ITR (TRIB) Volume 23 : Part 4 (Issue dated : 6-5-2013)

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

Volume 23 : Part 4 (Issue dated : 6-5-2013)

SUBJECT INDEX TO CASES REPORTED IN THIS PART

Advance tax --Interest--Company--Minimum alternate tax--Book profit--Provision for doubtful debts added back to book profits on basis of law amended retrospectively--No interest chargeable--As advance tax--Income-tax Act, 1961, s. 234B-- Garware Polyester Ltd. v. Assistant CIT (Mumbai) . . . 549

Business expenditure --Deduction only on actual payment--Exemption--Export of computer software--Provident fund contributions made before filing return--Allowable as business expenditure--If disallowed to be treated as business income under section 10A--Income-tax Act, 1961, ss. 10A, 43B-- Patni Telecom Solutions P. Ltd. v. ITO (Hyderabad) . . . 534

----Deduction only on actual payment--Payments to employees’€™ State corporation and provident fund--Payments made within grace period or within year itself or before filing return of income--Allowable--Income-tax Act, 1961, s. 43B-- Sonic Biochem Extractions P. Ltd. v. ITO (Mumbai) . . . 447

----Disallowance of travel expenses for want of details--System of reversing expenses in succeeding assessment years wherever not incurred--Assessing Officer to examine issue afresh and ascertain reasonableness of basis on which provision made--Matter remanded-- Trilogy E-Business Software India P. Ltd. v. Deputy CIT (Bangalore) . . . 464

----Disallowance--Royalty--Tax deduction at source--Purchase of software with hardware of computers--Claim to depreciation--No purchase of copyright--Does not involve commercial exploitation thereof--No intangible asset involved--Purchase of asset and claim to depreciation not covered under section 40(a)(ia) for disallowance--Income-tax Act, 1961, ss. 9(1)(vi), Expln. 2 , 40(a)(ia)-- Sonic Biochem Extractions P. Ltd. v. ITO (Mumbai) . . . 447

----Disallowance--Whether tax deducted at deposited in Government treasury before due date not clear--Direction to Assessing Officer to verify and decide under law--Matter remanded--Income-tax Act, 1961, ss. 40(a)(ia), 80-IB-- Deputy CIT v. Rameshbhai C. Prajapati (Ahmedabad) . . . 516

----Provision towards building registration charges--Disallowance--Provision reversed and offered to tax during assessment year 2009-10--Assessing Officer not to tax sum in 2009-10 as taxed by disallowance in present year-- Trilogy E-Business Software India P. Ltd. v. Deputy CIT (Bangalore) . . . 464

----Repairs, telephone expenses, vehicle expenses and expenses on repairs and maintenance of machines and building--Ad hoc disallowances for personal use by employees and directors--Assessee a public limited company and maintaining books of account and these audited--Question of any element of personal nature does not arise--Expenditure to be allowed--Income-tax Act, 1961, s. 37-- Sonic Biochem Extractions P. Ltd. v. ITO (Mumbai) . . . 447

----Sums written off of as unrecoverable--All details furnished--Deduction allowable.--Income-tax Act, 1961-- Sonic Biochem Extractions P. Ltd. v. ITO (Mumbai) . . . 447

Business loss --Goods damaged in fire in plant--Assessee making assessment of damages and debiting to profit and loss account--Insurance company paying reduced amount--Difference between sum debited and received claim--Revenue expenditure--Assessing Officer to examine actual amounts incurred by assessee and determine actual loss--Income-tax Act, 1961, ss. 30, 31-- Sonic Biochem Extractions P. Ltd. v. ITO (Mumbai) . . . 447

Cash credit --Burden of proof--Initial burden on assessee to prove genuineness of credit--Details of creditorsbank accounts not enough to fulfil ingredients of section 68--Addition justified--Income-tax Act, 1961, s. 68-- ITO v. Gayatri Associates (Hyderabad) . . . 528

Closing stock --Packing material on which batch numbers and price printed and having no value to assessee after lapse of time--Assessee devaluing inventory at Re. 1--To be allowed deduction--Income-tax Act, 1961, s. 145A-- Sonic Biochem Extractions P. Ltd. v. ITO (Mumbai) . . . 447

Depreciation --Refinery discontinued during year--Assets forming part of block of assets--Even if some assets in block functioning, entire block to be allowed depreciation--Income-tax Act, 1961, s. 32-- Sonic Biochem Extractions P. Ltd. v. ITO (Mumbai) . . . 447

----Technical know-how--Chart submitted by assessee--If depreciation claimed on technical know-how different from one-sixth deduction claimed under section 35AB, depreciation to be allowed--Income-tax Act, 1961, ss. 32, 35AB-- Garware Polyester Ltd. v. Assistant CIT (Mumbai) . . . 549

Exemption --Export of computer software--Export turnover--Expenses in foreign exchange on travelling expenses and internet charges for providing technical services--Internet charges on development of software--To be included--Allowable--Income-tax Act, 1961, s. 10A, Expln. 2(iv) -- Patni Telecom Solutions P. Ltd. v. ITO (Hyderabad) . . . 534

Export --Special deduction under section 80HHC--Sale of music rights--Assessee producing evidence regarding delivery of master tapes and receipt of foreign exchange within time and certificates of foreign inward remittance--Entitled to deduction--Income-tax Act, 1961, s. 80HHC-- Deputy CIT v. K. J. Yesudoss (Chennai) . . . 540

----Special deduction--Book profit--Deduction under section 80HHC to be computed in accordance with ruling of Supreme Court in Ajanta Pharma --Income-tax Act, 1961, ss. 80HHC, 115JB-- Garware Polyester Ltd. v. Assistant CIT (Mumbai) . . . 549

Housing projects --Special deduction--Profits of business--Expenditure disallowed under section 40(a)(ia)--Not to be included in profits eligible for special deduction--Income-tax Act, 1961, ss. 40(a)(ia), 80-IB-- Deputy CIT v. Rameshbhai C. Prajapati (Ahmedabad) . . . 516

Income-tax survey --Statement made by assessee during survey operations--Failure by Department to collect material during survey--Statement no evidentiary value--Addition to be deleted --Income-tax Act, 1961, s. 133A-- Mahesh Ohri v. Assistant CIT (Delhi) . . . 522

Industrial undertaking --Special deduction under section 80-IB --Findings of Commissioner (Appeals) that shops located on ground floor covered 2 per cent. of built-up area--Deduction allowable--Income-tax Act, 1961, s. 80-IB-- Deputy CIT v. Rameshbhai C. Prajapati (Ahmedabad) . . . 516

Interest on borrowed capital --Interest relating to capital work-in-progress--Not allowable--Matter remanded to give opportunity to assessee to give date-wise details of expenditure--Income-tax Act, 1961, s. 36(1)(iii)-- Garware Polyester Ltd. v. Assistant CIT (Mumbai) . . . 549

International transactions --Arm’s length price--Research and development expenses for developing new products in domestic markets--Not considered as part of cost--Assesses€™s submission that expenses incurred for website development--Contrary--Matter remanded for consideration afresh-- Trilogy E-Business Software India P. Ltd. v. Deputy CIT (Bangalore) . . . 464

----Arm’s length price--Determination--Comparable uncontrolled price--To examine whether there were any internal or external comparables--High degree of comparability necessary--Many variables for applying comparable uncontrolled price--Rejection of one method--Authority bound to adopt another from most appropriate methods’€ --Matter remanded to Transfer Pricing Officer to examine Arm’s length price adopting transactional net margin method and carry out fresh comparability analysis--Commissioner--Functional analysis of agency agreements assessee with associated enterprises and with non-associated enterprises--Cost to be incurred by associated enterprises and risk assumed far more--Rate of 10 per cent. reasonable--Benefit of 5 per cent. in terms of proviso to section 92C not a standard deduction--Income-tax Act, 1961, s. 92C(2)--Income-tax Rules, 1962, r. 10B-- Garware Polyester Ltd. v. Assistant CIT (Mumbai) . . . 549

----Arm’s length price--Determination--Transactional net margin method--Selection of comparables--Turnover filter important--No bar to considering companies with either abnormal profits or abnormal losses--Assessee to demonstrate abnormal factors if it seeks to exclude comparable--Onsite and offshore services--Assets and risk profile, pricing, prevailing market conditions different--Onsite revenue filter to be applied--Functional comparability--Foreign exchange gain/loss to be added to operating revenue--Fringe benefit tax not considered part of operating cost of comparables--Not to be considered part of operating cost of assessee--Information collected under section 133(6)--Assessee cannot ask for right to cross examine company--Comparability of company neither considered by Transfer Pricing Officer nor Dispute Resolution Panel--Tribunal would not consider--Income-tax Act, 1961, s. 92CA--Income-tax Rules, 1962, r. 10B-- Trilogy E-Business Software India P. Ltd. v. Deputy CIT (Bangalore) . . . 464

Penalty --Concealment of income--Assessee furnishing income-tax particulars as well as declarations for receiving gifts from donors along with their balance-sheets--Explanation bona fide--Penalty not exigible--Income-tax Act, 1961, s. 271(1)(c)-- Sushil Kumar Modi v. Assistant CIT (Jaipur) . . . 513

SECTIONWISE INDEX TO CASES REPORTED IN THIS PART

Income-tax Act, 1961 :

S. 9(1)(vi), Expln. 2 --Business expenditure--Disallowance--Royalty--Tax deduction at source--Purchase of software with hardware of computers--Claim to depreciation--No purchase of copyright--Does not involve commercial exploitation thereof--No intangible asset involved--Purchase of asset and claim to depreciation not covered under section 40(a)(ia) for disallowance-- Sonic Biochem Extractions P. Ltd. v. ITO (Mumbai) . . . 447

S. 10A --Business expenditure--Deduction only on actual payment--Exemption--Export of computer software--Provident fund contributions made before filing return--Allowable as business expenditure--If disallowed to be treated as business income under section 10A-- Patni Telecom Solutions P. Ltd. v. ITO (Hyderabad) . . . 534

S. 10A, Expln. 2(iv) --Exemption--Export of computer software--Export turnover--Expenses in foreign exchange on travelling expenses and internet charges for providing technical services--Internet charges on development of software--To be included--Allowable--Income-tax Act, 1961, Patni Telecom Solutions P. Ltd. v. ITO (Hyderabad) . . . 534

S. 30 --Business loss--Goods damaged in fire in plant--Assessee making assessment of damages and debiting to profit and loss account--Insurance company paying reduced amount--Difference between sum debited and received claim--Revenue expenditure--Assessing Officer to examine actual amounts incurred by assessee and determine actual loss-- Sonic Biochem Extractions P. Ltd. v. ITO (Mumbai) . . . 447

S. 31 --Business loss--Goods damaged in fire in plant--Assessee making assessment of damages and debiting to profit and loss account--Insurance company paying reduced amount--Difference between sum debited and received claim--Revenue expenditure--Assessing Officer to examine actual amounts incurred by assessee and determine actual loss-- Sonic Biochem Extractions P. Ltd. v. ITO (Mumbai) . . . 447

S. 32 --Depreciation--Refinery discontinued during year--Assets forming part of block of assets--Even if some assets in block functioning, entire block to be allowed depreciation-- Sonic Biochem Extractions P. Ltd. v. ITO (Mumbai) . . . 447

----Depreciation--Technical know-how--Chart submitted by assessee--If depreciation claimed on technical know-how different from one-sixth deduction claimed under section 35AB, depreciation to be allowed-- Garware Polyester Ltd. v. Assistant CIT (Mumbai) . . . 549

S. 35AB --Depreciation--Technical know-how--Chart submitted by assessee--If depreciation claimed on technical know-how different from one-sixth deduction claimed under section 35AB, depreciation to be allowed-- Garware Polyester Ltd. v. Assistant CIT (Mumbai) . . . 549

S. 36(1)(iii) --Interest on borrowed capital--Interest relating to capital work-in-progress--Not allowable--Matter remanded to give opportunity to assessee to give date-wise details of expenditure-- Garware Polyester Ltd. v. Assistant CIT (Mumbai) . . . 549

S. 37 --Business expenditure--Repairs, telephone expenses, vehicle expenses and expenses on repairs and maintenance of machines and building--Ad hoc disallowances for personal use by employees and directors--Assessee a public limited company and maintaining books of account and these audited--Question of any element of personal nature does not arise--Expenditure to be allowed-- Sonic Biochem Extractions P. Ltd. v. ITO (Mumbai) . . . 447

S. 40(a)(ia) --Business expenditure--Disallowance--Royalty--Tax deduction at source--Purchase of software with hardware of computers--Claim to depreciation--No purchase of copyright--Does not involve commercial exploitation thereof--No intangible asset involved--Purchase of asset and claim to depreciation not covered under section 40(a)(ia) for disallowance-- Sonic Biochem Extractions P. Ltd. v. ITO (Mumbai) . . . 447

----Business expenditure--Disallowance--Whether tax deducted at deposited in Government treasury before due date not clear --Direction to Assessing Officer to verify and decide under law--Matter remanded-- Deputy CIT v. Rameshbhai C. Prajapati (Ahmedabad) . . . 516

----Housing projects--Special deduction--Profits of business--Expenditure disallowed under section 40(a)(ia)--Not to be included in profits eligible for special deduction-- Deputy CIT v. Rameshbhai C. Prajapati (Ahmedabad) . . . 516

S. 43B --Business expenditure--Deduction only on actual payment--Exemption--Export of computer software--Provident fund contributions made before filing return--Allowable as business expenditure--If disallowed to be treated as business income under section 10A-- Patni Telecom Solutions P. Ltd. v. ITO (Hyderabad) . . . 534

----Business expenditure--Deduction only on actual payment--Payments to employees’€™ State corporation and provident fund--Payments made within grace period or within year itself or before filing return of income--Allowable-- Sonic Biochem Extractions P. Ltd. v. ITO (Mumbai) . . . 447

S. 68 --Cash credit--Burden of proof--Initial burden on assessee to prove genuineness of credit--Details of creditorsbank accounts not enough to fulfil ingredients of section 68--Addition justified-- ITO v. Gayatri Associates (Hyderabad) . . . 528

S. 80HHC --Export--Special deduction--Book profit--Deduction under section 80HHC to be computed in accordance with ruling of Supreme Court in Ajanta Pharma -- Garware Polyester Ltd. v. Assistant CIT (Mumbai) . . . 549

----Export--Special deduction under section 80HHC--Sale of music rights--Assessee producing evidence regarding delivery of master tapes and receipt of foreign exchange within time and certificates of foreign inward remittance--Entitled to deduction-- Deputy CIT v. K. J. Yesudoss (Chennai) . . . 540

S. 80-IB --Business expenditure--Disallowance--Whether tax deducted at deposited in Government treasury before due date not clear --Direction to Assessing Officer to verify and decide under law--Matter remanded-- Deputy CIT v. Rameshbhai C. Prajapati (Ahmedabad) . . . 516

----Housing projects--Special deduction--Profits of business--Expenditure disallowed under section 40(a)(ia)--Not to be included in profits eligible for special deduction-- Deputy CIT v. Rameshbhai C. Prajapati (Ahmedabad) . . . 516

----Industrial undertaking--Special deduction under section 80-IB--Findings of Commissioner (Appeals) that shops located on ground floor covered 2 per cent. of built-up area--Deduction allowable-- Deputy CIT v. Rameshbhai C. Prajapati (Ahmedabad) . . . 516

S. 92C(2) --International transaction--Arm’s length price--Determination--Comparable uncontrolled price--To examine whether there were any internal or external comparables--High degree of comparability necessary--Many variables for applying comparable uncontrolled price--Rejection of one method--Authority bound to adopt another from most appropriate methods’€ --Matter remanded to Transfer Pricing Officer to examine Arm’s length price adopting transactional net margin method and carry out fresh comparability analysis--Commissioner--Functional analysis of agency agreements assessee with associated enterprises and with non-associated enterprises--Cost to be incurred by associated enterprises and risk assumed far more--Rate of 10 per cent. reasonable--Benefit of 5 per cent. in terms of proviso to section 92C not a standard deduction-- Garware Polyester Ltd. v. Assistant CIT (Mumbai) . . . 549

S. 92CA --International transactions--Arm’s length price--Determination--Transactional net margin method--Selection of comparables--Turnover filter important--No bar to considering companies with either abnormal profits or abnormal losses--Assessee to demonstrate abnormal factors if it seeks to exclude comparable--Onsite and offshore services--Assets and risk profile, pricing, prevailing market conditions different--Onsite revenue filter to be applied--Functional comparability--Foreign exchange gain/loss to be added to operating revenue--Fringe benefit tax not considered part of operating cost of comparables--Not to be considered part of operating cost of assessee--Information collected under section 133(6)--Assessee cannot ask for right to cross examine company--Comparability of company neither considered by Transfer Pricing Officer nor Dispute Resolution Panel--Tribunal would not consider-- Trilogy E-Business Software India P. Ltd. v. Deputy CIT (Bangalore) . . . 464

S. 115JB --Export--Special deduction--Book profit--Deduction under section 80HHC to be computed in accordance with ruling of Supreme Court in Ajanta Pharma -- Garware Polyester Ltd. v. Assistant CIT (Mumbai) . . . 549

S. 133A --Income-tax survey--Statement made by assessee during survey operations--Failure by Department to collect material during survey--Statement no evidentiary value--Addition to be deleted-- Mahesh Ohri v. Assistant CIT (Delhi) . . . 522

S. 145A --Closing stock--Packing material on which batch numbers and price printed and having no value to assessee after lapse of time--Assessee devaluing inventory at Re. 1--To be allowed deduction-- Sonic Biochem Extractions P. Ltd. v. ITO (Mumbai) . . . 447

S. 234B --Advance tax--Interest--Company--Minimum alternate tax--Book profit--Provision for doubtful debts added back to book profits on basis of law amended retrospectively--No interest chargeable--As advance tax-- Garware Polyester Ltd. v. Assistant CIT (Mumbai) . . . 549

S. 271(1)(c) --Penalty--Concealment of income--Assessee furnishing income-tax particulars as well as declarations for receiving gifts from donors along with their balance-sheets--Explanation bona fide--Penalty not exigible-- Sushil Kumar Modi v. Assistant CIT (Jaipur) . . . 513

Income-tax Rules, 1962 :

R. 10B --International transaction--Arm’s length price--Determination--Comparable uncontrolled price--To examine whether there were any internal or external comparables--High degree of comparability necessary--Many variables for applying comparable uncontrolled price--Rejection of one method--Authority bound to adopt another from most appropriate methods’€ --Matter remanded to Transfer Pricing Officer to examine Arm’s length price adopting transactional net margin method and carry out fresh comparability analysis--Commissioner--Functional analysis of agency agreements assessee with associated enterprises and with non-associated enterprises--Cost to be incurred by associated enterprises and risk assumed far more--Rate of 10 per cent. reasonable--Benefit of 5 per cent. in terms of proviso to section 92C not a standard deduction-- Garware Polyester Ltd. v. Assistant CIT (Mumbai) . . . 549

----International transactions--Arm’s length price--Determination--Transactional net margin method--Selection of comparables--Turnover filter important--No bar to considering companies with either abnormal profits or abnormal losses--Assessee to demonstrate abnormal factors if it seeks to exclude comparable--Onsite and offshore services--Assets and risk profile, pricing, prevailing market conditions different--Onsite revenue filter to be applied--Functional comparability--Foreign exchange gain/loss to be added to operating revenue--Fringe benefit tax not considered part of operating cost of comparables--Not to be considered part of operating cost of assessee--Information collected under section 133(6)--Assessee cannot ask for right to cross examine company--Comparability of company neither considered by Transfer Pricing Officer nor Dispute Resolution Panel--Tribunal would not consider-- Trilogy E-Business Software India P. Ltd. v. Deputy CIT (Bangalore) . . . 464