Where the assessee carrying on the mercantile system of accounting claimed that:

(i) The additional liability arising on account of fluctuation in the rate of exchange in respect of loans taken for revenue purposes was allowable as deduction u/s 37(1) in the year of fluctuation in the rate of exchange and not in the year of repayment of such loans; and

(ii) The actual cost of imported assets acquired in foreign currency is entitled to be adjusted u/s 43A (prior to the amendment by the FA 2002) on account of fluctuation in the rate of exchange at each balance sheet date, pending actual payment of the varied liability HELD approving the claim that:

(a) The term “expenditure” in s. 37 covers an amount which is a “loss” even though the said amount has not gone out from the pocket of the assessee. The “loss” suffered by the assessee on account of the exchange difference as on the date of the balance sheet is an item of expenditure u/s 37(1) ;

Where the assessee-employer obtained expatriate-employees from a foreign company and the said employees, continuing to be employees of the foreign company, received salary and allowance in their home country in foreign currency and the question arose whether the assessee was obliged to deduct tax thereon at source u/s 192 and the High Court held that the assessee was not obliged to deduct tax at source on the ground that the payment was by the foreign company and not by the assessee, HELD, reversing the High Court that:

(i) Though the payment of salary to the expatriate was made by the foreign company outside India, the TDS provisions did apply as the Act had extra-territorial operation as there was a nexus between the said salary and the rendering of services in India;

(ii) U/s 9 (1) (ii), salary received abroad is deemed to arise in India if it is for services rendered in India. This charging provision has to be read with the machinery provision of s.192 and both are part of an integrated code;

(iii) S. 192 requires the employer to deduct tax after “estimating” the salary payable to the employee. The act of “estimation” is akin to computation of income. In making the estimate, s. 9 (1) (ii) has to be taken into account;

(iv) On facts, as it was found that the salary paid by the foreign company was for services in India the same was deemed to accrue in India u/s 9 (1) (ii) and the assessee ought to have deducted tax u/s 192 though it was not the payer

Where s. 35G of the Central Excise Act (= 260A of the I. T. Act) provided a time limit of 180 days for filing an appeal and there was no provision for condoning delay by showing sufficient cause after the prescribed period, there was complete exclusion of section 5 of the Limitation Act and the High Court had no power to condone the delay after expiry of the prescribed period. Even otherwise, the legislature had provided sufficient time for filing a reference to the High Court which was more than the period prescribed for an appeal and revision.

Note: The judgement of the Full Bench of the Bombay High Court in CCE vs. Shree Rubber Plast is impliedly overruled.

Where the assessee transferred rights in feature films by way of lease outside India and the question arose whether films constituted “goods or merchandise” for purposes of s. 80HHC, HELD

Today the difference between goods and services is getting blurred with globalization and cross-border
Transactions and with technological advancement one has to change one’s thinking regarding concepts like goods, merchandise and articles. The telecast “rights” certainly fall in the category of articles of trade and commerce, hence, merchandise and are eligible u/s 80HHC.

The Provio to s. 113 (which imposes surcharge on block assessments), though inserted only with effect from 1.6.2002, is applicable to searches conducted prior to that date as it is ‘clarificatory’ and ‘curative’ in nature. CIT vs. Suresh N. Gupta 297 ITR 322 (SC) followed.

“Sham” lease transactions cannot be given relief as “financial arrangements”. (1) Where the AO disallowed part depreciation on bottles leased out by the assessee on the ground of “non-user” but the Tribunal & High Court confirmed the same on the …

MCorp Global vs. CIT (Supreme Court) Read More »

A person accused of commission of an offence is not expected to prove to the hilt that confession had been obtained from him by any inducement, threat or promise by a person in authority. The burden is on the prosecution to show that the confession is voluntary in nature and not obtained as an outcome of threat, etc. if the same is to be relied upon solely for the purpose of securing a conviction. With a view to arrive at a finding as regards the voluntary nature of statement or otherwise of a confession which has since been retracted, the Court must bear in mind the attending circumstances which would include the time of retraction, the nature thereof, the manner in which such retraction has been made and other relevant factors. Law does not say that the accused has to prove that retraction of confession made by him was because of threat, coercion, etc. but the requirement is that it may appear to the court as such

Where the assessee-employer allowed the employees the benefit of deduction under section 10 (5) of the Act without collecting evidence to show that its employees had actually utilized the amounts paid towards Leave Travel Concessions/Conveyance Allowance and the question arose whether the employer could be said to have wrongly allowed the deduction, HELD:

As the beneficiary of exemption under Section 10(5) is an individual employee and there is no circular of the Central Board of Direct Taxes (CBDT) requiring the employer under Section 192 to collect and examine the supporting evidence to the Declaration to be submitted by an employees, the employer was not at fault.

In view of the assessee submitting copies of the agreements (which had not been submitted earlier before the AO or the High Court) and the law laid down in Management of Express Newspapers vs. Workers AIR 1963 SC 569 that the High Court should ordinarily not embark upon deciding questions of fact which require appreciation of evidence, the question in regard to “the jurisdictional issue” should be decided by the AO as a “preliminary issue” and the assessee shall be entitled to question the decision of the AO on that preliminary issue before the High Court. The question of law “to that extent” remains open.

In CIT vs. Suresh N. Gupta 297 ITR 322, the Supreme Court held that the Provio to s. 113 (which imposes surcharge on block assessments), though inserted only with effect from 1.6.2002, was applicable to searches conducted prior to that date as it was ‘clarificatory’ and ‘curative’ in nature.

HELD, however, by another Division bench that as the said proviso was introduced with effect from 1.6.2002, i.e. with prospective effect “we are of the opinion that keeping in view the principles of law that the taxing statute should be construed strictly and a statute, ordinarily, should not be held to have any retrospective effect, it is necessary that the matter be considered by a larger Bench”.