Prior to 1.4.1988, Ss. 41(1) and 41(2) both existed on the statute book. S. 41(1) deals with recoupment of trading liability while s. 41(2) deems balancing charge to be business income. Both operate in different spheres. If the argument of the department that balancing charge should be read as falling within the scope of s. 41(1) is accepted then it was not necessary for Parliament to enact S. 41(2) in the first instance. Section 41(1) alone would have sufficed.
Under Article 217(2) (b) “right to practice” is the prerequisite constitutional requirement of the eligibility criteria and not “actual practice”. There is a basic difference between “eligibility” and “suitability”. The process of judging the fitness of a person to be appointed as a High Court Judge falls in the realm of “suitability” and is governed by Article 217(1). “Eligibility” is an objective factor and falls within the scope of judicial review. However, the question as to who should be elevated, which essentially involves the aspect of “suitability” and evaluation of the worth and merit of a person, stands excluded from the purview of judicial review.
Held in the context of s. 11AC of the Excise Act (which provides that where any duty of excise has not been .. paid .. by reasons of fraud, collusion or any wilful mis-statement or suppression of facts ….. or contravention of any of the provisions of this Act … with intent to evade payment of duty, the person who is liable to pay duty as determined under sub-section (2) of section 11A, shall also be liable to pay a penalty equal to the duty so determined) that
(1) “At this stage, we need to examine the recent decision of this Court in Dharamendra Textile (supra). In almost every case relating to penalty, the decision is referred to on behalf of the Revenue as if it laid down that in every case of non-payment or short payment of duty the penalty clause would automatically get attracted and the authority had no discretion in the matter. One of us (Aftab Alam,J.) was a party to the decision in Dharmendra Textile and we see no reason to understand or read that decision in that manner.”
The assessee sold valve actuators. At the time of sale, the assessee provided standard warranty that if the product was defective within the stated period, the product would be rectified or replaced free of charge. For AY 1991-92, the assessee made a provision for warranty at Rs.10,18,800 at the rate of 1.5% of the turnover. As the actual expenditure was only Rs. 5,18,554, the excess provision of Rs.5,00,246 was reversed and only the net provision was claimed. The Tribunal allowed the claim on the basis that the provision had been consistently made and on a realistic manner. The High Court reversed the Tribunal on the basis that the liability was contingent and not allowable u/s 37 (1). HELD, reversing the High Court that:
(1) A provision is a liability which can be measured only by using a substantial degree of estimation. A provision is recognized when: (a) an enterprise has a present obligation as a result of a past event; (b) it is probable that an outflow of resources will be required to settle the obligation; and (c) a reliable estimate can be made of the amount of the obligation. If these conditions are not met, no provision can be recognized;
The State Commission, Delhi, held that services rendered by a Lawyer would not come within the ambit of s. 2(1)(o) of the Consumer Protection Act, 1986, as the client executes the power of attorney authorizing the Counsel to do certain acts on his behalf and there is no term of contract as to the liability of the lawyer in case he fails to do any such act. The State Commission held that it is a unilateral contract executed by the client giving authority to the lawyer to appear and represent the matter on his behalf without any specific assurance or undertaking.
Where the assessee carrying on the mercantile system of accounting claimed that:
(i) The additional liability arising on account of fluctuation in the rate of exchange in respect of loans taken for revenue purposes was allowable as deduction u/s 37(1) in the year of fluctuation in the rate of exchange and not in the year of repayment of such loans; and
(ii) The actual cost of imported assets acquired in foreign currency is entitled to be adjusted u/s 43A (prior to the amendment by the FA 2002) on account of fluctuation in the rate of exchange at each balance sheet date, pending actual payment of the varied liability HELD approving the claim that:
(a) The term “expenditure” in s. 37 covers an amount which is a “loss” even though the said amount has not gone out from the pocket of the assessee. The “loss” suffered by the assessee on account of the exchange difference as on the date of the balance sheet is an item of expenditure u/s 37(1) ;
Where the assessee-employer obtained expatriate-employees from a foreign company and the said employees, continuing to be employees of the foreign company, received salary and allowance in their home country in foreign currency and the question arose whether the assessee was obliged to deduct tax thereon at source u/s 192 and the High Court held that the assessee was not obliged to deduct tax at source on the ground that the payment was by the foreign company and not by the assessee, HELD, reversing the High Court that:
(i) Though the payment of salary to the expatriate was made by the foreign company outside India, the TDS provisions did apply as the Act had extra-territorial operation as there was a nexus between the said salary and the rendering of services in India;
(ii) U/s 9 (1) (ii), salary received abroad is deemed to arise in India if it is for services rendered in India. This charging provision has to be read with the machinery provision of s.192 and both are part of an integrated code;
(iii) S. 192 requires the employer to deduct tax after “estimating” the salary payable to the employee. The act of “estimation” is akin to computation of income. In making the estimate, s. 9 (1) (ii) has to be taken into account;
(iv) On facts, as it was found that the salary paid by the foreign company was for services in India the same was deemed to accrue in India u/s 9 (1) (ii) and the assessee ought to have deducted tax u/s 192 though it was not the payer
Where s. 35G of the Central Excise Act (= 260A of the I. T. Act) provided a time limit of 180 days for filing an appeal and there was no provision for condoning delay by showing sufficient cause after the prescribed period, there was complete exclusion of section 5 of the Limitation Act and the High Court had no power to condone the delay after expiry of the prescribed period. Even otherwise, the legislature had provided sufficient time for filing a reference to the High Court which was more than the period prescribed for an appeal and revision.
Note: The judgement of the Full Bench of the Bombay High Court in CCE vs. Shree Rubber Plast is impliedly overruled.
Where the assessee transferred rights in feature films by way of lease outside India and the question arose whether films constituted “goods or merchandise” for purposes of s. 80HHC, HELD
Today the difference between goods and services is getting blurred with globalization and cross-border
Transactions and with technological advancement one has to change one’s thinking regarding concepts like goods, merchandise and articles. The telecast “rights” certainly fall in the category of articles of trade and commerce, hence, merchandise and are eligible u/s 80HHC.
The Provio to s. 113 (which imposes surcharge on block assessments), though inserted only with effect from 1.6.2002, is applicable to searches conducted prior to that date as it is ‘clarificatory’ and ‘curative’ in nature. CIT vs. Suresh N. Gupta 297 ITR 322 (SC) followed.