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DATE: April 15, 2021 (Date of pronouncement)
DATE: April 17, 2021 (Date of publication)
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Limitation Act: The principle of s. 9 of the Limitation Act, namely, that when time begins to run, it cannot be halted, except by a process known to law, has to be strictly adhered to. S. 18 of the Limitation Act, which extends the period of limitation depending upon an acknowledgement of debt made in writing and signed by the corporate debtor, is also applicable to the Insolvency and Bankruptcy Code since s. 238A uses the expression “as far as may be” governing the applicability of the Limitation Act. An entry made in the books of accounts, including the balance sheet, can amount to an acknowledgement of liability within the meaning of Section 18 of the Limitation Act. The notes annexed to or forming part of the balance sheet, or the auditor’s report, must be read along with the balance sheet. (V. Padmakumar v. Stressed Assets Stabilisation Fund (NCLAT)(FB) reversed. All imp judgements referred).

Under S. 18 an acknowledgement of liability signed by the party against whom the right is claimed gives rise to a fresh period of limitation. Under Explanation (b) to the Section the word ‘signed’ means signed either personally or by an agent duly authorised. A company being a corporate body acts through its representatives, the Managing Director and the Board of Directors. Under S. 210 of the Companies Act it is the statutory duty of the Board of Directors to lay before the Company at every annual general body meeting a balance sheet and a profit and loss account for the preceding financial year. S. 211 directs that the form and contents of the balance sheet should be as set out in Part I of Schedule VI. The said form stipulates for the details of the loans and advances and also of sundry creditors. The balance sheet should be approved by the Board of Directors, and thereafter authenticated by the Manager or the Secretary if any and not less than two directors one of whom should be the Managing Director. (See S. 215). The Act also provides for supply of copies of the balance sheet to the members before the company in general meeting. Going by the above provisions, a balance sheet is the statement of assets and liabilities of the company as at the end of the financial year, approved by the Board of Directors and authenticated in the manner provided by law. The persons who authenticate the document do so in their capacity as agents of the company. The inclusion of a debt in a balance sheet duly prepared and authenticated would amount to admission of a liability and therefore satisfies the requirements of law for a valid acknowledgement under S. 18 of the Limitation Act, even though the directors by authenticating the balance sheet merely discharge a statutory duty and may not have intended to make an acknowledgement.

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DATE: April 6, 2021 (Date of pronouncement)
DATE: April 7, 2021 (Date of publication)
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S. 254(2A) Stay by ITAT: Since the object of the 3rd proviso to s. 254(2A) is the automatic vacation of a stay that has been granted on the completion of 365 days, whether or not the assessee is responsible for the delay caused in hearing the appeal, such object being itself discriminatory, is liable to be struck down as violating Article 14 of the Constitution of India. Also, the said proviso would result in the automatic vacation of a stay upon the expiry of 365 days even if the Appellate Tribunal could not take up the appeal in time for no fault of the assessee. Further, vacation of stay in favour of the revenue would ensue even if the revenue is itself responsible for the delay in hearing the appeal. In this sense, the said proviso is also manifestly arbitrary being a provision which is capricious, irrational and disproportionate so far as the assessee is concerned. Consequently, the third proviso to s. 254(2A) will now be read without the word “even” and the words “is not” after the words “delay in disposing of the appeal”. Any order of stay shall stand vacated after the expiry of the period or periods mentioned in the Section only if the delay in disposing of the appeal is attributable to the assessee.

Judged by both these parameters, there can be no doubt that the third proviso to Section 254(2A) of the Income Tax Act, introduced by the Finance Act, 2008, would be both arbitrary and discriminatory and, therefore, liable to be struck down as offending Article 14 of the Constitution of India. First and foremost, as has correctly been held in the impugned judgment, unequals are treated equally in that no differentiation is made by the third proviso between the assessees who 23 https://itatonline.org are responsible for delaying the proceedings and assessees who are not so responsible. This is a little peculiar in that the legislature itself has made the aforesaid differentiation in the second proviso to Section 254(2A) of the Income Tax Act, making it clear that a stay order may be extended upto a period of 365 days upon satisfaction that the delay in disposing of the appeal is not attributable to the assessee. We have already seen as to how, as correctly held by Narang Overseas (supra), the second proviso was introduced by the Finance Act, 2007 to mitigate the rigour of the first proviso to Section 254(2A) of the Income Tax Act in its previous avatar. Ordinarily, the Appellate Tribunal, where possible, is to hear and decide appeals within a period of four years from the end of the financial year in which such appeal is filed. It is only when a stay of the impugned order before the Appellate Tribunal is granted, that the appeal is required to be disposed of within 365 days. So far as the disposal of an appeal by the Appellate Tribunal is concerned, this is a directory provision. However, so far as vacation of stay on expiry of the said period is concerned, this condition becomes mandatory so far as the assessee is concerned. The object sought to be achieved by the third proviso to Section 254(2A) of the Income Tax Act is without doubt the speedy disposal of appeals before the Appellate Tribunal in cases in which a stay has been granted in favour of the assessee.

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DATE: March 2, 2021 (Date of pronouncement)
DATE: March 2, 2021 (Date of publication)
AY: -
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Taxability of sums received for supply of software as "royalty": Given the definition of royalties contained in Article 12 of the DTAAs, the amounts paid by resident Indian end-users/ distributors to non-resident computer software manufacturers/suppliers, as consideration for the resale/use of the computer software through EULAs/distribution agreements is not the payment of royalty for the use of copyright in the computer software and that the same does not give rise to any income taxable in India, as a result of which the persons referred to in section 195 of the Income Tax Act were not liable to deduct any TDS under section 195 of the Income Tax Act. The provisions contained in the Income Tax Act (section 9(1)(vi), along with explanations 2 and 4 thereof), which deal with royalty, not being more beneficial to the assessees, have no application in the facts of these cases

Given the definition of royalties contained in Article 12 of the DTAAs mentioned in paragraph 41 of this judgment, it is clear that there is no obligation on the persons mentioned in section 195 of the Income Tax Act to deduct tax at source, as the distribution agreements/EULAs in the facts of these cases do not create any interest or right in such distributors/end-users, which would amount to the use of or right to use any copyright. The provisions contained in the Income Tax Act (section 9(1)(vi), along with explanations 2 and 4 thereof), which deal with royalty, not being more beneficial to the assessees, have no application in the facts of these cases. Our answer to the question posed before us, is that the amounts paid by resident Indian end-users/distributors to non-resident computer software manufacturers/suppliers, as consideration for the resale/use of the computer software through EULAs/distribution agreements, is not the payment of royalty for the use of copyright in the computer software, and that the same does not give rise to any income taxable in India, as a result of which the persons referred to in section 195 of the Income Tax Act were not liable to deduct any TDS under section 195 of the Income Tax Act. The answer to this question will apply to all four categories of cases enumerated by us in paragraph 4 of this judgment

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DATE: October 16, 2020 (Date of pronouncement)
DATE: November 21, 2020 (Date of publication)
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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: October 3, 2019 (Date of pronouncement)
DATE: November 2, 2019 (Date of publication)
AY: -
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Doctrine of mutuality: A club registered as a 'company' u/s 25 of Companies Act is not like other companies as it has no shareholders, no dividends declared, and no distribution of profits takes place. Such clubs cannot be treated as separate in law from their members. The ratio decidendi in Bacha F. Guzdar 27 ITR 1 does not apply to such clubs. When a club supplies goods to its members, there is no "sale" and sales-tax cannot be levied (Bangalore Club 350 ITR 509 (SC), Venkatesh Premises Coop Soc 402 ITR 670 (SC) & other imp judgements referred)

if persons carry on a certain activity in such a way that there is a commonality between contributors of funds and participators in the activity, a complete identity between the two is then established. This identity is not snapped because the surplus that arises from the common fund is not distributed among the members – it is enough that there is a 44 right of disposal over the surplus, and in exercise of that right they may agree that on winding up, the surplus will be transferred to a club or association with similar activities. Most importantly, the surplus that is made does not come back to the members of the club as shareholders of a company in the form of dividends upon their shares. Since the members perform the activities of the club for themselves, the fact that they incorporate a legal entity to do it for them makes no difference.

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DATE: July 9, 2019 (Date of pronouncement)
DATE: July 20, 2019 (Date of publication)
AY: -
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S. 4: The primary liability and onus is on the Dept to prove that a certain receipt is liable to be taxed. Deposits collected by a finance company are capital receipts and not revenue receipts. The fact that the deposits are credited to the profit and loss account is irrelevant. The true nature of the receipts have to be seen and not the entry in the books of account (All imp judgements referred).

It is the true nature and quality of the receipt and not the head under which it is entered in the account books that would prove decisive. If a receipt is a trading receipt, the fact that it is not so shown in the account books of the assessee would not prevent the assessing authority from treating it as trading receipt. It has been held by the Supreme court that the primary liability and onus is on the Department to prove that a certain receipt is liable to be taxed

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DATE: July 8, 2019 (Date of pronouncement)
DATE: July 20, 2019 (Date of publication)
AY: -
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S. 80IB(10)(a): There shall be stay of judgement in Global Reality 379 ITR 107 (MP) where it was held that issuance of completion certificate, after the cut off date by the Local Authority but, mentioning the date of completion of project before the cut off date, does not fulfill the condition specified in clause (a) of Section 80IB (10) read with Explanation (ii) thereunder

We accordingly hold that issuance of completion certificate, after the cut off date by the Local Authority but, mentioning the date of completion of project before the cut off date, does not fulfill the condition specified in clause (a) of Section 80IB (10) read with Explanation (ii) thereunder. We reject the argument of the assessee that the effect of amended clause (a) of sub-Section 10 of Section 80IB, which has come into force with effect from 1st April, 2005, has retrospective effect or that it is unjust in any manner or incapable of compliance at all

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DATE: February 20, 2019 (Date of pronouncement)
DATE: June 22, 2019 (Date of publication)
AY: -
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Entire law explained on (i) whether a litigant is bound by concessions of fact and law made by his Counsel/ Authorized representative during the hearing, (ii) tests to find out whether contract labourers are direct employees or not, (iii) meaning of "control and supervision", (iv) meaning of "master-servant" relationship & (v) when the findings in a judgement can be said to be "perverse" and such that no reasonable person could possibly arrive at

There can be no doubt that admission of a party is a relevant material. But can the statement made by the learned counsel of a party across the Bar be treated as admission of the party? Having regard to the requirements of Section 18 of the Evidence Act, on the facts of this case, in our view, the aforementioned statement of the counsel for the respondent cannot be accepted as an admission so as to bind the respondent. Equally, where a question is a mixed question of fact and law, a concession made by a lawyer or his authorised representative at the stage of arguments cannot preclude the party for whom such person appears from re-agitating the point in appeal

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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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