CHAPTER XII-C — SPECIAL PROVISIONS RELATING TO RETAIL TRADE, ETC. (HISTORIC)
CHAPTER XII-C — SPECIAL PROVISIONS RELATING TO RETAIL TRADE, ETC. (HISTORIC)
SECTION 115K — SPECIAL PROVISION FOR COMPUTATION OF INCOME IN CERTAIN CASES
Case Laws & Commentary · Income-tax Act, 1961 (as amended by the Finance Act, 2026) · Historic / Omitted Provision
Status: OMITTED (HISTORIC). Section 115K was the charging/computation provision of Chapter XII-C. It was inserted by the Finance Act, 1992 with effect from 1 April 1993 (assessment year 1993-94) and omitted by the Finance Act, 1997 with effect from 1 April 1998. It was therefore live for five assessment years only — 1993-94 to 1997-98.
Finance Act, 2026 impact: None. The Finance Act, 2026 does not (and cannot) amend section 115K or Chapter XII-C, the entire Chapter having been omitted with effect from 1 April 1998. The provision is reproduced and discussed here for the completeness of the Treatise and because assessments, rectifications and appeals for the assessment years 1993-94 to 1997-98 in which the Chapter was operative may still arise for historical or precedential reference.
Candour note on case law: As at June 2026 there is no reported decision of the Supreme Court, of any High Court or of the Income-tax Appellate Tribunal that directly interprets section 115K. This is not an accident of reporting but a consequence of the scheme’s own design: an assessee who opted in filed only a short statement, was relieved of filing a return (s.115L) and was protected by a bar of proceedings (s.115N). The provision was thus built to keep small retailers out of the assessment-and-appeal machinery, and it lasted only five years. The authorities in Part C are therefore, of necessity, cognate / principle authorities — on presumptive and best-judgment estimation, on the construction of optional concessional schemes, and on the effect of the omission of a provision — each expressly identified as such.
A. SECTION COMMENTARY
A.1 Where the section sat in the architecture of the Act
Section 115K opened Chapter XII-C, “Special Provisions Relating to Retail Trade, etc.” It was the first organised experiment in presumptive (estimated) taxation of small traders in the post-1961 Act. The Chapter formed a self-contained code of four sections that worked as a unit: section 115K supplied the computation of income on an estimated basis; section 115L removed the return-filing obligation for those who came within it; section 115M withdrew the deductions and rebates that would otherwise dilute the bargain; and section 115N barred reassessment proceedings so that the estimate, once accepted, was final. Section 115K was the engine; the other three were the gearing.
A.2 The policy object — trust, simplicity and a wider base
The Chapter was a deliberate instrument of tax administration. The Memorandum explaining the Finance Bill, 1992 placed it within the Government’s drive to widen the tax base and to draw the large, hard-to-assess universe of small shopkeepers into the net by offering a simplified, low-friction, trust-based procedure rather than the full rigour of books, audit, return and scrutiny. The design philosophy was that of a compounding / estimated-income scheme: the State accepted a modest, formula-based figure of income, foregoing precision and enforcement cost, in exchange for voluntary compliance from a class of assessees whose actual incomes were small and whose records were typically rudimentary.
A.3 The scheme in outline (editorial reconstruction — NOT verbatim)
Caution. The operative words enacted in 1992 were repealed on omission and are not reproduced in the current Bare Act or on the Income-tax Department’s website (each now shows only the heading and “[Omitted…]”). The following is an editorial reconstruction of the scheme’s broad mechanics, drawn from the Memorandum to the Finance Bill, 1992 and contemporary commentary; it is offered for understanding only and must not be cited as the statutory text. For anything turning on the exact words for assessment years 1993-94 to 1997-98, the gazetted Finance Act, 1992 must be consulted.
Eligible assessee: a resident person (in practice an individual or Hindu undivided family) carrying on the business of retail trade in any goods or merchandise, and certain other small businesses to which the scheme was extended.
Eligibility ceiling: the scheme was confined to small traders — the turnover / total-income thresholds (in the region of a few lakh rupees of turnover) kept it to the bottom of the trade pyramid, so that larger businesses could not shelter within it.
Estimated income: instead of computing profits and gains under the normal Chapter IV-D machinery (books, depreciation, expenses, section 44AA / 44AB obligations), the eligible trader’s income from the business was taken at an estimated / presumptive figure, determined on the statutory basis rather than by examination of accounts.
A statement, not a return: the assessee who opted in filed a short statement under section 115K disclosing the prescribed particulars, on the strength of which the estimated income stood computed — this is the hinge that section 115L then used to dispense with the return.
A bargain, not a windfall: in return for the simplicity, the assessee surrendered most Chapter VI-A deductions and Chapter VIII rebates (section 115M) and accepted that the matter would not be reopened (section 115N).
A.4 The optional, concessional character of the section
Section 115K was not a compulsory charge. It was an opt-in concession. An eligible trader could either come within the Chapter (estimated income, no return, no reopening, but no deductions) or stay outside it and be assessed in the ordinary way (real income on books, with the full suite of deductions but also the full compliance burden). Two consequences follow for construction. First, the conditions of eligibility had to be strictly satisfied: a concessional, code-displacing provision is available only to one who squarely answers its description (the principle later restated for exemptions in Commissioner of Customs v. Dilip Kumar & Co.). Secondly, because the object was beneficial — to ease the lot of the small trader — the working of the scheme, once an assessee was within it, called for a reasonable, purpose-serving construction rather than a grudging one (the approach in Bajaj Tempo Ltd v. CIT and CIT v. J.H. Gotla).
A.5 Estimation at the core — and its judicial discipline
Although section 115K substituted a statutory estimate for a best-judgment estimate, it lived in the same conceptual family as best-judgment assessment under sections 143/144. The body of law on how an estimate of a trader’s income must be made therefore illuminates the section: an estimate is permissible and a degree of guesswork is inevitable, but it must rest on material and a rational basis, and must not be arbitrary or punitive (State of Kerala v. C. Velukutty; Brij Bhushan Lal Praduman Kumar v. CIT; CST v. H.M. Esufali H.M. Abdulali; Kachwala Gems v. JCIT). Section 115K simply removed the case-by-case guesswork by fixing the basis in advance — trading certainty for individual precision.
A.6 Omission, and what the omission did and did not undo
The Finance Act, 1997 omitted the whole Chapter with effect from 1 April 1998 and, in the same Act, introduced section 44AF (“Special provision for computing profits and gains of retail business”) operative from assessment year 1998-99. The two events are best read together: the experiment of a separate Chapter with its own statement, return-waiver and proceedings-bar was replaced by a simpler presumptive rule embedded in the normal computation machinery of Chapter IV-D — a flat percentage of turnover deemed to be income, assessed through the ordinary return. Section 44AF was in turn omitted and folded into the substituted, expanded section 44AD by the Finance (No.2) Act, 2009 with effect from assessment year 2011-12. The lineage is therefore: s.115K (1993–98) → s.44AF (1998–2011) → s.44AD (2011 onwards).
The omission did not erase the five years in which the Chapter operated. By the rule now settled in Fibre Boards (P) Ltd v. CIT — which held that an “omission” is a form of “repeal” for the purposes of sections 6 and 24 of the General Clauses Act, 1897, departing from the narrower view in General Finance Co. v. CIT — rights acquired and liabilities incurred under sections 115K to 115N for assessment years 1993-94 to 1997-98 were not obliterated by the 1998 omission, and any surviving proceeding for those years falls to be governed by the law as it then stood. That is the principal reason this historic section still earns a place in a working treatise.
B. STATUTORY POSITION (verbatim, as it now stands in the Bare Act)
Reproduced verbatim from the Income-tax Act, 1961 (Bare Act, as amended up to the Finance Act, 2025; the position is unchanged by the Finance Act, 2026). The operative text enacted by the Finance Act, 1992 was deleted on omission and is not carried in the current Bare Act; what now appears is the heading and the omission note only:
Special provision for computation of income in certain cases.
115K. [Omitted by the Finance Act, 1997, w.e.f. 1-4-1998.]
Chapter-level note carried in the Bare Act: “[Chapter XII-C, consisting of sections 115K to 115N, omitted by the Finance Act, 1997, w.e.f. 1-4-1998. Earlier Chapter XII-C was inserted by the Finance Act, 1992, w.e.f. 1-4-1993.]”
C. AUTHORITIES — COGNATE AND PRINCIPLE MATERIALS
Important. No decision of the Supreme Court, any High Court or the ITAT has directly interpreted section 115K. Every authority below is cited on principle only — for the doctrines of estimation, of construction of concessional schemes, of beneficial-provision interpretation, and of the effect of omission — and not as a ruling on the section itself.
Cluster C-1 : The statutory successors — the living law of presumptive retail taxation
Section 44AF, Income-tax Act, 1961 (inserted by the Finance Act, 1997, w.e.f. AY 1998-99; omitted by the Finance (No.2) Act, 2009, w.e.f. AY 2011-12)
Nature: The immediate successor to Chapter XII-C. It deemed a flat 5% of the total turnover of a retail-trade business (turnover up to the prescribed limit) to be the profits and gains of that business, with the option for the assessee to declare higher income, and a bar on further deductions under sections 30 to 38.
Relevance to s.115K: Shows what Parliament kept and what it discarded: it retained the presumptive idea but discarded the separate Chapter, the no-return rule and the proceedings-bar, embedding the estimate instead in ordinary Chapter IV-D computation through the normal return. The interpretive learning under s.44AF/44AD is the nearest live analogue for any historic s.115K question.
Status: Statutory provision; both now omitted. Cited for lineage and analogy, not as authority on s.115K.
Section 44AD, Income-tax Act, 1961 (as substituted by the Finance (No.2) Act, 2009, w.e.f. AY 2011-12)
Nature: The current general presumptive-income provision for eligible small businesses, which absorbed s.44AF.
Relevance to s.115K: Completes the lineage s.115K → s.44AF → s.44AD and is the provision a small retailer of today would use; the policy continuity (simplified, formula-based income for small business) is unbroken from 1993.
Status: Live statutory provision. Cited for continuity of policy only.
Cluster C-2 : Estimation of a trader’s income — the discipline of a fair estimate
State of Kerala v. C. Velukutty (1966) 60 ITR 239 (SC)
Principle: A best-judgment estimate must not be capricious; it must have a reasonable nexus to the available material. The authority makes an estimate, but it is an honest estimate on a rational basis — there is an element of guess-work but it shall not be arbitrary.
Application to s.115K: Section 115K replaced the case-specific estimate with a statutory one, but the underlying value it served — a fair, rule-bound figure for small traders rather than an arbitrary one — is the same. It explains why a formula was thought preferable for this class.
Status: Supreme Court; foundational on best-judgment estimation. Principle authority only.
Principle: Where income is estimated by applying a net-profit rate, the rate must be applied to a properly ascertained base and allowances already built into the rate cannot be granted again; the estimate must be reasonable and referable to comparable cases.
Application to s.115K: Illustrates the logic of a percentage/flat estimate — the very technique that s.115K (and later s.44AF) adopted — and the rule that a presumptive figure is taken to be inclusive, which is why s.115M then barred further deductions.
Status: Supreme Court. Principle authority only.
Commissioner of Sales Tax v. H.M. Esufali H.M. Abdulali (1973) 90 ITR 271 (SC)
Principle: An estimate may be founded even on a single instance or limited material provided there is a rational basis; the estimating authority is not fettered by technical rules of evidence but cannot act on pure surmise.
Application to s.115K: Supports the legitimacy of taxing on an estimated basis for a class where exact computation is impractical — precisely the small-retailer universe that the Chapter targeted.
Status: Supreme Court. Principle authority only.
Kachwala Gems v. Joint CIT (2007) 288 ITR 10 (SC)
Principle: There is always a certain degree of guess-work in a best-judgment assessment, but the authority should try to make an honest and fair estimate and should not act totally arbitrarily; the estimate must relate to some material and be more than mere suspicion.
Application to s.115K: The modern restatement of the estimation discipline; explains the policy attraction of a fixed statutory estimate (s.115K) which removes arbitrariness by fixing the basis in advance.
Status: Supreme Court. Principle authority only.
Cluster C-3 : Construction of an optional, concessional, code-displacing scheme
Commissioner of Customs (Import), Mumbai v. Dilip Kumar & Co. (2018) 9 SCC 1 (SC, Constitution Bench)
Principle: A provision conferring an exemption or concession is to be construed strictly; the burden of bringing oneself within it lies on the claimant, and any genuine ambiguity in the eligibility conditions is resolved in favour of the Revenue.
Application to s.115K: Because the Chapter was an opt-in concession that displaced the normal computation, an assessee had to satisfy its eligibility conditions strictly before claiming its benefits; the boundary conditions (turnover/eligibility) were not to be read expansively.
Principle: A provision enacted to grant an incentive for a beneficial purpose should be construed liberally and in a manner that advances the object, not one that defeats it; the qualifying conditions are construed strictly, but the operative benefit is construed to fulfil the purpose.
Application to s.115K: Once an assessee was within the Chapter, its machinery was to be worked so as to serve its object — easing compliance for the small trader — rather than read down to deny the very relief it promised.
Status: Supreme Court. Principle authority only.
CIT v. J.H. Gotla (1985) 156 ITR 323 (SC)
Principle: Where a literal construction leads to a result plainly contrary to the legislative purpose, the court leans towards a construction that gives effect to the object and avoids absurdity or injustice.
Application to s.115K: A purposive aid for resolving any gap in the (now-repealed) text of a beneficial small-trader scheme in favour of its evident object.
Status: Supreme Court. Principle authority only.
Cluster C-4 : The effect of omission — survival of the five operative years
Principle: An “omission” of a statutory provision is a form of “repeal”; sections 6 and 24 of the General Clauses Act, 1897 apply to omissions as they do to express repeals, so accrued rights and incurred liabilities are not destroyed merely because the provision was ‘omitted’ rather than ‘repealed’.
Application to s.115K: Decisive for the after-life of Chapter XII-C: the 1998 omission did not wipe out the rights, options exercised and liabilities crystallised under s.115K for AYs 1993-94 to 1997-98; those years remain governed by the Chapter as it then stood.
Status: Supreme Court. Directly settles the omission question; cited on that principle (not on s.115K’s content).
General Finance Co. v. Assistant CIT (2002) 257 ITR 338 (SC)
Principle: Had earlier taken the narrower view that section 6 of the General Clauses Act applies to a ‘repeal’ but not to a mere ‘omission’.
Application to s.115K: Included for completeness and contrast: this narrower view was disapproved in Fibre Boards (supra). The current and correct position is that the omission of Chapter XII-C is a repeal to which the savings of the General Clauses Act apply.
Status: Supreme Court; on this point no longer good law after Fibre Boards. Cited for the doctrinal history only.
Principle: A fiscal amendment is presumed prospective unless the contrary is clearly expressed; a benefit-conferring provision may be read to operate fairly, but a burden is not to be imposed retrospectively by implication.
Application to s.115K: Anchors the temporal boundaries of the Chapter: it operated for AYs 1993-94 to 1997-98 and the omission took effect prospectively from 1 April 1998, neither reaching back to unsettle completed matters nor extending the scheme forward.
CHAPTER XII-C — SPECIAL PROVISIONS RELATING TO RETAIL TRADE, ETC. (HISTORIC)
SECTION 115K — SPECIAL PROVISION FOR COMPUTATION OF INCOME IN CERTAIN CASES
Case Laws & Commentary · Income-tax Act, 1961 (as amended by the Finance Act, 2026) · Historic / Omitted Provision
Status: OMITTED (HISTORIC). Section 115K was the charging/computation provision of Chapter XII-C. It was inserted by the Finance Act, 1992 with effect from 1 April 1993 (assessment year 1993-94) and omitted by the Finance Act, 1997 with effect from 1 April 1998. It was therefore live for five assessment years only — 1993-94 to 1997-98.
Finance Act, 2026 impact: None. The Finance Act, 2026 does not (and cannot) amend section 115K or Chapter XII-C, the entire Chapter having been omitted with effect from 1 April 1998. The provision is reproduced and discussed here for the completeness of the Treatise and because assessments, rectifications and appeals for the assessment years 1993-94 to 1997-98 in which the Chapter was operative may still arise for historical or precedential reference.
Candour note on case law: As at June 2026 there is no reported decision of the Supreme Court, of any High Court or of the Income-tax Appellate Tribunal that directly interprets section 115K. This is not an accident of reporting but a consequence of the scheme’s own design: an assessee who opted in filed only a short statement, was relieved of filing a return (s.115L) and was protected by a bar of proceedings (s.115N). The provision was thus built to keep small retailers out of the assessment-and-appeal machinery, and it lasted only five years. The authorities in Part C are therefore, of necessity, cognate / principle authorities — on presumptive and best-judgment estimation, on the construction of optional concessional schemes, and on the effect of the omission of a provision — each expressly identified as such.
A. SECTION COMMENTARY
A.1 Where the section sat in the architecture of the Act
Section 115K opened Chapter XII-C, “Special Provisions Relating to Retail Trade, etc.” It was the first organised experiment in presumptive (estimated) taxation of small traders in the post-1961 Act. The Chapter formed a self-contained code of four sections that worked as a unit: section 115K supplied the computation of income on an estimated basis; section 115L removed the return-filing obligation for those who came within it; section 115M withdrew the deductions and rebates that would otherwise dilute the bargain; and section 115N barred reassessment proceedings so that the estimate, once accepted, was final. Section 115K was the engine; the other three were the gearing.
A.2 The policy object — trust, simplicity and a wider base
The Chapter was a deliberate instrument of tax administration. The Memorandum explaining the Finance Bill, 1992 placed it within the Government’s drive to widen the tax base and to draw the large, hard-to-assess universe of small shopkeepers into the net by offering a simplified, low-friction, trust-based procedure rather than the full rigour of books, audit, return and scrutiny. The design philosophy was that of a compounding / estimated-income scheme: the State accepted a modest, formula-based figure of income, foregoing precision and enforcement cost, in exchange for voluntary compliance from a class of assessees whose actual incomes were small and whose records were typically rudimentary.
A.3 The scheme in outline (editorial reconstruction — NOT verbatim)
Caution. The operative words enacted in 1992 were repealed on omission and are not reproduced in the current Bare Act or on the Income-tax Department’s website (each now shows only the heading and “[Omitted…]”). The following is an editorial reconstruction of the scheme’s broad mechanics, drawn from the Memorandum to the Finance Bill, 1992 and contemporary commentary; it is offered for understanding only and must not be cited as the statutory text. For anything turning on the exact words for assessment years 1993-94 to 1997-98, the gazetted Finance Act, 1992 must be consulted.
A.4 The optional, concessional character of the section
Section 115K was not a compulsory charge. It was an opt-in concession. An eligible trader could either come within the Chapter (estimated income, no return, no reopening, but no deductions) or stay outside it and be assessed in the ordinary way (real income on books, with the full suite of deductions but also the full compliance burden). Two consequences follow for construction. First, the conditions of eligibility had to be strictly satisfied: a concessional, code-displacing provision is available only to one who squarely answers its description (the principle later restated for exemptions in Commissioner of Customs v. Dilip Kumar & Co.). Secondly, because the object was beneficial — to ease the lot of the small trader — the working of the scheme, once an assessee was within it, called for a reasonable, purpose-serving construction rather than a grudging one (the approach in Bajaj Tempo Ltd v. CIT and CIT v. J.H. Gotla).
A.5 Estimation at the core — and its judicial discipline
Although section 115K substituted a statutory estimate for a best-judgment estimate, it lived in the same conceptual family as best-judgment assessment under sections 143/144. The body of law on how an estimate of a trader’s income must be made therefore illuminates the section: an estimate is permissible and a degree of guesswork is inevitable, but it must rest on material and a rational basis, and must not be arbitrary or punitive (State of Kerala v. C. Velukutty; Brij Bhushan Lal Praduman Kumar v. CIT; CST v. H.M. Esufali H.M. Abdulali; Kachwala Gems v. JCIT). Section 115K simply removed the case-by-case guesswork by fixing the basis in advance — trading certainty for individual precision.
A.6 Omission, and what the omission did and did not undo
The Finance Act, 1997 omitted the whole Chapter with effect from 1 April 1998 and, in the same Act, introduced section 44AF (“Special provision for computing profits and gains of retail business”) operative from assessment year 1998-99. The two events are best read together: the experiment of a separate Chapter with its own statement, return-waiver and proceedings-bar was replaced by a simpler presumptive rule embedded in the normal computation machinery of Chapter IV-D — a flat percentage of turnover deemed to be income, assessed through the ordinary return. Section 44AF was in turn omitted and folded into the substituted, expanded section 44AD by the Finance (No.2) Act, 2009 with effect from assessment year 2011-12. The lineage is therefore: s.115K (1993–98) → s.44AF (1998–2011) → s.44AD (2011 onwards).
The omission did not erase the five years in which the Chapter operated. By the rule now settled in Fibre Boards (P) Ltd v. CIT — which held that an “omission” is a form of “repeal” for the purposes of sections 6 and 24 of the General Clauses Act, 1897, departing from the narrower view in General Finance Co. v. CIT — rights acquired and liabilities incurred under sections 115K to 115N for assessment years 1993-94 to 1997-98 were not obliterated by the 1998 omission, and any surviving proceeding for those years falls to be governed by the law as it then stood. That is the principal reason this historic section still earns a place in a working treatise.
B. STATUTORY POSITION (verbatim, as it now stands in the Bare Act)
Reproduced verbatim from the Income-tax Act, 1961 (Bare Act, as amended up to the Finance Act, 2025; the position is unchanged by the Finance Act, 2026). The operative text enacted by the Finance Act, 1992 was deleted on omission and is not carried in the current Bare Act; what now appears is the heading and the omission note only:
Special provision for computation of income in certain cases.
115K. [Omitted by the Finance Act, 1997, w.e.f. 1-4-1998.]
Chapter-level note carried in the Bare Act: “[Chapter XII-C, consisting of sections 115K to 115N, omitted by the Finance Act, 1997, w.e.f. 1-4-1998. Earlier Chapter XII-C was inserted by the Finance Act, 1992, w.e.f. 1-4-1993.]”
C. AUTHORITIES — COGNATE AND PRINCIPLE MATERIALS
Important. No decision of the Supreme Court, any High Court or the ITAT has directly interpreted section 115K. Every authority below is cited on principle only — for the doctrines of estimation, of construction of concessional schemes, of beneficial-provision interpretation, and of the effect of omission — and not as a ruling on the section itself.
Cluster C-1 : The statutory successors — the living law of presumptive retail taxation
Section 44AF, Income-tax Act, 1961 (inserted by the Finance Act, 1997, w.e.f. AY 1998-99; omitted by the Finance (No.2) Act, 2009, w.e.f. AY 2011-12)
Nature: The immediate successor to Chapter XII-C. It deemed a flat 5% of the total turnover of a retail-trade business (turnover up to the prescribed limit) to be the profits and gains of that business, with the option for the assessee to declare higher income, and a bar on further deductions under sections 30 to 38.
Relevance to s.115K: Shows what Parliament kept and what it discarded: it retained the presumptive idea but discarded the separate Chapter, the no-return rule and the proceedings-bar, embedding the estimate instead in ordinary Chapter IV-D computation through the normal return. The interpretive learning under s.44AF/44AD is the nearest live analogue for any historic s.115K question.
Status: Statutory provision; both now omitted. Cited for lineage and analogy, not as authority on s.115K.
Section 44AD, Income-tax Act, 1961 (as substituted by the Finance (No.2) Act, 2009, w.e.f. AY 2011-12)
Nature: The current general presumptive-income provision for eligible small businesses, which absorbed s.44AF.
Relevance to s.115K: Completes the lineage s.115K → s.44AF → s.44AD and is the provision a small retailer of today would use; the policy continuity (simplified, formula-based income for small business) is unbroken from 1993.
Status: Live statutory provision. Cited for continuity of policy only.
Cluster C-2 : Estimation of a trader’s income — the discipline of a fair estimate
State of Kerala v. C. Velukutty (1966) 60 ITR 239 (SC)
Principle: A best-judgment estimate must not be capricious; it must have a reasonable nexus to the available material. The authority makes an estimate, but it is an honest estimate on a rational basis — there is an element of guess-work but it shall not be arbitrary.
Application to s.115K: Section 115K replaced the case-specific estimate with a statutory one, but the underlying value it served — a fair, rule-bound figure for small traders rather than an arbitrary one — is the same. It explains why a formula was thought preferable for this class.
Status: Supreme Court; foundational on best-judgment estimation. Principle authority only.
Brij Bhushan Lal Praduman Kumar v. CIT (1978) 115 ITR 524 (SC)
Principle: Where income is estimated by applying a net-profit rate, the rate must be applied to a properly ascertained base and allowances already built into the rate cannot be granted again; the estimate must be reasonable and referable to comparable cases.
Application to s.115K: Illustrates the logic of a percentage/flat estimate — the very technique that s.115K (and later s.44AF) adopted — and the rule that a presumptive figure is taken to be inclusive, which is why s.115M then barred further deductions.
Status: Supreme Court. Principle authority only.
Commissioner of Sales Tax v. H.M. Esufali H.M. Abdulali (1973) 90 ITR 271 (SC)
Principle: An estimate may be founded even on a single instance or limited material provided there is a rational basis; the estimating authority is not fettered by technical rules of evidence but cannot act on pure surmise.
Application to s.115K: Supports the legitimacy of taxing on an estimated basis for a class where exact computation is impractical — precisely the small-retailer universe that the Chapter targeted.
Status: Supreme Court. Principle authority only.
Kachwala Gems v. Joint CIT (2007) 288 ITR 10 (SC)
Principle: There is always a certain degree of guess-work in a best-judgment assessment, but the authority should try to make an honest and fair estimate and should not act totally arbitrarily; the estimate must relate to some material and be more than mere suspicion.
Application to s.115K: The modern restatement of the estimation discipline; explains the policy attraction of a fixed statutory estimate (s.115K) which removes arbitrariness by fixing the basis in advance.
Status: Supreme Court. Principle authority only.
Cluster C-3 : Construction of an optional, concessional, code-displacing scheme
Commissioner of Customs (Import), Mumbai v. Dilip Kumar & Co. (2018) 9 SCC 1 (SC, Constitution Bench)
Principle: A provision conferring an exemption or concession is to be construed strictly; the burden of bringing oneself within it lies on the claimant, and any genuine ambiguity in the eligibility conditions is resolved in favour of the Revenue.
Application to s.115K: Because the Chapter was an opt-in concession that displaced the normal computation, an assessee had to satisfy its eligibility conditions strictly before claiming its benefits; the boundary conditions (turnover/eligibility) were not to be read expansively.
Status: Supreme Court, Constitution Bench. Principle authority only.
Bajaj Tempo Ltd v. CIT (1992) 196 ITR 188 (SC)
Principle: A provision enacted to grant an incentive for a beneficial purpose should be construed liberally and in a manner that advances the object, not one that defeats it; the qualifying conditions are construed strictly, but the operative benefit is construed to fulfil the purpose.
Application to s.115K: Once an assessee was within the Chapter, its machinery was to be worked so as to serve its object — easing compliance for the small trader — rather than read down to deny the very relief it promised.
Status: Supreme Court. Principle authority only.
CIT v. J.H. Gotla (1985) 156 ITR 323 (SC)
Principle: Where a literal construction leads to a result plainly contrary to the legislative purpose, the court leans towards a construction that gives effect to the object and avoids absurdity or injustice.
Application to s.115K: A purposive aid for resolving any gap in the (now-repealed) text of a beneficial small-trader scheme in favour of its evident object.
Status: Supreme Court. Principle authority only.
Cluster C-4 : The effect of omission — survival of the five operative years
Fibre Boards (P) Ltd v. CIT (2015) 376 ITR 596 (SC)
Principle: An “omission” of a statutory provision is a form of “repeal”; sections 6 and 24 of the General Clauses Act, 1897 apply to omissions as they do to express repeals, so accrued rights and incurred liabilities are not destroyed merely because the provision was ‘omitted’ rather than ‘repealed’.
Application to s.115K: Decisive for the after-life of Chapter XII-C: the 1998 omission did not wipe out the rights, options exercised and liabilities crystallised under s.115K for AYs 1993-94 to 1997-98; those years remain governed by the Chapter as it then stood.
Status: Supreme Court. Directly settles the omission question; cited on that principle (not on s.115K’s content).
General Finance Co. v. Assistant CIT (2002) 257 ITR 338 (SC)
Principle: Had earlier taken the narrower view that section 6 of the General Clauses Act applies to a ‘repeal’ but not to a mere ‘omission’.
Application to s.115K: Included for completeness and contrast: this narrower view was disapproved in Fibre Boards (supra). The current and correct position is that the omission of Chapter XII-C is a repeal to which the savings of the General Clauses Act apply.
Status: Supreme Court; on this point no longer good law after Fibre Boards. Cited for the doctrinal history only.
CIT v. Vatika Township (P) Ltd (2015) 367 ITR 466 (SC, Constitution Bench)
Principle: A fiscal amendment is presumed prospective unless the contrary is clearly expressed; a benefit-conferring provision may be read to operate fairly, but a burden is not to be imposed retrospectively by implication.
Application to s.115K: Anchors the temporal boundaries of the Chapter: it operated for AYs 1993-94 to 1997-98 and the omission took effect prospectively from 1 April 1998, neither reaching back to unsettle completed matters nor extending the scheme forward.
Status: Supreme Court, Constitution Bench. Principle authority only.