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DATE: October 16, 2020 (Date of pronouncement)
DATE: November 21, 2020 (Date of publication)
AY: -
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The principles of natural justice have undergone a sea change. The earlier view that even a small violation would result in the order being rendered a nullity is not correct. Some real prejudice must be caused to the complainant by the refusal to follow natural justice. The prejudice must not merely be the apprehension of a litigant. No prejudice is caused to the person complaining of the breach of natural justice where such person does not dispute the case against him or it. There is a clear distinction between cases where there was no hearing at all and the cases where there was mere technical infringement of the principle (All imp judgements referred)

Natural justice is a flexible tool in the hands of the judiciary to reach out in fit cases to remedy injustice. The breach of the audi alteram partem rule cannot by itself, without more, lead to the conclusion that prejudice is thereby caused. Where procedural and/or substantive provisions of law embody the principles of natural justice, their infraction per se does not lead to invalidity of the orders passed. Here again, prejudice must be caused to the litigant, except in the case of a mandatory provision of law which is conceived not only in individual interest, but also in public interest.

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DATE: July 22, 2020 (Date of pronouncement)
DATE: July 24, 2020 (Date of publication)
AY: 2007-08
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The condition precedent for applicability of “fixed place” permanent establishments under Article 5(1) of the Double Taxation Avoidance Treaties is that it should be an establishment “through which the business of an enterprise” is wholly or partly carried on. Further, the profits of the foreign enterprise are taxable only where the said enterprise carries on its core business through a permanent establishment. The maintenance of a fixed place of business which is of a preparatory or auxiliary character in the trade or business of the enterprise would not be considered to be a permanent establishment under Article 5. Also, it is only so much of the profits of the enterprise that may be taxed in the other State as is attributable to that permanent establishment (All imp judgements referred)

Though it was pointed out to the ITAT that there were only two persons working in the Mumbai office, neither of whom was qualified to perform any core activity of the Assessee, the ITAT chose to ignore the same. This being the case, it is clear, therefore, that no permanent establishment has been set up within the meaning of Article 5(1) of the DTAA, as the Mumbai Project Office cannot be said to be a fixed place of business through which the core business of the Assessee was wholly or partly carried on. Also, as correctly argued by Shri Ganesh, the Mumbai Project Office, on the facts of the present case, would fall within Article 5(4)(e) of the DTAA, inasmuch as the office is solely an auxiliary office, meant to act as a liaison office between the Assessee and ONGC

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DATE: July 22, 2020 (Date of pronouncement)
DATE: July 23, 2020 (Date of publication)
AY: 1995-96
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S. 28(v-a): There is a dichotomy between receipt of compensation by an assessee for the loss of agency and receipt of compensation attributable to the negative/restrictive covenant. The compensation received for the loss of agency is a revenue receipt whereas the compensation attributable to a negative/ restrictive covenant is a capital receipt. Payment received as non-competition fee under a negative covenant was always treated as a capital receipt till AY 2003-2004. It is only w.e.f. 1-4-2003 that the said capital receipt is now made taxable u/s 28(v-a). It is well settled that a liability cannot be created retrospectively (All imp judgements referred)

The revenue has no business to second guess commercial or business expediency of what parties at arms-length decide for each other. For example, stating that there was no rationale behind the payment of INR 6.6 crores and that the assessee was not a probable or perceptible threat or competitor to the SWC group is the perception of the Assessing Officer, which cannot take the place of business reality from the point of view of the assessee, as has been pointed out by us hereinabove. The fact that M/s Maltings Ltd. had incurred a loss in the previous year is again neither here nor there. It may in future be a direct threat to the SWC group and may turn around and make profits in future years. Besides, M/s Maltings Ltd. is only one concern of the assessee – it is the assessee’s expertise in this field on all counts that was the threat perception of the SWC group which cannot be second guessed by the revenue

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DATE: February 7, 2020 (Date of pronouncement)
DATE: February 15, 2020 (Date of publication)
AY: 2000-01
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U/s 43B(a), deduction is allowed on “any sum payable by the assessee by way of tax, duty, cess or fee.” The scheme of s. 43B is to allow deduction when the sum is actually paid. (i) The credit of Excise Duty earned under MODVAT scheme is not sum payable by the assessee by way of tax, duty, cess. It is merely the incident of Excise Duty that has shifted from the manufacturer to the purchaser and not the liability to the same. Consequently, the unutilised credit under MODVAT scheme does not qualify for deduction u/s 43B. (ii) The sales tax paid by the appellant was debited to a separate account titled ‘Sales Tax recoverable account’ and is liable for disallowance u/s 43B.

Deductions under Section 43B is allowable only when sum is actually paid by the assessee. In the present case, the Excise Duty leviable on appellant on manufacture of vehicles was already adjusted in the concerned assessment year from the credit of Excise Duty under the MODVAT scheme. The unutilised credit in the MODVAT scheme cannot be treated as sum actually paid by the appellant. The assessee when pays the cost of raw materials where the duty is embedded, it does not ipso facto mean that assessee is the one who is liable to pay Excise Duty on such raw material/inputs. It is merely the incident of Excise Duty that has shifted from the manufacturer to the purchaser and not the liability to the same

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DATE: November 16, 2018 (Date of pronouncement)
DATE: November 24, 2018 (Date of publication)
AY: -
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Professional Misconduct of CAs: A Chartered Accountant can be held guilty of professional misconduct even when he is acting as an individual in commercial dealings and is not acting as a CA nor discharging any function in relation to his practice as a Chartered Accountant. Under the CA Act, any action which brings disrepute to the profession or the Institute is misconduct whether or not related to professional work

The Disciplinary Committee has, on facts, found the Chartered Accountant guilty of a practice which was not in the Chartered Accountant’s professional capacity. This, it was entitled to do under Schedule I Part-IV subclause (2) if, in the opinion of the Council, such act brings disrepute to the profession whether or not related to his professional work

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DATE: October 30, 2018 (Date of pronouncement)
DATE: November 6, 2018 (Date of publication)
AY: -
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Interpretation of statutes: Effect of repeal of a statute u/s 6 of the General Clauses Act on pending proceedings explained in the context of the Gold Control Act and in view of law laid down in State of Punjab vs. Mohar Singh [1955] 1 SCR 893, New India Assurance Co. Ltd. vs. C. Padma (2003) 7 SCC 713 etc

The statement of objects and reasons makes it clear that over 22 years, the results achieved under the Act have not been encouraging and the desired objectives for which the Act has been introduced have failed. Following the advice of experts, who have examined issues related to the Act, the objects and reasons goes on further to state that this Act has proved to be a regressive measure which has caused considerable dissatisfaction in the minds of the public and hardship and harassment to artisans and small self-employed goldsmiths. This being the case, we are of the opinion that the repeal simpliciter, in the present case, does not attract the provisions of Section 6 of the General Clauses Act as a contrary intention is very clearly expressed in the statement of objects and reasons to the 1990 repeal Act

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DATE: May 4, 2018 (Date of pronouncement)
DATE: June 30, 2018 (Date of publication)
AY: -
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S. 69 Bogus Purchases: Purchases cannot be treated as Bogus if (a) they are duly supported by bills, (b) all payments are made by account payee cheques, (c) the supplier has confirmed the transactions, (d) there is no evidence to show that the purchase consideration has come back to the assessee in cash, (e) the sales out of purchases have been accepted & (f) the supplier has accounted for the purchases made by the assessee and paid taxes thereon

It can thus be seen that the appellate authority as well as the Tribunal came to concurrent conclusion that the purchases already made by the assessee from Raj Impex were duly supported by bills and payments were made by Account Payee cheque. Raj Impacts also confirmed the transactions. There was no evidence to show that the amount was recycled back to the assessee. Particularly, when it was found that the assessee the trader had also shown sales out of purchases made from Raj Impex which were also accepted by the Revenue, no question of law arises

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DATE: April 24, 2018 (Date of pronouncement)
DATE: April 26, 2018 (Date of publication)
AY: -
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Diversion of income by overriding title: Only income that has actually accrued to the assessee 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. The fact that there is no written agreement to show that the assessee was acting as a broker is not relevant. The relationship of the assessee vis-a-vis others can be inferred from the conduct of the parties

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 Rs. 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 Rs. 14,73,91,000/- cannot be termed as the income of the Respondent

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DATE: March 14, 2018 (Date of pronouncement)
DATE: March 24, 2018 (Date of publication)
AY: -
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S. 148: 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

In the judgment of this Court dated 24th October, 2017 in Assistant Director of Income Tax-I, New Delhi v. M/s. E-Funds IT Solution Inc., Civil Appeal NO.6082 of 2015 and connected matters, it has been held that once arm’s length principle has been satisfied, there can be no further profit attributable to a person even if it has a permanent establishment in India. Since the impugned notice for the reassessment is based only on the allegation that the appellant(s) has permanent establishment in India, the notice cannot be sustained once arm’s length price procedure has been followed

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DATE: March 12, 2018 (Date of pronouncement)
DATE: March 14, 2018 (Date of publication)
AY: -
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CITATION:
Principles of Mutuality: Receipts by housing co­-operative societies such as non­-occupancy charges, transfer charges, common amenity fund charges and certain other charges from their members are exempt from income-tax based on the doctrine of mutuality. The fact that the receipts are in excess of the limits prescribed by the State Government does not mean that the Societies have rendered services for profit attracting an element of commerciality and thus was taxable

Transfer charges are payable by the outgoing member. If for convenience, part of it is paid by the transferee, it would not partake the nature of profit or commerciality as the amount is appropriated only after the transferee is inducted as a member. In the event of non­ admission, the amount is returned. The moment the transferee is inducted as a member the principles of mutuality apply. Likewise, non­occupancy charges are levied by the society and is payable by a member who does not himself occupy the premises but lets it out to a third person. The charges are again utilised only for the common benefit of facilities and amenities to the members. Contribution to the common amenity fund taken from a member disposing property is similarly utilised for meeting sudden and regular heavy repairs to ensure continuous and proper hazard free maintenance of the properties of the society which ultimately enures to the enjoyment, benefit and safety of the members. These charges are levied on the basis of resolutions passed by the society and in consonance with its bye­laws. The receipts in the present cases have indisputably been used for mutual benefit towards maintenance of the premises, repairs, infrastructure and provision of common amenities

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