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A cluster of cases

K. Srinivasan gives the gist of recent judgments in income-tax law

IN ORDER to arrive at the conclusion that the payments made under an agreement by a resident to a non-resident constituted fees for technical services liable to tax under clause (vii) of sub-section (1) of Section 9 or income by way of salary or consider ation for any construction, assembly, mining or like project undertaken by the non-resident, which would be outside the purview of the section, the AO will not merely have to examine all the terms of the agreement but also see what the non-resident has i n fact done in pursuance of the agreement (Asian Development Service vs CIT).

Income escaping assessment (Sections 147 and 148): For reopening an assessment for covering the liability to tax of the gains from the compensation paid by the Government for the acquisition of land, which was stated to be agricultural, there must be som e material on record to show why the income-tax authorities believed that the land was not agricultural. In the absence of such material, the reassessment proceedings initiated by the ITO would not be valid in law (Ram Bai vs CIT).

Reopening of assessment: An order of the Settlement Commission cannot operate to revive a proceeding barred by limitation. A notice under Section 148 would be bad for non-compliance with the provisions of sub-section (2) of Section 148 if the AO has fail ed to record his reasons for issuing it (Gauri Shankar Choudhary vs Additional CIT).

House property: When a continuing firm transfers its immovable property valued at more than Rs 100 to the partners without a registered deed or by any other manner known to law, the transfer will not be valid in law. When the transfer is not valid, the i ncome arising from the property is includable only in the hands of the firm, the transferor (CIT vs Palaniappa Enterprises).

Income from other sources: Interest payable by an assessee on any loans he had availed of cannot be disallowed merely because the investments for which the loans had been taken did not yield any income in a particular accounting year (CIT vs Murli Manoha r).

Interest from foreign country (Section 56): It is the gross interest earned outside India, before deduction of tax at source in the source country, that is liable to be included in the resident assessee's total income in India (CIT vs R. Ramanathan Chett ier).

Income from property held for charitable or religious proposes: A guarantee company will be assessable to tax in that status and not as an association of persons. It will not be eligible for treatment as a charitable trust under Section 11 unless it is p revented from distributing its profits by its memorandum/articles/bye-laws and its objects are charitable in nature (CIT vs Leign Bazar Merchants Association Ltd).

Power to relieve hardship

THE CBDT has sufficient power under clause (b) of sub-section (2) of Section 119 to consider the desirability or expediency of awarding a relief under the Act, even after the expiry of limitation laid down under any specific provision, and dispose of the matter on merits in accordance with the law, provided it is intended to avoid genuine hardship in a given case (Mysore Sales International Ltd vs Member (Income-tax), CBDT (Karnataka)).

Power to relieve hardship (Section 119(2)(b) read with Section 237): Section 237 embodies the salutory principle that the right of the Revenne to receive and collect tax is limited to what is properly due and payable as tax. It is, therefore, incumbent o n the part of the Board to examine the genuineness of every claim that is made before it. Any communication by the Board, rejecting an application for relief, unsupported by any reasons, cannot be regarded as proper compliance with clause (b) of sub-sect ion (2) of Section 119 (Tiam House Service Ltd vs CBDT).

The Board has the power to tone down the rigour of the law for the benefit of the assessee, to ensure a proper administration of the fiscal statute. The benefit of such circulars is admissible to the assessee even though the circular might have departed from the strict tenor of the statutory provision. No circular can, however, impose on the taxpayer a burden higher than what the Act itself, on a true interpretation, envisages (UCO Bank vs CIT).

(By arrangement with Corporate Law Adviser, New Delhi.)