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1. Accounts Method of Accounting S.145
The Supreme Court held that when the department
want to assess a particular income in a particular year, it should always
ascertain the method followed by the assessee in the past and whether the
change in the method of accounting was warranted on the ground that profit is
being underestimated under the impugned method of accounting. Unless the
officer gives a finding with facts and figures that there is a underestimation
the presumption would be that the whole exercise is revenue neutral.
CIT vs. Realest Builders & Services Ltd. (2008)
307 ITR 202 (SC)
2. Appeal by the revenue Rule of consistency
The Supreme Court held that when the revenue had
not filed any appeal in other assessment year, it would by precluded from
filing the appeal in the relevant assessment year on identical facts.
CIT vs. J. K. Charitable Trust (2008) 220 CTR
105 (SC) 308 ITR 161
3. Capital Gains Where it is impossible to
determine cost of acquisition compensation not taxable Ss. 45, 50 55(a)
The assessee, a banking company, was
nationalized and it received certain amount as compensation. If the
compensation was not allocable item-wise on various intangible assets held by
it, hence, it was impossible to determine capital gain and cost of
acquisition. The compensation was not taxable u/s 45.
PNB Finance Ltd. vs. CIT (2008) 175 Taxman 252
(SC)/(2008) 307 ITR 75 (SC)
4. Circular Whether binding on the court S.
119
The Supreme Court held that so far as circular
issued by the Central or State Government are concerned, they represent merely
their understanding of the provisions. They are not binding on the courts. It
is for the court to declare what the provisions of the statute say and not for
the executive. Therefore, the circular cannot be given effect to in preference
to the view expressed by the High Court or the Supreme Court.
CCE vs. Ratan Melting and Wire Industries (2008)
220 CTR 98 (SC)
5. DEPB Licence under sales tax law Regarded as
goods
REP licences were granted under the Import and
Export Policy for the period April 1988 to March 1991 issued under the Imports
and Exports (Control) Act, 1947 Replaced by Duty Entitlement Passbook (DEPB)
provided for in the Exim Policy 1997-02 under the Foreign Trade (Development
and Regulation) Act, 1992. Appellant submitted that DEPB credit is not
exigible to sales tax just as REP licences as held in Vikas Sales Corporation
vs. Commnr. of Commercial Taxes. According to the Appellant Vikas was
impliedly overruled by Sunrise Associates vs. Govt. of NCT of Delhi wherein it
was held that lottery tickets were actionable claims and were, therefore,
excluded from the definition of goods under the Sales Tax Act and hence,
said sale of lottery tickets not taxable.
Question arose Whether the decision in Vikas
can be said to be impliedly overruled by the Constit-ution Bench decision in
Sunrise; (ii) And, if Vikas is still good law, would it also apply to sale of
DEPB?
Held, analyzing the two Judgments it was
observed that in Vikas, the Court held that REP licence/Exim Scrip fell within
the definition of goods quite independently as REP licences had their own
value and they were freely bought and sold in the market for their intrinsic
value and could not be classified as actionable claims In Sunrise, it was
held that a lottery ticket has no value itself and was a mere piece of paper
Decision in Sunrise in no way affects the position insofar as REP licences are
concerned and the legal position in regard to their sale is concluded by the
decision in Vikas DEPB like REP licence has its own intrinsic value and the
purchaser, on payment of consideration, buys something for its value. DEPB is
not a licence. DEPB credit clearly goods within the meaning of Sales Tax
laws of Delhi, Kerala and Mumbai and its sale clearly exigible to tax
Appeals dismissed Yasha Oversees vs. Commissioner of Sales Tax (2008) 11 RC
495
6. Depreciation S. 32
Temporary lull vis-ΰ-vis passive user without
proper examination, High Court dismissing appeal Suspension of business
during the relevant previous year the matter set aside on the ground of
passive user for fresh decision.
Nirma Credit & Capital Ltd. vs. ACIT (2008) 220
CTR 537 (SC)
7. Gift Tax Act Deemed Gift S. 2(xii) (xxiv)
4(1)(a)
The Supreme Court held that the shares come into
existence at the time of allotment of shares; i.e., the shares are created at
that time, and therefore, the allotment of shares are not transfer and
therefore section 4(1)(a) of the Gift Tax Act would not apply.
Khoday Distilleries Ltd. vs. CIT (2008) 307 ITR 312 (SC)
8. Income Waiver of interest S. 4
Where the assessee entered into an agreement for
transfer of its industrial undertaking under which the buyer agreed to pay it
interest on the unpaid consideration w.e.f 1-3-1977 and subsequently on
30-6-1978 the parties agreed to defer the date of commencement of interest to
1-7-1979 and the question arose whether the interest foregone by the assessee
could be assessed for the A.Y.s 1979-80 and 1980-81 under the accrual system
of accounting;
Held
(a) As regards A.Y. 1979-80, the interest had
already accrued and could not be wiped out by the subsequent agreement. The
waiver could not have retrospective effect.
(b) As regards A.Y. 1980-81, there was full
scope to the assessee to defer the interest and as this was done before
accrual, the interest was not chargeable to tax.
(c) Penalty u/s 273(2)(a) is not an automatic
outcome of the addition of income. Though there was no valid justification for
the waiver of the interest and it was an attempt to evade tax, still mens rea
would have to be shown and as a definite conclusion could not be drawn that
the assessee had reason to believe that the estimate of advance tax was
untrue, penalty could not be levied.
CIT vs. Sarabhai Holdings Pvt. Ltd. (2008)
11 RC 593 307 ITR 89
9. Interest tax S. 2(7)
The Supreme Court held that interest on
Government securities is not liable to interest tax in view of section 2(7) of
the Interest-tax
Act, 1974.
CIT vs. Ratankar Bank Ltd. (2008) 306 ITR 257
(SC)/(2008) 220 CTR 7 (SC)
10. Investment Allowance S. 32A, 41(1)(a) 43A(1)
In the relevant year the assessee had claimed
deduction of investment allowance for the machineries purchased in the earlier
year on account of foreign exchange fluctuation. The Supreme Court held that
43A(1) would be clearly applicable in relation to investment allowance. And
also if any extra benefit was taken the same had to be taxed in the year when
the liability was reduced as provided in section 41(1)(a). This aspect was not
considered by the Commissioner (A) and therefore, the matter was send back for
the limited purpose to consider this aspect.
CIT vs. Gujarat Sindh Cement Ltd. (2008) 307 ITR
393 (SC)
11. Manufacturing Conversion of Jumbo rolls into
small flat and rolls is manufacturing S. 80HH & 80I
The conversion of jumbo rolls of photographic
films into small flats and rolls is desired sizes, amounts to manufacture or
production and, therefore, it is entitled to claim deduction u/s 32AB, 80HH
and 80I.
India Cine Agencies vs. CIT (2008) 175 Taxman
361 (SC)/(2008) 220 CTR 223 (SC) 308 ITR 98
12. Manufacturing Ship breaking activity is
manufacturing Ss. 80HH & 80-I
The ship breaking activity results in production
of a distinct and different article and, therefore assessee doing such
activity would be entitled to deduction u/ss. 80HH and 80-I.
Vijay Ship Breaking Corp. vs. CIT (2008) 175
Taxman 7 (SC)/(2008) 219 CTR 639 (SC)
13. Penalty Concealment S. 271(1)(c)
The Supreme Court overruled the judgment in the
case of Dilip N. Shroff 291 ITR 519 (SC) and held that the Explanations
appended to section 271(1)(C) of the Act entirely indicate the element of
strict liability. Section 271(1)(c) read with the Explanation indicate that
the said section has been enacted to provide for a remedy for a loss of
revenue. The penalty under that provision is a civil liability and wilful
concealment is not an essential ingredient for attracting civil liability.
CIT vs. Dharmendra Textiles Processors (2008)
306 ITR 277 (SC)/(2008) 219 CTR 617 (SC)
14. Waiver Interest S. 220(2A)
The Supreme Court held that the provision for
levy of interest for non-payment of tax within time, has to be interpreted by
the principle of purposive construction and the same principle has to be
applied for the purpose of determining whether any hardship has been caused or
not. The ingredients of genuine hardship must be determined by the dictionary
meaning thereof and the legal conspectus attending thereto. The Supreme Court
then send the matter back to the Commissioner for fresh consideration in view
of the findings of the Supreme Court.
As the department had failed to consider genuine
hardship and the circumstances which were beyond the control of the Assessee
which CIT having failed the consider, the matter was remitted to CIT to
reconsider relating wavier of interest as per prov. Of Sec. 220(2A) afresh.
B. M. Malani vs. CIT (2008) 306 ITR 196 (SC)/
(2008) 219 CTR 313 (SC)
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