In Allied Motors 224 ITR 677 & Alom Extrusions 319 ITR 306, the Supreme Court held that the amendments to the aforesaid provision (s. 43B) have retrospective application. Also, in R.B. Jodha Mal Kuthiala 82 ITR 570 (SC), the Supreme Court held that a provision which was inserted the remedy to make a provision workable requires to be treated with retrospective operation so that reasonable deduction can be given to the section as well. In view of the authoritative pronouncement of the Supreme Court, this court cannot decide otherwise. Hence the appeal is dismissed.

S. 36(2)(i) provides that a deduction on account of a bad debt can be allowed only where such debt or part thereof has been taken into account in computing the income of the assessee. The debt comprised of the value of the shares transacted and the brokerage payable by the client. The brokerage as well as the value of the shares constituted a part of the debt due to the assessee since both arose out of the same transaction. The fact that the liability to pay brokerage arose at a point in time anterior to the liability to pay the value of the shares transacted makes no material difference to the position. As the brokerage from the transaction of the purchase of shares had been taxed in the hands of the assessee as business income, the debt or part thereof has been taken into account in computing the income of the assessee and the requirements of s. 36(1)(vii) r.w.s. 36(2) were satisfied. (Issue regarding the value of the shares which remain in the hands of the assessee which has to be adjusted against the amount receivable from the client left open) (CIT vs. T. Veerabhadra Rao 155 ITR 152 (SC) CIT vs. Bonanza Portfolio Ltd 320 ITR 178 (Del) followed)

Though paragraph 11 of Instruction No. 3/2011 provides that the revised tax limits will apply only to fresh appeals, the same has to be held to be applicable to pending appeals as well because (i) the Department has not kept in mind the object with which such Instructions have been issued from time to time; (ii) the object of s. 268A which empowers the CBDT to issue such instructions & under the National Litigation Policy, the Government has to be an “efficient & responsible” litigant and not a “compulsive” litigant and appeals should not be pursued in low-tax matters, (iii) a beneficial circular has to be applied retrospectively (iv) extending the benefit of the Instruction to pending matters will be only in the nature of a one-time settlement akin to the KVSS & VDIS, (v) by experience it is seen that tax is levied by defeating Parliament’s intention to grant incentives to trade and industry & where the Tribunal has come to the rescue of the assessees, appeals are filed mechanically & compulsively with the approach of “let the Court decide” & to “save their skin”; (vi) there would be an anomaly in confining the Instruction to fresh appeals because if the Tribunal has decided a case expeditiously, such matters will be denied the benefit of the bar on filing appeals while if there is no disposal by the Tribunal owing to pendency etc, the benefit accrues to the assessee. The benefit to which the assessee is entitled cannot depend on the date of the decision over which neither the assessee nor revenue has any control; (vii) the Instruction would be discriminatory, if held to be prospective only. It can be saved from the vice of discrimination by holding it as retrospective.

S. 143(2) (ii) provides that no notice shall be “served” on the assessee after the expiry of six months. The question is that what is the meaning of expression ‘served’? Is it used literally, so as to mean actual physical receipt of notice by the addressee or the expression ‘served’ is inter changeable with the word issue. We are of the opinion that the expressions ‘serve’ and ‘issue’ are interchangeable. In view of the law laid down in several judgments, the date of receipt of notice by the addressee is not relevant to determine, as to whether the notice has been issued within the prescribed period of limitation. The expression “serve” means the date of issue of notice. The date of receipt of notice cannot be left to be undetermined dependent upon the will of the addressee. Therefore, to bring certainly and to avoid attempts of the addressee to evade the process of receipt of notice, the purpose of the statute will be better served, if the date of issue of notice is considered as compliance of the requirement of proviso to s. 143(2) of the Act. In fact that is the only conclusion that can be arrived at to the expression ‘serve” in s. 143(2). In AVI-OIL India 323 ITR 242 (P&H), a literal meaning of the term “service” was taken in ignorance of the binding precedents. It does not lay down any binding principle and is per incuriam

Though, pursuant to GKN Driveshaft, the AO was under an obligation to dispose of the objections to the reopening by passing a speaking order, he passed a non-speaking and cryptic order. Further, though the AO had sufficient time to complete the assessment, he had proceeded with the reassessment proceedings with undesirable haste and hurry, in violation of principles of natural justice and contrary to the procedure mandated and this had resulted in a miscarriage of justice. The fact that the assessee had an alternative remedy of filing an appeal (which it had exercised) was no bar to the exercise of writ jurisdiction. The concerned CIT should examine the reassessment file in the present case and take appropriate action if warranted. The department to pay cost of Rs.10,000 to the assessee.

This case shows how the department is filing appeals without proper application of mind and wasting the precious time of the Court and the tax payer’s money. Even if the AO was overzealous in passing the assessment order, there was no need to file an appeal to the High Court. This is not an isolated case. The department is filing appeals mechanically either for the purpose of statistics or to save their skins without application of mind. In the process, a person eligible to tax holiday has been denied the benefit and made to contest the proceedings. If the object of extending the benefits was to give added thrust to exports, the assessee is made to unnecessarily waste his time in fighting the dispute in different forums. The only way to bring reason to the department is by imposing costs so that appropriate action may be taken against the person who has taken a decision to file the appeal and recover the same after enquiry. The department is directed to pay costs of Rs. 1 lakh for wasting the tax payer’s money. lt is open to the authorities to recover the money from the person who has taken a decision to file the frivolous appeal

Foreign law firms or foreign lawyers cannot practice the profession of law in India either on the litigation or non-litigation side, unless they fulfil the requirement of the Advocates Act, 1961 and the Bar Council of India Rules. As rightly held in Lawyers Collective vs. Bar Council 112 BLR 32 establishing liaison office in India by the foreign law firm and rendering liaisoning activities is not permissible. However, given that the foreign law firms have to give legal advise to their clients in India regarding foreign law or their own system of law and on diverse international legal issues, there can be no bar in their visiting India for a temporary period on a “fly in and fly out” basis, for such purpose. Also, having regard to the aim and object of the International Commercial Arbitration introduced in the Arbitration and Conciliation Act, 1996, foreign lawyers cannot be debarred to come to India and conduct arbitration proceedings in respect of disputes arising out of a contract relating to international commercial arbitration (Vodafone International Holdings B.V referred)

The department’s contention that in a case where s. 49 applies the holding of the predecessor has to be accounted for the purpose of computing the cost of acquisition, cost of improvement and indexed cost of improvement but not for the indexed cost of acquisition will result in absurdities. It leads to a disconnect and contradiction between “indexed cost of acquisition” and “indexed cost of improvement”. This cannot be the intention behind the enactment of s. 49 and the Explanation to s. 48. There is no reason why the legislature would want to deny or deprive an assessee the benefit of the previous holding for computing “indexed cost of acquisition” while allowing the said benefit for computing “indexed cost of improvement”. The benefit of indexed cost of inflation is given to ensure that the taxpayer pays capital gain tax on the “real” or actual “gain” and not on the increase in the capital value of the property due to inflation. The expression “held by the assessee” used in Explanation (iii) to s. 48 has to be understood in the context and harmoniously with other Sections and as the cost of acquisition stipulated in s. 49 means the cost for which the previous owner had acquired the property, the term “held by the assessee” should be interpreted to include the period during which the property was held by the previous owner. CIT v. Manjula J. Shah 16 Taxman 42 (Bom) followed

The department’s submission that in computing the gross total income for the purpose of the explanation to s. 73, income under the heads of “Profits and gains of business” must be ignored and /or that the share loss should not be allowed to be set off against the income from any other source under the head “Profits and gains of business” is not acceptable because it leads to an incongruous situation where in determining whether a company is carrying on a speculation business within the meaning of the Explanation, sub-section (1) of s. 73 is applied in the first instance. This is not permissible as a matter of statutory interpretation because the Explanation is designed to define a situation where a company is deemed to carry on speculation business. It is only thereafter that sub-section (1) of s. 73 can apply. Applying the provisions of s. 73(1) to determine whether a company is carrying on speculation business would reverse the order of application. Legislature has mandated that in order to determine whether the exception that is carved out by the Explanation applies, a computation of the gross total income has to be made in accordance with the normal provisions of the Act and it is only thereafter that it has to be determined whether the gross total income so computed consists mainly of income which is chargeable under the heads referred to in the Explanation to s. 73 or not

As the method for accounting for lease rentals was based on the Guidance Note “Accounting For Leases” issued by the ICAI, the AO was not entitled to disregard the same. The Guidance Note reflects the best practices adopted by accountants the world over and the fact that it was not mandatory is irrelevant. The ICAI is recognized as the body vested with the authority to recommend Accounting Standards for ultimate prescription by the Central Government u/s 211(3C) of the Companies Act. Also AS-1 pertaining to Disclosure of Accounting Policies has mandatory status for periods commencing on or after 01.04.1991. The change by the assessee in the policy of accounting for leases had the imprimatur of the ICAI and so the AO was not entitled to disregard the books of accounts or the method of accounting for leases