S.2(12A) : Books of account –Entries in loose papers/ sheets are irrelevant and inadmissible as evidence – Offences and prosecution – Settlement Commission [Ss.132, 143(3), 245D, Evidence Act, S. 34]
Entries in loose papers/ sheets are irrelevant and inadmissible as evidence. Such loose papers are not “books of account” and the entries therein are not sufficient to charge a person with liability. Even if books of account are regularly kept in the ordinary course of business, the entries therein shall not alone be sufficient evidence to charge any person with liability. It is incumbent upon the person relying upon those entries to prove that they are in accordance with facts. Finding of Settlement Commission disregarding such evidence as inadmissible and unreliable. The materials in question were not good enough to constitute offences to direct the registration of a first information report and investigation therein. (C.B.I. v. V. C. Shukla (1998)3 SCC 410 (SC) followed).
Common Cause (A Registered Society) v. UOI (2017) 394 ITR 220 (SC)
S.4 : Charge of income–tax – Capital or revenue – Subvention received by assessee from parent company at time when assessee making losses, payment to protect capital investment was held to be not revenue receipt [Ss.2(24), 28(i)]
On the question whether the subvention received by the assessee-company from its parent company in Germany in a situation where the assessee-company was making losses had to be treated as a capital or revenue receipt.
Held, that the voluntary payments made by the parent company to its loss making Indian company could be understood to be payments made in order to protect the capital investment of the assessee-company. The payments made to the assessee-company by the parent company for the assessment years in question could not be held to be revenue receipts. (AY. 1999-2000, 2000-01, 2001-02)
Siemens Pub. Communication Network Ltd v. CIT (2017) 390 ITR 1 / 291 CTR 22 / 244 Taxman 188 (SC)
S.4 : Charge of income-tax –Capital or revenue receipt – Sales tax subsidy – Matter was remanded to High Court for consideration [S.28(i)]
Allowing the appeal of the revenue, the matter was remanded to the High Court with a direction that the High Court shall admit the appeal and decide it on the merits. CIT v. Reliance Industries Ltd ( 2004) 88 ITD 273 (Bom.) (SB) (Trib.)
CIT v. Nitco Tiles Ltd. (2017) 395 ITR 519/ 247 Taxman 308 (SC)
S.9(1)(vii) : Income deemed to accrue or arise from India – Automated software – based communication system set up and maintained by assessee for use of its agents enabling them to access customer and documentation information – Payment received for providing said facility was held to be not taxable as fees for technical services – DTAA-India –Denmark. [Articles 13, 19]
Dismissing the appeal of the revenue, the Court held that payments received by the assessee, a shipping company from its agents towards reimbursement of cost for maintaining a global vertically integrated telecommunication facility called Maersk Net system which enabled agents to co-ordinate cargos and ports of call for its fleet were not fees for technical services and changeable to tax in terms of Article 9 of the DTAA.
DIT(IT) v. A. P. Moller Maersk A/S (2017) 392 ITR 186/ 246 Taxman 309 / 293 CTR 1 / 147 DTR 395 (SC)
S.22 : Income from house property – Business income – The objects clause is not determinative. Income earned from sub-licences is required to be taxed under the head “Income from House Property”. [Ss. 27(iii)(b), 28(i), 269UA(f)]
Dismissing the appeal of the assessee, the Supreme Court after analysing various sections and case laws the Court held that to determine whether income earned by the appellant from the shopping centre was required to be taxed under the head ‘business income’ or ‘income from house property’; the object clause, as contained in the partnership deed, would not be the conclusive factor. Matter has to be examined on the facts of each case as held in Sultan Bros. (P) Ltd. Even otherwise, the object clause which is contained in the partnership firm is to take the premises on rent and to sub-let. In the present case, reading of the object clause would bring out two discernible facts. The Tribunal had specifically adverted to this issue and recorded the finding that the assessee had not established that it was engaged in any systematic or organised activity of providing service to the occupiers of the shops or stalls so as to constitute the receipts as business income. The Tribunal being final fact finding authority and the assessee has not shown the finding was perverse. (AY. 2000-01)
Raj Dadarkar & Associates v. ACIT (2017) 394 ITR 592/ 248 Taxman 1 (SC)
S.35B : Export Markets Development Allowance –Commission paid to agent is held to be eligible for weighted deduction
Allowing the appeal, the Court held that the finding of the High Court that the assessee had not put up a case that it had maintained branch or agency outside the country was clearly an erroneous finding and against the record. Although the assessee was not maintaining any branch office, it had paid commission to agent for export business and hence eligible for weighted deduction. (AY. 1983-84)
Velvet Carpet and Co. Ltd v. CIT (2017) 395 ITR 515 (SC)
S.37(1) : Business expenditure – Capital or revenue – Technical Know-how – Agreement crucial for setting up of plant project for manufacture of goods hence the payment was held to be capital in nature
What is “capital expenditure” and what is “revenue” are not eternal verities but must need to be flexible so as to respond to the changing economic realities of business. The expression “asset or advantage of an enduring nature” was evolved to emphasise the element of a sufficient degree of durability, appropriate to the context. On facts the payment was made under the technical collaboration agreement for setting up of project for manufacture of goods hence the payment was held to be capital in nature. (AY. 1999-2000 to 2005-06)
Honda Siel Cars India Ltd. v. CIT (2017) 395 ITR 713/ 295 CTR 569 /82 taxmann.com 212 (SC)
S.37(1) : Business expenditure –Capital or revenue – Interest paid on loan taken for establishment of new unit capitalised in books was held to be revenue expenditure [Ss.32, 145]
Dismissing the appeal of the Revenue, the Court held that the Tribunal was justified in allowing the expenditure incurred by the assessee towards the interest paid on loans taken and expenditure on other items connected with establishment of the unit which have been capitalized by the assessee but claimed as revenue expenditure. Court also observed that if the assessee has taken any depreciation on the amount of interest and other items which has been allowed as revenue expenditure that such depreciation should be reversed by the assessing authority. (AY. 2000-01)
CIT v. Shri Rama Multi Tech Ltd. (2017) 393 ITR 371 / 151 DTR 169/ 295 CTR 233 (SC)
S.80IA : Industrial undertakings – Any activity which brings a commercially new product into existence constitutes production. The process of bottling of LPG renders it capable of being marketed as a domestic kitchen fuel and, thereby, makes it a viable commercial product
[Ss. 80HH, 80-I ]
Dismissing the appeal of the revenue, the Court held that bottling of LPG, as undertaken by the assessee, is a process which amounts to ‘production’ or ‘manufacture’ for the purposes of Sections 80HH, 80-I and 80-IA of the Act, and the assessees are entitled to claim the benefit of deduction under the aforesaid provisions while computing their taxable income. The Court held that any activity which brings a commercially new product into existence constitutes production. (CA. No. 9295 of 2017, dt. 3-8-2017)
CIT v. Hindustan Petroleum Corporation Ltd.(SC), www.itatonline.org
S. 194A : Deduction at source – Interest on compensation awarded by the Motor Accident Claims Tribunal – Threshold limit of ₹ 50,000 for making deduction – High Court holding interest not to be taken at lump sum but having accrued from year to year from date of claim till deposit after apportionment among claimants – Interest so computed in hands of each claimant was, below threshold limit of ₹ 50,000 per year, considering the smallness of the amount the appeal was dismissed and the question of law left open
Dismissing the appeal of the Revenue, the Court held that interest computed in hands of each claimant was below threshold limit of ₹ 50,000 per year. Considering the smallness of the amount the appeal was dismissed and the question of law is left open.
CIT v. Hansaguri Prafulchandra Ladhani and Ors. (2017) 393 ITR 82/ 152 DTR 288 (SC)
CIT v. Aruna Begum & Ors ( 2017) (2017) 393 ITR 82 / 152 DTR 288 (SC)
CIT v. Mani Gopal & Ors ( 2017) (2017) 393 ITR 82 / 152 DTR 288 (SC)
S.254(2) : Appellate Tribunal – Rectification of mistake apparent from the record – Non consideration of paper book filed is a mistake apparent from the record, Tribunal was directed to hear the appeal of the assessee afresh on the basis of documents which have been already found to be filed by the assessees
Allowing the petition the Court held that Non consideration of paper book filed is a mistake apparent from the record. Tribunal was directed to hear the appeal of the assessee afresh on the basis of documents which have been already found to be filed by the assessee. (AY. 1996-97)
Nisha Synthetics Ltd. v. CIT (2017) 145 DTR 345 / 291 CTR 328 (SC)
Finance Act, 2016
Finance Act, 2016 – Pradhan Mantri Garib Kalyan Yojna, 2016
S.199A : Pradhan Mantri Garib Kalyan Yojna, 2016 – Legislative powers – Judicial review – Court declined to enter into or encroach upon policy making arena and suggest a different policy on ground that it was not within domain of Court – There is a distinction between assailment of the Constitutional validity of a policy and conception of framing of a better policy. [Ss. 199E, 199F Art. 32 ]
Challenging the Section 199A of the Finance Act, 2016, Pradhan Mantri Garib Kalyan Yojna, 2016 the Petitioner urged for a different and better scheme which could have got more good money in banks and honest tax payers would have deposited amount. However Court declined to enter into or encroach upon policy making arena and suggest a different policy on ground that it was not within domain of Court, therefore there was no justification to issue notice in instant petition and accordingly it was dismissed
Siddharth Mehta v. UOI (2017) 393 ITR 312 / 244 Taxman 289/ 148 DTR 248/ 293 CTR 365 (SC)
Precedent – Dismissal of Special Leave Petition in limine – Not an affirmation of High Court. [S.40(a)(ia), 194C, 200 ]
The fact that the Special Leave Petition against the decision of the High Court was dismissed by the Supreme Court would not
amount to a confirmation of the view of the High Court.
Palam Gas Service v. CIT ( 2017) 394 ITR 300/ 247 Taxman 379 / 151 DTR 1/ 295 CTR 1 (SC)
Precedent – Law laid down by High Court is binding on all in the State
The law laid down by the High Court is binding on all authorised in the State
CIT v. Raghuvir Synthetics Ltd( 2017) 394 ITR 1/ 151 DTR 153/ 295 CTR 143 (SC)
Res judicata – Need for consistency and certainty
While it is true that the principle of Res judicata would not apply to assessment proceedings under the Act, the need for consistency and certainty and existence of strong and compelling reasons for a departure from a settled position has to be spelt out for departure from settled position. Radhasoami Satsang v. CIT (1992) 193 ITR 321 (SC) followed.
Godrej & Boyce Manufacturing Co. Ltd v. Dy. CIT (2017) 394 ITR 449 / 247 Taxman 361/ 151 DTR 89/ 295 CTR 121 (SC).