Income Tax Rules, 1962

The Commissioner of Income Tax (Mumbai) appealed against the Bombay High Court's dismissal of its challenge to the applicability of Rule 8D, which provides a method for computing expenditure under Section 14A of the Income Tax Act. The issue was whether Rule 8D, introduced by the Income‑Tax (Fifth Amendment) Rules, 200…

The British Bank of Middle East, a non‑resident banking company, provided free cars to its employees for the assessment years 1975‑76 and 1976‑77. The assessing officer disallowed the perquisite value of the cars under Section 40A(5) of the Income‑Tax Act, estimating it at 50% of the actual running expenses. The Commis…

Price Waterhouse Coopers Pvt. Ltd., a large consultancy firm, filed its 2000-01 return of income together with a tax audit report that clearly stated the provision for gratuity was not allowable under section 40A(7). However, the firm mistakenly claimed a deduction for that provision, resulting in an under‑assessment o…

The petitioners, industrial undertakings, challenged the validity of Rule 19A of the Income‑Tax Rules, 1962, which excluded borrowed capital and fixed the computation of "capital employed" on the first day of the previous year for the purpose of the tax exemption under Section 80J of the Income‑Tax Act. They also conte…

The Supreme Court examined whether two US‑incorporated companies, eFunds Corp. and eFunds IT Solutions Inc., had a permanent establishment (PE) in India under the India‑US Double Taxation Avoidance Agreement (DTAA). The Revenue argued that a fixed place of business, a service PE, and an agency PE existed through the In…

The appellant, a female partner in two firms, omitted from her 1964-65 return the shares of profit attributable to her husband and minor daughter, which under s.64(1)(i) and (iii) of the Income Tax Act, 1961 must be included in her total income. The Revenue assessed the omitted amount and imposed a penalty under s.271(…

Madhumilan Syntex Ltd., a public limited company, failed to deposit Tax Deducted at Source (TDS) within the statutory period for AY 1989-90, though it later paid the amount with interest. The Income Tax Officer issued a show‑cause notice under Section 276B read with Section 278B, treating the company and its directors …

The assessee company Mis Indore Construction Co. Pvt. Ltd. was subjected to a block assessment under Section 158BC of the Income Tax Act after a search was conducted at the residence of its director, Rameshwar Maheshwari, under Section 132. The Assessing Officer issued a notice under Section 15880 but did not record an…

Elecon Engineering Co. Ltd., a public limited company, claimed a rebate under Section 84 of the Income‑Tax Act for the assessment year 1964‑65, the second year of its new industrial project. The Assessing Officer initially allowed a rebate of Rs 2,72,372 but on reassessment reduced it to Rs 2,51,222, prompting the comp…

The appellants, who were the intended purchasers of a property, challenged an order of pre‑emptive purchase made by the Income Tax Department under Section 269UD of the Income Tax Act, 1961, on the ground that the order was unreasoned and they were denied a hearing. The property owner did not contest the order, and aft…

The Union of India challenged the constitutional validity of Section 115‑0 of the Income Tax Act, 1961, which imposes an additional 10% tax on dividends declared by domestic companies. Tea companies argued that because up to 60% of their income is agricultural, the dividend is agricultural income and therefore only the…

Thiru Arooran Sugars Ltd., a sugar manufacturer, cultivated sugarcane for its own factory and also bought large quantities of sugarcane from the market. Because part of its income was agricultural and part was business, the company sought to deduct the market value of the sugarcane it used as raw material under Rule 7 …

SAP Labs India Private Limited and several other assessees challenged the Income Tax Officer's assessment on transfer pricing grounds, contending that the arm's length price (ALP) determined by the Income Tax Appellate Tribunal (ITAT) was not final and could be reviewed under Section 260A of the Income Tax Act, 1961. T…

Prima Realty, a partnership firm, entered into a compulsory purchase agreement with the Union of India for a property in Chembur. The Central Government was required to tender the consideration within one month of the purchase order, but the cheque issued to Prima Realty was incorrectly made out to "Prime Realty Ltd" a…

Sirpur Paper Mills made contributions to an approved superannuation fund amounting to Rs 2,70,911 for the current year and Rs 2,14,785 for the preceding five years. The assessing officer allowed a deduction of only 80% of the contributions and spread it over five years, relying on a Central Board of Direct Taxes notifi…

The Commissioner of Income Tax, Dibrugarh appealed against judgments upholding the assessment of Doom Dooma India Ltd., a tea manufacturer, for assessment years 1988-89 to 1991-92. The core issues were the meaning of "depreciation actually allowed" under Section 43(6)(b) of the Income‑Tax Act, 1961 and the method of co…

Tarsem Kumar was intercepted by Customs in 1970, and Rs.93,500 in cash, gold sovereigns and his car were seized and placed under the custody of the Customs department. After the Customs seizure was quashed, the Income Tax Department issued a warrant under section 132 of the Income‑Tax Act to seize the cash from the Cus…

Smt. Kusum Lata Singhal, a tobacco stockist, challenged the seizure of her books and jewellery after a search under Section 132 of the Income Tax Act was deemed unauthorized. Her husband, R.K. Singhal, was simultaneously prosecuted under Section 132(5) and claimed the jewellery belonged to him as undisclosed income. Th…

The appeal concerned whether depreciation for computing book profit under Section 115J of the Income Tax Act should be allowed as per Rule 5 of the Income Tax Rules, 1962, rather than Schedule XIV of the Companies Act, 1956. The assessee, a private limited company, had claimed depreciation under the Rules, but the Asse…

The trustees of H.E.H. The Nizam's Supplemental Family Trust filed a return for AY 1962‑63 in 1964 together with a Section 237 refund claim for tax deducted at source. The Income‑Tax Officer neither granted the refund nor communicated any final decision, but later recorded a note on 10‑Nov‑1965 stating that credit for …

The appellants, employees of Tata Iron & Steel Co., challenged the amendment to Rule 3 of the Income Tax Rules, 1962 which altered the method of valuing perquisites for rent‑free accommodation. They argued that the amendment was arbitrary, violated Article 14 of the Constitution and was inconsistent with Section 17(2)(…

The Revenue appealed a Gujarat High Court order that quashed a pre‑emptive purchase notice issued under Chapter XX‑C of the Income‑Tax Act. The respondents, co‑owners of an immovable property in Ahmedabad, had agreed to sell the whole property for Rs 47 lakhs, which exceeded the Rule 48‑K limit of Rs 25 lakhs for the a…

The case concerned Williamson Financial Services, which earned composite income from growing, manufacturing and exporting tea. The assessee claimed a deduction under s.80HHC of the Income‑Tax Act on the entire tea income before applying the 60:40 apportionment mandated by Rule 8(1) of the Income‑Tax Rules, 1962. The As…

The assessee, Mis Anand Theatres, claimed a 15% depreciation on its theatre building by treating it as "plant" under the Income Tax Act, 1961. The Assessing Officer allowed only the standard 5% rate for buildings, leading to an appeal that was initially allowed by the Commissioner of Income Tax (Appeals) and the Income…

The Supreme Court examined whether interest expenditure incurred by Maxopp Investment Ltd. on shares held to acquire controlling interest, or held as stock‑in‑trade, could be deducted when the dividend income from those shares is exempt under Section 10. The Court held that the dominant‑purpose test is irrelevant; Sect…

The appellant, the Commissioner of Income Tax, challenged the Bombay High Court’s order quashing a notice issued under s.263 of the Income Tax Act against Chowgule & Co. Ltd., an exporter of iron ore whose export proceeds were credited in rupees by an Indian bank. The issue was whether Rule 115 of the Income Tax Rules,…

The assessee, a sugar manufacturer, claimed a higher depreciation rate of 15% on its machinery under Item 3(ii) B(7) of Appendix I to the Income Tax Rules, 1962, arguing that the plant came into contact with corrosive chemicals such as sulphuric and phosphoric acid. The Income Tax Officer rejected the claim, refusing t…

South India Viscose Ltd., a public limited company engaged in rayon yarn and wood pulp manufacturing, claimed extra shift depreciation allowance for AY 1971-72 on the basis of the number of days the entire concern worked double or triple shift, rather than on a per‑machinery basis. The Income Tax Officer limited the al…

The American Hotel & Lodging Association Educational Institute (AH&L) – a US non‑profit educational institution – had enjoyed exemption under Section 10(22) of the Income‑Tax Act until 31‑Mar‑1998. After the Finance Act, 1998 omitted Section 10(22), AH&L applied on 7‑Apr‑1999 for initial approval under the newly insert…

The Supreme Court examined whether income from the sale of green tea leaves by Belgachi Tea Co. Ltd. should be taxed as business income under the Income Tax Act, 1961, or as agricultural income under the Bengal Agricultural Income Tax Act, 1944. The Court held that the mixed income from tea grown and manufactured must …

Two loaders, Sant Raj and Itwari Lal Sherya, were terminated by their employer, a foreign air‑transport company. The Labour Court held the termination to be retrenchment and illegal because the employer had not complied with Section 25F of the Industrial Disputes Act, 1947, and awarded them one year's wages as compensa…

The assessees, Attar Singh and Gurmukh Singh, made cash payments exceeding Rs.10,000 for purchases of stock-in-trade, which the assessing authority disallowed as deductions under Section 40A(3) of the Income Tax Act, 1961 read with Rule 6DD of the Income Tax Rules, 1962. The assessees challenged the validity of Section…

The All India Bank Officers’ Confederation and other bank staff unions challenged Section 17(2)(viii) of the Income Tax Act, 1961 and Rule 3(7)(i) of the Income Tax Rules, 1962, alleging that they amounted to an excessive delegation of the essential legislative function to the Central Board of Direct Taxes and that the…

The case involved M/s Jindal Steel & Power Ltd., which operated captive power plants to supply electricity to its own industrial units at Rs 3.72 per unit while selling surplus power to the State Electricity Board at Rs 2.32 per unit. The assessing officer reduced the deduction claimed under Section 80‑IA, treating Rs …

The appellant, Burmah Shell Oil Storage and Distribution Co. (now Bharat Petroleum), purchased iron cylinders as returnable packages for LPG distribution, costing Rs 1,09,63,754, and claimed no depreciation. In 1961 it sold the cylinders to the refinery for Rs 82,19,947, incurring a loss of Rs 27,43,807, which it sough…

The Supreme Court examined writ petitions filed by Tata Tea Ltd. and other tea companies challenging amendments made by the West Bengal and Kerala legislatures that sought to tax the entire income from the sale of tea grown and manufactured by the assessees. The petitioners argued that only 60% of such income could be …

The assessee, Alcock Ashdown & Co. Ltd., started a new industrial undertaking and purchased plant and machinery, some of which remained uninstalled at the end of the accounting year. It claimed a deduction under Section 84 of the Income‑Tax Act, 1961, on the basis that the cost of these assets constituted "capital empl…

The State Bank of India (SBI) paid Leave Travel Concession (LTC) to its employees for trips that included foreign legs and circuitous routes, and did not deduct tax at source (TDS). The Income Tax Department held SBI liable as an assessee in default under Section 201 of the Income Tax Act for failing to deduct TDS, a v…

The petitioners, a retired employee of Indian Oxygen Ltd. and a pensioners’ society, challenged the scheme of the company’s non‑contributory approved superannuation fund. They argued that improvements made to the fund in 1985 should have been extended to existing pensioners and that the denial of such benefits violated…

Two real‑estate developers (DLF Universal Ltd. and Ansal Properties) entered into agreements for the sale of flats that were still under construction and filed Form 37‑1 before the Income‑Tax Appropriate Authority seeking a no‑objection certificate for registration. The Authority issued notices under Section 269‑UC(4) …

The Supreme Court examined whether an amendment to the Air India Employees Self‑Contributory Superannuation Pension Scheme, made on 3 April 2002, could be applied retrospectively to retirees whose annuity rights had already crystallized. The Court held that the right to receive an annuity and its quantum become fixed a…

Gujarat Urja Vikas Nigam Limited (GUVNL) entered into power purchase agreements (PPAs) with four wind‑energy companies, fixing a tariff of Rs 3.56 per kWh that was applicable only to projects availing accelerated depreciation under the Income‑Tax Act. The respondents later approached the Gujarat Electricity Regulatory …

The Commissioner of Income Tax, Jullundur issued notices under Section 139(2) of the Income Tax Act, 1961 to Ajanta Electricals and its partners, requiring them to file returns within 30 days. The assessees filed their returns and applications for extension of time after the due dates, leading the Income Tax Officer to…

Gujarat Urja Vikas Nigam Ltd (GUVNL) entered into a Power Purchase Agreement (PPA) with EMCO Ltd for a 5 MW solar project, the tariff being fixed by the Gujarat Electricity Regulatory Commission (GERC) in its first tariff order of 29 Jan 2010, which assumed the benefit of accelerated depreciation under Section 32 of th…