The Following are the important Tax Judgments delivered by the Supreme Court of India in 2019.
The Supreme Court of India has struck down New Delhi Municipal Council ( NDMC ) (Determination of Annual Rent) Bye-laws, 2009. The municipal body’s 2009 bylaws were empowered to charge property tax even on vacant land.
The two-judge bench comprising of Justice A.K Sikri and Justice Ashok Bhushan has observed that, “we agree with the High Court that the Impugned Bye-laws that provide UAM which is based on value of the property that on rental which the property is likely to fetch and are, there, foreign to the methodology provided in Section 63 of the NDMC Act. Such Bye-laws are, thus, ultra vires the provisions of NDMC Act. They are in excess of the scope and ambit of powers vested in the NDMC Act under Section 388(1)(A)(9) of the NDMC Act”.
A two-judge bench of the Supreme Court has held that the Courts should interpret the penal or taxation statutes strictly. Justices A M Khanwilkar and Ajay Rastogi observed that the expression “total turnover” + “turnover” which has been used u/s 6B has the same meaning as defined under Section 2(1)(u2) and 2(v) of the Act. Moreover, u/s 6B, reference is made on ‘total turnover’ and not the ‘turnover’ as defined u/s 2(v) of the KST Act and taking note of the exemption provided under first proviso clause(iii), exclusion has been made in reference to use of sale or purchase of goods in the course of interstate trade or commerce. According to the bench, it clearly indicates that the expression ‘total turnover’ which has been incorporated as referred to under Section 6B(1) is for the purpose of identification of the dealers and for prescribing different rates/slabs. The first proviso to Section 6B(1) provides an exhaustive list of deductions which are to be made in computation of such turnover with a further stipulation as referred to in second proviso that except for the manner provided for in Section 6B(1), no other deduction shall be made from the total turnover of a dealer.
The Supreme Court in the case of Smt. P. Leelavathi v. V. Shankarnarayana Rao held that the intention of the father to give financial assistance was for the purpose of welfare of his sons and not ‘benami’.
The Bench comprising of Justice L. Nageswara Rao and Justice M. R. Shah relied upon the Hon’ble Court’s decisions laying principles to establish the nature of transactions which can be categorized as ‘benami’ to adjudicate the present case. The Hon’ble Court held that the plaintiff had failed to prove that the purchase of the suit properties was benami in nature. Further, such financial assistance was also given to the plaintiff and her husband to purchase the residential house. The intention of Late G. Venkata Rao to give the financial assistance to purchase the properties in the names of defendants was looked through and held to be not purchased for himself and hence not benami in nature.
A two-judge bench of the Supreme Court comprising Justice R F Nariman and Justice Sanjiv Khanna held that the deposits collected by a finance company are capital receipts and not revenue receipts. The bench also held that the primary liability and onus is on the Dept to prove that a certain receipt is liable to be taxed.
The Supreme Court of India upheld the decision of the High Court of Judicature at Madras has dismissed a batch of writ petitions which challenged the constitutional validity of the provisions of the Tamil Nadu Value Added Tax Act, 2006.
The Court held that in those cases where a dealer makes sales exclusively to the other State Government(s), benefit of ITC would be allowed without insisting on the furnishing of Form ‘C’. The Supreme Court clarified that when dealers who are making sales exclusively to the other State Governments (i.e. outside the State of Tamil Nadu), the said States would be deemed as registered dealers for the purposes of availing benefits of ITC.
Justices Arun Mishra, Navin Sinha and Indira Banerjee held that “the provisions under Section 27 cannot be invoked in the absence of amendment or modification having been made in the bill of entry on the basis of which self-assessment has been made. In other words, the order of self-assessment is required to be followed unless modified before the claim for refund is entertained under Section 27. The refund proceedings are in the nature of execution for refunding amount. It is not assessment or reassessment proceedings at all.”
The Court hence upheld the necessary amendment to the original order of assessment for a refund claim as has been held by the Priya Blue Industries case and overruled the view taken by the Delhi High Court in the case of Union of India & Ors. v. Micromax Informatics Ltd. (2016) 335 ELT 446 (Del).
The Supreme Court of India held the value of software and the concerned services are to be taken as a part of the importation.
The Bench comprising of Justice Uday Umesh Lalit and Justice Vineet Saran upheld the view taken by the Department to conclude that the principle stated under Note 4 shall be applicable. The Bench considered the imported items as part of one apparatus or machine to be classifiable under the heading appropriate to the function.
The bench also observed that “after considering the purchase order in the instant case, the Tribunal found that apart from supply of equipment, necessary software had to be embedded in the equipment before the supply was effected. The facts also disclose that out of 19 items indicated in the Bill of Entry, only 8 items were physically presented while the rest were already embedded in the main unit. These facts are not only reflective that the individual components were intended to contribute together and attain a clearly defined function as dealt with in Note 4 of Section XVI as stated above, but also indicate that software that was embedded through cards in the main unit, was not any post-importation activity. The value of the software and the concerned services were therefore rightly included and taken as part of the importation.”
The Supreme Court of India has ruled that services rendered by incorporated clubs to members are exempted from service tax.
The Bench constituting of Justice R.F. Nariman, Justice Surya Kant and Justice V. Ramasubramanian held while referring to the Statement of Objects and Reasons that sub-clause (f) to Article 366 of clause 29-A (which permits the States to impose a tax on the supply of food and drink) does not include ‘goods’ in their entirety. Upholding the position laid in Young Men’s Indian Association it was held that supply of various preparations by each club to its members would not amount to a transfer of property from one to another and hence there would be no sale eligible to tax. The club would only act as an agent for its members even if the club is a distinct legal entity and hence the Doctrine of Mutuality subsists.
It has been held that members’ clubs stand on a different footing from proprietary clubs due to the absence of two parties (i.e. seller and buyer). On the issue of application of service tax, it has been accepted by the Court that incorporated clubs or associations prior to July 1st, 2012 were not included in the service tax net and due to existence of the same terminology i.e. ‘body of persons’ after the 2012 amendment, the position pre-2012 was upheld.
The Supreme Court of India has rejected a plea seeking to recall an ex-parte order citing the reason that if in-person notice was served to company’s Chartered Accountant ( CA ).
While dismissing the petition, the two judge bench comprising of Justice U.U Lalit and Justice Indu Malhotra observed that, “the Applicant – Company was duly served through their authorized representative, and were provided sufficient opportunities to appear before this Court, and contest the matter. The Applicant – Company chose to let the matter proceed exparte. The grounds for Recall of the Judgment are devoid of any merit whatsoever”.
The Supreme Court has held that the provisions of Section 5 of the Limitation Act are applicable on High Court while exercising revisional power since there is no express exclusion of the Limitation Act by the provisions of HP VAT.
The Bench constituting of Justices Arun Mishra, M.R. Shah and B.R. Gavai held that the provisions of Section 5 of the Limitation Act are applicable to the revisional provision under Section 48 of the Act of 2005. The Court stated that as the revision under the Act of 2005 lies to the High Court, the provisions of Section 5 of the Limitation Act are applicable on the major reason that there is no express exclusion of the provisions of Section 5 and per se Section 29(2), unless a special law expressly excludes the provision, sections 4 to 24 of the Limitation Act are applicable. The Court discussed that scheme of the HP VAT, 2005 to conclude that the same does not attract the application of the Limitation Act. However, also, the intent of the scheme of the HP VAT is not to exclude the application of the Limitation Act.
The Supreme Court has struck down Tribunal, Appellate Tribunals and other Authorities (Qualification and other Conditions of Service of Members) Rules, 2017 and directed the appointments in terms of respective statutes as existed before the enactment of the Finance Bill, 2017.
The Supreme Court of India held that a petition that is admitted by the High Court may be rejected by the Court on the ground of availability of an alternative remedy.
The Bench constituting of Justices U.U Lalit and Indira Banerjee held that (1) Appeal would be maintainable against the determination of liability under Section 115QA of the Income Tax Act. (2) Further, the Supreme Court held that the High Court’s approach while refusing to entertain the Writ Petition is correct.
The Supreme Court of India Civil Appellate Jurisdiction decided the seminal question involves in the appeals is about the power of the State to rescind notification providing for rebate in respect of tax payable under the Uttar Pradesh Trade Tax Act, 1948 and thus withdrawing the facility even in respect of industrial units, which had commenced production and had complied with the conditions for grant of such rebate in terms of Notification.
The division bench comprising of Justice A.M Khanwilkar and Justice Dinesh Maheshwari held that they reject the stand of the State Government about the supervening public interest and held that the notification cannot be construed as having retrospective or retroactive effect to whittle down the accrued rights in favour of such industrial units. The respondents and similarly placed persons would be entitled to a rebate for the relevant period prescribed in the notification and which would continue to remain until the expiry of the specified period, namely, ten years. The amount of rebate, however, would depend on the verification of their refund claim pending before the concerned authorities and would be subject to just exceptions including the principle of unjust enrichment. In view of the above, these appeals must fail.
The Supreme Court of India has ruled that, agreement to Transfer of Right to use the Vessel would amount to a ‘Deemed Sale’ and hence liable to be taxed under Karnataka Sales Tax Act. The Court held that the Charter Party Agreement amount to a deemed sale as there was a transfer of right to use the vessel as provided in Article 366(29A)(d) read with section 5C or section 2(j) of the Karnataka Sales Tax Act. Thus, the transaction is liable to be taxed by the concerned authorities in the State of Karnataka.
The Supreme Court of India on the basis of statement-admission by the appellant that he was holding the impugned post in the Trust until 1996 by virtue of which the amount was received, it to be treated as revenue receipt.
The Bench constituting of Justices A.M. Khanwilkar and D. Maheshwari held that the amount received is in the nature of revenue receipt. The sole basis of the finding is the authorities’ reliance on the appellant’s statement- admission that the appellant was holding the post of Secretary of a Trust until 1996 and left the same after new members were elected as the managing committee. Hence, the Court, considering the aforementioned facts held that the question of appellant invoking the principle of the capital asset does not arise.
