ITR'S TRIBUNAL TAX REPORTS (ITR (TRIB))
SUBJECT INDEX TO CASES REPORTED
Exemption --Export oriented undertaking--Computation of exemption--Expenses reduced from export turnover should also be reduced from total turnover--Income-tax Act, 1961, s. 10A-- 3i Infotech Ltd. v. ITO (Chennai) . . . 1
International transactions --Arm’s length price--Determination--Profit or loss in respect of domestic transactions--To be excluded--No legal requirement that segment-wise working should be audited by chartered accountant before submission to Transfer Pricing Officer--No specific defect in working of assessee pointed out--Profit level indicator of assessee not to be rejected--Profit level declared by assessee in respect of associated enterprise transactions more than profit level of comparable cases found by Transfer Pricing Officer--No adjustment warranted--Income-tax Act, 1961, s. 92C-- 3i Infotech Ltd. v. ITO (Chennai) . . . 1
Volume 24 : Part 4 (Issue dated : 24-6-2013)
SUBJECT INDEX TO CASES REPORTED
Advance tax --Interest--Assessee, a non-resident--Duty cast on payer to deduct tax at source--Failure of payer to do so--No interest chargeable from assessee under section 234B--Income-tax Act, 1961, s. 234B-- Lloyds Register v. Deputy Director of Income-tax (International Taxation) (Mumbai) . . . 579
Appellate Tribunal --Judicial propriety--Must adhere to decision of Tribunal in assessee’s own case--That appeal against order of Tribunal was pending in High Court--Not ground to disregard order-- Assistant CIT v. LG Electronics India P. Ltd. (Delhi) . . . 634
Business expenditure --Accrued or contingent liability--Provision for service warranty--Allowable-- Assistant CIT v. LG Electronics India P. Ltd. (Delhi) . . . 634
----Corporate agent of life insurance company--Expenditure on certified data purchase, salary and referral fees--Data purchased from sister concern--Assessee maintaining complete details of data purchased--Return of income filed by sister concern showing receipt from assessee--No doubt as to business activities of that concern--No specific defect in any data purchased shown--Disallowance unjustified--Copies of Form 16 filed to show genuine payments of salary to staff--Complete details of salary payments maintained--No disallowance out of salary expenses in preceding and subsequent years--Expenditure reasonable looking to percentage and volume of business receipts--No inflation of expenses--No adverse material brought against assessee--No justification for disallowance of 30 per cent. of salary expenses--Evidence for referral fees filed in form of vouchers, Form 16A and permanent account numbers--Some persons appearing and confirming receipt--No disallowance on account of referral fees for preceding assessment year--Present year expenditure at lower percentage than for other years--No inflation of expenses--No specific defect in books of account pointed out--Assessing Officer accepting expenses substantially incurred for business--Disallowance of 30 per cent. not justified--Disallowance under referral fees alone at 5 per cent. of total expenses--Income-tax Act, 1961, s. 37-- Recent Insurance Services Ltd. v. Deputy CIT (Agra) . . . 551
----Disallowance--Contribution by State Warehousing Corporation to Karmachari Welfare Fund--Payment falling within expression “required by or under any other law†--Not to be disallowed--Income-tax Act, 1961, s. 40A(9)-- Maharashtra State Warehousing Corporation v. Deputy CIT (Pune) . . . 595
----Lease rent--Dredgers--Monthly payments not hire charges but sale instalments--Not allowable as deduction--Non-residents hiring dredgers in India not entitled to contend they had no business connection in India--Payments in any case to be disallowed under section 40(a)(i) for failure to deduct tax at source--Order of Commissioner (Appeals) set aside--Income-tax Act, 1961, s. 40(a)(i)-- Dharti Dredgers and Infrastructure Ltd. v. Assistant CIT (Hyderabad) . . . 538
Capital gains --Exemption--Sale of agricultural land and investment in purchase another agricultural land--Assessee unable to use land for agricultural purposes due to vagaries of nature and non-availability of resources--Exemption cannot be denied--Income-tax Act, 1961, s. 54B-- Assistant CIT v. N. Raghu Varma (Hyderabad) . . . 616
Capital or revenue receipt --Sales tax exemption--Assessee collecting sales tax as part of dealers’ price--At year end bifurcating sales tax portion--Exemption notification issued by State Government not authorising assessee to collect sales tax and retain it--Collection of sales tax as part of dealers’ price constituted trading receipt-- Assistant CIT v. LG Electronics India P. Ltd. (Delhi) . . . 634
Charitable purposes --Registration of trust--Assessee-trust established by State under Urban Development Act for developing urban areas in State--Object of general public utility--Entitled to registration under section 12A--Income-tax Act, 1961, s. 12A-- Urban Improvement Trust v. CIT (Jodhpur) . . . 622
----Registration--Denial of registration on ground that object not to benefit public at large--Finding that objects clause was amended--Order of Commissioner based on pre-amended clause--Application to be reconsidered in light of amended clause--Matter remanded--Income-tax Act, 1961, s. 12A-- Vyapari Vyavasayi Ekopana Samithi Welfare Society v. CIT (Cochin) . . . 528
Deduction of tax at source --Payment made by assessee to bus owners for hire of vehicles to provide pick-up and drop facility to school students--Not a case of hire of machinery but of service rendered by bus owners to assessee--Tax to be deducted under section 194C--Income-tax Act, 1961, ss. 194C, 194-I-- Assistant CIT (TDS) v. Delhi Public School (Delhi) . . . 531
Depreciation --Condition precedent--Assets must be owned wholly or partly by assessee--Assessee not owner of dredgers either wholly or partly--Not entitled to depreciation--Income-tax Act, 1961, s. 32-- Dharti Dredgers and Infrastructure Ltd. v. Assistant CIT (Hyderabad) . . . 538
Export --Special deduction--Computation--Assessee maintaining separate sets of books of account for each division--Profits of divisions clubbed while calculating deduction--Not proper--Income-tax Act, 1961, s. 80HHC-- Assistant CIT v. LG Electronics India P. Ltd. (Delhi) . . . 634
International transactions --Arm’s length price--Indian subsidiary and Korean parent company sharing contribution for sponsorship of cricket world cup tournament in ratio of 40 : 60--Benefits of advertisement would accrue only to entities in cricket-playing nations--Considering sales of entire group not appropriate basis to apportion benefits--Agreement leading to significant cost saving for assessee--Assessee’s sales increasing by 35.04 per cent. during year--Assessee deriving commensurate benefit and contribution not excessive--Apportionment of contribution in respective gross profit ratio of assessee and Korean holding company not correct--Income-tax Act, 1961, ss. 92(1), 92CA(1)-- Assistant CIT v. LG Electronics India P. Ltd. (Delhi) . . . 634
----Transfer pricing--Computation of arm’s length price--Royalty--Transactional net margin method--Assessee to adopt arm’s length price within variation of 5 per cent. from price determined by Transfer Pricing Officer--Declaration of net profit margin within permissible variation--Assessee justified to claim under section 92C(2)--Income-tax Act, 1961, s. 92C(2)-- Assistant CIT v. Reebok India Co. (Delhi) . . . 599
Medical institution --Exemption--Society formed by State Government to implement public health programmes--Wholly or substantially funded by Government of India or State Government--Exemption automatic under section 10(23C)(iiiac)--Income-tax Act, 1961, s. 10(23C)(iiiac)-- The District Health and Family Welfare Society v. Deputy CIT (Bangalore) . . . 604
Non-resident --Permanent establishment in India--Head office expenditure--Work undertaken by permanent establishment not completed without direct and substantial involvement of head office--No co-relation between actual expenditure incurred by head office and that recovered from branches--Profit element in recovery from branches--Work done by head office separate and distinct from that done by Indian branch--Head office did not merely recover costs incurred from Indian branch--Sum neither allowable as deduction in hands of Indian branch nor be considered as income in hands of head office--No question of application of section 40(a)(i) to such expenditure--Assessee as non-resident entitled to benefits of Double Taxation Avoidance Agreement--Matter remanded to compare liability to tax in respect of income of permanent establishment under domestic law and Double Taxation Avoidance Agreement--Liability to be on lower of two computations--Income not chargeable to tax in hands of head office under domestic law--No question of examining taxability of amount under Double Taxation Avoidance Agreement--Income-tax Act, 1961, ss. 40(a)(i), 90(2)-- Lloyds Register v. Deputy Director of Income-tax (International Taxation) (Mumbai) . . . 579
Penalty --Furnishing inaccurate particulars of income--Disallowance of miscellaneous expenses--Assessee failing to produce relevant documents sought by Assessing Officer since records lost or misplaced during shifting of its office--No bogus expenses relating to its business--Penalty not justified--Income-tax Act, 1961, s. 271(1)(c)-- Dresser-rand India P. Ltd. v. Deputy CIT (Mumbai) . . . 610
----Furnishing inaccurate particulars of income--Expenses incurred towards plant and machinery and repairs to building--Disallowance of expenses and imposition of penalty treating expenses as capital in nature--Allowing depreciation on expenses showed that genuineness not disputed and expenses related to business--Penalty not justified--Income-tax Act, 1961, s. 271(1)(c)-- Dresser-rand India P. Ltd. v. Deputy CIT (Mumbai) . . . 610
Precedent --Conflict of decisions--View in favour of assessee to be adopted-- Assistant CIT v. LG Electronics India P. Ltd. (Delhi) . . . 634
SECTIONWISE INDEX TO CASES REPORTED
S. 10(23C)(iiiac) --Medical institution--Exemption--Society formed by State Government to implement public health programmes--Wholly or substantially funded by Government of India or State Government--Exemption automatic under section 10(23C)(iiiac)-- The District Health and Family Welfare Society v. Deputy CIT (Bangalore) . . . 604
S. 12A --Charitable purposes--Registration of trust--Assessee-trust established by State under Urban Development Act for developing urban areas in State--Object of general public utility--Entitled to registration under section 12A-- Urban Improvement Trust v. CIT (Jodhpur) . . . 622
----Charitable purposes--Registration--Denial of registration on ground that object not to benefit public at large--Finding that objects clause was amended--Order of Commissioner based on pre-amended clause--Application to be reconsidered in light of amended clause--Matter remanded-- Vyapari Vyavasayi Ekopana Samithi Welfare Society v. CIT (Cochin) . . . 528
S. 32 --Depreciation--Condition precedent--Assets must be owned wholly or partly by assessee--Assessee not owner of dredgers either wholly or partly--Not entitled to depreciation-- Dharti Dredgers and Infrastructure Ltd. v. Assistant CIT (Hyderabad) . . . 538
S. 37 --Business expenditure--Corporate agent of life insurance company--Expenditure on certified data purchase, salary and referral fees--Data purchased from sister concern--Assessee maintaining complete details of data purchased--Return of income filed by sister concern showing receipt from assessee--No doubt as to business activities of that concern--No specific defect in any data purchased shown--Disallowance unjustified--Copies of Form 16 filed to show genuine payments of salary to staff--Complete details of salary payments maintained--No disallowance out of salary expenses in preceding and subsequent years--Expenditure reasonable looking to percentage and volume of business receipts--No inflation of expenses--No adverse material brought against assessee--No justification for disallowance of 30 per cent. of salary expenses--Evidence for referral fees filed in form of vouchers, Form 16A and permanent account numbers--Some persons appearing and confirming receipt--No disallowance on account of referral fees for preceding assessment year--Present year expenditure at lower percentage than for other years--No inflation of expenses--No specific defect in books of account pointed out--Assessing Officer accepting expenses substantially incurred for business--Disallowance of 30 per cent. not justified--Disallowance under referral fees alone at 5 per cent. of total expenses-- Recent Insurance Services Ltd. v. Deputy CIT (Agra) . . . 551
S. 40(a)(i) --Business expenditure--Lease rent--Dredgers--Monthly payments not hire charges but sale instalments--Not allowable as deduction--Non-residents hiring dredgers in India not entitled to contend they had no business connection in India--Payments in any case to be disallowed under section 40(a)(i) for failure to deduct tax at source--Order of Commissioner (Appeals) set aside-- Dharti Dredgers and Infrastructure Ltd. v. Assistant CIT (Hyderabad) . . . 538
----Non-resident--Permanent establishment in India--Head office expenditure--Work undertaken by permanent establishment not completed without direct and substantial involvement of head office--No co-relation between actual expenditure incurred by head office and that recovered from branches--Profit element in recovery from branches--Work done by head office separate and distinct from that done by Indian branch--Head office did not merely recover costs incurred from Indian branch--Sum neither allowable as deduction in hands of Indian branch nor be considered as income in hands of head office--No question of application of section 40(a)(i) to such expenditure--Assessee as non-resident entitled to benefits of Double Taxation Avoidance Agreement--Matter remanded to compare liability to tax in respect of income of permanent establishment under domestic law and Double Taxation Avoidance Agreement--Liability to be on lower of two computations--Income not chargeable to tax in hands of head office under domestic law--No question of examining taxability of amount under Double Taxation Avoidance Agreement-- Lloyds Register v. Deputy Director of Income-tax (International Taxation) (Mumbai) . . . 579
S. 40A(9) --Business expenditure--Disallowance--Contribution by State Warehousing Corporation to Karmachari Welfare Fund--Payment falling within expression “required by or under any other law†--Not to be disallowed-- Maharashtra State Warehousing Corporation v. Deputy CIT (Pune) . . . 595
S. 54B --Capital gains--Exemption--Sale of agricultural land and investment in purchase another agricultural land--Assessee unable to use land for agricultural purposes due to vagaries of nature and non-availability of resources--Exemption cannot be denied-- Assistant CIT v. N. Raghu Varma (Hyderabad) . . . 616
S. 80HHC --Export--Special deduction--Computation--Assessee maintaining separate sets of books of account for each division--Profits of divisions clubbed while calculating deduction--Not proper-- Assistant CIT v. LG Electronics India P. Ltd. (Delhi) . . . 634
S. 90(2) --Non-resident--Permanent establishment in India--Head office expenditure--Work undertaken by permanent establishment not completed without direct and substantial involvement of head office--No co-relation between actual expenditure incurred by head office and that recovered from branches--Profit element in recovery from branches--Work done by head office separate and distinct from that done by Indian branch--Head office did not merely recover costs incurred from Indian branch--Sum neither allowable as deduction in hands of Indian branch nor be considered as income in hands of head office--No question of application of section 40(a)(i) to such expenditure--Assessee as non-resident entitled to benefits of Double Taxation Avoidance Agreement--Matter remanded to compare liability to tax in respect of income of permanent establishment under domestic law and Double Taxation Avoidance Agreement--Liability to be on lower of two computations--Income not chargeable to tax in hands of head office under domestic law--No question of examining taxability of amount under Double Taxation Avoidance Agreement-- Lloyds Register v. Deputy Director of Income-tax (International Taxation) (Mumbai) . . . 579
S. 92(1) --International transactions--Arm’s length price--Indian subsidiary and Korean parent company sharing contribution for sponsorship of cricket world cup tournament in ratio of 40 : 60--Benefits of advertisement would accrue only to entities in cricket-playing nations--Considering sales of entire group not appropriate basis to apportion benefits--Agreement leading to significant cost saving for assessee--Assessee’s sales increasing by 35.04 per cent. during year--Assessee deriving commensurate benefit and contribution not excessive--Apportionment of contribution in respective gross profit ratio of assessee and Korean holding company not correct-- Assistant CIT v. LG Electronics India P. Ltd. (Delhi) . . . 634
S. 92C(2) --International transactions--Transfer pricing--Computation of arm’s length price--Royalty--Transactional net margin method--Assessee to adopt arm’s length price within variation of 5 per cent. from price determined by Transfer Pricing Officer --Declaration of net profit margin within permissible variation--Assessee justified to claim under section 92C(2)-- Assistant CIT v. Reebok India Co. (Delhi) . . . 599
S. 92CA(1) --International transactions--Arm’s length price--Indian subsidiary and Korean parent company sharing contribution for sponsorship of cricket world cup tournament in ratio of 40 : 60--Benefits of advertisement would accrue only to entities in cricket-playing nations--Considering sales of entire group not appropriate basis to apportion benefits--Agreement leading to significant cost saving for assessee--Assessee’s sales increasing by 35.04 per cent. during year--Assessee deriving commensurate benefit and contribution not excessive--Apportionment of contribution in respective gross profit ratio of assessee and Korean holding company not correct-- Assistant CIT v. LG Electronics India P. Ltd. (Delhi) . . . 634
S. 194C --Deduction of tax at source--Payment made by assessee to bus owners for hire of vehicles to provide pick-up and drop facility to school students--Not a case of hire of machinery but of service rendered by bus owners to assessee--Tax to be deducted under section 194C-- Assistant CIT (TDS) v. Delhi Public School (Delhi) . . . 531
S. 194-I --Deduction of tax at source--Payment made by assessee to bus owners for hire of vehicles to provide pick-up and drop facility to school students--Not a case of hire of machinery but of service rendered by bus owners to assessee--Tax to be deducted under section 194C-- Assistant CIT (TDS) v. Delhi Public School (Delhi) . . . 531
S. 234B --Advance tax--Interest--Assessee, a non-resident--Duty cast on payer to deduct tax at source--Failure of payer to do so--No interest chargeable from assessee under section 234B-- Lloyds Register v. Deputy Director of Income-tax (International Taxation) (Mumbai) . . . 579
S. 271(1)(c) --Penalty--Furnishing inaccurate particulars of income--Disallowance of miscellaneous expenses--Assessee failing to produce relevant documents sought by Assessing Officer since records lost or misplaced during shifting of its office--No bogus expenses relating to its business--Penalty not justified-- Dresser-rand India P. Ltd. v. Deputy CIT (Mumbai) . . . 610
----Penalty--Furnishing inaccurate particulars of income--Expenses incurred towards plant and machinery and repairs to building--Disallowance of expenses and imposition of penalty treating expenses as capital in nature--Allowing depreciation on expenses showed that genuineness not disputed and expenses related to business--Penalty not justified-- Dresser-rand India P. Ltd. v. Deputy CIT (Mumbai) . . . 610
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