Yr | | my” {QGA UB. Sl Paper of Det Unity PRINCIPLES OF TAXATIO) (2019) N Law 1 Accning the ditonay, the on Sana ening ote nn Mg ‘comes in’ vever realization of o ‘sem hugh inca a wean Dnt of scion 280 othe Tome Tar gain ee Soin Caatt (Din th he po ied ‘which maintenance ar to ge Se mstances, ‘Sots dee my tence ele he Seo came ofan nee NE whe comp Ans 10) The question a assed os pe se anni of dean edn 82 othe ia 5.2) of the Act defines income a ‘econ incades €) profits nd gains (i dividend (8) Volunarty contributions rec holy or pay of carlable or regi Sut cm 3 ano en 2 sant it f dco in een ve gael anya Narayan Singh v-CIT 193) gh seed to hm anche Ee tear vi at saan Naraian Singh v. CIT (935) se rs ai ee ace aaa rane peal exemple. ‘he Yomibay High Cour through Tendular J, afmed that he oon income” shoud reeive the most Hberal censtructon. He held Minder "Acceding to the dictionary, income means "thing tht ‘Sin. sch side meaning was put upon the word wcome™ for becuse of any parca legslaive practi... bu bec such tes the normal concept and connotation of the ordinary English "Now! income’. Is natal meaning embraces ay prot of gain ‘hich is aetualy received. This is orsonance with he observations ocd Wright to which reference he aleady been ade. the “ror shoul be geen is widest contain n view of the fc that IVescurs in a lghltve ead cofering egiative power.” \shagwan Das Jain Union of Ida 560 tn ths case here was a dane 02 poison in the I Act wih sited that where the property coms of Rouse in ‘ccupation of the owner fr the papas of his own residence the Shoal wae of such house shal tbe determined i the sme ‘nave a the property had Bean kt and farther be reduced by efit t tne enue so determined or Rs 1800 whichever kes. is amano a hase rg Ha Dt wa tring ay ronetary bene by sesiig is own Rouse, and heefrs, n0 sae ited en um en te ound Bat be i ering income i can Be ewe ore coed hat the word icome means ‘eae of monetary eet an ta the absence of ay such ‘elation of pene cu tbe bel ae Wo py ta for thot incomei rcrtecrtecreerets cere ett rte nag of ton a 2) s (A LL Sted pe of et Unerty -v.GR Kathikeyan (1999) » xr person before being earned ascessee, itis Or cca BP eve Rll} ved the ete iy at 2 Fie lands ol te ence? me ee ee estore cuca ene psted tha even te not tana wind ie tone te te ry Re 20807 pe mone hee Ruseiitfvatsl here othcome Venice |S a bang wt employe of Cregc han poy eee wad “west wnat cs od ws oo00/- out of his salary and disburse the remaining salary to epee Oe ee ale ek Re mBince, the amount of Rs. 20000- isan obligation of A to pay meee Bene fa |r Sty ran out ois came, tnd anor wad ta Of aver came Samana Yu fl ad an overriding title, it included in A'S total income and thus crewed cone win be meaning of Sacer ttm | MSDS ade Serer ae moter ecleAmed pra ie or psi sort of regulating oF expected regularity fee 0m in a newspaper on the condition that the remuneration will be sources. However, recurring nature is not sv tiie shared by them equally. After publication, A recieves the whole ‘secessty in order for an item to be considered, eh remuneration of Rs. 2.000/-half of which is later paid by A to B. The ‘for the purposes of income tax. ‘oe Srmst ote 150)" by Awd wikwsunerea eee Re : EBT ice aan ic cet he las sega nng | Sent Rs Se/s he bees adnan salary, is provided in S. 2@28) (i) of the ITA acy” BOL ah ie moment aa "nome 0) tna te yg men rece teen the wo cnc teased in came forthe ppt of icone tan Wako Ye flowing andor geen ( Warn eae (2) Income may not necessarily be in the form be in kind or service, fr eg. perquisites ot a Cm A erases eee Tisha Sep att ch Fara ee SOCRAE TVS Em pie ns co c “a nee ee the asessee in favour of his stepmother under which she was fo be it snot treated as income oe paid RS 1100 per month. This amount was declared to bea charge anamest inever rd to hi ‘upon the properties in the hands ofthe sssessee Lord Macmullen ns. (8) ~The issue under consideration i ison observed as under: vasionaf income to determine table nee eee taxable income within "When Section 3 subjects to change al ofthe IT Act, 196 ey thin the mening the Act by ee ge ll ‘mount is not excluded from the total iam STIRS. ssse a itis merely an application of income, ad «iy Bins table inthe hands ofthe ase Gi) Diversion of Betoe 9 cr ecOme,~ isthe process of diveing ixom the assesse. amount shall be Sie fo ea sept income” of an india what reaches the india income whchit is itnded Yo change In the present exes the deere of te cout wil argig te appelante ee, ‘source wih spec poyment this sepmotics Renee that owe! dened heme foo Bm a hase i to his stepmother, 1o that evtent what e receives font oth oe feof he elton bythe 1 semtathis beumeina patiodst wane Fre dak of 9 sum ot of his venue before income i hand ‘becom 2 P. Malick¥.C1T- 0898) feraor appointed the appt In this ee, he tester appcinted the appellaNs 38 executors and dived hem 0 pay RS. 1000008 ofthe income on the aceon,: ® pat, The eos pld Ra SS” for sch ips SEAR re sown rom te aseabie oS, eS gd Ba pores owe ad oo or of oes caning fo the ands of the executors and in p82 ee i op tm by Be tata nee i eg on of be crm Feces bad bears SEUSS tom te pemon ho would ne ee charwce: Ths, ths was a case of application of ino et SOSSIELIME to be ined wii he a ae Sates = aT. 0R Naika Te cut fas ie ks mriving iesier of undivided family. Hindy These cco cot by whlch Spt vag te reshe proper a 9 eng leat, Sub hwc ee eed adaeanes Cte, wrens members of the family. The court held that the ed he Fea les (2018) Se seus war nly the taance KA afer papers heee Saiuraree carpe as thee was » charge for Be mea Sake pope be cso th i ce he igaton which created a change and divers ‘Ssememe esos rel whith he deduction et site mount so pad (0 VM Raghav Noi & Son. CT (950) Te see were the excotors and tris of wl we wee ‘sz poy manure alvanes fo the mots ee Sf te usta. The ano of tase aowancas wes son Geducted, but the claim was disallowed. oe Veswarathas ober that the estat was unde Forth purpose of sessment or essen nde ths scon, he AO may asses ens Ue ae "pec ye wih ad ep apt es {ae toh rote uso. Nowibsanding at he es torsade hve rot been cid ws see S18 nue of note whee income has caped ate! 6) Bete nkingte stent resssmentorrconpesn wis'Mh he RO sal ave upon the sso he ‘requiring him to furnish within such period as may be Sys nthe nace stm of incomes be rae fay ber pon fr wih ssn wd ‘et daing ib previous yen onespondng be Explanati i. EA LB. Sl Papers $f tee DAY, in he pert foo and vee nthe say nner and setting fourth, and aes Sills far 5 maybe apa ea sete tet eq ke €) The AO shal bel ising an aes ade ecto, record his reasons for doing so. ci A combined reading of 5.17 and 18 he Ae provides ha ue Ass of (name Tat fen a a 1s props open he une a ng me chiro mid the sane, athough te tl inone abe eee (2 Where tetim of come fas tn faa ut no assent haw been made rif ena i have underined Nis nome cme Ses Gesncten,allwan lt se 6) Where an asesnen Ey a be ee ioe ray exert la Sat ba See er RSS arenes oon caine LT Ae Hh en ety TSC) emp re a Ale Fee lon eiel Sprrenpepemia endear A ne Ge een ea aos 2h eI Aa ee At pn Secret creed atime eeetcae Na me NaS avert eae ee seat ner Wage te irate een, err nae eee ermal ayes ome mseseed Ot‘eee yeni tm 39) a me Tel has bee 90 Omission off (sorting a one part Of Un rae ns MO) the 8 me seen of information in his : TO peeve tat come, profis © gains charges ‘earn craps ace! fo ay yr dene he may i css fling us Saget Suiergnt an cae ties Bay ine win yes seve onthe ass, 0) arg al or any OF the requirement vow reed to Caleta Discount Co. Lid. y, canpane ute 1 Caleta (96D ween the Supreng CTO: heed asunder “The WordsusedinS Mare “omission or lure to dg sayindmy aera ie ree re yer pots ty on every astee to gy ‘yar al mri aes nce a tot act neces for asesment wl fer es toca. From the primary facts in is possession, wheheose, Gicnre y the mes o dacvered by mone ot of he ce sed, others the tring sea as fo di iatence as rears certain oer instely fom the primary facts and furber fy by Hin fom them he atbonty has to dw the ee jl nkerenes, and aceran on a comet interpre? the tang enackment, the proper tx lvesble™ Thus was held hat S241) doesnot impose 9 more obviny dhlgations were on he evidence and the materials produc) a 'TO/AO oul, with due diligence have reached a cofchaaes je than the one he had eached, a proceeding u/s 34)9) wate merely onthe ground thatthe FTO has raged an iene he may ltr regards erroneous (©) Gemini Leather Stores v. The ITO, “B* Ward Aga (1975) In this case he ITO issued a notice u/s 148 stating that he had reasons to belive that income chargeable in respect ofthe roo AY had escaped assessment within the meaning of § 147 oft Art AC, Gutpa, J analysed the provisions contained in S147 and 148 and observed ‘Te questions whether the Income Tax Office ha reson to eleve thatthe income chargeable to the tax has eseaped ‘sessment by reason ofthe omission or failure onthe partol at Ce te Seren Ar Shey ne MO ye Ms ker ane gl nd wiht wi at aly ea ial facts The FTO ad all the material lacs befoe him sehen he made the orginal ass ent. He cannot now take recourse to S. 147[) to remedy the enor remiling fog his own overnight’ 2. 4ncome Tax Officer v. Lakshmani Meneal Das (1976) ln this case, Justice HR Khanna interpreted the expression reason to believe’ as mentioned in. M0 the el Ac to phase ‘upon the safeguards avaiable under tl the Act against an arbitrary reopening of assessment by the asesing authorities, He obserced asundee Unersty iy ll material facts. Once assessing authority he (0) “The provisions of 147 o 13a the Act corespond to $34 albeit At, im, Twoceadhons nee tbesaetes eee sine Gitomer 18 in rape ofan sesrnt beyond the period ers hs bat wilt spt 8 yur me Be ene rae yet oad (6) The TO must hve reason to believe that income urge ox ba ped ascsanen an He mast hve mmon o belove that mach come has i ane assessment by reason of omission or failure on. efoto be morse i ln 180 pire AO, nds mene | ig ngs xy Fakes None ae atte Asda the empry tS yas eas aeeae are: rm Tt La 209) ee leet cues eee we erg fe Ae Petia he sete te She ane ae eae caer cote sed ya ah eal eS Soretemmecues fence em he he erg pe nae ieee eet are eee ee eae oe eesti TO wa Soi rhea onary, ooo weigh ei ‘men Sing a mes Peyte enS pet Bi ern mt bl ed th So Save ree naa camer piel Gee ed eens The powes ofthe TO to reopen assessment though wide ae tot pny The wo ofthe ste ae "reson ne ot Feson lo sept 1 and no any and every male, howsoever vague and inden, rotor farfthe, which would warrant the ats ting to excacpment ofthe income of the sosse (Ssh) U9. 170 096) i sue BP evan Reddy eters the ri bid inthe above cases wherein it was with epee othe poe of ie ‘sseing ocr /s 17 and 148 of the Ac. He le tore Phoolchand Bajranj Lal v, ITO. (1993). tis open to the assessee to establish that there inact ‘ited molt oF wt the eli was nota all Be ‘one ‘or was based on vague, irrelevant ot non-specific ‘formato. Tot hat lintel extent, the cout maya lo bythe 0 and examine wheter valable on record from which the conclusion arrived at there was any material a GA 11 requnite belie! could be formed by the FIO ard fetter tuhether that material had any recent 5 ove link for the information of the requsite besee Analysing the provisions contained in $147 1 ihe court held that the power confered pen the 20 = [ik s nat an unbridled one, but "lelged i te Caneeied in the interest of eliminating rom tor seose ty the assessing lfcers, The idea was to seve te mee oe farasment remitting ftom mechanical reopening of sect ths protection avails only those asesuss who Seca se fate truly and fully. G7. Me. Renu is the sole proprietor of Dine to Healt = ‘restaurant which specialized in serving healthy foe picked from Indian cuisines. Her husband, Me. Ramet Gt ‘harge of the kitched, which has a staf of 10 wockers mal the is paid a salary of Rs. $0400 per month The Incoo ‘Tax officer added the amount of salary paid to Me Ramat in the total income of Mrs. Rens on the grand Gat Me. Ramesh does not have any profesional degree to perfors ‘the job in ‘Dine to Health’ wheress Mix Ren cote that he had 12 years experience of running» Diab fod stallrestaurant Mrs. Renu comes to you to seek your legal advice Arise her explaining clearly with the belp of decided ces. Ans 7.The ee unde cnet th men tig ot ‘nome ss pie! mo @ wo enone Tr Rk wa Chap X ofthe cone To A 18 pie coe [cess ere eee ‘cies ecm preter | “© S.A ~ Transfer of income where there no tans of mets Se Ta inccaie espe pod «Sot Revel tert as 1G Niece ect ee 2S G7 Te ard b oeiie eome of pe, tine dc we) 5. 65 — lbiity of person in pet Spelncome of tier ponems of Teton a (20097 a “cca psi Ty oe ae Se ae tie yy ot sy Oe re gaat me ty, Sesh tesserae SS Peres ses reaedonraugMabuenealncr saute oS ee etc eeyntn my arose ates na be ee years ikgnelaioorekad arene ene Rpm Sica bree eran ee Sich I Sa mei sear rence et Sen ed fe a ccs es aes ae iit cr ate Ge ey tip o Calig tne ae Cy pt ly oe a Np crower Ml bea a ye Se eu pag ah cy at = ieroy wane pc ow me eee See ‘This concept with respect to $.64( Ascused in the following case lawsr i) particular has been 1. Bata kalyaniv. Commissioner of Income Tas (1985) Inahs cas the asec appellants) ran a hardware and paint ‘hops She employed her husbaa o manage the busines extol thm sly forthe services tendered. She was the sole pope o the sd sins. he ITO included in the oa Bald by thease to her hsb 564) Gof he ac ‘manag, the busines ‘Taian. The income eed by the assesses spouse nl bane “tly atrbuable wo the aplication of technical and. profesional income ofthe asssice the salary ind by applying the provisions of t onthe ground that the husband employed © 3 didnot os The word “kine of profesional qualaton cxcring the 8 pat ihe anc ene” tc he chal poeta qaeen cy by cotinine, dma er depen a form trom 8 recognized body ie wane si ed 10 the expression edn the proviso to S {wo parts ofthe proviso would be tha fs technical or professional Knowledge and tributable to the application nowledge and experiene, Of the proviso is satisfied, may not possess an Peon possess the weome solely of such ich or profesional ‘he rolement or oplsion although the penon concerned Y gts tly 2 nee Soy the recipient of tes posses the sen of Lehn or profesional qulfsion nthe sae Se te hos gol experise in such poss o techiugue ie ‘nough Yor appjng he peveo 6 SUNT ke of hat expertise inte profeion or technique te pens oncemed eas aly then the ter pate the previa sho sated owen i tse rie pe a he income eared by the hasan fhe asec was sly strbutble 10 the apa of sal petra tei perience Ths, he appa was iiss. UM Mayon me ‘The aes wars aang ysis and candi. He "employed ni ite werent cam cea and pai sm oe oe sick ie of Ans of Bombay a ne prove fA) (i) of ae 9 the asses PHS om Sram he lowing coenince The Te seen ea GN Bd aol che panonio, (0) The wad cae ch tn sce eae 3 Sah id not ey. ase eesHibs. isa » 2) Te exprin ssl nee” In &. 6K ed van 01 ts oped sae et 5 HC va wg Seo iadas nna ow te ea eee (ays eae ns proprietary canes n wn Sanat” penal cial ml flea sire © Beiboue ote trees does tata ta soe ah 2 ages ocean story or wiventy pte ‘ra or proanonal we Hs ute eat sel oe ees ce ee ‘Coninige reperine wiih might Fen ra The acest reled on the following cases 10 support hs (a) Botta Kalyani v. CTT (1985) (©) CIT v. Sorabi Dorji (1967) (Dr. K. Thomas Vaghese v. CTT (1986) Sara, J held as under ~ A plain reading ofS. 641) (i ofthe at makes iter that this section lays down various circumstances undes whan, the income of certain family members specified, thectt namely spouse, minor child, Son’s wile, ets clubbed wih the income of the assssee races of Teton Le (2018) attention, interest or eae the content of S. 4) {ear that concern in oF that affects his welfare oF happiness. In ‘of the Act read with explanation thereto it ‘cludes any company, fr, individual or any “The word sbusiness* m continuously and systemat ‘pplications of his labour or ‘The court further held 's to create a legal fiction Which the imerest of the weans an activity carried on ally by “a. person by the shill with a'view to earning an that since the object of Explanation 2 to extend its application to concems In Individual concerned exceeds the iis a ee A tL Ste pf Une ‘roger “i ro ci te hn whe po oa cubbegotincne a sou ae ane So mtb spe nthe pea eas Ps Ith pups fhe nda wee ei we ‘pce quat ges eae ae Skt po tpt 2h ona requorintb be amc atone Sera Iiin byte Paton a sapaesen ‘he wor “guia at map ee mind with 00 ts a ene a ne mig Soa OF he provi 5, The. possession by an individual of the equalities, broperties, or circumstances, natural or adventiions when, ore inherently or legally necesary lo render him ciple fill an office or to perform public duty or offer whereas profession was defined as veclin, or occupation ‘equiting special usually advanced edveaton, knowledge and sly 8 Law oF medical profesional (lacks law Dictionary). ‘The count further remarked asunder “she a of oy ol lr alle esa. er oe ‘chnial ob or eg on the rofenn to Snr ee income ated fo lee tenet a ft parol be pee ows nd eel Seksnte Lrpanee geen gr cal sce ys stage he igloos ere Sense pain of et elon ecg ne pe i a on amy ep seri ct te tought within th pure fi ye he wos "tenet PE cE were atoned that if the taxing thermore, the cour sonics ina wtnerore Mealon pai forthe egalae «mn! 0 he mites profesional knowledge 11 Ne ere ne te ature of ravuneralo [Watnige am egecnce and ext only that part of hee ional FO et te nd Sees eer eae ae Ser ieee aetna ree a oe ae Sina im his as, Mrs, Re pada salary of Rs 40000/~ pm, g ‘er hasan, Mr Ramesh for managing the Kitchen and he hae go segue expert o prio the jb, regardless of the profane s ‘qualification: the proviso to 5.641), oft the FT Act will apply. Soe «an support her ce by placing reliance on Balla Kalyan 985. 8, Write short notes om any two: (©) Agricultural land is excluded from the definition of ‘Capital asset; however, there ate situations whee may be included under the head capital gain, Discs (©) Best Judgement assessment (©) Place f effective management (POEM), ‘Ans. 8a) = The quston relates to definition of capital assets in ‘Seton 28) of the IT At 961 for understanding the en ‘assets in S. 462) ofthe Ae. '.4S{0)of the Act sates - CAPITAL GAINS = 8 from the transfer of» capital previous year shall, save as otherwise Provided fs S. 54.540, 54D, S4EA, SHER, SAR, SAM and 360 he changeable to income tx a capil gale anda oe seme to be the name a he prviou yarn wfc {Copia asscts mean property of any kind held by an ‘assests, whether or nol connected with his business oF Profession, but does not inelude: (i) agricutara land in tna, 6A LL Sed Paps Oi Lnmenty 5.6 read 98 under— (1) Nowiandng ayhing in S$, whee th mse ata company ate ditted io aang, 8 Satin, uch dtbaton sal pot eo transfer by the company for the Purposes of S. 45, (2) Whee a sharcholer onthe lato fran Iie any money othe a fea salle carga income oun ins epee of he or the market srt and ofthe cosieraton fre puree aE ‘ee prov in 8 460) lero me se ey ae cue a tla gags ter yw ‘Momiation Wafer et rr ovina thse to provaane wal eee go ened Nabil to tax u/s 48 of he Act which why has bee et a ogihin he faa a WCITW. RM. Anwin {os this case the count ld that $460) was enced with a view 'o make shareholders lable or payment of on ial yan sell sto prescribe the mode af alelting the opel gai ee sfurcholdessondstbution of ssetsbytheconpany niga Nor is introduction i wa ie foley tx on Cpl pans to the shareholders on dtbuten of ate by a compare ‘ewiation because ofthe esoning inCT, Mais Maral Ml (6, Li. (197) wherein twat hd ht when a share rece ‘woney represerting hs share on dstbuton of eet set of he ‘ompany i guidton be ie tht money saison othe "ight which belonged t him by virtue of his holding the shares and ‘ot by any tansation which tarts wha S125 of he 12 ‘ls owe A ctuace Thus, 8 62) now expres provides fo ret of acts ‘company in liquidation by a shareholder as 2 taxable al. C1T 2003) Nth Ane a evry tn his ie th spain ath wre data shone set ined ag peop he apelan “pon guation tothe appa and oe po pps ‘were charged in respect ofpf Tvs Law 2019) a ee mm le a rt ‘ ° aes aan nas neo by src fom 3 come ae anaes lees no make any referee to Capital anon soa ee eel sae SONAL crecehaea ns sh, SRLOSEE Tia enn tome ec pecan pea PS Fp rie mein re oa een henge ee sareetees orien cr abe Sraertapi ts ane ag eos ho enn cera tas a ee “€) any person. (2) fast make the retum u/s 19() oF has not made Fetum oF a revised retum i/s 139) or (no (© (a to comply wit ll the terms of notice sued 4 FRU) fas to comply with a direction iene i, 122A), oF (© Raving made a return, falls to comply with the tee Sea Rabee issued w/s 43Q) the Assessing ote afer taking into account all relevant mate net A ASscsing ofcer has gathered, shall afer pk) the ssessee an opportunity of being herd, sake ae liable to be the sum payable by the fassessce on the basis of such a rg tt uch oportnty shal be given bythe A bya and tee note caling upon the asessce to show causes on oie tor gob specified in the notice, why the aseareectchold "ot be completed to the best of ie judgment. Provided further that it shat! ae 204 8 te Pf 8 nay nm et 5 ashen sane ine ag | Conmiin of OMe Ta. Leming tng ts 0 He epson "he ba of ae rl EM lB At ne NPT “pe ea tng Te yee held asunder “The assessing authority. must not or inden or aay eens he ncn ferment sme He masta ea cee Setewes te, fir extn of he pat toy assessment andor this purpose he mud Be aot io conidcratin lol Ennead men, et to te assent ceumstane, and hs outed Previous retums by thease aswel a oe therefore, and all ohr mates whi he Beets him in ariving at a fir and proper etna et an hone gue 2 Sia of Kerala v.C. Veukuty (1966) ena eee tenemrenrecrcs cohen nd ea the por ne tap rns cea tf vig et iyo rns rec pat, ht eb to ae wip hauler eee ap ee ae et aaa ~meeraames am i "A company i said tobe resident in act dishonestyame ™ Props of Taxation Law (2 i. ot Oe a pre coal and RONRMEn off (8 Sr, ft yo cr ee it by Finance Bill, 2015 S. 63) stated,— (ee cman wd ob alent Ino oy Pern yore 1 ho mind copy oF 1 epi eee mangement of time hat ya, fetus tly company would hve been conser wy sollewe eas be See te cape ras the commie Sse ane iy aed ing SEWN & Pah Li i bombs Goat Mowe bets ft wr ay tim a. 6), 2 lynn he pun th a St St tin be sey a rot cn soem Sa ince FOB ead stra wet aa Tennesse acon wos Bohs in Pd eon Se ee tom be dee oa eet ap) Bee byte a of Pane e215 sng stot doe allowing aoe () The cater provers u/s imentre shoal ot 613) required 3 com management in India. This provided 3° opportunity forthe companies to avoid ti 2 ©) the ization of Economic ‘lopment). Thus, in order to align SNe domestic laws with inematona’ songs, oh » aimendinent are eel inane : Indion tx laws the concept in POEM, a8 defined in LOOT Cirulp No. 6 of 2017, means ramen od cme de et ined trom the Ince and eumatneofrtheh ie fever Simlils OBI vg tee sch OPP I eee i sce bar cna ‘anon, 1 I Sampany sent in ABO) FON of wach raul be presumed fo be outside a meting ft Bord of Diecon of te oe, outside India, ny are held However, if BODs ©) U8 Company Is no enseed in ABO, POEM wou determined in 2 stages: a