18. Block Assessment – Setoff of losses & Depreciation inter se in block period

– S. 158BC

The Supreme Court held that set off of losses and depreciation accruing in any of the previous year in the block period against the income returned/assessed in any other previous year in the block period is permissible.

E. K. Lingamurthy vs. CIT (2009) 314 ITR 305 (SC)

19. Business Expenditure – Warranty Expenses – S. 37

The Supreme Court held that warranty is an integral part of the sale price and if the warranty expenses are properly ascertainable and discounted on accrual basis deduction is allowable under section 37 of the Act.

Rotork Controls India P. Ltd. vs. CIT (2009) 314 ITR 62 (SC)

20. Capital Expenditure – Repair – S. 37

The Supreme Court held that although each machine in a textile mill is part of integral process of manufacture of yarn and is integrally connected to the other machines in the mill for production of the final product, this interconnectivity does not take away the independent identity of each machine. Therefore, replacement of machinery in a textile mill neither amounts to a current repairs nor revenue expenditure as each separate machine is an independent entity which brings an enduring benefit to the assessee.

CIT vs. Sri Mangayarkarshi Mills (P) Ltd. (2009) 26 DTR 58 (SC) / 315 ITR 114, (2009) 224 CTR 513 (SC)

21. Capital Gains – Enhanced compensation – S. 45(5)

The Supreme Court held that even in cases where pending appeal, the Court/Tribunal/authority permits the claimant to withdraw the disputed enhanced compensation against security or otherwise, the same is liable to be taxed under section 45(5). The Supreme Court further held that interest under section 28, additional amount under section 23(1A) and solatium under section 23(2) of the Land Acquisition Act, 1894 forms part of the enhanced compensation under section 45(5)(b)

CIT vs. Ghanshyam (2009) 26 DTR 129 (SC) / (2009) 315 ITR 1 (SC), (2009) 224 CTR 572 (SC)

22. Deduction – Actual Payment – Bottling Fee under the Rajasthan Excise Act

– S. 43B

The Supreme Court held that the bottling fee for acquiring the right of bottling Indian manufactured Foreign Liquor, was payable by the assessee as a consideration for acquiring an exclusive privilege and hence the amount did not fall within the purview of section 43B.

CIT vs. McDowell and Co. (2009) 314 ITR 174 (SC)

23. Deduction – Co-operative Society

– S. 80P

The Supreme Court held that the burden is on the assessee to establish that the income comes within the four corners of section 80P(2)(e). The deduction is available only in respect of income derived from letting of godowns or warehouses, where the purpose is for storage, processing or facilitating the marketing of commodities. The Supreme Court confirmed the order of the High Court where it had held that the assessee was storing the goods in the godowns for its own trading activity and hence not eligible for deduction under section 80P.

Udaipur Sahkari Upbhokta Thok Bhandar Ltd. vs. CIT 26 DTR 82 (SC) / 315 ITR 21

24. Deduction – Profits derived from industrial undertaking – S. 80IA

The Supreme Court held that DEPB/Duty drawbacks are incentives which flow from Schemes framed by Central Government or from section 75 of the Customs Act, 1962, hence, incentives profits are not profits derived from the eligible business and therefore, do not form part of net profits of the industrial undertaking for the purpose of section 80IA and 80IB.

Liberty India vs. CIT (2009) 28 DTR 73 (SC), (2009) 317 ITR 218 (SC)

25. Income – Block of Asset

– S. 41(1), 50

The assessee had sold soft drink bottles and crates on which depreciation was claimed @ 100 % as the cost of each item was less then Rs. 5000. The Supreme Court held that such receipts are not assessable under section 41(1) as it would have been taxable under section 41(2) which was omitted by Finance Act 1988.

The Supreme Court held that bottles and crates purchased before 31st March, 1995 would not be assessable under section 50 as they do not form part of block of assets in view of the proviso to section 32(1)(ii), however bottles and crates purchased later would be assessable under section 50 as the proviso was deleted.

Nectar Beverages P. Ltd. vs. Dy. CIT (2009) 25 DTR 218 (SC)

26. Manufacture – Ship breaking activity

– S. 80HH, 80-I

The Supreme Court held that assessee was entitled to deduction under section 80HH and 80I in respect of profits from ship breaking activity, because the ship breaking activity gave rise to a distinct and different article.

Vijay Ship Breaking Corporation and Other vs. CIT (2009) 314 ITR 309 (SC)

27. Penalty – Concealment – S. 271(1)(c)

The High Court had relied upon the decision of CIT vs. Ram Commercial Enterprises 246 ITR 568 (Del) which was approved by the Supreme Court in the case of Dilip N. Shroff vs. JCIT 291 ITR 519 (SC). The Supreme Court set aside the matter for fresh consideration to the High Court since in the case of Union of India vs. Dharmendra Textiles 306 ITR 277 (SC) the Supreme Court has held that Dilip N Shroff is no longer a good law.

CIT vs. Atul Mohan Bindal (2009) 28 DTR 82 (SC)

28. Reassessment – Direction of higher authority – S. 147

The Assessing Officer for assessment year 2000-01 recorded a specific note in the assessment order which indicated that the assessment order was passed under the dictates of the Commissioner. The Supreme Court in the challenge to the reopening for the same assessment year held that the assessment order passed on the dictates of the higher authority, being wholly without jurisdiction, was a nullity. Therefore, with a view to do complete justice to the parties. The Supreme Court directed that the assessment proceedings should be gone through again.

CIT vs. Greenworld Corporation (2009) 314 ITR 81 (SC)

29. Special Leave Petition – Decision of earlier year not challenged – Article 132

The issue involved in this matter was whether the deduction under section 80HHC would be available to the assessee in respect of processing/fabrication charges received from other exporters. It was held that the Assessee having been allowed deduction under section 80HHC in respect of such processing/fabrication charges on goods which were ultimately exported by the other exporters following decision of the High Court in the earlier years, which decision not challenged by the Revenue, no Special Leave Petition could lie.

Southern Sea Foods Ltd. vs. JCIT (2009) 225 CTR 256

30. Survey – Retention of documents – S. 133A

In case of the retention of documents beyond unreasonable period – Registry was directed to return the documents to the Respondents within two weeks with the liberty to take out xerox copies of all pages.

ITO vs. U. K. Mahapatra & Co. (2009) 225 CTR 131 (SC)