The Hindu Business Line : How much milk is too much milk?

"Pursuant to a search at their residential premises, a loose paper was found which indicated that the assessee had consumed 250 litres of milk in the months of February and March. The assessee had debited a sum of Rs 1,88,000 in the books of account for household purposes. The assessing officer considered the same to be very low and, accordingly, made an addition of Rs 6,58,600 on account of alleged unaccounted household expenses on the basis of consumption of milk which was considered equally in the hands of six brothers."

Held: "It was not known as to whether there was any social or religious function in the families of assessees in those two months. However, the assessees, during the course of hearing before the AO, the Commissioner (Appeals) or even before the Tribunal had hesitatingly admitted that the assessee family might be consuming about 10 litres of milk per day." That is, 250 litres divided by 25 members.

A case of milk-loving-family and milk-loving- family-loving-Department.

Accounts undefined

ON `books of account', the Delhi ITAT had something to say in the Brij Lal Goyal case. "Law does not permit to keep duplicate accounts," observed the Tribunal. "There is nothing in the principles of accountancy or in the income-tax law to treat any part of record of business in duplicate, non-regular or unofficial and to withhold it from the auditors or the I-T authorities."

Also, that "neither the bad shape, form or condition of any part of record is a valid ground for secreting it." And, interestingly, "the word `accounts' has not been defined under the I-T Act. However, under Section 34 of the Indian Evidence Act, 1872, sanctity is attached to the books of account, if the books are indeed `account books', that is, in original if they show on their face, that they are kept in the regular course of business."

Perhaps the Institute of Chartered Accountants of India should lobby for a comprehensive definition of books of account in statutes.

Education on education

FINANCE is lifeblood of any activity. So, is there a reverse transfusion when you finance something? Which, perhaps, was the confusion for the Director of Income-tax when he filed a case against Sir Shri Ram Education Foundation in the Delhi High Court.

The Foundation had sought tax exemption as an educational institution and the Department had denied the benefit. However, the Tribunal had ruled in favour of assessee. The court cited the Aditanar Educational Institution case (1997) where the apex court had held as follows: "It will be rather unreal and hypertechnical to hold that the assessee society is only a financing body... Colleges and schools are the media through which the assessee imparts education and effectuates its objects. In substance and reality, the sole purpose for which the assessee has come into existence is to impart education." Thus, the judgment went against the Department's contention.

An education on education, shall we say?

Hot spot

ALL monitors are not equal, as the Hozur Instruments case that came up before the Chennai CESTAT would show. The assessee wanted to classify a colour monitor along with thermal imager system, but the Department was not too happy with the bunching.

However, the Commissioner (Appeals) had decided in favour of the assessee stating: "The item is not a plain video recorder and monitor item but it is working along with thermal imager and the system is based on optical radiation and used for measuring the quantities of heat. Pictures taken by the imager are stored in tape and then played in VCR having a power supply unit which is a super VHS recorder for detailed study to enable proper adjustment in the source of heat energy, thus enabling the control of the temperature of the kiln. Images that are captured by video recorder are analysed through LIPS software operated on an IBM compatible PCAT.

"The capability of the software enables to put in different shades of colour on the thermal mapping of the captured subject. The populated printed circuit board imported is meant for such purpose. A high resolution RGB linear colour monitor combined with the capability of the software distinguishes different thermal gradients of the objects stored in the computer. This, thus maps out the thermal mapping distinguished by different colours, pinpointing out a hot spot."

The Tribunal, therefore, held that the two were `complementary to each other'.

No ordinary monitor, this.

Case sensitive

THE queer case of Al Thompson appears on the AccountingWEB, US. Al had failed to deduct taxes from his employees for four years and so owed $500,000 in back taxes. When asked, he claimed that income-tax law had been repealed in 1939. Court summoned him but Al failed to turn up. So, an arrest warrant was issued against him. That is invalid, said Al, because his name has been spelt in capital letters.

The New York Times reports that the dodger was of the view that any warrant, court document or order must capitalise only the first letter; and putting the name all in capitals made any court order `null and void.' "Names are usually printed in all capital letters on federal court papers and many judges have called the capital letter argument nonsense."

Is Al too case sensitive?

Staple threat

WHEN a robber came up asking, `Money, now!' brandishing a pocket knife, DeAnna Rankins, a tax preparer in Iowa thought he was asking her about the `Money Now' program the company had to loan customers up-front cash on their anticipated tax refunds. She didn't have any money, only cheques.

And, quite uncharacteristically for a typical accounting staff, she looked around for a weapon, grabbed the stapler on her desk because "it had a good, solid feel". AccountingWeb notes: "I've got no money," she said, standing, "and you better get out of here." She stepped toward him; he moved toward her. She raised the stapler. "I will fight you," she said. The man hesitated, then left the office in a hurry. "I would have stapled him," Rankins said.

A police report said, "The robber had second thoughts and apparently wanted no part of this." If Rankins had a double punch, she would not have hesitated to file the fellow. Or, perhaps, he was asking for Money Now program and got bamboozled by the staff's ferociousness.

Tailpiece

"When they change the tax law too drastically... "

"You need to buy a new book for reference."

"Also, we appoint one accountant for each assessment year."

Detaxification@thehindu.co.in

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