ITR (TRIB) Volume 12 : Part 1 (Issue dated : 31-10-2011)

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

Volume 12 : Part 1 (Issue dated : 31-10-2011)

SUBJECT INDEX TO CASES REPORTED IN THIS PART

Business expenditure --Disallowance on account of excessive consumption of raw material and other direct expenses disproportionate to production as compared to earlier years--Discontinuance of manufacturing activity and stocks held at end of year sold over succeeding years--Addition to be deleted--Income-tax Act, 1961-- Lakshmi Udyog Mandir P. Ltd. v. Deputy CIT (Chandigarh) . . . 36

Business income --Overdue interest from customers and interest on staff loans--Only net amount of interest income having nexus with interest bearing fund to be excluded--Matter remanded--Income-tax Act, 1961-- Purolator India Ltd. v. Deputy CIT (Delhi) . . . 46

Charitable trust --Registration--Cancellation of registration--Assessee engaging manufacturing and trading activities--Assessee converting incidental objects as main objects--Assessee not satisfying first condition of section 11(4A)--Cancellation of registration valid--Income-tax Act, 1961, ss. 11(4A), 12A-- Aurolab Trust v. CIT (Chennai) . . . 74

Export --Special deduction--Computation--Interest on fixed deposits for availing of credit facilities from bank--No immediate nexus with export business--To be treated as income from other sources--Income-tax Act, 1961, s. 80HHC-- Purolator India Ltd. v. Deputy CIT (Delhi) . . . 46

----Special deduction--Computation--Profits on transfer of DEPB credits--Not profits of business includible in computing deduction under section 80HHC--Income-tax Act, 1961, ss. 28(iiib), 80HHC-- Purolator India Ltd. v. Deputy CIT (Delhi) . . . 46

Industrial undertaking --Special deduction--Condition precedent for deduction--Profits must be derived from industrial undertaking--“Derived from”, meaning of--Repairs and maintenance not manufacturing activity--Profits therefrom not eligible for deduction--Income-tax Act, 1961, s. 80-IB-- Deputy CIT v. Rajesh Kr. Drolia [SB] (Kolkata) . . . 1

Non-resident --Fees for technical services--Assessee stated to be leader of consortium but co-operation agreement specifying share of assessee at only 3 per cent. of total consideration--Activities entailing rendering technical service only--Department accepting receipt of consideration at 3 per cent.--Bound to accept scope of activities outlined in co-operation agreement --Receipts taxable at 10 per cent. as fees for technical services, not as business profits--Permanent establishment of assessee in relation to another project not connected to income in question--Income-tax Act, 1961, ss. 9(1)(vii), Expln. 2, 44DA, 115A(1)(b), (BB), 144C(1)--Double Taxation Avoidance Agreement between India and Russia, arts. 5, 7-- Joint Stock Company Zangas v. Addl. Director of Income-tax (International Taxation) (Ahmedabad) . . . 57

Penalty --Failure to deduct tax at source--Interest--Assessee disclosing payment of interest in return--No concealment of facts--Recipients showing receipt of interest in their returns and paying tax thereon within time prescribed--No loss to Government--Penalty cannot be levied--Income-tax Act, 1961, s. 271C-- Muthoot Bankers v. Joint CIT (Cochin) . . . 40

SECTIONWISE INDEX TO CASES REPORTED IN THIS PART

Double Taxation Avoidance Agreement between India and Russia :

Art. 5 --Non-resident--Fees for technical services--Assessee stated to be leader of consortium but co-operation agreement specifying share of assessee at only 3 per cent. of total consideration--Activities entailing rendering technical service only--Department accepting receipt of consideration at 3 per cent.--Bound to accept scope of activities outlined in co-operation agreement--Receipts taxable at 10 per cent. as fees for technical services, not as business profits--Permanent establishment of assessee in relation to another project not connected to income in question-- Joint Stock Company Zangas v. Addl. Director of Income-tax (International Taxation) (Ahmedabad) . . . 57

Art. 7 --Non-resident--Fees for technical services--Assessee stated to be leader of consortium but co-operation agreement specifying share of assessee at only 3 per cent. of total consideration--Activities entailing rendering technical service only--Department accepting receipt of consideration at 3 per cent.--Bound to accept scope of activities outlined in co-operation agreement --Receipts taxable at 10 per cent. as fees for technical services, not as business profits--Permanent establishment of assessee in relation to another project not connected to income in question-- Joint Stock Company Zangas v. Addl. Director of Income-tax (International Taxation) (Ahmedabad) . . . 57

Income-tax Act, 1961 :

S. 9(1)(vii), Expln. 2 --Non-resident--Fees for technical services--Assessee stated to be leader of consortium but co-operation agreement specifying share of assessee at only 3 per cent. of total consideration--Activities entailing rendering technical service only--Department accepting receipt of consideration at 3 per cent.--Bound to accept scope of activities outlined in co-operation agreement --Receipts taxable at 10 per cent. as fees for technical services, not as business profits--Permanent establishment of assessee in relation to another project not connected to income in question-- Joint Stock Company Zangas v. Addl. Director of Income-tax (International Taxation) (Ahmedabad) . . . 57

S. 11(4A) --Charitable trust--Registration--Cancellation of registration--Assessee engaging manufacturing and trading activities--Assessee converting incidental objects as main objects--Assessee not satisfying first condition of section 11(4A)--Cancellation of registration valid-- Aurolab Trust v. CIT (Chennai) . . . 74

S. 12A --Charitable trust--Registration--Cancellation of registration--Assessee engaging manufacturing and trading activities--Assessee converting incidental objects as main objects--Assessee not satisfying first condition of section 11(4A)--Cancellation of registration valid-- Aurolab Trust v. CIT (Chennai) . . . 74

S. 28(iiib) --Export--Special deduction--Computation--Profits on transfer of DEPB credits--Not profits of business includible in computing deduction under section 80HHC-- Purolator India Ltd. v. Deputy CIT (Delhi) . . . 46

S. 44DA-- Non-resident--Fees for technical services--Assessee stated to be leader of consortium but co-operation agreement specifying share of assessee at only 3 per cent. of total consideration--Activities entailing rendering technical service only--Department accepting receipt of consideration at 3 per cent.--Bound to accept scope of activities outlined in co-operation agreement--Receipts taxable at 10 per cent. as fees for technical services, not as business profits--Permanent establishment of assessee in relation to another project not connected to income in question-- Joint Stock Company Zangas v. Addl. Director of Income-tax (International Taxation) (Ahmedabad) . . . 57

S. 80-IB --Industrial undertaking--Special deduction--Condition precedent for deduction--Profits must be derived from industrial undertaking--“Derived from”, meaning of--Repairs and maintenance not manufacturing activity--Profits therefrom not eligible for deduction-- Deputy CIT v. Rajesh Kr. Drolia [SB] (Kolkata) . . . 1

S. 80HHC --Export--Special deduction--Computation--Interest on fixed deposits for availing of credit facilities from bank--No immediate nexus with export business--To be treated as income from other sources-- Purolator India Ltd. v. Deputy CIT (Delhi) . . . 46

----Export--Special deduction--Computation--Profits on transfer of DEPB credits--Not profits of business includible in computing deduction under section 80HHC-- Purolator India Ltd. v. Deputy CIT (Delhi) . . . 46

S. 115A(1)(b)(BB) --Non-resident--Fees for technical services--Assessee stated to be leader of consortium but co-operation agreement specifying share of assessee at only 3 per cent. of total consideration--Activities entailing rendering technical service only--Department accepting receipt of consideration at 3 per cent.--Bound to accept scope of activities outlined in co-operation agreement --Receipts taxable at 10 per cent. as fees for technical services, not as business profits--Permanent establishment of assessee in relation to another project not connected to income in question-- Joint Stock Company Zangas v. Addl. Director of Income-tax (International Taxation) (Ahmedabad) . . . 57

S. 144C(1) --Non-resident--Fees for technical services--Assessee stated to be leader of consortium but co-operation agreement specifying share of assessee at only 3 per cent. of total consideration--Activities entailing rendering technical service only--Department accepting receipt of consideration at 3 per cent.--Bound to accept scope of activities outlined in co-operation agreement --Receipts taxable at 10 per cent. as fees for technical services, not as business profits--Permanent establishment of assessee in relation to another project not connected to income in question-- Joint Stock Company Zangas v. Addl. Director of Income-tax (International Taxation) (Ahmedabad) . . . 57

S. 271C --Penalty--Failure to deduct tax at source--Interest--Assessee disclosing payment of interest in return--No concealment of facts--Recipients showing receipt of interest in their returns and paying tax thereon within time prescribed--No loss to Government--Penalty cannot be levied-- Muthoot Bankers v. Joint CIT (Cochin) . . . 40