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DATE: October 16, 2015 (Date of pronouncement)
DATE: February 16, 2016 (Date of publication)
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CITATION:
Law on prospective vs. retrospective operation of legislation explained. The Hindu Succession (Amendment Act), 2005 which came into effect on 09.09.2015 and by which daughters in a joint Hindu family, governed by Mitakshara law, were granted statutory right in the coparcenary property (being property not partitioned or alienated) of their fathers applies only if both the father and the daughter are alive on the date of commencement of the Amendment Act

An amendment of a substantive provision is always prospective unless either expressly or by necessary intendment it is retrospective3. In the present case, there is neither any express provision for giving retrospective effect to the amended provision nor necessary intendment to that effect. Requirement of partition being registered can have no application to statutory notional partition on opening of succession as per unamended provision, having regard to nature of such partition which is by operation of law. The intent and effect of the Amendment will be considered a little later. On this finding, the view of the High Court cannot be sustained. Interpretation of a provision depends on the text and the context (RBI vs. Peerless (1987) 1 SCC 424, para 33). Normal rule is to read the words of a statute in ordinary sense. In case of ambiguity, rational meaning has to be given (Kehar Singh vs. State (1988) 3 SCC 609). In case of apparent conflict, harmonious meaning to advance the object and intention of legislature has to be given (District Mining Officer vs. Tata Iron and Steel Co. (2001) 7 SCC 358)

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DATE: December 22, 2015 (Date of pronouncement)
DATE: February 16, 2016 (Date of publication)
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CITATION:
Pursuant to the amendment to the Hindu Succession Act, 1956 by the Hindu Succession (Amendment) Act, 2005 all rights which were available to a Hindu male are now also available to a Hindu female. A daughter is now recognised as a co-parcener by birth in her own right and has the same rights in the co-parcenary property that are given to a son. Consequently, the eldest daughter is entitled to be the Karta of the HUF

The impediment which prevented a female member of a HUF from becoming its Karta was that she did not possess the necessary qualification of co-parcenership. Section 6 of the Hindu Succession Act is a socially beneficial legislation; it gives equal rights of inheritance to Hindu males and females. Its objective is to recognise the rights of female Hindus as co-parceners and to enhance their right to equality apropos succession. Therefore, Courts would be extremely vigilant apropos any endeavour to curtail or fetter the statutory guarantee of enhancement of their rights. Now that this disqualification has been removed by the 2005 Amendment, there is no reason why Hindu women should be denied the position of a Karta. If a male member of an HUF, by virtue of his being the first born eldest, can be a Karta, so can a female member. The Court finds no restriction in the law preventing the eldest female co-parcener of an HUF, from being its Karta. The plaintiff’s father‟s right in the HUF did not dissipate but was inherited by her. Nor did her marriage alter the right to inherit the co-parcenary to which she succeeded after her father‟s demise in terms of Section 6

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DATE: February 11, 2016 (Date of pronouncement)
DATE: February 15, 2016 (Date of publication)
AY: 2008-09
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CITATION:
Argument that transfer pricing adjustment cannot be made if the assessee's income is deductible u/s 10A/ 10B is not acceptable. Contrary view in TCS cannot be followed as it is obiter dicta & contrary to law laid down in Aztech Software 107 ITD 141 (SB)

No exception has been carved out by the statute for non-determination of the ALP of an international transaction of an assessee who is eligible for the benefit of deduction section 10A/10B or any other section of Chapter- VIA of the Act. Section 92(1) clearly provides that any income arising from an international transaction is required to be computed having regard to its arm’s length price. There is no provision exempting the computation of total income arising from an international transaction having regard to its ALP, in the case of an assessee entitled to deduction u/s 10A or 10B or any other relevant provision. Section 92C dealing with computation of ALP clearly provides that the ALP in relation to an international transaction shall be determined by one of the methods given in this provision. This section also does not immune an international transaction from the computation of its ALP when income is otherwise eligible for deduction. On the contrary, we find that sub-section (4) of section 92C plainly stipulates that where an ALP is determined, the AO may compute the total income of the assessee having regard to the ALP so determined. This shows that the total income of an assessee entering into an international transaction, is required to be necessarily computed having regard to its ALP without any exception

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DATE: August 28, 2015 (Date of pronouncement)
DATE: February 15, 2016 (Date of publication)
AY: 2005-06
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CITATION:
S. 54EC: The period of "6 months" available for making investment means 6 calendar months & not 180 days. Payment by cheque dates back to date of presentation & not date of encashment

For purposes of section 54EC, as held by the Special Bench of Ahmedabad bench in the case of Alkaben B. Patel (2014) 148 ITD 31 (Ahd) and M/s. Crucible Trading Co. Pvt. Ltd. in ITA No.5994/Mum/2013 dated 25.02.2015 “6 months” have been interpreted and it is held that the same would mean 6 calendar months and not 180 days. As held by the Supreme Court in CIT vs. Ogale Glass Works Ltd. (1954) 25 ITR 529 (SC), in the case of cheques not having been dishonored but having been encashed, the payment related back to the date of the receipt of the cheques and in law the dates of payments were the dates of the delivery of the cheques

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DATE: September 29, 2015 (Date of pronouncement)
DATE: February 15, 2016 (Date of publication)
AY: 2006-07
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CITATION:
Expl to s. 37(1): Penalties & fines paid to SEBI, BSE etc for breach of regulatory/ procedural requirements are "compensatory" in nature and not for any purpose which is an ‘offense’ prohibited by the law

An ‘offence’ would be the one which will arise as a result to commission of an action which is prohibited by law, and, in all the given situations, no element of any consent of the parties involved can bring any change in its legal consequences. Similarly, any amount paid by the assessee, in the form of compensation, as a consequence of breach of contract between the two parties, cannot be said to be amount paid for any purpose which is an ‘offence’, prohibited by the law. In other words, under the income tax law, one is required to go into the real nature of the transactions and not to the nomenclature that may have been assigned by the parties. Thus, to decide such issues, we are required to see real substance under the Income Tax Law, and not merely its form. Thus, only those payments, which have been made by the assessee for any purpose which is an ‘offence’ or which is ‘prohibited by law’, shall alone would be hit by the explanation to section 37

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DATE: August 28, 2016 (Date of pronouncement)
DATE: February 15, 2016 (Date of publication)
AY: 2008-09
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CITATION:
There is a distinction betwen "setting up" and "commencement" of a business. A business is "set up" and expenditure is deductible even if assessee has no customers and no income

The assessee has already purchased residential flat for the purpose of resale/lease, and therefore assessee was apparently ready to do its business. Under these circumstances, it can be said that the business is set up by the assessee during the year under consideration. For the deductibility of expenses incurred after this stage, earning of the business income is not a mandatory condition under the law. The assessee may not have been successful in getting customers or earning the business income, but if the assessee has done requisite preparations and if the assessee can be said to be in a position to cater to its customers, then it can be said that business is set up and it would amount to carrying on the business and accordingly the expenses would stand allowable to the assessee, irrespective of the fact whether actually assessee got any customer and earned any business income during the year or not

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DATE: September 16, 2015 (Date of pronouncement)
DATE: February 13, 2016 (Date of publication)
AY: 2007-08
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CITATION:
Transfer Pricing: Companies with large turnover like Infosys & Wipro are not comparable to companies with smaller turnover and should be excluded from the list of comparables

The said Companies are no doubt large and distinct companies where the area of development of subject services are different and as such the profit earned therefrom cannot be a bench-marked or equated with the assessee. The Tribunal whilst passing the impugned Order has considered the said principles whilst coming to the conclusion that the said three Companies cannot be treated to be comparable to the Assessee Company. The turn over is obviously a relevant factor to consider the comparability

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DATE: February 12, 2016 (Date of pronouncement)
DATE: February 13, 2016 (Date of publication)
AY: 2011-12
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CITATION:
S. 2(22)(d)/ 46A: A buyback of shares u/s 77A of the Companies Act is not a reduction of capital u/s 100 - 104 of that Act. A buyback cannot be regarded as a "colourable transaction" and cannot be assessed as "deemed dividend" u/s 2(22)(d). The capital gains on buy-back are exempt under the India-Mauritius DTAA

Section 100-105 r.w.s. 391of the CA deal with reduction of capital and obtaining permission of the Court. Clearly, both deal with different situations. The Hon’ble Jurisdictional High Court has dealt with the schemes of buyback of shares and reduction of capital in the case of Capgemini India Private Limited (Company Scheme Petition No.434 of 2014 dated 28.04.2015) where it was held that it is open to a company to buy back its own shares by following the procedure prescribed under section 77A/Section 68 or by following the procedure prescribed under section 391 read with Sections 100 to 104 of the 1956, Act. The observations of the Hon’ble Court does not leave any doubt that buyback of shares cannot be equated with reduction of capital

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DATE: February 8, 2016 (Date of pronouncement)
DATE: February 12, 2016 (Date of publication)
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CITATION:
S. 9(1)(vi) vs. Article 12 of DTAA: The retrospective amendment to s. 9(1)(vi) so as to supersede the law laid down in Asia Satellite 332 ITR 340 (Del) and assess transmission fees as “royalty” has no impact on assessees covered by DTAA because a corresponding amendment has not been made to the definition of “royalty” therein. Amendments to domestic law do not affect the DTAA

This Court is of the view that no amendment to the Act, whether retrospective or prospective can be read in a manner so as to extend in operation to the terms of an international treaty. In other words, a clarificatory or declaratory amendment, much less one which may seek to overcome an unwelcome judicial interpretation of law, cannot be allowed to have the same retroactive effect on an international instrument effected between two sovereign states prior to such amendment. In the context of international law, while not every attempt to subvert the obligations under the treaty is a breach, it is nevertheless a failure to give effect to the intended trajectory of the treaty. Employing interpretive amendments in domestic law as a means to imply contoured effects in the enforcement of treaties is one such attempt, which falls just short of a breach, but is nevertheless, in the opinion of this Court, indefensible

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DATE: January 25, 2016 (Date of pronouncement)
DATE: February 12, 2016 (Date of publication)
AY: 2001-02
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CITATION:
S. 271(1)(c)/ 271(1-B): If the notice is issued without application of mind (by striking out the relevant part in the notice), the penalty proceedings are invalid

It is clear that the notice is issued proposing to levy penalty under Section 271(1)(b) of the Act whereas the order is passed by the Assessing Officer under Section 271(1)(c) of the Act which clearly indicates that there was no application of mind by the Assessing Officer while issuing the notice under Section 274 of the Act. As regards Section 271(1-B) of the Act, it clearly indicates that the assessment order should contain a direction for initiation of proceedings. Merely saying that the penalty proceedings have been initiated would not satisfy the requirement, a direction to initiate proceeding shall be clear and not be ambiguous

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