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Residence and Source Rules

Ishikawajma-Harima Heavy Industries Ltd. vs. Assistant Director Income Tax- [2007] 158 Taxman 259 (SC)

ISSUE:

Whether the amounts received/receivable by the applicant from Petronet LNG for offshore supply of equipment, materials, etc., are liable to be taxed in India under the provisions of the Income Tax Act,1961?

RULE:

Whatever is payable by a resident to a non-resident by way of fees for technical services, thus, would not always come within the purview of S.9(1)(vii) of the Income Tax Act,1961.

Services of a non-resident to a resident utilized in India may not have much relevance in determining whether the income of the non-resident accrues or arises in India.

It must have sufficient territorial nexus with India so as to furnish a basis for the imposition of tax.

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Residence and Source Rules

Assistant Director of Income Tax v. M/s E-Funds Solution Inc., [2017] 251 Taxman 280 (SC)

ISSUE:

Whether E-Funds India is a fixed place permanent establishment ('Fixed PE') of E-Funds Corporation?

Whether any profits should be attributed to the Permanent Establishment, if it exists at all, when the transactions were entered on arm's length price?

RULE:

In order to constitute Fixed PE, the assessee must, first, have a fixed place of business and, second the assessee should exercise sufficient control over the said place.

Provision of support services by an entity in India would not make the entity a Permanent Establishment of a foreign entity.

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Residence and Source Rules

Engineering Analysis Centre of Excellence Pvt Ltd v the Commissioner of Income Tax & Anr, LL 2021 SC 124

ISSUE:

Whether the sum paid by Indian enterprises to use foreign software is taxable as royalty for copyright as defined in the Act and Double Taxation Avoidance Agreement (DTAA)?

Whether the payer was required to deduct tax at source on such payments under Section 195 of the Act?

RULE:

Payments made for using foreign software by Indian businesses to foreign corporations do not constitute royalties that are taxable in India.

Therefore, there is no liability on the resident Indian companies to deduct tax at source on the purchase of software under section 195 of the Income Tax Act 1961

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Sources of Tax Laws

Poona Electric Supply Co. Ltd., Bombay v. Commissioner of Income Tax (1965) 57 ITR 521

ISSUE:

Whether the funds that were credited to the "Consumers Benefit Reserve Account" by Poona Electric Supply Co. Ltd. should be treated as taxable income for income tax assessment.

Whether the deductions used to calculate profits are valid for tax purposes and can be distinguished from distributions made with the proceeds, as well as how the mercantile method of accounting affects the calculation of taxable income.

RULE:

The money a firm reserves for a specified statutory purpose, such as delivering refunds or rebates to clients as relevant legislation requires, should not be taxable income for income tax purposes. Instead, these reserved funds should be subtracted from the business's total income.

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Sources of Tax Laws

CIT v. Chaphalkar Brothers [400 ITR 279 (SC]

ISSUE:

Whether the recipient's entertainment duty subsidy intended for regular usage, like recurring revenue or spending, or was it designed for a particular use, like encouraging the development of multiplex theatres?

Whether the court required to decide whether or not the tax treatment of the subsidy should take into account the principal objective of its grant, regardless of the source of funds utilized for construction or the time when the money was received?

RULE:

A subsidy's classification as revenue or capital for tax purposes depends on why the government provided it. Regardless of where the funds came from or when they were received, a subsidy is deemed capital when the government's primary goal is to support the launch of a new project or the material expansion of an existing one.

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Categories
Tort and Criminal Liability

State of Madhya Pradesh v. Warren Andreson, criminal case No. 8460/1996

ISSUE:

Can the accused persons be held guilty of the negligible act of running a defective plant of MIC without reasonable care and caution and without informing the local people about the remedial precautions?

RULE:

A company owes a duty of care, and if it falls far below the standard required, it is guilty of gross negligence. The concept of negligence in the law of tort is the same in criminal law. The difference is criminal negligence must be 'gross'.

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Environmental Ethics

Mohd Salim v. State of Uttarakhand WPPIL 126/2014

ISSUE:

Whether the rivers have the same status as that of an individual?

Whether rivers can have the same legal rights as living people?

RULE:

A juristic person, like any other natural person, is conferred with rights and obligations and dealt with according to law; similarly, rivers are considered living beings for the well-being of society at large.

The doctrine of parens patriae translates to “parent of the nation.” It refers to the power of the state to intervene against an abusive or negligent parent, legal guardian, or informal caretaker and to act as the parent of the child, individual, or animal who needs the protection.

"Loco Parentis"; this Latin phrase means “instead of a parent.” it means the legal responsibility of some person or organization to perform some of the functions or responsibilities of a parent.

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Statutory Regimes

Sirikoti Narayana Rao and Ors. v. A.P. Pollution Control Board 2007 SCC OnLine AP 133

ISSUE:

Whether the Andhra Pradesh Pollution Control Board (APPCB) had a duty to control the dust emanating from stone crushers in C. Rayavaram village of East Godavari District?

Did the APPCB violate the precautionary principle in dealing with the issue of environmental pollution?

RULE:

Duty of the Pollution Control Board: The case establishes that the Andhra Pradesh Pollution Control Board (APPCB) has a statutory duty to protect the environment and prevent pollution. This duty is derived from environmental laws and regulations that govern the functioning of the APPCB.

Compensation for Harm: The court orders the industrial unit to pay compensation to the affected villagers for the damage caused to their health and property. This reinforces the principle that those who cause harm or violate the law must be held accountable and provide restitution to the affected parties.

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Statutory Regimes

M C Mehta v. Union of India, AIR 2002 SC 1696 (CNG Vehicles Case)

ISSUE:

Whether Delhi has reached a higher pollution level, which is also affecting people's health?

Whether the existing environmental laws require the government to take measures to control air pollution in the interest of public health caused due to heavy vehicles?

RULE:

Article 21 of the constitution does not merely include the right to life and personal liberty. The right to life aspect of article 21 also encompasses a life more than a “mere animal existence” , therefore article 21 also provides for an inherent right to live in a clean and healthy environment.

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Statutory Regimes

Dileep Nevatia v. Union of India MANU/GT/0102/2016

ISSUE:

Whether the use of multi-tone horns and sirens by vehicles, including horns and sirens in ambulances and Police vehicles, violates the Noise Pollution (Regulation and Control) Rules, 2000?

RULE:

The case was guided by the principles of natural justice, and the rule of law applied was that the use of sirens and multi-tone horns should be regulated and restricted to emergency vehicles only.

Rule 4 of the Noise Pollution (Regulation and Control) Rules, 2000 states that the noise levels in any area/zone shall not exceed the ambient air quality standards in respect of noise as specified in the Schedule, and the authority shall be responsible for the enforcement of noise pollution control measures and the due compliance of the ambient air quality standards in respect of noise.

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