Assessee a diamond bourse was a company limited by guarantee. The primary objects were to establish facilities to promote diamond export, effective liaison between Industry in India and abroad, promote trade in export and imports of diamonds and develop media as a modern diamond market. Dominant purpose of the company is the advancement of objects of general purpose utility- hence diamond bourse is a charitable institution. But where income is utilized for the benefit of founder by providing a loan of Rs. 70 lakhs without written agreement, the assessee lost the benefit of exemption.
(Applied 121 ITR 0001 (SC) Addl. CIT - Vs -Bharat Art Silk Cloth Mills Manufacturer Association)

Assessee was a partner in a firm having 10% share. He created a Trust assigning his right, title and interest (excluding capital) as partner in the firm. It was held that no sub partnership with Trust came into existence. Trust was only entitled 50% share of income as an assignee of the assigner partner. There is no diversion of income by overriding title, which would have been a case if partner had formed sub partnership with others. The share of the income of the assessee assigned to the trust had to be included in the income of the assessee. Where a third person becomes entitled to receive the amount in question under an obligation of the assessee, even before the assessee could lay claim to receive it as his income, there would be a diversion of income by overriding title but when after the receipt of the Income by the assessee, the same is passed on to a third person in discharged of an obligation of the assessee it will be a case of application by the assessee and not of diversion of income by overriding title.
(K.A. Ramadhar -Vs - CIT 42 ITR 25(SC) applied.)

(1) Interest chargeable u/s 234B would be from be from first day of assessment year till the order u/s 245D(4) is passed.
(2) Settlement Commission does not have power to waive or reduce tax or interest which have to be determined as per the provisions of the Act.
(3) Interest payable u/s 245D(2C) and 245D(6A) are for defaults different from those under section 234A, 234B and 234C.
(4) Mere application for settlement has no effect on earlier assessment or recovery proceedings. Order allowing or admitting such application is necessary when jurisdiction will transfer to ITSC.
(5) Interest u/s 234A, 234B and 234C will be on the consolidated amount of income one disclosed before the I.T. authorities and other undisclosed, which is for the first time disclosed before the Commission.

1. The I.T. authorities are free to proceed with the matter pending before them till application is admitted by the ITSC. The situation before I.T. authorities and ITSC are different. The return filed before I.T. Authorities would be in respect of disclosed income whereas application before ITSC is in respect of undisclosed income.
2. Even though for computation of tax both disclosed and undisclosed income is to be clubbed by ITSC but it does not empower the Commission to deal with the disclosed income before deciding to proceed with Application of Settlement. The assessment order passed by the A.O prior to the admission of the application for settlement will subsist and recovery proceedings continue. The assessment order does not automatically get set-aside on the admission of the application for settlement.
3. The Commission can consider waiving interest u/s. 220(2A) provided conditions laid down therein are satisfied.
4. Interest levied for different infraction is not a double levy of interest. Section 234B, 245D(2C) and 245D(6A) operate in different field and hence there is no double levy, if all the three interest are charged.

Where counter sales affected by the assessee involved custom clearance within the meaning of Expl. (aa) to sec. 80HHC and further, sales were in convertible foreign exchange, he is entitled to special deduction u/s 80HHC in respect of profits from those transactions. (Impliedly approved - Ram Babu & Sons - Vs - U.O.I. 222 ITR 606(All))

On liquidation of a company, its assets were distributed to the shareholders. The assessee, on distribution, got 479.89 acres of Agriculture land in lieu of his shares. The question was whether market value of Agriculture land was assessable to capital gains in the hands of the assessee. The assessee receives assets, whether capital or in any other form, from the company in liquidation, the assessee is liable to pay capital gains tax on market value of the assets on the date of distribution as provided in section 46(2). It is because there is a transfer of shares by way of buy back by the company on liquidation and in lieu of which the assessee is getting 479.86 acres of agricultural land. The invoking of section 2(14) which defines Capital asset is unnecessary for the purpose construing section 46(2).
[On similar point - Vijay Kumar Bhudia - Vs VIT and Anusuia Devi Bhudhia - Vs - CIT 204 ITR 355 (SC) - Distribution of aspect of liquidation of accompany to a share holder would give rise to capital gains i.e. Surplus from the value of asset received over the price of the share holding would be taxable as Capital Gains]

Dispute between Contractor and Govt. was referred to Arbitrator who awarded compensation as well as interest. The question was whether the interest so awarded was a capital receipt or revenue receipt. Orissa High Court held it to be Capital receipt. Reversing the decision of High Court, Hon'ble S.C. held it to be assessable as business receipt of the assessee.
[ CIT - Vs - Gauridas Chaudhuri & Sons 203 ITR 881 (SC) followed]

Where tax or duty is collected without authority of law by the State but assessee passes on the burden to the consumer, then manufacturer cannot claim refund from the State. Doctrine of unjust enrichment does not apply to the state as it represents the people and no body can speak of the people being unjustly enriched. It is for the manufacturer to prove that he suffered unjust loss, as the burden was not passed on to the consumer. If not then power of Court cannot be unjustly utilized to enrich the manufacturer who has not suffered the loss due to payment of duty even though without authority of law.

If certain items of receipt is not treated as income under any provision of Act, then that receipt can not be treated as taxable income under any provision of the Act. Where agricultural land is compulsory acquired and compensation so payable is exempt and is treated as not income before 1st March, 1970, it will not become a part of distributable income for the purposes of additional tax.
{Followed - 82 ITR 816 (sc) CIT vs Asiatic Textile Ltd.}

The decision of Hon'ble Supreme Court in Assam Co-op. Apex Marketing Society Ltd. Vs Addl.CIT 201 ITR 338, which held that whole of the amount of profit and gains of business by marketing of produce of its members meant the marketing of produce by its members, was over ruled by Hon'ble Supreme Court in Kerala State Co-op. Marketing Federation Ltd. Vs CIT 231 ITR 814 which held that income of the Co-operative.Society u/s 80P(2)(a)(iii) from marketing of produce of its members would mean income from marketing of produce belonging to members which means that if member society purchased goods from their primary members or even from market would be entitled to exempt under said section.
Parliament amended section 80P (2)(a)(iii) by Income tax Section Amendment Act, 1998(No.11 of 1999) with retrospective effect April 1. 1968 by substituting sub-clause-III to read "the marketing of agricultural produce grown by its members". This means that early decision of Supreme Court reported in 201 ITR 338 was accepted as true interpretation of the said section and thus subsequent decision of the Supreme Court reported in 231 ITR 814 was in a way not accepted as true interpretation of the said section and thus subsequent decision of the Supreme Court reported in 231 ITR 814 was in a way not accepted. The Parliament has power to change the law and can neutralize the effect of a decision of the Supreme Court. This amendment, however, does not authorize the Revenue Officer to re-open those assessments which are already barred by limitation. There is no such amendment which would authorize or empower the officers to take action in those cases which are barred by limitation.
[Followed- K.M. Verma vs ITO 254 ITR 772 (SC)]