How Tax Law Is Read

How Tax Law Is Read — the law in short

Every authority in this library on how tax law is read, with what each one decided.

• DIT (International Taxation) v Star Cruises (India) P Ltd Supreme CourtHelps taxpayer
  My client is the Indian agent of a foreign cruise ship that sails round trips out of Mumbai. The Assessing Officer says a cruise is entertainment and hospitality, not carriage of passengers, so s.44B does not apply and he wants the s.195 withholding worked out on 25% of the fare instead of 7.5%. Can he do that?
  It depends on the findings of fact, and on these facts he could not. The Supreme Court refused to confine 'carriage' in s.44B to movement from one port to a different port, and held that ancillary services provided on a voyage do not take the activity outside the section. The concurrent findings of the CIT(A), the Tribunal and the Bombay High Court that the non-resident ship owner was carrying passengers were left undisturbed, so the deduction under s.195 stood on the statutory presumptive rate of 7.5% of gross cruise fare receipts and not on the 25% the Assessing Officer had estimated. The Revenue's appeals were dismissed.
• Sanand Properties P Ltd v Jt CIT Supreme CourtHelps department
  My company is a member of an AOP and takes 35% of the AOP's gross sale proceeds under the AOP deed. We showed it as an exempt share of the AOP's profit. After a survey the AO reopened two years and now says it is revenue. Can he reopen, and is the money taxable in my hands?
  No on the reopening challenge and no on the exemption. Where the assessment order shows the Assessing Officer never applied his mind to the character of the receipt at all, there is no opinion to change, and material coming out of a s.133A survey that reveals the true nature of the receipt is tangible material for s.147. On the merits the Court read Clause 7 of the AOP deed itself and held that a member's entitlement to 35% of gross sale proceeds, taken upfront and untouched by the AOP's expenses, is not a share of profit but a diversion of the AOP's receipts by overriding title, taxable in the member's hands as a business receipt. Two Revenue appeals were allowed and the assessee's appeal dismissed.
• L.K. Trust v CIT Supreme CourtHelps taxpayer
  I borrowed from a bank to buy shares, but the money passed through a group company before the shares were bought. The department says the borrowing was not for my business. Can it disallow my interest under s.36(1)(iii)?
  No, not on the reasoning the High Court gave. The Supreme Court set aside a Karnataka High Court order that had disallowed interest because the borrowed money was ultimately used for the benefit of the assessee's subsidiary rather than for the assessee's own business, and held that the borrowed funds must be looked at from the point of view of commercial expediency. It declared the assessee entitled to deduct the interest paid on the capital of Rs 3,80,00,000 borrowed from the Corporation Bank, and agreed with the Tribunal's interpretation of s.36(1)(iii).
• Aspinwall and Co Ltd v Inspecting Assistant Commissioner Supreme CourtHelps department
  My company absorbed a loss-making company under a court-sanctioned scheme of amalgamation, and the scheme says the transferor's losses are to be treated as mine. Can I set those accumulated losses off against my own income under the Kerala Agricultural Income Tax Act, 1991?
  No. The Kerala Agricultural Income Tax Act, 1991 contains no provision answering to s.72A of the Income-tax Act, 1961, and counsel could point to none under which the losses of the amalgamating company may be set off against the income of the amalgamated company. A clause in the scheme of amalgamation saying the transferor's losses shall be deemed to be the transferee's does not supply the missing statutory right, and Dalmia Power does not help where the State of Kerala was never noticed in the amalgamation proceedings. The five appeals were dismissed.
• Jindal Equipment Leasing Consultancy Services Ltd v CIT Supreme CourtCuts both ways
  My client held shares of the amalgamating company as stock-in-trade and received shares of the amalgamated company under the court-sanctioned scheme. Is there business income at that point, or only when those shares are sold?
  It depends. Section 28 does not require a sale, an exchange or a transfer - business profit can be realised in kind - so the substitution of shares on an amalgamation can be charged as business income where shares held as stock-in-trade are replaced by shares that are freely realisable and capable of definite valuation. It is not automatic: the Court laid down a fact-sensitive test of commercial realisability, put the burden of establishing it on the Revenue, and held that the charge is attracted only on allotment of the new shares and not on the appointed date or the date the scheme is sanctioned. The Delhi High Court's judgment was affirmed and the matter remitted to the Tribunal to decide, on the facts, whether the shares were stock-in-trade at all and whether what was received was freely realisable.
• Sharp Business System v CIT-III Supreme CourtHelps taxpayerNo later treatment found
  Is a lump sum non-compete fee paid to keep a former partner out of the market capital expenditure, or is it deductible as revenue expenditure under s.37(1)?
  On these facts it was revenue expenditure and deductible under s.37(1). Because the payment was held to be on revenue account, the alternative claim for depreciation on a non-compete right as an intangible asset did not arise and was left undecided.
• DIT (IT)-I, Mumbai v American Express Bank Ltd Supreme CourtHelps department
  Does the section 44C ceiling bite only on head office expenditure shared with other branches, or also on expenditure the head office incurred exclusively for the Indian branch?
  It bites on both. The Explanation to s.44C defines head office expenditure by two things only: that it is incurred outside India, and that it is executive and general administrative expenditure of the kind listed. Nothing in it says the expenditure must be common or shared. The Bombay High Court's contrary view in Emirates Commercial Bank was held to be wrong.
• National Cooperative Development Corporation v ACIT Supreme CourtHelps departmentNo later treatment found
  Is dividend income, interest on short-term bank deposits and monitoring service charges part of the profits 'derived from' the business of providing long-term finance for s.36(1)(viii)?
  No. 'Derived from' requires a direct and proximate connection — a first-degree nexus — between the receipt and the business of providing long-term finance. Income that is incidental or ancillary to that business, however closely connected in a commercial sense, does not qualify. Section 36(1)(viii) is a ring-fenced deduction, not a general exemption for the whole of a finance corporation's income.
• Union of India v Virendra Amrutbhai Patel Supreme CourtHelps taxpayerNo later treatment found
  My benami matter was decided on the strength of Ganpati Dealcom and became final. The Supreme Court has now recalled that judgment. Can the Department reopen my case by review?
  On this order, no. A two-Judge Bench declined to act on the clause in the 18 October 2024 recall order that gave aggrieved parties liberty to seek review of decisions founded on Ganpati Dealcom. It applied the Explanation to Order XLVII Rule 1 CPC — that reversal or modification of a proposition of law by a later decision is not a ground of review — and dismissed the Union's review petition.
• Pride Foramer S.A. v CIT Supreme CourtHelps taxpayerNo later treatment found
  A non-resident had no contract in India for several years but kept trying for one. Had its business ceased, so that expenditure and unabsorbed depreciation fall away?
  No. A business going through a lean period which could be revived if circumstances permitted is a lull in business, not a cessation. The test is the assessee's conduct judged as a prudent businessman would judge it, not whether a contract was actually obtained. Expenditure of the lull years remained deductible and could be set off, and unabsorbed depreciation carried forward.
• Sarla Holdings P Ltd v PCIT Supreme CourtHelps department
  I did not tick s.115BAA in the return and filed Form 10-IC late. Can I still get the concessional rate?
  No, if the return itself did not opt. Section 115BAA(5) requires the option to be exercised in the prescribed manner on or before the s.139(1) due date, and Circular 6/2022 condones only a late Form 10-IC where the option was in fact exercised in the return. A company that marked 'None of the above' cannot claim the benefit later, and s.115JB applies.
• ACIT v Shelf Drilling Ron Tappmeyer Supreme CourtCuts both waysSuperseded by amendment
  Has the Supreme Court settled whether the s.144C nine-month DRP process runs over and above the s.153 limitation?
  A two-judge bench heard the Revenue's appeals against the Bombay High Court in Shelf Drilling and delivered a split verdict. One judge held the s.144C timelines operate independently of s.153(3); the other held the whole s.144C procedure must finish within the s.153(3) period. The matter was referred to the Chief Justice of India for an appropriate bench, so there is no binding ratio.
• Shital Fibers Ltd v CIT Supreme CourtHelps taxpayer
  Where a deduction has been allowed under s.80-IA, does s.80-IA(9) require the other Chapter VI-A deduction, such as s.80-HHC, to be computed on a reduced profit?
  No. Section 80-IA(9) operates at the stage of allowance, not computation. The s.80-HHC deduction is still computed on the profits of the business without first reducing them by the s.80-IA deduction; what s.80-IA(9) prevents is the aggregate of the deductions under heading C exceeding the profits of the eligible business. A three-Judge Bench answered a reference to this effect, approving the Bombay High Court's view in Associated Capsules.
• NBCC (India) Ltd v State of West Bengal Supreme CourtCuts both waysNo later treatment found
  You are told the Supreme Court has settled that a supplier must be registered before the contract. Is that safe to rely on?
  Not without qualification. A two-Judge Bench set out the proposition as it appears in Mahakali Foods, held that the question had never been formulated, discussed or decided in the earlier cases, and read s.18 as speaking of 'any party to a dispute' rather than of a supplier. It said it was open to it to hold that Silpi Industries and Mahakali Foods are not binding precedents on the point, but chose not to decide that and referred to a three-Judge Bench whether an enterprise can invoke the s.18 remedy without prior registration under s.8.
• AO v Nestle SA Supreme CourtHelps department
  My protocol has an MFN clause and I applied the lower rate India later agreed with an OECD member. Was I entitled to?
  No, on both counts. A notification under s.90(1) is a mandatory condition before any court, authority or tribunal can give effect to a treaty or to a protocol that alters the existing provisions of law, so an MFN clause does not import a later treaty's rate or scope by itself. And where the clause is triggered by India's treaty with a third state 'which is a member of the OECD', that state must have been an OECD member when it entered the treaty with India, not merely by the time the benefit is claimed.
• CIT v Bharti Hexacom Ltd Supreme CourtHelps departmentJudgment not reachable
  I run a telecom company and I have been claiming the annual revenue-share licence fee paid to the Department of Telecommunications as a business expense. The assessing officer says the Supreme Court has held it is capital and must go through section 35ABB. What did the Court actually decide?
  It decided that the licence fee has one character throughout, and that the character is capital. The licensees had migrated from the telecom policy of 1994, under which the fee was fixed, to the policy of 1999, under which a one-time entry fee was payable, calculated as the licence fee dues up to 31 July 1999, and the fee thereafter was a share of gross revenue. The Delhi High Court had split the payment on that date, treating the fee up to 31 July 1999 as capital, qualifying for deduction under section 35ABB, and the revenue-share fee after 1 August 1999 as revenue. The Supreme Court framed the question as whether the variable annual licence fee paid to the Department of Telecommunications under the policy of 1999 is revenue in nature and deductible under section 37, or capital and accordingly required to be amortised under section 35ABB. It answered that the later payment is a continuation of the earlier one in an altered format, that the change of format does not take away the essence of the payment, that it is a mandatory payment traceable to the licence agreement and non-payment would put the licensee out of the trade, and that such a payment has to be treated or characterised as capital only. The date of 31 July 1999 therefore marks a change in how the fee is measured, not a change in what it is.
• 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.
• DIT v Travelport Inc. Supreme CourtHelps taxpayer
  The Assessing Officer has found a permanent establishment and wants to tax my client's entire Indian booking revenue. My client already pays its Indian distributor a commission larger than anything that could be attributed to India. Is there anything left to tax?
  No, where the commission already paid to the Indian agent exceeds the profit attributable to the Indian operations, the assessment is extinguished. The Supreme Court upheld the Tribunal's attribution of 15 per cent of the revenue to India on a functions, assets and risks analysis and held that, because the distribution commission was more than twice that figure and had already been taxed, no further income was taxable in India — and it declined to decide whether there was a permanent establishment at all, because the attribution answer disposed of the appeals.
• Godrej Sara Lee Ltd v Excise and Taxation Officer Supreme CourtHelps taxpayer
  The High Court dismissed my writ saying an appeal was available. Was it entitled to do that without looking at the point?
  It depends, and the Supreme Court drew the distinction that matters. Maintainability goes to the root — it decides whether the court can receive the case at all. Entertainability is discretion. The mere availability of an appeal or revision that the petitioner has not pursued does not oust the High Court's jurisdiction or make the writ petition 'not maintainable', and where the challenge is to the very jurisdiction of the authority, or is a pure question of law, the petition deserves consideration on merits.
• CIT v Mansukh Dyeing and Printing Mills Supreme CourtHelps departmentSuperseded by amendment
  The firm revalued its land and credited the surplus to the partners' capital accounts. Is that taxable?
  Under the old s.45(4), yes. The Supreme Court held that crediting a revaluation surplus to partners' capital accounts on a reconstitution is in effect a distribution of the assets to the partners and a transfer chargeable to capital gains, because the enhanced balances were immediately available for withdrawal — and two partners did withdraw.
• Gujarat State Civil Supplies Corporation Ltd v Mahakali Foods Pvt Ltd Supreme CourtCuts both waysUnder appeal
  Your supplier registered on Udyam after the goods were supplied. Does the MSMED Act still apply to those supplies?
  On this judgment, no. The Supreme Court held that a party who was not a 'supplier' within s.2(n) of the MSMED Act on the date of entering into the contract cannot claim any benefit as a supplier under the Act. It also held that Chapter V of the MSMED Act overrides the Arbitration and Conciliation Act 1996 and that an independent arbitration agreement does not bar a reference to the Facilitation Council.
• DIT v Mitsubishi Corporation Supreme CourtCuts both ways
  My Indian payer did not deduct tax at source and paid me gross. The Assessing Officer says I should have paid advance tax and has charged s.234B interest. Which years can he do that for?
  Only from financial year 2012-13 onwards. The Supreme Court held that for every assessment up to and including financial year 2011-12, s.209(1)(d) entitled the assessee to reduce, in computing its advance tax, the income-tax that WOULD BE deductible at source, even though it had in fact received the full amount without deduction — so no s.234B interest could be charged. The proviso to s.209(1)(d) inserted by the Finance Act 2012 with effect from 1 April 2012 reverses that, and from financial year 2012-13 the assessee cannot reduce tax that the payer failed to deduct.
• Silpi Industries v Kerala State Road Transport Corporation Supreme CourtCuts both waysUnder appeal
  The supplier registered under the MSMED Act part-way through the relationship. Which supplies does the Act protect?
  Those made after registration. The Supreme Court refused the appellant the benefit of the Act because there was no acceptable material to show that any supply of goods or rendering of services had taken place after it was registered as a unit under the MSMED Act. The Court also held that a counter-claim is maintainable before the statutory authorities under the Act.
• Vineeta Sharma v. Rakesh Sharma — the daughter is a coparcener by birth, and the father need not have been living on 9 September 2005 (Hindu Succession Act, 1956, not the Income-tax Act) Supreme CourtCuts both ways
  My client's father died in 1999 and her brothers say she cannot claim a share in the coparcenary because the 2005 amendment needed a living father on the date it came into force. Two Supreme Court benches had said different things. What is the position now?
  A three-Judge Bench of the Supreme Court settled it on 11 August 2020. Answering a reference, the Court held that the substituted section 6 of the Hindu Succession Act, 1956 confers the status of coparcener on a daughter born before or after the amendment in the same manner as a son, with the same rights and liabilities, and — this is the point that had divided the earlier benches — that "Since the right in coparcenary is by birth, it is not necessary that father coparcener should be living as on 9.9.2005." The Court overruled the contrary view in Prakash v. Phulavati and in Mangammal v. T.B. Raju, and partly overruled Danamma @ Suman Surpur v. Amar to the extent it is contrary. THIS IS NOT AN INCOME-TAX JUDGMENT: the Act construed is the Hindu Succession Act, 1956 as amended by the Hindu Succession (Amendment) Act, 2005, and what the Court decides is a partition claim, not the assessment of any income.
• DIT v Samsung Heavy Industries Co Ltd Supreme CourtHelps taxpayer
  My foreign company opened a project office in India to coordinate an EPC contract. Has the department made it a permanent establishment, and can it tax a slice of my offshore revenue?
  No, not on those facts. The Supreme Court held that a fixed place is a permanent establishment under Article 5(1) of the India-Korea treaty only if the core business of the foreign enterprise is carried on through it. Samsung's Mumbai project office had two non-technical employees, its accounts showed no expenditure on executing the contract, and it did liaison and coordination work only — preparatory or auxiliary activity excluded by Article 5(4)(e). The Court also held the burden of proving a permanent establishment is initially on the Revenue, and that an ad hoc attribution of 25 per cent of gross offshore revenue had no foundation.
• Union of India v U.A.E. Exchange Centre Supreme CourtHelps taxpayer
  My UAE client's Indian liaison office only downloads remittance instructions from the head office server and prints cheques on Indian banks. The Assessing Officer says that is a permanent establishment and wants to tax the whole remittance commission. Is he right?
  No, on these facts. The Supreme Court held that a liaison office whose only activity is downloading information from the head office server and printing and despatching cheques is carrying on an activity of a preparatory or auxiliary character, which Article 5(3)(e) of the India-United Arab Emirates DTAA expressly takes out of the expression 'permanent establishment'. Once the office is deemed by that legal fiction not to be a PE, Article 7 gives India no right to tax the enterprise's profits, and the deeming provisions in ss.5 and 9 of the Act 'can have no bearing whatsoever'.
• 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.
• Internet and Mobile Association of India v RBI Supreme CourtCuts both ways
  The AO's position is that dealing in crypto was illegal in the years under assessment. Is there Supreme Court authority the other way?
  Yes, on the regulatory question. The Supreme Court set aside the RBI's April 2018 circular that had barred regulated entities from providing services to persons dealing in virtual currencies, holding the measure disproportionate, and recorded that RBI itself had not banned virtual currencies. The judgment also records that courts in different jurisdictions have placed virtual currencies in categories ranging from property to commodity. It decides nothing about the Income-tax Act.
• Seshasayee Steels P Ltd v ACIT Supreme CourtHelps department
  I signed a development agreement and a power of attorney years ago and let the builder start construction. The Department says my capital gain arose only later, when the settlement money came in. Which year is right?
  The later year. The Supreme Court dismissed the assessee's appeal and held the transfer took place in assessment year 2004-05. Permission to a builder to enter and construct is a licence, not possession under section 53A of the Transfer of Property Act, so section 2(47)(v) was not attracted on the 1998 agreement to sell. Nor was section 2(47)(vi), because on that date the owner's rights were intact both in ownership and in possession. What effected the transfer was the memorandum of compromise of July 2003, under which the whole consideration was received and the owner's rights were extinguished on encashment of the last cheque.
• PCIT v S.G. Asia Holdings (India) Pvt Ltd Supreme CourtCuts both ways
  The Assessing Officer worked out the arm's length price himself and added to my income without ever sending the transaction to the Transfer Pricing Officer. Is that adjustment good?
  No, but it does not follow that you keep the money. The Supreme Court held that the Assessing Officer breached the Board's mandatory instructions by not making the reference, so the adjustment could not stand as made. It then refused the Tribunal's remedy of simply deleting the adjustment, and restored the matter to the Assessing Officer so that the reference could be made and the Transfer Pricing Officer could do the work. The defect is one of procedure and the Court cured it by sending the file back.
• Mangathai Ammal v Rajeswari Supreme CourtHelps taxpayerNo later treatment found
  The officer says my wife's property is mine because the money came from my account. Is that enough to make it benami?
  No, not by itself. The burden of proving that a purchase is benami rests throughout on the person asserting it, and the source of the purchase money has never been the sole consideration. What decides the question is the intention of the person who put up the money, drawn from the relationship of the parties, the motive for the arrangement and their conduct afterwards.
• Snowtex Investment Ltd v PCIT Supreme CourtHelps department
  Can I set my share trading loss off against my F&O profits?
  No, for years up to AY 2014-15. Where a company's principal business is dealing in shares, the Explanation to s.73 deems that loss to be speculative, while derivatives profits on a recognised exchange are non-speculative under s.43(5)(d) — so the two cannot be set off. The 2014 amendment to the Explanation is prospective and does not help earlier years.
• Vijay Industries v CIT Supreme CourtHelps taxpayer
  Is my section 80HH deduction 20 per cent of the undertaking's gross profits and gains, or of the income left after depreciation?
  Of gross profits and gains, for the years before section 80AB applied. A three judge bench of the Supreme Court held that section 80HH allows a deduction of 20 per cent of profits and gains, and that profits and gains is conceptually different from income; read with section 80A the deduction is of gross profits and gains, before computing income under sections 30 to 43D, so depreciation and investment allowance are not first deducted. Motilal Pesticides, which had equated the language of section 80HH with that of section 80M, was held erroneous and overruled. Section 80AB is prospective from 1 April 1981 and did not apply to assessment years 1979-80 and 1980-81.
• CIT v Gujarat Cypromet Ltd Supreme CourtHelps department
  The bank sanctioned a fresh loan and the outstanding interest was squared off against it. My books show no interest outstanding. Is that actual payment under section 43B?
  No. Where the accrued interest is not paid back but is adjusted against a further loan from the same institution, Explanation 3C to section 43B applies and there is no actual payment. The Supreme Court allowed the Revenue's appeal and restored the Assessing Officer's disallowance.
• Principal CIT v Aarham Softronics Supreme CourtHelps taxpayer
  My Himachal unit took the 100 per cent deduction under section 80-IC for five years and then I put in substantial expansion. Do I drop to 25 per cent, or can I go back to 100 per cent?
  You go back to 100 per cent. A three-judge bench of the Supreme Court held that the definition of initial assessment year in section 80-IC(8)(v) includes the year in which substantial expansion is completed, so there can be more than one initial assessment year within the ten year window. From the year of substantial expansion the unit is entitled to 100 per cent deduction again under section 80-IC(3)(ii). The ceiling in sub-section (6) is on the number of years, not on quantum. The Court held that its own earlier judgment in Classic Binding Industries, which had said otherwise, does not lay down the correct law.
• Ravi Agrawal v Union of India Supreme CourtHelps departmentSuperseded by amendment
  My client took a Jeevan Aadhar policy for his disabled child and claimed s.80DD, but the policy pays nothing while he is alive. Is that condition open to challenge?
  The Supreme Court held it is not. Section 80DD(2)(a), which allowed the deduction only where the scheme provided for payment of the annuity or lump sum on the death of the subscriber, was held to rest on a reasonable classification with a rational objective and could not be struck down under Article 14; the Court said it cannot direct Parliament to amend a provision in a specified manner. It disposed of the writ petition by urging the Union to have a relook and explore suitable amendments — and Parliament then did amend the section.
• Commissioner of Customs v Dilip Kumar & Co Supreme CourtHelps department
  Does the two-views rule also apply when you claim an exemption?
  No — it reverses. An exemption notification is construed strictly, the burden is on you to fall squarely within it, and any ambiguity goes to the revenue. The contrary rule in Sun Export was overruled.
• Additional Commissioner of Income Tax v Bharat V. Patel Supreme CourtHelps taxpayerSuperseded by amendment
  The Assessing Officer wants to tax what my client received on redemption of stock appreciation rights granted by the foreign parent as a perquisite. Is there Supreme Court authority on this?
  There is, but read the year carefully. For a redemption before 1 April 2000 the Supreme Court held the amount was not taxable: it fell within clause (iiia) of s.17(2), which was inserted by the Finance Act 1999 with effect from 1 April 2000 and was not retrospective, and it could not be forced into s.17(2)(iii) or s.28(iv). The Court held that a receipt must be made taxable before it can be treated as income.
• Sky Light Hospitality LLP v ACIT Supreme CourtHelps department
  The reassessment notice was issued in the name of my old private limited company, which had already been converted into an LLP and dissolved. I am told that makes the notice void. Is that always right?
  Not always, and this is the decision the Revenue will cite against you. The Delhi High Court dismissed the writ petition, holding that the issue of the notice in the name of the dissolved private limited company was an error and technical lapse which caused no prejudice, that there was no doubt and debate that the notice was meant for the petitioner and no one else, and that human errors and mistakes cannot and should not nullify proceedings which are otherwise valid — that being the effect and mandate of section 292B. The Supreme Court dismissed the special leave petition with the words: 'In the peculiar facts of this case, we are convinced that wrong name given in the notice was merely a clerical error which could be corrected under Section 292B of the Income Tax Act.'
• CIT v Essar Teleholdings Ltd Supreme CourtHelps taxpayer
  The Assessing Officer has applied Rule 8D to an assessment year before 2008-09. Can he?
  No. Rule 8D is prospective and cannot be applied to any assessment year prior to AY 2008-09. For earlier years the officer must work out a reasonable disallowance under s.14A(1) on the material before him, not by the prescribed formula.
• National Travel Services v CIT Supreme CourtHelps departmentNo later treatment found
  Our firm is not on the company's register of members — our partners are. Can s.2(22)(e) still reach a loan to the firm?
  A two-Judge Bench of the Supreme Court said it prima facie can, and doubted the High Court line that a 'shareholder' must be both registered and beneficial owner. It did not decide the point. It referred the correctness of the Delhi High Court's Ankitech judgment to a three-Judge Bench, and that reference is the state of play.
• CIT v Vasisth Chay Vyapar Ltd Supreme CourtHelps taxpayer
  We are an NBFC. The AO wants interest on a non-performing loan taxed on accrual even though we have not recognised it. Can he do that?
  No. The Supreme Court agreed with the Delhi High Court that where the assessee is a non-banking financial company governed by the Reserve Bank of India Act, interest on an advance classified as non-performing cannot be said to have accrued, having regard to s.45Q of that Act and the prudential norms issued under it. It is an application of the real-income principle: income that has not really arisen is not taxed because the books are kept on the mercantile basis.
• 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.
• CIT v Equinox Solution P Ltd Supreme CourtHelps taxpayer
  I sold my whole business for one lump sum. Can the AO tax it as short-term gain?
  No. Where an undertaking is sold as a running business on a going-concern basis, with all assets and liabilities, for a single slump price, no part of the consideration can be attributed to any particular depreciable asset, so s.50(2) has no application. The undertaking itself is the capital asset, and having been held for more than the prescribed period the gain is long-term.
• Berger Paints India Ltd v CIT Supreme CourtHelps department
  My s.35D claim is capped at 5% of capital employed. Does the share premium I collected count as capital employed?
  No. Capital employed in the business of the company for s.35D(3)(b) is the aggregate of three things only — issued share capital, debentures and long-term borrowings. Share premium is none of them, and the Supreme Court held that if Parliament had meant to include it, it would have said so in the Explanation. The ceiling is therefore computed on the face value subscribed, not on what the subscribers actually paid.
• DIT v A.P. Moller Maersk A/S Supreme CourtHelps taxpayerNo later treatment found
  Our Indian agents pay the foreign principal a pro-rata share of the cost of its global booking and communication system — is that fees for technical services taxable in India?
  No. The Supreme Court held that the payments the Indian agents made to a Danish shipping line for using its Maersk Net system were reimbursement of a proportionate share of cost, not fees for technical services. The system was an integral part of the shipping business and was a common facility available to all agents worldwide, not a service catering to any agent's special needs. Once the character of a payment is reimbursement of expenses, it cannot be income chargeable to tax; and since freight income was exempt under the India-Denmark treaty shipping article, the expenses of earning it could not be split off. The Revenue's appeals were dismissed.
• M/s Fibre Boards (P) Ltd. v CIT, Bangalore Supreme CourtHelps taxpayer
  I am shifting my factory out of an urban area. I have paid advances for the new land, building and machinery but nothing is bought yet, and I have not deposited anything in the capital gains scheme. Is s.54G lost?
  No. The Supreme Court held that advances paid towards the purchase or acquisition of new machinery, plant, land or building amount to 'utilisation' of the capital gain for the purposes of s.54G, so the deposit machinery in s.54G(2) is not attracted and the assessee has the full three-year window in s.54G(1) in which to complete the purchases. The Court also held that the 1967 notification declaring Thane an urban area survived the omission of s.280ZA, so the section was workable.
• Shabina Abraham v Collector of Central Excise & Customs Supreme CourtHelps taxpayer
  The sole proprietor died while a demand was pending. Can the department carry on the assessment against his widow and daughters?
  Not under the Central Excises and Salt Act 1944. The Supreme Court held that assessment proceedings against a dead person's legal representatives cannot continue where the statute contains no machinery provision for it, and that Act, unlike the Income-tax Act, has none. Section 11 deals only with modes of recovery of sums already payable and says nothing about dead persons. Equitable or moral considerations, including unlawful enrichment, have no place in construing a taxing statute. The Kerala High Court's Division Bench judgment was set aside and the Single Judge's order quashing the proceedings restored.
• Oil & Natural Gas Corporation Ltd v CIT Supreme CourtHelps taxpayer
  The Assessing Officer says our contract with ONGC is really technical services, so 44BB is out and 44D applies. How is that decided?
  By the pith and substance of the contract, not by picking out its ancillary parts. If the dominant purpose of the agreement is prospecting for, or extraction or production of, mineral oils, the payment is assessable under s.44BB and not as fees for technical services under s.44D read with Explanation 2 to s.9(1)(vii).
• CIT v Sarkar Builders Supreme CourtHelps taxpayer
  My housing project was sanctioned before April 2005 but finished afterwards, and the shops exceed the 5 per cent limit. Does the new clause (d) apply to me?
  No. The Supreme Court held that clause (d) of section 80-IB(10), which caps the built-up area of shops and commercial establishments and took effect on 1 April 2005, does not apply to a housing project approved before 31 March 2005, even if construction was completed and profits offered to tax afterwards. The condition is inextricably linked to the approval and construction of the project, and an assessee cannot be required to satisfy a condition that was not on the statute book when the local authority sanctioned the plans. The Revenue's appeals from several High Courts were all dismissed.
• Chennai Properties and Investments Ltd v CIT Supreme CourtHelps taxpayer
  My company's whole business is acquiring properties and letting them. Is the rent business income or house property income?
  Business income, on these facts. Where the company's main object is to acquire and hold properties and let them out, and that is the activity it actually carries on, the rent is assessable under s.28 and not under s.22. The Court warned that the object clause is not by itself determinative - what matters is what the company in fact does.
• GVK Industries Ltd v ITO Supreme CourtHelps department
  We paid a Swiss adviser a success fee for tying up the loans for our power project. He has no office here and did all the work abroad. Do we still have to deduct before we remit?
  Yes, on these facts. The Supreme Court held that the success fee paid to a non-resident consultant for structuring and tying up the finance for an Indian power project was fees for technical services, in the consultancy limb, and that tax should have been deducted, so the no-objection certificate for remittance was rightly refused. Section 9(1)(vii)(b) charges the fee where the payer is a resident and lays down what is known as the source rule - the recipient's income is chargeable in the country where the source of payment is located - and requires the services to be utilised in India. The clause carves out an exception in its latter part, for services utilised in a business or profession carried on outside India or for making or earning income from a source outside India; the Court set that exception out but did not rule on it in terms, deciding the case instead on the definition of fees for technical services.
• CIT v Vatika Township P Ltd Supreme CourtHelps taxpayer
  An amendment adds a new levy. Does it reach back to earlier years?
  Not unless the statute says so. Legislation is presumed not to operate retrospectively, and that presumption applies with full force where the amendment imposes a new burden. Only clarificatory or beneficial amendments may be read back.
• Chironjilal Sharma HUF v Union of India Supreme CourtHelps taxpayerSuperseded by amendment
  Cash seized in a search was appropriated against a tax liability that the Tribunal later knocked out. The Department has paid me interest from the date of the assessment to the date of refund. Am I entitled to anything for the years before the assessment?
  Yes. The Supreme Court held that section 132B(4) governs the pre-assessment period in search and seizure matters while sections 240 and 244A govern the post-assessment period as per the order in appeal, and that there is no conflict between them — so interest for the pre-assessment period under section 132B(4) is payable in addition to, and not in substitution for, the interest already paid on the refund. On the provision as it then stood the assessee was held entitled to simple interest at 15 per cent per annum from the day after six months from the section 132(5) order to the date of the last regular assessment.
• CIT v Excel Industries Ltd Supreme CourtHelps taxpayer
  The AO has taxed my advance licence and DEPB benefits in the year I exported. Is that the right year?
  No. The benefit accrues only when the imports are actually made, because until then the customs authorities are under no corresponding obligation to give anything up. Income tax is a levy on real income, and until the import happens the entitlement is at best a hypothetical income that may or may not materialise. The Court also declined to let the department reopen a position it had accepted for earlier years without any change in facts or law.
• CIT v Chhabil Dass Agarwal Supreme CourtHelps department
  Can I go straight to the High Court against an income-tax order instead of filing the statutory appeal?
  Ordinarily no. The Supreme Court held that the Income-tax Act supplies a complete machinery for assessment and reassessment, and an assessee cannot abandon that machinery and invoke Article 226. The exceptions are narrow and have to be pleaded and made out — an order passed otherwise than in accordance with the enactment, in defiance of fundamental principles of judicial procedure, under repealed provisions, or in total violation of natural justice.
• I.C.D.S. Ltd v CIT Supreme CourtHelps taxpayer
  I am a finance company. I bought the vehicles, I lease them to my customers, and the customer is shown as the owner in the registration certificate. The assessing officer says that makes the customer the owner and refuses me depreciation. Is he right?
  No. The Supreme Court held that the lessor, not the lessee, is entitled to depreciation on vehicles leased out in the course of a leasing business. Two conditions have to be met under section 32 - ownership and use for the purposes of the business - and the Court held both were satisfied. On ownership, the lease agreement provided that the assets remain at all times the sole and exclusive property of the lessor, and the lessor kept the right to repossess, to inspect and to require the vehicles back; the entry of the lessee as owner in the registration certificate does not displace that, because section 2(30) of the Motor Vehicles Act is a deeming provision creating a fiction of ownership in favour of the lessee only for the purposes of that Act. As long as the assessee has a right to retain the legal title of the vehicle against the rest of the world, it is the owner in the eyes of law. On use, the Court held that section 32 requires the asset to be used for the purposes of business but does not require the assessee to use it himself; leasing was this assessee's business and the lease income was its business income. The Court went further and held the assessee entitled to the higher rate as well, because its main activity was leasing out or hiring the vehicles. The appeals were allowed and the High Court's judgments set aside.
• Columbia Sportswear Company v DIT Supreme CourtHelps taxpayer
  The Authority for Advance Rulings has ruled against me and section 245S says the ruling is binding. Is there anything I can do about it?
  Yes. The Supreme Court held that the Authority for Advance Rulings is a tribunal within Articles 136 and 227, exercising judicial power, so its rulings can be challenged in the High Court under Articles 226 and 227 and, in this Court's discretion, under Article 136. Section 245S making a ruling binding on the applicant and the income tax authorities cannot oust a jurisdiction conferred by the Constitution. But the Court will ordinarily send the applicant to the High Court unless a substantial question of general importance arises. Such a writ petition should be heard directly by a Division Bench and decided as expeditiously as possible.
• Catholic Syrian Bank Ltd v CIT Supreme CourtHelps taxpayer
  My bank has a section 36(1)(viia) provision for rural advances. Does that provision cut down my deduction for urban bad debts actually written off under section 36(1)(vii)?
  No. The Supreme Court held that the deduction under section 36(1)(viia) for a provision against rural advances is distinct and independent of the deduction under section 36(1)(vii) for a bad debt actually written off. The proviso to clause (vii), which limits the write-off deduction to the excess over the credit balance in the clause (viia) account, exists only to prevent double deduction, and can operate only where that risk exists - that is, in respect of rural advances. Where the debts written off arise out of urban advances, the allowance is not affected by the proviso at all. The banks' appeals were allowed and the Revenue's dismissed.
• Suraj Lamp & Industries (P) Ltd v State of Haryana Supreme CourtCuts both waysNo later treatment found
  I bought a property on an agreement to sell plus a general power of attorney and a will, with possession and full payment. Do I own it?
  No. A three-judge bench of the Supreme Court held that a sale agreement, a general power of attorney and a will - singly or together - convey no title and create no interest in immovable property. Immovable property can be transferred only by a registered deed of conveyance. A power of attorney creates an agency, not a transfer, and even an irrevocable one does not pass title; a will operates only on death and is revocable until then. The purchaser is left with the agreement, which can support specific performance and the limited protection of section 53A of the Transfer of Property Act.

The 60 strongest entries are summarised here. The other 761 entries are listed in full below, and each has its own page.

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.