1. Apollo Tyres Ltd. V/s. C.I.T. [255 ITR 273] [SC]

The assessee-company while determining its net profit for the relevant accounting year provided for arrears of depreciation in its profit and loss account. The book profit for the purposes of section 115J was worked out on this basis. The Assessing Officer, however, was of the view that profit & loss account prepared is not in accordance with Parts II and III of Schedule VI to the Companies Act. Hence, the Assessing Officer recomputed the said profit and loss account of the company by excluding the provision made for arrears of depreciation. The action of the Assessing Officer in questioning the correctness of the accounts maintained by the company was challenged by the company before the Tribunal which held that the Assessing Officer has no authority to reopen the accounts of a company.

This view of the Tribunal was not accepted by the High Court.

On appeal, the Supreme Court reversed the judgement of the High Court and affirmed the view taken by the tribunal. The Supreme Court held as under.

(i) Section 115J makes income reflected under Company's books deemed income.
(ii) Reference to "in accordance with provisions of Parts II & III of Schedule VIA to the Companies Act" is for limited purpose of empowering A.O. to rely upon the authentic statement of account of the company.
(iii) Having regard to well laid procedure prescribed under the Companies Act namely accounts to be maintained in a manner provided under Companies Act; to be scrutinized and certified by statutory auditors; will have to be approved in general meeting and to file with ROC who had statutory obligation to ascertain that account are maintained as per Companies Act.. It is not open for the A.O. to rescrutinise the accounts to ascertain preparation thereof in accordance with provisions of the Companies Act.
(iv) Section 115J(1) mandates company to maintain account as per Companies Act. This section does not empower A.O. to embark upon fresh enquiry.
(v) There cannot be two incomes - one for the purpose of the Companies Act and another for Income tax both maintained under the same Act.
(vi) In the absence of any overriding powers given to A.O., he cannot reassess company's income.

The Court observed at page 280 as under :
"Therefore, we are of the opinion, the Assessing Officer while computing the income under section 115J has only the power of examining whether the books of account are certified by the authorities under the Companies Act as having been properly maintained in accordance with the Companies Act. The Assessing Officer thereafter has the limited power of making increases and reductions as provided for in the Explanation to the said section. To put it differently, the Assessing Officer does not have the jurisdiction to go behind the net profit shown in the profit and loss account except to the extent provided in the Explanation to section 115J."

Another issue before the Court was whether loss on sale of units of UTI is hit by Explanation to section 73.

Department contended that buying and selling of units of UTI is to be treated as speculative business having regard to deeming fiction created under section 32(3) of UTI Act.

The Supreme Court did not approve department's view point.

The Court held at page 282 as under :
"We have examined the provisions of the UTI Act and we are of the opinion that even though the said section creates a fiction to make the UTI a deemed company and distribution of income received by the unit holder a deemed dividend, by virtue of these deemed provisions, it cannot be said that it also makes the unit of the UTI a deemed share. In our opinion, a deeming provision of this nature as found in section 32(3) should be applied for the purpose for which the said deeming provision is specifically enacted, which in the present case is confined only to deeming the UTI a company and deeming the income from the units a dividend. If, as a matter of fact, the Legislature had contemplated making the units also a deemed share then it would have stated so. In the absence of any such specific deeming in regard to the units as shares it would be erroneous to extend the provisions of section 32(3) of the UTI Act to the units of the UTI for the purpose of holding that the unit is a share."

2) ITO V/s. KULDEEPAK JAIN [81 ITD 379 (Del)]

The assessee, an individual, derived income from salary, house property and other sources. Three minor children of assessee had income from interest and dividends. In view of provisions of section 64(1A), in the return filed by him, the assessee included minor's income after claiming deduction under section 80-L of an amount of Rs.7,000 in each case.

This claim of the assessee was negated by the Assessing Officer and deduction under section 80L was restricted to maximum allowable under section 80-L in the hands of the assessee.

In first appeal, the CIT (Appeals) directed to allow the deduction admissible under section 80L separately in the case of each minor whose income is clubbed in the hands of the assessee.

On department filing appeal, the ITAT upheld order of the A.O. The tribunal held as under.

(i) That, under section 64(1A) all income arising or accruing to the minor child is required to be clubbed.
(ii) That, Section 64(1A) uses the term "income" and not "total income".
(iii) While deduction may be allowed in determining income under respective head, deduction under section 80L is to be granted in the computation of the "total income".
(iv) The object of introducing provisions of section 64(1A) is to check evasion of tax. Having regard thereto, clubbing is to be of "gross total income", and cannot be of "total income".
(v) That, deduction under section 80L is to be made "in computing the total income of the assessee". There cannot be computation of "total income" in the hands of minor as assessee here would be parent.

3) Wadilal Dairy International Ltd. V/s. A.C.I.T. [81 ITD 238 (Pune)]
Assessee is engaged in manufacturing of dairy products. The assessee purchased packing material such as big cartoons, small bags, plastic bags, wrapping material for its products. Printing material contained company's name, monogram, nature of product, quantity of product, etc. The specifications thereof were set by the assessee. However, raw material required was purchased by supplier. In the sale invoice along with sale price the supplier levied excise and sales tax.

The ITO (TDS) was of the view that supplies made attracted section 194C. According to the A.O. the aspects of specifications set by the assessee; samples approved by assessee, etc. revealed that sole object was to obtain printed material in desired specifications. The A.O. also noted that excess stock or rejects of material was not reusable and were required to be destroyed by the supplier. The A.O. thus concluded that the contract was that of works contract for composite charges. The A.O., thus, worked out TDS liability of the assessee along with interest U/s.201(1A).

The CIT(A) upheld A.O.'s order.

On further appeal, the ITAT, set aside A.O's order. The tribnal held that,
. Section 194C applies to contract for work, it does not apply to sale of goods.
. Manufacturing of customer specific product is sale and not `carrying out any work.'
. In the instant case, property passes only after its delivery.
. Payment of Sales Tax and Excise is indicative that the transaction is of sale.
. Main purpose of assessee was to obtain goods for the purpose of packing; printing thereon was incidental. There was no works contract involved.
. Support was drawn from examples given in CBDT circular No.681 dated