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Vishal International Productions (P.) ... vs Inspecting Assistant Commissioner on 10 November, 1986 cites

Godavari Sugar Mills Ltd. vs Commissioner Of Income-Tax, Bombay ... on 27 September, 1962

15. The learned Counsel for the assessee criticised the order of the Commissioner (Appeals) in disallowing a part of the consideration after holding the provisions of Section 40A(2) were not applicable in terms. He asked how any part of the payment could be disallowed. He submitted that the payment itself was not doubted and in such circumstances ad hoc disallowance was wholly unjustified. For this reliance was placed on the decision in the case of Godavari Sugar Mills Ltd. v. CIT [1985] 155 ITR 306 (Bom.), where it was held that the ITO cannot disallow expenditure which has been in fact incurred by the assessee for the purposes of business upon the ground that such expenditure is excessive or unreasonable. It was further held that for such disallowance it was necessary to show that the transaction in question is a sham one or not a bona fide transaction. In that case the entire amount paid for the purchase of sugarcane was held to be allowable as it had not been shown that the transaction of sale was non-bona fide or that the price was different from that shown in the books.
Bombay High Court Cites 21 - Cited by 5 - Full Document

Commissioner Of Income- Tax, Bombay vs Smt. Indira Balkrishna on 14 April, 1960

We have already referred to the decision of the Supreme Court in the case of Indira Balkrishna (supra). We cannot also ignore the provisions of the Indian Trust Act, 1882, and the duties and capacities of the trustees. We are, therefore, in argument with the Commissioner (Appeals) that though the parties who are concerned with a transaction, are very close to each other, the provisions of Section 40A(2) in terms is not applicable.
Supreme Court of India Cites 6 - Cited by 209 - S K Das - Full Document

Commissioner Of Income-Tax, Poona vs Y.S. Desale on 17 February, 1982

The learned Counsel further relied on the decision of the Bombay High Court in the case of CIT v. Y.S. Desale [1982] 137 ITR 117. In this case their Lordships have observed that for the purpose of becoming an AOP, some persons must join in a common action for producing income. In the present case the trustees had not joined hands with each other but had been appointed by the settlers. Trustees are individuals and the trust itself is also an individual. In view of this, it was contended that the IAC was wrong in considering the trust to be an AOP and the trustees to its members. In view of this, it was contended that the above sub-clauses would not be applicable. It was also submitted that the trustees or some of the trustees or one of the trustees may have substantial interest in the company in their individual capacity but it was not enough. Unless it was shown that the trustees were having substantial interest in the business of the company in their capacity as trustees, the above provisions could not be applied. It was pointed out that the trust as such does not own shares of the company though some trustees do own such shares. The learned Counsel argued that unless the case of the assessee was clearly brought under the provisions of Section 40A(2) it was not open to the department to apply the above provisions for the purpose of disallowing any part of the purchase consideration. The learned Counsel submitted that the confusion has arisen as a result of not distinguishing between the individuals and their capacity as trustees.
Bombay High Court Cites 16 - Cited by 10 - Full Document

Mehta Parikh & Co. Ltd. vs Commissioner Of Income-Tax, Gujarat on 29 August, 1977

While we make these observations, we find that the provisions of Section 40A(2) are specific and they can be applied only if the requirements given there are satisfied. Now, generally in law transactions with relatives or sister concerns cannot be discarded or disregarded unless it could be shown that the transaction was sham or the value shown for goods or services was not the value really paid or the transaction which was not a bona fide one. In such matters the onus is on the department. The provisions of Section 40A(2) have been introduced to stop excessive payments where the parties concerned are related to each other in the manner laid down in that section. Where the assessee is a company, which is the case before us, the payment in question should either be to the director of the company or to a person having a substantial interest in the company or any person of which a director, partner, or member has a substantial interest in the company or any relative of any such director or person. The payment in the present case has been made to the trust and we have no material on the basis of which it could even be argued that the trust was not a genuine one. We find that the department has recognised it as a charitable trust having certain objects of public utility. The case of a trust could be brought under the provisions of Section 40A(2) only if we can hold that the trust was an AOP and/or the trustees are members of such association. It is not possible to accept the plea of the assessing officer that the trust is an AOP where the trustees have combined to carry on any activity of profit. The trustees cannot be considered as members of that association though they are in a way administrators of the trust in a representative capacity. When once a genuine and valid trust is created, the trustees have an independent status as trustees and it cannot be confused with their individual capacity or individual transaction. It is true that in the present case, some of the trustees have shares in the assessee-company in their individual capacity and those shares are more than 20 per cent which would make them having substantial interest in the company. However, where we are considering the question of the trustees it has to be the trustees in their capacity as trustees and not in their separate individual capacity. The assessing officer has given the example of Smt. Goswami who was a trustee and a director of the assessee-company and was a substantial shareholder. If the payment is made to Smt. Shashi Goswami, the payment would certainly be hit by the provisions of Section 40A(2). However, in the present case, the payment is being made to the trustees which is represented among other by Smt. Goswami. This, in our opinion, could not bring the transaction under Section 40A(2). It may lead to a lot of confusions if the representative capacity of the person is ignored and confused with the individual capacity of that person. Thus, as far as the language of provisions of Section 40A(2) are concerned, it does not appear to be applicable to the transactions in question. There is no justification for ignoring the position of trust which is a peculiar one under law. As the payment is admittedly made to the trust, we cannot hold that it is being made to any trustee in his individual capacity as the trustees are obliged to utilise the income and corpus of the trust or the objects of the trust. The argument regarding the trustee being a member of an AOP is also not appropriate as the trustees cannot be considered as an AOP within the meaning of that term as interpreted under the Act.
Gujarat High Court Cites 16 - Cited by 4 - Full Document
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