ITR'S TRIBUNAL TAX REPORTS (ITR (TRIB)) -- PRINT AND ONLINE EDITION
Volume 29 : Part 1 (Issue dated : 6-1-2014)
SUBJECT INDEX TO CASES REPORTED
Appeal --Power to admit new grounds--Appellate authorities can accept new claims not made before Assessing Officer-- Mahindra and Mahindra Ltd. v. Additional CIT (Mumbai) . . . 95
Assessment --Enquiry--Condition precedent--Notice under section 143(2)--Failure to issue and serve notice within prescribed time--Assessment invalid--Income-tax Act, 1961, s. 143(2)-- Abacus Distribution Systems (India) P. Ltd. v. Deputy CIT (Mumbai) . . . 1
Bad debt --Share broker--Sums not recoverable from clients--Deduction to be determined after reducing sum recoverable from sale proceeds of shares with assessee--Matter remanded--Income-tax Act, 1961-- Assistant CIT v. Rishti Stock and Shares P. Ltd. (Mumbai) . . . 61
Business expenditure --Bad debts--Amount of deduction in respect of bad debts to be reduced by opening balance of provision for bad and doubtful debts created and not closing balance--Income-tax Act, 1961, s. 36(1)(vii)--CBDT Circular 17 of 2008 dated 26-11-2008.-- Assistant CIT v. Kerala State Industrial Development Corporation Ltd. (Cochin) . . . 45
----Capital or revenue expenditure--Expenditure shown as capital work-in-progress claimed as revenue in return--Expenditure on salary incurred for expansion of existing line of business--Expenditures neither creating any asset nor providing enduring benefit to business of assessee--Allowable as revenue--Income-tax Act, 1961, s. 37-- Reliance Footprint Ltd. v. Assistant CIT (Mumbai) . . . 82
----Disallowance--Expenditure on welfare of employees--Contribution to Mahindra Academic--Matter remanded--Income-tax Act, 1961, s. 40A(9)-- Mahindra and Mahindra Ltd. v. Additional CIT (Mumbai) . . . 95
----Disallowance--Payments subject to deduction of tax at source--Commission debited under head “sales promotion†and commission on sales/contracts--Dealer incentive not covered by section 194H as sale made on principal-to-principal basis--Service coupon--Matter remanded to Assessing Officer for fresh adjudication--Income-tax Act, 1961, s. 194H-- Mahindra and Mahindra Ltd. v. Additional CIT (Mumbai) . . . 95
----Disallowance--Payment subject to deduction of tax at source--Payment of tax deducted at source to credit of Central Government before due date for filing return of income--Disallowance under section 40(a)(ia) not attracted--Income-tax Act, 1961, s. 40(a)(ia)-- Assistant CIT v. Ace Fire Services (Bangalore) . . . 73
----Disallowance--Payments subject to deduction of tax at source--Year-end provision based on services rendered by various persons--Tax not deducted at source on provision on ground that liability arose when sum paid or credited in later year--Disallowance not justified--Income-tax Act, 1961, s. 40(a)(ia)-- Mahindra and Mahindra Ltd. v. Additional CIT (Mumbai) . . . 95
----Employee cost--Difference between fair market value of shares offered to employees on date of grant of option and price at which offered to employees under employees stock option plan--Matter remanded for decision in light of Special Bench ruling in Biocon Ltd. v. Deputy CIT [2013] 25 ITR (Trib) 602 (Bang) [SB]-- Mahindra and Mahindra Ltd. v. Additional CIT (Mumbai) . . . 95
----Industrial Development Corporation--Deduction in respect of special reserve--No debit in special reserve account--Only adjustment in balance-sheet for purpose of presentation--Method of presentation of special reserve account in balance-sheet does not matter for purpose of section 36(1)(viii) read with section 41(4A)--Income-tax Act, 1961, ss. 36(1)(viii), 41(4A)-- Assistant CIT v. Kerala State Industrial Development Corporation Ltd . (Cochin) . . . 45
----Membership and entrance fees paid to clubs--Matter remanded for consideration in light of CIT v. Groz Beckert Asia Ltd. [2013] 351 ITR 196 (P&H) [FB]-- Mahindra and Mahindra Ltd. v. Additional CIT (Mumbai) . . . 95
----Property tax--Liability under dispute--Not bar to allowing deduction--Income-tax Act, 1961-- Assistant CIT v. The Hindustan Times Ltd. (Delhi) . . . 42
----Provision for warranties--Whether deductible--Matter remanded for decision in light of decision of Supreme Court in Rotork Controls India P. Ltd. v. CIT [2009] 314 ITR 62 (SC)-- Mahindra and Mahindra Ltd. v. Additional CIT (Mumbai) . . . 95
Business income or income from house property --Property let to group concern--Property sub-let by that concern to third party--Income from letting to group concern assessed for many years as business income derived from stock-in-trade--Rent realised by that concern from third party not attributable to assessee--Income-tax Act, 1961, ss. 22, 28-- Mahindra and Mahindra Ltd. v. Additional CIT (Mumbai) . . . 95
Capital gains --Sale of capital assets on which 100 per cent. deduction allowed under section 35(1)(iv)--Indexation for claiming capital loss cannot be allowed--Income-tax Act, 1961, ss. 35(1)(iv), 48-- Mahindra and Mahindra Ltd. v. Additional CIT (Mumbai) . . . 95
Capital or revenue expenditure --Assessee engaged in manufacture and sale of automobiles--Professional fees paid for scientific research in relation to development of engine technology, to meet future emission standards--Whether fall within ambit of section 35D--Matter to be examined by Assessing Officer--Premium on foreign currency convertible bonds--Revenue expenditure--Difference in exchange in respect of premium payable on foreign currency convertible bonds--Additional liability to be allowed as revenue expenditure--Payment for development of vehicle used as construction equipment--Capital expenditure--Income-tax Act, 1961, s. 35D-- Mahindra and Mahindra Ltd. v. Additional CIT (Mumbai) . . . 95
----Expenditure incurred in laying cables for providing cable connections to domestic viewers--Assessee can neither retrieve cable profitably nor protect it--Cost involved is sunk cost--Longevity of facility alone cannot make cable capital asset--Revenue expenditure--Income-tax Act, 1961-- Assistant CIT v. Gemini TV P. Ltd. (Chennai) . . . 32
Capital or revenue receipt --Subsidy--Octroi incentive given under package scheme of incentives with main object to intensify and accelerate process of dispersal of development areas and development of under developed regions of State--Matter remanded for decision in light of principles laid down by Supreme Court and High Court-- Mahindra and Mahindra Ltd. v. Additional CIT (Mumbai) . . . 95
Deduction of tax at source --Credit for tax deducted at source to be given if details filed before Assessing Officer before finalisation of assessment-- Mahindra and Mahindra Ltd. v. Additional CIT (Mumbai) . . . 95
Depreciation --Intangible asset--Know-how acquired for advance system--Existence of agreement to acquire technology not sufficient--Some active or passive use of technology know-how must be shown--Depreciation not allowable-- Mahindra and Mahindra Ltd. v. Additional CIT (Mumbai) . . . 95
Dividend --Deemed dividend--Transactions with sister concern--Commercial nature--Section 2(22)(e) not applicable--Income-tax Act, 1961, ss. 2(22)(e), 10B-- Deputy CIT v. Chariot International P. Ltd. (Bangalore) . . . 36
Income --Computation--Expenditure related to income not forming part of total income--Dividend--Assessee not furnishing material to substantiate claim that it did not utilise borrowed funds for making investments in purchase of shares--Disallowance to be made in accordance with rule--Income-tax Act, 1961, s. 14A(2), (3)--Income-tax Rules, 1962, r. 8D(2)(iii)-- Assistant CIT v. Kerala State Industrial Development Corporation Ltd . (Cochin) . . . 45
----Disallowance in earlier year of deduction for future obligation under “Post Retrial Medical Scheme†--Reduction in liability offered to tax--Deduction to be allowed on account of reversal of provision for medical benefit disallowed in earlier years--Denial of claim on ground assessee’s appeal for earlier year pending--Not proper-- Mahindra and Mahindra Ltd. v. Additional CIT (Mumbai) . . . 95
----Expenditure related to exempted income--Dividend--Claim of assessee that no investment made out of borrowed funds and assessee had sufficient profit and interest-free funds for making investment--Claim not examined by Assessing Officer--Matter remanded--Income-tax Act, 1961, ss. 10(34), 14A-- Mahindra and Mahindra Ltd. v. Additional CIT (Mumbai) . . . 95
----Reversal of foreign currency convertible bonds premium offered for taxation--No double taxation permissible--Amount taxed in earlier year not to be added-- Mahindra and Mahindra Ltd. v. Additional CIT (Mumbai) . . . 95
Industrial undertaking --Special deduction--Unit incurring loss during assessment year 2008-09 and no deduction claimed--Assessing Officer to quantify loss and allow it in accordance with law--Income-tax Act, 1961, s. 80-IC-- Mahindra and Mahindra Ltd. v. Additional CIT (Mumbai) . . . 95
International transactions --Arm’s length price--Determination--Change of law--Order of Transfer Pricing Officer--Not binding on Assessing Officer prior to 1-6-2007--Assessing Officer may consider not only report of Transfer Pricing Officer but other material that may be brought by assessee--Assessee must be given opportunity to be heard--Denial of opportunity to assessee to object to arm’s length price determined by Transfer Pricing Officer--Assessment set aside and matter remanded for adjudication afresh after affording assessee opportunity to be heard--Income-tax Act, 1961, ss. 92C(4), 92CA(4)-- Abacus Distribution Systems (India) P. Ltd. v. Deputy CIT (Mumbai) . . . 1
----Arm’s length price--Determination--Transfer Pricing Officer duplicating same order for several assessment years except for different figures--Assessee’s explanations and objections and documents not considered--Order passed without application of mind and with pre-determined mind--To be set aside and matter remanded--Income-tax Act, 1961-- Abacus Distribution Systems (India) P. Ltd. v. Deputy CIT (Mumbai) . . . 1
----Transfer pricing--Arm’s length price--Selection of comparables--Transactional net margin method--Computation of operating profit margin--Only data relating to relevant financial year to be relied on--Income-tax Rules 1962, r. 10B(4)-- Assistant CIT v. Infotech Enterprises Ltd. (Hyderabad) . . . 67
----Transfer pricing--Guarantee fee adopting 4.66 per cent. per annum--Rate of 3 per cent. confirmed by Tribunal for earlier years--Same rate applicable for this year also--Assessee charging 6 per cent. per annum interest on loans to associated enterprise--Notional interest at 17.26 per cent. added--Matter remanded to Assessing Officer to apply LIBOR rate--If LIBOR rate less than 6 per cent., 6 per cent. to be taken to be at arm’s length-- Mahindra and Mahindra Ltd. v. Additional CIT (Mumbai) . . . 95
Method of accounting --Unutilised Cenvat credit on raw material not included in closing stock whether taxable--Matter remanded--Income-tax Act, 1961, s. 145A-- Mahindra and Mahindra Ltd. v. Additional CIT (Mumbai) . . . 95
Non-resident --Taxability in India--Royalty--Contract for supply of software required for telecommunications network--Software supplied separately and not along with equipment--Licence to use copyright belonging to non-resident--Transfer of part of copyright or transfer of right to use copyright--Payments made to non-resident suppliers was payment for use of or right to use copyright--Amounts to royalty--No evidence of deputing personnel to India or for inferring existence of permanent establishment--No permanent establishment of non-resident--Question of attribution of profits does not arise--Assessing Officer to give credit for tax deducted at source--No question of levy of interest under section 234B--Payment for purchase of certain telecommunication satellite bandwidth capacity (software) amounted to royalty--Income-tax Act, 1961, ss. 9(1)(vi), 195, 234B--Double Taxation Avoidance Agreement between India and the U. S. A, art. 12-- Deputy DIT (International Taxation) v. Reliance Infocom Ltd. (Mumbai) . . . 132
Precedent --Ratio decidendi--Business expenditure--Disallowance--Amount on which tax not been deducted at source--Income-tax Act, 1961, s. 40(a)(i)-- Assistant CIT v. Rishti Stock and Shares P. Ltd. (Mumbai) . . . 61
Scientific research expenditure --Weighted deduction--Approval of Department of Scientific and Industrial Research--Research and development assets and facilities approved in Form 3CL and DSIR not rejecting application--Presumption that application accepted--Failure by DSIR to inform income-tax authorities in time--Not reason for denying weighted deduction--Income-tax Act, 1961, s. 35(2AB)-- Mahindra and Mahindra Ltd. v. Additional CIT (Mumbai) . . . 95
SECTIONWISE INDEX TO CASES REPORTED IN THIS PART
Double Taxation Avoidance Agreement between India and the U. S. A.
Art. 12 --Non-resident--Taxability in India--Royalty--Contract for supply of software required for telecommunications network--Software supplied separately and not along with equipment--Licence to use copyright belonging to non-resident--Transfer of part of copyright or transfer of right to use copyright--Payments made to non-resident suppliers was payment for use of or right to use copyright--Amounts to royalty--No evidence of deputing personnel to India or for inferring existence of permanent establishment--No permanent establishment of non-resident--Question of attribution of profits does not arise--Assessing Officer to give credit for tax deducted at source--No question of levy of interest under section 234B--Payment for purchase of certain telecommunication satellite bandwidth capacity (software) amounted to royalty-- Deputy DIT (International Taxation) v. Reliance Infocom Ltd. (Mumbai) . . . 132
S. 2(22)(e) --Dividend--Deemed dividend--Transactions with sister concern--Commercial nature--Section 2(22)(e) not applicable-- Deputy CIT v. Chariot International P. Ltd. (Bangalore) . . . 36
S. 9(1)(vi) --Non-resident--Taxability in India--Royalty--Contract for supply of software required for telecommunications network--Software supplied separately and not along with equipment--Licence to use copyright belonging to non-resident--Transfer of part of copyright or transfer of right to use copyright--Payments made to non-resident suppliers was payment for use of or right to use copyright--Amounts to royalty--No evidence of deputing personnel to India or for inferring existence of permanent establishment--No permanent establishment of non-resident--Question of attribution of profits does not arise--Assessing Officer to give credit for tax deducted at source--No question of levy of interest under section 234B--Payment for purchase of certain telecommunication satellite bandwidth capacity (software) amounted to royalty-- Deputy DIT (International Taxation) v. Reliance Infocom Ltd. (Mumbai) . . . 132
S. 10(34) --Income--Expenditure related to exempted income--Dividend--Claim of assessee that no investment made out of borrowed funds and assessee had sufficient profit and interest-free funds for making investment--Claim not examined by Assessing Officer--Matter remanded-- Mahindra and Mahindra Ltd. v. Additional CIT (Mumbai) . . . 95
S. 10B --Dividend--Deemed dividend--Transactions with sister concern--Commercial nature--Section 2(22)(e) not applicable-- Deputy CIT v. Chariot International P. Ltd. (Bangalore) . . . 36
S. 14A --Income--Expenditure related to exempted income--Dividend--Claim of assessee that no investment made out of borrowed funds and assessee had sufficient profit and interest-free funds for making investment--Claim not examined by Assessing Officer--Matter remanded-- Mahindra and Mahindra Ltd. v. Additional CIT (Mumbai) . . . 95
S. 14A(2), (3) --Income--Computation--Expenditure related to income not forming part of total income--Dividend--Assessee not furnishing material to substantiate claim that it did not utilise borrowed funds for making investments in purchase of shares--Disallowance to be made in accordance with rule-- Assistant CIT v. Kerala State Industrial Development Corporation Ltd . (Cochin) . . . 45
S. 22 --Business income or income from house property--Property let to group concern--Property sub-let by that concern to third party--Income from letting to group concern assessed for many years as business income derived from stock-in-trade--Rent realised by that concern from third party not attributable to assessee-- Mahindra and Mahindra Ltd. v. Additional CIT (Mumbai) . . . 95
S. 28 --Business income or income from house property--Property let to group concern--Property sub-let by that concern to third party--Income from letting to group concern assessed for many years as business income derived from stock-in-trade--Rent realised by that concern from third party not attributable to assessee-- Mahindra and Mahindra Ltd. v. Additional CIT (Mumbai) . . . 95
S. 35(1)(iv) --Capital gains--Sale of capital assets on which 100 per cent. deduction allowed under section 35(1)(iv)--Indexation for claiming capital loss cannot be allowed-- Mahindra and Mahindra Ltd. v. Additional CIT (Mumbai) . . . 95
S. 35(2AB) --Scientific research expenditure--Weighted deduction--Approval of Department of Scientific and Industrial Research--Research and development assets and facilities approved in Form 3CL and DSIR not rejecting application--Presumption that application accepted--Failure by DSIR to inform income-tax authorities in time--Not reason for denying weighted deduction-- Mahindra and Mahindra Ltd. v. Additional CIT (Mumbai) . . . 95
S. 35D --Capital or revenue expenditure--Assessee engaged in manufacture and sale of automobiles--Professional fees paid for scientific research in relation to development of engine technology, to meet future emission standards--Whether fall within ambit of section 35D--Matter to be examined by Assessing Officer--Premium on foreign currency convertible bonds--Revenue expenditure--Difference in exchange in respect of premium payable on foreign currency convertible bonds--Additional liability to be allowed as revenue expenditure--Payment for development of vehicle used as construction equipment--Capital expenditure-- Mahindra and Mahindra Ltd. v. Additional CIT (Mumbai) . . . 95
S. 36(1)(vii) --Business expenditure--Bad debts--Amount of deduction in respect of bad debts to be reduced by opening balance of provision for bad and doubtful debts created and not closing balance--CBDT Circular 17 of 2008 dated 26-11-2008-- Assistant CIT v. Kerala State Industrial Development Corporation Ltd. (Cochin) . . . 45
S. 36(1)(viii) --Business expenditure--Industrial Development Corporation--Deduction in respect of special reserve--No debit in special reserve account--Only adjustment in balance-sheet for purpose of presentation--Method of presentation of special reserve account in balance-sheet does not matter for purpose of section 36(1)(viii) read with section 41(4A)-- Assistant CIT v. Kerala State Industrial Development Corporation Ltd . (Cochin) . . . 45
S. 37 --Business expenditure--Capital or revenue expenditure--Expenditure shown as capital work-in-progress claimed as revenue in return--Expenditure on salary incurred for expansion of existing line of business--Expenditures neither creating any asset nor providing enduring benefit to business of assessee--Allowable as revenue-- Reliance Footprint Ltd. v. Assistant CIT (Mumbai) . . . 82
S. 40(a)(i) --Precedent--Ratio decidendi--Business expenditure--Disallowance--Amount on which tax not been deducted at source-- Assistant CIT v. Rishti Stock and Shares P. Ltd. (Mumbai) . . . 61
S. 40(a)(ia) --Business expenditure--Disallowance--Payment subject to deduction of tax at source--Payment of tax deducted at source to credit of Central Government before due date for filing return of income--Disallowance under section 40(a)(ia) not attracted-- Assistant CIT v. Ace Fire Services (Bangalore) . . . 73
----Business expenditure--Disallowance--Payments subject to deduction of tax at source--Year-end provision based on services rendered by various persons--Tax not deducted at source on provision on ground that liability arose when sum paid or credited in later year--Disallowance not justified-- Mahindra and Mahindra Ltd. v. Additional CIT (Mumbai) . . . 95
S. 40A(9) --Business expenditure--Disallowance--Expenditure on welfare of employees--Contribution to Mahindra Academic--Matter remanded-- Mahindra and Mahindra Ltd. v. Additional CIT (Mumbai) . . . 95
S. 41(4A) --Business expenditure--Industrial development corporation--Deduction in respect of special reserve--No debit in special reserve account--Only adjustment in balance-sheet for purpose of presentation--Method of presentation of special reserve account in balance-sheet does not matter for purpose of section 36(1)(viii) read with section 41(4A)-- Assistant CIT v. Kerala State Industrial Development Corporation Ltd . (Cochin) . . . 45
S. 48 --Capital gains--Sale of capital assets on which 100 per cent. deduction allowed under section 35(1)(iv)--Indexation for claiming capital loss cannot be allowed-- Mahindra and Mahindra Ltd. v. Additional CIT (Mumbai) . . . 95
S. 80-IC --Industrial undertaking--Special deduction--Unit incurring loss during assessment year 2008-09 and no deduction claimed--Assessing Officer to quantify loss and allow it in accordance with law-- Mahindra and Mahindra Ltd. v. Additional CIT (Mumbai) . . . 95
S. 92C(4) --International transactions--Arm’s length price--Determination--Change of law--Order of Transfer Pricing Officer--Not binding on Assessing Officer prior to 1-6-2007--Assessing Officer may consider not only report of Transfer Pricing Officer but other material that may be brought by assessee--Assessee must be given opportunity to be heard--Denial of opportunity to assessee to object to arm’s length price determined by Transfer Pricing Officer--Assessment set aside and matter remanded for adjudication afresh after affording assessee opportunity to be heard-- Abacus Distribution Systems (India) P. Ltd. v. Deputy CIT (Mumbai) . . . 1
S. 92CA(4) --International transactions--Arm’s length price--Determination--Change of law--Order of Transfer Pricing Officer--Not binding on Assessing Officer prior to 1-6-2007--Assessing Officer may consider not only report of Transfer Pricing Officer but other material that may be brought by assessee--Assessee must be given opportunity to be heard--Denial of opportunity to assessee to object to arm’s length price determined by Transfer Pricing Officer--Assessment set aside and matter remanded for adjudication afresh after affording assessee opportunity to be heard-- Abacus Distribution Systems (India) P. Ltd. v. Deputy CIT (Mumbai) . . . 1
S. 143(2) --Assessment--Enquiry--Condition precedent--Notice under section 143(2)--Failure to issue and serve notice within prescribed time--Assessment invalid-- Abacus Distribution Systems (India) P. Ltd. v. Deputy CIT (Mumbai) . . . 1
S. 145A --Method of accounting--Unutilised Cenvat credit on raw material not included in closing stock whether taxable--Matter remanded-- Mahindra and Mahindra Ltd. v. Additional CIT (Mumbai) . . . 95
S. 194H --Business expenditure--Disallowance--Payments subject to deduction of tax at source--Commission debited under head “sales promotion†and commission on sales/contracts--Dealer incentive not covered by section 194H as sale made on principal-to-principal basis--Service coupon--Matter remanded to Assessing Officer for fresh adjudication-- Mahindra and Mahindra Ltd. v. Additional CIT (Mumbai) . . . 95
S. 195 --Non-resident--Taxability in India--Royalty--Contract for supply of software required for telecommunications network--Software supplied separately and not along with equipment--Licence to use copyright belonging to non-resident--Transfer of part of copyright or transfer of right to use copyright--Payments made to non-resident suppliers was payment for use of or right to use copyright--Amounts to royalty--No evidence of deputing personnel to India or for inferring existence of permanent establishment--No permanent establishment of non-resident--Question of attribution of profits does not arise--Assessing Officer to give credit for tax deducted at source--No question of levy of interest under section 234B--Payment for purchase of certain telecommunication satellite bandwidth capacity (software) amounted to royalty-- Deputy DIT (International Taxation) v. Reliance Infocom Ltd. (Mumbai) . . . 132
S. 234B --Non-resident--Taxability in India--Royalty--Contract for supply of software required for telecommunications network--Software supplied separately and not along with equipment--Licence to use copyright belonging to non-resident--Transfer of part of copyright or transfer of right to use copyright--Payments made to non-resident suppliers was payment for use of or right to use copyright--Amounts to royalty--No evidence of deputing personnel to India or for inferring existence of permanent establishment--No permanent establishment of non-resident--Question of attribution of profits does not arise--Assessing Officer to give credit for tax deducted at source--No question of levy of interest under section 234B--Payment for purchase of certain telecommunication satellite bandwidth capacity (software) amounted to royalty-- Deputy DIT (International Taxation) v. Reliance Infocom Ltd. (Mumbai) . . . 132
R. 8D(2)(iii) --Income--Computation--Expenditure related to income not forming part of total income--Dividend--Assessee not furnishing material to substantiate claim that it did not utilise borrowed funds for making investments in purchase of shares--Disallowance to be made in accordance with rule-- Assistant CIT v. Kerala State Industrial Development Corporation Ltd . (Cochin) . . . 45
R. 10B(4) --International transactions--Transfer pricing--Arm’s length price--Selection of comparables--Transactional net margin method--Computation of operating profit margin--Only data relating to relevant financial year to be relied on-- Assistant CIT v. Infotech Enterprises Ltd. (Hyderabad) . . . 67
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