ITR'S TRIBUNAL TAX REPORTS (ITR (TRIB))--PRINT AND ONLINE EDITION
SUBJECT INDEX TO CASES REPORTED
Business expenditure --Deduction on actual payment--Scientific research expenditure--Weighted deduction--Provision for leave encashment claimed as weighted deduction cannot be disallowed invoking provisions of section 43B(f)--Income-tax Act, 1961, ss. 35(2AB), 43B(f)-- Wheels India Ltd. v. Deputy CIT (Chennai) . . . 166
----Disallowance--Payments to non-residents--Failure to deduct tax at source--Entire services rendered outside India--No permanent establishment in India--Not managerial services--Amount not deductible--Income-tax Act, 1961, ss. 40(a)(i), 195-- Wheels India Ltd.v. Deputy CIT (Chennai) . . . 166
----Loss on account of exchange fluctuation on forward contracts allowable--Income-tax Act, 1961-- Wheels India Ltd. v. Deputy CIT (Chennai) . . . 166
Depreciation --Additional depreciation--Carry forward of unabsorbed additional depreciation--Not permissible--Income-tax Act, 1961-- Wheels India Ltd. v. Deputy CIT (Chennai) . . . 166
Fringe benefits tax --Expenditure on foreign representative office--Assessee within parameters of section 115WB(1) and (2)--Indian company carrying on business outside India and not having employees in India not liable to fringe benefits tax in India--Income-tax Act, 1961, s. 115WB(1), (2)--CBDT Circular No. 8 of 2005, dated 29-08-2005-- M. P. Fashions P. Ltd. v. ITO (Mumbai) . . . 160
Income --Disallowance of expenditure in relation to exempt income--Interest-free funds with assessee in excess of investments earning tax-free income--Provisions of rule 8D(2)(ii) have no application--Substantial transactions in shares involving administrative expenses--Rule 8D(2)(iii) can be invoked where exact quantum of expenditure not known--Income-tax Act, 1961, s. 14A--Income-tax Rules, 1962, r. 8D(2)(ii), (iii)-- Wheels India Ltd. v. Deputy CIT(Chennai) . . . 166
Volume 34 : Part 1 (Issue dated : 25-8-2014)
SUBJECT INDEX TO CASES REPORTED
Accounting --Method of accounting--Rejection of accounts--Assessee following method of accounting from year to year--No defects pointed out by Department in method of accounting--No reason to reject method--Income-tax Act, 1961-- Hill View Infrastructure P. Ltd. v. Deputy CIT (Chandigarh) . . . 128
----Rejection of accounts--Estimation of profits--Contract for onshore supply and services--Estimation of income at 10 per cent. reasonable--Income-tax Act, 1961, s. 145(3)-- Pirelli Cavi E Sistemi Telecom S. P. A. (India Project Office) v. Asst. CIT (Hyd) . . . 41
Advance tax --Interest--No liability to interest where tax deductible at source on income--Income-tax Act, 1961, ss. 234B, 234C-- GFA Anlagenbau Gmbh v. Deputy/Asst. DIT (International Taxation) (Hyd) . . . 73
----Interest--Interest cannot be levied if entire income liable to deduction of tax at source--Matter remanded--Income-tax Act, 1961, s. 234B-- Pirelli Cavi E Sistemi Telecom S. P. A. (India Project Office) v. Asst. CIT (Hyd) . . . 41
Assessment --Limitation--Commissioner passing revision order on March 8, 2010--Assessment to be made within nine months from end of relevant assessment year--Assessing Officer passing consequential order on March 28, 2011--Assessment after expiry of limitation and to be annulled--Income-tax Act, 1961, ss. 153(2A), 263-- ITO v. Jheendu Ram (Lucknow) . . . 97
Business expenditure --Brothers carrying on similar business as proprietors from same premises--Executing mutual power of attorney documents and each taking out insurance on life of other--Insurance premium consideration for one another--Arrangement collusive--Expenditure not allowable--Income-tax Act, 1961, s. 37(1)-- Habibur Raheman F. Ansari v. Deputy CIT (Mumbai) . . . 16
----Disallowance--Excessive and unreasonable payments--Increase in salary of employees in earlier assessment years on basis of sixth pay commission--Expenditure incurred in remuneration of employees allowable--Income-tax Act, 1961, s. 40A(2)(b)-- Asst. CIT v. Idicula Trust Society (Delhi) . . . 1
----Disallowance--Payments liable to deduction of tax at source--Non-resident--Payment to non-resident translators--Would not fall within ambit of Explanation 2 to section 9(1)(vii) so as to attract provisions of section 194J--Expenditure allowable under section 40(a)(i)--Income-tax Act, 1961, ss. 40(a)(i), 194J-- Cosmic Global Ltd. v. Asst. CIT (Chennai) . . . 114
Charitable purpose --Exemption--Status of assessee that of charitable society eligible for claim of exemption--Exemption allowable--Income-tax Act, 1961, s. 11(1)(a)-- Asst. CIT v. Idicula Trust Society (Delhi) . . . 1
----Registration of trust--Cancellation--Trustees deciding to sell property to recover funds already invested--Mere intention to sell land not violation of objects of trust--Purchase of luxury car out of funds of trust in name of trustee--Debatable matter--Not ground to infer activities of trust not genuine--Scholarships to students routed through another trust--No violation of objects of trust--Not sufficient ground for cancellation of registration--Income-tax Act, 1961, ss. 12A, 12AA, 12AA(3)-- Cancer Aid and Research Foundation v. DIT(Exemption) (Mumbai) . . . 56
Company --Book profits--Computation--Lease equalisation charges--Insertion of Explanation 1(g) to section 115JA from 1-4-1998 with retrospective effect--Lease equalisation charges to be added to book profits--Income-tax Act, 1961, s. 115JA-- Deputy CIT v. Citi Financial Retail Services India Ltd. (Chennai) . . . 92
Deduction of tax at source --Commission or brokerage--Assessee charging constructive payment to subscriber--Section 194H applicable for constructive payment--Assessee in default--Income-tax Act, 1961, ss. 194H, 201-- Idea Cellular Ltd. v. Asst. CIT (Hyd) . . . 101
----Commission--Assessee providing cellular mobile telephone services through network of distributors--Discount offered to distributors in nature of commission--Assessee liable to deduct tax at source--Income-tax Act, 1961, s. 194H-- Idea Cellular Ltd. v. Asst. CIT (Hyd) . . . 101
----Commission--Different from discount--Commission passed on to person who solicits business, whereas discount is reduction on sale price--Assessee offering discount to its customers--Tax deduction at source not attracted--Income-tax Act, 1961, s. 194H-- ITO (TDS) v. Kesar Travels Ltd. (Mumbai) . . . 124
----Failure to deduct tax at source--Levy of interest--Assessing Officer to work out interest from date of tax deductible to date of payment by recipient on amounts determined after verification--Income-tax Act, 1961, s. 201(1A)-- Idea Cellular Ltd. v. Asst. CIT (Hyd) . . . 101
----Interest--Failure to deduct tax at source--Order holding assessee in default--Limitation--Order passed beyond four years but within six years--Not barred by limitation--Income-tax Act, 1961, s. 201-- Idea Cellular Ltd. v. Asst. CIT (Hyd) . . . 101
----Non-resident--Taxability in India--Assessee paying software development charges, salary and benefits and expenses abroad--Companies receiving amounts having no permanent establishment in India or business connection in India--Payments cannot be brought to tax in India--Income-tax Act, 1961, ss. 194C, 194J-- Prithvi Information Solutions Ltd. v. ITO (Hyd) . . . 28
----Payment to contractors--Professional fees--Assessee entering into agreements with certain companies for undertaking certain works in information systems--Vendee-vendor relationship--Payments made to vendor companies were for work falling under section 194C not professional fees under section 194J--Income-tax Act, 1961, ss. 194C, 194J, 201(1), (1A)-- Prithvi Information Solutions Ltd. v. ITO (Hyd) . . . 28
Double Taxation Avoidance --Provision against discrimination--Non-discrimination clause on applicability of tax rate--Rate of tax applicable to foreign company to be same as that applicable to domestic company in similar circumstances--Income-tax Act, 1961--Double Taxation Avoidance Agreement between India and Italy-- Pirelli Cavi E Sistemi Telecom S. P. A. (India Project Office) v. Asst. CIT (Hyd) . . . 41
Exemption --Export--Receivables from foreign clients--Payment in convertible foreign exchange--Assessee making payment to foreign client setting off expenditure incurred abroad with approval of Reserve Bank of India--Assessee entitled to exemption--Income-tax Act, 1961, s. 10A-- Asst. CIT v. DQ Entertainment (International) Ltd. (Hyd) . . . 22
Housing project --Special deduction--No discussion by Assessing Officer in assessment order on allowability of deduction--Application of mind should be reflected in order itself--Matter remanded to Assessing Officer to record reason for conclusion either allowing or disallowing claim--Income-tax Act, 1961, s. 80-IB(10)-- Hemalatha (P. V) v. Asst. CIT(Cochin) . . . 8
Income from undisclosed sources --Assessee contending payment made for dishonour of cheque--No evidence to prove--Seized document not mentioning dishonour of cheques--Income to be assessed as income from undisclosed sources in hands of assessee--Income-tax Act, 1961-- Hill View Infrastructure P. Ltd. v. Deputy CIT (Chandigarh) . . . 128
----Entries in seized documents in duplicate and in triplicate--Another entity and director of assessee offering income before Settlement Commission and Commission deciding income was theirs--Income cannot be assessed in hands of assessee--Income-tax Act, 1961, s. 69-- Hill View Infrastructure P. Ltd. v. Deputy CIT (Chandigarh) . . . 128
Industrial undertaking --Special deduction--Income surrendered as result of search--Assessee not entitled to deduction for surrendered income--Income-tax Act, 1961, s. 80-IB--Hill View Infrastructure P. Ltd. v. Deputy CIT (Chandigarh) . . . 128
Non-resident --Permanent establishment--Foreign technicians staying in India for more than 183 days--Assessee not having building site of its own and no fixed place of business--Articles 5 and 7 not applicable--Assessee’s activities technical in nature and payments fees for technical service--Taxable under article 12--Double Taxation Avoidance Agreement between India and Germany, arts. 5, 7, 12-- GFA Anlagenbau Gmbh v. Deputy/Asst. DIT (International Taxation) (Hyd) . . . 73
----Taxability in India--Offshore contract--Training in India incidental to offshore contract--No profit on training--Equipment transferred outside India--Income not taxable in India--Income-tax Act, 1961-- Pirelli Cavi E Sistemi Telecom S. P. A. (India Project Office) v. Asst. CIT(Hyd) . . . 41
Reassessment --Notice--Must be on tangible material--Reopening of assessment to disallow expenditure incurred on software development as capital expenditure--Reopening of assessment not justified--Income-tax Act, 1961, ss. 147, 148-- Deputy CIT v. India Infoline Insurance Services P. Ltd. (Mumbai) . . . 119
Refund --Interest on excess refund--Section 234D not applicable, if assessment completed before June 1, 2003--Matter remanded--Income-tax Act, 1961, s. 234D-- Pirelli Cavi E Sistemi Telecom S. P. A. (India Project Office) v. Asst. CIT (Hyd) . . . 41
Unexplained expenditure --Document found in possession of assessee during search--Assessee claiming document belonging to contractor operating from site of assessee--Failure by Assessing Officer to summon contractor to establish nature of transaction--Addition cannot be made in hands of assessee on basis of document--Income-tax Act, 1961, s. 69C-- Hill View Infrastructure P. Ltd. v. Deputy CIT (Chandigarh) . . . 128
SECTIONWISE INDEX TO CASES REPORTED IN THIS PART
Double Taxation Avoidance Agreement between India and Germany
Art. 5 --Non-resident--Permanent establishment--Foreign technicians staying in India for more than 183 days--Assessee not having building site of its own and no fixed place of business--Articles 5 and 7 not applicable--Assessee’s activities technical in nature and payments fees for technical service--Taxable under article 12-- GFA Anlagenbau Gmbh v. Deputy/Asst. DIT (International Taxation) (Hyd) . . . 73
Art. 7 --Non-resident--Permanent establishment--Foreign technicians staying in India for more than 183 days--Assessee not having building site of its own and no fixed place of business--Articles 5 and 7 not applicable--Assessee’s activities technical in nature and payments fees for technical service--Taxable under article 12-- GFA Anlagenbau Gmbh v. Deputy/Asst. DIT (International Taxation) (Hyd) . . . 73
Art. 12 --Non-resident--Permanent establishment--Foreign technicians staying in India for more than 183 days--Assessee not having building site of its own and no fixed place of business--Articles 5 and 7 not applicable--Assessee’s activities technical in nature and payments fees for technical service--Taxable under article 12-- GFA Anlagenbau Gmbh v. Deputy/Asst. DIT (International Taxation) (Hyd) . . . 73
S. 10A --Exemption--Export--Receivables from foreign clients--Payment in convertible foreign exchange--Assessee making payment to foreign client setting off expenditure incurred abroad with approval of Reserve Bank of India--Assessee entitled to exemption-- Asst. CIT v. DQ Entertainment (International) Ltd. (Hyd) . . . 22
S. 11(1)(a) --Charitable purpose--Exemption--Status of assessee that of charitable society eligible for claim of exemption--Exemption allowable-- Asst. CIT v. Idicula Trust Society(Delhi) . . . 1
S. 12A --Charitable purpose--Registration of trust--Cancellation--Trustees deciding to sell property to recover funds already invested--Mere intention to sell land not violation of objects of trust--Purchase of luxury car out of funds of trust in name of trustee--Debatable matter--Not ground to infer activities of trust not genuine--Scholarships to students routed through another trust--No violation of objects of trust--Not sufficient ground for cancellation of registration-- Cancer Aid and Research Foundation v. DIT (Exemption) (Mumbai) . . . 56
S. 12AA --Charitable purpose--Registration of trust--Cancellation--Trustees deciding to sell property to recover funds already invested--Mere intention to sell land not violation of objects of trust--Purchase of luxury car out of funds of trust in name of trustee--Debatable matter--Not ground to infer activities of trust not genuine--Scholarships to students routed through another trust--No violation of objects of trust--Not sufficient ground for cancellation of registration-- Cancer Aid and Research Foundation v. DIT (Exemption) (Mumbai) . . . 56
S. 12AA(3) --Charitable purpose--Registration of trust--Cancellation--Trustees deciding to sell property to recover funds already invested--Mere intention to sell land not violation of objects of trust--Purchase of luxury car out of funds of trust in name of trustee--Debatable matter--Not ground to infer activities of trust not genuine--Scholarships to students routed through another trust--No violation of objects of trust--Not sufficient ground for cancellation of registration-- Cancer Aid and Research Foundation v. DIT (Exemption) (Mumbai) . . . 56
S. 37(1) --Business expenditure--Brothers carrying on similar business as proprietors from same premises--Executing mutual power of attorney documents and each taking out insurance on life of other--Insurance premium consideration for one another--Arrangement collusive--Expenditure not allowable-- Habibur Raheman F. Ansari v. Deputy CIT (Mumbai) . . . 16
S. 40(a)(i) --Business expenditure--Disallowance--Payments liable to deduction of tax at source--Non-resident--Payment to non-resident translators--Would not fall within ambit ofExplanation 2 to section 9(1)(vii) so as to attract provisions of section 194J--Expenditure allowable under section 40(a)(i)-- Cosmic Global Ltd. v. Asst. CIT (Chennai) . . . 114
S. 40A(2)(b) --Business expenditure--Disallowance--Excessive and unreasonable payments--Increase in salary of employees in earlier assessment years on basis of sixth pay commission--Expenditure incurred in remuneration of employees allowable-- Asst. CIT v. Idicula Trust Society (Delhi) . . . 1
S. 69 --Income from undisclosed sources--Entries in seized documents in duplicate and in triplicate--Another entity and director of assessee offering income before Settlement Commission and Commission deciding income was theirs--Income cannot be assessed in hands of assessee-- Hill View Infrastructure P. Ltd. v. Deputy CIT (Chandigarh) . . . 128
S. 69C --Unexplained expenditure--Document found in possession of assessee during search--Assessee claiming document belonging to contractor operating from site of assessee--Failure by Assessing Officer to summon contractor to establish nature of transaction--Addition cannot be made in hands of assessee on basis of document-- Hill View Infrastructure P. Ltd. v. Deputy CIT (Chandigarh) . . . 128
S. 80-IB --Industrial undertaking--Special deduction--Income surrendered as result of search--Assessee not entitled to deduction for surrendered income-- Hill View Infrastructure P. Ltd. v. Deputy CIT (Chandigarh) . . . 128
S. 80-IB(10) --Housing project--Special deduction--No discussion by Assessing Officer in assessment order on allowability of deduction--Application of mind should be reflected in order itself--Matter remanded to Assessing Officer to record reason for conclusion either allowing or disallowing claim-- Hemalatha (P. V) v. Asst. CIT (Cochin) . . . 8
S. 115JA --Company--Book profits--Computation--Lease equalisation charges--Insertion ofExplanation 1(g) to section 115JA from 1-4-1998 with retrospective effect--Lease equalisation charges to be added to book profits-- Deputy CIT v. Citi Financial Retail Services India Ltd. (Chennai) . . . 92
S. 145(3) --Accounting--Rejection of accounts--Estimation of profits--Contract for onshore supply and services--Estimation of income at 10 per cent. reasonable-- Pirelli Cavi E Sistemi Telecom S. P. A. (India Project Office) v. Asst. CIT (Hyd) . . . 41
S. 147 --Reassessment--Notice--Must be on tangible material--Reopening of assessment to disallow expenditure incurred on software development as capital expenditure--Reopening of assessment not justified-- Deputy CIT v. India Infoline Insurance Services P. Ltd.(Mumbai) . . . 119
S. 148 --Reassessment--Notice--Must be on tangible material--Reopening of assessment to disallow expenditure incurred on software development as capital expenditure--Reopening of assessment not justified-- Deputy CIT v. India Infoline Insurance Services P. Ltd.(Mumbai) . . . 119
S. 153(2A) --Assessment--Limitation--Commissioner passing revision order on March 8, 2010--Assessment to be made within nine months from end of relevant assessment year--Assessing Officer passing consequential order on March 28, 2011--Assessment after expiry of limitation and to be annulled-- ITO v. Jheendu Ram (Lucknow) . . . 97
S. 194C --Deduction of tax at source--Non-resident--Taxability in India--Assessee paying software development charges, salary and benefits and expenses abroad--Companies receiving amounts having no permanent establishment in India or business connection in India--Payments cannot be brought to tax in India-- Prithvi Information Solutions Ltd. v. ITO(Hyd) . . . 28
----Deduction of tax at source--Payment to contractors--Professional fees--Assessee entering into agreements with certain companies for undertaking certain works in information systems--Vendee-vendor relationship--Payments made to vendor companies were for work falling under section 194C not professional fees under section 194J-- Prithvi Information Solutions Ltd. v. ITO (Hyd) . . . 28
S. 194H --Deduction of tax at source--Commission--Assessee providing cellular mobile telephone services through network of distributors--Discount offered to distributors in nature of commission--Assessee liable to deduct tax at source-- Idea Cellular Ltd. v. Asst. CIT(Hyd) . . . 101
----Deduction of tax at source--Commission--Different from discount--Commission passed on to person who solicits business, whereas discount is reduction on sale price--Assessee offering discount to its customers--Tax deduction at source not attracted-- ITO (TDS) v. Kesar Travels Ltd. (Mumbai) . . . 124
----Deduction of tax at source--Commission or brokerage--Assessee charging constructive payment to subscriber--Section 194H applicable for constructive payment--Assessee in default-- Idea Cellular Ltd. v. Asst. CIT (Hyd) . . . 101
S. 194J --Business expenditure--Disallowance--Payments liable to deduction of tax at source--Non-resident--Payment to non-resident translators--Would not fall within ambit ofExplanation 2 to section 9(1)(vii) so as to attract provisions of section 194J--Expenditure allowable under section 40(a)(i)-- Cosmic Global Ltd. v. Asst. CIT (Chennai) . . . 114
----Deduction of tax at source--Non-resident--Taxability in India--Assessee paying software development charges, salary and benefits and expenses abroad--Companies receiving amounts having no permanent establishment in India or business connection in India--Payments cannot be brought to tax in India-- Prithvi Information Solutions Ltd. v. ITO (Hyd) . . . 28
----Deduction of tax at source--Payment to contractors--Professional fees--Assessee entering into agreements with certain companies for undertaking certain works in information systems--Vendee-vendor relationship--Payments made to vendor companies were for work falling under section 194C not professional fees under section 194J-- Prithvi Information Solutions Ltd. v. ITO (Hyd) . . . 28
S. 201 --Deduction of tax at source--Commission or brokerage--Assessee charging constructive payment to subscriber--Section 194H applicable for constructive payment--Assessee in default-- Idea Cellular Ltd. v. Asst. CIT (Hyd) . . . 101
----Deduction of tax at source--Interest--Failure to deduct tax at source--Order holding assessee in default--Limitation--Order passed beyond four years but within six years--Not barred by limitation-- Idea Cellular Ltd. v. Asst. CIT (Hyd) . . . 101
S. 201(1) --Deduction of tax at source--Payment to contractors--Professional fees--Assessee entering into agreements with certain companies for undertaking certain works in information systems--Vendee-vendor relationship--Payments made to vendor companies were for work falling under section 194C not professional fees under section 194J-- Prithvi Information Solutions Ltd. v. ITO (Hyd) . . . 28
S. 201(1A) --Deduction of tax at source--Failure to deduct tax at source--Levy of interest--Assessing Officer to work out interest from date of tax deductible to date of payment by recipient on amounts determined after verification-- Idea Cellular Ltd. v. Asst. CIT (Hyd) . . . 101
----Deduction of tax at source--Payment to contractors--Professional fees--Assessee entering into agreements with certain companies for undertaking certain works in information systems--Vendee-vendor relationship--Payments made to vendor companies were for work falling under section 194C not professional fees under section 194J-- Prithvi Information Solutions Ltd. v. ITO (Hyd) . . . 28
S. 234B --Advance-tax--Interest--Interest cannot be levied if entire income liable to deduction of tax at source--Matter remanded-- Pirelli Cavi E Sistemi Telecom S. P. A. (India Project Office) v. Asst. CIT (Hyd) . . . 41
----Advance tax--Interest--No liability to interest where tax deductible at source on income--GFA Anlagenbau Gmbh v. Deputy/Asst. DIT (International Taxation) (Hyd) . . . 73
S. 234C --Advance tax--Interest--No liability to interest where tax deductible at source on income-- GFA Anlagenbau Gmbh v. Deputy/Asst. DIT (International Taxation) (Hyd) . . . 73
S. 234D --Refund--Interest on excess refund--Section 234D not applicable, if assessment completed before June 1, 2003--Matter remanded-- Pirelli Cavi E Sistemi Telecom S. P. A. (India Project Office) v. Asst. CIT (Hyd) . . . 41
S. 263 --Assessment--Limitation--Commissioner passing revision order on March 8, 2010--Assessment to be made within nine months from end of relevant assessment year--Assessing Officer passing consequential order on March 28, 2011--Assessment after expiry of limitation and to be annulled-- ITO v. Jheendu Ram (Lucknow) . . . 97
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