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DATE: February 1, 2018 (Date of pronouncement)
DATE: March 14, 2018 (Date of publication)
AY: -
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Hindu Undivided Family (HUF) Law: The very factum of birth in a coparcenary creates the coparcenary. Therefore the sons and daughters of a coparcener become coparceners by virtue of birth. The amendment to s. 6 of the Hindu Succession Act, 1956 in 2005 statutorily recognizes the rights of coparceners of daughters as well since birth. Consequently, married daughters can be said to be the coparceners in the HUF and are entitled to the ancestral property even if they were born prior to the amendment to the Hindu Succession Act

Section 6, as amended, stipulates that on and from the commencement of the amended Act, 2005, the daughter of a coparcener shall by birth become a coparcener in her own right in the same manner as the son. It is apparent that the status conferred upon sons under the old section and the old Hindu Law was to treat them as coparceners since birth. The amended provision now statutorily recognizes the rights of coparceners of daughters as well since birth. The section uses the words in the same manner as the son. It should therefore be apparent that both the sons and the daughters of a coparcener have been conferred the right of becoming coparceners by birth. It is the very factum of birth in a coparcenary that creates the coparcenary, therefore the sons and daughters of a coparcener become coparceners by virtue of birth

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DATE: December 5, 2017 (Date of pronouncement)
DATE: December 7, 2017 (Date of publication)
AY: -
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S. 80-IB: The incentive meant for small scale industrial undertakings cannot be availed by undertakings which do not continue as small scale industrial undertakings during the relevant period. Each assessment year is a different assessment year. The fact that the object of legislature is to encourage industrial expansion does not mean that the incentive should remain applicable even where on account of industrial expansion, the small scale industrial undertakings ceases to be small scale industrial undertakings. The fact that in the initial year eligibility was satisfied is irrelevant

The observations in the impugned order are that the object of legislature is to encourage industrial expansion which implies that incentive should remain applicable even where on account of industrial expansion small scale industrial undertakings ceases to be small scale industrial undertakings. We are unable to appreciate the logic for these observations. Incentive is given to a particular category of industry for a specified purpose. An incentive meant for small scale industrial undertaking cannot be availed by an assessee which is not such an undertaking. It does not, in any manner, mean that the object of permitting industrial expansion is defeated, if benefit is not allowed to other undertakings. On this logic, incentive must be given irrespective of any condition as the incentive certainly helps further expansion by reducing the tax burden. The concept of vertical equity is well known under which all the assessees need not be uniformally taxed. Progressive taxation is a well known element of tax policy. Higher slabs of tax or higher tax burden on an assessee having higher income or higher capacity cannot in any manner, be considered unreasonable

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DATE: September 5, 2017 (Date of pronouncement)
DATE: September 9, 2017 (Date of publication)
AY: 1981-82, 1982-83, 1983-84
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S. 260A/27A: Meaning of "substantial question of law" explained. The High Court cannot proceed to hear a second appeal without formulating the substantial question of law involved in the appeal and if it does so it acts illegally and in abnegation or abdication of the duty case on Court

The High Court cannot proceed to hear a second appeal without formulating the substantial question of law involved in the appeal and if it does so it acts illegally and in abnegation or abdication of the duty case on Court. The existence of substantial question of law is the sine qua non for the exercise of the jurisdiction under the amended Section 100 of the Code

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DATE: December 16, 2016 (Date of pronouncement)
DATE: December 19, 2016 (Date of publication)
AY: -
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S. 10A/ 10B: Though s. 10A/ 10B were amended by FA 2000 w.e.f. 01.04.2001 to change "exemption" to "deduction", the "deduction" contemplated therein is qua the eligible undertaking of an assessee standing on its own and without reference to the other eligible or non-eligible units or undertakings of the assessee. The benefit of deduction is given by the Act to the individual undertaking and resultantly flows to the assessee. The deduction of the profits and gains of the business of an eligible undertaking has to be made independently and before giving effect to the provisions for set off and carry forward contained in s. 70, 72 and 74. The deductions u/s 10A/10B are prior to the commencement of the exercise to be undertaken under Chapter VI of the Act for arriving at the total income of the assessee from the gross total income

If the specific provisions of the Act provide [first proviso to Sections 10A(1); 10A (1A) and 10A (4)] that the unit that is contemplated for grant of benefit of deduction is the eligible undertaking and that is also how the contemporaneous Circular of the department (No.794 dated 09.08.2000) understood the situation, it is only logical and natural that the stage of deduction of the profits and gains of the business of an eligible undertaking has to be made independently and, therefore, immediately after the stage of determination of its profits and gains. At that stage the aggregate of the incomes under other heads and the provisions for set off and carry forward contained in Sections 70, 72 and 74 of the Act would be premature for application. The deductions under Section 10A therefore would be prior to the commencement of the exercise to be undertaken under Chapter VI of the Act for arriving at the total income of the assessee from the gross total income. The somewhat discordant use of the expression “total income of the assessee” in Section 10A has already been dealt with earlier and in the overall scenario unfolded by the provisions of Section 10A the aforesaid discord can be reconciled by understanding the expression “total income of the assessee” in Section 10A as ‘total income of the undertaking’

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DATE: August 22, 2016 (Date of pronouncement)
DATE: August 26, 2016 (Date of publication)
AY: -
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S. 68: When the facts show that the loan applications of 37 alleged trade creditors were processed and handled by the assessee and that the loan amounts were not reflected in the returns of the alleged creditors, the High Court erred in remanding the matter to the AO on the ground that the AO ought to given notice to the alleged trade creditors

Both the Assessing Officer and the C.I.T. had recorded findings of fact adverse to the Assessee which has been upheld by the learned single judge of the High Court. The Division Bench of the High Court in the Writ Appeal thought it appropriate to reverse the said findings on the ground that the 37 persons who had advanced the loan to the Assessee ought to have been given notice. The jurisdiction of the Division Bench in a Writ Appeal is primarily one of adjudication of questions 6 of law. Findings of fact recorded concurrently by the authorities under the Act and also in the first round of the writ proceedings by the learned single judge are not to be lightly disturbed

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DATE: August 11, 2016 (Date of pronouncement)
DATE: August 17, 2016 (Date of publication)
AY: -
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CITATION:
S. 28: Income from letting of property on rent by an assessee engaged in the business of letting is assessable as "business profits" u/s 28 and not as "Income from house property" u/s 22

The issue involved in these appeals is no more res integra as this Court has decided in the case of Chennai Properties and Investments Ltd. v. Commissioner of Income Tax [2015] 373 ITR 673 (SC) that if an assessee is having his house property and by way of business he is giving the property on rent and if he is receiving rent from the said property as his business income, the said income, even if in the nature of rent, should be treated as “Business Income” because the assessee is having a business of renting his property and the rent which he receives is in the nature of his business income

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DATE: June 24, 2016 (Date of pronouncement)
DATE: July 4, 2016 (Date of publication)
AY: 2010-11
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S. 40(a)(ia): When there are conflicting judgements of non-jurisdiction High Courts, the Tribunal is not permitted to choose based on its perception of what the correct law is because it will amount to sitting in judgement over the High Courts’ views. Instead, it has to follow the view which is in favour of the assessee even if it believes that this view is not the correct law. Second proviso to s. 40(a)(ia) inserted by FA 2013 should be treated as retrospectively applicable from 1st April 2005

It will be wholly inappropriate for us to choose views of one of the High Courts based on our perceptions about reasonableness of the respective viewpoints, as such an exercise will de facto amount to sitting in judgment over the views of the High Courts something diametrically opposed to the very basic principles of hierarchical judicial system. We have to, with our highest respect of both the Hon’ble High Courts, adopt an objective criterion for deciding as to which of the Hon’ble High Court should be followed by us. We find guidance from the judgment of Hon’ble Supreme Court in the matter of CIT vs. Vegetable Products Ltd. [(1972) 88 ITR 192 (SC)]. Hon’ble Supreme Court has laid down a principle that “if two reasonable constructions of a taxing provisions are possible, that construction which favours the assessee must be adopted”. This principle has been consistently followed by the various authorities as also by the Hon’ble Supreme Court itself

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DATE: May 2, 2016 (Date of pronouncement)
DATE: May 25, 2016 (Date of publication)
AY: 1981-82
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S. 153: In a case of conferment of “concurrent” jurisdiction upon the ITO & IAC, the ITO does not stand denuded of powers to make an assessment. It is open to the ITO to assume jurisdiction and pass the assessment order in case the IAC does not exercise those powers. What is important is the actual exercise of powers and not merely conferment of the powers. S. 144B applies only if the IAC exercises powers or performs the functions of an ITO

It is not the IAC who exercises the powers or performs the functions of the ITO, even when such a power was conferred upon him, concurrently with the ITO. The significant feature of Section 125A of the Act is that even when the IAC is given the same powers and functions which are to be performed by the ITO in relation to any area or classes or person or income or classes of income or cases or classes of cases, on the conferment of such powers, the ITO does not stand denuded of those powers. With conferment of such powers on the IAC gives him “concurrent” jurisdiction which means that both, ITO as well as the IAC, are empowered to exercise those functions including passing assessment order. It is still open to the ITO to assume the jurisdiction and pass the order in case the IAC does not exercise those powers in respect of the assessment year. Provisions of Section 144B would not apply only if the IAC exercises powers or performs the functions of an ITO. What is important is the actual exercise of powers and not merely conferment of the powers that are borne out from the bare reading of sub-Section (4) of Section 125B

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DATE: May 13, 2016 (Date of pronouncement)
DATE: May 19, 2016 (Date of publication)
AY: 2007-08
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CITATION:
S. 271(1)(c) penalty on Bogus Purchases: If the assessment order in the quantum proceedings is altered by an appellate authority in a significant way, the very basis of initiation of the penalty proceedings is rendered non-existent and the AO cannot continue the penalty proceedings on the basis of the same notice

Once the assessment order of the AO in the quantum proceedings was altered by the CIT (A) in a significant way, the very basis of initiation of the penalty proceedings was rendered non-existent. The AO could not have thereafter continued the penalty proceedings on the basis of the same notice. Also, the Court concurs with the CIT (A) and the ITAT that once the finding of the AO on bogus purchases was set aside, it could not be said that there was any concealment of facts or furnishing of inaccurate particulars by the Assessee that warranted the imposition of penalty under Section 271 (1) (c) of the Act

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DATE: April 22, 2016 (Date of pronouncement)
DATE: April 25, 2016 (Date of publication)
AY: 2004-05 to 2009-10
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S. 10(23C): Meaning of expression "existing solely for the purpose of education and without any profit motive" explained. Mere fact that there is huge surplus (in excess of 6 to 15%) and minimal expenditure does not imply profit motive if the surplus is ploughed back into educational activities. Fees collected from students, though as per statute, is not a funding by the Government

In the present case, we find that during a short period of a decade i.e. from the year 1999 to 2010 the University had generated a surplus of about Rs.500 crores. There is no doubt that the huge surplus has been collected/accumulated by realizing fees under different heads in consonance with the powers vested in the University under Section 23 of the VTU Act. The difference between the fees collected and the actual expenditure incurred for the purposes for which fees were collected is significant. In fact the expenditure incurred represents only a minuscule part of the fees collected. No remission, rebate or concession in the amount of fees charged under the different heads for the next Academic Year(s) had been granted to the students. The surplus generated is far in excess of what has been held by this Court to be permissible (6 to 15%)

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