country liquor, difference between the selling prices shown by it in its books of account and the selling rates prescribed by the Excise Department which were higher than that shown by the assessee and the assessee surrendered the difference between the two rates as additional income to avoid litigation and to buy peace, the Nagpur Bench held that penalty under section 271(1)(c) was not leviable since there was no finding that the assessee had sold the liquor for a price higher than what was shown in the books of account and there was no positive proof of concealment.
TRIBUNAL
Where litigation is between a State Government Undertaking and the Income Tax Department, the Tribunal can hear the appeal without clearance from the Committee on Disputes constituted by the Government of India ruled the Mumbai `F' Bench (Special Bench) in DCIT v. Maharashtra State Road Transport Corpn. (2006) 100 ITD 187 (Mum) (SB).
