CIT vs. Vardhaman Polytex (P & H High Court) (Full Bench)

(i) In considering whether the interest paid by an assessee on loans raised for acquisition of new asset, before the same was first put to use, is to be added towards the cost of the asset or the same is to be granted as a revenue expenditure for the reason that the assessee was already in business, the provisions of s 36 (1)(iii) cannot be read in isolation but have to be read with s. 43 (1). DCIT vs. Core Healthcare 251 ITR 61 (Guj) dissented from;

(ii) S. 36(1)(iii) does not confer a deduction orrowed for the purposes of setting up a new unit even in the case of an assessee already in business. Deduction for interest on capital borrowed can be allowed only after the asset is first put to use and starts generating income;

(iii) It is implicit from Expl. 8 to s. 43(1), which provides that interest payable after the asset is put to use shall not be added to the actual cost, that interest payable before the asset is put to use has to be added to the actual cost;

(iv) In conformity with law and accounting principles, interest paid on capital borrowed for acquisition of an asset has to capitalized and cannot be allowed as a revenue deduction till the asset is put to use. There is no distinction between capital borrowed for the setting up of a new business and the expansion of an existing business;

(v) The Proviso to s. 36(1)(iii) inserted by the Finance Act 2003 is to ‘curb tax avoidance’ and is merely clarificatory

In Re Ashok Organic Industries (Bombay High Court)

The Sick Inndustrial Companies Act is a complete code and during the pendency of a reference, an industrial company cannot apply to the High Court for sanctioning a scheme under ss. 391 to 394 of the Companies Act. The principles to deal with conflicts between two statutes is discussed in detail.

Girilal & Co vs. ITO (Bombay High Court)

The fact that the information regarding the actual size of the plot used for the construction of a building for deduction u/s 80-IB(10) was available in the valuation report and the recorded statement is not sufficient to constitute "full disclosure" in view of Explanation 2 (c) (iv) of S. 147.The assessee has to show that no part of the relevant material had been kept out from the AO and/or that it would not be unreasonable for the AO to draw inference from the annexures produced.

Bhagat Singh vs. CIC (Delhi High Court)

The right to information is a fundamental right under Article 19(1) (a) of the Constitution. The RTI Act is akin to a welfare measure. it is an effectuation of the right to freedom of speech and expression and should receive a liberal interpretation. Access to information is the rule and denial is the exception. Information cannot be denied merely on the ground that it would hamper investigations without giving reasons how that is so. Strictures passed on the delay and "lackadaisical approach" of the authorities in dealing with the Applicant's request to provide income-tax information relating to ex-wife.

Contra: See Rakesh Kumar Gupta vs. ITAT (CIC - Full Bench): The ITAT is beyond the purview of the Right to Information Act.

CIT vs. ITSC & J. Jayalalitha (Madras High Court)

The income offered in the settlement application must not only be undisclosed but must also be fully and truly disclosed. A revision of the application is not permissible. Where the facts showed that the disclosure was not full and true, held the ITSC had wrongly admitted the application.

See also: Centurion Bank v/s ITSC & Haji Abdullah vs. ITSC (Bombay High Court)

CIT vs. Asian Hotels Ltd (Delhi High Court)

The notional interest on refundable interest-free deposit received by an assessee in respect of a shop let out on rent is neither taxable as business profit u/s 28(iv) nor as income from house property u/s 23(1)(a).

See also: CIT vs. J. K. Investors (SC) (decision of the Bombay HC in 248 ITR 723 u/s 23(1)(b) approved)

CIT vs. Amar Tea Ltd (Bombay High Court)

High Court expresses dismay over the fact that despite repeatedly pointing out that the appeals are filed in respect of the same assessee on the same questions for different assessment years, when matters come up for hearing, the department is not in a position to inform the Court either of the numbers of the appeal or its status. With a view to save valuable judicial time, The Court directed the department to maintain a record of all the appeals filed (by the department & the assessee) with their numbers & the status of these appeals and to file a compliance report within two weeks.

See also: Pradeep Sangodkar vs. State (dismay over delay in passing orders by judicial bodies)

Sedco Forex vs. CIT (Uttaranchal High Court)

Fixed mobilization fees received by a non-resident company, which has no nexus with the actual amount incurred by the recipient company for transportation of drilling units of rigs to specified drilling locations in India, is not reimbursement of expenditure and is assessable u/s 44BB.

CIT vs. Rolls Royce (Uttaranchal High Court)

Technical services, though rendered in respect of a compressor used in the production of oil at an off-shore platform, is assessable under s. 9(1)(vii) read with s. 115A and not under s. 44BB.

Honda Siel vs. CIT (Delhi High Court)

Profits from sale of spare parts and imported gensets, though incidental to the business activity of the assessee, has no direct nexus with the activity of the industrial undertaking of manufacture of gensets and is not “derived from the industrial undertaking”.

CIT vs. M/s Heritage Estate (Bombay High Court)

In computing limitation for purposes of s.153(1)(c)(iii) which uses the expression "commencing from the date", the first in the series of days or any other period of time has to be excluded as per s. 9 of the General Clauses Act, 1897. The Court has also considered in detail the circumstances in which sale proceeds of land can be assessed as business income.

Bipin Jain vs. ADIT (Bombay High Court)

The presumption u/s 292C of the Act that the amount found during the course of search belongs to that person is a rebuttable presumption. U/s 132B (1)(i), the AO cannot retain the seized cash if he has no reason to believe that it represented the undisclosed income of and merely on the ground that assessment order has not been passed.

Siemens Information vs. ACIT (Bombay High Court)

Where the AO, for AY 2001-2002, accepted the assessee's stand but took a contrary view for AY 2003-2004, and sought to reopen (within four years) the assessment for AY 2001-2002 on the basis of AY 2003-2004; held it was a change of opinion and not permissable.

CIT vs. M/s Sabari Enterprises (Karnataka High Court)

The deletion of the second proviso to s. 43B by the Finance Act 2003 wef 1.4.2004 should be treated as a retrospective amendment and contributions towards PF and ESI made before the due date of filing the ROI are allowabale deductions even though they may be beyond the period stipulated in s 36(1)(va).

Note: This view is contrary to that taken by the Madras High Court in CIT vs. Synergy Financial Exchange 288 ITR 366.

CIT vs. Samarth Sahakari (Bombay High Court)

Where it is the custom in the business to pay bakshish to the labourers and the amounts are not exorbitant or unreasonable, the same cannot be disallowed.

Southern Petro vs. DCIT (Madras High Court)

Expenditure incurred on issue of zero capital bonds is capital in nature and not deductible.

Note: In Ganesh Benzoplast vs. ACIT (ITAT Mumbai), expenditure on issuing fully convertible debentures was held to be revenue in nature after distinguishing Ashima Syntex Ltd vs. ACIT 100 ITD 247 (SB).

CIT vs. Combustion Engineering Inc by agent BHEL (Madras High Court)

Appeals filed by or against a public sector company acting as agent of a non-resident does not require approval of the Committee on Disputes.

CIT vs. Ucal Fuel (Madras High Court)

Upfront lease charges paid to take propoerty on lease for a period of 20 years is deductible as revenue expenditure.

Contra: See the judgement of the Special Bench Bombay ITAT in JCIT vs. Mukund Ltd

Narang Overseas vs. ITAT (Bombay High Court)

The Tribunal's power to extend stay on collection of demand is not denuded by the third proviso to section 254 (2A) of the Act, as inserted by the Finance Act, 2007.

Note: The order of the Tribunal is available for download here (pdf).

Gujarat Flourochemicals vs. CIT (Gujarat High Court)

An assessee is entitled to compensation by way of interest for the delay in payment of amounts lawfully due to him which were withheld wrongly and contrary to law.

See also: UOI vs. Honda Siel (Del) (recovery directed to be made from defaulting officers), Ajay Gupta vs. CIT (Del) & CIT vs. Cholamandalam (Mad)

CIT vs. Kay Aar Enterprises (Madras High Court)

A re-arrangement of share holdings in a company to avoid possible litigation among family members is not a "transfer" for purposes of capital gains.

Gyanendra Gupta vs. UOI (Allahabad High Court)

Where there was no material to show that the concerned authority had formed any belief whatsoever that s. 132 was attracted, the search and seizure operation and the consequent s. 158BC notice were illegal and liable to be set aside.

Siemens Information vs. ACIT (Bombay High Court)

Where the facts clearly demonstrate that there was total non-application of mind on the part of the AO, a s. 147 notice based on that reason is not valid. Navin Bharat Industries Ltd. 90 ITD 1 (Mum) (TM) is not an authority for the proposition as to whether losses suffered by a section 10A unit could be set off against profits of other business income of the assessee or vice versa and a s. 147 notice on that ground is also not valid.

Yashpal Sahni vs. ACIT (Bombay High Court)

Where tax is deducted at source, the revenue cannot recover the tax from the payee in view of s. 205 of the Act. Where, for want of TDS certificate, credit cannot be given to the payee, the revenue should earmark the said TDS liability (in the D. C. Register) as "not recoverable" from the payee.

Legrand vs. UOI (Bombay High Court)

High Court reiterates the law that no recovery of outstanding demand can take place before the expiry of the statutory period for filing an appeal. Reiterates that the law laid down by the High Court must be followed by all authorities and subordinate tribunals and they cannot ignore it either in initiating proceedings or deciding on the rights involved in such a proceeding and warns that if there is utter disregard of this position it will be held to be a wilful disregard of the law laid down by the High Court and would amount to civil contempt as defined in s. 2 (b) of the Contempt of Courts Act, 1971.

CIT vs. Goyal Gases (Delhi High Court)

Under the real income theory, income, even if accrued under the mercantile system of accounting is not chargeable to tax.

CIT vs. Elgi Finance (Madras High Court)

Interest earned on Non-Performing Assets (NPAs) is not chargeable to tax .

CIT vs. Revathy Equipment(Madras High Court)

If shortfall in advance tax arises on account of a retrospective amendment, interest under sections 234B and 234C is not payable.

CIT vs. Cholamandalam Investment (Madras High Court)

It is trite law that wherever the assessee is entitled to refund, there is a statutory liability on the Revenue to pay interest on such refund on general principles to pay interest on sums wrongfully retained. Interest is payable on refund of self-assessment tax.

CIT vs. A V Thomas (Madras High Court)

Reassessment after four years, even to give effect to a judgement of the Supreme Court, is not permissible in the absence of failure on the part of the assessee to make a full and true disclosure of material facts.

CIT vs. Eicher Ltd (Delhi High Court)

Reassessment on a change of opinion is not permissible. It is subversive of judicial discipline to follow the view laid down in Consolidated Photo that reassessment is permissible where there is no discussion in the assessment order. An assessee has no control over the way the assessment order is written.

A. B. Shanthi vs. ADI (Madras High Court)

Though section 276DD was omitted on 1.4.1989, a proceeding initiated prior to that date can be continued {General Finance Co. vs. ACIT (SC)} distinguished. However, in view of ommission, imprisonment is not possible and only fine can be levied.

CIT vs. R. M. Patel (HUF) (Madras High Court)

Undisclosed income under sections 158BD and 158BC cannot be assessed in the absence of any material collected during the search relating the assessee. The Revenue cannot proceed on the basis of material not related to the assessee.

Phatela Kotgin vs. CIT (Punjab & Harayana)

Interest received on delayed payments on account of the sale to customers of manufactured goods is "derived" from the industrial undertaking and eligible under ss 80HH & 80-I

CIT vs. Willard India Ltd (Allahabad High Court)

A unilateral entry on the part of the debtor to write back the amount on the ground of limitation having expired, would not tantamount to cessation of liability and, therefore, the provisions of Section 41(1) of the Act would not be attracted.

CIT vs. Global Capital Ltd (Delhi High Court)

Under section 36(1)(vii) of the Act, as amended w.e.f. 1st April, 1989, an assessee was not required to establish that the concerned debt has actually become bad in the relevant year for the purpose of claiming deduction and the only requirement for claiming this deduction is that the assessee has to write off the relevant debts in its books of accounts treating the same as bad.

Hero Motors Limited vs. The State of UP (Allahabad High Court)

A scheme of arrangement (demerger and merger of a going concern with another company or amalgamation/ merger with another company) sanctioned by the Court is an instrument and a conveyance within the meaning of section 2(10) of the UP Stamp Act. However, (per Yatindra Singh, J.) as the scheme of arrangement cannot be split up into transfer of assets and liabilities; nor can the assets be split into immovable or moveable, it cannot be treated as a "conveyance" under Article 23. Per Ran Vijai Singh, J, dissenting: the assets will have to be split and charged as a "conveyance" without any reduction on account of the liabilities transferred. (Difference referred to third judge).

Allahabad Agricultural Institute vs. UOI (Allahabad High Court)

(1) The AO has juridiction to treat an assessee as non-charitable in a case of wholesale change in the objects even though the CIT has not cancelled the registration as a charitable trust under section 12AA (3). (2) (2) Neither Instruction No. 96 dated 21.8.1969 issued by the CBDT nor the decision Mrs. R. Mani Goyal v. CIT 217 ITR 641 are an authority for holding that interim stay of recovery must be granted in every appeal under the Act irrespective of merit merely because the income determined on assessment is double of the amount shown in the return. The circular is merely a guideline to be considered while judging the strength of the prima facie case of the appellant for the purpose of granting or denying the interim order. In other words the circular merely means that where there is some prima facie case, and in addition to the prima facie case, the assessed income is substantially more than the returned income, the recovery in that event should remain in abeyance during appeal (3) the non-giving of reasons by the AO is merely a technical ground.

CIT vs. Woodward Governer India Pvt Ltd (Delhi High Court)

The increase in liability ( revenue account) on account of the fluctuation in the rate of foreign exchange prevailing on the last day of the financial year is not notional or contingent and therefore has to be allowed as a deduction in terms of Section 37 of the Act. The ITAT Special Bench in ONGC is affirmed. In the capital account cases where the cost of asset has been either paid fully or in part prior to the fluctuation in the rate of foreign exchange, the cost of the asset would correspondingly be permitted to be reworked for purposes of repayment or depreciation or investment allowance as the case may be with reference to the rate prevailing on the last date of the financial year in which the fluctuation occurs. The amendment to Section 43 A with effect fro 1.4.2003 is prospective.

Sun Pharmaceutical Industries Limited. vs. UOI (Bombay High Court)

While the High Court has the jurisdiction under Article 226 to entertain a writ petition if a part of the cause of action arises within the State, it has the discretion to decline to entertain the petition under the doctrine of "forum conveniens" if a substantial and intrinsic cause of action has arisen within the jurisdiction of another High Court.

M/s Siraj Advertising Company vs. ITAT (Allahabad High Court)

The Appellate Tribunal has no inherent power of reviewing its order on merits. It cannot, in the purported exercise of its inherent powers, rehear a case on its merits. It is true that as an incidental or ancillary to the appellate power, for the furtherance of the statutory power which is conferred upon it, Tribunal can set aside the ex-parte order and can recall its earlier order or stay the realization of the tax in the absence of any specific provisions but there is no inherent power with the Tribunal to deal with the matter on merits to review or modify its earlier order.

M/s Nokia Corporation vs. Director of Income-tax (Delhi High Court)

The fact that the order of an appellate authority is the subject matter of further appeal cannot furnish any ground for not following it, unless its operation has been suspended by a competent Court. If this healthy rule is not followed, the result will not only be undue harassment to assessees but chaos in the administration of tax laws.The State is bound to be fair to those with whom it has to deal with, and to the extent possible, it must avoid any harassment to the assessee public without causing any loss to the exchequer. A narrow or constricted view which would unnecessarily deprive an assessee of good money due to it from the Revenue should not be adopted.

CIT vs. Oracle Software India Ltd (Delhi High Court)

(1) A disallowance u/s 40(a)(i) cannot be made where the assessee has deducted the tax during the relevant year. It is not necessary that payment of the tax to the treasury should be in the same financial year. (2) An assessee engaged in duplicating software from the imported master copies by formatting a blank disc and copying the software onto it is engaged in "manufacture" of an article or thing and thereby eligible for deduction u/s 80-IA.

CIT vs. Roshan Lal Talwar (Allahabad High Court)

The instructions of the CBDT dated 27th March 2000 as modified on 24th october 2005 that the department should not file appeals where the monetary limits do not exceed the specified limits are an internal matter of the Department and the assessee cannot object to filing of an appeal despite such an instruction. However, it is a matter of self-restraint for the Tax Department and it would be in fitness of thing that the authorities incharge of filing such appeal, must apply their mind and examine in all such cases where the amount involved is less than Rs.4,00,000/- as to whether the appeal falls in any of those exceptions contained in the instructions. It would be better that in every such appeal involving an amount of Rs.4,00,000/-, a specific averment is made, in a separate paragraph in the memo of appeal, that the officer concerned of the Tax Department has applied his mind to this particular aspect and in his view the appeal is to be filed as per a particular clause under the said Instructions.

Ajay Gupta v/s CIT (Delhi High Court)

Interest in respect of moneys seized during search is payable till the date of refund and does not cease on the date of passing of the assessment order because it is unacceptable for the Revenue to drag its feet or create obstacles or delays for refunding monies to assessees.. While interest upto the date of the assessment is payable under section 132B (4)(b), damages/compensation at the rate of 9% pa is payable thereafter till the date of refund. Such compensation/damages are also payable in respect of moneys refunded pursuant to the order of the CIT (A).

UOI v/s Honda Siel Cars Ltd (Delhi High Court)

Where the Settlement Commission directed refund of money to the assessee and the customs department challenged that order and did not refund the money to the assessee on the pretext that they were under a bona fide belief that the moneys need not be refunded during the pendency of the Petition and thereby became needlessly liable to pay interest, the Court held that the loss to the public exchequer due to the wilful inaction of the Commissioner of Customs was indeed staggering and that it had doubts whether the obduracy of the Commissioner was bona fide. It directed that appropriate disciplinary action should be initiated against the concerned defaulting officers and the additional liability incurred by the Department should be recovered from the concerned officers if they fail to furnish a plausible defence. The department was also directed to pay costs of Rs.25,000 to be deposited with the Prime Minister's Relief Fund.

CIT vs. Hotline International Pvt Ltd (Delhi High Court)

A notice under section 148 was sent on a day when the office was closed due to a holiday and the security gaurd refused to accept it. The notice was served by affixation. Another notice was sent by registered post but without acknowledgement due. Held the resultant assessment was void as there was no valid service of the notice. Under s. 282 of the Act read with Order V Rule 17 of the CPC, a notice can be served by affixation only where the assessee refuses service or cannot be found. The refusal by the security gaurd is not a refusal by the assessee. The service by registered post is not valid as per Order V Rule 19A in the absence of acknowledgement due.

CIT vs. Borax Morarji Ltd (Bombay High Court)

If the Revenue has accepted the order of the Tribunal for earlier assessment years and if the Tribunal has relied upon those orders, the Revenue is not entitled to file an appeal for the subsequent assessment year without an explanation as to why it did not file an appeal for the earlier assessment year.

CIT vs. Shri. Manoj M. Shah (Bombay High Court)

The Court directed that costs of Rs. 10,000 be recovered from the Commissioner of Income-tax for failure to file a proper affidavit despite several opportunities. It was noted that in several matters the Revenue appears to be totally callous and that they are not filing proper affidavits at all with regard to the contention of condonation of delay. It was held that the Revenue suffers and if that be so, all the members of the public also suffer since the tax is contributed by the members of the public. It was held that the person responsible for this will have to be made answerable and accountable.

Centurion Bank of Punjab Ltd v/s The Income Tax Settlement Commission (Bombay High Court)

Where the CIT had categorically agreed that complexities of investigation were involved and the facts of the case supported that view, the Settlement Commission was held to have committed an error in coming to the conclusion that there are no complexities of investigation. It was also held that the Settlement Commission's finding that there was no "full and true disclosure" without explaining on what basis it came to this conclusion and what particulars have not been disclosed was not justified. The Settlement Commission was directed to treat the applications as admitted and to proceed at the 245D (4) stage.

CIT vs. Anil Kumar (Delhi High Court)

Taxability of "gifts": (i) Mere identification of donor and showing the movement of gift amount through banking channels is not sufficient to prove the genuineness of the gift. (ii) Since the claim of the gift is made by the Assessee, the onus lies on him not only to establish the identity of the person making the gift but also his capacity to make such a gift.

Narayan Karwa vs. Union of India (Bombay High Court)

Schedule II to the Income-tax Act : Aspects to be considered by the Tax Recovery Officer while dealing with an application filed under rule 60 seeking setting aside of an auction sale of a defaulter's property.

Kirloskar Power Equipment (Voltas Transformers) (Bombay High Court)

Ch. XX-C: The High Court distinguished its earlier decisions and held that the purchaser has locus standi to challenge a compulsary acquisition. It was also held that an order of compulsary acquisition in a case of transfer by the holding company to its wholly owned subsidiary was not valid.

Lotus Trans Travel (Delhi High Court)

s. 80HHD: For computing deduction under section 80 HHD the payment made by the assessee to the hotels has not only to be reduced from the amount received by the assessee for services rendered to the foreign tourists but also from the total receipts of the business.

CIT vs. Shri Kulvant Rai (Delhi High Court)

Substantial question of law: What are the tests to determine a "substantial question of law" for purposes of s. 260A of the Act.

Asian Paints vs. DCIT (Bombay High Court).

s. 147 - Objections to Reassessment proceedings:

In Allana Sons, the Court held that it was not permissible for the AO to pass an order of reassessment before dealing with the objections filed by the assessee. This has been taken forward by the Court to hold that if the assessing officer does not accept the objections so filed, he shall not proceed further in the matter within a period of four weeks from the date of receipt of service of the said order on objections, on the assessee. It has also been directed that the said procedure should be followed strictly.

CIT vs. Shri Ram Honda Pvt Ltd. (Delhi High Court):

S. 80HHC - Eligibility of interest income and the netting principle:

The appeals arose from the decision of the Special Bench in Lalsons Enterprises v. DCIT [2004] 89 ITD 25 (Del) (SB). The following three questions were answered in the affirmative:

(a)Does the expression “profits derived from such export” occurring in subsection (3) read with Explanation (baa) restrict the profits available for deduction in terms of sub-section (1) to only those items of income directly relatable to the business of export?
(b)Does the expression “interest” in Explanation (baa) connote net interest, i.e. the gross interest income less the expenditure incurred by the assessee for earning such income?
(c)If the expression `interest” implies net interest, then should netting be allowed where the interest income is computed to be business income?

KLM ROYAL DUTCH AIRLINES vs. ADIT (Delhi High Court):

Scope of reassessment under s. 147 of the Act.

(a) During the pendency of a return filed under section 139 of the Act along with the refund application under section 237 of the Act, action could not have been taken under section 147/148 of the Act.
(b) the decision of the Division Bench in Consolidated Photo and Finvest Ltd. -vs- Assistant Commissioner of Income-Tax, [2006] 281 ITR 394(Delhi), inasmuch as it is irreconcilable with the views of the Full Bench in Commissioner of Income-Tax -vs- Kelvinator of India Ltd., [2002] 256 ITR 1, must be held not to lay down the correct law.
(c)If the assessment is not framed before the expiry of the period of limitation for a particular AY, it would have to be assumed that since proceedings had not been opened under Section 143(2), the Return had been accepted as correct. Thereafter recourse could be taken to Section 147 only if fresh material had been received by the AO after the expiry of limitation fixed for framing the original assessment.
-wherever and whenever it appears to the High Court that proceedings have been initiated or are continuing without the authority of the law the High Court would be in dereliction of duty if it hesitated in exercising the extraordinary powers contained under Articles 226/227 of the Constitution of India.

Godrej Agrovet vs. ACIT (Bombay High Court)

Reassessment within 4 years:

Reassessment within four years is invalid in the absence of material on record to suggest that income has escaped assessment: