Supreme Court & High Courts Weekly Roundup

This weekly round-up analytically summarizes the key stories related to the Supreme Court and High Courts reported at Taxscan.in from June 29, 2024 to July 5, 2024.

HIGH COURTS

Calcutta HC allows Income Tax Deduction u/s 80-IC(2)(a)(i) for the Manufacture of Mouth Freshener (Pan Masala Without Tobacco) M/S UNICORN INDUSTRIES vs PRINCIPAL COMMISSIONER OF INCOME TAX CITATION: 2024 TAXSCAN (HC) 1462

In a recent case, the Calcutta High Court allowed the deduction under section 80-ic(2)(a)(i) of the Income Tax Act for the manufacture of Mouth Freshener ( Pan Masala Without Tobacco )

A division bench comprising Justice Surya Prakash Kesarwani and Justice Rajarshi Bharadwaj observed that the word ‘pan masala’ used in Entry 1 of Part B is not incorporated in Part-A of the 13th Schedule (for the state of Sikkim). Once the Legislature has not included pan masala in Part-A for the State of Sikkim, then it was not open for the ITAT to read the aforesaid entry-1 of Part-B in Entry-1 of Part-A. The finding recorded by the ITAT that the item manufactured by the appellant/assessee is included in tobacco products, is baseless and beyond the provisions of Section 80IC(2) read with the 13th Schedule

Gujarat HC allows Income Tax Deduction for Payment made to Clear Mortgage, dismisses Revenue’s Appeal u/s 263 PRINCIPAL COMMISSIONER OF INCOME TAX vs RINKI SHASHIKANT GANDHI CITATION: 2024 TAXSCAN (HC) 1461

The Gujarat High Court has upheld the decision of the Income Tax Appellate Tribunal ( ITAT ) to allow income tax deduction for payment made to clear a mortgage, dismissing the appeal filed by the Principal Commissioner of Income Tax ( PCIT ).

The bench of Justices Bhargav D. Karia and Niral. R. Mehta noted that the findings of the Tribunal indicated that the assessee did not establish a mortgage on the property but instead provided a personal guarantee to Titco Ltd. to discharge the debt. This resulted in a charge over the property, and upon the buyer’s payment directly to Titco Ltd., the mortgage was released based on the assessee’s guarantee.

GST Liability confirmed on Non-Production of Un-demanded Documents: Madras HC sets aside Order Arul Rubbers Pvt Ltd vs Assistant Commissioner CITATION: 2024 TAXSCAN (HC) 1459

The Madras High Court set aside the GST ( Goods and Services Tax ) order, however, 10% pre-deposit was imposed with regards to the second issue related to RCM ( Reverse Charge Mechanism ).

The bench of Justice Senthilkumar Ramamoorthy observed that petitioner has placed on record the relevant GSTR 3B, GSTR 1 and GSTR 9C returns. And, upon examining these documents, the court found a prima facie opinion that the amount variation could have been an inadvertent error. Thus, in the interest of justice, the court decided to provide another opportunity on this issue.

Delhi HC highlights Need To Enhance Disciplinary Mechanisms Against CA Firms HARINDERJIT SINGH vs DISCIPLINARY COMMITTEE BENCH III THE INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA & ANR CITATION: 2024 TAXSCAN (HC) 1467

A Single Bench of the Delhi High Court remarked that there’s a need for stricter rules against Chartered Accountant ( CA ) firms to improve accountability and transparency.

The court said CAs are important for ensuring the financial system is healthy because they conduct audits and supervise clients. Stricter rules are needed to prevent misconduct, according to the court. The court also said that a consultation is needed to establish how multinational accounting firms can operate in India. The court said these firms can improve India’s accounting practices and provide opportunities for young people. Justice Prathiba M Singh made these comments while dismissing appeals filed by individuals against disciplinary proceedings against ICAI.

Application of 8% Net Profit Rate on Gross Receipts under Contract is valid unless Illegality is Proven: Calcutta HC upholds ITAT’s Order PRINCIPAL COMMISSIONER OF INCOME TAX, KOL-3, KOLKATA vs SIKARIA INFRAPROJECTS PVT. LTD. CITATION: 2024 TAXSCAN (HC) 1468

In a recent case, the Calcutta High Court Upheld the ITAT order which held that the application of a net profit rate of 8% on gross receipts under contract is valid unless illegality is proven.

A division bench of High Court Justices Surya Prakash Kesarwani and Rajarshi Bharadwaj did not find any illegality in the impugned order of the ITAT. The substantial question of law is answered in favour of the assessee and against the revenue. The appeal filed by the revenue is hereby dismissed.

Relief to Alembic Ltd: Gujarat HC allows Rs. 4 cr Income Tax Deduction u/s 80IA for Captive Power Plant THE PR. COMMISSIONER OF INCOME TAX 1 VADODARA vs M/S ALEMBIC LTD CITATION: 2024 TAXSCAN (HC) 1472

In a recent ruling, the Gujarat High Court allowed an income tax deduction of Rs. 4 crores under Section 80IA for the captive power plant of M/s Alembic Ltd. at Baroda. The court upheld the decision of the Income Tax Appellate Tribunal ( ITAT ) and dismissed the appeal filed by the Principal Commissioner of Income Tax.

The Coordinate Bench of Justices Bhargav. D. Karia and Niral. R. Mehta found no substantial question of law arising for consideration and dismissed the appeal, thereby upholding the ITAT’s decision to allow the income tax deduction of Rs. 4 crores under Section 80IA for the assessee’s captive power plant at Baroda.

Bombay HC Quashes IGST Refund Rejection Order, Accepts 25-Day Delay Condonation Request Considering Nascent Stage of GST Regime Sanjeev Suresh Desai vs Union of India and Ors CITATION: 2024 TAXSCAN (HC) 1471

The division bench, comprising Justice K.R. Shriram and Justice Jitendra Jain of the Bombay High Court, quashed the Integrated Goods and Service Tax ( IGST ) refund rejection order and accepted the 25-day delay condonation request, taking into account the nascent stage of the GST regime.

The bench observed, “Our judicial conscience does not permit us to reject this cause shown as bogus, particularly in view of the fact that the petitioner was an individual and the GST regime was at a nascent stage. Moreover, in both orders impugned in the petitions, there is no whisper about the merits of the application.”

ITAT cannot Place Reliance on Order of ITSC in Previous Years: Delhi HC restores Additions PR. COMMISSIONER OF INCOME TAX -CENTRAL -1 vs MAHARAJI EDUCATION TRUST CITATION: 2024 TAXSCAN (HC) 1466

The Delhi High Court has ruled that the order of the Income Tax Settlement Commission ( ITSC ) is final and conclusive for the assessment year ( AY ) for which the application was filed.

The bench of Justice Yashwant Varma and Justice Purushaindra Kumar Kaurav observed that the ITSC’s order is deemed conclusive for all matters pertaining to the concerned AY for which the settlement application was accepted and processed by the ITSC. If the Income Tax Department is dissatisfied with the ITSC’s computation of income for the relevant AY, it can only challenge it according to the provisions under Sections 245D(6) and 245D(7) of the Income Tax Act

GSTR 3B Filing Error: Madras HC quashes GST Demand, allows to Rectify Returns and Hearing M/s.Bright Hardware vs The Deputy State Tax Officer – I CITATION: 2024 TAXSCAN (HC) 1454

In a recent ruling, the Madras High Court allowed to rectify the inadvertent error of GSTR 3B returns as claimed by the assessee and also a fresh personal hearing on 10% pre-deposit condition.

The bench of Justice Senthilkumar Ramamoorthy acknowledged the fact that the error was inadvertent while filing the GSTR 3B return for the month of September 2018. It was observed that prima facie, it appeared that there is merit in the contention of the assessee. However, the court decided to put him on terms.

Relief to Bharti Airtel: Gujarat HC rules Distributor Discounts not Subject to TDS u/s 194 of Income Tax Act BHARTI AIRTEL LTD vs INCOME TAX OFFICER CITATION: 2024 TAXSCAN (HC) 1456

The Gujarat High Court ruled in favor of Bharti Airtel Ltd., determining that the discounts offered to its distributors on pre-paid SIM cards and recharge coupons do not constitute a commission and, therefore, are not subject to tax deduction at source ( TDS ) under Section 194H of the Income Tax Act, 1961.

A division bench of Justices Bhargav D. Karia and Niral R. Mehta stated that Section 194-H of the Act does not apply to the facts and circumstances of the case and that the assessees would not be legally required to deduct tax at source on the income or profit component of the payments.

Documents Enclosed with Email not taken into Consideration: Madras HC sets aside Income Tax Assessment Order Muthu Pitchamuthu Prabu vs Assistant/Deputy Commissioner of Income Tax (International Taxation), Circle 1 (1)(1) CITATION: 2024 TAXSCAN (HC) 1452

In a recent ruling, the Madras High Court set aside an income tax assessment order on the grounds that the documents enclosed with an email by the petitioner were not taken into consideration.

The bench of Justice Senthilkumar Ramamoorthy set aside the impugned order, and the matter was remanded for reconsideration. The court directed the respondents to enable the portal and provide access to the petitioner within two weeks.

VAT Refund Allegation worth Rs.24L through Forged and Fabricated Documents: Punjab and Haryana HC allows Regular Bail on Completion of Investigation MAHESH KUMAR ALIAS MAHESH BANSAL vs STATE OF HARYANA CITATION: 2024 TAXSCAN (HC) 1449

In a recent case, the Punjab and Haryana High Court allowed regular bail on completion of investigation on the allegation of Value Added Tax ( VAT ) refund worth Rs.24 lacs through forged and fabricated documents.

A single bench of Justice Karamjit Singh without commenting on the merits of the case, allowed the petition and the petitioner was ordered to be released on regular bail subject to his furnishing bail bonds/surety bonds to the satisfaction of the trial Court/Chief Judicial Magistrate/Duty Magistrate concerned.

Failure to File Claim during Insolvency Proceedings u/s 31 and 32A of IBC: Gujarat HC Abates Income Tax Appeals COMMISSIONER OF CUSTOMS vs M/S. GENERAL FOODS LTD. CITATION: 2024 TAXSCAN (HC) 1447

The Gujarat High Court abated income tax appeals filed by the Commissioner of Customs (Preventive) due to the failure to file a claim during insolvency proceedings

The bench of Justices Bhargav. D. Karia and Niral. R. Mehta observed that under Section 31 and 32A of the IBC, upon approval of the Resolution Plan, the liability of the corporate debtor for past offences is extinguished. The Gujarat High Court held that the tax appeals became infructuous and were abated due to the appellant’s failure to file a claim during the company’s insolvency proceedings.

Maintenance not Provided to Minor Son Stating Unemployment: Punjab and Haryana HC directs to Pay Maintenance Considering ITR Pradeep Yadav vs Priyesh Yadav CITATION: 2024 TAXSCAN (HC) 1443

The Punjab & Haryana High Court HC directed the petitioner to pay arrears of maintenance and monthly maintenance to his son which was ordered to do so. The court found that the petitioner had sufficient income by analysing the Income Tax Returns ( ITR ). The court found that the non-payment of maintenance to the minor son stating the reason as unemployment.

Justice Nidhi Gupta observed that the mother of the respondent is single-handedly taking care of his day-to-day care and provision of amenities, his physical, mental, and emotional well-being, his educational and medical expenses, etc. The petitioner has exhibited a very uncooperative and irresponsible attitude in his categoric refusal to contribute towards the maintenance of his child.

Setback for ITC Ltd: Calcutta HC rules Rs. 32.42 Cr from Hotel Rights Relinquishment is Revenue Receipt, Not Capital Receipt PRINCIPAL COMMISSIONER OF INCOME TAX-3, KOLKATA vs M/S. ITC LIMITED CITATION: 2024 TAXSCAN (HC) 1442

The Calcutta High Court ruled that Rs. 32.42 Crores received for relinquishment of right to Operate Hotel under operating licence is Revenue receipt and not Capital Receipts.

The court set aside the orders passed by the CIT(A) and the ITAT, thus ruling in favour of the Income Tax Department. The bench of Justices Surya Prakash Kesarwani and Rajarshi Baradwaj observed that “..we hold that the sum of Rs. 32.42 crores received by the respondent assessee shall not fall under long term capital gain. The findings recorded by the ITAT that the aforesaid sum of Rs. 32.42 crores constituted long term capital gain is perverse. The impugned order of the ITAT to the extent it relates to the aforesaid sum of Rs. 32.42 crore cannot be sustained….. It is held that the receipt in question of Rs. 32.42 crores in the hands of the respondent assesse is revenue receipt and not capital receipt.

Relief to Ford India: Madras HC sets aside Unreasoned GST Demand Order Confirming Liability in GSTR 9 and GSTR 2A Mismatch Ford India Private Limited vs Deputy Commissioner (ST-III) CITATION: 2024 TAXSCAN (HC) 1439

The Madras High Court, set aside the unreasoned GST ( Goods and Services Tax ) order issued confirming the tax liability in mismatch between Table 8A data of GSTR 9 and GSTR 2A, granting relief to Ford India.

The bench of Justice Senthilkumar Ramamoorthy observed that the GST proposal was confirmed without any reasoning. Thus, ruled that the impugned order cannot be sustained.

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