Supreme Court Judgments — 2018

The Supreme Court held that the payments made by Prasar Bharati to the advertising agencies were indeed in the nature of commission, attracting the provisions of Section 194H. Consequently, the failure to deduct tax at source was a default under Section 201.

The Supreme Court held that the provisions of Section 194H of the Income Tax Act, 1961, are applicable to the payments made by the appellant to the advertising agencies. The Court reasoned that the agreement itself used the term 'commission' consistently, there was no ambiguity in the clauses, and the parties clearly intended the payments to be treated as commission. The nature of the transaction, where the appellant paid 15% after collecting money from agencies to secure more advertisements, indicated a principal-agent relationship, not principal-to-principal. Furthermore, the inclusive definition of 'commission' in the Explanation to Section 194H covered these transactions. Consequently, the appellant was under a statutory obligation to deduct tax at source. Non-compliance with Section 194H attracted the rigor of Section 201, which provides for consequences of failure to deduct or pay tax. Therefore, the AO rightly invoked Section 201 against the appellant. The appeals were dismissed.

The Supreme Court held that the notification dated 09.08.2001 is applicable only to cooperative housing societies and not to premises societies. Receipts beyond the permissible limits under this notification, or from transferees who are not members, are taxable.

The Supreme Court allowed the appeals, setting aside the High Court's judgment. The Court held that the definition of 'sale price' under Section 2(39) of the Rajasthan Sales Tax Act, 1994, clearly indicates that it is the price paid or payable as consideration for the sale, and any sum by way of discount or rebate according to trade practice shall be deducted. The definition of 'turnover' means the aggregate amount received or receivable. In this case, the price of Rs. 682.00 was provisional, subject to review and final approval by the MoP&NG. The assessee was under a legal obligation to receive only the price fixed by the MoP&NG. Since the price was reduced to Rs. 645.00, the assessee could not charge more than the fixed price, was bound to refund the excess collected, and was therefore legally entitled to a refund of the sales tax paid on the excess amount. The Court noted that the price fixation was not in the hands of the assessee or the oil companies, but by the MoP&NG. The Deputy Commissioner's order was restored, and the assessee was entitled to interest at 9% per annum.

The Supreme Court held that the CIT had no express power to cancel a registration certificate granted under Section 12A of the Act prior to the amendment in 2004. Such an order is quasi-judicial and cannot be cancelled under Section 21 of the General Clauses Act.

The Supreme Court held that the markings on the jute bags were compulsory requirements by the Jute Commissioner and not for indicating a connection in the course of trade between the product and the manufacturer. Therefore, these markings did not amount to a "brand name" as defined.

The Supreme Court held that Section 14A of the Income Tax Act, 1961, is applicable to dividend income irrespective of whether the shares are held to gain control or as stock-in-trade. The dominant purpose test is not relevant for interpreting Section 14A; instead, the principle of apportionment of expenses comes into play, as engrained in the section. For shares held as stock-in-trade, expenditure incurred in acquiring them must be apportioned, as dividend income, though incidental, is exempt. The Court clarified that only expenditure "in relation to" earning dividends can be disallowed. Regarding procedural aspects, the AO must record satisfaction, having regard to the assessee's nature, that the suo motu disallowance was incorrect before applying the apportionment theory under Section 14A(2) read with Rule 8D. This satisfaction is required when the AO disagrees with the assessee's apportionment. The nature of loans taken for share investments must also be examined. Civil Appeal No. 1423 of 2015 (Avon Cycles Limited) was dismissed as the High Court correctly found that funds used were mixed funds, warranting apportionment. Appeals concerning periods prior to the introduction of Rule 8D were decided in favour of assessees on the ground that the rule is prospective.

The tribunal held that outward transportation from the place of removal to the customer's premises is covered under the definition of 'input service' as it existed prior to April 1, 2008. The conditions for determining the 'place of removal' as per the circular were not disputed by the Revenue.

The Tribunal held that the amended definition of 'input service' restricts credit to services used 'upto the place of removal'. Transportation beyond the place of removal does not qualify as input service. Therefore, the assessee is not eligible for Cenvat credit on outward transportation to buyer's premises.

The Supreme Court held that Rule 8D of the Income Tax Rules is prospective in operation and cannot be applied to assessment years prior to Assessment Year 2008-09. The amendments to Rule 8D in 2016 further indicate its prospective nature.

The Supreme Court found the reasoning of the lower appellate tribunal difficult to accept. It held that the amended definition of 'shareholder' in Section 2(22)(e) now includes a beneficial owner of shares, and it is not necessary for the person to be a registered shareholder.

The tribunal and High Court correctly interpreted the unamended definition of 'input service' to include transportation of final products from the place of removal to depots or customers' premises. The Supreme Court found no error in this interpretation.