Though BFSL was a shell company with no asset other than the land and by buying the shares of BFSL, DLF in effect purchased the land, the transaction cannot be said to a sham or an unreal one. In coming to the conclusion that the transaction is a colourable devise, the authorities have been carried away by the fact that the assessee was able to avoid payment of income tax. The assessee did resort to tax planning and took advantage of the law/ loopholes in the law. After seeing how the loophole was exploited within the four corners of the law, it is open to Parliament to amend the law plugging the loophole. However it cannot be done by judicial interpretation. S. 10(38) of the Act is unambiguous. If the share holder chooses to transfer the lands through a transfer of the shares of the company owning the land, it would be a valid legal transaction in law and cannot be said to be a colourable devise or a sham merely because tax is avoided thereby (McDowell 154 ITR 148 (SC), Azadi Bachao Andolan 263 ITR 706 (SC) & Vodafone International 341 ITR 1 (SC) referred)

Firstly, it is the settled position of law that every tax exemption should have a sunset clause. As the exemption in s. 115JB(6) & 115-O(6) did not have a sunset clause, the flaw is removed by the impugned amendment. Secondly, the exemption created an inequality between SEZ companies and other companies which is now removed. Thirdly, the exemptions provided to SEZ companies resulted in erosion of tax base. Fourthly, the impugned amendment relates to fiscal policy of the state and any decision in the economic sphere is adhoc and experimental in its nature and the Government is well within it sovereign power to regulate the same. Lastly, the impugned amendments do not transgress any of the fundamental rights of the petitioners guaranteed under the Constitution. The legislature can never be precluded from exercising its legislative power by resort to the Doctrine of Promissory Estoppel. Since it is an equitable doctrine, it must yield when equity so requires. The courts would decline to enforce this doctrine if it results in great hardship to government and would be prejudicial to the public interest

U/s 9(1)(i) income accruing or arising from any “business connection” in India is deemed to accrue or arise in India. The expression “business connection” is defined in Explanation 2 to s. 9 to include any business activities carried out by a person who is habitually acting on behalf of the non-resident in India. However, this does not include an authority to conclude contracts on behalf of the non-resident if the activities are limited to the purchase of the goods or merchandise for the non-resident. Under Explanation 1(b) to s. 9(1)(e) a non-resident is not liable to tax in India on any income attributable to operations confined to purchase of goods in India for export, even if the non-resident has an office or agency in India for that purpose and the goods are subjected by him to any manufacturing process before being exported from India. The result is that no income is deemed to accrue or arise in India to a non-resident, whether directly or indirectly through or from any “business connection“, if the activities are confined for the purpose of export

It is a shocking to note that as a matter of fact, the said assessment order is no assessment order in the eyes of law. There is not even a whisper with regard to the receipt of donation of Rs. 1.57 crore. It is really not understandable under what circumstances the said assessment order came into existence. The assessment order is bereft of any discussion with regard to the genuineness of the donation given or the creditworthiness of the donor to part with such a huge amount. It is also shocking to note that the CIT passed an order dropping the proceedings for cancellation of registration without assigning any reason. One fails to understand what impelled him to do so. The order being bereft of any reason is no order in the eyes of law and is liable to be ignored being illegal and void. The income tax authorities are required to administer the Act. The right to administer cannot obviously include the right to mal-administer. Thus, we find no words to express anguish as what kind of governance it had been. Failure to give reasons amounts to denial of justice. It is a case where the AO, the Addl. CIT and the CIT have abdicated their duties. The Court in the exercise of supervisory jurisdiction under Articles 226 and 227 of the Constitution of India cannot be a mute spectator. Such actions on the part of the department not only bring disrepute to the department but also encourages the dishonest assessees and promotes the nefarious activities which not only causes loss to revenue but also promotes dishonestly. An honest tax payer feels cheated. Let the matter be examined by the Chief Commissioner of Income-tax and appropriate departmental proceedings may be taken out against the erring officials. A copy of this judgment may also be sent to the Chairman of the CBDT for appropriate action

The expression “a residential house” in s. 54 (1) has to be understood in the sense that the building should be of residential nature and “a” should not be understood to indicate a singular number. Where an assessee had purchased two residential flats, he is entitled to exemption u/s 54 in respect of capital gains on sale of its property on purchase of both the flats, despite the fact that the flats were purchased by separate sale deeds. Deduction is allowable even if the flats are on different floors. On facts, as the two flats purchased by the assessee are adjacent to one another and have a common meeting point, the deduction cannot be denied (D. Ananda Basappa 309 ITR 329 (Kar), K. G. Rukminiamma 331 ITR 211 (Kar) followed; Susheela M. Jhaveri 107 ITD 327 (Mum) (SB) held not good law)