1. Assessment – Adjustment – S. 143(1)(a)

The Supreme Court held that since there was conflicting decisions at the relevant time on the question whether deduction under section 80-O is allowable on gross income or net income, deduction under section 80-O claimed by the assessee on gross income cannot be reduced by way of prima facie adjustment under section 143(1)(a).

Kvaerner John Brown Engg. (India) (P) Ltd. vs. ACIT (2008) 216 CTR 193 (SC)

2. Business expenditure – S. 37

Assessee purchased a land and a building thereon under an agreement. The building standing on the land was scrapped and sold for Rs. 5,88,001/-. Further, there was a delay in payment and the assessee had to pay an interest of Rs. 4,00,000/. The Supreme Court held that once the department has treated the income of Rs. 5,88,001 as business income, interest expenditure on the delayed payment cannot be disallowed.

Kerala Road Lines vs. CIT (2008) 299 ITR 343 (SC)

3. Cash Credit – Share application – S. 68

If the assessee has given the name of the shareholders from whom they have received the share application money, then the department is free to proceed to reopen their individual assessments in accordance with law, but it cannot be regarded as the undisclosed income of the company.

CIT vs. Lovely Exports Pvt. Ltd. (2008) 216 CTR 195 (SC)

4. Charitable Trust – Registration of Charitable Trust – Ss. 11, 12A

The registration of trust under section 12A of the Income-tax Act, once done is a fait accompli and the Assessing Officer cannot thereafter make further probe into the objects of the Trust.

ACIT vs. Surat City Gymkhana (2008) 300 ITR 214 (SC)

5. DTAA – Dividend Income – S. 90

Under Article 11 of the India–Malaysia DTAA, dividend is taxable only in the contracting state where such income accrues. Therefore, dividend income received from a Malaysian company would not be taxable in the hands of the assessee.

DCIT vs. Torquoise Investment and Finance Ltd. (2008) 300 ITR 1 (SC)

Editorial Note: The new treaty with Malaysia has become operative from 2004.

6. Fringe Benefit Tax

The Supreme Court held that the transportation cost incurred in bringing non-resident employees to a place of work in India and back to their home country is liable to FBT.

R & B Falcon (A) Pty Ltd. vs. CIT (2008) 301 ITR 309 (SC)

7. Jurisdiction – Transfer of cases – S. 127

The power under section 127 to transfer cases would also apply to block assessment proceedings as well. The Supreme Court also referred to section 158BH which categorically states that all the other provisions of the Act shall apply to assessment made under the said Chapter.

K. P. Mohammed Salim vs. CIT (2008) 216 CTR 97 (SC); 300 ITR 302 (SC)

8. MAT profit – S. 115J

ITO has no jurisdiction to rework the book profit under section 115J by substitution the rate of depreciation prescribed in Schedule XIV of the Companies Act, 1956, for the rates which have been constantly applied by the assessee.

Malayala Manorama Co. Ltd. vs. CIT (2008) 216 CTR 102

9. Natural Justice – Principles of Natural Justice

The Supreme Court held that even an administrative order or decision in matter involving civil consequence has to be made consistently with the rules of natural justice, unless the statute conferring the power excludes its application by express language. Therefore, assessee would have to be given a reasonable opportunity of being heard before passing an order for special audit under section 142(2A).

Sahara India (Firm) vs. CIT (2008) 300 ITR 403 (SC)

10. Penalty – Question of law – S. 18(1)(c)

Whether penalty under section 18(1)(c) could be cancelled on the ground that the assessee was entitled to the benefit under the amnesty scheme, particularly when the assessee had revised its return several times subsequent to the search operation is a substantial question of law.

CIT vs. Taktawala (2008) 215 CTR 399 (SC)

11. Precedent – Binding precedent

The Supreme Court held that although the judgments given by a High Court is not binding on another High Court(s), they hold persuasive value. A High Court when not following another High Court should record its dissent along with the reasons therefor.

Pradip J. Mehta vs. CIT (2008) 216 CTR 1 (SC); 300 ITR 231 (SC)

12. Question of law – Credit for MAT – is to be allowed before charging interest – Ss. 234B and 234C, 115JAA

Whether credit for MAT under section 115JAA is to be allowed before charging interest under sections 234B and 234C is a question of law and therefore the judgment of High Court is set aside to consider the aforesaid question in accordance with law.

CIT vs. Xpro India Limited (2008) 215 CTR 400 (SC); 300 ITR 337 (SC)

13. Rectification of mistake – S. 154

If the application for rectification is made within 4 years, then the rectification order can be passed by the Tribunal after the expiry of 4 years.

Sree Ayyanar Spinning and Weaving Mills Ltd. vs. CIT (2008) 301 ITR 434 (SC)

14. Residential status – S. 6

For the assessment year 1982-83, the Supreme Court came to the conclusion that a person would be an ordinary resident only if (a) he has been resident in India in nine out of ten preceding years, and (b) he has been in India for at least 730 days in the previous seven years.

Pradip J. Mehta vs. CIT (2008) 216 CTR 1 (SC); 300 ITR 231 (SC)

15. Scope of jurisdiction in a reference

The Supreme Court held that the Tribunal is a final fact finding authority. In a reference to the High Court, fact can only be gone into only a finding of fact recorded by the Tribunal has been challenged on the grounds of perversity.

Sudarshan Silk & Sarees vs. CIT (2008) 216 CTR 12 (SC); 300 ITR 204 (SC)

16. Scope of Writ Jurisdiction

Respondent was a manufacturer of Vicco Vajradanti and Vicco Turmeric stated to be ayurvedic medicines. The High Court dismissed the appeal of the appellant holding that impugned goods were ayurvedic medicines. Two SLPs filed by the appellant which were dismissed and disposed of simultaneously with a rider that the claim for refund of the amounts already paid would be subject to ascertaining whether the amounts were passed on to the purchaser or not and consequential relief shall be subject to the 11B. Second Show Cause Notice was issued by the Department about the same matter. However the matter was withdrawn. Central Board of Excise issued a circular withdrawing its earlier clarification in respect of Vicco products and asked the authorities to reopen and finalise the classification on the basis of Judgment in Shree Baidyanath Bhavan vs. CCE, Nagpur. A fresh show cause notice was issued to the respondent. Whether the said show cause notice was without jurisdiction and had been issued in arbitrary exercise of power and that it is an abuse of process of law — Held, where a Show Cause Notice was issued either without jurisdiction or in an abuse of process of law, certainly in that case, the Writ Court would not hesitate to interfere even at the stage of issuance of Show Cause Notice. Classification of the said products having attained finality pursuant to the decision of this Court. Appellants have no jurisdiction to issue impugned Show Cause Notice in respect of an issue which stands concluded by the decision of this Court. It is an abuse of process of law. High Court after referring to the history of litigation rightly concluded that the matter stood concluded by Judgments of this Court and the High Court in respondents’ case. High Court rightly observed that the impugned Show Cause Notice was nothing but a repetition of the earlier Show Cause Notices with slight variations which in no way was relatable to any different test. When the factual scenario is considered in the background of the legal principles the inevitable conclusion is that the appeal is without merit.

Union of India vs. Vicco Laboratories (2008) 10 RC 377

17. Search & Seizure – S. 132(B)

Appellant’s assets were seized by the respondents after conducting a search under section 132(B). Repeated requests for release of the assets seized were not accepted. A Writ Petition filed by the appellant for release of the assets was also dismissed observing that there was estimated tax liability of approximately Rs. 10,00,000. Stand of the appellants essentially was that there is no power to retain any amount seized for the purpose of meeting estimated liability. Held, there are different stages under section 132(1). First stage is seizure, then comes adjudication on the non disclosure aspect and then determination relatable to section 132(8A). Lastly, the Order can be passed under section 132B. Power under Section 132(3) was revoked and was exercised at the initial stage for the purposes of verification of the source of funds lying in the bank account. Thereafter, when the assessee was unable to satisfactorily explain the source of these funds, the same were seized under a fresh warrant under section 132 (1) issued by the Director of Income Tax (Inv.), who duly recorded his satisfaction as provided under section 132(1)(c). An Authorized Officer acting under section 132(1)(iii) of the Act has full power and jurisdiction to seize cash balance lying in bank account as these would come within the meaning of “money” and/or “assets” as provided under section 132(1)(iii) of the Act. Further, amount seized has not become a part of the Consolidated Fund of India and is deposited in separate PD account of the concerned Commissioner and is held in the custody till final determination of the tax liability by the assessing officer for the relevant assessment years and that is permissible. As there is no challenge to the Order passed under section 132B of the Act no relief can be granted to the appellants Assessment to be completed within the time statutorily provided.

KCC Software Ltd. vs. DIT 2008 (5) SCC 201