Supreme Court Annual Digest 2022-Income Tax

Income Tax Act, 1961 - Appeal against Gujarat High Court judgment extending the immunity under the "Income Declaration Scheme" (IDS) to an assessee who was not the declarant under the scheme - Allowed - The High Court fell into error, in holding that the sequitur to a declaration under the IDS can lead to immunity (from taxation) in the hands of a non-declarant. Deputy Commissioner of Income Tax v. MR Shah Logistics, 2022 LiveLaw (SC) 323 : 2022 (5) SCALE 395

Income Tax Act, 1961 - The ‘fee’ or ‘charge’ as mentioned in Section 40(a)(iib) is clear in terms and that will take in only ‘fee’ or ‘charge’ as mentioned therein or any fee or charge by whatever name called, but cannot cover tax or surcharge on tax and such taxes are outside the scope and ambit of Section 40(a)(iib)(A) and Section 40(a)(iib)(B) of the Act. (Para 14.3) Kerala State Beverages Manufacturing & Marketing Corporation Ltd. v. Assistant Commissioner of Income Tax Circle 1(1), 2022 LiveLaw (SC) 4: AIR 2022 SC 309 : (2022) 4 SCC 240

Income Tax Act, 1961 - The aspect of ‘exclusivity’ under Section 40(a)(iib) has to be viewed from the nature of undertaking on which levy is imposed and not on the number of undertakings on which the levy is imposed- Exclusivity is to be considered with reference to nature of licence and not on number of State-owned Undertakings. (Para 14.2) Kerala State Beverages Manufacturing & Marketing Corporation Ltd. v. Assistant Commissioner of Income Tax Circle 1(1), 2022 LiveLaw (SC) 4: AIR 2022 SC 309 : (2022) 4 SCC 240

Income Tax Act, 1961 - The surcharge on sales tax and turnover tax, is not a fee or charge coming within the scope of Section 40(a)(iib)(A) or 40(a)(iib)(B), as such same is not an amount which can be disallowed under the said provision. (Para 16) Kerala State Beverages Manufacturing & Marketing Corporation Ltd. v. Assistant Commissioner of Income Tax Circle 1(1), 2022 LiveLaw (SC) 4 : AIR 2022 SC 309 : (2022) 4 SCC 240

Income Tax Act, 1961 - Turnover tax is also outside the purview of Section 40(a) (iib)(A) and 40(a)(iib)(B). (Para 15) Kerala State Beverages Manufacturing & Marketing Corporation Ltd. v. Assistant Commissioner of Income Tax Circle 1(1), 2022 LiveLaw (SC) 4 : AIR 2022 SC 309 : (2022) 4 SCC 240

Section 2 (1A) - "Agricultural Income"

Income Tax Act, 1961; Section 2 (1A) - Companies Act, 1956; Section 394 (2), 481 - Despite amalgamation, the business, enterprise and undertaking of the transferee or amalgamated company- which ceases to exist, after amalgamation, is treated as a continuing one, and any benefits, by way of carry forward of losses (of the transferor company), depreciation, etc., are allowed to the transferee - Whether corporate death of an entity upon amalgamation per se invalidates an assessment order ordinarily cannot be determined on a bare application of Section 481 of the Companies Act, 1956 (and its equivalent in the 2013 Act), but would depend on the terms of the amalgamation and the facts of each case. (Para 42) Principal Commissioner of Income Tax v. Mahagun Realtors (P) Ltd; 2022 LiveLaw (SC) 346 : AIR 2022 SC 1672

Section 2 (15) - "Charitable Purpose"

Income Tax Act, 1961; Section 2(15) - Tax exemption for charitable purposes - An assessee advancing general public utility cannot engage itself in any trade, commerce or business, or provide service in relation thereto for any consideration-However, in the course of achieving the object of general public utility, the concerned trust, society, or other such organization, can carry on trade, commerce or business or provide services in relation thereto for consideration, provided that the activities of trade, commerce or business are connected to the achievement of its objects of GPU; and the receipts do not exceed the quantified limit. (Para 253) Assistant Commissioner of Income Tax v. Ahmedabad Urban Development Authority, 2022 LiveLaw (SC) 865

Income Tax Act 1961; Section 2(15) - Tax exemption for charitable purposes - for achieving a general public utility object, if the charity involves itself in activities, that entail charging amounts only at cost or marginal mark up over cost, and also derive some profit, the prohibition against carrying on business or service relating to business is not attracted - if the quantum of such profits do not exceed 20% of its overall receipts. (Para 172) Assistant Commissioner of Income Tax v. Ahmedabad Urban Development Authority, 2022 LiveLaw (SC) 865

Income Tax Act 1961; Section 2(15) - Amounts charged by statutory authorities, corporations, statutory regulatory authorities for their public activities can't be treated as commercial receipts-However, if the amounts collected are significantly higher than the costs incurred, it can be treated as commercial income. (Para 253) Assistant Commissioner of Income Tax v. Ahmedabad Urban Development Authority, 2022 LiveLaw (SC) 865

Income Tax Act 1961; Section 2(15) - Tax exemption for professional bodies like ICAI- bodies which regulate professions and are created by or understatutes which are enjoined to prescribe compulsory courses to be undergone before the individuals concerned is entitled to claim entry into the profession or vocation, and also continuously monitor the conduct of its members do not ipsofacto carry on activities in the nature of trade, commerce or business, or services in relation thereto-However, this is subject to the caveat that if the assessing authorities discern that certain kinds of activities carried out by such regulatory body involved charging of fees that are significantly higher than the cost incurred (with a nominal mark-up) or providing other facilities or services such as admission forms, coaching classes, registration processing fees, etc., at markedly higher prices, those would constitute commercial or business receipts. (Para 196, 253) Assistant Commissioner of Income Tax v. Ahmedabad Urban Development Authority, 2022 LiveLaw (SC) 865

Section 10 - Incomes not included in total income

Income Tax Act, 1961; Section 10(23C) - The requirement of the charitable institution, society or trust etc., to 'solely' engage itself in education or educational activities, and not engage in any activity of profit, means that such institutions cannot have objects which are unrelated to education - All objects of the society, trust etc., must relate to imparting education or be in relation to educational activities - Where the objective of the institution appears to be profit-oriented, such institutions would not be entitled to approval under Section 10(23C) of the IT Act. At the same time, where surplus accrues in a given year or set of years per se, it is not a bar, provided such surplus is generated in the course of providing education or educational activities. (Para 60, 76-a,b) New Noble Educational Society v. Chief Commissioner of Income Tax 1,2022 LiveLaw (SC) 859 : 2022 (15) SCALE 302

Income Tax Act, 1961; Section 10(23C) - Wherever registration of trust or charities is obligatory under state or local laws, the concerned trust, society, other institution etc. seeking approval under Section 10(23C) should also comply with provisions of such state laws. This would enable the Commissioner or concerned authority to ascertain the genuineness of the trust, society etc.). (Para 73,76-g) New Noble Educational Society v. Chief Commissioner of Income Tax 1,2022 LiveLaw (SC) 859 : 2022 (15) SCALE 302

Income Tax Act, 1961; Section 10(5), 192(1) - Income Tax Rules, 1962; Rule 2B - Appeal against Delhi HC Judgment holding that amount received by SBI employees towards their Leave Travel Concession (LTC) claims is not liable for the exemption as these employees had visited foreign countries which is not permissible under the law - Dismissed - LTC is not for foreign travel - The travel must be done from one designated place in India to another designated place within India - The moment employees undertake travel with a foreign leg, it is not a travel within India and hence not covered under the provisions of Section 10(5) - Employer cannot claim ignorance about the travel plans of its employees as during settlement of LTC Bills the complete facts are available before the assessee about the details of their employees' travels. Therefore, it cannot be a case of bonafide mistake. State Bank of India v. Assistant Commissioner of Income Tax, 2022 LiveLaw (SC) 917 : AIR 2022 SC 5604

Income Tax Act, 1961; Section 10B(8) - For claiming the benefit under Section 10B (8) of the IT Act, the twin conditions of furnishing a declaration before the assessing officer and that too before the due date of filing the original return of income under section 139(1) are to be satisfied and both are mandatorily to be complied with. (Para 14) Principal Commissioner of Income Tax-III Bangalore v. Wipro Ltd., 2022 LiveLaw (SC) 583 : AIR 2022 SC 3466

Section 12AA - Procedure for registration

Income Tax Act, 1961; Section 12AA - Registration of a trust or institution - Even if in a case where the registration application under Section 12AA is not decided within six months, there shall not be any deemed registration. Harshit Foundation v Commissioner, 2022 LiveLaw (SC) 431

Section 36 - Other deductions

Income Tax Act, 1961; Sections 36(1)(va), 43B - The non-obstante clause under Section 43B or anything contained in that provision would not absolve the assessee from its liability to deposit the employee's contribution on or before the due date as a condition for deduction - There is a marked distinction between the nature and character of the two amounts viz. the employers' contribution and employees' contribution required to be deposited by the employer - the employer's liability is to be paid out of its income whereas the second is deemed an income, by definition, since it is the deduction from the employees' income and held in trust by the employer. (Para 53-54) Checkmate Services Pvt. Ltd. v. Commissioner of Income Tax-I, 2022 LiveLaw (SC) 838 : 2022 (15) SCALE 117

Section 37 – General

Income Tax Act, 1961; Section 37 - Loss suffered owing to exchange fluctuation while repaying loan can be regarded as revenue expenditure - The exchange fluctuation loss is an expenditure incidental to carrying on of business and comes within the purview of section 37 of the Act as the same is incurred wholly and exclusively for the purposes of business. (Para 3, 7-9) Wipro Finance Ltd. v. Commissioner of Income Tax, 2022 LiveLaw (SC) 418

Income Tax Act, 1961 - Section 37(1) - Explanation 1 contains within its ambit all such activities which are illegal/prohibited by law and/or punishable. (Para 17) Apex Laboratories Pvt. Ltd. v. Deputy Commissioner, 2022 LiveLaw (SC) 195 : (2022) 7 SCC 98

Income Tax Act, 1961 - Section 37(1) - Indian Medical Council (Professional Conduct, Etiquette and Ethics) Regulations, 2002 - Pharmaceutical companies' gifting freebies to doctors, etc. is clearly "prohibited by law", and not allowed to be claimed as a deduction under Section 37(1) - When acceptance of freebies is punishable by the MCI, pharmaceutical companies cannot be granted the tax benefit for providing such freebies, and thereby (actively and with full knowledge) enabling the commission of the act which attracts such opprobrium. (Para 33, 22) Apex Laboratories Pvt. Ltd. v. Deputy Commissioner, 2022 LiveLaw (SC) 195 : (2022) 7 SCC 98

Income Tax Act, 1961 - Section 37(1) - Indian Medical Council (Professional Conduct, Etiquette and Ethics) Regulations, 2002 - Denial of the tax benefit cannot be construed as penalizing the assessee pharmaceutical company. Only its participation in what is plainly an action prohibited by law, precludes the assessee from claiming it as a deductible expenditure. (Para 27) Apex Laboratories Pvt. Ltd. v. Deputy Commissioner, 2022 LiveLaw (SC) 195 : (2022) 7 SCC 98

Section 40 - Amounts not deductible

Income Tax Act, 1961 - Kerala General Sales Tax Act, 1963 - Surcharge or tax were never intended to be included in the net of amended Section 40(a)(iib)(A) or 40(a)(iib)(B) of the Income­tax Act, 1961. (Para 14.5) Kerala State Beverages Manufacturing & Marketing Corporation Ltd. v. Assistant Commissioner of Income Tax Circle 1(1), 2022 LiveLaw (SC) 4: AIR 2022 SC 309 : (2022) 4 SCC 240

Section 45 - Capital gains

Income Tax Act, 1961; Section 45(4) - Section 45(4) applicable to not only the cases of dissolution but also cases of subsisting partners of a partnership, transferring the assets in favour of a retiring partner. Commissioner of Income Tax v. Mansukh Dyeing and Printing Mills, 2022 LiveLaw (SC) 991

Section 127 - Power to transfer cases

Income Tax Act, 1961; Section 127 - by administrative order a 'case' can be transferred from one Assessing Authority to another Assessing Officer located in a different State - power of transfer under Section 127 relates to the jurisdiction of the Income Tax Authorities, not the ITAT of High Court - appellate jurisdiction of a High Court cannot dependent upon pure executive power exercised under Section 127 - transfer of a case from one judicial forum to another judicial forum, without the intervention of Court is against the independence of judiciary - even when cases of an assessee are transferred, the High Court within whose jurisdiction the Assessing Officer has passed the order, shall continue to exercise appellate jurisdiction - this would be true even when the transfer is under Section 127 for the same assessment year. [Para Nos. 19, 25, 26, 28, 29, 31, 33] Pr. Commissioner of Income Tax-I, Chandigarh v. ABC Papers Ltd., 2022 LiveLaw (SC) 686 : AIR 2022 SC 3905

Section 132 - Search and seizure

Income Tax Act, 1961; Section 132 - Appeal against the judgment of High Court of Gujarat whereby the warrant of authorization issued by Principal Director of Income Tax (Investigation) under Section 132 of the Income Tax Act was quashed - Allowed - The question as to whether such reasons are adequate or not is not a matter for the Court to review in a writ petition. The sufficiency of the grounds which induced the competent authority to act is not a justiciable issue. Principal Director of Income Tax (Investigation) v. Laljibhai KanjiBhai Mandalia, 2022 LiveLaw (SC) 592 : AIR 2022 SC 3304

Income Tax Act, 1961; Section 132 - Principles in exercising the writ jurisdiction in the matter of search and seizure under Section 132 restated. (Para 33) Principal Director of Income Tax (Investigation) v. Laljibhai KanjiBhai Mandalia, 2022 LiveLaw (SC) 592 : AIR 2022 SC 3304

Income Tax Act, 1961; Section 132 - Sufficiency or inadequacy of the reasons to believe recorded cannot be gone into while considering the validity of an act of authorization to conduct search and seizure. The belief recorded alone is justiciable but only while keeping in view the Wednesbury Principle of Reasonableness. Such reasonableness is not a power to act as an appellate authority over the reasons to believe recorded. (Para 32) Principal Director of Income Tax (Investigation) v. Laljibhai KanjiBhai Mandalia, 2022 LiveLaw (SC) 592 : AIR 2022 SC 3304

Section 148 - Issue of notice where income has escaped assessment.

Income Tax Act, 1961; Section 148, 148A - Finance Act, 2021 - (i) The respective impugned section 148 notices issued to the respective assessees shall be deemed to have been issued under section 148A of the IT Act as substituted by the Finance Act, 2021 and treated to be show cause notices in terms of section 148A(b). The respective assessing officers shall within thirty days from today provide to the assessees the information and material relied upon by the Revenue so that the assessees can reply to the notices within two weeks thereafter; (ii) The requirement of conducting any enquiry with the prior approval of the specified authority under section 148A(a) be dispensed with as a one time measure vis­à­vis those notices which have been issued under Section 148 of the unamended Act from 01.04.2021 till date, including those which have been quashed by the High Courts; (iii) The assessing officers shall thereafter pass an order in terms of section 148A(d) after following the due procedure as required under section 148A(b) in respect of each of the concerned assessees; (iv) All the defences which may be available to the assessee under section 149 and/or which may be available under the Finance Act, 2021 and in law and whatever rights are available to the Assessing Officer under the Finance Act, 2021 are kept open and/or shall continue to be available and; (v) The present order shall substitute/modify respective judgments and orders passed by the respective High Courts quashing the similar notices issued under unamended section 148 of the IT Act irrespective of whether they have been assailed before this Court or not - The present order shall govern, not only the impugned judgments and orders passed by the High Court of Judicature at Allahabad, but shall also be made applicable in respect of the similar judgments and orders passed by various High Courts across the country and therefore the present order shall be applicable to pan India. (Para 8) Union of India v. Ashish Agarwal, 2022 LiveLaw (SC) 444 : AIR 2022 SC 2781

Constitution of India, 1950; Article 226 - Appeal against Bombay HC judgments dismissing writ petitions reopening of the assessment/re-assessment proceedings under Section 148 of the Income Tax Act - Allowed - Orders are bereft of reasoning as diverse grounds were urged/raised by the parties which ought to have been examined by the High Court in the first place and a clear finding was required to be recorded upon analysing the relevant documents - Remanded. Vishal Ashwin Patel v. Assistant Commissioner, 2022 LiveLaw (SC) 322

Section 194A - Interest other than "Interest on securities"

Income Tax Act, 1961; Section 194A(1) - Any person who is responsible for paying to a resident any income by way of interest shall at the time of credit of such income to the account of the payee or at the time of payment thereof in cash/cheque or draft whichever is earlier deduct income tax thereon at the rates in force - the Union Bank of India did not deduct TDS at source while paying interest to Agra Development Authority, but subsequently deducted and deposited the same within the financial year. Union Bank of India v. Additional Commissioner of Income Tax (TDS), 2022 LiveLaw (SC) 278

Income Tax Act, 1961; Section 194A(3)(iii)(f) - Provided for exemption from mandate of Section 194A(1), inter alia, for paying interest to such corporations as notified by the Central Government - Central Government vide notification dated 22.10.1970 notified corporation established by a statute for the purpose of exemption - Applying the same principle as in Commissioner of Income Tax (TDS) Kanpur And Anr. v. Canara Bank (2018) 9 SCC 322, the Apex Court permitted Agra Development Authority to be considered as a corporation established by a statute - Therefore, Union Bank of India was eligible for the exemption. Union Bank of India v. Additional Commissioner of Income Tax (TDS), 2022 LiveLaw (SC) 278

Section 194H - Commission or brokerage

Income Tax Act, 1961; Section 194H - Contract Act, 1870; Section 182 - Application of Section 194H of the IT Act to the Supplementary Commission amounts earned by the travel agent - Section 194H is to be read with Section 182 of the Contract Act. If a relationship between two parties as culled out from their intentions as manifested in the terms of the contract between them indicate the existence of a principal­agent relationship as defined under Section 182 of the Contract Act, then the definition of "Commission" under Section 194H of the IT Act stands attracted and the requirement to deduct TDS arises. Singapore Airlines Ltd. v. C.I.T., Delhi, 2022 LiveLaw (SC) 959

Section 220 - When tax payable and when assessee deemed in default.

Income Tax Act, 1961; Section 220(2A) - Merely raising the dispute before any authority cannot be a ground not to levy the interest and/or waiver of interest under Section 220(2A) - Otherwise each and every assessee may raise a dispute and thereafter may contend that as the assessee was bona fidely litigating and therefore no interest shall be leviable - Under Section 220(2) of the Act, the levy of simple interest on non-payment of the tax @ 1% p.a. is, as such, mandatory. Pioneer Overseas Corporation USA v. Commissioner of Income Tax, 2022 LiveLaw (SC) 944

Section 254 - Orders of Appellate Tribunal

Income Tax Act, 1961; Section 254 - Limitation to to entertain fresh claim would apply to the "assessing authority", but not impinge upon the plenary powers of the ITAT bestowed under Section 254 of the Act - Rejected contention that ITAT cannot entertain fresh claim for the first time. (Para 10-11) Wipro Finance Ltd. v. Commissioner of Income Tax, 2022 LiveLaw (SC) 418

Section 260A - Appeal to High Court

Income Tax Act, 1961; Section 260A - Appeals against every decision of ITAT shall lie only before the High Court within whose jurisdiction the assessing officer who passed the assessment order is situated. Commissioner of Income Tax - I v. Balak Capital Pvt. Ltd; 2022 LiveLaw (SC) 982

Income Tax Act, 1961; Section 260A - provides for a statutory appeal to the High Court against every order of the ITAT - does not specify the High Court before which an appeal would lie in cases where Tribunals operated for plurality of States - benches of the ITAT are constituted to exercise jurisdiction over more than one state; functions as the administrative discretion of the President - jurisdiction exercised by the benches of the ITAT do not follow the structure contemplated in Article 1 of the Constitution, which divides the Union into States and Union Territories - the appropriate High Court would be the one where the Assessing Authority is situated. [Para Nos. 13.3, 14, 15, 18, 30, 33] Pr. Commissioner of Income Tax-I, Chandigarh v. ABC Papers Ltd., 2022 LiveLaw (SC) 686 : AIR 2022 SC 3905

Income Tax Act 1961; Section 260A - Appeals against orders of Income Tax Appellate Tribunal (ITAT) will lie only before the High Court within whose jurisdiction the assessing officer is situated. Even if the case or cases of an assessee are transferred in exercise of power under Section 127 of the Act, the High Court within whose jurisdiction the Assessing Officer has passed the order, shall continue to exercise the jurisdiction of appeal. This principle is applicable even if the transfer is under Section 127 for the same assessment year(s). (Para 33) Pr. Commissioner of Income Tax-I, Chandigarh v. ABC Papers Ltd., 2022 LiveLaw (SC) 686 : AIR 2022 SC 3905

Section 271C - Penalty for failure to deduct tax at source

Income Tax Act, 1961; Section 271C - If the recipient of income on which TDS has not been deducted, even though it was liable to such deduction under the IT Act, has already included that amount in its income and paid taxes on the same, the Assessee can no longer be proceeded against for recovery of the short fall in TDS. However, it would be open to the Revenue to seek payment of interest under Section 201(1A) for the period between the date of default in deduction of TDS and the date on which the recipient actually paid income tax on the amount for which there had been a shortfall in such deduction. (Para 56) Singapore Airlines Ltd. v. C.I.T., Delhi, 2022 LiveLaw (SC) 959

NOMINAL INDEX

1. Apex Laboratories Pvt. Ltd. v. Deputy Commissioner, 2022 LiveLaw (SC) 195 : (2022) 7 SCC 98
2. Assistant Commissioner of Income Tax v. Ahmedabad Urban Development Authority, 2022 LiveLaw (SC) 865
3. Checkmate Services Pvt. Ltd. v. Commissioner of Income Tax-I, 2022 LiveLaw (SC) 838 : 2022 (15) SCALE 117
4. Commissioner of Income Tax - I v. Balak Capital Pvt. Ltd; 2022 LiveLaw (SC) 982
5. Commissioner of Income Tax v. Mansukh Dyeing and Printing Mills, 2022 LiveLaw (SC) 991
6. Deputy Commissioner of Income Tax v. MR Shah Logistics, 2022 LiveLaw (SC) 323 : 2022 (5) SCALE 395
7. Harshit Foundation v Commissioner, 2022 LiveLaw (SC) 431
8. Kerala State Beverages Manufacturing & Marketing Corporation Ltd. v. Assistant Commissioner of Income Tax Circle 1(1), 2022 LiveLaw (SC) 4: AIR 2022 SC 309 : (2022) 4 SCC 240
9. New Noble Educational Society v. Chief Commissioner of Income Tax 1,2022 LiveLaw (SC) 859 : 2022 (15) Scale 302
10. Pioneer Overseas Corporation USA v. Commissioner of Income Tax, 2022 LiveLaw (SC) 944
11. Pr. Commissioner of Income Tax-I, Chandigarh v. ABC Papers Ltd., 2022 LiveLaw (SC) 686 : AIR 2022 SC 3905
12. Principal Commissioner of Income Tax v. Mahagun Realtors (P) Ltd; 2022 LiveLaw (SC) 346 : AIR 2022 SC 1672
13. Principal Commissioner of Income Tax-III Bangalore v. Wipro Ltd., 2022 LiveLaw (SC) 583 : AIR 2022 SC 3466
14. Principal Director of Income Tax (Investigation) v. Laljibhai KanjiBhai Mandalia, 2022 LiveLaw (SC) 592 : AIR 2022 SC 3304
15. Singapore Airlines Ltd. v. C.I.T., Delhi, 2022 LiveLaw (SC) 959
16. State Bank of India v. Assistant Commissioner of Income Tax, 2022 LiveLaw (SC) 917 : AIR 2022 SC 5604
17. Union Bank of India v. Additional Commissioner of Income Tax (TDS), 2022 LiveLaw (SC) 278
18. Union of India v. Ashish Agarwal, 2022 LiveLaw (SC) 444 : AIR 2022 SC 2781
19. Vishal Ashwin Patel v. Assistant Commissioner, 2022 LiveLaw (SC) 322
20. Wipro Finance Ltd. v. Commissioner of Income Tax, 2022 LiveLaw (SC) 418