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DATE: November 5, 2015 (Date of pronouncement)
DATE: November 26, 2015 (Date of publication)
AY: 1988-89
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S. 36(1)(iii): Law on when interest expenditure on loans diverted to sister concerns and directors can be allowed as business expenditure explained

Once it is established that there is nexus between the expenditure and the purpose of business (which need not necessarily be the business of the assessee itself), the Revenue cannot justifiably claim to put itself in the arm-chair of the businessman or in the position of the Board of Directors and assume the role to decide how much is reasonable expenditure having regard to the circumstances of the case. It further held that no businessman can be compelled to maximize his profit and that the income tax authorities must put themselves in the shoes of the assessee and see how a prudent businessman would act. The authorities must not look at the matter from their own view point but that of a prudent businessman

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DATE: April 17, 2015 (Date of pronouncement)
DATE: November 26, 2015 (Date of publication)
AY: 1991-92
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S. 143(1)/ 147: As a s. 143(1) intimation is not an assessment, there is no question of "change of opinion" by the AO

Can it be said that any “assessment” is done by them? The reply is an emphatic “no”. The intimation under Section 143(1)(a) was deemed to be a notice of demand under Section 156, for the apparent purpose of making machinery provisions relating to recovery of tax applicable. By such application only recovery indicated to be payable in the intimation became permissible. And nothing more can be inferred from the deeming provision. Therefore, there being no assessment under Section 143(1)(a), the question of change of opinion, as contended, does not arise

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DATE: October 6, 2015 (Date of pronouncement)
DATE: November 23, 2015 (Date of publication)
AY: -
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CBDT & Govt are bound by their own interpretation of a statutory provision. Principle of "contemporanea expositio" explained. The word "or" can be interpreted as "and" if the former leads to unintelligible and absurd results

It is to be borne in mind that it is the Central Government which has framed the Rules as well as issued the notifications. If the Central Government itself is of the opinion that the rebate is to be allowed on both the forms of excise duties the government is bound thereby and the rule in-question has to interpreted in accord with this understanding of the rule maker itself. Law in this respect is well settled and, therefore, it is not necessary to burden this judgment by quoting from various decisions

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DATE: November 18, 2015 (Date of pronouncement)
DATE: November 20, 2015 (Date of publication)
AY: -
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S. 2(7) Interest-tax Act: Right to charge overdue interest on discounted Bills of Exchange is not “interest” as it does not arise on account of delay in repayment of any loan or advance. The right arises on account of default in the payment of amounts due under a discounted bill of exchange

Section 2(7) itself makes a distinction between loans and advances made in India and discount on bills of exchange drawn or made in India. It is obvious that if discounted bills of exchange were also to be treated as loans and advances made in India there would be no need to extend the definition of “interest” to include discount on bills of exchange. Indeed, this matter is no longer res integra. The Karnataka High Court’s view is directly contrary to the view of this Court in CIT v. Sahara India Savings & Investment Corpn. Ltd., (2009) 17 SCC 43, and, therefore, cannot be countenanced. “Loans and advances” has been held to be different from “discounts” and the legislature has kept in mind the difference between the two. It is clear therefore that the right to charge for overdue interest by the assessee banks did not arise on account of any delay in repayment of any loan or advance made by the said banks. That right arose on account of default in the payment of amounts due under a discounted bill of exchange.

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DATE: September 2, 2015 (Date of pronouncement)
DATE: November 16, 2015 (Date of publication)
AY: -
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Failure to give the assessee the right to cross-examine witnesses whose statements are relied up results in breach of principles of natural justice. It is a serious flaw which renders the order a nullity

Not allowing the assessee to cross-examine the witnesses by the Adjudicating Authority though the statements of those witnesses were made the basis of the impugned order is a serious flaw which makes the order nullity inasmuch as it amounted to violation of principles of natural justice because of which the assessee was adversely affected

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DATE: October 15, 2015 (Date of pronouncement)
DATE: October 19, 2015 (Date of publication)
AY: 1995-96
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S. 32: Even prior to the insertion of "intangible assets" in s. 32, intellectual property rights such as trademarks, copyrights and know-how constitute "plant" for purposes of depreciation. The department is not entitled to rewrite the terms of a commercial agreement

The question is, would intellectual property such as trademarks, copyrights and know-how come within the definition of ‘plant’ in the ‘sense which people conversant with the subject-matter with which the statute is dealing, would attribute to it’? In our opinion, this must be answered in the affirmative for the reason that there can be no doubt that for the purposes of a large business, control over intellectual property rights such as brand name, trademark etc. are absolutely necessary. Moreover, the acquisition of such rights and know-how is acquisition of a capital nature, more particularly in the case of the Assessee. Therefore, it cannot be doubted that so far as the Assessee is concerned, the trademarks, copyrights and know-how acquired by it would come within the definition of ‘plant’ being commercially necessary and essential as understood by those dealing with direct taxes

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DATE: July 29, 2015 (Date of pronouncement)
DATE: September 28, 2015 (Date of publication)
AY: -
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Entire law on the taxation of deceased persons and their estate explained in the context of the Income-tax Act and the Central Excise Act

The individual assessee has ordinarily to be a living person and there can be no assessment on a dead person and the assessment is a charge in respect of the income of the previous year and not a charge in respect of the income of the year of assessment as measured by the income of the previous year. Wallace Brothers & Co. Ltd. v Commissioner of Income-tax. By section 24B of the Income-tax Act the legal representatives have, by fiction of law, become assessees as provided in that section but that fiction cannot be extended beyond the object for which it was enacted

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DATE: September 21, 2015 (Date of pronouncement)
DATE: September 28, 2015 (Date of publication)
AY: 1977-78 to 1986-87
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Important principles relating to valuation of property subject to the Land Ceiling Act explained in the context of the Wealth-tax Act

One has to assume that the property in question is saleable in the open market and estimate the price which the assumed willing purchaser would pay for such a property. When the asset is under the clutches of the Ceiling Act and in respect of the said asset/vacant land, the Competent Authority under the Ceiling Act had already determined the maximum compensation of Rs.2 lakhs, how much price such a property would fetch if sold in the open market? We have to keep in mind what a reasonably assumed buyer would pay for such a property if he were to buy the same. Such a property which is going to be taken over by the Government and is awaiting notification under Section 10 of the Act for this purpose, would not fetch more than Rs.2 lakhs as the assumed buyer knows that the moment this property is taken over by the Government, he will receive the compensation of Rs.2 lakhs only. We are not oblivious of those categories of buyers who may buy “disputed properties” by taking risks with the hope that legal proceedings may ultimately be decided in favour of the assessee and in such a eventuality they are going to get much higher value. However, as stated above, hypothetical presumptions of such sales are to be discarded as we have to keep in mind the conduct of a reasonable person and “ordinary way” of the presumptuous sale. When such a presumed buyer is not going to offer more than Rs.2 lakhs, obvious answer is that the estimated price which such asset would fetch if sold in the open market on the valuation date(s) would not be more than Rs.2 lakhs

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DATE: September 14, 2015 (Date of pronouncement)
DATE: September 17, 2015 (Date of publication)
AY: -
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Acche Din For Corrupt Babus: Mere possession and recovery of currency notes from an accused is not sufficient to establish an offense under the Prevention of Corruption Act. Proof of demand of illegal gratification is essential. Its absence is fatal to the complaint

Mere possession and recovery of currency notes from an accused without proof of demand would not establish an offence under Sections 7 as well as 13(1)(d)(i)&(ii) of the Act. In the absence of any proof of demand for illegal gratification, the use of corrupt or illegal means or abuse of position as a public servant to obtain any valuable thing or pecuniary advantage cannot be held to be proved. The proof of demand is an indispensable essentiality and of permeating mandate for an offence under Sections 7 and 13 of the Act. Qua Section 20 of the Act, which permits a presumption as envisaged therein, it has been held that while it is extendable only to an offence under Section 7 and not to those under Section 13(1)(d) (i)&(ii) of the Act, it is contingent as well on the proof of acceptance of illegal gratification for doing or forbearing to do any official act. Such proof of acceptance of illegal gratification, it was emphasized, could follow only if there was proof of demand. Axiomatically, in absence of proof of demand, such legal presumption under Section 20 of the Act would also not arise. As a corollary, failure of the prosecution to prove the demand for illegal gratification would be fatal and mere recovery of the amount from the person accused of the offence under Sections 7 or 13 of the Act would not entail his conviction thereunder

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DATE: September 4, 2015 (Date of pronouncement)
DATE: September 16, 2015 (Date of publication)
AY: -
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S. 32: The "functional" test has to be applied to determine whether an asset is "plant". Even a pond designed for rearing prawns can be "plant"

In Commissioner of Income Tax vs. Anand Theatres 224 ITR 192 it was held that except in exceptional cases, the building in which the plant is situated must be distinguished from the plant and that, therefore, the assessee’s generating station building was not to be treated as a plant for the purposes of investment allowance. It is difficult to read the judgment in the case of Anand Theatres so broadly. The question before the court was whether a building that was used as a hotel or a cinema theatre could be given depreciation on the basis that it was a “plant” and it was in relation to that question that the court considered a host of authorities of this country and England and came to the conclusion that a building which was used as a hotel or cinema theatre could not be given depreciation on the basis that it was a plant

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