Income Tax Act 1961 - The Legal Chamber

The Supreme Court held that a temporary lull in business activities does not amount to cessation of business. The absence of a permanent establishment or a subsisting contract is not determinative; continuous business efforts, such as correspondence and bidding, suffice to constitute "carrying on business" for claiming deductions under Sections 37 and 71 and carry-forward of depreciation under Section 32(2) of the Income Tax Act. Facts Of The Case: The appellant, Pride Foramer S.A., a French non-resident company engaged in oil drilling, was awarded a 10-year contract by ONGC in 1983, which concluded in 1993. A subsequent drilling contract was awarded only in October 1998, formalized in January 1999. During the interregnum assessment years (1996-97, 1997-98, 1999-2000), the comp...

The Supreme Court delivered a split verdict on the interplay between Sections 144C and 153 of the Income Tax Act, 1961. The key legal question was whether the detailed procedure and timelines under Section 144C for eligible assessees operate within or in addition to the limitation period prescribed under Sections 153 for passing assessment orders. The divergence of opinion led to the matter being referred to a larger bench for final determination. Facts Of The Case: The case involved several foreign companies, including Shelf Drilling Ron Tappmeyer Ltd., engaged in oil exploration in India. For Assessment Years 2014-15 and 2018-19, the companies filed returns declaring losses. Their cases were selected for scrutiny, and the Assessing Officers passed draft assessment orders ...

Tag: Income Tax Act 1961

Supreme Court Allows Business Expense Deduction for Firm in “Lull Period” Between Contracts

Key Income Tax Ruling: Supreme Court Divided on Limitation Period Under Sections 144C & 153