Supreme Court Judgments — 2021

The Supreme Court held that Section 6(1) of the Smugglers and Foreign Exchange Manipulators (Forfeiture of Property) Act, 1976, does not mandate the issuance of a primary notice to a convict when forfeiture proceedings are initiated against a relative of the convict, provided the property is held by the relative and the relative is a person to whom the Act applies. The Court reasoned that the purpose of Section 6(1) is to notify the person holding the tainted property and likely to be affected by the forfeiture, which is the person in possession and recorded ownership. If the property is held by the relative, they are the one who must discharge the burden of proof under Section 8, not the convict. The Court also noted that in this specific case, the convict had expired before the notices were issued, and the heirs of the convict did not claim any right to the properties. Therefore, the High Court's order vitiating the proceedings for lack of notice to the convict was set aside. The appeals were allowed, and the writ petitions were remitted back to the High Court for fresh consideration on all other issues.

The Supreme Court held that a primary notice to the convict under Section 6(1) is not mandatory when the illegally acquired property is held in the name of and possessed by a relative. The Court reversed the Madras High Court's decision which had held such notice to be mandatory.

The Supreme Court held that the respondent, having accepted the lower post with an undertaking, was estopped from later seeking retrospective appointment to the higher post. The Division Bench's direction to treat the Record Clerk appointment as Junior Assistant was unsustainable.

The Supreme Court held that while the issuing bank provides a service, the interchange fee is part of a unified transaction where service tax is collected by the acquiring bank. Therefore, the issuing bank cannot be taxed again for the same service, avoiding double taxation.

The Supreme Court held that the ITAT exceeded its powers under Section 254(2) by re-hearing the entire appeal on merits, which is beyond the scope of rectifying a mistake apparent from the record. The Court quashed the ITAT's recall order and the High Court's affirming judgment, thereby restoring the original ITAT order.

The Supreme Court held that the High Court erred by passing a common judgment in two separate appeals based on evidence from only one trial. This violated the principles of criminal jurisprudence and the right to a fair trial.

The Supreme Court held that the relevant date for determining the limitation period under Section 263(2) is the date the order is 'made' (passed), not when it is received by the assessee. The order was passed within the prescribed two-year period.

The Supreme Court held that the High Court and ITAT had misconstrued and misinterpreted Section 263(2) of the Income Tax Act, 1961. The Court emphasized that the language of Section 263(2) clearly states that no order shall be "made" after the expiry of two years from the end of the financial year in which the order sought to be revised was passed. The word "made" is crucial, and the date of "receipt" by the assessee, or even "dispatch", is not relevant for calculating the period of limitation. The Court reasoned that adhering to the High Court's interpretation would mean adding words to the statute that are not present. Since the Commissioner's order was passed on 26.03.2012, which was within the two-year period ending 31.03.2012 (the end of the financial year in which the assessment order for AY 2008-09 was passed), it was within the period of limitation. The appeal was allowed, and the question of law was answered in favour of the revenue.

The Supreme Court allowed the applications for withdrawal of the civil appeals. The appeals were disposed of as withdrawn, with no order as to costs.

The Supreme Court held that the Tribunal erred in not considering the merits of the case and set aside its judgment. The matter was restored to the Tribunal for a fresh determination.

The Supreme Court held that Section 234B cannot be read in isolation and must be construed in conjunction with Section 209 of the Income Tax Act, 1961. The Court reasoned that the liability for interest under Section 234B arises from a default in paying advance tax. While the definition of 'assessed tax' in Section 234B refers to tax deducted or collected at source, the preconditions for levying interest, namely, the liability to pay advance tax and its non-payment or short payment, must be satisfied. Therefore, Section 209, which governs the computation of advance tax, is crucial for interpreting Section 234B. The Court noted that the proviso to Section 209(1)(d), inserted by the Finance Act, 2012, clarified that an assessee receiving income without deduction of tax is liable to pay advance tax. However, for assessment years prior to FY 2012-13, the intended effect of Section 209(1)(d) was to allow the assessee to reduce the amount of income-tax deductible or collectible at source when calculating its advance tax liability. Consequently, the Respondent (Mitsubishi Corporation) could not be held to have defaulted in its advance tax liability. The Court upheld the view of the High Court and ITAT in this regard, stating that the Revenue is not remediless and can proceed against the payer who defaulted in deducting tax at source. The appeals filed by the Revenue were dismissed. The Court also noted that the position changed from FY 2012-13 onwards due to the proviso to Section 209(1)(d). The appeals concerning Alcatel Lucent were allowed, overturning the High Court's decision, based on the reasoning in the Mitsubishi Corporation case.

The Supreme Court held that proportionate disallowance of interest under Section 14A is not warranted when interest-free own funds of the assessee exceed their investments. A nexus must be established between the expenditure and the earning of exempt income.

The Supreme Court held that proportionate disallowance of interest under Section 14A of the Income Tax Act, 1961, is not warranted for investments made in tax-free bonds/securities when the assessee bank has sufficient interest-free own funds exceeding its investments. The Court reasoned that a nexus between the expenditure disallowed and the earning of exempt income had not been established. The Court clarified that while an assessee has an obligation to provide full material disclosures, there is no corresponding legal obligation to maintain separate accounts for different types of funds. The Court also noted that the Revenue did not contend that the securities were held for maintaining Statutory Liquidity Ratio (SLR). The High Court erred in endorsing the proportionate disallowance solely on the ground that separate accounts were not maintained. The appeals filed by the assessee were allowed.

The Supreme Court upheld the High Court's judgment. It held that the amended Rule 13 of the Abkari Shops Departmental Management Rules, 1972, was not applicable to contracts entered into before its amendment on December 23, 1993, and to licenses cancelled prior to that date. The Court affirmed the principle that legislative functions cannot create rules with retrospective effect unless explicitly intended. Therefore, the departmental management fees collected by the State for the period it managed the vend (September 1993 to March 1994) had to be adjusted against the licensee's overall liability. The Court also noted the State's rejection of the licensee's application under the 2008 amnesty scheme and its subsequent permission for the licensee to deposit 50% of the admitted amount under the 2011 scheme. The Court directed the licensee to deposit the remaining 50% of ₹40,51,288 within two months for full discharge of liability, and ordered the State to release the licensee's attached property within the same period. The licensee would not be liable for any interest. The appeal was dismissed in terms of these directions.

The Supreme Court held that the issuance of debentures in lieu of interest payment constituted an actual payment for the purpose of Section 43B. The Court restored the order of the ITAT, allowing the deduction.

The Supreme Court held that the High Court erred in setting aside the cancellation of the trust's registration. The Court found that the trust had clearly misused its registration by engaging in bogus donation activities and returning funds to donors, justifying the cancellation.

The Supreme Court held that Section 80-IA(5) is limited to determining the quantum of deduction by treating the eligible business as the only source of income. It cannot be used to restrict the deduction only to 'business income'.

The Supreme Court held that the third proviso to Section 254(2A) of the Income Tax Act, as it stood, was unconstitutional and violated Article 14 of the Constitution. The Court directed that the proviso be read to allow for extensions of stay orders beyond 365 days if the delay in disposing of the appeal was not attributable to the assessee.

The Supreme Court held that the show cause notices issued by the DRI were invalid as they were not issued by 'the proper officer' who had assessed the goods. The Court also found no wilful mis-statement or suppression of facts by the importers.

The Supreme Court held that the 'Relays' should be classified under Chapter Heading 8608 as railway signaling equipment, as the initial classification list was approved. Furthermore, the show cause notices were time-barred as they were issued after the normal period of limitation without any evidence of fraud or suppression of facts.

The Supreme Court held that payments for the resale or use of computer software through EULAs/distribution agreements do not constitute royalty for the use of copyright. Consequently, such payments do not give rise to taxable income in India, and no tax deduction at source was required.

The Supreme Court dismissed the Special Leave Petition, upholding the concurrent findings of the Rajasthan Tax Board and the High Court. The Court found no grounds to interfere with the impugned judgment. The reasoning implicitly accepted that the respondent was correctly classified as a 'Casual Trader' and that the assessment order was indeed barred by limitation. The Court referred to the definition of 'Casual Trader' and the provisions of Section 10B(iii) read with Section 10A of the Rajasthan Sales Tax Act, 1954, which prescribe a two-year limitation period from the date of the transaction in the absence of a report. The Court also noted the principle that words in the singular include the plural and vice versa, as per the General Clauses Act, suggesting that 'occasional transactions' could encompass a single transaction in certain contexts, and emphasized the need for a just, reasonable, and sensible interpretation of statutes to avoid absurdity or inconsistency with legislative intent. The operative direction was the dismissal of the SLP.

The Supreme Court held that the exemption claimed under Section 5(2) of the CST Act was rightly denied to the appellant. The High Court was justified in dismissing the writ petitions. The reasoning was that the appellant alone was assessed for customs duty upon filing the bills of entry, indicating that the appellant was the importer. The High Court correctly found that the sale by the appellant to the end-buyer could only have been effected after the goods were cleared for home consumption, meaning the import stream had ended. The Court also noted that the appellant's claims about multiple parties and arrangements were found to be false, with some alleged end-buyers denying knowledge of the appellant or not being found at their addresses. The Court endorsed the views of the CTO and the High Court. The appellant's prayer to contest the matter in a statutory appeal was rejected, as it had consciously invoked writ jurisdiction and contested on merits. The Court dismissed the appeals with costs.

The Supreme Court held that Section 80P(4) is a proviso and should be read in conjunction with the main section. It clarified that deductions under Section 80P(2)(a)(i) are available to primary agricultural credit societies, even if they provide loans to non-members or for non-agricultural purposes, provided they are not engaged in banking business requiring an RBI license.