ITR’S TRIBUNAL TAX REPORTS (ITR (TRIB)) -- PRINT AND ONLINE EDITION
ONLINE EDITION
SUBJECT INDEX TO CASES REPORTED
Business expenditure --Disallowance--Sums liable to deduction of tax at source--Amendment of section 40(a)(ia) by Finance Act, 2010--Remedial and curative in nature--Retrospective effect--No disallowance where tax deducted at source deposited before date of filing of return--Income-tax Act, 1961, s. 40(a)(ia)-- ITO v. Naresh Kumar (Delhi) . . . 123
Non-resident --Fees for technical services--Deduction of tax at source--Appeal to Appellate Tribunal--Additional ground that deduction of tax at source should be not at 15 per cent. but at 10 per cent.--Ground not raised before Assessing Officer or Commissioner (Appeals)--Matter remanded--Income-tax Act, 1961, s. 115A(1)(b)(BB)-- Bajaj Holdings and Investments Ltd. v. Additional DIT (International Taxation) (Mumbai) . . . 117
----Fees for technical services--Payment to non-resident for developing inkjet printers and ink--Agreement for supply of technology to assessee--Agreement allowing assessee to file patent application, design application and intellectual property rights--Technology made available--Payment was fees for technical services and liable to deduction of tax at source--Income-tax Act, 1961, s. 195--Double Taxation Avoidance Agreement between India and the United Kingdom, art. 13(2)-- Bajaj Holdings and Investments Ltd. v. Additional DIT (International Taxation) (Mumbai) . . . 117
----Taxability in India--Fees for technical services--Definition--Agreement for making available technical knowledge, expertise, skill and know-how--Services rendered by assessee falling within definition in DTAA--Payment received by assessee taxable in India as fees for included services--Double Taxation Avoidance Agreement between India and the U. S. A., art. 12(4)(b)-- Avion Systems Inc. v. Deputy DIT (International Taxation) (Mumbai) . . . 128
PRINT EDITION
Volume 30 : Part 1 (Issue dated : 24-2-2014)
SUBJECT INDEX TO CASES REPORTED
Appeal to Appellate Tribunal --Rectification of mistake--Error apparent from record--Application challenging findings of Tribunal arrived at on merits--Not permissible--Income-tax Act, 1961, s. 254(2)-- Willis Processing Services India P. Ltd. v. Deputy CIT (Mumbai) . . . 129
Business expenditure --International transactions--Arm’s length price--Inclusion of amounts in overall advertisement, marketing and promotion expenses for working out transfer pricing adjustment--No justification for disallowing entire amount under section 37(1) as not having been incurred “wholly and exclusively†for business purpose--Income-tax Act, 1961, ss. 37(1), 92-- Whirlpool of India Ltd. v. Deputy CIT (Delhi) . . . 29
Donations for charitable purpose --Special deduction--Approval of institution--Application for--Entry passed by Commissioner that accounts produced and 95 per cent. of donations found used for charitable purpose--Not granting approval but observing that approval can be granted after verification of objects--Inference that Commissioner not satisfied about utilisation of income for charitable purpose--Burden of proof on assessee to establish trust incurred expenditure not exceeding 5 per cent. of total income for religious purpose--Assessee̢۪s income and expenditure account showing no expenditure for charitable activity--Direction of High Court to Commissioner to either grant or reject approval after verifying books of account--Limitation prescribed under rule 11AA(6) not applicable--Consequence of not passing order within prescribed time not to deem approval to have been granted--Income-tax Act, 1961, s. 80G(5B)--Income-tax Rules, 1962, r. 11AA-- Nilackal St. Thomas Church & Ecumenical Centre Trust v. CIT (Cochin) . . . 19
Exemption --Educational institution--Assessee not entitled to deduction if collection of capitation fees from students for purpose of giving admission proved--Matter remanded--Income-tax Act, 1961, ss. 11, 12A-- Deputy DIT (Exemption) v. Chaitanya Memorial Education Society (Hyderabad) . . . 120
Export --Exemption--Deduction allowed in first year--Assessing Officer not entitled to disallow claim for subsequent assessment year without disturbing order of earlier year--Whether two existing units merged and consolidated to bring into existence new unit by restructuring during year--Matter remanded--Computation of export turnover--Satellite link charges--Not “telecommunication charges†--Not to be excluded from export turnover--Technical service fee--Not to be excluded from export turnover--Income-tax Act, 1961, s. 10A-- Willis Processing Services (I) P. Ltd. v. Deputy CIT (Mumbai) . . . 39
International transactions --Arm’s length price--Advertisement, marketing and sales promotion expenses--“Pricing adjustment†passed on to dealers and distributors as “extra trade discount†--To be excluded from total advertisement, marketing and promotion expenses--Sum representing salaries paid to demonstrators engaged at dealers’ and distributors’ outlets in connection with sale of products--Correct nature of amount decisive and not nomenclature given by parties--Assessing Officer or Transfer Pricing Officer to decide afresh after ascertaining correct nature of amount--Matter remanded-- Whirlpool of India Ltd. v. Deputy CIT (Delhi) . . . 29
----Arm̢۪s length price--Determination--Power of Transfer Pricing Officer to carry out fresh search for comparables--Selection of comparables--Related party transactions ranging from 10 to 25 per cent. of total revenue can be considered--Exclusion of comparables--Only on basis of factors enumerated in Rules--Entity cannot be excluded solely on basis of high profit or loss--Classification of slab range on basis of turnover from Rs. 1 crore to Rs. 200 crores not practically workable--Turnover not criterion prescribed in rule--Adjustment for risk only if proved by proper data and accurate calculation--Extraordinary events like mergers and de-mergers--Whether company became functionally different and should be excluded to be seen--Allegation of fraud against directors--Business or results not influenced or affected--Company not to be excluded--Income-tax Act, 1961, ss. 92C(2), (3), 92CA(3), 92F(iv), 133(6)--Income-tax Rules, 1962, r. 10B(2), (3), (4)--Notification No. S. O. 890(E) dated 26-9-2000-- Willis Processing Services (I) P. Ltd. v. Deputy CIT (Mumbai) . . . 39
----Arm̢۪s length price--Determination--Selection of comparables--Entities selected by assessee--Assessee not precluded at later stage from seeking their exclusion on cogent grounds--Income-tax Rules, 1962, r. 10B(4)-- Tata Power Solar Systems Ltd. v. Deputy CIT (Mumbai) . . . 1
----Arm̢۪s length price--To be determined on international transactions undertaken by assessee and not in relation to assessee̢۪s entire turnover-- Tata Power Solar Systems Ltd. v. Deputy CIT (Mumbai) . . . 1
Royalty or business profits --Business expenditure-- Disallowance--Payments subject to deduction of tax at source--Payments to non-resident in connection with satellite link charges--Payment for use of standard facility not involving use or right to use equipment--Payment not royalty but business profits--Not taxable in India in absence of permanent establishment in India--Assessee not liable to deduct tax at source on payment--No question of disallowance of payment--Income-tax Act, 1961, s. 40(a)(ia)-- Willis Processing Services (I) P. Ltd. v. Deputy CIT (Mumbai) . . . 39
SECTIONWISE INDEX TO CASES REPORTED IN THIS PART
Income-tax Act, 1961
S. 10A --Export--Exemption--Deduction allowed in first year--Assessing Officer not entitled to disallow claim for subsequent assessment year without disturbing order of earlier year--Whether two existing units merged and consolidated to bring into existence new unit by restructuring during year--Matter remanded--Computation of export turnover--Satellite link charges--Not “telecommunication charges†--Not to be excluded from export turnover--Technical service fee--Not to be excluded from export turnover-- Willis Processing Services (I) P. Ltd. v. Deputy CIT (Mumbai) . . . 39
S. 11 --Exemption--Educational institution--Assessee not entitled to deduction if collection of capitation fees from students for purpose of giving admission proved--Matter remanded-- Deputy DIT (Exemption) v. Chaitanya Memorial Education Society (Hyderabad) . . . 120
S. 12A --Exemption--Educational institution--Assessee not entitled to deduction if collection of capitation fees from students for purpose of giving admission proved--Matter remanded-- Deputy DIT (Exemption) v. Chaitanya Memorial Education Society (Hyderabad) . . . 120
S. 37(1) --Business expenditure--International transactions--Arm’s length price--Inclusion of amounts in overall advertisement, marketing and promotion expenses for working out transfer pricing adjustment--No justification for disallowing entire amount under section 37(1) as not having been incurred “wholly and exclusively†for business purpose-- Whirlpool of India Ltd. v. Deputy CIT (Delhi) . . . 29
S. 40(a)(ia) --Royalty or business profits--Business expenditure-- Disallowance--Payments subject to deduction of tax at source--Payments to non-resident in connection with satellite link charges--Payment for use of standard facility not involving use or right to use equipment--Payment not royalty but business profits--Not taxable in India in absence of permanent establishment in India--Assessee not liable to deduct tax at source on payment--No question of disallowance of payment-- Willis Processing Services (I) P. Ltd. v. Deputy CIT (Mumbai) . . . 39
S. 80G(5B) --Donations for charitable purpose--Special deduction--Approval of institution--Application for--Entry passed by Commissioner that accounts produced and 95 per cent. of donations found used for charitable purpose--Not granting approval but observing that approval can be granted after verification of objects--Inference that Commissioner not satisfied about utilisation of income for charitable purpose--Burden of proof on assessee to establish trust incurred expenditure not exceeding 5 per cent. of total income for religious purpose--Assessee̢۪s income and expenditure account showing no expenditure for charitable activity--Direction of High Court to Commissioner to either grant or reject approval after verifying books of account--Limitation prescribed under rule 11AA(6) not applicable--Consequence of not passing order within prescribed time not to deem approval to have been granted-- Nilackal St. Thomas Church & Ecumenical Centre Trust v. CIT (Cochin) . . . 19
S. 92 --Business expenditure--International transactions--Arm’s length price--Inclusion of amounts in overall advertisement, marketing and promotion expenses for working out transfer pricing adjustment--No justification for disallowing entire amount under section 37(1) as not having been incurred “wholly and exclusively†for business purpose-- Whirlpool of India Ltd. v. Deputy CIT (Delhi) . . . 29
S. 92C(2) --International transactions--Arm̢۪s length price--Determination--Power of Transfer Pricing Officer to carry out fresh search for comparables--Selection of comparables--Related party transactions ranging from 10 to 25 per cent. of total revenue can be considered--Exclusion of comparables--Only on basis of factors enumerated in Rules--Entity cannot be excluded solely on basis of high profit or loss--Classification of slab range on basis of turnover from Rs. 1 crore to Rs. 200 crores not practically workable--Turnover not criterion prescribed in rule--Adjustment for risk only if proved by proper data and accurate calculation--Extraordinary events like mergers and de-mergers--Whether company became functionally different and should be excluded to be seen--Allegation of fraud against directors--Business or results not influenced or affected--Company not to be excluded--Notification No. S. O. 890(E) dated 26-9-2000-- Willis Processing Services (I) P. Ltd. v. Deputy CIT (Mumbai) . . . 39
S. 92C(3) --International transactions--Arm̢۪s length price--Determination--Power of Transfer Pricing Officer to carry out fresh search for comparables--Selection of comparables--Related party transactions ranging from 10 to 25 per cent. of total revenue can be considered--Exclusion of comparables--Only on basis of factors enumerated in Rules--Entity cannot be excluded solely on basis of high profit or loss--Classification of slab range on basis of turnover from Rs. 1 crore to Rs. 200 crores not practically workable--Turnover not criterion prescribed in rule--Adjustment for risk only if proved by proper data and accurate calculation--Extraordinary events like mergers and de-mergers--Whether company became functionally different and should be excluded to be seen--Allegation of fraud against directors--Business or results not influenced or affected--Company not to be excluded--Notification No. S. O. 890(E) dated 26-9-2000-- Willis Processing Services (I) P. Ltd. v. Deputy CIT (Mumbai) . . . 39
S. 92CA(3) --International transactions--Arm̢۪s length price--Determination--Power of Transfer Pricing Officer to carry out fresh search for comparables--Selection of comparables--Related party transactions ranging from 10 to 25 per cent. of total revenue can be considered--Exclusion of comparables--Only on basis of factors enumerated in Rules--Entity cannot be excluded solely on basis of high profit or loss--Classification of slab range on basis of turnover from Rs. 1 crore to Rs. 200 crores not practically workable--Turnover not criterion prescribed in rule--Adjustment for risk only if proved by proper data and accurate calculation--Extraordinary events like mergers and de-mergers--Whether company became functionally different and should be excluded to be seen--Allegation of fraud against directors--Business or results not influenced or affected--Company not to be excluded--Notification No. S. O. 890(E) dated 26-9-2000-- Willis Processing Services (I) P. Ltd. v. Deputy CIT (Mumbai) . . . 39
S. 92F(iv) --International transactions--Arm̢۪s length price--Determination--Power of Transfer Pricing Officer to carry out fresh search for comparables--Selection of comparables--Related party transactions ranging from 10 to 25 per cent. of total revenue can be considered--Exclusion of comparables--Only on basis of factors enumerated in Rules--Entity cannot be excluded solely on basis of high profit or loss--Classification of slab range on basis of turnover from Rs. 1 crore to Rs. 200 crores not practically workable--Turnover not criterion prescribed in rule--Adjustment for risk only if proved by proper data and accurate calculation--Extraordinary events like mergers and de-mergers--Whether company became functionally different and should be excluded to be seen--Allegation of fraud against directors--Business or results not influenced or affected--Company not to be excluded--Notification No. S. O. 890(E) dated 26-9-2000-- Willis Processing Services (I) P. Ltd. v. Deputy CIT (Mumbai) . . . 39
S. 133(6) --International transactions--Arm̢۪s length price--Determination--Power of Transfer Pricing Officer to carry out fresh search for comparables--Selection of comparables--Related party transactions ranging from 10 to 25 per cent. of total revenue can be considered--Exclusion of comparables--Only on basis of factors enumerated in Rules--Entity cannot be excluded solely on basis of high profit or loss--Classification of slab range on basis of turnover from Rs. 1 crore to Rs. 200 crores not practically workable--Turnover not criterion prescribed in rule--Adjustment for risk only if proved by proper data and accurate calculation--Extraordinary events like mergers and de-mergers--Whether company became functionally different and should be excluded to be seen--Allegation of fraud against directors--Business or results not influenced or affected--Company not to be excluded--Notification No. S. O. 890(E) dated 26-9-2000-- Willis Processing Services (I) P. Ltd. v. Deputy CIT (Mumbai) . . . 39
S. 254(2) --Appeal to Appellate Tribunal--Rectification of mistake--Error apparent from record--Application challenging findings of Tribunal arrived at on merits--Not permissible-- Willis Processing Services India P. Ltd. v. Deputy CIT (Mumbai) . . . 129
Income-tax Rules, 1962
R. 10B(2) --International transactions--Arm̢۪s length price--Determination--Power of Transfer Pricing Officer to carry out fresh search for comparables--Selection of comparables--Related party transactions ranging from 10 to 25 per cent. of total revenue can be considered--Exclusion of comparables--Only on basis of factors enumerated in Rules--Entity cannot be excluded solely on basis of high profit or loss--Classification of slab range on basis of turnover from Rs. 1 crore to Rs. 200 crores not practically workable--Turnover not criterion prescribed in rule--Adjustment for risk only if proved by proper data and accurate calculation--Extraordinary events like mergers and de-mergers--Whether company became functionally different and should be excluded to be seen--Allegation of fraud against directors--Business or results not influenced or affected--Company not to be excluded--Notification No. S. O. 890(E) dated 26-9-2000-- Willis Processing Services (I) P. Ltd. v. Deputy CIT (Mumbai) . . . 39
R. 10B(3) --International transactions--Arm̢۪s length price--Determination--Power of Transfer Pricing Officer to carry out fresh search for comparables--Selection of comparables--Related party transactions ranging from 10 to 25 per cent. of total revenue can be considered--Exclusion of comparables--Only on basis of factors enumerated in Rules--Entity cannot be excluded solely on basis of high profit or loss--Classification of slab range on basis of turnover from Rs. 1 crore to Rs. 200 crores not practically workable--Turnover not criterion prescribed in rule--Adjustment for risk only if proved by proper data and accurate calculation--Extraordinary events like mergers and de-mergers--Whether company became functionally different and should be excluded to be seen--Allegation of fraud against directors--Business or results not influenced or affected--Company not to be excluded--Notification No. S. O. 890(E) dated 26-9-2000-- Willis Processing Services (I) P. Ltd. v. Deputy CIT (Mumbai) . . . 39
R. 10B(4) --International transactions--Arm̢۪s length price--Determination--Power of Transfer Pricing Officer to carry out fresh search for comparables--Selection of comparables--Related party transactions ranging from 10 to 25 per cent. of total revenue can be considered--Exclusion of comparables--Only on basis of factors enumerated in Rules--Entity cannot be excluded solely on basis of high profit or loss--Classification of slab range on basis of turnover from Rs. 1 crore to Rs. 200 crores not practically workable--Turnover not criterion prescribed in rule--Adjustment for risk only if proved by proper data and accurate calculation--Extraordinary events like mergers and de-mergers--Whether company became functionally different and should be excluded to be seen--Allegation of fraud against directors--Business or results not influenced or affected--Company not to be excluded--Notification No. S. O. 890(E) dated 26-9-2000-- Willis Processing Services (I) P. Ltd. v. Deputy CIT (Mumbai) . . . 39
----International transactions--Arm̢۪s length price--Determination--Selection of comparables--Entities selected by assessee--Assessee not precluded at later stage from seeking their exclusion on cogent grounds-- Tata Power Solar Systems Ltd. v. Deputy CIT (Mumbai) . . . 1
R. 11AA --Donations for charitable purpose--Special deduction--Approval of institution--Application for--Entry passed by Commissioner that accounts produced and 95 per cent. of donations found used for charitable purpose--Not granting approval but observing that approval can be granted after verification of objects--Inference that Commissioner not satisfied about utilisation of income for charitable purpose--Burden of proof on assessee to establish trust incurred expenditure not exceeding 5 per cent. of total income for religious purpose--Assessee̢۪s income and expenditure account showing no expenditure for charitable activity--Direction of High Court to Commissioner to either grant or reject approval after verifying books of account--Limitation prescribed under rule 11AA(6) not applicable--Consequence of not passing order within prescribed time not to deem approval to have been granted-- Nilackal St. Thomas Church & Ecumenical Centre Trust v. CIT (Cochin) . . . 19
