Important Decisions reported in 327 and 328 ITRs

Bid amount disbursed in chit is not money lending

In CIT v. Sahib Chits (Delhi) Pvt Ltd (2010) 328 ITR 342 (Del) it was held that chit agreement would not fall under “money lending” and the amount disbursed on bidding is not to be treated as money lent / borrowed. Accordingly, disbursement is not liable for deduction of tax at source in terms of section 194A of the Act.

Addition solely based on statement recorded at the time of survey

In CIT v. Dhingra Metal Works (2010) 328 ITR 384 (Del) based on the statement recorded at the time of survey, some additions were made to the income of the assessee. The assessee was able to explain the discrepancy noticed at the time of survey. It was held that since the assessee had reconciled the discrepancy subsequently which was sufficient enough, the statement recorded at the time of survey under section 133A cannot be a conclusive proof for sustaining the addition. Accordingly, the additions were deleted by the court.

Stock exchange membership card is eligible for depreciation

In Techno Shares & Stocks Ltd v. CIT (2010) 327 ITR 323 (SC) it was held that the membership card of Bombay Stock Exchange is an “intangible asset”, which is eligible for depreciation.

Freight subsidy cannot form part of profit derived from industrial undertaking

In CIT v. Kiran Enterprises (2010) 327 ITR 520 (HP) the assessee who was eligible for deduction under section 80-IA of the Act, claimed that the freight subsidy received from Government must also be treated as profit “derived” from eligible undertaking. The court held that the profit “derived” from industrial undertaking would not include freight subsidy received from Government. Accordingly, it was held that the amount received by way of freight subsidy is to be excluded while computing the special deduction under section 80-IA.

Tax is deductible only when the remittance to non-resident contains wholly or partly taxable income

In GE India Technology Centre (P) Ltd v. CIT (2010) 327 ITR 456 (SC) it was held that mere remittance of money would not warrant deduction of tax at source. Only when the remittance includes any income, the provisions relating to tax deduction under section 195 could be applied.

Valuation report cannot be the basis for reopening the assessment

In CIT v. Dhariya Construction Co (2010) 328 ITR 515 (SC) it was held that the opinion of the District Valuation Officer cannot be the basis for reopening the assessment.

In CIT v. Naveen Gera (2010) 328 ITR 516 (Del) it was held that reference to Valuation Officer for valuation is not permissible where the assessment is made before 30.09.2004.