Monday, July 22, 2013

ITR (TRIB) Volume 17 : Part 3 (Issue dated : 23-07-2012)

ITR'S TRIBUNAL TAX REPORTS (ITR (TRIB))
Volume 17 : Part 3 (Issue dated : 23-07-2012)

SUBJECT INDEX TO CASES REPORTED IN THIS PART

Accounting --Valuation of stock--Books of account maintained regularly--Valuation of closing stock on basis of method followed in past accepted by income-tax authorities--Addition on ground that valuation was not proper--Not justified--Income-tax Act, 1961-- Assistant CIT v. Seaward Exports P. Ltd. (Jaipur) . . . 353

Business expenditure --Claim on account of breakage--Explanation regarding claim reasonable--Entire amount deductible--Income-tax Act, 1961, s. 37-- Assistant CIT v. Seaward Exports P. Ltd. (Jaipur) . . . 353

----Deduction of tax at source--Disallowance of expenditure--Non-deduction of tax at source on payments for freight, agency charges and crane charges etc.--Finding that tax was not deductible on payments--Expenditure cannot be disallowed--Income-tax Act, 1961, ss. 37, 40(a)(ia)-- Assistant CIT v. Seaward Exports P. Ltd. (Jaipur) . . . 353

----Disallowance--Failure to deduct tax at source--Reimbursement of cost to group concern--Deduction of tax at source not required--Disallowance of expenditure not justified--Income-tax Act, 1961, s. 40(a)(ia)-- Bayer Material Science P. Ltd. v. Addl. CIT (Mumbai) . . . 275

----Wages and bonus--No defect in accounts--Ad hoc disallowance of part of expenditure--Not justified--Income-tax Act, 1961-- Deputy CIT v. Octave Apparels (Chandigarh) . . . 307

Company --Dividend--Deemed dividend--Advance to shareholder--Advance to assessee which held 1.07 per cent. of shares in company--Not to be assessed as deemed dividend--Partners of assessee-firm holding more than 10 per cent. shareholding in company--Not relevant--Income-tax Act, 1961, s. 2(22)-- Deputy CIT v. Octave Apparels (Chandigarh) . . . 307

Depreciation --Depreciation claimed in accordance with Income-tax Rules--Deductible--Income-tax Act, 1961, s. 32--Income-tax Rules, 1962-- Assistant CIT v. Seaward Exports P. Ltd. (Jaipur) . . . 353

International transactions --Arm’s length price--Determination--Transfer Pricing Officer--Must record reasons for rejecting method adopted by assessee--Rejection without stating reasons--Assessing Officer not following any of prescribed methods to determine arm’s length price--Transactional net margin method--Mean percentage of certain type of expenditure not arm’s length price--Not transactional net margin method--Order not sustainable--Income-tax Act, 1961, s. 92CA-- Assistant CIT v. Genom Biotech P. Ltd. (Mumbai) . . . 260

----Determination of arm’s length price--Assessee having trading and indenting activities--No proper figures regarding indenting activities--Determination of arm’s length price after considering comparable cases--Justified--Income-tax Act, 1961, s. 92CA-- Bayer Material Science P. Ltd. v. Addl. CIT (Mumbai) . . . 275

Non-resident --Double taxation avoidance--Fees for technical services--Fees for designing management tool termed balance score card--Balance score card enabled clients in India to implement business strategies more effectively--Amount received for development of balance score cards--Fees for technical services--Assessable in India--Income-tax Act, 1961, s. 9--Double Taxation Avoidance Agreement between India and Singapore, art. 12-- Organisation Development Pte. Ltd. v. Deputy Director of Income-tax (International Taxation) (Chennai) . . . 341

Penalty --Concealment of income--Claim for deduction of fees paid for raising authorised capital--Expenditure prima facie inadmissible--No evidence that claim was bona fide--Levy of penalty justified--Income-tax Act, 1961, s. 271(1)(c)-- Chadha Sugars P. Ltd. v. Asst. CIT (Delhi) . . . 316

Reassessment --Notice--Income escaping assessment--Reassessment on factually incorrect reasons--Assessing Officer must apply his mind--Reassessment not valid--Income-tax Act, 1961, ss. 147, 148-- Mahadev Trading Co. v. ITO (Ahmedabad) . . . 332

Revision --Commissioner--Erroneous and prejudicial to interests of Revenue--Two conditions precedent--Income from investment in shares treated as capital gains--Order passed applying mind and taking a view tenable in law--Cannot be revised only because prejudicial to interests of Revenue--Income-tax Act, 1961, s. 263-- Manish Kumar v. CIT (Indore) . . . 324

----Commissioner--
Jurisdiction--Capital gains--Sale of substantial shareholding in company by assessee--Original agreement showing part consideration as non-compete consideration--Direction of SEBI to acquirers to make public offer at consolidated price--Agreement revised to show single consolidated price without mention of non-compete fee--Valid--Profits from sale of shares brought to tax as capital gains--Proper--Assessing Officer failure to conduct enquiry not stated as ground for revision--No material to show agreement was colourable device--Revision to tax sum originally shown as non-compete consideration as business income--Not proper--Income-tax Act, 1961, ss. 28(va), 263-- Hulas Rahul Gupta v. CIT (Delhi) . . . 366

----Limitation--Revision of order of reassessment--Limitation starts from date of order of reassessment--Income-tax Act, 1961, s. 263-- Pentamedia Graphics Ltd. v. Asst. CIT (Chennai) . . . 302

----Powers of Commissioner--Order passed by Assessing Officer under direction of Tribunal--Can be revised--Excess depreciation allowed--Order to recompute depreciation--Justified--Commissioner has power to remand matter to Assessing Officer--Income-tax Act, 1961, s. 263-- Pentamedia Graphics Ltd. v. Asst. CIT (Chennai) . . . 302

Words and phrases --†Prejudicial to interests of Revenue†-- Manish Kumar v. CIT (Indore) . . . 324

SECTIONWISE INDEX TO CASES REPORTED IN THIS PART

Double Taxation Avoidance Agreement between India and Singapore :

Art. 12 --Non-resident--Double taxation avoidance--Fees for technical services--Fees for designing management tool termed balance score card--Balance score card enabled clients in India to implement business strategies more effectively--Amount received for development of balance score cards--Fees for technical services--Assessable in India-- Organisation Development Pte. Ltd. v. Deputy Director of Income-tax (International Taxation) (Chennai) . . . 341

Income-tax Act, 1961 :

S. 2(22) --Company--Dividend--Deemed dividend--Advance to shareholder--Advance to assessee which held 1.07 per cent. of shares in company--Not to be assessed as deemed dividend--Partners of assessee-firm holding more than 10 per cent. shareholding in company--Not relevant-- Deputy CIT v. Octave Apparels (Chandigarh) . . . 307

S. 9 --Non-resident--Double taxation avoidance--Fees for technical services--Fees for designing management tool termed balance score card--Balance score card enabled clients in India to implement business strategies more effectively--Amount received for development of balance score cards--Fees for technical services--Assessable in India-- Organisation Development Pte. Ltd. v. Deputy Director of Income-tax (International Taxation) (Chennai) . . . 341

S. 28(va) --Revision--Commissioner--Jurisdiction--Capital gains--Sale of substantial shareholding in company by assessee--Original agreement showing part consideration as non-compete consideration--Direction of SEBI to acquirers to make public offer at consolidated price--Agreement revised to show single consolidated price without mention of non-compete fee--Valid--Profits from sale of shares brought to tax as capital gains--Proper--Assessing Officer failure to conduct enquiry not stated as ground for revision--No material to show agreement was colourable device--Revision to tax sum originally shown as non-compete consideration as business income--Not proper-- Hulas Rahul Gupta v. CIT (Delhi) . . . 366

S. 32 --Depreciation--Depreciation claimed in accordance with Income-tax Rules--Deductible-- Assistant CIT v. Seaward Exports P. Ltd. (Jaipur) . . . 353

S. 37 --Business expenditure--Claim on account of breakage--Explanation regarding claim reasonable--Entire amount deductible-- Assistant CIT v. Seaward Exports P. Ltd. (Jaipur) . . . 353

----Business expenditure--Deduction of tax at source--Disallowance of expenditure--Non-deduction of tax at source on payments for freight, agency charges and crane charges etc.--Finding that tax was not deductible on payments--Expenditure cannot be disallowed-- Assistant CIT v. Seaward Exports P. Ltd. (Jaipur) . . . 353

S. 40(a)(ia) --Business expenditure--Deduction of tax at source--Disallowance of expenditure--Non-deduction of tax at source on payments for freight, agency charges and crane charges etc.--Finding that tax was not deductible on payments--Expenditure cannot be disallowed-- Assistant CIT v. Seaward Exports P. Ltd. (Jaipur) . . . 353

----Business expenditure--Disallowance--Failure to deduct tax at source--Reimbursement of cost to group concern--Deduction of tax at source not required--Disallowance of expenditure not justified-- Bayer Material Science P. Ltd. v. Addl. CIT (Mumbai) . . . 275

S. 92CA --International transactions--Arm’s length price--Determination--Transfer Pricing Officer--Must record reasons for rejecting method adopted by assessee--Rejection without stating reasons--Assessing Officer not following any of prescribed methods to determine arm’s length price--Transactional net margin method--Mean percentage of certain type of expenditure not arm’s length price--Not transactional net margin method --Order not sustainable-- Assistant CIT v. Genom Biotech P. Ltd. (Mumbai) . . . 260

----International transactions--Determination of arm’s length price--Assessee having trading and indenting activities--No proper figures regarding indenting activities--Determination of arm’s length price after considering comparable cases--Justified -- Bayer Material Science P. Ltd. v. Addl. CIT (Mumbai) . . . 275

S. 147 --Reassessment--Notice--Income escaping assessment--Reassessment on factually incorrect reasons--Assessing Officer must apply his mind--Reassessment not valid-- Mahadev Trading Co. v. ITO (Ahmedabad) . . . 332

S. 148 --Reassessment--Notice--Income escaping assessment--Reassessment on factually incorrect reasons--Assessing Officer must apply his mind--Reassessment not valid-- Mahadev Trading Co. v. ITO (Ahmedabad) . . . 332

S. 263 --Revision--Commissioner--Erroneous and prejudicial to interests of Revenue--Two conditions precedent--Income from investment in shares treated as capital gains--Order passed applying mind and taking a view tenable in law--Cannot be revised only because prejudicial to interests of Revenue-- Manish Kumar v. CIT (Indore) . . . 324

----Revision--Commissioner--Jurisdiction--Capital gains--Sale of substantial shareholding in company by assessee--Original agreement showing part consideration as non-compete consideration--Direction of SEBI to acquirers to make public offer at consolidated price--Agreement revised to show single consolidated price without mention of non-compete fee--Valid--Profits from sale of shares brought to tax as capital gains--Proper--Assessing Officer failure to conduct enquiry not stated as ground for revision--No material to show agreement was colourable device--Revision to tax sum originally shown as non-compete consideration as business income--Not proper-- Hulas Rahul Gupta v. CIT (Delhi) . . . 366

----Revision--Limitation--Revision of order of reassessment--Limitation starts from date of order of reassessment-- Pentamedia Graphics Ltd. v. Asst. CIT (Chennai) . . . 302

----Revision--Powers of Commissioner--Order passed by Assessing Officer under direction of Tribunal--Can be revised--Excess depreciation allowed--Order to recompute depreciation--Justified--Commissioner has power to remand matter to Assessing Officer-- Pentamedia Graphics Ltd. v. Asst. CIT (Chennai) . . . 302

S. 271(1)(c) --Penalty--Concealment of income--Claim for deduction of fees paid for raising authorised capital--Expenditure prima facie inadmissible--No evidence that claim was bona fide--Levy of penalty justified-- Chadha Sugars P. Ltd. v. Asst. CIT (Delhi) . . . 316

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