Case Law # 1: Discount on ESOP is allowable as an expenditure:
Object of issuing ESOPs at a discounted price is not to raise share capital but to earn profit by securing the consistent and concentrated efforts of its dedicated employees during the vesting period. Such discount is construed, both by the employees and the company, as nothing but a part of package of remuneration. Thus, it is allowable as an expenditure U/S 37(1). [Biocon Ltd Vs Dy CIT (LTU)]  [35 Taxmann.com 335] [Bangalore-Tribunal] [SB]
Case Law # 2: Scope of the word ‘Payable’ U/S 40a(ia):
The provisions of Sec 40a(ia) are applicable not only to the amount which is shown as payable on the date of the balance sheet, but it is applicable to such expenditure, which become payable at any time during the relevant previous year and has been actually been paid within the previous year. Thus, the Tribunal’s judgment in the case of ‘Merilyn Shipping & Transports Vs ACIT”  [20 Taxmann.com 244] was overruled.
[CIT Vs Crescent Export Syndicate]  [33 Taxmann.com 250] [Kolkatta - HC]
[CIT Vs Md.Jakir Hossain Mondal]  [33 Taxmann.com 123] [Kolkatta - HC]
[CIT Vs Sikandarkhan N Tunvar]  [33 Taxmann.com 133] [Gujarat - HC]
Case law # 3: ‘Principle of Mutuality’
Interest on FDs placed by a club with its member banks will not be exempt under the principle of mutuality as such arrangements lack complete identity between the contributors and participators. Also, such arrangements do not satisfy other conditions of mutuality. For instance, the deposits received by the member banks were used to be advanced to their own clients as loans rupturing the principle of ‘Mutuality’.
[Bangalore Club Vs CIT]  [29 Taxmann.com 29] [SC]
Exemptions / IOS
Case Law #4: Awards, Rewards / Prizes received by ‘Amateur Sportsperson’ are not ‘Income’ as per CBDT Circular No 447/1986 and hence free from income tax.
Thus, where ‘Shree Abhinav Bhindra’ received Awards / Rewards / Prizes mainly from various governments, local authorities, trusts and institutions, some private corporate and individuals, it was held that such receipts are not ‘Incomes’ and hence the same cannot be taxed. It is so because, he was pursuing ‘Shooting’ as hobby but never pursued the same with the prospect of monetary gain or as a professional. Also, the same cannot be taxed as ‘Gifts’ under the provisions of Sec 56 as they are capital receipts.
[Abhinav Bindra Vs Dy CIT]  [35 Taxmann.com 575] [Delhi – Tribunal]
Case Law # 5: Sec 2(15) read with Sec 10(23C):
Exemption U/S 10(23C)(iv) could not be denied to ICAI on account of fees received for providing coaching classes and campus placement of its students as the predominant objective is not profit motive.
[ICAI Vs DGIT(Exemptions)]  [35 Taxmann.com 140] [Delhi-HC]
Case Law # 6: “Objects of Cricket Associations organizing IPL Matches are not charitable in nature”
Though the game of cricket, its promotion or advancement will remain a charitable, as such, yet where matches were organized on a commercial basis, various avenues of generating revenues were discovered and exploited, whether by itself or through BCCI, there was clearly a ‘Profit Motive’ involved in entire activities of the association and hence, the Association cannot claim the benefit of Sec 11/12/13.
[Tamilnadu Cricket Association Vs DIT (Exemptions)]  [32 Taxmann.com 50] [Chennai – Tribunal]
MAT and Company Assessment
Case Law # 7: Sec 115JB:
Where the assessee company had set aside certain amount out of profits as debenture redemption reserve, said amount was deductible in computation of book profit U/S 115JB.
[JSW Energy Ltd Vs ACIT]  [34 Taxmann.com 152] [Mumbai-Trib]
Case Law # 8: “Principle of Res Judicata”
Where High Court, while considering appeal for preceding assessment year in assessee’s own case, found that appellate authorities had deleted addition after analyzing material on record, said decision would equally apply to year under consideration where addition was based on self same grounds.
[CIT Vs Dr.Suresn Sharma]  [36 Taxmann.com 4 / 217 Taxman 44] [Mag] [Rajasthan]
Case Law # 9: “Change of opinion” does not entitle the AO to re-open the case U/S 147
The assessee, engaged in wholesale business of gold and silver, claimed loss on hedging of metals in commodity exchange to insure against price fluctuation. The said loss was allowed in the course of assessment proceedings U/S 143(3). The AO proposed to reopen the assessment on the ground that the exchange was recognized only in a later year.
The HC held that any post assessment attempt on part of AO to fall back on conditions required to be satisfied for application of sub clause (a) of Sec 43(5) would amount to change of reasons recorded for reopening and hence reopening was not permitted.
[Jayesh Raichand Shah Vs ACIT]  [212 Taxman 306] [Guj-HC]
Case Law # 10: “Change of opinion” does not entitle the AO to re-open the case U/S 147:
The assessee (Mc Donalds Corpn), a non-resident company had entered into a master licensing agreement with (Mc Donalds India Private Limited) in terms of which the Indian entity was granted non-exclusive right to use the assessee’s system at agreed locations in India. The terms also required the Indian entity to pay “Initial Franchise Fees” and also “Royalty” on recorded monthly sales of each restaurant during the period.
The scrutiny assessments were completed for the relevant assessment years treating the same as “Royalty Income” in the hands of the non-resident entity. [i.e Taxed at 15%]
After that, notices were served U/S 148 attributing the receipts to Permanent Establishment to India. [i.e Proposed to tax at 30% the then prevailing rate for business income.]
The HC held that since all facts relating to Royalty Income had been placed on record in course of assessment, initiation of reassessment proceedings on basis of change of opinion was not sustainable. [Mc Donalds Corpn]  [213 Taxman 26] [Delhi-HC]
Case Law # 11: Withdrawal of a deduction by retrospective amendment does not warrant invocation of Sec 147:
When Legislature amends provisions of the Act with retrospective effect, it cannot be said that there has been a failure on part of assessee to disclose fully and truly all material facts at relevant time and, thus, reassessment proceedings cannot be initiated in such a case.
[CIT Vs K.Mohan & Co (Exports) (Regd)]  [31 Taxmann.com 278] [Mumbai]
Case Law # 12: Audit Party Remarks cannot be the sole criterion to invoke provisions of Sec 147:
Where Assessing Officer has acted only under compulsion of Audit Party and not independently, action of reopening assessment in such a case would be vitiated. [Vijay Rameshbhai Gupta Vs ACIT]  [32 Taxmann.com 41] [Gujarat]
Case Law #13: Writ Jurisdiction:
Writ petitions cannot be entertained when alternate remedy of filing an appeal before CIT (A) is available. [CIT Vs Chabil Dass Agarwal]  [36 Taxmann.com 36] [SC]
Case Law # 14: Sec 194J: Charges paid to Depositories:
Charges paid to Depositories, i.e NSDL / CDSL by share transfer agents would fall under professional managerial services and, therefore, tax was deductible at source on such payments.
[ACIT Vs Karvy Computershare (P) Ltd]  [35 Taxmann.com 403] [Hyd – Trib]
Case law # 15: Sec 194H:
TDS provisions are not attracted on the commission / brokerage received by the stamp vendors from the state government as it is in the nature of discount.
[CIT Vs Ahmedabad Stamp Vendors Association]  [25 Taxmann.com 201] [SC]
Case Law # 16: ‘Royalty / Fees for Technical Services’ [Sec 195]
Payment for online advertisement is not ‘Royalty’ or ‘Fees for Technical Services’. Hence, where a ‘Florist’ pays sums to search engines like ‘Google and Yahoo’ to promote its business, TDS provisions are not applicable as the recipients do not have Permanent Establishment in India.
[ITO Vs Right Florists (P) Ltd]  [32 Taxmann.com 99] [Kolktatta –Tribunal]. Similar judgments were given in ‘Yahoo India (P) Ltd Vs Dy CIT’  [46 SOT 105] and also in ‘Pinstorm Technologies P Ltd Vs ITO’  [54 SOT 78] [Mumbai]
Case Law # 17: “Sums paid to a ‘Model’ is liable to TDS U/S 194C but not U/S 194J”
To fall U/S 194J, Film Artists should be engaged in the production of a ‘CINEMATOGRAPHIC FILM’. Also, the professional should be a ‘Film Artist’. Where the professional is not a ‘Film Artist’ then it is not liable to TDS U/S 194J.
Film Artist means (i.e the definition is exhaustive) any person engaged in his professional capacity in the production of a CINEMATOGRAPHIC FILM, whether produced by him or by any other person, as
i. An Actor;
ii. A Cameraman;
iii. A Director, including an Assistant Director;
iv. A Music Director, including an assistant music director;
v. An Art Director, including an Assistant Art Director;
vi. A Dance Director, including an Assistant Dance Director;
vii. An Editor;
viii. A Singer;
ix. A Lyricist;
x. A Storey Writer;
xi. A Screen Play Writer;
xii. A Dialogue Writer; and
xiii. A Dress Designer.
Thus, where ‘Katrina Kaif’ received sums from ‘Kodak, Rochester (USA)’ for acting as a ‘Model’ for the promotional material created by Kodak, including posing for photographs or promotion of products of Kodak, the same is liable to TDS U/S 194C as ‘Model’ is not covered within the definition of ‘Film Artist’.
Thus, sums received by her as an ‘Actress’ for acting in movies are liable to TDS U/S 194J whereas sums received by her as a ‘Model’ are liable to TDS U/S 194C.
Note: On similar reasoning, sums paid to ‘Stunt Masters’ also fall U/S 194C.
[Kodak India (P) Ltd Vs Dy CIT]  [32 Taxmann.com 88] [Mumbai – Tribunal]
Case Law # 18: Transfer Pricing – Marketing Intangibles: [292/Mar 2012 – Intl Taxation] [267/Sep 2012 – Intl Taxation]
Segregate the routine and Non-Routine AMP [Advertising; Marketing; Promotion] Spend. i.e It needs to satisfy the bright line test based on which one needs to segregate the routine marketing spend and the non-marketing spend.
The entity incurring non-marketing spend should charge the AE at ALP as it is creating a marketing intangible. Thus, it is argued by the revenue that the Indian entity should be compensated in the form of a “Reimbursement of Excessive Costs incurred along with a Fixed Profit Margin”.
In this case, the Indian entity is incurring huge non-routine outlay on one hand and paying the AE towards usage of brand on the other hand. Such payment to the AE is disallowed as “Nil” arm’s length value by the revenue on the premise that local market development undertaken by the Indian tax payer has enhanced the value of brand / trademark legally owned by the foreign affiliate, thereby necessitating a PAY IN rather than a PAY OUT.
The crux is the non-routine spend is in the nature of brand building rather than in the nature of promoting a particular product. [Maruti Suzuki India Ltd Vs Addl CIT]  [198 Taxman 102]. Similar rulings were now given in “L.G.Electronics India (P) Ltd Vs ACIT”  [29 Taxmann.com 300] [Delhi-Trib-SB] and in “Ford India Private Limited Vs Dy CIT”  [34 Taxmann.com 50] [Chennai-Trib]
Case Law # 19: ‘Refunds’:
Where there is no intimation in writing to assessee before making an adjustment of refund, impugned order is to be set aside.
[Cognizant Technology Solutions India P Ltd Vs Dy CIT]  [34 Taxmann.com 204] [Madras]
Case Law # 20: Sec 222: Primacy of certain debts over the dues under the IT Act:
Dues of a State Owned Financial Corporation in case of mortgage will have primacy over realization of dues under the Income Tax Act.
[Karnataka State Industrial Investment Development Corporation Ltd Vs CIT]  [33 Taxmann.com 93] [Karnataka]
Case law # 21 : Applicability of Sec 269SS with regard to loans taken by partner from firm:
In case of a partnership firm, there is no separate identity of partners and firm and, therefore, where a partner took loan in cash from firm, there was no violation of Sec 269SS so as to invoke penal provisions of Sec 271D. [CIT Vs Sivakumar]  [32 Taxmann.com 62] [Madras]
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