1982 (5) TMI 75

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....ng the assessment. 2. That on the facts and in the circumstances of the case the learned Commissioner of Income-tax (Appeals) erred in holding that the Income-tax Officer had erroneously applied the provisions of section 147 without giving his finding on the jurisdiction of the Income-tax Officer and in quashing the assessment." 2. The respondent-assessee is a resident limited company and the method of accounting is mercantile. The relevant accounting period is the year ending 30-9-1973. 3. The assessment originally framed was reopened by initiating reassessment proceedings under section 147(b) of the Income-tax Act, 1961 ('the Act'). The learned ITO, Shri T.V. Verghese, considered that in computing the disallowable expenditure under sec....

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....ecessary for assessment. It was also contended before the learned Commissioner (Appeals) that the learned ITO erroneously treated the technical fees paid to the UK company as payment under section 40(c), because payments made to corporate bodies were not covered by the provisions of the aforesaid section, and that 'person' appearing in section 40(c)(i) referred to 'individual' only and not to corporate bodies. Objections also appear to have been taken that information from audit party did not constitute any information within the meaning of section 147(b) and furthermore, the original assessment order had already merged with the earlier order of the learned Commissioner (Appeals) dated 22-11-1978. 4. The learned Commissioner (Appeals) vaca....

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....TO and that the word 'person' appearing in section 40(c) has got to be understood in terms of section 2(31), in accordance to which a 'person' includes an artificial juridical person also. He specially invited our attention to sub-clause (vii) of section 2(31). On the basis of this contention, he submitted that it is not correct that section 40(c) applies only to the natural person. Reference was also made to section 2(32). 7. Shri Jana further contended that in the facts and circumstances of the assessee's case, the learned ITO was justified in initiating the reopening proceedings under section 147(b) and that the reopening was not on the basis of the audit report as wrongly mentioned in the impugned order. Reliance was placed on the rati....

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....t illustrative as to what is understood by the word 'person' in the Act. But the terminology of section 40(c) where the word 'relation' appears, the person in our view automatically means for the purpose of section 40(c), a natural person. For taking such a view of the matter, the clarification conveyed on behalf of the Government of India in Letter No. D. O. F. 236/344 of 1978 A & PAC II dated 9-2-1979, wherein it is conveyed that the provisions of section 40(c) applied only to a natural person, is relevant. For such a view, we get further support from the view taken by their Lordships of the Karnataka High Court in the case of South Kanara Central Co-operative Wholesale Stores v. CIT [1978] 114 ITR 298, wherein a co-operative society was ....