CIT vs. Gold Coin Health (Supreme Court - Larger Bench)

(i) “Income” includes “loss” as held in CIT vs. Harprasad 99 ITR 118 (SC). Expl. 4 to s. 271 (1) (c) as it stood prior to the amendment by the Finance Act 2002 has to be understood in this background.

(ii) The recommendations of the Wanchoo Committee and the CBDT Circular make it clear that the amendment to Expl. 4 to s. 271(1)(c) was to make explicit what was otherwise implicit i.e. that penalty can be imposed even in a case where the assessment results in a loss.

(iii) In interpreting a statute, the circumstances under which the amendment was brought in existence and the consequences of the amendment will have to be taken care of while deciding the issue as to whether the amendment was clarificatory or substantive in nature and, whether it will have retrospective effect or it was not so.

(iv) Applying this test, the amendment to Explanation 4 to s. 271(1)(c), though made with effect from 1st April 2003, should be treated as clarificatory and retrospective.

(v) Accordingly, Virtual Soft Systems Ltd. vs. CIT 289 ITR 83 is overruled.

Faqir Chand Gulati vs. Uppal (Supreme Court)

(i) A development agreement is one where the land-holder provides the land. The Builder puts up a building. Thereafter, the land owner and builder share the constructed area. The builder delivers the `owner's share' to the land-holder and retains the `builder's share'. The land-holder sells/transfers undivided share/s in the land corresponding to the Builder's share of the building to the builder or his nominees. The land-holder will have no say or control in the construction or have any say as to whom and at what cost the builder's share of apartments are to be dealt with or disposed of. Such an agreement is not a “joint venture” in the legal sense. It is a contract for “services”.

(2) On the other hand, an agreement between the owner of a land and a builder, for construction of apartments and sale of those of apartments so as to share the profits in a particular ratio may be a joint venture, if the agreement discloses an intent that both parties shall exercise joint control over the construction/development and be accountable to each other for their respective acts with reference to the project.

(3) The title of the document is not determinative of the nature and character of the document, though the name may usually give some indication of the nature of the document. The use of the words `joint venture' or `collaboration' in the agreement will not make the transaction a joint venture, if there are no provisions for shared control and losses.

Shiv Kant Jha vs. UOI (Supreme Court)

Against the judgement of the Supreme Court in UOI vs. Azadi Bachao Andolan 263 ITR 706, a review petition was filed. That petition was dismissed by a division bench of 2 judges. Upon that dismissal, a curative petition was filed. That curative petition has been dismissed by a bench of 5 judges.

Note: For the law on whether Azadi Bachao Andolan can prevail against McDowell vs. CTO 159 ITR 148 (SC), see CIT vs. Lazor Syntex & CIT vs. Akshay Textiles Trading (Bombay High Court).

CIT vs. Jai Parabolic Springs (Delhi High Court)

In Goetze v. CIT 284 ITR 323 (SC) the Supreme Court held that the assessee was not entitled to claim a deduction by way of a letter filed before the AO without filing a revised return. However, this judgement is limited to the power of the AO to entertain a claim for deduction otherwise than by revised return and does not impinge on the power of the Tribunal to entertain the claim by way of an additional ground.

See Articles discussing the law here and here.

CIT vs. Dodsal Ltd (Bombay High Court)

(1) It is not possible to accept the submission of the Revenue that once the AO comes to the conclusion that there is a breach of the mandate of Section 158BFA(1), then the penalty has to be mandatorily imposed. The terminology of section 158BFA makes it clear that the AO has a discretion in the matter of levy of penalty.

(2) Whilst considering taxing statute, it is settled law that the expressions used in a taxing statute would ordinarily be understood in the sense in which it is harmonious with the object of the statute to effectuate the legislative intention. It is equally settled law that, if the language is plain and unambiguous, one can look fairly at the language used and interpret it to give effect to the legislative intention. Tax law, nevertheless, have to be interpreted reasonably and in consonance with justice adopting a purposive approach.

CIT vs. Vishnu Industrial Gases (Delhi High Court)

Where the department had not disputed that the expenditure was deductible in principle but was only disputing the year in which the deduction could be allowed HELD, castigating the department, that as the tax rates were the same in both years, the department should not fritter away its energies in raising questions as to the year of deductibility/taxability.

CIT vs. Nagri Mills 33 ITR 681 (Bom) followed.

See also: CIT vs. Shri Ram Pistons (Delhi High Court).

Comed Laboratories vs. UOI (Gujarat High Court)

Writ petitions were filed challenging the constitutional validity of the provisions of Section 245HA of the Income Tax Act, 1961 under which the petitioners' applications before the Settlement Commission are to be treated as having abated on account of failure of the Settlement Commission to pass orders under Section 245D(4) of the Act on or before 31.03.2008. In view of the fact that the Supreme Court was seized of an identical issue, the petitions were disposed of with the direction that the parties would abide by the decision of the Supreme Court and in the meanwhile the assessment proceedings would be stayed.

R. B. K. Securities vs. ITO (ITAT Mumbai)

Even prior to the amendment to s. 43(5) by the Finance Act 2005 w.e.f 1.4.2006, dealings in Futures & Options and other derivatives products cannot be treated as speculative transactions as they are special kind of transactions, not involving purchase and sale of shares and consequently the loss arising therefrom cannot be treated as a speculation loss.

Jashan Textile Mills vs. DCIT (ITAT Mumbai)

In ACIT vs. Rogini Garments 108 ITD 49, the Chennai Special Bench of the ITAT held that in view of s. 80-IA (9), relief under s. 80-IA had to be deducted from the profits and gains before computing relief u/s 80-HHC. M/s SCM Creations was an intervener in that case and a common judgement was passed. The Madras has reversed the judgement of the Special Bench and held that relief u/s 80-IA should not be deducted from profits and gains of business before computing relief u/s 80-HHC. In view of this, it has been held that Rogini Garments is no longer good law.

Note: For the law on conflict between a Special Bench judgement and a non-jurisdictional High Court judgement, see ACIT vs. Aurangabad Holiday Resorts P. Ltd 111 TTJ 741 (Pune).