Transfer Pricing: ITAT Explains Importance Of Segment-Wise Results

 

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The following important judgement is available for download at itatonline.org.

Sandoz Private Limited vs. DCIT (ITAT Mumbai)

Transfer Pricing: ALP should be determined on segment-wise profits & not at an entity level. Adjustment cannot be made to the entire entity turnover/ profits

 

The assessee entered into several international transactions with its AE and claimed that there were at arm's length on the basis of a segment-wise TNMM analysis for each of them. The TPO rejected the claim on the ground that the segment-wise accounts were not audited. He adopted an entity method approach for purposes of determining the ALP. However, while rejecting the segmental analysis undertaken by the assessee, the TPO accepted 4 segments of the assessee's operations and identified comparables. He arrived at different arithmetical means of appropriate profit level indicators by taking operating profit by cost of various identified comparables in each segment. He thereafter gave weighted average to the assessee's percentage of turnover out of the total turnover and determined the weighted average of the arithmetic mean in each segments and arrived at the operating profit at 18.09% at entity level. This was taken as the arm's length profit margin and as the assessee's operating margin of 4.78% operating cost was less than the ALP so determined, an adjustment of Rs. 82 crore was made to the assessee's income. Before the DRP, the assessee furnished audited segmental accounts though these were ignored by it. On appeal by the assessee to the Tribunal, HELD:

 

As the assessee's operates in four different & independent segments and it submitted segmental accounts for each of its operation, the correct approach under TNMM should be to determine the ALP of each of the segments by comparing with the corresponding comparables involved in similar lines of functioning after proper FAR analysis. As the TPO had details of each segment-wise profit margin of the comparables, he ought to have compared the relevant profit margins with that of the assessee's profit margins in each segment. His approach of taking the weighted average method of arriving at entity based profit margin is not correct. Also, his approach of making the adjustment on the entire turnover of the assessee including transactions with non-AEs instead of restricting it to the AEs' transactions is not supported by the transfer pricing provisions. Further, in arriving at the segment-wise profit margin, the TPO should carry out an analysis of each company's business activity, why they are selected as comparable and what are the functions of the company, operating margins, etc. He should adopt proper parameters/filters in respect of each segment. If the assessee opposes the selection of comparables by the TPO, it is the responsibility of the TPO to furnish necessary details. The onus cannot be shifted to the assessee when it is contending that proper data is not available in public domain in this regard.

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Constitution Of The Bombay High Court's Tax Bench w.e.f. 08.04.2013

Constitution Of The Bombay High Court’s Tax Bench w.e.f. 08.04.2013

Dear Subscriber,

Constitution Of The Bombay High Court's Tax Bench w.e.f. 08.04.2013

Pursuant to the retirement of Hon'ble Justice J. P. Devadhar, there will be a change in the Constitution of the Bombay High Court's Tax Bench w.e.f. 08.04.2013

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Cotton Naturals (I) Pvt. Ltd vs. DCIT (ITAT Delhi)

Transfer Pricing: ALP of loan transaction has to be determined as per CUP & LIBOR

Section 80-IA(4): ITAT Reverses Its Own Larger Bench Ruling

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The following important judgement is available for download at itatonline.org.

B.T. Patil & Sons Belgaum Constructions Pvt. Ltd vs. ACIT (ITAT Pune)

S. 80-IA(4): Larger Bench verdict in B. T. Patil vs. ACIT 32 DTR 1 is not good law

 

The assessee, a civil contractor, claimed deduction u/s 80-IA (4) in respect of the profits from infrastructure projects executed by it. The lower authorities rejected the claim on the ground that the assessee was a mere contractor and not a developer. Before the Tribunal, the Members of the Division Bench dissented and so the issue was first referred to a Third Member and then to a Larger Bench of three Members. The Larger Bench (32 DTR 1) rejected the assessee's claim on the ground that in order to be eligible u/s 80IA (4), the assessee had to be directly engaged in developing, maintaining and operating the facility and that there had to be a complete development of the facility and not just a part of it. When the matter came before the Division Bench for giving effect to the Larger Bench's verdict u/s 255(4) the assessee did not appear and so the Bench dismissed the appeal in limine for non-appearance. The assessee filed a MA before the Tribunal to recall the said order and also filed an appeal before the High Court. The Tribunal recalled its order dismissing the appeals and refixed the matter for hearing. Consequently, the assessee withdrew the appeal filed in the High Court. In the order permitting the withdrawal, the High Court directed the Tribunal to consider the judgement in ABG Heavy Industries 322 ITR 323 (Bom). HELD by the Tribunal:

 

The view of the Larger Bench that the assessee had to be directly engaged in developing, maintaining and operating the facility and that there had to be a complete development of the facility and not just a part of it is contrary to the law laid down in ABG Heavy Industries 322 ITR 323 (Bom). The High Court held that the effect of the amendment by the Finance Act of 1999 is that the benefit of s. 80IA(4) is available to any enterprise carrying on the business of (i) developing, (ii) maintaining & operating, or (iii) developing, maintaining and operating an infrastructure facility. It was also held that the assessee did not have to develop the entire project in order to qualify for deduction u/s 80-IA and that Parliament did not legislate a condition impossible of compliance. The Explanation below 80-IA (13) inserted by FA 2007 & 2009 w.r.e.f 1.4.2000 which provides that s. 80-IA(4) shall not apply to a person executing a "works contract" does not apply to a case where the assessee executes the work by shouldering Investment & technical risk by employing team of technically & administratively qualified persons and it is liable for liquidated damages if failed to fulfill the obligation laid down in the agreement and also securing by Bank guarantee. On facts, the assessee had shouldered the investment & technical risk in respect of the work executed and it was liable for liquidated damages if failed to fulfill the obligation laid down in the agreement. The liability which had been assumed by the assessee were obligations involving the development of an infrastructure facility. Consequently, it is not correct to say that the assessee is merely a contractor & not a developer. The assessee is eligible for benefit u/s 80-1A even if only part of the Infrastructural Project work is executed by it.

 

Note: This case is unique in that a Bench constituted to give effect to a Larger Bench verdict u/s 255(4) ends up reversing the Larger Bench verdict. For more on s. 80-IA(4) see Pratibha Industries (ITAT Mum)

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Latest:

SKOL Breweries Ltd vs. ACIT (ITAT Mumbai)

Transfer Pricing: RBI approval has no relevance on issue of Arms Length Price

Share Application Advance Not Hit By S. 2(22)(e) Deemed Dividend: ITAT Mumbai

 

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The following important judgement is available for download at itatonline.org.

DCIT vs. Vikas Oberoi (ITAT Mumbai)

S. 2(22)(e) Deemed Dividend: Share application money is not "loan or advance"

 

The assessee was a beneficial shareholder of two companies named Kingston Properties P Ltd. (KPPL), New Dimensions Consultants P Ltd (NDCPL) & R. S. Estate Developers P Ltd (RSEDPL). NDCPL & RESEDPL advanced various sums of money to KPPL towards "share application money". However, some of the advances were returned by KPPL while some were adjusted towards allotment of shares. The AO held that the transaction was a "colourable device" and a "loan and advance" which fell within the ambit of s. 2(22)(e). The said "loan and advance" was assessed as "deemed dividend" in the hands of the assessee – beneficial shareholder – following Universal Medicare 324 ITR 264 (Bom). The CIT(A) reversed the AO. On appeal by the department to the Tribunal HELD dismissing the appeal:

 

Share application money or share application advance is distinct from 'loan or advance'. Although share application money is one kind of advance given with the intention to obtain the allotment of shares/equity/preference shares etc, such advances are innately different form the normal loan or advances specified both in section 269SS or 2(22)(e) of the Act. Unless the mala fide is demonstrated by the AO with evidence, the book entries or resolution of the Board of the assessee become relevant and credible, which should not be dismissed without bringing any adverse material to demonstrate the contrary. It is also evident that share application money when partly returned without any allotment of shares, such refunds should not be classified as 'loan or advance' merely because share application advance is returned without allotment of share. In the instant case, the refund of the amount was done for commercial reasons and also in the best interest of the prospective share applicant. Further, it is self explanatory that the assessee being a 'beneficial share holder', derives no benefit whatsoever, when the impugned 'share application money/advance' is finally returned without any allotment of shares for commercial reasons. In this kind of situations, the books entries become really relevant as they show the initial intentions of the parties into the transactions. It is undisputed that the books entries suggest clearly the 'share application' nature of the advance and not the 'loan or advance'. As such the revenue has merely suspected the transactions without containing any material to support the suspicion. Therefore, the share application money may be an advance but they are not advances which are referred to in section 2(22)(e) of the Act. Such advances, when returned without any allotment or part allotment of shares to the applicant/subscriber, will not take a nature of the loan merely because the same is repaid or returned or refunded in the same year or later years after keeping the money for some time with the company. So long as the original intention of payment of share application money is towards the allotment of shares of any kind, the same cannot be deemed as 'loan or advance' unless the mala fide intentions are exposed by the AO with evidence.

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ITO vs. Right Florists Pvt Ltd (ITAT Kolkata)

Advertisement charges paid to Google & Yahoo is not chargeable to tax in India

ITR (TRIB) VOL 22 PART 6

 

ITR'S TRIBUNAL TAX REPORTS (ITR (TRIB))

Volume 22 : Part 6 (Issue dated : 1-4-2013)

SUBJECT INDEX TO CASES REPORTED IN THIS PART

Advance tax --Interest--Shortfall--No direction in assessment order for levy of interest under section 234C--Contention that assessee had paid excess advance tax--Matter remanded--Income-tax Act, 1961, s. 234C-- Hindustan Unilever Ltd. v. Additional CIT (Mumbai) . . . 737

Assessment --Bad debts--Factual aspects of bad debts not examined--Matter remanded for fresh assessment after providing opportunity to assessee--Income-tax Act, 1961-- Givaudan Flavours (India) P. Ltd. v. Deputy CIT (Mumbai) . . . 732

Business expenditure --Cost of club services--Allowable--When assessee is a company, there cannot be any expenditure for personal use-- Hindustan Unilever Ltd. v. Additional CIT (Mumbai) . . . 737

----Disallowance--Payments liable to deduction of tax at source--No disallowance in case of short deduction of tax--Income-tax Act, 1961, s. 40(a)(ia)-- Hindustan Unilever Ltd. v. Additional CIT (Mumbai) . . . 737

----Provision made in earlier year and offered to tax in year in which provision was made--Sum not to be taxed in year of write back-- Hindustan Unilever Ltd. v. Additional CIT (Mumbai) . . . 737

Capital or revenue expenditure --Amounts paid by assessee for purchase of master plate of audio songs with copyright--Revenue expenditure--Income-tax Act, 1961-- ITO v. Five Star Audio (Chennai) . . . 707

----Payments made to suppliers for termination of arrangement for supply of sugar candies--No right acquired by assessee--Business decision--Revenue expenditure--Payment for discontinuation of purchase agreement for manufacture of toothpaste and shampoos--One-time lump sum including compensation towards covenants of non-competing--Claim to be re-examined-- Hindustan Unilever Ltd. v. Additional CIT (Mumbai) . . . 737

Deduction of tax at source --Professional services--Payments for services of modeling--Modeling not connected with cinematographic film--Section 194J not applicable--Income-tax Act, 1961, s. 194J-- Kodak India P. Ltd. v. Deputy CIT (Mumbai) . . . 721

Depreciation --Carry forward and set off--Change of law--Amendment by Finance (No. 2) Act, 1996--Effect--Unabsorbed depreciation of assessment years 1996-97 and 1997-98--Allowable in 2006-07--Income-tax Act, 1961, s. 32(2)-- Hindustan Unilever Ltd. v. Additional CIT (Mumbai) . . . 737

----Written down value--Adjustment of capital subsidy in written down value--Proper--Income-tax Act, 1961, s. 32-- Hindustan Unilever Ltd. v. Additional CIT (Mumbai) . . . 737

Donations to charitable institutions --Payment by cheque to Parent Teachers Association for cover page advertisement in souvenir--Receipt in name product of assessee for which advertisement material given--Deduction allowable--Income-tax Act, 1961, s. 80G-- Hindustan Unilever Ltd. v. Additional CIT (Mumbai) . . . 737

Exemption --Export--Order of Commissioner (Appeals) mala fide--Amounted to harassment of assessee--Assessee entitled to exemption--Income-tax Act, 1961, s. 10B-- Qmax Test Equipments P. Ltd. v. Assistant CIT (Chennai) . . . 690

Income --Disallowance of expenditure in relation to exemption income--Income from tax free bonds and dividends--Ad hoc amount of 0.5 per cent. reasonable--Income-tax Act, 1961, s. 14A--Income-tax Rules, 1962, r. 8D-- Hindustan Unilever Ltd. v. Additional CIT (Mumbai) . . . 737

----Interest on refund--To be taxed in year of grant of refund--Assessing Officer to examine whether assessee entitled to interest after order under section 143(3) passed and if so grant relief--Income-tax Act, 1961, ss. 143(3), 244A-- Hindustan Unilever Ltd. v. Additional CIT (Mumbai) . . . 737

Industrial undertaking --Special deduction--Allocation of expenses among units--Expenses attributable to any other unit or head office expenses which have no relevance to industrial undertaking not to be deducted--Expenses relating to operations at head office were not connected to running of units not to be allocated--Other common expenses to be allocated--Research expenditure not to be allocated to units claiming deduction unless there was nexus--No interest expenditure claimed for investment in unit--Expenditure not to be allocated on common expense basis--Income-tax Act, 1961, ss. 10A, 10B, 80-IB, 80-IC-- Hindustan Unilever Ltd. v. Additional CIT (Mumbai) . . . 737

International transactions --Arms€™s length price--Determination--Actual transactions of assessee with associated enterprises within range of plus or minus 5 per cent. of sum determined by Transfer Pricing Officer--Entire adjustment made by Transfer Pricing Officer to be deleted--Income-tax Act, 1961-- Hindustan Unilever Ltd. v. Additional CIT (Mumbai) . . . 737

----Arms€™s length price--Determination--Reference to Transfer Pricing Officer--Transfer Pricing Officer computing total expenses at enterprise level against total expenses claimed by assessee and adding difference as transfer pricing adjustment--Matter remanded for fresh adjudication--Income-tax Act, 1961-- Givaudan Flavours (India) P. Ltd. v. Deputy CIT (Mumbai) . . . 732

----Arms€™s length price--Determination--To be on international transactions and not in relation to assessee’s entire sales or turnover--Benchmarking only on associated enterprise transactions and not for entire turnover--Income-tax Act, 1961, ss. 92, 92C-- Hindustan Unilever Ltd. v. Additional CIT (Mumbai) . . . 737

Reassessment --Income escaping assessment--Notice after four years--Assessing Officer must apply his mind--No failure to disclose material facts necessary for assessment--Reassessment not valid--Income-tax Act, 1961, ss. 147, 148-- Qmax Test Equipments P. Ltd. v. Assistant CIT (Chennai) . . . 690

Revision --Commissioner--Revision on ground that expenses incurred by assessee capital in nature--Finding that expenses revenue in nature--Assessment order not erroneous--Order of revision to be set aside--Income-tax Act, 1961, s. 263-- Star Music v. Deputy CIT (Chennai) . . . 700

Words and phrases --†Modeling€ and Acting -- Kodak India P. Ltd. v. Deputy CIT (Mumbai) . . . 721

 

SECTIONWISE INDEX TO CASES REPORTED IN THIS PART

Income-tax Act, 1961 :

S. 10A --Industrial undertaking--Special deduction--Allocation of expenses among units--Expenses attributable to any other unit or head office expenses which have no relevance to industrial undertaking not to be deducted--Expenses relating to operations at head office were not connected to running of units not to be allocated--Other common expenses to be allocated--Research expenditure not to be allocated to units claiming deduction unless there was nexus--No interest expenditure claimed for investment in unit--Expenditure not to be allocated on common expense basis-- Hindustan Unilever Ltd. v. Additional CIT (Mumbai) . . . 737

S. 10B --Exemption--Export--Order of Commissioner (Appeals) mala fide--Amounted to harassment of assessee--Assessee entitled to exemption-- Qmax Test Equipments P. Ltd. v. Assistant CIT (Chennai) . . . 690

----Industrial undertaking--Special deduction--Allocation of expenses among units--Expenses attributable to any other unit or head office expenses which have no relevance to industrial undertaking not to be deducted--Expenses relating to operations at head office were not connected to running of units not to be allocated--Other common expenses to be allocated--Research expenditure not to be allocated to units claiming deduction unless there was nexus--No interest expenditure claimed for investment in unit--Expenditure not to be allocated on common expense basis-- Hindustan Unilever Ltd. v. Additional CIT (Mumbai) . . . 737

S. 14A --Income--Disallowance of expenditure in relation to exemption income--Income from tax free bonds and dividends--Ad hoc amount of 0.5 per cent. reasonable-- Hindustan Unilever Ltd. v. Additional CIT (Mumbai) . . . 737

S. 32 --Depreciation--Written down value--Adjustment of capital subsidy in written down value--Proper-- Hindustan Unilever Ltd. v. Additional CIT (Mumbai) . . . 737

S. 32(2) --Depreciation--Carry forward and set off--Change of law--Amendment by Finance (No. 2) Act, 1996--Effect--Unabsorbed depreciation of assessment years 1996-97 and 1997-98--Allowable in 2006-07-- Hindustan Unilever Ltd. v. Additional CIT (Mumbai) . . . 737

S. 40(a)(ia) --Business expenditure--Disallowance--Payments liable to deduction of tax at source--No disallowance in case of short deduction of tax-- Hindustan Unilever Ltd. v. Additional CIT (Mumbai) . . . 737

S. 80G --Donations to charitable institutions--Payment by cheque to Parent Teachers Association for cover page advertisement in souvenir--Receipt in name product of assessee for which advertisement material given--Deduction allowable-- Hindustan Unilever Ltd. v. Additional CIT (Mumbai) . . . 737

S. 80-IB --Industrial undertaking--Special deduction--Allocation of expenses among units--Expenses attributable to any other unit or head office expenses which have no relevance to industrial undertaking not to be deducted--Expenses relating to operations at head office were not connected to running of units not to be allocated--Other common expenses to be allocated--Research expenditure not to be allocated to units claiming deduction unless there was nexus--No interest expenditure claimed for investment in unit--Expenditure not to be allocated on common expense basis-- Hindustan Unilever Ltd. v. Additional CIT (Mumbai) . . . 737

S. 80-IC --Industrial undertaking--Special deduction--Allocation of expenses among units--Expenses attributable to any other unit or head office expenses which have no relevance to industrial undertaking not to be deducted--Expenses relating to operations at head office were not connected to running of units not to be allocated--Other common expenses to be allocated--Research expenditure not to be allocated to units claiming deduction unless there was nexus--No interest expenditure claimed for investment in unit--Expenditure not to be allocated on common expense basis-- Hindustan Unilever Ltd. v. Additional CIT (Mumbai) . . . 737

S. 92 --International transactions--Arms€™s length price--Determination--To be on international transactions and not in relation to assessee’s entire sales or turnover--Benchmarking only on associated enterprise transactions and not for entire turnover-- Hindustan Unilever Ltd. v. Additional CIT (Mumbai) . . . 737

S. 92C --International transactions--Arms€™s length price--Determination--To be on international transactions and not in relation to assessee’s entire sales or turnover--Benchmarking only on associated enterprise transactions and not for entire turnover-- Hindustan Unilever Ltd. v. Additional CIT (Mumbai) . . . 737

S. 143(3) --Income--Interest on refund--To be taxed in year of grant of refund--Assessing Officer to examine whether assessee entitled to interest after order under section 143(3) passed and if so grant relief-- Hindustan Unilever Ltd. v. Additional CIT (Mumbai) . . . 737

S. 147 --Reassessment--Income escaping assessment--Notice after four years--Assessing Officer must apply his mind--No failure to disclose material facts necessary for assessment--Reassessment not valid-- Qmax Test Equipments P. Ltd. v. Assistant CIT (Chennai) . . . 690

S. 148 --Reassessment--Income escaping assessment--Notice after four years--Assessing Officer must apply his mind--No failure to disclose material facts necessary for assessment--Reassessment not valid-- Qmax Test Equipments P. Ltd. v. Assistant CIT (Chennai) . . . 690

S. 194J --Deduction of tax at source--Professional services--Payments for services of modeling--Modeling not connected with cinematographic film--Section 194J not applicable-- Kodak India P. Ltd. v. Deputy CIT (Mumbai) . . . 721

S. 234C --Advance tax--Interest--Shortfall--No direction in assessment order for levy of interest under section 234C--Contention that assessee had paid excess advance tax--Matter remanded-- Hindustan Unilever Ltd. v. Additional CIT (Mumbai) . . . 737

S. 244A --Income--Interest on refund--To be taxed in year of grant of refund--Assessing Officer to examine whether assessee entitled to interest after order under section 143(3) passed and if so grant relief-- Hindustan Unilever Ltd. v. Additional CIT (Mumbai) . . . 737

S. 263 --Revision--Commissioner--Revision on ground that expenses incurred by assessee capital in nature--Finding that expenses revenue in nature--Assessment order not erroneous--Order of revision to be set aside-- Star Music v. Deputy CIT (Chennai) . . . 700

Income-tax Rules, 1962 :

R. 8D --Income--Disallowance of expenditure in relation to exemption income--Income from tax free bonds and dividends--Ad hoc amount of 0.5 per cent.-- Hindustan Unilever Ltd. v. Additional CIT (Mumbai) . . . 737

 

ITR VOL 352 PART 1

 

INCOME TAX REPORTS (ITR)

Volume 352 Part 1 (Issue dated 8-4-2013)

SUBJECT INDEX TO CASES REPORTED IN THIS PART

HIGH COURTS

Business expenditure --Contingent or ascertained liability--Liability on account of wage revision--Liability certain--Liability deductible--Income-tax Act, 1961, s. 37-- CIT v. Bharat Heavy Electricals Ltd . (Delhi) . . . 88

----Donation for charitable institutions which would benefit assessee's employees--No details furnished regarding donations--Donations not deductible under section 37--Income-tax Act, 1961, s. 37-- CIT v. Bharat Heavy Electricals Ltd .
(Delhi) . . . 88

----Fines and penalties--Assessee taking business decision not to honour its commitment of fulfilling export entitlement in view of losses--Encashment of bank guarantee by Export Promotion Council--Payment recorded as penalty in assessee's books and claimed as deduction--No contravention of any provisions of law--Compensatory in nature--Allowable--Income-tax Act, 1961, s. 37(1)-- CIT v . Regalia Apparels Pvt. Ltd. (Bom) . . . 71

Exemption --Interest on tax-free bonds--Scope of section 10(15)--Interest for period between application for allotment and actual allotment--Entitled to exemption--Income-tax Act, 1961, s. 10(15)-- CIT v. Bharat Heavy Electricals Ltd .
(Delhi) . . . 88

Export --Special deduction--Computation--Miscellaneous income--Is part of total turnover for purposes of deduction--Income-tax Act, 1961, s. 80HHC-- CIT v . Infosys Technologies Ltd . (Karn) . . . 74

----Special deduction--Cut and polished marble blocks--Extent of cutting and polishing not prescribed--Process should add value--Assessee eligible for deduction--Income-tax Act, 1961, s. 80HHC, Sch. XII, entry (x)--Circular No. 693 dated 17-11-1994-- CIT v . Arihant Tiles and Marbles Pvt. Ltd . (Raj) . . . 20

----Special deduction--Dividend and interest receipts--Ninety per cent. of net receipts, included in profits, and not of gross receipts for arriving at profits--Income-tax Act, 1961, s. 80HHC-- CIT v . Infosys Technologies Ltd . (Karn) . . . 74

Export of computer software --Special deduction--Computation of profits--Expenditure incurred in foreign exchange by providing technical services outside India--Whether to be reduced from export turnover and total turnover--Matter remanded--Income-tax Act, 1961, s. 80HHE-- CIT v . Infosys Technologies Ltd .
(Karn) . . . 74

Income --Non-banking financial company--Mercantile system--Interest on non-performing assets--Provision for non-performing assets--Characterisation as non-performing assets alone not sufficient--Uncertainty in realization of income or interest to be proved--Nothing to indicate interest non-recoverable--Whether uncertainty of interest accrued--Matter remanded to Assessing Officer to decide issue afresh--Income-tax Act, 1961-- CIT v . Sakthi Finance Ltd . (Mad) . . . 102

Income from house property --Income from business--Construction business--Rental income from unsold flats--Assessable as income from house property--Income-tax Act, 1961, ss. 14, 22-- Azimganj Estate Pvt. Ltd. v. CIT (Cal) . . . 82

Interest on borrowed capital --Assessee allowing its directors and family members to use its funds for their personal benefits--No attempt by directors to repay loan--No evidence showing loan without interest given for business purposes--Interest not allowable--Income-tax Act, 1961, s. 36(1)(iii)-- CIT v. Sahu Enterprises Pvt. Ltd .
(All) . . . 8

Offences and prosecution --Compounding of offences--Revised guidelines--Condition that compounding cannot be done in cases where order of conviction has been passed--Assessee to show sufficient cause or reason to support request for compounding of offence--Direction to consider application on the merits--Income-tax Act, 1961, s. 276CC-- V. G. Paneerdas and Co. P. Ltd . v. Secretary, Central Board of Direct Taxes (Mad) . . . 77

Penalty --Concealment of income--Failure to furnish accurate particulars--Disallowance of claim and imposition of penalty on basis of subsequent Supreme Court decision--Not furnishing of inaccurate particulars--Penalty levied not justified--Income-tax Act, 1961, s. 271(1)(c)-- CIT v . Celetronix Power India P. Ltd . (Bom) . . . 70

----Concealment of income--Survey--Surrender of income without explanation--Not voluntary disclosure--Furnishing inaccurate particulars--Penalty justified--Income-tax Act, 1961, s. 271(1)(c), Expln. 1(A) -- CIT v. Mak Data Ltd . (Delhi) . . . 1

Projects outside India --Special deduction under section 80HHB--Computation of special deduction--Loss in one unit not to be set off against profits in another unit--Income-tax Act, 1961, s. 80HHB-- CIT v . Bharat Heavy Electricals Ltd.
(Delhi) . . . 88

Reassessment --Notice after four years--Authority for Advance Rulings in assessee's case ruling that profits arising from realization of portfolio investments in India be treated as part of business profits of assessee--Claim of loss on sale of shares accepted on basis of ruling--Reopening of assessment on ground earlier ruling not correct in view of subsequent ruling--No failure on part of assessee to disclose fully and truly all material facts necessary for assessment--High Court holding that advance ruling in assessee's case will continue to govern assessee's assessments--Notice not valid--Income-tax Act, 1961, ss. 147, 148-- DIT v. Prudential Assurance Co. Ltd. (Bom) . . . 66

Transfer of case --Assessee must be given opportunity to be heard--Assessee submitted objections to transfer of case to New Delhi and stating hardships that would be caused if such transfer effected--Furnishing personal hearing necessary--Income-tax Act, 1961, s. 127(1)-- Aamby Valley Ltd . v . CIT (Bom) . . . 48

----Assessee must be given opportunity to be heard--Failure to inform assessee of reasons for transfer--Impossible for assessee to put forth its case--Objections of assessee to be considered before taking any decision to confirm or drop notice--Income-tax Act, 1961, s. 127-- Shikshana Prasaraka Mandali v . CIT (Bom) . . . 53

----Transfer from one city to another--Assessee must be given opportunity to be heard--Assessee requesting personal hearing but not afforded one--Order of transfer--Not valid--Income-tax Act, 1961, s. 127-- Sahara Hospitality Ltd . v . CIT
(Bom) . . . 38

Voluntary disclosure of income --Existence of stock, cash and amount of sundry debtors accepted in previous years--Presumption that stock, cash and amount of sundry debtors continued for a short period--Voluntary disclosure not rendered invalid--Voluntary Disclosure of Income Scheme, 1997--Finance Act, 1997, s. 64(2)(ii)-- Jainsons v. ITAT
(Jharkhand) . . . 28

 

SECTIONWISE INDEX TO CASES REPORTED IN THIS PART

Finance Act, 1997 :

S. 64(2)(ii) --Voluntary disclosure of income--Existence of stock, cash and amount of sundry debtors accepted in previous years--Presumption that stock, cash and amount of sundry debtors continued for a short period--Voluntary disclosure not rendered invalid-- Jainsons v. ITAT (Jharkhand) . . . 28

Income-tax Act, 1961 :

S. 10(15) --Exemption--Interest on tax-free bonds--Scope of section 10(15)--Interest for period between application for allotment and actual allotment--Entitled to exemption-- CIT v. Bharat Heavy Electricals Ltd . (Delhi) . . . 88

S. 14 --Income from house property--Income from business--Construction business--Rental income from unsold flats--Assessable as income from house property-- Azimganj Estate Pvt. Ltd. v. CIT (Cal) . . . 82

S. 22 --Income from house property--Income from business--Construction business--Rental income from unsold flats--Assessable as income from house property-- Azimganj Estate Pvt. Ltd. v. CIT (Cal) . . . 82

S. 36(1)(iii) --Interest on borrowed capital--Assessee allowing its directors and family members to use its funds for their personal benefits--No attempt by directors to repay loan--No evidence showing loan without interest given for business purposes--Interest not allowable-- CIT v. Sahu Enterprises Pvt. Ltd . (All) . . . 8

S. 37 --Business expenditure--Contingent or ascertained liability--Liability on account of wage revision--Liability certain--Liability deductible-- CIT v. Bharat Heavy Electricals Ltd . (Delhi) . . . 88

----Business expenditure--Donation for charitable institutions which would benefit assessee's employees--No details furnished regarding donations--Donations not deductible under section 37-- CIT v. Bharat Heavy Electricals Ltd .
(Delhi) . . . 88

S. 37(1) --Business expenditure--Fines and penalties--Assessee taking business decision not to honour its commitment of fulfilling export entitlement in view of losses--Encashment of bank guarantee by Export Promotion Council--Payment recorded as penalty in assessee's books and claimed as deduction--No contravention of any provisions of law--Compensatory in nature--Allowable-- CIT v . Regalia Apparels Pvt. Ltd.
(Bom) . . . 71

S. 80HHB --Projects outside India--Special deduction under section 80HHB--Computation of special deduction--Loss in one unit not to be set off against profits in another unit-- CIT v . Bharat Heavy Electricals Ltd. (Delhi) . . . 88

S. 80HHC --Export--Special deduction--Computation--Miscellaneous income--Is part of total turnover for purposes of deduction-- CIT v . Infosys Technologies Ltd .
(Karn) . . . 74

----Export--Special deduction--Dividend and interest receipts--Ninety per cent. of net receipts, included in profits, and not of gross receipts for arriving at profits-- CIT v . Infosys Technologies Ltd . (Karn) . . . 74

S. 80HHC, Sch. XII, entry (x) --Export--Special deduction--Cut and polished marble blocks--Extent of cutting and polishing not prescribed--Process should add value--Assessee eligible for deduction--Circular No. 693 dated 17-11-1994-- CIT v . Arihant Tiles and Marbles Pvt. Ltd . (Raj) . . . 20

S. 80HHE --Export of computer software--Special deduction--Computation of profits--Expenditure incurred in foreign exchange by providing technical services outside India--Whether to be reduced from export turnover and total turnover--Matter remanded-- CIT v . Infosys Technologies Ltd . (Karn) . . . 74

S. 127 --Transfer of case--Assessee must be given opportunity to be heard--Failure to inform assessee of reasons for transfer--Impossible for assessee to put forth its case--Objections of assessee to be considered before taking any decision to confirm or drop notice-- Shikshana Prasaraka Mandali v . CIT (Bom) . . . 53

----Transfer of case--Transfer from one city to another--Assessee must be given opportunity to be heard--Assessee requesting personal hearing but not afforded one--Order of transfer--Not valid-- Sahara Hospitality Ltd . v . CIT (Bom) . . . 38

S. 127(1) --Transfer of case--Assessee must be given opportunity to be heard--Assessee submitted objections to transfer of case to New Delhi and stating hardships that would be caused if such transfer effected--Furnishing personal hearing necessary-- Aamby Valley Ltd . v . CIT (Bom) . . . 48

S. 147 --Reassessment--Notice after four years--Authority for Advance Rulings in assessee's case ruling that profits arising from realization of portfolio investments in India be treated as part of business profits of assessee--Claim of loss on sale of shares accepted on basis of ruling--Reopening of assessment on ground earlier ruling not correct in view of subsequent ruling--No failure on part of assessee to disclose fully and truly all material facts necessary for assessment--High Court holding that advance ruling in assessee's case will continue to govern assessee's assessments--Notice not valid-- DIT v. Prudential Assurance Co. Ltd. (Bom) . . . 66

S. 148 --Reassessment--Notice after four years--Authority for Advance Rulings in assessee's case ruling that profits arising from realization of portfolio investments in India be treated as part of business profits of assessee--Claim of loss on sale of shares accepted on basis of ruling--Reopening of assessment on ground earlier ruling not correct in view of subsequent ruling--No failure on part of assessee to disclose fully and truly all material facts necessary for assessment--High Court holding that advance ruling in assessee's case will continue to govern assessee's assessments--Notice not valid-- DIT v. Prudential Assurance Co. Ltd. (Bom) . . . 66

S. 271(1)(c) --Penalty--Concealment of income--Failure to furnish accurate particulars--Disallowance of claim and imposition of penalty on basis of subsequent Supreme Court decision--Not furnishing of inaccurate particulars--Penalty levied not justified-- CIT v . Celetronix Power India P. Ltd . (Bom) . . . 70

S. 271(1)(c), Expln. 1(A) --Penalty--Concealment of income--Survey--Surrender of income without explanation--Not voluntary disclosure--Furnishing inaccurate particulars--Penalty justified-- CIT v. Mak Data Ltd . (Delhi) . . . 1

S. 276CC --Offences and prosecution--Compounding of offences--Revised guidelines--Condition that compounding cannot be done in cases where order of conviction has been passed--Assessee to show sufficient cause or reason to support request for compounding of offence--Direction to consider application on the merits-- V. G. Paneerdas and Co. P. Ltd . v. Secretary, Central Board of Direct Taxes
(Mad) . . . 77

From April 1, it is mendatory to register Equitable Mortgage agreement

From April 1, it is mendatory to register Equitable Mortgage agreement (Deposit of the Title Deeds) with sub-registrar (where property is situated) within 4 months of execution. If agreement not executed then Mortgagor has to file notice within 30 days from mortgage.
Detailed procedures at www.igrmaharashtra.gov.in

-Regards
CA.C.V.PAWAR
M-9423961209
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