Section 46A of the Income Tax Act
The decision most relied on for Section 46A is CIT v. MAF Academy (P) Ltd. (361 ITR 258), cited in 132 of the 612 judgments on BharatTax that turn on this section.
Leading authorities on Section 46A
Amounts received from bogus share transactions, where a private limited company sells shares to unrelated parties at a huge premium and then repurchases them at a loss shortly after, are taxable as unexplained cash credits under Section 68. The onus to prove identity, creditworthiness, and genuineness of such transactions lies solely on the assessee.
For exemption under Section 54, the expression 'a residential house' allows for investment in multiple residential units that form one functional unit, as 'a' does not imply a singular number. The amendment to Section 54, effective from April 1, 2015, is prospective.
The Commissioner of Income-tax (Appeals) must admit additional evidence if it is crucial for the proper disposal of the appeal, ensuring substantial justice to the appellant.
For capital gains exemption under sections 54 and 54F, the term "a residential house" does not restrict the exemption to a single residential unit and can include multiple contiguous or combined residential units treated as one house.
Best judgment assessments under Section 144 must be a fair and rational estimation of income by the Assessing Officer, not capricious or arbitrary. Appellate authorities should accept clarificatory evidence to test the fairness of such assessments, even if produced for the first time.
The Supreme Court clarifies the distinction between income chargeable as capital gains and income taxable as business profits, guiding the assessment of whether a transaction constitutes a transfer of a capital asset or is in the nature of trade.
The Supreme Court may dismiss an appeal challenging the allocation of intra-group cross-charges if the entire transaction is found to be revenue neutral for the relevant assessment year.
Multiple floors or houses can qualify as 'a residential house' for capital gains exemption under Sections 54 and 54F if they are constructed or capable of being used as a single unit. This applies to assessment years where the unamended law used the term 'a residential house'.
Additions under Section 68 for share capital received from companies managed by one person are justified when the Assessing Officer establishes this fact. The Supreme Court has upheld this view.
Disallowance under Section 40A(2)(b) is not maintainable when both the payer and payee are assessed at the maximum marginal rate, as it results in a revenue-neutral situation.
Judgments on Section 46A
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