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The High Court addressed two questions of law referred by the Tribunal. On the first question, concerning the precedence of deductions under Chapter VI-A over Section 32AB, the Court, in view of the Supreme Court's decision in Motilal Pesticides (I) Pvt. Ltd. vs. CIT, held that deduction under Section 32AB is to be given first, and subsequently, deduction under Section 80HHC (referring to the deduction claimed by the assessee) is to be given. Therefore, Question No. 1 was answered in favour of the Revenue and against the assessee. On the second question, regarding the admissibility of an unsigned audit report filed during assessment proceedings, the Court answered in favour of the assessee, relying on its own decision in CIT vs. Gujarat Oil and Allied Industries. This decision held that while the audit report being audited is mandatory, the procedural requirement of filing it along with the return is directory, and substantial compliance is sufficient. The Court reasoned that insisting on literal compliance could lead to absurdity and frustrate the beneficial purpose of the deduction provisions, especially when the report is available at the stage of assessment framing.
The High Court held that the issue of lease rent expenses for the Soda Ash Project being allowable revenue expenditure was covered by its own decision in CIT v. Nirma Ltd., implying it was allowed. For issues concerning the reduction of eligible income for 80HHC relief by carry-forward losses and unabsorbed depreciation, the Court relied on decisions in Mahalaxmi Fabric Mills Ltd. v. ACIT and Karnataka Small Scale Industries Development Corporation Ltd. v. CIT, which were against the assessee, meaning the eligible income would be reduced. However, for Tax Appeal No. 27/2002 with Tax Appeal No. 111/2002, issues No. 3 and 4 regarding the exclusion of sales tax, central sales tax, and excise duty from total turnover for Section 80HHC relief were answered in favour of the assessee, following the Supreme Court's decision in Karnataka Small Scale Industries Development Corporation Ltd. The Court also noted that one issue (Issue No. 4 in Tax Appeal No. 26/2002) had already been remanded by the Tribunal. Consequently, all appeals were partly allowed.
The High Court held that the Tribunal's interpretation of the amendment to Section 2(47)(v) of the Income Tax Act, 1961, as retrospective was erroneous. The Court referred to the statutory provisions which clearly state that the amendments were to come into force with effect from 1-4-1988 and would apply to assessment year 1988-89 and subsequent years. The Court emphasized that the principles of interpretation of statutes do not permit giving retrospective effect to legislation unless explicitly intended. The Court found that the Government Circular also clarified the prospective nature of the amendment. Therefore, the Tribunal could not have applied the amended provisions retrospectively to assessment year 1977-78. The appeals were answered in the negative, in favour of the assessee. The impugned orders of the Tribunal were quashed and set aside.
The High Court held that the issue of lease rent expenses for the Soda Ash Project was covered by its own decision in CIT v. Nirma Ltd., implying it was allowable as revenue expenditure. For issues concerning the reduction of 80HHC relief by carry-forward losses and unabsorbed depreciation, the Court relied on the Supreme Court's decisions in Synco Industries Ltd. and CIT v. Shirke Construction Equipment Ltd., and this Court's decision in Mahalaxmi Fabric Mills Ltd., holding against the assessee on these points. The issue of unabsorbed depreciation carry-forward was also decided against the assessee based on Karnataka Small Scale Industries Development Corporation Ltd. v. CIT. For Tax Appeal No. 26/2002, issues 1 and 2 (lease rent and hire purchase charges) were covered by CIT v. Nirma Ltd. Issues 3 and 4 (80HHC relief reduction by loss and exclusion of income) were decided against the assessee based on Mahalaxmi Fabric Mills Ltd. and Karnataka Small Scale Industries Development Corporation Ltd., except that issue 4 was remanded by the ITAT. For Tax Appeal No. 27/2002, issues 1 and 2 (80HHC relief reduction by investment allowance and exclusion of income) were covered by CIT-IV v. Shah Alloys Ltd., with the appellant submitting that the question of issue 2 would not arise based on ITAT observations. Issues 3 and 4 (sales tax, central sales tax, and excise duty from total turnover for 80HHC) were answered in favour of the assessee, citing Karnataka Small Scale Industries Development Corporation Ltd. The appeals were partly allowed.
The Gujarat High Court held that the issue raised in the present Tax Appeal is covered by its earlier decision in Tax Appeal No. 102/1995 dated 07/10.02.2006, reported in [2006] 286 ITR 66 (Guj.), in the case of Commissioner of Income Tax vs. Brahmi Investments Pvt Ltd. In that judgment, the Court had considered the legal aspect from all angles and held that capital gains tax is not leviable upon the assessee on the said receipt. Therefore, the present Tax Appeal was disposed of in terms of that judgment and order. The operative direction was to dispose of the appeal in terms of the cited precedent.
The High Court answered the first question in the negative, in favour of the Revenue, and the second question in the affirmative, in favour of the Assessee. For the first issue, the Court relied on the Supreme Court decision in Liberty India vs. Commissioner of Income Tax (2009) 317 ITR 218 (SC), holding that interest income from bank deposits, irrespective of the purpose, is derived from the bank and not directly from the industrial undertaking, thus not eligible for deduction under Sections 80HH and 80I. Regarding the second issue, the Court referred to its own unreported decision in Commissioner of Income Tax, Ahmedabad vs. Nirma Ltd. (Tax Appeal No. 811 of 2013 dated 27.01.2014), implying that interest expenditure should be considered. The operative direction was to partly allow the Tax Appeal, reflecting the mixed outcome on the two questions.
The High Court held that the lease rent and hire purchase charges for the Soda Ash Project were allowable revenue expenditure, relying on the decision in CIT v. Nirma Ltd., which held that if the project is an expansion of the existing business, the expenditure is revenue. Regarding the reduction of eligible income for 80HHC relief by carried forward losses, the Court held against the assessee, citing Mahalaxmi Fabric Mills Ltd. v. Assistant Commissioner of Income-Tax and the Supreme Court's decisions in Synco Industries Ltd. and CIT v. Shirke Construction Equipment Ltd., which established that business losses must be set off before computing deductions under Chapter VI-A. The issue of unabsorbed depreciation was also decided against the assessee, referencing Karnataka Small Scale Industries Development Corporation Ltd. v. Commissioner of Income-tax. For Tax Appeal No. 27/2002, issues concerning sales tax and excise duty in relation to total turnover for 80HHC relief were answered in favour of the assessee, as the Tribunal had erred in not excluding them. The Court did not decide on the additional ground regarding sales tax and central sales tax as it was not admitted by the Tribunal.
The High Court of Gujarat allowed the Tax Appeal filed by the Revenue. The Court, considering the Supreme Court's decision in Commissioner of Income-Tax vs. Shirke Construction Equipment Ltd., held that in determining business profits for the deduction under Section 80HHC, unabsorbed business losses of earlier years under Section 72 should be set off. Consequently, the question of law was answered in favour of the Revenue. The impugned judgment and order passed by the ITAT were quashed and set aside. The Court did not provide elaborate reasons, relying on the Supreme Court's precedent. The operative direction was to allow the appeal in favour of the Revenue and against the assessee.
The High Court held that the issue regarding lease rent expenses for the Soda Ash Project being allowable revenue expenditure was covered by its own decision in CIT v. Nirma Ltd. For issues concerning the reduction of 80HHC relief by carried forward losses, the Court relied on the Supreme Court's decisions in Mahalaxmi Fabric Mills Ltd. v. Assistant Commissioner of Income-Tax and CIT v. Shirke Construction Equipment Ltd., which held that such losses must be set off before computing 80HHC relief. Similarly, for the issue of unabsorbed depreciation and the treatment of sales tax and central sales tax, the Court referred to the decision in Karnataka Small Scale Industries Development Corporation Ltd. v. Commissioner of Income-tax, which was against the assessee. However, for Tax Appeal No. 27/2002 and 111/2002, issues No. 3 and 4 (regarding sales tax, central sales tax, and excise duty from total turnover for 80HHC) were answered in favour of the assessee, holding that these components should be avoided from the total turnover. The Court noted that one issue (Issue No. 4 in Tax Appeal No. 26/2002) was already remanded by the Tribunal. Consequently, the appeals were partly allowed.
The Tribunal committed no error in its award. Regarding the first contention, the business of running a dining hall is highly dependent on the owner's efficiency, and the widow's attempt to run it after the deceased's death was largely unsuccessful, with the business coming to a standstill or running intermittently without profit. Therefore, compensating for the full potential earning was justified. Concerning the second issue, the Supreme Court in Santosh Devi v. National Insurance Company Ltd. (2012) 6 SCC 421 clarified that self-employed individuals are also entitled to a 30% increase for future prospects, aligning with the Tribunal's decision. The Tribunal's assessment of average income was based on steadily increasing business income over three years, with interest income forming a decreasing proportion, thus the average income of Rs. 1,03,664/- was correctly determined. The multiplier of 14 and one-third deduction for personal expenses were also in line with established precedents. The Court found no major deviation in the total compensation awarded. The First Appeal, Civil Application, and Cross Objections were dismissed.
The High Court dismissed the appeal filed by the Revenue. The Court referred to two Supreme Court decisions: B. Desraj vs. Commissioner of Income-tax [2008] 301 ITR 439 (SC) and Commissioner of Income-tax vs. Lakshmi Machine Works [2007] 290 ITR 667 (SC). The Court held that these decisions would enure for the benefit of the assessee as they were fully applicable to the facts of the present case. Consequently, the substantial question of law was answered against the appellant-Revenue and in favour of the assessee. No elaborate reasoning was provided by the High Court, relying on the cited precedents. The operative direction was the dismissal of the Tax Appeal.
The High Court held that the lease rent and hire purchase charges for the Soda Ash Project were allowable revenue expenditure, relying on the decision in CIT v. Nirma Ltd., which held that if the project is an expansion of the existing business, the expenditure is revenue. Regarding the reduction of eligible income for 80HHC relief by carried forward losses, the Court held against the assessee, citing Mahalaxmi Fabric Mills Ltd. v. Assistant Commissioner of Income-Tax and the Supreme Court's decisions in Synco Industries Ltd. and CIT v. Shirke Construction Equipment Ltd., which established that business losses must be set off before computing deductions under Chapter VI-A. The issue of unabsorbed depreciation was also decided against the assessee, referencing Karnataka Small Scale Industries Development Corporation Ltd. v. Commissioner of Income-tax. For Tax Appeal No. 27/2002, issues concerning sales tax and excise duty in relation to total turnover for 80HHC relief were answered in favour of the assessee, as the Tribunal had erred in not excluding them. The Court did not decide on the additional ground regarding sales tax and central sales tax as it was not admitted by the Tribunal.
The High Court held that the issue regarding lease rent expenses for the Soda Ash Project was covered by its own decision in CIT v. Nirma Ltd., implying it was allowable as revenue expenditure if it was an expansion of the existing business. The issue of reducing 80HHC relief by carried forward losses was decided against the assessee, following the Supreme Court's decisions in Mahalaxmi Fabric Mills Ltd. and CIT v. Shirke Construction Equipment Ltd., which held that business losses must be set off before computing deductions under Chapter VI-A, including Section 80HHC. The issue of carrying forward unabsorbed depreciation under Section 115J was decided against the assessee, referencing Karnataka Small Scale Industries Development Corporation Ltd. For Tax Appeal No. 26/2002, issues 1 and 2 (lease rent and hire purchase) were covered by CIT v. Nirma Ltd. Issues 3 and 4 (80HHC relief and turnover) were covered against the assessee by Mahalaxmi Fabric Mills Ltd. and Karnataka Small Scale Industries Development Corporation Ltd., except that issue 4 was already remanded by the Tribunal. For Tax Appeal No. 27/2002, issues 1 and 2 (80HHC relief and income exclusion) were covered by CIT-IV v. Shah Alloys Ltd., and the assessee's submission that the questions did not arise due to ITAT observations was noted. Issues 3 and 4 (sales tax, central sales tax, and excise duty from turnover) were answered in favour of the assessee, following Karnataka Small Scale Industries Development Corporation Ltd., meaning these components should be excluded from total turnover for Section 80HHC. The appeals were partly allowed.
The High Court held in favor of the assessee. It noted that the substantial question of law raised in the appeal was required to be answered in favor of the assessee, considering the Supreme Court's decision in Vijay Ship Breaking Corporation and Others (Supra). The Supreme Court had held that ship breaking activity gives rise to the production of a distinct and different article, thus entitling the assessee to deduction under Section 80HH and 80-I. The High Court stated it was not giving elaborate reasons as the Supreme Court's judgment was decisive. Consequently, the impugned judgment and order passed by the ITAT was confirmed, and the Tax Appeal was dismissed. No issue was expressly left undecided.
The High Court held that the ITAT had committed an error in shifting the profit shown by the appellant as income from business to income from other sources. The Court was of the opinion that the income should have been assessed under the head 'profits and gains of business or profession' and not under the head 'income from other sources'. The issue was answered in favour of the appellant. The appeal was allowed to this extent. The reasoning was based on the fact that the appellant had shown the profit as income from business, and the High Court found that the ITAT's decision to reclassify it was erroneous. The Court's decision was influenced by the fact that an identical issue concerning a sister concern had been decided in favour of the assessee and upheld by the High Court.
The High Court held that the Tribunal's interpretation was erroneous. The Court referred to the statutory provisions indicating that the amendments made by the Finance Act, 1987, came into force with effect from 1-4-1988 and would apply to assessment year 1988-89 and subsequent years. The Court stated that no law can be given retrospective effect. Consequently, the Tribunal's reliance on a Supreme Court decision was also deemed erroneous. The substantial question of law was answered in the affirmative, in favour of the assessee. The impugned order of the Tribunal was quashed and set aside, and no further proceedings were required.
The Tribunal committed no error in its award. Regarding the first contention, the Tribunal correctly assessed the compensation based on the deceased's business income. The nature of running a dining hall necessitates personal involvement, and the widow's attempt to run the business after the accident was largely unsuccessful, with the dining hall coming to a standstill or running intermittently without significant profit, as evidenced by her deposition and lack of further probing by the Insurance Company. The argument for compensation limited to loss of supervision was therefore rejected. Concerning the second contention, the Tribunal's grant of a 30% increase for future prospects was justified, aligning with the Supreme Court's decision in Santosh Devi v. National Insurance Company Ltd. (2012) 6 SCC 421, which allows for such increases for self-employed individuals. The Tribunal's average income calculation of Rs. 1,03,664/- based on the income tax returns, which showed a steady increase in business income and a decrease in interest income over the years, was also found to be correct. The multiplier of 14 and the one-third deduction for personal expenses were also deemed appropriate. Any minor misdescription in sundry heads did not lead to a major deviation in the total compensation. Therefore, the ultimate award was found to be without error.
The High Court held that the Tribunal's interpretation was erroneous. The Court referred to the statutory provisions which clearly stated that the amendments made by the Finance Act, 1987, came into force with effect from 1-4-1988 and would accordingly apply to the assessment year 1988-89 and subsequent years. The Court emphasized that no law can be given retrospective effect unless expressly provided, and principles of statutory interpretation do not permit holding that legislation intends retrospective application when it is not explicitly stated. The Court noted that the Government Circular also clarified the prospective nature of the amendment. Therefore, the amendment could not be applied to assessment year 1977-78. The reliance placed by the Tribunal on an Apex Court decision was also deemed erroneous. The substantial question of law was answered in the negative, in favour of the assessee. The impugned orders of the Tribunal were quashed and set aside.
The High Court dismissed the appeal, answering both issues against the Revenue and in favour of the assessee. The Court relied on the decisions in [2008] 301 ITR 439 (SC) in the case of B. Desraj vs. Commissioner of Income-tax and [2007] 290 ITR 667 (SC) in the case of Commissioner of Income-tax vs. Lakshmi Machine Works. The Court found these decisions fully applicable to the facts of the present case and therefore did not provide elaborate reasoning. The operative direction was the dismissal of the Tax Appeal.
The High Court held that the Appellate Tribunal was not right in its interpretation and application of Section 35C of the Act. The Court referred to its own decision in Kaira Dist. Co-op. Milk Producers Unions Ltd. v. Commissioner of Income-Tax (253 ITR 766), which stated that the Tribunal was incorrect in holding that only 10% of the expenditure was eligible for weighted deduction. The Court reasoned that Section 35C does not permit bifurcating qualifying expenditure, and the entire qualifying expenditure is eligible for weighted deduction. The nexus requirement under Section 35C(1)(a) is met if the assessee incurs expenditure to provide goods, services, or facilities to a person who would be a supplier of raw material, with the underlying idea being to obtain raw material and develop the recipient and their rural area. The Court concluded that merely because certain activities might not directly disseminate information does not disqualify otherwise eligible expenditure. The questions were answered in favour of the assessee. The second question's figure would stand reduced as expenses for 'Amul Patrika' were allowed by the AO and development/research expenditure was restored to the AO's file. The assessee is entitled to deduction of expenditure claimed in its entirety, except for the two items dealt with by the AO.
The High Court decided both issues. For Issue No. 1, concerning the deduction of depreciation under Section 115JA after a change in method, the Court followed the decision in Deputy Commissioner of Income-Tax (Assessment) v. Farmson Pharmaceuticals Guj. Ltd., which affirmed the principle that interest under Sections 234B and 234C cannot be charged when total income is determined under Section 115J. Therefore, this issue was answered against the Department. For Issue No. 2, regarding the charging of interest under Sections 234B and 234C when income is calculated under Section 115JA, the Court relied on the Supreme Court's decision in Joint Commissioner of Income-Tax v. Rolta India Ltd. This ruling established that Sections 115JA and 115JB do not exempt assessees from interest under Sections 234B and 234C. Consequently, this issue was answered in favour of the Department. The operative direction was that the Tax Appeal partly succeeds.
The High Court held that the principal relief sought, quashing the Settlement Commission's order of abatement, was rejected. The Court reasoned that the abatement order under section 245HA(1)(ii) was passed due to the petitioner's non-compliance with section 245D(2D). However, the Court found that the assessment order passed by the Assessing Officer under section 158BC of the Act would continue to subsist, as it is not automatically set aside by the abatement order. Since the petitioner had withdrawn his appeal before the ITAT based on the admission of his settlement application, and now the settlement proceedings had abated, the petitioner would be remediless if the appeal was not restored. The Court relied on the principle that justice demands allowing the petitioner to avail the remedy of appeal against the block assessment order. Therefore, the Court quashed the ITAT's order dated 23.1.2001 and restored the appeal (ITA No.170/Ahd/1997) to the file of the ITAT for decision on merits. This restoration was based on equitable considerations, not under section 245HA(2).
The High Court partly allowed First Appeal No. 1881 of 2007 (Insurance Company vs. Naginbhai Fogatbhai Patel & 3, concerning Umaben's death). The Court upheld the Tribunal's finding of 100% negligence on the part of the truck driver, noting that the truck owner and driver did not contest the proceedings. Regarding quantum, the Court found substance in the Insurance Company's contention that Umaben's income should be treated as Rs. 36,000/- per annum based on her disclosed business income. Applying the principles from Sarla Verma vs. Delhi Transport Corporation, the Court calculated the compensation, including prospective loss of income and conventional heads, arriving at a total of Rs. 4,61,800/-. This resulted in a reduction of Rs. 2,73,200/- from the Tribunal's award. The rate of interest was upheld. The Court directed the release of the balance amount to the claimants and the refund of the excess to the Insurance Company. In relation to MAC Petition No. 1686 of 2004 (death of Hiralben), the Court dismissed First Appeal No. 1882 of 2007 (Insurance Company) and allowed First Appeal No. 3174 of 2007 (claimants). The Court found no substance in the plea of contributory negligence. For Hiralben, a 26-year-old M.Sc. Part II student, the Court found the Tribunal's calculation of future loss of income flawed. Applying Sarla Verma principles, the Court determined the monthly loss of prospective income to be Rs. 2250/- (Rs. 27,000/- per annum) after deducting half for personal expenses and applying a multiplier of 17, resulting in Rs. 4,59,000/-. Adding Rs. 25,000/- for conventional heads, the total award was fixed at Rs. 4,84,000/-. This meant an enhancement of Rs. 1,73,000/-. The Insurance Company was directed to deposit this additional amount with interest.
The High Court partly allowed First Appeal No. 1881 of 2007, reducing the compensation for Umaben's death. The Tribunal's finding of 100% negligence on the part of the truck driver was upheld, as neither the truck owner nor driver contested the proceedings. Regarding quantum, the Court found that Umaben's disclosed business income of Rs. 37,844/- per annum should be treated as her appropriate income. Applying the principles from Sarla Verma vs. Delhi Transport Corporation, the Court calculated the monthly loss of future prospective income at Rs. 2600/- (Rs. 3900/- minus Rs. 1300/-), leading to an annual figure of Rs. 31,200/-. With a multiplier of 14, the loss of future income was Rs. 4,36,800/-. Adding Rs. 25,000/- for conventional heads, the total award was Rs. 4,61,800/-, a reduction of Rs. 2,73,200/- from the Tribunal's award. The rate of interest was upheld. The Court directed the release of the balance amount to claimants and refund of the remaining F.D. to the Insurance Company. For MAC Petition No. 1686 of 2004, First Appeal No. 1882 of 2007 was dismissed, and First Appeal No. 3174 of 2007 was allowed. The Court found that the Tribunal should have deducted half of the income towards personal expenses for Hiralben (aged 26) and not two-thirds. Considering her income of Rs. 3000/- per month with a 50% addition for prospective income, the monthly loss was Rs. 2250/- (Rs. 4500/- minus Rs. 2250/-), or Rs. 27,000/- per annum. Applying a multiplier of 17, the loss of future income was Rs. 4,59,000/-. Adding Rs. 25,000/- for conventional heads, the total award was Rs. 4,84,000/-, an enhancement of Rs. 1,73,000/-. The Insurance Company was directed to deposit the additional amount.
The High Court partly allowed First Appeal No. 1881 of 2007 (Insurance Company vs. Naginbhai Fogatbhai Patel & 3, concerning Umaben's death). The Court upheld the Tribunal's finding of 100% negligence on the part of the truck driver, noting that the truck owner and driver did not contest the proceedings. Regarding quantum, the Court found substance in the Insurance Company's contention that Umaben's income should be treated as Rs. 36,000/- per annum based on her disclosed business income. Applying the principles from Sarla Verma vs. Delhi Transport Corporation, the Court calculated the compensation, including prospective loss of income and conventional heads, arriving at a total of Rs. 4,61,800/-. This resulted in a reduction of Rs. 2,73,200/- from the Tribunal's award. The rate of interest was upheld. The Court directed the release of the balance amount to the claimants and the refund of the excess to the Insurance Company. In relation to MAC Petition No. 1686 of 2004 (death of Hiralben), the Court dismissed First Appeal No. 1882 of 2007 (Insurance Company) and allowed First Appeal No. 3174 of 2007 (claimants). The Court found no substance in the plea of contributory negligence. For Hiralben, a 26-year-old M.Sc. Part II student, the Court found the Tribunal's calculation of future loss of income flawed. Applying Sarla Verma principles, the Court determined the monthly loss of prospective income to be Rs. 2250/- (Rs. 27,000/- per annum) after deducting half for personal expenses and applying a multiplier of 17, resulting in Rs. 4,59,000/-. Adding Rs. 25,000/- for conventional heads, the total award was fixed at Rs. 4,84,000/-. This meant an enhancement of Rs. 1,73,000/-. The Insurance Company was directed to deposit this additional amount with interest.
The High Court held that the respondent No. 2 (GERC) does not have the power to demand security deposit in the form of a bank guarantee for electricity purchased by the petitioner through the Indian Energy Exchange (IEX) from third parties. The Court reasoned that Section 47 of the Electricity Act, 2003, specifically refers to security in respect of electricity supplied by the licensee. Chapter 4 of the GERC (Security Deposit) Regulations, 2005, deals with security for electricity supplied or to be supplied by the licensee and does not grant power to demand security for transactions with third parties via IEX. The Court found that such a demand would amount to GERC regulating the petitioner's transactions with third parties, which is beyond its statutory powers. The Court also noted that the 'removal of difficulties' clause in Chapter 5 of the Regulations cannot grant powers beyond the main statute. Therefore, the demand for security deposit was unsustainable as it was made even though there was no transaction for purchase of electricity by the consumer with respondent No. 2. The Court allowed the petition, quashing the impugned order and notices.
The High Court held that the controversy in the present appeals is concluded by its earlier decision in the case of Amarshiv Construction Pvt. Ltd. v. The Deputy Commissioner of Income-Tax, rendered on March 19, 2014, in Tax Appeal No. 554/2003 and cognate matters. In that decision, the question was answered in favour of the assessee and against the revenue. Consequently, the present appeals were also allowed, with the substantial question of law answered in favour of the appellant-assessee and against the revenue. However, the Assessing Officer was directed to tax the retention money in the assessment year relevant to the previous year in which the retention money becomes payable to the appellant, as per the contract terms, which is after the defect liability period and upon certification by the Engineer-in-Charge that no liability attaches to the appellant.
The High Court allowed both appeals, holding that the controversy is concluded by its prior decision in Amarshiv Construction Pvt. Ltd. v. The Deputy Commissioner of Income-Tax (Tax Appeal No.554/2003 and cognate matters), which was decided in favour of the assessee. The court answered the substantial question of law in favour of the appellant-assessee and against the revenue. The ratio decidendi is that retention money is not taxable in the year it is withheld, but only when it becomes payable to the assessee. The Assessing Officer is directed to tax the retention money in the assessment year relevant to the previous year in which it becomes payable, specifically after the defect liability period is over and certified by the Engineer-in-Charge.
The High Court held that the CBDT's notification dated August 20, 2014, extending the due date for furnishing the report of audit under Section 44AB of the Act to November 30, 2014, without extending the due date for filing the Income Tax Return (ITR) under Section 139 of the Act, was unsustainable. The Court reasoned that Section 44AB mandates that the 'specified date' for obtaining and furnishing the audit report is the due date for furnishing the return of income under Section 139(1). While the CBDT has the power under Section 119(2)(a) to relax the provisions of Section 139, it does not have the statutory power to relax the provisions of Section 44AB. The notification, by extending the 'due date' for furnishing the audit report, implicitly attempted to relax Section 44AB without a corresponding extension of the ITR due date, which is the 'specified date' for the purpose of Section 44AB. The Court found that the CBDT could have extended the due date for filing ITR under Section 139 in exercise of its powers under Section 119, which would have automatically extended the 'specified date' for filing TAR. The Court noted that the CBDT's reluctance to extend the ITR due date was likely due to concerns about deferring self-assessment tax, but suggested this could be managed by extending the ITR due date for all purposes except for Section 234A. The petition was allowed, directing the CBDT to relax the provisions of Section 139(1) by extending the due date for filing ITR till November 30, 2014.
The High Court held that the CBDT, in exercise of its powers under Section 119(2)(a) of the Income Tax Act, 1961, can relax the provisions of Section 139 of the Act and extend the due date for filing the Income Tax Return (ITR). Consequently, the specified date for furnishing the Tax Audit Report (TAR) under Section 44AB would automatically stand extended. The court noted that the CBDT has the power to relax provisions of Section 139 but not Section 44AB. The notification dated August 20, 2014, extending the TAR due date without extending the ITR due date, was found to lack statutory power. The court suggested that the CBDT could have extended the ITR due date for all purposes except for Section 234A to protect revenue interests. The petition was allowed, directing the CBDT to extend the due date for filing the ITR under Section 139(1) of the Act until November 30, 2014, as a consequence of which the specified date for furnishing the TAR under Section 44AB would also be extended.
The High Court, in its Letters Patent Appeal, agreed with the concurrent findings of the Competent Authority, the Appellate Tribunal, and the learned Single Judge. The Court found that the Competent Authority had noted discrepancies in the appellants' capital accounts, balance sheets, and cash flow statements, with closing balances not tallying with opening balances and numerous incorrect entries. The accounts were also not signed by a qualified Chartered Accountant. The Appellate Authority further noted that while a Chartered Accountant explained some discrepancies, there was no explanation for large cash deposits in the bank in 1997-98. The Appellate Authority also found that only a portion of the sale proceeds from an ancestral house was proven to be used for the forfeited properties, leaving the legitimacy of the remaining amount unproven. The learned Single Judge emphasized the discrepancies and the failure to explain them. The High Court rejected the contention that accepted income tax returns validated the source of income, noting the Competent Authority's statement that there was no proof of accounts being finalized or accepted by income tax authorities. Even if returns were accepted, the Court reasoned that given the fabricated accounts and appellant no. 1's involvement in smuggling, the investments were disproportionate to known sources of income, proving illegal acquisition. Therefore, the properties were liable for forfeiture under Section 7 of SAFEMA. The appeal was dismissed.
The High Court modified the MACT's award. Regarding the income assessment, it was held that while the deceased's income of Rs. 10,000/- p.m. was not disbelieved due to agricultural land and bore-well trucks, the 50% prospective rise was excessive. Citing "SARLA VERMA AND OTHERS VS. DELHI TRANSPORT CORPORATION AND ANR.", the Court reduced the prospective rise to 30%. The monthly income was recalculated to Rs. 13,000/- (Rs. 10,000 + 30% rise), and after deducting 1/3 for personal expenses, the monthly dependency was assessed at Rs. 8670/-, leading to an annual dependency loss of Rs. 1,04,040/-. Applying a multiplier of 14 (deemed just and proper for the deceased's age of 43), the total dependency loss was Rs. 14,56,560/-. Other heads of compensation were deemed just. The judgment in "NEW INDIA ASSURANCE CO. VS. YOGESH DEVI" was distinguished as the business continuation was not proven. The claim for Rs. 1,00,000/- for loss of love and affection was not allowed separately, as the Tribunal had already awarded amounts for funeral expenses and loss of estate/consortium which covered this. The total modified award was Rs. 15,71,560/- with 9% interest. The cross-objections were dismissed.
The Tribunal erred in considering a 50% prospective rise in income. Citing SARLA VERMA AND OTHERS VS. DELHI TRANSPORT CORPORATION AND ANR., (2009) 6 SCC 121, the Court held that a 30% prospective rise in income should have been considered, given the absence of income-tax returns and PAN card, and the deceased not having permanent employment. However, the Court did not disbelieve the deceased was earning Rs. 10,000/- p.m. considering his agricultural land and bore-well trucks. The monthly income was reassessed at Rs. 13,000/- (Rs. 10,000 + 30% rise), and after deducting 1/3 for personal expenses, the monthly dependency loss was Rs. 8670/-. With a multiplier of 14 (appropriate for the deceased's age of 43), the total dependency loss came to Rs. 14,56,560/-. Amounts awarded under other heads were deemed just. The judgment in NEW INDIA ASSURANCE CO. VS. YOGESH DEVI was not applicable as the business's continuation after death was not proven. The claim for Rs. 1,00,000/- for loss of love and affection was rejected as the Tribunal had already awarded Rs. 15,000/- for funeral expenses and Rs. 1,00,000/- for loss of estate/consortium, which covered this aspect. The total compensation was modified to Rs. 15,71,560/- with 9% interest. The cross-objections were dismissed.
The High Court allowed the appeal in part. On the first issue, the Court found merit in the contention that the multiplier should be 17, citing Sarla Verma v/s. Delhi Transport Corporation. Regarding the second issue, the Court agreed that the Tribunal erred in calculating future loss based on past employment income. Instead, it considered the income tax returns of the deceased for the years 1990-91, 1991-92, and 1992-93, which showed yearly incomes of Rs. 60,000/-, Rs. 34,520/-, and Rs. 21,705/-. The Court calculated the mean income of Rs. 38,741/- and, after deducting 1/3rd for personal expenses and adding 50% for prospective loss, arrived at Rs. 38,741/-. Applying the multiplier of 17 and adding Rs. 20,000/- for conventional charges, the total enhanced award was fixed at Rs. 6,78,597/-. On the third issue, the Court held that the interest rate should be 12% per annum from the date of filing until December 31, 1999, and thereafter 9% per annum until realization. The award was enhanced by Rs. 2,03,597/- (Rs. 6,78,597/- minus Rs. 4,75,000/-), and the insurance company was directed to deposit the balance amount with interest within two months. The Tribunal was directed to release the amount to the claimants.
The High Court allowed the petition. It quashed the direction issued by the Commercial Tax Officer to the Sub-Registrar for attaching the property and directed the Sub-Registrar to permit the execution of the sale deed in favour of the proposed purchaser. The Court noted that while the revenue contended the transaction was void under Section 47 of the VAT Act and possibly a benami transaction to defraud revenue, it chose not to adjudicate on disputed questions of title. The Court acknowledged the revenue's request to move the civil court to decide the title, referencing the case of Tax Recovery Officer v. Gangadhar Viswanath Ranade, and left these issues open for parties to raise and contest before the appropriate forum. The Court also noted that a serious question of limitation would stare in the face of the respondent if they were to pursue such a suit. The Court found the revenue's contention that the erstwhile owner's wife had no funds to be unacceptable, considering the possibility of 'Stridhan' or inherited property, and the legal presumption favouring a wife in property purchases. The Court also noted the severe matrimonial disputes between Shri Deepak Magiya and his wife, which made the revenue's contention of a benami transaction to defraud revenue unsustainable.
The High Court held that the RBI was within its powers to issue the Master Circular on willful defaulters, as it is empowered to regulate the banking system under the RBI Act, 1934, and the Banking Regulation Act, 1949. The circular was deemed to be issued in public interest, even if not explicitly stated, as its source of power was traceable. The circular was found not to suffer from impermissible delegation of legislative power and was considered to have the force of law, being a statutory circular. The court rejected the argument that banks would be judges in their own cause, stating that biased actions could be challenged. The circular's restriction on promoters/entrepreneurs from availing new facilities for five years was held not to be an unreasonable restriction violating Article 19(1)(g). However, the application of the Master Circular to all directors of a company was declared arbitrary and unreasonable, violative of Article 19(1)(g), to that limited extent. The show-cause notice in SCA No. 645/2014 was quashed for lacking basic details. Standard Chartered Bank, being a private bank, was held not amenable to writ jurisdiction.
The High Court held that the RBI was within its powers to issue the Master Circular on willful defaulters, as it is empowered to regulate the banking system under the RBI Act, 1934, and Banking Regulation Act, 1949. The circular was considered to be in public interest, even if not explicitly stated, as the source of power was traceable. It was also held that the Master Circular does not suffer from impermissible delegation of legislative power and has the force of law, being a statutory circular. The contention regarding the bank being a judge in its own cause was deemed misplaced unless malafides or bias were proven. The Court found that the Master Circular does not impose unreasonable restrictions on promoters/entrepreneurs, thus not violating Article 19(1)(g). However, the application of the circular to all directors was found to be arbitrary and unreasonable, violating Article 19(1)(g), and was declared ultra vires to that extent, but this would not apply to promoters/entrepreneurs. The show-cause notice in SCA No. 645/2014 was quashed for lacking basic details. Standard Chartered Bank, being a private bank, was held not amenable to writ jurisdiction. Consequently, SCA No. 645/2014 was partly allowed by quashing the show-cause notices, allowing PNB to issue a fresh valid notice. SCA No. 10120/2014 was partly allowed regarding the unconstitutionality of applying the circular to all directors, with liberty to seek remedy elsewhere for other grievances.
The High Court held that the award passed by the Tribunal was not supported by a proper consideration of the materials on record. The Court recalculated the compensation. For future loss of income, it considered the net annual income of Rs. 66,000/-, added 30% for prospective income (Rs. 85,800/-), applied a multiplier of 14 (age 42), resulting in Rs. 12,01,200/-. Applying the 20% disability, the loss of future income was determined to be Rs. 2,40,240/-. Medical expenses were enhanced to Rs. 1,09,000/-. The Court did not disturb the amounts for special diet (Rs. 2,000/-) and transport charges (Rs. 5,000/-). For pain, shock, and suffering, and loss of amenities, Rs. 1 lakh was awarded, considering the two operations, inability to attend business for a year, and the permanent shortening of her leg. An additional Rs. 60,000/- was awarded for the actual loss of income for one year. The total calculated compensation was Rs. 5,16,240/-. However, considering the claimant's claim restricted to Rs. 5 lakh initially and further restricted to Rs. 3 lakh in appeal over the awarded amount, the total enhanced compensation was fixed at Rs. 4,14,400/- (Rs. 1,14,400/- + Rs. 3,00,000/-). The interest rate was enhanced to 9% per annum on the entire amount.
The Tribunal's award of Rs. 18,000/- for pain, shock, and suffering was found to be inadequate. Considering the claimant's age of 70 years at the time of the accident, the severe injuries sustained, and the fact that he continued to suffer from an 18% disability even 12 years later, the High Court enhanced the compensation for pain, shock, suffering, and loss of amenity of life to Rs. 70,000/-. This resulted in an enhancement of Rs. 52,000/-. The Tribunal's calculation of medical bills was accepted, and it was noted that no financial loss from business was demonstrated. The rate of interest awarded by the Tribunal was also deemed insufficient. The High Court directed that the interest should be payable at the rate of 8% per annum from the date of filing of the application till realization, instead of the previously awarded 6% per annum. The Insurance Company was directed to deposit the enhanced amount with interest within two months.
The High Court held that the multiplier should be determined considering both the age of the deceased and the age of the dependents, as per the larger bench decision in U.P. State Road Transport Corporation and Others. The Court found that the Tribunal's determination of the multiplier based on the mother's age (50 years) was not acceptable, and the request to enhance the multiplier from 12 to 17 could not be acceded to. Regarding the second submission on prospective income, the Court found no error in the Tribunal's assessment of the monthly income at Rs. 1,500 in the absence of reliable and cogent evidence. The Court emphasized that claimants cannot benefit from their own wrong of not paying income tax. Therefore, the appeal was dismissed.
The High Court held that the claimants failed to prove the victim's annual income was Rs. 10 to 12 Lac. The Tribunal's finding that the income-tax return was filed after the victim's death and the admission by the victim's son that the deceased had no motor vehicle or bank balance were crucial. The Court agreed with the Tribunal's assessment that the victim's monthly income was Rs. 3000/-. Applying a multiplier of 7 to the victim's age of 58 years, the Tribunal arrived at Rs. 2,53,000/-. An additional Rs. 20,000/- for loss of consortium and Rs. 3,000/- for miscellaneous expenses were awarded, totaling Rs. 2,75,000/-. The Court found no substance in the appeal, upholding the Tribunal's award. The ratio decidendi is that claims of high income must be substantiated with credible evidence, and the absence of assets or bank balance, coupled with late filing of tax returns, weakens such claims.
The High Court held that a sum of Rs. 2,000/- should be awarded towards funeral expenses. Regarding the multiplier, the Court noted that the post-mortem report indicated the victim's age as 70 years, making enhancement of the multiplier inappropriate. The Court found no reason to interfere with the Tribunal's finding of a monthly income of Rs. 3,000/-, especially since the Insurance Company or vehicle owner had not appealed the award. The Court enhanced the total award by Rs. 2,000/- for funeral expenses, with interest at 12% per annum from the date of filing till realization. The respondent no. 3 was directed to pay the enhanced amount within two months. The appeal was allowed to this extent. The issue of whether the conventional amount awarded (Rs. 33,000/-) was adequate compared to Rs. 25,000/- in Sarla Verma was implicitly addressed by not enhancing it further, but the primary focus was on funeral expenses and multiplier.
The High Court dismissed the Tax Appeal. Regarding the issues concerning the netting of income and allowance of expenses (Questions 1-4), the Tribunal had restored the matters to the AO for verification of the nexus with various incomes. The Court did not delve deeply into these specific issues as the primary focus shifted to the broader principle of business expansion. For the disallowances related to the sale of various items for calculating deductions under Sections 80HH, 80HHC, and 80IA (Questions 5-9), the Court noted that the ITAT had confirmed the CIT(A)'s order deleting these disallowances. The Court's reasoning heavily relied on its previous decision in the case of CIT v. Alembic Glass Industries Limited, 103 ITR 715 (Guj), and the Supreme Court's decision in Dy. CIT v. Core Health Care Limited, 298 ITR 194 (SC). The Court found that the Soda Ash Project and related facilities were an expansion of the existing business, not a new one. Therefore, the tests laid down in Alembic Glass Industries Limited were applicable. The Court held that in such a scenario, the nature of the borrowing (capital or revenue expenditure) was of no consequence. The Court found that the issues raised in the present appeal were covered by its earlier decision, which was in favour of the assessee. Consequently, the Tax Appeal was dismissed.
The High Court found that while the Family Court considered the respondent's net salary income at Rs.1,00,000/- based on an older salary slip, it failed to provide reasoning for arriving at Rs.10,000/- as interim maintenance. The Court noted that the respondent's net income, based on the latest salary slip, was Rs.1,18,696/- (earlier stated as Rs.1,27,750/- in para 8, but Rs.1,18,696/- in para 4). Even after considering the petitioner's increased income of Rs.17,510/- per month and the respondent's liabilities towards his parents and unmarried sister, the Court felt the respondent, with a substantial monthly income, could provide more. The Court held that the interim alimony needed to be increased to Rs.20,000/- per month to allow the petitioner to live with comfort and status. Regarding litigation expenses, the Court found the Rs.5,000/- awarded to be on the lower side and enhanced it to Rs.20,000/-. The Family Court was also directed to expedite the hearing of the divorce suit.
The High Court held that the Tribunal was right in allowing the investment allowance under Section 32A of the Act. The court reasoned that Section 32A(8B) specifically applies to new machinery installed between April 1, 1987, and March 31, 1988. The introduction of an Explanation below Section 32A(1) clarifies that the 'actual cost' is reduced by the part met out of amounts released under Section 32AB(6), thus preventing double deduction. Furthermore, the court noted that Section 32A(8C) and Section 32AB(10) indicate that an assessee can avail of the benefit of either provision, not both in the same assessment year. Since investment allowance was reintroduced from assessment year 1989-90, and an option between Section 32A and Section 32AB was provided for the first time in this year, assessment year 1989-90 is the initial year for exercising this option. Therefore, claiming Section 32A allowance in assessment year 1989-90, even if Section 32AB was availed in earlier years, does not constitute a double deduction. The revenue's contention that Section 32A(8B) would be rendered nugatory if their interpretation were accepted was also considered. The question is answered in favour of the assessee.
The High Court allowed the petition and quashed the notice dated March 7, 2013, issued under Section 148 of the Income-tax Act, 1961, along with all consequential proceedings. The Court held that the fundamental requirement for reopening an assessment under Section 147 is that the Assessing Officer must have a 'reason to believe' that income chargeable to tax has escaped assessment. The Court noted that while this belief need not be a final decision, it must be based on some tangible material. In this case, the Court found that the AO's belief regarding the escapement of income due to claiming cost of improvement before obtaining non-agricultural permission lacked validity. Furthermore, the Court discussed the legal position regarding depreciation, stating that prior to the introduction of Explanation 5 to Section 32(1) from April 1, 2002, an assessee was not compelled to claim depreciation if they did not wish to avail of the benefit. Therefore, the AO's belief that the assessee had selectively claimed depreciation to prolong the claim beyond eight years was not a valid ground for reopening, as the assessee's actions were within the legal framework at the time. The Court concluded that since the fundamental requirement of having a valid reason to believe was not fulfilled, the notice lacked validity.
The High Court partly allowed the appeal. Regarding the income calculation, the Court noted that the deceased was 54 years old, and as per Sarla Verma (Smt) and others Versus Delhi Transport Corporation and another, (2009) 6 SCC 121, nothing was required to be added towards future prospective income. The Court accepted the concession that the income for AY 2008-2009 should be considered at Rs. 2,57,856. Averaging this with the income of Rs. 1,58,850 for AY 2007-2008, the annual income was determined at Rs. 2,05,578, which was rounded off to Rs. 2,10,000 per annum (Rs. 17,500 per month). Deducting 1/3rd for personal expenses and applying a multiplier of 11, the loss of dependency was calculated at Rs. 15,40,000. The Court found the Tribunal erred in adding 10% for future prospective income. For consortium, loss to estate, and loss of love and affection, the Court reduced the award from Rs. 1,50,000 to Rs. 50,000. For funeral expenses, the award was reduced from Rs. 25,000 to Rs. 10,000. Medical expenses of Rs. 1,39,700 were upheld. After deducting 10% for contributory negligence, the total compensation was fixed at Rs. 15,65,730 with 9% interest. The appeal was partly allowed to this extent.
The High Court held that the adjustments made by the Assessing Officer while processing the return under Section 143(1)(a) of the Income Tax Act, 1961, concerning the sale of cylinders and the claim for depreciation, were indeed beyond the scope and ambit of Section 143(1)(a). The Court noted that both the CIT(A) and the ITAT had concurrently held that the issues regarding the depreciation claim on the entire plant and machinery versus individual cylinders, and the treatment of deductions under Section 43(6)(c)(B), were debatable and allowed for two possible views. In such circumstances, it was not open for the AO to make such adjustments under the summary procedure of Section 143(1)(a). Therefore, the High Court found no reason to interfere with the ITAT's judgment, which had set aside the AO's adjustment. The question of law was decided in favour of the assessee.
The High Court, noting a broad consensus between the learned advocates for the assessee and the revenue, decided to quash and set aside the impugned judgments and orders passed by the learned ITAT. The matters were remanded to the learned ITAT to decide all three appeals together afresh, in accordance with law and on their own merits. The Court explicitly stated that it had not expressed any opinion on the merits of the case in favour of either party. The ITAT was directed to complete this exercise within six months from the date of the order. The appeals were allowed to this extent, with no order as to costs.
The High Court held that the impugned orders of the ITAT deserved to be quashed and set aside. The Court reasoned that the ITAT, while disposing of the appeals and upholding the deletion of penalty, had solely relied on the CIT(A)'s order concerning the quantum of appeal. However, the quantum appeal itself was challenged before the ITAT and its order was set aside with further directions. Therefore, the ITAT's decision to delete the penalty without a proper consideration of the quantum appeal's status was flawed. Consequently, the matters were required to be remanded to the ITAT for a fresh consideration and disposal in accordance with law, after hearing both sides. The appeals were allowed to this extent, and no order as to costs was made.