Constitution of India – Article 14, Entry 97, List I (Union List), Entry 62, List II (State List) – Kerala Tax on Luxuries Act, 2006 – Constitutional Validity – Cable TV Services – Legislative Competence – Aspect Theory – Held, cable TV services qualify as a “luxury” under Entry 62, List II, enabling State taxation. No conflict exists between State's luxury tax...
Constitution of India – Article 14, Entry 97, List I (Union List), Entry 62, List II (State List) – Kerala Tax on Luxuries Act, 2006 – Constitutional Validity – Cable TV Services – Legislative Competence – Aspect Theory – Held, cable TV services qualify as a “luxury” under Entry 62, List II, enabling State taxation. No conflict exists between State's luxury tax on entertainment and Central service tax on broadcasting under Entry 97, List I. Initial arbitrary exemptions under the Act violated Article 14, but the revised framework rectified these issues. The Supreme Court upheld the constitutional validity of Kerala's luxury tax on cable TV services under the Kerala Tax on Luxuries Act, 2006, affirming the State's legislative competence under Entry 62, List II. Applying the aspect theory, the Court distinguished the State's luxury tax on entertainment (cable TV services) from the Central tax on broadcasting services under the Finance Act, finding no constitutional overlap. The aspect theory, in India, focuses on the taxable event's nature, not legislative competence, unlike its Canadian application. The High Court's ruling striking down exemptions for smaller cable operators (under 7,500 connections) as violative of Article 14 was upheld, but the revised framework was deemed constitutionally valid. The tax was not discriminatory against cable TV operators compared to DTH providers. The appeal was allowed, reversing the High Court's decision to strike down the tax. (Para 17) State of Kerala v. Asianet Satellite Communications Ltd., 2025 LiveLaw (SC) 611 : 2025 INSC 757
Income Tax Act, 1961; Section 80-IA(9) - Scope of - Deductions under Sections 80-IA/80-IB and 80-HHC – Deductions under Sections 80-IA/80-IB (industrial undertaking profits) and Section 80-HHC (export profits) can be computed independently. Resolving the split verdict in Assistant Commissioner of Income Tax v. Micro Labs Limited, (2015) 17 SCC 96, the Court held that Section 80-IA(9) does not mandate reducing the gross total income by the Section 80-IA/80-IB deduction before computing deductions under Section 80-HHC. Instead, it restricts the aggregate deductions under heading 'C' of Chapter VI-A to the extent of eligible business profits, preventing double benefits on the same profits. Approving the High Court's reasoning in Associated Capsules (P) Ltd. v. Deputy Commissioner of Income Tax, (2011) SCC OnLine Bom 27, the Court clarified that Section 80-IA(9) limits the allowability, not the computability, of deductions. For example, if business profits are Rs. 100 and Rs. 30 is allowed under Section 80-IA, a computed deduction of Rs. 80 under Section 80-HHC would be restricted to Rs. 70 to ensure the total deduction does not exceed the profits. The reference was answered accordingly, permitting independent computation of deductions while capping their aggregate to the eligible profits. (Para 20, 21 & 23) Shital Fibers v. Commissioner of Income Tax, 2025 LiveLaw (SC) 606 : 2025 INSC 743
Constitutional Law – Taxation - Sales Tax - Purchase Tax - Validity of Provisions Imposing Purchase Tax on Exempted Transactions - In a reference to resolve conflicting views on the interpretation of "levy" in sales tax exemptions, the Supreme Court (3 Bench) upheld the constitutional validity of Section 5A, Kerala General Sales Tax Act, 1963 (KGST Act), and the pari materia Section 7A, Tamil Nadu General Sales Tax Act, 1959 (TNGST Act). The provisions impose purchase tax on purchasers who acquire goods from sellers exempted from sales tax under notifications issued pursuant to Section 10, KGST Act (or equivalent), and subsequently dispatch such goods outside the state via stock transfer (not constituting inter-state sale). Facts: The appellants, registered dealers, purchased voltage stabilizers from small-scale industrial (SSI) units and charitable institutions within Kerala, which were exempt from sales tax liability under Section 10 notifications. The goods were then dispatched outside Kerala by way of branch/stock transfer. The revenue authorities levied purchase tax under Section 5A, KGST Act, treating the purchases as "liable to tax." The appellants contended that the exemption under Section 10 rendered the transactions non-liable to tax altogether, excluding the operation of Section 5A. A 2009 Division Bench of Supreme Court, in a lead case, distinguished between "leviability" (imposition of tax liability) and "payability" (actual payment), holding the goods liable but exempt from payment. Due to a contrary view in Peekay Re-rolling Mills (P) Ltd. v. Assistant Commissioner, (2007) 4 SCC 30 (interpreting "levy" to include collection/payment), the matter was referred to a larger Bench. Issues Referred: 1. Whether purchases from tax-exempt dealers under the KGST/TNGST Acts constitute purchases "liable to tax" within the meaning of Section 5A/7A. 2. Whether such purchasers are liable to pay purchase tax under Section 5A/7A despite the exemption. 3. Whether the purchase tax under Section 5A/7A is ultra vires the Constitution, being in the nature of a manufacture tax, consignment tax, or inter-state levy beyond state legislative competence. Held, Issues (i) and (ii) answered in the affirmative; issue (iii) in the negative. Appeals dismissed; judgments of Kerala and Madras High Courts affirmed. Held, Sections 5A/7A are independent charging provisions levying purchase tax solely where no sales tax is payable on the underlying sale, ensuring the transaction is not taxed twice. Such tax is triggered in three scenarios: (a) goods used in manufacture without sales tax payment; (b) goods dispatched outside the state (other than inter-state trade/commerce); or (c) goods disposed of otherwise than by intra-state sale. The charge remains a tax on purchase, with satisfaction of these conditions merely delineating its applicability. "Levy" denotes the imposition or exigibility of tax liability (authorization to tax), distinct from assessment (quantification) and collection/payment. An exemption under Section 10 affects only payability, not the underlying leviability; goods remain "liable to tax" in principle, though payment is deferred or waived. The provisions do not encroach on Union powers under Entries 52/54, List I (inter-state sales) or Entry 52A, List II (declared goods), as they target intra-state purchases followed by non-sales dispositions or out-of-state dispatches that do not qualify as inter-state sales. Inter-state movement of goods (sans sale) falls within state legislative domain under Entry 54, List II. States retain prerogative to levy such taxes for revenue generation, warranting interpretive leeway absent clear constitutional overreach. Peekay Re-rolling Mills, (2007) 4 SCC 30 distinguished as pertaining to declared goods under Entry 52A, List II, where exemption impacts the charge itself; the ratio in Kandaswami, (1975) 4 SCC 745; Hotel Balaji, 1993 Supp (4) SCC 536 and Devi Dass, (1994) Supp 2 SCC 59 (upholding similar provisions) prevails, overruling Goodyear, (1990) 2 SCC 71 to the extent of conflict. (Para 30 - 33) C.T. Kochouseph v. State of Kerala, 2025 LiveLaw (SC) 554 : 2025 INSC 661
Central Goods and Services Tax Act, 2017 – Section 132 – Bail should be normally granted for offences u/s. 132 CGST Act unless extraordinary circumstances exists. Vineet Jain vs Union of India, 2025 LiveLaw (SC) 513
Income Tax Act, 1961; Section 263 - Power of Commissioner to revise assessment - Distinction between failure to investigate and wrong decision by Assessing Officer - Where Assessing Officer conducts investigation but makes no addition, it implies acceptance of assessee's plea - Commissioner can revise under Section 263 by deciding on merits and making additions, not by remanding for lack of investigation - Remand justified only if superficial or random investigation established with recorded error and prejudice to Revenue - High Court and Tribunal orders upheld - Special Leave Petition dismissed. Principal Commissioner of Income Tax-1 v. V-Con Integrated Solutions, 2025 LiveLaw (SC) 435
Central Sales Tax Act, 1956; Section 13 – Central Sales Tax (Rajasthan) Rules, 1957; Rule 17(20) – State Rules Cannot Override Central Rules under CST Act – The Supreme Court upheld the High Court's decision striking down Rule 17(20) of the Central Sales Tax (Rajasthan) Rules, 1957, as ultra vires the Central Sales Tax Act, 1956. The Court held that the State Government, under its delegated powers, cannot frame rules inconsistent with the Central Sales Tax (Registration and Turnover) Rules, 1957. Rule 17(20) permitted the cancellation of Form C in cases of fraud, misrepresentation, or legal contravention, a provision absent in the Central Rules, which prescribe Form C but do not provide for its cancellation. The Court clarified that only the Central Government has the authority to prescribe the form of declaration and its particulars, and State rules cannot derogate from Central Rules. The State's appeal, challenging the High Court's declaration of Rule 17(20) as ultra vires due to inconsistency with Central law, was dismissed. (Para 16) State of Rajasthan v. Combined Traders, 2025 LiveLaw (SC) 432 : 2025 INSC 496
Income Tax Act, 1961 - Sections 269ST, 271DA - Prohibition of Cash Transactions Exceeding ₹2,00,000 - Mandatory Reporting by Courts and Sub-Registrars - Disciplinary Action for Non-Compliance - Role of Income Tax Authorities - Circulation of Judgment - Section 269ST of the Income Tax Act, 1961 prohibits cash transactions of ₹2,00,000 or more in a single transaction, aggregate per day, or for a single event, except through account payee cheque, bank draft, or electronic clearing systems. Violations attract penalties under Section 271DA to promote digital transactions and curb black money. Courts are obligated to report to the jurisdictional Income Tax Department any suit involving cash transactions of ₹2,00,000 or more to verify compliance with Section 269ST. Sub-Registrars must report documents (e.g., sale agreements) presented for registration indicating cash payments of ₹2,00,000 or above. Failure to report by officials will lead to disciplinary action initiated by the Chief Secretary of the State/Union Territory. The jurisdictional Income Tax Authority shall investigate reported transactions for potential violations. The Registrar (Judicial) was directed to circulate this judgment to all High Court Registrar Generals, Chief Secretaries of States/Union Territories, and the Principal Chief Commissioner of Income Tax for strict compliance. The case involved a property dispute where a charitable trust, in possession since 1929, challenged a 2018 sale agreement claiming ₹75,00,000 in cash, violating Section 269ST. The Supreme Court set aside the High Court's dismissal of the trust's revision petition, dismissed the respondents' suit as defective and speculative, and emphasized mandatory reporting of high-value cash transactions by courts and Sub-Registrars to ensure compliance with tax laws. Appeal allowed. (Para 18) Correspondence RBANMS Educational Institution v. B. Gunashekar, 2025 LiveLaw (SC) 429 : 2025 INSC 490
Value Added Tax Act, 2008 (Uttar Pradesh); Section 7 (c) and 13 (7) - A dealer cannot claim Input Tax Credit (ITC) on purchases linked to tax-exempt sales under Section 7(c), as per Section 13(7). Emphasizing strict construction of tax statutes, the Court rejected the appellant's claim for ITC of ₹6.42 lakh on exempt sales of ₹1.89 crore to a manufacturer-exporter, prioritizing statutory language over policy intent to boost exports. The appeal was dismissed, upholding the disallowance of ITC. (Para 10) Neha Enterprises v. Commissioner, 2025 LiveLaw (SC) 423 : 2025 INSC 476
Central Goods and Services Tax Act, 2017; Section 39 (9) - Denial of Input Tax Credit (ITC) due to clerical or arithmetical errors - Examination of timelines for correction of bona fide mistakes in tax filings - Judicial observations on software limitations in tax compliance. Held, timelines for rectifying bona fide errors in tax filings should be realistic, as denial of ITC due to inadvertent mistakes unfairly burdens taxpayers. Denying correction rights in cases of genuine errors contradicts the fundamental right to conduct business. Software limitations cannot justify denying taxpayers the right to correct mistakes, as compliance mechanisms should facilitate, not hinder, rectifications. Special Leave Petition dismissed declining to interfere with the High Court's judgment, as there was no loss of revenue. 2025 LiveLaw (SC) 361
Constitution of India, 1950; Article 246A - Central Goods and Services Tax Act, 2017 (CGST Act); Sections 69 and 70 - Constitutionality of - Power to Arrest and Summon - Legislative Competence under Article 246A - Incidental Powers for Tax Evasion. The constitutional validity of Sections 69 (power to arrest) and 70 (power to summon) of the CGST Act, and analogous provisions in State GST Acts, was challenged. Petitioners contended that Article 246A, which empowers Parliament and State Legislatures to levy and collect GST, does not authorize criminalization of violations, such as through arrest and summons. They argued these powers fall outside legislative competence, being neither ancillary to GST levy nor covered by Entry 93 of List I (offences against laws of the Union) in the Seventh Schedule. Whether Sections 69 and 70 of the CGST Act are constitutionally valid and within Parliament's legislative competence under Article 246A. Held, Provisions upheld as constitutionally valid. Challenge to vires rejected; provisions do not violate constitutional limits. (Para 75) Radhika Agarwal v. Union of India, 2025 LiveLaw (SC) 255 : 2025 INSC 272 : (2025) 6 SCC 545
Value Added Tax Act, 2005 (Punjab) - Held, Rule 21(8) of the Punjab Value Added Tax Rules, 2005, notified on January 25, 2014, cannot be applied to transactions prior to April 1, 2014, as the enabling amendment to Section 13(1) of the Punjab Value Added Tax Act, 2005, came into effect only on that date. The benefit of Input Tax Credit (ITC) cannot be reduced without statutory sanction. Rule 21(8), which limits ITC to the reduced tax rate for goods in stock following a tax rate reduction, lacked statutory backing before April 1, 2014. Applying it retroactively would cause financial loss to taxable persons who purchased goods at a higher tax rate, as ITC is a statutory right accrued at the time of purchase. The Court dismissed the State's appeals, upholding the High Court's decision that Rule 21(8) applies only to transactions on or after April 1, 2014. (Para 41.1) State of Punjab v. Trishala Alloys Pvt. Ltd., 2025 LiveLaw (SC) 221 : 2025 INSC 231
Income Tax Act, 1961; Sections 10, 11 and 12-AA - Charitable Trust - Income Tax Exemption - Proposed Activities – Held, since Section 12AA pertains to the registration of the Trust and not to assess of what a trust has actually done, the term 'activities' in the provision includes 'proposed activities'. Commissioner of Income Tax Exemptions v. International Health Care Education and Research Institute, 2025 LiveLaw (SC) 214
Income Tax Act, 1961; Sections 10, 11 and 12-AA - Whether registration of a charitable trust under Section 12-AA of the Act, 1961, for income tax exemptions under Sections 10 and 11 should be based on the trust's proposed activities or actual activities. Held: The Supreme Court reiterated that registration under Section 12-AA of the Act, 1961, must be decided based on the trust's proposed activities rather than its actual activities, affirming the precedent set in Ananda Social, (2020) 17 SCC 254. The Commissioner must satisfy themselves of the genuineness of the trust's objects and proposed activities. However, mere registration does not guarantee exemptions under Sections 10 and 11, and the assessing officer may deny exemptions if the trust's materials are not convincing or genuine. The Supreme Court rejected the Revenue's contention that actual activities should be considered and declined to refer the Ananda Social decision to a larger bench. The High Court's order upholding the Appellate Tribunal's direction to grant registration was affirmed. Commissioner of Income Tax Exemptions v. International Health Care Education and Research Institute, 2025 LiveLaw (SC) 214
Income Tax Act, 1961; Sections 10, 11 and 12-AA - The respondent, a charitable trust engaged in education and medical aid, sought registration under Section 12-AA for tax exemptions. The Commissioner denied registration, citing insufficient evidence of actual charitable activities. The Appellate Tribunal reversed this, directing registration, which the High Court upheld. The Commissioner challenged this via a Special Leave Petition. Held, Section 12-AA requires the Commissioner to verify the genuineness of a trust's objects and activities for registration to claim benefits under Sections 11 and 12. The Court relied on Ananda Social, (2020) 17 SCC 254, which clarified that “activities” under Section 12-AA include “proposed activities,” and the Commissioner must assess the trust's objects and their alignment with proposed activities. Appeal dismissed; High Court's decision upheld. (Para 9, 13, 15) Commissioner of Income Tax Exemptions v. International Health Care Education and Research Institute, 2025 LiveLaw (SC) 214
Income Tax Act, 1961 – Section 132 and 271AAA - Penalty for undisclosed income - Search and seizure - Levy of penalty u/s. 271AAA(1) - Discretion of Assessing Officer – Mere surrender of undisclosed income during search insufficient to attract penalty; Assessing Officer must prove that income was "found in the course of search" as defined in Explanation to s. 271AAA(1) - Discretion to levy penalty not arbitrary but must be exercised judiciously, guided by law. K. Krishnamurthy v. Deputy Commissioner of Income Tax. 2025 LiveLaw (SC) 202 : 2025 INSC 208
Income Tax Act, 1961 – Section 132 and 271AAA - Penalty for undisclosed income - Held, Penalty leviable only where conditions satisfied; expression "found in the course of search" not confined to documents seized from assessee's premises but extends to materials obtained in continuation thereof, e.g., sale deeds procured from third party (society) triggered by initial search. K. Krishnamurthy v. Deputy Commissioner of Income Tax. 2025 LiveLaw (SC) 202 : 2025 INSC 208
Income Tax Act, 1961 – Section 271AAA - Exemption from penalty u/s. 271AAA(2) – Conditions - Assessee admits undisclosed income in statement u/s. 132(4) during search; substantiates manner of derivation; pays tax together with interest - No specific time-limit prescribed for payment - Delayed payment does not disentitle assessee from exemption. K. Krishnamurthy v. Deputy Commissioner of Income Tax. 2025 LiveLaw (SC) 202 : 2025 INSC 208
Income Tax Act, 1961 – Section 271AAA - Exemption from penalty u/s. 271AAA(2) –Held, If conditions (i)-(iii) of s. 271AAA(2) fulfilled, 10% penalty normally not leviable, even with delay in tax payment. K. Krishnamurthy v. Deputy Commissioner of Income Tax. 2025 LiveLaw (SC) 202 : 2025 INSC 208
Income Tax Act, 1961 – Section 132 and 271AAA - During search u/s. 132 at assessee's premises, assessee admitted undisclosed income of Rs. 2,27,65,580 for AY 2011-12 in statement u/s. 132(4) and later substantiated source, paying tax with interest (albeit delayed). Penalty imposed u/s. 271AAA on this amount and additional sum detected via sale deeds obtained from housing society post-search. Tribunals/High Court upheld penalty; assessee appealed to Supreme Court. Held, Appeal partly allowed - No penalty on admitted income of Rs. 2,27,65,580 as Section 271AAA(2) conditions complied with; 10% penalty payable only on additional undisclosed income from sale deeds, held to be "found in the course of search". Matter remitted for recomputation of penalty on latter amount. (Para 29, 31, 33, 35, 40, 41) K. Krishnamurthy v. Deputy Commissioner of Income Tax. 2025 LiveLaw (SC) 202 : 2025 INSC 208
Central Sales Tax Act, 1956 - Section 8 - The amendment to Section 8(5) of the Act, 1956, introduced by the Finance Act, 2002—making state-granted exemptions from inter-state sales tax subject to production of declarations in Forms 'C' or 'D' under Section 8(4)—operates prospectively and does not retrospectively nullify or revoke absolute exemptions already accrued and granted under pre-amendment incentive schemes, such as the Maharashtra Package Scheme of Incentives, 1993. The respondent assessee, eligible under the 1993 Scheme and issued an Eligibility Certificate for full/partial sales tax exemption without Form 'C'/'D' requirements, faced trade circulars from the Commissioner of Sales Tax, Mumbai, demanding refund of exempted tax post-2002 amendment and revising assessments for non-submission of declarations. The High Court set aside the circulars, holding the amendment prospective. Whether the 2002 amendment to Section 8(5) applies retrospectively to deprive assessees of vested exemption rights under unamended provisions empowering states to grant absolute exemptions in public interest, dispensing with Section 8(4) formalities. Held, every statute is prima facie prospective unless expressly or by necessary implication retrospective; absent clear legislative intent to affect existing rights, prior exemptions persist. Premature deprivation of accrued exemption benefits is arbitrary; states cannot unilaterally revoke vested substantive rights without notice or hearing. Unrevoked Eligibility Certificates preserve accrued rights; post-amendment Form 'C'/'D' requirements apply only from May 11, 2002, onward. Appeal dismissed; impugned High Court order upheld. [Para 17, 23, 28] State of Maharashtra v. Prism Cement, 2025 LiveLaw (SC) 198 : 2025 INSC 199
Income Tax Act, 1961 - Sections 276CC, 279(2) - Compounding of offences - "First offence" under Guidelines for Compounding of Offences under Direct Tax Laws, 2014 - Interpretation - Assessee filed delayed returns for AY 2011-12 (due 30.09.2011, filed 04.03.2013) and AY 2013-14 (due 31.10.2013, filed 29.11.2014), leading to prosecution proposals under Section 276CC - Compounding application for AY 2011-12 accepted on 11.11.2014 post show-cause notice dated 27.10.2014 - For AY 2013-14, show-cause notice issued 12.03.2015; compounding rejected on ground it was not "first offence" due to prior compounding – High Court upheld rejection – Held, Offence u/s 276CC committed on day immediately following due date for filing return (01.10.2011 for AY 2011-12; 01.11.2013 for AY 2013-14), relying on Prakash Nath Khanna v. CIT, (2004) 9 SCC 686 - Subsequent belated filing does not erase commission of offence - "First offence" u/para 8.1 of 2014 Guidelines (superseding 2008 Guidelines) means offence committed prior to issuance of show-cause notice or intimation of prosecution, whichever earlier - Both offences here preceded respective show-cause notices - Prior compounding for AY 2011-12 immaterial as each offence assessed independently against "first offence" criteria - Rejection of compounding for AY 2013-14 set aside; assessee directed to file fresh application within 2 weeks - If accepted, trial proceedings abate - Appeal allowed. (Para 35, 41, 44, 69, 70) Vinubhai Mohanlal Dobaria v. Chief Commissioner of Income Tax, 2025 LiveLaw (SC) 173 : 2025 INSC 155
Motor Vehicles Taxation and Certain Other Law (Amendment) Act, 2003 (Karnataka) repealed the Contract Carriages (Acquisition) Act, 1976 (Karnataka), which had nationalized private contract carriages, and delegated the power to issue non-stage carriage permits (including contract carriages, special, tourist, and temporary vehicles) from the State Transport Authority (STA) to its Secretary under Section 68(5) of the Motor Vehicles Act, 1988 (MV Act) read with Rule 56(1)(d) of the Karnataka Motor Vehicles Rules, 1989 (KMV Rules). The High Court struck down the delegation provision as unconstitutional, holding it required fresh presidential assent akin to the 1976 Act and that quasi-judicial permit-granting powers could not be delegated to a single officer. Aggrieved private operators appealed to the Supreme Court – Issues - 1. Whether Section 3 of the 2003 Act, repealing the 1976 Act (previously upheld by the Supreme Court), is constitutionally valid absent fresh presidential assent. 2. Whether the STA's delegation of routine non-stage carriage permit-granting authority to its Secretary violates administrative law principles, given the quasi-judicial nature of such functions. Held (Appeal Allowed): The Supreme Court upheld the constitutionality of the 2003 Act and the delegation, dismissing the challenge by the Karnataka State Road Transport Corporation (KSRTC). On Issue 1: The State Legislature possesses plenary power to repeal its enactments, including those previously assented to by the President, as a repeal merely extinguishes operative provisions without recreating a new framework or overriding judicial precedents. The 2003 repeal was a valid policy shift to liberalize the transport sector, address public transport shortages, and enhance private participation; no fresh presidential assent was required, as it fell squarely within legislative competence under Article 245 of the Constitution. On Issue 2: Delegation of quasi-judicial functions is permissible under administrative law if expressly authorized by the enabling statute, distinguishing between complex adjudicatory tasks (e.g., stage carriage permits, reserved for the full STA) and routine administrative functions (e.g., non-stage carriage permits). Section 68(5) of the MV Act and Rule 56(1)(d) of the KMV Rules explicitly permit such delegation to the STA Secretary—a senior expert officer—ensuring efficiency, timely service delivery, and oversight without arbitrary discretion. Prohibiting delegation would overburden the STA, causing delays and inefficiencies contrary to legislative intent. The Secretary is empowered to grant such permits subject to prescribed conditions. S.R.S. Travels v. Karnataka State Road Transport Corporation Workers, 2025 LiveLaw (SC) 166 : 2025 INSC 152
Disproportionate Assets - Income Tax Returns - Quashing of FIR - Economic Inflation - Long-Term Asset Valuation - The Appellant argued that his wife's income and other declared sources of income were not properly considered in the calculation of assets. The Appellant submitted income tax returns and other supporting documents to justify the declared assets. Held, the income of the Appellant's wife and other declared sources were not adequately considered by the Vigilance Department. It was observed that while calculating disproportionate assets over a long period (1996-2020), inflation and economic changes should be considered. Referring to State of Haryana v. Bhajan Lal, 1992 SCC (Cri) 426 the Court noted that powers under Article 226 of the Constitution could be exercised when allegations in the FIR do not constitute any offence. The Court found that the alleged disproportionate assets were not substantiated when the Appellant's and his wife's declared income was properly accounted for. The Supreme Court quashed the FIR registered against the Appellant. Consequently, the appeal was allowed. Nirankar Nath Pandey v. State of U.P., 2025 LiveLaw (SC) 90
Income Tax Act, 1961 - Section 2(47) - Whether the reduction in share capital of a subsidiary company, resulting in a proportionate reduction in the number of shares held by the assessee, constitutes a "transfer" under Section 2(47) of the Income Tax Act, 1961, thereby allowing the assessee to claim a capital loss. The respondent-assessee, M/s. Jupiter Capital Pvt. Ltd., held 99.88% shares in Asianet News Network Pvt. Ltd. (ANNPL). Due to financial losses, ANNPL filed for a reduction in share capital, which was approved by the High Court. The share capital was reduced from 15,35,05,750 shares to 10,000 shares, and the assessee's shareholding was proportionately reduced from 15,33,40,900 shares to 9,988 shares. The face value of the shares remained unchanged at Rs. 10. The assessee claimed a long-term capital loss of Rs. 164,48,55,840/- due to the reduction in share capital. The Assessing Officer disallowed the claim, stating that the reduction did not amount to a "transfer" under Section 2(47) of the Income Tax Act, as there was no extinguishment of rights or sale of shares. The CIT(A) upheld the Assessing Officer's decision, but the ITAT allowed the assessee's claim, holding that the reduction in share capital amounted to a transfer under Section 2(47). The High Court affirmed the ITAT's decision. The Supreme Court dismissed the Revenue's appeal, holding that the reduction in share capital amounted to a "transfer" under Section 2(47) of the Income Tax Act, 1961. The Court relied on its earlier decision in Kartikeya v. Sarabhai v. CIT (1997) 7 SCC 524, which held that the extinguishment of rights in a capital asset, even without a sale, constitutes a transfer. The Court emphasized that the reduction in the number of shares held by the assessee resulted in the extinguishment of rights in the capital asset, and the assessee was entitled to claim a capital loss. The Court also noted that the face value of the shares remaining unchanged did not negate the fact that the assessee's rights in the shares had been extinguished. Principal Commissioner of Income Tax-4 v. Jupiter Capital, 2025 LiveLaw (SC) 41 : 2025 INSC 38
Income Tax Act, 1961 - Section 2(47) - "transfer" - Reduction of Share Capital - Capital Loss - Legal Principles - The definition of "transfer" includes the extinguishment of any rights in a capital asset, even if there is no sale or exchange. A reduction in share capital, resulting in the extinguishment of a shareholder's rights, constitutes a transfer under Section 2(47). The assessee is entitled to claim a capital loss when there is a reduction in share capital that results in the extinguishment of rights in the capital asset. The Supreme Court held that the reduction in share capital of the subsidiary company and the consequent reduction in the assessee's shareholding amounted to a transfer under Section 2(47) of the Income Tax Act, 1961. The assessee was entitled to claim a capital loss, and the petition filed by the Revenue was dismissed. Principal Commissioner of Income Tax-4 v. Jupiter Capital, 2025 LiveLaw (SC) 41 : 2025 INSC 38