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Mahaveer Kumar Jain vs. CIT (Supreme Court)

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DATE: April 19, 2018 (Date of pronouncement)
DATE: April 23, 2018 (Date of publication)
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CITATION:
It is a fundamental rule of law of taxation that, unless otherwise expressly provided, income cannot be taxed twice. A taxing Statute should not be interpreted in such a manner that its effect will be to cast a burden twice over for the payment of tax on the taxpayer unless the language of the Statute is so compelling that the court has no alternative than to accept it. In a case of reasonable doubt, the construction most beneficial to the taxpayer is to be adopted

It is not disputed that there can be double taxation if the legislature has distinctly enacted it. It is only when there are general words of taxation and they have to be interpreted, they cannot be so interpreted as to tax the subject twice over to the same tax….. If any double taxation is involved, the Legislature itself has, in express words, sanctioned it. It is not open to any one thereafter to invoke the general principles that the subject cannot be taxed twice over

ACIT vs. Manufax (India) S.B. (ITAT Agra)

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DATE: April 11, 2018 (Date of pronouncement)
DATE: April 19, 2018 (Date of publication)
AY: 2010-11, 2011-12
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CITATION:
S. 9(1)(i)/ 40(a)(i): Entire law on whether commission paid by an Indian entity to foreign agents can be said to accrue in India and whether the assessee is obliged to deduct TDS thereon u/s 195 explained. All relevant judgements and CBDT Circulars Nos.7 dated 22.10.2009, 23 dated 23 July 1969, 163 dated 29th May 1975 and 786 dated 7th February 2000 considered

It is not disputed that that the withdrawal of the circulars No. 23 and 786 has been made on 22.10.2009 vide CBDT Circular No. 7 of 2009 and mere withdrawal of the circular does not negate the principles of income deemed to accrue or arise in India or outside India. The CBDT has not stated that any part of the circulars is contrary to law or that the circulars were wrongly issued or that the law has undergone changes holding their withdrawal. Thus, in respect of cases, which directly follow with the situations covered by the circulars, the liability to tax should continue to be in accordance with section 9 of the Act and its intent. The relevant sections, namely section 5(2) and section 9 of the Income-tax Act, 1961 not having undergone any change in this regard, the clarification in Circular No. 23 still prevails even after the withdrawal. No tax is therefore deductible under section 195 and consequently, the expenditure on export commission payable to a non-resident for services rendered outside India is not liable for withholding tax

Sedco Forex International Inc vs. CIT (Supreme Court)

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DATE: October 30, 2017 (Date of pronouncement)
DATE: November 1, 2017 (Date of publication)
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CITATION:
S. 44BB: Amounts received as “mobilisation fee” on account of provision of services and facilities in connection with the extraction etc. of mineral oil in India attracts s. 44BB and have to be assessed as business profits. S. 44BB has to be read in conjunction with ss. 5 and 9 of the Act. Ss. 5 and 9 cannot be read in isolation. The argument that the mobilisation fee is “reimbursement of expenses” and so not assessable as income is not acceptable because it is a fixed amount paid which may be less or more than the expenses incurred. Incurring of expenses, therefore, would be immaterial. Also, the contract was indivisible

Section 44BB starts with non-obstante clause, and the formula contained therein for computation of income is to be applied irrespective of the provisions of Sections 28 to 41 and Sections 43 and 43A of the Act. It is not in dispute that assessees were assessed under the said provision which is applicable in the instant case. For assessment under this provision, a sum equal to 10% of the aggregate of the amounts specified in sub-section (2) shall be deemed to be the profits and gains of such business chargeable to tax under the head ‘profits and gains of the business or profession’. Sub-section (2) mentions two kinds of amounts which shall be deemed as profits and gains of the business chargeable to tax in India. Sub-clause (a) thereof relates to amount paid or payable to the assessee or any person on his behalf on account of provision of services and facilities in connection with, or supply of plant and machinery on hire used, or to be used in the prospecting for, or extraction or production of, mineral oils in India. Thus, all amounts pertaining to the aforesaid activity which are received on account of provisions of services and facilities in connection with the said facility are treated as profits and gains of the business.

Sumana Bandyopadhyay vs. DDIT (Calcutta High Court)

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DATE: July 13, 2017 (Date of pronouncement)
DATE: July 17, 2017 (Date of publication)
AY: 2010-11
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CITATION:
S. 5(2)(a): Salary of a non-resident seafarer for services rendered outside India on-board foreign ships accrues outside India and is not assessable in India even if received by the seafarer into the NRE bank account maintained in India by the seafarer. CBDT Circular No. 13/2017 dated 11.04.2017 is clarificatory

Whether on the facts and in the circumstances of the case and in law, income by way of salary which became due and has accrued to the assessee, a non-resident, for services rendered outside India and which is not chargeable to tax in India on the “due” or “accrual” basis, can be said to be chargeable to tax on the “receipt” basis merely because the foreign employers, on the instructions of the assessee, have remitted a part of amount of salary to the assessee’s NRE bank account in India?

Utanka Roy vs. DIT (Calcutta High Court)

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DATE: December 15, 2017 (Date of pronouncement)
DATE: January 4, 2017 (Date of publication)
AY: 2011-12
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S. 5/ 9: Salary received by a non-resident for services rendered abroad accrues outside India and is not chargeable to tax in India. The source of the receipt is not relevant. The CIT has wide powers u/s 264 and has to exercise them in favour of the assessee in terms of CBDT Circular No. 14 (XL-35) dated 11.04.1955

The relevant test to be applied to decide whether the income accrued to a non-resident in India or outside is concerned, is to find the place where the services were rendered, in order to consider where the income accrued. The source of the income was not relevant for the purposes of ascertaining whether the income had accrued in India or outside India. The question whether the petitioner has rendered services in India or not is a question of fact

P.G. & W. Sawoo Pvt. Ltd vs. ACIT (Supreme Court)

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DATE: April 19, 2016 (Date of pronouncement)
DATE: May 7, 2016 (Date of publication)
AY: 1989-90
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S. 5/ 147: Even if income by way of rent is enhanced with retrospective effect, it accrues only when a right to receive the income is vested in the assessee. A notice u/s 148 seeking to assessee the income prior to its accrual is without jurisdiction

A reading of the decision of this Court in E.D. Sassoon (supra) would go to show that the income to be chargeable to tax must accrue or arise at any point of time during the previous year. This Court in E.D. Sassoon (supra) has held in categorical terms that income can be said to have accrued or arisen only when a right to receive the amount in question is vested in the assessee. Viewed from the aforesaid perspective, it is clear that no such right to receive the rent accrued to the assessee at any point of time during the assessment year in question, inasmuch as such enhancement though with retrospective effect, was made only in the year 1994. The contention of the Revenue that the enhancement was with retrospective effect, in our considered view, does not alter the situation as retrospectivity is with regard to the right to receive rent with effect from an anterior date. The right, however, came to be vested only in the year 1994

Bechtel International Inc vs. DDIT (ITAT Mumbai)

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DATE: October 30, 2015 (Date of pronouncement)
DATE: April 5, 2016 (Date of publication)
AY: 2002-03
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CITATION:
Income does not accrue if the debtor is in a precarious financial position and recovery is doubtful

Income did not accrue in the hands of the assessee owing to the precarious financial condition of the debtor notwithstanding that: (a) Services were rendered and the income was recorded in the books of account of the assessee during the relevant year & (b) bad debts were claimed in subsequent years when the dispute was settled

CIT v. Gujarat Reclaim & Rubber Products (Bombay High Court)

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DATE: December 8, 2015 (Date of pronouncement)
DATE: December 21, 2015 (Date of publication)
AY: 2007-08, 2008-09
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CITATION:
Commission earned by a non-resident agent who carried on business of selling Indian goods outside India cannot be said have deemed to be income which has accrued and/or arisen in India. Circular No. 23 of 1969 & Circular No.786 of 2000 were withdrawn on 22.10.2009. The withdrawal of a Circular cannot have retrospective operation

in CIT v/s. Toshoku Ltd. 125 ITR 525 the Apex Court held that the commission earned by the non-resident agent who carried on the business of selling Indian goods outside India, cannot be said have deemed to be income which has accrued and/or arisen in India. Circular No. 23 of 1969 and its reiteration in Circular No.786 of 2000 were in force during the Assessment Years. It was only subsequently i.e. on 22nd October, 2009 that the earlier Circular of 1969 were withdrawn. However, such subsequent withdrawal of an earlier Circular cannot have retrospective operation as held in UTI v. P. K. Unny 249 ITR 612

CIT vs. Deogiri Nagari Sahakari Bank Ltd (Bombay High Court)

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DATE: January 22, 2015 (Date of pronouncement)
DATE: August 21, 2015 (Date of publication)
AY: 2009-10
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CITATION:
Interest on NPAs and Stick Loans, even if accrued as per the mercantile system of accounting, is not taxable as per prudential norms

The assessee herein being a Cooperative Bank also governed by the Reserve Bank of India and thus the directions with regard to the prudential norms issued by the Reserve Bank of India are equally applicable to the Cooperative banks. The provisions of Section 45Q of Reserve Bank of India Act has an overriding effect vis-à-vis income recognition principle under the Companies Act. Hence, Section 45Q of the RBI Act shall have overriding effect over the income recognition principle followed by cooperative banks. Hence, the Assessing Officer has to follow the Reserve Bank of India directions 1998. In UCO Bank the Supreme Court considered the nature of CBDT circular and held that the Board has power, inter alia, to tone down the rigour of the law and ensure a fair enforcement of its provisions, by issuing circular in exercise of its statutory powers under section 119 of act which are binding on the authorities in the administration of the Act, it is a beneficial power given to the Board for proper administration of fiscal law so that undue hardship may not be caused to the assessee and the fiscal laws may be correctly applied

CIT vs. Chemosyn Ltd (Bombay High Court)

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DATE: February 11, 2015 (Date of pronouncement)
DATE: February 24, 2015 (Date of publication)
AY: 2007-08
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CITATION:
(i) Even if gains have accrued on execution of the development agreement as per Chaturbhuj Dwarkadas, the subsequent modification/ supercession of the agreement means that gains are not taxable as per real income theory, (ii) expenditure on buy-back of shares of warring shareholders is business expenditure

In Chaturbhuj Dwarkadas Kapadia, the issue was to determine the year in which the property was transferred for the purpose of capital gains. In this case the issue is what is the consideration received for the transfer of an asset. No income is accrued or received of the value of 18000 sq.feet of constructed area under the development agreement because the said agreement was not acted upon as it came to be uperseded/modified by the Tripartite agreement. This was the position when the return of income was filed. On the application of the real income theory, there would be neither accrual nor receipt of income to warrant bringing to tax to the constructed area of 18,000 sq.ft which has not been received by the assessee (CIT vs. Shoorji Vallabhdas 46 ITR 144 (SC) followed)

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