Category: Supreme Court

Archive for the ‘Supreme Court’ Category


Khoday Distilleries Ltd vs. Sri Mahadeshwara Sahakara Sakkare Kharkhane Ltd (Supreme Court) (Larger Bench)

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DATE: March 1, 2019 (Date of pronouncement)
DATE: April 6, 2019 (Date of publication)
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Articles 136, 141: Entire law on legal effect of dismissal of a Special Leave Petition (SLP) by a speaking/ non-speaking order explained. If the dismissal is by a speaking order & reasons are given, the same is a declaration of law which is binding under Article 141. The findings are also binding by way of judicial discipline. However, this does not mean that the order of the lower court has merged in the dismissal order of the Supreme Court

If the order refusing leave to appeal is a speaking order, i.e., gives reasons for refusing the grant of leave, then the order has two implications. Firstly, the statement of law contained in the order is a declaration of law by the Supreme Court within the meaning of Article 141 of the Constitution. Secondly, other than the declaration of law, whatever is stated in the order are the findings recorded by the Supreme Court which would bind the parties thereto and also the court, tribunal or authority in any proceedings subsequent thereto by way of judicial discipline, the Supreme Court being the Apex Court of the country. But, this does not amount to saying that the order of the court, tribunal or authority below has stood merged in the order of the Supreme Court rejecting the special leave petition or that the order of the Supreme Court is the only order binding as res judicata in subsequent proceedings between the parties

CIT vs. Reliance Industries Limited (Supreme Court)

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DATE: January 2, 2019 (Date of pronouncement)
DATE: March 23, 2019 (Date of publication)
AY: 2003-04, 2004-05, 2005-06, 2006-07
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S. 14A/ 36(1)(iii): If the interest free funds available to the assessee are sufficient to meet its investment, it could be presumed that the investments are made from the interest free funds available with the assessee and not from borrowed funds

The High Court has noted the finding of the Tribunal that the interest free funds available to the assessee were sufficient to meet its investment. Hence, it could be presumed that the investments were made from the interest free funds available with the assessee

CIT vs. Gopal Shri Scrips Pvt. Ltd (Supreme Court)

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DATE: March 12, 2019 (Date of pronouncement)
DATE: March 15, 2019 (Date of publication)
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Defunct companies: The fact that the assessee company stands dissolved as a defunct company u/s 560(5) of the Companies Act, 1956 does not mean that income-tax proceedings & appeals become infructuous. The liability against such companies has to be dealt with in accordance with s. 506(5) proviso (a) of the Companies Act and Chapter XV of the Income Tax Act which deal with "liability in special cases" and "discontinuance of business or dissolution"

The High Court failed to notice Section 506(5) proviso (a) of the Companies Act and further failed to notice Chapter XV of the Income Tax Act which deals with “liability in special cases” and its clause (L) which deals with “discontinuance of business or dissolution”. The aforementioned two provisions, namely, one under the Companies Act and the other under the Income Tax Act specifically deal with the cases of the Companies, whose name has been struck off under Section 506 (5) of the Companies Act. These provisions provide as to how and in what manner the liability against such Company arising under the Companies Act and under the Income Tax Act is required to be dealt with

CIT vs. Tasgaon Taluka S.S.K. Ltd (Supreme Court)

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DATE: March 5, 2019 (Date of pronouncement)
DATE: March 9, 2019 (Date of publication)
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S. 37(1)/40A(2) Business expenditure vs. sharing of profit: The AO has to take into account the manner in which the business works, the modalities and manner in which SAP/additional purchase price/final price are decided and determine what amount forms part of the profit. Whatever is the profit component is sharing of profit/distribution of profit and the rest is deductible as expenditure

Merely because the higher price is paid to both, members and non-members, qua the members, still the question would remain with respect to the distribution of profit/sharing of the profit. So far as the non-members are concerned, the same can be dealt with and/or considered applying Section 40A (2) of the Act, i.e., the assessing officer on the material on record has to determine whether the amount paid is excessive or unreasonable or not

Sanjay Jain vs. Nu Tech Corporate Service Ltd (Supreme Court)

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DATE: March 1, 2019 (Date of pronouncement)
DATE: March 7, 2019 (Date of publication)
AY: 2009-10
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S. 226 illegal Recovery - Strictures against DCIT: High Court was not justified in its remarks against the DCIT and in issuing directions that (i) ‘deadwood’ should be weeded out (ii) personal costs of Rs. 1.5 lakh should be imposed (iii) adverse entry should be made in the Annual Confidential Report (iv) Denial of promotion etc. The directions were wholly unnecessary to the lis before the Court & are expunged

We find merit in the submission which has been urged on behalf of the petitioner that the High Court was not justified in its remarks against the petitioner and in issuing the directions which it has issued. The High Court, in the course of its judgment has issued a slew of directions including: (i) The necessity of weeding out ‘deadwood’; (ii) imposition of costs of Rs. 1.5 lakhs which are to be apportioned among two officers, out of them being the petitioner; (iii) Making an adverse entry in the Annual Confidential Reports of the petitioner; and (iv) Denial of promotion including monetary benefits to the petitioner. Apart from the fact that these directions were issued without specific notice to the petitioner, we find that they were wholly unnecessary having regard to the lis before the High Court. We accordingly, expunge the adverse remarks made against the petitioner in the impugned judgment and order of the High Court as well as the directions issued against the petitioner

M/s Vijay Industries vs. CIT (Supreme Court)

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DATE: March 1, 2019 (Date of pronouncement)
DATE: March 7, 2019 (Date of publication)
AY: 1979-80, 1980-81
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S. 80-HH/ 80-I/ 80-AB: There is a difference between 'income' referred to in s. 80-AB and 'profits & gains' referred in s. 80-HH/80-I. Deduction u/s 80-HH/ 80-I has to be computed on the ‘profits and gains’, without deducting therefrom ‘depreciation’ and ‘investment allowance’ & not from ‘income’ as computed under the Act. S. 80AB is prospective. Motilal Pesticides 243 ITR 26 (SC) reversed

Reading of Section 80HH along with Section 80A would clearly signify that such a deduction has to be of gross profits and gains, i.e., before computing the income as specified in Sections 30 to 43D of the Act. It is correctly pointed out by Division Bench in the reference order that in Motilal Pesticides case, the Court followed the judgment rendered in the M/s. Cloth Traders (P) Ltd. which was a case under Section 80M of the Act, on the premise that language of Section 80HH and Section 80M is the same. This basis is clearly incorrect as the language of two provisions is materially different. We are, therefore, of the considered opinion that judgment of Motilal Pesticides is erroneous. We, therefore, overrule this judgment.

PCIT vs. NRA Iron & Steel Pvt. Ltd (Supreme Court)

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DATE: March 5, 2019 (Date of pronouncement)
DATE: March 6, 2019 (Date of publication)
AY: 2009-10
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S. 68 Bogus share capital/ premium: The practice of conversion of un-accounted money through cloak of Share Capital/Premium must be subjected to careful scrutiny especially in private placement of shares. Filing primary evidence is not sufficient. The onus to establish credit worthiness of the investor companies is on the assessee. The Assessee is under legal obligation to prove the receipt of share capital/premium to the satisfaction of the AO, failure of which, would justify addition of the said amount to the income of the Assessee

The practice of conversion of un-accounted money through the cloak of Share Capital/Premium must be subjected to careful scrutiny. This would be particularly so in the case of private placement of shares, where a higher onus is required to be placed on the Assessee since the information is within the personal knowledge of the Assessee. The Assessee is under a legal obligation to prove the receipt of share capital/premium to the satisfaction of the AO, failure of which, would justify addition of the said amount to the income of the Assessee.

PCIT vs. Aarham Softronics (Supreme Court)

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DATE: February 20, 2019 (Date of pronouncement)
DATE: February 22, 2019 (Date of publication)
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S. 80-IC: An assessee availing exemption of 100% tax on setting up of a new industry, which is admissible for 5 years, and either on the expiry of 5 years or thereafter (but within 10 years) from the date when these assessees started availing exemption, they carried out substantial expansion of its industry, from that year the assessees become entitled to claim exemption @ 100% again (Classic Binding Industries 407 ITR 429 held not good law and reversed)

We have no hesitation to accept this mistake which occurred in Commissioner of Income Tax vs. M/s. Classic Binding Industries 407 ITR 429. The Court specifically dealt with ‘initial assessment year’ and came into conclusion that there cannot be two initial assessment years within a span of 10 years which is the maximum period for allowing deduction as per sub-section (6) of Section 80-IC. As the issue directly concerned with initial assessment year, its definition contained in that very Section was missed out. To that extent, there is an error in the judgment dated 20th August, 2018 in Classic Binding Industries case

Ram Siromani Tripathi vs. State of U.P. (Supreme Court)

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DATE: February 7, 2019 (Date of pronouncement)
DATE: February 14, 2019 (Date of publication)
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An adjournment cannot be sought on the ground that Counsel is out of station. The appeal has to be dismissed for non-prosecution. Under no circumstances, application for restoration shall be entertained

The appeals are dismissed for non-prosecution in terms of the signed order. We make it clear that since we have not found it to be a good ground for adjournment, under no circumstances, application for restoration shall be entertained

Anil Kumar Nehru vs. ACIT (Supreme Court)

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DATE: December 3, 2018 (Date of pronouncement)
DATE: December 20, 2018 (Date of publication)
AY: 2007-08
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S. 260A Condonation of delay of 1662 days: The High Court should not take a technical approach and refuse to condone the delay when appeals for earlier years with identical issues are already pending before it

It is a matter of record that on the identical issue raised by the appellant in respect of earlier assessment, the appeal is pending before the High Court. In these circumstances, the High Court should not have taken such a technical view of dismissing the appeal in the instant case on the ground of delay, when it has to decide the question of law between the parties in any case in respect of earlier assessment year

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