Section 145A

Section 145A — the law in short

What the courts have decided on section 145A, in one screen. Read this first; open an entry when you need the facts, the reasoning and the source.

• P.A. Jose v Union of India — ICDS II displaced LIFO from AY 2017-18, but opening and closing stock cannot be valued on two different methods High CourtHelps taxpayer
  ICDS II forced my client off LIFO in AY 2017-18 and the whole switching difference has been taxed in that one year. Is there any answer?
  Yes, and the Kerala High Court has given it. It quashed the notices and directed the department either to accept the LIFO valuation of both opening and closing stock for AY 2017-18, or to permit the assessees to value their stocks by applying FIFO or weighted average cost — in other words, the same method must be applied to both ends of the year. What the court did not do is strike down the substituted s.145A or ICDS II.
• PCIT v Inderjit Singh Sodhi (HUF) — interest on compensation and enhanced compensation is income from other sources after the 2010 amendment High CourtHelps departmentHigh Courts differ
  My client received interest on enhanced compensation for compulsorily acquired land. Ghanshyam says it is part of compensation. Does that still hold?
  Not in the Delhi High Court. It held that on a conjoint reading of s.56(2)(viii) and s.145B, interest received on compensation or on enhanced compensation is chargeable under the head 'income from other sources', and that the conclusions drawn from CIT v Ghanshyam (HUF), decided in 2009, are unsustainable because the position as it exists today came into being only in 2010. The Tribunal was held to have erred in following Ghanshyam and ignoring the changes made by the Finance (No.2) Act 2009 with effect from 1 April 2010.
• Mahender Pal Narang v Central Board of Direct Taxes High CourtHelps departmentHigh Courts differ
  For a year after 2010, is the interest I received under s.28 of the Land Acquisition Act still capital gains following Ghanshyam, or has s.56(2)(viii) changed that?
  The Punjab and Haryana High Court held that the insertion of s.56(2)(viii) and s.57(iv) has changed the position, and that interest received on compensation or enhanced compensation is to be treated as income from other sources and not under the head capital gains. It said in terms that Ghanshyam does not come to the rescue of a claimant seeking to have s.28 interest treated as compensation, and it expressly recorded its disagreement with the Gujarat High Court in Movaliya Bhikhubhai Balabhai.
• Statutory position — the Finance Act 2018 answer to Chamber of Tax Consultants: s.36(1)(xviii), s.40A(13), s.43AA, s.43CB, s.145A and s.145B CBDT Circulars & InstructionsCuts both ways
  The Delhi High Court struck down parts of the ICDS in 2017. Can I still rely on that for an AY 2017-18 assessment?
  Only in part, and for most of what was struck down the answer is no. The Finance Act 2018 inserted s.36(1)(xviii), s.40A(13), s.43AA and s.43CB, and substituted new sections 145A and 145B, in every case with the words "shall be deemed to have been inserted" or "deemed to have been substituted" with effect from the 1st day of April 2017 — that is, retrospectively from AY 2017-18, the very first year in which the ICDS operated. What Parliament could not do by executive notification it did by statute, so the substance of the struck-down ICDS provisions now stands in the Act itself and the 2017 judgment no longer answers the point.

Listed strongest first: Supreme Court, then High Court, then Tribunal, then CBDT. Nothing here has yet been read in full by a chartered accountant — open an entry to see where it came from.