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DATE: March 23, 2015 (Date of pronouncement)
DATE: March 24, 2015 (Date of publication)
AY: 1996-97
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S. 36(1)(iii)/ 37(1): Normally revenue expenditure incurred in a particular year has to be allowed in that year and if the assessee claims that expenditure in that year, the Department cannot deny the same. Fact that assessee has deferred the expenditure in the books of account is irrelevant. However, if the assessee himself wants to spread the expenditure over a period of ensuing years, it can be allowed only if the principle of 'Matching Concept' is satisfied

U/s 36(1)(iii) when the interest was actually incurred by the assessee, which follows the mercantile system of accounting, the assessee would be entitled to deduction of full amount in the assessment year in which it is paid. The High Court wrongly applied the “Matching Concept” to deny the deduction of the upfront interest payment in the first year.

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DATE: March 16, 2015 (Date of pronouncement)
DATE: March 18, 2015 (Date of publication)
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S. 10(23C)(v) & (vi): Mere surplus does not mean institution is existing for making profit. The predominant object test must be applied. The AO must verify the activities of the institution from year to year

The 13th proviso to Section 10(23C) is of great importance in that assessing authorities must continuously monitor from assessment year to assessment year whether such institutions continue to apply their income and invest or deposit their funds in accordance with the law laid down. Further, it is of great importance that the activities of such institutions be looked at carefully. If they are not genuine, or are not being carried out in accordance with all or any of the conditions subject to which approval has been given, such approval and exemption must forthwith be withdrawn. All these cases are disposed of making it clear that revenue is at liberty to pass fresh orders if such necessity is felt after taking into consideration the various provisions of law contained in Section 10(23C) read with Section 11 of the Income Tax Act

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DATE: March 10, 2015 (Date of pronouncement)
DATE: March 12, 2015 (Date of publication)
AY: -
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S. 37(1): principles for deduction of business expenditure reiterated

The question that was posed by the High Court was whether acceptance of the agreements, affidavits and proof of payment would debar the assessing authority to go into the question whether the expenses claimed would still be allowable under Section 37 of the Act. This is a question which the High Court held was required to be answered in the facts of each case in the light of the decision of this Court in Swadeshi Cotton Mills Co. Ltd. Vs. Commissioner of Income Tax 1967 (63) ITR 57 and Lachminarayan Madan Lal vs. Commissioner of Income Tax West Bengal 1972 (86) ITR 439

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DATE: February 18, 2015 (Date of pronouncement)
DATE: February 19, 2015 (Date of publication)
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S. 9(1)(i) & (vii): Concept of “source rule” vs. "residence rule" explained. Definition of expression "fees for technical services" in s. 9(1)(vii) explained with reference to "consultancy" services

The nature of service referred by the NRC, can be said with certainty would come within the ambit and sweep of the term ‘consultancy service’ and, therefore, it has been rightly held that the tax at source should have been deducted as the amount paid as fee could be taxable under the head ‘fee for technical service’. Once the tax is payable paid the grant of ‘No Objection Certificate’ was not legally permissible

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DATE: July 20, 2012 (Date of pronouncement)
DATE: February 19, 2015 (Date of publication)
AY: 2004-05
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CITATION:
S. 147: Verdict of Bombay High Court in The Indian Hume Pipe Co Ltd vs. ACIT 348 ITR 439 that “full & true disclosure of material facts” means “specific” disclosure of “each” fact nullified

We make it clear, that on the validity of Notice under Section 148 of the Income Tax Act, 1961, it would be open to the assessee as well as the Department to put forth their respective contentions before the Appellate Authority and the Appellate Authority will decide this issue also along with other issues without being influenced by the observations made by the High Court in the impugned order

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DATE: September 23, 2014 (Date of pronouncement)
DATE: October 8, 2014 (Date of publication)
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As the UOI has continued the process of appointment of Tribunal Members without amending the Rules, the Petitioner, who was wait-listed in 2007, deserves to be considered for appointment within 30 days

The Selection Committee finalized a list of 18 persons, 13 for the post of Accountant Member and 5 for the post of Judicial Member. The Petitioner, Inturi Rama Rao, was placed in a ‘Waiting List’ appointment as Accountant Member. The …

Inturi Rama Rao vs. UOI (Supreme Court) Read More »

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DATE: September 25, 2014 (Date of pronouncement)
DATE: October 4, 2014 (Date of publication)
AY: 1989-90
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Income Tax Act does not provide for any paramountcy of dues by way of income tax. Government dues only have priority over unsecured debts

The first thing to be noticed is that the Income Tax Act does not provide for any paramountcy of dues by way of income tax. This is why the Court in Dena Bank’s case (supra) held that Government dues only …

The Stock Exchange, Bombay vs. V.S. Kandalgaonkar (Supreme Court) Read More »

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DATE: September 25, 2014 (Date of pronouncement)
DATE: September 25, 2014 (Date of publication)
AY: 2005
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The NTT Act “crosses the boundary” & is unconstitutional. CAs/CSs are specialists on accounts & facts and are not capable of arguing/ deciding ‘Substantial Questions Of Law’


The NTT Act “crosses the boundary” & is unconstitutional. CAs/CSs are specialists on accounts & facts and are not capable of arguing/ deciding ‘Substantial Questions Of Law’

A perusal of the reported judgements shows that while deciding tax related disputes, provisions of different laws on diverse subjects had to be taken into consideration. The Members of the NTT would most definitely be confronted with the legal issues emerging out of Family Law, Hindu Law, Mohammedan Law, Company Law, Law of Partnership, Law related to Territoriality, Law related to Trusts and Societies, Contract Law, Law relating to Transfer of Property, Law relating to Intellectual Property, Interpretation of Statutes, and other Miscellaneous Provisions of Law, from time to time. The NTT besides the aforesaid statutes, will not only have to interpret the provisions of the three statutes, out of which appeals will be heard by it, but will also have to examine a challenge to the vires of statutory amendments made in the said provisions, from time to time. They will also have to determine in some cases, whether the provisions relied upon had a prospective or retrospective applicability. Keeping in mind the fact, that in terms of s. 15 of the NTT Act, the NTT would hear appeals from the Income Tax Appellate Tribunal and the CESTAT only on “substantial questions of law”, it is difficult for us to appreciate the propriety of representation, on behalf of a party to an appeal, through either Chartered Accountants or Company Secretaries, before the NTT. The determination at the hands of the NTT is shorn of factual disputes. It has to decide only “substantial questions of law”. In our understanding, Chartered Accountants and Company Secretaries would at best be specialists in understanding and explaining issues pertaining to accounts. These issues would, fall purely within the realm of facts. We find it difficult to accept the prayer made by the Company Secretaries to allow them, to represent a party to an appeal before the NTT. Even insofar as the Chartered Accountants are concerned, we are constrained to hold that allowing them to appear on behalf of a party before the NTT, would be unacceptable in law. We accordingly reject the claim of Company Secretaries, to represent a party before the NTT. We simultaneously hold s. 13(1), insofar as it allows Chartered Accountants to represent a party to an appeal before the NTT, as unconstitutional and unsustainable in law.

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DATE: September 15, 2014 (Date of pronouncement)
DATE: September 16, 2014 (Date of publication)
AY: Block Period
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CITATION:
S. 113 Proviso inserted by FA 2002 w.e.f. 01.06.2002 to impose surcharge in search assessments is not clarificatory or retrospective. Suresh Gupta 297 ITR 322 (SC) overruled


S. 113 Proviso inserted by FA 2002 w.e.f. 01.06.2002 to impose surcharge in search assessments is not clarificatory or retrospective. Suresh Gupta 297 ITR 322 (SC) overruled

There cannot be imposition of any tax without the authority of law. Such a law has to be unambiguous and should prescribe the liability to pay taxes in clear terms. If the concerned provision of the taxing statute is ambiguous and vague and is susceptible to two interpretations, the interpretation which favours the subjects, as against there the revenue, has to be preferred. This very principle is based on the “fairness” doctrine as it lays down that if it is not very clear from the provisions of the Act as to whether the particular tax is to be levied to a particular class of persons or not, the subject should not be fastened with any liability to pay tax

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DATE: July 6, 2014 (Date of publication)
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Dept’s SLP against High Court’s verdict that s. 40(a)(ia) disallowance applies only to amounts “payable” as of 31st March and not to amounts already “paid” during the year dismissed

In CIT vs. Vector Shipping Services (P) Ltd 357 ITR 642, the Allahabad High Court held that disallowance u/s 40(a)(ia) applies only to amounts “payable” as of 31st March and not to amounts already “paid” during the year. The majority judgement in Merilyn Shipping 136 ITD 23 (SB) was approved. The department filed a Special Leave Petition (SLP) in the Supreme Court. The said SLP has been dismissed by the Supreme Court in limine

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