ITR'S TRIBUNAL TAX REPORTS (ITR (TRIB)) -- PRINT AND ONLINE EDITION
Volume 26 : Part 3 (Issue dated : 9-9-2013)
SUBJECT INDEX TO CASES REPORTED
Advance tax --Interest--Payment not liable to deduction of tax at source--Liability to advance tax and hence to interest--Income-tax Act, 1961, ss. 234B, 234D-- Convergys Customer Management Group Inc. v. Assistant Director of Income-tax, International Taxation (Delhi) . . . 443
Appeal to Appellate Tribunal --Appealable orders--Maintainability of appeal--Appeal not maintainable unless specifically provided for under section 253--Section 271FA providing for penalty for failure to furnish annual information return not mentioned--Appeal from order levying penalty under section 271FA not maintainable--Income-tax Act, 1961, ss. 253, 271FA-- Sub-Registrar Office, Meppayur v. Director of Income-tax (Intelligence) (Cochin) . . . 341
Appeal to Commissioner (Appeals) --Order passed by Assessing Officer under section 154 resulting in refund--Failure to grant interest--Cannot be agitated in appeal to Commissioner (Appeals) against order under section 143(3)--Income-tax Act, 1961, ss. 143(3), 154, 244A-- Assistant CIT v. IOT Infrastructure and Energy Services Ltd. (Mumbai) . . . 406
Business expenditure --Club expenses--Allowable-- Assistant CIT v. IOT Infrastructure and Energy Services Ltd. (Mumbai) . . . 406
----Disallowance--Deduction of commission under sales promotion expenses--Finding by Assessing Officer that claim of expenditure amounted to double deduction--No evidence on record to show double claim of expenses--No infirmity in Commissioner (Appeals)’s order--Income-tax Act, 1961-- Assistant CIT v. Caravan Travels (Kolkata) . . . 373
----Disallowance--Payments subject to deduction of tax at source--Amendment permitting deduction where tax deducted at source remitted before due date for filing return--Amendment retrospective--Income-tax Act, 1961, ss. 40(a)(ia), 194C-- S. S. Warad v. Additional CIT (Bangalore) . . . 358
----Expenditure incurred in earlier years towards premium and “right to way†and other charges in respect of leasehold land--Whether can be amortised over lease period--Whether proportionate deduction allowable--Income-tax Act, 1961, s. 37-- Assistant CIT v. IOT Infrastructure and Energy Services Ltd. (Mumbai) . . . 406
Capital gains --Short-term capital gains--Computation of capital gains--Depreciable assets--Sale of factory premises and purchase of apartment--Asset would fall under same block if used for business purpose and depreciation allowable for premises if used as office premises--Matter remanded for verification whether asset used as office premises--Income-tax Act, 1961, ss. 2(11), 50(1)(iii)-- Avin Pumps P. Ltd. v. Joint CIT (Mumbai) . . . 345
Capital or revenue expenditure --Provision for warranty claims--To be quantified based on past data--Data showing negligible liability--Disallowance of provision at 5 per cent. and allowance to extent of 0.2 per cent.--Proper--Book profits--Liability to extent of 0.2 per cent. alone to be treated as ascertained--Income-tax Act, 1961, s. 115JB-- Assistant CIT v. IOT Infrastructure and Energy Services Ltd. (Mumbai) . . . 406
Charitable purposes --Exemption--Hospital--Assessee earning interest from fixed deposits--Directly incidental to main activities of trust--Exemption allowable--Income-tax Act, 1961, s. 11-- Deputy CIT v. Nehru Prasutika Asptal Samiti (Agra) . . . 376
----Registration of trusts--Donation to charitable institution--Approval of institution--Factors to be considered--Only genuineness of objects to be tested--Receipt of donations or whether charitable activities commenced, not relevant--Income-tax Act, 1961, ss. 12AA, 80G-- Babu Ram Education Society v. CIT (Agra) . . . 351
Deduction of tax at source --Payments to contractors--Transport contracts--Contention of assessee that it merely took trucks on hire and truck owners not sub-contractors and payments to them not subject to deduction of tax at source--Matter remanded for consideration of facts afresh--Income-tax Act, 1961, s. 194C-- S. S. Warad v. Additional CIT (Bangalore) . . . 358
Export --Exemption--Assessee manufacturing and exporting granite monumental slabs--Whether eligible for exemption in respect of trading profits--Finding by Commissioner (Appeals) that if trading receipts included, assessee could set up token production and start free trading--Not applicable to facts of case--Assessee entitled to exemption--Income-tax Act, 1961, s. 10B-- GTP Granites Ltd. v. Assistant CIT (Chennai) . . . 369
Hospital --Exemption--Assessee running maternity hospital--Not treatment of illness envisaged by section 10(23C)(iiiae)--Does not satisfy ingredients of section 10(23C)(iiiae)--Exemption not allowable--Income-tax Act, 1961, s. 10(23C)(iiiae)-- Deputy CIT v. Nehru Prasutika Asptal Samiti (Agra) . . . 376
Income --Accrual of income--Civil construction--Method of accounting--Percentage completion method--Consistently followed and accepted--Mobilisation and other advances received by assessee according to progress billing for work done--Revenue from contract recognised by percentage completion method--Advances adjusted on such completion--Amount representing advances shown by assessee as “amount due to customer†--Not income of assessee at point of receipt-- Assistant CIT v. IOT Infrastructure and Energy Services Ltd. (Mumbai) . . . 406
----Expenditure relating to exempt income--Dividend income and income from mutual funds--Rule 8D applicable from assessment year 2008-09--Disallowance for earlier years to be made on reasonable basis--Disallowance at same percentage of total expenses as exempt income bears to total income--Availability of assessee’s own funds for making investment in shares and mutual funds--No utilisation of borrowed funds to make investment--Disallowance out of interest not called for--Disallowance of other expenses--Expenses offered by assessee to be adjusted from disallowance worked out applying rule 8D--Income-tax Act, 1961, s. 14A--Income-tax Rules, 1962, r. 8D-- Assistant CIT v. IOT Infrastructure and Energy Services Ltd. (Mumbai) . . . 406
International transactions --Arm’s length price--Associated enterprise--Definition--Managing director of German company director in Indian company--Transactions of export sales and purchase of raw material--Whether prices and other conditions relating to transactions influenced by other enterprise--Matter remanded--Income-tax Act, 1961, s. 92A(2)(e), (i), (m)-- ITO v. Alumeco India Extrusion Ltd. (Hyderabad) . . . 381
----Arm’s length price--Determination--Adjustments to be restricted to international transactions and not to entire turnover of assessee-- ITO v. Alumeco India Extrusion Ltd. (Hyderabad) . . . 381
----Arm’s length price--Determination--Cost plus method--Multiple comparable prices providing range of prices to be addressed by ± 5 per cent. range--Proviso to section 92C(2) would apply only if there is more than one comparable price--Income-tax Act, 1961, s. 92C(2)-- ITO v. Alumeco India Extrusion Ltd. (Hyderabad) . . . 381
----Arm’s length price--Most appropriate method--Assessee having reasonably significant sales to non-associated enterprises--Internal domestic transactions similar to export transactions--Internal cost plus method more appropriate than external transactional net margin method--Incorrect allocation of costs no reason for rejecting cost plus method--Transfer Pricing Officer’s reasons for rejection of assessee’s internal cost plus method and adoption of external transactional net margin method not tenable--Assessee a sick company--Erroneous to compare it cursorily using external transactional net margin method--Income-tax Act, 1961, s. 92CA-- ITO v. Alumeco India Extrusion Ltd. (Hyderabad) . . . 381
Non-resident --Permanent establishment--Employees of assessee frequently visiting premises of Indian subsidiary to provide supervision, direction and control over operations--Fixed place of business--Computation of profits attributable to permanent establishment--To be made by transfer pricing principles--Attributing entire receipts of assessee without allowing cost incurred to earn revenue outside India--Not proper--Estimation of profits attributable to permanent establishment by counting worldwide number of employees and dividing it by assessee’s global revenue--Not proper--Income-tax Act, 1961, s. 44C--Double Taxation Avoidance Agreement between India and the U. S. A., arts. 5, 7(4), 12-- Convergys Customer Management Group Inc. v. Assistant Director of Income-tax, International Taxation (Delhi) . . . 443
----Royalty--Payment to telecommunications service providers in U. S. A. for leased undersea cables--Part of cost in connection with India link reimbursed by Indian subsidiary--No transfer of right to use--Reimbursement of expenses not taxable in hands of assessee--Not royalty--Double Taxation Avoidance Agreement between India and the U. S. A., art. 12-- Convergys Customer Management Group Inc. v. Assistant Director of Income-tax, International Taxation (Delhi) . . . 443
----Royalty--Purchase of software--Copyrighted article--No acquisition of copyright in software--Payment in nature of reimbursement of expenses--Not taxable in hands of non-resident--Income-tax Act, 1961, s. 9(1), Expln., (vi)-- Convergys Customer Management Group Inc. v. Assistant Director of Income-tax, International Taxation (Delhi) . . . 443
Precedent --High Court--Special leave petition from decision of High Court pending--Decision to be followed until reversed-- Assistant CIT v. IOT Infrastructure and Energy Services Ltd. (Mumbai) . . . 406
SECTIONWISE INDEX TO CASES REPORTED IN THIS PART
Double Taxation Avoidance Agreement between India and the U. S. A. :
Arts. 5, 7(4), 12 --Non-resident--Permanent establishment--Employees of assessee frequently visiting premises of Indian subsidiary to provide supervision, direction and control over operations--Fixed place of business--Computation of profits attributable to permanent establishment--To be made by transfer pricing principles--Attributing entire receipts of assessee without allowing cost incurred to earn revenue outside India--Not proper--Estimation of profits attributable to permanent establishment by counting worldwide number of employees and dividing it by assessee’s global revenue--Not proper-- Convergys Customer Management Group Inc. v. Assistant Director of Income-tax, International Taxation (Delhi) . . . 443
Art. 12 --Non-resident--Royalty--Payment to telecommunications service providers in U. S. A. for leased undersea cables--Part of cost in connection with India link reimbursed by Indian subsidiary--No transfer of right to use--Reimbursement of expenses not taxable in hands of assessee--Not royalty-- Convergys Customer Management Group Inc. v. Assistant Director of Income-tax, International Taxation (Delhi) . . . 443
S. 2(11) --Capital gains--Short-term capital gains--Computation of capital gains--Depreciable assets--Sale of factory premises and purchase of apartment--Asset would fall under same block if used for business purpose and depreciation allowable for premises if used as office premises--Matter remanded for verification whether asset used as office premises-- Avin Pumps P. Ltd. v. Joint CIT (Mumbai) . . . 345
S. 9(1), Expln., (vi) --Non-resident--Royalty--Purchase of software--Copyrighted article--No acquisition of copyright in software--Payment in nature of reimbursement of expenses--Not taxable in hands of non-resident-- Convergys Customer Management Group Inc. v. Assistant Director of Income-tax, International Taxation (Delhi) . . . 443
S. 10B --Export--Exemption--Assessee manufacturing and exporting granite monumental slabs--Whether eligible for exemption in respect of trading profits--Finding by Commissioner (Appeals) that if trading receipts included, assessee could set up token production and start free trading--Not applicable to facts of case--Assessee entitled to exemption-- GTP Granites Ltd. v. Assistant CIT (Chennai) . . . 369
S. 10(23C)(iiiae) --Hospital--Exemption--Assessee running maternity hospital--Not treatment of illness envisaged by section 10(23C)(iiiae)--Does not satisfy ingredients of section 10(23C)(iiiae)--Exemption not allowable-- Deputy CIT v. Nehru Prasutika Asptal Samiti (Agra) . . . 376
S. 11 --Charitable purposes--Exemption--Hospital--Assessee earning interest from fixed deposits--Directly incidental to main activities of trust--Exemption allowable-- Deputy CIT v. Nehru Prasutika Asptal Samiti (Agra) . . . 376
S. 12AA --Charitable purposes--Registration of trusts--Donation to charitable institution--Approval of institution--Factors to be considered--Only genuineness of objects to be tested--Receipt of donations or whether charitable activities commenced, not relevant-- Babu Ram Education Society v. CIT (Agra) . . . 351
S. 14A --Income--Expenditure relating to exempt income--Dividend income and income from mutual funds--Rule 8D applicable from assessment year 2008-09--Disallowance for earlier years to be made on reasonable basis--Disallowance at same percentage of total expenses as exempt income bears to total income--Availability of assessee’s own funds for making investment in shares and mutual funds--No utilisation of borrowed funds to make investment--Disallowance out of interest not called for--Disallowance of other expenses--Expenses offered by assessee to be adjusted from disallowance worked out applying rule 8D-- Assistant CIT v. IOT Infrastructure and Energy Services Ltd. (Mumbai) . . . 406
S. 37 --Business expenditure--Expenditure incurred in earlier years towards premium and “right to way†and other charges in respect of leasehold land--Whether can be amortised over lease period--Whether proportionate deduction allowable-- Assistant CIT v. IOT Infrastructure and Energy Services Ltd. (Mumbai) . . . 406
S. 40(a)(ia) --Business expenditure--Disallowance--Payments subject to deduction of tax at source--Amendment permitting deduction where tax deducted at source remitted before due date for filing return--Amendment retrospective-- S. S. Warad v. Additional CIT (Bangalore) . . . 358
S. 44C --Non-resident--Permanent establishment--Employees of assessee frequently visiting premises of Indian subsidiary to provide supervision, direction and control over operations--Fixed place of business--Computation of profits attributable to permanent establishment--To be made by transfer pricing principles--Attributing entire receipts of assessee without allowing cost incurred to earn revenue outside India--Not proper--Estimation of profits attributable to permanent establishment by counting worldwide number of employees and dividing it by assessee’s global revenue--Not proper-- Convergys Customer Management Group Inc. v. Assistant Director of Income-tax, International Taxation (Delhi) . . . 443
S. 50(1)(iii) --Capital gains--Short-term capital gains--Computation of capital gains--Depreciable assets--Sale of factory premises and purchase of apartment--Asset would fall under same block if used for business purpose and depreciation allowable for premises if used as office premises--Matter remanded for verification whether asset used as office premises-- Avin Pumps P. Ltd. v. Joint CIT (Mumbai) . . . 345
S. 80G --Charitable purposes--Registration of trusts--Donation to charitable institution--Approval of institution--Factors to be considered--Only genuineness of objects to be tested--Receipt of donations or whether charitable activities commenced, not relevant-- Babu Ram Education Society v. CIT (Agra) . . . 351
S. 92A(2)(e), (i), (m) --International transactions--Arm’s length price--Associated enterprise--Definition--Managing director of German company director in Indian company--Transactions of export sales and purchase of raw material--Whether prices and other conditions relating to transactions influenced by other enterprise--Matter remanded-- ITO v. Alumeco India Extrusion Ltd. (Hyderabad) . . . 381
S. 92C(2) --International transactions--Arm’s length price--Determination--Cost plus method--Multiple comparable prices providing range of prices to be addressed by ± 5 per cent. range--Proviso to section 92C(2) would apply only if there is more than one comparable price-- ITO v. Alumeco India Extrusion Ltd. (Hyderabad) . . . 381
S. 92CA --International transactions--Arm’s length price--Most appropriate method--Assessee having reasonably significant sales to non-associated enterprises--Internal domestic transactions similar to export transactions--Internal cost plus method more appropriate than external transactional net margin method--Incorrect allocation of costs no reason for rejecting cost plus method--Transfer Pricing Officer’s reasons for rejection of assessee’s internal cost plus method and adoption of external transactional net margin method not tenable--Assessee a sick company--Erroneous to compare it cursorily using external transactional net margin method-- ITO v. Alumeco India Extrusion Ltd. (Hyderabad) . . . 381
S. 115JB --Capital or revenue expenditure--Provision for warranty claims--To be quantified based on past data--Data showing negligible liability--Disallowance of provision at 5 per cent. and allowance to extent of 0.2 per cent.--Proper--Book profits--Liability to extent of 0.2 per cent. alone to be treated as ascertained-- Assistant CIT v. IOT Infrastructure and Energy Services Ltd. (Mumbai) . . . 406
S. 143(3) --Appeal to Commissioner (Appeals)--Order passed by Assessing Officer under section 154 resulting in refund--Failure to grant interest--Cannot be agitated in appeal to Commissioner (Appeals) against order under section 143(3)-- Assistant CIT v. IOT Infrastructure and Energy Services Ltd. (Mumbai) . . . 406
S. 154 --Appeal to Commissioner (Appeals)--Order passed by Assessing Officer under section 154 resulting in refund--Failure to grant interest--Cannot be agitated in appeal to Commissioner (Appeals) against order under section 143(3)-- Assistant CIT v. IOT Infrastructure and Energy Services Ltd. (Mumbai) . . . 406
S. 194C --Business expenditure--Disallowance--Payments subject to deduction of tax at source--Amendment permitting deduction where tax deducted at source remitted before due date for filing return--Amendment retrospective-- S. S. Warad v. Additional CIT (Bangalore) . . . 358
----Deduction of tax at source--Payments to contractors--Transport contracts--Contention of assessee that it merely took trucks on hire and truck owners not sub-contractors and payments to them not subject to deduction of tax at source--Matter remanded for consideration of facts afresh-- S. S. Warad v. Additional CIT (Bangalore) . . . 358
S. 234B --Advance tax--Interest--Payment not liable to deduction of tax at source--Liability to advance tax and hence to interest-- Convergys Customer Management Group Inc. v. Assistant Director of Income-tax, International Taxation (Delhi) . . . 443
S. 234D --Advance tax--Interest--Payment not liable to deduction of tax at source--Liability to advance tax and hence to interest-- Convergys Customer Management Group Inc. v. Assistant Director of Income-tax, International Taxation (Delhi) . . . 443
S. 244A --Appeal to Commissioner (Appeals)--Order passed by Assessing Officer under section 154 resulting in refund--Failure to grant interest--Cannot be agitated in appeal to Commissioner (Appeals) against order under section 143(3)-- Assistant CIT v. IOT Infrastructure and Energy Services Ltd. (Mumbai) . . . 406
S. 253 --Appeal to Appellate Tribunal--Appealable orders--Maintainability of appeal--Appeal not maintainable unless specifically provided for under section 253--Section 271FA providing for penalty for failure to furnish annual information return not mentioned--Appeal from order levying penalty under section 271FA not maintainable-- Sub-Registrar Office, Meppayur v. Director of Income-tax (Intelligence) (Cochin) . . . 341
S. 271FA --Appeal to Appellate Tribunal--Appealable orders--Maintainability of appeal--Appeal not maintainable unless specifically provided for under section 253--Section 271FA providing for penalty for failure to furnish annual information return not mentioned--Appeal from order levying penalty under section 271FA not maintainable-- Sub-Registrar Office, Meppayur v. Director of Income-tax (Intelligence) (Cochin) . . . 341
R. 8D --Income--Expenditure relating to exempt income--Dividend income and income from mutual funds--Rule 8D applicable from assessment year 2008-09--Disallowance for earlier years to be made on reasonable basis--Disallowance at same percentage of total expenses as exempt income bears to total income--Availability of assessee’s own funds for making investment in shares and mutual funds--No utilisation of borrowed funds to make investment--Disallowance out of interest not called for--Disallowance of other expenses--Expenses offered by assessee to be adjusted from disallowance worked out applying rule 8D-- Assistant CIT v. IOT Infrastructure and Energy Services Ltd. (Mumbai) . . . 406
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