ITR'S TRIBUNAL TAX REPORTS (ITR (TRIB))
Volume 14 : Part 4 (Issue dated : 12-3-2012)
SUBJECT INDEX TO CASES REPORTED IN THIS PART
Accounting --Sum shown as liability in accounts--Assessing Officer not entitled to classify it as "liability no longer required"--Assessee alone entitled to write off liability taking business requirements into account--Income-tax Act, 1961-- Yum ! Restaurants (India) P. Ltd. v. Addl. CIT (Delhi) . . . 420
Business expenditure --Business loss--Claim to deduction of travel expenses--Service agreement providing for fixed fee plus reimbursement of travel expenses incurred in performance of its duties--Assessee not entitled to claim it had incurred expenses on its own--No material to show that expenses not reimbursed--Sum not allowable as business loss--Income-tax Act, 1961, s. 37-- Yum ! Restaurants (India) P. Ltd. v. Addl. CIT (Delhi) . . . 420
----Deduction only on actual payment--Interest on SEBI turnover fees same as SEBI fees--To be allowed --Income-tax Act, 1961, s. 43B-- Wallfort Financial Services Ltd. v. Addl. CIT (Mumbai) . . . 349
----Disallowance--Payments liable to deduction of tax at source--Sum claimed to be received by assessee on behalf of subsidiary--Credit for tax deducted at source taken by assessee--Whether claimed as deduction and accounting treatment of sum by assessee not clear--Matter remanded for verification and readjudication--Income-tax Act, 1961-- Yum ! Restaurants (India) P. Ltd. v. Addl. CIT (Delhi) . . . 420
----House rent paid by assessee as sub-tenant to relatives for residence of directors--Rentals based on salaries of directors and excessive--Disallowance of excess over rent paid to original tenant as not spent for business purposes--No addition on basis of notional interest on security deposit--Expenses on conference of employees accompanies by wives and children--Not wholly and exclusively for purposes of business--Not allowable--Fee of R for M. B. A. course--Not incurred for any business purpose--Not allowable--Medical expenses of director and expenses on uniforms of his driver--Expenses relating to day to day business of assessee--Allowable--Expenses on experimenting on new food items--Allowable--Income-tax Act, 1961, s. 37-- Yum ! Restaurants (India) P. Ltd. v. Addl. CIT (Delhi) . . . 420
----Mercantile system of accounting--Provision for probable expenditure made but not entirely utilised--Provision bona fide made in view of possibility at time--Excess not to be disallowed--Income-tax Act, 1961-- Yum ! Restaurants (India) P. Ltd. v. Addl. CIT (Delhi) . . . 420
----Technology licence agreements with restaurant chains in America--Assessee entering into development agreements with franchisees in India--Continuing fees collected from franchisees and paid to principals abroad as royalty--Deductible--Income-tax Act, 1961, s. 37-- Yum ! Restaurants (India) P. Ltd. v. Addl. CIT (Delhi) . . . 420
----V-Sat and lease line charges--Payment not for any services but for use of facilities provided by stock exchange to members--Tax need not be deducted at source--Addition to be deleted--Income-tax Act, 1961, s. 40(a)(ia)-- Wallfort Financial Services Ltd. v. Addl. CIT (Mumbai) . . . 349
----Wholly owned subsidiary formed for marketing products of franchisees--Tripartite agreement between assessee, subsidiary and franchisee--Administrative expenses fully borne by assessee--Allocation as between assessee and subsidiary not proper--Income-tax Act, 1961-- Yum ! Restaurants (India) P. Ltd. v. Addl. CIT (Delhi) . . . 420
----Year in which allowable--Annual maintenance contracts--Expenditure relating to future year--Not allowable--Income-tax Act, 1961-- Yum ! Restaurants (India) P. Ltd. v. Addl. CIT (Delhi) . . . 420
Business income --Delivery based transactions of shares--Finding that assessee carried on trading transactions and not investments--Income to be assessed as business income--Income-tax Act, 1961, ss. 28, 45-- Wallfort Financial Services Ltd. v. Addl. CIT (Mumbai) . . . 349
Business income or income from other sources --Interest from investment of surplus funds--Assessable as income from other sources--Income-tax Act, 1961, s. 56-- Yum ! Restaurants (India) P. Ltd. v. Addl. CIT (Delhi) . . . 420
----Technology licence agreements with restaurant chains to operate restaurants in India--Franchise agreements with franchisees in India--Service fee and supply chain management fees received from franchisees--Is business income--Income-tax Act, 1961, ss. 2(13), 28, 56-- Yum ! Restaurants (India) P. Ltd. v. Addl. CIT (Delhi) . . . 420
Capital gains --Business income--Definition--Amendment to include non-compete fee--Not clarificatory--Assessee having experience in and knowledge relating to cement industry and is promoter of two cement companies--Companies taken over--Consideration paid to assessee for forbearing to start fresh cement industries--Is consideration for "not carrying out any activity in relation to any business"--Not taxable as business income prior to 1-4-2003--Receipt not for giving up right to carry on business--Receipt not covered by provisions relating to capital gains--"Right to manufacture, produce or process any article or thing" different from "right to carry on business"--Income-tax Act, 1961, ss. 28(va)(a), 55(2)(a)-- Asst. CIT v. Dr. B. V. Raju (Decd.) [SB] (Hyderabad) . . . 387
Capital or revenue expenditure --Expenditure on purchase of projector lamp, room heaters and imported chairs incurred for replacement of existing assets--Allowable--Expenditure on purchase of fire extinguishers and electronic equipment--Capital expenditure--Income-tax Act, 1961-- Yum ! Restaurants (India) P. Ltd. v. Addl. CIT (Delhi) . . . 420
Depreciation --Discrepancies in accounts--Duty of Assessing Officer to identify each item and find out how item treated in block of assets and if item not used for purpose of business make out case for disallowance--Denial of total claim to depreciation on basis of general observation--Not proper--Income-tax Act, 1961-- Yum ! Restaurants (India) P. Ltd. v. Addl. CIT (Delhi) . . . 420
----Membership card of Bombay stock exchange--Not business or commercial asset relating to intellectual property right--Not entitled to depreciation--Income-tax Act, 1961, s. 32-- Wallfort Financial Services Ltd. v. Addl. CIT (Mumbai) . . . 349
Income from undisclosed sources --Invoices inadvertently prepared in names of two parties--Explanation of assessee accepted by Transfer Pricing Officer--Document not sufficient to infer undisclosed income--Income-tax Act, 1961-- Yum ! Restaurants (India) P. Ltd. v. Addl. CIT (Delhi) . . . 420
International transactions --Arm's length price--Determination--Selection of comparables--Income-tax Act, 1961, s. 92CA-- Yum ! Restaurants (India) P. Ltd. v. Addl. CIT (Delhi) . . . 420
----Determination of arm's length price--Reference to Transfer Pricing Officer--Safe harbour to be computed with reference to arm's length price determined by Transfer Pricing Officer less than 5 per cent.--Addition to be deleted--Income-tax Act, 1961, s. 92CA(1)--Circular Nos. 5 dated 3-6-2010 and 12 dated 23-8-2001-- iPolicy Network P. Ltd. v. ITO (Delhi) . . . 375
Refund --Interest on excess refund--Not leviable prior to assessment year 2004-05--Income-tax Act, 1961, s. 234D-- Yum ! Restaurants (India) P. Ltd. v. Addl. CIT (Delhi) . . . 420
SECTIONWISE INDEX TO CASES REPORTED IN THIS PART
S. 2(13) --Business income or income from other sources--Technology licence agreements with restaurant chains to operate restaurants in India--Franchise agreements with franchisees in India--Service fee and supply chain management fees received from franchisees--Is business income-- Yum ! Restaurants (India) P. Ltd. v. Addl. CIT (Delhi) . . . 420
S. 28 --Business income--Delivery based transactions of shares--Finding that assessee carried on trading transactions and not investments--Income to be assessed as business income-- Wallfort Financial Services Ltd. v. Addl. CIT (Mumbai) . . . 349
----Business income or income from other sources--Technology licence agreements with restaurant chains to operate restaurants in India--Franchise agreements with franchisees in India--Service fee and supply chain management fees received from franchisees--Is business income-- Yum ! Restaurants (India) P. Ltd. v. Addl. CIT (Delhi) . . . 420
S. 28(va)(a) --Capital gains--Business income--Definition--Amendment to include non-compete fee--Not clarificatory--Assessee having experience in and knowledge relating to cement industry and is promoter of two cement companies--Companies taken over--Consideration paid to assessee for forbearing to start fresh cement industries--Is consideration for "not carrying out any activity in relation to any business"--Not taxable as business income prior to 1-4-2003--Receipt not for giving up right to carry on business--Receipt not covered by provisions relating to capital gains--"Right to manufacture, produce or process any article or thing" different from "right to carry on business"-- Asst. CIT v. Dr. B. V. Raju (Decd.) [SB] (Hyderabad) . . . 387
S. 32 --Depreciation--Membership card of Bombay stock exchange--Not business or commercial asset relating to intellectual property right--Not entitled to depreciation-- Wallfort Financial Services Ltd. v. Addl. CIT (Mumbai) . . . 349
S. 37 --Business expenditure--Business loss--Claim to deduction of travel expenses--Service agreement providing for fixed fee plus reimbursement of travel expenses incurred in performance of its duties--Assessee not entitled to claim it had incurred expenses on its own--No material to show that expenses not reimbursed--Sum not allowable as business loss-- Yum ! Restaurants (India) P. Ltd. v. Addl. CIT (Delhi) . . . 420
----Business expenditure--House rent paid by assessee as sub-tenant to relatives for residence of directors--Rentals based on salaries of directors and excessive--Disallowance of excess over rent paid to original tenant as not spent for business purposes--No addition on basis of notional interest on security deposit--Expenses on conference of employees accompanies by wives and children--Not wholly and exclusively for purposes of business--Not allowable--Fee of R for M. B. A. course--Not incurred for any business purpose--Not allowable--Medical expenses of director and expenses on uniforms of his driver--Expenses relating to day to day business of assessee--Allowable--Expenses on experimenting on new food items--Allowable-- Yum ! Restaurants (India) P. Ltd. v. Addl. CIT (Delhi) . . . 420
----Business expenditure--Technology licence agreements with restaurant chains in America--Assessee entering into development agreements with franchisees in India--Continuing fees collected from franchisees and paid to principals abroad as royalty--Deductible-- Yum ! Restaurants (India) P. Ltd. v. Addl. CIT (Delhi) . . . 420
S. 40(a)(ia) --Business expenditure--V-Sat and lease line charges--Payment not for any services but for use of facilities provided by stock exchange to members--Tax need not be deducted at source--Addition to be deleted-- Wallfort Financial Services Ltd. v. Addl. CIT (Mumbai) . . . 349
S. 43B --Business expenditure--Deduction only on actual payment--Interest on SEBI turnover fees same as SEBI fees--To be allowed-- Wallfort Financial Services Ltd. v. Addl. CIT (Mumbai) . . . 349
S. 45 --Business income--Delivery based transactions of shares--Finding that assessee carried on trading transactions and not investments--Income to be assessed as business income-- Wallfort Financial Services Ltd. v. Addl. CIT (Mumbai) . . . 349
S. 55(2)(a) --Capital gains--Business income--Definition--Amendment to include non-compete fee--Not clarificatory--Assessee having experience in and knowledge relating to cement industry and is promoter of two cement companies--Companies taken over--Consideration paid to assessee for forbearing to start fresh cement industries--Is consideration for "not carrying out any activity in relation to any business"--Not taxable as business income prior to 1-4-2003--Receipt not for giving up right to carry on business--Receipt not covered by provisions relating to capital gains--"Right to manufacture, produce or process any article or thing" different from "right to carry on business"-- Asst. CIT v. Dr. B. V. Raju (Decd.) [SB] (Hyderabad) . . . 387
S. 56 --Business income or income from other sources--Interest from investment of surplus funds--Assessable as income from other sources-- Yum ! Restaurants (India) P. Ltd. v. Addl. CIT (Delhi) . . . 420
----Business income or income from other sources--Technology licence agreements with restaurant chains to operate restaurants in India--Franchise agreements with franchisees in India--Service fee and supply chain management fees received from franchisees--Is business income-- Yum ! Restaurants (India) P. Ltd. v. Addl. CIT (Delhi) . . . 420
S. 92CA --International transactions--Arm's length price--Determination--Selection of comparables-- Yum ! Restaurants (India) P. Ltd. v. Addl. CIT (Delhi) . . . 420
S. 92CA(1) --International transactions--Determination of arm's length price--Reference to Transfer Pricing Officer--Safe harbour to be computed with reference to arm's length price determined by Transfer Pricing Officer less than 5 per cent.--Addition to be deleted--Circular Nos. 5 dated 3-6-2010 and 12 dated 23-8-2001-- iPolicy Network P. Ltd. v. ITO (Delhi) . . . 375
S. 234D --Refund--Interest on excess refund--Not leviable prior to assessment year 2004-05-- Yum ! Restaurants (India) P. Ltd. v. Addl. CIT (Delhi) . . . 420
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