January 2025

In this landmark Supreme Court judgment, the Court definitively settled that share premiums received by a company before the Companies Act 1956 constitute ‘accumulated profits’ for purposes of dividend taxation under Section 2(6A) of the Income Tax Act 1922. The Court rejected the assessee’s contention that share premiums were capital receipts not available for dividend distribution, relying on established English company law principles that recognized share premiums as distributable profits before statutory restrictions. The judgment clarifies that Section 78 of Companies Act 1956, which created the share premium account mechanism, doesn’t retrospectively alter the tax character of dividends declared from pre-1956 share premiums. This decision reinforces the principle that taxability of dividends depends on the statutory definition at the time of distribution, not subsequent legislative changes to company law.

In this landmark judgment, the Income Tax Appellate Tribunal, Amritsar Bench, overturned the CIT(E)’s rejection of a charitable trust’s registration under section 12AA. The Tribunal criticized the CIT(E) for relying on unverified surplus calculations and incorrectly linking the application to pending proceedings under section 10(23C). It reaffirmed that charitable trusts can seek registration under section 12AA irrespective of other exemption claims, provided their activities are genuine and charitable. The case is remanded for a fresh, evidence-based assessment, highlighting the importance of procedural fairness and accurate factual analysis in tax exemption matters.

In Deepak Dalela vs. ITO, the ITAT Jaipur Bench upheld the rejection of books of account under section 145(3) and a trading addition for unverifiable purchases. The assessee, a gem trader, claimed purchases from 14 parties totaling Rs. 38.81 lakhs, but the Investigation Wing found these parties issued bogus bills and were untraceable. The assessee failed to produce the parties despite summons, and the Tribunal ruled that the onus to prove genuineness rests solely on the assessee. Providing bills and cheque payments was insufficient; verifiability through party production was essential. The decision reinforces that in cases of suspected bogus purchases, the assessee must substantiate transactions with credible evidence, and the AO can invoke section 145(3) to estimate income. This judgment is critical for professionals dealing with verification of third-party transactions and the implications of non-cooperation in tax assessments.

In this landmark judgment, the Supreme Court of India reinforced the application of natural justice in disciplinary proceedings under the Chartered Accountants Act, 1949. The Court ruled that members accused of professional misconduct are entitled to a hearing before the Institute’s Council when it considers the Disciplinary Committee’s report, as the Council’s finding of guilt is a critical, determinative step with severe consequences like removal from practice. Additionally, the Court held that the participation of Disciplinary Committee members in Council deliberations vitiates the proceedings due to inherent bias, ensuring procedural fairness and impartiality. This decision underscores that statutory silence does not negate fundamental justice principles, impacting professional disciplinary frameworks across sectors.

This Madhya Pradesh High Court judgment addresses key estate duty issues in a Hindu Undivided Family context. The Court significantly applied Section 14 of the Hindu Succession Act 1956 retrospectively to recognize the wife’s 1/6th share in joint family property, reducing the estate duty base. It clarified that a wife’s right to share vests absolutely under the 1956 Act, even without formal partition. The Court also upheld the exclusion of gifted amounts from estate duty under Section 10, finding no retention of benefit by the donor. The decision illustrates the transformative impact of the Hindu Succession Act on traditional Hindu law concepts in taxation matters.

In a landmark ruling on corporate control under tax law, the Supreme Court delineated the essential distinction between shareholding control and mere voting agency. The case centered on whether Jeewanlal Ltd.’s directors, through one director acting as voting representative for a majority shareholder (Aluminium Ltd.), could claim ‘controlling interest’ under the Excess Profits Tax Act, 1940, to avail a higher profit percentage. Overturning the High Court, the Court held that ‘controlling interest’ necessitates registered or beneficial ownership of majority shares, not just delegated voting power. This decision reinforces the principle that tax statutes must be interpreted strictly regarding ownership and control, safeguarding against artificial claims of director control based on agency relationships.

In this landmark Supreme Court judgment on Indian income tax, the Court ruled on the priority of set-off between unabsorbed depreciation and unabsorbed investment allowance. The assessee, Seshasayee Paper & Boards Ltd., argued for the right to choose investment allowance set-off over depreciation, but the Court upheld the Revenue’s position. It emphasized that under Section 32(2), unabsorbed depreciation is deemed part of current depreciation by legal fiction, creating an indivisible claim. Therefore, statutory priority (as per CBDT Circular) requires unabsorbed depreciation to be set off first, overriding the assessee’s preference. This decision clarifies that the deeming provision in Section 32(2) operates automatically when current depreciation is claimed, ensuring consistent application of tax benefits.

In a significant ruling on search assessments, the Jodhpur ITAT overturned additions made under Sections 69 and 69A, emphasizing that retracted statements during search operations require corroborative evidence. The Tribunal clarified that income duly declared and explained in books of accounts cannot be treated as unexplained money or investment. It reinforced the principle that confessions under duress are not reliable, and assessments must be based on tangible evidence. The decision provides relief to taxpayers facing additions based solely on uncorroborated statements, aligning with CBDT directives and established jurisprudence.