ITR’S TRIBUNAL TAX REPORTS (ITR (TRIB)) -- PRINT AND ONLINE EDITION PRINT EDITION Volume 29 : Part 4 (Issue dated : 27-1-2014) SUBJECT INDEX TO CASES REPORTED Advance --Interest--Liability to pay interest for deferment of advance tax based on advance tax payable on returned income not on assessed income--Income-tax Act, 1961, s. 234C-- SAP India P. Ltd. v. Deputy CIT (Bangalore) . . . 469 Business expenditure --Amortisation of preliminary expenses--Investment of substantial amount of additional equity share capital in purchase of machinery--Substantial increase in sales turnover--Expenditure can be attributed to extension of undertaking--Assessee entitled to amortisation of preliminary and pre-operative expenses--Income-tax Act, 1961, s. 35D-- Chiranjeevi Wind Energy Ltd. v. Assistant CIT (Chennai) . . . 534 ----Disallowance--Payments liable to deduction of tax at source--Professional consultancy fee--Direction to verify if tax deducted and allow if tax deducted--Proper--Income-tax Act, 1961, s. 40(a)(ia)-- Premier Exploration Services P. Ltd. v. ITO (Delhi) . . . 427 ----Staff welfare and advertising and sales promotion expenses--Expenses towards food and refreshments to employees at workplace and gifts to employees--Provision of free meals to employees essential for employee welfare--Allowable as business expenditure--No case that sales promotion expenses not directly linked to promotion of business and growth objectives--Allowable--Income-tax Act, 1961, s. 37(1)-- SAP India P. Ltd. v. Deputy CIT (Bangalore) . . . 469 Capital or revenue loss --Film production--Expenditure incurred on abandoned film allowable--Income-tax Act, 1961-- ITO v. Abdul G. Nadiadwala (Mumbai) . . . 528 Charitable purpose --Exemption--Notification of charitable activity in circular issued by Central Board of Direct Taxes not required--Exemption cannot be denied on ground of lack of registration under A. P. Charitable and Hindu Religious Institutions and Endowments Act, 1987--Whether sums used for tsunami project or Indiramma project would not make any difference--Exemption allowable--Income-tax Act, 1961, ss. 11, 12-- Deputy DIT (Exemption) v. Society for Integrated Development in Urban and Rural Areas (Siddur) (Hyderabad) . . . 506 Depreciation --Rate of depreciation--Computer peripherals--60 per cent. depreciation allowable--Income-tax Act, 1961-- Premier Exploration Services P. Ltd. v. ITO (Delhi) . . . 427 Exemption --Export of computer software--†Computer software†--Definition--Conditions for grant of exemption--Undertaking must be set up under Software Technology Park Scheme, must manufacture or produce computer software and computer software or information technology enabled services must be exported out of India--Assessee formed as subsidiary of foreign company which manufactured standard software--Assessee’s role to provide customisation of standard software and corrections or development of new software module--Is development of computer software--Assessee to establish correlation between receipts in foreign exchange and nature of services rendered--Matter remanded--Claim relating to computation of export turnover and total turnover--To be adjudicated on remand--Income-tax Act, 1961, s. 10A-- SAP India P. Ltd. v. Deputy CIT (Bangalore) . . . 469 ----Export oriented undertaking in special economic zone--Assessee purchasing unfinished handicraft goods and applying various processes like cutting, polishing, repairing, remaking, to them--Certificates issued by Government and other authorities showing assessee as “manufacturer of all types of handicrafts†--Assessments made after scrutiny in preceding years allowing deduction--No change in facts--Principle of consistency--Assessee entitled to deduction--Amount accrued or received from duty drawback--Entitled to deduction--Income-tax Act, 1961, s. 10AA-- ITO v. Makers Mart (Jodhpur) . . . 444 Income --Accrual of income--Token advance received during earlier previous year--To be considered as income in year of performance of work--Direction to Assessing Officer to consider whether income accrued in current assessment year--Matter remanded--Income-tax Act, 1961-- Robin Nana Bhai Bhatt v. Assistant CIT (Mumbai) . . . 531 Industrial undertaking --Special deduction--Claim to additional deduction cannot be raised for first time before Commissioner (Appeals)--Income-tax Act, 1961, s. 80-IB-- Chiranjeevi Wind Energy Ltd. v. Assistant CIT (Chennai) . . . 534 International transactions --Computation of arm’s length price--Benefit of plus or minus 5 per cent. not allowable--Income-tax Act, 1961, s. 92C(2)-- Premier Exploration Services P. Ltd. v. ITO (Delhi) . . . 427 ----Computation of arm’s length price--Profit level indicator--Foreign exchange income to be included as operating income--Income-tax Act, 1961-- Premier Exploration Services P. Ltd. v. ITO (Delhi) . . . 427 ----Computation of arm’s length price--Selection of comparables--Profit of comparable company overstated in auditors report--Overstated profit to be adjusted while working out operational profit--Matter remanded--Income-tax Act, 1961-- Premier Exploration Services P. Ltd. v. ITO (Delhi) . . . 427 ----Computation of arm’s length price--Selection of comparables--Risk profile--Adjustment only where difference in risk resulting in deflation or inflation of financial results of comparables--Income-tax Act, 1961-- Premier Exploration Services P. Ltd. v. ITO (Delhi) . . . 427 ----Computation of arm’s length price--Selection of comparables--Segment allocation of expenses not reliable--Functional dissimilarity--Not comparable--Income-tax Act, 1961-- Premier Exploration Services P. Ltd. v. ITO (Delhi) . . . 427 ----Computation of arm’s length price--Transactional net margin method--Non-operational income to be excluded in computation of arm’s length price--Income-tax Act, 1961-- Premier Exploration Services P. Ltd. v. ITO (Delhi) . . . 427 ----Computation of arm’s length price--Transactional net margin method--Use of multiple years’ data--Failure of assessee to establish influence of multiple years’ data on determination of transfer pricing--Transfer Pricing Officer justified in using current year data--Income-tax Act, 1961-- Premier Exploration Services P. Ltd. v. ITO (Delhi) . . . 427 Reassessment --Jurisdiction--Mere change of opinion--No fresh information collected--Reopening of proceedings bad in law--Income-tax Act, 1961, ss. 143(3), 147-- ITO v. Object Connect India P. Ltd. (Hyderabad) . . . 518 Revision --Commissioner--Erroneous and prejudicial to Revenue--Computation of peak fund deficiency--Difference between figures computed by Assessing Officer and by Commissioner--Excess portion of cash outflow requiring examination by Assessing Officer--Direction issued by Commissioner justified--Income-tax Act, 1961, s. 263-- K. V. Balagangadharan v. Deputy CIT (Cochin) . . . 539 ----Commissioner--Erroneous and prejudicial to Revenue--Cost relatable to sale of land to be deducted whether gains as business income or short-term capital gains--Closing stock credited to profit and loss account will not increase profits from business--No prejudice to Revenue--Revision not justified--Income-tax Act, 1961, s. 263-- K. V. Balagangadharan v. Deputy CIT (Cochin) . . . 539 SECTIONWISE INDEX TO CASES REPORTED IN THIS PART Income-tax Act, 1961 S. 10A --Exemption--Export of computer software--†Computer software†--Definition--Conditions for grant of exemption--Undertaking must be set up under Software Technology Park Scheme, must manufacture or produce computer software and computer software or information technology enabled services must be exported out of India--Assessee formed as subsidiary of foreign company which manufactured standard software--Assessee’s role to provide customisation of standard software and corrections or development of new software module--Is development of computer software--Assessee to establish correlation between receipts in foreign exchange and nature of services rendered--Matter remanded--Claim relating to computation of export turnover and total turnover--To be adjudicated on remand-- SAP India P. Ltd. v. Deputy CIT (Bangalore) . . . 469 S. 10AA --Exemption--Export oriented undertaking in special economic zone--Assessee purchasing unfinished handicraft goods and applying various processes like cutting, polishing, repairing, remaking, to them--Certificates issued by Government and other authorities showing assessee as “manufacturer of all types of handicrafts†--Assessments made after scrutiny in preceding years allowing deduction--No change in facts--Principle of consistency--Assessee entitled to deduction--Amount accrued/received from duty drawback--Entitled to deduction-- ITO v. Makers Mart (Jodhpur) . . . 444 S. 11 --Charitable purpose--Exemption--Notification of charitable activity in circular issued by Central Board of Direct Taxes not required--Exemption cannot be denied on ground of lack of registration under A. P. Charitable and Hindu Religious Institutions and Endowments Act, 1987--Whether sums used for tsunami project or Indiramma project would not make any difference--Exemption allowable-- Deputy DIT (Exemption) v. Society for Integrated Development in Urban and Rural Areas (Siddur) (Hyderabad) . . . 506 S. 12 --Charitable purpose--Exemption--Notification of charitable activity in circular issued by Central Board of Direct Taxes not required--Exemption cannot be denied on ground of lack of registration under A. P. Charitable and Hindu Religious Institutions and Endowments Act, 1987--Whether sums used for tsunami project or Indiramma project would not make any difference--Exemption allowable-- Deputy DIT (Exemption) v. Society for Integrated Development in Urban and Rural Areas (Siddur) (Hyderabad) . . . 506 S. 35D --Business expenditure--Amortisation of preliminary expenses--Investment of substantial amount of additional equity share capital in purchase of machinery--Substantial increase in sales turnover--Expenditure can be attributed to extension of undertaking--Assessee entitled to amortisation of preliminary and pre-operative expenses-- Chiranjeevi Wind Energy Ltd. v. Assistant CIT (Chennai) . . . 534 S. 37(1) --Business expenditure--Staff welfare and advertising and sales promotion expenses--Expenses towards food and refreshments to employees at workplace and gifts to employees--Provision of free meals to employees essential for employee welfare--Allowable as business expenditure--No case that sales promotion expenses not directly linked to promotion of business and growth objectives--Allowable-- SAP India P. Ltd. v. Deputy CIT (Bangalore) . . . 469 S. 40(a)(ia) --Business expenditure--Disallowance--Payments liable to deduction of tax at source--Professional consultancy fee--Direction to verify if tax deducted and allow if tax deducted--Proper-- Premier Exploration Services P. Ltd. v. ITO (Delhi) . . . 427 S. 80-IB --Industrial undertaking--Special deduction--Claim to additional deduction cannot be raised for first time before Commissioner (Appeals)-- Chiranjeevi Wind Energy Ltd. v. Assistant CIT (Chennai) . . . 534 S. 92C(2) --International transactions--Computation of arm’s length price--Benefit of plus or minus 5 per cent. not allowable-- Premier Exploration Services P. Ltd. v. ITO (Delhi) . . . 427 S. 143(3) --Reassessment--Jurisdiction--Mere change of opinion--No fresh information collected--Reopening of proceedings bad in law-- ITO v. Object Connect India P. Ltd. (Hyderabad) . . . 518 S. 147 --Reassessment--Jurisdiction--Mere change of opinion--No fresh information collected--Reopening of proceedings bad in law-- ITO v. Object Connect India P. Ltd. (Hyderabad) . . . 518 S. 234C --Advance tax--Interest--Liability to pay interest for deferment of advance tax based on advance tax payable on returned income not on assessed income-- SAP India P. Ltd. v. Deputy CIT (Bangalore) . . . 469 S. 263 --Revision--Commissioner--Erroneous and prejudicial to Revenue--Computation of peak fund deficiency--Difference between figures computed by Assessing Officer and by Commissioner--Excess portion of cash outflow requiring examination by Assessing Officer--Direction issued by Commissioner justified-- K. V. Balagangadharan v. Deputy CIT (Cochin) . . . 539 ----Revision--Commissioner--Erroneous and prejudicial to Revenue--Cost relatable to sale of land to be deducted whether gains as business income or short-term capital gains--Closing stock credited to profit and loss account will not increase profits from business--No prejudice to Revenue--Revision not justified-- K. V. Balagangadharan v. Deputy CIT (Cochin) . . . 539 | 
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