The Chartered Accountant

Appellant/assessee is a multi-state Cooperative Society
engaged in the business of manufacturing urea
and ammonia at its Plant at Hazira. Appellant used to
supply ammonia gas through pipe connections from
its plant at Hazira directly to the Heavy Water Plant
(HWP) of the Heavy Water Board (HWB). The HWP
is located next to the appellant’s plant. In fact, it is in
the precinct of the appellant’s plant. In view of an
agreement executed between the appellant and HWB,
appellant was entitled to be reimbursed for the cost
of ammonia manufactured by it and supplied to the
HWB and in addition thereto it was also entitled to
receive service charges and incentives from HWB.
The Commissioner (Appeals) held that since the receipt
of service charges was not directly connected or
linked with the manufacturing activity carried out in
the industrial undertaking of the assessee, the service
charges received by the assessee from the activity of
producing Heavy Water cannot be considered as the
DECEMBER 2008 998 THE CHARTERED ACCOUNTANT
LEGAL UPDATE
profit derived from its industrial undertaking so as to
qualify for deduction under Section 80-I.
The Supreme Court held that prima facie one finds
that Hazira Ammonia Extension Plant (HAEP) is
an extension of the Ammonia Plant of the appellant
then the question which arises is whether the above
process constituted manufacturing activity carried out
in the industrial undertaking of the appellant. Another
feature to be noticed in this regard is that the Department
of Atomic Energy entered into an agreement
with the appellant to set up HAEP in the premises
of the appellant’s Ammonia Plant. Hence, the entire
scheme was based on the principle of functional interdependence
between the two plants.
On the above discussion the judgment of the High
Court was set aside and the matter was remitted back
to the Tribunal for reconsideration of the matter in accordance
with law.
Sections 273A read with Section 139(8) of the Income-tax Act, 1961 — Penalty — Power to Reduce or Waive,
in certain cases [Assessment Year 1985-86 to 1989-90]
Late filing of return by itself cannot be the only reason to reject an application for waiver of penalty in case of
return filed voluntarily and in good faith
Madhuri, Akola v. Commissioner of Income Tax, Vidarbha Region, Nagpur (BOM) 7 August, 2008
The petitioner is a house wife and earning through
the private tuitions. She voluntarily submitted the returns
of income in good faith and in response to the
general representation by the Deputy Commissioner
of Income Tax, that department would be waiving interest
and penalty of those who have not filed returns
though have assessable income. Returns were duly
accepted by Assessing Officer under Section 143(1).
However, the petitioner’s request for waiver of interest
and penalties was rejected.
The High Court held that in the instant case there
was no dispute that the return was filed before any
demand notice was issued by the department. The returns
were admittedly filed late but considering the
scheme of Section 273A and as all the ingredients are
available, the Assessing Officer ought to have considered
the case in view of the scheme and purpose of
Section 273A. The reason given by Assessing Officer
to reject petitioner’s application was insufficient and
there was failure to consider all the elements to exercise
the power and discretion as contemplated under
scheme of the Section 273A. The late filing of return
by itself cannot be the only reason to reject the application
in case of return filed voluntarily and in good
faith like present one, as those were filed even prior to
the notice or any such demand.
The petition was allowed.
Section 273A read with Sections 139(8) and Section 217 of the Income Tax Act, 1961 — Penalty — Power to
Reduce or Waive, in certain cases [Assessment Year 1984-85 to 1988-89]
Section 273A(1)(a) requires a disclosure of full and true income and not the filing of valid returns in time before
issue of notice under Section 139(2) or Section 148
Vasantbhai Jethalal Lathiwala v. Commissioner of Income Tax, Vidarbha Region, Nagpur (BOM) 7 August, 2008
The petitioner is a Karta of HUF. He voluntarily and
in good faith pursuant to the assurance given by the
Income Tax Department made a full and true disclosure
of his income before issuance of any notice.
The respondent issued notice under Section 148.
The Income Tax Officer charged interest for all the
years under Section 139 for late filing of returns and
charged interest under Section 217 for nonpayment
of advance tax. The Commissioner has rejected the
application filed by the petitioner.
The High Court observed that the Commissioner has
relied the case of Saberaj Industries vs. F.J.Bahadur