FW: [GlobalIndianCAs] IT : Provisions of section 154 can be invoked for rectifying mistake of non-levy

Provisions of section 154 can be invoked for rectifying mistake of non-levy of interest under sections 234A, 234B and 234C in original assessment

Income-tax : When provisions of sections 234A, 234B and 234C themselves specifically provide for levy, Assessing Officer would be right in invoking provisions of section 154 for rectifying mistake of non-levy of interest under sections 234A, 234B and 234C in the original assessment [Section 154 of the income tax Act, 1961 - Rectification of mistake - Apparent from records] - [2011] 10 taxmann.com 141 (Chennai - ITAT)

Once provision is made for diminution in value of any asset, same has to be

Once provision is made for diminution in value of any asset, same has to be added to net profit for computing book profit u/s 115JB

Income-tax : If amount set aside as provision for diminution in value of any asset, appears on debit side of profit and loss account, which implies that amount of net profit as per profit and loss account is after amount of such provision, then such amount will be added back to net profit for computing `book profit' as per Explanation 1 to section 115JB(2); there is no other requirement in language of section for addition or non-addition of amount of provision for diminution in value of any asset to amount of net profit as shown in profit and loss account, depending on way in which such provision has been shown in balance sheet [Section 115JB of the Income-tax Act, 1961 - Minimum Alternate Tax]

l There is not even a remotest hint in the language of clause (i) of Explanation 1 to section 115JB that some value of the asset must remain after diminution, as a precondition for adding it to the net profit - [2011] 10 taxmann 144 (Mum. - ITAT)

Hyderabad Stock Exchange is not entitled to exemption u/s 11 even though it

Hyderabad Stock Exchange is not entitled to exemption u/s 11 even though its dominant purpose is general public utility

Income-tax : If the assessee - Stock exchange is having uncontrolled powers to carry out any object which is to benefit its members, employees or ex-employees, then exemption under section 11 should not be available to the assessee though at the same time primary dominant purpose of the assessee is of the nature of 'general public utility' [Section 2(15) of the Income-tax Act, 1961 - Charitable or religions trust - Charitable purpose - [2011] 10 taxmann.com 132 (Hyd. - ITAT)

There is no absolute ban on disclosure of IT returns under RTI Act

There is no absolute ban on disclosure of IT returns under RTI Act

Income-tax : RTI : The right forum for seeking the IT Returns of an assessee by a third person is either the Chief Commissioner, Income-tax or the Concerned Court, if the matter is sub-judice.

After the repealing of section 137 of the Income-tax Act, 1961 by Finance Act, 1964 the Court in a sub-judice matter can direct the IT authorities to furnish the information pertaining to IT Returns of an assessee for inspection by the Court - [2011] 10 taxmann 149 (CIC)

Character of an expenditure shall not change merely because

Character of an expenditure shall not change merely because it was spent out of a subsidy amount received from State Government

Income-tax : Expenditure incurred out of capital subsidy sanctioned in favour of assessee by Govt, of A.P on rectification and improvement of power lines damaged due to cyclone is allowable as a revenue expenditure, source of fund being quite immaterial, shall not change nature of expenditure incurred by assessee [Section 37(1) of the Income-tax Act, 1961 - Business expenditure - Allowability of] - [2011] 10 taxmann.com 152 (Hyd. - ITAT)(TM)

Merely because transaction is with an AE can't be a ground to reject it as

Merely because transaction is with an AE can't be a ground to reject it as a comparable when transaction is at arm's length

Income-tax : For transfer pricing adjustments, it will be most appropriate to compare the transactions for the same year for which the figures are available in respect of comparables which have already been accepted by the department [Section 92C of the Income-tax Act, 1961 - Transfer Pricing]

l Where both the comparables selected by the assessee and those by AO were not suitable for comparison due to difference in nature of business, transactions in assessee's own case for a particular year which was found to be at arm's length in that year should be adopted as basis as the business being same, it would give better results - [2011] 10 taxmann.com 140 (Mum. - ITAT)

Identity of share applicants would be established where assessee had furnis

Identity of share applicants would be established where assessee had furnished copies of their applications for allotment of share PAN details and company details downloaded from MCA site - [2011] 10 taxmann 137 (Delhi)

Where during search in case no evidence found, no addition

Where during search and seizure operation in assessee's case no evidence was found indicating that assessee had any undisclosed income, no addition could be made in block assessment proceedings - [2011] 10 taxmann.com 138 (Delhi )

Adjustment of Modvat Credit towards central excise liability amounts to act

Adjustment of Modvat Credit towards central excise liability amounts to actual payment u/s 43B

Income-tax : When unexpired MODVAT credit is set off against excise duty payable and thereby liability is extinguished or reduced setting off of MODVAT credit is as good as duty paid and it amounts to actual payment [Section 43B of the Income-tax Act, 1961 - Business disallowance - Certain deductions to be allowed only on actual payment] - [2011] 10 taxmann.com 133 (Delhi - ITAT)

Direct Tax Laws Sept 2011

DGIT's order to the effect that CA Institute holding coaching classes is a business is narrow and myopic - [2011] 13 taxmann 175 (DELHI)

Process of converting raw gherkins into gherkin pickles was eligible for deduction under section 10B, as it stood prior to 1-4-2001 - [2011] 13 taxmann 174 (CHENNAI - ITAT)

Merely because income from certain business is assessed under heading 'Income from other sources', expenditure incurred in running that business cannot be disallowed under section 57(iii) - [2011] 13 taxmann 167 (KAR.)

Extension of time for realization of export proceeds by competent authority under FEMA constitutes deemed approval granted by RBI under section 10A(3) - [2011] 13 taxmann 166 (BOM.)

Merely because a liability is pending for many years it cannot be said to have ceased to exist and charged to tax under section 41(1) - [2011] 13 taxmann 163 (MUM. - ITAT)

Where assessee utilized unspent credit limit of other party and reimbursed said party amount of interest payable by it to bank, assessee would be liable to deduct tax at source from such payment under section 194A - [2011] 13 taxmann 162 (CAL.)

Where due to amendment assessee became liable to pay advance tax under section 115JB on book profit deemed to be total income whereas it had paid advance tax on total income, interest could not be charged under sections 234B and 234C - [2011] 13 taxmann 161 (KAR.)
 

.......

=============================================================================

Dear Friends : The emails are schedule to be posted in the blog (itronline.blogspot.com)and will sent to the group on various dates and time fixed. Instead of sending it on one day.

=========================================================================

Judicial Pronouncements - International Taxation

Judicial Pronouncements - International Taxation

M/s Havells India Ltd. Vs. Addl.CIT [ITA No.1300/Del./2010, dtd. 27.05.2011] (2011) 59 DTR (Del)(Trib) 118

Fees paid to a foreign company for rendering testing and certification services cannot be treated as income deemed to accrue or arise in India under Section 9(1)(vii) of the Income-tax Act

ITAT Delhi Bench held that where services have been rendered outside India and have been utilised for the purpose of making or earning any income from any source outside India, such payments would fall outside the purview of Section 9(1)(vii) of the Act and will not be deemed to accrue or arise in India. The Tribunal observed that the testing and certification was necessary for the export of the product and was utilised for such export. The said services were rendered and utilised outside India. Therefore, the income fell outside the purview of Section 9(1)(vii) of the Act and did not deem to accrue or arise in India. The Tribunal observed that the tax department had failed to prove its contention that the testing and certification were utilised in the taxpayer’s production activity in India. The burden in this regard was entirely on the tax department, which the tax department had failed to discharge. The tax department’s argument on remitting the matter to the AO was neither required, nor appropriate to be adopted. The Tribunal observed that it was not possible to remit the matter to the AO since the appellate authority examines whether the assessment had been framed in accordance with law and if the assessment was not framed in accordance with law it was not the responsibility of the authority to start investigation suo moto and in order to fill up the gap which was missing. The Tribunal further observed that the tax department did not bring anything on record to substantiate its observation of the testing and certification services provided to the taxpayer by CSA having been utilised for the taxpayer’s business activity in India.

Accordingly, it was held that fees paid by the taxpayer did not deemed to accrue or arise in India and withholding of tax under Section 195 of the Act was not required and thus disallowance under Section 40(a)(i) of the Act was also not required. [Post amendment of section 9(1)(vii)]

Nippon Keiji Kyokoi Vs. ITO [ITA no.6329, 6330, 6331/Mum./2007, dtd. 29.07.2011]

Income of non-resident attributed to its PE in India taxable as business profits; balance income not to be taxed as fee for technical services

Notwithstanding a change in the position by the assessee, the Tribunal has held that the effective connection with the permanent establishment in India has to be determined based on a functional test in the case of fees for technical services . Furthermore, the Tribunal also upheld that if the services are said to have been effectively connected with the permanent establishment, the income would be taxable only as business profits to the extent of attribution and the balance income would not be liable to tax in India as fees for technical services. Article-12(5) of the DTAA, excludes the entire receipt from Article-12(1) and 12(2), if the receipt has an effective connecting with the P.E. The argument that Port is to be taxed under Article-7 and balance under Article-12, is devoid of merit. The DTAA does not contemplate the same. Such an interpretation said to be placed by learned Departmental Representative is incorrect and, hence, we reject the same. When certain FTS is effectively connected with the P.E., then so much of the fees i.e., directly or indirectly attributable to the P.E. is to be taxed under Article-7. Services rendered through own staff and those rendered through independent surveyors cannot be dealt with differently and hence the services rendered through independent surveyors have an effective connection with the PE.

Destination of the World (Subcontinent) Pvt. Ltd., Vs. Asstt. CIT [ITA No. 5534(Del)/2010, dtd. 08.07.2011]

For transfer pricing, internal comparability to be given preference over external comparables

The ITAT Delhi Tribunal held that in the first instance, the attempt should be made to determine arm’s length price of controlled transactions by comparing the same with internal uncontrolled transactions undertaken in same or similar economic scenario.

ACIT Vs. Anchor Health and Beauty Care Pvt Ltd [ITA No. 7164/ Mum/2008, dtd. 26.08.2011]

Fee for “user of name” and “accreditation” not taxable as “royalty”

The assessee, engaged in manufacture of tooth paste etc paid Rs 11,71,826 as “accreditation panel fees” to British Dental Health Foundation UK without deduction of tax at source. The AO disallowed the sum u/s 40(a)(i) on the ground that the sum was taxable as “royalty” and tax had not been deducted at source u/s 195(1). The CIT (A) deleted the disallowance. Before the Tribunal, the department argued that since the assessee derived valuable advantage from the accreditation by BDHF and use the same as a marketing tool, the amount constituted “royalty”. ITAT Mumbai bench dismissing the appeal held that (i) The obligation to deduct tax u/s 195(1) arises only if the payment is chargeable to tax in the hands of non-resident recipient. If the recipient of the income is not chargeable to tax, the vicarious liability on the payer is ineffectual. As the AO had not established how the recipient was liable to pay tax, he was in error in disallowing u/s 40(a)(i) (GE India Technology Center 327 ITR 456 (SC) followed; (ii) On merits, though the accreditation fees permitted the assessee the use of name of British Dental Health Foundation, it did not constitute “royalty” under Article 13 of the India-UK DTAA because it did not allow the accredited product to use, or have a right to use, a trademark, nor any information concerning industrial, commercial or scientific experience so as to fall within the definition of the term. The purpose of the accreditation by a reputed body was to give certain comfort level to the end users of the product and to constitute the USP of the product. The term “royalty” cannot be construed as per its normal connotations in business parlance but has to be construed as per the definition in Article 13. The amount constituted “business profits” and as the recipient did not have a PE in India, it was not taxable in India.

DCIT Vs. RBS Equities India Ltd [ITA No. 2570/Mum/2010, dtd. 26.08.2011]

When method changed by TPO, no penalty is leviable

The assessee adopted the TNMM to determine the ALP in respect of the broking transactions entered into with its affiliates. The AO & TPO held that the assessee ought to have adopted the CUP method and made an adjustment of Rs. 1.10 crores. This was accepted by the assessee.

The AO levied penalty under Explanation 1 to s. 271(1)(c) on the ground that the assessee had filed inaccurate particulars of income. This was deleted by the CIT (A). On appeal by the department to the Tribunal, ITAT Mumbai Bench dismissing the appeal held that explanation 1 to s. 271(1)(c) does not apply to transfer pricing adjustments. Penalty for transfer pricing adjustments is governed by Explanation 7 to s. 271 (1)(c). Under Explanation 7 to s. 271(1) (c), the onus on the assessee is only to show that the ALP was computed by the assessee in accordance with the scheme of s. 92 C in “good faith” and with “due diligence”. The assessee adopted the TNMM and no fault was found with the computation of ALP as per that method. Instead, the method was rejected on the ground that CUP method was applicable. It is a contentious issue whether any priority in the methods of determining ALPs exists. So, when TNMM is rejected, without any specific reasons for inapplicability of the TNMM and simply on the ground that a direct method is more appropriate to the fact situation, it is not a fit case for imposition of penalty. The expression ‘good faith’ used alongwith ‘due diligence’, which refers to ‘proper care, means that not only must the action of the assessee be in good faith, i.e. honestly, but also with proper care. An act done with due diligence would mean an act done with as much as care as a prudent person would take in such circumstances. As long as no dishonesty is found in the conduct of the assessee and as long as he has done what a reasonable man would have done in his circumstances, to ensure that the ALP was determined in accordance with the scheme of s. 92 C, deeming fiction under Explanation 7 cannot be invoked.

ADIT Vs. TII Team Telecom International Pvt Ltd [ITA No. 3939/ Mum/2010, dtd. 26.08.2011]

Income from license of software not assessable as “royalty”.

The assessee, an Israeli company, entered into an agreement with Reliance Infocom for supply and licence of software for RIL’s wireless network in India. The assessee received Rs. 3 crores which it claimed to be “business profits” and not taxable for want of a permanent establishment (PE) in India. The AO took the view that the said sum was assessable as “royalty”. This was reversed by the CIT (A) following Motorola Inc 96 TTJ 1 (Del) (SB). In appeal before the Tribunal, the department argued that in view of Gracemac Corp 42 SOT 550 (Del), the use of software was assessable as “royalty”. ITAT Mumbai bench dismissing the appeal held that (i) Under Article 12 (3) of the India- Israel DTAA, royalty is defined inter alia to mean payments for the “use of” a “copyright” or a “process”. There is a distinction between “use of copyright” and “use of a copyrighted article”. In order to constitute “use of a copyright”, the transferee must enjoy four rights viz: (i) the right to make copies of the software for distribution to the public, (ii) The right to prepare derivative computer programmes based upon the copyrighted programme, (iii) the right to make a public performance of the computer programme and (iv) The right to publicly display the computer programme. If these rights are not enjoyed, there is no “use of a copyright”. The consideration is also not for “use of a process” because what the customer is paying for is not for the “process” but for the “results” achieved by use of the software. It will be a “hyper technical approach totally divorced from ground business realities” to hold that the use of software is use of a “process”. (Motorola Inc 96 TTJ 1 (Del) (SB) and Asia Sat 332 ITR 340 (Del) followed. Gracemac Corp 42 SOT 550 (Del) not followed); (ii) It is well settled that a DTAA prevails over the Act where it is more favourable to the assessee. The view taken in Gracemac, relying on Gramophone Co AIR 1984 SC 667, that the Act overrides the treaty provisions where there is irreconcilable conflict is not acceptable because (a) it is obiter dicta, (b) contrary to Azadi Bachao Andolan 263 ITR 706 (SC) and (c) Gramophone Co not applicable to I. T. Act as it dealt with law in which specific enabling clause for treaty override did not exist. (Ram Jethmalani vs UOI also considered).

LS Cable Limited Vs. DIT [ A.A.R. Nos. 858-861 of 2009, dtd. 26.07.2011]

Off-shore supplies not taxable despite composite contract & PE’s role in clearance

The assessee, a Korean company, entered into three contracts with Delhi Transco Ltd for (i) offshore supply contract on CIF basis, (ii) onshore supply contract and (iii) onshore service contract. The applicant claimed that the income arising from the offshore supply contract was not taxable in India. The revenue claimed that the profits from the off-shore supply was taxable in India on the basis that (a) though the supply contract was awarded of sepa successful completion of the facility as per specifications, (c) the three contracts were separate contracts did not dilute the responsibility of the applicant for successful completion of the facility as per specifications, (c) the three contracts were composite contracts and one could not exist without the other, (d) the offshore supplies were on CIF basis and the contracts for offshore supply and onshore contracts were signed on the same date, (e) the insurance requirement of the offshore supplies contract require that the applicant will take out and maintain insurance of cargo, installation, worker compensation, etc, (f) the case is not a case of a sale simpliciter but is for full package involving onshore services. It could not have made a difference had the contract been one instead of three divisible contracts. AAR rejecting the contentions of the department held that (i) The clauses in the offshore supply contract agreement regarding the transfer of ownership, the payment mechanism in the form of letter of credit which ensures the credit of the amount in foreign currency to the applicant’s foreign bank account on receipt of shipment advice and insurance clause establish that the transaction of sale and the title took place outside Indian Territory. The ownership and property in goods passed outside India. The transit risk borne by the applicant till the goods reach the site in India is not necessarily inconsistent with the sale of goods taking place outside India. The parties may decide between them as to when the title of the goods should pass. As the consideration for the sale portion is separately specified, it can well be separated from the whole. (Ishikwajima Harima 288 ITR 410 (SC) & Hyosung Corporation 314 ITR 343 (AAR) followed; Ansaldo Energia SPA 310 ITR 237 (Mad) distinguished); (ii) Nothing in law prevents parties to enter into a contract which provides for sale of material for a specified consideration although they were meant to be utilized in the fabrication and installation of a complete plant; (iii) Though the assessee had a PE in India, that came into existence for the purpose of carrying out the contract for onshore supplies and services etc and had no role to play in offshore supplies. Even if the PE was involved in carrying on some incidental activities such as clearance from the port and transportation, it cannot be said that the PE is in connection with the offshore supplies.

.......

=============================================================================

Dear Friends : The emails are schedule to be posted in the blog (itronline.blogspot.com)and will sent to the group on various dates and time fixed. Instead of sending it on one day.

=========================================================================

Direct Tax Laws Sept 2011

Once one of the bars created by proviso to section 245R(2) is found to exist, AAR is enjoined by the very statute that created it, to decline jurisdiction to give a ruling - [2011] 13 taxmann 158 (AAR - New Delhi)

Where question raised in application is already pending before an Appellate Authority, though not at instance of applicant but at instance of a person who is immediately concerned with said question raised, the clause (i) of proviso to section 245R(2) is attracted and it would be appropriate for the Authority to decline jurisdiction to entertain application - [2011] 13 taxmann 157 (AAR - New Delhi)

In view of fact that section 28(va) was inserted by Finance Act, 2002 with effect from 1-4-2003, amount of non-compete fee received by assessee prior to that date was not taxable - [2011] 13 taxmann 156 (Karnataka)

For estimating assessee's income, GP rate should be fixed by taking into account GP rates of earlier years and subsequent years - [2011] 13 taxmann 152 (Delhi)

Where a partnership firm paid remuneration to assessee as a partner after deducting TDS and disclosed said payment in its return, remuneration income stood disclosed to department - [2011] 13 taxmann 147 (Karnataka)

Merely because advertisement/publicity expenditure benefited not only to assessee-company but also to its principals abroad, expenditure cannot be said to have been incurred for non-business purposes - [2011] 13 taxmann 160 (Mumbai - Trib.)(TM)

Lawful activities undertaken by an institution for overall prosperity of Tamilians should be treated as charitable activities for purpose of its registration under section 12AA - [2011] 13 taxmann 159 (Chennai - Trib.)

Where assessee challenged invocation of provisions of section 249(4)(b) on ground that since it had incurred loss in relevant year, it was not liable to pay tax of an amount equal to amount of advance tax, matter was to be remanded back to Commissioner (Appeals) - [2011] 13 taxmann 155 (Pune - Trib.)

Where assessee-company for setting up refinery had incurred expenditure on travelling, bidding for tenders, exploration activities, etc., same were to be allowed as revenue expenditure.Where assessee had been carrying on business through a permanent establishment in Oman and Qatar and was deriving income therefrom, it was only Oman and Qatar Government which was entitled to levy tax as per article 7 of DTAA between India and of aforesaid countries - [2011] 13 taxmann 151 (Mumbai - Trib.)

Where Assessing Officer has not rejected assessee's books of account under section 145(3), there is no justification for him to make a reference to DVO under section 142A - [2011] 13 taxmann 150 (Delhi - Trib.)

Where two companies merged in a comparable and, there was nothing on record to show that those two companies were also engaged in same business, assessee was justified in excluding apresaid comparable from list of comparables while determining ALP.Where assessee earned commission income in respect of direct sales by AEs, in view of fact that assessee was rendering warranty services for said sales, it could be concluded that commission income was operational income and, it was not to be excluded from assessee's profitability while determining ALP - [2011] 13 taxmann 149 (Mumbai - Trib.)

Where accreditation of a reputed foundation about quality of product is allowed to be used for sales promotion, payment of accreditation fee would not be 'royalty' as set out in article 13(3) of Indo-UK DTAA; it will be business income - [2011] 13 taxmann 148 (Mumbai - Trib.)

Income of a recreation club from FDRs, dividend, etc., would be exempt from

Income of a recreation club from FDRs, dividend, etc., would be exempt from income-tax on principle of mutuality - [2011] 10 taxmann.com 114 (Delhi)

ITR (TRIB) Volume 11 : Part 5 Issue dated : 26-09-2011, SUBJECT INDEX

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

Volume 11 : Part 5 (Issue dated : 26-09-2011)

SUBJECT INDEX TO CASES REPORTED IN THIS PART

->> Charitable purposes --Registration--Society running educational institutions--No proof that funds applied for non-charitable or religious purposes--Direction to grant to retrospective registration--Income-tax Act, 1961, s. 12AA-- Karandhai Tamil Sangam v. CIT (Chennai) . . . 430

->> Charitable trust --Registration--Denial of registration as activities confined to one religion--Finding that activities not only religious but also charitable--Assessee to be given status of religious and charitable trust--Income-tax Act, 1961, s. 12A-- Kasyapa Veda Research Foundation v. CIT (Cochin) . . . 468

->> Company --Computation of profits under section 115JB--Provision for bad debts--Amount to be added to book profits--Income-tax Act, 1961, s. 115JB-- Magnum Power Generation Ltd. v . Deputy CIT (Delhi) . . . 493

->> Income from house property --Business income--Income from property or business income--Assessee constructing residential units and dealing in them--Amount received on lease of some units--Not from business--Income from property--Income-tax Act, 1961, ss. 22, 28-- Roma Builders P. Ltd. v. Joint CIT (Mumbai) . . . 503

->> Income from undisclosed sources --Survey in premises of assessee--Defects in books of account--No nexus between un-accounted profit earned and investment made in properties outside books of account--Set off allowed--Amounts to reducing additional income declared by assessee--Set off not justified--Income-tax Act, 1961-- V. R. Textiles v. Joint CIT (Ahmedabad) . . . 476

->> Income-tax survey --Accounting--Rejection of books of account--Defects in books of account--Entire undisclosed sales cannot be treated as profit of assessee--Commissioner (Appeals) applying gross profit rate--Proper--Income-tax Act, 1961, s. 145-- V. R. Textiles v. Joint CIT (Ahmedabad) . . . 476

->> Industrial undertaking --Generation and supply of power--Amount received from sale of scrap and writing back of credit balances--No finding whether credit balances related to business and whether scrap was generated by industrial undertaking--Matter remanded--Income-tax Act, 1961, s. 80-IA-- Magnum Power Generation Ltd. v. Deputy CIT (Delhi) . . . 493

->> ----Generation and supply of power--Special deduction under section 80-IA--Agreement for supply of power--Agreement providing that if power not required compensation charges to be paid--Amount received for deemed generation of power--Entitled to special deduction under section 80-IA--Income-tax Act, 1961, s. 80-IA-- Magnum Power Generation Ltd. v. Deputy CIT (Delhi) . . . 493

->> Non-resident --Advance tax--Interest--Not payable where entire income liable to deduction of tax at source--Income-tax Act, 1961, ss. 195, 234B-- Samsung Heavy Industries Co. Ltd. v. Addl. DIT (International Taxation) (Delhi) . . . 513

->> ----Taxability in India--Turnkey project in India--Permanent establishment--Project office in Mumbai involved in activities of project from commencement--Contract indivisible--No material to show project office concerned only with activities outside India--Mode of accounting of expenses of project office not decisive--Mumbai office constituted permanent establishment--Ad hoc attribution of percentage of income to permanent establishment not permissible--Matter remanded for determination on basis of material --Income-tax Act, 1961, s. 144C--Double Taxation Avoidance Agreement between India and Korea, art. 5-- Samsung Heavy Industries Co. Ltd. v. Addl. DIT (International Taxation) (Delhi) . . . 513

->> Penalty --Concealment of income--Discrepancy in accounts--Amount surrendered because auditors raided and books of account could not be produced--Explanation of assessee reasonable--Penalty cannot be levied--Income-tax Act, 1961, s. 271(1)(c)-- ITO v. Dr. V . Muralikrishnan (Chennai) . . . 443

->> Perquisites --Employees stock option--Equity warrant certificates--Not by themselves securities but merely granting option to obtain shares--Date of exercise of option is date of acquisition of shares not date of certificate--Warrrant issued in February 1999 and assessee exercising option in April 1999--Perquisites arise and taxable in financial year 1999-2000 relevant to assessment year 2000-01--Income-tax Act, 1961, s. 17(2)(iiia) -- Deputy CIT v. Vijay Gopal Jindal (Delhi) . . . 451

->> Reassessment --Notice--Notice after four years--Validity--No failure to disclose material facts necessary for assessment--Returns accompanied by audited accounts--Special deduction under section 80HHC allowed after considering material on record--Reassessment proceedings after four years to reduce special deduction--Barred by limitation--Income-tax Act, 1961, ss. 80HHC, 147, 148-- Deputy CIT v. Purolator India Ltd. (Delhi) . . . 434

SECTIONWISE INDEX TO CASES REPORTED IN THIS PART

->> Double Taxation Avoidance Agreement between India and Korea :

art. 5 --Non-resident--Taxability in India--Turnkey project in India--Permanent establishment--Project office in Mumbai involved in activities of project from commencement--Contract indivisible--No material to show project office concerned only with activities outside India--Mode of accounting of expenses of project office not decisive--Mumbai office constituted permanent establishment--Ad hoc attribution of percentage of income to permanent establishment not permissible--Matter remanded for determination on basis of material-- Samsung Heavy Industries Co. Ltd. v. Addl. DIT (International Taxation) (Delhi) . . . 513

Income-tax Act, 1961 :

->> S. 12A --Charitable trust--Registration--Denial of registration as activities confined to one religion--Finding that activities not only religious but also charitable--Assessee to be given status of religious and charitable trust-- Kasyapa Veda Research Foundation v. CIT (Cochin) . . . 468

->> S. 12AA --Charitable purposes--Registration--Society running educational institutions--No proof that funds applied for non-charitable or religious purposes--Direction to grant to retrospective registration-- Karandhai Tamil Sangam v. CIT (Chennai) . . . 430

->> S. 17(2)(iiia) --Perquisites--Employees stock option--Equity warrant certificates--Not by themselves securities but merely granting option to obtain shares--Date of exercise of option is date of acquisition of shares not date of certificate--Warrrant issued in February 1999 and assessee exercising option in April 1999--Perquisites arise and taxable in financial year 1999-2000 relevant to assessment year 2000-01-- Deputy CIT v. Vijay Gopal Jindal (Delhi) . . . 451

->> S. 22 --Income from house property--Business income--Income from property or business income--Assessee constructing residential units and dealing in them--Amount received on lease of some units--Not from business--Income from property-- Roma Builders P. Ltd. v. Joint CIT (Mumbai) . . . 503

->> S. 28 --Income from house property--Business income--Income from property or business income--Assessee constructing residential units and dealing in them--Amount received on lease of some units--Not from business--Income from property-- Roma Builders P. Ltd. v. Joint CIT (Mumbai) . . . 503

->> S. 80-IA --Industrial undertaking--Generation and supply of power--Amount received from sale of scrap and writing back of credit balances--No finding whether credit balances related to business and whether scrap was generated by industrial undertaking--Matter remanded-- Magnum Power Generation Ltd. v. Deputy CIT (Delhi) . . . 493

->> ----Industrial undertaking--Generation and supply of power--Special deduction under section 80-IA--Agreement for supply of power--Agreement providing that if power not required compensation charges to be paid--Amount received for deemed generation of power--Entitled to special deduction under section 80-IA-- Magnum Power Generation Ltd. v. Deputy CIT (Delhi) . . . 493

->> S. 80HHC --Reassessment--Notice--Notice after four years--Validity--No failure to disclose material facts necessary for assessment--Returns accompanied by audited accounts--Special deduction under section 80HHC allowed after considering material on record--Reassessment proceedings after four years to reduce special deduction--Barred by limitation-- Deputy CIT v. Purolator India Ltd. (Delhi) . . . 434

->> S. 115JB --Company--Computation of profits under section 115JB--Provision for bad debts--Amount to be added to book profits-- Magnum Power Generation Ltd. v. Deputy CIT (Delhi) . . . 493

->> S. 144C --Non-resident--Taxability in India--Turnkey project in India--Permanent establishment--Project office in Mumbai involved in activities of project from commencement--Contract indivisible--No material to show project office concerned only with activities outside India--Mode of accounting of expenses of project office not decisive--Mumbai office constituted permanent establishment--Ad hoc attribution of percentage of income to permanent establishment not permissible--Matter remanded for determination on basis of material-- Samsung Heavy Industries Co. Ltd. v. Addl. DIT (International Taxation) (Delhi) . . . 513

->> S. 145 --Income-tax survey--Accounting--Rejection of books of account--Defects in books of account--Entire undisclosed sales cannot be treated as profit of assessee--Commissioner (Appeals) applying gross profit rate--Proper-- V. R. Textiles v. Joint CIT (Ahmedabad) . . . 476

->> S. 147 --Reassessment--Notice--Notice after four years--Validity--No failure to disclose material facts necessary for assessment--Returns accompanied by audited accounts--Special deduction under section 80HHC allowed after considering material on record--Reassessment proceedings after four years to reduce special deduction--Barred by limitation-- Deputy CIT v. Purolator India Ltd. (Delhi) . . . 434

->> S. 148 --Reassessment--Notice--Notice after four years--Validity--No failure to disclose material facts necessary for assessment--Returns accompanied by audited accounts--Special deduction under section 80HHC allowed after considering material on record--Reassessment proceedings after four years to reduce special deduction--Barred by limitation-- Deputy CIT v. Purolator India Ltd. (Delhi) . . . 434

->> S. 195 --Non-resident--Advance tax--Interest--Not payable where entire income liable to deduction of tax at source-- Samsung Heavy Industries Co. Ltd. v. Addl. DIT (International Taxation) (Delhi) . . . 513

->> S. 234B --Non-resident--Advance tax--Interest--Not payable where entire income liable to deduction of tax at source-- Samsung Heavy Industries Co. Ltd. v. Addl. DIT (International Taxation) (Delhi) . . . 513

->> S. 271(1)(c) --Penalty--Concealment of income--Discrepancy in accounts--Amount surrendered because auditors raided and books of account could not be produced--Explanation of assessee reasonable--Penalty cannot be levied-- ITO v. Dr. V. Muralikrishnan (Chennai) . . . 443

.......

=============================================================================

Dear Friends : The emails are schedule to be posted in the blog (itronline.blogspot.com)and will sent to the group on various dates and time fixed. Instead of sending it on one day.

=========================================================================

ITR ISSUE DATED 26-09-2011 Volume 337 Part 3, SUBJECT INDEX TO CASES REPORTED IN THIS PART

INCOME TAX REPORTS (ITR)

Volume 337 : Part 3 (Issue dated 26-9-2011)

SUBJECT INDEX TO CASES REPORTED IN THIS PART

HIGH COURTS

->> Advance tax --Interest payable by assessee--Default in payment of advance tax--Withdrawal of investment allowance--Fiction under section 32A(5) applicable to levy of interest --Income-tax Act, 1961, ss. 32A(5), 234B-- I. C. I. India Ltd . v. CIT (Cal) . . . 327

->> Assessing Officer --Powers of Assessing Officer--Remand by Commissioner (Appeals) in respect of specific issues--Assessing Officer has no power to consider a new issue--Income-tax Act, 1961, ss. 32A, 43(3), 250-- Deputy CIT (Asstt.) v. Surat Electricity Co. Ltd. (Guj) . . . 271

->> Bad debt --Condition precedent for allowance--Effect of amendment of section 36 w.e.f. 1-4-1989--Writing off amount is sufficient--Assessee need not prove that debt had been bad--Income-tax Act, 1961, s. 36(1)(vii), (2)(iii)-- Asst. CIT v. Pullen Pump Industries (Guj) . . . 294

->> Capital gains --Business income--Purchase of shares and sale within a short time--Finding that shares had been purchased as investment--Gains assessable as capital gains--Income-tax Act, 1961, ss. 28, 45-- CIT v. Consolidated Finvest and Holding Ltd . (Delhi) . . . 264

->> Current repairs --Business expenditure--Meaning of current repairs--Capital or revenue expenditure--Breakdown of machinery after long use--Expenditure on overhauling and reconditioning machinery--Not deductible as current repairs or revenue expenditure--Expenditure on minor repairs of many machines--Deductible--Income-tax Act, 1961, ss. 31, 37-- Bharat Gears Ltd. v. CIT (Delhi) . . . 368

->> Depreciation --Rate of depreciation--Motor vehicle--Difference between lease and hire--Assessee leasing motor vehicles to clients--Not engaged in business of hire--Not entitled to higher rate of depreciation--Income-tax Act, 1961, s. 32--Income-tax Rules, 1962, Appendix I-- Bhagwati Appliance v. ITO (Guj) . . . 286

->> Exemption --Difference between sections 10 and 11--Agricultural marketing committee--Law applicable--Effect of insertion of clause (26AAB) in section 10 w.e.f. 1-4-2009--Provision not retrospective--Committee entitled to exemption under section 10(26AAB) from 1-4-2009--Income-tax Act, 1961, ss. 10, 11-- CIT v. Agriculture Market Committee (AP) . . . 299

->> Interpretation of taxing statutes --Rule against retrospectivity--Declaratory legislation-- CIT v. Agriculture Market Committee (AP) . . . 299

->> Investment allowance --Withdrawal of allowance--Conditions precedent--Transfer of entire division in slump sale within eight years--No price separately indicated for plant and machinery--Section 32A(5) applicable--Withdrawal of investment allowance--Justified--Income-tax Act, 1961, s. 32A(5)-- I. C. I. India Ltd . v. CIT (Cal) . . . 327

->> Penalty --Concealment of income--Failure to furnish return of income when amounts to concealment--Effect of Explanation 3 to section 271(1)--Conditions enumerated in the Explanation are cumulative--Notice under section 148 within period stipulated in section 153(1)--Explanation not applicable--Penalty could not be levied--Income-tax Act, 1961, s. 271-- Chhaganlal S Uteriya v. ITO (Guj) . . . 350

->> Precedent --Effect of decision of Supreme Court in CIT v. Gupta Global Exim P. Ltd. [2008] 305 ITR 132 (SC)-- Bhagwati Appliance v. ITO (Guj) . . . 286

->> Residence --Requirement of stay in India for specified period in previous year--Effect of Explanation (a) to section 6(1)(c)--Employment includes self-employment--Indian citizen doing business in foreign country and staying in India for one hundred and seventy-seven days in the previous year--To be treated as non-resident--Income-tax Act, 1961, s. 6(1)(c)-- CIT v. O. Abdul Razak (Ker) . . . 267

->> Revision --Application for revision--Rejection of application without considering merits--Levy of penalty not valid--Rejection of application not justified--Income-tax Act, 1961, s. 264-- Chhaganlal S Uteriya v. ITO (Guj) . . . 350

->> Search and seizure --Assessment of third person--Condition precedent--Satisfaction of Assessing Officer that undisclosed income found during search belonged to third person--Cash belonging to third person seized from his employee in premises of searched person--No evidence to indicate satisfaction of Assessing Officer that cash seized belonged to third person--Notice under section 158BD to third person--Not valid--Income-tax Act, 1961, s. 158BD-- Chandrakantbhai Amratlal Thakkar v. Deputy CIT (Guj) . . . 258

->> ----Block assessment--Penalty--Scope of section 158BFA--Substantial addition to income returned under section 158BC--Tax not paid--Penalty to be levied--Commissioner allowing payment of tax in instalments--Not relevant--Income-tax Act, 1961, s. 158BFA-- CIT v. Heera Construction Co. P. Ltd. (Ker) . . . 359

AUTHORITY FOR ADVANCE RULINGS

->> Non-resident --Transfer to non-resident subsidiary of shares in Indian company without consideration--Not taxable in India--Transfer pricing provisions not applicable--No requirement of deduction of tax at source--But liable to file return--Income-tax Act, 1961, ss. 45, 47(iii), 92 to 92F, 139, 195-- Deere and Company, In re. . . 277

SECTIONWISE INDEX TO CASES REPORTED IN THIS PART

Income-tax Act, 1961 :

->> S. 6(1)(c) --Residence--Requirement of stay in India for specified period in previous year--Effect of Explanation (a) to section 6(1)(c)--Employment includes self-employment--Indian citizen doing business in foreign country and staying in India for one hundred and seventy-seven days in the previous year--To be treated as non-resident-- CIT v. O. Abdul Razak (Ker) . . . 267

->> S. 10 --Exemption--Difference between sections 10 and 11--Agricultural marketing committee--Law applicable--Effect of insertion of clause (26AAB) in section 10 w.e.f. 1-4-2009--Provision not retrospective--Committee entitled to exemption under section 10(26AAB) from 1-4-2009-- CIT v. Agriculture Market Committee (AP) . . . 299

->> S. 11 --Exemption--Difference between sections 10 and 11--Agricultural marketing committee--Law applicable--Effect of insertion of clause (26AAB) in section 10 w.e.f. 1-4-2009--Provision not retrospective--Committee entitled to exemption under section 10(26AAB) from 1-4-2009-- CIT v. Agriculture Market Committee (AP) . . . 299

->> S. 28 --Capital gains--Business income--Purchase of shares and sale within a short time--Finding that shares had been purchased as investment--Gains assessable as capital gains-- CIT v. Consolidated Finvest and Holding Ltd .(Delhi) . . . 264

->> S. 31 --Current repairs--Business expenditure--Meaning of current repairs--Capital or revenue expenditure--Breakdown of machinery after long use--Expenditure on overhauling and reconditioning machinery--Not deductible as current repairs or revenue expenditure--Expenditure on minor repairs of many machines--Deductible-- Bharat Gears Ltd. v. CIT (Delhi) . . . 368

->> S. 32 --Depreciation--Rate of depreciation--Motor vehicle--Difference between lease and hire--Assessee leasing motor vehicles to clients--Not engaged in business of hire--Not entitled to higher rate of depreciation-- Bhagwati Appliance v. ITO (Guj) . . . 286

->> S. 32A --Assessing Officer--Powers of Assessing Officer--Remand by Commissioner (Appeals) in respect of specific issues--Assessing Officer has no power to consider a new issue-- Deputy CIT (Asstt.) v. Surat Electricity Co. Ltd. (Guj) . . . 271

->> S. 32A(5) --Advance tax--Interest payable by assessee--Default in payment of advance tax--Withdrawal of investment allowance--Fiction under section 32A(5) applicable to levy of interest-- I. C. I. India Ltd . v. CIT (Cal) . . . 327

->> ----Investment allowance--Withdrawal of allowance--Conditions precedent--Transfer of entire division in slump sale within eight years--No price separately indicated for plant and machinery--Section 32A(5) applicable--Withdrawal of investment allowance--Justified-- I. C. I. India Ltd . v. CIT (Cal) . . . 327

->> S. 36(1)(vii) --Bad debt--Condition precedent for allowance--Effect of amendment of section 36 w.e.f. 1-4-1989--Writing off amount is sufficient--Assessee need not prove that debt had been bad-- Asst. CIT v. Pullen Pump Industries (Guj) . . . 294

->> S. 36(2)(iii) --Bad debt--Condition precedent for allowance--Effect of amendment of section 36 w.e.f. 1-4-1989--Writing off amount is sufficient--Assessee need not prove that debt had been bad-- Asst. CIT v. Pullen Pump Industries (Guj) . . . 294

->> S. 37 --Current repairs--Business expenditure--Meaning of current repairs--Capital or revenue expenditure--Breakdown of machinery after long use--Expenditure on overhauling and reconditioning machinery--Not deductible as current repairs or revenue expenditure--Expenditure on minor repairs of many machines--Deductible-- Bharat Gears Ltd. v. CIT (Delhi) . . . 368

->> S. 43(3) --Assessing Officer--Powers of Assessing Officer--Remand by Commissioner (Appeals) in respect of specific issues--Assessing Officer has no power to consider a new issue-- Deputy CIT (Asstt.) v. Surat Electricity Co. Ltd. (Guj) . . . 271

->> S. 45 --Capital gains--Business income--Purchase of shares and sale within a short time--Finding that shares had been purchased as investment--Gains assessable as capital gains-- CIT v. Consolidated Finvest and Holding Ltd .(Delhi) . . . 264

->> ----Non-resident--Transfer to non-resident subsidiary of shares in Indian company without consideration--Not taxable in India--Transfer pricing provisions not applicable--No requirement of deduction of tax at source--But liable to file return-- Deere and Company, In re (AAR) . . . 277

->> S. 47(iii) --Non-resident--Transfer to non-resident subsidiary of shares in Indian company without consideration--Not taxable in India--Transfer pricing provisions not applicable--No requirement of deduction of tax at source--But liable to file return-- Deere and Company, In re (AAR) . . . 277

->> Ss. 92 to 92F --Non-resident--Transfer to non-resident subsidiary of shares in Indian company without consideration--Not taxable in India--Transfer pricing provisions not applicable--No requirement of deduction of tax at source--But liable to file return-- Deere and Company, In re (AAR) . . . 277

->> S. 139 --Non-resident--Transfer to non-resident subsidiary of shares in Indian company without consideration--Not taxable in India--Transfer pricing provisions not applicable--No requirement of deduction of tax at source--But liable to file return-- Deere and Company, In re (AAR) . . . 277

->> S. 158BD --Search and seizure--Assessment of third person--Condition precedent--Satisfaction of Assessing Officer that undisclosed income found during search belonged to third person--Cash belonging to third person seized from his employee in premises of searched person--No evidence to indicate satisfaction of Assessing Officer that cash seized belonged to third person--Notice under section 158BD to third person--Not valid-- Chandrakantbhai Amratlal Thakkar v. Deputy CIT (Guj) . . . 258

->> S. 158BFA --Search and seizure--Block assessment--Penalty--Scope of section 158BFA--Substantial addition to income returned under section 158BC--Tax not paid--Penalty to be levied--Commissioner allowing payment of tax in instalments--Not relevant-- CIT v. Heera Construction Co. P. Ltd. (Ker) . . . 359

->> S. 195 --Non-resident--Transfer to non-resident subsidiary of shares in Indian company without consideration--Not taxable in India--Transfer pricing provisions not applicable--No requirement of deduction of tax at source--But liable to file return-- Deere and Company, In re (AAR) . . . 277

->> S. 234B --Advance tax--Interest payable by assessee--Default in payment of advance tax--Withdrawal of investment allowance--Fiction under section 32A(5) applicable to levy of interest-- I. C. I. India Ltd . v. CIT (Cal) . . . 327

->> S. 250 --Assessing Officer--Powers of Assessing Officer--Remand by Commissioner (Appeals) in respect of specific issues--Assessing Officer has no power to consider a new issue-- Deputy CIT (Asstt.) v. Surat Electricity Co. Ltd. (Guj) . . . 271

->> S. 264 --Revision--Application for revision--Rejection of application without considering merits--Levy of penalty not valid--Rejection of application not justified-- Chhaganlal S Uteriya v. ITO (Guj) . . . 350

->> S. 271 --Penalty--Concealment of income--Failure to furnish return of income when amounts to concealment--Effect of Explanation 3 to section 271(1)--Conditions enumerated in the Explanation are cumulative--Notice under section 148 within period stipulated in section 153(1)--Explanation not applicable--Penalty could not be levied-- Chhaganlal S Uteriya v. ITO (Guj) . . . 350

Income-tax Rules, 1962 :

->> Appendix I --Depreciation--Rate of depreciation--Motor vehicle--Difference between lease and hire--Assessee leasing motor vehicles to clients--Not engaged in business of hire--Not entitled to higher rate of depreciation-- Bhagwati Appliance v. ITO (Guj) . . . 286

.......

=============================================================================

Dear Friends : The emails are schedule to be posted in the blog (itronline.blogspot.com)and will sent to the group on various dates and time fixed. Instead of sending it on one day.

=========================================================================