ITR’S TRIBUNAL TAX REPORTS (ITR (TRIB)) -- PRINT AND ONLINE EDITION
SUBJECT INDEX TO CASES REPORTED
Charitable purpose --Registration of trust--Object of trust--Evaluation of benefits of reservation and undertaking research and survey for abolition of reservation policy--Cannot be construed as direct confrontation with Government--Conducting coaching classes on co-operative basis and without profit motive--Assessee entitled to registration under section 12A--Income-tax Act, 1961, s. 12A-- Paras Prerna Trust v. Director of Income-tax (Exemption) (Mumbai) . . . 239
Exemption --Capital gains--Transfer of shares in private company from assessee to holding company--Shares in private company not tradable in open market and cannot treated as stock-in-trade--Solitary transaction of shares to holding company--Borrowing from holding company for purchase of shares capital rather than commercial--Gains on sale of shares to be treated as capital gains--Assessee entitled to exemption with respect to long-term capital gains--Income-tax Act, 1961, s. 2(47)(v)-- Renato Finance and Investments Ltd. v. Deputy CIT (Mumbai) . . . 232
Interest on borrowed capital --Investment in equity shares of group concern--Nexus between investment and availability of funds for investment not available--Details regarding purchase of share not available--Commercial expediency cannot be blindly applied--Matter remanded--Income-tax Act, 1961-- Asst. CIT v. Lakson Footwear P. Ltd. (Delhi) . . . 246
International transactions --Computation of arm’s length price--Selection of comparables--No opportunity given to assessee to rebut--Violation of principles of natural justice--Substantial manufacturing product of assessee different from that of comparable--Identical product representing only small percentage of total turnover of comparable company--Raw materials different--Huge difference in interest burden--Company not to be treated as comparable--Income-tax Act, 1961-- Manaksia Ltd. v. Addl. CIT (Kolkata) . . . 220
PRINT EDITION
Volume 30 : Part 4 (Issue dated : 17-3-2014)
SUBJECT INDEX TO CASES REPORTED
Business expenditure --Disallowance--Expenditure by way of cash expenses--Expenditure not verifiable--Disallowance restricted to 5 per cent.--Income-tax Act, 1961-- Highlight Pictures (India) P. Ltd. v. Asst. CIT (Mumbai) . . . 475
----Disallowance--Payments liable to deduction of tax at source--Deduction made under wrong provision--Not a case of non-deduction of tax or non-deduction of tax so as to attract disallowance under section 40(a)(ia)--Income-tax Act, 1961, s. 40(a)(ia)-- Highlight Pictures (India) P. Ltd. v. Asst. CIT (Mumbai) . . . 475
----Disallowance--Payments liable to deduction of tax at source--Foreign subsidiaries not working exclusively for assessee and obtaining orders on their own from other foreign parties and sub-contracting work to assessee depending on exigencies--No operations undertaken by foreign subsidiaries in India--No permanent establishments in India--No income of foreign subsidiary taxable in India--Change of law--Disallowance based on application of retrospective amendment which assessee could not have foreseen--Not permissible--Fees for technical services--“Make available†clause--No technical knowledge made available by non-resident to assessee--Income-tax Act, 1961, s. 9(1)(i), (vi)-- Infotech Enterprises Ltd. v. Addl. CIT (Hyderabad) . . . 542
----Disallowance--Payments liable to deduction of tax at source--Royalty--Payment to Netherlands company towards purchase of software--Software bundled with assessee’s own software and customised and sold to customers--No operations of foreign company in India to which income attributable--Licence in respect of software not obtained by assessee--Payment not royalty--No requirement of withholding tax on payment--No question of disallowance--Double Taxation Avoidance Agreement between India and the Netherlands, art. 12--Income-tax Act, 1961, ss. 9(1)(i), (vi), 40(a)(i)-- Infotech Enterprises Ltd. v. Addl. CIT (Hyderabad) . . . 542
Depreciation --Assessee providing assistance in making of advertising films--Purchase of paintings for utilisation in advertising films--Paintings part of furniture--Depreciation allowable under head furniture and fixtures--Income-tax Act, 1961-- Highlight Pictures (India) P. Ltd. v. Asst. CIT (Mumbai) . . . 475
----Goodwill--Depreciation allowable on goodwill-- Taj Sats Air Catering Ltd. v. Addl. CIT (Mumbai) . . . 465
Export --Exemption--Communication expenses--Any expenditure reduced from export turnover to be excluded from total turnover--Communication expenses to be excluded--Income-tax Act, 1961, s. 10A-- Intoto Software India P. Ltd. v. Asst. CIT (Hyderabad) . . . 504
----Exemption--Computation--Export turnover--Softlink charges booked under communication expenses not to be reduced from export turnover--Gains from foreign exchange fluctuation accrued on conversion of Euro EEFC account balance belonging to merged company into Indian rupees--Not to be reduced from “profit of business†or “total turnover†--Income-tax Act, 1961, s. 10A-- Infotech Enterprises Ltd. v. Addl. CIT (Hyderabad) . . . 542
Income --Expenditure relating to exempt income--Dividend--Disallowance based on percentage of remuneration paid to chief financial advisor not related to investment of assessee--Disallowance to be restricted--Income-tax Act, 1961, s. 14A-- Taj Sats Air Catering Ltd. v. Addl. CIT (Mumbai) . . . 465
International transactions --Arm’s length price--Determination--Catering services--Catering services provided to associated enterprise, an airline company--Adjustments proposed by Transfer Pricing Officer on basis of price per item of food--Meal provided as a basket and transaction to be considered as whole--Price charged to associated enterprise the highest--No adjustment called for--Income-tax Act, 1961, s. 92CA(3)-- Taj Sats Air Catering Ltd. v. Addl. CIT (Mumbai) . . . 465
----Arm’s length price--Determination--Interest on loans advanced to foreign subsidiaries--Reasonable rate--LIBOR plus 2 per cent.--Loan period less than one year--Differential interest to be levied for relevant period instead of for entire period of one year-- Infotech Enterprises Ltd. v. Addl. CIT (Hyderabad) . . . 542
----Arm’s length price--Determination--Profit level indicator--Computation--Failure of Dispute Resolution Panel to consider contention of assessee--No proper adjudication on objections and failure to assign reasons--Issue to be adjudicated afresh--Matter remanded--Income-tax Act, 1961-- Advance Power Display Systems Ltd. v. Asst. CIT (Mumbai) . . . 481
----Arm’s length price--Determination--Transactional net margin method--Selection of comparables--Software development and maintenance services--Captive service provider to group companies--Comparables to be excluded under events like merger or demerger--Functions of services not similar--Comparable to be excluded--Segmental profits of particular service not available--Comparable to be excluded--Matter remanded to Transfer Pricing Officer to verify and decide issue in accordance with law--Claim for risk adjustment--Matter remanded to Transfer Pricing Officer to verify and grant risk adjustment after analysing risk to assessee comparing to other companies--Income-tax Act, 1961, s. 10A-- CNO IT Services (India) P. Ltd. v. Deputy CIT (Hyderabad) . . . 525
----Arm’s length price--Determination--Transactional net margin method--Selection of comparables--Software development services--High operating margin reflected due to extraordinary event in comparable company--Comparable to be excluded--Small company cannot be compared to giant company engaged in development of niche products--Functions of services not similar--Cannot be compared--Income-tax Act, 1961-- Intoto Software India P. Ltd. v. Asst. CIT (Hyderabad) . . . 504
----Definition--Retrospective amendment--Guarantees offered by assessee to bankers of foreign subsidiaries--International transactions--Matter remanded for determining quantum of corporate guarantee rates--Income-tax Act, 1961, s. 92B, Expln. (i)(c) -- Infotech Enterprises Ltd. v. Addl. CIT (Hyderabad) . . . 542
Penalty --Furnishing of inaccurate particulars--Bona fide claim of assessee not accepted and different view taken by Assessing Officer--Debatable issue--No reason to doubt explanation for not considering receipts as taxable under section 9(1)(vii)--No intention to evade tax--Penalty cannot be imposed--Income-tax Act, 1961, ss. 9(1)(vii), 115A, 271(1)(c)-- Asst. CIT v. Technip Italy SPA (Delhi) . . . 494
----Furnishing of inaccurate particulars--Information furnished not found to be false--Disallowance of deduction in quantum proceedings does not automatically warrant levy of penalty--Penalty to be deleted--Income-tax Act, 1961, s. 271(1)(c)-- Sun Infraa v. Deputy CIT (Hyderabad) . . . 451
----Furnishing of inaccurate particulars--No finding of false claim by assessee--Estimation of income based on disclosure by assessee--Penalty cannot be made on estimation of income--Income-tax Act, 1961, s. 271(1)(c)-- Asst. CIT v. Technip Italy SPA (Delhi) . . . 494
SECTIONWISE INDEX TO CASES REPORTED IN THIS PART
Double Taxation Avoidance Agreement between India and the Netherlands :
Art. 12 --Business expenditure--Disallowance--Payments liable to deduction of tax at source--Royalty--Payment to Netherlands company towards purchase of software--Software bundled with assessee’s own software and customised and sold to customers--No operations of foreign company in India to which income attributable--Licence in respect of software not obtained by assessee--Payment not royalty--No requirement of withholding tax on payment--No question of disallowance-- Infotech Enterprises Ltd. v. Addl. CIT (Hyderabad) . . . 542
S. 9(1)(i), (vi) --Business expenditure--Disallowance--Payments liable to deduction of tax at source--Foreign subsidiaries not working exclusively for assessee and obtaining orders on their own from other foreign parties and sub-contracting work to assessee depending on exigencies--No operations undertaken by foreign subsidiaries in India--No permanent establishments in India--No income of foreign subsidiary taxable in India--Change of law--Disallowance based on application of retrospective amendment which assessee could not have foreseen--Not permissible--Fees for technical services--“Make available†clause--No technical knowledge made available by non-resident to assessee-- Infotech Enterprises Ltd. v. Addl. CIT (Hyderabad) . . . 542
----Business expenditure--Disallowance--Payments liable to deduction of tax at source--Royalty--Payment to Netherlands company towards purchase of software--Software bundled with assessee’s own software and customised and sold to customers--No operations of foreign company in India to which income attributable--Licence in respect of software not obtained by assessee--Payment not royalty--No requirement of withholding tax on payment--No question of disallowance-- Infotech Enterprises Ltd. v. Addl. CIT (Hyderabad) . . . 542
S. 9(1)(vii) --Penalty--Furnishing of inaccurate particulars--Bona fide claim of assessee not accepted and different view taken by Assessing Officer--Debatable issue--No reason to doubt explanation for not considering receipts as taxable under section 9(1)(vii)--No intention to evade tax--Penalty cannot be imposed-- Asst. CIT v. Technip Italy SPA (Delhi) . . . 494
S. 10A --Export--Exemption--Communication expenses--Any expenditure reduced from export turnover to be excluded from total turnover--Communication expenses to be excluded-- Intoto Software India P. Ltd. v. Asst. CIT (Hyderabad) . . . 504
----Export--Exemption--Computation--Export turnover--Softlink charges booked under communication expenses not to be reduced from export turnover--Gains from foreign exchange fluctuation accrued on conversion of Euro EEFC account balance belonging to merged company into Indian rupees--Not to be reduced from “profit of business†or “total turnover†-- Infotech Enterprises Ltd. v. Addl. CIT (Hyderabad) . . . 542
----International transactions--Arm’s length price--Determination--Transactional net margin method--Selection of comparables--Software development and maintenance services--Captive service provider to group companies--Comparables to be excluded under events like merger or demerger--Functions of services not similar--Comparable to be excluded--Segmental profits of particular service not available--Comparable to be excluded--Matter remanded to Transfer Pricing Officer to verify and decide issue in accordance with law--Claim for risk adjustment--Matter remanded to Transfer Pricing Officer to verify and grant risk adjustment after analysing risk to assessee comparing to other companies-- CNO IT Services (India) P. Ltd. v. Deputy CIT (Hyderabad) . . . 525
S. 14A --Income--Expenditure relating to exempt income--Dividend--Disallowance based on percentage of remuneration paid to chief financial advisor not related to investment of assessee--Disallowance to be restricted-- Taj Sats Air Catering Ltd. v. Addl. CIT (Mumbai) . . . 465
S. 40(a)(i) --Business expenditure--Disallowance--Payments liable to deduction of tax at source--Royalty--Payment to Netherlands company towards purchase of software--Software bundled with assessee’s own software and customised and sold to customers--No operations of foreign company in India to which income attributable--Licence in respect of software not obtained by assessee--Payment not royalty--No requirement of withholding tax on payment--No question of disallowance-- Infotech Enterprises Ltd. v. Addl. CIT (Hyderabad) . . . 542
S. 40(a)(ia) --Business expenditure--Disallowance--Payments liable to deduction of tax at source--Deduction made under wrong provision--Not a case of non-deduction of tax or non-deduction of tax so as to attract disallowance under section 40(a)(ia)-- Highlight Pictures (India) P. Ltd. v. Asst. CIT (Mumbai) . . . 475
S. 92B, Expln. (i)(c) --International transactions--Definition--Retrospective amend-ment--Guarantees offered by assessee to bankers of foreign subsidiaries--International transactions--Matter remanded for determining quantum of corporate guarantee rates-- Infotech Enterprises Ltd. v. Addl. CIT (Hyderabad) . . . 542
S. 92CA(3) --International transactions--Arm’s length price--Determination--Catering services--Catering services provided to associated enterprise, an airline company--Adjustments proposed by Transfer Pricing Officer on basis of price per item of food--Meal provided as a basket and transaction to be considered as whole--Price charged to associated enterprise the highest--No adjustment called for-- Taj Sats Air Catering Ltd. v. Addl. CIT (Mumbai) . . . 465
S. 115A --Penalty--Furnishing of inaccurate particulars--Bona fide claim of assessee not accepted and different view taken by Assessing Officer--Debatable issue--No reason to doubt explanation for not considering receipts as taxable under section 9(1)(vii)--No intention to evade tax--Penalty cannot be imposed-- Asst. CIT v. Technip Italy SPA (Delhi) . . . 494
S. 271(1)(c) --Penalty--Furnishing of inaccurate particulars--Bona fide claim of assessee not accepted and different view taken by Assessing Officer--Debatable issue--No reason to doubt explanation for not considering receipts as taxable under section 9(1)(vii)--No intention to evade tax--Penalty cannot be imposed-- Asst. CIT v. Technip Italy SPA (Delhi) . . . 494
----Penalty--Furnishing of inaccurate particulars--Information furnished not found to be false--Disallowance of deduction in quantum proceedings does not automatically warrant levy of penalty--Penalty to be deleted-- Sun Infraa v. Deputy CIT (Hyderabad) . . . 451
----Penalty--Furnishing of inaccurate particulars--No finding of false claim by assessee--Estimation of income based on disclosure by assessee--Penalty cannot be made on estimation of income-- Asst. CIT v. Technip Italy SPA (Delhi) . . . 494
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