The case was a classic one of change of opinion. The question whether a subsidy is capital or revenue depends on the facts of the case. S. 154 can only apply to a “mistake apparent from the record”. A “rectifiable mistake” is a mistake which is obvious and not something which has to be established by a long drawn process of reasoning or where two opinions are possible. Decision on debatable point of law cannot be treated as a “mistake apparent from the record”.
The judgement of the Calcutta High Court in Exide Industries Ltd vs. UOI 292 ITR 470 holding that s. 43B (f) is arbitrary, unconscionable and de hors the apex Court decision in Bharat Earth Movers vs. CIT 245 ITR 428 has been stayed by the Supreme Court and it has been clarified that the assessee must pay tax as if s. 43B (f) is on the Statute Book though it is entitled to make a claim in its return.
Though the object behind DEPB etc is to neutralize the incidence of customs duty payment on the import content of export product DEPB credit/duty drawback receipt do not come within the first degree source as the said incentives flow from Incentive Schemes enacted by the Government or from s. 75 of the Customs Act. Such incentives profits are not profits derived from the eligible business u/s 80-IB. They are ‘ancillary profits’ of such undertakings
Replacement expenditure is neither “current repairs” nor “revenue” The assessee incurred expenditure on replacement of machinery in a textile mill and claimed the same as revenue expenditure on the ground that it was merely for replacement of spare parts in …
CIT vs. Sri Mangayarkarasi Mills (Supreme Court) Read More »
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) ;