Home ›

Search Results For: 4

This section is now closed. Click here for new judgements


Posted on by editor — No Comments ↓
COURT:
CORAM: ,
SECTION(S): , ,
GENRE:
CATCH WORDS: , ,
COUNSEL: ,
DATE: September 11, 2020 (Date of pronouncement)
DATE: September 12, 2020 (Date of publication)
AY: 1976-77
FILE: Click here to view full post with file download link
CITATION:
(i) To decide whether a particular source is business income, one has to look to the notions of what is the business activity. The activity must have a set purpose. The fact that the assessee does not carry on business activity for profit motive is not material as profit making is not an essential ingredient (ii) The Act requires determination of ‘real income’ on the basis of ordinary commercial principles of accountancy. To determine the ‘real income’, permissible expenses are required to be set off. Every application of income towards business objective of the assessee is a business expenditure and nothing else (iii) Mediation inter se the Government authorities or Government departments is an efficacious remedy. A Committee of legal experts presided by a retired Judge can give its imprimatur to the settlement (iv) A vibrant system of Advance Ruling can go a long way in reducing taxation litigation. This is true even of disputes between the taxation department and private persons, who are more than willing to comply with the law of the land but find some ambiguity.

In the case of a business, the profits must be arrived at on ordinary commercial principles. The scheme of the IT Act requires the determination of ‘real income’ on the basis of ordinary commercial principles of accountancy. To determine the ‘real income’, permissible expenses are required to be set off. There is, thus, a clear distinction between deductions made for ascertaining real profits and thereafter distributions made out of profits.The distribution would be application of income. There is also a distinction between real profits ascertained on commercial principles and profits fixed by a statute for a specific purpose. Income tax is a tax on real income.

Read more ›

Posted on by editor — No Comments ↓
COURT:
CORAM: ,
SECTION(S): ,
GENRE:
CATCH WORDS:
COUNSEL: , ,
DATE: July 22, 2020 (Date of pronouncement)
DATE: July 23, 2020 (Date of publication)
AY: 1995-96
FILE: Click here to view full post with file download link
CITATION:
S. 28(v-a): There is a dichotomy between receipt of compensation by an assessee for the loss of agency and receipt of compensation attributable to the negative/restrictive covenant. The compensation received for the loss of agency is a revenue receipt whereas the compensation attributable to a negative/ restrictive covenant is a capital receipt. Payment received as non-competition fee under a negative covenant was always treated as a capital receipt till AY 2003-2004. It is only w.e.f. 1-4-2003 that the said capital receipt is now made taxable u/s 28(v-a). It is well settled that a liability cannot be created retrospectively (All imp judgements referred)

The revenue has no business to second guess commercial or business expediency of what parties at arms-length decide for each other. For example, stating that there was no rationale behind the payment of INR 6.6 crores and that the assessee was not a probable or perceptible threat or competitor to the SWC group is the perception of the Assessing Officer, which cannot take the place of business reality from the point of view of the assessee, as has been pointed out by us hereinabove. The fact that M/s Maltings Ltd. had incurred a loss in the previous year is again neither here nor there. It may in future be a direct threat to the SWC group and may turn around and make profits in future years. Besides, M/s Maltings Ltd. is only one concern of the assessee – it is the assessee’s expertise in this field on all counts that was the threat perception of the SWC group which cannot be second guessed by the revenue

Read more ›

Posted on by editor — 4 Comments ↓
COURT:
CORAM: ,
SECTION(S):
GENRE:
CATCH WORDS:
COUNSEL: ,
DATE: April 24, 2020 (Date of pronouncement)
DATE: April 24, 2020 (Date of publication)
AY: 2001-02
FILE: Click here to view full post with file download link
CITATION:
Entire law on principles of mutuality reiterated. The doctrine of mutuality bestows a special status to qualify for exemption from tax liability. It is a settled proposition of law that exemptions are to be put to strict interpretation. If the assessee fails to fulfil the stipulations and to prove the existence of mutuality, the question of extending exemption from tax liability to the assessee, that too at the cost of public exchequer, does not arise. Taking any other view would entail in stretching the limits of construction.

On cogitating over the rival submissions, we reckon that the following questions of law would arise for our consideration in the present case: (i) Whether the assessee company would qualify as a mutual concern in the eyes of law, thereby exempting subject transactions from tax liability? (ii) Whether the excess of income over expenditure in the hands of the assessee company is not taxable?

Read more ›

Posted on by editor — No Comments ↓
COURT:
CORAM: ,
SECTION(S): , ,
GENRE:
CATCH WORDS:
COUNSEL:
DATE: November 21, 2019 (Date of pronouncement)
DATE: December 7, 2019 (Date of publication)
AY: -
FILE: Click here to view full post with file download link
CITATION:
S. 4/ 56: Amount received by assessee for relinquishing secretaryship of educational society cannot be treated as a capital receipt. The question of the principle of capital asset being invoked does not arise. The receipt is assessable as income from other sources. It may have been a different matter if it was a case of life time appointment of the assessee as Secretary of the concerned Institution but no such evidence was produced by the assessee (CIT vs. Ramachandra Rao 330 ITR 0322 affirmed)

The substance of the admission is that the appellant was holding the post of Secretary of the Institution [Paramahamsa Foundation (R) Trust] until 1996 but he left the institution after new members were elected as the managing committee. That being the case, the question of appellant invoking the principle of capital asset does not arise. It may have been a different matter if it was a case of life time appointment of the appellant as Secretary of the concerned Institution. No such evidence was produced by the appellant before the assessing officer or before us

Read more ›

Posted on by editor — No Comments ↓
COURT:
CORAM: , ,
SECTION(S):
GENRE:
CATCH WORDS:
COUNSEL: ,
DATE: October 3, 2019 (Date of pronouncement)
DATE: November 2, 2019 (Date of publication)
AY: -
FILE: Click here to view full post with file download link
CITATION:
Doctrine of mutuality: A club registered as a 'company' u/s 25 of Companies Act is not like other companies as it has no shareholders, no dividends declared, and no distribution of profits takes place. Such clubs cannot be treated as separate in law from their members. The ratio decidendi in Bacha F. Guzdar 27 ITR 1 does not apply to such clubs. When a club supplies goods to its members, there is no "sale" and sales-tax cannot be levied (Bangalore Club 350 ITR 509 (SC), Venkatesh Premises Coop Soc 402 ITR 670 (SC) & other imp judgements referred)

if persons carry on a certain activity in such a way that there is a commonality between contributors of funds and participators in the activity, a complete identity between the two is then established. This identity is not snapped because the surplus that arises from the common fund is not distributed among the members – it is enough that there is a 44 right of disposal over the surplus, and in exercise of that right they may agree that on winding up, the surplus will be transferred to a club or association with similar activities. Most importantly, the surplus that is made does not come back to the members of the club as shareholders of a company in the form of dividends upon their shares. Since the members perform the activities of the club for themselves, the fact that they incorporate a legal entity to do it for them makes no difference.

Read more ›

Posted on by editor — 4 Comments ↓
COURT:
CORAM: ,
SECTION(S):
GENRE:
CATCH WORDS:
COUNSEL:
DATE: July 9, 2019 (Date of pronouncement)
DATE: July 20, 2019 (Date of publication)
AY: -
FILE: Click here to view full post with file download link
CITATION:
S. 4: The primary liability and onus is on the Dept to prove that a certain receipt is liable to be taxed. Deposits collected by a finance company are capital receipts and not revenue receipts. The fact that the deposits are credited to the profit and loss account is irrelevant. The true nature of the receipts have to be seen and not the entry in the books of account (All imp judgements referred).

It is the true nature and quality of the receipt and not the head under which it is entered in the account books that would prove decisive. If a receipt is a trading receipt, the fact that it is not so shown in the account books of the assessee would not prevent the assessing authority from treating it as trading receipt. It has been held by the Supreme court that the primary liability and onus is on the Department to prove that a certain receipt is liable to be taxed

Read more ›

Posted on by editor — No Comments ↓
COURT:
CORAM: , ,
SECTION(S): , ,
GENRE:
CATCH WORDS: ,
COUNSEL:
DATE: April 9, 2019 (Date of pronouncement)
DATE: April 10, 2019 (Date of publication)
AY: -
FILE: Click here to view full post with file download link
CITATION:
If an amount (Dharmada, Charity) is paid at the time of the sale transaction for a purpose other than the price of the goods, it cannot form part of the transaction value. Such payment is not for the transaction of sale and cannot be treated as consideration for the goods. The fact that the payment is compulsory upon purchase does not mean that it is involuntary because the purchaser purchases the goods out of his own volition (All imp judgements referred)

When an amount is paid as Dharmada along with the sale price of goods, such payment is not made in consideration of the transfer of goods. Such payment is meant for charity and is received and held in trust by the seller. If such amounts are meant to be credited to charity and do not form part of the income of the assessee they cannot be included in the transaction value or assessable value of the goods

Read more ›

Posted on by editor — No Comments ↓
COURT:
CORAM: ,
SECTION(S): ,
GENRE:
CATCH WORDS: , ,
COUNSEL: ,
DATE: April 2, 2019 (Date of pronouncement)
DATE: April 9, 2019 (Date of publication)
AY: 2009-10
FILE: Click here to view full post with file download link
CITATION:
S. 43D Interest on NPAs: Even though the special provision in s. 43D for taxing interest income on NPAs on receipt basis does not apply to NBFCs, it does not mean that NBFCs have to offer interest on bad or doubtful debts to tax on accrual basis. Such interest is not taxable on the real income theory

Learned counsel for the Revenue submitted that the assessee had to offer the interest income to tax on accrual basis. The special provision for taxing interest income on NPAs on the basis of receipt has been made under Section 43D of the Income Tax Act, 1961 (“the Act” for short) which does not apply to NBFC. By necessary implication, therefore, the legislature desired that such benefit would be restricted only to such of the entities as are referred to in Section 43D of the Act

Read more ›

Posted on by editor — No Comments ↓
COURT:
CORAM: ,
SECTION(S): ,
GENRE:
CATCH WORDS: , ,
COUNSEL:
DATE: November 15, 2018 (Date of pronouncement)
DATE: December 12, 2018 (Date of publication)
AY: 2009-10
FILE: Click here to view full post with file download link
CITATION:
S. 4/ 145: Law on accrual on income, matching concept & principles of Revenue Recognition as per Accounting Standards (AS-9, AS-22) explained in the context of sale of prepaid mobile cards (All important judgements referred)

Matching Concept is based on the accounting period concept. The paramount object of running a business is to earn profit. In order to ascertain the profit made by the business during a period, it is necessary that “revenues” of the period should be matched with the costs (expenses) of that period. In other words, income made by the business during a period can be measured only with the revenue earned during a period is compared with the expenditure incurred for earning that revenue. However, in cases of mergers and acquisitions, companies sometimes undertake to defer revenue expenditure over future years which brings in the concept of Deferred Tax Accounting. Therefore, today it cannot be said that the concept of accrual is limited to one year. It is a principle of recognizing costs (expenses) against revenues or against the relevant time period in order to determine the periodic income. This principle is an important component of accrual basis of accounting. As stated above, the object of AS 22 is to reconcile the matching principle with the Fair Valuation Principles. It may be noted that recognition, measurement and disclosure of various items of income, expenses, assets and liabilities is done only by Accounting Standards and not by provisions of the Companies Act

Read more ›

Posted on by editor — No Comments ↓
COURT:
CORAM: ,
SECTION(S): , , ,
GENRE:
CATCH WORDS: ,
COUNSEL:
DATE: October 23, 2018 (Date of pronouncement)
DATE: November 13, 2018 (Date of publication)
AY: 2011-12
FILE: Click here to view full post with file download link
CITATION:
S. 4: Law on whether compensation received on closure/ termination of business activity resulting in loss of source of income, impairing its profit making structure or sterilization of profit making apparatus can be assessed as a revenue receipt or it is a capital receipt which is not chargeable to tax explained after referring to important judgements on the subject

Where, on a consideration of the circumstances, payment is made to compensate a person for cancellation of a contract which does not affect the trading structure of his business, nor deprive him of what in substance is his source of income, termination of the contract being a normal incident of the business, and such cancellation leaves him free to carry on his trade (freed from the contract terminated), the receipt is revenue : where by the cancellation of an agency the trading structure of the assessee is impaired, or such cancellation results in loss of what may be regarded as the source of the assessee’s income, the payment made to compensate for cancellation of the agency agreement is normally a capital receipt.

Read more ›