K.C.C. Software Ltd vs. DIT (Inv.) (Supreme Court)

Cash in bank is conceptually different from cash in hand. It is not permissible for the Revenue to withdraw money from the attached bank accounts. However, as the order u/s 132B was not challenged, no relief given. Directions given for deposit of seized moneys in fixed deposit.

M/s Ahmed Anis vs. CIT (Supreme Court)

Where the assessee had led satisfactory evidence that its business was that of a commission agent and not a trader and 10-11 years had passed, the assessee could not be held responsible for non-appearance of five traders to whom summons were issued by the AO.

CIT vs. Infosys Technologies (Supreme Court)

(i) A stock option which is subject to a 'lock-in' is not a chargeable perquisite u/s 17(2) on the date of grant, vesting or exercise. The benfit is purely notional.

(ii) s. 17(2)(iiia) inserted w.e.f 1.4.2000 is not clarificatory;

(iii) Every "benefit" is not chargeable unless it is in the nature of 'income' or specifically made chargeable;

(iv) Estimation of TDS u/s 192 in the absence of clear provisions on valuation of "perquisite" does not justify the department treating the employer as an assessee-in-default.

CIT vs. Lucas TVS (Supreme Court)

Where the High Court held that for purposes of determining the actual cost for computing investment allowance u/s 32A, the additional liability due to fluctuation in foreign exchange rates incurred by the assessee who has imported the machinery from abroad was required to be taken into account in view of provisions of s. 43A and that the deduction was allowable in different assessment years, held that as s. 43A had nothing to do with the allowability of the claim in different years, the matter had to be readjudicated by the High Court.

Note: See also: Associated bearing Co. vs. CIT 286 ITR 341 (Bom) & CIT vs. GSFC 259 ITR 526 (Guj) (FB) on the same point.

Deva Metal Products vs. CTT (Supreme Court)

Where the Sales Tax Officer passed an assessment order treating aluminium powder as a 'metal'and later, pursuant to a judgement of the SC (which was not directly on the point), passed a rectification order u/s 22 of the UPST Act (corresponding to s. 154 of the I.T.Act) and taxed the powder as another item - held the AO was not entitled to pass a rectification order because: (i) rectification of an order does not mean obliteration of the order originally passed and its substitution by a new order and (ii) as the AO inferentially applied the SC decision, the issue was debatable and not "apparant" from the record {there is detailed discussion on what is an "apparant mistake"}.

Note: See also Honda Siel Power Products vs. CIT (Supreme Court).

Review Petitions in important matters dismissed by the SC:

(i) Hoogly Mills vs. CIT {Against judgement reported in 287 ITR 333 on the point that gratuity liability pertaining to predecessor company is neither allowable in the hands of successor company as a deduction or as actual cost}
(ii) Century Building vs. CIT (Against judgement reported in 293 ITR 194 on the point that interest liability pertaining to directors routed through company assessee is subject to TDS u/s 194A.
(iii) Saravana Spinning vs. CIT {Against judgement reported in 293 ITR 201 on the point that for purposes of section 31 of the Act repairs must be ‘current’ in nature and concept of ‘revenue vs capital’ is not material.

CIT vs. J. K. Investors (Supreme Court)

The department's SLP against the judgement of the Bombay High Court in 248 ITR 723 to the effect that notional interest on the security deposit could not be added in computing the annual value u/s 23 (1) (b) was dismissed by stating "we find no justifiable reason to interfere with the orders under challenge".

Honda Siel Power Products vs. CIT (Supreme Court)

Where the ITAT passed an order against the assessee on allowability of foreign exchange fluctuation on accrual basis without noticing an earlier judgement of a co-ordinate bench and thereafter recalled its order on the ground that non-consideration of the said decision was a "mistake apparant from the record" and the High Court reveresed the ITAT on the ground that the recall was a "review", held the High Court was not justified because (i) the fundamental principle behind s. 254(2) is that no party should suffer for a mistake of the ITAT (ii) "Rule of precedent" is an important aspect of legal certainty in rule of law which is not obliterated by section 254(2) and (iii) When prejudice results from an order attributable to the Tribunal's mistake, error or omission, then it is the duty of the Tribunal to set it right. Atonement to the wronged party by the court or Tribunal for the wrong committed by it has nothing to do with the concept of inherent power to review.

Note: The judgement of the Delhi High Court in CIT v. Woodward Governor India (P) Ltd 162 TAXMAN 60 (foreign exchange fluctuation loss is allowable on accrual basis) was noted but not commented upon.

J. K. Industries Ltd vs. UOI (Supreme Court)

Accounting Standard 22 (AS 22) entitled "accounting for taxes on income" insofar as it relates to deferred taxation is not inconsistent with or ultra vires the provisions of the Companies Act, 1956 or the Income-tax Act, 1961. The question whether it violates Articles 14 and 19(1)(g) of the Constitution of India is left open.

CIT vs. P.V.A.L. Kulandagan Chettiar (Supreme Court)

The review petition filed by the department against the judgement reported in CIT P.V.A.L Kulandagan Chettiar (2004) 267 ITR 654 (SC) {reg applicability of DTAA} has been dismissed.

CIT vs. Max India Ltd (Supreme Court)

(1) For considering the validity of an order passed u/s 263, the position prevailing on the date of the order of the CIT has to be considered (2) The mechanics of section 80HHC, having been amended 11 times, have become so complicated over the years that two views were inherently possible (3) When the ITO adopted one of the courses permissible in law and it has resulted in loss of revenue; or where two views are possible and the ITO has taken one view with which the CIT does not agree, the order is not erroneous or prejudicial to the interest of the revenue, unless the view taken by the ITO is unsustainable in law (4) Despite the retrospective insertion of the word "loss" in the proviso to s. 80 HHC (3), two views on the said word "profits" existed on the date of the revision order.

CIT vs. Vinay Cement Ltd (Supreme Court)

Contribution made towards provident fund etc; after the close of the accounting period but before the due date for filing of the return of income are allowable as a deduction u/s 43B(b) of the Act even for assessment years prior to the deletion of the second proviso by the Finance Act 2003 wef 1.4.2004.

Note: The judgement of the High Court in CIT vs. George Williamson 284 ITR 619 (Gau) was approved. The judgement of the Bombay High Court in CIT vs. M/s Godavari Sahakari (Bombay High Court) and that of the Madras High Court in CIT vs. Synergy Financial Exchange 288 ITR 366 stand impliedly overruled while that of the Karnataka High Court in CIT vs. M/s Sabari Enterprises (Karnataka High Court) stands impliedly approved.

Rakesh Kumar Gupta vs. ITAT (CIC - Full Bench)

Judicial proceedings of Courts and Tribunals are beyond the purview of the Right to Information Act as they are independent and must work without any interference insofar as their judicial work is concerned. ITAT was justified in refusing to give copies of log book of the Members of the Bench in the case of Escorts Limited and grant inspection of the case records.

AIFTP vs. UOI (Supreme Court)

The levy of service tax on chartered accountants, cost accountants and architects is constitutionally valid. (The law on Parliament's competence to legislate on fiscal matters is discusssed in detail).

TRO vs. Custodian, Special Court (Supreme Court)

Where the assets belonging to a defaulter were attached and realized by the Custodian of the Special Court in satisfaction of debts due to a notified party and the TRO applied to the Special Court for realization of arrears due from the defaulter,  held the Special Court rightly refused to exercise jurisdiction as it pertained to recovery of taxes of the defaulter who was not a notified party.

CIT vs. Canara Bank (Supreme Court)

Rediscounting interest paid on promissory note/bill does not accrue or arise to the assessee-bank by reason of diversion of such discount through overriding title in favour of Industrial Development Bank of India (IDBI) and hence does not form part of chargeable interest under Section 2(7) of the Interest-tax Act.

CIT vs. Alagendran Finance (Supreme Court)

(1) If the CIT revised the only in relation to matters which were not the subject of the  reassessment proceedings, the period of limitation u/s 263 (2) runs from the date of the order of assessment and not from the order of reassessment (2) once an order of assessment is reopened, the previous underassessment is set aside and the whole proceedings would start afresh but the same would not mean that even when the subject matter of reassessment is distinct and different, the entire proceeding of assessment would be deemed to have been reopened.

CIT vs. K. Chinnathamban (Supreme Court)

(1) In order to find out whether the assessee is the owner of any money in terms of Section 69A of the said Act, the principle of Common Law Jurisprudence in Section 110 of the Evidence Act, 1872 can be applied (2) where a deposit stands in the name of a third person and where that person is related to the assessee then in such a case the proper course would be to call upon the person in whose books the deposit appears or the person in whose name the deposit stands should be called upon to explain such deposit.

CIT vs. Catapharma (Supreme Court)

Sales-tax and excise duty do not form part of total turnover for purposes of section 80-HHC of the Act.

DIT vs. Morgan Stanley (Supreme Court)

Circumstances in which a company providing back-office support services can be considered to be a "permanent establishment" and the methodology of determining the profits of such permanent establishment discussed in detail.

CIT vs. Tara Agencies (Supreme Court)

Blending of tea is neither manufacture not production for purposes of s. 35B. The Court has discussed in detail the meaning of the terms "manufacture", "production" and "processing".

CIT vs. Hyundai Heavy Industries (Supreme Court)

The Court discusses the extent to which the profits arising to a foreign company from a turnkey contract of off-shore supply of equipment and on-shore commissioning and installation services can be charged to tax under the DTAA.

Aashirwad Films vs. UOI (Supreme Court)

In the context of entertainment tax, the Court discusses in detail the circumstances in which a statute can be declared void under Article 14 of the Constitution on the ground of hostile discrimination.

Dilip N. Shroff vs. JCIT (Supreme Court)

(i) As penalty proccedings are quasi-criminal in nature, they must be strictly construed and the primary burden of proof of concealment is on the revenue (ii) The AO must record his satisfaction to show that there is primary evidence against the assessee (Ram Commercial 246 ITR 568 Diwan Enterprises 246 ITR 571 approved). Only thereafter the secondary burden of proof shifts on the assessee (iii) 'concealment of income' and 'furnishing of inaccurate particulars' are different though both require a deliberate act or omission on the part of the assessee. Mere non-filing of particulars is not enough; (iv) Issue whether Explanation 1 to s. 271(1)(c) applies only to concealment of income and not to furnishing of inccurate particulars left open (v) findings in an assessment procceding cannot be automatically adopted; (vi) The non-deletion of the inappropriate words in the standard proforma shows that the AO was unsure as to whether there is concealment or inaccurate filing of particulars and the order suffers from non-application of mind and breach of natural justice.

Sri T. Ashok Pai vs. CIT (Supreme Court)

Existence of mens rea is essentially a question of fact. The Tribunal alone, as the highest authority empowered to determine the question of fact, would be entitled to go thereinto and the High Court should not ordinarily disturb such finding of fact. Therefore, if an explanation given by the assessee with regard to the mistake committed by him has been treated to be bona fide and it has been found as of fact that he had acted on the basis of wrong legal advice, the question of his failure to discharge his burden in terms of the Explanation appended to Section 271(1)(C) of the Act would not arise. Principles of Dilip N. Shroff vs. JCIT reiterated.

ACIT vs. Rajesh Jhaveri Stock Brokers Pvt. Ltd. (Supreme Court)

(1) The word “reason” in the phrase “reason to believe” would mean cause or justification. The expression cannot be read to mean that the Assessing Officer should have finally ascertained the fact by legal evidence or conclusion. At that stage, the final outcome of the proceeding is not relevant. what is required at the initiation stage, is “reason to believe”, but not the established fact of escapement of income. At the stage of issue of notice, the only question is whether there was relevant material on which a reasonable person could have formed a requisite belief. Whether the materials would conclusively prove the escapement is not the concern at that stage. This is so because the formation of belief by the Assessing Officer is within the realm of subjective satisfaction (2) An intimation under section 143(1)(a) cannot be treated to be an order of assessment. As there is no assessment, the question of change of opinion does not arise. The fact that the AO has issued an intimation under s. 143 (1) and has failed to take steps under s. 143 (3) will not render the Assessing Officer powerless to initiate reassessment proceedings so long as the ingredients of section 147 are fulfilled.

CIT vs. P. Mohankala (Supreme Court)

Under section 68, the opinion of the Assessing Officer for not accepting the explanation offered by the assessees as not satisfactory is required to be based on proper appreciation of material and other attending circumstances available on record. The opinion of the Assessing Officer is required to be formed objectively with reference to the material available on record. Application of mind is the sine qua non for forming the opinion. Even after rejecting the explanation given by the assessees if found unacceptable, the crucial aspect whether on the facts and circumstances of the case it should be inferred the sums credited in the books of the assessees constituted income of the previous year must receive the consideration of the authorities provided the assessees rebut the evidence and the inference drawn to reject the explanation offered as unsatisfactory.

CIT vs. Lakshmi Machine Works (Supreme Court)

For purposes of section 80-HHC of the Act, excise duty and sales tax are not includible in comouting "total turnover".

CIT vs. Distillers Co Ltd (Supreme Court)

An excise duty which is in the nature of tax can be imposed only by a statute which answers the description of Article 265 of the Constitution of India. An amount levied as "penalty" for failure to affix labels under a circular issued by the excise authorities is merely an additional levy which is neither "penalty" nor "tax". Consequently, it is allowable under section 37 (1) and is not hit by section 43B.

CIT vs. M/s Baby Marine Exports (Supreme Court)

The export house premium received by the assessee - a supporting manufacturer on sales to the Export House - is includible in the "profits of the business" of the assessee while computing the deduction under section 80HHC of the Act.

Vishwanath Chaturvedi vs. UOI & Mulayam Singh (Supreme Court)

Though a PIL is not maintainable to probe or enquire into the returns or another taxpayer except in special circumstances, when scams take place, allegation of disproportionate assets are required to be looked into.An enquiry should not be shut out at the threshold because a political opponent of a person with political difference raises an allegation of acquisition of wealth disproportionate assets to the known source of income commission of offence. The CBI was directed to look into the allegations and see whether there is a prima facie case made out.

CIT vs. Ralson Industries Ltd (Supreme Court).

The CIT has jurisdiction to revise an assessment even in a case where the AO had issued a notice under section 154 in respect of the matters sought to be revised and had dropped the rectification proceedings.

National Tax Tribunal decision of the Supreme Court dated 9th January 2007.