ITR'S TRIBUNAL TAX REPORTS (ITR (TRIB)) -- PRINT AND ONLINE EDITION
SUBJECT INDEX TO CASES REPORTED
Business expenditure --Capital or revenue expenditure--Expenses incurred on advertisement in print and electronic media--No element of brand building or acquisition of brand by incurring expenses--Brand belonging to overseas group entity--Assessee reimbursed entire advertisement and sale promotion expenses--Expenditure revenue in nature--Income-tax Act, 1961, s. 37(1)-- Assistant CIT v. Intercontinental Hotels Group India P. Ltd . (Delhi) . . . 598
----Capital or revenue expenditure--Payment for availing of service in course of service provided to parent company--Normal course of business--Expenditure revenue in nature--Income-tax Act, 1961, s. 37(1)-- Assistant CIT v. Intercontinental Hotels Group India P. Ltd. (Delhi) . . . 598
----Capital or revenue expenditure--Payment on brokerage--Payment made for rental of office space not purchase--No enduring benefit to assessee--Expenditure revenue in nature--Income-tax Act, 1961, s. 37(1)-- Assistant CIT v. Intercontinental Hotels Group India P. Ltd. (Delhi) . . . 598
----Disallowance--Payments liable to deduction of tax at source--Fees for technical services--Stock exchange--Assessee a member of stock exchange making payment towards very small aperture terminal, lease line charges and lease line rent charges--Reimbursement of charges not fees for technical services--No tax required to be deducted--Income-tax Act, 1961, s. 40(a)(ia)-- ITO v. Excel Mercantile P. Ltd. (Mumbai) . . . 581
----Disallowance--Payments liable to deduction of tax at source--Non-resident--Commission to non-resident agents for services rendered outside India--No income accrued in India--Tax need not be deducted at source--Expenditure allowable under section 40(a)(i)--Income-tax Act, 1961, ss. 40(a)(i), 195-- Deputy CIT v. Good Leather Shoes P. Ltd. (Chennai) . . . 608
Double taxation relief --Tax relief under section 90 inadvertently mentioned as advance tax in electronically filed return--Assessing Officer refusing to consider claim made without filing revised return--Powers of Tribunal to consider claim under section 254--Assessing Officer to examine and allow eligible amount of double taxation credit according to law--Income-tax Act, 1961, ss. 90, 254-- Tecnimont ICB Ltd. v. Deputy CIT (Mumbai) . . . 583
Income from undisclosed sources --Ledger showing purchases made after date of last sale bill but closing stock shown as nil--Contention that purchases were for ongoing projects for which bills already raised--Assessing Officer to verify whether purchases made after date of last bill utilised for ongoing project and bills already raised--If assessee able to prove with proper supporting evidence no addition required--Income-tax Act, 1961-- Assistant DIT v. Synetics (Hyderabad) . . . 604
International transactions --Arm’s length price--Determination--Reimbursement of cost recovered from associated enterprises--Arrangement between assessee and associated enterprises for graded mark up--Transfer Pricing Officer determining 5 per cent. mark-up on flat basis--Mark-up to be in accordance with arrangement--Income-tax Act, 1961-- Tecnimont ICB Ltd. v. Deputy CIT (Mumbai) . . . 583
----Arm’s length price--Interest for delay in reimbursement of expenses from associated enterprises--To be restricted to period beyond agreed credit period-- Tecnimont ICB Ltd. v. Deputy CIT (Mumbai) . . . 583
Non-resident --Income deemed to accrue or arise in India--Royalty--Indian company subscribing to website of foreign company--Payments of subscription whether could be remitted without deduction of tax at source--No finding on transfer of right to use copyright--Order relied on by Commissioner (Appeals) reversed by High Court--Matter remanded for decision afresh--Income-tax Act, 1961, s. 9(1)(vi)--Double Taxation Avoidance Agreement between India and the U.K., art. 13(3)-- Assistant DIT v. Globus Stores P. Ltd. (Mumbai) . . . 587
Volume 31 : Part 6 (Issue dated : 19-5-2014)
SUBJECT INDEX TO CASES REPORTED
Advance tax --Interest--Mandatory and consequential--Income-tax Act, 1961, s. 234B-- Global One India P. Ltd. v. Assistant CIT (Delhi) . . . 722
Assessment --Enquiry--Addition merely on basis of statement recorded during survey cannot be sustained--Addition can be made only on proper enquiry--Income-tax Act, 1961-- Sanjeev Kumar v. ITO (Chandigarh) . . . 680
Business expenditure --Disallowance--Payments liable to deduction of tax at source--Assessee a licensed internet provider procuring domestic half circuit facility for customers from organisations in France--Payments made towards use of standard facility as lessee not having any domain or control or possessory rights over facility--Not a use of assets and no tax deductible on payments--Income-tax Act, 1961, ss. 40(a)(ia), 194-I-- Global One India P. Ltd. v. Assistant CIT (Delhi) . . . 722
----Interest on borrowed capital--Assessee advancing interest-free loan to subsidiaries and associate concerns--Assessee having sufficient interest-free funds at its disposal--No nexus shown between interest bearing loans and interest-free advances--Interest cannot be disallowed--Income-tax Act, 1961, s. 36(1)(iii)-- Deputy CIT v. Gujarat Narmada Valley Fertilizers Co. Ltd. (Ahmedabad) . . . 668
Export --Exemption--Telecommunication, foreign exchange and foreign travel expenses incurred in foreign currency to be excluded from export turnover and total turnover--Income-tax Act, 1961, s. 10B-- Systech Integrators India P. Ltd. v. ITO (Bangalore) . . . 697
Income --Expenditure in relation to income not includible in taxable income--Dividend--Income utilised for investment--No fresh investment--Interest-free funds available with assessee in excess of investments--No addition can be made--Income-tax Act, 1961, s. 14A-- Deputy CIT v. Gujarat Narmada Valley Fertilizers Co. Ltd. (Ahmedabad) . . . 668
Income-tax --General principles--Res judicata--International transactions--Arm’s length price--Determination--Transfer Pricing Officer after detailed enquiry accepting profit split method as most appropriate for earlier years--Not entitled to reject same method for following year-- Global One India P. Ltd. v. Assistant CIT (Delhi) . . . 722
International transactions --Arm’s length price--Determination--Assessee engaged in providing internet and related network services to group’s customers in India--Group relying on functions of each entity of group to generate revenues and each entity deploying necessary assets and functions required at each step for network footprint--Each entity owning assets and employed man power--Operations integrated, interconnected and interdependent--Transactional net margin method not most appropriate method--Profit split method most appropriate--Factum of assessee having loss not ground to reject profit split method--Transfer Pricing Officer to determine arm’s length price adopting residual profit split method as most appropriate method and allocating residual profits based on relative value of each enterprise’s contribution-- Global One India P. Ltd. v. Assistant CIT (Delhi) . . . 722
----Arm’s length price--Determination--Most appropriate method--Selection does not depend on whether assessee making loss or profit--Transfer Pricing Officer to primarily examine functional profile of assessee and nature of international transaction--Transfer Pricing Officer not to reject method merely because not correctly applied by assessee--Must apply method in manner it should have been applied-- Global One India P. Ltd. v. Assistant CIT (Delhi) . . . 722
----Arm’s length price--Determination--Profit split method--Requirement of mandatory adoption of comparable profit split method renders entire mechanism of profit split method impossible of compliance--Harmonious construction to be adopted--Transaction involving contributions of multiple entities and integrated and interrelated where knowledge of third party behaviour is impossible to possess--Flexibility to adopt sub-methods under overall profit split method--Contribution profit split method, residual profit split method or comparable profit split method can be used--Rule introduced with effect from April 1, 2012 providing for adoption of any “other method†to determine arm’s length price--Procedural provision and can be used to determine arm’s length price for years--Income-tax Rules, 1962, rr. 10B(1)(d), 10AB-- Global One India P. Ltd. v. Assistant CIT (Delhi) . . . 722
----Arm’s length price--Determination--To be with reference to Indian regulations--Guidance of OECD commentaries, United Nations guidelines and other literature permissible--Income-tax Rules, 1962, r. 10AB-- Global One India P. Ltd. v. Assistant CIT (Delhi) . . . 722
----Computation of arm’s length price--Selection of comparables--Failure to furnish information to assessee vitiates selection of comparable by Transfer Pricing Officer--Matter remanded--Income-tax Act, 1961, s. 133(6)-- Systech Integrators India P. Ltd. v. ITO (Bangalore) . . . 697
----Computation of arm’s length price--Selection of comparables--Functionally different companies not comparable--Companies owning intangible rights not comparable to companies not owning intangibles--Income-tax Act, 1961-- Systech Integrators India P. Ltd. v. ITO (Bangalore) . . . 697
Interpretation of taxing statutes --Harmonious interpretation permissible to make provisions workable and subserve purpose for which enacted--Global One India P. Ltd. v. Assistant CIT-- Global One India P. Ltd. v. Assistant CIT (Delhi) . . . 722
SECTIONWISE INDEX TO CASES REPORTED IN THIS PART
S. 10B --Export--Exemption--Telecommunication, foreign exchange and foreign travel expenses incurred in foreign currency to be excluded from export turnover and total turnover-- Systech Integrators India P. Ltd. v. ITO (Bangalore) . . . 697
S. 14A --Income--Expenditure in relation to income not includible in taxable income--Dividend--Income utilised for investment--No fresh investment--Interest-free funds available with assessee in excess of investments--No addition can be made-- Deputy CIT v. Gujarat Narmada Valley Fertilizers Co. Ltd. (Ahmedabad) . . . 668
S. 36(1)(iii) --Business expenditure--Interest on borrowed capital--Assessee advancing interest-free loan to subsidiaries and associate concerns--Assessee having sufficient interest-free funds at its disposal--No nexus shown between interest bearing loans and interest-free advances--Interest cannot be disallowed-- Deputy CIT v. Gujarat Narmada Valley Fertilizers Co. Ltd. (Ahmedabad) . . . 668
S. 40(a)(ia) --Business expenditure--Disallowance--Payments liable to deduction of tax at source--Assessee a licensed internet provider procuring domestic half circuit facility for customers from organisations in France--Payments made towards use of standard facility as lessee not having any domain or control or possessory rights over facility--Not a use of assets and no tax deductible on payments-- Global One India P. Ltd. v. Assistant CIT (Delhi) . . . 722
S. 133(6) --International transactions--Computation of arm’s length price--Selection of comparables--Failure to furnish information to assessee vitiates selection of comparable by Transfer Pricing Officer--Matter remanded-- Systech Integrators India P. Ltd. v. ITO (Bangalore) . . . 697
S. 194-I --Business expenditure--Disallowance--Payments liable to deduction of tax at source--Assessee a licensed internet provider procuring domestic half circuit facility for customers from organisations in France--Payments made towards use of standard facility as lessee not having any domain or control or possessory rights over facility--Not a use of assets and no tax deductible on payments-- Global One India P. Ltd. v. Assistant CIT (Delhi) . . . 722
S. 234B --Advance tax--Interest--Mandatory and consequential-- Global One India P. Ltd. v. Assistant CIT (Delhi) . . . 722
R. 10B(1)(d) --International transactions--Arm’s length price--Determination--Profit split method--Requirement of mandatory adoption of comparable profit split method renders entire mechanism of profit split method impossible of compliance--Harmonious construction to be adopted--Transaction involving contributions of multiple entities and integrated and interrelated where knowledge of third party behaviour is impossible to possess--Flexibility to adopt sub-methods under overall profit split method--Contribution profit split method, residual profit split method or comparable profit split method can be used--Rule introduced with effect from April 1, 2012 providing for adoption of any “other method†to determine arm’s length price--Procedural provision and can be used to determine arm’s length price for years-- Global One India P. Ltd. v. Assistant CIT (Delhi) . . . 722
R. 10AB --International transactions--Arm’s length price--Determination--Profit split method--Requirement of mandatory adoption of comparable profit split method renders entire mechanism of profit split method impossible of compliance--Harmonious construction to be adopted--Transaction involving contributions of multiple entities and integrated and interrelated where knowledge of third party behaviour is impossible to possess--Flexibility to adopt sub-methods under overall profit split method--Contribution profit split method, residual profit split method or comparable profit split method can be used--Rule introduced with effect from April 1, 2012 providing for adoption of any “other method†to determine arm’s length price--Procedural provision and can be used to determine arm’s length price for years-- Global One India P. Ltd. v. Assistant CIT (Delhi) . . . 722
----International transactions--Arm’s length price--Determination--To be with reference to Indian regulations--Guidance of OECD commentaries, United Nations guidelines and other literature permissible-- Global One India P. Ltd. v. Assistant CIT (Delhi) . . . 722
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