Top 30 Income Tax Judgments in 2018

The year 2018 has been a very significant one to the taxation regime due to some important reforms in the laws and procedures. The contribution of the judiciary including the Supreme Court and various High Courts and Tribunals cannot be ignored. Some of the significant tax judgments delivered by the Indian judiciary in this year have been enlisted below.

1. Quoting Aadhaar Mandatory for Filing Income Tax Returns and PAN Application: Supreme Court [Read Judgment] The Constitution bench of the Supreme Court has upheld the Constitutional Validity of Section 139AA of the Income Tax Act, 1961 which mandated quoting of Aadhaar or enrolment ID of Aadhaar application form for filing of income tax returns and making application for allotment of PAN.

2. Transfer Charges, Non-Occupancy Charges etc collected by Co-operative Societies from Its Members are Exempt from Income Tax: Supreme Court [Read Judgment]
   A two-judge bench of the Supreme Court, held that the transfer charges, non-occupancy charges and common amenity fund charges and certain other charges, collected by Co-operative Societies from Its members are not subject to income tax since the principle of mutuality applies to all these cases.
3. Interest Income on NPAs received by NBFCs not Taxable on Accrual Basis: Supreme Court [Read Judgment]
   While dismissing a departmental appeal in CIT v. Vasisth Chay Vyapar Ltd, a two-judge bench of the Supreme Court of India held that the interest income earned by Non-Banking Financial Companies (NBFCs) on non-performing assets (NPAs) should not be taxed on the accrual basis.
4. Interest from Share Application Money can be Set Off against Public Issue Expenses: Supreme Court [Read Judgment]
   In the Commissioner of Income Tax vs. M/s. Shree Rama Multi-Tech Ltd. the Supreme Court held that the interest income earned out of the share application money is liable to be set off against the public issue expenses.
5. Benefit Received in the Nature of Cash or Money from Waiver of Loan is Non-Taxable under Section 28(iv) of IT Act: Supreme Court [Read Judgment]
   In The Commissioner vs. Mahindra and Mahindra Ltd. the Supreme Court held that perquisite received in the form of waiver of loan cannot be taxed under Section 28(iv) of the Income Tax Act,1961, if the receipts are in the nature of cash or money.
6. No TDS on Premium paid for a limited period for Acquisition of Leasehold Rights: SC [Read Judgment]
   The Supreme Court last week held that the amounts paid as part of the lease premium or biannual or annual payments for a limited/specific period towards the acquisition of leasehold rights are not subject to TDS, as the same amount to capital payments.
7. Bogus Balance Sheet prepared to avail Bank Loan can be basis for Addition: Calcutta HC asks to proceed against CA Firm for Inflating Value of Assets [Read Judgment]
   The Calcutta High Court, last week held that the addition to income can be made on the basis of balance sheet and profit and loss accounts certified to have been prepared on estimate basis to avail bank loan and having no relation with the actual. While upholding the addition, Justices Sanjib Banerjee and Abhijit Gangopadhyay has asked to proceed against the Chartered Accountant firm for inflating the value of assets of the assessee to avail the credit facilities from the bank.
8. Gain from Sale is Business Income If Assessee followed Stock Market Trend: Bombay HC rejects House Wife’s Plea [Read Judgment]
   While rejecting a plea of a House wife who claimed that the income earned from the sale of shares is capital gain, the Bombay High Court held that such income is assessable as business income since she moved as per stock market trend and was selling shares at first available opportunity.
9. Karnataka HC Interprets Powers of ITAT, says Tribunal can give directions for Fresh Enquiry on any Grounds [Read Judgment]
   The Karnataka High Court in the case of M/s. Fidelity Business Services India Pvt. Ltd. v. ACIT vide its judgment dated July 23, 2018 has delivered a significant judgment by interpreting the powers of the Income Tax Appellate Tribunal (ITAT) and held that ITAT has the power to give directions for fresh enquiry into the aspects of the subject matter of appeal filed before it either suo motu or on any grounds raised by either party to the appeal.
10. Depreciation cannot be disallowed merely on ground that IPR was not used for Manufacturing Activities: Delhi HC [Read Judgment]
    A division bench of the Delhi High Court has held that the claim for depreciation under Section 32 of the Income Tax Act, 1961 cannot be disallowed merely on the ground that the intellectual property rights were not used by the assessee for the manufacturing activity.
11. Income Tax Department can’t Recover Dues during Liquidation Process under IBC: Hyderabad HC [Read Judgment]
    A division bench of the Hyderabad High Court has held that an order of attachment of the subject property by the Income Tax department cannot affect the completion of the sale effected by the liquidator under the provisions of the Insolvency and Bankruptcy Code, 2016. The bench made it clear that the Income Tax department is not a secured creditor once liquidation under IBC begins.
12. Limited Scrutiny applicable only in cases where AO seeks to do Comprehensive Scrutiny to Find if there is Potential Escapement of Income: Kerala HC [Read Judgment]
    The Kerala High Court held that Limited Scrutiny was applicable only in cases where the Assessing Officer needs to take the case of the assessee for a comprehensive scrutiny on a finding that there is potential escapement of income on other issues.
13. Person Prosecuted u/s 420 of IPC can’t avail Benefit of Income Declaration Scheme, 2016: Uttarakhand HC [Read Judgment]
    The Uttarakhand High Court has held that the persons prosecuted under section 420 of the Indian Penal Code is not eligible to avail the benefit of the Income Declaration Scheme, 2016.
14. Service of Notice to Chartered Accountant of Assessee is not Service at all: Chhattisgarh HC [Read Judgment]
    The Chhattisgarh High Court recently held that the service of notice to the Chartered Accountant of the assessee cannot be treated as ‘service’.
15. Education Subsidy given by Employer to Schools where Children of Employees pay only part Fee is not Perquisite: Gujarat HC [Read Judgment]
    The Gujarat High Court in Gujarat Co-operative Milk Marketing Federation Ltd vs. Income Tax Officer, held that the subsidy provided by the employer to the school towards the deficit of education expenses of children of his employees is not perquisite in the hands of the employees as per the provisions of Section 17 [2] (iii) and (iv) of the Income Tax Act, 1961 read with Rule 3 of the Income Tax Rules, 1962.

16. Both Managing Director and Director are Equally responsible to file IT returns of Company: Delhi High Court [Read Judgment]
    The Delhi High Court has held that both the Managing Director and the Directors of the Company are responsible to file the income tax returns of the Company under the provisions of the Income Tax Act, 1961.
17. TDS can’t be recovered from Deductee / Employee in Case of Default by Deductor / Employer: Gujarat HC [Read Judgment]
    A two-judge bench of the Gujarat High Court has held that the tax department cannot recover tax from the deductee/employer for the fault of the deductor/employer to remit the TDS amount to the Government.
18. Criminal Prosecution along with IT Proceedings is necessary to curb Tax Evasion: Jammu & Kashmir HC [Read Order]
    The Jammu and Kashmir High Court, while upholding a criminal prosecution against an alleged tax evader, concluded that criminal prosecution along with the other assessment and penalty proceedings is necessary to remove tax evasion.
19. Service Tax due but not actually Collected from Customers eligible for Income Tax Deduction: Bombay HC [Read Judgment]A two-judge bench of the Bombay High Court has held that the Service Tax due but not actually collected from customers and not remitted to the Central Government cannot be disallowed under Section 43B of the Income Tax Act, 1961.

20. IT Defaulter need not apprehend Immediate Arrest: Karnataka HC denies Anticipatory Bail [Read Order]
    While denying anticipatory bail to an individual, the Karnataka High Court held that the Income Tax defaulters need not apprehend immediate arrest on receipt of show cause notice from the Income Tax department.
21. Non-Residents not required to disclose their Foreign Bank Accounts and Assets to Indian Income Tax Authorities: ITAT [Read Order]The Mumbai bench of the Income Tax Appellate Tribunal (ITAT) has held that the non-residents are not required to disclose the details of their foreign bank accounts and assets to the Indian Income Tax department.

22. Beneficiaries not Taxable for Fund invested by Trust in Swiss Bank: ITAT [Read Order]
    The Mumbai bench of the Income Tax Appellate Tribunal (ITAT) has held that the beneficiaries of an Indian Trust cannot be taxed for the fund invested by the Trust in the Swiss Bank.
23. Benefit of CBDT Circular permitting Holding of Gold Jewellery also applicable to Silver Jewellery: ITAT [Read Order]
    The Indore bench of the Income Tax Appellate Tribunal (ITAT) has held that the benefit of the circular issued by the Central Board of Direct Taxes (CBDT) permitting the holding of gold jewellery can be applicable to silver jewellery also.
24. NRIs can be appointed as Trustees of valid Indian Trusts under Income Tax Act: ITAT [Read Order]
    The New Delhi bench of Income Tax Appellate Tribunal (ITAT) in Global Academy of Emergency Medicine versus CIT(E), held that under the Income Tax Act appointing of NRIs as trustees of valid Indian trusts are permissible.
25. Late Fee for Belated TDS Returns can be levied only from 1.6.2015: ITAT [Read Order]
    The Hyderabad bench of the Income Tax Appellate Tribunal (ITAT) has held that the late fee can be imposed for belated TDS returns only with effect from 1.6.2015.
26. Ex-Director can’t Sign and Verify Appeal Memo filed before Tribunal: ITAT [Read Order]
    The Mumbai bench of the Income Tax Appellate Tribunal (ITAT) has held that an ex-Director of the assessee- Company is not authorized to sign and verify the Appeal Memorandum on behalf of the Company under the Income Tax Laws.
27. No Tax Relief for Sale of Old House If New One purchased in Wife & Daughters’ Name: ITAT [Read Order]
    The Income Tax Appellate Tribunal (ITAT) Mumbai bench has held that no tax relief under section 54 can be granted to the assessee for the sale of an old property if the new property was purchased in the name of his wife and daughter.
28. Discounts by E-Commerce Portals not Taxable: Flipkart gets relief from ITAT [Read Order]
    The Bangalore bench of the Income Tax Appellate Tribunal ( ITAT ), on Wednesday set aside a 109.52 crore tax demand from the income tax department against e-commerce giants Flipkart.
29. Assessee can’t be Penalized for the Limitations in Dept’s Online Portal : ITAT [Read Order]
    In an assessee-favor ruling, the Delhi bench of Income Tax Appellate Tribunal (ITAT) ruled that the Assessee cannot be penalized due to limitations of the online portal provided by the department.
30. A Family can possess up to 1450 gms Jewellery: ITAT follows CBDT Circular [Read Order] While hearing the case between Ritu Bajaj and Assistant Commissioner of Income Tax, Delhi bench of Income Tax Appellate Tribunal (ITAT), while following a circular issued by the Central Board of Direct Taxes (CBDT), held that a family can possess up to 1450 gms gold jewellery.