Part 1: A Study of the Indian Tax System
Part 2: Taxation of E-commerce Transactions
From the printing press to the digital revolution, humankind has been inclined to innovate first and plan later. It goes without saying that in the modern world, technology develops faster than the law. Cell- phones and high-tech computers are common examples of technologies that have grown beyond their support structure.
Technical advances sometimes outstrip the development of legal systems and often force basic principles to be reexamined. Advances in the fields of information technology, biotechnology, e-commerce, and out- sourcing, for example, have recently created a host of celebrated legal confusions and debates. This article outlines the main issues in the international taxation of e-commerce transactions with a particular emphasis on India.
Since nearly a decade ago, because of the diminished need for a vendor to have a physical presence in the country of the customer, a frequent consequence of electronic commerce has been to shift revenues away from source jurisdictions and toward residence jurisdictions.1 The tax authorities were faced with a challenge, and to overcome it; they continued to apply principles of traditional tax dealing essentially with the physical movement of goods and services. In their objective to implement a tax to the invisible trade, governments around the world have fine-tuned regulations to extend the scope of national tax regulations. The OECD’s support and guidelines help these governments ensure that the right arm's length principle is applied. This article will examine significant tax statutes in India with a particular emphasis on the tax system and the powers of tax officers, and will explore the legalities involved in the taxation of information technology and biotech companies.I. Taxation in India The world’s 12th-largest economy at market exchange rates and the fourth largest in purchasing power, India has a quasi-federal form of government. India’s Constitution is the longest and the most exhaustive constitution of any independent nation in the world. India has a three-tier federal structure, com- prised of the union or central government, the state governments, and the local bodies, all of which have the authority to levy taxes. Besides direct taxes such as the income tax, indirect forms of tax are collected such as the sales tax, VAT, service tax, stamp duty, customs, and excise duty. A. Income Tax Act — Background Historians have argued that modern ideas and institutions of law, medicine, and criminal justice were first tested in the colonies and later implemented in metropolitan areas.2 The tax system was first introduced in India during the British rule. Today, the Income Tax Act, 1961 (Act 43 of 1961) — the primary legislation dealing with taxability of income — is self-contained legislation. The Income Tax Act empowers the Central Board of Direct Taxes to formulate rules for implementing the provisions of the ITA.3 Income tax is a tax payable under section 139 of the ITA by filing a return (form/declaration) of income,4 at the rate enacted by the Union Budget (Fi- nance Act) for every year on the total income earned in the previous year by every person (individual or company) who is a resident, nonresident, or resident who is not ordinarily resident. Residents are taxable for all their income, including income arising outside India. The division of tax and expenditure powers is spelled out in the constitution. Article 366(29) defines tax on income as including tax in the nature of an excess profits tax. Thus, the Indian Parliament has the exclusive power to levy a tax on income other than agricultural income. The Indian Parliament also has the power to make laws regarding any other matters not enumerated, including any tax not mentioned. While agriculture plays a dominant role in the economy, a government task force recommended that agricultural income be taxed.5 The share of revenue generated from agriculture has been declining while the IT and outsourcing services sector has become a major catalyst for the Indian economy given its effects on income generation and job creation.
Table 1. Structure of the Economy (% of GDP)
Show MoreAccordingly, it is Parliament and the central government that has the power to tax income, not the states. However, the state legislatures have the power to impose a tax on professions, trades, and employments. States also have the power to tax luxuries, including entertainments, amusements, betting, and gambling. B. Powers Vested in the Tax Department The ITA was passed to charge income tax on the total income of a person in the previous year. Person and income have been defined in the preliminary to the ITA, which provides an exhaustive list of definitions. The General Clauses Act and past precedents further aid in understanding the definition of terms not de- fined in the ITA. The ITA in Chapter XIV defines the procedures for assessing total income; the appointment and control of income tax authorities are in Chapter XIII, and the jurisdiction of the income tax authorities is in Chapter XIII-B. The income tax officer (known as an assessing officer, or AO) is the first officer in charge and is vested with quasi-judicial powers and duties regarding tax administration, tax assessment, and prosecution on the discovery of illegitimate inaccuracies, concealment of income, incorrect valuation, or violations. Income tax authorities have been vested with powers that are coterminous with the powers of a court under section 75 of the Code of Civil Procedure, 1908. The ITA empowers the tax recovery officer to appoint a receiver for the management of the defaulter’s movable and immovable property.6 C. Assessment Procedures 1. Investigative Powers of the Tax Officers Chapter XIV of the Income Tax Act deals with the assessment procedure. Section 143 confers investigative powers (except the power to rectify) on the assessing officer. Under section 142, powers are conferred on the assessing officer to make relevant inquiries and obtain details or information before beginning the assessment procedure. The Supreme Court of India and subordinate courts have in several cases ruled that the tax officers are duty bound to exercise a reasonable degree of care and caution in handling the assessment process.7 The officers do not have to assess the income of one person in the hands of another.8 If any tax or interest is found due on the basis of such return, after adjustments,9 the assessing officer will issue a notice of demand under section 156 of the ITA. Similarly, if any refund is due to the taxpayer, the money will be sent to him, but not more than one year from the end of the financial year in which the return or declaration is made.10 Under section 143(1), it is incumbent on the taxpayer to furnish the information that the assessing officer may ask for. Under section 281B, the tax officers have been conferred powers to provisionally attach properties during the pendency of any proceeding for the assessment of any income or for the assessment or reassessment of any income that has escaped assessment. Through a legal fiction, section 136 of the ITA makes an assessment proceeding a judicial proceeding. The assessment proceeding, therefore, is a part of the judicial process. 2. Natural Justice The Supreme Court has ruled that: Assessment proceedings before the income tax officer are judicial proceedings and all the incidents of such judicial proceedings have to be ob- served before the result is arrived at. The assessee has a right to inspect the record and all relevant documents before he is called upon to lead evidence in rebuttal. This right has not been taken away by any express provision of the Income Tax Act.11 The principles of natural justice that are deeply em- bedded in the Indian Constitution apply to assessment proceedings as well.12 The elementary principle of natural justice is that the assessee should have knowledge of the material that is going to be used against him so that he may be able to meet it. The courts have held that ‘‘when a power is given to do a certain thing in a certain manner, the same must be done in that manner alone or not at all. All other proceedings are necessarily forbidden.’’13 3. The Assessment Process Under section 143(2) the assessing officer may form an opinion that any claim of loss, exemption, deduction, allowance, or relief made in a tax return is inadmissible. If the AO considers it necessary to ensure that the assessee has not understated the income or has not computed excessive loss or underpaid the tax, he may serve the assessee a notice within the expiration of 12 months from the end of the month in which the return is furnished. This notice requires the assessee, on a date to be specified, to produce any evidence on which the assessee may rely in support of the return. In the event the assessing officer has doubts about the income disclosed by the assessee, the AO may proceed against more than one person.14 The assessing officer, besides exercising reasonable caution in the assessment process, must under all circumstances relate his estimate or calculation to some evidence on the record. He cannot make an arbitrary addition and base his conclusion purely on guess- work.15 If the order is passed by assessing in a mechanical manner without giving any reasons in the or- der itself and without any indication as to the prior approval of the higher authority, then the order would not be valid and would be liable to be quashed. Under section 143(3) the assessing officer, by an or- der in writing, can allow or reject the claim specified in the notice and make an assessment determining the total income or loss and the sum payable by the assessee on the basis of the assessment. The officer is duty bound to prove that the income has been concealed by the assessee or that information furnished in the declaration or return is not bona fide. Once the assessment order under section 143 has been duly processed, the assessee cannot request any rectification,16 including rectification as to an enhanced claim in expenses or depreciation.17 Several past precedents have ruled that if an order passed by an assess- ing officer is unsigned, the order is invalid.18 4. Best Judgment Assessment Under Section 144 of the ITA, the assessing officer is empowered to proceed with a best judgment assessment if the taxpayer fails to file a return of income or fails to comply with terms of a notice issued by the AO under Section142(1) or 143(2). 5. Income Escaping Assessment Section 147 of the ITA confers discretionary19 powers on the assessing officer to charge tax in cases when he has reason to believe that any income charge- able to tax has escaped assessment for any assessment year. These powers extend only to the extent of income that has escaped assessment and not to revising, re- opening, or reconsidering the whole assessment. The income tax officer is required to set out clear reasons in his notice to the taxpayer indicating the basis or the reason for coming to the conclusion that it is a fit case to issue notice under section 148. The reasons must be certain and definite, not loose or vague.20 The phrase ‘‘reason to believe’’ in section 147 of the ITA is stronger than the phrase ‘‘is satisfied.’’21 ‘‘Reason to believe’’ postulates a foundation based on information and a belief based on reasons.22 Regarding the word ‘‘information,’’ it ‘‘must be something more than a mere rumor or a gossip or a hunch.’’23 The taxpayer also has a duty to disclose all relevant primary facts. On disclosure of these facts, the taxpayer is relieved of his duty of any further disclosure in assisting the tax officer.24 The time notice under section 148 can be is- sued before the expiration of four years from the end of the relevant assessment year, irrespective of the quantum of income escaping assessment. 6. Death of a Party during the Assessment Process Generally, the assessment process does not extend to the estate of a deceased person beyond the previous year in which the person died.25 If the legal representative, after inheriting the assets of the deceased, had converted the assets into a different form, the income tax officers are entitled to proceed against the substituted asset in the same way as they could have against the original asset of the deceased. Furthermore, it has been held that when notice was served on the assessee before his death, fresh notice to the legal representative is not necessary.26 In an assessment made on a legal representative, the name of the legal representative must be specified. It will not suffice to describe him as a successor-in-interest.27 If a person dies executing a will appointing more than one executor or dies intestate leaving behind more than one heir, the assessing officer will proceed to assess the total income of the deceased against all the executors or the legal representatives.28 However, if an assessee files a tax return, that return is not presumed to be incorrect. It was held that once an assessment is reopened, the previous under-assessment is set aside and the whole proceedings start anew.29 7. Taxability of Court Compensation Compensation awarded by the court is taxable, but not all courts have agreed. The Punjab and Haryana Court ruled in a case in which it ultimately confirmed the decision of the tribunal that the interest awarded by the High Court to an assessee is not taxable.30 8. Tax payer's right to Appeal Chapter XX of the ITA deals with provisions relating to appeals and revisions. Part X of the Income Tax Rules provides rules and forms in relation to appeals. The Income Tax (Appellate Tribunal) Rules, 1963, gov- ern the appellate proceedings. Section 249, together with rule 45, provides for the form of appeal and its limitations for the First appeal before the commissioner of income tax (appeals) (CIT(A)). 9. Tax Tribunals Section 252 of the ITA provides for constitution of an appellate tribunal by the central government. Part XXIVA of the Indian Constitution empowers the government to constitute appropriate tribunals for speedy adjudication and disposal of disputes. The Income Tax Appellate Tribunal is the second-tier appellate forum under the ITA and is the final fact-finding authority. The tribunal functions under the Ministry of Law (not the Ministry of Finance, which controls the Income Tax Department). The minister of finance has in the past controlled a few provisions relating to the tribunal. The proceedings before the Tribunal are judicial proceedings. Section 253 of the ITA provides for the form of appeal and its limitations for the second appeal before the Tribunal. Similarly, Income Tax (Appellate Tribunal) Rules, 1963, govern proceedings before the tribunal. Section 255(5) of the ITA confers power on the tribunal to regulate its own procedure and the procedure of its benches in all matters arising out of the exercise of its powers or of the discharge of its functions. 9. Procedure to File Appeal Rules 6 through 9 of the Appellate Tribunal Rules prescribe the actual procedure for filing an appeal before the tribunal. The form of appeal is to be signed and verified by the person who is authorized to sign the income tax return under section 140 of the ITA. In the event the appeal is defective for any reason, the appellant has the opportunity to rectify it and file it before the tribunal. Similarly, minor errors or incorrect descriptions of some terms may be rectified. Under Rule 12 of the Appellate Tribunal Rules, the Tribunal may reject or return for correction a memorandum of appeal that is not in the proper form. On proper rectification, the appellant may present the appeal again for consideration and further action. 10. Res Judicata The principle of res judicata does not strictly apply to income tax proceedings and, therefore, an assessee can always challenge an action of the assessing officer in a particular year. 11. Condonation of Delay In N. Balakrishnan v. M. Krishnamurthy,31 the court explained the scope of limitation and condonation of delay: The primary function of a court is to adjudicate the dispute between the parties and to advance substantial justice. The time limit fixed for approaching the court in different situations is not because on the expiry of such time a bad cause would transform into a good cause. Rules of limitation are not meant to destroy the rights of parties. They are meant to see that parties do not resort to dilatory tactics but seek their remedy for the redress of the legal injury so suffered. The law of limitation is thus founded on public policy. D. Conclusion Table 2 shows the revenue collections of the tax department. While the gross domestic product has been on a constant rise, the tax revenues collected by the income tax departments in India have also grown significantly. The next section of the article explores taxa- tion of e-commerce and considers precedents passed by the Authority for Advance Rulings and the Supreme Court of India. Table 2: Revenue Collection (USD in millions)
Direct tax paid by households
Indirect tax less subsidies
Since nearly a decade ago, it was first predicted that because of the diminished need for a vendor to have a physical presence in the country of the customer, one of the likely effects of electronic commerce would be a shifting of revenues away from source jurisdictions and toward residence jurisdictions.32 Today, e-commerce has encouraged companies to have online presence with minimum staff and maximum impact. Products and services are rendered electronically. Tax authorities worldwide face critical issues concerning cross-border e-commerce transactions. The challenge lies in deter- mining the place where income has accrued, assessing the character of revenue, and ascertaining whether a permanent establishment was created in the source country. Digitized movement of content, services, or goods also raises a question as to whether a particular transaction is a service, product, or license.A. Background There are many definitions of e-commerce. The OECD defines an electronic transaction as ‘‘the sale or purchase of goods or services, whether between businesses, households, individuals, governments, and other public or private organizations, conducted over computer-mediated networks. The goods and services are ordered over those networks, but the payment and the ultimate delivery of the good or service may be conducted on or off-line.’’33 The OECD’s definition of e-commerce is broad. The U.S. Treasury, however, defines e-commerce as the ‘‘use of electronic means to improve the way a company does business and to create value or competitive advantages for the company. Improvements can be in the way a company transacts business-to-business (B2B), business-to-consumer (B2C) and its intra-business transactions to provide goods and services.’’34 Today there are five different segments of electronic commerce: B2B, B2C, consumer-to-consumer (C2C), business-to-government (B2G), and consumer-to- government (C2G). 1. Investigative Powers of the Tax Officers Several international bodies have addressed the areas of e-commerce. The United Nations Commission on International Trade Law (UNCITRAL) proposed the Model Law on Electronic Commerce in 1996,35 which was followed by the proposed Model Law on Electronic Signatures 2001.36 The U.N. Conference on Trade and Development Division of Services Infrastructure for Development and Trade Efficiency has set several workshops and roundtables on electronic commerce. The World Intellectual Property Organization has contributed to the development of e-commerce by ex- amining issues surrounding the growth and governance of the Internet Corporation for Assigned Names and Numbers. Similarly, several international bodies such as the World Customs Organization, the International Telecommunications Union, and the U.N. Economic Commission for Europe have rendered technical assistance. Finally, the OECD has made a large contribu- tion toward e-commerce. In addition to continuously organizing conferences, the OECD has played a major role in the international policy framework to foster and promote e-commerce worldwide in several areas such as taxation, international cooperation, and tax adminis- tration. 2. E-commerce in India The Indian government had long recognized the need and importance of information technology. Be- cause of the government’s strong initiative in providing the regulatory framework and requisite infrastructure, India is slowly gaining a strong position in the areas of outsourcing, B2B wholesale travel, financial and bank- ing products, and e-commerce. 3. E-commerce Regulations The Department of Electronics was tasked with drafting laws on information and technology. The first preliminary draft of the law was ready in July 1998 and placed before the Lok Sabha for consideration on December 16, 1999.37 The IT Bill provided a basic framework for the e-commerce regime. The draft later underwent substantial amendments, and the Union Cabinet approved the bill on May 13, 2000, and both houses of Parliament passed it on May 17, 2000. The presidential assent was finally received in June 2000.38 The Information Technology Act, 2000, amended other statutory enactments and covers such things as digital signatures, electronic governance, attribution, acknowledgment, and dispatch of electronic records, secure electronic records, and secure digital signatures, and regulation of certifying authorities.
Table 3. E-Commerce in India (USD millions)
Notes: *represents B2C and C2C.
The lack of authentic audited financial data in Indian
e-commerce space with most of the firms being privately held makes it difficult to conduct research on the effectiveness of business models in terms of publicly available financial numbers.
US $1=INR 43.31 as of July 8, 2008.
bE-stats India (http://www.estatsindia.com/stoolbox2.asp). cInternet and Mobile Association of India (eTechnology Group, Internet & Mobile Association of India, Consumer E-Commerce Market in India 2006/2007, Sept. 2007, New Delhi).
Show More4. E-Commerce Growth in India
It is evident from Table 3 that e-commerce in India has grown by leaps and bounds. While B2C transactions continue to grow, B2B growth is dominant be- cause of outsourcing, wholesale travel, logistics, consulting, and commercial services.
B. Business Process Outsourcing
Generally, business process outsourcing (BPO) may be defined as an act or process in which in-house business is contracted to a third party (whether domestically or cross-border) and the third party agrees to undertake and manage the business for a short or long-term economic consideration.
Knowledge process outsourcing (KPO) and legal process outsourcing are other forms of outsourcing. A KPO is different from a BPO in terms of the nature of work and the required skill set. A KPO involves high complexity and judgment-based work, whereas a BPO involves basic processes involving templates and stand- ard procedures. KPO may be defined as an act or process in which a firm’s in-house knowledge-intensive work is contracted to a third party (whether domestically or cross-border) and the third party agrees to undertake and manage the business using personnel with advanced skills, knowledge, and judgment.
Many BPO services are basic back-office functions consisting primarily of data entry, data transfer, or data conversion tasks; moving data from a document or data- base to a general ledger; or billing services. These tasks require basic clerical skills and can usually be fully accomplished off-site. BPO vendors may also offer advanced data and accounting services. As the BPO ven- dor establishes itself as a reputable business, it may begin to offer more complex BPO services.
C. Taxation of E-Commerce Transactions
Web-based online transactions between companies may be subject to different market forces and strategies. Income arising from an international transaction be- tween associated enterprises is computed at the arm’s- length price.
The powers of the assessing officer and the tax ad- ministration have been discussed in Section I. The tax authorities enjoy a wide discretionary power under the ITA. Under sections 92C and 92F of the ITA, which deal with the computation of the arm's length price, the assessing officer is empowered to determine the arm's length price and compute the total income of the assessee. The assessing officer is exempt from demonstrating avoidance or diversion of tax before invoking provisions of section 92C and 92CA.39 It is sufficient for the assessing officer to invoke provisions of section 92CA(1) if it is shown that there were circumstances that prompted him to consider it necessary to refer the computation of the arm's length price to the transfer pricing officer.
D. India-U.S. Tax Treaty
India and the United States have signed an income tax treaty.40 Under the treaty, taxation of income is determined by citizenship in addition to the residence of a person. Accordingly, income arising in the hands of an Indian resident regarding professional services rendered to a U.S. entity in the United States would generally not be subject to tax. However, if the person is a U.S. citizen, the income would be taxable in the United States.41
In cases in which a parent company that holds 10 percent shares in its subsidiary receives dividends from the subsidiary, the dividend is subject to tax at the rate of 15 percent. Interest on deposits earned by banking or financial institutions is subject to tax at the rate of 10 percent.
Under the treaty, industrial or copyright royalties are taxed at the rate of 20 percent for a period of five years from the date the treaty came into effect. After the expiration of the five-year term, the applicable tax rate is set to 15 percent.
India’s tax system has come a long way from a narrow and complicated system to one that is efficient.
That said, it is complex and needs transparency. It is imperative to codify one statutory enactment instead of having separate rules, circulars, bylaws, and guides.
While the tax department is technologically savvy, measures may need to be undertaken to refine the administrative and procedural aspects. The tax authorities must disclose the information and details that they have relied on. In international tax transactions, the statute needs to prohibit departmental authorities and assessing officers from using information based on un- confirmed, private sources.
Because India is a high-tax jurisdiction, it is imperative that foreign corporate entities exercise a reasonable degree of caution before establishing a presence in India. Determining the type of entity and the nature of operations, appointing distributors, and adopting an appropriate mode of sales may need detailed consideration.
This Article was originally published in Tax Notes International, Volume 52, Number 2 (13 October 2008)
End Notes:1See, e.g., David Tillinghast, ‘‘The Impact of the Internet on the Taxation of International Transactions,’’ 50 Bull. Int’l Fiscal Document 11/12, 524, 525 (1996); Tillinghast, ‘‘Taxation of Electronic Commerce: Federal Income Tax Issues in the Establishment of a Software Operation in a Tax Haven,’’ 4 Fla. Tax Rev. 339 (1998). 2See Eric Stokes, The English Utilitarians and India, Oxford: Clarendon Press (1959); and Uday Singh Mehta, Liberalism, and Empire: A Study in Nineteenth-Century British Liberal Thought, Chicago: University of Chicago Press (1999). 3Income tax rules are amended by publishing a notification in the official gazette of the government of India. To amend the ITA, the amendment to the bill must be passed in Parliament. 4Tax may also be payable on receipt of a notice. 5See http://finmin.nic.in/kelkar/Full_Report.pdf. 6Section 222(d) of the ITA read with rule 69 of the Income Tax Rules authorizes the tax recovery officer to attach the busi- ness and appoint a person as receiver to manage the business. These powers are consistent with Order XL of the Civil Pro- cedure Code, 1908, relating to appointment of receivers by courts in civil disputes. 7See, e.g., Thalibai F. Jain v. ITO,  101 ITR 1 (Kar.); K. Rudra Rao v. ITO,  34 ITR 216 (AP); CIT v. Simon Carves Ltd.,  105 ITR 212 (SC); Sheoshankar v. State Government of Madhya Pradesh, AIR 1951 Nag. 58 F.B. at 66. 8See Jain, supra note 7. 9These adjustments could be by way of tax deducted at source, any advance tax paid, any tax paid on self-assessment, and any amount paid otherwise by way of tax or interest. 10For the purposes of assessing income tax, the law to be ap- plied is the law that is in force in the assessment year; in other words, the ITA as it stands amended on the first day of April of a financial year will apply to the assessment for that year; see Reliance Jute & Industries Ltd. v. CIT,  120 ITR 921 (SC); Addl. CIT v. Joginder Singh,  151 ITR 93 (Delhi). 11Suraj Mall Mohta and Co. v. A.V. Viswanatha Sastry,  26 ITR 1 (SC); Ajantha Industries v. Central Board of Direct Taxes,  102 ITR 281 (SC); in State of Orissa v. Dr. Binapani Dei AIR, 1967 SC 1269, the Apex Court held that even an administrative order that involves civil consequences must be passed consistent with the rules of natural justice. 12Gargi Din Jwala Prasad v. Commissioner of Income-tax,  96 ITR 97 (ALL.). See also Maneka Gandhi v. Union of India, (1978) 1 SCC 248, in which the Supreme Court discussed in detail the various aspects of the rule of natural justice and considered the principles of audi alteram partem and nemo judex in causa sua. Ar- ticle 311 (2)(b) of the constitution also expressly permits an ex- ception for holding an inquiry by authorities empowered to re- move or dismiss a person or reduce his rank in cases when it is not expedient in the public interest to hold the inquiry. 13Dr. Nalini Mahajan v. Director of Income-tax,  257 ITR 123; see also Nazir Ahmad v. King Emperor AIR, 1936 PC 253; Viter- alli v. Saton, 3 Law Ed. 1012; and Ramana Dayaram Shetty v. Inter- national Airport Authority of India,  3 SCC 489. 14See Lalji Haridas v. ITO/Chhotalal Haridas v. M.D. Karnik, 43 ITR 387 (SC). 15See International Forest Co. v. CIT,  101 ITR 721 (J & K). 16Section 154 of the ITA provides for the rectification of mistakes. 17 See Choice Aquaculture (P) Ltd v. ITO, (2006 100 ITD 143 Ahmedabad-Tribunal); the tribunal referred to S.I.J. Chains (P) Ltd v. ACIT, (2006) 100 ITD 379 (Asr.), in arriving atthe judgmentt. 18 See Kalyankumar Ray v. CIT,  191 ITR 634; Smt. Kilasho Devi Burman v. CIT,  85 Taxman 346/219 ITR 214 (SC). 19 Reliance is placed on use of ‘‘may’’ in the section: ‘‘he may, subject to the provisions of sections 148 to 153.’’ 20 See Chhugamal Rajpal v. S.P. Chaliha and Ors., (1971) 79 ITR 603; in this case, reassessment proceedings were struck down by the Supreme Court on the grounds that in the reasons recorded by the AO, he had vaguely referred to some communications that he had received. 21 See Ganga Saran and Sons Pvt. Ltd. v. Income-tax Officer and Others, (1981) 130 ITR 1. 22 See United Electrical Co. Pvt. Ltd. v. Commissioner of Income-tax,(2002) 258 ITR 317. 23See Bawa Abhai Singh v. Deputy Commissioner of Income Tax, (2002) 253 ITR 86. 24See Calcutta Discount Co. Ltd. v. ITO, (1961) 41 ITR 191 (SC). 25 See CIT v. Amarchand N. Shroff,  48 ITR 59 (SC); CIT v. James Anderson,  51 ITR 345 (SC); Estate of Late Rangalal Jajodia v. CIT,  79 ITR 505 (SC); and CIT v. Hukumchand Mohanlal,  82 ITR 624 (SC). 26 See K. Ashok Kumar v. CIT,  162 ITR 543 (Kar.). 27 See Sahasrangshu Kanta Acharya v. Collector of Malda,  47 ITR 754 (Cal.). 28 Under the ITA, ‘‘legal representative’’ has the meaning as- signed to it in clause (11) of section 2 of the Code of Civil Pro- cedure, 1908 (5 of 1908). Section 2(11) of the Code of Civil Pro- cedure defines legal representative as a ‘‘person who in law represents the estate of a deceased person, and includes any per- son who intermeddles with the estate of the deceased and where a party sues or is sued in a representative character the person on whom the estate devolves on the death of the party so suing or sued.’’ See also First Addl. ITO v. Mrs. Suseela Sadanandan,  57 ITR 168 (SC). 29 In V. Jaganmohan Rao v. CIT,  75 ITR 373 (SC), the scope of section 34(1)(b) of the Indian Income Tax Act, 1922, arose for consideration. 30 Commissioner of Income-tax v. B. Rai,  264 ITR 617 (P&H); the court stated, ‘‘Where, however, interest to be paid, is in the discretion of the court, as is in the present case, the said payment would not amount to income for the purpose of the income-tax.’’ 31 1998 7 SCC 123 S; see also Hindu Business Line, taxation opinion, T.N. Pandey, former chair at the Central Board of Di- rect Taxes.