UNIT 1-9 cases ig

Question 1

CIT Vs Shaw Wallace & Co. 6ITC 178(PC)

Answer 1

CIT vs Shaw Wallace & Co. is a pivotal case in Indian tax jurisprudence that provided a foundational understanding of the term “income” under the Income Tax Act.

Key Points of the Case:
Definition of Income: The case delved into the essence of “income” and established that it is a periodical monetary return coming in with some regularity or expected regularity from definite sources.
Nature of Income: The Court emphasized that income is essentially the produce of something and not merely a windfall.
Distinction from Capital: While capital might be the source of income, it’s not synonymous with income. Income is the fruit or crop derived from the capital.
Significance of the Case:
Clarified the concept of income: The judgment provided a clear framework for determining whether a particular receipt is income or capital.
Basis for subsequent cases: This case has been cited extensively in later judgments to interpret the nature of various receipts as income or capital.
Impact on tax planning: Understanding the concept of income as per this case is crucial for effective tax planning.

Question 2

Gopal Saran Narain Singh V. CIT

Answer 2

The assessee, Gopal Saran Narain Singh, owned a landed estate. To settle debts and other financial obligations, he transferred the estate to another party in exchange for:

A lump sum payment
A cash payment for his daughter’s marriage
A life annuity
The dispute arose when the tax authorities included the life annuity payments in the assessee’s taxable income.

The court held that the life annuity payments were indeed taxable as income and not a return of capital.
The court reasoned that:
The annuity was a regular periodic payment based on the assessee’s life expectancy.
It was not a repayment of the capital value of the estate.
The transaction was essentially an exchange of a capital asset (the estate) for, among other things, a life annuity, which is considered income.
Significance of the Case
This case established the principle that life annuities are generally taxable as income in the hands of the recipient in India. It has been a foundational decision in interpreting the nature of income for tax purposes.

Question 3

CIT v. Piara Singh

Answer 3

Bro was crossing border from india to pakistan and got caught w like 65k cash and oonce asked abt it he said he wanna buy gold in pak to smuggle back into india and the Collector of Central Excise confiscated the cash, then The tax dept found out bro had 65K of undisclosed income and wanted to tax that b and then Bro was like dawg u took my money how the eff will i pay the tax, and that it is a loss incurred in his “GOLD SMUGGLING business” LOL and the appellate tribunal and High Court
HELD: that was a claim of deduction and thus did not need to pay tax as it was a loss in course of business

illegal income is taxable but to what extent

q: is loss arising from confiscation of cash an allowed deduction? YES

Question 4

TA Quereshi v CIT

Answer 4

bro was a doctor transporting hella heroin and got caught and raid in his resedential premises and lab showed hella drugs. Contraband was obv seized, and proceedings were initiated against him, he claimed a tax deduction cuz he had a “business loss” and eventually supreme court allowed it because according to letter of law, it was allowed even if it was against the moral spirit. CIT vs Piara Singh was used as precedence.

Question 5

CIT v Vadarajan

Answer 5

Bro bought a car at a way lower price than market value. is that a benefit and can that be taxed. YES it is a benefit and can be taxed.

Question 6

RM PILLAI vs CIT

Answer 6

Following shall be considered agri income=
1. profit recievied from a parternership firm engaged in agri produce or activities - as salary or interest to the partners and that wil be considere dagri income = because a firm is not a legal entity of its own it is a passable entity.

Bacha F Guzdar vs CIT
- tea company dividend recieved is it taxable? YES since company is a legal

Question 7

Raja Benoy Roy Vs CIT

Answer 7

Is sale of forest produce like trees to be considered agri income?

HELD: if the forest is of spontaneuos growth and was not grown through the aid of human skill and labour then it is not agri income. but if there were proprietors that planted fresh trees and ensured the growth of it= it is agri income.
in this case the tax dept did not prove that skill and labour was not used so it was not taxed

Question 8

CIT vs Soundary Nursery Case

Answer 8

Sale of plants grown directly in pots and sale of seeds to be treated as agri income?
bro had a nurserry and stuff and it was HELD:
there was clear labour and skill incoleved and it was agricultural operations such as weeding, watering, nurturing etc were of effort and thus it was agriculture and it doesnt matter if it is not connected to the earths core, the soil in the pots was still an extension of land. further sale of seeds is OBV Agricultural.

Question 9

K Lakshamna co vs CIT

Answer 9

bro was partnership firm that reared silkworms and also grew mulberry leaves for the purpose of it.
COntended that it was fully agri income as the silk cocoons he sold in th emarket were through the worms feeding on mulburry leaves.

HELD: THe growing of mulberry leaves and to that extent only it was to be consudered as agri income. but the production and sale of silk cocoon was not agri income and thus was to be taxed.

Question 10

union list, state list and concurrent list tax

Answer 10

UNION:
1. Tax on income (except agri)
2. customs duty
3. excise duty of tobaccor and petroleum products
4. residual entry

STATE list
1. Tax agri income
2. electricity tax
3. tolls
4. VAt on local sales
5. stamp duty

CONCURRENT
in any clashing case, Central gov will prevail

Question 11

section 2(7) assessee

Answer 11

1. a person by whom any tax, interest, penatly etc is payable under the act,
2. against whom any income tax proceeding has been initiated to assess income/ loss/ refund
3. or an assessee in default

a senior citizen= aged 60-80
very sention citizen= 80 and above

HUF, Company, LLP, Firm, Association of Persons, Body of Individuals, and Artificial juristic person

Question 12

Assessment Year and previous year

Answer 12

Assessment Year= period of 12 months in which income of previous year is to be assessed
from 1st April to 31st March of following year year

Previous year
= financial year immediately preceeding assessment year
in case of a business newly set up in the said financial year, the “previous year” will be the date on which the new business was set up and ends with the said financial year.

generally the income of a Prevous year (1.04.2020-31.03.2021) is assessed in Assessment year (1.04.2021-31.03.2022) following the Previous year,

Question 13

exceptions: when is the previous year income assessed in previous year itself?

Answer 13

1. Bodies (AOP, AJP, BOI) incorporated for a partucalar event or function= section 174A
2. Assessee likely e to transfer his assets to avoid tax= section 175
3. assesssee is leaving india for long duration or permamently= section 174
4. Income of discontinues business = this is at discretion of Assessment officer
5. Shipping business of a Non resident
   6.

Question 14

Income definitiion

Answer 14

Section 2(24)
Income=
1. Profits and gains
2. Dividends
3. Voluntary contributuions
4. value of any perquisite or profit in lieu of salary
5. any allowance granted to assessee to meet his personal expenses or increased cost of living
6. any capital gains under section 45
7. winnings from lotteries or cross word puzzle or betting etc
8.

Question 15

gifts and taxation

Answer 15

gifts typically are capital reciepts but some are taxable such as:
1. gift from employer= taxed under income from salary
- if it is cashe= fully taxable
- if in kinds= taxable if the value is above 5000 Rs

2. Gift from client in course of business fully taxable
3. other gifts due to love and affection
   - taxable if the value is above 50,000 it is taxable under income from other sources. Exception is gift from marriage, relatives etc

Question 16

diversion and application of income

Answer 16

Diversion- it is a process where due to an obligation, income is diverted before it reaches the assessee and it is not taxable. this is typically due to overriding title.

Application of income:
1. spending income after it is earned by assessee and hence it is taxable -

Question 17

Sitaldas Tirathdas vs CIT

Answer 17

Legal Obligation: The assessee, Sitaldas Tirathdas, was legally bound to pay maintenance to his family members under a decree.
Taxability: The tax authorities argued that the entire income earned by the assessee was taxable, including the portion that was subsequently used to pay maintenance.

The present case is one in which the wife and children of the assessee who continued to be members of the family received a portion of the income of the assessee, after the assessee had received the income as his own. The case is one of** application of a portion** of the income to discharge an obligation and not a case in which by an overriding charge the assessee became only a collector of another’s income.

APPLICATION OF INCOME

Question 18

Agricultural Income

Answer 18

1. Income from rent or revenue derived from agri land in india and used for agri purpose
2. Income derived from either agriculture or a process which is used in agricultural business to make the produce fit for market
3. income from farm building required form agricultural operations
   - this is only if it is in rural are and immediate vicinity of agri land and is used as a store or dwelling house

Question 19

what is rural area

Answer 19

an area that is
- within jurisdication of mncplty w poplation of 10K
- withink 2km of local limits of mncplty w population of 10K-1L
- within 6km of local limits of mncplty of 1L to 10L
- within 8km of mncplty population more than 10L

Question 20

rubber tea coffee agri vs non agri split

Answer 20

Rule 7A= Growing and MFG RUbber= Agri 65%, NA= 35%

Rule 7B= Crowing & cure coffee= agri 75%, NA 25%
Grow cure roast and growund coffee = agri 60%, NA 40%

Rule 8, Growing and mnfg TEA= agri 60%, NA 40%

Question 21

process taxed in agri income

Answer 21

process must be necessary to render the product fit and sold in the markatable if necessary then it is still exempted under agricultural income. but if you can sell it in the basic form but you choose to process it then it is TAXABLE because it is a process not ordinarily employed by the agriculture process.

Question 22

principle of mutuality

Answer 22

persons come together for a mutual concert for a common object and contribute to the same by dividing surplus, any specific services or general services provided to a member is not taxable.
it is taxable to outsiders though

Question 23

CIT vs Bankipur Club and chelmsoford club vs CIT

Answer 23

Bankipur= reciepts from members for service provided as usuall privileges provided due to membership= not taxable

chelmsford club vs cit= annual value of the club house not taxable as it runs on mutuality and there a no loss no profit basis for it

Question 24

RESEDENTIAL STATUS

Answer 24

under section 6(1)
a person is a resident in india if in PY he:
A. In india for >= 182 days
B. In india for 60 days in PY AND+ 365 days in 4 PPY combined

if any one of the above is satisfied= resident
if none are satisfied = non resident

RESIDENT NOT ORDINARILY RESIDENT
C. non rseident of india in 9/10 PPY
D. during past 7 years has been in india for only 729 days or LESS

if anyone of these is satisfied then he is RNOR. of they have stayed for more than the mentioned amount in these 2 conditions= ORDINARY RESIDENT

Question 25

ACTIVE BUSINESS OUTSIIIDE INDIA

Answer 25

in order to determine POEM = place of effective management=
we must see
1. More than 50% of asset outside india
2. headcount of total employees 50% and above to be outside india
3. 50% and more of total payroll to employees outside india
4. majority board meetings outside india
5. passive income less than 50% of total income

if ALL of these qualify, only then POEM outside india. if even one of them is majority in india= poem india

passive income= rent, dividend, royalty etc from associate from associated or non associated enterprise
and
trnxns where both seller and buyer are associated enterprise of the company in question

if the BOD all outside india etc are standing aside and the acualy power of management is by resident or holding company in india- POEM = india