Recent important judgements feb 2016

CA Ashok Seth

126th Feb 2016

PRECEDENT

A judgment of SC is binding. It is theprinciple laid down in the judgment, andnot every word appearing therein, thatbecomes the law of the land.

Between two decisions of benches ofequal strength of the Supreme Court,the later decision should be followed,provided the earlier decision isconsidered

26th Feb 2016 CA Ashok Seth 2

Acceptance or Rejection of SLP by SC

SC dealt the effect of acceptance or

rejection of a SLP in Kunhayammed v.

State of Kerala, (245 ITR 360) and held

that when there is a refusal of SLP in non -

speaking order, it does not amount to a

declaration of the law as laid down by the

SC. If the refusal is a speaking order, it

then becomes a declaration of law.


Reliance of Decision

Sun Engineering Works Pvt. Ltd. (198

ITR 297) SC observed

It is neither desirable nor permissible to

pick out a word or a sentence from the

judgment of the Supreme Court divorced

from the context of the question under

consideration and treat it to be the

complete law declared by the court.


Contd.

The judgment must be read as a whole and

the observations from the judgment have to be

considered in the light of the questions which

were before the court. A decision of the

Supreme Court takes its colour from the

questions involved in the case in which it is

rendered and, while applying the decision to a

later case, courts must carefully try to

ascertain the true principle laid down by the

decision.


Ratio Decidendi, Obiter Dicta, and

Casual Observations

The question which was necessary fordetermination of the case would be theratio; the opinion of the court on thequestion which was not necessary todecide the case would be only obiterdictum. ‘casual observations’ of the SC isthat observation are made on points whichdo not arise for the determination of thecourt at all.


S. 41(1) Perfect Paradise Emporium (ITAT Delhi)

S. 41(1)/ 68: Unclaimed liabilities to creditors, even if fictitious and bogus, cannot be assessed u/s 41(1) in the absence of a write-back. The bogus credits can be assessed u/s 68 only in the year the credits were made and not in the year they are found to be not payable


2(47)- Fardeen Khan .v. ACIT 69 SOT 109 (URO) MUM ITAT

Pursuant to amendment to S. 53A of Transfer of Property Act-Non-registered development agreement does not result in transfer u/s 2(47)(v)- Law in ChaturbhujDwarkadas Kapadia v.CIT 260 ITR 461 (Bom.) does not apply after amendment to S. 53A


Contd.- Section 53A of the TOPA-

Cumulative conditions application of doctrine of 'part performance':—

Written signed contract for consideration;

should pertain to transfer of immovable property;

the transferee should have taken possession

the transferee should be ready and willing to perform his part of contract and


Contd.

the contract should be registered under The Registration Act (introduced wefSept 2001).


Section 17(lA) of the Registration Act: -

"The documents containing contracts to transfer for consideration, any immovable property for the purposes of Section 53A of Transfer of Property Act, 1882 shall be registered if they have been executed on or after the commencement of the Registration and Other Related Laws (Amendment) Act, 2001 and if such documents are not registered they shall have no effect for the purposes of said Section 53A."


10(23C)(iiiad): Queen’s Educational Society 372 ITR 699 (SC)

Where an educational institution carries on the activity of education primarily for educating persons, the fact that it makes a surplus does not lead to the conclusion that it ceases to exist solely for educational purposes and becomes an institution for the purpose of making profit.


S. 12AA- Non disposal of application for registration

The Alld HC 171 Taxman 113 has taken the view that once an application is made under the said provision in case the same is not responded to within 6 months, it would results in deemed grant of registration

CIT vs. Society For The Promotion Of Education, Adventure Sport & Conservation Of Environment (SC)


http://itatonline.org/archives/cit-vs-society-for-the-promotion-of-education-adventure-sport-conservation-of-environment-supreme-court-s-12aa-non-disposal-of-an-application-for-registration-before-the-expiry-of-six-months-as-prov/

S. 147- n case of Intimation u/s 143(1)

DCIT vs. Zuari Estate Development and Investment Co 373 ITR 661 (SC)- as assessee's return was accepted under section 143(1), question of change of opinion did not arise


S. 147- of Intimation u/s 143(1)- Contd.

Khubchandani Healthparks Pvt. Ltd vs. ITO (Bombay High Court)- ZuariAgro Differentiated- It is open to the assessee to challenge a notice issued u/s 148 as being without jurisdiction for absence of reason to believe even in case where the assessment has been completed earlier by Intimation u/s 143(1) of the Ac


271(1)(C)- Surrender of Income- Survey- Return filed

Mak Data P. Ltd 358 ITR 593 (SC)

Penalty is not leviable on income declared during survey and offered in return. Law laid down in Mak Data 358 ITR 593 (SC) is distinguishable on facts and not universally applicable. – CIT v Hira Lal Doshi (Bo HC)


S. 263- Amendment in Expl. 2

which supersedes the law that there is a difference between "lack of inquiry" and "inadequate inquiry") is "declaratory & clarificatory" in nature and is inserted to provide clarity on the issue as to which orders passed by the AO shall constitute erroneous and prejudicial to the interests of Revenue- Crompton Greaves Ltd vs. CIT (ITAT Mumbai)


http://itatonline.org/archives/crompton-greaves-ltd-vs-cit-itat-mumbai-explanation-2-to-s-263-which-supersedes-the-law-that-there-is-a-difference-between-lack-of-inquiry-and-inadequate-inquiry-is-declaratory-clarific/

S. 36(1)(iii)- Hero Cycles Ltd –SC 236 Taxmann 447

Once it is established that there is nexus between the expenditure and the purpose of business (which need not necessarily be the business of the assessee itself), the Revenue cannot put itself in the arm-chair of the businessman or in the position of the Board of Directors and assume the role to decide how much is reasonable expenditure


Contd.

It further held that no businessman can be compelled to maximize his profit and that the income tax authorities must put themselves in the shoes of the assessee and see how a prudent businessman would act. The authorities must not look at the matter from their own view point but that of a prudent businessman


S. 143(2)/ 292BB

Pr. CIT vs. Shri Jai Shiv Shankar Traders Pvt. Ltd (Delhi HC) 64 Taxmann.com 220

Failure to issue a s. 143(2) notice renders the reassessment order void. S. 292BB saves a case of "non service" of the notice but not a case of "non issue"

The non-issue of the said notice is fatal to the order of re-assessment


http://itatonline.org/archives/pr-cit-vs-shri-jai-shiv-shankar-traders-pvt-ltd-delhi-high-court-s-1432-292bb-failure-to-issue-a-s-1432-notice-renders-the-reassessment-order-void-s-292bb-saves-a-case-of-non-service-of/

Depreciation- Victory Aqua Farm Ltd (SC) 61 Taxmann.com 166

The "functional" test has to be applied to determine whether an asset is "plant". Even a pond designed for rearing prawns can be "plant"

Anand Theatres 224 ITR 192 Differentiated. Held - It is difficult to read the judgment in the case of Anand Theatres so broadly.


50C- Chandra Narain Chowdhary 219 Taxman 60 (All)

the AO has to apply his mind on the validity of the objection and may either accept the valuation of the property on the basis of the report of the approved valuer filed by the assessee or invite refer the valuation of the capital asset to the DVO


S. 41(1) Perfect Paradise Emporium Pvt. Ltd (ITAT Delhi)


S. 41(1)/ 68: Unclaimed liabilities to creditors, even if fictitious and bogus, cannot be assessed u/s 41(1) in the absence of a write-back. The bogus credits can be assessed u/s 68 only in the year the credits were made and not in the year they are found to be not payable

Transfer S 2(47)\ Sec 54

Sanjeev Lal & Ors 365 ITR 389 (SC)

Agreement to sell in Dec 12 15 Lacs received. (Possession not transferred)

Sale Deed on Sept 14- Possession Tfd

Appellant purchased New Residential Property on April 2013.

Issue of whether eligible for benefit u/s 54


Contd.

Issue boils down to whether Trf. took place in Dec 12 or Sept 14.

HC held that in absence of delivery before Sept 14 the Trf took place in Sept 14 hence 54 not eligible as no rights were transferred in favour of purchaser in Dec 12.

Matter before SC


Contd.

Appellant pleaded before SC that there was extinguishment of rights in property hence trf. u/s 2(47)(ii) in Dec 12.

SC said by executing agreement to sell a right in personam is created in favour of purchaser

S. 2(47)(ii)- “extinguishment of anyright in such capital assists.”


Contd.

SC- on entering into the agreement to sell, some rights in respect of the capital assets was extinguished and accordingly, transferred in favour of the vendee.

SC used purposive and harmonious interpretation to held sec 54 relief was eligible.


Issues emerging

Extinguishment of “Some rights” whether such right could be considered “Land” or “Building” for purposes of 50C

Whether trf of “some rights” could mean trf of residential house within meaning of sec 54

How to value/ measure “some rights” and calculate Gain.


Issues emerging- Contd.

Can such incentive provision mould the definition of transfer.

Can a definition which is basis of charging section be interpreted “liberally” just because an assesse may loose benefit of incentive provision


Safina Hotels Private Limited vs. CIT (Karnataka)

S. 271(1)(c)/ 271(1-B): If the notice is issued without application of mind (by striking out the relevant part in the notice), the penalty proceedings are invalid

assessment order should contain a direction for initiation of proceedings. Merely saying that the penalty proceedings have been initiated would not satisfy the requirement


Interest on partners' capital allowable under section 24(b)

Siroya Holdings v. Additional Commissioner of Income Tax (Mum Trib)

Following Sane & Doshi Enterprises v. ACIT 232 Taxman 452 (Bom)


143(2) Notice Service

Income Tax Officer v. Rajesh Agarwal Lko ITAT

Notice under 143(2) issued by speed post on the last day of limitation at 15:19 hours, there was no possibility of its service on the same day -assessment was illegal and void ab initio. Moreover, notice served by affixture was not valid as not satisfied the conditions contemplated by order V, rule 17 read with rule 20 of CPC


S. 271C: Penalty for failure to deduct TDS

CIT vs. Bank Of Nova Scotia 380 ITR 550 (SC)

cannot be levied if Dept is unable to show contumacious conduct on the part of the assessee


Hiralal Chunilal Jain vs. ITO (ITAT Mumbai)

Bogus Sales/ Purchases: Addition solely on the basis of information received from the sales-tax department is not sustainable. Suspicion of the highest degree cannot take the place of evidence


Prakash vs. Phulvati (SC)

The Hindu Succession (Amendment Act), 2005 which came into effect on 09.09.2015 by which daughters in a HUF, governed by Mitakshara law, were granted statutory right in the coparcenary property (being property not partitioned or alienated) of their fathers applies only if both the father and the daughter are alive on the date of commencement of the Amendment Act


Prakash vs. Phulvati (SC)

An amendment of a substantive provision is always prospective unless either expressly or by necessary intendment it is retrospective


THANK YOU
