1. S.4 : Income chargeable to tax – Share application money – The interest accrued from share application money has statutorily required to be kept in separate account and was being adjusted towards the cost of raising share capital against public issue expenses [S. 56, 145]
   

   Dismissing the appeal of the revenue the Court held that interest accrued on account of deposit of share application money is not taxable income. Such interest is inextricably linked with the requirement to raise share capital and is thus adjustable towards the expenditures involved for the share issue. The fact that part of the share application money would normally have to be returned to unsuccessful applicants, and therefore, the entire share application money would not ultimately be appropriated by the Company, make no significant difference. The Interest earned from share application money has statutorily required to be kept in separate account and was being adjusted towards the cost of raising share capital against public issue expenses
   (Referred CT v. Bokaro Steel Ltd. (1999) 236 ITR 315 (SC)(CA No. 6391 of 2013/ 8336 of 2013 dt. 24-4-2018)

   CIT v. Shree Rama Multi Tech Ltd. (SC); www.itatonline.org

2. S.4 : Income chargeable to tax – Diversion of income by overriding title – Acted only broker – For determination of taxable income, written agreement is not relevant, conduct of parties can be considered accordingly. Only income that has actually accrued to the assessee is taxable. [S. 145]
   

   Dismissing the appeal of the revenue the Court held that. The income that has actually accrued to the respondent is taxable. What income has really occurred to be decided, not by reference to physical receipt of income, but by the receipt of income in reality. Given the fact that the respondent had acted only as a broker and could not claim any ownership on the sum of ₹ 14,73,91,000/- and that the receipt of money was only for the purpose of taking demand drafts for the payment of the differential interest payable by Indian Bank and that the Respondent had actually handed over the said money to the Bank itself, we have no hesitation in holding that the respondent held the said amount in trust to be paid to the public sector units on behalf of the Indian Bank based on prior understanding reached with the bank at the time of sale of securities and, hence, the said sum of ₹ 14,73,91,000/- cannot be termed as the income of the Respondent. In view of the above discussion, the decision rendered by the High Court requires no interference (CA. No.4341 of 2018, dt. 24-4-2018)(AY. 1991-92 to 1993-94)

   DCIT v. T. Jayachandran (SC); www.itatonline.org

3. S.5 : Scope of total income –Income chargeable to tax – Double taxation – Where the assessee has paid the income- tax at source in the State of Sikkim as per the law applicable at the relevant time in Sikkim, the same income was not taxable under the IT Act, 1961 – In a case of reasonable doubt, the construction most beneficial to the taxpayer is to be adopted [S.4, 80TT, 256(1), Sikkim State Income Tax Rules, 1948, Art. 371F]
   

   Allowing the appeal of the assessee the Court held that where the assessee has paid the income tax at source in the State of Sikkim as per the law applicable at the relevant time in Sikkim, the same income was not taxable under the IT Act, 1961. It is a fundamental rule of law of taxation that unless otherwise expressly provided, income cannot be taxed twice. A taxing Statute should not be interpreted in such a manner that its effect will be to cast a burden twice over for the payment of tax on the taxpayer unless the language of the Statute is so compelling that the Court has no alternative than to accept it. In a case of reasonable doubt, the construction most beneficial to the taxpayer is to be adopted. While S. 5 of the IT Act would not be applicable, the existing Sikkim State Income Tax Rules, 1948 would be applicable. Thus, on the income, it would appear that Income-tax would be payable, under Sikkim State Income Tax Rules, 1948 and not under the IT Act. Since Sikkim is a part of India for the accounting year, there would appear to be, on the same income, two types of income taxes cannot be applied. On the issue of double taxation reference was made to
   Laxmipat Singhania v. CIT (1969) 72 ITR 291 ( SC) (294) and Jain Brothers and Others v UOI (1970) 77 ITR 107 (SC). As regards other issues whether the income that is to be allowed deduction under section 80TT of the IT Act is on ‘Net Income’ or ‘Gross Income’, becomes academic. (CA No. 4166 of 2006, dt. 19-4-2018)

   Mahaveer Kumar Jain v. CIT (SC), www.itatonline.org

4. S.10A : Free trade zone – Profits of business – Export turnover –Total turn over – Export turnover is the numerator whereas the total turnover is the denominator in the formula for computing profit from exports. Software development charges are to be excluded while working out the deduction admissible on the ground that such charges are relatable towards expenses incurred on providing technical services outside India [S.80HHC, 80HHE]
   

   Dismissing the appeals of the revenue the Court held that if the deductions on freight, telecommunication and insurance attributable to the delivery of computer software u/s. 10A of the IT Act are allowed only in Export Turnover but not from the Total Turnover then, it would give rise to inadvertent, unlawful, meaningless and illogical result which would cause grave injustice to the assessee which could have never been the intention of the legislature As the object of the formula is to arrive at the profit from export business, expenses excluded from export turnover have to be excluded from total turnover also. Otherwise, any other interpretation makes the formula unworkable and absurd. Even in common parlance, when the object of the formula is to arrive at the profit from export business, expenses excluded from export turnover have to be excluded from total turnover also. Otherwise, any other interpretation makes the formula unworkable and absurd. Hence, we are satisfied that such deduction shall be allowed from the total turnover in same proportion as well. (CA Nos. 8489-8490 of 2013, dt. 24-4-2018)

   CIT v. HCL Technologies Ltd. (SC), www.itatonline.org

5. S.11 : Property held for charitable purposes – Application of income – Write back of depreciation was allowed to be carried forward for application of income of subsequent years [S.32]
   

   Dismissing the appeal the Court held that, the High Court has allowed the assessee to write back the depreciation for this year and even for previous years and if that is done, the AO is directed to modify the assessment determining the higher income and allow the recompted income with written back of by the assessee to be carried forward for subsequent years as applicable for charitable purposes Though the question was answered in favour of the revenue, relief was granted to the assessee as application of income. (AY. 2005-06)

   Lissie Medical Institutions v. CIT (2018) 161 DTR 73/300 CTR 130 (SC)

6. S.14A : Disallowance of expenditure – Exempt income – Stock in trade – Controlling interest – Only that expenditure which is “in relation to” earning dividends can be disallowed- AO has to record proper satisfaction on why the claim of the assessee as to the quantum of suo motu disallowance is not correct. [R.8D]
   

   Court held that the argument that S. 14A & Rule 8D will not apply if the “dominant intention” of the assessee was not to earn dividends but to gain control of the company or to hold as stock-in-trade is not acceptable. S. 14A applies irrespective of whether the shares are held to gain control or as stock-in-trade. However, where the shares are held as stock-in-trade, the expenditure incurred for earning business profits will have to be apportioned and allowed as a deduction. Only that expenditure which is “in relation to” earning dividends can be disallowed u/s. 14A & Rule 8D. The AO has to record proper satisfaction on why the claim of the assessee as to the quantum of suo motu disallowance is not correct. (CA. No. 104-109 of 2015, dt. 12-2-2018)

   Maxopp Investment Ltd. v. CIT (SC), www.itatonline.org

7. S.17(2) : Perquisite – Amount received by an employee from redemption of Stock Appreciation Rights (SARs) cannot be assessed as “perquisite” or as “profits of business” [S.17(2)(iii), 28(iv), 45]
   

   Dismissing the appeal of the revenue, the Court held that amount received by an employee from redemption of Stock Appreciation Rights (SARs) cannot be assessed as “perquisite” u/s. 17(2) (iii) or as “profits of business” u/s. 28 (iv) or as “capital gains” ,despite no “cost of acquisition. Circular No 710 dt 24-7-1995, was considered. The Court also held that; the Respondent got the Stock Appreciation Rights (SARs) and, eventually received an amount on account of its redemption prior to 1-4-2000 on which the amendment of Finance Act, 1999 (27 of 1999) came into force. In the absence of any express statutory provision regarding the applicability of such amendment from retrospective effect, we do not find any force in the argument of the Revenue that such amendment came into force retrospectively. It is well-established rule of interpretation that taxing provisions shall be construed strictly so that no person who is otherwise not liable to pay tax, be made liable to pay tax.
   (CIT v. Infosys Technologies Ltd. (2008) 297 ITR 167 (SC), Sumit Bhattacharya v. ACIT (2008) 112 ITD 1 (SB) (Mum)(Trib.) (CA. No. 4380/ 4381 of 2018, dt. 24-4-2018)(AY. 1998 -99)

   ACIT v. Bharat V. Patel (SC); www.itatonline.org

8. S.28(iv) : Business income – Waiver of loan – Remission or cessation of trading liability –Loan waiver cannot be assessed as cessation of liability, if the assessee has not claimed any deduction u/s. 36(1)(iii) of the Act qua the payment of interests in any previous year and S.28(iv) does not apply if the receipts are in the nature of cash or money [S. 4, 41(1)]
   

   Dismissing the appeal of the revenue the Court held that S. 28(iv) of the IT Act does not apply on the present case since the receipts are in the nature of cash or money and S.41(1) of the IT Act does not apply since waiver of loan does not amount to cessation of trading liability. It is a matter of record that the Respondent has not claimed any deduction under S. 36(1)(iii) of the IT Act qua the payment of interest in any previous year. (CA Nos. 6949-6950 of 2004, dt. 24-4-2018).

   CIT v. Mahindra and Mahindra Ltd. (SC), www.itatonline.org

9. S.40(a)(ia) : Amounts not deductible – Deduction at source – The amendment made by the Finance Act, 2010 in Section 40(a)(ia) of the IT Act is retrospective in nature
   

   Dismissing the appeal of the revenue the Court held that the amendment to S. 40(a)(ia) by the Finance Act, 2010 w.e.f. 1-4-2010 to provide that all TDS made during the previous year can be deposited with the Government by the due date of filing the return of income should be interpreted liberally and equitably and applied retrospectively from the date when S. 40(a)(ia) was inserted i.e., with effect from the AY 2005-2006 so that an assessee should not suffer unintended and deleterious consequences beyond what the object and purpose of the provision mandates. The amendment is curative in nature and should be given retrospective operation as if the amended provision existed even at the time of its insertion. (CA Nos. 4339-4340 of 2018, dt. 24-4-2018)( AY. 2005-06)

   CIT v. Calcutta Export Company (SC), www.itatonline.org

10. S.41(1) : Profits chargeable to tax – Remission or cessation of trading liability – Deferral sales tax Scheme – Premature payment in terms of net present value (NPV) of same cannot be assessed as remission or cessation of liability [S.43B]
    

    Dismissing the appeal of the revenue the Court held that premature payment in terms of net present value (NPV) of same cannot be assessed as remission or cessation of liability. What assessee was required to pay after 12 years in 6 equal instalments was paid by assessee prematurely in terms of net present value (NPV) of same. (AY. 2003-04)

    CIT v. Balkrishna Industries Ltd. (2018) 252 Taxman 375 / 300 CTR 209 (SC)

    Editorial: CIT v. Sulzer India Ltd. (2014) 369 ITR 717/ (2015) 229 Taxman 264 (Bom) (HC) is affirmed.

11. S.80IA : Industrial undertakings – Infrastructure development –Inland Container Depots (ICDs) are Inland Ports and income earned out of these Depots are eligible for deduction. However, the actual computation is to be made in accordance with the different Notifications issued by the Customs department with regard to different ICDs located at different places [S.80IA(4)]
    

    Dismissing the appeal of the revenue the Court held that Inland Container Depots (ICDs) are Inland Ports and income earned out of these Depots are eligible for deduction. However, the actual computation is to be made in accordance with the different Notifications issued by the Customs department with regard to different ICDs located at different places.
    (CA No. 8900 of 2012, dt. 24-4-2018) (AYs. 2003-04 to 2005-06)

    CIT v. Container Corporation of India Ltd. (SC), www.itatonline.org

12. S.80-O : Royalties – Foreign enterprises – Technical assistance – Principal agent relationship – Information concerning industrial, commercial or scientific knowledge, experience or skill – Major information sent by the appellant to the Sumitomo Corporation was in the form of blue prints for the manufacture of dies for stamping of doors therefore not entitle to deduction
    

    Dismissing the appeal of the assessee the Court held that; major information sent by the Appellant to the Sumitomo Corporation was in the form of blue prints for the manufacture of dies for stamping of doors. There was principal and agent relationship, accordingly the assessee was not entitle to deduction. Court also observed that, the Appellant failed to prove that he rendered technical services to the Sumitomo Corporation and also the relevant documents to prove the basis for alleged payment by the Corporation to him. The letters exchanged between the parties cannot be claimed for getting deduction under Section 80-O of the IT Act. Court also observed that it is settled law that the expressions used in a taxing statute would ordinarily be understood in the sense in which it is harmonious with the object of the Statute to effectuate the legislative animation. (CA No. 3892 of 2007, dt. 24-4-2018)(AY. 1997-98)

    B. L. Passi v. CIT (SC), www.itatonline.org

13. S.143(3) : Assessment – Real income – Lease rental – Interest and loan recovery – Guidance Note issued by the ICAI carries great weight – An assessee can only be taxed on “real income” [S. 145(3)]
    

    Dismissing the appeal of the revenue, the Court held that an assessee can only be taxed on “real income”. The bifurcation of lease rental is not an artificial calculation. Lease equalisation is an essential step in the accounting process to ensure that real income from the transaction in the form of revenue receipts only is captured for the purposes of income tax. The Guidance Note issued by the ICAI carries great weight. The method of accounting prescribed in such a Guidance Note, in order to compute real income and offering the same for taxation, cannot be disregarded by the AO unless such action falls within the scope and ambit of S. 145(3) of the IT Act (CA No. 4358 of 2018, dt. 24-4-2018) (AY. 1999-00)

    CIT v. Virtual Soft Systems Ltd. (SC) , www.itatonline.org

14. S.147 : Reassessment – Change of opinion – Excess deduction was allowed was based on change of opinion on same facts hence reassessment was held to be bad in law. [S. 10A, 148]
    

    Dismissing the appeal of the revenue the Court held that; initiation of the reassessment proceedings under Section 147 by issuing a notice under Section 148 merely because of the fact that now the Assessing Officer is of the view that the deduction under Section 10A was allowed in excess, was based on nothing but a change of opinion on the same facts and circumstances which were already in his knowledge even during the original assessment proceedings. Court also observed that, in order to constitute “change in opinion”, the assessment earlier made must either expressly or by necessary implication have expressed an opinion on the subject matter of reopening. If the assessment order is non-speaking, cryptic or perfunctory in nature, it may be difficult to attribute to the AO any opinion on the questions that are raised in the proposed reassessment proceedings. The reassessment cannot be struck down as being based on “change of opinion” if the assessment order does not address itself to the aspect sought to be examined in the re-assessment proceedings. (CIT v. Kelvinator of India Ltd (2010) 320 ITR 561 (SC) (CA No. 2732 of 2007, dt. 24-4-2018) (AY. 2001-02)

    ITO v. TechSpan India Private Ltd.(SC), www.itatonline.org

15. S.147 : Reassessment – Transfer pricing – Permanent establishment – Income had already been disclosed by the Indian subsidiary and found by the Transfer Pricing Officer (TPO) to be at arm’s length. Reassessment was held to be bad in law. [Ss. 92C, 148]
    

    Allowing the appeal of the assessee the Court held that the AO is not entitled to issue a reopening notice only on the basis that the foreign company has a permanent establishment (PE) in India if the transactions in respect of which it is alleged that there has been an escapement of income had already been disclosed by the Indian subsidiary and found by the Transfer Pricing Officer (TPO) to be at arm’s length. (CA. No. 2833 of 2018, dt. 14-3-2018)

    Honda Motor Co. Ltd. v. ADCIT(SC), www.itatonline.org

16. S.148 : Reassessment – Clerical mistake – The object and purpose behind S. 292B is to ensure that technical pleas on the ground of mistake, defect or omission should not invalidate the assessment proceedings, when no confusion or prejudice is caused due to non-observance of technical formalities [Ss. 147, 292B]
    

    Dismissing the petition the Court held that notice issued in the name of a company which does not exist upon its conversion into an LLP is valid if there is material to show that the issue in the name of the company was a clerical mistake. The object and purpose behind S. 292B is to ensure that technical pleas on the ground of mistake, defect or omission should not invalidate the assessment proceedings, when no confusion or prejudice is caused due to non-observance of technical formalities. The Court also observed that, in the peculiar facts of this case, we are convinced that wrong name given in the notice was merely a clerical error which could be corrected under S. 292B of the Income-tax Act. (SLP No. 7409/2018, dt. 2-2-2018) (AY. 2010-11)

    Skylight Hospitality LLP v. ACIT (SC), www.itatonline.org

    Editorial. Order of Delhi High Court in Skylight Hospitality LLP v. ACIT (WP No. 10870/ 2017 dt. 2- 2-2018 is affirmed

17. S.158BB : Block assessment – Material found in the course of search and survey which has been made simultaneously made at the premises of connected person can be utilised while making block assessment [Ss. 132, 133A, 158BC]
    

    Allowing the appeal of the revenue the Court held that while it is a cardinal principle of law that in order to add any income in the block assessment, evidence of such income must be found in the course of the search u/s. 132, any material or evidence found/collected in a survey u/s .133A which has been simultaneously made at the premises of a connected person can also be utilised while making the Block Assessment. The same would fall under the words “and such other materials or information as are available with the Assessing Officer and relatable to such evidence” occurring in S. 158 BB. (CA No. 10164 of 2010, dt. 2-5-2018)

    CIT v. S. Ajit Kumar (SC), www.itatonline.org

18. S.158BD : Block assessment –Undisclosed income of any other person – Recording of reasons – Issue of Second (Fresh) Notice under S. 158BD of the Act is valid [Ss. 132,148, 158BC]
    

    Dismissing the appeal of the assessee the Court held that; although S. 158BD does not speak of ‘recording of reasons’ as postulated in S. 148, but since proceedings u/s. 158BD may have monetary implications, such satisfaction must reveal mental and dispassionate thought process of the AO in arriving at a conclusion and must contain reasons which should be the basis of initiating the proceedings u/s. 158BD. Notice u/s. 158BC issued on the same date to the searched person and the other person is not valid as no reasonable or prudent man can come to the satisfaction that any undisclosed income belongs to the other person unless the seized books of account etc. are verified. The AO is empowered to issue a second notice u/s. 158BD to the other person. Accordingly the order of High Court was affirmed. (CA No. 2014 of 2007, dt. 24-4-2018)(AY. 1989-90 to 1999-2000)

    Tapan Kumar Dutta v. CIT (SC), www.itatonline.org

19. S.194H : Deduction at source – Commission or brokerage –Principal and agent – Payment of commission made to advertisement agencies was held to be deducted tax at source. Non-compliance was held to be attracted the provision of S. 201 [S. 201(IA]
    

    Dismissing the appeal of the assessee the Court held that, payment of commission made to advertisement agencies was held to be deducted tax at source. Non-compliance was held to be attracted the provision of S. 201(IA) of the Act. (CA Nos. 3496-3497 of 2018, dt. 3-4-2018)

    The Director, Prasar Bharti v. CIT (SC), www.itatonline.org

    Advocates Act (25 of 1961)

20. S.29 : Practice of law – Foreign law firms and foreign lawyers cannot set up offices and practice in India, however they can give advice to Indian clients on ‘fly in and fly out’ mode on temporary basis. [S. 24(1)(a), 47(2)]
    

    Dealing with the PIL petition the Court held that, Foreign law firms and foreign lawyers cannot set up offices and practice in India, however they can give advice to Indian clients on ‘fly in and fly out’ mode on temporary basis. As regards Arbitration proceedings if provisions of Act of 1996 are applicable, foreign lawyers may not be debarred from conducting arbitration proceedings in view of S. 32, 33 of Act of 1961, however, the Bar Council of India and Central Govt. are liberty to make rules in this regard. BPO companies, providing range of customized and integrated services and functions may not violate provision of Act of 1961, only if activities in pith and substance do not amount to practice of law. If their services do not directly or indirectly amount to practice of law, Act of 1961 may not apply. Mere label of such services cannot be treated as conclusive. If in pith and substance services amount to practice of law, provisions of Act 1961 will apply and foreign law firms or foreign lawyers will not be allowed to do so. This matter which may have to be dealt with on case to case basis having regard to.

    Bar Council of India v. A. K. Balaji and Others, AIR 2018 SC 1382

    Chartered Accountants Act, 1949

21. S.21 : Misconduct – Disciplinary Directorate – Multinational Accounting Firms (MAFs) – Union of India was to be directed to constitute a Committee of Experts in order to look into function of Multinational Accounting Firms (MAFs) [S. 25, 29]

Direction was given to Union of India to constitute a Committee of experts in order to look into functioning of MAFs in India, to look into question whether and what extent statutory frame work to enforce letter and spirit of sections 25 and 29 of CA Act and statutory code of conduct for CAs require revisit so as to appropriately and regulate MAFs.

S. Sukumar v. Secretary, Institute of Chartered Accountants of India ( 2018) 254 Taxmann 37 ( SC)

National Litigation Policy -Burdening the Court with frivolous litigation- Strictures passed –Union of India has created a huge financial liability by engaging so many lawyers for an appeal whose fate can easily imagined on the basis of existing orders in similar cases .Yet the Union of India is increasing its liability and asking the tax payers to bear an avoidable financial burden for the misadventures. Appeal was dismissed with cost of ₹ 1,00,000/.

Dismissing the appeal of Union of India the Court held that, Union of India has created a huge financial liability by engaging so many lawyers for an appeal whose fate can easily imagined on the basis of existing orders in similar cases. Yet the Union of India is increasing its liability and asking the taxpayers to bear an avoidable financial burden for the misadventures. Appeal was dismissed with cost of ₹ 1,00,000/. (Diary No. 8754 of 2018 dt. 24-4-2018)

UOI v. Pirthwi Singh (SC) www.itatonline.org