Capital Gains Exemptions

Capital Gains Exemptions — the law in short

Every authority in this library on capital gains exemptions, with what each one decided.

• Secunderabad Club v CIT Supreme CourtHelps department
  Our club's surplus sits in fixed deposits with a bank that is itself a corporate member. Is the interest covered by mutuality?
  No. The Supreme Court held that the principle of mutuality does not apply to interest earned on fixed deposits made by a club with a bank, whether or not the bank is a corporate member of the club. The interest is ordinary income under s.2(24) and is taxed like any other income. The Court dealt in the same batch with income the clubs earned through their assets and resources from persons who are not members, and held that too is taxable.
• Association of Old Settlers of Sikkim v Union of India Supreme CourtHelps taxpayerValidity unconfirmed
  I am a Sikkimese woman who married a non-Sikkimese after April 2008, and the department says the Sikkim exemption is no longer available to me — is that right?
  No. The Supreme Court, hearing writ petitions under Article 32 on 13 January 2023, dealt with two exclusions from the section 10(26AAA) exemption: old Indian settlers left out of the Register of Sikkim Subjects, and Sikkimese women marrying a non-Sikkimese on or after 1 April 2008. On the second, Nagarathna J's concurring opinion holds the proviso inherently arbitrary and discriminatory, an unconstitutional distinction based on sex and race, and liable to be struck down; the Explanation's reference to "an individual" covers all genders. The harvested text stops before the operative order, so the directions on the first limb could not be read.
• Yum! Restaurants (Marketing) Pvt Ltd v CIT Supreme CourtHelps department
  We pool advertising contributions from our franchisees in a group company that runs at no profit. Is the surplus exempt on the principle of mutuality?
  No, not on these facts. The Supreme Court dismissed the appeal and held the company was not a mutual concern, so the excess of income over expenditure for assessment year 2001-02 was taxable. Contributions were taken from Pepsi Foods Ltd, which was not a franchisee and had no franchise agreement, so members and non-members were dealt with in the same activity. The parent company had a sole and absolute discretion whether to contribute at all, controlled the board, and could take royalty benefit from the pooled funds. The franchisees had no right to a refund of surplus. Each limb of mutuality failed.
• CIT v HCL Technologies Ltd Supreme CourtHelps taxpayer
  The AO knocked freight and telecom charges out of my export turnover but left them in total turnover. Can he do that?
  No. What is excluded from export turnover must also come out of total turnover, because export turnover is a component of total turnover. Reading the exclusion into the numerator alone would make the s.10A formula produce an absurd result. The Court declined to construe the section in a way that would work an injustice on the assessee.
• ITO v Venkatesh Premises Co-operative Society Ltd Supreme CourtHelps taxpayer
  The AO has taxed our society's transfer fees and non-occupancy charges. Is that right?
  No. The Supreme Court held that transfer charges, non-occupancy charges, common amenity fund charges and similar receipts collected by a co-operative society from its own members are covered by the principle of mutuality and are not income. On transfer charges the Court held that the amount is appropriated only after the transferee has been admitted to membership and is returned if admission is refused, so by the time it is retained the payer is a member.
• Union of India v Tata Tea Co Ltd Supreme CourtHelps department
  Sixty per cent of my tea company's income is agricultural and outside income tax. When I distribute dividend, is the distribution tax payable on the whole dividend or only on the taxable forty per cent?
  On the whole dividend. The Supreme Court upheld section 115-O as within Parliament's competence under Entry 82 of List I and set aside the Calcutta High Court's rider that additional tax could be charged only on 40 per cent of the dividend. Dividend declared and distributed is not impressed with the character of the profits out of which it is paid, so it does not become agricultural income in the shareholder's hands merely because the company's income was largely agricultural. Reading a 40 per cent limit into section 115-O would alter the provision, for which there is no warrant. The tea company's appeal was dismissed.
• Queen's Educational Society v CIT Supreme CourtHelps taxpayer
  My school makes a surplus every year and puts it back into buildings and equipment. Does that mean it no longer exists solely for education?
  No. The Supreme Court held that a surplus ploughed back into the institution does not destroy the exemption. What matters is the predominant object: if the institution exists solely for education and not for profit, the fact that receipts exceed expenditure is beside the point. The Court set aside the Uttarakhand High Court's contrary judgment in Queen's Educational Society, approved the Punjab and Haryana, Delhi and Bombay High Court decisions, and restored the Tribunal's view. It reaffirmed Surat Art Silk Cloth, Aditanar and American Hotel and Lodging as the governing tests, while stressing that the thirteenth proviso requires the authorities to monitor actual application of income year by year.
• Sanjeev Lal v CIT Supreme CourtHelps taxpayer
  A court order delayed my sale deed. Does my s.54 exemption run from the agreement to sell?
  Yes. Executing the agreement to sell itself extinguished rights in the property and created rights in the vendee, which answers the definition of transfer in s.2(47), so that date governs. Section 54 relief could not be denied where a court restraint the assessee could not violate delayed the registered deed, and the new house had been bought within a year of the agreement.
• CIT v Dawoodi Bohara Jamat Supreme CourtCuts both waysValidity unconfirmed
  The Commissioner has refused my trust registration under section 12AA because our objects are tied to one religious community — can he refuse registration on that ground?
  No, not at the registration stage on this reasoning. The Supreme Court held on 20 February 2014 that section 13 is an exception to sections 11 and 12, so whether it bites is examined when exemption is claimed, not when registration is decided. On the merits the Court corrected both sides. Section 13(1)(b) is not confined to trusts that are purely charitable; a composite religious and charitable trust is not outside it merely because it is composite. But on these objects — food served on community occasions, a madarsa, help to the needy — the benefit was not channelled to the Dawoodi Bohra community alone, so section 13(1)(b) was not attracted and the appeals were dismissed.
• Bangalore Club v CIT Supreme CourtHelps departmentValidity unconfirmed
  Our members' club keeps its surplus in fixed deposits with banks that are themselves corporate members — is the interest exempt on the principle of mutuality?
  No. The Supreme Court held on 14 January 2013 that interest earned by a members' club on fixed deposits with banks that happen to be corporate members is taxable. Once the money goes into a bank deposit the closed circuit breaks: the bank lends it on to outsiders at a higher rate, so the funds are expended on non-members before they come back. All three conditions of mutuality fail — complete identity of contributors and participators, application of the surplus in furtherance of the club's objects, and the impossibility of members profiting from their own contributions. The club deals with the bank as a customer, not as a member.
• CIT v Walfort Share & Stock Brokers P Ltd Supreme CourtHelps taxpayerValidity unconfirmed
  I bought mutual fund units just before the record date, took the tax-free dividend and sold them ex-dividend at a loss — can the department disallow that loss for a year before section 94(7) came in?
  No, not for a year before 1 April 2002. The Supreme Court held on 6 July 2010 that section 14A disallows expenditure incurred to earn exempt income and needs a proximate cause between the two. A pay-back or return of investment is not expenditure at all: it hits the balance sheet, not the profit and loss account, and is not a debit item allowable under sections 30 to 37. The loss on sale was genuine, there was a real sale at a real price, and using the exemption in section 10(33) is not an abuse of law. From 1 April 2002 section 94(7) applies, but it ignores the loss only to the extent of the dividend.
• ACIT v Surat City Gymkhana Supreme CourtHelps taxpayer
  My trust already has registration under section 12A. Can the Assessing Officer go behind it and re-examine whether the objects are charitable?
  The Supreme Court dismissed the Revenue's appeals against a Gujarat High Court order that answered no, but it did so on a narrow ground. The Tribunal had held that the club's objects fell within general public utility under section 2(15) and that registration under section 12A was a fait accompli preventing the Assessing Officer from probing the objects further. The High Court dismissed the Revenue's appeals in limine as covered by Hiralal Bhagwati v. CIT. The Supreme Court found that both questions were concluded by that decision, which the Revenue had never challenged and which had attained finality. The appeals were therefore dismissed with no costs.
• CIT v Gujarat Maritime Board Supreme CourtHelps taxpayerValidity unconfirmed
  My body is a statutory authority, not a trust under any public trust law. Can it still be registered as a charitable institution under section 12A?
  Yes. The Supreme Court dismissed the Revenue's appeal and held that the Gujarat Maritime Board was entitled to registration under section 12A. Its predominant purpose is the development of minor ports in Gujarat, its management and control lie essentially with the State Government, and sections 73 to 75 of its own statute show it has no profit motive and must apply its income to that purpose. That is an object of general public utility within section 2(15). Section 10(20) and section 11 operate in different spheres, so ceasing to be a local authority after the 2002 amendment did not preclude the claim. The Court was concerned with registration, not application of income.
• ACIT v Thanthi Trust Supreme CourtCuts both ways
  Our trust runs a business and puts the profit into its objects. Does s.11(4A) still deny the exemption?
  No, on this decision. The Supreme Court read the substituted s.11(4A), in force from 1 April 1992, as more beneficial to a trust than the sub-section it replaced, and held that a business whose income is used by the trust to achieve its objectives is a business incidental to the attainment of those objectives. The trust ran a newspaper, applied the income to education and relief of the poor, and kept separate books, and was held entitled to s.11 from assessment year 1992-93 onwards. Read the disposal whole: for the earlier years, decided under s.11(4A) as it stood before that substitution, the exemption for the newspaper income was refused.
• CIT v Nagpur Hotel Owners Association Supreme CourtHelps department
  My trust never filed the accumulation notice for the year. Can I file it now, after the assessment was completed, and still get the exemption?
  No. The Supreme Court held that the notice under section 11(2) must reach the Assessing Officer before he completes the assessment. The requirement is mandatory, and without the particulars the officer cannot know what income is being accumulated or for what purpose, so he cannot exclude it. Even if no valid time limit had been prescribed by the rules, it is reasonable to presume that compliance must come at some point before the assessment proceedings end. Allowing the notice afterwards would mean reopening the assessment, which the Act does not contemplate.
• Chelmsford Club v CIT Supreme CourtHelps taxpayer
  My members-only club owns its own club house and uses it for members. Can the Department tax the annual letting value of that building as income from house property?
  No. The Supreme Court held that the principle of mutuality covers the annual value of a club house used only for members and their guests. Two steps get there. Section 22 taxes income, not property: the levy is traceable to entry 82 of List I and the Act cannot tax anything but income, so what is charged is deemed income from the property. And section 2(24) recognises mutuality by excluding businesses governed by it, other than those in clause (vii). Since the club satisfied the three tests of mutuality, the deemed income from its property was outside the charge too.
• K. Lakshmanan & Co v CIT Supreme CourtHelps department
  I grow mulberry, feed the leaves to silkworms and sell the cocoons. Is the whole income agricultural income and exempt?
  No. The Supreme Court held that income from rearing silkworms and selling cocoons is not agricultural income. The definition requires that what is taken to market and sold be the produce raised by the cultivator, processed only so far as to make it marketable. Mulberry leaves are the agricultural produce here; silkworms are not, and cocoons certainly are not. A process that alters the character of the produce into a different commodity takes the income outside the definition. That the leaves themselves had no market did not help the assessee. The appeals were dismissed.
• S.Rm.M.Ct.M. Tiruppani Trust v CIT Supreme CourtHelps taxpayer
  My trust filed Form 10 to accumulate income but then spent the money on a hospital building instead of buying government securities. Have I lost the exemption altogether?
  No. The Supreme Court held that a trust which fails the conditions of section 11(2) still keeps the whole of the exemption section 11(1)(a) gives it. Income actually applied to charitable purposes in India is exempt whether or not a declaration was filed, and buying a building to be used as a hospital is such an application. On top of that the trust may accumulate up to 25 per cent of its total income - the limit then in force - and claim exemption on that accumulation without investing it in government securities. Section 11(2) only lifts the ceiling; it does not cut down section 11(1).
• CIT v Bankipur Club Ltd Supreme CourtHelps taxpayer
  My members' club charges for drinks, rooms and subscriptions and ends the year with a surplus. Is that surplus taxable income?
  No, where the receipts come from members. The Supreme Court held that amounts realised from members for drinks, refreshments, letting of buildings, admission fees and periodical subscriptions were charges for the privileges, conveniences and amenities the members were entitled to under the club's rules, offered without profit motive and untainted with commerciality. That is not a trading activity, and the excess of receipts over expenditure arising from a mutual arrangement is not income under the Act. Income from extending facilities to non-members was not in issue in these appeals.
• Aditanar Educational Institution v Addl CIT Supreme CourtHelps taxpayer
  My society runs a college and ended the year with a surplus. Does that surplus mean we no longer exist solely for educational purposes and not for profit?
  No. The Supreme Court held that if a surplus results incidentally, after meeting expenditure, from an activity lawfully carried on by an educational institution, the institution does not cease to exist solely for educational purposes, because its object is not to make profit. The decisive test is whether, on an overall view, the object is to make profit. The Court also held that a society or trust running an educational institution solely for educational purposes and not for profit is itself an other educational institution, and rejected as unreal and hyper-technical the argument that such a body is merely a financing body.
• CIT v Kamla Town Trust Supreme CourtCuts both ways
  Our company trust builds quarters for our own workmen and staff. Is that a public charitable trust, and does a civil court decree rectifying the trust deed help for earlier years?
  It depends on the deed, and a rectification decree does not reach back. The Supreme Court held that under the 1945 rectified deed the trustees were obliged to build quarters in particular for the workmen, staff and other employees of the settlor company and its allied concerns, who may include the affluent. That made the reference to workmen in general illusory, so the object was not public charitable and the whole trust failed the wholly charitable test. Under the 1955 rectified deed the objects were wholly charitable. The second decree operated only from assessment year 1956-57. The assessing officer could not go behind the decree, but could construe the deed as rectified.
• CIT v G.R. Karthikeyan Supreme CourtHelps department
  I won prize money in a car rally that was a test of skill, not a lottery or a race. Is it taxable when it does not fit any sub-clause of section 2(24)?
  Yes. The Supreme Court held that section 2(24) is an inclusive definition, so a receipt can be income even though it falls under none of the sub-clauses. It is wrong to test a receipt against sub-clause (ix) and conclude, if it does not fit, that it is not income. The rally was a contest, the assessee entered it to win, and the prize was a return for his skill and endurance. If money not earned in the true sense is income, money earned by skill and toil is income too. It may be casual, but section 10(3) itself shows casual income is income.
• Bajaj Tempo Ltd v CIT Supreme CourtHelps taxpayer
  My new industrial undertaking runs from a leased building that was used for business before, and it took over a few old tools. Does that cost me the incentive deduction?
  No, not on these facts. The Supreme Court held that a provision granting an incentive to promote growth must be construed liberally, and so must the restriction on it, so as to advance the object rather than frustrate it. The disqualifying words are not formed by the transfer of a building, plant or machinery previously used in another business: the emphasis is on formation, not on use. Only a transfer without which the new undertaking could not have come into being takes it out of the section. A leased factory building and tools worth Rs 3,500 did not play a dominant part in forming this company.
• Union of India v Wood Papers Ltd Supreme CourtHelps department
  How is an exemption notification read when it is doubtful whether I am covered by it at all?
  Strictly at the entry, liberally afterwards. The Supreme Court held that whether a subject falls within an exemption is a question to be construed strictly and against the subject, because an exemption is in the nature of an exception. But once the doubt about applicability is lifted and the subject is found to be within the notification, full play is given to it and it is construed widely and liberally. Applying that, an existing paper factory that switched to packing and wrapping paper had not commenced production within the notification, and was exempt only to the extent attributable to its enlarged capacity.
• Addl CIT v Surat Art Silk Cloth Manufacturers Association Supreme CourtHelps taxpayerSuperseded by amendment
  Our trade association promotes commerce in our industry, but the work it does throws up a surplus every year. Does the surplus stop it being charitable?
  No, not by itself. A five-judge Bench of the Supreme Court held that the test is whether the predominant object of the activity carried on in advancing an object of general public utility is to subserve the charitable purpose or to earn profit. Profit-making must be the end to which the activity is directed; it is not enough that the activity in fact results in profit. Where the dominant object is the charitable purpose, the character of the purpose is not lost merely because some profit arises. The exclusionary clause does not require the activity to be run so that it yields no surplus.
• Textile Machinery Corporation Ltd v CIT Supreme CourtHelps taxpayer
  I set up a new foundry inside my existing engineering works and it mostly supplies my own divisions. The officer says it is only a reconstruction of my old business. Is he right?
  No. The Supreme Court held that the Steel Foundry Division and the Jute Mill Division were new industrial undertakings and not formed by reconstruction of the existing business. New plant, separate buildings, separate licences, separate books and substantial fresh capital made each a physically separate and identifiable unit that could exist on its own. That the bulk of what they produced was consumed by the assessee's own Boiler Division was not decisive. Reconstruction requires a transfer of the assets of the old business to the new undertaking; there was none here. The Calcutta High Court's contrary view was set aside.
• CIT v R.M. Chidambaram Pillai Supreme CourtHelps taxpayerSuperseded by amendment
  I draw a salary from my firm, which grows and manufactures tea. Only 40 per cent of the firm's income is taxable as business income - is my whole salary taxable, or only 40 per cent of it?
  Only the taxable proportion. The Supreme Court held that a firm is not a legal person, and since a contract of service needs two distinct persons there can be no contract of employment between a firm and its own partner. A salary agreed to a partner is therefore a special share of profits - profits under another name - and takes the character of the firm's income. Where the composite income from tea is apportioned so that 60 per cent is agricultural and beyond the Union's reach, 60 per cent of the partner's salary shares that character too. The position is different for a stranger who is not a partner.
• ITO v N. Takim Roy Rymbai Supreme CourtHelps department
  I am a Scheduled Tribe member living in a Sixth Schedule area but my salary is earned from an office outside it — is that income exempt under section 10(26)?
  No. The Supreme Court held that section 10(26) exempts a Scheduled Tribe member only on income accruing or arising from a source inside the specified area (or from dividends and interest on securities). Residence in the specified area alone is not enough; the source test in sub-clause (a) is a separate, mandatory condition. The Court reversed the Gauhati High Court, which had struck the sub-clause down under Article 14, and held the classification by source of income to be based on intelligible differentia and constitutionally valid.
• Ahmedabad Rana Caste Association v CIT Supreme CourtHelps taxpayer
  Our trust benefits one caste. Can that be a charitable purpose at all?
  Yes. It is not necessary that the object benefit the whole of mankind or all persons in a country; it is enough that a section of the public, as distinguished from specified individuals, is intended to be benefited. The Supreme Court held that the members of the Rana caste of Ahmedabad — whether natives or admitted to the caste under custom or usage — are united by a quality that is impersonal, so they form a section of the public and the trust's objects were charitable.
• CIT v Andhra Chamber of Commerce Supreme CourtHelps taxpayer
  My trade association only helps its own trade and its members get a benefit from it — can it still be charitable?
  Yes. The Supreme Court held that promotion and protection of trade, commerce and industry is an object of general public utility and therefore a charitable purpose, even though the members of the chamber benefit incidentally. An object need not benefit all mankind; it is enough that a section of the public, defined by some common quality of a public or impersonal nature, is intended to be benefited. Rental income from the chamber's building, held under a legal obligation to apply it to those objects, was exempt. The Revenue's appeals were dismissed with costs.
• CIT v Kumbakonam Mutual Benefit Fund Ltd Supreme CourtHelps department
  My company lends and takes deposits only from its own shareholders and shares the surplus among them. Is that mutual trading, so that the surplus is not taxable?
  No. The Supreme Court held that mutuality requires complete identity between contributors and participators: every contributor to the common fund must be entitled to share in the surplus, and every participator in the surplus must be a contributor. Here a shareholder could take his dividend without ever making a deposit or taking a loan, so the surplus came back to him as a shareholder on his shares, not as a person who had put money in. That is a company making a profit out of its members as customers, which is taxable. The Madras High Court's test, that the right to contribute and the right to participate need only be open to an identical body, was held unsound.
• CIT v Raja Benoy Kumar Sahas Roy Supreme CourtHelps taxpayer
  I sell timber from forest land that we prune, weed and replant. Is that agricultural income?
  Only so far as basic operations were performed. Income is agricultural where operations on the land itself prior to germination — tilling, sowing, planting — have been carried out; subsequent operations such as weeding, pruning, tending and harvesting qualify only when performed as part of an integrated activity with those basic operations. Produce of spontaneous growth is not agricultural income, so a part-replanted forest has to be apportioned.
• Bacha F Guzdar v CIT Supreme CourtHelps department
  I hold shares in a tea company and 60 per cent of its income is exempt as agricultural income. Is 60 per cent of my dividend exempt too?
  No. The Supreme Court held that dividend from a tea company is not agricultural income in the shareholder's hands. Agricultural income means revenue received by direct association with land used for agricultural purposes; it does not extend to revenue that changes hands by way of distribution of dividends. In fact and truth the dividend is derived from the investment in shares and rests on the contractual relation between the company and the shareholder. The shareholder has no interest in the property of the company, which is a juristic person distinct from him, only a right to participate in profits.
• Krishnagopal B Nangpal v DCIT High CourtHelps taxpayerSuperseded by amendment
  I put the whole capital gain from one flat into several houses. For years before assessment year 2015-16, does s.54 allow that?
  Yes. The Bombay High Court held that the words 'a residential house' in s.54(1) as it stood before 1 April 2015 were descriptive of the nature of the asset and did not restrict the number of houses that could be bought. The assessee sold a flat in Mumbai and invested the proceeds in seven row houses at Pune under a joint venture agreement, and the exemption was allowed against the entire capital gain of Rs. 1,08,30,625. The Court agreed with the Karnataka High Court in Arun K. Thiagarajan and the Madras High Court in Tilokchand and Sons, and reasoned that if the restriction to one house had already been in the unamended provision there would have been no need for the 2014 amendment to insert the word 'one'. That amendment took effect from 1 April 2015, and from assessment year 2015-16 the position is the opposite.
• CIT (E) v IILM Foundation High CourtHelps taxpayerValidity unconfirmed
  Our trust pays a salary to its chairperson, who is a trustee. Does that cost us the s.11 exemption?
  No, provided the salary is no more than what the services are reasonably worth. Section 13(2)(c) is not a bar on paying a specified person at all: it deems a salary to be application for that person's benefit only to the extent it is in excess of what may reasonably be paid for the services, so a payment that is reasonable for the service is not caught by s.13(1)(c) at all. The Delhi High Court answered both questions of law against the revenue and dismissed its appeals. Note what was not in issue: the reasonableness of the Rs 16,20,000 salary had been found below and was not contested before the High Court, which recorded that there was no cavil about it, so the decision is on the legal point and not a finding on the facts of this trust's remuneration.
• CIT (Exemptions) v Shree Sai Baba Sansthan Trust High CourtHelps taxpayer
  Our trust is religious and charitable and holds 80G approval. Can the officer tax our hundi collections under s.115BBC?
  No. Section 115BBC(2)(b) takes a trust created or established wholly for religious and charitable purposes out of the charge, except for a donation given with a specific direction that it is for a university or other educational institution or a hospital or other medical institution run by the trust. The Court held that whether the trust is religious and charitable is determined from the trust deed, and that s.80G registration is a separate and independent question which cannot be used to deny that character. Rs 159.12 crores of hundi collections out of Rs 228.25 crores of donations stayed outside s.115BBC(1).
• Sanjay Baweja v Dy CIT High CourtHelps taxpayerHigh Courts differ
  My employer paid me for the fall in value of options I never exercised. Is that a perquisite?
  No, on this decision. The Delhi High Court held that a one-time voluntary payment made to holders of unexercised stock options after a group disinvestment was not a perquisite under s.17(2)(vi), because the value of specified securities depends on the exercise of the option and no option had been exercised. The refusal of a nil-deduction certificate under s.197 was set aside.
• CIT (E) v Hamdard National Foundation (India) High CourtHelps taxpayer
  The officer says we let our building to a related party below market rent. Is that by itself a breach of s.13(2)(b)?
  No, not by itself. The burden of showing that the rent was inadequate is on the Department, and the market rate is not the only yardstick. Where the rent charged was higher than the valuation the municipal corporation had adopted for house tax, and the officer's only material was enquiries from estate agents and figures picked off the internet, the Delhi High Court held that s.13(2)(b) was not attracted and the s.11 exemption stood.
• Navin Jolly v ITO High CourtHelps taxpayer
  The officer says I already owned more than one residential house on the date of transfer, so s.54F is out. Some of those flats are let out for commercial use. Does that count?
  Usage decides it, not the sanction plan. The Karnataka High Court held that in applying the condition in the proviso to s.54F(1) the use to which a property is actually put has to be considered in deciding whether it is residential or commercial. The assessee owned nine flats; the Revenue conceded that seven were sanctioned for commercial purposes, and the remaining two, though sanctioned as residential, were being run as serviced apartments. Those two could not be treated as residential apartments. The Court also held, as an alternative ground, that two apartments of 500 square feet in the same building have to be treated as one residential unit.
• CIT (TDS) v Oil and Natural Gas Corporation Ltd High CourtHelps taxpayerValidity unconfirmed
  I am the employer. I treated the uniform allowance as exempt on my employees' self-certification and did not call for bills. The TDS officer has made me an assessee in default under s.201. Was I obliged to verify that each employee actually spent the money?
  No. The High Court held that the employer's liability under s.192 is to deduct tax to the extent of the employee's taxable income, and that where part of that income is exempt there is no liability to deduct from it. A certificate from the employee that he has incurred the expenditure is adequate for the disbursing officer when computing the tax deductible; whether the employee can in fact substantiate the claim is a matter for the employee's own assessment and has no bearing on the employer's estimate. The demand under s.201(1) and the consequential interest were rightly deleted.
• Kamal Kumar Kalia v Union of India High CourtHelps department
  I retired from a nationalised bank. Am I a government employee for the full leave encashment exemption under s.10(10AA)?
  No. The Delhi High Court rejected that challenge. Employees of public sector undertakings and nationalised banks do not become Central or State Government employees merely because their employer is treated as 'State' under Article 12 of the Constitution, so their leave encashment is exempt only under the capped second limb of s.10(10AA)(ii). On the separate grievance that the notified ceiling had not been revised since 1998 the Court expressed only a prima facie view and issued notice; that part of the petition was still pending in 2026.
• CIT (Exemptions) v Audyogik Shikshan Mandal High CourtHelps taxpayer
  Trust funds went to a trustee. Does the trust lose exemption on all its income or only that amount?
  Only that amount. Denial of exemption under s.11 is confined to the sum actually diverted in breach of s.13; s.13 withdraws the benefit in respect of the offending income or property, not for the trust as a whole.
• Mahadev Balai v ITO High CourtHelps taxpayer
  The new agricultural land is registered in my wife's name. Can the AO deny 54B?
  No, on this view. The statute contains no requirement that the new agricultural land be registered in the assessee's own name; what controls is that the funds applied to the purchase belonged to the assessee.
• Humayun Suleman Merchant v CCIT High CourtHelps departmentValidity unconfirmed
  I never deposited the unspent sale proceeds in a capital gains account. Can I still claim 54F?
  No, not for the unspent part. Section 54F(4) requires the amount not utilised towards the new house to be deposited in the notified account before the due date under section 139(1), and failure to do so confines the exemption to what was actually spent.
• CIT v Pritam Das Narang High CourtHelps taxpayerValidity unconfirmed
  A company withdrew my job offer before I joined and paid me compensation. Is that taxable as salary?
  No. The Delhi High Court held that s.17(3)(iii) presupposes an employment, that is a relationship of employer and employee between the payer and the recipient. Where the offer was withdrawn before the employment began, no such relationship ever existed, and the amount paid for non-commencement of employment was a capital receipt, not taxable as profits in lieu of salary or as income from other sources.
• CIT v Nitish Rameshchandra Chordia High CourtHelps taxpayer
  My land is more than eight kilometres from the municipal limit by road but within eight kilometres as the crow flies. For years before 2014, was it a capital asset?
  No. The Bombay High Court, Nagpur Bench, held that for assessment years before the amendment took effect the distance under section 2(14)(iii)(b) is to be measured by the shortest road distance and not aerially. The amendment prescribing aerial measurement came into force on 1 April 2014 and, as the CBDT circular itself says, applies prospectively from assessment year 2014-15; the very need for the amendment shows there was confusion earlier, and the benefit of that must go to the assessee. Section 11 of the General Clauses Act therefore had no application to assessment year 2009-10. The Revenue's appeals were dismissed.
• India Trade Promotion Organisation v DGIT (Exemptions) High CourtHelps taxpayerValidity unconfirmed
  My institution advances an object of general public utility but charges fees and ends up with a surplus — does the proviso to section 2(15) knock out my exemption?
  Not by itself. The Delhi High Court upheld the constitutional validity of the first proviso to section 2(15) but read it down: it bites only where the dominant and prime objective of the institution is profit making, whether directly through trade, commerce or business or indirectly through rendering services in relation to them. Charging a fee, or generating a surplus, does not by itself make an institution non-charitable. Because the India Trade Promotion Organisation's driving force was promoting the nation's trade rather than earning profit, its exemption under section 10(23C)(iv) was restored and a mandamus issued to grant approval within six weeks.
• CIT v C. Jaichander High CourtHelps taxpayerSuperseded by amendment
  I sold property in February and put Rs.50 lakh into bonds in March and another Rs.50 lakh in June, both within six months. Can I claim section 54EC on the whole Rs.1 crore?
  Yes, for transfers before the 2014 amendment. The Madras High Court held that section 54EC(1) fixes a six month window for investment, while the first proviso caps investment at Rs.50 lakh in any financial year. Read together, an assessee who invests Rs.50 lakh in each of two financial years, both within six months of the transfer, gets the exemption on the full Rs.1 crore. The Court declined to read the ceiling into the sub-section itself. Parliament closed the gap by a second proviso inserted by the Finance (No. 2) Act, 2014 with effect from 1 April 2015, so the answer is different from assessment year 2015-16 onwards.
• CIT v K. Ramachandra Rao High CourtHelps taxpayer
  I put the whole sale consideration into building a house within the section 54F time limit but never opened a Capital Gains Account. Can the officer deny me the exemption on that ground alone?
  No. The Karnataka High Court held that section 54F(4) is attracted only where the net consideration is not used to purchase or construct the house. If the assessee actually invests within the periods in section 54F(1), the deposit requirement never comes into play and exemption cannot be refused for want of a Capital Gains Account Scheme deposit. The Court also held there is no bar on constructing the new house on a site the assessee already owns; investments in that construction within one year before and three years after the transfer qualify. All four Revenue appeals were dismissed.
• Kishorebhai Bhikhabhai Virani v ACIT High CourtHelps departmentValidity unconfirmed
  My client sold two lots of long-term shares in the same year — one at a loss on shares whose gain would have been exempt under s.10(38), the other at a taxable gain. Can the loss be set off against the gain?
  On this Gujarat High Court decision, no. Because s.10(38) keeps the income arising from such a capital asset out of the computation of total income altogether, the loss arising on the same class of asset is likewise not includable, and is therefore not available for set-off under s.70(3) or for carry forward under s.74. The Court rejected the argument that 'income' in s.10(38) does not include 'loss'.
• Institute of Chartered Accountants of India v DGIT (Exemptions) High CourtHelps taxpayerValidity unconfirmed
  My institution is a statutory regulator that charges fees for coaching and placement and ends up with a surplus — does that make it a trade or business under the proviso to section 2(15)?
  No. The Delhi High Court held that a body incorporated to regulate a profession, which imparts education and training as part of that statutory function, is not carrying on trade, commerce or business merely because it charges fees and generates a surplus. Coaching classes and campus placement interviews were held to be activities in furtherance of the Institute's main object, so they are neither business nor services rendered in relation to any trade, commerce or business. The orders refusing exemption were set aside and the Director General was directed to recognise the Institute under section 10(23C)(iv) for assessment years 2006-07 to 2011-12.
• CIT v Gita Duggal High CourtHelps taxpayerSuperseded by amendment
  I got two independent floors from the builder. Is that one residential house for 54?
  Yes, for the years this decision governs. So long as the assessee acquires a building of several units that can conveniently and independently be used as residences, section 54 and 54F are satisfied and the exemption is not restricted to a single unit.
• CIT v Kamal Wahal High CourtHelps taxpayer
  I put the entire sale consideration into a house bought in my wife's name. Do I get 54F?
  Yes, on this view. Where the whole consideration came from the assessee and the spouse contributed nothing, section 54F does not require the new residential house to be bought in the assessee's own name or exclusively in his name.
• CIT v Cello Plast High CourtCuts both ways
  The 54EC bonds weren't on sale before my six months ran out. Have I lost the exemption?
  No. Where the specified bonds were genuinely unavailable on the last date of the six-month window, the time limit stands effectively extended and an investment made as soon as the bonds became available qualifies under section 54EC.
• CIT v Sambandam Udaykumar High CourtHelps taxpayer
  I invested the sale proceeds in construction but the house isn't finished. Do I lose 54F?
  No. What section 54F requires is that the consideration be invested within the prescribed period. Completion of construction, execution of the sale deed, or occupation of the new house within that period is not a requirement of the section.
• Gouli Mahadevappa v ITO High CourtCuts both waysSuperseded by amendment
  If the gain is computed on the stamp duty value, can I at least claim s.54F on everything I actually put into the new house?
  Yes, on this authority. Where the capital gain had been assessed on the notional consideration of Rs 36,00,000 substituted under s.50C in place of the Rs 20,00,000 actually received, the Karnataka High Court held that the Rs 24,00,000 the assessee invested in constructing a residential house was available for exemption under s.54F.
• Namdhari Seeds Pvt Ltd v CIT High CourtHelps departmentValidity unconfirmed
  I give farmers my foundation seed, supervise their fields and buy back the hybrid seed at a fixed rate per quintal. Is what I earn agricultural income exempt under section 10(1)?
  No. The Karnataka High Court held the whole of the income was business income. Under the contract farming arrangement the farmer used his own land and his own labour and carried out the basic operations - preparing the bed, sowing, cultivating and harvesting. The company only supplied foundation seed, gave technical advice and supervision, and paid a fixed rate per quintal for seed meeting its specification. Because the assessee did not itself carry out the basic agricultural operations, cleaning, grading and converting foundation seed into certified seed could not be treated as part of an integrated agricultural activity. The Commissioner (Appeals) was wrong to exempt all of it and the Tribunal wrong to split it 90:10.
• CIT v Jagriti Aggarwal High CourtHelps taxpayerValidity unconfirmed
  I sold my house, bought the new one after 31 July but before the end of the assessment year, and never opened a Capital Gains Account — do I lose the section 54 exemption?
  No. The Punjab and Haryana High Court held on 3 October 2011 that the due date in section 54(2) for furnishing the return under section 139(1) is subject to the extended period allowed by section 139(4). Sub-section (4) is not an independent provision; it operates on the time allowed by sub-section (1) and must be read with it, functioning in effect as a proviso to it. So an assessee who buys or constructs the new house, or deposits the gain, before the section 139(4) date keeps the exemption. Here the sale was on 13 January 2006, the purchase on 2 January 2007, and the return filed on 28 March 2007.
• CIT v Ravinder Kumar Arora High CourtHelps taxpayer
  I paid the whole price of the new house but put my wife's name on the deed alongside mine. Will the officer cut my section 54F exemption to half?
  No. The Delhi High Court held that section 54F requires the assessee to purchase a house; it does not require the house to be purchased in his name only. Where the assessee provided the entire consideration, paid the stamp duty, corporation tax, commission and legal expenses, and the wife contributed nothing, he is the real and constructive owner and the conditions of the section are met. Adding a wife's name is conduct to be encouraged rather than penalised. The section is a beneficial provision to be construed liberally and purposively, and the exemption on the full Rs.3.18 crore was allowed. The Revenue's appeal was dismissed with costs.
• Prakash v ITO High CourtHelps departmentValidity unconfirmed
  I paid for the new house but it's in my son's name. Can I still claim 54F?
  No, on this view. The court held that ownership and domain over the new asset must run to the assessee from the sale of the original asset through to the purchase or construction; where the son became the owner, the assessee had no right over the property and section 54F was refused.
• CIT v Koodathil Kallyatan Ambujakshan High CourtHelps taxpayerSuperseded by amendment
  My employer's early retirement scheme does not spell out every condition in Rule 2BA. Does that destroy the s.10(10C) exemption?
  Not on these facts. The Bombay High Court upheld the exemption for employees who took the Reserve Bank of India's Optional Early Retirement Scheme, holding that the six requirements of Rule 2BA were satisfied expressly or by implication on the material on record, including evidence that the vacancies were not filled. That is what the decision is still good for. Its second holding — that relief under s.89 is available on the amount above Rs 5,00,000 in addition to the exemption — states the law only for assessment years up to 2009-10. From assessment year 2010-11 the proviso to s.89 and the third proviso to s.10(10C), inserted by the Finance (No. 2) Act, 2009 with effect from 1 April 2010, make the exemption and the relief alternatives, and claiming s.89 relief forfeits the Rs 5,00,000 exemption 'in relation to such, or any other, assessment year'. The Court also applied the Supreme Court's ruling in Hero Cycles that a Board circular binds the Assessing Officer but not the appellate authorities, the Tribunal or the Court.
• CIT v Sardarmal Kothari High CourtHelps taxpayerValidity unconfirmed
  I put the whole sale consideration into land and started building, but the house was not finished when the officer inspected. Do I lose section 54F?
  No. The Madras High Court dismissed the Revenue's appeals and upheld the exemption. The assessees had invested the entire net consideration in the land and then spent large sums on construction, and neither the cost of the land nor the construction expenditure was disputed. The only ground for refusing the exemption was that the houses were not complete when the Assessing Officer visited. That is not the test. The Court held that Circular No. 667 does not support the Revenue's reading that construction must be completed, and it approved the Tribunal's consistent view that it is enough if the assessee establishes that the entire net consideration was invested within the stipulated period.
• CIT v Nagesh Devidas Kulkarni High CourtHelps taxpayerSuperseded by amendment
  I took voluntary retirement. Can I claim both the s.10(10C) exemption and s.89 relief on the balance?
  Only for assessment years up to 2009-10. The Bombay High Court held that a voluntary retirement payment is compensation received in connection with the termination of employment and so is 'profits in lieu of salary' under s.17(3), and that relief under s.89 was therefore available on the amount taxed over and above the Rs 5,00,000 exempted by s.10(10C). That was the position for the year before the Court, assessment year 2002-03. From assessment year 2010-11 the two are alternatives by statute: the proviso to s.89 and the third proviso to s.10(10C), both inserted by the Finance (No. 2) Act, 2009 with effect from 1 April 2010, mean that claiming the s.10(10C) exemption bars s.89 relief on the same receipt, and that taking s.89 relief forfeits the exemption — not only for that year but 'in relation to such, or any other, assessment year'. What survives of this decision is its holding that a voluntary retirement payment is 'profits in lieu of salary' under s.17(3).
• CIT v Rajesh Kumar Jalan High CourtHelps taxpayerValidity unconfirmed
  I did not put the unused capital gain into the capital gains account scheme by the due date under section 139(1). Have I lost the section 54 exemption?
  Not necessarily. The Gauhati High Court dismissed the Revenue's appeal and upheld the exemption for the whole gain of Rs 29,73,048. Section 54(2) requires the unutilised gain to be deposited before the date of furnishing the return of income under section 139, and section 139 there cannot mean only section 139(1); it means all the sub-sections, including sub-section (4). So an assessee who utilises the gain before the time allowed by section 139(4) has complied. The Court applied the settled rules that a beneficial provision is construed to advance its purpose and that no words are to be added to a plain provision.
• CIT v Ace Builders (P) Ltd High CourtHelps taxpayer
  I sold a building I had held for years and claimed depreciation on. The gain is computed as short-term under section 50. Can I still claim the capital gains exemption for investing the proceeds?
  Yes. The Bombay High Court held that the deeming fiction in section 50 is confined to the mode of computing capital gains under sections 48 and 49. It deems the gain to be short-term; it does not deem the asset to be a short-term capital asset. Section 54E draws no distinction between depreciable and non-depreciable assets, so an assessee who invests the net consideration from a long-term asset in the specified securities within the time allowed gets the exemption, whether the gain was computed under sections 48 and 49 or under section 50.
• CIT v G.V. Venugopal High CourtHelps taxpayerSuperseded by amendment
  I took VRS from a bank and claimed the Rs 5 lakh exemption under section 10(10C). Can I also claim spread-over relief under section 89(1) on the balance?
  Yes, for the years this judgment governs. The Madras High Court held that exemption under section 10(10C) up to Rs 5 lakh and relief under section 89(1) on the balance VRS compensation are two separate benefits, and nothing in the Act barred taking both. The second proviso to section 10(10C) only stops a second exemption under that clause in another assessment year; it says nothing about section 89(1). VRS compensation is a profit in lieu of salary under section 17(3), so section 89(1) applies to it. The Department's appeal was dismissed.
• SAIL DSP VR Employees Association 1998 v Union of India High CourtCuts both ways
  My VRS compensation is being paid to me in instalments over ten years. Does the section 10(10C) exemption still apply, or is it lost once the payments cross into later years?
  It still applies. The Calcutta High Court held that the whole compensation became due when the employee was released under the scheme and was chargeable under section 15(a) at that point, whether paid or not. Spreading the payment over ten years does not turn the later instalments into salary of those later years, so the second proviso to section 10(10C) is not attracted. The exemption up to Rs 5 lakh runs on the compensation component alone. Terminal benefits paid under the same scheme, such as gratuity and leave encashment, are not part of the amount received on voluntary retirement and are not covered.
• CIT v D.P. Malhotra High CourtHelps taxpayer
  My client resigned; he did not superannuate. The officer says s.10(10AA) is only for retirement, so his leave encashment is fully taxable. Is that right?
  No. Resignation is a mode of retirement, and s.10(10AA) applies to leave encashment received on resignation just as it does on superannuation. The clause says 'at the time of his retirement whether on superannuation or otherwise', and the Bombay High Court held that how the retirement came about is immaterial.
• K. Gopalakrishnan v Central Board of Direct Taxes High CourtHelps departmentValidity unconfirmed
  For the s.10(10) gratuity and s.10(10AA) leave encashment limits, can I compute 'salary' on the pay my employer actually used — basic plus all the allowances that went into provident fund pay?
  No. The Explanation to s.10(10) fixes 'salary' for both s.10(10) and s.10(10AA) as the meaning in clause (h) of rule 2 of Part A of the Fourth Schedule — basic pay plus dearness allowance if the terms of employment so provide, and nothing else. The Madras High Court held there is no ambiguity in that definition and it must be applied; it also upheld the differential treatment of government and non-government employees in both clauses against Article 14.
• CIT v Mrs Hilla J.B. Wadia High CourtHelps taxpayer
  I sold my house and put the money into a flat a co-operative society is building. The building is not finished. Have I constructed a house for section 54?
  Yes, on these facts. The Bombay High Court held that a member who acquires the right to a specific flat in a building being constructed by a co-operative society, and who pays substantially the whole cost of that flat within the statutory period, has constructed a house property for the purposes of section 54. The test is domain over the flat and investment in it. Formation of a society to build flats is simply the way residential tenements are constructed in a city like Bombay, and the section must be read in that context. The reference was answered in favour of the assessee.
• Pudhureddiyur Raju Kalaimani v ITO ITATHelps taxpayerValidity unconfirmed
  CPC denied my leave encashment exemption under s.10(10AA) because Form 26AS shows the gross salary, and the Department says I resigned and joined another employer in the same year. Can I still get it?
  Yes on both points. Leave encashment received on resignation is exempt under s.10(10AA), and nothing in the statute disentitles an employee who takes up fresh employment in the same year; what matters is that the receipt was on cessation of employment. A Form 26AS mismatch thrown up in s.143(1) processing is not a sustainable ground to tax the amount where the claim is supported by the employer's Form 16.
• Vinod Sharma v ACIT ITATCuts both waysValidity unconfirmed
  I claimed HRA on rent paid to my wife. We are co-owners of the flat and we live in it together. The officer has disallowed it. What exactly will sink the claim?
  Four things sank it here, and any one of them is dangerous: the assessee was himself a co-owner of the accommodation, there was no rent agreement, no monthly rent outgo could be traced in the bank account, and the recipient's return of income showing the rent as her income was never produced — not before the Assessing Officer, not before the Commissioner (Appeals), and not before the Tribunal. On those facts the Tribunal dismissed the ground in a paragraph.
• Smt. Madhu Khatri v DCIT ITATHelps taxpayerValidity unconfirmed
  My employer allowed my HRA and conveyance allowance in Form 16 after taking my Form 12BB with the landlord's name, address and PAN. The CPC has still added them back. Does the employer's Form 16, backed by the Rule 26C declaration, carry the claim?
  On these facts, yes. The Tribunal held the assessee eligible for the s.10(13A) exemption of Rs 7,41,983 and the s.10(14) conveyance allowance of Rs 19,200 because the claim was supported by the requisite documents — bank statement as proof of payment, the declaration under Rule 26C, Form 12BB carrying the landlord's name, address, PAN and rent receipts, and a Form 16 in which the employer had allowed both exemptions after satisfying itself — and because the Commissioner (Appeals) had ignored all of that. The Form 16 was disputed neither by the Commissioner (Appeals) nor by the Departmental Representative.
• Grow Foundation v CIT (Exemption) ITATHelps taxpayerValidity unconfirmed
  My trust's application in Form 10AB for final approval under s.80G(5) was rejected as time-barred. Do the CBDT circulars extending the date save it?
  Yes, on this decision. The Tribunal held that the application could not be rejected merely because it was not filed by 30 September 2023, that date having been arrived at through CBDT Circular No.6/2023 and then further extended to 30 June 2024 by CBDT Circular No.7/2024. The rejection was set aside and the matter restored to the CIT (Exemption) for de novo consideration on merits.
• Suresh Pal Chauhan v ITO ITATHelps taxpayer
  My client took the package when HMT's Tractor Division was closed. CPC allowed only Rs 5 lakh under s.10(10C) and then refused s.89 relief because of it. Is the whole package exempt?
  On these facts yes. Where the Central Government approves a scheme for extending special protection to workmen of an undertaking being closed down, the second proviso to s.10(10B) displaces the monetary ceiling and the whole of the compensation is exempt. The Chandigarh Bench held the HMT Tractor Division package fell under s.10(10B) and not s.10(10C), and separately directed that s.89 relief be allowed on the net gratuity.
• DCIT v Total Oil India Pvt Ltd (Special Bench) ITATHelps departmentValidity unconfirmed
  My company paid dividend distribution tax on dividend to a French shareholder. Can I pay at the lower treaty rate on dividends instead of the section 115-O rate?
  No, on the reasoning of this Special Bench. It treated dividend distribution tax under section 115-O as a charge on the domestic company on its own distributed profits, not a tax paid on behalf of the shareholder, following the Bombay High Court in Godrej & Boyce that the company does not act as the shareholder's agent and the charge is not on dividend in the shareholder's hands. It held that Tata Tea, which upheld the constitutional validity of section 115-O, does not support the taxpayer, a precedent being an authority only for what it actually decides. On that footing the shareholder's treaty rate does not limit the section 115-O rate.
• DCIT v Ganga Developers ITATHelps taxpayerValidity unconfirmed
  My land was compulsorily acquired and the award was made after 1 January 2014 but the proceedings began under the 1894 Act. Is the compensation taxable?
  No, on the Tribunal's reasoning. The Mumbai Bench held that where the award is made after the Land Acquisition Act, 1894 stood repealed, the acquisition is governed by the RFCTLARR Act, 2013, and section 96 of that Act provides that income-tax shall not be levied on any award or agreement made under it except as provided in section 46. Section 46 was not attracted, so the compensation of Rs. 69,92,42,974 was not chargeable at all. Because the exemption operates at the level of the charge and not through section 10(37), the Revenue's objections that section 10(37) covers only individuals and Hindu undivided families, and only agricultural land, did not arise. The appeal was dismissed.
• Harminder Kaur v ITO ITATHelps taxpayer
  I filed a belated return and only invested after 31 July. Can the AO deny my 54 exemption?
  Not on that ground, if the investment came before the belated return was filed. The Tribunal read sub-section (4) of section 139 as in substance a proviso to sub-section (1), so the section 54 reinvestment period runs to the extended filing date, and booking a flat with a builder counts as purchase even without possession or a registered deed.
• Krishnan Achary v ITO ITATHelps departmentValidity unconfirmed
  My client took the State Bank's exit option and claimed Rs 5 lakh under s.10(10C). The officer says the scheme does not meet rule 2BA. Is partial compliance enough?
  No. Compliance with s.10(10C) and rule 2BA is cumulative, and satisfying some of the six requirements does not entitle the employee to the exemption. Where the employer's own certificate described the payment as ex gratia under an 'Exit Option Scheme', said the amount would be added to income and tax deducted at source, and said nothing about rule 2BA, the Cochin Bench held the exemption was not available.
• M/s United Investments v ACIT ITATHelps taxpayerValidity unconfirmed
  The officer says my long-term capital loss on listed shares cannot even be determined, because gains on those shares would have been exempt under s.10(38). Is there authority the other way?
  Yes. The Kolkata Tribunal held that the judicial concept that 'income' includes 'loss' applies only where the entire source of income falls outside the charging provisions; where the source — capital gains — remains chargeable and s.10(38) exempts only one specie of income arising from it, the concept does not apply. It directed the Assessing Officer to assess the long-term capital loss on the sale of listed shares and to allow its carry forward.
• Girdhari Lal v ITO ITATHelps departmentSuperseded by amendment
  The land is recorded as agricultural in the revenue records. Is that enough to keep it outside s.2(14)?
  No. The Tribunal upheld the addition. The land lay within eight kilometres of municipal limits, no crop had been grown on it in the years before sale, and the sale deed itself described it as residential land with structures on it, so it was a capital asset under s.2(14) and s.50C applied to the consideration.
• ITO v Raj Kumar Parashar ITATHelps taxpayer
  The AO substituted the circle rate under s.50C. Does that higher figure also become the net consideration I have to reinvest for s.54F?
  No, on this line of authority. The Jaipur Bench held that the deeming fiction in s.50C is confined to computing capital gains under s.48 and does not carry into s.54F, so 'net consideration' in the Explanation to s.54F is the consideration actually received under the sale deed. The assessee had reinvested the whole of the actual consideration and got the whole gain exempted, even though the gain itself had been computed on the stamp duty value.
• Meena Vaswani v ACIT ITATHelps departmentValidity unconfirmed
  What evidence does the department actually need before it will accept HRA on rent paid to my mother?
  More than rent receipts. The Tribunal denied the exemption for three years on rent said to be paid to the assessee's mother, holding the arrangement a sham: there was no leave and licence agreement, the rent was paid in cash with nothing in the bank, the mother had not returned the rent as her income, and an inspector found the assessee actually living in her own flat nearby.
• ITO v Apsara Bhavana Sai ITATHelps departmentValidity unconfirmed
  I own a half share in one flat and a whole house. Does that block 54F?
  Yes. The proviso to section 54F denies the deduction where the assessee owns more than one residential house other than the new asset on the date of transfer, and a fractional or joint share counts as ownership for that purpose.
• Bajrang Prasad Ramdharani v ACIT ITATHelps taxpayerValidity unconfirmed
  I pay rent to my wife for the flat she owns and we live in it together. The officer says the whole thing is a colourable device and has disallowed my HRA. Is living under the same roof as my landlord by itself fatal?
  No. The Tribunal read s.10(13A) with its own Explanation and held that the provision imposes only two conditions — that the assessee occupies the accommodation, and that he has actually incurred expenditure on rent — and that neither of them is broken merely because the landlord is his wife and lives in the same house. Where rent receipts were produced and the payments were traceable to bank transfers, the exemption was restored even though the Assessing Officer and the Commissioner (Appeals) had both branded the arrangement a device.
• DDE ORG Systems (P) Ltd v ACIT (TDS) ITATHelps departmentValidity unconfirmed
  We pay our staff a fixed monthly attire allowance and washing allowance and treat it as exempt under s.10(14). Nobody actually wears a uniform. Can the TDS officer make us an assessee in default?
  Yes. The Tribunal held that Rule 2BB(1)(f) exempts expenditure incurred on the purchase or maintenance of a uniform for wear during the performance of duties, and that where the employees wore dress of different colour, different design and texture according to their own choice, there was no uniform and nothing to show the allowance was granted to meet expenses wholly, necessarily and exclusively incurred in the performance of duties. Tax was required to be deducted on both the attire allowance and the washing allowance, and the employer was in default under s.201(1).
• RBF Rig Corporation LLC v ACIT ITATHelps taxpayerValidity unconfirmed
  My employer pays my Indian tax under a net of tax contract. Must the tax on that tax be grossed up again, or is it exempt under section 10(10CC)?
  It is exempt, so there is only one round of grossing up. The Delhi Special Bench held that tax paid by an employer on an employee's behalf is a perquisite under section 17(2)(iv) - the discharge of an obligation which the employee would otherwise have had to meet - and is not a perquisite provided by way of monetary payment. Section 10(10CC) excludes only monetary payments to the assessee, and a payment to a third party, here the Government, is not one. So the tax borne by the employer is added to salary once, and no further tax on that tax is added. The earlier Delhi Bench decisions in B.J. Services and Western Geo were held to be wrong.
• Vance Robert Heffern v CIT Advance RulingHelps taxpayerSuperseded by amendment
  Our US employer has seconded a telecom manager to India and is bearing his Indian tax. He has no formal technical qualification and cannot produce his certificates. Can he still be a technician for the s.10(5B) exemption?
  Yes, on the law as it then stood. The Authority ruled that Vance Robert Heffern, seconded by ALLTEL Information Services International Holding Inc. to its group company in India as a telecom manager, qualified as a technician under s.10(5B), and that the taxes borne by his employer were exempt for forty-eight months from his arrival in India. Neither his inability to produce educational certificates nor the absence of technical education was a disqualification, because specialised knowledge may be obtained either by education or by special experience; his fourteen years in the ALLTEL group and the work he was doing in India fell within the notified field of information technology. Section 10(5B) has since been deleted from the Act.
• John A. Sayre v CIT Advance RulingHelps departmentSuperseded by amendment
  I am a geologist running production at three oil and gas fields in India for a foreign oil company. Am I a technician in mining, or in constructional operations, for the section 10(5B) exemption?
  No, on both routes. The Authority held that mining in the Explanation to s.10(5B) is not used in a broad sense that takes in prospecting for or extraction of mineral oil, because the Income-tax Act consistently treats mineral oil as something separate from minerals and makes its own special provision for it in ss.42, 44BB and 293A. It also rejected the alternative case that the applicant was a technician in constructional or manufacturing operations: he had a degree in geology and no shown special knowledge of construction, and he was employed to run oil and gas field production, not to build. It did accept the applicant's answer to the Commissioner's threshold objection - the second category of technician, one employed in any business carried on in India, need not be in government or public employment. The ruling binds only the applicant.
• David Kenneth White v CIT Advance RulingHelps taxpayerSuperseded by amendment
  I am a British engineer working for an Indian joint venture on a cellular network and my employer pays my tax. Am I a technician entitled to the exemption?
  Yes, on both counts. The Authority first rejected the Department's preliminary objection that the question was already pending because the applicant had filed his return after applying: what the proviso to section 245R(2) prohibits is raising before the Authority questions that were being agitated in other fora on the date of the application. It then held that the applicant was a technician in the field of information technology for section 10(5B), rejecting the argument that information technology means only computer data processing, because a cellular network is a medium for dissemination through a system of computers and is essentially a computer network. All four statutory conditions being met, the exemption was available.
• In re Amir Zai Sangin Advance RulingHelps taxpayerSuperseded by amendment
  I am a Swedish national deputed to India to set up a digital cellular network. Am I a technician for section 10(5B), and does a return filed after applying spoil my application?
  Yes to the first, no to the second. The Authority rejected the Department's objection that the question was already pending because the applicant had filed his return after applying to the Authority: the prohibition operates only on questions being agitated in another forum on the date of the application. On the merits it held that he was a technician within section 10(5B). It refused the Department's narrow reading of information technology as confined to computer and software systems, holding that a cellular network is a medium for dissemination through the system of computers and is essentially a computer network. The exemption was therefore available to him.
• Hari Gopal Chopra v CIT Advance RulingHelps taxpayerValidity unconfirmed
  I have come back to India after seven years working abroad and my NRNR rupee deposits and foreign currency deposits are still running. Do the non-resident concessions stop the day I become resident, and when is the interest taxed?
  No, they do not stop automatically. The Authority ruled that Hari Gopal Chopra, who returned to India on 24 May 1996 after employment in Zambia, remained entitled to the Chapter XII-A benefits under s.115H after becoming resident, provided he filed the written declaration that section requires with his return. It also ruled that interest on his non-resident non-repatriable rupee deposits was taxable only in the year the deposits matured, because nothing had been credited to his account before then, and that interest on his foreign currency deposits with a scheduled bank was exempt under s.10(15)(iv)(fa) for assessment year 1997-98 and later years for which he was found resident but not ordinarily resident. The ruling binds only the applicant.
• Arthur E. Newell v CIT Advance RulingHelps taxpayerSuperseded by amendment
  I am a foreign technician deputed to India by my overseas employer, who pays my Indian tax. The Indian factory slits, perforates and spools imported film. Am I a technician in manufacturing operations, and does it matter that my employer is foreign?
  Yes on both. The Authority ruled that Mr Newell, a production operations manager employed by Kodak Limited in the United Kingdom and deputed to the Goa factory of Kodak India Limited, was a technician within the Explanation to s.10(5B) and entitled to the exemption. Slitting, perforating, notching and spooling imported jumbo rolls of film into 35mm cassettes and motion picture film was held to be manufacture, because what emerged was a different commercial commodity even though the original article remained identifiable. On the second point, the Authority read s.10(5B) as placing no restriction on who the employer is: a technician employed in a business in India qualifies whether the employer is Indian or foreign. The ruling binds only Mr Newell.
• Educational Institute of American Hotel and Motel Association v CIT Advance RulingHelps taxpayerSuperseded by amendment
  A foreign non-profit runs hospitality courses in India through a branch and charges licence fees and course fees to Indian institutes. Is that income exempt as an educational institution, and does a surplus destroy the exemption?
  Yes, on the law as it then stood. The Authority ruled that the Educational Institute of American Hotel and Motel Association, a US non-profit working in India under a memorandum of understanding with the National Council of Hotel Management and Catering Technology, was entitled to exemption under s.10(22) on income from conducting courses and certification programmes, providing educational and training materials, conducting seminars and workshops, and training in-house faculty. Its objects barred any distribution of earnings to members or directors even on dissolution, and the activities under its licence agreements and memoranda were purely educational or ancillary to education. Because the first question was answered in the applicant's favour, the question on s.11 became academic. Section 10(22) has since been omitted from the Act.
• Monte Harris v CIT Advance RulingHelps taxpayerSuperseded by amendment
  I have become resident in India by the time I want an advance ruling, and I have filed my return in the meantime because the due date came round. Can the Authority still hear my application?
  Yes, on both objections. The Authority held that residential status for Chapter XIX-B is tested by the financial year immediately preceding the year in which the application is made, so an American software manager who had become resident in 1994-95 was still a non-resident applicant when he applied on 31 March 1995. It also held that the bar in clause (a) of the proviso to s.245R(2) bites only where the question was already pending on the date of the application, so a return filed afterwards does not defeat it. On the merits it ruled that he was a technician in information technology within the notified field and entitled to exemption under s.10(5B). The ruling binds only Monte Harris.
• CBDT Circular 15/2023 on the Rs 5 lakh premium test CBDT Circulars & InstructionsCuts both ways
  My client holds four life policies with different premiums and different maturity dates. How do I work out which of them still come out exempt under s.10(10D)?
  The circular is the Board's own worked answer to that question. It lays down that the Rs 5,00,000 test is applied afresh in each year in which a sum is received, by aggregating the premium payable on the policy being tested with the premium on every other eligible policy on which exemption has already been claimed, and it tells the assessee he may choose which combination of policies to claim on. It also settles two points the section does not: premium is taken exclusive of GST, and a pure term policy is outside the sixth and seventh provisos altogether and does not count towards the aggregate.
• CBDT Circular 3/2014 - a keyman policy assigned to the keyman stays a keyman policy CBDT Circulars & InstructionsHelps department
  Our company assigned its keyman policy to the director before maturity and he paid the surrender value. Is the maturity money still exempt in his hands?
  No, not where the assignment falls in assessment year 2014-15 or later. The Board's explanatory notes to the Finance Act 2013 record that keyman policies were being assigned to the keyman before maturity so that the proceeds could be claimed exempt under s.10(10D), and state that the clause was amended so that a policy assigned during its term, with or without consideration, continues to be treated as a keyman insurance policy. The change applies from 1 April 2014, that is, for assessment year 2014-15 onwards.
• CBDT Circular 672 CBDT Circulars & InstructionsHelps taxpayer
  My client's flat was allotted by a co-operative society, not the D.D.A. Does Circular 471 still help?
  It depends — on whether the society's scheme is similar. The Board decided that where the terms of the schemes of allotment and construction of flats or houses by co-operative societies or other institutions are similar to those in para 2 of Circular 471, those cases may also be treated as cases of construction for s.54 and s.54F. The comparison with para 2 is the whole of the test, so the work is in showing the similarity, not in citing the circular.
• CBDT Circular 471 CBDT Circulars & InstructionsHelps taxpayer
  Is a flat allotted under a self-financing scheme a purchase or a construction for s.54 and s.54F?
  Construction. The Board decided that allotment of a flat under the Self-Financing Scheme of the D.D.A. is to be treated as a case of construction, not purchase, so the three-year window applies rather than the one-year-before or two-years-after window. In reaching that view the Board recorded that the allottee gets title on the issue of the allotment letter and that paying the instalments and taking possession come afterwards — a sentence that has since done a great deal of work outside s.54 and s.54F.

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.