The observations of the Supreme Court in Transmission Corporation of AP 239 ITR 387 have to be read in the context of the question before the Court i.e. whether tax was deductible on the gross trading receipts or only on the “pure income profits”. The Court was not concerned with a case where the receipt was not chargeable to tax in the hands of the recipient at all. On the other hand the observations of the Court make it clear that the liability to deduct tax at source arises only when the sum payable to the non-resident is chargeable to tax. Even the plain language of s. 195 shows that the tax at source is to be deducted on the “sum chargeable under the provisions of the Act”. One can, therefore, reasonably say that the obligation to deduct tax at source is attracted only when the payment is chargeable to tax in India.

The retrospective amendment to s. 115JB was of no avail because it was enacted after the issue of the s. 148 notice. In Max India, the SC held in the context of s. 263 that the validity of the revision order had to be determined on the basis of the law on the date the order was passed. This principle is applicable to s. 147 as well and the validity of the reopening has to be determined on the basis of the law as it stands on the date of issue of the s. 148 notice. As the retrospective amendment to s. 115JB was not and could not have formed the basis for reopening the assessment, the same could not be relied upon to justify the reopening. The validity of the s. 148 notice must be determined with reference to the recorded reasons and the same cannot be allowed to be supplemented on a basis which was not present to the mind of the AO and could not have been so present on the date on which the power to reopen the assessment was exercised.

The power u/s 254(2) is confined to a rectification of a mistake apparent on record. S. 254(2) is not a carte blanche for the Tribunal to change its own view by substituting a view which it believes should have been taken in the first instance. S. 254(2) is not a mandate to unsettle decisions taken after due reflection. It is not an avenue to revive a proceeding by recourse to a disingenuous argument nor does it contemplate a fresh look at a decision recorded on merits, however appealing an alternate view may seem. Unless a sense of restraint is observed, judicial discipline would be the casualty. That is not what Parliament envisaged.

The argument of the Revenue that the term “speculative transaction” in s. 43(5) must be read into the provisions of s. 73 and that a business which involves actual delivery of shares would not constitute a speculation business cannot be accepted having regard to the deeming fiction created by the Explanation to s. 73. There is no justification to exclude a business involving actual delivery of shares. Once an assessee is deemed to be carrying on a speculation business for the purpose of s. 73, any loss computed in respect of that speculation business, can be set off only against the profits and gains of another speculation business.

The effect of s. 80-I (6) is that the deduction has to be computed as if the industrial undertaking were the only source of income of the assessee. Each industrial undertaking is to be treated separately and independently. It is only those industrial undertakings which have a profit or gain which have to be considered for computing the deduction. The loss making industrial undertaking would not come into the picture at all. The loss of one such industrial undertaking cannot be set off against the profit of another such industrial undertaking to arrive at a computation of the quantum of deduction that is to be allowed to the assessee u/s 80-I (1)

The basic postulate which underlines s. 147 is the formation of the belief by the AO that income chargeable to tax has escaped assessment. The AO must have reason to believe that such is the case before he proceeds to issue a notice u/s 147. The reasons which are recorded by the AO for reopening an assessment are the only reasons which can be considered when the formation of the belief is impugned. The recording of reasons distinguishes an objective from a subjective exercise of power. The requirement of recording reasons is a check against arbitrary exercise of power. The validity of the reopening has to be decided on the basis of the reasons recorded and on those reasons alone. The reasons recorded while reopening the assessment cannot be allowed to grow with age and ingenuity, by devising new grounds in replies and affidavits not envisaged when the reasons for reopening an assessment were recorded

Though the revenue has argued that a distinction is to be made between “employers’ contribution” and “employees’ contribution” and that employees’ contribution being in the nature of trust money in the hands of the assessee cannot be allowed as a deduction if not paid on or before the due date specified in the PF etc law, the scheme of the Act is that employees’ contribution is treated as income u/s 2 (24) (x) on receipt by the assessee and allowed as a deduction u/s 36 (1) (va) on making deposit with the concerned authorities. S. 43B (b) stipulates that such deduction would be permissible only on actual payment. The assessee can get the benefit if the actual payment is made before the return is filed, as per the principle laid down in Vinay Cement

Under the proviso to s. 147, an assessment made u/s 143 (3) can be reopened after the expiry of 4 years from the end of the assessment year only if there is a failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment. The condition precedent to a valid exercise of the power to reopen the assessment was absent. An exceptional power has been conferred upon the Revenue to reopen an assessment after a lapse of four years and the conditions prescribed by the statute for the exercise of such a power must be strictly fulfilled and in their absence, the exercise of power would not be sustainable in law.

The assessee is a State Govt. undertaking. Its appeal was dismissed by the Tribunal on the ground that the approval of the Committee on Disputes (“COD”) had not been obtained. In a writ petition filed by the assessee, the Additional Solicitor General appearing for the revenue stated that it was not the contention of the revenue that COD approval was required for appeals before the Tribunal in Income-tax matters. It was pointed out that though in ONGC vs. CIDCO 2007 (7) SCC 39, the Supreme Court had directed the formation of a Committee to sort out differences between the Central Government and State Government entities, and a Committee would be constituted by the UOI to look into disputes on a case to case, this was not necessary in income-tax matters. Accordingly, the order of the Tribunal was set-aside for a decision on the merits.

The RBI was not justified in granting permission to the foreign law firms to open liaison offices in India u/s 29 of FERA. Further, the foreign law firms were not entitled to practise in non litigious matters in India without following the provisions of the Advocates Act.