INCOME TAX REPORTS (ITR)--PRINT AND ONLINE EDITION
ITR Volume 381 : Part 3 (Issue dated : 29-2-2016)
SUBJECT INDEX TO CASES REPORTED IN THIS PART
Business expenditure --Disallowance--Excessive and unreasonable payments--Service charges paid to firm having common partners with assessee--Failure by assessee to produce proof of service rendered during year in question--Findings recorded in assessment proceedings for preceding year not relevant--Disallowance proper--Income-tax Act, 1961, s. 40A(2)-- Ganapathy and Co. v. CIT . . . 363
Business loss --Finding that entire transaction of investment and showing loss was sham and calculated to avoid tax liability--Disallowance proper-- Ganapathy and Co. v. CIT . . . 363
Documents --Interpretation of documents--Question of law-- Unitech Ltd. v. Union of India . . . 456
Interest-tax --Reassessment--Not permissible where no assessment made in first instance--Interest-tax Act, 1974, s. 10-- Standard Chartered Finance Ltd. v. CIT . . . 453
Purchase of immovable property by Central Government --General principles--No onus on Department to establish undervaluation with view to evade tax--Undervaluation greater than 15 per cent. below fair market value raises rebuttable presumption of attempt to evade taxes--Income-tax Act, 1961, s. 269UD-- Unitech Ltd. v. Union of India . . . 456
----Transfer--Definition--Land held under lease from Municipality--Collaboration agreement under which land holder agreeing to allow developer to construct commercial project on land at its cost--Developer to retain 78 per cent. of total constructed area and transfer 22 per cent. to land holder--Not a case of sale, lease or exchange--Agreement enabling developer to enjoy property of land holder for purpose of construction--Falls within definition--Consideration stated in agreement for land cannot be taken as consideration for available floor space index--Comparable instance of sale taken of property in adjoining locality and not commercial property--Order for pre-emptive purchase vitiated--Income-tax Act, 1961, ss. 269UA, 269UD-- Unitech Ltd. v. Union of India . . . 456
Reference --High Court--Scope of powers--Finality of findings of fact of Tribunal--High Court taking into account certain additional facts already on record but not taken note of by Tribunal--Permissible--High Court construing facts without departure therefrom--Differing emphasis on undisputed facts--Within jurisdiction of High Court--Income-tax Act, 1961, s. 256-- Ganapathy and Co. v. CIT . . . 363
Scientific research expenditure --Condition precedent for grant of deduction--Certificate showing that donee had complied with conditions subject to which registration granted to it--Donation by assessee to ashram--Failure by assessee to produce certificate--Denial of deduction proper--Income-tax Act, 1961, s. 35(2A)-- Ganapathy and Co. v. CIT . . . 363
Business expenditure --Difference between ascertained and contingent liability--Premises taken under licence agreement--Agreement for ten years with provision for renewal subject to enhancement of fees to be settled in future--Dispute regarding enhancement of fees and protracted litigation--Assessee continuing to use premises--Liability to pay licence fees was ascertained liability--Deduction of licence fees and interest on arrears of licence fees allowed in some assessment years and partly disallowed in some assessment years not justified--Entire licence fees and interest on arrears of licence fees deductible in assessment years 1987-88 to 1992-93, 1995-96, 1997-98 to 2001-02 and 2003-04--Income-tax Act, 1961, s. 37-- Aggarwal and Modi Enterprises (Cinema Project) Co. Pvt. Ltd. v. CIT (Delhi) . . . 469
----Royalty--Assessee acting like original equipment manufacturer--Cannot be treated as job worker or contractor--Payment of royalty allowable--Income-tax Act, 1961-- CIT v. Keihin Panalfa Ltd. (Delhi) . . . 407
Capital or revenue receipt --Amount received by way of compensation against employment contract as goodwill and one time settlement for non-commencement of proposed employment--Capital receipt not "profits in lieu of salary"--Assessee entitled to refund of tax deducted at source--Income-tax Act, 1961, s. 17(3)(iii)-- CIT v. Pritam Das Narang (Delhi) . . . 416
Exemption --Export--Computation of deduction--Exchange fluctuation loss to be reduced from total turnover--Income-tax Act, 1961, s. 10A-- CIT v. Kshema Technologies Ltd. (Karn) . . . 435
----Export--Computation of deduction--Services relating to development of computer software--Deemed to be part of export turnover of computer software outside India--Expenses incurred in foreign currency for providing software development services outside India cannot be excluded from export turnover--Income-tax Act, 1961, s. 10A-- CIT v.Kshema Technologies Ltd. (Karn) . . . 435
Income-tax --General principles--Principle of consistency in income-tax proceedings--Aggarwal and Modi Enterprises (Cinema Project) Co. Pvt. Ltd. v. CIT (Delhi) . . . 469
International transactions --Transfer pricing--Arm's length price--Adjustment only in respect of transactions with its associated enterprises--Income-tax Act, 1961, ss. 92A, 92B-- CIT v.Tara Jewels Exports P. Ltd. (Bom) . . . 404
----Transfer pricing--Arm's length price--Determination only with respect to assessee's international transactions with associated enterprises--Not in respect of transactions entered into by assessee with independent unrelated third parties--Income-tax Act, 1961, Chap. X--CIT v. Thyssen Krupp Industries India P. Ltd. (Bom) . . . 413
----Transfer pricing--Arm's length price--Determination--Transfer pricing adjustment to be made only for transactions attributed to international transactions and not to entire expenses--Income-tax Act, 1961, s. 92CA-- CIT v. Keihin Panalfa Ltd. (Delhi) . . . 407
Kar Vivad Samadhan Scheme --Instructions issued by Ministry of Finance cannot modify Scheme having statutory character--Instructions regarding applicability of marginal rate to unpaid tax for determining disputed income--Not applicable to taxable income arising from capital gains for which uniform rate applies--Assessing Officer to determine disputed income in relation to unpaid tax by applying rate of 33.6 per cent. and to calculate tax at 35 per cent. of disputed income--Income-tax Act, 1961--Kar Vivad Samadhan Scheme, 1998--Finance (No. 2) Act, 1998, ss. 88, 89-- B. P. Jain and Associates v. CIT (Delhi) . . . 423
Reassessment --Condition precedent--Belief that income had escaped assessment--Belief must be that of Assessing Officer--CBDT instruction directing remedial acti0n in case of audit objections--Instructions of CBDT cannot override provisions of section 147--Notice based solely on such instruction--Not valid--Income-tax Act, 1961, ss. 147, 148--CBDT Instruction No. 9 of 2006-- Sun Pharmaceutical Industries Ltd. v. Deputy CIT (Delhi) . . . 387
----Notice--Jurisdiction--Officer who has passed assessment order alone entitled to reopen assessment--Notice and reasons recorded for reopening by officer not Assessing Officer of assessee--Reopening of assessment vitiated--Subsequent notice issued for reopening of assessment by Assessing Officer beyond limitation period--Notice not valid--Income-tax Act, 1961, ss. 147, 148, 149(1)(b)-- Dushyant Kumar Jain v. Deputy CIT (Delhi) . . . 428
----Notice after four years--Validity--Failure to disclose material facts necessary for assessment--Assessment after scrutiny under section 143(3)--Presumption that Assessing Officer had passed order after application of mind--Claim rendered inadmissible due to subsequent change in law--No failure to disclose fact--No allegation that material facts had not been disclosed--Notice not valid--Income-tax Act, 1961, ss. 147, 148-- Sun Pharmaceutical Industries Ltd. v. Deputy CIT (Delhi) . . . 387
Reference --Monetary limits for applications by Revenue--Effect of CBDT Circular No. 21 of 2015 dated 10-12-2015 laying down threshold limit of tax effect Rs. 20 lakhs--Applicable even to pending references--Reference by Tribunal where tax effect less than Rs. 20 lakhs returned unanswered--Income-tax Act, 1961, s. 256--CBDT Circular No. 21 of 2015 dated 10-12-2015-- CIT v. Sunny Sounds P. Ltd. (Bom) . . . 443
----Monetary limits prescribed for litigation by Revenue--Effect of CBDT Instruction No. 5 of 2014--Instruction applicable to pending references--Tax effect less than monetary limit prescribed by instruction--Nothing to indicate that issue falls within exclusion clause of instruction nor that issue has cascading effect--Reference returned unanswered--Income-tax Act, 1961, s. 256(1)--CBDT Instruction No. 5 of 2014, dated 10-7-2014-- CIT v. Computer Point (I) Ltd. (Bom) . . . 441
Non-resident --Taxability in India--Exploration of mineral oils--Special provisions for computation of income--Contract for provision of floating production storage and offloading facility used in offshore oil exploration--Change order executed providing for amendments in original contract--Entire consideration received under original contract offered to tax by assessee without distinction based on where work was done or distance travelled outside India or in India as business profits taxable in India under section 44BB--Receipts under change order cannot have different character--Cannot be split--Contentions that receipts were capital or that work not done in India--Not tenable--Compensation for loss of lease rentals received as result of insurance policy obtained and signed outside India--Received outside India and not taxable in India--Income-tax Act, 1961, s. 44BB-- Aker Contracting FP ASA , In re . . . 489
SECTIONWISE INDEX TO CASES REPORTED IN THIS PART
S. 88 --Kar Vivad Samadhan Scheme--Instructions issued by Ministry of Finance cannot modify Scheme having statutory character--Instructions regarding applicability of marginal rate to unpaid tax for determining disputed income--Not applicable to taxable income arising from capital gains for which uniform rate applies--Assessing Officer to determine disputed income in relation to unpaid tax by applying rate of 33.6 per cent. and to calculate tax at 35 per cent. of disputed income-- B. P. Jain and Associates v. CIT (Delhi) . . . 423
S. 89 --Kar Vivad Samadhan Scheme--Instructions issued by Ministry of Finance cannot modify Scheme having statutory character--Instructions regarding applicability of marginal rate to unpaid tax for determining disputed income--Not applicable to taxable income arising from capital gains for which uniform rate applies--Assessing Officer to determine disputed income in relation to unpaid tax by applying rate of 33.6 per cent. and to calculate tax at 35 per cent. of disputed income-- B. P. Jain and Associates v. CIT (Delhi) . . . 423
S. 10A --Exemption--Export--Computation of deduction--Exchange fluctuation loss to be reduced from total turnover-- CIT v. Kshema Technologies Ltd. (Karn) . . . 435
----Exemption--Export--Computation of deduction--Services relating to development of computer software--Deemed to be part of export turnover of computer software outside India--Expenses incurred in foreign currency for providing software development services outside India cannot be excluded from export turnover-- CIT v. Kshema Technologies Ltd.(Karn) . . . 435
S. 17(3)(iii) --Capital or revenue receipt--Amount received by way of compensation against employment contract as goodwill and one time settlement for non-commencement of proposed employment--Capital receipt not "profits in lieu of salary"--Assessee entitled to refund of tax deducted at source-- CIT v. Pritam Das Narang (Delhi) . . . 416
S. 35(2A) --Scientific research expenditure--Condition precedent for grant of deduction--Certificate showing that donee had complied with conditions subject to which registration granted to it--Donation by assessee to ashram--Failure by assessee to produce certificate--Denial of deduction proper-- Ganapathy and Co. v. CIT (SC) . . . 363
S. 37 --Business expenditure--Difference between ascertained and contingent liability--Premises taken under licence agreement--Agreement for ten years with provision for renewal subject to enhancement of fees to be settled in future--Dispute regarding enhancement of fees and protracted litigation--Assessee continuing to use premises--Liability to pay licence fees was ascertained liability--Deduction of licence fees and interest on arrears of licence fees allowed in some assessment years and partly disallowed in some assessment years not justified--Entire licence fees and interest on arrears of licence fees deductible in assessment years 1987-88 to 1992-93, 1995-96, 1997-98 to 2001-02 and 2003-04-- Aggarwal and Modi Enterprises (Cinema Project) Co. Pvt. Ltd. v. CIT (Delhi) . . . 469
S. 40A(2) --Business expenditure--Disallowance--Excessive and unreasonable payments--Service charges paid to firm having common partners with assessee--Failure by assessee to produce proof of service rendered during year in question--Findings recorded in assessment proceedings for preceding year not relevant--Disallowance proper-- Ganapathy and Co. v. CIT (SC) . . . 363
S. 44BB --Non-resident--Taxability in India--Exploration of mineral oils--Special provisions for computation of income--Contract for provision of floating production storage and offloading facility used in offshore oil exploration--Change order executed providing for amendments in original contract--Entire consideration received under original contract offered to tax by assessee without distinction based on where work was done or distance travelled outside India or in India as business profits taxable in India under section 44BB--Receipts under change order cannot have different character--Cannot be split--Contentions that receipts were capital or that work not done in India--Not tenable--Compensation for loss of lease rentals received as result of insurance policy obtained and signed outside India--Received outside India and not taxable in India-- Aker Contracting FP ASA , In re (AAR) . . . 489
S. 92A --International transactions--Transfer pricing--Arm's length price--Adjustment only in respect of transactions with its associated enterprises-- CIT v. Tara Jewels Exports P. Ltd.(Bom) . . . 404
S. 92B --International transactions--Transfer pricing--Arm's length price--Adjustment only in respect of transactions with its associated enterprises-- CIT v. Tara Jewels Exports P. Ltd.(Bom) . . . 404
S. 92CA --International transactions--Transfer pricing--Arm's length price--Determination--Transfer pricing adjustment to be made only for transactions attributed to international transactions and not to entire expenses-- CIT v. Keihin Panalfa Ltd. (Delhi) . . . 407
Chap. X --International transactions--Transfer pricing--Arm's length price--Determination only with respect to assessee's international transactions with associated enterprises--Not in respect of transactions entered into by assessee with independent unrelated third parties--CIT v. Thyssen Krupp Industries India P. Ltd. (Bom) . . . 413
S. 147 --Reassessment--Condition precedent--Belief that income had escaped assessment--Belief must be that of Assessing Officer--CBDT instruction directing remedial acti0n in case of audit objections--Instructions of CBDT cannot override provisions of section 147--Notice based solely on such instruction--Not valid-- Sun Pharmaceutical Industries Ltd. v. Deputy CIT (Delhi) . . . 387
----Reassessment--Notice--Jurisdiction--Officer who has passed assessment order alone entitled to reopen assessment--Notice and reasons recorded for reopening by officer not Assessing Officer of assessee--Reopening of assessment vitiated--Subsequent notice issued for reopening of assessment by Assessing Officer beyond limitation period--Notice not valid-- Dushyant Kumar Jain v. Deputy CIT (Delhi) . . . 428
----Reassessment--Notice after four years--Validity--Failure to disclose material facts necessary for assessment--Assessment after scrutiny under section 143(3)--Presumption that Assessing Officer had passed order after application of mind--Claim rendered inadmissible due to subsequent change in law--No failure to disclose fact--No allegation that material facts had not been disclosed--Notice not valid-- Sun Pharmaceutical Industries Ltd.v. Deputy CIT (Delhi) . . . 387
S. 148 --Reassessment--Condition precedent--Belief that income had escaped assessment--Belief must be that of Assessing Officer--CBDT instruction directing remedial acti0n in case of audit objections--Instructions of CBDT cannot override provisions of section 147--Notice based solely on such instruction--Not valid-- Sun Pharmaceutical Industries Ltd. v. Deputy CIT (Delhi) . . . 387
----Reassessment--Notice--Jurisdiction--Officer who has passed assessment order alone entitled to reopen assessment--Notice and reasons recorded for reopening by officer not Assessing Officer of assessee--Reopening of assessment vitiated--Subsequent notice issued for reopening of assessment by Assessing Officer beyond limitation period--Notice not valid-- Dushyant Kumar Jain v. Deputy CIT (Delhi) . . . 428
----Reassessment--Notice after four years--Validity--Failure to disclose material facts necessary for assessment--Assessment after scrutiny under section 143(3)--Presumption that Assessing Officer had passed order after application of mind--Claim rendered inadmissible due to subsequent change in law--No failure to disclose fact--No allegation that material facts had not been disclosed--Notice not valid-- Sun Pharmaceutical Industries Ltd.v. Deputy CIT (Delhi) . . . 387
S. 149(1)(b) --Reassessment--Notice--Jurisdiction--Officer who has passed assessment order alone entitled to reopen assessment--Notice and reasons recorded for reopening by officer not Assessing Officer of assessee--Reopening of assessment vitiated--Subsequent notice issued for reopening of assessment by Assessing Officer beyond limitation period--Notice not valid-- Dushyant Kumar Jain v. Deputy CIT (Delhi) . . . 428
S. 256 --Reference--High Court--Scope of powers--Finality of findings of fact of Tribunal--High Court taking into account certain additional facts already on record but not taken note of by Tribunal--Permissible--High Court construing facts without departure therefrom--Differing emphasis on undisputed facts--Within jurisdiction of High Court-- Ganapathy and Co. v. CIT(SC) . . . 363
----Reference--Monetary limits for applications by Revenue--Effect of CBDT Circular No. 21 of 2015 dated 10-12-2015 laying down threshold limit of tax effect Rs. 20 lakhs--Applicable even to pending references--Reference by Tribunal where tax effect less than Rs. 20 lakhs returned unanswered-- CIT v. Sunny Sounds P. Ltd. (Bom) . . . 443
S. 256(1) --Reference--Monetary limits prescribed for litigation by Revenue--Effect of CBDT Instruction No. 5 of 2014--Instruction applicable to pending references--Tax effect less than monetary limit prescribed by instruction--Nothing to indicate that issue falls within exclusion clause of instruction nor that issue has cascading effect--Reference returned unanswered--CIT v. Computer Point (I) Ltd. (Bom) . . . 441
S. 269UA --Purchase of immovable property by Central Government--Transfer--Definition--Land held under lease from Municipality--Collaboration agreement under which land holder agreeing to allow developer to construct commercial project on land at its cost--Developer to retain 78 per cent. of total constructed area and transfer 22 per cent. to land holder--Not a case of sale, lease or exchange--Agreement enabling developer to enjoy property of land holder for purpose of construction--Falls within definition--Consideration stated in agreement for land cannot be taken as consideration for available floor space index--Comparable instance of sale taken of property in adjoining locality and not commercial property--Order for pre-emptive purchase vitiated-- Unitech Ltd. v. Union of India (SC) . . . 456
S. 269UD --Purchase of immovable property by Central Government--General principles--No onus on Department to establish undervaluation with view to evade tax--Undervaluation greater than 15 per cent. below fair market value raises rebuttable presumption of attempt to evade taxes-- Unitech Ltd. v. Union of India (SC) . . . 456
----Purchase of immovable property by Central Government--Transfer--Definition--Land held under lease from Municipality--Collaboration agreement under which land holder agreeing to allow developer to construct commercial project on land at its cost--Developer to retain 78 per cent. of total constructed area and transfer 22 per cent. to land holder--Not a case of sale, lease or exchange--Agreement enabling developer to enjoy property of land holder for purpose of construction--Falls within definition--Consideration stated in agreement for land cannot be taken as consideration for available floor space index--Comparable instance of sale taken of property in adjoining locality and not commercial property--Order for pre-emptive purchase vitiated-- Unitech Ltd. v. Union of India (SC) . . . 456
S. 10 --Interest-tax--Reassessment--Not permissible where no assessment made in first instance-- Standard Chartered Finance Ltd. v. CIT (SC) . . . 453
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