Supreme Court Judgments — 2020

The Supreme Court held that the disbursement of funds by NCDC was a pure application of its fund under Section 13(2) of the NCDC Act and not a revenue expenditure. Therefore, the interest income earned on these funds was not eligible for deduction.

The Supreme Court allowed the appeals. The Court held that Section 21AA of the Wealth Tax Act, 1957, is not attracted. The primary reasoning was that the Club is a social entity, and its members do not associate for the purpose of earning income or profit, which is a prerequisite for attracting the provisions related to 'association of persons' under taxing statutes, as established by previous Supreme Court judgments. Furthermore, the Court found that the shares of the members in the assets of the Club are determinate. Referring to Rule 35 of the Club Rules, which mandates the equal division of surplus assets among members after all debts and liabilities are discharged upon winding up, the Court concluded that on the date of liquidation, there would be a fixed list of members, making their shares determinate. This conclusion was supported by the ratio in Trustees of H.E.H. Nizam's Family (supra) and the principle that the position must be assessed on the relevant valuation date. The Court set aside the High Court's judgment and the review judgment.

The tribunal held that the DTA sales were made in contravention of the EXIM Policy and that customs duty was leviable on the inputs. The Supreme Court agreed with the tribunal's decision, upholding the levy of customs duty.

The Supreme Court held that the charges collected by the respondent for the supply of measurement equipment constituted a taxable service under Section 65(105)(zzzzj). The Court found that the equipment was used by the customer for accurate billing and regulation of gas supply, even without possession or effective control.

The Supreme Court held that capital gains arising from land acquisition compensation are chargeable to tax from the date of the award, not the date of notification, as the compensation amount is determined only upon the award.

The Supreme Court held that the orders of remand passed by the CESTAT were justified. The matters were remanded back for re-adjudication with specific principles to be followed for determining the valuation of goods for periods before and after July 1, 2000.

The Supreme Court held that the assessee was responsible for deducting tax at source on payments made to truck owners/operators exceeding Rs. 20,000 on a single bill/challan. The disallowance under Section 40(a)(ia) was upheld as the assessee failed to comply with TDS provisions.

The Supreme Court held that a payment received under a non-competition agreement is a capital receipt, not taxable under Section 28(ii)(a) of the Income Tax Act for the relevant assessment year. Such receipts became taxable only from Assessment Year 2003-04 onwards.

The Supreme Court held that the Mumbai project office was not a PE as it was solely an auxiliary office for liaison purposes, not involved in the core business activities. The Court found the ITAT's conclusion that the office was involved in execution to be perverse.

The Supreme Court held that the purchase turnover of empty bottles purchased by the assessee from unregistered dealers under bought note is exigible to purchase tax under Section 7-A of the Tamil Nadu General Sales Tax Act, 1959. The Court reasoned that the assessee could not escape this liability based on the revenue's Clarifications dated 09.11.1989 and 27.12.2000, as these did not conform to the statutory provision and judicial pronouncements. The Court found that the High Court had rightly decided the issue of purchase tax against the assessee for the assessment years 1986-87 to 1989-90. Regarding the cash discount, the Court affirmed the High Court's decision in favour of the assessee, noting the clear phraseology of Explanation 2(iii) to Section 2(r) of the Act, which excludes cash discounts from turnover, and observed that the revenue had not put forward serious contentions against this. The appeals filed by the revenue were partly allowed, and the appeals filed by the assessee were dismissed.

The Supreme Court held that the appellants were primarily procuring agents. The agreements, when read holistically, indicated that the appellants' responsibility was to ensure the supply of proper goods in proper packing to the satisfaction of the principals. Payments were based on the invoice amount of goods, with no specific provision for analysis or technical guidance. Default clauses further supported this, as no agent fees were payable if goods were unsatisfactory. The Court reiterated the principle from Dilip Kumar & Co. that tax incentive provisions require strict interpretation, and the burden is on the assessee to prove applicability. The generalized observations in Baby Marine Exports regarding liberal interpretation were not considered sound law. Therefore, the services rendered by the appellants did not qualify for deduction under Section 80-O. The appeals were dismissed.

The Supreme Court held that the services rendered by the appellants were essentially those of procuring agents for foreign buyers and not services rendered from India for the purpose of Section 80-O. Therefore, the deduction was not admissible.

The Supreme Court held that car mats, despite being specifically designed for cars, are correctly classifiable under Chapter 57 as textile floor coverings. The Explanatory Notes to the HSN specifically exclude textile carpets identifiable for use in motor cars from Chapter 87.

The Supreme Court held that the payments made by PILCOM to Non-Resident Sports Associations represented their income which accrued or arose or was deemed to have accrued or arisen in India. Consequently, PILCOM was liable to deduct tax at source in terms of Section 194E of the Act. The Court found the High Court's reasoning regarding the non-applicability of DTAA to the obligation to deduct tax at source to be correct. The Court distinguished the present case from the Performing Right Society Ltd. case, finding the facts not similar enough to be of help to the revenue. The Court dismissed the appeal, affirming the liability of PILCOM to deduct tax at source. The issue of whether the payments were income accruing or arising in India was decided in favour of the revenue. The operative direction was the dismissal of the appeal.

The Supreme Court held that for AYs prior to April 1, 2017, the issuance of a notice under Section 143(2) was sufficient to justify withholding processing under Section 143(1D). For AY 2017-18 onwards, Section 241A requires specific satisfaction and approval to withhold refunds.

The Supreme Court held that the tax authorities cannot impose a time limit for the delivery of goods from a carrier to qualify for the benefit of Section 6(2) of the Central Sales Tax Act, 1956. The Court reasoned that Explanation 1 to Section 3 of the Act clearly states that the movement of goods terminates when delivery is taken from the carrier, and this provision does not qualify 'delivery' with any timeframe. The Court found no concept of constructive delivery, either express or implied, in the said provision. It emphasized that taxing statutes should be interpreted strictly and that the legislature has not provided for an expansive meaning of 'delivery'. The Court disapproved of the interpretation in Arjan Dass Gupta and Brothers v. Commissioner of Sales Tax, Delhi Administration, which allowed for a principle akin to constructive delivery, stating that tax administration authorities cannot create their own interpretations of legislative provisions based on their perception of trade practices. The High Court's judgments quashing the circulars and tax demands were upheld. The Court explicitly left undecided any potential legislative amendments that might be considered by the legislature.

The Supreme Court held that the tax authorities cannot impose a time limit or timeframe within which delivery of goods must be taken from a carrier as a condition for granting the benefit of Section 6(2) of the Central Sales Tax Act, 1956. The Court reasoned that Section 3, Explanation 1, of the 1956 Act clearly states that the movement of goods in the course of inter-state trade or commerce terminates at the time when delivery is taken from the carrier. This provision does not qualify the term 'delivery' with any timeframe. The Court found that the Sale of Goods Act, 1930, particularly Section 51, also does not support the revenue's contention of imposing a time limit. The Court explicitly disagreed with the interpretation of the Delhi High Court in the case of Arjan Dass Gupta, stating that a legal fiction created by the statute should be read as it is, without incorporating any further words or concepts like constructive delivery. The Court emphasized that taxing statutes should be interpreted strictly, and if there are unintended benefits, the legislature should amend the law, rather than tax administration authorities interpreting provisions based on their perception of trade practices. The appeals were dismissed.

The Tribunal held that the disputed items related to post-importation activities and were not conditions for the sale of imported equipment. Therefore, their value could not be added to the assessable value.

The Supreme Court held that the addition under Section 68 was not justified as subsequent evidence produced during penalty proceedings, including affidavits and statements from unregistered dealers, established the genuineness of the purchases. The Court noted that the CIT(A) had accepted this explanation in penalty proceedings, finding no concealment of income.

The Supreme Court held that YRMPL failed to qualify as a mutual concern. The doctrine of mutuality requires three conditions: (i) identity of contributors and recipients, (ii) the company acting as an instrument obedient to members' mandate, and (iii) impossibility of profits. YRMPL failed the first test because contributions were accepted from non-members (like Pepsi Foods Ltd.), impairing the uniformity of identity and introducing commerciality. The Tripartite Agreement allowed only franchisees as members, excluding Pepsi Foods Ltd. from surplus participation. The second and third tests were also contravened as the company's mandate was not solely for members' benefit, and profits could accrue to the parent company, YRIPL, which is antithetical to mutuality. The Court noted that the alternative plea of diversion by overriding title was neither fully adjudicated by lower authorities nor argued before the Supreme Court, and a rectification application on this ground was pending. Therefore, the appeal was dismissed, upholding the impugned judgment, with liberty to the assessee to pursue the rectification application.

The tribunal held that while the AO had sufficient reason to believe in reopening the assessment, the notice was issued after 4 years and failed to invoke the second proviso of Section 147. The assessee was not given a proper opportunity to respond to the extended limitation period.

The Supreme Court held that the material disclosed in assessment proceedings for subsequent years was sufficient to form a prima facie view that income had escaped assessment, thus justifying the issuance of a notice under Section 147. However, regarding the first proviso, the Court found that the assessee had made a full and true disclosure of all material facts. The redemption of convertible bonds at a discounted price, which might have resulted in income for the assessment year, was an event subsequent to the year in question, and all relevant facts were within the assessing officer's knowledge. The Court noted that the assessing officer had accepted the transaction and only added guarantee fees to the income. Therefore, it could not be said that the assessee had withheld material information. Concerning the second proviso, the Court held that the notice and the reasons provided were silent about it, and it was only mentioned in the order rejecting the assessee's objections. This was considered unfair and a violation of natural justice, as the assessee was not put on notice about the reliance on the second proviso and the potential invocation of the 16-year limitation period. Consequently, the revenue could not take the benefit of the second proviso at that stage. The Court quashed the notice because it was issued after four years and the revenue failed to show non-disclosure of facts. However, the revenue was permitted to issue a fresh notice invoking the second proviso if otherwise permissible under law, with both parties free to raise all contentions.

The Supreme Court held that Section 143(1-A) can only be invoked when the lesser amount stated in the return is a result of an attempt to evade tax. In this case, the claim of 100% depreciation was due to a bonafide mistake and not an attempt to evade tax, hence the additional tax demand was unjustified.

The Supreme Court held that UFAC's activities satisfied the conditions for exemption under Notification No. 8/97. The Court found no conflict between the amended provisions and the exemption notification, and that the term 'allowed to be sold in India' was applicable to sales within permissible limits and with the Development Commissioner's permission.

The Supreme Court held that the conversion of the partnership firm into a company under Part IX of the Companies Act resulted in statutory vesting of properties and the agreement with the State Government was legally deemed to be with the company. Therefore, the company fulfilled the conditions for deduction under Section 80-IA.

The Supreme Court held that the satisfaction note recorded by the Assessing Officer was sufficient compliance with Section 153C, as the Assessing Officer was the same for both the searched person and the assessee. The High Court's decision to remand the matter to the ITAT for fresh consideration on merits was upheld.

The Supreme Court held that the term 'activities' in Section 12AA includes proposed activities, and a Commissioner must be satisfied about the genuineness of the trust's objects and its proposed activities for registration.

The Supreme Court held that Section 130A of the Customs Act does not mandate the High Court to call for a statement of the case from the Tribunal in every instance. The High Court has discretion in deciding whether to direct a reference.

The Supreme Court held that unutilised MODVAT credit as of the close of the accounting year is not an allowable deduction under Section 43B as the liability to pay excise duty arises on the removal of finished goods. The disallowance of sales tax recoverable was also upheld.

The Supreme Court held that the sales of imported goods from a bonded warehouse within the landmass of West Bengal to foreign-bound ships as ship stores were neither in the course of import nor in the course of export. The Court reasoned that for a sale to be in the course of import, it must occur before the goods cross the customs frontiers of India and must occasion the import. In this case, the sales did not occasion the import. Furthermore, the goods were not being exported as they were consumed on board the ship and did not reach a destination outside India. The definition of export under Section 2(18) of the Customs Act requires goods to be taken out of India to a place outside India. The Court also noted that the waiver of customs duty does not equate to a waiver of sales tax. The sales were effected from the bonded warehouse, which was within the landmass of the State and not within the customs station area. Therefore, the sales were taxable under the relevant State and Central laws, specifically Section 4 of the CST Act. The appeals were dismissed.