CA Abhay Agrawal

CA Abhay AgrawalRulings of Hon’ble Supreme Court of India

1. P.G. & W. Sawoo Pvt. Ltd vs. ACIT (Supreme Court): S. 5/ 147: Even if income by way of rent is enhanced with retrospective effect, it accrues only when a right to receive the income is vested in the assessee. A notice u/s 148 seeking to assessee the income prior to its accrual is without jurisdiction.

2. CIT vs. Amitabh Bachchan (Supreme Court): S. 263: Even if AO applies mind and decides not to assess expenditure as unexplained u/s 69C because the assessee withdrew the claim for deduction, the CIT is entitled to revise the assessment on the ground that the matter needed further investigation.

3. CIT vs. Meghalaya Steels Ltd (Supreme Court): S. 80-IB(4): Subsidies (such as transport subsidy, Interest subsidy and power subsidy) paid to the assessee with the object of reducing the cost of production constitutes “profits derived from the business of the industrial undertaking” and is eligible for deduction u/s 80-IB. Liberty India 317 ITR 218 (SC) is distinguishable on facts

4. ITC Limited vs. CIT (Supreme Court): S. 15, 17, 192: Concept of “salary” explained. Held that as “tips” are paid to employees of the assessee from an outsider on a voluntary basis and the employees have no vested right to receive the same, the same is not “salary” and the assessee has no obligation to deduct TDS.

Rulings of Hon’ble Bombay High Court

5. CIT vs. Mukesh Ratilal Marolia (Bombay High Court): S. 10(38)/ 69: Fact that a small amount invested in “penny” stocks gave rise to huge capital gains in a short period does not mean that the transaction is “bogus” if the documentation and evidences cannot be faulted.

6. DIT (Exemptions) vs. Khar Gymkhana (Bombay High Court): S. 2(15)/12AA(3): The DIT has no jurisdiction to cancel registration of a charitable institution on the ground that it is carrying on commercial activities which are in breach of the amended definition of “charitable purpose” in s. 2(15). Registration can be cancelled only if the activities of the trust are not genuine or are not being carried out in accordance with its objects. This is clarified by Circular No.21 of 2016.

7. Larsen & Toubro Limited vs. UOI (Bombay High Court): Reluctance of AOs to comply with binding Court judgements leads to negative reactions amongst business entities doing business in India and hurts National pride and image. Hereafter non-compliance with orders would visit officials with individual penalties, including forfeiture of salaries.

8. CIT vs. S. Ganesh (Bombay High Court): Inability of the assessee, an Advocate, to reconcile the professional receipts with the TDS certificates and to give a detailed party-wise breakup of fees receipts does not mean that the difference can be assessed as undisclosed income.

Rulings of Other Hon’ble High Courts & Tribunals

9. Tamil Nadu State Transport Corporation (Salem) Ltd vs. Chinnadurai (Madras High Court): Compensation awarded by the Motor Accident Claims Tribunal, and interest accruing thereon, is to ameliorate the sufferings of the victims and does not have the character of “income”. If there is a conflict between a social welfare legislation and a taxation legislation, the social welfare legislation will prevail since it subserves larger public interest. CBDT Circular dated 14.10.2011 is not good law.

10. Tata Teleservices Limited vs. CBDT (Delhi High Court): S. 143(1D): Instruction No.1 of 2015 dated 13.01.2015 which curtails the discretion of the AO by ‘preventing’ him from processing the return and granting refund, where notice has been issued to the assessee u/s 143(2), is unsustainable in law and quashed.

11. Hyosung Corporation vs. AAR (Delhi High Court): S. 143(2)/ 245R(2): A notice u/s 143(2)(ii) cannot be issued in a routine, casual or mechanical manner but after forming an opinion that it is “necessary or expedient” to do so. A S. 143(2) notice in the standard form is not a bar u/s 245R(2) for admission of an AAR application for advance ruling.

12. CIT vs. Herbalife International India Pvt. Ltd (Delhi High Court): S. 40(a)(i): The law in s. 40(a)(i) that failure to deduct TDS on payment to a non-resident will result in a disallowance violates the non-discrimination clause in Article 26 of the India-USA DTAA because a similar disallowance is not made on payments to residents (pre s. 40(a)(ia)).

13. Rule 8D not automatic upon rejecting Assessee’s working, AO may adopt ‘reasonable’ parameter (Allahabad Bank [TS-314-ITAT-2016(Kol)]): Kolkata ITAT accepts assessee’s Sec 14A disallowance working for AY 2008-09, as AO failed to provide reasons for rejecting assessee’s claim; Overturns CIT(A)’s conclusion that Rule 8D has to be mandatorily applied in cases relating to AY 2008-09 and subsequent years, clarifies that it is not mandatory for AO to apply Rule 8D the moment he rejects assessee’s basis of disallowance, opines that AO is free to make the disallowance on any reasonable basis; Rules that “it is only when no reasonable and proper parameters for making disallowance can be arrived at, that resort to Rule 8D(2) can be had by the AO. .. Rule 8D is not automatic and can be resorted to by the AO only as a measure of last resort..”.

14. ITO vs. Indravadan Jain (HUF) (ITAT Mumbai): S. 68: Long-term capital gains arising from transfer of penny stocks cannot be treated as bogus merely because SEBI has initiating an inquiry with regard to the Company & the broker if the shares are purchased from the exchange, payment is by cheque and delivery of shares is taken & given.

15. Inderjeet Singh Sachdeva vs. DCIT (ITAT Delhi): S. 147/ 148: The AO is duty bound to provide to the assessee the reasons recorded for reopening the assessment within a reasonable time. Failure to do so renders the reassessment order unsustainable in law.

16. New Explanation to sec. 263 doesn’t give unfettered powers to CIT to revise every order of AO (Narayan Tatu Rane v. Income-tax Officer) ([2016] 70 227 (Mumbai – Trib.)): On basis of documents unearthed during search at third party premises indicating payments made to persons holding public office, assessments of assessee were reopened for both years – Assessee had denied any connection with incriminating document – Assessing Officer was satisfied with said explanation and, accordingly, did not make any addition to total income in both years – Placing reliance on amendment made in Explanation 2(a) to section 263, Commissioner revised said order – Whether since Commissioner had not brought any material on record to substantiate his inference, Commissioner had passed impugned revision orders only to carry out fishing and roving enquiries with objective of substituting his views with that of Assessing Officer – Held, yes.

17. Narayan Tatu Rane vs. ITO (ITAT Mumbai): S. 263: There is doubt whether Explanation 2(a) to s. 263, inserted by FA 2015 w.e.f. 01.04.2015 has retrospective effect. The said Explanation does not override the law that the CIT cannot fault an assessment order without conducting his own inquiry or verification to establish that the assessment order is not sustainable in law.

18. Sec 194J TDS inapplicable on payments in “kind”, allows relief to SRK company [Red Chillies Entertainment Pvt. Ltd – ITA No.5271/Mum/2013 (Mum)]: Mumbai ITAT deletes expense disallowance u/s 40(a)(ia) in case of Red Chillies Entertainment Pvt. Ltd. for AY 2010-11, holds no Sec 194J TDS for payments made in “kind” to actors; Relies on SC ruling in Shri H.H. Sri Rama Verma and Karnataka HC rulings in Bruhat Bangalore Mahanagar Palika and Hindustan Lever Ltd to hold that the expression “any sum” used in Sec 194J would only relate to payment made in money terms;

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