ITR'S TRIBUNAL TAX REPORTS (ITR (TRIB))
SUBJECT INDEX TO CASES REPORTED
Appellate Tribunal --Precedent--Order of co-ordinate Bench normally followed where there are contrary decisions of two Benches-- Demag Cranes and Components (India) P. Ltd. v. Dy. CIT (Pune) . . . 32
International transactions –Arm's length price--Transactional net margin method--Net profit margin arising out of comparable uncontrolled transactions to be adjusted to take into account differences which could materially affect net profit margin in open market--Duty of Transfer Pricing Officer to minimise or eliminate differences--Working capital--Constitutes a difference --Merely because comparables supplied by assessee is no ground to refuse to entertain demanded adjustments--Adjustments on account of import cost--Manufacturing activity--Adjustments not to be computed considering entity level sales--Relatable sales drawing quantitative relationship to imports from associated enterprise--Principle of proportionality--Net profit margin computed in relation to relevant base--In relation to means in connection with --Basis of sales need not be total sales but proportionate sales relatable to international transactions--Assessee entitled to benefit of 5 per cent. variation from mean--Income-tax Act, 1961, s. 92C(2)--Income-tax Rules, 1962, r. 10B-- Demag Cranes and Components (India) P. Ltd. v. Dy. CIT (Pune) . . . 32
Precedent --Judgment favourable to assessee preferred-- Demag Cranes and Components (India) P. Ltd. v. Dy. CIT (Pune) . . . 32
Volume 24 : Part 5 (Issue dated : 1-7-2013)
SUBJECT INDEX TO CASES REPORTED
Business --Commencement of business--Assessee set up as joint venture with Government of India for business of consultancy for State Governments--Revenue generated in two years following incorporation of assessee--Lull in business thereafter not to be considered as cessation of business--Business commenced on setting up-- Urban Mass Transit Company Ltd. v. Assistant CIT (Delhi) . . . 741
Business expenditure --Accrual of liability--Assessee set up as joint venture with Government to consult on transport delivery systems--Advance given by Government of India for share capital--Shares not allotted--Return of share capital after twelve years to Government with return --Accrual, crystallisation and finalisation relatable to year in which returned--Allowable in full as business expenditure-- Urban Mass Transit Company Ltd. v. Assistant CIT (Delhi) . . . 741
----Accrued or unascertained liability--Provision for meeting warranty claims--Method for quantifying provision for warranty consistently followed--Scientific method based on past practice--Provision for warranty on accrual basis allowable deduction-- Canon India P. Ltd. v. Deputy CIT (Delhi) . . . 694
----Club expenses incurred by assessee on behalf of its directors for networking and marketing--Allowable-- Canon India P. Ltd. v. Deputy CIT (Delhi) . . . 694
----Consultancy fees--Not to be disallowed on ground of cessation of business-- Urban Mass Transit Company Ltd. v. Assistant CIT (Delhi) . . . 741
----Disallowance--Excessive and unreasonable payments--Figures wrongly reckoned by Assessing Officer--Price paid to sister concern for purchase of steel scrap lower than that paid to other parties--Disallowance not proper--Income-tax Act, 1961, s. 40A(2)-- Deputy CIT v. Raj Rani Steel Casting P. Ltd. (Pune) . . . 678
Business income or income from other sources --Assessee set up as joint venture with Government to consult on transport delivery systems--Interest earned on investment of idle funds--Not income from other sources but business income-- Urban Mass Transit Company Ltd. v. Assistant CIT (Delhi) . . . 741
Depreciation --Rate of depreciation--Computers, accessories and peripherals--Depreciation allowable at 60 per cent.-- Canon India P. Ltd. v. Deputy CIT (Delhi) . . . 694
Double taxation relief --Income from software development to be estimated by taking relevant figures--Ad hoc approach by applying lower profit margin relatable to trading activities not proper--Double Taxation Avoidance Agreement between India and Japan, art. 23-- Canon India P. Ltd. v. Deputy CIT (Delhi) . . . 694
Income or capital --Subsidy received from Singapore company for meeting specific expenditure pre-approved by Singapore company--Sums remitted with specific directions that money to be spent only for specified purposes and amount remaining unspent to be held by assessee in trust for and on behalf of Singapore company--Unutilised amount not credited to profit and loss account of assessee but taken to balance-sheet as current liability--Unspent subsidy not income of assessee--Income-tax Act, 1961, ss. 4, 5-- Canon India P. Ltd. v. Deputy CIT (Delhi) . . . 694
International transactions –Arm's length price--Determination--International transaction --Definition--Adjustment to be confined to international transactions with associated enterprises and not in relation to non-associated enterprise transactions--Assessee a manufacturer of material handling equipment and industrial cranes--Also carrying out installation and servicing thereof, sales of imported material handling equipment, components and spare parts and technical and after sales service to Indian customers--Working capital difference between international transaction and comparable materially affects net profit margin--Adjustment for additional cost incurred by assessee by way of customs duty, lending charges, clearing and forwarding charges, insurance and freight--± 5 per cent. variation from mean--To be considered in light of amendments by Finance Act, 2012 to section 92C(2)--Aggregation of all transactions considering them part of manufacturing activity--Closely linked transactions treated as composite transaction for common transfer pricing analysis--Proper--Marketing services, technical know-how and professional services whether to be aggregated--Matter remanded--Income-tax Act, 1961, ss. 92, 92B, 92C-- Demag Cranes and Components (India) P. Ltd. v. Deputy CIT (Pune) . . . 760
----Arm's length price--Determination--Power of Transfer Pricing Officer in course of reference to go into other transactions not reported by assessee--Provision retrospective--Expenditure incurred by assessee on advertisement, marketing and promotion--Transfer pricing adjustment to be decided in accordance with directions of Special Bench in L. G. Electronics case--Income-tax Act, 1961, ss. 92C(2), 92CA(2B)-- Canon India P. Ltd. v. Deputy CIT (Delhi) . . . 694
Transfer pricing --Determination of arm's length price--Dispute Resolution Panel--Duty to give cogent reasons--Non-speaking order not dealing with assertions or ascribing cogent reasons as regards dealer's objections--Not proper--Order set aside and matter remanded--Income-tax Act, 1961, s. 144C-- Dorling Kindersley India P. Ltd. v. ITO (Delhi) . . . 686
SECTIONWISE INDEX TO CASES REPORTED IN THIS PART
Double Taxation Avoidance Agreement between India and Japan :
Art. 23 --Double taxation relief--Income from software development to be estimated by taking relevant figures--Ad hoc approach by applying lower profit margin relatable to trading activities not proper-- Canon India P. Ltd. v. Deputy CIT (Delhi) . . . 694
S. 4 --Income or capital--subsidy received from Singapore company for meeting specific expenditure pre-approved by Singapore company--Sums remitted with specific directions that money to be spent only for specified purposes and amount remaining unspent to be held by assessee in trust for and on behalf of Singapore company--Unutilised amount not credited to profit and loss account of assessee but taken to balance-sheet as current liability--Unspent subsidy not income of assessee-- Canon India P. Ltd. v. Deputy CIT (Delhi) . . . 694
S. 5 --Income or capital--subsidy received from Singapore company for meeting specific expenditure pre-approved by Singapore company--Sums remitted with specific directions that money to be spent only for specified purposes and amount remaining unspent to be held by assessee in trust for and on behalf of Singapore company--Unutilised amount not credited to profit and loss account of assessee but taken to balance-sheet as current liability--Unspent subsidy not income of assessee-- Canon India P. Ltd. v. Deputy CIT (Delhi) . . . 694
S. 40A(2) --Business expenditure--Disallowance--Excessive and unreasonable payments--Figures wrongly reckoned by Assessing Officer--Price paid to sister concern for purchase of steel scrap lower than that paid to other parties--Disallowance not proper-- Deputy CIT v. Raj Rani Steel Casting P. Ltd. (Pune) . . . 678
S. 92 --International transactions—Arm's length price--Determination--International transaction --Definition--Adjustment to be confined to international transactions with associated enterprises and not in relation to non-associated enterprise transactions--Assessee a manufacturer of material handling equipment and industrial cranes--Also carrying out installation and servicing thereof, sales of imported material handling equipment, components and spare parts and technical and after sales service to Indian customers--Working capital difference between international transaction and comparable materially affects net profit margin--Adjustment for additional cost incurred by assessee by way of customs duty, lending charges, clearing and forwarding charges, insurance and freight--± 5 per cent. variation from mean--To be considered in light of amendments by Finance Act, 2012 to section 92C(2)--Aggregation of all transactions considering them part of manufacturing activity--Closely linked transactions treated as composite transaction for common transfer pricing analysis--Proper--Marketing services, technical know-how and professional services whether to be aggregated--Matter remanded-- Demag Cranes and Components (India) P. Ltd. v. Deputy CIT (Pune) . . . 760
S. 92B --International transactions—Arm's length price--Determination--International transaction --Definition--Adjustment to be confined to international transactions with associated enterprises and not in relation to non-associated enterprise transactions--Assessee a manufacturer of material handling equipment and industrial cranes--Also carrying out installation and servicing thereof, sales of imported material handling equipment, components and spare parts and technical and after sales service to Indian customers--Working capital difference between international transaction and comparable materially affects net profit margin--Adjustment for additional cost incurred by assessee by way of customs duty, lending charges, clearing and forwarding charges, insurance and freight--± 5 per cent. variation from mean--To be considered in light of amendments by Finance Act, 2012 to section 92C(2)--Aggregation of all transactions considering them part of manufacturing activity--Closely linked transactions treated as composite transaction for common transfer pricing analysis--Proper--Marketing services, technical know-how and professional services whether to be aggregated--Matter remanded-- Demag Cranes and Components (India) P. Ltd. v. Deputy CIT (Pune) . . . 760
S. 92C --International transactions—Arm's length price--Determination--International transaction€ --Definition--Adjustment to be confined to international transactions with associated enterprises and not in relation to non-associated enterprise transactions--Assessee a manufacturer of material handling equipment and industrial cranes--Also carrying out installation and servicing thereof, sales of imported material handling equipment, components and spare parts and technical and after sales service to Indian customers--Working capital difference between international transaction and comparable materially affects net profit margin--Adjustment for additional cost incurred by assessee by way of customs duty, lending charges, clearing and forwarding charges, insurance and freight--± 5 per cent. variation from mean--To be considered in light of amendments by Finance Act, 2012 to section 92C(2)--Aggregation of all transactions considering them part of manufacturing activity--Closely linked transactions treated as composite transaction for common transfer pricing analysis--Proper--Marketing services, technical know-how and professional services whether to be aggregated--Matter remanded-- Demag Cranes and Components (India) P. Ltd. v. Deputy CIT (Pune) . . . 760
S. 92C(2) --International transactions--Arm’s length price--Determination--Power of Transfer Pricing Officer in course of reference to go into other transactions not reported by assessee--Provision retrospective--Expenditure incurred by assessee on advertisement, marketing and promotion--Transfer pricing adjustment to be decided in accordance with directions of Special Bench in L. G. Electronics case-- Canon India P. Ltd. v. Deputy CIT (Delhi) . . . 694
S. 92CA(2B) --International transactions—Arm's length price--Determination--Power of Transfer Pricing Officer in course of reference to go into other transactions not reported by assessee--Provision retrospective--Expenditure incurred by assessee on advertisement, marketing and promotion--Transfer pricing adjustment to be decided in accordance with directions of Special Bench in L. G. Electronics€™ case-- Canon India P. Ltd. v. Deputy CIT (Delhi) . . . 694
S. 144C --Transfer pricing--Determination of arm’s length price--Dispute Resolution Panel--Duty to give cogent reasons--Non-speaking order not dealing with assertions or ascribing cogent reasons as regards dealer's objections--Not proper--Order set aside and matter remanded-- Dorling Kindersley India P. Ltd. v. ITO (Delhi) . . . 686
CA. RAJU SHAH
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