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DATE: August 22, 2019 (Date of pronouncement)
DATE: September 14, 2019 (Date of publication)
AY: 2012-13
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S. 10AA/ 115JB: Even income arising from the business of a SEZ Unit, which is exempt u/s 10AA, is subject to MAT from AY 2012-13 onwards owing to the insertion of the proviso to s. 115JB(6). The earlier judgements holding that the exemption provisions would prevail over s. 115JB are not good law after the insertion of the proviso to s. 115JB(6) (CBDT Circular No. 2/2012 dated 22.5.2012 referred)

It is thus seen that the Special Economic Zones Act, 2005 had initially inserted sub-section (6) in section 115JB of the Act to provide that the provisions of section 115JB shall not apply to income accrued or arising on or after 1-4-2005 from any business carried on, or services rendered, by an entrepreneur in a unit of SEZ or a developer of SEZ. Thus, a company carrying on the specified business in a unit in SEZ or as a developer of SEZ was not liable to pay MAT on the profits derived from the said business. However, the Finance Act, 2011 brought-in a sunset clause and inserts a proviso to sub- section (6) to provide that, with effect from 1-4-2012, the provisions of sub- section shall cease to have effect. Accordingly, a SEZ developer or any entrepreneur carrying on business in an SEZ unit (being a company) would be liable to pay MAT on the profits arising from the development of SEZ or the business carried on in an SEZ unit with assessment year 2012-13 and onwards

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DATE: July 1, 2019 (Date of pronouncement)
DATE: August 31, 2019 (Date of publication)
AY: 2013-14
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S. 10(38): The fact that "long-term capital gains" on listed shares are exempt from tax does not mean that "long-term capital loss" on such shares is not available for set-off against taxable income. While the gains are exempt, there is no bar against claiming set-off of the loss (J.H. Gotla 156 ITR 323 (SC) distinguished, CBDT Circular No.7/2013 dated 16.07.2013 referred, Raptakos Bret 69 SOT 383 (Mum) followed)

If one carefully analyzes various sub-sections of Section 10 then it is evident that each sub-section enlists specific specie of receipt to which exemption from tax is granted if certain conditions are fulfilled. We therefore find that Section 10 enlists various species of receipts which are otherwise revenue in nature but they are granted exemption from income-tax by the Legislature. The Legislature can grant exemption only when there is a positive income and not where there is a ‘loss’ or negative income on which admittedly there cannot be any charge of income-tax.

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DATE: February 8, 2019 (Date of pronouncement)
DATE: April 6, 2019 (Date of publication)
AY: -
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S. 14A/ Rule 8D: In the absence of any exempt income, disallowance u/s 14A & Rule 8D of the Act of any amount is not permissible (Essar Teleholdings 401 ITR 445 (SC) followed, Cheminvest 378 ITR 33 (Del) approved)

In view of the decision of this Court in Commissioner of Income Tax 5, Mumbai vs. Essar Teleholdings Ltd. through its Manager [401 ITR 445 (SC)] (2018) 3 SCC 253, we see no reason to entertain this special leave petition under Article 136 of the Constitution of India

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DATE: October 13, 2016 (Date of pronouncement)
DATE: August 17, 2018 (Date of publication)
AY: -
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S. 14A Rule 8D: The expression “does not form part of the total income” in s. 14A envisages that there should be an actual receipt of the income, which is not includible in the total income. If no exempt income is received or receivable during the relevant previous year, no disallowance u/s 14A can be made

The expression “does not form part of the total income” in Section 14A of the Income Tax Act, 1961 envisages that there should be an actual receipt of the income, which is not includible in the total income, during the relevant previous year for the purpose of disallowing any expenditure incurred in relation to the said income. The Income Tax Appellate Tribunal held that the provisions of Section 14A of the Income Tax Act, 1961 would not apply to the facts of this case as no exempt income was received or receivable during the relevant previous year

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DATE: April 26, 2017 (Date of pronouncement)
DATE: May 1, 2017 (Date of publication)
AY: 2013-14
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S. 68/ 2(14): "On Money" received by an assessee for sale of agricultural land has to be treated as "agricultural income" and exempted from tax if the facts show that the assessee has no other source for the receipt

The payment of on-money is an unfortunate practice in most part of our country, and none can deny this factual situation. It is the case of the assessee that the buyers were insisting on reducing the sale consideration to be disclosed in the sale deed for the purpose of reducing stamp duty payment. This contention of the assessee cannot be totally brushed aside

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DATE: March 3, 2017 (Date of pronouncement)
DATE: April 10, 2017 (Date of publication)
AY: 2010-11
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A disallowance u/s 14A & Rule 8D has to be made even in respect of securities that are held as stock-in-trade by the assessee. However, the disallowance has to be computed by taking into consideration only those shares which have yielded dividend income in the year under consideration

The object of s. 14A is to disallow the direct and indirect expenditure incurred in relation to income which does not form part of the total income. There is no dispute that part of the income of the assessee from its business is from dividend which is exempt from tax whereas the assessee was unable to produce any material before the authorities below showing the source from which shares were acquired. The mere fact that those shares were old ones and not acquired recently is immaterial. It is for the assessee to show the source of acquisition of those shares by production of materials that those were acquired from the funds available in the hands of the assessee at the relevant point of time without taking benefit of any loan. If those shares were purchased from the amount taken in loan, even for instance, five or ten years ago, it is for the assessee to show by the production of documentary evidence that such loaned amount had already been paid back and for the relevant assessment year, no interest is payable by the assessee for acquiring those old shares

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DATE: March 3, 2017 (Date of pronouncement)
DATE: March 11, 2017 (Date of publication)
AY: 2011-12
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S. 14A & Rule 8D: Disallowance under Rule 8D is not compulsory or mandatory. S. 14A(2) & Rule 8D cannot be invoked unless the AO examines the accounts and records the finding why the assessee's claim/ computation is not proper (entire law discussed and important judgements referred)

Thus, Rule 8D is not attracted and applicable to assessee who have exempt income and it is not compulsory and necessary that an assessee must voluntarily compute disallowance as per Rule 8D of the Rules. Where the disallowance or ‘nil’ disallowance made by the assessee is found to be unsatisfactory on examination of accounts, the assessing officer is entitled and authorised to compute the deduction under Rule 8D of the Rules. This pre-condition and stipulation as noticed below is also mandated in sub Rule (1) to Rule 8D of the Rules

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DATE: February 10, 2017 (Date of pronouncement)
DATE: February 15, 2017 (Date of publication)
AY: 2008-09
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CITATION:
S. 14A Rule 8D: No disallowance with respect to exempt income can be made if the securities are held as stock-in-trade. CBDT Circular No. 5/2014 dated 11.02.2014 referred

The Tribunal found that the assessee does not have any investment and all the shares are held as stock in trade as is evident from the orders of the lower authorities. On those facts the Tribuanl held:- “Once, the assessee has kept the shares as stock in trade, the rule 8D of the Rules will not apply.” In view of the clear finding of fact regarding the exempt income claimed treated to be business income and the shares held by the assessee having been treated as stock in trade, we do not find the case involves a substantial question of law

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DATE: January 31, 2017 (Date of pronouncement)
DATE: February 8, 2017 (Date of publication)
AY: 2009-10
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S. 80-IB(10): The profits of an undertaking eligible for deduction cannot be treated as "inflated" in the absence of material on record to show that there is an arrangement between the eligible unit and the non-eligible unit to generate more than ordinary profits for the eligible unit. The mere fact that there are common customers of both the units does not by itself indicate transfer of profits to the eligible unit

We note the fact that the CIT(A) has rendered a finding that there is nothing on record to indicate that there is any arrangement between the Appellant’s Jammu unit and his wife’s unit at Valsad to generate more than ordinary profits or any transfer of goods and/or services inter se, below the market price, resulting in inflated profits to the Appellant’s Jammu unit. Even before us, nothing has been shown by the Revenue that there is any business transacted between Appellant’s unit at Jammu and his wife’s unit at Valsad which resulted in inflating the profits being earned by the Appellant or that there is any transaction between them. The Tribunal has without considering the validity of the above finding of CIT(A), adopted the test of common customers of both the Appellant’s Jammu unit and his wife’s unit at Valsad, to conclude that profits of the Appellants, are inflated. Common customers by itself in the absence of some arrangement between the parties does not indicate transfer of profits to Appellant’s Jammu unit

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DATE: November 21, 2016 (Date of pronouncement)
DATE: December 6, 2016 (Date of publication)
AY: 2009-10
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S. 14A Rule 8D: The fact that the AO did not expressly record his dissatisfaction with the assessee's working does not mean that he cannot make the disallowance. The AO need not pay lip service and formally record dissatisfaction. It is sufficient if the order shows due application of mind to all aspects

Undoubtedly, the language of Section 14A presupposes that the AO has to adduce some reasons if he is not satisfied with the amount offered by way of disallowance by the assessee. At the same time Section 14A (2) as indeed Rule 8D(i) leave the AO equally with no choice in the matter inasmuch as the statute in both these provisions mandates that the particular methodology enacted should be followed. In other words, the AO is under a mandate to apply the formulae as it were under Rule 8D because of Section 14A(2). If in a given case, therefore, the AO is confronted with a figure which, prima facie, is not in accord with what should approximately be the figure on a fair working out of the provisions, he is but bound to reject it. In such circumstances the AO ordinarily would express his opinion by rejecting the disallowance offered and then proceed to work out the methodology enacted

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