INCOME TAX REPORTS (ITR)
Volume 343 : Part 2 (Issue dated 7-5-2012)
SUBJECT INDEX TO CASES REPORTED IN THIS PART
Assessment --Reference to Departmental Valuation Officer--Change of law of with retrospective effect--Effect--Construction in factory building relating to assessment year 1984-85--Reference by Assessing Officer to Departmental Valuation Officer--Not justified--Income-tax Act, 1961, s. 142A-- CIT v. Nabha Solvex (P) Ltd .(P&H) . . . 178
Business expenditure --Expenditure on higher education of two directors of assessee--Disallowance on ground directors are children of managing director--Not proper--Assessing Officer to consider whether assessee entitled to claim deduction under section 37(1)--Income-tax Act, 1961, ss. 37(1), 144(1)(b)-- Krishna Fabrications Ltd . v. Joint CIT (Asstt.) (Karn) . . . 126
Capital gains --Transfer--Slump sale--Agreement for transfer of business as going concern--Not of itemised assets--Capital gains not chargeable--Income-tax Act, 1961, s. 45-- CIT v. Polychem Ltd. (Bom) . . . 115
Reassessment --Notice--Assessing Officer finding that claim of depreciation bogus--Notice valid--Income-tax Act, 1961, s. 148-- Indo European Breweries Ltd. v. ITO (Bom) . . . 195
----Notice--Non-resident company deriving income by maintaining and operating super computer sold to Government of India--Assessment order showing Assessing Officer aware of nature and character of obligation performed for which consideration paid--Reassessment on ground agreement between assessee and Government not produced before Assessing Officer--Not proper--Income-tax Act, 1961, ss. 147, 148-- CIT v. Cray Research India Ltd. (Delhi) . . . 212
----Reassessment after four years--Condition precedent--Failure to disclose material facts necessary for assessment--Meaning of "primary facts"--Claim for special deduction under sections 80HHC and 80-IB--Audited accounts and auditor's report submitted--Special deductions allowed--Reassessment notice after four years on ground that special deductions were excessive--Notice not valid--Income-tax Act, 1961, s. 147-- CIT v. Purolator India Ltd. (Delhi) . . . 155
----Reassessment after four years--Condition precedent--Failure to disclose material facts necessary for assessment--No such failure--Reassessment to correct errors in assessment--Not valid--Income-tax Act, 1961, s. 147-- Titanor Components Ltd . v. Asst. CIT (Bom) . . . 183
----Reassessment after four years--Permissible on basis of disclosures made by assessee in assessment for subsequent year--Disclosures not made in year in question--Amounts to failure to disclose material facts--Income-tax Act, 1961, ss. 10A, 147, 148-- Siemens Information Systems Limited v. Asst. CIT (Bom) . . . 188
----Reassessment after four years--Validity--No failure to disclose material facts necessary for assessment--Deduction of expenditure in original assessment--Reassessment proceedings to disallow expenditure--Not valid--Income-tax Act, 1961, s. 147-- BLB Limited v. Asst. CIT (Delhi) . . . 129
----Validity--Failure to disclose material facts necessary for assessment--Details regarding loan not furnished--Assessment order for assessment year 1999-2000 that loan from sister concern was assessable as deemed dividend--Reassessment proceedings to assess such loans as deemed dividend in assessment year 2000-01--Valid--Income-tax Act, 1961, s. 147-- Atma Ram Properties Private Limited v. Deputy CIT (Delhi) . . . 141
----Validity--Reassessment after four years--Failure to disclose material facts necessary for assessment--Loans from sister concern--Facts disclosed by assessee--Failure to assess loans as deemed dividends--Reassessment proceedings not valid for assessment year 1999-2000--Income-tax Act, 1961, s. 147-- Atma Ram Properties Private Limited v. Deputy CIT (Delhi) . . . 141
Revision --Erroneous and prejudicial to Revenue--General principles--Special deductions under sections 80-I, 80-IA and 80HHC granted without allocation of expenditure to those units--Revision justified--Revision to allocate expenditure on green tea cess, interest and agency commission--Not justified--Income-tax Act, 1961, s. 263-- CIT v. Hindustan Lever Ltd. (Bom) . . . 161
Advance ruling --Authority--Jurisdiction--Prohibition where question in issue before authorities under Act--Application by Indian company whether tax deductible at source on payments to non-resident--Is in effect question of taxability of payments in hands of non-resident--Non-resident already assessed and appeal pending before Tribunal--Question already pending before income-tax authority--Application by Indian company not maintainable--Income-tax Act, 1961, ss. 195, 245N(a)(ii), 245R(2), 245S-- Nuclear Power Corporation of India Ltd. , In re . . . 220
----Maintainability--Question on which ruling sought already pending before income-tax authority--Application not maintainable--Date of filing return is date to be reckoned for determination whether question already pending before authority--Income-tax Act, 1961, s. 245R(2)-- WaveField Inseis ASA , In re . . . 136
Non-resident --Purchase of aircraft by Indian company from company incorporated in France--COFACE, body incorporated on behalf of French State, ensuring credit facility--Promissory notes, for principal and interest separately executed by Indian buyer in favour of foreign seller--Promissory notes irrevocably and unconditionally assigned by seller to BNP Paribas--Interest payable by Indian buyer to seller or to BNP not taxable in India--Income-tax Act, 1961, s. 195--Double Taxation Avoidance Agreement between India and France, art. 12(3)(b)-- Poonawalla Aviation Private Limited , In re . . . 202
SECTIONWISE INDEX TO CASES REPORTED IN THIS PART
Double Taxation Avoidance Agreement between India and France :
Art. 12(3)(b) --Non-resident--Purchase of aircraft by Indian company from company incorporated in France--COFACE, body incorporated on behalf of French State, ensuring credit facility--Promissory notes, for principal and interest separately executed by Indian buyer in favour of foreign seller--Promissory notes irrevocably and unconditionally assigned by seller to BNP Paribas--Interest payable by Indian buyer to seller or to BNP not taxable in India-- Poonawalla Aviation Private Limited , In re (AAR) . . . 202
S. 10A --Reassessment--Reassessment after four years--Permissible on basis of disclosures made by assessee in assessment for subsequent year--Disclosures not made in year in question--Amounts to failure to disclose material facts-- Siemens Information Systems Limited v. Asst. CIT (Bom) . . . 188
S. 37(1) --Business expenditure--Expenditure on higher education of two directors of assessee--Disallowance on ground directors are children of managing director--Not proper--Assessing Officer to consider whether assessee entitled to claim deduction under section 37(1)-- Krishna Fabrications Ltd . v. Joint CIT (Asstt.) (Karn) . . . 126
S. 45 --Capital gains--Transfer--Slump sale--Agreement for transfer of business as going concern--Not of itemised assets--Capital gains not chargeable-- CIT v. Polychem Ltd. (Bom) . . . 115
S. 142A --Assessment--Reference to Departmental Valuation Officer--Change of law of with retrospective effect--Effect--Construction in factory building relating to assessment year 1984-85--Reference by Assessing Officer to Departmental Valuation Officer--Not justified-- CIT v. Nabha Solvex (P) Ltd . (P&H) . . . 178
S. 144(1)(b) --Business expenditure--Expenditure on higher education of two directors of assessee--Disallowance on ground directors are children of managing director--Not proper--Assessing Officer to consider whether assessee entitled to claim deduction under section 37(1)-- Krishna Fabrications Ltd . v. Joint CIT (Asstt.) (Karn) . . . 126
S. 147 --Reassessment--Notice--Non-resident company deriving income by maintaining and operating super computer sold to Government of India--Assessment order showing Assessing Officer aware of nature and character of obligation performed for which consideration paid--Reassessment on ground agreement between assessee and Government not produced before Assessing Officer--Not proper-- CIT v. Cray Research India Ltd. (Delhi) . . . 212
----Reassessment--Reassessment after four years--Condition precedent--Failure to disclose material facts necessary for assessment--Meaning of "primary facts"--Claim for special deduction under sections 80HHC and 80-IB--Audited accounts and auditor's report submitted--Special deductions allowed--Reassessment notice after four years on ground that special deductions were excessive--Notice not valid-- CIT v. Purolator India Ltd. (Delhi) . . . 155
----Reassessment--Reassessment after four years--Condition precedent--Failure to disclose material facts necessary for assessment--No such failure--Reassessment to correct errors in assessment--Not valid-- Titanor Components Ltd . v. Asst. CIT (Bom) . . . 183
----Reassessment--Reassessment after four years--Permissible on basis of disclosures made by assessee in assessment for subsequent year--Disclosures not made in year in question--Amounts to failure to disclose material facts-- Siemens Information Systems Limited v. Asst. CIT (Bom) . . . 188
----Reassessment--Reassessment after four years--Validity--No failure to disclose material facts necessary for assessment--Deduction of expenditure in original assessment--Reassessment proceedings to disallow expenditure--Not valid-- BLB Limited v. Asst. CIT (Delhi) . . . 129
----Reassessment--Validity--Failure to disclose material facts necessary for assessment--Details regarding loan not furnished--Assessment order for assessment year 1999-2000 that loan from sister concern was assessable as deemed dividend--Reassessment proceedings to assess such loans as deemed dividend in assessment year 2000-01--Valid-- Atma Ram Properties Private Limited v. Deputy CIT (Delhi) . . . 141
----Reassessment--Validity--Reassessment after four years--Failure to disclose material facts necessary for assessment--Loans from sister concern--Facts disclosed by assessee--Failure to assess loans as deemed dividends--Reassessment proceedings not valid for assessment year 1999-2000-- Atma Ram Properties Private Limited v. Deputy CIT (Delhi) . . . 141
S. 148 --Reassessment--Notice--Assessing Officer finding that claim of depreciation bogus--Notice valid-- Indo European Breweries Ltd. v. ITO (Bom) . . . 195
----Reassessment--Notice--Non-resident company deriving income by maintaining and operating super computer sold to Government of India--Assessment order showing Assessing Officer aware of nature and character of obligation performed for which consideration paid--Reassessment on ground agreement between assessee and Government not produced before Assessing Officer--Not proper-- CIT v. Cray Research India Ltd. (Delhi) . . . 212
----Reassessment--Reassessment after four years--Permissible on basis of disclosures made by assessee in assessment for subsequent year--Disclosures not made in year in question--Amounts to failure to disclose material facts-- Siemens Information Systems Limited v. Asst. CIT (Bom) . . . 188
S. 195 --Advance ruling--Authority--Jurisdiction--Prohibition where question in issue before authorities under Act--Application by Indian company whether tax deductible at source on payments to non-resident--Is in effect question of taxability of payments in hands of non-resident--Non-resident already assessed and appeal pending before Tribunal--Question already pending before income-tax authority--Application by Indian company not maintainable-- Nuclear Power Corporation of India Ltd. , In re(AAR) . . . 220
----Non-resident--Purchase of aircraft by Indian company from company incorporated in France--COFACE, body incorporated on behalf of French State, ensuring credit facility--Promissory notes, for principal and interest separately executed by Indian buyer in favour of foreign seller--Promissory notes irrevocably and unconditionally assigned by seller to BNP Paribas--Interest payable by Indian buyer to seller or to BNP not taxable in India-- Poonawalla Aviation Private Limited , In re (AAR) . . . 202
S. 245N(a)(ii) --Advance ruling--Authority--Jurisdiction--Prohibition where question in issue before authorities under Act--Application by Indian company whether tax deductible at source on payments to non-resident--Is in effect question of taxability of payments in hands of non-resident--Non-resident already assessed and appeal pending before Tribunal--Question already pending before income-tax authority--Application by Indian company not maintainable-- Nuclear Power Corporation of India Ltd. , In re(AAR) . . . 220
S. 245R(2) --Advance ruling--Authority--Jurisdiction--Prohibition where question in issue before authorities under Act--Application by Indian company whether tax deductible at source on payments to non-resident--Is in effect question of taxability of payments in hands of non-resident--Non-resident already assessed and appeal pending before Tribunal--Question already pending before income-tax authority--Application by Indian company not maintainable-- Nuclear Power Corporation of India Ltd. , In re(AAR) . . . 220
----Advance ruling--Maintainability--Question on which ruling sought already pending before income-tax authority--Application not maintainable--Date of filing return is date to be reckoned for determination whether question already pending before authority-- WaveField Inseis ASA , In re (AAR) . . . 136
S. 245S --Advance ruling--Authority--Jurisdiction--Prohibition where question in issue before authorities under Act--Application by Indian company whether tax deductible at source on payments to non-resident--Is in effect question of taxability of payments in hands of non-resident--Non-resident already assessed and appeal pending before Tribunal--Question already pending before income-tax authority--Application by Indian company not maintainable-- Nuclear Power Corporation of India Ltd. , In re(AAR) . . . 220
S. 263 --Revision--Erroneous and prejudicial to Revenue--General principles--Special deductions under sections 80-I, 80-IA and 80HHC granted without allocation of expenditure to those units--Revision justified--Revision to allocate expenditure on green tea cess, interest and agency commission--Not justified-- CIT v. Hindustan Lever Ltd. (Bom) . . . 161
ITR'S TRIBUNAL TAX REPORTS (ITR (TRIB))
Volume 15 : Part 5 (Issue dated : 07-05-2012)
SUBJECT INDEX TO CASES REPORTED IN THIS PART
Appeal to Appellate Tribunal --Difference of opinion among Members--Reference to Third Member--Order of Third Member agreeing with one Member of original Bench--Majority view prevails and is binding--No power in Member holding minority view to frame questions afresh on same matter while giving effect--Income-tax Act, 1961, s. 255(4)-- Tulip Hotels P. Ltd. v. Deputy CIT [SB] (Mumbai) . . . 548
International transactions --Arm's length price--Determination--Transactions with associated enterprises alone to be considered--Data that can be considered by Transfer Pricing Officer--No cut off date--Power of Officer to issue notices to parties for selection as comparables--No duty to inform assessee--Duty only to furnish assessee with information adverse to it and provide opportunity for cross examination if assessee seeks it--Duty to consider objections of assessee--Transactional net margin method--Filters to be used for selection of comparables--Companies having turnover falling within particular range to be considered--Standard deduction of five per cent. to be granted--Income-tax Act, 1961, ss. 92B, 92CA, 92D, 92F--Income-tax Rules, 1962, r. 10D-- Genisys Integrating Systems (India) P. Ltd. v. Deputy CIT (Bangalore) . . . 475
----Reference to Transfer Pricing Officer--Determination of arm's length price--Difference between assessee and comparable companies in terms of functions, assets and risk not considered--Matter remanded--Income-tax Act, 1961, s. 92C--Income-tax Rules, 1962, r. 10B-- Trigent Software Ltd. v. Asst. CIT (Mumbai) . . . 452
----Transfer pricing analysis--Arm's length price--Determination--Assessee's manufacturing export activities and buying/sourcing and commission earning activities independent and having different factors--Assessee undertaking benchmarking on transaction-by-transaction basis--Proper--Entity level benchmarking combining international transactions not justified--Companies having substantially high related party transactions--Not to be selected as comparables--Assessee's operating profit much higher than that of comparables--Even if all factors held against assessee, difference less than five per cent.--No adjustment in assessee's transfer pricing analysis called for--Income-tax Act, 1961, s. 92CA(3)-- Benetton India P. Ltd. v. ITO (Delhi) . . . 518
----Transfer pricing--Arm's length price--Determination--Transactional net margin method--Selection of comparables--Tribunal taking conscious decision that companies having margin less than 6 per cent. to be excluded--Not to be disturbed in application under section 254(2)--Benefit of deduction of 5 per cent. under proviso to section 92C(2) granted--No separate adjustment on account of risk functional difference--Adjustment of 5 per cent. only after arriving at arithmetical mean of two prices--Matter remanded --Income-tax Act, 1961, ss. 92C(2), 92CA, 254(2)-- SAP Labs India P. Ltd. v. Asst. CIT (Bangalore) . . . 506
SECTIONWISE INDEX TO CASES REPORTED IN THIS PART
S. 92B --International transactions--Arm's length price--Determination--Transactions with associated enterprises alone to be considered--Data that can be considered by Transfer Pricing Officer--No cut off date--Power of Officer to issue notices to parties for selection as comparables--No duty to inform assessee--Duty only to furnish assessee with information adverse to it and provide opportunity for cross examination if assessee seeks it--Duty to consider objections of assessee--Transactional net margin method--Filters to be used for selection of comparables--Companies having turnover falling within particular range to be considered--Standard deduction of five per cent. to be granted-- Genisys Integrating Systems (India) P. Ltd. v. Deputy CIT (Bangalore) . . . 475
S. 92C --International transactions--Reference to Transfer Pricing Officer--Determination of arm's length price--Difference between assessee and comparable companies in terms of functions, assets and risk not considered--Matter remanded-- Trigent Software Ltd. v. Asst. CIT (Mumbai) . . . 452
S. 92C(2) --International transactions--Transfer pricing--Arm's length price--Determination--Transactional net margin method--Selection of comparables--Tribunal taking conscious decision that companies having margin less than 6 per cent. to be excluded --Not to be disturbed in application under section 254(2)--Benefit of deduction of 5 per cent. under proviso to section 92C(2) granted--No separate adjustment on account of risk functional difference--Adjustment of 5 per cent. only after arriving at arithmetical mean of two prices--Matter remanded-- SAP Labs India P. Ltd. v. Asst. CIT (Bangalore) . . . 506
S. 92CA --International transactions--Arm's length price--Determination--Transactions with associated enterprises alone to be considered--Data that can be considered by Transfer Pricing Officer--No cut off date--Power of Officer to issue notices to parties for selection as comparables--No duty to inform assessee--Duty only to furnish assessee with information adverse to it and provide opportunity for cross examination if assessee seeks it--Duty to consider objections of assessee--Transactional net margin method--Filters to be used for selection of comparables--Companies having turnover falling within particular range to be considered--Standard deduction of five per cent. to be granted-- Genisys Integrating Systems (India) P. Ltd. v. Deputy CIT (Bangalore) . . . 475
----International transactions--Transfer pricing--Arm's length price--Determination--Transactional net margin method--Selection of comparables--Tribunal taking conscious decision that companies having margin less than 6 per cent. to be excluded--Not to be disturbed in application under section 254(2)--Benefit of deduction of 5 per cent. under proviso to section 92C(2) granted--No separate adjustment on account of risk functional difference--Adjustment of 5 per cent. only after arriving at arithmetical mean of two prices--Matter remanded-- SAP Labs India P. Ltd. v. Asst. CIT (Bangalore) . . . 506
S. 92CA(3) --International transactions--Transfer pricing analysis--Arm's length price--Determination--Assessee's manufacturing export activities and buying/sourcing and commission earning activities independent and having different factors--Assessee undertaking benchmarking on transaction-by-transaction basis--Proper--Entity level benchmarking combining international transactions not justified--Companies having substantially high related party transactions--Not to be selected as comparables--Assessee's operating profit much higher than that of comparables--Even if all factors held against assessee, difference less than five per cent.--No adjustment in assessee's transfer pricing analysis called for-- Benetton India P. Ltd. v. ITO (Delhi) . . . 518
S. 92D --International transactions--Arm's length price--Determination--Transactions with associated enterprises alone to be considered--Data that can be considered by Transfer Pricing Officer--No cut off date--Power of Officer to issue notices to parties for selection as comparables--No duty to inform assessee--Duty only to furnish assessee with information adverse to it and provide opportunity for cross examination if assessee seeks it--Duty to consider objections of assessee--Transactional net margin method--Filters to be used for selection of comparables--Companies having turnover falling within particular range to be considered--Standard deduction of five per cent. to be granted-- Genisys Integrating Systems (India) P. Ltd. v. Deputy CIT (Bangalore) . . . 475
S. 92F --International transactions--Arm's length price--Determination--Transactions with associated enterprises alone to be considered--Data that can be considered by Transfer Pricing Officer--No cut off date--Power of Officer to issue notices to parties for selection as comparables--No duty to inform assessee--Duty only to furnish assessee with information adverse to it and provide opportunity for cross examination if assessee seeks it--Duty to consider objections of assessee--Transactional net margin method--Filters to be used for selection of comparables--Companies having turnover falling within particular range to be considered--Standard deduction of five per cent. to be granted-- Genisys Integrating Systems (India) P. Ltd. v. Deputy CIT (Bangalore) . . . 475
S. 254(2) --International transactions--Transfer pricing--Arm's length price--Determination--Transactional net margin method--Selection of comparables--Tribunal taking conscious decision that companies having margin less than 6 per cent. to be excluded--Not to be disturbed in application under section 254(2)--Benefit of deduction of 5 per cent. under proviso to section 92C(2) granted--No separate adjustment on account of risk functional difference--Adjustment of 5 per cent. only after arriving at arithmetical mean of two prices--Matter remanded-- SAP Labs India P. Ltd. v. Asst. CIT (Bangalore) . . . 506
S. 255(4) --Appeal to Appellate Tribunal--Difference of opinion among Members--Reference to Third Member--Order of Third Member agreeing with one Member of original Bench--Majority view prevails and is binding--No power in Member holding minority view to frame questions afresh on same matter while giving effect-- Tulip Hotels P. Ltd. v. Deputy CIT [SB] (Mumbai) . . . 548
R. 10B --International transactions--Reference to Transfer Pricing Officer--Determination of arm's length price--Difference between assessee and comparable companies in terms of functions, assets and risk not considered--Matter remanded-- Trigent Software Ltd. v. Asst. CIT (Mumbai) . . . 452
R. 10D --International transactions--Arm's length price--Determination--Transactions with associated enterprises alone to be considered--Data that can be considered by Transfer Pricing Officer--No cut off date--Power of Officer to issue notices to parties for selection as comparables--No duty to inform assessee--Duty only to furnish assessee with information adverse to it and provide opportunity for cross examination if assessee seeks it--Duty to consider objections of assessee--Transactional net margin method--Filters to be used for selection of comparables--Companies having turnover falling within particular range to be considered--Standard deduction of five per cent. to be granted-- Genisys Integrating Systems (India) P. Ltd. v. Deputy CIT (Bangalore) . . . 475
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