Category: Sources of Tax Laws

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.

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.

ISSUE:

Whether the imposition to levy entry tax in relation to Entry 52 List II of Schedule VII violative of Article 301 of the Constitution?

Whether the entire State or any part will be covered as a “local area” for entry tax?

Whether the Haryana Local Area Development Act, 2000 is violative of Article 301 and Article 304 of the Constitution of India?

RULE:

Entry tax is legitimate under the constitutional framework since Entry 52 of the State List provides for the levy of entry law. Entry taxes are a sort of tax that state governments apply on the transportation of commodities between jurisdictions. When entering the products, it is paid to the state governments. Many states have implemented and announced entry tax legislation in response to this clause. But unless a law is in accordance with other provisions listed in the Constitution, being listed in the Seventh Schedule does not make it constitutionally valid.

ISSUE:

Whether tax can be levied on hypothetical income or income that has yet to be received?

RULE:

Section 4 of the Income Tax Act, 1961 provides for the charge of income tax on the total income of a taxpayer. The section lays down the scope of taxable income, which includes all income from whatever source derived, subject to certain exemptions and deductions.

Section 145 of the Income Tax Act, 1961 provides the method of accounting by the individual taxpayer. To maintain a similar process of recording income, expenses, assets, and liabilities of every business, certain standards are designed which are known as the methods of accounting.

ISSUE:

Whether the income of the assessee, Emil Webber, will be placed under which head?

RULE:

According to Section 56(1) of the Income Tax Act, 1961, any income, that is not exempt from tax and has to be included in the total income, shall be chargeable to tax under the head 'Income from Other Sources' if it is not chargeable to income tax under any of the following heads: Salaries. Income from house property, Profits and gains from business or profession.

ISSUE:

Whether the amount received by the assessee would be the income of the company as defined in Section 5(1)(c) of the Income Tax Act, 1961?

RULE:

Section 5 of the Income Tax Act, 1961 states the provisions relating to income that is taxable in the hands of the person during the previous year. Once the income is taxed on an accrual basis, tax need not be paid during the actual receipt of such income.