ITR (TRIB) Volume 23 : Part 1 (Issue dated : 15-4-2013)

TR'S TRIBUNAL TAX REPORTS (ITR (TRIB))
Volume 23 : Part 1 (Issue dated : 15-4-2013)

SUBJECT INDEX TO CASES REPORTED IN THIS PART

Business expenditure --Provision for expenses--Provisions for unascertained liabilities--Amount actually paid by club--Allowable--Income-tax Act, 1961, s. 37-- ITO v. Kamala Vihar Sports Club (Mumbai) . . . 104

Capital gains or business income --Non-compete fees--Law applicable--Section 28(va) inserted w. e. f. 1-4-2003--Non-compete fee taxable for period after amendment--Income-tax Act, 1961, s. 28(va)-- Anurag Toshniwal v. Deputy CIT (Mumbai) . . . 112

Capital gains --Income from other sources--Compensation on surrender of tenancy rights--Law applicable--Amendment of section 55(2)--Whether assessee’s right in property constituted “tenancy rights†under section 55(2)--To be decided--Assessee to be provided with reasonable opportunity of being heard--Matter remanded--Income-tax Act, 1961, ss. 45, 55(2)-- Kishori Lal Basanti Lal Patodia v. Assistant CIT (Mumbai) . . . 42

Cash credits --Company--Capital--Amount credited in books of account as share application money--Burden on assessee to prove genuineness of transaction and identity of parties--Matter remanded for fresh consideration--Income-tax Act, 1961, s. 68-- Assistant CIT v. Mancherial Cement Co. P. Ltd. (Hyderabad) . . . 30

Charitable purpose --Charitable trust--Application for renewal of deduction--Finding that trust created by mutual club of masons--Mother body not surrendering its mutual status--Not to be treated as independent charitable institution--Income-tax Act, 1961, s. 80G-- The Lodge of Universal Charity 273 EC Charitable Trust v. Director of Income-tax (Exemptions) (Chennai) . . . 25

----Registration of trust--Assessee collecting subscription fee and providing opportunities for students of an institute to seek employment--Not charitable activity--Trust not entitled to registration--Income-tax Act, 1961, ss. 12A, 80G-- DSE-Economics Placement Cell v. Director of Income-tax (Exemptions) (Delhi) . . . 121

Deduction of tax at source --Fees for technical services--Technical services rendered in foreign country--Services not involving much human interface--Services not technical services under Explanation 2 to section 9(1)(vii)--Not liable for tax deduction at source--Income-tax Act, 1961, s. 9(1)(vii), Expln. 2 -- Siemens Ltd. v. CIT (Appeals) (Mumbai) . . . 86

----Non-resident--Payment not containing element of income taxable in India--Payer not liable to make application for permission to make payment without deduction of tax at source--Income-tax Act, 1961, s. 195(2)-- Yash Raj Films P. Ltd. v. ITO (Mumbai) . . . 125

Income from house property --Ownership of property--Assessee taking three floors building on hire for business purposes--Letting out excess area--Not owner or deemed owner of premises--Rental income not to be assessed as from house property--Nor as business income--To be assessed as income from other sources--Income-tax Act, 1961, ss. 22, 27(iiib), 56, 269UA(f)-- Stream International Services P. Ltd. v. Assistant Director of Income-tax (International Taxation) (Mumbai) . . . 70

Income-tax --General principles--Object of assessment to arrive at correct income of assessee--Department not entitled to take advantage of assessee’s mistake--Assessee entitled to seek before appellate authority correction of wrong stand--Constitution of India, art. 265-- Stream International Services P. Ltd. v. Assistant Director of Income-tax (International Taxation) (Mumbai) . . . 70

Income --Computation--Income not forming part of total income--Disallowance of expenditure incurred--Dividend on units of mutual fund claimed as exempt--Rule 8D applicable only from assessment year 2007-08--Disallowance for prior years to be made by adopting some reasonable method--Matter remanded--Income-tax Act, 1961, s. 14A --Income-tax Rules, 1962, r. 8D-- Welspun Zucchi Textiles Ltd. v. Assistant CIT (Mumbai) . . . 53

----Computation--Incomes not includible in total income--Disallowance of expenditure in relation to--Even if no exempt income realised--For years prior to introduction of rule 8D--To be on some reasonable basis--Income-tax Act, 1961, s. 14A--Income-tax Rules, 1962, r. 8D-- Stream International Services P. Ltd. v. Assistant Director of Income-tax (International Taxation) (Mumbai) . . . 70

----Mutual concern--Sports club--No disputes as to identities of contributors and participators--Commissioner (Appeals) justified in upholding principle of mutuality--Income-tax Act, 1961-- ITO v. Kamala Vihar Sports Club (Mumbai) . . . 104

International transactions --Arm’s length price--Determination--
Appropriate method--Assessee not disputing adoption of transactional net margin method in earlier assessment years--Not entitled to object-- Deputy CIT v. Hellosoft India Pvt. Ltd. (Hyderabad) . . . 1

----Arm’s length price--Determination--Appropriate method--Differences in characteristics of enterprises compared having material effect on net margins--Transactional net margin method not to be used without making adjustments for such differences--Income-tax Act, 1961, s. 92C-- Deputy CIT v. Hellosoft India Pvt. Ltd. (Hyderabad) . . . 1

----Arm’s length price--Determination--Assessee’s income exempt under section 10A--Does not mean Assessing Officer has to prove shifting of profits by assessee to associated enterprise--Income-tax Act, 1961. s. 10A-- Deputy CIT v. Hellosoft India Pvt. Ltd. (Hyderabad) . . . 1

----Arm’s length price--Determination--Most appropriate method--Different types of bathrobes manufactured and exported by assessee--Average price of all bathrobes supplied to associated enterprises and other enterprises taken--Not proper--Absence of exact data to compare the prices of similar products supplied to associated enterprises and other enterprises--Comparable uncontrolled price method could not be applied--Geographical location and size of markets different--Transactional net margin method most appropriate--Duty entitlement pass book benefit taken into account in comparable cases to work out their profit margin--DEPB benefit to be considered as part of turnover of assessee also for working out profit margin--Profit margin of assessee after taking into consideration benefit as part of its turnover within limit of 5 per cent--No transfer pricing adjustment required--Income-tax Act, 1961, s. 92CA(1)--Income-tax Rules, 1962, r. 10B(2)(d)-- Welspun Zucchi Textiles Ltd. v. Assistant CIT (Mumbai) . . . 53

----Arm’s length price--Determination--Provision introduced with retrospective effect from April 1, 2002--Benefit of plus or minus 5 per cent. standard deduction not to be allowed--Income-tax Act, 1961, s. 92CA(2A)-- Deputy CIT v. Hellosoft India Pvt. Ltd. (Hyderabad) . . . 1

----Arm’s length price--Determination--Transactional net margin method--Comparables having high turnovers of more than Rs. 100 crores not to be considered as comparables--Comparables selected applying “employee cost to sale†filter--Selection of comparables applying “onsite income†filter--Relevant information not available--Not to be selected--Loss-making companies and companies having super normal profits not to be considered as comparables--Income-tax Act, 1961, s. 92C(2)-- Deputy CIT v. Hellosoft India Pvt. Ltd. (Hyderabad) . . . 1

----Arm’s length price--Determination--Transactional net margin method--Comparables--Judged primarily on functional similarity--“Transaction†--Reimbursement of expenses by one associated enterprise to another is “transaction†--Not to be ignored in applying filters based on quantum of related party transactions--Income-tax Act, 1961, ss. 92B, 92C(2), 92CA(1), 92F(v)-- Stream International Services P. Ltd. v. Assistant Director of Income-tax (International Taxation) (Mumbai) . . . 70

----Arm’s length price--Determination--Transfer Pricing Officer--Power to collect information under section 133(6)--Information so collected and proposed to be utilised to be confronted to assessee-- Deputy CIT v. Hellosoft India Pvt. Ltd. (Hyderabad) . . . 1

Non-resident --Payment for services in connection with shooting of films for arrangement for shooting locations, obtaining necessary permits, arrangement for shipping and custom clearances, arranging for “extras†, shooting equipment, meals, transport, obtaining visas, arranging for make-up of casts and coordinating necessary licences--Services commercial and logistic, not technical services--Payments therefor business profits not chargeable to tax in India in absence of permanent establishment in India--Assessee not liable to deduct tax at source--Income-tax Act, 1961, ss. 9(1)(vii), Explanation 2 , 195(2), 201(1A)-- Yash Raj Films P. Ltd. v. ITO
(Mumbai) . . . 125

Penalty --Concealment of income--Claim to depreciation on entire medical equipment as life saving device--No concealment of any fact--Penalty not leviable for wrong claim--Income-tax Act, 1961, s. 271(1)(c)-- Deputy CIT v. Apollo Hospitals Enterprise Ltd. (Chennai) . . . 49

Precedent --Divergent views on issue among Benches of Tribunal--View favourable to assessee to be taken-- Deputy CIT v. Hellosoft India Pvt. Ltd. (Hyderabad) . . . 1

Words and phrases --†Technical services†--Meaning of-- Siemens Ltd. v. CIT (Appeals) (Mumbai) . . . 86

SECTIONWISE INDEX TO CASES REPORTED IN THIS PART

Constitution of India :

Art. 265 --Income-tax--General principles--Object of assessment to arrive at correct income of assessee--Department not entitled to take advantage of assessee’s mistake--Assessee entitled to seek before appellate authority correction of wrong stand-- Stream International Services P. Ltd. v. Assistant Director of Income-tax (International Taxation) (Mumbai) . . . 70

Income-tax Act, 1961 :

S. 9(1)(vii), Expln. 2 --Deduction of tax at source--Fees for technical services--Technical services rendered in foreign country--Services not involving much human interface--Services not technical services under Explanation 2 to section 9(1)(vii)--Not liable for tax deduction at source-- Siemens Ltd. v. CIT (Appeals) (Mumbai) . . . 86

----Non-resident--Payment for services in connection with shooting of films for arrangement for shooting locations, obtaining necessary permits, arrangement for shipping and custom clearances, arranging for “extras†, shooting equipment, meals, transport, obtaining visas, arranging for make-up of casts and coordinating necessary licences--Services commercial and logistic, not technical services--Payments therefor business profits not chargeable to tax in India in absence of permanent establishment in India--Assessee not liable to deduct tax at source-- Yash Raj Films P. Ltd. v. ITO (Mumbai) . . . 125

S. 10A --International transactions--Arm’s length price--Determination--Assessee’s income exempt under section 10A--Does not mean Assessing Officer has to prove shifting of profits by assessee to associated enterprise-- Deputy CIT v. Hellosoft India Pvt. Ltd. (Hyderabad) . . . 1

S. 12A --Charitable purpose--Registration of trust--Assessee collecting subscription fee and providing opportunities for students of an institute to seek employment--Not charitable activity--Trust not entitled to registration-- DSE-Economics Placement Cell v. Director of Income-tax (Exemptions) (Delhi) . . . 121

S. 14A --Income--Computation--Income not forming part of total income--Disallowance of expenditure incurred--Dividend on units of mutual fund claimed as exempt--Rule 8D applicable only from assessment year 2007-08--Disallowance for prior years to be made by adopting some reasonable method--Matter remanded-- Welspun Zucchi Textiles Ltd. v. Assistant CIT (Mumbai) . . . 53

----Income--Computation--Incomes not includible in total income--Disallowance of expenditure in relation to--Even if no exempt income realised--For years prior to introduction of rule 8D--To be on some reasonable basis-- Stream International Services P. Ltd. v. Assistant Director of Income-tax (International Taxation) (Mumbai) . . . 70

S. 22 --Income from house property--Ownership of property--Assessee taking three floors building on hire for business purposes--Letting out excess area--Not owner or deemed owner of premises--Rental income not to be assessed as from house property--Nor as business income--To be assessed as income from other sources-- Stream International Services P. Ltd. v. Assistant Director of Income-tax (International Taxation) (Mumbai) . . . 70

S. 27(iiib) --Income from house property--Ownership of property--Assessee taking three floors building on hire for business purposes--Letting out excess area--Not owner or deemed owner of premises--Rental income not to be assessed as from house property--Nor as business income--To be assessed as income from other sources-- Stream International Services P. Ltd. v. Assistant Director of Income-tax (International Taxation) (Mumbai) . . . 70

S. 28(va) --Capital gains or business income--Non-compete fees--Law applicable--Section 28(va) inserted w. e. f. 1-4-2003--Non-compete fee taxable for period after amendment-- Anurag Toshniwal v. Deputy CIT (Mumbai) . . . 112

S. 37 --Business expenditure--Provision for expenses--Provisions for unascertained liabilities--Amount actually paid by club--Allowable-- ITO v. Kamala Vihar Sports Club (Mumbai) . . . 104

S. 45 --Capital gains--Income from other sources--Compensation on surrender of tenancy rights--Law applicable--Amendment of section 55(2)--Whether assessee’s right in property constituted “tenancy rights†under section 55(2)--To be decided--Assessee to be provided with reasonable opportunity of being heard--Matter remanded-- Kishori Lal Basanti Lal Patodia v. Assistant CIT (Mumbai) . . . 42

S. 55(2) --Capital gains--Income from other sources--Compensation on surrender of tenancy rights--Law applicable--Amendment of section 55(2)--Whether assessee’s right in property constituted “tenancy rights†under section 55(2)--To be decided--Assessee to be provided with reasonable opportunity of being heard--Matter remanded-- Kishori Lal Basanti Lal Patodia v. Assistant CIT (Mumbai) . . . 42

S. 56 --Income from house property--Ownership of property--Assessee taking three floors building on hire for business purposes--Letting out excess area--Not owner or deemed owner of premises--Rental income not to be assessed as from house property--Nor as business income--To be assessed as income from other sources-- Stream International Services P. Ltd. v. Assistant Director of Income-tax (International Taxation) (Mumbai) . . . 70

S. 68 --Cash credits--Company--Capital--Amount credited in books of account as share application money--Burden on assessee to prove genuineness of transaction and identity of parties--Matter remanded for fresh consideration-- Assistant CIT v. Mancherial Cement Co. P. Ltd. (Hyderabad) . . . 30

S. 80G --Charitable purpose--Charitable trust--Application for renewal of deduction--Finding that trust created by mutual club of masons--Mother body not surrendering its mutual status--Not to be treated as independent charitable institution-- The Lodge of Universal Charity 273 EC Charitable Trust v. Director of Income-tax (Exemptions) (Chennai) . . . 25

----Charitable purpose--Registration of trust--Assessee collecting subscription fee and providing opportunities for students of an institute to seek employment--Not charitable activity--Trust not entitled to registration-- DSE-Economics Placement Cell v. Director of Income-tax (Exemptions) (Delhi) . . . 121

S. 92B --International transactions--Arm’s length price--Determination--Transactional net margin method--Comparables--Judged primarily on functional similarity--“Transaction†--Reimbursement of expenses by one associated enterprise to another is “transaction†--Not to be ignored in applying filters based on quantum of related party transactions-- Stream International Services P. Ltd. v. Assistant Director of Income-tax (International Taxation) (Mumbai) . . . 70

S. 92C --International transactions--Arm’s length price--Determination--Appropriate method--Differences in characteristics of enterprises compared having material effect on net margins--transactional net margin method not to be used without making adjustments for such differences-- Deputy CIT v. Hellosoft India Pvt. Ltd. (Hyderabad) . . . 1

S. 92C(2) --International transactions--Arm’s length price--Determination--Transactional net margin method--Comparables having high turnovers of more than Rs. 100 crores not to be considered as comparables--Comparables selected applying “employee cost to sale†filter--Selection of comparables applying “onsite income†filter--Relevant information not available--Not to be selected--Loss-making companies and companies having super normal profits not to be considered as comparables-- Deputy CIT v. Hellosoft India Pvt. Ltd. (Hyderabad) . . . 1

----International transactions--Arm’s length price--Determination--Transactional net margin method--Comparables--Judged primarily on functional similarity--“Transaction†--Reimbursement of expenses by one associated enterprise to another is “transaction†--Not to be ignored in applying filters based on quantum of related party transactions-- Stream International Services P. Ltd. v. Assistant Director of Income-tax (International Taxation) (Mumbai) . . . 70

S. 92CA(1) --International transactions--Arm’s length price--Determination--Most appropriate method--Different types of bathrobes manufactured and exported by assessee--Average price of all bathrobes supplied to associated enterprises and other enterprises taken--Not proper--Absence of exact data to compare the prices of similar products supplied to associated enterprises and other enterprises--Comparable uncontrolled price method could not be applied--Geographical location and size of markets different--Transactional net margin method most appropriate--Duty entitlement pass book benefit taken into account in comparable cases to work out their profit margin--DEPB benefit to be considered as part of turnover of assessee also for working out profit margin--Profit margin of assessee after taking into consideration benefit as part of its turnover within limit of 5 per cent--No transfer pricing adjustment required-- Welspun Zucchi Textiles Ltd. v. Assistant CIT (Mumbai) . . . 53

----International transactions--Arm’s length price--Determination--Transactional net margin method--Comparables--Judged primarily on functional similarity--“Transaction†--Reimbursement of expenses by one associated enterprise to another is “transaction†--Not to be ignored in applying filters based on quantum of related party transactions-- Stream International Services P. Ltd. v. Assistant Director of Income-tax (International Taxation) (Mumbai) . . . 70

S. 92CA(2A) --International transactions--Arm’s length price--Determination--Provision introduced with retrospective effect from April 1, 2002--Benefit of plus or minus 5 per cent. standard deduction not to be allowed-- Deputy CIT v. Hellosoft India Pvt. Ltd. (Hyderabad) . . . 1

S. 92F(v) --International transactions--Arm’s length price--Determination--Transactional net margin method--Comparables--Judged primarily on functional similarity--“Transaction†--Reimbursement of expenses by one associated enterprise to another is “transaction†--Not to be ignored in applying filters based on quantum of related party transactions-- Stream International Services P. Ltd. v. Assistant Director of Income-tax (International Taxation) (Mumbai) . . . 70

S. 195(2) --Deduction of tax at source--Non-resident--Payment not containing element of income taxable in India--Payer not liable to make application for permission to make payment without deduction of tax at source-- Yash Raj Films P. Ltd. v. ITO (Mumbai) . . . 125

----Non-resident--Payment for services in connection with shooting of films for arrangement for shooting locations, obtaining necessary permits, arrangement for shipping and custom clearances, arranging for “extras†, shooting equipment, meals, transport, obtaining visas, arranging for make-up of casts and coordinating necessary licences--Services commercial and logistic, not technical services--Payments therefor business profits not chargeable to tax in India in absence of permanent establishment in India--Assessee not liable to deduct tax at source-- Yash Raj Films P. Ltd. v. ITO (Mumbai) . . . 125

S. 201(1A) --Non-resident--Payment for services in connection with shooting of films for arrangement for shooting locations, obtaining necessary permits, arrangement for shipping and custom clearances, arranging for “extras†, shooting equipment, meals, transport, obtaining visas, arranging for make-up of casts and coordinating necessary licences--Services commercial and logistic, not technical services--Payments therefor business profits not chargeable to tax in India in absence of permanent establishment in India--Assessee not liable to deduct tax at source-- Yash Raj Films P. Ltd. v. ITO (Mumbai) . . . 125

S. 269UA(f) --Income from house property--Ownership of property--Assessee taking three floors building on hire for business purposes--Letting out excess area--Not owner or deemed owner of premises--Rental income not to be assessed as from house property--Nor as business income--To be assessed as income from other sources-- Stream International Services P. Ltd. v. Assistant Director of Income-tax (International Taxation) (Mumbai) . . . 70

S. 271(1)(c) --Penalty--Concealment of income--Claim to depreciation on entire medical equipment as life saving device--No concealment of any fact--Penalty not leviable for wrong claim-- Deputy CIT v. Apollo Hospitals Enterprise Ltd. (Chennai) . . . 49

Income-tax Rules, 1962 :

R. 8D --Income--Computation--Income not forming part of total income--Disallowance of expenditure incurred--Dividend on units of mutual fund claimed as exempt--Rule 8D applicable only from assessment year 2007-08--Disallowance for prior years to be made by adopting some reasonable method--Matter remanded-- Welspun Zucchi Textiles Ltd. v. Assistant CIT (Mumbai) . . . 53

----Income--Computation--Incomes not includible in total income--Disallowance of expenditure in relation to--Even if no exempt income realised--For years prior to introduction of rule 8D--To be on some reasonable basis-- Stream International Services P. Ltd. v. Assistant Director of Income-tax (International Taxation) (Mumbai) . . . 70

R. 10B(2)(d) --International transactions--Arm’s length price--Determination--Most appropriate method--Different types of bathrobes manufactured and exported by assessee--Average price of all bathrobes supplied to associated enterprises and other enterprises taken--Not proper--Absence of exact data to compare the prices of similar products supplied to associated enterprises and other enterprises--Comparable uncontrolled price method could not be applied--Geographical location and size of markets different--Transactional net margin method most appropriate--Duty entitlement pass book benefit taken into account in comparable cases to work out their profit margin--DEPB benefit to be considered as part of turnover of assessee also for working out profit margin--Profit margin of assessee after taking into consideration benefit as part of its turnover within limit of 5 per cent--No transfer pricing adjustment required-- Welspun Zucchi Textiles Ltd. v. Assistant CIT (Mumbai) . . . 53