This weekly round-up analytically summarises the key tax judgments of the Supreme Court and all High Courts reported at Taxscan.in during the previous week from December 01 to December 08, 2023.
The Supreme Court clarified that an individual accused under Section 3 of the Prevention of Money Laundering Act (PMLA) is not required to face charges related to a scheduled offense.
The Court highlighted the prerequisites for a section 3 offense under PMLA, emphasizing the occurrence of a scheduled offense and the presence of proceeds from the crime linked to the scheduled offense.
It was noted that if the prosecution for the scheduled offense results in the acquittal or discharge of all accused, there would be no proceeds of crime, and Section 3 of the PMLA cannot be applied.Similarly, if the proceedings related to the scheduled offense are entirely quashed, the scheduled offense benefits from the quashing.
Justices Abhay S. Oka and Pankaj Mithal emphasized that “It is not a requirement for an individual accused under Section 3 of the PMLA to be specifically named as an accused in the scheduled offense.”
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The Supreme Court of India observed that the National Company Law Tribunal (NCLT) must pass reasoned order for rejection of resolution plan under Section 31(2) of the Insolvency and Bankruptcy Code, 2016 (IBC).
A Two-Judge Bench, comprising Justice Vikram Nath and Justice Ahsanuddin Amanullah, observed that the Adjudicating Authority holds jurisdiction solely under Section 31(2) of the Code. This authority possesses the power to disapprove only when the Resolution Plan fails to meet the stipulated requirements outlined in Section 31(1) of the Code, necessitating the issuance of a reasoned order.
The court additionally observed that Committee of Creditors has full authority over determining the course of action regarding the Corporate Debtor’s entire debt.
The civil appeal by Gujarat State Fertilizer challenging the dismissal of the appeal by the Excise Commissioner due to non-prosecution has been disposed of by the Supreme Court of India. Gujarat State Fertilizers and Chemicals Ltd., the petitioner, had filed the civil appeal against the Excise Commissioner’s order. A two-judge bench comprising Justice B V Nagarathna and Justice Ujjal Bhuyan stated, “Considering the order dated 05.03.2019 dismissing the appeal for non-prosecution, there is no further action required in this matter as per the order. Any pending application(s) shall be deemed disposed of.”
The Supreme Court dismissed the Special Leave Petition (SLP) arising from the final judgment and order of the High Court of Gujarat. The challenge pertained to the reopening of the assessment based on an allegation of bogus purchase supported by a statement.
A two-judge bench consisting of Justice B V Nagarathna and Justice Ujjal Bhuyan stated, “With the dismissal of the SLP Diary No.29859/2023 in accordance with the mentioned order, this special leave petition is also deemed dismissed.”
A Two-Judge Bench comprising Justice BV Nagarathna and Justice Ujjal Bhuyan of the Bombay High Court observed that the notice for reopening the assessment lacked reference to any new information and amounted to a change of opinion based on the same material considered in the initial assessment. The court deemed this action impermissible under Section 147 of the Income Tax Act. Additionally, the High Court noted that the notice failed to address the objections raised by the petitioner, and there was no indication of suppression of material or newly discovered facts leading to the alleged escapement of income.
The notice under Section 148 of the Income Tax Act was quashed. The Income Tax Commissioner has preferred the present appeal impugning the judgment of the Bombay High Court. The court observed that “Although, there is a delay of 128 days in filing the Special Leave Petition, nevertheless, we have heard learned Additional Solicitor General on merits of the case. Delay condoned.”
The petitioner’s counsel argued that despite a delay of 422 days in SLP (C) Dy.No.29859/2023, 524 days in SLP (C) Diary No(s). 45805/2023, and 524 days in SLP (C) Dy. No.45797/2023 in filing these special leave petitions, the matters are governed by the Supreme Court’s order in SLP (C) No.13121/2023 dated 03.07.2023, where similar special leave petitions were dismissed. Justices BV Nagarathna and Ujjal Bhuyan, a Two-Judge Bench, observed, “Hence, appropriate order may be made in these special leave petitions. The special leave petitions are dismissed both on the ground of delay as well as on merits following the order referred to above.”
The Supreme Court of India directed Renault Nissan Automotive India Pvt Ltd to pay 10 Crores to the Sales Tax Department. The Special Leave to Appeal (SLP) arose from the final judgment and order of the High Court of Judicature at Madras, which addressed the challenge related to the assessment under the Central Sales Tax Act, 1956.
The assessee had explicitly stated that they were not disputing the merits of the assessments but were challenging the assessment orders based on jurisdictional issues and violations of the principles of natural justice.
A two-judge bench comprising Justice B V Nagarathna and Justice Ujjal Bhuyan ruled that “there shall be a stay of any coercive action against the petitioner herein, subject to the deposit of a further sum of Rs.10,00,00,000/- (Rupees Ten Crores only) by the petitioner with the respondent-Department within four weeks from today.”
The Supreme Court stayed the Income Tax Proceedings against the public charitable trust as donation voluntarily paid to the educational trust does not amount to a capitation fee. The Special Leave Petition(SLP) arose out of the impugned final judgment and order passed by the High Court of Judicature at Madras.
A two-judge bench of Justice B V Nagarathna and Justice Ujjal Bhuyan held that “following the order dated 24.11.2023 passed in SLP (C) arising from the same batch of cases disposed of by the Madras High Court, there shall be an interim stay of further proceedings of the impugned judgment and order in these matters also.”
The Supreme Court has upheld the computation of market value of electricity for deduction under Section 80IA of the Income Tax Act, 1961.
Due to the inadequacy of electricity supplied by the State Electricity Board to meet its industrial units’ requirements, the assessee established captive power generating units to fulfill its industrial needs. The surplus power generated was supplied by the assessee to the State Electricity Board. In response to this appeal, the assessee, the respondent, filed a return of income on October 29, 2001, declaring nil income.
The assessed total income at nil was determined after claiming various deductions, including under Section 80 IA of the Income Tax Act. Despite the substantial book profit of the assessee, amounting to Rs. 1,11,43,36,230.00, income tax was imposed under Section 115 JB of the Act at a rate of 7.5 percent, along with surcharge and interest. Section 80 IA of the Income Tax Act provides deductions for profits and gains from industrial undertakings or enterprises engaged in infrastructure development, etc.
The Supreme Court Bench of Justice B V Nagarathna and Justice Ujjal Bhuyan held that the Tribunal had rightly computed the market value of electricity supplied by the captive power plants of the assessee to its industrial units after comparing it with the rate of power available in the open market i.e., the price charged by the State Electricity Board while supplying electricity to the industrial consumers.
The Supreme Court has upheld the deletion of addition made on payments made to S K Gupta and group of companies Assessee claimed allowance of expenditure of about Rs. 3.39 crores on account of payments made to one SK Gupta and his group of companies. The assessing officer vide the assessment order dated 19.03.2008 passed under Section 143 (3) of the Income Tax Act, referred to the statement of S.K. Gupta recorded during the search operations and held that the said person had not rendered any service to the assessee so as to receive such payments. Therefore, the assessing officer disallowed such claim of expenditure of the assessee and added the same to the income of the assessee.
The Supreme Court bench of Justice Ujjal Bhuyan and B V Nagarathna observed that there is no admissible material to deny the claim of expenditure made by the assessee.
The Supreme Court has refrained from providing a verdict on whether Carbon Credit constitutes a revenue or capital receipt, as the department did not press the issue in a series of income tax appeals against Jindal Steel and Power Limited.
Carbon credit arises from technologies, plant, and machinery that contribute to the reduction of greenhouse gases. Additionally, carbon credits are designed to promote environmentally sound investments, which are inherently of a capital nature. Consequently, the Tribunal had previously determined that carbon credit is a capital receipt.
Noting that the revenue did not raise or argue the issue related to carbon credit, the two-judge bench of the Supreme Court held that “the revenue would be estopped from raising the said issue before this Court at the stage of final hearing. That apart, there is no decision of the High Court on this issue against which the revenue can be said to be
aggrieved and which can be assailed.” Therefore, the Supreme Court
declined to address this question raised by the revenue and left it open for determination in a suitable proceeding.
The Supreme Court of India upheld the adoption of Written Down Value (WDV) method in place of the straight line method while computing depreciation on the assets used for power generation by assessee.
It was observed by the Supreme Court that, “After obtaining the clarification of the assessee, assessing officer held that since the assessee did not exercise the option of adopting WDV method, therefore, in view of the provision of Rule 5(1A) of the Income Tax Rules, 1962 , it would be entitled to depreciation on the straight line method.” Finding no merit in the question proposed by the revenue, the Supreme Court, answered the question of law in favour of the assessee and against the revenue.
The Delhi High Court has issued a corrigendum for a typographical error in the coal scam case ruling. The court noted that the authorities, under Section 50 of PMLA, possess the power to summon any person deemed essential for providing evidence or producing records in the course of investigations or proceedings under PMLA. The ongoing investigation in the present ECIR(Enforcement Case Information Report) prompted the summons to the petitioner for appearing and submitting specific documents.
Upon careful consideration of the petition and in alignment with legal precedents, the Court finds no grounds to annul the summons issued under Section 50 of PMLA to the petitioner.
Justice Swarana Kanta Sharma directed the respondent to notify the petitioner at least 24 hours in advance and secure the petitioner’s attendance at its office located in Kolkata in the original case.
The Delhi High court recently ruled that simultaneous continuance of arbitration proceedings and section 138 of Negotiable Instrument Act 1881 proceedings could be initiated , even if the two arise from the separate causes of action.
The court observed that the arbitration proceedings as well as the proceedings under Section 138 of the NI Act arise from separate causes of action and the pendency of the arbitration proceedings would not affect the proceedings under Section 138 of the NI Act.
Justice Amit Bansal held that simultaneous continuance of arbitration proceedings and section 138 of Negotiable Instrument Act 1881 proceedings could be initiated , even if the two arise from the separate causes of action.
The Himachal Pradesh High Court has held that disallowing registration of sale certificates and mutation dehors provision of the Securitisation and Reconstructions of Financial Assets and Enforcement of Security Interest Act (SARFAESI) Act, 2002.
A division bench comprising Justice Tarlok Singh Chauhan and Justice Satyen Vaidya noted that when assets such as land, buildings, plants, and machinery are mortgaged or hypothecated to a secured creditor, the Secured Creditor, in accordance with Section 2(zc) to (zf) of the SARFAESI Act, 2002, along with Section 13 of the SARFAESI ACT, 2002, holds the First Charge on the Secured Assets. Furthermore, Section 35 of the SARFAESI Act, 2002, stipulates that its provisions shall take precedence over all other laws. It is crucial to highlight that even the provisions in Section 11E of the Central Excise Act, 1944, are subservient to the SARFAESI Act, 2002. The Court granted approval to the current petition.
The Patna High Court upheld the order of the commercial tax tribunal wherein it was held that adjustment of entry tax paid on damaged cement is not admissible under Bihar Tax on Entry of Goods into Local Areas for Consumption, Use or Sale therein Act, 1993.
The court acknowledged that the obligation to pay tax and the actual remittance of tax were deemed conceptually distinct. The finding in favor of the assessee emphasized that the exemption notification does not eliminate the liability established by the charging section but merely relieves the assessee of the obligation to pay the tax.
Chief Justice and Justice Rajiv Roy highlighted the query regarding an exemption that does not erase the tax liability. Additionally, they noted that the words “by sale of imported scheduled goods or sale of goods manufactured by consuming such imported scheduled
goods” were introduced to the provision granting set-off through an amendment subsequent to the ACC case. The ruling explicitly stated that set-off is a concession that cannot be claimed as a matter of right unless the specific conditions for its grant are fulfilled.
The matter was remanded only for consideration of the ground raised of no liability of entry tax since the OMCs to which the appellant had sold petroleum products had sold it outside Patna and thus the goods were not consumed, used or sold within the local limits of Patna. The court dismissed the appeal.
The Delhi High Court has held that Explanation 7 of Section 9(1)(i) of the Income Tax Act, 1961has retrospective effect and upheld the deletion of addition towards Long Term Capital Gain (LTCG)
The court observed that the Finance Act, of 2003, to the extent indicated above, should be read as retrospective. It would, therefore, operate from 1-4-1988, when the first proviso was introduced. Indeed, Parliament has explicitly stated that the Finance Act, of 2003, will operate with effect from 1-4-2004.
The division bench comprising of Justice Rajiv Shakdher and Justice Girish Kathpalia observed that the object of Explanation 5 was not to extend the scope of Section 9(1)(i) of the Act to income, which had no territorial nexus with India, but to tax income that had a nexus with India, irrespective of whether the same was reflected in a sale of an asset situated outside India.
The Gujarat High Court observed that the object of section 31 of the Motor Vehicles Act, 1988 is only for collection of tax.
Justice Hasmukh D Suthar observed that the petitioner is not a registered owner of the vehicle and has failed to prove his ownership as regards he has purchased the vehicle and paid loan instalments also to respondent No.4 – Finance Company and except bare words, the petitioner is not having any evidence even to prove the said fact that he had made the payment towards the instalment of loan for the muddamal vehicle.
Further, the trial Court is directed to decide the question of ownership of the muddamal vehicle without being influenced by any of the observations made by the Revisional Court in Criminal Revision Application No.61/2023 while deciding the ownership and possession.
The Kerala High Court has granted permission to amend the income tax returns (ITR) as the application under Section 119 (2) (b) of the Income Tax Act, 1961, was filed to seek condonation of delay for rectifying the ITR.
The current writ petition challenges the order passed by the Principal Commissioner of Income Tax, which rejected the petitioner’s application to condone the delay in filing the return of income for the assessment years 2016-17.
Justice Dinesh Kumar Singh stated, “I am of the opinion that the application dated 31.05.2023 should not be treated in isolation, as it dates back to 26.02.2019 when the petitioner raised her grievance for the first time. Thus, I consider the application to be on time. Hence, the impugned order is set aside. The petitioner should be allowed to
rectify the returns of income for the assessment year 2016-17. The petitioner
should approach the Assessing Authority within a period of ten days from today and
rectify the errors/defects in the returns. After the petitioner rectifies the
errors, his claim for refund should be processed in accordance with the law.”
The Himachal Pradesh High Court has held that mere possession and recovery of currency notes without proof of demand is not enough to convict the accused.
Charges were framed by the learned trial Court against the accused under Sections 7 and 13(2) of the PC Act, vide order dated 24.03.2015. The accused did not plead guilty to the charge framed against him and claimed trial.
The court observed that In the absence of any proof of demand for illegal gratification, the use of corrupt or illegal means or abuse of position as a public servant to obtain any valuable thing or pecuniary advantage cannot be held to be proved. It was settled law that in the absence of proof of demand, the presumption under Section 20 of the Prevention of the Corruption Act would not be attracted.
Justice Sushil Kukreja observed that “the prosecution has failed to prove its case against the accused beyond reasonable doubt. There has been a wrong appreciation of evidence on record by the trial Court, which has resulted in a miscarriage of justice.” While allowing the criminal appeal, the court set aside the impugned judgment of conviction and order of sentence passed by the Special Judge. Further the appellant-accused is acquitted of the charges framed against him. The fine amount collected, if any, shall be refunded to him. The bail bonds executed shall stand cancelled.
The Supreme Court rejected the Special Leave Petition (SLP) arising from the challenged final judgment and order of the High Court of Gujarat, which involved a dispute over the reopening of the assessment based on an allegation of a bogus purchase supported by a statement.
The Assessing Officer (AO) initiated the reassessment under Section 147 of the Income Tax Act, relying on an investigation report that alleged a bogus purchase based on a statement. The AO added the entire purchase amount of Rs. 8.10 crore as unexplained expenditure.
The Commissioner of Income Tax Appeal (CIT(A)) limited the addition to 12.5%.
Subsequently, the Income Tax Appellate Tribunal (ITAT) further reduced the addition to 6%, prompting the Department to appeal to the High Court.
A two-judge bench comprising Justice B V Nagarathna and Justice Ujjal Bhuyan observed that the assessee had not been furnished witha copy of the statement or given the opportunity for cross-examination. In all
instances, the AO and CIT(A) opted for additions ranging from 3 to 5% of bogus
purchases, and the Department failed to demonstrate whether they had appealed
to the High Court or the Supreme Court, given the absence of provision of the statement or an opportunity for cross-examination.
The Kerala High Court directed the release of seized gold items from employee on furnishing bonds and securities.
Justice Dinesh Kumar Singh observed that “In view of the above, the present writ petition is disposed of with a direction to the respondents to release the aforesaid gold items seized from the employee of the petitioner, to the petitioner on furnishing bonds and securities other than the Bank Guarantee. Such release shall be subject to any order(s) passed by the appellate authority, in case the Department has preferred an appeal or preferring an appeal against the Order.”
The Kerala High Court dismissed A writ petition to approach Appellate Authority against assessment order under the Income Tax Act, 1961.
The petitioner’s counsel expressed the intention to withdraw the writ petition to pursue recourse to the Appellate Authority as per the provisions of the Income Tax Act, 1961, challenging the assessment order dated 17.03.2023 issued under Section 147 read with Section 144B of the Income Tax Act for the Assessment Year 2018-19.
Justice Dinesh Kumar Singh, presiding over the case, remarked, “Considering the aforesaid prayer, the writ petition is dismissed as withdrawn with the liberty of the petitioner to approach the Appellate Authority against the impugned assessment order dated 17.03.2023 within a period of fifteen days from today. If the petitioner is filing the appeal within a period of fifteen days from today, the Appellate Authority should proceed with the appeal on merits.”
The petitioner, Hongkong and Shanghai Banking Corporation (HSBC), challenges the retention of Rs.56,19,84,075 by the respondents (GST department). HSBC asserts that the amount was deposited under protest to preclude potential service tax and interest on “interchange income.” There was no show cause notice for ‘interchange income’ from October 2007 to June 2012. The petitioner argues that the retention of funds is unauthorized and violates Article 265 of the Constitution. The Bombay High Court directs the GST department to refund the amount deposited by HSBC under protest.
A Division Bench of Justices Jitendra Jain and GS Kulkarni observed that “It is well settled that once such amounts were deposited by the petitioner and were retained by the department without the authority in law, the claim of the petitioner for refund could not have been denied. In such circumstances, it was appropriate for the petitioner to invoke the jurisdiction of this Court under Article 226 of the Constitution praying for writ for directing refund of money illegally retained / withheld.”
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