Thursday, December 3, 2009



ISSUE DATED 7-12-2009

Volume 319 : Part 2




F Infrastructure development : Matter remanded giving liberty to Department to raise issue whether deduction allowable on entire earnings without deducting export incentives : Asst. CIT v. Neo Sack P. Ltd. p. 124

F Penalty : Tribunal as well as High Court directing AO in appeal from penalty to determine whether additional amount was received on different dates : Direction of High Court in assessment proceedings held proper : Fifth Avenue v. CIT p. 132

F Rectification of mistake on basis of subsequent SC decision not permissible : MEPCO Industries Ltd. v. CIT p. 208


F Provision of technology and technical services : Payment of royalty for technical services at percentage of domestic and export sales for seven years deductible : Climate Systems India Ltd. v. CIT (Delhi) p. 113

F Reassessment : No material to hold belief that any income chargeable to tax had escaped assessment : Notice to be quashed : Gujarat Narmada Valley Fertilizers Co. Ltd. v. Deputy CIT (Guj) p. 120

F Unaccounted money : Assessment to be completed by finding whether entire amount was received by partners during assessment year : Fifth Avenue v. CIT (Karn) p. 127

F Order u/s 254(2) merges with original order : Second application for rectification before Tribunal not maintainable : Dr. S. Panneerselvam v. Asst. CIT (Mad) p. 135

F Delay in filing writ petition : Writ would not issue : Dr. S. Panneerselvam v. Asst. CIT (Mad) p. 135

F Cellular network providers : Fee for interconnection between networks : Interconnection charges : Not liable for tax deduction : CIT v. Bharti Cellular Ltd. (Delhi) p. 139

F Notice served after office hours on last date : Assessment invalid : CIT v. Vishnu and Co. P. Ltd. (Delhi) p. 151

F High Court has no power to condone delay in filing appeal u/s 260A : CIT v. Grasim Industries Ltd. (Bom) p. 154

F Stock option to employees at concessional rate : Lock-in-period : Not perquisite : CIT v. Wipro Ltd. (Karn) p. 156

F Society applying income earned from running of school on fixed assets to expand institution : Not entitled to exemption : CIT v. Queens' Educational Society (Uttarakhand) p. 160

F Penalty cancelled on basis of SC decision : SC overruling decision subsequently : Matter remanded : CIT v. Nuware India Ltd. (P&H) p. 165

F Assessee handing over possession of property and receiving consideration but not producing sale documents : Matter remanded : Pallonji M. Mistry (Decd.) v. CIT (Bom) p. 167

F No suppression of sales or inflated purchases found : No mistake found in accounts : Addition not justified : CIT v. R. K. Rice Mills (P&H) p. 173

F Tribunal directing AO to reconsider status of assessee : No substantial question of law : CIT v. Bangalore Water Supply and Sewerage Board (Karn) p. 176

F Predominant object of society to render appropriate assistance and help to its members for improving their performance and role : Receipt of rental income by assessee from non-members not taxable : CIT v. Standing Conference of Public Enterprises (SCOPE) (Delhi) p. 179

F Disclosure of all material facts in return : Reassessment after four years without assigning sufficient reasons not valid : CIT v. TVS Motor Co. Ltd. (Mad) p. 192

F Overdue charges on hire purchase and lease transactions not taxable : CIT v. Annamalai Finance Ltd. (Mad) p. 196

F Valuation of shares : To be valued u/r 1D of WT Rules : CWT v. Seth Gokuldas Pradeep Kumar Rathi (Raj) p. 201

F Acquisition of shares using assessee's own funds : No interest expenditure incurred : No disallowance warranted u/s 14A : CIT v. Winsome Textile Industries Ltd. (P&H) p. 204

F Wilful attempt to evade tax : Trial court ought not to have acquitted accused for absence of complainant : N. Rengaraj v. P. Dhamodarasamy (Mad) p. 216

F No proper reasons for notice : Notice for reassessment not valid : Shipra Srivastava v. Asst. CIT (Delhi) p. 221


F Assets of assessee attached and custodian in charge : Addition made on basis of bank accounts, copies collected from custodian to be deleted : Smt. Jyoti Harshad Mehta v Asst. CIT (Mumbai) p. 107

F Gains arising from assignment of sales tax liability assessable as business income : MIRC Electronics Ltd. v. Deputy CIT (Mumbai) p. 130

F Gain arising from assignment of sales tax liability to be treated as derived from industrial undertaking entitled to deduction u/s 80-IA : MIRC Electronics Ltd. v. Deputy CIT (Mumbai) p. 130

F Identification of transfer of right to be a capital asset operative wef 2003-04 : Transaction pertaining to 1999-2000 cannot be subject matter of capital gains taxation : Asst. CIT v. T. J. George (Cochin) p. 150

F Return filed by assessee considered defective and treated as non est for earlier assessment years : Allowance or deduction not made in an earlier year in respect of loss, expenditure or trading liability : No addition u/s 41(1) : Rayala Corporation P. Ltd. v. Asst. CIT (Chennai) p. 158

F Recovery of tax : Interest u/s 234D applicable from AY 2004-05 : Rayala Corporation P. Ltd. v. Asst. CIT (Chennai) p. 158

F Housing project : AO to examine whether area of balcony to be included in built-up area in terms of Development Control Regulation, 2000, for Nagpur city : Matter remanded : ITO v. AIR Developers (Nagpur) p. 167

F AO creating demand by changing character of income : Beyond scope of powers u/s 143(1) : Microsoft Regional Sales Corporation v. Addl. CIT (Delhi) p. 181

F Search continued and panchanama drawn on subsequent date : Later date is date when search was completed : Smt. Krishna Verma v. Asst. CIT (Delhi) [SB] p. 197

F Acts of authorised officers done in regular course : Bona fides not to be questioned : Smt. Krishna Verma v. Asst. CIT (Delhi) [SB] p. 197


F C. B. D. T. Circulars :

Applicability of provisions u/s 194J in the case of transactions by the Third Party Administrators with hospitals, etc. : Circular No. 8 of 2009, dated November 24, 2009
p. 22

F Rules :

Special Economic Zone Authority Rules, 2009
p. 23

F Notifications :

Authorities to issue authorisation u/s 132(1)
p. 37

Eligible projects or schemes u/s 35AC(1)
p. 37

Institutions approved for purpose of s 10(23C)(iv)
p. 36

Scientific research association notified for the purpose of section 35(1)(iii)
p. 34


F IT Department inquiry leads to six TPAs pay backlog as TDS

The Income-tax Department has sent notices to six Mumbai-based third party administrators (TPAs), who process insurance claims, asking them to cough up Rs. 117 crore for two consecutive financial years, beginning 2008-09.

Confirming the development, an I-T official in Mumbai said the Department raised the demand after conducting a survey, which revealed that none of the TPAs had deducted tax (TDS) while making payment to hospitals. In Mumbai, the tax liability of six TPAs ranged from Rs. 3 crores to Rs. 69 crores each.

He said Chief Commissioners in other cities might also follow suit the Mumbai division as tax outstanding of 27 TPAs operating in the country could be over Rs. 500 crores.

TPAs handle the task traditionally handled by the companies providing insurance to its employees. They make payment from its own float funds to hospitals on behalf of the policyholders. The insurance companies reimburse them later and also pay them a commission of 5 per cent. of the health insurance premium.

The association has moved the Bombay High Court after its members received the I-T notices. In the writ petition filed with the High Court, TPAs said they do not pay the hospitals to fulfil their own personal liabilities and responsibilities. The payment is meant at discharging the primary liability of the insurance companies, TPAs claimed. The association had also challenged the previous I-T demand at the Delhi High Court.

The Karnataka High Court, in a recent judgment, had observed that the TPAs were obligated to deduct TDS as they were paying hospitals. The court had also observed that the critical factor in deciding this issue was the fact that the agreement for paying to the hospitals was between a TPA and a hospital.
[Source : dated November 23, 2009]

F Special panels set to cover up MNCs' tax rows

Multinational companies can now look forward to expeditiously settling their tax disputes in India. The Central Board of Direct Taxes has announced the new rules for creation of special dispute resolution panels (DRP) that will allow foreign taxpayers to sort out their tax disputes in a faster and cost effective manner.

However, the new mechanism could be resorted to by a foreign company only if it has a dispute with tax authorities regarding transfer pricing, that refers to tax disputes pertaining to pricing of tangible and non-tangible assets transferred within an organisation.

A foreign company facing a dispute pertaining to corporate tax in India along with a transfer pricing would also be able to avail this window. There would be eight DRPs across the country in eight metros including Delhi, Mumbai, Chennai, Kolkata, Bangalore, Pune and Hyderabad. India had introduced transfer pricing rules in 2001. Tax experts say that the new DRP would not just ensure resolution of issues swiftly but also help in bringing down litigation related to transfer pricing.

MNC taxpayers would be allowed to go through the draft assessment order specifying their tax liability, before it is finally handed out unlike the present practice of handing out the order without giving taxpayer any such opportunity.

Taxpayer, will have 30 days to come back to the panel with objections and get the order amended. And, even if the order is passed by the panel, taxpayer would be allowed to appeal against the decision.
[Source : dated November 24, 2009]


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