Tax Annual Digest 2024: Part II
Pankaj Bajpai
26 Jan 2025 6:45 AM
Entry Tax | Indian Made Foreign Liquor Not Taxable Under UP Entry Of Goods Into Local Area Act 2007: Allahabad High CourtThe Allahabad High Court has recently quashed assessment order taxing Indian Made Foreign Liquor under the UP Entry of goods into Local Area Act 2007 on grounds that it is not provided in the schedule to the Act. Provisional assessment order against the petitioner was passed...
The Allahabad High Court has recently quashed assessment order taxing Indian Made Foreign Liquor under the UP Entry of goods into Local Area Act 2007 on grounds that it is not provided in the schedule to the Act.
Provisional assessment order against the petitioner was passed on 19.04.2006 under Section 4-A (Realization Of Tax Through Manufacturer) of the Uttar Pradesh Entry of Goods into Local Area Tax Act, 2000 read with Rule 41(5) of the Uttar Pradesh Sales Tax Rule 2000. Final assessment order was passed on 30.03.2008 under the UP Entry of goods into Local Area Act 2007.
The Allahabad High Court has held that once the Appellate Authority has recorded a specific finding that quantification of stock was based on eye estimate and not in accordance with law, the confiscation order as well as the penalty order are liable to be set aside.
“When the Appellate Authority had come to the finding that the officers in the survey did not carry out the quantification of the stock in the correct manner, there was no reason for the Appellate Authority to uphold the confiscation and penalty,” held Justice Shekhar B. Saraf.
The Madras High Court has held that the Circular dated May 24, 2023, issued by the Central Board of Direct Taxes (CBDT) not extending time to file applications for regular registration of new provisionally registered trusts under Section 80G of the Income Tax Act is violative of the Constitution of India.
The bench of Chief Justice Sanjay V. Gangapurwala and Justice D. Bharatha Chakravarthy has observed that the petitioner trusts do not have any vested right to claim an extension of time. When the statute prescribes a time limit, the petitioner trusts are expected to apply within the said date to avail themselves of the benefits. The first respondent board issues circulars enlarging the time limit even beyond the prescribed limit to mitigate the rigors of the statute and the hardship faced by the assessees. The same is in exercise of its powers under Section 119(2)(b) of the Income Tax Act. No discrimination or differentiation was made between the existing trusts and the new trusts at the first instance when Circular No. 8 of 2022 was issued. When the impugned Circular No. 6 of 2023 was issued, the reason stated by the first respondent was to mitigate genuine hardship.
Placing reliance on the judgment of the Supreme Court in State of Karnataka vs. M/s Ecom Gill Coffee Trading Private Limited, the Allahabad High Court has held that input tax credit cannot be granted based solely on invoices and RTGS payment details.
While dealing with Section 70 of the Karnataka Value Added Tax Act, 2003 the Supreme Court in M/s Ecom Gill Coffee Trading Private Limited held that burden to prove that claim for input tax credit and the genuineness of the transaction lies solely on the assesee. The Court held that mere production of invoices and payments made by cheques is not enough to prove that the assesee is entitled to ITC.
“The dealer claiming ITC has to prove beyond doubt the actual transaction which can be proved by furnishing the name and address of the selling dealer, details of the vehicle which has delivered the goods, payment of freight charges, acknowledgement of taking delivery of goods, tax invoices and payment particulars etc. The aforesaid information would be in addition to tax invoices, particulars of payment etc,” held the Apex Court.
The Delhi High Court has quashed the initiation of assessment proceedings under Section 153C of the Income Tax Act, which was falling beyond the maximum 10-year block period.
The bench of Justice Yashwant Varma and Justice Purushaindra Kumar Kaurav has allowed the writ petitions placed in Lists I and II and pertaining to AYs' 2010-11, 2011-12, 2012-13, and 2013-14, all of which fall beyond the maximum 10-year block period.
The Kerala High Court has held that consideration received by trustees for such relinquishment of trusteeship cannot be treated as a capital receipt for the purposes of assessing it under the head of capital gains; the consideration will have to be treated as the individual income of the assessees and assessed accordingly under the appropriate head.
The bench of Justice A.K. Jayasankaran Nambiar has observed that a perusal of the trust deed in the instant cases does not indicate that any power was conferred on the trustees to relinquish their position as trustees en banc. A person who is appointed as trustee is not bound to accept the trust, but having once entered upon the trust, he cannot renounce the duties and liabilities except with the permission of the court, with the consent of the beneficiaries, or by the authority of the trust deed itself.
Delhi High Court Interpretes Rule 11UA For Determination FMV Of Shares U/S 56(2)(viib)
The Delhi High Court has held that it has interpreted Rule 11UA of the Income Tax Rules, 1962, for determining the fair market value (FMV) of shares under Section 56(2)(viib) of the Income Tax Act, 1961.
The bench of Justice Yashwant Varma and Justice Purushaindra Kumar Kaurav has observed that Section 56(2)(viib) postulates that the FMV of shares shall be the value determined in accordance with the methods as may be prescribed or as may be substantiated by the company to the satisfaction of the AO, whichever is higher.
A perusal of Rule 11UA(2) would indicate that the assessee is enabled to determine the FMV of the unquoted equity shares either in accordance with the formula prescribed in clause (a) or on the basis of a report drawn by a merchant banker who may have determined the FMV as per the DCF Method.
The Kerala High Court has held that the land in question was used for agricultural purposes, which yielded agricultural income, which in turn was exempt from income tax under Section 10(1) of the Income Tax Act.
The bench of Justice A.K. Jayasankaran Nambiar and Justice Syam Kumar V.M. has observed that there is no material produced by the appellant that would clearly suggest that the loan amount availed by it during the assessment year in question had been used for purchasing an asset, which it had used for the purposes of its business as a provider of asset management services.
The Calcutta High Court has held that payments by supervisors to individual labourers, each not exceeding Rs. 20,000, cannot be disallowed under Section 40A(3) of the Income Tax Act, 1961.
The bench of Justice Surya Prakash Kesarwani and Justice Rajarshi Bharadwaj has observed that the supervisors acted as agents of the assessee to disburse the amount to individual labourers, which in no case exceeded Rs. 20,000/- for any individual labour. Therefore, in view of the circumstances prescribed in the second proviso to Section 40A(3) read with Rule 6DD(l) of the Income Tax Rules, 1962, and the provisions of the Indian Contract Act, the payment of Rs. 1,21,49,190 cannot fall within the scope of Section 40A(3) of the Act, 1961.
The Delhi High Court has held that a reopening or abatement would be triggered only upon the discovery of material that is likely to “have a bearing on the determination of the total income” and would have to be examined bearing in mind the AYs' that are likely to be impacted.
The bench of Justice Yashwant Varma and Justice Purushaindra Kumar Kaurav has observed that abatement of the six AYs' or the “relevant assessment year” under Section 153C would follow the formation of an opinion and satisfaction being reached that the material received is likely to impact the computation of income for a particular AY or AYs' that may form part of the block of ten AYs'. Abatement would be triggered by the formation of that opinion, rather than the other way around.
Supreme Court Expunges Gujarat HC's Adverse Observation Against GST Officials
The Supreme Court (on March 12) expunged the observations made by the Gujarat High Court in an interim order that statutory protection of the good faith clause under Section 157 of the Goods and Services Tax Act may not be available to the GST officers who conducted a search operation in the instant case.
A bench of Justices P.S. Narasimha and Aravind Kumar stated that the impugned observations made by the High Court were, in nature, “advance rulings” and expressed a tentative opinion. Reasoning this, the Court said that the High Court expressed such a view without even initiation of the legal proceedings.
The Delhi High Court has held that the Income Tax Settlement Commission (ITSC) is entrusted with the power to grant immunity from penalty and prosecution only in cases of full and true disclosure.
The bench of Justice Yashwant Varma and Justice Purushaindra Kumar Kaurav has observed that once it is seen that the disclosure was not full and truthful, the ITSC loses its jurisdiction to entertain such an application as well as to provide any immunity to the applicant from prosecution and penalties.
Delhi High Court Grants Relief Of As Low As 5% IGST On Import Of Dialysis Machines By FMC India
The Delhi High Court has granted relief of as low as 5% Integrated Goods and Service Tax (IGST) on the import of dialysis machines by Fresenius Medical Care India Private Limited (FMC India).
The bench of Justice Sanjeev Sachdeva and Justice Ravinder Dudeja has observed that dialysis machines covered under HSN Code 9018 and 9031 are liable to be taxed at 5%, essentially awarding a significant rebate of 7% on the import of dialysis machines.
The Delhi High Court has held that the rationale to deny input tax credit (ITC) to service providers who are not liable to pay tax on output services is obvious.
The bench of Justice Vibhu Bakhru and Justice Amit Mahajan has held that the service providers rendering services on which tax is payable on a reverse charge basis would constitute a class of their own, and a challenge to the same founded on Article 14 of the Constitution of India would necessarily fail.
It is well settled that Article 14 of the Constitution of India does not prohibit reasonable classification, which has a rational nexus to its object. Denying input tax credit to service tax providers, who are not liable to pay tax on output services, is founded on a rational basis, which has a clear nexus with the classification.
The Kerala High Court has held that the permission to effect over-the-counter sales of alcoholic liquor was a concession given to bar-attached hotel owners to permit them to carry on business and tide over the COVID lockdown period. The assessee cannot now contend that the tax on such transactions should not be levied on him because he did not originally have permission to effect such sales.
The bench of Justice A.K. Jayasankaran Nambiar and Justice Syam Kumar V.M. has observed that the appellant, having opted to pay tax on a compound basis in lieu of the regular basis of assessment, cannot turn around and contend that the formula provided for payment of tax on a compound basis does not apply to him.
The Bombay High Court has quashed a reassessment order against a housewife when the alleged investment was made by her husband.
The bench of Justice K. R. Shriram and Justice Neela Gokhale has observed, “We also have to notice that, surprisingly, the Principal Chief Commissioner of Income Tax has also accorded sanction for the issuance of this order instead of directing the AO to drop the proceedings against the petitioner.”
AO Is Not Clothed With Powers To Ascertain ALP Of Any International Transaction: Delhi High Court
The Delhi High Court has held that AO is not clothed with the powers to ascertain the Arm's Length Price (ALP) of any international transaction.
The bench of Justice Yashwant Varma and Justice Purushaindra Kumar Kaurav has observed that the AO is not clothed with the powers to ascertain the ALP of any international transaction that is selected based on the transfer pricing risk parameters. Furthermore, Section 92CA(4) of the Income Tax Act evidently mandates that the AO cannot deviate itself from the TPO order while computing the total income of the assessee.
The Allahabad High Court has held that intention to evade tax is essential condition for imposing penalty under Section 54(1)(2) of the Uttar Pradesh Value Added Tax Act, 2008.
Section 54(1) of the Uttar Pradesh Value Added Tax Act, 2008 provides for circumstances under which penalties can be imposed on an assesee. It is provided that where an assessing authority is satisfied that an assesee has committed any wrong mentioned therein, penalty can be imposed after giving due opportunity of hearing to such assesee.
The Delhi High Court has held that the National Faceless Assessment Centre (NFAC) cannot sustain invocation of penalty proceedings based on their own failure to lodge a claim under the Insolvency and Bankruptcy Code (IBC) within time.
The bench of Justice Yashwant Varma and Justice Purushaindra Kumar Kaurav has observed that, as per Section 144B of the Income Tax Act, proceedings for assessment, reassessment, or re-computation are initiated in terms of the faceless procedure of assessment as prescribed therein. Any effort to assess, reassess, or re-compute could tend to lean towards a re-computation of liabilities that otherwise stand frozen by virtue of the resolution plan having been approved.
The Madras High Court held that the assessee cannot be absolved of responsibility as a registered person to monitor the GST portal.
The bench of Justice Senthilkumar Ramamoorthy has observed that an audit was conducted and that an audit report dated 15.09.2023 was issued. An intimation and show cause notice preceded the impugned order. It is noticeable that the tax proposal was confirmed because the petitioner did not submit a reply along with supporting documents. Therefore, by putting the petitioner on terms, the interest of justice demands that the petitioner be provided an opportunity.
The Bombay High Court has quashed the show cause notice (SCN) demanding GST on ocean freight on transportation of goods from outside India.
The bench of Justice G. S. Kulkarni and Justice Firdosh P. Pooniwalla has relied on the decision of the Supreme Court in the case of Mohit Minerals and observed that the verdict applies to both free on board (FOB) and sum of cost, insurance, and freight (CIF) contracts.
The Telangana High Court holds 'Handling of Cargo in Customs Areas Regulations, 2009' by way of which cost of living expenses were recoverable from the Customs Cargo Service Provider as ultra vires of the Customs Act, 1962. “In the absence of any special authorization to levy cost recovery charges, appellants have no authority to impose cost recovery charges by means of a Regulation. The inevitable conclusion is that the 2009 Regulations are ultra vires the Customs Act, 1962.”
The order was passed by a division bench comprising, Chief Justice Alok Aradhe and Justice Anil Kumar Jukanti in a Writ Appeal preferred by the Central Board of Excise and Customs against the order passed by a single judge bench, wherein section 5(b) of the Customs Regulations, 2009 was held ultra vires and consequently, it was held that Custom Officers placed at the Rajiv Gandhi International Airport, Hyderabad were not entitled to recover the cost of living expenses from the Custodian of Sea Ports and Air Cargo Complexes (M/s. GMR Hyderabad International Airport Limited, Rep. by its General Manager/ R1) of the RGIA, Hyderabad.
Malabar 'Parota' Is Akin To 'Bread', Exigible To 5% GST: Kerala High Court
The Kerala High Court has held that Malabar 'Parota' is akin to 'bread' and is exigible at the rate of 5% GST and not 18% GST.
The bench of Justice Dinesh Kumar Singh has observed that Malabar 'Parota' and Whole Wheat Malabar Parota are exigible at the rate of 5% GST and not 18% as held by the Advance Ruling Authority and Advance Ruling Appellate Authority.
The Rajasthan High Court has held that for holding an assessee guilty of the offence of filing delayed income tax returns, “mens rea“ is a necessary ingredient.
The bench of Justice Anoop Kumar Dhand has observed that in the absence of mens rea, an accused cannot be held guilty, and his conviction under Section 276 CC of the Income Tax Act cannot be sustained.
The Allahabad High Court has held that the jurisdiction of the Assessing Authority to decide the application for release of seized assets under Section 132B (1)(i) does not abate after a period of 120 days from the date on which the last of the authorizations for search under section 132 or for requisition under section 132-A was executed.
The Court held that the word “shall” in 2nd proviso to Section 132B (1)(i) is directory in nature as no stipulation is made for the automatic release of goods after the period of 120 days. It held that a levy of interest on the seized asset contemplated under Section 132B (4) does not make the “shall” in 2nd proviso to Section 132B (1)(i) mandatory in nature.
The Allahabad High Court has held that mandatory condition of pre-deposit prescribed under Section 35F of the Central Excise Act for filing appeals before the Customs Excise and Service Tax Appellate Tribunal cannot be waived under Article 226 of the Constitution of India.
Petitioner approached the High Court against the order passed by the Commissioner, Central Goods and Service Tax, Ghaziabad. Alternatively, petitioner prayed for waiver of mandatory pre-deposit under Section 35F of the Central Excise Act while being relegated to appellate jurisdiction under Section 86 of the Finance Act, 1994.
The Bombay High Court has held that the error on the part of the auditor cannot be rejected but should be accepted as a reasonable cause shown by the trust management.
The bench of Justice K. R. Shriram and Justice Neela Gokhale has observed that an assessee, a public charitable trust with almost over thirty years, which otherwise satisfies the condition for availing exemption, should not be denied the same merely on the bar of limitation, especially when the legislature has conferred wide discretionary powers to condone such delay on the authorities concerned.
The Bombay High Court has held that Tata Steel is entitled to treat the contribution of Rs. 212.52 crores to the Compensatory Afforestation Fund (CAF) as revenue expenditure.
The bench of Justice K. R. Shriram and Justice Neela Gokhale has relied on the decision of the Bombay High Court (Goa Bench) in the case of The Commissioner of Income Tax v. Dr. Prafulla R. Hede, and another has accepted that a contribution to CAF will be revenue expenditure and not capital in nature.
The Delhi High Court has held that one of the consequences of cancelling a taxpayer's registration with retrospective effect is that the taxpayer's customers are denied the input tax credit availed in respect of the supplies made by the taxpayer.
The bench of Justice Sanjeev Sachdeva and Justice Ravinder Dudeja has observed that simply because a taxpayer has not filed the returns for some period, it does not mean that the taxpayer's registration is required to be cancelled, with a retrospective date also covering the period when the returns were filed and the taxpayer was compliant.
Emery Cloth Is Cotton Coated Fabric And Liable To Be Exempted From Tax: Andhra Pradesh High Court
The Andhra Pradesh High Court has held that emery cloth is cotton coated fabric and liable to be exempted from tax.
The bench of Justice Ravi Nath Tilhari and Justice Harinath Nunepally has upheld the Tribunal's ruling in which it was held that the emery cloth is covered in Item-59.03 of the First Schedule to the Additional Duties of Excise (Goods of Special Importance) Act, 1957 and therefore is exempted under Fourth Schedule to the APGST Act, as the same is liable for additional duties of excise under the Additional Duties Act. It held that emery cloth is cotton coated fabric and therefore liable to be exempted from tax. Regarding the levy of tax on tarpaulins, the Appellate Tribunal held that tarpaulin which is waterproof with the base as cloth falls under cotton fabrics in item-5 of the Fourth Schedule to the APGST Act.
The Delhi High Court has upheld the disqualification as the CA Certificate did not match details on the Institute of Chartered Accountants of India (ICAI) portal as per the Unique Document Identification Number (UDIN).
The bench of Acting Chief Justice Manmohan and Justice Manmeet Pritam Singh Arora has observed that the discrepancy has arisen on account of the non-mention of the certified information by the petitioner's Chartered Accountant in the corresponding UDIN certificate in the field under the heading 'Figures/Particulars'. With respect to the UDIN certificate filled in by the Chartered Accountant on the ICAI website, the Chartered Accountant has left the field blank, and consequently, there is no certified information available in the UDIN certificate.
The Gujarat High Court has allowed the cenvat credit on welding electrodes, welding wire, etc. used for laying rail lines outside factories.
The bench of Justice Bhargav D. Karia and Justice Niral R. Mehta, while dismissing the appeal of the GST department, observed that CESTAT has correctly allowed the Cenvat credit on inputs, i.e., welding electrodes, wire FLR, filler wires, welding wires, wire rope, material used for railway lines, and capital goods, i.e., M.S. gratings and G.I. coated gratings.
The Punjab & Haryana High Court deleted the addition made by the AO u/s 41(1) of the Income tax Act on account of sale of copper wire, finding that the AO had made additions under the said provision simply on basis of presumption regarding the said sale, even after finding no stock in the premises.
A Division Bench of Justice Sanjeev Prakash Sharma and Justice Sudeepti Sharma observed that “A perusal of the assessement order and the explanation given by the assessee shows that the assessee explained each and every question put by the Assessing Officer. Further inspite of the fact that the Assessing Officer himself personally visited the factory premises along with the Inspector Sh. S.K.Gupta, and nothing was found to show that the assessee has tried to evade tax, the Assessing Officer on assumptions and presumptions made addition to the tune of Rs.2,15,150/- as profit”.
The Calcutta High Court has held that merely proving the identity of the investors does not discharge the onus on the assessee if the capacity or credit worthiness has not been established.
The bench of Chief Justice T.S. Sivagnanam and Justice Hiranmay Bhattacharyya has observed that the assessee has not established the capacity of the investors to advance money for the purchase of the shares at a high premium. The credit worthiness of those investors' companies is questionable, and the explanation offered by the assessee, at any stretch of imagination, cannot be construed to be a satisfactory explanation of the nature of the source.
Relying on its earlier decision in A.S. Solanki Vs. State of U.P. and others, the Allahabad High Court has reiterated that tax dues cannot be collected from director of company under liquidation unless it has been provided in any statute.
The Allahabad High Court in A.S. Solanki had held that in a case where it was ascertained that the corporate veil had been used for malafide intent, the corporate personality shall be lifted so that the individuals responsible could be held liable. However, this doctrine could not be applied as a matter of course and be used to recover the dues of a company when they were unrecoverable, from the personal assets of the Directors.
The Allahabad High Court has held that computation of correct input tax credit can only be done till the passing of the regular assessment order by the Assessing Authority and not at a later stage.
The Court held that reverse input tax credit is neither a 'rate of tax' nor a 'turnover' which can be subjected to reassessment under Section 29 of the Uttar Pradesh Value Added Tax Act, 2008. Section 29 of the UPVAT Act empowers the Assessing Authority to initiate reassessment proceedings against an assesee if there is “reason to believe” that whole or part of the turnover has escaped assessment or has been assessed to tax at a lower rate than prescribed or if deductions and exemptions have been wrongly allowed.
AO Can't Proceed With Assessment In Absence Of Section 127 Transfer Order: Delhi High Court
The Delhi High Court has held that the Assessing Officer cannot proceed with assessment in the absence of a transfer order under Section 127 of the Income Tax Act.
The bench of Justice Yashwant Varma and Justice Purushaindra Kumar Kaurav has observed that once the case of the assessee is centralized, then the transfer of the case of the assessee to another AO would not be permissible without a decentralization order or transfer order under Section 127 of the Income Tax Act, as contrary to such a position outside the underlying objective that the Act seeks to achieve by virtue of powers enshrined under Section 127.
The Supreme Court has held that labelling or re-labelling of containers amounts to 'manufacture' under the Central Excise Act for availing cenvat credit
The bench of Justices A. S. Oka and Ujjal Bhuyan was pronouncing its judgment on an appeal by the revenue under Section 35L(1)(b) of the Central Excise Act, 1944 against a 2015 order passed by the CESTAT, Mumbai.
By the impugned order, CESTAT has allowed the appeal filed by the respondent holding that as per Note 3 to Chapter 18 of the Central Excise Tariff Act, 1985 , the activity of labelling amounted to manufacture and hence, the respondent was eligible for availing the cenvat credit of the duty paid by its Jammu unit and was also eligible for rebate on the duty paid by it while exporting its goods.
The Calcutta High Court has held that the source of investments by those two companies is also the share capital and share premium raised by them while issuing their own shares to other closely held companies, and those companies had no noticeable business activities.
The bench of Chief Justice T.S. Sivagnanam and Justice Hiranmay Bhattacharyya, while upholding the ITAT's order, noted that the effects of the documents were considered by the tribunal, and it was not satisfied with the genuineness of the transaction. More importantly, the assessee itself claimed that there was no noticeable business activity during the year. Thus, the tribunal ultimately concluded that the assessee has failed to establish the basic ingredients required to be established under Section 68.
Unexplained Expenditure Addition Merely Based On CBIC Instruction Not Sustainable: Delhi High Court
The Delhi High Court has deleted the addition for unexplained expenditure, which was based on the instruction issued by the Central Board of Indirect Taxes and Customs (CBIC).
“Merely proceeding on the basis that CBIC is an apex body and therefore, information provided by it cannot be doubted, without even identifying or meaningfully analyzing such information, is wholly insufficient to proceed to make an addition,” the bench of Justice Vibhu Bakhru and Justice Tara Vitasta Ganju observed.
Delhi High Court Quashes MOOWR Instructions Denying Benefit To Solar Power Generation Units
The Delhi High Court has held that the statutory scheme underlying the Manufacture and Other Operations in Warehouse Regulations, 2019 (MOOWR) cannot be construed as seeking to exclude solar power generation in terms of permissions granted under Section 65 of the Customs Act, 1962.
The bench of Justice Yashwant Varma and Justice Ravinder Dudeja has observed that the activities undertaken by the writ petitioners are in aid of the objective of the country transitioning towards renewable energy sources so as to meet the targets of switching to a cleaner energy source. This is clearly an aspect that cannot possibly be doubted, even by the respondent department.
Merely Brandishing Newspaper Cuttings Doesn't Prove Sharing Commercial Expertise: Bombay High Court
The Bombay High Court has held that merely brandishing newspaper cuttings does not amount to proof of sharing commercial expertise with its French counterpart as mandated by Section 80-O of the Income Tax Act.
The bench of Justice K. R. Shriram and Justice Neela Gokhale has observed that Section 80-O was inserted in place of Section 85C, which was deleted by the Finance (No. 2) Act, 1967. While moving the bill relevant to the Finance Act No. 2 of 1967, the then Finance Minister highlighted the fact that fiscal encouragement needs to be given to Indian industries to encourage them to provide technical know-how and technical services to newly developing countries.
The employer's grant of interest-free loans or loans at a concessional rate will certainly qualify as a 'fringe benefit' and 'perquisite", the Court said.
A Division bench of the Supreme Court comprising of Justice Sanjiv Khanna and Justice Dipankar Datta while deciding a Civil Appeal in the case of All India Bank Officers' Confederation Vs The Regional Manager, Central Bank Of India & Others has held that Rule 3(7)(i) of the Income Tax Rules, 1962 is not violative of Article 14 of the Constitution of India and provision of interest free/concessional loan benefits provided by banks to bank employees shall be taxable as a perquisite under Section 17 of the Income Tax Act, 1961.
Capital Gain Tax Not Payable On Transfer Of Shares By Way Of Gift: Bombay High Court
The Bombay High Court has held that capital gain tax is not payable on the transfer of shares by way of gift.
The bench of Justice K. R. Shriram and Justice Neela Gokhale has observed that Section 45 of the Income Tax Act provides that any profits or gains arising from the transfer of a capital asset have to be considered by the assessee. Only when there is consideration received can the profit or gain be measured. A gift is commonly known as a voluntary transfer of property by one person to another without any consideration. A gift does not require consideration, and if there is consideration for the transaction, it is not a gift.
Reassessment Order Can't Merely Be Based On Tax Evasion Report Or An Audit Report: Orissa High Court
The Orissa High Court has held that reassessment orders cannot merely be based on a tax evasion report or an audit report.
The bench of Justice B.R. Sarangi and Justice G. Satapathy has observed that it is not enough if the Assessing Officer refers to the tax evasion report or an audit report; he has to independently apply his mind and record his satisfaction that there has been an escapement of tax. It is the mandatory minimum requirement of Section 43 of the OVAT Act.
The Bombay High Court has held that lender bank registration with the Central Registry of Securitisation and Security Interest of India (CERSAI) has first priority over Deputy Commissioner of Sales Tax (GST) (DCST) against proceeds of enforcement under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act).
The bench of Justice B.P. Colabawalla and Justice Somasekhar Sundaresan observed that the Lender Bank had first priority in enforcement against the Walkeshwar Flat with effect from January 24, 2020, having been the first to register with CERSAI, which was done on January 2, 2020. The bench noted that Encore ARC, which conducted the auction on February 28, 2023, acquired the entitlement to priority from the lender bank along with the assignment of the loans to the borrowers with attendant security interests on March 21, 2020.
The Calcutta High Court has held that the adjudicating authority, without resorting to any action against the supplier, who is the selling dealer, ignored the tax invoices produced by the appellant as well as the certificates issued by the Chartered Accountants, which are erroneous and wholly without jurisdiction.
The bench of Chief Justice T.S. Sivagnanam and Justice Hiranmay Bhattacharyya has observed that even in the show-cause notice, the authority has admitted that "it is true that the recipient has made payment of the element of tax to the supplier against such transaction, but the payment of such tax has not been reciprocated to the exchequer." If the authority has admitted the fact that the recipient, who is the appellant, has made payment of the tax to the supplier against the transaction, If it is the case of the department that such tax has not been remitted to the state exchequer, the elementary principle to be adopted is to cause an inquiry with the supplier, and without doing so to penalize the appellant, it would be arbitrary, illegal, and without jurisdiction.
The Delhi High Court dismisses Revenue's appeal against ITAT's order in case of Dabur India Ltd., while reiterating that for purpose of deduction u/s 80IB & 80IC of the Income tax Act, the only essential requisite is that the eligible industrial undertakings should be carrying out manufacture or production of articles or things.
With respect to valuation of shares of Dabur Overseas Ltd, the Division Bench comprising Justice Yashwant Varma and Justice Purushaindra Kumar Kaurav considered ITAT's conclusive findings of fact i.e. that TPO's approach of applying astronomical growth rate of 89% without giving any cogent reason and failure to alter corresponding outgoings/expenses for future years, was unreasonable, particularly when, in subsequent valuation report obtained from an independent valuer, the actual financials which were available during assessment proceedings were adopted.
The Jharkhand High Court has held that any unjust withholding of money or property from another party goes against the fundamental principles of justice, fairness, and good conscience. In this context, the unauthorized deductions made from the ongoing bills are unquestionably unlawful. Furthermore, the Court has imposed a substantial penalty of Rs 5 Lacs on the Managing Director of Jharkhand Bijli Vitran Nigam Limited (JBVNL) for engaging in unnecessary litigation and presenting frivolous defenses.
The Division Bench, comprising Acting Chief Justice Shree Chandrashekhar and Justice Navneet Kumar, emphasized, “Any unjust retention of money or property of another shall be against the fundamental principles of justice, equity and good conscience. The unauthorized deductions from the running bills of the petitioner-Firm are patently illegal. Such deductions caused loses to the petitioner-Firm which filed its Income Tax retuns but was deprived of Rs. 2,90,32,000/- and thereby suffered business or alteast interest losses. On the other hand, the JBVNL was unjustly enriched and need to restitute the petitioner-Firm. The refund of Rs. 2,90,32,000/- must therefore carry interest as a matter of course.”
While hearing a batch of petitions challenging penal provisions of GST Act, Customs Act, etc. as non-compatible with the CrPC and the Constitution, the Supreme Court on Thursday (May 2) expressed concerns about the ambiguity in Section 69 of the GST Act (dealing with power with arrest) and conveyed that it would interpret the law to "strengthen" liberty, if need be, but not allow citizens to be harassed.
The Bench of Justices Sanjiv Khanna, MM Sundresh and Bela M Trivedi asked Additional Solicitor General SV Raju (appearing for Revenue) to furnish data regarding the number of notices issued under the Central Goods and Services Tax Act, 2017 (in past 3 years) with respect to amounts exceeding Rs. 1 crore and Rs. 5 crores, as well as the number of arrests made during the time.
Life Of Provisional Attachment Order Is Only One Year: Delhi High Court
The Delhi High Court has held that the life of an order of provisional attachment is only one year.
The bench of Justice Sanjeev Sachdeva and Justice Ravinder Dudeja has observed that the communication of attachment is dated August 14, 2019, and a period of one year has elapsed since the issuance of the communication. Consequently, the order dated August 14, 2019 has ceased to be effective and cannot be further implemented either by the department or the bank. The order dated August 14, 2019 ceases to have effect. Consequently, the bank henceforth cannot restrain the operation of the bank account of the petitioner based solely on the basis of an order.
The Bombay High Court has held that the sanctioning authority has to be the Principal Chief Commissioner of Income Tax (PCCIT) for issuing a reopening notice after the expiry of three years.
The bench of Justice K. R. Shriram and Justice Neela Gokhale has observed that, as per the order and the notice, the authority that has accorded the sanction is the PCIT-27, Mumbai. The matter pertains to Assessment Year 2017-2018, and since the order as well as the notice were issued on July 20, 2022, both have been issued beyond a period of three years. Therefore, the sanctioning authority has to be the PCCIT, as provided under Section 151(ii) of the Income Tax Act. The proviso to Section 151 has been inserted only with effect from April 1, 2023, and, therefore, shall not be applicable to the matter at hand.
The Delhi High Court has held that, as per Section 75(5) of the GST Act, if sufficient cause is shown, the proper officer shall adjourn the hearing; however, not more than three adjournments may be granted.
The bench of Justice Sanjeev Sachdeva and Justice Ravinder Dudeja has observed that, in terms of Section 75(5) of the Act, three adjournments may be granted, but it is not mandatory for the proper officer to grant three adjournments. Adjournment is not a right. Said provisions empower the proper officer to grant up to three adjournments if sufficient cause is shown. It would be dependent on the facts of each case whether sufficient cause has been shown or not for the exercise of the discretion to adjourn.
Finding that the stock production and consumption records were maintained under the supervision of the Excise Authorities and there is no objection raised with regard to the said stock by the ITO, the Punjab & Haryana High Court held that the Assessing Officer could not have proceeded on a presumption alleging higher wastage shown by the assessee.
The High Court found that in the present case, the Assessing Officer has accepted the closing stock and further accepted the trading account to be correct and complete and without computing afresh, as per the proviso to Section 145(1) of the Income tax Act, the Assessing Officer has made addition to the account of wastage.
The Bombay High Court has held that the reasons for reopening clearly show that the assessing officer, except borrowing the information from the third report of the Justice M.B. Shah Commission, failed to record independently to his own satisfaction any reason so as to direct the reopening of the assessment.
The bench of Justice Bharat P. Deshpande and Justice Valmiki Menezes did not see any reason for independently forming opinions by the Assessing Officer, apart from what was borrowed from the Justice M.B. Shah Commission report. Thus, reasons that do not have any application to the mind or any independent material or reason to believe cannot be construed as legal reasons for re-opening the assessment.
The Allahabad High Court has held that the authorities are not estopped from taking action against wrongful claim of input tax credit merely because the firms with which transactions were alleged to have been done were registered at the time of the alleged transactions.
Observing that fraud vitiates even the most solemn proceedings, Justice Subhash Vidyarthi, held that “mere fact that the I.T.C. benefit had earlier been granted to the petitioner merely because the firms were registered, would not create any estoppel against the authority taking appropriate action for claiming refund of the benefit wrongly availed by the petitioner on the ground of receiving inward supplies from non-existent firms.”
The Sikkim High Court has held that when a procedure is prescribed, the petitioner, while seeking the grant of budgetary support, is required to follow that procedure and not work out a different procedure for the authorities to follow.
The bench of Justice Bhaskar Raj Pradhan has observed that when the petitioner was required by the authorities to modify their initial applications to a quarterly basis as required under the law, they had no choice but to reflect the balance of the ITC of CGST for the month of September 2017 as well.
Relying on its earlier decision in M/s Anandeshwar Traders v. State of U.P. and Others, the Allahabad High Court has held that the burden to prove double movement of goods based on same documents lies on the department.
The Allahabad High Court in M/s Anandeshwar Traders v. State of U.P. and Others held that the positive burden to prove that goods had been transported on an earlier occasion lies on the Assessing Authority. The Court had observed that since no inquiries were made from the assesee, toll plaza, purchasing dealer or any other source as to whether goods had been transported earlier, presumption could not have been drawn by the authorities merely based on the e-way bill.
No Change In Opening And Closing Stock Of NCDs; Bombay High Court Quashes Reassessment Notice
The Bombay High Court has quashed the reassessment notices as there was no change in the opening and closing stock of the non-convertible debts (NCDs).
The Bench of Justice K. R. Shriram and Justice Neela Gokhale has observed that the reopening of assessment by the notice was merely on the basis of a change of opinion of the AO. The change of opinion does not constitute justification and/or reasons to believe that income chargeable to tax has escaped assessment.
The Delhi High Court refuses to interfere with the order of the AO passed u/s 127 where the case of the Taxpayer was centralized and transferred from Income-tax Officer (ITO), Delhi to Deputy Commissioner of Income-tax (DCIT), Central Circle, Haryana.
As per Section 127 of Income tax Act, the [Principal Director General or Director General] or [Principal Chief Commissioner or Chief Commissioner] or [Principal Commissioner or Commissioner] may, after giving the assessee a reasonable opportunity of being heard in the matter, wherever it is possible to do so, and after recording his reasons for doing so, transfer any case from one or more Assessing Officers subordinate to him (whether with or without concurrent jurisdiction) to any other Assessing Officer or Assessing Officers (whether with or without concurrent jurisdiction) also subordinate to him.
The Bombay High Court recently quashed the search proceedings authorized by CBDT u/s 132(1) along with consequential notices and further actions on the ground that the material considered for authorizing the search is irrelevant and unrelated, and that “the reasons recorded, only indicates a mere pretence”.
Finding that the reasons forming part of the satisfaction note must satisfy the judicial conscience, the Division Bench comprising Justice K. R. Shriram and Justice Dr. Neela Gokhale observed that “the note also does not contain anything altogether regarding any reason to believe, on account of which, there is total non-compliance with the requirements as contemplated by Section 132(1) of the said Act which vitiates the search and seizure. It does not fulfil the jurisdictional pre-conditions specified in Section 132 of the Act”.
The Delhi High Court has held that the assessee can't be obstructed from availing of the benefits of the Direct Tax Vivad se Vishwas Act, 2020 (DTVSV Act) even where the time limit for an appeal has not expired.
The bench of Justice Yashwant Varma and Justice Purushaindra Kumar Kaurav has observed that the DTVSV Act aspires to finally free the tax arrears locked in litigation combat for ages and ultimately ensures timely collection of tax. In the present case, the dispute pertains to AY 2010–11. Much water has already flown through the gates, and a lot of time, resources, and energy have already been consumed in the ongoing litigation. Moreover, since the assessee aspires to avail himself of the benefits of the settlement scheme and the beneficial legislation in place to finally effectuate his aspirations.
The Allahabad High Court has held that plant and machinery sold after the closure of business are capital goods under Section 2(f) of the Uttar Pradesh Value Added Tax Act, 2008 and are excluded from levy of tax under the amended definition of 'business' under Section 2(e) of the Act.
The definition of 'business' under Section 2(e)(iv) of the Uttar Pradesh Value Added Tax Act, 2008 was amended in 2014 to include any transaction, even after the closure of business, if it relates to sale of goods acquired during the period in which business was carried out. Section 2(f) defines 'capital goods' as plant, machine, machinery, equipment, apparatus, tool, appliance or electrical installation used for manufacture or processing of any goods for sale by the dealer.
Right Of Appeal Relating To Value Of Service Maintainable Before Supreme Court: Meghalaya High Court
The Meghalaya High Court has held that the right of appeal relating to the value of service is maintainable before the Supreme Court.
The bench of Chief Justice S. Vaidyanathan and Justice W. Diengdoh has observed that there is an appellate remedy available to the appellant or to the aggrieved party in terms of Section 35G of the Central Excise Act, 1944; the issue pertaining to the value of service cannot be agitated before the High Court. The party has a right only before the Supreme Court in terms of Section 35L.
Crane Services To Transport Department Does Not Constitute Sale: Rajasthan High Court
The Rajasthan High Court, Jaipur Bench has held that crane services to the transport department does not constitute sale.
The bench of Justice Sameer Jain has observed that the crane services provided by the respondent-assessee do not constitute sale as provided under Section 2(35)(iv) of the Rajasthan Value Added Tax Act, 2003 and hence, the order of the Tax Board does not call for any interference.
The Calcutta High Court has held that if the share application money is neither a loan nor a deposit, then neither Section 269SS nor 269T of the Income Tax Act, 1961 shall apply. Consequently, no penalty, either under Section 271D or under Section 271E of the Income Tax Act, 1961, could be imposed.
The bench of Justice Surya Prakash Kesarwani and Justice Rajarshi Bharadwaj has observed that in cases of loans, it is ordinarily the duty of the debtor to seek the creditor and to repay the money according to the agreement. In other words, a loan grants temporary use of money or temporary accommodation under certain conditions. Thus, a loan is an act of advancing money by one person to another under an agreement by which the recipient of the money agrees to repay the amount on agreed terms.
The Orissa High Court has held that information related to the outcome of a tax evasion petition sought under the Right to Information Act cannot be provided.
The bench of Justice B.R. Sarangi and Justice G. Satapathy has observed that the claim of the petitioner with regard to the supply of information sought in the application filed under the Right to Information Act is not permissible in view of the provisions contained under clause (i) of Section 8(1) of the Right to Information Act.
The Allahabad High Court has held that once the acceptance of books of accounts by the Commissioner of Income Tax (Appeals) have not been objected to by the Assessing Authority before the Income Tax Appellate Tribunal, it is not open to the Assessing Officer to disturb the gross profit rate as declared by the assesee.
The bench comprising of Justice Saumitra Dayal Singh and Justice Donadi Ramesh held that “in absence of any other objection found in the books of accounts of the assessee as may have been pressed before the Tribunal, there survives no room to reject the books of accounts of the assessee. Consequently, there is no intrinsic evidence to enhance the gross profit rate. Once the books of accounts of an assessee are found accepted the Assessing Officer may have remained within the confines of his powers ad not disturbed the gross profit rate as that would remain in the nature of the result of the book entries and not an original entry by itself.”
The Gujarat High Court has upheld the imposition of a 12 percent tax on Mango Pulp since the inception of GST.
The court clarified that Circular No. 179/11/2022-GST dated August 3, 2022, and Notification No. 06/2022 dated July 13, 2022, simply reinforce that mango pulp falls under the 12 percent GST bracket, specifically after the inclusion of "Mangoes (other than mangoes, sliced, dried)" following guava.
The Allahabad High Court has held that the limitations prescribed under special statutes, such as Finance Act, 1994 will prevail over the limitations mentioned in the Limitation Act, 1963.
The Court held that statutes such as the Finance Act, 1994 or the Central Excise Act, 1944 were enabled to address specific areas of law and that they often contained detailed provisions regarding procedural aspects such as limitation.
The Gujarat High Court has ruled that the Notified Area Authority, Vapi, does not qualify as a local authority or governmental authority. As a result, the Solid Waste Management and recycling services provided to it are not eligible for exemption under Notification No. 12/2017-State Tax (Rate) dated 30th June 2017.
The division bench, comprising Justice Bhargav D. Karia and Justice Niral M. Mehta, held, “considering the conspectus of law laid down by the Hon'ble Apex Court in the case of New Okhla Industrial Development Authority (supra), the Notified Area Authority, Vapi cannot be considered as “local authority” or “Governmental Authority”. Therefore, the Notified Area Authority,Vapi is neither a “local authority” nor a “Governmental Authority” carrying out any activity in relation to any function entrusted to Panchayat under Article 243G of the Constitution or in relation to any function entrusted to Municipality under Article 243W of the Constitution.”
Additions U/s 69C Based Merely On CBIC Information Can't Be Sustained: Delhi High Court
The Delhi High Court sets aside the assessment order and remits the matter to AO on the ground that the additions of Rs.70.10 Cr. made under Section 69C as unexplained expenditure based merely on information received from Central Board of Indirect Taxes & Customs (CBIC) is unsustainable.
The Division Bench comprising Justice Vibhu Bakhru and Justice Tara Vitasta Ganju observed that if the AO intends to make any addition on account of unexplained expenditure, it can do so only after apprising himself as to the details of such expenditure and providing the assessee necessary opportunity to explain the same.
While remarking that the AO had no knowledge as to which import or purchase made by the Assessee was not disclosed by the Assessee, the Bench concurred with Assessee's submission that since it was not provided with the information based on which the addition was made, despite demanding the same, it was impossible for them to dispute the alleged additional purchases, except for stating that it had not imported goods of the value as disclosed in CBIC information.
The Calcutta High Court has held that the letter by the joint secretary cannot override the plain and unambiguous provisions of the Income Tax Act, 1961, and the Finance Act.
The bench of Justice Surya Prakash Kesarwani and Justice Rajarshi Bharadwaj has observed that the letter of the Joint Secretary merely informs that “the matter has been looked into and the board is of the opinion that the tax rate applicable in the case of ABN AMRO BANK would be the same as for an Indian company at the relevant tax rate applicable for the concerned assessment years." The letter is a D.O. letter. It is not a circular issued in exercise of power conferred under Section 119 of the Income Tax Act, 1961. Apart from that, the letter is in conflict with the plain and unambiguous provisions of the Act of 1961 and the Finance Act.
Additional Income Can't Be Treated As Concealed Income: Kerala High Court
The Kerala High Court has held that additional income cannot be treated as concealed income for the purposes of Section 271(1)(c) of the Income Tax Act.
The bench of Justice A.K. Jayasankaran Nambiar and Justice Syam Kumar V.M. has observed that a satisfactory explanation has been offered by the assessee, well before the issuance of a notice to him under Section 148 of the Income Tax Act, and the admission of additional income made by the assessee has been accepted by the department that completed the assessment under Section 143 read with Section 147 of the Income Tax Act. On that basis, the explanation offered by the assessee with regard to the differential income has to be seen as accepted by the Revenue for the purposes of the explanation under Section 271 of the Income Tax Act.
The Delhi High Court has held that once the Transfer Pricing Officer (TPO) had proceeded to pass the order of October 17, 2017, all that the AO was obliged to do was pass an assessment order in accordance with the procedure prescribed in Section 92CA(4) of the Income Tax Act.
“The prescription of nine months would also be applicable to a fresh order that is liable to be made in accordance with Section 92CA of the Act. This is since Section 153 of the Act speaks not merely of assessments but also of orders that are liable to be framed under Section 92CA. The order which is spoken of in Section 92CA of the Act, as explained above, is the one which the TPO may come to make in accordance with sub-section (3) thereof. It is thus manifest that the assessment exercise was liable to be concluded within a period of nine months when computed from July 14, 2017,” the bench of Justice Yashwant Varma and Justice Purushaindra Kumar Kaurav observed.
The Kerala High Court has held that the stipulation under Clause 16 of the Income Computation and Disclosure Standards (ICDS) for the adoption of first-in, first-out (FIFO) or weighted average cost for valuation of the stock or inventory cannot be applied in the Assessment Year 2017-2018 for the valuation of the opening stock, as the opening and closing stock of the year are to be valued by applying the same methodology.
The bench of Justice Dinesh Kumar Singh has observed that the substitution of Section 145A with retrospective effect from April 1, 2017 by the Finance Act, 2018 is to give relief to those assessees who had adopted the FIFO to value their stock in the Assessment Year 2017-18 and to save their returns from being declared incorrect or invalid. This retrospective operation has the same purpose and objective. However, if an assessee did not apply the FIFO to value its opening and closing stock, as it was not mandatory, requiring such an assessee to apply the FIFO to value their stocks for the assessment year 2017–18 would result in an uncalled-for outcome.
The Kerala High Court has held that the expenditure that was incurred by the appellant/assessee by way of addition to buildings and electrical fittings on leasehold premises was in the nature of capital expenditure and not revenue expenditure.
The bench of Justice Dr. A.K. Jayasankaran Nambiar has observed that the assessing authority and the First Appellate Authority have clearly relied on the written submissions given by the assessee to find that the nature of the expenses incurred by the assessee was capital in nature. Neither in the grounds of appeal before the First Appellate Authority nor before the Tribunal was there any material produced by the assessee to show that the expenses incurred by them were revenue in nature. If the assessee had in fact a case that the expenditure incurred by it was revenue in nature, then it was for the assessee to produce materials that would clearly demonstrate that the expenditure was revenue in nature.
The Gauhati High Court has held that the long-term capital gains are exempt from income tax, and the non-disclosure while computing the long-term capital gains cannot result in causing prejudice to the department.
The bench of Justice Kaushik Goswami has observed that the Principal Commissioner of Income Tax has initiated the proceedings simply on the basis of the proposal of the subordinate authority and has not applied his mind after perusal of the records called for by him, and the very initiation of the proceeding is illegal, without jurisdiction, and not tenable in law.
'Transit Rent' Can't Be Considered As 'Revenue Receipt', Not Liable To Be Taxed: Bombay High Court
The Bombay High Court has held that 'Transit Rent' is not to be considered a revenue receipt and is not liable to be taxed. As a result, there will be no question of the deduction of TDS from the amount payable by the developer to the tenant.
The bench of Justice Rajesh S. Patil has observed that the ordinary meaning of rent would be an amount that the tenant or licensee pays to the landlord or licensee. In the present proceedings, the term used is “transit rent," which is commonly referred to as a hardship allowance, rehabilitation allowance, or displacement allowance, which is paid by the developer or landlord to the tenant who suffers hardship due to dispossession.
The Allahabad High Court has held that Over Dimensional Cargo cannot be penalized by the authorities for reaching its destination in less time than estimated by travelling at a higher speed when there is no intention to evade tax.
Clause 2.4 of the Circular issued by Commissioner, State Tax dated 17.01.2024 provides that Over Dimensional Cargo cannot be detained and penalty cannot be imposed only because the goods have reached the intended place earlier than the estimated time.
“The mere fact that the goods in question were transported at a faster speed does not constitute sufficient grounds for penalization, in light of the departmental circular explicitly excluding transit speed as a criterion for classification. The reliance on speculative assumptions and conjectural reasoning to justify the imposition of penalties is antithetical to the principles of fairness and equity that underpin the rule of law,” held Justice Shekhar B. Saraf.
The Allahabad High Court has held that the franchise agreement granted a non-exclusive licence rather than a transfer of the right to use goods and the transaction does not attract Value Added Tax under the Uttar Pradesh Value Added Tax Act (UPVAT Act).
The bench of Justice Shekhar B. Saraf has observed that the respondent-department had received royalty amount from various dealers under the franchise agreement and service tax has been duly paid by it on the same. If the payments have been subjected to service tax, they cannot be recharacterized as the sale of goods to levy VAT or sales tax.
The Delhi High Court has held that interest received by the Indian PE on deposits maintained with the Head Office/Overseas Branch is not taxable in India.
The bench of Justice Yashwant Varma and Justice Purushaindra Kumar Kaurav has observed that the branch office would not partake in the character or attribute of a separate legal personality; the view as taken by the Tribunal is clearly rendered unexceptional. In any event, it would be the exception carved out in the Double Taxation Avoidance Agreement (DTAA) with respect to banking enterprises that would govern.
The Delhi High Court, while quashing the penalty, has held that both under-reporting and misreporting are viewed as separate and distinct misdemeanours.
The bench of Justice Yashwant Varma and Justice Purushaindra Kumar Kaurav has observed that, as per Section 270A(1), a person would be liable to be considered to have under-reported their income if the contingencies spoken of in clauses (a) to (g) of Section 270A(2) were attracted. In terms of Section 270A(3), the under-reported income is liable to be computed in accordance with the prescribed stipulations.
The Kerala High Court has held that a claim for exemption in respect of transit sales must be justified by showing the sale as having occurred in transit.
The bench of Justice A.K. Jayasankaran Nambiar and Justice Syam Kumar V.M. has observed that the petitioner/assessee cannot establish the transit sales by showing the sale as having occurred in transit since the E1 Forms relied on by the assessee have been accounted for only in a subsequent year, which could only be after the transportation of the goods and not while the goods were in transit.
The Delhi High Court has held that exemption is allowable on donations made by one charitable trust to other charitable institutions for a temporary period.
The bench of Justice Yashwant Varma and Justice Purushaindra Kumar Kaurav has observed that Section 11(3) of the Income Tax Act and the adverse consequences would have been attracted provided the incomes so accumulated were diverted for a purpose other than charitable or religious, or where they were not utilized for the purpose for which they were so accumulated or set apart during the period of five years contemplated under Section 11(2)(a). This was not a case where a permanent endowment was made or one where the donation stood imbued with some degree of permanency. It also cannot possibly be said that the money was lost or became unavailable to be applied.
Colourable Devices To Evade Tax Can't Be Tax Planning, Rules Telangana High Court
The Telangana High Court has held that tax planning may be legitimate, provided it is within the framework of the law. Colorable devices cannot be part of tax planning, and it is wrong to encourage or entertain the belief that it is honorable to avoid the payment of tax by resorting to dubious methods. It is the obligation of every citizen to pay the taxes honestly without resorting to subterfuges.
The bench of Justice P.Sam Koshy and Justice Laxmi Narayana Alishetty has relied on the decision of the Apex Court in the case of McDowell & Co. Ltd. v. CTO, in which it was held that the proper way to construe a taxing statute while considering a device to avoid tax is not to ask whether the provisions should be construed literally or liberally, nor whether the transaction is not unreal and not prohibited by the statute, but whether the transaction is a device to avoid tax, and whether the transaction is such that the judicial process may accord its approval to it.
The Delhi High Court has held that the deduction under Section 37 of the Income Tax Act is allowable on unsettled claims as well as Incurred But Not Reported (IBNR), which would amount to contingent liabilities.
The bench of Justice Yashwant Varma and Justice Purushaindra Kumar Kaurav has observed that if the historical trend indicates that a large number of sophisticated goods were being manufactured in the past and if the facts established show that defects existed in some of the items manufactured and sold, then the provision made for warranty in respect of the army of such sophisticated goods would be entitled to deduction from the gross receipts under Section 37 of the 1961 Act. It would all depend on the data systematically maintained by the assessee.
The Kerala High Court has held that it is the prerogative of the government to fix the limit of income from the encashment of earned leave salary for the purposes of exemption from payment of income tax. Unless the government issues a notification fixing the limit of income for earned leave salary, an employee cannot claim exemption from payment of income tax on the encashment of earned leave for up to 300 days.
The bench of Justice Murali Purushothaman has observed that the last notification was issued on May 31, 2002, and the government did not thereafter issue a notification despite there having been three pay revisions. The latest notification is only in 2023, after which the upper limit has been fixed at Rs. 25 lakhs, taking the highest salary of the cabinet secretary, i.e., Rs. 2.5 lakhs per month.
While upholding ITAT's decision deleting disallowance of provisions for unsettled outstanding claims and 'Incurred But Not Reported' (IBNR) claims of health insurance company, the Delhi High Court held that provisions for unsettled outstanding and IBNR claims are not contingent liabilities, and hence allowable u/s 37 of Income tax Act.
The Division Bench comprising Justice Yashwant Varma and Justice Purushaindra Kumar Kaurav observed that “it would be wholly incorrect to understand IBNR provisioning to be a contingent liability. We, in this regard, bear in consideration the precepts of reasonable estimation, the capability of a liability being quantified based upon historical trends and the known actuarial methods for estimation which are liable to be adopted in accordance with the IRDA Regulations”.
While quashing a show cause notice issued by the Department for initiation of penalty proceedings u/s 270A in a vague manner, the Delhi High Court held that categorical finding of 'mis-reporting/ under-reporting' is essential for levy of penalty u/s 270A.
The High Court also set aside an order dismissing immunity claimed by the assessee u/s 270AA and dropped the penalty proceedings u/s 270A due to AO's failure to allude to specific charge of misreporting or under-reporting in show cause notice.
While quashing the reassessment notice issued to the Assessee, pursuant to a search operation conducted against a third party, the Delhi High Court held the same to be barred by limitation under first proviso to Section 149(1) read with Section 153C & Section 153A of Income tax Act. The High Court rejected the AO's contention that Section 148 notice would not be beyond the limitation period as provided under the first proviso to Section 149 when computed from the date of actual search of the third party.
The Bombay High Court has upheld the order passed by the Income Tax Appellate Tribunal (ITAT) directing Vodafone India to deposit Rs. 230 crores for staying income tax demand.
The bench of Justice G. S. Kulkarni and Justice Somasekhar Sundaresan directed the petitioner, Vodafone India, to deposit an amount of Rs. 230 crore, being the lowest or minimum amount of 20% of the disputed tax demand, which, in our opinion, is clearly in consonance with the provisions of Section 254(2A) of the Income Tax Act.
The Kerala High Court has held that the statutory scheme for determining the taxable turnover of a works contract under the Kerala Value Added Tax Act (KVAT Act) does not suffer from any defect so as to render it unworkable to effectuate the charge to tax on a works contract.
The bench of Justice A.K. Jayasankaran Nambiar and Justice Syam Kumar V. M. has observed that it was incumbent upon the petitioner or assessee to declare the total turnover (contract receipts) pertaining solely to the works undertaken by them without including the component representing the value of the undivided share in the land. If the petitioner assessees choose not to do so, they have only themselves to blame for the predicament that they find themselves in.
ITC Wrongfully Availed But No Fraud/Misstatement Proven; Madras High Court Imposes Token Penalty
The Madras High Court has imposed a token penalty of Rs. 10,000 on the assessee instead of a higher penalty as the assessee wrongfully availed of the input tax credit (ITC), but the department could not prove fraud or misstatement on the part of the assessee.
The bench of Justice C. Saravanan has observed that the assessee reversed the ITC. Penalties under Section 74 deal with situations where credit is availed or utilized by reason of fraud or any wilful misstatement or suppression of facts that was not proved by the department.
The Gauhati High Court has held that it is not mandatory for the assessee to install all capital goods in the year of procurement itself so as to avail CENVAT credit.
The bench of Chief Justice Vijay Bishnoi and Justice Suman Shyam has observed that as long as the CENVAT credit is availed during the period of exemption available under the Notification dated July 8, 1999, the claim of the assessee would not stand extinguished merely because the CENVAT credit claim was not lodged nor availed during the financial years when the capital goods were procured.
Slump Sale Doesn't Amount To Sale Of Goods Within MVAT Act: Bombay High Court
The Bombay High Court has held that slump sale under the Business Transfer Agreement (BTA) would not amount to sale of goods within the purview of the Maharashtra Value Added Tax (MVAT) Act.
The bench of Justice G. S. Kulkarni and Justice Jitendra Jain has observed that it was completely a flawed approach on the part of the reviewing authority to tax part of the BTA considering it to be petitioner's sales/turnover of sales, for the financial year 2010-11 in respect of the amounts of the intangible assets as set out in schedule 3.3 of the BTA. Thus, in the context of the BTA, the reviewing authority could not have regarded the intangible items to be in any manner “sale of goods”, so as to fall within the petitioner's turnover of sales.
The Madras High Court has quashed the order imposing tax demands on post-sale discounts received by way of financial credit notes on the ground that receiving a discount is not tenable in law.
The bench of Justice Senthilkumar Ramamoorthy has observed that the assessing officer concluded that the taxable person is providing a service to the supplier while taking advantage of a discount by facilitating an increase in the volume of sales of such supplier. This conclusion is ex facie erroneous and contrary to the fundamental tenets of GST law.
Credit Available On Advance Tax Paid For Stock-Transferred: Kerala High Court
The Kerala High Court has held that the petitioner will be entitled to credit for the entire amount paid in terms of Circular No. 50/2006 for the goods in question, which were stock-transferred to its branch office in Pollachi.
The bench of Justice Gopinath P. has observed that a combined reading of the provisions of Circular No. 50/2006 and the definition of input tax in Section 2(xxiii) of the KVAT Act indicates that the tax paid in terms of Circular No. 50/2006 cannot assume the character of input tax.
The Bombay High Court has held that transportation of machinery from Jawaharlal Nehru Port Authority (JNPT) to the factory of the assessee does not constitute supply, and hence GST is not payable.
The bench of Justice K.R. Shriram and Justice Jitendra Jain has observed that the first limb of Section 129(1)(a), which provides for a penalty equal to one hundred percent of the tax payable, cannot be invoked in the present case. The State GST Authority in the impugned order has erroneously applied the rate of GST without first satisfying itself whether the transportation to one's own factory can at all fall within the charging section. The applicability of the rate of tax would get triggered only if a transaction falls within the meaning of the term “supply” as per Section 7 of the Maharashtra Goods and Service Tax Act (MGST Act).
Assessment Order Passed Against Dead Person Is Nullity: Karnataka High Court
The Karnataka High Court, while quashing the assessment order, held that the assessment order under Section 147 read with Section 144 of the Income Tax Act amounts to nullity.
The bench of Justice S. Sunil Dutt Yadav has observed that when the assessee dies during the pendency of the proceedings, proceedings are to be continued through the legal representatives of the deceased.
The Karnataka High Court has held that undervaluation cannot be a ground for seizure of goods in transit by the inspecting authority.
The bench of Justice Krishna S. Dixit and Justice Ramachandra D. Huddar upheld the single bench order in which the obligation to pay tax and penalty has been quashed coupled with a direction to release the vehicle.
The Gujarat High Court has allowed the deduction under Section 54 of the Income Tax Act on the cash transaction of the sale and purchase of residential property.
The bench of Justice Bhargav D. Karia and Justice Niral R. Mehta, while quashing the order of the Interim Board for Settlement Commission, denied the deduction of Rs. 2.4 crore with respect to the cash transaction of the sale and purchase of the residential property.