As held in D. Ananda Bassappa (SLP dismissed) & K G Rukminiamma, the Revenue’s contention that the phrase “a” residential house would mean “one” residential house is not correct. The expression “a” residential house should be understood in a sense that building should be of residential in nature and “a” should not be understood to indicate a singular number. Also, s. 54/54F uses the expression “a residential house” and not “a residential unit”. S. 54/54F requires the assessee to acquire a “residential house” and so long as the assessee acquires a building, which may be constructed, for the sake of convenience, in such a manner as to consist of several units which can, if the need arises, be conveniently and independently used as an independent residence, the requirement of the Section should be taken to have been satisfied. There is nothing in these sections which require the residential house to be constructed in a particular manner. The only requirement is that it should be for the residential use and not for commercial use. If there is nothing in the section which requires that the residential house should be built in a particular manner, it seems to us that the income tax authorities cannot insist upon that requirement. A person may construct a house according to his plans, requirements and compulsions. A person may construct a residential house in such a manner that he may use the ground floor for his own residence and let out the first floor having an independent entry so that his income is augmented. It is quite common to find such arrangements, particularly post-retirement. One may build a house consisting of four bedrooms (all in the same or different floors) in such a manner that an independent residential unit consisting of two or three bedrooms may be carved out with an independent entrance so that it can be let out. He may even arrange for his children and family to stay there, so that they are nearby, an arrangement which can be mutually supportive. He may construct his residence in such a manner that in case of a future need he may be able to dispose of a part thereof as an independent house. There may be several such considerations for a person while constructing a residential house. The physical structuring of the new residential house, whether it is lateral or vertical, cannot come in the way of considering the building as a residential house. The fact that the residential house consists of several independent units cannot be permitted to act as an impediment to the allowance of the deduction u/s 54/54F. It is neither expressly nor by necessary implication prohibited

Both the CIT(A) as well as the ITAT have set aside the penalty imposed by the AO u/s 271(1)(c) on the ground that the issue of deduction u/s 14A of the Act was a debatable issue. We may also note that against the quantum assessment where under deduction u/s 14A of the Act was prescribed to the assessee, the assessee has preferred an appeal in this Court u/s 260A of the Act which has also been admitted and substantial question of law framed. This itself shows that the issue is debatable. For these reasons, we are of the opinion that no question of law arises in the present case

The regulation of the Medical Council prohibiting medical practitioners from availing of freebies is a very salutary regulation which is in the interest of the patients and the public. This Court is not oblivious to the increasing complaints that the medical practitioners do not prescribe generic medicines and prescribe branded medicines only in lieu of the gifts and other freebies granted to them by some particular pharmaceutical industries. Once this has been prohibited by the Medical Council under the powers vested in it, s. 37(1) comes into play. The Petitioner’s contention that the circular goes beyond the section is not acceptable. In case the assessing authorities are not properly understanding the circular then the remedy lies for each individual assessee to file an appeal but the circular which is totally in line with s. 37(1) cannot be said to be illegal. If the assessee satisfies the assessing authority that the expenditure is not in violation of the regulations framed by the medical council then it may legitimately claim a deduction, but it is for the assessee to satisfy the AO that the expense is not in violation of the Medical Council Regulations

In order to decide whether the expenditure is a revenue or a capital one has to look at the expenditure from a commercial point of view. Not every advantage of enduring nature constitutes capital expenditure. What is material to consider is the nature of the advantage in a commercial sense and it is only where the
advantage is in the capital field that the expenditure would be disallowable. If the advantage consists merely in facilitating the assessee’s trading operations or enabling the management and conduct of the assessee’s business to be carried on more efficiently or more profitably while leaving the fixed capital untouched, the expenditure would be on revenue account, even though the advantage may endure for an indefinite future. On facts, the corporate membership was for a limited period of 5 years. It was obtained for running the business with a view to produce profit. Such membership does not bring into existence an asset or an advantage for the enduring benefit of the business. It is an expenditure incurred for the period of membership and is not long lasting. By subscribing to the membership of a club, no capital asset is created or comes into existence. By such membership, a privilege to use facilities of a club alone, are conferred on the assessee and that too for a limited period. Such expenses are for running the business with a view to produce the benefits to the assessee. Consequently, it cannot be treated as capital asset (Otis Elevator 195 ITR 682 (Bom), Engineers India 239 ITR 237 (Del), Gujarat State Export Corp 209 ITR 649 (Guj) followed; Framatone Connector OEN 294 ITR 559 (Ker) dissented from; Majestic Auto overruled)

ShanH was incorporated as part of the policy that all off-shore investments must be made through a subsidiary incorporated in France. It is not the case of the Revenue that in 2006 itself ShanH was conceived as a preordained scheme to avoid tax in India. The Revenue’s case about when ShanH became a tax avoidance scheme is ambivalent and incoherent. ShanH is an entity of commercial substance and business purpose. Though a subsidiary of MA/GIMD, it is not a mere nominee or alter ego of MA/GIMD and there is nothing to show that they exercised overriding control over it. The creation of subsidiaries for investment is a legitimate practice. ShanH is accordingly the true and beneficial owner of the Indian company’s shares. When the shares of ShanH were sold, it was the sale of shares of a French company and it cannot be said that the control, management or underlying assets of the Indian company were sold so as to attract tax on capital gains in India (Azadi Bachao Andolan 263 ITR 706 (SC) & Vodafone International 341 ITR 1 (SC) followed)

S. 147 empowers the AO to reopen an assessment if he has reason to believe that income has escaped assessment. If the requirements of giving jurisdiction to the AO to reopen the assessment are satisfied, he may also assess any other escaped income which comes to his notice subsequently in the course of the proceedings. Prior to the insertion of Explanation 3 to s. 147 by the Finance Act 2009 w.r.e.f. 1.4.1989, it was clear that if the reason for which the assessment is reopened fails, the AO could not proceed to assess other income which had escaped assessment. For assuming jurisdiction to frame an assessment u/s 147 what is essential is a valid reopening. If the very foundation of the reopening is knocked out, any further proceeding in respect to such assessment naturally would not survive. Explanation 3 to s. 147 does not change this position. Explanation 3 to s. 147 was inserted to counter the view taken by some courts (Atlas Cycle Industries 180 ITR 319 (P&H) & Travancore Cements 305 ITR 170 (Ker)) that even if the jurisdiction was validly exercised, the AO could not assess the other escaped income that was not referred to in the reasons. It merely clarifies the existing law and does not expand the powers of the AO u/s 147. If the AO drops the ground for which the notice for reopening was issued, it means he had no “reason to believe” that income had escaped assessment and so he has no jurisdiction to assess the other escaped income (Jet Airways 331 ITR 236 (Bom), Ranbaxy Laboratories 336 ITR 136 (Del) & Major Deepak Mehta 344 ITR 641 (Chhattisgarh) followed; Majinder Singh Kang 344 ITR 358 (P &H) not followed)

Though in Krishna Sales (73) ELT 519 (SC) it was held that the mere filing of an appeal does not operate as a stay or suspension of the order appealed against, where the delay in the disposal of an appeal or a stay application arises due to a failure of the Appellate Authority to dispose of the appeal or the stay application and the assessee is not at fault, there is no reason or justification to penalize the assessee by recovering the demand in the meantime. Administrative reasons for non-disposal of the stay application may include lack of adequate infrastructure, unavailability of the officer concerned before whom the stay application has been filed, absence of a Bench before the CESTAT for the decision of an application for stay or the sheer volume of work. In such a situation, where an assessee has done everything within his control by moving an application for stay and which remains pending because of the inability of the Commissioner (Appeals) or the CESTAT to dispose of the application within thirty days, it would be a travesty of justice if recovery proceedings are allowed to be initiated in the meantime. The protection of the revenue has to be necessarily balanced with fairness to the assessee. That was why, even though a specific statutory provision came to be introduced by Parliament in s. 35C(2A) to the effect that an order of stay would stand vacated where the appeal before the Tribunal was not disposed of within 180 days, the Supreme Court held in Kumar Cotton Mills 180 ELT 434 (SC) that this would not apply to a situation where the appeal had remained pending for reasons not attributable to the assessee

Rule 4 of the Point of Taxation Rules, 2011 which has continued even after 01.04.2012 is clearly the answer. It provides for a specific situation namely determination of the point of taxation in case of change in effective rate of tax. As per Rule 4, whenever there is a change in the effective rate of tax in respect of a service, the point of taxation shall be determined in the manner set out in the Rule. Sub-clause (ii) of Clause (a) of Rule 4 provides that where the taxable service has been provided before 01.04.2012 and the invoice was also issued before 01.04.2012, but the payment is received after 01.04.2012, then the date of issuance of invoice shall be deemed to be the date on which the service was rendered and, consequently, the point of taxation. The result is that where the services of the chartered accountants were actually rendered before 01.04.2012 and the invoices were also issued before that date, but the payment was received after the said date, the rate of tax will be 10% and not 12%. The circulars in question have not taken note of this aspect, and have proceeded on the erroneous assumption that the old Rule 7 continued to govern the case notwithstanding the introduction of the new Rule 7 which does not provide for the contingency that has arisen in the present case. Consequently, the circulars are quashed as being contrary to the Finance Act, 1994 and the Point of Taxation Rules, 2011. A Circular which is contrary to the Act and the Rules cannot be enforced (Ratan Melting & Wire Industries followed)

Though the question raised proceeds on the basis that approval of the JCIT was given as he had corrected the draft assessment order and the changes were incorporated by the AO in the final assessment order, the finding of fact was recorded by the Tribunal is that no prior approval of the Joint Commissioner was taken before the ITO passed the order. In view of the above, there is no reason to entertain the proposed question and the appeal is dismissed

The issue of a notice u/s 143(2) is mandatory. The failure to do so renders the reassessment void (J.M.Scindia 300 ITR 193 (Bom) followed). S. 292BB was inserted w.e.f. 1.4.2008 and came into operation prospectively for AY 1999-2000 and onwards