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Wednesday, February 3, 2016

ITR Volume 380 : Part 5 (Issue dated : 1-2-2016)


 

INCOME TAX REPORTS (ITR)--PRINT AND ONLINE EDITION

ONLINE EDITION

SUBJECT INDEX TO CASES REPORTED

HIGH COURTS

Company --Computation of book profits under section 115JA--Effect of amendment with retrospective effect by Finance (No. 2) Act, 2009--Provision for bad debts--Not deductible from book profits--Income-tax Act, 1961, s. 115JA-- CIT v. Shriram Investment Ltd. (Mad) . . . 53

----Computation of book profits under section 115JA--Overdue charges not includible in book profits--Income-tax Act, 1961, s. 115JA-- CIT v. Shriram Investment Ltd. (Mad) . . . 53

Non-resident --Taxability in India--Damages on account of fraud--Authority for Advance Rulings rendering its ruling based on wrong premise that receipts were in nature of revenue receipts--Authority to examine afresh whether receipts capital or revenue receipts and to determine whether those receipts chargeable to income tax in India in light of section 195--Matter remanded--Income-tax Act, 1961, s. 195-- Bernstein Litowitz Berger and Grossmann LLP v. Union of India (Delhi) . . . 49

 

PRINT EDITION

ITR Volume 380 : Part 5 (Issue dated : 1-2-2016)

SUBJECT INDEX TO CASES REPORTED

HIGH COURTS

Income --Disallowance of expenditure relating to exempt income--Burden of proof--Onus on Assessing Officer to record satisfaction that interest bearing funds used for investment to earn tax-free income--No tangible material on record that could have enabled Assessing Officer to record satisfaction in terms of section 14A--No disallowance--Income-tax Act, 1961, s. 14A--Income-tax Rules, 1962, r. 8D-- CIT v. Abhishek Industries Ltd. (P&H) . . . 652

Loss --Carry forward and set off of losses--Condition precedent--Shares carrying fifty-one per cent. of voting power at close of financial year in which loss suffered should be held by same persons on last day of previous year in which loss to be set off--Change of hundred per cent. shareholding and beneficial ownership of shares in assessee--No question of piercing veil at instance of assessee to show ultimate beneficial ownership with parent company arises--Income-tax Act, 1961, s. 79-- Yum Restaurants (India) P. Ltd. v. ITO(Delhi) . . . 637

Reassessment --Notice after four years--Conditions precedent--Assessing Officer in original assessment proceedings considering each and every document and explanation given by assessee on seized documents--Tribunal finding categorically that assessee disclosed all material facts necessary for making assessment and no failure on his part--Notice after four years not valid--Income-tax Act, 1961, ss. 147, 148-- CIT v. Hemkunt Timbers Ltd. (All) . . . 658

----Notice after four years--Limitation--Provision at relevant time was ten years--Notice could be issued on or before 31-5-2001--Notice issued on 11-4-2001--Not barred by limitation--Income-tax Act, 1961, s. 149-- CIT v. Hemkunt Timbers Ltd. (All) . . . 658

Search and seizure --Assessment in search cases--Share application money--No incriminating evidence related to share capital issued found during course of search--Deletion of addition under section 68--Justified--Income-tax Act, 1961, ss. 68, 153A--Principal CIT v. Kurele Paper Mills P. Ltd. (Delhi) . . . 571

----Assessment of third person--Condition precedent--Discovery of incriminating material showing undisclosed income of third person--Documents seized--Affidavits of person in respect of whom search conducted that documents belonged to him--No other evidence of undisclosed income--Proceedings under section 153C not valid--Income-tax Act, 1961, s. 153C-- CIT v. RRJ Securities Ltd. (Delhi) . . . 612

----Assessment of third person--Condition precedent--No satisfaction recorded by Assessing Officer that assets, documents seized belong to some other person--No incriminating material attributable to assessee seized during course of search at premises searched--Assessing Officer cannot assume jurisdiction and transmit items to another file concerning that person without recording satisfaction--Income-tax Act, 1961, ss. 153A, 158BD-- CIT v. Mechmen (MP) . . . 591

----Assessment of third person--Condition precedent--Recording of satisfaction by Assessing Officer having jurisdiction over person in respect of whom search conducted that money or assets discovered during search belong to third person--Recording of satisfaction necessary even if Assessing Officer of both persons same--Income-tax Act, 1961, s. 153A-- CIT v. Mechmen (MP) . . . 591

----Assessment of third person--Condition precedent--Satisfaction of Assessing Officer that undisclosed income found during search belongs to third person--No satisfaction recorded before initiating proceedings under section 153C--Assessment not valid--Income-tax Act, 1961, s. 153C-- CIT v. Nirmala Keshwani (Smt.) (All) . . . 566

----Assessment of third person--Limitation--Limitation starts from date on which assets or documents received by Assessing Officer of third person--Assessing Officer of third person also assessee of person in respect of whom search conducted--Limitation will start on date of recording of satisfaction that incriminating material belonged to third person--Satisfaction recorded on 8-9-2010--Assessments for assessment years 2003-04 and 2004-05 barred by limitation--Income-tax Act, 1961, s. 153C-- CIT v. RRJ Securities Ltd. (Delhi) . . . 612

----Block assessment--Undisclosed income--General principles--Assessments completed on date of search--No incriminating materials found during search--Block assessment not valid--Income-tax Act, 1961, ss. 132, 153A-- CIT v. Kabul Chawla (Delhi) . . . 573

----Procedure for assessment of third person--Special procedure of assessment of search cases--No dissimilarity--Power of Assessing Officer having jurisdiction in both cases identical--Income-tax Act, 1961, ss. 153C, 158BD-- CIT v. Mechmen (MP) . . . 591

Transfer pricing --International transactions--Arm’s length price--Advertising, marketing and promotion expenses--Bright line method not legally permissible method--Need for detailed examination of operating agreement between assessee and its associated enterprise and franchisees to ascertain if any part of expenses was for purpose of creating marketing intangibles for associated enterprise of assessee--Determination of arm’s length price only thereafter--Matter remanded--Income-tax Act, 1961, s. 92B-- Yum Restaurants (India) P. Ltd. v. ITO (Delhi) . . . 637

 

AUTHORITY FOR ADVANCE RULINGS

Non-resident --Taxability in India--Capital gains--Capital asset--Non-resident acquiring shares in Indian company between September, 1995 and January, 2005--Proposing to transfer them in favour of group entity in Singapore as part of group re-organisation--Non-resident not having permanent establishment in India--Transaction not for avoidance of tax--Shares to be treated as capital asset not stock-in-trade--Profits not business income but capital gains--Not taxable in India--Even if treated as business income not taxable in absence of permanent establishment--Provisions relating to minimum alternate tax, transfer pricing and deduction of tax at source not applicable--Non-resident not bound to file return in India--Income-tax Act, 1961, ss. 2(14), 92 to 92F, 115JB, 139, 195--Double Taxation Avoidance Agreement between India and Mauritius, arts. 5, 13-- Dow AgroSciences Agricultural Products Ltd. , In re . . . 668

 

SECTIONWISE INDEX TO CASES REPORTED

Double Taxation Avoidance Agreement between India and Mauritius :

Art. 5 --Non-resident--Taxability in India--Capital gains--Capital asset--Non-resident acquiring shares in Indian company between September, 1995 and January, 2005--Proposing to transfer them in favour of group entity in Singapore as part of group re-organisation--Non-resident not having permanent establishment in India--Transaction not for avoidance of tax--Shares to be treated as capital asset not stock-in-trade--Profits not business income but capital gains--Not taxable in India--Even if treated as business income not taxable in absence of permanent establishment--Provisions relating to minimum alternate tax, transfer pricing and deduction of tax at source not applicable--Non-resident not bound to file return in India-- Dow AgroSciences Agricultural Products Ltd. , In re . . . 668

Art. 13 --Non-resident--Taxability in India--Capital gains--Capital asset--Non-resident acquiring shares in Indian company between September, 1995 and January, 2005--Proposing to transfer them in favour of group entity in Singapore as part of group re-organisation--Non-resident not having permanent establishment in India--Transaction not for avoidance of tax--Shares to be treated as capital asset not stock-in-trade--Profits not business income but capital gains--Not taxable in India--Even if treated as business income not taxable in absence of permanent establishment--Provisions relating to minimum alternate tax, transfer pricing and deduction of tax at source not applicable--Non-resident not bound to file return in India-- Dow AgroSciences Agricultural Products Ltd. , In re . . . 668

Income-tax Act, 1961 :

S. 2(14) --Non-resident--Taxability in India--Capital gains--Capital asset--Non-resident acquiring shares in Indian company between September, 1995 and January, 2005--Proposing to transfer them in favour of group entity in Singapore as part of group re-organisation--Non-resident not having permanent establishment in India--Transaction not for avoidance of tax--Shares to be treated as capital asset not stock-in-trade--Profits not business income but capital gains--Not taxable in India--Even if treated as business income not taxable in absence of permanent establishment--Provisions relating to minimum alternate tax, transfer pricing and deduction of tax at source not applicable--Non-resident not bound to file return in India-- Dow AgroSciences Agricultural Products Ltd. , In re . . . 668

S. 14A --Income--Disallowance of expenditure relating to exempt income--Burden of proof--Onus on Assessing Officer to record satisfaction that interest bearing funds used for investment to earn tax-free income--No tangible material on record that could have enabled Assessing Officer to record satisfaction in terms of section 14A--No disallowance-- CIT v.Abhishek Industries Ltd. (P&H) . . . 652

S. 68 --Search and seizure--Assessment in search cases--Share application money--No incriminating evidence related to share capital issued found during course of search--Deletion of addition under section 68--Justified-- Principal CIT v. Kurele Paper Mills P. Ltd.(Delhi) . . . 571

S. 79 --Loss--Carry forward and set off of losses--Condition precedent--Shares carrying fifty-one per cent. of voting power at close of financial year in which loss suffered should be held by same persons on last day of previous year in which loss to be set off--Change of hundred per cent. shareholding and beneficial ownership of shares in assessee--No question of piercing veil at instance of assessee to show ultimate beneficial ownership with parent company arises-- Yum Restaurants (India) P. Ltd. v. ITO (Delhi) . . . 637

S. 92 to 92F --Non-resident--Taxability in India--Capital gains--Capital asset--Non-resident acquiring shares in Indian company between September, 1995 and January, 2005--Proposing to transfer them in favour of group entity in Singapore as part of group re-organisation--Non-resident not having permanent establishment in India--Transaction not for avoidance of tax--Shares to be treated as capital asset not stock-in-trade--Profits not business income but capital gains--Not taxable in India--Even if treated as business income not taxable in absence of permanent establishment--Provisions relating to minimum alternate tax, transfer pricing and deduction of tax at source not applicable--Non-resident not bound to file return in India-- Dow AgroSciences Agricultural Products Ltd. , In re . . . 668

S. 92B --Transfer pricing--International transactions--Arm’s length price--Advertising, marketing and promotion expenses--Bright line method not legally permissible method--Need for detailed examination of operating agreement between assessee and its associated enterprise and franchisees to ascertain if any part of expenses was for purpose of creating marketing intangibles for associated enterprise of assessee--Determination of arm’s length price only thereafter--Matter remanded-- Yum Restaurants (India) P. Ltd. v. ITO(Delhi) . . . 637

S. 115JB --Non-resident--Taxability in India--Capital gains--Capital asset--Non-resident acquiring shares in Indian company between September, 1995 and January, 2005--Proposing to transfer them in favour of group entity in Singapore as part of group re-organisation--Non-resident not having permanent establishment in India--Transaction not for avoidance of tax--Shares to be treated as capital asset not stock-in-trade--Profits not business income but capital gains--Not taxable in India--Even if treated as business income not taxable in absence of permanent establishment--Provisions relating to minimum alternate tax, transfer pricing and deduction of tax at source not applicable--Non-resident not bound to file return in India-- Dow AgroSciences Agricultural Products Ltd. , In re . . . 668

S. 132 --Search and seizure--Block assessment--Undisclosed income--General principles--Assessments completed on date of search--No incriminating materials found during search--Block assessment not valid-- CIT v. Kabul Chawla (Delhi) . . . 573

S. 139 --Non-resident--Taxability in India--Capital gains--Capital asset--Non-resident acquiring shares in Indian company between September, 1995 and January, 2005--Proposing to transfer them in favour of group entity in Singapore as part of group re-organisation--Non-resident not having permanent establishment in India--Transaction not for avoidance of tax--Shares to be treated as capital asset not stock-in-trade--Profits not business income but capital gains--Not taxable in India--Even if treated as business income not taxable in absence of permanent establishment--Provisions relating to minimum alternate tax, transfer pricing and deduction of tax at source not applicable--Non-resident not bound to file return in India-- Dow AgroSciences Agricultural Products Ltd. , In re . . . 668

S. 147 --Reassessment--Notice after four years--Conditions precedent--Assessing Officer in original assessment proceedings considering each and every document and explanation given by assessee on seized documents--Tribunal finding categorically that assessee disclosed all material facts necessary for making assessment and no failure on his part--Notice after four years not valid-- CIT v. Hemkunt Timbers Ltd. (All) . . . 658

S. 148 --Reassessment--Notice after four years--Conditions precedent--Assessing Officer in original assessment proceedings considering each and every document and explanation given by assessee on seized documents--Tribunal finding categorically that assessee disclosed all material facts necessary for making assessment and no failure on his part--Notice after four years not valid-- CIT v. Hemkunt Timbers Ltd. (All) . . . 658

S. 149 --Reassessment--Notice after four years--Limitation--Provision at relevant time was ten years--Notice could be issued on or before 31-5-2001--Notice issued on 11-4-2001--Not barred by limitation-- CIT v. Hemkunt Timbers Ltd. (All) . . . 658

S. 153A --Search and seizure--Assessment in search cases--Share application money--No incriminating evidence related to share capital issued found during course of search--Deletion of addition under section 68--Justified-- Principal CIT v. Kurele Paper Mills P. Ltd.(Delhi) . . . 571

----Search and seizure--Assessment of third person--Condition precedent--No satisfaction recorded by Assessing Officer that assets, documents seized belong to some other person--No incriminating material attributable to assessee seized during course of search at premises searched--Assessing Officer cannot assume jurisdiction and transmit items to another file concerning that person without recording satisfaction-- CIT v. Mechmen (MP) . . . 591

----Search and seizure--Assessment of third person--Condition precedent--Recording of satisfaction by Assessing Officer having jurisdiction over person in respect of whom search conducted that money or assets discovered during search belong to third person--Recording of satisfaction necessary even if Assessing Officer of both persons same-- CIT v.Mechmen (MP) . . . 591

----Search and seizure--Block assessment--Undisclosed income--General principles--Assessments completed on date of search--No incriminating materials found during search--Block assessment not valid-- CIT v. Kabul Chawla (Delhi) . . . 573

S. 153C --Search and seizure--Assessment of third person--Condition precedent--Discovery of incriminating material showing undisclosed income of third person--Documents seized--Affidavits of person in respect of whom search conducted that documents belonged to him--No other evidence of undisclosed income--Proceedings under section 153C not valid-- CIT v.RRJ Securities Ltd. (Delhi) . . . 612

----Search and seizure--Assessment of third person--Condition precedent--Satisfaction of Assessing Officer that undisclosed income found during search belongs to third person--No satisfaction recorded before initiating proceedings under section 153C--Assessment not valid-- CIT v. Nirmala Keshwani (Smt.) (All) . . . 566

----Search and seizure--Assessment of third person--Limitation--Limitation starts from date on which assets or documents received by Assessing Officer of third person--Assessing Officer of third person also assessee of person in respect of whom search conducted--Limitation will start on date of recording of satisfaction that incriminating material belonged to third person--Satisfaction recorded on 8-9-2010--Assessments for assessment years 2003-04 and 2004-05 barred by limitation-- CIT v. RRJ Securities Ltd. (Delhi) . . . 612

----Search and seizure--Procedure for assessment of third person--Special procedure of assessment of search cases--No dissimilarity--Power of Assessing Officer having jurisdiction in both cases identical-- CIT v. Mechmen (MP) . . . 591

S. 158BD --Search and seizure--Assessment of third person--Condition precedent--No satisfaction recorded by Assessing Officer that assets, documents seized belong to some other person--No incriminating material attributable to assessee seized during course of search at premises searched--Assessing Officer cannot assume jurisdiction and transmit items to another file concerning that person without recording satisfaction-- CIT v. Mechmen(MP) . . . 591

----Search and seizure--Procedure for assessment of third person--Special procedure of assessment of search cases--No dissimilarity--Power of Assessing Officer having jurisdiction in both cases identical-- CIT v. Mechmen (MP) . . . 591

S. 195 --Non-resident--Taxability in India--Capital gains--Capital asset--Non-resident acquiring shares in Indian company between September, 1995 and January, 2005--Proposing to transfer them in favour of group entity in Singapore as part of group re-organisation--Non-resident not having permanent establishment in India--Transaction not for avoidance of tax--Shares to be treated as capital asset not stock-in-trade--Profits not business income but capital gains--Not taxable in India--Even if treated as business income not taxable in absence of permanent establishment--Provisions relating to minimum alternate tax, transfer pricing and deduction of tax at source not applicable--Non-resident not bound to file return in India-- Dow AgroSciences Agricultural Products Ltd. , In re . . . 668

Income-tax Rules, 1962 :

R. 8D --Income--Disallowance of expenditure relating to exempt income--Burden of proof--Onus on Assessing Officer to record satisfaction that interest bearing funds used for investment to earn tax-free income--No tangible material on record that could have enabled Assessing Officer to record satisfaction in terms of section 14A--No disallowance-- CIT v.Abhishek Industries Ltd. (P&H) . . . 652

 

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Posted by: CA RAJU SHAH <shahmars@hotmail.com>