ITR'S TRIBUNAL TAX REPORTS (ITR (TRIB)) -- PRINT AND ONLINE EDITION
ONLINE EDITION Volume 27 : Part 4 (Issue dated : 28-10-2013)
SUBJECT INDEX TO CASES REPORTED
Business expenditure --Disallowance--Payments to non-resident--Failure to deduct tax at source--Commission paid to foreign agent for procurement of export orders--No evidence that agents were also designers and technical advisors--Payments not “fees for technical services†--Income of non-resident neither received in India nor accrued on deemed to accrue in India--Not chargeable to tax in India--Assessee not required to deduct tax at source--Expenditure allowable--Income-tax Act, 1961, ss. 9(1)(vii), 40(a)(ia), 195--CBDT Circular Nos. 23 of 1969, 163 of 1975, 786 of 2000, 7 of 2009-- Assistant CIT v. Model Exims (Lucknow) . . . 451
----Year in which allowable--Prior period expenses claimed to have crystallised during year under consideration--Exact nature of liability and how it related to business of assessee not seen--Evidence about crystallisation in year not seen--Matter remanded--Assessee to show why expenditure could not be claimed in year to which it belonged-- Atul Ltd. v. Assistant CIT (Ahmedabad) . . . 461
Capital or revenue expenditure --Advance made for equipment but assessee afterwards deciding not to take equipment--Advance retained by party--Advance related to acquisition of capital asset not to be allowed--Not “debt†but an advance--Not to be allowed as bad debt--Income-tax Act, 1961, ss. 36(1)(vii), 37-- Atul Ltd. v. Assistant CIT (Ahmedabad) . . . 461
Depreciation --Assessee not claiming but Assessing Officer allowing for 2001-02--Assessing Officer reducing depreciation for 2006-07 by depreciation already allowed from 2001-02 to 2005-06--Consequential effect of re-computation of depreciation--Proper--Income-tax Act, 1961, ss. 32, 80-IA-- Atul Ltd. v. Assistant CIT (Ahmedabad) . . . 461
----Carry forward and set off--Special deduction--Industrial undertaking--Allowed for earlier year before setting of unabsorbed depreciation--Balance of unabsorbed depreciation after such set off available carried forward--Disallowance of differential claim--Proper--Income-tax Act, 1961, ss. 32(2), 72, 73, 80-IA-- Atul Ltd. v. Assistant CIT (Ahmedabad) . . . 461
Income --Expenditure relating to income not forming part of total income--Dividend--Disallowance of proportionate expenditure--Only when relevant facts considered by Assessing Officer--Presumption that interest-bearing funds could have been utilised towards earning of non-taxable dividend--Not proper--Assessing Officer to compute correct disallowance, after providing adequate opportunity of hearing to assessee--Income-tax Act, 1961, s. 14A--Income-tax Rules, 1962, r. 8D-- Atul Ltd. v. Assistant CIT (Ahmedabad) . . . 461
Industrial undertaking --Special deduction--Installation of new power plant, captive power plant and co-generation plant--Whether new undertaking dependent on existing unit--Whether new undertaking separate and distinct identity--Matter remanded--Income-tax Act, 1961, s. 80-IA-- Atul Ltd. v. Assistant CIT (Ahmedabad) . . . 461
International transactions --Arm’s length price--Determination--Assessing Officer need not demonstrate avoidance of tax before invoking transfer pricing provisions--Assessing Officer not bound to provide opportunity of hearing to assessee before making reference to Transfer Pricing Officer--Comparable uncontrolled price method--Product for sale and circumstances surrounding controlled transaction must be substantially the same as those of uncontrolled transaction--End use of product by buyer has no relevance in fixation of sale price--Common market practice to give bulk purchase discount--Several divisions engaged in manufacturing different product--Aggregation ruled out when arm’s length price can be more accurately determined on separate basis--Income-tax Act, 1961, ss. 92C(3), 92CA(3)--Income-tax Rules, 1962, r. 10A(d)-- Atul Ltd. v. Assistant CIT (Ahmedabad) . . . 461
----Arm’s length price--Transaction not made part of reference to Transfer Pricing Officer--Adjustment by Transfer Pricing Officer without jurisdiction--Non-disclosure by assessee--Assessing Officer empowered to determine international transaction coming to his knowledge on basis of any material or document available with him--Including report of Transfer Pricing Officer--Income-tax Act, 1961, s. 92CA(3)-- Atul Ltd. v. Assistant CIT (Ahmedabad) . . . 461
Volume 27 : Part 4 (Issue dated : 28-10-2013)
SUBJECT INDEX TO CASES REPORTED
Bad and doubtful debts --Amounts mostly in nature of liquidated damages and not bad debts--Details of liquidated damages not furnished by assessee and no finding by Assessing Officer--Matter remanded-- GE India Industrial P. Ltd. v. Deputy CIT (Ahmedabad) . . . 543
Bad debts --Advances written off in profit and loss account--Required details like name of parties, purpose for which advance was granted, were not furnished--No finding as to compliance with conditions under section 36(1)(vii) of Act--Matter remanded--Income-tax Act, 1961, s. 36(1)(vii)-- GE India Industrial P. Ltd. v. Deputy CIT (Ahmedabad) . . . 543
Business expenditure --Claim based on utilisation or reversal of provision--Disallowance on ground appeal against disallowance in earlier year pending--Assessee’s contention that amount disallowed was out of disallowance in earlier year--Assessing Officer to verify whether reversal in year under appeal was out of disallowance--Matter remanded-- GE India Industrial P. Ltd. v. Deputy CIT (Ahmedabad) . . . 543
----Deduction only on actual payment--Provident fund contribution made after due date for filing return--Allowable in year of payment--Income-tax Act, 1961, ss. 36(1)(va), 43B-- Euro Pratik Ispat P. Ltd. v. Assistant CIT (Mumbai) . . . 432
----Disallowance--Payment to non-resident--Management fee paid to non-resident for services--Failure by Assessing Officer to examine taxability of amount paid--Matter remanded--Income-tax Act, 1961, s. 40(a)-- GE India Industrial P. Ltd. v. Deputy CIT (Ahmedabad) . . . 543
----Freight accrual expenses for services received by assessee for which payments made in subsequent years--Contention of assessee that amount reversed in current year represented amount disallowed in earlier year--Matter to be examined afresh on merits-- GE India Industrial P. Ltd. v. Deputy CIT (Ahmedabad) . . . 543
----Provision for “warranty and replacement expenses†--Guidelines of Supreme Court for allowance--No material to show compliance with guidelines by assessee--Matter remanded for decision afresh-- GE India Industrial P. Ltd. v. Deputy CIT (Ahmedabad) . . . 543
Business loss --Claim that loss was on account of difference in general ledger and subsidiary ledgers arising out of posting error--No details of posting error filled--No interference--Income-tax Act, 1961, s. 29-- GE India Industrial P. Ltd. v. Deputy CIT (Ahmedabad) . . . 543
----Loss of stocks due to floods--Assessee’s insurance claim not fully accepted--Claim of assessee not found bogus--Disallowance to extent insurance claim not accepted--Not proper--Income-tax Act, 1961, s. 29-- GE India Industrial P. Ltd. v. Deputy CIT (Ahmedabad) . . . 543
Capital or revenue expenditure --Expenditure on software--Expenditure treated as capital in earlier year and depreciation granted--Claim to depreciation at 60 per cent. on balance in current year--If appeal for earlier year decided in favour of assessee, Assessing Officer to rectify assessment for present year-- GE India Industrial P. Ltd. v. Deputy CIT (Ahmedabad) . . . 543
Company --Book profits--Provision for foreseeable losses, claims and import duty demands--Assessing Officer to recompute book profits after considering issues like provision for bad and doubtful debts and advances, provision for claims--On other aspects, order of Dispute Resolution Panel upheld--Income-tax Act, 1961, s. 115JB-- GE India Industrial P. Ltd. v. Deputy CIT (Ahmedabad) . . . 543
----Dividend--Deemed dividend--Loan to assessee-company by another company--Common shareholders--Scope of section 2(22)(e)--Provision does not contemplate piercing corporate veil--Test of holding substantial interest by common shareholders not satisfied--Assessee not shareholder of company which provided loan--Section 2(22)(e) not attracted--Income-tax Act, 1961, s. 2(22)(e)-- Assistant CIT v. Source Hub India P. Ltd. (Bangalore) . . . 470
Deduction of tax at source --Payment to non-resident--Fees for technical services--Payment made towards part reimbursement of salaries of seconded employees--No transfer of technology--Payment not fees for technical services--Payment already subjected to tax in India--Assessee not liable for non-deduction of tax at source--Income-tax Act 1961, ss. 195, 201--Double Taxation Avoidance Agreement between India and the U.K. art. 13(4)-- Additional DIT (International Taxation) v. Mark and Spencer Reliance India P. Ltd. (Mumbai) . . . 448
Depreciation --Rate of depreciation--Uninterrupted power supply system (UPS) and printer--Higher depreciation at sixty per cent allowable--Income-tax Act, 1961, s. 32-- RayBan Sun Optics India Ltd. v. Deputy CIT (Delhi) . . . 440
Income --Deduction of expenditure--Burden on assessee to show correlation with income-- Hatkesh Co-Operative Housing Society Ltd. v. Assistant CIT (Mumbai) . . . 494
----Principle of mutuality--Essential conditions for application of principle--Mutual arrangement must not lead to scope for generation of income in hands of individual member--Whether commerciality or by profit motive involves question of fact--Co-operative plot owners’ society--Regulations providing for previous written consent for member to let or part with possession of property and for payment to society of half premium received by him from purchaser on every permitted disposition--Assessee-society has stake in transaction--Transfer fees received by assessee taxable to extent in excess of sum allowed by notification to be charged--Premium received on transfer of development rights--Chargeable as income of assessee-society--Income-tax Act, 1961, ss. 2(24)(v), 28(iii)-- Hatkesh Co-Operative Housing Society Ltd. v. Assistant CIT (Mumbai) . . . 494
International transactions --Arm’s length price--Determination--Advertising, marketing and promotional expenses--Guidelines laid down by Tribunal in L. G. Electronics India P. Ltd. v. Asst. CIT [2013] 22 ITR (Trib) 1 (Delhi) [SB]--Matter remanded for consideration in accordance with law in light of guidelines--Income-tax Act, 1961, ss. 92B(2), Expln. , 92C(1)(f), 92CA, 92F(v)-- RayBan Sun Optics India Ltd. v. Deputy CIT (Delhi) . . . 440
----Arm’s length price--Transfer pricing--Profit level indicator--Altering of profit level indicator without assigning reason and opportunity of hearing--Contrary to principles of natural justice--Matter remanded--Income-tax Act, 1961-- Sandvik Asia P. Ltd. v. Assistant CIT (Pune) . . . 477
----Arm’s length price--Transfer pricing--Selection of comparables--Two comparables excluded--Materials on record indicating profits and functionality comparable--No cogent reason to exclude comparables--Direction to Assessing Officer to recompute arm’s length price--Income-tax Act, 1961-- Sandvik Asia P. Ltd. v. Assistant CIT (Pune) . . . 477
----Transfer pricing--Adjustments proposed by Transfer Pricing Officer--Assessee’s submissions and objections not dealt with by Dispute Resolution Panel or cogent reasons given why objections not acceptable--Non-speaking order--Liable to be set aside--Dispute Resolution Panel to pass speaking order after taking into consideration submissions of both parties-- GE India Industrial P. Ltd. v. Deputy CIT (Ahmedabad) . . . 543
----Transfer pricing--Arm’s length price--Transactional net margin method--Profit level indicator--Use of multi-year data--Failure to show influence of multi-year data in determination of transfer prices--Selection of comparables--Rejection of comparable justifies on non-availability of data in public domain--Company in debt cannot be compared to company with sufficient capital base and differ in product--Income-tax Act, 1961, s. 92C--Income-tax Rules, 1962, r. 10B(4)-- Michael Aram Exports P. Ltd. v. ITO (Delhi) . . . 528
----Transfer pricing--Arm’s length price--Transfer pricing adjustment to be limited to international transaction with associated enterprises not to entity level transactions--Income-tax Act, 1961, s. 92(1)-- Sandvik Asia P. Ltd. v. Assistant CIT (Pune) . . . 477
Loss --Unabsorbed loss and depreciation--Carry forward and set off would depend upon finality of order for earlier years--Assessing Officer to determine carried forward losses based on outcome for earlier years--Matter remanded-- GE India Industrial P. Ltd. v. Deputy CIT (Ahmedabad) . . . 543
Penalty --Concealment of income--Adjustment applying transfer pricing provisions not concealment of income--Cancellation of penalty justified--Income-tax Act, 1961, s. 271(1)(c)-- Michael Aram Exports P. Ltd. v. Income-tax Officer (Delhi) . . . 528
Search and seizure --Assessment--Limitation--Exclusion of period for which assessment stayed by High Court on writ petition--Limitation resumes on date of order vacating stay--Not from date of receipt of order by Department--Assessment barred by limitation--Income-tax Act, 1961, s. 158BC-- Deputy CIT v. Drs. X-Ray and Pathology Institute P. Ltd. (Lucknow) . . . 434
SECTIONWISE INDEX TO CASES REPORTED IN THIS PART
Double Taxation Avoidance Agreement between India and the U.K. :
Art. 13(4) --Deduction of tax at source--Payment to non-resident--Fees for technical services--Payment made towards part reimbursement of salaries of seconded employees--No transfer of technology--Payment not fees for technical services--Payment already subjected to tax in India--Assessee not liable for non-deduction of tax at source-- Additional DIT (International Taxation) v. Mark and Spencer Reliance India P. Ltd. (Mumbai) . . . 448
S. 2(22)(e) --Company--Dividend--Deemed dividend--Loan to assessee-company by another company--Common shareholders--Scope of section 2(22)(e)--Provision does not contemplate piercing corporate veil--Test of holding substantial interest by common shareholders not satisfied--Assessee not shareholder of company which provided loan--Section 2(22)(e) not attracted-- Assistant CIT v. Source Hub India P. Ltd. (Bangalore) . . . 470
S. 2(24)(v) --Income--Principle of mutuality--Essential conditions for application of principle--Mutual arrangement must not lead to scope for generation of income in hands of individual member--Whether commerciality or by profit motive involves question of fact--Co-operative plot owners’ society--Regulations providing for previous written consent for member to let or part with possession of property and for payment to society of half premium received by him from purchaser on every permitted disposition--Assessee-society has stake in transaction--Transfer fees received by assessee taxable to extent in excess of sum allowed by notification to be charged--Premium received on transfer of development rights--Chargeable as income of assessee-society-- Hatkesh Co-Operative Housing Society Ltd. v. Assistant CIT (Mumbai) . . . 494
S. 28(iii) --Income--Principle of mutuality--Essential conditions for application of principle--Mutual arrangement must not lead to scope for generation of income in hands of individual member--Whether commerciality or by profit motive involves question of fact--Co-operative plot owners’ society--Regulations providing for previous written consent for member to let or part with possession of property and for payment to society of half premium received by him from purchaser on every permitted disposition--Assessee-society has stake in transaction--Transfer fees received by assessee taxable to extent in excess of sum allowed by notification to be charged--Premium received on transfer of development rights--Chargeable as income of assessee-society-- Hatkesh Co-Operative Housing Society Ltd. v. Assistant CIT (Mumbai) . . . 494
S. 29 --Business loss--Claim that loss was on account of difference in general ledger and subsidiary ledgers arising out of posting error--No details of posting error filled--No interference-- GE India Industrial P. Ltd. v. Deputy CIT (Ahmedabad) . . . 543
----Business loss--Loss of stocks due to floods--Assessee’s insurance claim not fully accepted--Claim of assessee not found bogus--Disallowance to extent insurance claim not accepted--Not proper-- GE India Industrial P. Ltd. v. Deputy CIT (Ahmedabad) . . . 543
S. 32 --Depreciation--Rate of depreciation--Uninterrupted power supply system (UPS) and printer--Higher depreciation at sixty per cent allowable-- RayBan Sun Optics India Ltd. v. Deputy CIT (Delhi) . . . 440
S. 36(1)(va) --Business expenditure--Deduction only on actual payment--Provident fund contribution made after due date for filing return--Allowable in year of payment-- Euro Pratik Ispat P. Ltd. v. Assistant CIT (Mumbai) . . . 432
S. 36(1)(vii) --Bad debts--Advances written off in profit and loss account--Required details like name of parties, purpose for which advance was granted, were not furnished--No finding as to compliance with conditions under section 36(1)(vii) of Act--Matter remanded-- GE India Industrial P. Ltd. v. Deputy CIT (Ahmedabad) . . . 543
S. 40(a) --Business expenditure--Disallowance--Payment to non-resident--Management fee paid to non-resident for services--Failure by Assessing Officer to examine taxability of amount paid--Matter remanded-- GE India Industrial P. Ltd. v. Deputy CIT (Ahmedabad) . . . 543
S. 43B --Business expenditure--Deduction only on actual payment--Provident fund contribution made after due date for filing return--Allowable in year of payment-- Euro Pratik Ispat P. Ltd. v. Assistant CIT (Mumbai) . . . 432
S. 92(1) --International transactions--Transfer pricing--Arm’s length price--Transfer pricing adjustment to be limited to international transaction with associated enterprises not to entity level transactions-- Sandvik Asia P. Ltd. v. Assistant CIT (Pune) . . . 477
S. 92B(2), Expln. --International transactions--Arm’s length price--Determination--Advertising, marketing and promotional expenses--Guidelines laid down by Tribunal in L. G. Electronics India P. Ltd. v. Asst. CIT [2013] 22 ITR (Trib) 1 (Delhi) [SB]--Matter remanded for consideration in accordance with law in light of guidelines-- RayBan Sun Optics India Ltd. v. Deputy CIT (Delhi) . . . 440
S. 92C --International transactions--Transfer pricing--Arm’s length price--Transactional net margin method--Profit level indicator--Use of multi-year data--Failure to show influence of multi-year data in determination of transfer prices--Selection of comparables--Rejection of comparable justifies on non-availability of data in public domain--Company in debt cannot be compared to company with sufficient capital base and differ in product--Income-tax Rules, 1962, r. 10B(4)-- Michael Aram Exports P. Ltd. v. ITO (Delhi) . . . 528
S. 92C(1)(f) --International transactions--Arm’s length price--Determination--Advertising, marketing and promotional expenses--Guidelines laid down by Tribunal in L. G. Electronics India P. Ltd. v. Asst. CIT [2013] 22 ITR (Trib) 1 (Delhi) [SB]--Matter remanded for consideration in accordance with law in light of guidelines-- RayBan Sun Optics India Ltd. v. Deputy CIT (Delhi) . . . 440
S. 92CA --International transactions--Arm’s length price--Determination--Advertising, marketing and promotional expenses--Guidelines laid down by Tribunal in L. G. Electronics India P. Ltd. v. Asst. CIT [2013] 22 ITR (Trib) 1 (Delhi) [SB]--Matter remanded for consideration in accordance with law in light of guidelines-- RayBan Sun Optics India Ltd. v. Deputy CIT (Delhi) . . . 440
S. 92F(v) --International transactions--Arm’s length price--Determination--Advertising, marketing and promotional expenses--Guidelines laid down by Tribunal in L. G. Electronics India P. Ltd. v. Asst. CIT [2013] 22 ITR (Trib) 1 (Delhi) [SB]--Matter remanded for consideration in accordance with law in light of guidelines-- RayBan Sun Optics India Ltd. v. Deputy CIT (Delhi) . . . 440
S. 115JB --Company--Book profits--Provision for foreseeable losses, claims and import duty demands--Assessing Officer to recompute book profits after considering issues like provision for bad and doubtful debts and advances, provision for claims--On other aspects, order of Dispute Resolution Panel upheld-- GE India Industrial P. Ltd. v. Deputy CIT (Ahmedabad) . . . 543
S. 158BC --Search and seizure--Assessment--Limitation--Exclusion of period for which assessment stayed by High Court on writ petition--Limitation resumes on date of order vacating stay--Not from date of receipt of order by Department--Assessment barred by limitation-- Deputy CIT v. Drs. X-Ray and Pathology Institute P. Ltd. (Lucknow) . . . 434
S. 195 --Deduction of tax at source--Payment to non-resident--Fees for technical services--Payment made towards part reimbursement of salaries of seconded employees--No transfer of technology--Payment not fees for technical services--Payment already subjected to tax in India--Assessee not liable for non-deduction of tax at source-- Additional DIT (International Taxation) v. Mark and Spencer Reliance India P. Ltd. (Mumbai) . . . 448
S. 201 --Deduction of tax at source--Payment to non-resident--Fees for technical services--Payment made towards part reimbursement of salaries of seconded employees--No transfer of technology--Payment not fees for technical services--Payment already subjected to tax in India--Assessee not liable for non-deduction of tax at source-- Additional DIT (International Taxation) v. Mark and Spencer Reliance India P. Ltd. (Mumbai) . . . 448
S. 271(1)(c) --Penalty--Concealment of income--Adjustment applying transfer pricing provisions not concealment of income--Cancellation of penalty justified--Income-tax Act, 1961, Michael Aram Exports P. Ltd. v. ITO (Delhi) . . . 528
R. 10B(4) --International transactions--Transfer pricing--Arm’s length price--Transactional net margin method--Profit level indicator--Use of multi-year data--Failure to show influence of multi-year data in determination of transfer prices--Selection of comparables--Rejection of comparable justifies on non-availability of data in public domain--Company in debt cannot be compared to company with sufficient capital base and differ in product-- Michael Aram Exports P. Ltd. v. ITO (Delhi) . . . 528
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