PROBLEM QUESTION

[Link]. X was not is chennai but he conducted competition with The prized money
through a news paper printed and published from calcutta having a wide
circulation in chennai. The tamil nadu government levied tax to Mr. X for
carrying on business in the state. Whether Mr. X the organizer of the competitor
who was outside the state of tamil nadu shall be validly tax under the act.

Facts:
Mr. X, residing outside Tamil Nadu (in Calcutta), organized a competition with
prize money through a newspaper printed and published in Calcutta, which had
wide circulation in [Link] Tamil Nadu Government levied tax on Mr. X,
claiming he carried on business in the state.

ISSUES:
➢ Whether Mr. X was carrying on business within Tamil Nadu?
➢ Can the Tamil Nadu Government levy tax on a person residing outside the
state?
➢ Does the circulation of newspapers amount to business activity in Tamil Nadu?

LEGAL PROVISION:
Under the Tamil Nadu General Sales Tax Act and principles of territorial nexus, a
state can levy tax only if the business activity has a sufficient connection (nexus)
with that [Link] Constitution of India – Article 245 & 246 – restricts a state’s
power to impose tax beyond its territorial limits.

ANALYSIS ON THE ISSUE

Whether Mr. X was carrying on business within Tamil Nadu?
➤ No, Mr. X was not carrying on any business in Tamil Nadu. The competition was
organized and controlled entirely from Calcutta, and mere newspaper circulation
in Tamil Nadu does not amount to carrying on business there.

Can the Tamil Nadu Government levy tax on a person residing outside the state?
➤ No, the Tamil Nadu Government cannot levy tax on Mr. X because there is no
territorial connection (nexus) between his business activity and the State of Tamil
Nadu. Taxing power is limited to activities within the state’s territory.

Does the circulation of newspapers amount to business activity in Tamil Nadu?

➤ No, the circulation of a newspaper in Tamil Nadu does not make Mr. X’s
competition a local business activity. The source and control of the competition
remained in Calcutta. Hence, it cannot be treated as business carried on in Tamil
Nadu.

CASE LAW:
Tata Iron & Steel Co. Ltd. v. State of Bihar (1958 AIR 452 SC)
– The Supreme Court held that a state cannot impose tax unless there is a
territorial nexus between the state and the taxable event.
State of Bombay v. R.M.D. Chamarbaugwala (1957 AIR 699 SC)
– The Court ruled that competitions involving skill or chance organized from
outside the state cannot be taxed by the state merely because newspapers
circulate within its territory.

DECISION:
The competition was organized from Calcutta, and Mr. X did not conduct any
business activity within Tamil [Link], there is no territorial nexus between
Mr. X and the State of Tamil Nadu.

CONCLUSION:
The Tamil Nadu Government cannot validly levy tax on Mr. X, as he was not
carrying on business within the state, and the circulation of newspapers alone
does not constitute taxable business activity. Therefore, the levy of tax is invalid
under the constitutional principle of territorial nexus.
___________________________________________________________________

[Link] GOVERNMENT LEVIED TAX ON MOTOR VEHICLE USED WITHIN THE STATE
IN ANY PUBLIC PLACE OR KEPT FOR USE IN THE STATE. THE AUTOMOBILE
TRANSPORTATION CLAIMS THAT TAX CALIM HIT THE FREEDOM OF. STATE
DECIDE.

Facts:
The State Government imposed a tax on motor vehicles that are used or kept for
use in any public place within the state.
The Automobile Transport Company challenged this tax, claiming it violates their
freedom of trade, commerce, and intercourse guaranteed under Article 301 of the
Constitution.
Issues:
➢ Whether the motor vehicle tax restricts freedom of trade and commerce
under Article 301?
➢ Whether such a tax is compensatory or regulatory in nature?
➢ Can the State Government validly levy this tax under its legislative powers?

Legal Provisions:
➢ Article 301 – Freedom of trade, commerce, and intercourse throughout India.
➢ Article 304(b) – Permits states to impose reasonable restrictions in the public
interest.
➢ Seventh Schedule, List II, Entry 57 – Gives states the power to levy tax on
vehicles used or kept for use within the state.

Case Law:
Automobile Transport (Rajasthan) Ltd. v. State of Rajasthan (AIR 1962 SC 1406)
The Supreme Court held that —

“The imposition of a tax on motor vehicles used or kept for use within the state
is not a restriction on the freedom of trade, commerce, or intercourse under
Article 301 of the Constitution. It is a compensatory tax, meant to cover the cost
of road maintenance and facilities provided for vehicle users.”

Hence, the tax was declared constitutional and valid, and the State Government
had the legislative competence under Entry 57, List II (State List) to levy it.

Decision:
The Supreme Court held that the motor vehicle tax is valid.
It is a compensatory tax, not a restriction on free trade. The tax is imposed to
maintain roads and provide facilities for motor vehicle users.

Analysis of the Decision with Issues:

ON Issue 1: The tax does not violate Article 301, as it facilitates rather than
restricts trade.
ON Issue 2: It is compensatory, meaning it covers the cost of services provided by
the state.
ON Issue 3: The state is empowered under Entry 57, List II to levy such a tax.
Conclusion:
The motor vehicle tax levied by the state is constitutional and valid. It does not
infringe upon the freedom of trade and commerce, as it is a regulatory and
compensatory measure, upheld by the Supreme Court in Automobile Transport
(Rajasthan) Ltd. v. State of Rajasthan (1962).
___________________________________________________________________
[Link] the Y village The villagers were paying Rs 100 per day to the head man as
tax in the place of a custom to rent a-free a days labour. This was happened
every year and the practice had been continuing for generation. Discuss its
validity.
Facts:
In Village Y, villagers paid Rs. 100 per day to the headman as a customary tax,
instead of providing a day’s free labour. This practice had been continued for
generations as a customary payment imposed by the village headman.
Issues:
➢ Whether the payment of Rs.100 per day to the headman is a valid tax under
law.
➢ Whether such a customary tax can be imposed without legal authority.
➢ Whether this practice violates Article 265 of the Constitution of India.
Legal Provision:
➢ Article 265 of the Constitution of India:
➢ “No tax shall be levied or collected except by authority of law.”
➢ Only the Legislature has the power to impose taxes by statutory authority.
➢ Customary practices cannot override constitutional provisions.
Decision:
The payment made by villagers as a customary tax has no legal authority and is
therefore invalid. The headman has no power to levy or collect tax without
authorization by law.
Issue 1:
The payment of Rs.100 per day to the headman cannot be treated as a valid tax,
since it is not imposed under any law enacted by the Legislature.
Issue 2:
A customary practice cannot create a legal obligation to pay tax unless it has
statutory backing. Hence, the customary tax is invalid.
Issue 3:
The practice violates Article 265 of the Constitution, which mandates that no tax
shall be levied or collected except by authority of law.
Therefore, the payment made by villagers is unconstitutional, unauthorized, and
void.

Case Law:
A. Venkata Subba Rao v. State of Andhra Pradesh (AIR 1965 SC 1773)
Any levy or collection without legislative sanction is void under Article 265.
Custom or executive action cannot substitute for statutory authority.

Conclusion:
The practice in Village Y of paying Rs.100 per day as a customary tax is invalid.
It violates Article 265, as the tax was not authorized by law.
Hence, the collection by the headman is unconstitutional and unenforceable.

The municipalities of punjab are governed by 2 enactments. The numerous little

ones are statutory bodies created and controlled by the punjab municipal act
1911 and few large ones by the punjab municipal corp act 1976. In April 1977 the
state requires various municipal bodies in the state to impose tax on the sale of
Indian made foreign liquor at Rs. 1 per bottle. The municipal authority is having
failed to take action. The petitioner challenged the constitutional validity of the
said statute and The levy decide.

Facts:
The Punjab Government directed all municipal bodies to levy a tax of ₹1 per
bottle on the sale of Indian Made Foreign Liquor (IMFL) under the Punjab
Municipal Act, 1911 and the Punjab Municipal Corporation Act, 1976. The
municipal authorities did not act, and the petitioners challenged the
constitutional validity of the government’s direction, claiming it exceeded
state powers.

Issues:
➢ Whether the State Government has the authority to direct municipalities
to impose a tax.
➢ Whether such tax is constitutionally valid under Article 265 of the
Constitution.
➢ Whether the tax on sale of liquor falls within the municipal or state taxing
power.

Legal Provisions:
Article 265 – No tax shall be levied or collected except by authority of law.
Punjab Municipal Act, 1911 and Punjab Municipal Corporation Act,
1976 – Empower municipalities to levy local taxes, but not through mere
executive direction.
Entry 52, List II (State List) – Grants state power over taxes on goods
and luxuries including liquor.
Decision:
The Court held that the State Government’s direction was unconstitutional,
as a tax cannot be imposed by executive order without legislative sanction.
Only the municipal body has the power to levy taxes as per the Act.

Case Law:
Case: Municipal Corporation, Patiala v. State of Punjab (1978)
Held: The government cannot compel municipalities to impose taxes unless
authorized by statute. The executive order was ultra vires and invalid.

Analysis of the Issue:

The power to tax lies only with the legislature, not the executive. The direction
from the state was administrative and lacked legal force. Hence, the levy
violated Article 265 and the principle of separation of powers.

Issue 1:The State Government cannot direct municipalities to impose a tax, as

taxation powers must be exercised only under legislative authority, not by
executive order.
Issue 2:The levy of ₹1 per bottle is unconstitutional, since it was not backed by
any statutory provision under the Punjab Municipal Act, 1911 or the Punjab
Municipal Corporation Act, 1976.
Issue 3:The tax violates Article 265 of the Constitution, which mandates that
no tax shall be levied or collected except by authority of law.
Hence, the government’s direction to impose the tax is ultra vires (beyond its
powers) and invalid.

Conclusion:
The levy of ₹1 per bottle imposed through government direction was
unconstitutional and void, as it lacked statutory authority. The power to tax
must come from a valid law, not an executive instruction.
The cotton merchant had to meet some export targets. In a promotion scheme
started by the government and it also announces that if they fell short of target
then an additional exercise duty was to be levie on the shortfall by the
government decide.

Facts:
A government scheme for cotton merchants required meeting certain export
targets. The scheme stated that if merchants failed to meet the target, an
additional excise duty would be imposed on the shortfall. The merchant
challenged the levy, arguing that the government had no authority to impose such
a conditional duty.
Issues:
➢ Whether the government can impose an excise duty based on failure to meet
export targets.
➢ Whether such a conditional levy is authorized under the Central Excise Act,
1944.
➢ Whether the levy violates Article 265 of the Constitution (no tax except by
authority of law).

Legal Provisions:
Article 265 of the Constitution – No tax shall be levied or collected except by
authority of law.

Section 3, Central Excise Act, 1944 – Provides for levy and collection of excise duty
on manufacture or production of goods, not on export performance.

Decision:
The Court held that the excise duty imposed on the shortfall of export target was
invalid, as it was not based on manufacture or production but on non-fulfilment of
a condition. Such a levy lacked statutory authority and violated Article 265.

Ram carries the business in the manufacture & sale of rubber tiers . and then he
owns a rubber farm &utilized this in the production of rubber [Link]
whether the income earned from the process of rubber into rubber tiers
constitute agricultural income.

Facts:
Ram owns a rubber farm and uses the raw rubber from his farm to manufacture
and sell rubber tyres. The question is whether the income from sale of tyres can
be treated as agricultural income.

Issues:
➢ Whether processing rubber into tyres is part of agricultural operations.
➢ Whether such income is exempt under Section 10(1) of the Income Tax Act,
1961.
➢ Whether manufacturing changes the character of agricultural produce.
Legal Provision:
Section 2(1A) – Defines agricultural income.
Section 10(1) – Exempts agricultural income from total income.
Only income from basic or ordinary processing to make produce marketable is
agricultural.

Decision:
The income from manufacture of tyres is not agricultural income as it involves
industrial processing, not ordinary agricultural operations.

Analysis/Justification:
Agricultural income ends when produce reaches a marketable state. Converting
raw rubber into tyres is a manufacturing process, changing its form and nature
completely. Hence, it becomes business income.

Case Law:
Karimtharuvi Tea Estates Ltd. v. State of Kerala (1963) – Processing beyond the
marketable stage is not agricultural income.

Conclusion:
Income from manufacturing and selling tyres is taxable business income, not
agricultural income.

___________________________________________________________________

[Link] came to India 1st time during the P.Y 2019-2020 .During the p.y he
stayed in India for
I)50 Days
II)183 Days
III)&153 Days
Determine his Residencial status for the A.Y 2020 -24.
Facts:
Sandy came to India for the first time in P.Y. 2019–20. His stay durations:
(i) 50 days (ii) 183 days (iii) 153 days

Issues:
Whether Sandy becomes a resident under Section 6(1).
Whether he qualifies as Resident and Ordinarily Resident (ROR) or Resident but
Not Ordinarily Resident (RNOR).
Whether shorter stays affect his status.

Legal Provision:
Section 6(1) – Basic conditions for residency:
(a) Stay ≥182 days in India during the P.Y., or
(b) Stay ≥60 days in P.Y. and ≥365 days during preceding 4 years.

Section 6(6) – Tests for Ordinary or Not Ordinarily Resident.

Decision:
(i) 50 days: Non-Resident
(ii) 183 days: Resident (but Not Ordinarily Resident)
(iii) 153 days: Non-Resident
If Sandy stays 50 days or 153 days, he is Non-Resident.
If he stays 183 days, he becomes Resident but Not Ordinarily Resident (RNOR).
He cannot be ROR as he is visiting India for the first time.

Analysis/Justification:
Since Sandy came to India for the first time, he cannot satisfy the 365-day test of
the previous four years. Hence, even if he stays for 183 days, he becomes Resident
but Not Ordinarily Resident (RNOR).
Analysis (each sub-scenario)

General point: Sandy has no prior presence in the 4 preceding years (this is his
first visit), so the “365 days in 4 preceding years” criterion cannot be met.

(i) 50 days in P.Y.

➢ Does not satisfy 182-day test.
➢ Does not satisfy clause (b), since 50 < 60 and prior 4 years days = 0.
→ Non-Resident (NR).

(ii) 183 days in P.Y.

Satisfies Section 6(1)(a) (≥182 days).
But since he has no prior residency, he cannot be ROR (requires residency in at
least 2 of 10 preceding years and 730 days in 7 preceding years). He is Resident for
the year, and because prior tests for ordinary residence are not met, he will
normally be Resident but Not Ordinarily Resident (RNOR).
→ Resident but Not Ordinarily Resident (RNOR).
(iii) 153 days in P.Y.
153 < 182; also < 60? No, it's >60 but clause (b) requires 365 days in previous 4
years — not satisfied.
→ Non-Resident (NR).

Case Law:
CIT v. Deepak Kumar Modi (2007) – The number of days must strictly satisfy
Section 6 tests.

Courts have applied Section 6 strictly — presence must meet numerical tests.
See e.g. rulings such as Keshav Mills Ltd. v. CIT (physical presence counting
principle) and other authorities stressing strict compliance with day counts.

Conclusion:
(i) & (iii) Non-Resident
(ii) Resident but Not Ordinarily Resident.

"R"was Born in Lahore in [Link] has been staying in America since [Link]
returns on 31/03/2020. Determine his R.S for the A.Y 2021-21.

Facts:
“R” has been staying in America since 1971 and came back to India only on
31/03/2020.

Issues:
➢ Whether R satisfies the stay conditions for residential status.
➢ Whether his single-day stay qualifies as residence.
➢ Whether he becomes RNOR or NR.

Legal Provision:

➢ Section 6(1) – Basic conditions: stay ≥182 days or 60 days + 365 days preceding
4 years.
➢ Section 6(6) – Resident but Not Ordinarily Resident if not resident in 9 out of
10 preceding years.

Decision:
R stayed only 1 day (31 March 2020). Hence, he is a Non-Resident for A.Y. 2020–
21.
Analysis/Justification:

A one-day stay does not satisfy any condition of Section 6(1). Thus, R cannot be
treated as resident.

“R” stayed in India for only one day (31-03-2020).

He does not satisfy any of the stay conditions under Section 6(1).
Hence, he cannot be treated as a resident for that year.

ON ISSUE NO.1:R’s presence in P.Y. 2019–20 = 1 day → far below 182.

ON ISSUE NO 2:He cannot meet the 60+365 test either (lack of prior days).
ON ISSUE NO 3:So R is a Non-Resident (NR) for the P.Y. 2019–20 (A.Y. 2020–21).

Note: some cases treat even part of a day as presence, but count still will be 1
day—insufficient.
Case Law:
Keshav Mills Ltd. v. CIT (1953) – Residential status depends purely on physical
presence and days of stay.

Conclusion:
R is a Non-Resident for the A.Y. 2020–21.
___________________________________________________________________
[Link] the reason how the following attract income tax in India @the hands of
the recipient.
A) income from HOUSE PROPERTY of the political Party.
B)Family persion by the widow of member of the armed force.
C)contribution to National Pension Scheme.

A) Income from House Property of a Political Party

Facts (typical): Political party owns property and earns rent or other receipts from
letting.

Legal provisions

Section 22–24 — Income from house property; annual value concept.

Section 13A — Specific exemption for income of political parties (subject to

conditions: maintaining books of account and filing returns in prescribed form and
manner; only income from voluntary contributions is exempted from tax if
conditions fulfilled).

Analysis
Absent the Section 13A conditions, rental income is assessable as Income from
House Property under Section 22. Political parties are not automatically exempt
merely by being political entities — they must comply with statutory conditions to
claim [Link] the party satisfies documentary/accounting conditions under
Section 13A, income can be exempted to the extent provided. The exemption is
not universal or automatic.

Case law
Courts have held exemption under 13A depends on compliance with conditions;
failure to maintain accounts or file return disqualifies exemption (see High
Court/Supreme Court rulings interpreting Section 13A, e.g., Indian National
Congress v. CIT style decisions).

Conclusion
Rental/house property income of a political party is taxable unless the statutory
conditions of Section 13A are satisfied — then it may be exempt (subject to
statutory limits and compliance).

B) Family pension (widow of armed forces member)

Facts
Widow receives family pension after death of serving/former armed forces
member.

Legal provisions
Income from Other Sources (Section 56) — family pension taxed as income from
other sources.

Section 57(iia) — allows deduction of a fixed percentage (one-third or actual) for

family pension (specifics depend on rules).

Section 10(19) — certain pensions/gratuities to armed forces personnel or their

dependents may be exempt (e.g., where granted in relation to death in operations,
gallantry awards — specific statutory exemptions and notifications apply).
Analysis
General rule: Family pension is taxable under the head Income from Other
Sources in the hands of the recipient; standard deductions allowed (Section 57).
Exception: If the pension is specifically exempted by statute (e.g., certain
pensions/grants to armed forces dependents linked to gallantry or certain
specified payments), then it is not [Link] nature of the pension (whether it’s
family pension or a special grant) and whether it falls under a specific exemption
must be examined.

Conclusion
Family pension is generally taxable under Income from Other Sources, with
allowable deductions; specific exemptions available only where
statute/notification so provides (e.g., certain armed-forces related grants).

C) Contribution to National Pension System (NPS)

Facts
Individual contributes to NPS (Tier I/ Tier II) during employment.

Legal provisions
Section 80CCD(1) — deduction for employee’s contribution (subject to limits,
e.g., percentage of salary).

Section 80CCD(1B) — additional deduction up to ₹50,000 for NPS contributions

(over and above 80C).

Tax treatment at withdrawal: The corpus/annuity withdrawal has its own tax
treatment under Sections 10(12A) etc. (note: exit/withdrawal rules affect
taxability later).

Analysis
Contributions by the employee are allowed as deductions (subject to caps) — thus
not taxed as income. This is an incentive for retirement [Link] deduction
reduces taxable income in the year of contribution. However, taxability at the
time of withdrawal (partial exemption/annuity taxable) depends on the provisions
in force (statutory amendments may affect the taxability of the corpus/annuity).
Conclusion
Employee contributions to NPS are deductible under Sections 80CCD(1) and
80CCD(1B); such contributions are not treated as taxable income in the hands of
contributor in the year of contribution (subject to limits). Subsequent taxability on
withdrawal/annuity governed by separate provisions.

OVER ALL Conclusion

(A) Political party HP income taxable unless Section 13A compliance → exempt;
(B) (B) Family pension taxable under Other Sources except specific statutory
exemptions;
(C) NPS contributions deductible under Sections 80CCD(1)/(1B) (not taxable when
contributed, subject to withdrawal rules later).

Mr. Mohan is a Resident Individual.

He deposits an amount A Sum of 60k LIC every year for the maintenance of the
disables grand father who is wholly dependant on him. The disability is one
which comes with the persons with disable equal opportunity protection of
Rights and fee participation act, 1995. A copy of the Certificate from the medical
Authority is submitted .Compute the amount Deduction Available Sec 80DD for
Assessment yr 2022-23

Facts of the Case

Mr. Mohan is a resident individual who pays ₹60,000 per annum as a premium to
the LIC for the maintenance of his disabled grandfather, who is wholly dependent
on [Link] disability is certified under the Persons with Disabilities (Equal
Opportunities, Protection of Rights and Full Participation) Act, 1995, and a valid
medical certificate is submitted to the assessing officer.

Issues Involved
➢ Whether Mr. Mohan is eligible to claim a deduction under Section 80DD for
the LIC premium paid.
➢ What is the maximum amount of deduction available under this section for A.Y.
2022–23?
➢ Whether the actual amount paid (₹60,000) affects the quantum of deduction.

Legal Provision
Under Section 80DD of the Income Tax Act, 1961:

A resident individual or HUF can claim a fixed deduction for:

Expenditure incurred for the medical treatment, nursing, training, and
rehabilitation of a dependent person with disability, or

Payment/deposit to any approved insurance scheme (like LIC) for the

maintenance of such dependent.

Deduction Limits (A.Y. 2022–23):

₹75,000 – for a person with disability (at least 40% disability).

₹1,25,000 – for a person with severe disability (80% or more).

Important Condition: The deduction is fixed and not based on the actual amount
spent.

Answer for the Issue / Analysis

Even though Mr. Mohan pays ₹60,000, the deduction under Section 80DD is not
proportional to the amount spent.
If the dependent (grandfather) has:

Disability ≥ 40% but < 80%, deduction = ₹75,000.

Severe Disability ≥ 80%, deduction = ₹1,25,000.

Since the question does not specify the percentage of disability, it can be
considered normal disability (≥40%), so deduction allowed = ₹75,000.
Thus, Mr. Mohan can claim ₹75,000 under Section 80DD for A.Y. 2022–23.

Case Law

CIT v. K. Meenakshi [2006] 286 ITR 612 (Madras HC)

Held: The court held that the deduction under Section 80DD is a fixed deduction
and does not depend on the actual amount incurred. The assessee is entitled to
the full deduction amount prescribed by law if conditions are satisfied.

Decision

Mr. Mohan satisfies all the conditions under Section 80DD:

He is a resident individual.
The dependent (grandfather) is wholly dependent on him.
The disability is certified under the 1995 Act.
LIC premium paid qualifies as approved insurance contribution.
Hence, he is eligible for a deduction of ₹75,000 under Section 80DD.

Conclusion
The deduction under Section 80DD is available to Mr. Mohan for the maintenance
of his dependent disabled grandfather.
The actual amount paid (₹60,000) is irrelevant, and he can claim a fixed deduction
of ₹75,000 (or ₹1,25,000 if severe disability).
This provision promotes social welfare and supports individuals maintaining
dependents with disabilities.
___________________________________________________________________
Mr. Rakesh, a Businessman, whose total income (before allowing deduction
under section 80 GG) for A.Y. 2022-23 is 4,60,000 paid house rent at 12.000p.m.
in respect of residential accomodation occupied by him at Mumbai. compute the
deduction allowable to him under dec. 80GG for A.Y.2022-2023.

Facts of the Case

Assessee: Mr. Rakesh (Businessman)
Assessment Year: 2022–23
Total Income (before 80GG deduction): ₹4,60,000
Rent paid: ₹12,000 per month = ₹1,44,000 per annum
Residential accommodation: Rented house in Mumbai
Condition: He does not receive any House Rent Allowance (HRA) and does not
own any residential property at the place of residence or employment.

Issues Involved
➢ Whether Mr. Rakesh is eligible for deduction under Section 80GG.
➢ What is the maximum amount of deduction allowable under this section?
➢ How to compute the deduction based on income and rent paid.

Legal Provision
Section 80GG of the Income Tax Act, 1961 provides deduction for rent paid for
residential accommodation when HRA is not received.

Conditions:
The assessee must be an individual (self-employed or salaried without HRA).
Should not own any house at the place where he resides or carries on business.
Should not claim HRA exemption under Section 10(13A).
Must file a declaration in Form 10BA confirming these conditions.

Deduction under Section 80GG = Least of the following:

₹5,000 per month = ₹60,000 per year
25% of total income (before 80GG deduction)
= 25% of ₹4,60,000 = ₹1,15,000

Rent paid – 10% of total income = ₹1,44,000 – ₹46,000 = ₹98,000

Answer for the Issue / Computation

Now, the least of the above three is:
₹60,000
₹1,15,000
₹98,000
Deduction allowable under Section 80GG = ₹60,000

Case Law

CIT v. Smt. Sharda Devi [2005] 277 ITR 433 (Raj.)

Held: Deduction under Section 80GG can be claimed only when the assessee does
not own any residential property and satisfies all the prescribed conditions. The
deduction amount must be restricted to the least of the three limits prescribed.

Decision
Since Mr. Rakesh:
Does not receive HRA,
Does not own any house at the place of business/residence,
Pays rent for his accommodation,
he fulfills the conditions of Section 80GG and is entitled to claim deduction of
₹60,000 for A.Y. 2022–23.

Conclusion
Mr. Rakesh is eligible for deduction under Section 80GG, and the deduction
amount allowable is ₹60,000, being the least of the three limits.
This section provides relief to self-employed individuals or salaried persons
without HRA for rent paid towards their residential accommodation.
Final Deduction under Section 80GG (A.Y. 2022–23): ₹60,000
Assessee filed return of income declaring total income of Rs. 75L 31,769.
subsequently when the income tax department. received info. regarding
existence of a foreign bank account, the assessee offered to pay the tax on the
amount lying in foreign bank account. Later, assesses filed appeal against the
penalty order passed by the assessing officer. The assesses also filed in the stay
application before the addi. chief metropolitan Magistrate against launch of
prosecution. the ground that the appeal before the appellate authority is
pending . The Addl. Cmm dismissed the stay application filed by the assesse
Decide-

Facts of the Case

The assessee filed a return of income declaring total income of ₹75,31,769.
Later, the Income Tax Department received information about the existence of an
undisclosed foreign bank account.
Upon discovery, the assessee offered to pay tax on the undisclosed foreign
income.
The Assessing Officer (AO) initiated penalty and prosecution proceedings for
concealment of income.
The assessee filed an appeal against the penalty order and also filed a stay
application before the Addl. Chief Metropolitan Magistrate (ACMM) requesting a
stay on prosecution, citing that the appeal is pending.
The ACMM dismissed the stay application.

Issues
➢ Whether the pendency of appeal before the appellate authority bars
prosecution proceedings under the Income Tax Act.
➢ Whether the Addl. CMM was justified in dismissing the stay application.
➢ Whether the assessee’s subsequent offer to pay tax can absolve him from
prosecution for earlier concealment of income.

Legal Provisions
A. Section 276C – Income Tax Act, 1961
Deals with willful attempt to evade tax, penalty, or interest.
If an assessee willfully conceals income or evades tax, prosecution may be
initiated.
B. Section 278E – Presumption as to Culpable Mental State
The court shall presume the existence of a guilty mind, unless the assessee proves
otherwise.

C. Section 271(1)(c)
Provides for penalty for concealment of income or furnishing inaccurate
particulars.

D. Principle under Criminal Law

Pendency of appeal or payment of tax does not automatically suspend or bar
prosecution, unless a higher authority or court issues a specific stay order.

Answer for the Issue / Analysis

➢ The pendency of appeal against the penalty order does not prevent
prosecution proceedings under the Income Tax Act.
➢ Payment of tax after detection does not nullify the offense of concealment.
➢ The prosecution is independent of assessment proceedings, as held by the
courts.
➢ Hence, the Addl. CMM rightly dismissed the stay application since there was
no legal ground to stay prosecution merely because an appeal was pending.

Case Law
Case: P. Jayappan v. S.K. Perumal, First ITO (1984) 149 ITR 696 (SC)
Held:
The pendency of reassessment or appellate proceedings does not bar prosecution
for offenses under the Income Tax Act. Both can proceed simultaneously.
The Supreme Court ruled that the criminal court has jurisdiction to try the case
even when tax appeals are pending.

Decision
The assessee concealed income by not disclosing the foreign bank account.
Subsequent payment of tax does not erase the original concealment.
The Addl. CMM was correct in dismissing the stay application, as no statutory bar
exists to prevent prosecution merely due to pending appeal.

Conclusion
The Addl. Chief Metropolitan Magistrate rightly dismissed the stay application
since:
The appeal pending before the appellate authority does not bar prosecution, and
Payment of tax after detection does not exonerate the assessee from penalty or
prosecution under Sections 276C and 271(1)(c).
Therefore, the prosecution proceedings were valid, and the assessee remains
liable for both penalty and possible prosecution for concealment of income.

DECISION
Pendency of appeal does not stay prosecution — (P. Jayappan v. S.K. Perumal,
1984, SC).During the year 2021-22, sky ltd an indian company Contributed a sum
of 3.5L to an electoral of incurred expenditure of 52,000 on advertisement in
brochure of a political party & the Co. eligible for deduction in respect of such
contribution of the expenditure assuming that the contribution was made by
check if to what is the amount of deduction
___________________________________________________________________

Waane, an African cricket player has been coming India since 1995-1996, Every
year to play cricket has been staying here for about 4 months. Explain his
residential Status for the assessment year 2021.

Facts of the Case

Assessee: Mr. Waane, an African cricket player.
He has been visiting India every year since 1995–96 to play cricket.
He stays in India for about 4 months each year (approximately 120 days).
The question is to determine his residential status for the Assessment Year 2021–
22 (i.e., for the Previous Year 2020–21).

Issues Involved
➢ Whether Waane can be considered a Resident or Non-Resident in India under
Section 6 of the Income Tax Act, 1961.
➢ Whether his repeated visits to India affect his residential status.
➢ What are the tax implications of his residential status for income earned in
India.

Legal Provisions
Section 6 – Residential Status (Income Tax Act, 1961)
Basic Conditions:
An individual is Resident in India if any one of the following is satisfied:
He is in India for 182 days or more during the relevant previous year, OR
He is in India for 60 days or more in that year and for 365 days or more during the
4 preceding previous years.
Exceptions:
For foreign nationals visiting India for employment, sports, or business, only the
first condition (182 days or more) applies.
If not satisfying any of the above → Non-Resident.

Answer for the Issue / Analysis

Waane stays in India for only 120 days each year, which is less than 182 days.
Though he visits India every year, his total stay each year does not cross the
threshold required under Section 6(1).
Since he comes only to play cricket (a professional visit) and does not maintain
any permanent place of residence in India, he cannot be considered a resident.
Hence, he will be treated as a Non-Resident for the Assessment Year 2021–22.

Case Law
Case: D.T. & T.D. Devasher v. CIT (1957) 31 ITR 872 (Bom.)
Held:
The court held that mere physical presence for a few months each year does not
establish residence unless the stay meets the statutory time limit. Repeated visits
of short duration do not make one a resident under Section 6.

Decision
Based on the statutory conditions and the facts of the case:
Mr. Waane’s stay in India is less than 182 days every year.
He is a Non-Resident for the A.Y. 2021–22.
Only income earned or received in India (e.g., cricket match fees, endorsements in
India) is taxable in India.
Income earned outside India is not taxable for a Non-Resident.

Conclusion
Mr. Waane, being a foreign cricket player who stays in India for about 4 months
each year, does not satisfy the residency conditions under Section 6(1) of the
Income Tax Act, 1961.
Therefore, his residential status for the Assessment Year 2021–22 is that of a Non-
Resident, and he is liable to pay tax only on income accrued or received in India.
Final Status: Non-Resident (A.Y. 2021–22)
Case Law: D.T. & T.D. Devasher v. CIT (1957) 31 ITR 872 (Bom.)
ABC ltd., a restaurant with bar attached facility having the annual turnover for
1cr wishes to apply for composition levy under the CGST Act 2017. Advice. ABC
ltd about the maintainability.
Facts of the Case

Assessee: ABC Ltd. – operates a restaurant with a bar attached (i.e., supplies both
food and alcoholic liquor).
Annual turnover: ₹1 crore.
The company wishes to opt for the Composition Levy under Section 10 of the
CGST Act, 2017 for the upcoming financial year.
The issue arises as the business involves both taxable (restaurant) and non-taxable
(alcoholic liquor) supplies.

Issues
➢ Whether ABC Ltd. is eligible to opt for the composition scheme under Section
10 of the CGST Act, 2017.
➢ Whether supply of alcoholic liquor (a non-taxable supply under GST) affects
eligibility.
➢ What are the conditions and restrictions applicable for composition levy.

Legal Provisions
Section 10 of the CGST Act, 2017 – Composition Levy
Allows a registered taxable person whose aggregate turnover in the preceding
financial year did not exceed ₹1.5 crore (₹75 lakh in special category states) to pay
tax at a fixed rate instead of normal GST rates.

Applicable Rates (Notification No. 8/2017 – CT (Rate)):

1% (0.5% CGST + 0.5% SGST) – For manufacturers.
5% (2.5% CGST + 2.5% SGST) – For restaurants (not serving alcohol).
0.5% on turnover – For traders.

Conditions under Section 10(2):

A person is not eligible to opt for composition levy if he:
Is engaged in the supply of non-taxable goods or services under this Act.
Is engaged in inter-state supply.
Supplies goods through e-commerce operators liable to collect TCS.
Is a casual taxable person or non-resident taxable person.

Alcoholic liquor for human consumption is excluded from GST under Section 9(1)
of the CGST Act and is subject to State Excise laws.
Answer for the Issue / Analysis
Since ABC Ltd. operates a restaurant with bar attached, it supplies both:
Taxable supply: food and non-alcoholic beverages (covered under GST).
Non-taxable supply: alcoholic liquor (excluded from GST).

As per Section 10(2)(b), a person engaged in supply of non-taxable goods or

services cannot opt for the composition scheme.
Therefore, ABC Ltd. is not eligible to opt for composition levy under the CGST Act,
2017.

Case Law
Case: Union of India v. Mohit Minerals Pvt. Ltd. (2022) 4 SCC 481

Held:
The Supreme Court held that GST is applicable only to taxable supplies, and
certain items like alcoholic liquor remain outside the scope of GST.
Hence, businesses dealing in both taxable and non-taxable supplies cannot opt for
composition levy.

Decision
Since alcoholic liquor is not taxable under GST,
And Section 10(2)(b) specifically prohibits persons making non-taxable supplies
from availing composition scheme,
Therefore, ABC Ltd. is not entitled to apply for composition levy under the CGST
Act, 2017.

Conclusion
ABC Ltd., a restaurant with a bar attached, is not eligible to opt for the
Composition Scheme under Section 10 of the CGST Act, 2017, because:
It engages in non-taxable supply (alcoholic liquor),
Which is outside the purview of GST,
Hence, it violates the eligibility conditions of the composition scheme.

Conclusion:
ABC Ltd. cannot opt for the Composition Levy under the CGST Act, 2017.
Only restaurants not serving alcohol can avail the 5% composition rate.
Happy ltd, provides management consultancy Services without charge to Joy ltd.
in which Happy ltd has controlling sights The said consultancy has been provided
for the benefit of the entire group. Does it quality as a supply?

FACTS
Happy Ltd. provides management consultancy services to Joy Ltd. free of cost.
Happy Ltd. has a controlling interest in Joy Ltd. (thus, they are related entities).
The consultancy services are rendered for the benefit of the entire group, not for
any monetary consideration.

ISSUES
➢ Whether Happy Ltd. and Joy Ltd. can be considered related persons under the
CGST Act, 2017?
➢ Whether services provided without consideration between related persons
are treated as supply under GST?
➢ Whether management consultancy services provided by Happy Ltd. to Joy Ltd.
without consideration are liable to GST?

LEGAL PROVISIONS

Section 7(1)(a) of the CGST Act, 2017:

Defines “supply” to include all forms of supply of goods or services such as sale,
transfer, barter, exchange, license, rental, lease, or disposal for a consideration in
the course or furtherance of business.

Schedule I, Para 2 – CGST Act, 2017:

States that the supply of goods or services between related persons or distinct
persons, made without consideration, shall be treated as supply, if made in the
course or furtherance of business.

Explanation to Section 15 – CGST Act, 2017:

Defines “related persons” — persons are deemed related if one person controls
the other, or both are controlled by a common person.

ANSWER FOR THE ISSUES

Issue 1:
Yes, Happy Ltd. and Joy Ltd. are related persons as Happy Ltd. holds controlling
interest in Joy Ltd. (Section 15 explanation).
Issue 2:
Yes, even without consideration, the transaction is deemed a supply if it occurs
between related persons and is in the course of business (Schedule I, Para 2).

Issue 3:
The free consultancy service provided by Happy Ltd. to Joy Ltd. qualifies as a
supply under Section 7(1)(c) read with Schedule I, and hence, GST is applicable.

DECISION / CASE LAW

Case Law:
Cargill India Pvt. Ltd. v. Commissioner of CGST (2020)

Held:
The AAR held that such services between related entities, even without
consideration, constitute supply under Schedule I and are liable to GST.

CONCLUSION
Happy Ltd. and Joy Ltd. are related persons. Free consultancy service is in the
course of [Link] Schedule I, such a transaction is treated as supply even
without consideration. Hence, it qualifies as a supply and is taxable under GST.
___________________________________________________________________

An agent acting on behalf of reg. tax payer has an annual turnover 10L. Is it
compulsory for them to be registered under GST.

FACTS
An agent is acting on behalf of a registered taxpayer and earns an annual turnover
of ₹10 lakh.
The question is whether such an agent is required to obtain GST registration, even
though the turnover is below the general exemption limit of ₹20 lakh.

ISSUES
➢ Whether an agent supplying or dealing in goods/services on behalf of another
person is liable for compulsory registration under GST?

➢ Whether the threshold exemption limit of ₹20 lakh (₹10 lakh in special
category states) applies to such agents?
➢ Whether the agent’s annual turnover of ₹10 lakh exempts him from GST
registration?

LEGAL PROVISIONS

Section 22(1), CGST Act, 2017:

Every supplier is liable to be registered under GST if the aggregate turnover
exceeds ₹20 lakh (₹10 lakh in special category states).

Section 24(vii), CGST Act, 2017:

Notwithstanding Section 22, agents of a supplier who make supply of goods or
services on behalf of another taxable person are required to be registered
compulsorily, irrespective of turnover.

Definition (Section 2(5)):

“Agent” means a person, including a factor, broker, commission agent, arhatia, del
credere agent, or any other mercantile agent who carries on business on behalf of
another person.

ANSWER FOR THE ISSUES

Issue 1:
Yes, agents who act on behalf of another person in the supply of goods or services
must compulsorily register under GST (Sec. 24(vii)).

Issue 2:
No, the threshold limit of ₹20 lakh does not apply to such agents.

Issue 3:
Even though the turnover is ₹10 lakh, the agent must register under GST, since
compulsory registration applies to agents under Section 24.

DECISION

Case Law:
Amit Kumar Gupta v. Commissioner of CGST (2019)

Held:
The Authority for Advance Ruling (AAR) held that agents representing a registered
principal are mandatorily required to obtain GST registration, even if their
turnover is below the threshold limit, as per Section 24(vii) of the CGST Act, 2017.

CONCLUSION (IN SHORT)

The agent acts on behalf of a registered taxpayer Section 24(vii) overrides the
threshold limit under Section [Link], registration under GST is compulsory,
even though the agent’s turnover is ₹10 [Link], the agent must register
under GST.
___________________________________________________________________
xyz Ltd give diwali gift worth Rs5L. does it qualify as supply.

FACTS

XYZ Ltd., a registered company under the CGST Act, 2017, distributed Diwali gifts
worth ₹5,00,000 to its employees without any consideration. The issue arises as to
whether such distribution of gifts shall be considered a “supply” under GST and
whether it is liable to tax.

ISSUES

➢ Whether free Diwali gifts given to employees without consideration qualify as

a “supply” under Section 7 of the CGST Act, 2017?
➢ Whether such gifts are treated as supply between related persons under
Schedule I, even when given without consideration?
➢ Whether Input Tax Credit (ITC) on such gifts can be claimed or needs to be
reversed under Section 17(5)?

LEGAL PROVISIONS

Section 7(1)(a), CGST Act, 2017:

Supply includes all forms of supply of goods or services for a consideration in the
course or furtherance of business.

Schedule I, Entry 2:
Supply between related persons, made without consideration, shall be treated as
supply if it is made in the course or furtherance of business.
Explanation to Section 15:
Employer and employee are related persons under GST law.

Section 17(5)(h):
Input Tax Credit shall not be available on goods disposed of by way of gift.

ANSWER FOR THE ISSUES

Issue 1:
Gifts given without consideration do not qualify as supply unless covered under
Schedule I.

Issue 2:
Gifts to employees may qualify as supply between related persons, but as per
Circular No. 172/04/2022-GST, gifts up to ₹50,000 per employee per financial year
are not treated as supply.

Issue 3:
ITC is not available on gifts distributed, even if such gifts are in the course of
business (Section 17(5)(h)).

Case Law:
Biocon Ltd. v. Commissioner of Central Tax (2019) 110 [Link] 282 (AAR
– Karnataka)

Held:
Gifts and free samples given to employees are not considered supply if given
occasionally and voluntarily without any contractual obligation. However, ITC
reversal is required under Section 17(5)(h).

CONCLUSION
Diwali gifts worth ₹5 lakh are not taxable as supply if they are occasional and
voluntary, and value per employee does not exceed ₹50,000. However, ITC on
such gifts cannot be claimed under Section 17(5)(h).Thus, XYZ Ltd. need not pay
GST on such gifts, but must reverse the ITC claimed on them.
__________________________________________________________________
The Exporter made a self-assessment Uls.50 of custom Act. the proper officer
verified & found that self assessment is not done correctly .Explain the provisions
relating to re-assessment under customs Act

FACTS

An exporter made a self-assessment of export goods under Section 50 of the

Customs Act, 1962 and filed a shipping bill. Later, the proper officer examined the
goods and found discrepancies between the declared value/quantity and the
actual goods. The issue is whether the proper officer can re-assess or amend the
self-assessed bill of entry/shipping bill made by the exporter.

ISSUES

Whether the proper officer has the power to verify or re-assess a self-assessment
made under Section 50 of the Customs Act, 1962?

Whether the exporter’s self-assessment is final or subject to correction by the

proper officer?

What is the legal remedy available to the exporter if he disagrees with the re-
assessment done by the proper officer?

LEGAL PROVISIONS

Section 17 of the Customs Act, 1962:

Deals with the assessment of duty.

Sub-section (1): Importer/exporter shall self-assess the duty leviable.

Sub-section (4): The proper officer may verify and re-assess the goods if found
incorrect.

Section 50 of the Customs Act, 1962:

Requires the exporter to file a shipping bill for goods to be exported.

Exporter shall make a self-assessment of export duty, if any.

Section 17(5):
If the exporter is aggrieved by the re-assessment, he may appeal under Section
128.

ANSWER FOR THE ISSUES

Issue 1:
The proper officer has the statutory power under Section 17(4) to verify and re-
assess the self-assessment made under Section 50.

Issue 2:
The self-assessment made by the exporter is not final; it can be subject to
verification and correction by the customs authorities.

Issue 3:
If the exporter disagrees with the re-assessment, he can appeal under Section 128
of the Customs Act, 1962.

Case Law:
ITC Ltd. v. Commissioner of Customs, Chennai (2019) 368 ELT 216 (SC)

Held:
The Supreme Court held that self-assessment is not final. The proper officer is
empowered to verify and re-assess the goods under Section 17(4). The
exporter/importer, if aggrieved, must file an appeal under Section 128 rather than
seeking rectification directly.

CONCLUSION

The proper officer has authority to verify and re-assess self-assessed shipping bills
under Section 17(4) The exporter’s self-assessment is not final and can be
[Link] exporter’s remedy is to file an appeal under Section 128.
Supported by the Supreme Court ruling in ITC Ltd. v. Commissioner of Customs
(2019).After the Goods are cleared on payment of Excise duty, there was a
Subsequent reduction in the prize of goods on the basis of discount provided.
Assessee claims for refund of excise duty on the amount of prize reduced will he
succeed .
___________________________________________________________________
Mr.x stored the medical product xyz in the Warehouse for exporting .
Meanwhile the Govt imposed this Pohibition on export of certain medical
products including xyz. Discuss.

FACTS

Mr. X, an exporter, stored medical product XYZ in a customs bonded warehouse

for export [Link], before the export could take place, the
Government imposed a prohibition on the export of certain medical products,
including XYZ, under Section 11 of the Customs Act, [Link] issue arises whether
Mr. X can still export the goods or whether such goods must be detained or
confiscated under customs law.

ISSUES

Whether Mr. X can export the goods stored in the warehouse after the imposition
of export prohibition?

Whether the prohibition on export under Section 11 applies to goods already

stored in a warehouse for export before the notification?

What are the legal consequences and liabilities of Mr. X under the Customs Act if
he attempts to export the prohibited goods?

LEGAL PROVISIONS

Section 11, Customs Act, 1962 — Power to prohibit importation or exportation of

goodsThe Central Government may prohibit export of goods of any specified
description for maintaining security, public order, or essential supplies.

Section 2(18), Customs Act, 1962 — Definition of Export

“Export” means taking goods out of India to a place outside India.

Section 111(d), Customs Act, 1962 — Confiscation

Goods attempted to be exported contrary to any prohibition imposed under the
Act shall be liable to confiscation.

Section 112, Customs Act, 1962 — Penalty

Any person attempting to export prohibited goods is liable to penalty under this
section.
ANSWER FOR THE ISSUES

Issue 1:
Once a prohibition notification is issued under Section 11, the export cannot be
permitted, even if the goods were stored earlier.

Issue 2:
The prohibition applies prospectively, but since the goods had not yet been
exported, Mr. X cannot claim a vested right to export.

Issue 3:
If Mr. X attempts to export, the goods become liable to confiscation under Section
111(d) and penalty may be imposed under Section 112.

DECISION / CASE LAW WITH HELD

Case Law:
East India Commercial Co. Ltd. v. Collector of Customs (1962 AIR 1893, SC)

Held:
The Supreme Court held that no person has a vested right to export goods once
a prohibition notification is issued. Even if goods were ready for export, the
Government’s prohibition is binding, and any attempt to export contrary to it
renders the goods liable to confiscation.

CONCLUSION

The Government’s prohibition under Section 11 is binding on all exporters. Mr. X

cannot export medical product XYZ after the prohibitioAny attempt to export will
attract confiscation (Sec. 111(d)) and penalty (Sec. 112).Supported by East India
Commercial Co. Ltd. v. Collector of Customs (1962) — prohibition overrides
private export rights.
__________________________________________________________________
[Link] removed the manufactured products before making the invoice &
sold to Mr. Shanmugam without pAying Cen VAT. Decide the Liability of Mr.
Sunder.

FACTS

Mr. Sunder, a manufacturer, removed the finished goods from his factory and sold
them to Mr. Shanmugam without:Preparing an excise invoice, andPaying the
required CENVAT duty under the Central Excise Act, [Link] issue arises whether
Mr. Sunder is liable for excise duty, penalty, and interest under the law.

ISSUES

➢ Whether removal of goods without invoice and payment of excise duty

amounts to evasion of duty under the Central Excise Act?
➢ Whether CENVAT credit provisions are violated by not paying duty and not
recording the transaction in books?
➢ What are the consequences and penalties Mr. Sunder is liable for such illegal
clearance of goods?

LEGAL PROVISIONS
Section 4, Central Excise Act, 1944:
Duty of excise is chargeable on manufacture and removal of goods.
Rule 11, Central Excise Rules, 2002:
Every removal of excisable goods from the factory shall be under a valid invoice
signed by the manufacturer.
Rule 4, Central Excise Rules, 2002:
Goods shall not be removed from the factory without payment of duty.
Section 11A, Central Excise Act, 1944:
Authorizes recovery of duty not levied or short-levied due to fraud, collusion, or
suppression of facts.
Section 11AC, Central Excise Act, 1944:
Provides for mandatory penalty equal to the duty evaded in case of willful
suppression or fraud.
Rule 25, Central Excise Rules, 2002:
Prescribes confiscation of goods and penalties for removal without proper
documents.
ANSWER FOR THE ISSUES

Issue 1:
Removal of goods without invoice and payment of duty is a clear violation of Rule
4 & 11 and amounts to evasion of excise duty.

Issue 2:
Mr. Sunder is liable for payment of duty, interest under Section 11AB, and penalty
under Section 11AC.

Issue 3:
Goods can also be confiscated, and the buyer (Mr. Shanmugam) may be treated as
having purchased non-duty-paid goods.

Case Law:
CCE v. Chemphar Drugs & Liniments (1989 AIR 832, SC)

Held:
The Supreme Court held that non-payment of excise duty and removal of goods
without proper documentation constitutes willful suppression. Hence, extended
limitation under Section 11A and penalty under Section 11AC are justified.

CONCLUSION
Mr. Sunder illegally removed excisable goods without invoice and duty
[Link] is liable to pay excise duty, interest, and penalty under Sections 11A
& 11AC, and the goods are liable for confiscation under Rule 25. Supported by CCE
v. Chemphar Drugs & Liniments (1989) — suppression and evasion justify penalty
and recovery.

Mr.Z imported the Goods into a customs station which are intended for trans-
shipment. He presented the bill of trans-shipment to the proper officer. Explain
the provision relating to payment of duty.

FACTS OF THE CASE:

Mr. Z imported goods into a customs station.

These goods were not intended for home consumption, but were to be trans-
shipped to another customs station (within India or abroad).
He presented a bill of trans-shipment to the proper officer for approval under the
Customs Act, 1962.
The issue arises whether customs duty is payable on such goods intended for
trans-shipment.

ISSUES:

➢ Whether goods imported for trans-shipment are liable to pay customs duty
under the Customs Act, 1962.

➢ What are the procedures and conditions under which such goods can be trans-
shipped without duty payment?

➢ What is the responsibility of the proper officer in relation to trans-shipment of

goods?

LEGAL PROVISIONS:

Section 54 – Trans-shipment of goods (Customs Act, 1962)

Sub-section (1): Any goods imported in a customs station intended for trans-
shipment to another customs station or foreign destination may be allowed to be
trans-shipped without payment of duty, subject to prescribed conditions.

Sub-section (2): A bill of trans-shipment must be presented to the proper officer in

the prescribed form.

Regulations: Goods (Trans-shipment) Regulations, 1995 prescribe the procedure,

documentation, and supervision.

Section 2(13): Defines “customs station” to include customs port, airport, inland
container depot (ICD), or land customs station.

Section 12: Imposes customs duty only on goods imported into India for home
consumption, not on goods meant for trans-shipment.

ANSWER FOR ISSUES:

For Issue 1:
Goods imported only for trans-shipment are not subject to customs duty, as there
is no clearance for home consumption.

For Issue 2:
Mr. Z must present a bill of trans-shipment to the proper officer. On approval, the
goods can be transported under bond or supervision to the destination customs
station without duty.

For Issue 3:
The proper officer must verify that goods are indeed meant for trans-shipment
and ensure no diversion for domestic use. Once verified, trans-shipment may be
permitted without payment of duty.

CASE LAW

Case: Collector of Customs v. Jayanti Shipping Co. (P) Ltd. (1986)

Held: Goods imported for trans-shipment and not for home consumption are not
chargeable to customs duty.

Duty liability arises only when goods are cleared for home consumption under
Section 47.

Hence, trans-shipment goods remain duty-free until such clearance occurs.

CONCLUSION:

Mr. Z, having imported goods solely for trans-shipment, and having presented a
bill of trans-shipment to the proper officer, is not liable to pay customs duty.
As per Section 54 of the Customs Act, 1962, goods intended for trans-shipment
are exempt from duty, provided all conditions and procedural requirements are
duly complied with.

Therefore, Mr. Z is not liable to pay duty on the goods intended for trans-
shipment.