Case BriefsSupreme Court

Supreme Court: In an important ruling on taxation law, the bench of Sanjay Kishan Kaul and Hrishikesh Roy*, JJ has held that the proportionate disallowance of interest is not warranted, under Section 14A of Income Tax Act for investments made in tax free bonds/ securities which yield tax free dividend and interest to Assessee Banks in those situations where, interest free own funds available with the Assessee, exceeded their investments.


Whether Section 14A of the Income Tax Act, 1961, enables the Department to make disallowance on expenditure incurred for earning tax free income in cases where assessees like the present appellant, do not maintain separate accounts for the investments and other expenditures incurred for earning the tax-free income?

What does Section 14A state?

In Section 14, the various incomes are classified under Salaries, Income from house property, Profit & Gains of business or profession, Capital Gains & Income from other sources.

The Section 14A relates to expenditure incurred in relation to income which are not includable in Total Income and which are exempted from tax. No taxes are therefore levied on such exempted income. The Section 14A had been incorporated in the Income Tax Act to ensure that expenditure incurred in generating such tax exempted income is not allowed as a deduction while calculating total income for the concerned assessee.

Legislative history

Section 14A was introduced to the Income Tax Act by the Finance Act, 2001 with retrospective effect from 01.04.1962, in aftermath of judgment in the case of Rajasthan State Warehousing Corporation Vs. CIT, (2000) 3 SCC 126. The said Section provided for disallowance of expenditure incurred by the assessee in relation to income, which does not form part of their total income.

“As such if the assessee incurs any expenditure for earning tax free income such as interest paid for funds borrowed, for investment in any business which earns tax free income, the assessee is disentitled to deduction of such interest or other expenditure.”

Although the provision was introduced retrospectively from 01.04.1962, the retrospective effect was neutralized by a proviso later introduced by the Finance Act, 2002 with effect from 11.05.2001 whereunder, re-assessment, rectification of assessment was prohibited for any assessment year, up-to the assessment year 2000-2001, when the proviso was introduced, without making any disallowance under Section 14A. The earlier assessments were therefore permitted to attain finality. As such the disallowance under Section 14A was intended to cover pending assessments and for the assessment years commencing from 2001-2002.


  • In the case at hand, the Court was concerned with disallowances made under Section 14A for assessment years commencing from 2001-2002 onwards or for pending assessments.
  • The assessees are scheduled banks and in course of their banking business, they also engage in the business of investments in bonds, securities and shares which earn the assessees, interests from such securities and bonds as also dividend income on investments in shares of companies and from units of UTI etc. which are tax free.
  • None of the assessee banks amongst the appellants, maintained separate accounts for the investments made in bonds, securities and shares wherefrom the tax-free income is earned so that disallowances could be limited to the actual expenditure incurred by the assessee.
  • In absence of separate accounts for investment which earned tax free income, the Assessing Officer made proportionate disallowance of interest attributable to the funds invested to earn tax free income by referring to the average cost of deposit for the relevant year.
  • The CIT (A) had concurred with the view taken by the Assessing Officer.
  • The ITAT in Assessee’s appeal against CIT(A) considered the absence of separate identifiable funds utilized by assessee for making investments in tax free bonds and shares but found that assessee bank is having indivisible business and considering their nature of business, the investments made in tax free bonds and in shares would therefore be in nature of stock in trade. The ITAT then noticed that assessee bank is having surplus funds and reserves from which investments can be made. Accordingly, it accepted the assessee’s case that investments were not made out of interest or cost bearing funds alone and held that disallowance under Section 14A is not warranted, in absence of clear identity of funds.
  • The decision of the ITAT was reversed by the High Court.


The Supreme Court took note of the fact that the CIT(A) and the High Court had based their decision on the fact that the assessee had not kept their interest free funds in separate account and as such had purchased the bonds/shares from mixed account. This is how a proportionate amount of the interest paid on the borrowings/deposits, was considered to have been incurred to earn the tax-free income on bonds/shares and such proportionate amount was disallowed applying Section 14A of the Act.

It, however, explained that

“In a situation where the assessee has mixed fund (made up partly of interest free funds and partly of interest-bearing funds) and payment is made out of that mixed fund, the investment must be considered to have been made out of the interest free fund. To put it another way, in respect of payment made out of mixed fund, it is the assessee who has such right of appropriation and also the right to assert from what part of the fund a particular investment is made and it may not be permissible for the Revenue to make an estimation of a proportionate figure.”

The Court, hence, held that if investments in securities is made out of common funds and the assessee has available, non-interest-bearing funds larger than the investments made in tax- free securities then in such cases, disallowance under Section 14A cannot be made.

[South Indian Bank v. CIT, CIVIL APPEAL NO. 9606 OF 2011, decided on 09.09.2021]

*Judgment by: Justice Hrishikesh Roy

Know Thy Judge | Justice Hrishikesh Roy

Appearances before the Court by:

For Appellants: Senior Advocates S. Ganesh, S.K. Bagaria, Jehangir Mistri and Joseph Markose,

For Respondent/Revenue: ASG Vikramjit Banerjee and Senior Advocate Arijit Prasad

Case BriefsHigh Courts

Delhi High Court: Subramonium Prasad, J., while addressing a revision petition in regard to maintenance of wife, held that

Magazine covers are not sufficient evidence to demonstrate that the respondent /wife can sustain herself.

Instant revision petition is against the Family Court’s decision directing the husband to pay maintenance at the rate of Rs 17,000 per month to the wife.

The daughter of husband and wife in the present matter passed away in the year 2010 and at present, they have two major adult sons who are well settled.

Parties have been living separately since the year 2012. Wife filed the petition under Section 125 CrPC for grant of maintenance stating that she was treated with cruelty and was thrown out of the house in the year 2012 and she was unable to sustain herself, hence required maintenance from the husband.

It was stated that the husband was earning an income of Rs 50,000 from the post of Head Constable and also had some agricultural land from which he was earning an income.

Wife claimed Rs 25,000 per month as maintenance.

Husband submitted that the wife was a working lady earning handsomely. Adding to this he stated that she participates in Jagrans and does TV Serials and was in a position to take care of herself. Both the parties filed their respective affidavits of income.

Counsel for the petitioner submitted that as per the Statement filed by the wife under Section 165 of the Evidence Act, she herself stated that she was doing modelling and it was for her to establish that income earned by her was so less that she couldn’t maintain herself.

Petitioners counsel also presented certain magazine covers and newspaper articles to establish that the respondent was employed and capable of maintaining herself.

Bench stated that law laid down by Supreme Court decision in Rajnesh v. Neha, (2021) 2 SCC 324, indicates that proceedings under Section 125 CrPC have been enacted to remedy/reduce the financial suffering of a lady, who was forced to leave her matrimonial house, so that some arrangements could be made to enable her to sustain herself.

It is the duty of the husband to maintain his wife and to provide financial support to her and their children. A husband cannot avoid his obligation to maintain his wife and children except if any legally permissibly ground is contained in the statutes. 

Court noted that in the present matter, petitioner relied only on the statement given by the respondent/wife under Section 165 Indian Evidence Act. In the said statement she clearly mentioned her employment adding that her income was very low on which her sustenance was difficult.

In view of the above position, the onus to show how much the respondent/wife was earning shifts on the petitioner to show that it was enough for her sustenance. But petitioner failed to bring any evidence.

Court reiterated the Supreme Court’s position that newspaper clippings, etc. are not evidence.

 It was noted that the petitioner was working as an ASI and both the children were well settled, and he was not under any obligation to maintain his children but the wife.

On asking about divorce, it was stated that the petitioner’s children did not want him to take divorce from his wife, hence it becomes the moral and legal obligation of the husband to maintain his wife.

Bench while dismissing the revision petition held that no material was placed on record to show that respondent/wife was able to sustain herself. [Jaiveer Singh v. Sunita Chaudhary, 2021 SCC OnLine Del 1488, decided on 05-04-2021]

Advocates before the Court:

For the Petitioner: Neerad Pandey, Advocate

For the Respondent: D.K. Sharma, Advocate

Case BriefsHigh Courts

Calcutta High Court: Shampa Sarkar, J., expressed that Hindu Marriage Act is a gender-neutral provision and further expressed the scope of maintenance.

In the present revisional application, the issue was with respect to the wife being aggrieved with the quantum of maintenance.

Wife had filed an application under Section 24 of the Hindu Marriage Act and maintenance pendente lite @Rs 30,000 per month and Rs 75,000 as litigation cost was prayed.

Wife was aggrieved that the lower court allowed 1/5th of the husband’s income as maintenance pendente lite and considering the husband’s income as Rs 60,000, Court proceeded to grant an amount of Rs 12,000 as maintenance.

Hindu Marriage Act provides for the rights, liabilities and obligations arising from a marriage between two Hindus.

Sections 24 and 25 make provisions for providing maintenance to a party who has no independent income sufficient for his or her support and necessary expenses. This is a gender-neutral provision, where either the wife or the husband may claim maintenance. The pre-requisite is that the applicant did not have independent income which is sufficient for his or her support during the pendency of the lis.

Justice Krishna Iyer’s decision of Supreme Court in Captain Ramesh Chander Kaushal v. Veena Kaushal, (1978) 4 SCC 70 was referred to regarding the object of maintenance laws.

Supreme Court’s decision in Rajnesh v. Neha, (2021) 2 SCC 324 discussed the criteria for determining the quantum of maintenance and the relevant factors to be taken into consideration in order to quantify the amount. The object behind granting maintenance is to ensure that the dependent spouse was not reduced to destitution or vagrancy on account of failure of the marriage and not as a punishment to the other spouse.

In the instant case, wife’s potential to earn may exist as she had a post-graduate degree but as per the evidence, it appeared that she had been out of employment Since May, 2014. Records revealed that the husband had been appointed at a salary of Rs 23,000. It was expected that in the intervening period, husband’s income must have gone up by at least 3 times.

Supreme Court noted that some guesswork could not be ruled out estimating the income when the sources or correct sources are not disclosed. Hence, Trial Court rounded the figure at Rs 60,000 as the expected income of the husband at present.

Bench considered it prudent to award Rs 20,000 to the wife as maintenance pendente lite.

Bench dismissed Mr Chatterjee’s contention that wife should be directed to disclose her present income and file the affidavit of assets.

Further, the Court stated that in the absence of any evidence on the part of the husband, this Court is of the opinion that taking into consideration the criteria as laid down by several judicial precedents on the subject from time to time, Rs 20,000/- as maintenance pendete lite per month is just and proper.

High Court modified the impugned order to the above extent. It was directed that the current maintenance shall be paid with effect from April, 2021 within 20th of the month.  Thereafter on and from May 2021 the maintenance shall be paid within 15th of every month as directed by lower court.[Upanita Das v. Arunava Das, C.O. No. 4386 of 2019, decided on 09-04-2021]

Advocates before the Court:

For the Petitioner: Mr Srijib Chakraborty and Ms Sudeshna Basu Thakur

For the Opposite Party: Mr Aniruddha Chatterjee and Mr Sachit Talukdar

Case BriefsHigh Courts

Karnataka High Court: A Division Bench of Alok Aradhe and H. T. Narendra Prasad JJ., allowed the appeal and quashed the impugned order due to point of law favouring the assessee and not the revenue.

The facts of the case are such that the assessee is a software engineer who was employed with Aerospace Systems Pvt. Ltd., a company registered in India between the period from 1995-1998 and was deputed to SiRF Technology Inc., U.S. in the year 1995 by Aerospace Systems Pvt. Ltd., India as an independent consultant and worked in that capacity 1995-1998 and later as an employee of SiRF USA from 2001-2004. While on deputation to SiRF USA, the assessee was granted stock option by SiRF USA whereunder the assessee was given right to purchase 30,000 shares of SiRF USA at an exercise price of US $0.08 per share and he also had an option of cashless exercise of stock options. The assessee in assessment year 2006- 07 exercised his right under stock option plan by way of cashless exercise and received net consideration of US $ 283,606 and offered the gain as a long term capital gain as the stock options were held nearly for ten years. The assessee also claimed deduction under Section 54 F of the Act. The Assessing Officer vide order dated 26-12-2018 and as per Section 143 (3) of the Income Tax Act, 1961 i.e IT Act artificially split the transaction into two and brought to tax the difference between the market value of shares on the date of exercise and the exercise price as ‘income from salary’ and the difference between the sale price of shares and market value of shares on the date of exercise of ‘income from short term capital gains’. The claim for deduction under Section 54 F of IT Act was disallowed.  The Commissioner of Income Tax (Appeals) was approached who dismissed the appeal on merits which further went in appeal before Income Tax Appellate Tribunal which was thereby dismissed. Aggrieved by the said orders, instant appeal was filed before present High Court.

Counsel for the appellants submitted that the finding recorded by the tribunal that assesee was an employee of SiRF USA is perverse and therefore, the finding of the tribunal that consideration received on transfer of stock options is in the nature of income from salaries cannot be sustained in the eye of law. It was further submitted that stock option was granted to asssessee when he was an independent consultant with SiRF USA and therefore, cannot be treated to be an employee for the purposes of Sections 15 to 17 of the IT Act.

Counsel for the respondents submitted that as per clause 2(f) of the stock plan even a consultant who performs services for the company or a subsidiary shall be treated as an employee. Therefore, the assessee shall be treated as an employee of SiRF USA and amount received as income from salary.

The Court relied on judgment Dhun Dadabhoy Kapadia v. CIT, (1967) 63 ITR 651 (SC) and on perusing clause 2 (f) and 11 of the stock plan as well as the communication dated 03-08-2006 sent by the SiRF USA to the assessee, the Court observed that the assessee was an independent consultant to SiRF USA and was not an employee of SiRF USA at the relevant time.

The Court thus held that, there was no relationship of employer and employee between the SiRF USA and the assessee and therefore, the finding recorded between the SiRF USA and the assessee and therefore, the finding recorded by the tribunal that the income from the exercise of stock option has to be treated as income from salaries is perverse as it is trite law that unless the relationship of employer and employee exists, the income cannot be treated as salary.

In view of the above, impugned order was quashed and appeal was allowed.[Chittharanjan A. Dasannacharya v.  Commissioner of Income Tax, I.T.A. No. 153 of 2014, decided on 23-10-2020]

Arunima Bose, Editorial Assistant has put this story together

Hot Off The PressNews

Finance Bill, 2020 has proposed that an Indian citizen shall be deemed to be resident in India, if he is not liable to be taxed in any country or jurisdiction. This is an anti-abuse provision since it is noticed that some Indian citizens shift their stay in low or no tax jurisdiction to avoid payment of tax in India.

            The new provision is not intended to include in tax net those Indian citizens who are bonafide workers in other countries. In some section of the media, the new provision is being interpreted to create an impression that those Indians who are bonafide workers in other countries, including in the Middle East, and who are not liable to tax in these countries will be taxed in India on the income that they have earned there. This interpretation is not correct.

  In order to avoid any misinterpretation, it is clarified that in case of an Indian citizen who becomes deemed resident of India under this proposed provision, income earned outside India by him shall not be taxed in India unless it is derived from an Indian business or profession. Necessary clarification, if required, shall be incorporated in the relevant provision of the law.

Ministry Finance

[Press Release dt. 02-02-2020]

[Source: PIB]

Legislation UpdatesNotifications

In the context of Alternate Investment Funds (AIFs), references have been made to the Central Board of Direct Taxes (the Board) seeking clarity regarding taxability of income from investments made by the non-resident investor through these AIFs, outside India (off-shore investment).

The incidence of tax arising from the off-shore investment made by a non-resident investor through the AIFs would depend on determination of the status of income of non-resident investor as per provisions of Section 5(2) of the Income-Tax Act, 1961 (Act). As per Section 5(2) of the Act, the income of a person who is non-resident, is liable to be taxed in India if it is received or is deemed to be received in India in such year by or on behalf of such person; or accrues or arises or is deemed to accrue or arise to him in India.

Chapter XII-FB contains special provisions relating to tax on the income of investment funds and income received from such funds. Under Chapter XII-FB, Section 115 UB of the Act (‘Tax on income of investment fund and its unit holders‘) is the applicable provision to determine the income and tax-liability of investment funds & their investors. In this context, ‘Investment fund” is defined in Explanation 1 of Chapter XII-FB to mean any fund established or incorporated in India in the form of a trust or a company or a limited liability partnership or a body corporate which has been granted a certificate of registration as a Category I or Category II Alternative Investment Fund and is regulated under the Securities and Exchange Board of India (Alternative Investment Fund) Regulations, 2012, made under the Securities and Exchange Board of India Act, 1992 (15 of 1992). Thus, provisions of Section 115 UB apply only to Category I or Category II AIFs, as defined in SEBIs regulations.

By an overriding effect over other provisions of the Act, sub-section (1) of Section 115 UB of the Act provides that any income accruing or arising to, or received by, a person, being a unit holder of an investment fund, out of investments made in the investment fund, shall be chargeable to income-tax in the same manner as If it were the income accruing or arising, to or received by, such person had the investments made by the investment fund been made directly by him and not through the AIF.

The matter has been considered by the Board. As Section 115 UB(I) of the Act provides that the investments made by Category I or Category II AIFs are deemed to have been made by the investor directly, it is hereby clarified that any income in the hands of the non-resident investor from off-shore investments routed through the Category I or Category II AIF, being a deemed direct investment outside India by the non-resident investor, is not taxable in India under Section 5(2) of the Act.

It is further clarified that loss arising from the off-shore investment relating to a non-resident investor, being an exempt loss, shall not be allowed to be set-off or carried forward and set off against the income of the Category I or Category II AIF.

[Circular dt. 03-07-2019]

Central Board of Direct Taxes

Ministry of Finance

Case BriefsHigh Courts

Karnataka High Court: H.T. Narendra Prasad, J. dismissed the appeal filed by an Insurance Company against the order passed by Motor Accident Claims Tribunal (MACT).

In the instant case, Jyothi and Nagaraj were traveling on a motorcycle and a lorry came in a rash and negligent manner and dashed against the motorcycle. As a result, Jyothi fell on the road and the lorry ran over her and she died while shifting her to the hospital. Hence, the parents of the deceased filed the claim petition before the Tribunal. The Tribunal granted compensation of Rs 6,96,000 with interest at 6 percent per annum. Being aggrieved by the same, the Insurance Company filed the present appeal.

The learned counsel for the petitioner, Lingaraj H S submitted that the Tribunal had erred in taking the multiplier based on the age of the deceased instead of based on the age of the mother. Further, the Tribunal was unjustified in adding 50 percent of the income of the deceased towards loss of future prospects while calculating the “loss of dependency”. Further, the compensation of Rs 25,000 each awarded to the claimants in the category of “loss of love and affection” was on the higher side. Therefore, the counsel for the petitioner prayed for allowing the appeal by reducing the compensation.

The learned counsel for the claimants, Nataraj Ballal relied on the law laid down by the Supreme Court in the case of National Insurance Co. Ltd v. Pranay Sethi, 2017 SCC OnLine SC 1270, in which it was held that in case the deceased was having a permanent job and was below the age of 40 years, an addition of 50 percent of the established income should be made. Further, as per the said decision, while calculating the “loss of dependency”, the age of the deceased had to be taken into consideration. Hence, the counsel for the claimants submitted that there was no error in the finding of the Tribunal. Therefore, he prayed for dismissal of the appeal.

The Court relied on the decision of Supreme Court in the case of Pranay Sethi, and held that multiplier had to be applied based on the age of the deceased and not based on the age of the mother of the deceased. Moreover, the Court also relied on the case of Magma General Insurance Co. Ltd v. Nanu Ram, 2018 SCC OnLine SC 1546 in which it was held that the claimants were entitled to compensation under the head “loss of love and affection”. Therefore, the Insurance Company has erred in taking the multiplier based on the age of deceased instead of based on the age of the mother and that the Tribunal was unjustified in adding 50 percent of the income of the deceased towards loss of future prospects while calculating the “loss of dependency”. Hence, the appeal could not be accepted and was unsustainable.

The appeal was dismissed accordingly.[Oriental Insurance Co. Ltd. v. Rathna, 2019 SCC OnLine Kar 566, decided on 29-05-2019]

Case BriefsHigh Courts

Gauhati High Court: Hitesh Kumar Sarma, J. dismissed a revision petition filed against the order of the family court whereby the petitioner was directed to pay a monthly sum of Rs 2000 each to his wife and child towards their maintenance under Section 125 CrPC.

The wife had left petitioner’s home due to alleged torture inflicted upon her and thereafter she filed an application under Section 125 claiming maintenance which was allowed by the family court in the terms above. The petitioner was a Government Servant earning a monthly salary of about Rs 22,000.

The High Court noted that while the wife was staying at her parental house, she was not provided maintenance which amounted to negligence in the sense that the petitioner was bound to maintain the wife and the child, which is a settled legal position. It was also noted that the allegation that the wife was working in a school and earning money could not be established by the petitioner and no specific evidence to that effect was laid by him. It was observed: “In the absence of any specific evidence, it cannot be held that the wife/respondent was earning sufficient amount to maintain herself. That being so, in the absence of any specific evidence as to the income of the respondent/wife, the petitioner/husband is bound to maintain his wife and the child fathered by him.”

In that view of the matter, the Court did not find any reason to interfere with the order of the family court. The revision petition was accordingly dismissed. [Jotirmoy Kalita v. Jonamoni Kalita, 2019 SCC OnLine Gau 2245, Order dated 07-05-2019]

Case BriefsHigh Courts

Delhi High Court: A Bench of Jyoti Singh and G.S. Sistani, JJ. dismissed an appeal filed against the order of the family court rejecting the appellant-wife’s application for grant of maintenance pendente lite under Section 24 of the Hindu Marriage Act, 1951.

The parties married to each-other in June 2012 and had been living separately since September of that year. The wife was living in Gurgaon and the husband was in Singapore. The husband sought a decree of nullity of marriage under Section 12(1)(a) and (c), pending which the wife filed the application under Section 24 claiming pendente lite maintenance of Rs 2.50 lakhs per month along with litigation expenses. The same was rejected by the family court. Aggrieved thereby, the wife filed the present appeal.

The High Court noted that the wife was well educated and earning a monthly salary of around Rs 1.25 lakhs. On the other hand, the husband was also at a senior position in a reputed company in Singapore and was earning about Rs 13 lakhs per month. Noting all the facts and discussing the law on the subject, the Court was of the view that the impugned order does not need interference. Observing that the cost of living as per the standards of the country where the husband is employed is to be considered, the Court stated, “We cannot agree with the contention of the appellant that merely because the respondent is earning in ‘dollars’ she is entitled to the maintenance claimed by converting his salary in dollars into Indian rupees. We agree with the respondent that his expenditure being in dollars, the salary being in dollars is a fact which cannot be overemphasized.”

Being satisfied that wife’s earnings were sufficient to maintain herself, it was stated, “The provisions of this section (Section 24) are not meant to equalize the income of the wife with that of the husband but are only to see that when divorce or other matrimonial proceedings are filed, either of the party should not suffer because of paucity of source of income and the maintenance is then granted to tie over the litigation expenses and to provide a comfortable life to the spouse. Where, however, both the spouses are earning and have a good salary, merely because there is some salary difference cannot be a reason for seeing maintenance.”

In light of the above discussion, the wife’s appeal was dismissed as being devoid of merits.[KN v. RG, 2019 SCC OnLine Del 7704, dated 12-02-2019]

Case BriefsSupreme Court

Supreme Court: The 3-judge bench of Dr. AK Sikri, SA Nazeer and MR Shah, JJ decided an issue relating to interpretation of Section 80HH of the Income Tax Act, 1961 referred to it by a division bench in 2014 and that the decision of the Court in Motilal Pesticides (I) Pvt. Ltd. vs. Commissioner of Income Tax, Delhi-II, (2000) 9 SCC 63, was erroneous.

The issue before the Court was”

“while computing the deduction whether it is to be available out of ‘income’ as computed under the Income Tax Act, 1961 or out of ‘profits and gains’, without deducting therefrom ‘depreciation’ and ‘investment allowance’.”

The Court discussed the scheme of the Act at length and said:

“Reading of Section 80HH along with Section 80A would clearly signify that such a deduction has to be of gross profits and gains, i.e., before computing the income as specified in Sections 30 to 43D of the Act.”

It said that the scheme itself draws distinction between the concept ‘income’ on the one hand and ‘profits and gains’ on the other hand. Below is the point-wise summary of how the Court explained the scheme of the Act in order to reach the abovementioned conclusion:

  • Insofar as computation of income under the head ‘profits and gains’ from business or profession is concerned, Section 28 of the Act mentions various kinds of incomes which are chargeable under this head.
  • Section 29 mentions the method of arriving at ‘income’ which is to be computed in accordance with the provisions contained in Sections 30-43D of the Act.
  • Sections 30-43D contain deductions of various kinds which are in the nature of expenditure or the like nature.
  • After providing the deductions admissible in these provisions, one arrives at the figure of net profits which would become the net income under the head ‘profits and gains of business or profession’.
  • Under Chapter VI-A of the Act certain deductions are given by way of incentives. Assessees may earn these deductions on fulfilling the eligibility conditions contained therein, even when they are not in the nature of any expenditure incurred by the assessee.
  • Section 80A of the Act provides that in computing the total income of assessee, there shall be allowed from his gross total income, in accordance with the subject of the provisions of this Chapter, the deductions specified in Sections 80C to 80U.
  • Section 80A itself uses the expression ‘from his gross total income’ as it states that deduction is to be allowed to an assessee ‘from his gross total income’.
  • Section 80HH specifically mentions that deduction @ 20% of ‘profits and gains’.

The Court, hence, overruled the verdict in Motilal Pesticides as it missed the marked difference in the terms ‘Income’ and ‘Gross Total Income’

[Vijay Industries v. Commissioner of Income Tax, 2019 SCC OnLine SC 299, decided on 01.03.2019]

Legislation UpdatesRules & Regulations

S.O. 1023(E)—In the exercise of the powers conferred by Section 169 read with Section 33 of the Representation of People Act, 1951 (43 of 1951), the Central Government after consulting the Election Commission hereby makes the following rules further to amend the Conduct of Elections Rules, 1961, namely:––

1. (1) These rules may be called the Conduct of Elections (Amendment) Rules, 2019.
(2) They shall come into force on the date of their publication in the Official Gazette.

2. In the Conduct of Elections Rules, 1961 in FORM 26,––
I. in PART A—
(i) for paragraph (4) and the Table thereunder, the following shall be substituted, namely:—
“(4) Details of Permanent Account Number (PAN) and status of filing of income tax return:

[Refer link for detailed notification: Notification]

Ministry of Law and Justice

Note: In accordance to the amended Form 26, five years’ returns are to be furnished, along with details of offshore assets. Along with this,  it would also require details under various heads of the candidate’s spouse, members of the Hindu Undivided Family (if the candidate is a ‘karta’ or coparcener) and dependents.

Case BriefsHigh Courts

Delhi High Court: A Division Bench comprising of G.S. Sistani and Jyoti Singh, JJ. dismissed an appeal filed against the order of the Family Judge whereby the appellant-husband was directed to pay a sum of Rs 15, 000 per month as maintenance to his wife.

The respondent-wife had filed an application under Section 24 of the Hindu Marriage Act, 1955 seeking maintenance from her husband. The Family Judge decided the quantum of maintenance as above to be paid by the husband to the wife. Aggrieved thereby, the husband filed the instant appeal. It was contended by the appellant that the Family Court did not properly appraise the facts and documents as submitted by him. It was averred that he was barely earning Rs 10,000 per month and therefore the Family Judge was not right in awarding the abovementioned amount as maintenance.

The High Court perused the record and was of the view that the pleas taken by the appellant about his income were not believable. Similarly, for his plea regarding the salary earned by the respondent was not supported by evidence. The Court referred to Jasbir Kaur v. District Judge, Dehradun, (1997) 7 SCC 7 wherein it was held that “considering the diverse claims made by the parties one inflating the income and the other suppressing, an element of conjecture and guess work does enter for arriving at the income of the husband. It cannot be done by any mathematical precision.” It was observed that in family matters, there is a tendency of spouses no to disclose their correct and true income; the present case was no different. In such view of the matter, it was held that the quantum of maintenance as calculated by the Family Judge suffered from no infirmity. Therefore, the appeal was dismissed. [Bhuvneneshwar Sachdeva v. Kavita Sachdeva,2018 SCC OnLine Del 12415,dated 29-10-2018]

Case BriefsHigh Courts

Delhi High Court: A Division Bench comprising of Sangita Dhingra Sehgal and G.S. Sistani, JJ. dismissed an appeal filed by the husband against the award of maintenance pendente lite awarded to the wife by the family court.

The instant appeal was filed by the husband under Section 19 of the Family Courts Act, 1984 assailing  the order passed by the family court where the appellant was directed to pay Rs 4500 per month as maintenance to the respondent-wife under Section 24 of the Hindu Marriage Act (maintenance pendente lite)  from the date of filing of the application. The husband submitted that as he was a permanent resident of U.P., the Minimum Wages Act of Delhi would not be applicable to him.

The High Court perused Section 24 and noted that it empowers the Court to award maintenance pendente lite and litigation expenses to a party who has no independent source of income sufficient for his/her support during the pendency of proceedings. Reference was made to Jasbir Kaur Sehgal v. District Judge, (1997) 7 SCC 7. The Court observed that in the present case, the husband failed to produce any documentary proof with regard to his employment status and also his actual income; and by not disclosing his source of income the husband was trying to defeat the legitimate right of the wife to claim maintenance. Furthermore, the appellant could not be allowed to take benefit of non-disclosure of his income despite being bound in law to disclose it. Thus, the plea of the husband that Minimum Wages Act of U.P. is applicable to him doesn’t come to his rescue. The appeal was accordingly dismissed. [Vijay Kushwaha v. Chanchal,2018 SCC OnLine Del 10828, dated 24-07-2018]

Case BriefsSupreme Court

Supreme Court: In a case where the assessment order for actor Amitabh Bachchan’s income in the year 2001-2002 was in question, the bench of Ranjan Gogoi and P.C. Pant, JJ held that the Commissioner of Income Tax (CIT) is empowered to revise the said order under Section 263 of the Income Tax Act, 1961 as making a claim which would prima facie disclose that the expenses in respect of which deduction has been claimed has been incurred and thereafter abandoning/withdrawing the same gives rise to the necessity of further enquiry in the interest of the Revenue.

The assessee, in his earlier stand had stated that the expenses incurred were for security purposes and that payments have been made out of cash balances available and later, by a re-revised return, he withdrew his claims, acting upon which, the Assessing Officer abandoned the enquiry.

Explaining the law on revisional power of CIT, the Court said that There can be no doubt that so long as the view taken by the Assessing Officer is a possible view the same ought not to be interfered with by the Commissioner under Section 263 of the Act merely on the ground that there is another possible view of the matter. Permitting exercise of revisional power in a situation where two views are possible would really amount to conferring some kind of an appellate power in the revisional authority which is a course of action that must be desisted from. However, the Court said that the present case was an exceptional one and required a revision as the matter had not been investigated by the Assessing Officer and that the notice issued under Section 69-C of the Act could not have been simply dropped on the ground that the claim has been withdrawn. [Commissioner of Income Tax v. Amitabh Bachchan, 2016 SCC OnLine SC 484, decided on 11.05.2016]