Tax Law Cases

[Justice K.S. Puttaswamy (RETD.) v. Union of India [2018] 97 taxmann.
com 585 (SC)]
The Finance Act, 2017 inserted a new section 139AA in the Income-tax Act, 1961. With
effect from July 1, 2017 this provision requires every eligible person to link the Aadhaar
no. with PAN and quote the Aadhaar number in the Income-tax return. If any person
does not possess the Aadhaar Number but he has applied for the Aadhaar card then he
has to quote Enrolment ID of such Aadhaar application in the ITR.
The Supreme Court had already upheld the validity of Section 139AA by repelling the
contention raised on Articles 14 and 19 of the Constitution of India in the case of Binoy
Viswam v. Union of India [2017] 82 taxmann.com 211 (SC).
The following are the triple tests which need to be satisfied for judging the permissible
limits for invasion of privacy while testing the validity of any legislation:
a) Existence of a law
b) Legitimate State interest
c) Test of Proportionality
The first requirement stands satisfied as section 139AA is a statutory provision and,
therefore, there is a backing of law. Insofar as requirement of ‘legitimate State interest’
is concerned, Section 139AA seeks to safeguard the following interest:
“To prevent income tax evasion by requiring, through an amendment to the Income Tax
Act, that the Aadhaar number be linked with the PAN.”
Regarding the aspect of proportionality, there was specific discussion on that aspect in
Binoy Viswam’s case (supra) as well. Therefore, the provision of Section 139AA has
successfully met the triple test of right to privacy.
2. Discounts offered by Flipkart.com to buyers aren’t intangible assets: ITAT:

[Flipkart India Private Limited v. ACIT [2018] 92 taxmann.com 387 (Bangalore -
Trib.)]
The assessee-co., a wholesale dealer, acquired goods from various persons and
immediately sold them to retail seller - WS Retail Services Pvt. Ltd. The retail seller
ultimately sold those goods from e-commerce platform ‘Flipkart.Com’. To increase the
volume of sale, assessee was purchasing goods, say, at Rs. 100 and selling them to the
retailers at discount, say, at Rs. 80. The strategy to forego the profit had resulted in
assessee-co. became a loss making company.
The Assessing Officer held that the profits foregone by selling goods at less than cost
price were to be regarded as expenditure incurred in creating intangibles/brand value or
goodwill. Thus, only depreciation claim could be allowed on it.
The Tribunal held in favour of assessee that one couldn’t proceed on the basis of
presumption that the profit foregone would be deemed as expenditure to acquire an
intangible asset, being brand value or goodwill. For creation of an intangible asset, i.e.,
goodwill, it is not possible to ascertain the cost of acquisition of goodwill. It was,
therefore, not possible to say that profits foregone created goodwill or any other
intangibles or brand value to assessee.
3. Gift received by an individual from HUF isn't exempt: ITAT:

[Gyanchand M. Bardia v. ITO [2018] 93 taxmann.com 144 (Ahmedabad - Trib.)]
The assessee claimed that gift of certain amount received from his Hindu undivided
family (HUF) was exempt from tax under section 56(2)(vii). However, the Assessing
Officer held that the term 'relative' in Explanation (e) to Section 56(2)(vii) does not
include HUF as donor and, therefore, added the impugned amount to assessee's income
under Section 68.
On further appeal, the Tribunal held in favour of revenue that as per Explanation to
Section 56(2)(vii) members of an HUF are its relatives. Therefore, if HUF receives any
sum from any of its member, such sum shall not be chargeable to tax.
4. Sec. 68 additions not tenable on grounds that relatives gave gift without any
occasion: High Court:
[Pendurthi Chandrasekhar v. DCIT [2018] 91 taxmann.com 229 (Hyderabad)]
In the Instant case, additions were made under section 68 on the grounds that assessee
had failed to show why, without any occasion, Rs. 73 Lakhs had been gifted by the
maternal aunt without any consideration. The appellate authorities also upheld the
action of the Assessing Officer. On further apeal, the High Court held in favour of
assessee that an occasion is not necessary to accept a gift from a relative.
The Court further held that when donor had given a confirmation letter that she had
transferred Rs. 73 lakhs to her nephew as a gift out of natural love and affection, the AO
should not have further doubted her. The donor in instant case was assessee's own
maternal aunt and was covered within the definition of 'relative' defined under
explanation to section 56(2)(v).
MasterCard shall have a PE in India and its fees for processing card payments
taxable as business income: AAR:
[MasterCard Asia Pacific Pte. Ltd., In re. [2018] 94 taxmann.com 195 (AAR - New
Delhi)]
6. Market value of other business assets not relevant to determine FMV value
of unlisted shares of a co.:
[Minda S M Technocast (P.) Ltd. v. ACIT [2018] 92 taxmann.com 29 (Delhi - Trib.)]
The Tribunal held in favour of assessee that Rule 11UA contains the provisions for
determination of fair market value of a property, other than an immovable property.
Rule 11UA provides that while valuing the shares the book value of the assets and
liabilities declared by the issuing co. should be taken into consideration. There is no
provision in Rule 11UA as to substitute the FMV of land with its book value while
calculating the FMV of shares. Therefore, the share price calculated by the assessee of
issuing co. at Rs. 5 per share had rightly been determined in accordance with the
provisions of Rule 11UA.
7. Domain registration fee received by 'GoDaddy' is taxable as royalty: ITAT:

[Godaddy.com LLC v. ACIT [2018] 92 taxmann.com 241 (Delhi - Trib.)]
Thus, the rendering of services for domain registration was equivalent to rendering of
services in connection with the use of an intangible property which was similar to
trademark. Therefore, charges received by the assessee for said services in respect of
domain name was royalty as per Explanation 2 to section 9(1)(vi).
9. ‘Sachin Tendulkar’ entitled to vacancy allowance as he failed to find tenant

for vacant flat:
[Sachin R. Tendulkar v. DCIT [2018] 96 taxmann.com 253 (Mumbai - Trib.)]
The ITAT held in favour of assessee when same builder had helped the assessee to find
tenant for another flat, it couldn’t be said that these letters to the same builder to help
him identify one more tenant, to be considered as fake, defied logic. Therefore, if a
property was held with an intention to let out in the relevant year coupled with efforts
made for letting it out, the same would fall within the purview of section 23(1)(c).
Delhi HC directs I-T Dept. to allow filing of ITR without Aadhaar No.:
[Shreyasen, & Anr. v. Union of India & ORS [2018] 95 taxmann.com 256 (Delhi)]
The petitioners filed a writ in the Delhi High Court to seek directions that I-T Dept.
should allow filing of Income-tax return (ITR) without complying with the condition of
providing Aadhaar Number.
Section 139AA of the Income-tax, Act 1961 requires every eligible person to quote his
Aadhaar number in the ITR. If any person does not possess the Aadhaar Number but
has applied for the Aadhaar then he can quote Enrolment ID of Aadhaar application
Form in the ITR. This provision also requires the linking of Aadhaar number with PAN
of the taxpayer
Subsequent to the directions issued by the Delhi High Court, the Income-tax Dept.
updated the ITR utilities and e-filing platform which enabled the taxpayer to file the
return without furnishing the Aadhaar or Enrolment Id.
16. Compensation received by ‘Jackie Shroff’ for withdrawing criminal case

was capital receipt and not taxable:
[ACIT v. Jackie Shroff - [2018] 97 taxmann.com 277 (Mumbai - Trib.)]
The amount received towards compensation could not fit in to the definition of income
as per section 2(24), read with section 4 of the Income-tax Act, 1961.
The Peerless General Finance and Investment Company Ltd vs.

Commissioner of Income Tax A two-judge bench of the Supreme Court
comprising Justice R F Nariman and Justice Sanjiv Khanna held that the
deposits collected by a finance company are capital receipts and not revenue
receipts. The bench also held that the primary liability and onus is on the Dept
to prove that a certain receipt is liable to be taxed.
Read more at: https://www.taxscan.in/top-15-tax-judgments-2019/42231/
ITC Limited vs. Commissioner of Central Excise Justices Arun Mishra, Navin
Sinha and Indira Banerjee held that “the provisions under Section 27 cannot
be invoked in the absence of amendment or modification having been made in
the bill of entry on the basis of which self-assessment has been made. In
other words, the order of self-assessment is required to be followed unless
modified before the claim for refund is entertained under Section 27. The
refund proceedings are in the nature of execution for refunding amount. It is
not assessment or reassessment proceedings at all.” The Court hence upheld
the necessary amendment to the original order of assessment for a refund
claim as has been held by the Priya Blue Industries case and overruled the
view taken by the Delhi High Court in the case of Union of India & Ors. v.
Micromax Informatics Ltd. (2016) 335 ELT 446 (Del).

State of West Bengal & Ors vs. Calcutta Club Ltd The Supreme Court of India
has ruled that services rendered by incorporated clubs to members are
exempted from service tax. The Bench constituting of Justice R.F. Nariman,
Justice Surya Kant and Justice V. Ramasubramanian held while referring to
the Statement of Objects and Reasons that sub-clause (f) to Article 366 of
clause 29-A (which permits the States to impose a tax on the supply of food
and drink) does not include ‘goods’ in their entirety.

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[Justice K.S. Puttaswamy (RETD.) v. Union of India [2018] 97 taxmann.

com 585 (SC)]

2. Discounts offered by Flipkart.com to buyers aren’t intangible assets: ITAT:

3. Gift received by an individual from HUF isn't exempt: ITAT:

7. Domain registration fee received by 'GoDaddy' is taxable as royalty: ITAT:

9. ‘Sachin Tendulkar’ entitled to vacancy allowance as he failed to find tenant

16. Compensation received by ‘Jackie Shroff’ for withdrawing criminal case

The Peerless General Finance and Investment Company Ltd vs.

Read more at: https://www.taxscan.in/top-15-tax-judgments-2019/42231/

Read more at: https://www.taxscan.in/top-15-tax-judgments-2019/42231/

Read more at: https://www.taxscan.in/top-15-tax-judgments-2019/42231/

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