INCOME TAX REPORTS (ITR)
Volume 343 : Part 5 (Issue dated 28-5-2012)
SUBJECT INDEX TO CASES REPORTED IN THIS PART
HIGH COURTS
Business income --Remission or cessation of trading liability--Scope of section 41--Liability to creditors outstanding for more than four years--Liability shown in accounts of assessee-company--Amount not assessable as income under section 41(1)--Income-tax Act, 1961, s. 41(1)-- CIT v. Shri Vardhman Overseas Ltd. (Delhi) . . . 408
Industrial park --Special deduction under section 80-IA--Scheme formulated under section 80-IA--Scheme cannot override provisions of the section--Requirement in section 80-IA that industrial park must be developed before 31st March, 2006--No requirement that industrial park should be operational before 31st March, 2006--Refusal of approval of industrial park because it was not operational on 31st March, 2006--Not valid--Income-tax Act, 1961, s. 80-IA-- Silver Land Developers Pvt. Ltd. v. Empowered Committee (Bom) . . . 439
Interpretation of taxing statutes --Legal terms-- CIT v. Shri Vardhman Overseas Ltd . (Delhi) . . . 408
Investment allowance --Scope of section 32A--Investment allowance can be claimed in respect of machinery and plant used in job work--Income-tax Act, 1961, s. 32A-- CIT v. Firma Hi-Tech (AP) . . . 507
Non-resident --Swiss company supplying hardware and software as well as installing and commissioning cellular services--Agreements concluded in foreign country--Goods manufactured outside India and sold outside India--No business connection in India--Supply of software integral part of sale agreement--Payment not a royalty--No income accrued or arose in India--Income-tax Act, 1961, s. 9--Double Taxation Avoidance Agreement between India and Sweden, art. 13-- Director of Income-tax v. Ericsson A. B. (Delhi) . . . 470
Penalty --Concealment of income--Claim for depreciation based on transaction of sale and simultaneous lease of assets--Finding that assessee had been cheated and there was no sale--No concealment of income--Penalty could not be imposed--Income-tax Act, 1961, s. 271(1)(c)-- CIT v. Sangeeta Leasing (Delhi) . . . 428
----Concealment of income--Disallowances of expenditure on foreign travel and provision for warranty--Deleted by High Court--Penalty could not be imposed--Disallowance of marketing expenditure and additions to closing stock--Matter before Assessing Officer on remand in quantum proceedings--Penalty infructuous--Disallowance of part of provision for obsolescence--Finding by Tribunal that disallowance made on ad hoc basis--No concealment of income--Penalty could not be imposed--Income-tax Act, 1961, s. 271(1)(c)-- CIT v. Nokia India Pvt. Ltd . (Delhi) . . . 434
Precedent --Effect of decision of Supreme Court in Lalji Haridas v. ITO [1961] 43 ITR 387-- CIT v. Mahindra Finlease P. Ltd . (Delhi) . . . 464
Search and seizure --Block assessment--Protective assessment--Assessing Officer has power to make protective assessment--Income-tax Act, 1961, ss. 158BC, 158BD-- CIT v. Mahindra Finlease P. Ltd. (Delhi) . . . 464
AUTHORITY FOR ADVANCE RULINGS
Non-resident --Indian company closely held by group holding companies in U. S. A., Singapore and Mauritius--Scheme for buy-back of shares by Indian company--Holding company in Mauritius alone accepting offer to buy-back shares--Capital gains claimed not chargeable in India under Double Taxation Avoidance Agreement with Mauritius--No dividend distributed by Indian company since introduction of dividend distribution tax--Considerable profits allowed to accumulate over years--Scheme for buy-back accepted only by Mauritius holding company--Device to avoid tax in India--Profits arising to be treated as deemed dividend and taxable in India--Indian company to deduct tax at source on sale proceeds--Income-tax Act, 1961, ss. 2(22), 46A, 115-O, 195, 245R(2)--Double Taxation Avoidance Agreement between India and Mauritius, arts. 10(2), (4), 13(4)-- A , In re . . . 455
SECTIONWISE INDEX TO CASES REPORTED IN THIS PART
Double Taxation Avoidance Agreement between India and Mauritius :
Arts. 10(2), (4), 13(4) --Non-resident--Indian company closely held by group holding companies in U. S. A., Singapore and Mauritius--Scheme for buy- back of shares by Indian company--Holding company in Mauritius alone accepting offer to buy-back shares--Capital gains claimed not chargeable in India under Double Taxation Avoidance Agreement with Mauritius--No dividend distributed by Indian company since introduction of dividend distribution tax--Considerable profits allowed to accumulate over years--Scheme for buy-back accepted only by Mauritius holding company--Device to avoid tax in India--Profits arising to be treated as deemed dividend and taxable in India--Indian company to deduct tax at source on sale proceeds-- A , In re (AAR) . . . 455
Double Taxation Avoidance Agreement between India and Sweden :
Art. 13 --Non-resident--Swiss company supplying hardware and software as well as installing and commissioning cellular services--Agreements concluded in foreign country--Goods manufactured outside India and sold outside India--No business connection in India--Supply of software integral part of sale agreement--Payment not a royalty--No income accrued or arose in India-- Director of Income-tax v. Ericsson A. B. (Delhi) . . . 470
Income-tax Act, 1961 :
S. 2(22) --Non-resident--Indian company closely held by group holding companies in U. S. A., Singapore and Mauritius--Scheme for buy- back of shares by Indian company--Holding company in Mauritius alone accepting offer to buy-back shares--Capital gains claimed not chargeable in India under Double Taxation Avoidance Agreement with Mauritius--No dividend distributed by Indian company since introduction of dividend distribution tax--Considerable profits allowed to accumulate over years--Scheme for buy-back accepted only by Mauritius holding company--Device to avoid tax in India--Profits arising to be treated as deemed dividend and taxable in India--Indian company to deduct tax at source on sale proceeds-- A , In re (AAR) . . . 455
S. 9 --Non-resident--Swiss company supplying hardware and software as well as installing and commissioning cellular services--Agreements concluded in foreign country--Goods manufactured outside India and sold outside India--No business connection in India--Supply of software integral part of sale agreement--Payment not a royalty--No income accrued or arose in India-- Director of Income-tax v. Ericsson A. B. (Delhi) . . . 470
S. 32A --Investment allowance--Scope of section 32A--Investment allowance can be claimed in respect of machinery and plant used in job work-- CIT v. Firma Hi-Tech (AP) . . . 507
S. 41(1) --Business income--Remission or cessation of trading liability--Scope of section 41--Liability to creditors outstanding for more than four years--Liability shown in accounts of assessee-company--Amount not assessable as income under section 41(1)-- CIT v. Shri Vardhman Overseas Ltd. (Delhi) . . . 408
S. 46A --Non-resident--Indian company closely held by group holding companies in U. S. A., Singapore and Mauritius--Scheme for buy- back of shares by Indian company--Holding company in Mauritius alone accepting offer to buy-back shares--Capital gains claimed not chargeable in India under Double Taxation Avoidance Agreement with Mauritius--No dividend distributed by Indian company since introduction of dividend distribution tax--Considerable profits allowed to accumulate over years--Scheme for buy-back accepted only by Mauritius holding company--Device to avoid tax in India--Profits arising to be treated as deemed dividend and taxable in India--Indian company to deduct tax at source on sale proceeds-- A , In re (AAR) . . . 455
S. 80-IA --Industrial park--Special deduction under section 80-IA--Scheme formulated under section 80-IA--Scheme cannot override provisions of the section--Requirement in section 80-IA that industrial park must be developed before 31st March, 2006--No requirement that industrial park should be operational before 31st March, 2006--Refusal of approval of industrial park because it was not operational on 31st March, 2006--Not valid-- Silver Land Developers Pvt. Ltd. v. Empowered Committee (Bom) . . . 439
S. 115-O --Non-resident--Indian company closely held by group holding companies in U. S. A., Singapore and Mauritius--Scheme for buy- back of shares by Indian company--Holding company in Mauritius alone accepting offer to buy-back shares--Capital gains claimed not chargeable in India under Double Taxation Avoidance Agreement with Mauritius--No dividend distributed by Indian company since introduction of dividend distribution tax--Considerable profits allowed to accumulate over years--Scheme for buy-back accepted only by Mauritius holding company--Device to avoid tax in India--Profits arising to be treated as deemed dividend and taxable in India--Indian company to deduct tax at source on sale proceeds-- A , In re (AAR) . . . 455
S. 158BC --Search and seizure--Block assessment--Protective assessment--Assessing Officer has power to make protective assessment-- CIT v. Mahindra Finlease P. Ltd. (Delhi) . . . 464
S. 158BD --Search and seizure--Block assessment--Protective assessment--Assessing Officer has power to make protective assessment-- CIT v. Mahindra Finlease P. Ltd. (Delhi) . . . 464
S. 195 --Non-resident--Indian company closely held by group holding companies in U. S. A., Singapore and Mauritius--Scheme for buy- back of shares by Indian company--Holding company in Mauritius alone accepting offer to buy-back shares--Capital gains claimed not chargeable in India under Double Taxation Avoidance Agreement with Mauritius--No dividend distributed by Indian company since introduction of dividend distribution tax--Considerable profits allowed to accumulate over years--Scheme for buy-back accepted only by Mauritius holding company--Device to avoid tax in India--Profits arising to be treated as deemed dividend and taxable in India--Indian company to deduct tax at source on sale proceeds-- A , In re (AAR) . . . 455
S. 245R(2) --Non-resident--Indian company closely held by group holding companies in U. S. A., Singapore and Mauritius--Scheme for buy- back of shares by Indian company--Holding company in Mauritius alone accepting offer to buy-back shares--Capital gains claimed not chargeable in India under Double Taxation Avoidance Agreement with Mauritius--No dividend distributed by Indian company since introduction of dividend distribution tax--Considerable profits allowed to accumulate over years--Scheme for buy-back accepted only by Mauritius holding company--Device to avoid tax in India--Profits arising to be treated as deemed dividend and taxable in India--Indian company to deduct tax at source on sale proceeds-- A , In re (AAR) . . . 455
S. 271(1)(c) --Penalty--Concealment of income--Claim for depreciation based on transaction of sale and simultaneous lease of assets--Finding that assessee had been cheated and there was no sale--No concealment of income--Penalty could not be imposed-- CIT v. Sangeeta Leasing (Delhi) . . . 428
----Penalty--Concealment of income--Disallowances of expenditure on foreign travel and provision for warranty--Deleted by High Court--Penalty could not be imposed--Disallowance of marketing expenditure and additions to closing stock--Matter before Assessing Officer on remand in quantum proceedings--Penalty infructuous--Disallowance of part of provision for obsolescence--Finding by Tribunal that disallowance made on ad hoc basis--No concealment of income--Penalty could not be imposed-- CIT v. Nokia India Pvt. Ltd . (Delhi) . . . 434
ITR'S TRIBUNAL TAX REPORTS (ITR (TRIB))
Volume 16 : Part 1 (Issue dated : 28-05-2012)
SUBJECT INDEX TO CASES REPORTED IN THIS PART
Assessment --Revised computation of income--Assessing Officer passing order based on original return--Direction to consider revised computation of income after opportunity to assessee of being heard--Matter remanded--Income-tax Act, 1961-- Rachana S. Talreja v. Deputy CIT (Mumbai) . . . 53
Business expenditure --Disallowance of sums on which tax deductible at source--Applies only to sums "payable" as on date of balance-sheet, i.e., March 31 of year in question--Not to sums already paid during year without deduction of tax at source--Income-tax Act, 1961, s. 40(a)(ia)-- Merilyn Shipping and Transports v. Addl. CIT [SB] (Visakhapatnam) . . . 1
----Disallowance--Cannot exceed expenditure actually claimed by assessee--Disallowance unjustified--Income-tax Act, 1961, s. 14A-- Gillette Group India P. Ltd. v. Asst. CIT (Delhi) . . . 57
----Disallowance--Payments in cash exceeding prescribed limit--Payments by distributor to service provider--Assessee not covered under rule 6DD--Transaction between principal and agent--Does not attract provision of section 40A(3)--Income-tax Act, 1961, s. 40A(3)--Income-tax Rules, 1962, r. 6DD-- Koottummal Groups v. ITO (Cochin) . . . 66
Capital gains --Computation of capital gains--Adoption of stamp duty value under section 50C--Sale of property by owner and simultaneous surrender of tenancy rights by assessee--Section 50C not applicable in case of transfer of tenancy--Income-tax Act, 1961, ss. 45, 50C-- Deputy CIT v. Tejinder Singh (Kolkata) . . . 45
----Exemption--Condition precedent--Investment of sale consideration in specified securities within six months of sale--Part of sale consideration received on transfer of possession and balance subsequently--Investment in specified securities within six months of receipt of amounts--Sufficient for getting benefit of section 54EC--Fact that investment was beyond six months of deemed sale--Not relevant--Income-tax Act, 1961, ss. 45, 54EC-- Chanchal Kumar Sircar v. ITO (Kolkata) . . . 91
Double taxation avoidance --Provisions of domestic law applicable if more advantageous--Income-tax Act, 1961, s. 90(2)-- Sumitomo Mitsui Banking Corporation v. Deputy Director of Income-tax [SB] (Mumbai) . . . 116
Export --Special deduction--Telecommunication charges and implementation expenses--To be excluded from export turnover and total turnover--Income-tax Act, 1961, s. 10A-- Four Soft Ltd. v. Deputy CIT (Hyderabad) . . . 73
Fringe benefits --Gift--Meaning of--Presents to stocktists according to volume of sales--Not a gift but expenditure on sales promotion--Income-tax Act, 1961, s. 115WB--CBDT Circular No. 8, dated August 29, 2005-- Birla Corporation Ltd. v. Deputy CIT (Kolkata) . . . 60
International transactions --Transfer pricing--Computation of arm's length price--Exchange rate fluctuation--Assessee's margin falling within arm's length range--No adjustment required to be made on margin declared by assessee--Income-tax Act, 1961, s. 92CA-- Four Soft Ltd. v. Deputy CIT (Hyderabad) . . . 73
----Transfer pricing--Computation of net margin--Only cost related to transaction with associated enterprises to be considered--Assessing Officer to verify veracity of segmental financials prepared by assessee--Income-tax Act, 1961, s. 92CA-- Four Soft Ltd. v. Deputy CIT (Hyderabad) . . . 73
----Transfer pricing--Corporate guarantee provided by assessee to subsidiary does not fall within international transaction--No transfer pricing adjustment required--Income-tax Act, 1961, ss. 92B, 92C-- Four Soft Ltd. v. Deputy CIT (Hyderabad) . . . 73
----Transfer pricing--International loan--Comparables to be LIBOR based--Matter remanded--Income-tax Act, 1961-- Four Soft Ltd. v. Deputy CIT (Hyderabad) . . . 73
Interpretation of taxing statutes --Intention of Legislature--Words found in Finance Bill dropped in final enactment--Effect-- Merilyn Shipping and Transports v. Addl. CIT [SB] (Visakhapatnam) . . . 1
----Literal meaning-- Merilyn Shipping and Transports v. Addl. CIT [SB] (Visakhapatnam) . . . 1
Non-resident --Royalty--U. S. company selling software to its distributor in India and distributor reselling it to customers--Income received by non-resident was not royalty but business profits--U. S. company not having permanent establishment in India--Income not taxable in India--Income-tax Act, 1961, s. 9--Double Taxation Avoidance Agreement between the U. S. A. and India, art. 12-- Novel Inc. v. Deputy Director of Income-tax (International Taxation) (Mumbai) . . . 101
----Taxability in India--Foreign bank--Payments of interest by branch in India on advances by head office--Branch office not a separate entity--Payment is to itself and not taxable--No tax deductible at source--Payments deductible in computation of profits of permanent establishment in terms of Double Taxation Avoidance Agreement--Income-tax Act, 1961, ss. 40(a)(i), 9(1)(v)(c), 90(2), 195--Double Taxation Avoidance Agreement between India and Japan, arts. 7, 11, 23-- Sumitomo Mitsui Banking Corporation v. Deputy Director of Income-tax [SB] (Mumbai) . . . 116
Precedent --Judicial discipline-- Sumitomo Mitsui Banking Corporation v. Deputy Director of Income-tax [SB] (Mumbai) . . . 116
Words and phrases --"Payable"-- Merilyn Shipping and Transports v. Addl. CIT [SB] (Visakhapatnam) . . . 1
SECTIONWISE INDEX TO CASES REPORTED IN THIS PART
Double Taxation Avoidance Agreement between India and Japan :
Art. 7 --Non-resident--Taxability in India--Foreign bank--Payments of interest by branch in India on advances by head office--Branch office not a separate entity--Payment is to itself and not taxable--No tax deductible at source--Payments deductible in computation of profits of permanent establishment in terms of Double Taxation Avoidance Agreement-- Sumitomo Mitsui Banking Corporation v. Deputy Director of Income-tax [SB] (Mumbai) . . . 116
Art. 11 --Non-resident--Taxability in India--Foreign bank--Payments of interest by branch in India on advances by head office--Branch office not a separate entity--Payment is to itself and not taxable--No tax deductible at source--Payments deductible in computation of profits of permanent establishment in terms of Double Taxation Avoidance Agreement-- Sumitomo Mitsui Banking Corporation v. Deputy Director of Income-tax [SB] (Mumbai) . . . 116
Art. 23 --Non-resident--Taxability in India--Foreign bank--Payments of interest by branch in India on advances by head office--Branch office not a separate entity--Payment is to itself and not taxable--No tax deductible at source--Payments deductible in computation of profits of permanent establishment in terms of Double Taxation Avoidance Agreement-- Sumitomo Mitsui Banking Corporation v. Deputy Director of Income-tax [SB] (Mumbai) . . . 116
Double Taxation Avoidance Agreement between the U. S. A. and India :
Art. 12 --Non-resident--Royalty--U. S. company selling software to its distributor in India and distributor reselling it to customers--Income received by non-resident was not royalty but business profits--U. S. company not having permanent establishment in India--Income not taxable in India-- Novel Inc. v. Deputy Director of Income-tax (International Taxation) (Mumbai) . . . 101
Income-tax Act, 1961 :
S. 9 --Non-resident--Royalty--U. S. company selling software to its distributor in India and distributor reselling it to customers--Income received by non-resident was not royalty but business profits--U. S. company not having permanent establishment in India--Income not taxable in India-- Novel Inc. v. Deputy Director of Income-tax (International Taxation) (Mumbai) . . . 101
S. 9(1)(v)(c) --Non-resident--Taxability in India--Foreign bank--Payments of interest by branch in India on advances by head office--Branch office not a separate entity--Payment is to itself and not taxable--No tax deductible at source--Payments deductible in computation of profits of permanent establishment in terms of Double Taxation Avoidance Agreement-- Sumitomo Mitsui Banking Corporation v. Deputy Director of Income-tax [SB] (Mumbai) . . . 116
S. 10A --Export--Special deduction--Telecommunication charges and implementation expenses--To be excluded from export turnover and total turnover-- Four Soft Ltd. v. Deputy CIT (Hyderabad) . . . 73
S. 14A --Business expenditure--Disallowance--Cannot exceed expenditure actually claimed by assessee--Disallowance unjustified-- Gillette Group India P. Ltd. v. Asst. CIT (Delhi) . . . 57
S. 40(a)(i) --Non-resident--Taxability in India--Foreign bank--Payments of interest by branch in India on advances by head office--Branch office not a separate entity--Payment is to itself and not taxable--No tax deductible at source--Payments deductible in computation of profits of permanent establishment in terms of Double Taxation Avoidance Agreement-- Sumitomo Mitsui Banking Corporation v. Deputy Director of Income-tax [SB] (Mumbai) . . . 116
S. 40(a)(ia) --Business expenditure--Disallowance of sums on which tax deductible at source--Applies only to sums "payable" as on date of balance-sheet, i.e., March 31 of year in question--Not to sums already paid during year without deduction of tax at source-- Merilyn Shipping and Transports v. Addl. CIT [SB] (Visakhapatnam) . . . 1
S. 40A(3) --Business expenditure--Disallowance--Payments in cash exceeding prescribed limit--Payments by distributor to service provider--Assessee not covered under rule 6DD--Transaction between principal and agent--Does not attract provision of section 40A(3)-- Koottummal Groups v. ITO (Cochin) . . . 66
S. 45 --Capital gains--Computation of capital gains--Adoption of stamp duty value under section 50C--Sale of property by owner and simultaneous surrender of tenancy rights by assessee--Section 50C not applicable in case of transfer of tenancy-- Deputy CIT v. Tejinder Singh (Kolkata) . . . 45
----Capital gains--Exemption--Condition precedent--Investment of sale consideration in specified securities within six months of sale--Part of sale consideration received on transfer of possession and balance subsequently--Investment in specified securities within six months of receipt of amounts--Sufficient for getting benefit of section 54EC--Fact that investment was beyond six months of deemed sale--Not relevant-- Chanchal Kumar Sircar v. ITO (Kolkata) . . . 91
S. 50C --Capital gains--Computation of capital gains--Adoption of stamp duty value under section 50C--Sale of property by owner and simultaneous surrender of tenancy rights by assessee--Section 50C not applicable in case of transfer of tenancy-- Deputy CIT v. Tejinder Singh (Kolkata) . . . 45
S. 54EC --Capital gains--Exemption--Condition precedent--Investment of sale consideration in specified securities within six months of sale--Part of sale consideration received on transfer of possession and balance subsequently--Investment in specified securities within six months of receipt of amounts--Sufficient for getting benefit of section 54EC--Fact that investment was beyond six months of deemed sale--Not relevant-- Chanchal Kumar Sircar v. ITO (Kolkata) . . . 91
S. 90(2) --Double taxation avoidance--Provisions of domestic law applicable if more advantageous-- Sumitomo Mitsui Banking Corporation v. Deputy Director of Income-tax [SB] (Mumbai) . . . 116
----Non-resident--Taxability in India--Foreign bank--Payments of interest by branch in India on advances by head office--Branch office not a separate entity--Payment is to itself and not taxable--No tax deductible at source--Payments deductible in computation of profits of permanent establishment in terms of Double Taxation Avoidance Agreement-- Sumitomo Mitsui Banking Corporation v. Deputy Director of Income-tax [SB] (Mumbai) . . . 116
S. 92B --International transactions--Transfer pricing--Corporate guarantee provided by assessee to subsidiary does not fall within international transaction--No transfer pricing adjustment required-- Four Soft Ltd. v. Deputy CIT (Hyderabad) . . . 73
S. 92C --International transactions--Transfer pricing--Corporate guarantee provided by assessee to subsidiary does not fall within international transaction--No transfer pricing adjustment required-- Four Soft Ltd. v. Deputy CIT (Hyderabad) . . . 73
S. 92CA --International transactions--Transfer pricing--Computation of arm's length price--Exchange rate fluctuation--Assessee's margin falling within arm's length range--No adjustment required to be made on margin declared by assessee-- Four Soft Ltd. v. Deputy CIT (Hyderabad) . . . 73
----International transactions--Transfer pricing--Computation of net margin--Only cost related to transaction with associated enterprises to be considered--Assessing Officer to verify veracity of segmental financials prepared by assessee-- Four Soft Ltd. v. Deputy CIT (Hyderabad) . . . 73
S. 115WB --Fringe benefits--Gift--Meaning of--Presents to stocktists according to volume of sales--Not a gift but expenditure on sales promotion--CBDT Circular No. 8, dated August 29, 2005-- Birla Corporation Ltd. v. Deputy CIT (Kolkata) . . . 60
S. 195 --Non-resident--Taxability in India--Foreign bank--Payments of interest by branch in India on advances by head office--Branch office not a separate entity--Payment is to itself and not taxable--No tax deductible at source--Payments deductible in computation of profits of permanent establishment in terms of Double Taxation Avoidance Agreement-- Sumitomo Mitsui Banking Corporation v. Deputy Director of Income-tax [SB] (Mumbai) . . . 116
Income-tax Rules, 1962 :
R. 6DD--Business expenditure--Disallowance--Payments in cash exceeding prescribed limit--Payments by distributor to service provider--Assessee not covered under rule 6DD--Transaction between principal and agent--Does not attract provision of section 40A(3)-- Koottummal Groups v. ITO (Cochin) . . . 66
