Section 132: A Practical Guide To The Law And Procedure Of Search And Seizure

 

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S. 132: A Practical Guide To The Law And Procedure Of Search And Seizure

The power of search & seizure is a potent tool for the department to unearth unaccounted income. However, to mitigate the possibility of its misuse by over-zealous officials, the law has incorporated several safeguards. The author, an eminent advocate with rich experience in the subject, has explained the entire law in a succinct manner. His check list will ensure that the department and the taxpayers are always on the right side of the law

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Latest:

CIT vs. Orient Instrument Pvt. Ltd (Delhi High Court)

Loss from shares dealing cannot be deemed to be from "speculation" under Explanation to s. 73 if company is not engaged in the "business" of shares dealing

High Court Verdict On Treating Derivatives As Speculation Does Not Apply To FIIs: ITAT Mumbai

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Platinum Asset Management Ltd vs. DDIT (No. 2) (ITAT Mumbai)

S. 115AD: High Court verdict in Bharat Ruia 337 ITR 452 (Bom) on taxation of derivatives as speculation income/ loss is not applicable to FIIs

The assessee, a Foreign Institutional Investor ("FII"), suffered a loss of Rs. 172.18 crore on account of derivative transactions which was claimed as a short-term capital loss. The AO held that the said loss constituted a business/ speculation loss and could not be set-off against the short-term capital gains. Though in the assessee's own case (Platinum Investment Management Ltd vs. DDIT (ITAT Mumbai)) it had been held that all income arising to a FII, including from dealings in derivatives, has to be assessed as capital gains, the department argued that this view was no longer good law in view of CIT vs. Bharat R. Ruia (HUF) 337 ITR 452 (Bom) where it was held that as transactions in derivatives are entered into and settled without taking any delivery of the shares, the same constitutes a speculative transaction. HELD by the Tribunal rejecting the department's case:

The judgement of the Bombay High Court in Bharat Ruia is not applicable to assessees which are FIIs duly registered with SEBI. FIIs are allowed to only invest in the Capital Market and the income arising from transfer of security is to be considered as short term capital gain or long term capital gain as per s. 115AD of the Act. FIIs are not allowed to do business in the security market. Also, derivative is a security as per the clause (ia) to sub-section (h) of section 2 of The Securities Contracts (Regulation) Act, 1956 with effect from 22.2.2000. The co-ordinate Bench of the Tribunal has considered this aspect as well in the earlier order dated 5.12.2012 in which the earlier decision in LG Asian Plus Ltd v/s ADIT 46 SOT 159 was also considered

Note: On the issue that a FII cannot have business profits contrary views have been taken in ABC Equity Fund 250 ITR 194, Fidelity Advisor Series VII 271 ITR 1, General Electric Pension Trust 280 ITR 425, Fidelity Northstar Fund 288 ITR 641 and Royal Bank of Canada 323 ITR 380

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CIT vs. M/s. Gem Granites (Karnataka) (Madras High Court)

S. 271(1)(c) penalty cannot be levied if the assessee discharges the primary burden by a cogent explanation and the AO is unable to rebut it. MAK Data (SC) explained

Third Member, ITAT, Resolves Controversy On S. 14A + Rule 8D Disallowance For Shares Held As Stock-in-trade

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D. H. Securities Pvt. Ltd vs. DCIT (ITAT Mumbai) (Third Member)

S. 14A & Rule 8D disallowance applies to tax-free securities held as stock-in-trade

The assessee claimed that as it was engaged in the business of trading in shares, its main object is to earn profit on purchase and sale of shares and not to earn dividend income from such shares. It claimed that the accrual of tax-free dividend on such shares was merely incidental to the holding of shares as stock-in-trade and that no disallowance could be made u/s 14A and Rule 8D. It also claimed that though the assessee had not incurred any direct or indirect expenditure to earn the said dividend, the AO had made the disallowance on a presumptive basis. The Division Bench referred the dispute to a Third Member in view of the difference of opinion between the Benches. Before the Third Member, the assessee relied on CCI Ltd 71 DTR (Kar) 141 , India Advantage Securities, Yatish Trading etc in which the law had been laid down that s. 14A & Rule 8D does not apply to securities held as stock-in-trade. The department relied on Godrej & Boyce Manufaturing Co 328 ITR 81 (Bom) (where it was held that Rule 8D is mandatory) and Daga Capital 117 ITD 169 (Mum) (SB) (where it was held that s. 14A applies to stock-in-trade). HELD by the Third Member:

It is accepted by both parties that the assessee is a dealer in shares and that the shares were held by it as stock-in-trade. The issue under appeal is squarely covered by the principles laid down in Godrej & Boyce, Dhanuka & Sons 339 ITR 319 (Cal), American Express Bank and Damani Estates & Finance in which the issue has been elaborately considered. The argument that the judgement of the Karnataka High Court in CCI Ltd is the solitary High Court judgement on the point and it should be followed is not correct because the issue has also been considered by the Calcutta High Court in Dhanuka & Sons. Also, while CCI Ltd has not considered the jurisdictional High Court judgement in Godrej & Boyce, Dhanuka & Sons has duly considered Godrej & Boyce in taking the view that s. 14A/ Rule 8D applies to shares held as stock-in-trade. Accordingly, disallowance u/s 14A can be made in conformity with law even where dividend income has been earned on shares held as stock-in-trade.

Note: We had suggested that the controversy, being one between Division Benches of the Tribunal and not just Members of a Bench, ought to be referred to a 5 Member Special Bench

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Chironjilal Sharma HUF vs. UOI (Supreme Court)

S. 132B(4)(b)/ 240/ 244A: Assessee is entitled to interest on cash appropriated during search even if refund is directed in appeal proceedings

Section 132B(4): Supreme Court Explains Law On Grant Of Interest On Excess Seized Cash

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

Chironjilal Sharma HUF vs. UOI (Supreme Court)

S. 132B(4)(b)/ 240/ 244A: Assessee is entitled to interest on cash appropriated during search even if refund is directed in appeal proceedings

Pursuant to a search conducted u/s 132, cash of Rs. 2.35 lakhs was recovered. The AO passed an order u/s 132(5) in which he calculated the tax liability and appropriated the seized cash. An assessment order was also passed to the same effect. The AO's order was finally set-aside by the Tribunal and it became final. Consequently, the assessee was refunded the amount of Rs. 2.35 lakhs with interest from 4.3.1994 (date of last of the regular assessments by the AO) until the date of refund. The assessee claimed that he is entitled to interest u/s 132B(4)(b) of the Act for the period from the expiry of period of six months from the date of order u/s 132(5) to the date of regular assessment order. In other words, as the order u/s 132(5) was passed on 31.5.1990, six months expired on 30.11.1990 and the last of the regular assessments was done on 4.3.1994, the assessee claimed interest u/s 132B(4)(b) from 1.12.1990 to 4.3.1994. HELD by the Supreme Court:

The department's argument that the refund of excess amount is governed by s. 240 and that s. 132B(4)(b) has no application is not acceptable. S. 132B(4)(b) deals with pre-assessment period and there is no conflict between this provision and s. 240 or for that matter s. 244(A). The former deals with pre-assessment period in the matters of search and seizure and the later deals with post assessment period as per the order in appeal. The department's view is not right on the plain reading of s. 132B(4)(b) and the assessee is entitled to simple interest at the rate of 15% per annum u/s 132B(4)(b) from 1.12.1990 to 4.3.1994. The interest shall be paid within two months from today.

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Latest:

Platinum Asset Management Ltd vs. DDIT (No. 2) (ITAT Mumbai)

S. 115AD: High Court verdict in Bharat Ruia 337 ITR 452 (Bom) on taxation of derivatives as speculation income/ loss is not applicable to FIIs

Explanation to Section 73 Shares Loss Is Not Speculation Loss In Absence Of 'Business' Of Shares Dealing: Delhi High Court

 

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CIT vs. Orient Instrument Pvt. Ltd (Delhi High Court)

Loss from shares dealing cannot be deemed to be from "speculation" under Explanation to s. 73 if company is not engaged in the "business" of shares dealing

The assessee, engaged in the business of trading of crafts paper etc claimed a loss of Rs. 5.53 lakhs arising on account of a transaction whereby it purchased and sold shares. The AO held that under the Explanation to s. 73, the said loss was deemed to be arising from a speculation business and could not be set off against other business profits. However, the CIT(A) and Tribunal allowed the assessee's claim on the basis that the assessee was not engaged in the "business of purchase and sale of shares" so as to fall into the mischief of the Explanation to s. 73. In appeal before the High Court, the department relied on Bhikam Chand Jankilal 131 ITR 554 (MP) and argued that even a single transaction of sale or purchase of shares might amount to a "business". HELD by the High Court dismissing the appeal:

The assessee was engaged in the business of trading of crafts paper, installation, job work, consultancy and commission. By all means, the transaction whereby it purchased the shares and incurred loss on account of the fall in the value of the share was a solitary one. The findings of the Tribunal that the transaction did not constitute the business carried on by the company, cannot be termed as perverse or unreasonable. No substantial question of law arises (Standipack 350 ITR 251 (Cal) noted)

See also Prasad Agents 333 ITR 275 (Bom), Lokmat Newspapers 322 ITR 43 (Bom) & Paharpur Cooling Towers 338 ITR 295 (Cal) on the scope of Explanation to s. 73

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D. H. Securities Pvt. Ltd vs. DCIT (ITAT Mumbai) (Third Member)

S. 14A & Rule 8D disallowance applies to tax-free securities held as stock-in-trade

ITR VOL 359 PART 2

 

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

ONLINE EDITION

SUBJECT INDEX TO CASES REPORTED

HIGH COURTS

Appeal to High Court --Deduction--Disallowance of expenditure relating to income not includible in total income--Remand by Tribunal to Assessing Officer to work out disallowance in light of Godrej and Boyce Mfg. Co. Ltd. [2010] 328 ITR 81 (Bom)--No substantial question of law--Income-tax Act, 1961, s. 14A--Income-tax Rules, 1962, r. 8D-- CIT v. Suashish Diamonds Ltd. (Bom) . . . 544

Business expenditure --Disallowance--Payments subject to deduction of tax at source--Advertisement expenditure--Assessee acting as sub-agent for advertising agencies to which it transferred advertisements from clients--Payments received from clients after deduction of tax by clients made over to agencies--Assessee not required to deduct tax at source--Payment allowable--Income-tax Act, 1961, ss. 40(a)(ia), 194C-- CIT v. Honest Publicity (Guj) . . . 547

----Employer’s contribution towards superannuation fund--Tribunal holding not allowable under section 36(1)(iv)--Can be allowed under section 37--Matter remanded to determine whether incurred exclusively for purpose of business--Proper--Income-tax Act, 1961, ss. 36(1)(iv), 37-- CIT v. Suashish Diamonds Ltd. (Bom) . . . 544

Income from house property or income from other sources --Finding that letting of plant, machinery or furniture and premises constituted single, composite and inseparable letting--Finding that intention of parties was to have single inseparable letting evidenced by composite lease deed for which consolidated lease rent fixed--Income assessable as “Income from other sources†--Income-tax Act, 1961, ss. 22, 56-- Garg Dyeing and Processing Industries v. Asst. CIT (Delhi) . . . 550

 

PRINT EDITION

ITR Volume 359 : Part 2 (Issue dated : 9-12-2013)

SUBJECT INDEX TO CASES REPORTED IN THIS PART

HIGH COURTS

Appeal to Appellate Tribunal --Duty of Tribunal--Duty to record reasons for order--Matter remanded--Income-tax Act, 1961-- ATM Forgings v. CIT (P&H) . . . 314

Assessment --Unexplained investment--Reference to Valuation Officer--Scope of section 142A--Rejection of accounts--Condition precedent for reference to Valuation Officer--No defect detailed in books of account--Reference to Valuation Officer not valid--Difference between cost of construction disclosed by assessee and estimate by Valuation Officer--Not assessable as unexplained investment--Income-tax Act, 1961, ss. 69, 142A-- Goodluck Automobiles Pvt. Ltd. v. Asst. CIT (Guj) . . . 306

Capital gains --Conversion of shares from stock-in-trade to investments--Difference between sale price of shares and market value of shares as on date of conversion--Assessable as capital gains--Income-tax Act, 1961-- CIT v. Yatish Trading Co. Pvt. Ltd. (Bom) . . . 320

----Long-term capital gains--Rate of tax--Non-resident--Transfer of listed shares--Lower rate of ten per cent.--Disqualification for lower rate where assessee takes benefit of indexation under second proviso to section 48--Assessee availing of benefit of first proviso to section 48--Entitled to benefit of lower rate of tax at 10 per cent.--Income-tax Act, 1961, ss. 48, 112(1)-- Cairn UK Holdings Ltd. v. DIT (Delhi) . . . 268

Exemption --Export--New industrial undertaking manufacturing articles for export--Undertaking obtaining approval from Government--Exemption granted for assessment year 1994-95--No change in facts--Exemption available for assessment years 1995-96, 1993-94, 1996-97 and 1997-98--Income-tax Act, 1961, s. 10B-- CIT v. Relco P. Ltd. (Mad) . . . 291

Interpretation of taxing statutes --When purposive construction adopted and when literal construction applied-- Cairn UK Holdings Ltd. v. DIT (Delhi) . . . 268

Investment allowance --Foreign exchange--Increase in liability due to fluctuation in rate of foreign exchange--Law applicable--Amendment to section 43A w.e.f. 1-4-2003--Amendment not retrospective--Machinery purchased in assessment year 1987-88--Increase in liability due to fluctuation in rate of foreign currency--Investment allowance to be granted on enhanced cost in assessment year 1993-94--Income-tax Act, 1961, ss. 32A, 43A-- CIT v. Punjab Anand Industries (P&H) . . . 300

Precedent --Effect of decision of Supreme Court in Kranti Associates P. Ltd. v. Masood Ahmed Khan [2010] 9 SCC 496-- ATM Forgings v. CIT (P&H) . . . 314

Recovery of tax --Reduction of period for payment of tax--Condition precedent--Reason to believe grant of full period would be detrimental to Revenue and prior permission of Joint Commissioner--End of financial year approaching--Not a ground for reduction of period--Provisional attachment to extent of Rs. 36.54 crores--No basis for forming reason to believe that grant of period of thirty days would be detrimental to Revenue--Order of reduction of period--Not valid--Income-tax Act, 1961, s. 220-- Firoz Tin Factory v. Asst. CIT (Bom) . . . 296

 

SECTIONWISE INDEX TO CASES REPORTED IN THIS PART

Income-tax Act, 1961 :

S. 10B --Exemption--Export--New industrial undertaking manufacturing articles for export--Undertaking obtaining approval from Government--Exemption granted for assessment year 1994-95--No change in facts--Exemption available for assessment years 1995-96, 1993-94, 1996-97 and 1997-98-- CIT v. Relco P. Ltd. (Mad) . . . 291

S. 32A --Investment allowance--Foreign exchange--Increase in liability due to fluctuation in rate of foreign exchange--Law applicable--Amendment to section 43A w.e.f. 1-4-2003--Amendment not retrospective--Machinery purchased in assessment year 1987-88--Increase in liability due to fluctuation in rate of foreign currency--Investment allowance to be granted on enhanced cost in assessment year 1993-94-- CIT v. Punjab Anand Industries (P&H) . . . 300

S. 43A --Investment allowance--Foreign exchange--Increase in liability due to fluctuation in rate of foreign exchange--Law applicable--Amendment to section 43A w.e.f. 1-4-2003--Amendment not retrospective--Machinery purchased in assessment year 1987-88--Increase in liability due to fluctuation in rate of foreign currency--Investment allowance to be granted on enhanced cost in assessment year 1993-94-- CIT v. Punjab Anand Industries (P&H) . . . 300

S. 48 --Capital gains--Long-term capital gains--Rate of tax--Non-resident--Transfer of listed shares--Lower rate of ten per cent.--Disqualification for lower rate where assessee takes benefit of indexation under second proviso to section 48--Assessee availing of benefit of first proviso to section 48--Entitled to benefit of lower rate of tax at 10 per cent.-- Cairn UK Holdings Ltd. v. DIT (Delhi) . . . 268

S. 69 --Assessment--Unexplained investment--Reference to Valuation Officer--Scope of section 142A--Rejection of accounts--Condition precedent for reference to Valuation Officer--No defect detailed in books of account--Reference to Valuation Officer not valid--Difference between cost of construction disclosed by assessee and estimate by Valuation Officer--Not assessable as unexplained investment-- Goodluck Automobiles Pvt. Ltd. v. Assistant CIT (Guj) . . . 306

S. 112(1) --Capital gains--Long-term capital gains--Rate of tax--Non-resident--Transfer of listed shares--Lower rate of ten per cent.--Disqualification for lower rate where assessee takes benefit of indexation under second proviso to section 48--Assessee availing of benefit of first proviso to section 48--Entitled to benefit of lower rate of tax at 10 per cent.-- Cairn UK Holdings Ltd. v. DIT (Delhi) . . . 268

S. 142A --Assessment--Unexplained investment--Reference to Valuation Officer--Scope of section 142A--Rejection of accounts--Condition precedent for reference to Valuation Officer--No defect detailed in books of account--Reference to Valuation Officer not valid--Difference between cost of construction disclosed by assessee and estimate by Valuation Officer--Not assessable as unexplained investment-- Goodluck Automobiles Pvt. Ltd. v. Asst. CIT (Guj) . . . 306

S. 220 --Recovery of tax--Reduction of period for payment of tax--Condition precedent--Reason to believe grant of full period would be detrimental to Revenue and prior permission of Joint Commissioner--End of financial year approaching--Not a ground for reduction of period--Provisional attachment to extent of Rs. 36.54 crores--No basis for forming reason to believe that grant of period of thirty days would be detrimental to Revenue--Order of reduction of period--Not valid-- Firoz Tin Factory v. Asst. CIT (Bom) . . . 296

 

ITR (TRIB) VOL 28 PART 3

 

ITR'S TRIBUNAL TAX REPORTS (ITR (TRIB)) -- PRINT AND ONLINE EDITION

 

ONLINE EDITION

SUBJECT INDEX TO CASES REPORTED

Business expenditure --Disallowance--Payments subject to deduction of tax at source--Assessee acting as sub-agent of advertising agencies on commission basis--Not required to deduct tax from payments to advertising agencies--Payments deductible--Income-tax Act, 1961, ss. 40(a)(ia), 194C--CBDT Circular No. 452, dated 17.3.1986-- ITO v. Honest Publicity (Ahmedabad) . . . 792

Insurance business --Computation of profits--Special provision--Non obstante clause--Annual average of surplus arrived at by adjusting surplus or deficit disclosed by actuarial valuation made in accordance with Insurance Act, 1938--Actuarial valuation to be accordance with unamended 1938 Act--Policyholders’ and shareholders’ account to be consolidated for arriving at deficit or surplus without taking into consideration transfer of funds from shareholders’ account to policyholders’ account--Section 14A not applicable to insurance business--Assessee entitled to exemption under section 10(23AAB) of surplus of participating pension business and dividend under section 10(34)--Incomes in shareholders’ account to be considered as arising out of life insurance business--Not to be taxed as income from other sources--Negative reserve part of actuarial valuation--Assessing Officer has no power to modify amount after actuarial valuation done--Depreciation allowable on assets capitalised in accounts--Income-tax Act, 1961, ss. 10(23AAB), (34), 14A, 32, 44, Sch. I, Part A, r. 2--Insurance Act, 1938--Insurance Regulatory and Development Authority Act, 1999--Insurance Regulatory and Development Authority (Actuarial Report and Abstract) Regulations, 2000--Insurance Regulatory and Development Authority (Preparation of Financial Statements and Auditor’s Report of Insurance Companies) Regulations, 2002-- ICICI Prudential Insurance Co. Ltd. v. Asst. CIT (Mumbai) . . . 715

PRINT EDITION

Volume 28 : Part 3 (Issue dated : 9-12-2013)

SUBJECT INDEX TO CASES REPORTED

Business expenditure --Disallowance--Commission liable to deduction of tax at source--“Sale scheme expenses†debited to profit and loss account--Benefit given by way of credit note to distributors--Amount not part of invoice--No provision in agreement for such discount over and above invoice price--Whether discount or commission--Failure by assessee to produce scheme under which benefit given to distributors--Matter remanded to Assessing Officer to verify and decide issue in accordance with law--Income-tax Act, 1961, s. 40(a)(ia)-- SKOL Breweries Ltd. v. Assistant CIT (Mumbai) . . . 465

----Disallowance--Excessive or unreasonable payments--Failure of assessee to produce books of account and bills and vouchers for verification--Disallowance of 15 per cent. from total expenditure proper--Income-tax Act, 1961, s. 40A(2)-- Brigade Global Services P. Ltd. v. ITO (Hyderabad) . . . 411

----Disallowance--Payments liable to deduction of tax at source--Fees for technical services--Human skill involved in internet bandwidth facilities availed of by assessee--Payment in nature of fees for technical services--Assessee under obligation to deduct tax at source--Income-tax Act, 1961, s. 40(a)(ia)-- Brigade Global Services P. Ltd. v. ITO (Hyderabad) . . . 411

----Disallowance--Payments subject to tax deduction at source--Production of additional evidence before Commissioner (Appeals) in form of revised tax deduction at source return in Form 26Q4 filed subsequent to assessment--Assessing Officer should be granted opportunity to examine additional evidence--Matter remanded--Income-tax Act, 1961, s. 40(a)(ia)--Income-tax Rules, 1962, r. 46A-- Assistant CIT v. Shimoga District Milk Producers Societies Union Ltd. (Bangalore) . . . 369

----Disallowance--Payment subject to deduction of tax at source--Royalty--Definition for purpose of disallowance-- Explanation 2 to section 9(1)(vi) applicable--Payment to group company towards licence fees representing annual charges for up-gradation of accounting software--Payment for transfer of any right to use or right to use computer software--Not royalty as provided under Explanation 2 to section 9(1)(vi)--Amount not be to disallowed under section 40(a)(i)--Income-tax Act, 1961, ss. 9(1)(vi), Expln. 2, 40(a)(i)-- SKOL Breweries Ltd. v. Assistant CIT (Mumbai) . . . 465

----Disallowance--Sum liable to deduction of tax at source--Provision not applicable to depreciation--Sum paid for acquisition of brand from non-resident and capitalised in accounts--Depreciation cannot be denied for failure to deduct tax at source on payment--Income-tax Act, 1961, ss. 32(1)(ii), 40(a)(i)-- SKOL Breweries Ltd. v. Assistant CIT (Mumbai) . . . 465

----Interest on borrowed capital--Loans advanced to group companies at lower rate of interest--Disallowance only to extent of advance given by assessee during year and only for period for which advance remained with group concerns--Whether assessee had its own funds for making advance to be seen--Matter remanded--Income-tax Act, 1961, s. 36(1)(iii)-- SKOL Breweries Ltd. v. Assistant CIT (Mumbai) . . . 465

Capital or revenue expenditure --Assessee, a co-operative society engaged in dairy development--Expenditure incurred to construct building for milk producers’ co-operative societies--No capital asset in hands of assessee--Grant to facilitate carrying out of business objects more effectively--Revenue expenditure--Income-tax Act, 1961-- Assistant CIT v. Shimoga District Milk Producers Societies Union Ltd. (Bangalore) . . . 369

----Payments to clubs towards entrance fee, subscription and other services-- Allowable--SKOL Breweries Ltd. v. Assistant CIT (Mumbai) . . . 465

Depreciation --Condition precedent--User of asset--Asset can be said to be in use when kept ready for use--Mining equipment and consumables kept ready for use when machines of sub-contractor broke down--Assessee entitled to depreciation--Income-tax Act, 1961, s. 32-- Assistant CIT v. Ashok Doshi (Jodhpur) . . . 389

----Rate of depreciation--Assessee already having Maruti van--Purchase of Tavera car for undertaking supervision at mine site for which Maruti van not suitable--No material to substantiate personal use--Depreciation to extent of 50 per cent. allowable--Income-tax Act, 1961, s. 32-- Assistant CIT v. Ashok Doshi (Jodhpur) . . . 389

----Rate of depreciation--Tippers--Purchase of tankers and tippers for giving them on hire--Assessee engaged in business of mining--Tippers not part of plant and machinery--Depreciation at 40 per cent. allowable--Income-tax Act, 1961, s. 32-- Assistant CIT v. Ashok Doshi (Jodhpur) . . . 389

Exemption --Charitable purpose--Educational institution--Object of assessee to promote education in practice of management and related subjects--Assessee eligible for exemption--Income-tax Act, 1961, ss. 2(15), 11-- Ahmedabad Management Association v. Joint DIT (Exemption) (Ahmedabad) . . . 349

----Export--Disallowance of expenditure by Assessing Officer on computing income--Claiming of exemption for inflated business income as additional ground before Appellate Tribunal--Deduction allowable on account of disallowance of expenditure--Income-tax Act, 1961, s. 10A-- Brigade Global Services P. Ltd. v. ITO (Hyderabad) . . . 411

Income --Income not includible in total income--Awards in case of sportsman who is not professional--Awards not in nature of income--Assessee not liable to tax--Income-tax Act, 1961, s. 10(17A)--CBDT Circular No. 447 of 1986, dated 22-1-1986-- Abhinav Bindra v. Deputy CIT (Delhi) . . . 376

----Income not includible in total income--Share of profits received by partner from firm--Amount credited in capital account verifiable from bank account of firm--Amount not taxable--Income-tax Act, 1961, s. 10(2A)-- Assistant CIT v. Ashok Doshi (Jodhpur) . . . 389

International transactions --Arm’s length price--Determination--Press Note in respect of foreign direct investment policy prescribing percentage of royalty allowed under automatic route--Only for remittance of foreign exchange--Not substitute for determination of arm’s length price under provisions of Act--International transactions of assessee constituting only 3.93 per cent. of its total operating cost--Comparison of entity-level results in contravention of transfer pricing regulations--Comparable uncontrolled price method adopted by assessee in subsequent years not disputed by Department--Determination of arm’s length price remanded to Assessing Officer considering appropriate comparables--Income-tax Act, 1961, s. 92CA-- SKOL Breweries Ltd. v. Assistant CIT (Mumbai) . . . 465

----Determination of arm’s length price--Assessment--Dispute Resolution Panel--Direction of Dispute Resolution Panel binding on Assessing Officer--Matter remanded to pass fresh assessment order in accordance with directions of Dispute Resolution Panel--Income-tax Act, 1961, s. 144C(13)-- Diamond Management and Technology Consultants Ltd. v. Assistant DIT (International Taxation) (Mumbai) . . . 359

----Transfer pricing--Arm’s length price--Selection of comparables--Companies having extraordinarily high profit or loss excludible as comparables--New company--Financial data of only four months available--Part period data cannot be taken and company considered as comparable--Company rejected by co-ordinate Bench on similar issue is not comparable--Income-tax Act, 1961-- BA Continuum India P. Ltd. v. Assistant CIT (Hyderabad) . . . 445

----Transfer pricing--Computation of arm’s length price--Depreciation has impact on profit margin--Adjustment for depreciation to be made in computing arm’s length price--Income-tax Act, 1961-- BA Continuum India P. Ltd. v. Assistant CIT (Hyderabad) . . . 445

----Transfer pricing--Computation of arm’s length price--Difference between arm’s length price determined by Transfer Pricing Officer and assessee within range of plus or minus 5 per cent.--Assessee entitled for deduction of 5 per cent--Income-tax Act, 1961-- Brigade Global Services P. Ltd. v. ITO (Hyderabad) . . . 411

----Transfer pricing--Computation of arm’s length price--Selection of comparables--Companies having abnormal loss or profit and functionally different companies to be excluded--Income-tax Act, 1961-- Brigade Global Services P. Ltd. v. ITO (Hyderabad) . . . 411

----Transfer pricing--Computation of arm’s length price--Selection of comparables--Super profit making companies--Outsourcing company and functionally different companies to be excluded from comparables--Selection of company having extraordinary events depends upon its influence on profit margin--Matter remanded to consider adjustments to be made before arriving at arm’s length--Income-tax Act, 1961, s. 92CA-- Google India P. Ltd. v. Deputy CIT (Bangalore) . . . 403

-- --Transfer pricing--Exemption--Export--Computation of export turnover--Expenses on freight, telecommunication charges, or insurance attributable to delivery of articles or providing technical services outside India--To be excluded from export turnover--Income-tax Act, 1961, s. 10B(4)-- Brigade Global Services P. Ltd. v. ITO (Hyderabad) . . . 411

SECTIONWISE INDEX TO CASES REPORTED IN THIS PART

Income-tax Act, 1961

S. 2(15) --Exemption--Charitable purpose--Educational institution--Object of assessee to promote education in practice of management and related subjects--Assessee eligible for exemption-- Ahmedabad Management Association v. Joint DIT (Exemption) (Ahmedabad) . . . 349

S. 9(1)(vi), Expln. 2 --Business expenditure--Disallowance--Payment subject to deduction of tax at source--Royalty--Definition for purpose of disallowance--Explanation 2 to section 9(1)(vi) applicable--Payment to group company towards licence fees representing annual charges for up-gradation of accounting software--Payment for transfer of any right to use or right to use computer software--Not royalty as provided under Explanation 2 to section 9(1)(vi)--Amount not be to disallowed under section 40(a)(i)-- SKOL Breweries Ltd. v. Assistant CIT (Mumbai) . . . 465

S. 10(2A) --Exemption--Income not includible in total income--Share of profits received by partner from firm--Amount credited in capital account verifiable from bank account of firm--Amount not taxable-- Assistant CIT v. Ashok Doshi (Jodhpur) . . . 389

S. 10(17A) --Income--Income not includible in total income--Awards in case of sportsman who is not professional--Awards not in nature of income--Assessee not liable to tax--CBDT Circular No. 447 of 1986, dated 22-1-1986-- Abhinav Bindra v. Deputy CIT (Delhi) . . . 376

S. 10A --Exemption--Export--Disallowance of expenditure by Assessing Officer on computing income--Claiming of exemption for inflated business income as additional ground before Appellate Tribunal--Deduction allowable on account of disallowance of expenditure-- Brigade Global Services P. Ltd. v. ITO (Hyderabad) . . . 411

S. 10B(4) --International transaction--Transfer pricing--Exemption--Export--Computation of export turnover--Expenses on freight, telecommunication charges, or insurance attributable to delivery of articles or providing technical services outside India--To be excluded from export turnover-- Brigade Global Services P. Ltd. v. ITO (Hyderabad) . . . 411

S. 11 --Exemption--Charitable purpose--Educational institution--Object of assessee to promote education in practice of management and related subjects--Assessee eligible for exemption-- Ahmedabad Management Association v. Joint DIT (Exemption) (Ahmedabad) . . . 349

S. 32 --Depreciation--Condition precedent--User of asset--Asset can be said to be in use when kept ready for use--Mining equipment and consumables kept ready for use when machines of sub-contractor broke down--Assessee entitled to depreciation-- Assistant CIT v. Ashok Doshi (Jodhpur) . . . 389

----Depreciation--Rate of depreciation--Assessee already having Maruti van--Purchase of Tavera car for undertaking supervision at mine site for which Maruti van not suitable--No material to substantiate personal use--Depreciation to extent of 50 per cent. allowable-- Assistant CIT v. Ashok Doshi (Jodhpur) . . . 389

----Depreciation--Rate of depreciation--Tippers--Purchase of tankers and tippers for giving them on hire--Assessee engaged in business of mining--Tippers not part of plant and machinery--Depreciation at 40 per cent. allowable-- Assistant CIT v. Ashok Doshi (Jodhpur) . . . 389

S. 32(1)(ii) --Business expenditure--Disallowance--Sum liable to deduction of tax at source--Provision not applicable to depreciation--Sum paid for acquisition of brand from non-resident and capitalised in accounts--Depreciation cannot be denied for failure to deduct tax at source on payment-- SKOL Breweries Ltd. v. Assistant CIT (Mumbai) . . . 465

S. 36(1)(iii) --Business expenditure--Interest on borrowed capital--Loans advanced to group companies at lower rate of interest--Disallowance only to extent of advance given by assessee during year and only for period for which advance remained with group concerns--Whether assessee had its own funds for making advance to be seen--Matter remanded-- SKOL Breweries Ltd. v. Assistant CIT (Mumbai) . . . 465

S. 40(a)(i) --Business expenditure--Disallowance--Payment subject to deduction of tax at source--Royalty--Definition for purpose of disallowance--Explanation 2 to section 9(1)(vi) applicable--Payment to group company towards licence fees representing annual charges for up-gradation of accounting software--Payment for transfer of any right to use or right to use computer software--Not royalty as provided under Explanation 2 to section 9(1)(vi)--Amount not be to disallowed under section 40(a)(i)-- SKOL Breweries Ltd. v. Assistant CIT (Mumbai) . . . 465

----Business expenditure--Disallowance--Sum liable to deduction of tax at source--Provision not applicable to depreciation--Sum paid for acquisition of brand from non-resident and capitalised in accounts--Depreciation cannot be denied for failure to deduct tax at source on payment-- SKOL Breweries Ltd. v. Assistant CIT (Mumbai) . . . 465

S. 40(a)(ia) --Business expenditure--Disallowance--Commission liable to deduction of tax at source--“Sale scheme expenses†debited to profit and loss account--Benefit given by way of credit note to distributors--Amount not part of invoice--No provision in agreement for such discount over and above invoice price--Whether discount or commission--Failure by assessee to produce scheme under which benefit given to distributors--Matter remanded to Assessing Officer to verify and decide issue in accordance with law-- SKOL Breweries Ltd. v. Assistant CIT (Mumbai) . . . 465

----Business expenditure--Disallowance--Payments liable to deduction of tax at source--Fees for technical services--Human skill involved in internet bandwidth facilities availed of by assessee--Payment in nature of fees for technical services--Assessee under obligation to deduct tax at source-- Brigade Global Services P. Ltd. v. ITO (Hyderabad) . . . 411

----Business expenditure--Disallowance--Payments subject to tax deduction at source--Production of additional evidence before Commissioner (Appeals) in form of revised tax deduction at source return in Form 26Q4 filed subsequent to assessment--Assessing Officer should be granted opportunity to examine additional evidence--Matter remanded-- Assistant CIT v. Shimoga District Milk Producers Societies Union Ltd. (Bangalore) . . . 369

S. 40A(2) --Business expenditure--Disallowance--Excessive or unreasonable payments--Failure of assessee to produce books of account and bills and vouchers for verification--Disallowance of 15 per cent. from total expenditure proper-- Brigade Global Services P. Ltd. v. ITO (Hyderabad) . . . 411

S. 92CA --International transactions--Arm’s length price--Determination--Press Note in respect of foreign direct investment policy prescribing percentage of royalty allowed under automatic route--Only for remittance of foreign exchange--Not substitute for determination of arm’s length price under provisions of Act--International transactions of assessee constituting only 3.93 per cent. of its total operating cost--Comparison of entity-level results in contravention of transfer pricing regulations--Comparable uncontrolled price method adopted by assessee in subsequent years not disputed by Department--Determination of arm’s length price remanded to Assessing Officer considering appropriate comparables-- SKOL Breweries Ltd. v. Assistant CIT (Mumbai) . . . 465

----International transactions--Transfer pricing--Computation of arm’s length price--Selection of comparables--Super profit making companies--Outsourcing company and functionally different companies to be excluded from comparables--Selection of company having extraordinary events depends upon its influence on profit margin--Matter remanded to consider adjustments to be made before arriving at arm’s length-- Google India P. Ltd. v. Deputy CIT (Bangalore) . . . 403

S. 144C(13) --International transactions--Determination of arm’s length price--Assessment--Dispute Resolution Panel--Direction of Dispute Resolution Panel binding on Assessing Officer--Matter remanded to pass fresh assessment order in accordance with directions of Dispute Resolution Panel-- Diamond Management and Technology Consultants Ltd. v. Assistant DIT (International Taxation) (Mumbai) . . . 359

Income-tax Rules, 1962

R. 46A ----Business expenditure--Disallowance--Payments subject to tax deduction at source--Production of additional evidence before Commissioner (Appeals) in form of revised tax deduction at source return in Form 26Q4 filed subsequent to assessment--Assessing Officer should be granted opportunity to examine additional evidence--Matter remanded-- Assistant CIT v. Shimoga District Milk Producers Societies Union Ltd. (Bangalore) . . . 369