Income Tax Act 1961 (Compilation of Case Laws) - NADT

274 Pages·2011·16.64 MB·English

Foreword

K.K.Srivastava, I.R.S. Direct Taxes Regional Training Institute,
Director, 16B, Rowland Road, Kolkata 700020
e-mail: [email protected]
Tele: 033-24765986 Fax: [phone]

1. The interpretation of the direct tax statute is the domain of the Honourable
Supreme Court of India and the Honourable High Courts. The pronouncements of these
august institutions constitute the wisdom for guidance of subordinate authorities.

2. While numerous commentaries and compilations in respect of case laws on
direct tax statute are available, a need is always felt by the officers of the Department for a
compilation of latest pronouncements in favour of revenue.

3. The DTRTI, Kolkata had published “One Thousand Judgements of the
Honourable Supreme Court of India and the Honourable High Courts of India in Favour of
Revenue” in January 2010. The publication is now updated to include selected case laws up
to ITR 336. The publication is also recast by arranging the case laws in ascending order of
reference to sections of the Income Tax Act, 1961. Further for each indexed item, based on
section referred, the case laws are arranged in descending order of year of citation.

4. Smt. Sarita Mishra Kolhe, Addl. Director, DTRTI, Kolkata has painstakingly
selected numerous citations and carefully compiled the gists of the case laws in the
publication. She deserves praise for successful completion of this publication.

5. It is hoped that the compilation in the present form will be of immense help to
the Officers of the Department in discharge of their functions.

Kolkata (K.K.Srivastava)
Dated 15.09.2011 Director,
DTRTI, Kolkata
Preface

Sarita Mishra Kolhe, I.R.S. Direct Taxes Regional Training Institute,
Additional Director of Income Tax (Training) 16B, Rowland Road, Kolkata- 700 20.
e-mail: saritamishrakolhe@ yahoo.com
Tel: [phone]. Fax: [phone]

1. Almost every day the Honourable Supreme Court of India and the Honourable High Courts
of India settle a number of disputes arising out of the interpretation and applicability of the various
sections of the Income Tax Act 1961.

2. The needs of the Assessing Officers and their Supervisory Officers functioning in the Income
Tax Department for apprising themselves about the scope of effective application of the statutory
provisions of the Income Tax Act 1961, in a given situation and under a given set of facts cannot be
overemphasized.

3. From the midst of thousands of judgements pronounced by the Honourable Supreme Court
of India and the Honourable High Courts of the country it is not always very easy to locate a
decision favourable to the Department on a specific issue or on a particular aspect of a section of the
Income Tax Act, 1961. Although a lot of citations are available in numerous tax publications such as
Taxmann’s Direct Tax Laws Online, Tax India Online and others, still, the task of locating a
favourable judgement on a pin-pointed issue is difficult, unless one is an avid reader of a bevy of
judgments, and regularly follows up the judicial rulings of the Honourable Supreme Court of India
and of the Honourable High Courts of India pertaining to the Income Tax Act, 1961.

4. With this constraint in view, an attempt has been made in this Publication to present a gist of
several judgements, including several landmark judgements, of the Honourable Supreme Court of
India and of the Honourable High Courts of India in favour of the Department on a spectrum of
issues under the Income Tax Act, 1961. Care has been taken to include quite a large number of
judgments section wise, including many recent judgements.

5. The Publication is so designed that the user will not only get the citation and the relevant
section of the Income Tax Act, 1961 but also the gist of the judgement so that the Assessing
Officers, their Supervisory Officers, CsIT, CsIT(A), Officers in the ITAT and other Officers may
readily match the facts and circumstances of the case at hand with those covered in the judgements.

6. In this compilation, a gist of several judgements favourable to revenue from ITR 2 to ITR
336 are included. To compile this Publication reliance has been placed on several publications like
ITRs, Taxmann, Taxmann’s Direct Tax Laws Online, Current Tax Reporter, Taxman’s Corporate
Professional Today etc. However this compilation is not an exhaustive one, in as much as, several
judgements favourable to revenue in several ITRs on several sections of the Income Tax Act, 1961
have remained to be included.

7. In the compilation, the case laws have been presented section wise. In some judgements, there
are references to many sections, and sub-sections of the Income Tax Act, 1961. For the benefit of
readers it is mentioned here that wherever some judgments have references to more than one section
of the Income Tax Act, 1961 the section wise order is maintained and referred to in bold.
Subsequently, such judgments are repeated in respect of relevant section/sections which are again
made bold in respective places. There may also be some inadvertent mistakes and omissions in this
compilation.

8. The first edition of this Publication was made by DTRTI Kolkata in January 2010 titled ‘One
Thousand Judgements of the Honourable Supreme Court of India and the Honourable High
Courts of India in Favour of Revenue’ which was compiled by the undersigned containing one
thousand judgements in favour of revenue from ITR 2 to ITR 319.

9. My special thanks to Shri K. K. Srivastava, Director of Income Tax, DTRTI Kolkata for his
help, guidance, encouragement and support and for his tireless efforts in software sorting the
compilation section wise. I also thank the faculty members DTRTI Kolkata for their support. My
special thanks to Shri Lalji Bhartiya Stenographer DTRTI, Kolkata for the efforts put in by him in
providing the secretarial assistance during preparation of this compilation.

10. The case laws compiled in this publication span from ITR 2 (1934) to ITR 336 (2011). It is
hoped that this compilation of judgements in favour of revenue will be useful and relevant for the
Officers of the Income-tax Department.

11. Reader’s views, comments and suggestions for improvement of this compilation are welcome
which can be e-mailed to saritamishrakolhe@ yahoo.com.

Place : Kolkata
Dated: 15.09.2011 Sarita Mishra Kolhe
Addl. Director of Income Tax (Training)
DIRECT TAXES REGIONAL TRAINING INSTITUTE
KOLKATA
DISCLAIMER

The contents of this publication should not be construed as
exhaustive statements of law. There may be some inadvertent
mistakes and omissions in this compilation. In the event of any
doubt, reference may please be made to the relevant Income Tax
Reports, Taxmann, Taxmann’s Direct Tax Laws online, Current
Tax Reporter, Taxman’s Corporate Professionals Today, stated in
the citation as well as to the relevant provisions of the Direct Tax
Laws, Rules, Allied Acts and wherever necessary, Circulars,
Notifications, Instructions issued by the C.B.D.T. from time to
time.
First Edition Published in January 2010

Second Edition Published in October 2011

Published by:
Direct Taxes Regional Training Institute
16 B, Rowland Road, Kolkata-700020
e-mail: [email protected]

Printed by:
La Belle (Art & Publicity)
107/2 Raja Rammohan Sarani,
Kolkata- 700009
Cell 9433936348
E mail : [email protected]
INDEX
Income Tax Act 1961
(Compilation of Case Laws)

Section Page
of the Income Tax Particulars Number
Act 1961

CHAPTER -1
Preliminary

Definitions

2 (1A) Agricultural Income 1
2 (7) Assessee 1
2 (7)(c) Every person who is deemed to be an assessee in default 1
2 (7A) Assessing Officer 2
2(8) Assessment 2
2 (14) Capital Asset 2
2 (15) Charitable Purpose 3
2 (22) (e) Deemed Dividend 3
2 (31) Person 4
2(35)(b) Principal Officer 5
2 (40) Regular Assessment 5
2 (42A) Short Term Capital Asset 5
2 (47) Transfer 5
3 (4) Previous Year 6

Chapter – II
BASIS OF CHARGE

4 Charge of Income Tax 6
5 Scope of Total Income 11
9 Income deemed to accrue or arise in India 14

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Chapter – III
INCOMES WHICH DO NOT FORM PART OF TOTAL INCOME

10 (1) Agricultural Income 16
10 (10C) Any amount received by an employee of certain institutions 16
10 (13A) Any special allowance to meet expenditure on payment of 17
rent in respect of residential accommodation
10 (14) Any special allowance or benefit, not being perquisite, 17
specifically granted to meet expenses in the performance
of the duties of an office
10 (20) Income of a local authority 18
10 (20A) Income of an authority for town planning etc. 18
10 (22) Income exempt in respect of university,educational 18
institutions solely for educational purpose.Omitted w.e.f.
1.4.1999
10 (23C) Any income received by certain funds, approved hospitals 19
and educational institutions etc.
10 (29) Exemption of income of marketing authorities constituted 20
under law in respect of income of godown or
warehouse.Omitted by the Finance Act 2002 w.e.f.
1.4.2003
10 (33) Any income arising from the transfer of a capital asset 20
being a unit of UTI 1964
10A Special provision in respect of newly established 21
undertakings in free trade zone etc.
11 Income from property held for charitable or religious 21
purpose
12 Income of trusts or institutions from contributions 23
13 Section 11 not to apply in certain cases 23

Chapter IV
COMPUTATION OF TOTAL INCOME
Heads of income

14A Expenditure incurred in relation to income not includible in 24
total income

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A- Salaries

15 Salaries 24
16 Deductions from salaries 25
17 ‘salary’, ‘perquisite’ and ‘Profits in lieu of salary’ defined 26

C- Income from House Property

22 Income from House property 27
23 Annual value how determined 29
24 Deductions from income from house property 30

D- Profits and gains of business or profession

28 Income chargeable under the head ‘Profits and Gains of 30
business or profession’
29 Income from profits and gains of business or profession 34
how computed
30 Rent, Rates, Taxes, Repairs and Insurance for Buildings 34
31 Repairs and insurance of machinery, plant and furniture 34
32 Depreciation 34
32A Investment allowance 39
32AB Investment deposit account 41
33 Development rebate 41
34 Conditions for depreciation allowance and development 41
rebate
35 Expenditure on scientific research 42
35AB Expenditure on know-how 42
35ABB Expenditure for obtaining licence to operate 42
telecommunication services.
35B Exports markets development allowance omitted w.e.f. 42
1.4.1989
35D Amortisation of certain preliminary expenses 45
36 Other deductions 45
37 Any expenditure laid out or expended wholly and 49
exclusively for the purpose of the business or profession
40(a)(ia) Amounts not deductible - on which tax deductible at 63
source under Chapter XVII-B,not deducted or not deposited
40(b) Amounts not deductible in the case of a firm 63
40(c) Excessive remuneration to director or a person having 64
substantial interest in a company .
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