Taxation Law - Income Tax – Deduction under Section 37 – License Fee for Use of Goodwill – Valid Business Expenditure – The assessee, a law firm, claimed deductions for license fees paid to Remfry & Sagar Consultants Pvt. Ltd. (RSCPL) for the right to use the goodwill attached to the name "Remfry & Sagar" – The Assessing Officer (AO) disallowed the deduction, holding the transaction as a colorable device for diverting funds to non-lawyers – The ITAT allowed the deduction, holding that goodwill was a valid business asset – Held: Payments made for using goodwill and name recognition do not violate Explanation 1 to Section 37 – The transaction was commercially justified and unrelated to tax avoidance [Paras 1-10].

Goodwill in Legal Profession – Transfer Permissibility – Payment for Usage is Not Illegal – The court held that goodwill, including in the legal profession, is a transferable and monetizable asset – Dr. V. Sagar, the original owner, had lawfully gifted it to RSCPL, which then licensed it to the law firm – The Bar Council of India Rules prohibit sharing of legal fees but do not bar payment for goodwill usage – Held: The license fee was a valid expenditure, as it was for goodwill utilization and not a fee-sharing arrangement [Paras 26-33].

Income Tax – Section 37 Explanation 1 – Whether Bar Council Rules Prohibit Such Payments – Test of Purpose – Revenue argued that linking the license fee to 25% of the firm's revenue amounted to fee-sharing in violation of Bar Council Rules – The Supreme Court’s decision in Apex Laboratories v. DCIT was cited to argue that payments violating professional conduct rules are disallowable – Held: The purpose of expenditure determines its allowability under Explanation 1 to Section 37(1) – The primary purpose of the payment was to utilize goodwill, not share legal fees – Bar Council Rules were not violated, and the expenditure was not prohibited by law [Paras 15-36].

Income Tax – Revenue’s Attempt to Question Gift of Goodwill – Irrelevant to Deduction Dispute – Revenue sought to challenge the legitimacy of the gift deed transferring goodwill from Dr. V. Sagar to RSCPL – Court held that the validity of the gift was not in question; the sole issue was whether license fees paid for goodwill usage were allowable deductions – Held: Revenue's challenge to the gift was an unwarranted digression, and the payment for goodwill usage was a valid business expense [Paras 29-32].

Decision: The Delhi High Court dismissed the appeals. The court held that the license fee paid for goodwill usage is a valid business expenditure, as goodwill is a legitimate, transferable asset. It further ruled that the Bar Council of India Rules were not violated since the payments were not a revenue-sharing arrangement but a consideration for goodwill. Explanation 1 to Section 37 does not apply, as the expenditure was not for an illegal purpose or against public policy. The Revenue’s attempt to challenge the gift deed was irrelevant, as the only issue before the court was whether the license fees were deductible. Questions of law were answered in favor of the assessee and against the Revenue.

Matrimonial Law - Family Courts – Representation by Power of Attorney – Order III Rule 1 CPC – Permissible – Petitioner, a non-resident Indian, sought to prosecute a matrimonial case through a power agent due to travel restrictions – Family Court refused to number the power of attorney petition – Held: Representation through a duly registered/adjudicated power of attorney is permissible for prosecuting proceedings except for mediation and evidence recording – Court issues guidelines ensuring proper authentication of power of attorney and procedural safeguards – C.R.P.(PD) No. 4073 of 2024 allowed – Family Court directed to number the power of attorney petition and issue certified copies to the petitioner or his authorized agent [Paras 54-61].

Family Courts – Appearance through Video Conferencing – Rule 4 of the Madras High Court Video Conferencing Rules, 2020 – Permitted – Petitioner’s case was dismissed for default as she was unable to join the virtual hearing despite attempting to appear – Family Court failed to acknowledge the presence of her counsel physically – Held: Courts must facilitate virtual hearings and avoid penalizing litigants for technical glitches – Guidelines issued for seamless video conferencing in Family Court proceedings, including mediation, recording of evidence, and final hearing – C.R.P.(PD) No. 4227 of 2024 allowed – Order dismissing the petitioner’s divorce petition for default set aside – Family Court directed to reissue notice to the respondent and proceed with the case after ensuring procedural fairness [Paras 86-115].

Mediation – Online Mediation Permissible – Section 9 of the Family Courts Act and Tamil Nadu Mediation Rules, 2010 – Petitioner sought online mediation due to residence abroad – Family Court insisted on physical appearance – Held: Mediation can be conducted through video conferencing upon prior notice to the mediator and the other party – Procedure prescribed for verification of parties and submission of settlement agreements electronically [Paras 70-78].

Family Courts – Right to Legal Representation – Section 13 of the Family Courts Act read with Rule 41 – Limited restriction – Petitioner challenged the denial of legal representation in Family Court – Held: Advocates are not completely barred and can represent parties upon obtaining leave of court – Lawyers permitted to assist litigants in drafting and filing documents, appearing in procedural hearings, and arguing cases post-mediation failure – Courts must adopt a liberal approach in granting representation applications [Paras 37-45].

Family Court Procedures – Numbering of Petitions and Service of Summons – Rule 12 of the Family Courts (Procedure) Rules, 1996 – Court directs procedural simplifications – Held: Petitioner or power agent can seek advocate’s assistance for numbering petitions and serving summons – Summons may be served through counsel or advocate’s clerk to prevent procedural delays [Paras 62-64].

Recording of Evidence – Permissibility through Video Conferencing – Rule 4 of the Madras High Court Video Conferencing Rules, 2020 – Permitted for parties residing abroad or unable to travel – Held: Family Court must allow video conferencing for recording of evidence unless compelling reasons exist – Deposition to be authenticated through electronic transmission and physical submission of signed copies – Directions issued for verification of identity and handling of exhibits electronically [Paras 96-108].

Issuance of Certified Copies – Rule 43 of the Family Courts (Procedure) Rules, 1996 – Advocate’s Right to Apply – Petitioner challenged Family Court’s insistence on personal appearance for obtaining certified copies – Held: Certified copies can be obtained by an advocate, power agent, or a duly authorized advocate’s clerk – Family Courts directed to email orders to parties unable to appear in person [Paras 116-117].

Family Courts – Mandatory Withdrawal of Pending Cases Before Filing Mutual Divorce Petition – Not Required – Family Court practice of requiring litigants to withdraw pending cases before accepting Section 13B petition criticized – Held: Such practice unjustified – Prior cases to remain in suspended animation until mutual divorce petition is decided – If granted, prior cases stand closed; if denied, they continue [Para 118].
 

Criminal Law – Murder – Right of Private Defence – Reduction of Conviction to Section 304 Part II IPC – The accused, while in possession of agricultural land, inflicted multiple injuries on the complainant and the deceased when the latter attempted to assert possession – Held: Though the accused had a right to private defense, they exceeded the same by inflicting excessive injuries – The conviction under Section 302 IPC was set aside and modified to Section 304 Part II IPC with a sentence of 5 years rigorous imprisonment – Fine imposed by the trial court remained unaltered [Paras 25-27, 32-33].

Criminal Law – Common Intention – Vicarious Liability Under Section 149 IPC – The appellants contended that only specific injuries were attributed to them – Held: Since the accused acted collectively, they were vicariously liable for the injuries leading to the death of the deceased – Conviction altered from Section 302/149 IPC to Section 304 Part II read with Section 34 IPC [Paras 31-32].

Criminal Law – Self-Defence – Justification and Limits – The accused claimed they acted in self-defence while protecting their possession of the disputed land – Held: The right of private defense did not extend to causing death, as the complainant and deceased were unarmed and outnumbered – The injuries inflicted were disproportionate to the perceived threat, exceeding the limits of private defense [Paras 27-28, 30].

Criminal Law – Section 313 CrPC – Accused’s Right to Raise Plea of Self-Defence at Any Stage – The appellants argued that the plea of self-defense was not raised during trial – Held: A plea of self-defense can be considered even if not explicitly raised under Section 313 CrPC, as long as the circumstances support it – The Supreme Court’s rulings affirming this principle were followed [Paras 29-30].

Criminal Law – Sentence Enhancement – Scope of Revisional Jurisdiction – The complainant sought enhancement of sentence and conviction of acquitted co-accused – Held: The sentence of 5 years rigorous imprisonment under Section 304 Part II IPC was found to be appropriate – No interference warranted in revisional jurisdiction – Criminal revision dismissed [Paras 34].
 

Service Law – Selection Grade – Calculation of Cadre Strength – Plaintiffs claimed Selection Grade based on total cadre strength of 430 posts, while defendants argued cadre strength was 264 – Evidence showed sanctioned strength was 384 as admitted by defendants' witness – Held: 20% of 384 posts (i.e., 76 employees) were entitled to Selection Grade – Findings of Trial Court & First Appellate Court upheld [Paras 8-9].

Jurisdiction of Civil Court – Pendency of Writ Petition – No Bar – Defendants contended that grant of Selection Grade was linked to pending CWP-4194-1986 before High Court – Held: No bar on Civil Court’s jurisdiction as no stay was granted in writ petition – Civil Court had jurisdiction to decide claim [Para 11].

Concurrent Findings of Fact – No Interference in Second Appeal – High Court found no illegality or perversity in judgments of Trial Court & First Appellate Court – No substantial question of law raised – Second Appeal dismissed [Para 11].

Decision: Appeal dismissed – No error found in concurrent findings of lower courts – 76 employees rightfully entitled to Selection Grade – No interference warranted.

Civil Law - Court Fees – Suit for Rescission of Agreement to Sell – Liability to Pay Ad Valorem Court Fees – The petitioners filed a suit under Section 27 of the Specific Relief Act for rescission of an agreement to sell due to non-performance by the respondent – Trial Court directed payment of ad valorem court fees on the total sale consideration – Petitioners contended they were only seeking rescission and forfeiture of earnest money, not cancellation of title – Held: A plaintiff seeking rescission of an agreement to sell is required to pay ad valorem court fees only on the forfeited earnest money, not the total sale consideration – Decision: Trial court order set aside [Paras 25-27].

Court Fees – Applicability of Ad Valorem Fee – Agreement to Sell vs. Registered Sale Deed – Agreement to sell does not confer title but merely creates an obligation – Only a registered sale deed transfers ownership – Petitioners seeking rescission due to breach by the defendant cannot be burdened with ad valorem court fees on the total sale consideration – Held: Suit for rescission does not attract ad valorem court fees on the sale consideration, only on earnest money if forfeiture is claimed – Decision: Impugned order quashed [Paras 30-32].

Estoppel Against Defendant – Failure to Seek Specific Performance – No Right to Demand Ad Valorem Fees from Plaintiff – Defendant argued he was ready and willing to perform his obligations – Court noted that he never filed a suit for specific performance within the limitation period – Held: Defendant is estopped from contesting rescission when he himself failed to enforce the contract – Decision: No ad valorem court fees required on total sale consideration [Paras 16-17].

Legal Precedents – Conflicting Views on Ad Valorem Fees – Larger Bench Interpretation – Various High Court decisions had conflicting views on whether ad valorem court fees apply to rescission suits – Larger Bench reconciled the differences – Held: The correct position is that ad valorem court fees apply only to the forfeited earnest money, not the total sale consideration – Decision: Reference answered accordingly [Paras 20-21].

Decision: The High Court held that the petitioners were not required to pay ad valorem court fees on the total sale consideration. Instead, they were only liable for ad valorem court fees on the earnest money sought to be forfeited. The order of the trial court directing the petitioners to affix ad valorem court fees on the full sale consideration was set aside. The matter was remitted back to the trial court for further proceedings in accordance with the judgment.
 

Taxation Law - Income Tax – Reassessment of Fictitious Income – Powers of CBDT under Section 119 – Held: The petitioner, formerly Satyam Computer Services Ltd., suffered due to financial fraud committed by its ex-management – The company was made to pay income tax on inflated and non-existent income – Despite multiple judicial findings confirming the fraud, CBDT rejected the petitioner’s plea for reassessment – The court held that CBDT’s refusal was arbitrary, illegal, and contrary to Article 265 of the Constitution – The impugned order was set aside, and reassessment directed based on the revised financial statements for AYs 2003-04 to 2008-09 [Paras 64-72].

Fraud and Taxation – Effect of Fraud on Assessments – Principles of Real Income – Held: Fraud vitiates all legal proceedings – The assessments made on fictitious income were null and void – Real income doctrine mandates that tax can only be levied on actual earnings – The petitioner was entitled to rectification of its tax liabilities based on true financial records, excluding fraudulent entries [Paras 66-68].

Reassessment and Procedural Fairness – Power of High Court under Article 226 – Held: The rejection of the petitioner’s application under Section 119 of the Income Tax Act was arbitrary – The High Court has jurisdiction to intervene and direct reassessment in cases where fundamental tax principles and natural justice are violated – Petition allowed, and reassessment ordered [Paras 71-75].

Decision – Writ Petition Allowed – Reassessment Directed – Held: The impugned CBDT order dated 11.07.2011 quashed – Respondents directed to conduct fresh assessments for AYs 2003-04 to 2008-09 based on revised financial statements – No tax recovery permitted until reassessment is completed – Petitioner voluntarily waived refund claims on excess tax paid [Paras 72-76].

Civil Law - Permanent injunction - Land Assignment – Cancellation of DKT Patta – Validity of Cancellation Process – Procedural Irregularity – Rejection of Claim – The Plaintiff challenged the cancellation of a DKT Patta and sought a permanent injunction against dispossession – The First Appellate Court found that the cancellation was done after due notice and that the Plaintiff failed to cultivate the land as per the conditions – Held: Substituted service of cancellation notice was justified as the Plaintiff was not residing in the village – No legal infirmity in the cancellation process [Paras 19-21].

Possession Rights – Injunction Suit Without Declaratory Relief – Maintainability – The Plaintiff sought a permanent injunction without challenging the cancellation of the patta – The Court held that the Plaintiff failed to prove possession at the time of filing the suit – Mere past possession and kist receipts until 1980 did not establish possession in 1987 – Injunction suit without a declaratory relief challenging patta cancellation is not maintainable – Held: Plaintiff had no possessory rights as of the suit date, and an injunction could not be granted [Paras 22-24].

Jurisdiction – Authority of Mandal Revenue Officer to Cancel Assignment – Board Standing Order No. 15 – The Plaintiff contended that the Mandal Revenue Officer lacked the authority to cancel the assignment after 20 years – The First Appellate Court rejected this argument, holding that the Plaintiff violated conditions of the assignment and was not cultivating the land – Held: Cancellation was within jurisdiction and followed due process – Plaintiff failed to take legal steps to challenge the cancellation order in proper forums [Paras 17-18].

Substituted Service – Validity of Notice – Awareness of Cancellation Proceedings – The Plaintiff argued that substituted service of cancellation notice was impermissible under Board Standing Orders – The Court held that as the Plaintiff’s whereabouts were unknown, substituted service was justified – Evidence indicated that the Plaintiff was aware of the cancellation but failed to challenge it in a timely manner – Held: No procedural irregularity in the service of notice [Paras 19-20].

Burden of Proof – Plaintiff's Failure to Prove Possession – Adverse Findings by First Appellate Court – The Plaintiff relied on kist receipts from 1962 to 1980 but failed to show continuous possession beyond that period – The First Appellate Court observed that revenue records did not support possession after 1980, and the Plaintiff failed to pay kist after that year – Held: Inference drawn by the First Appellate Court that the Plaintiff was not in possession at the time of suit was correct – Appeal dismissed [Paras 21-23].

Findings of First Appellate Court – No Substantial Question of Law – Second Appeal Dismissed – The High Court held that the First Appellate Court properly appreciated evidence and found that the Plaintiff was neither in possession nor had challenged the patta cancellation in appropriate legal forums – No substantial question of law was involved in the Second Appeal – Held: Second Appeal dismissed, and injunction relief denied [Paras 24-26].
 

Dishonour of Cheque – Conviction under Section 138 NI Act – Compounding of Offence Permissible at Any Stage – The petitioner, an exporter, had issued a cheque in favor of the respondent for Rs. 43,73,398/- towards settlement of outstanding dues—On presentation, the cheque was dishonoured with an endorsement ‘Account Closed’—Legal notice was issued, but the petitioner failed to make payment—The trial court convicted the petitioner and sentenced him to six months simple imprisonment and imposed a compensation of Rs. 53,73,398/-—The conviction and sentence were upheld by the appellate court—During the pendency of the revision before the High Court, parties amicably settled the dispute and filed a Joint Compromise Memo—Held: Section 147 of the NI Act permits compounding of offences at any stage, and the High Court has inherent powers to secure the ends of justice by allowing the compromise [Paras 9-15].

Jurisdiction of High Court – Power to Compound Offences under Section 147 NI Act – Overriding Effect on Section 320 Cr.P.C. – The respondent opposed the compounding, arguing that the conviction had already been confirmed by the appellate court—The Court held that Section 147 of the NI Act, being a special provision, overrides the restrictions in Section 320 Cr.P.C.—Even at the revisional stage, the offence can be compounded if both parties agree—Relied on Damodar S. Prabhu v. Sayed Babalal H. (2010) 2 SCC (Cri) 1328 and M/s. Meters and Instruments Pvt. Ltd. v. Kanchan Mehta (2017) 7 SCC 558—Held: The inherent powers of the High Court can be invoked to permit compounding, even after the appellate court’s confirmation of conviction, to uphold the objective of NI Act, which is primarily compensatory rather than punitive [Paras 26-38].

Legal Recognition of Mediation Settlements in Criminal Cases – Courts Encouraged to Uphold Amicable Resolutions – The parties voluntarily settled the dispute in mediation, and the petitioner agreed to pay Rs. 32,50,000/- as full and final settlement—The Court noted that in cheque dishonour cases, courts must encourage settlements to reduce litigation and ensure financial restitution to the complainant—Held: The settlement is legally valid, and the conviction is set aside in view of the compromise [Paras 45-50].

Decision: The Criminal Revision Case is disposed of in terms of the Joint Compromise Memo dated 30.01.2025. The conviction and sentence passed in C.A. No. 421 of 2019, dated 18.03.2022, by the XXI Additional Sessions Judge at Chennai, confirming the conviction and sentence imposed in C.C. No. 6549 of 2017, dated 08.11.2019, by the Metropolitan Magistrate, Fast Track No.I, Allikulam, Chennai, are modified. The conviction and sentence imposed on the petitioner stand annulled. The petitioner, Agamadou Ibraguime Shuaid, shall be treated as acquitted on account of compounding of the offence with the complainant/respondent.
 

Taxation Law - Income Tax – Reassessment Proceedings – Rule Against Reopening Same Issue Twice – The petitioner’s income for AY 2017-18 was previously reassessed under Section 147 read with Section 144B based on allegations of undervaluation of shares – The assessment order passed on 29.03.2022 accepted the petitioner’s explanation and made no additions – The Assessing Officer (AO) initiated fresh reassessment proceedings on 28.03.2024, relying on the same facts and assumptions – Held: Reopening the assessment for the same issue is impermissible – The impugned order and notice are quashed [Paras 1-7, 19-21, 24-25].

Income Tax – Reassessment Based on New Information – Absence of Fresh Tangible Material – The AO claimed that fresh information was received indicating that the petitioner had transferred the entire Friends Colony property through a sale of shares – The petitioner demonstrated that TREPL, the company in question, owned only two floors and not the entire property – No new material was provided by the AO to contradict the petitioner’s position – Held: In absence of new tangible material, reopening of assessment is invalid [Paras 16-22].

Income Tax – Requirement to Consider Assessee’s Reply Before Passing Reassessment Order – Section 148A(d), Income Tax Act – The petitioner provided detailed replies to both the earlier and latest reassessment proceedings, explaining that TREPL owned only two floors of the Friends Colony property – The AO disregarded this explanation and proceeded with reassessment – Held: Failure to consider the assessee’s reply before passing an order under Section 148A(d) renders the reassessment order unsustainable [Paras 23-24].

Decision: The impugned order dated 22.04.2024 passed under Section 148A(d) and the impugned notice dated 22.04.2024 issued under Section 148 are set aside – Reassessment proceedings for AY 2017-18 quashed as they were based on the same issue previously adjudicated – Court refrains from examining the limitation issue [Paras 25-27].