ITR (TRIB) Volume 17 : Part 4 (Issue dated : 30-07-2012) SUBJECT INDEX TO CASES REPORTED IN THIS PART

ITR'S TRIBUNAL TAX REPORTS (ITR (TRIB))
Volume 17 : Part 4 (Issue dated : 30-07-2012)

SUBJECT INDEX TO CASES REPORTED IN THIS PART

Appeal --Additional evidence--Commissioner (Appeals) admitting new evidence after considering facts and circumstances of case in entirety and validly--Justified--Income-tax Rules, 1962, r. 46A-- ITO v. Bhagwan Dass (Chandigarh) . . . 446

Business expenditure --Capital or revenue expenditure--Assessee running tutorial institution--Purchase of books for use by students for professional entrance examinations--Is capital expenditure--Depreciation to be allowed at 60 per cent.--Income-tax Act, 1961, ss. 32, 37-- Brilliant Study Centre v. Asst. CIT (Cochin) . . . 394

----Cost of books and awards--Assessee failing to produce vouchers of purchase of books--Expenditure to be disallowed--Assessee to furnish details regarding expenditure on awards--Matter remanded--Income-tax Act, 1961-- Brilliant Study Centre v. Asst. CIT (Cochin) . . . 394

----Demurrage charges paid to railways--Assessee furnishing certificate regarding nature of demurrage--Deduction allowable--Income-tax Act, 1961-- ITO v. Bhagwan Dass (Chandigarh) . . . 446

----Disallowance--Payments in cash exceeding specified limit--Finding that single transactions made to appear as multiple transactions--Payments to be disallowed--Income-tax Act, 1961, s. 40A(3)-- Brilliant Study Centre v. Asst. CIT (Cochin) . . . 394

----Interest on borrowed capital--Interest-free advances--Direction to disallow interest at same rate charged by bank from assessee--Justified--Income-
tax Act, 1961-- ITO v. Bhagwan Dass (Chandigarh) . . . 446

Business income --Remission or cessation of trading liability--Addition--Unclaimed liabilities--No record of any remission or cessation of trading liability--Addition to be deleted--Income-tax Act, 1961, s. 41(1)-- Dy. CIT v. Bax Global India P. Ltd. (Delhi) . . . 414

Capital gains --Computation--Sale of land--Valuation by stamp valuation authority applied--Fair market value lower than value adopted by stamp duty authority--Direction to adopt fair market value--Justified--Income-tax Act, 1961, s. 50C-- ITO v. Gita Roy (Kolkata) . . . 431

Cash credits --Assessee producing details and creditor confirming loan granted to assessee--Addition to be deleted--Income-tax Act, 1961, s. 68-- ITO v. Bhagwan Dass (Chandigarh) . . . 446

Company --Dividend--Deemed dividend--Advance to shareholder--Advance to company in which shareholder had substantial interest--Section 2(22)(e) not applicable--Amount not assessable as deemed dividend--Income-tax Act, 1961, s. 2(22)(e)-- Asst. CIT v. Color Crafts P. Ltd. (Chandigarh) . . . 419

Depreciation --Assets given on financial lease--Assessing Officer to determine nature of lease--Different yardstick cannot be adopted for allowing depreciation and taxing lease rent--Matter remanded--Income-tax Act, 1961, s. 32-- Dy. CIT v. Bax Global India P. Ltd. (Delhi) . . . 414

Double taxation avoidance --Non-resident--Permanent establishment--Exact period of continuation of activities in India to be ascertained--Matter remanded--Double Taxation Avoidance Agreement between India and Mauritius, art. 5(1), (2)(i)-- GIL Mauritius Holdings Ltd. v. Assistant Director of Income-tax (International Taxation) (Delhi) . . . 491

Income --Business income--Remission of liability--Bank--Amount transferred from inter-branch transaction blocked accounts to reserves through profit and loss account--Transfer permitted by Reserve Bank of India subject to conditions that claim in respect of entries should be honoured and amount should not be used for declaration of dividends--Amount not of revenue nature to begin with--Amount not assessable under section 41(1)--Income-tax Act, 1961, s. 41(1)-- Punjab National Bank v. Addl. CIT (Delhi) . . . 462

Income from undisclosed sources --Unexplained sales and expenditure--Addition based on statement of director recorded by Central excise authorities--Addition not supported by evidence--Additions not valid--Income-tax Act, 1961-- Asst. CIT v. A. K. Alloys P. Ltd. (Chandigarh) . . . 424

Interpretation of taxing statutes --Interpretation beneficial to assessee--Principle applicable to non-residents-- Deputy Director of Income-tax (International Taxation) v. Solid Works Corporation (Mumbai) . . . 510

Loss --Set off--Loss on share transactions--Actual delivery received by agent of assessee--Loss not speculation loss--Commissioner (Appeals) allowing set off of loss against other heads of income--Justified--Income-tax Act, 1961, s. 43(5)-- Dy. CIT v. Dr. S. Thilagavathy (Chennai) . . . 506

Non-resident --Income deemed to accrue or arise in India--Double taxation avoidance--Assessee providing various hotel related services to hotels across the world--Assessee having no permanent establishment in India--Payments received not royalty or fees for technical services--Income-tax Act, 1961, s. 9(1)(vii), Explanation 2 --Double Taxation Avoidance Agreement between India and the U. S. A, art. 7-- Deputy Director of Income-tax (International Taxation) v. Sheraton International Inc. (Delhi) . . . 457

----Royalty--Payment from re-sellers on sale of shrink wrap software--Not royalty but business income--Non-resident not having permanent establishment in India--Income not assessable in India--Income-tax Act, 1961, s. 9--Double Taxation Avoidance Agreement between India and the U. S. A., art. 12(3)-- Deputy Director of Income-tax (International Taxation) v. Solid Works Corporation (Mumbai) . . . 510

Revision --Powers of Commissioner--No tax effect--Order cannot be revised--Income-tax Act, 1961, s. 263-- Punjab Wool Syndicate v. ITO (Chandigarh) . . . 439

Unexplained income --Unexplained credit entries in capital account--Assessee furnishing details of remittance--Addition to be deleted--Income-tax Act, 1961-- ITO v. Bhagwan Dass (Chandigarh) . . . 446

SECTIONWISE INDEX TO CASES REPORTED IN THIS PART

Double Taxation Avoidance Agreement between India and Mauritius :

Art. 5(1), (2)(i) --Double taxation avoidance--Non-resident--Permanent establishment--Exact period of continuation of activities in India to be ascertained--Matter remanded-- GIL Mauritius Holdings Ltd. v. Assistant Director of Income-tax (International Taxation) (Delhi) . . . 491

Double Taxation Avoidance Agreement between India and the U. S. A :

Art. 7 --Non-resident--Income deemed to accrue or arise in India--Double taxation avoidance--Assessee providing various hotel related services to hotels across the world--Assessee having no permanent establishment in India--Payments received not royalty or fees for technical services-- Deputy Director of Income-tax (International Taxation) v. Sheraton International Inc. (Delhi) . . . 457

Art. 12(3) --Non-resident--Royalty--Payment from re-sellers on sale of shrink wrap software--Not royalty but business income--Non-resident not having permanent establishment in India--Income not assessable in India-- Deputy Director of Income-tax (International Taxation) v. Solid Works Corporation (Mumbai) . . . 510

Income-tax Act, 1961 :

S. 2(22)(e) --Company--Dividend--Deemed dividend--Advance to shareholder--Advance to company in which shareholder had substantial interest--Section 2(22)(e) not applicable--Amount not assessable as deemed dividend-- Asst. CIT v. Color Crafts P. Ltd. (Chandigarh) . . . 419

S. 9 --Non-resident--Royalty--Payment from re-sellers on sale of shrink wrap software--Not royalty but business income--Non-resident not having permanent establishment in India--Income not assessable in India-- Deputy Director of Income-tax (International Taxation) v. Solid Works Corporation (Mumbai) . . . 510

S. 9(1)(vii), Explanation 2 --Non-resident--Income deemed to accrue or arise in India--Double taxation avoidance--Assessee providing various hotel related services to hotels across the world--Assessee having no permanent establishment in India--Payments received not royalty or fees for technical services-- Deputy Director of Income-tax (International Taxation) v. Sheraton International Inc. (Delhi) . . . 457

S. 32 --Depreciation--Assets given on financial lease--Assessing Officer to determine nature of lease--Different yardstick cannot be adopted for allowing depreciation and taxing lease rent--Matter remanded-- Dy. CIT v. Bax Global India P. Ltd. (Delhi) . . . 414

----Business expenditure--Capital or revenue expenditure--Assessee running tutorial institution--Purchase of books for use by students for professional entrance examinations--Is capital expenditure--Depreciation to be allowed at 60 per cent.-- Brilliant Study Centre v. Asst. CIT (Cochin) . . . 394

S. 37 --Business expenditure--Capital or revenue expenditure--Assessee running tutorial institution--Purchase of books for use by students for professional entrance examinations--Is capital expenditure--Depreciation to be allowed at 60 per cent.-- Brilliant Study Centre v. Asst. CIT (Cochin) . . . 394

S. 40A(3) --Business expenditure--Disallowance--Payments in cash exceeding specified limit--Finding that single transactions made to appear as multiple transactions--Payments to be disallowed-- Brilliant Study Centre v. Asst. CIT (Cochin) . . . 394

S. 41(1) --Business income--Remission or cessation of trading liability--Addition--Unclaimed liabilities--No record of any remission or cessation of trading liability--Addition to be deleted-- Dy. CIT v. Bax Global India P. Ltd. (Delhi) . . . 414

----Income--Business income--Remission of liability--Bank--Amount transferred from inter-branch transaction blocked accounts to reserves through profit and loss account--Transfer permitted by Reserve Bank of India subject to conditions that claim in respect of entries should be honoured and amount should not be used for declaration of dividends--Amount not of revenue nature to begin with--Amount not assessable under section 41(1)-- Punjab National Bank v. Addl. CIT (Delhi) . . . 462

S. 43(5) --Loss--Set off--Loss on share transactions--Actual delivery received by agent of assessee--Loss not speculation loss--Commissioner (Appeals) allowing set off of loss against other heads of income--Justified-- Dy. CIT v. Dr. S. Thilagavathy (Chennai) . . . 506

S. 50C --Capital gains--Computation--Sale of land--Valuation by stamp valuation authority applied--Fair market value lower than value adopted by stamp duty authority--Direction to adopt fair market value--Justified-- ITO v. Gita Roy (Kolkata) . . . 431

S. 68 --Cash credits--Assessee producing details and creditor confirming loan granted to assessee--Addition to be deleted-- ITO v. Bhagwan Dass (Chandigarh) . . . 446

S. 263 --Revision--Powers of Commissioner--No tax effect--Order cannot be revised-- Punjab Wool Syndicate v. ITO (Chandigarh) . . . 439

Income-tax Rules, 1962 :

R. 46A --Appeal--Additional evidence--Commissioner (Appeals) admitting new evidence after considering facts and circumstances of case in entirety and validly--Justified-- ITO v. Bhagwan Dass (Chandigarh) . . . 446

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

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

SUBJECT INDEX TO CASES REPORTED IN THIS PART

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

SECTIONWISE INDEX TO CASES REPORTED IN THIS PART

Double Taxation Avoidance Agreement between India and Singapore :

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

Income-tax Act, 1961 :

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

ITR (TRIB) Volume 17 : Part 2 (Issue dated : 16-07-2012)

ITR'S TRIBUNAL TAX REPORTS (ITR (TRIB))
Volume 17 : Part 2 (Issue dated : 16-07-2012)

SUBJECT INDEX TO CASES REPORTED IN THIS PART

Agricultural income --Fact of ownership of agricultural land not disputed--Claim for deduction of expenses for agriculture allowed--No evidence that agricultural operations were not performed--Income was agricultural--Income-tax Act, 1961, s. 10(1)-- Thangamani Vinodhagan v. Asst. CIT (Chennai) . . . 230

----Rose plants grown in green house--Mother plants grown in agricultural land using human labour --Income from rose flowers exempt as agricultural income--Income-tax Act, 1961, ss. 2(1), 10(1)--Circular No. 1, dated 27-3-2009-- CIT (Dy.) v. Best Roses Biotech P. Ltd. (Ahmedabad) . . . 211

Appeal to Appellate Tribunal --Powers of Tribunal--Power to admit additional ground of appeal--Question regarding limitation can be raised for first time before Tribunal--Income-tax Act, 1961-- Crompton Creaves Ltd. v. Dy. CIT (Mumbai) . . . 151

Business expenditure --Expenditure for purpose prohibited by law--Assessee exporting rice to Iraq under oil for food programme of United Nations--Paying commission to company for services in connection with export from procurement to final realisation of proceeds--Report by U. N. committee probing irregularities that company to which assessee paid commission was front company for Iraqi regime and payment used as kickback--Payment to Iraqi regime by agent not under assessee’s control--No denial that services rendered--No material to show assessee knew and was part of scheme to pay kickbacks to Iraqi regime--Payment deductible--Income-tax Act, 1961, s. 37, Expln. -- CIT (Dy.) v. Rajrani Exports P. Ltd. (Kolkata) . . . 239

Cash credits --Amounts repaid by debtors--Debtors not denying transaction--Amount not includible in assessee’s total income--Amount claimed to be advanced by sister--No evidence of such advance--Amount includible in total income of assessee--Income-tax Act, 1961, s. 68-- Thangamani Vinodhagan v. Asst. CIT (Chennai) . . . 230

Company --Book profits--Computation--Minimum alternate tax--Deduction from net profit on account of foreign exchange fluctuation--No adjustment available except as provided in Explanation --Reduction of amount while computing book profit--Not permissible--Income-tax Act, 1961, s. 115JB-- City Gold Media Ltd. v. ITO (Ahmedabad) . . . 192

Deduction of tax at source --Payment to non-resident--Failure to deduct tax at source--No assessment proceedings against non-resident for four years--Assessee cannot be treated as assessee in default under section 201--Income-tax Act, 1961, ss. 195, 201-- Crompton Creaves Ltd. v. Dy. CIT (Mumbai) . . . 151

Heads of income --Capital gains or business income--Proprietary concern of assessee taken over by company as going concern--Consideration for transfer is taxable as long-term capital gains--Assessee employed by company on salary and other terms of employment--Not a case of compensation for not engaging in similar business--Income-tax Act, 1961, ss. 28(va), 50B-- CIT (Asst.) v. Sangeeta Wij (Smt.) (Delhi) . . . 162

Income --Computation of income--Disallowance of expenditure relating to non-taxable income from firm--Borrowed amount invested as capital of firm--Interest relating to share of profit to be disallowed--Income-tax Act, 1961, s. 14A-- CIT (Asst.) v. Vinay Singal (Chandigarh) . . . 146

Penalty --Concealment of income--Capital gains--Claim for exemption--Investment of net consideration in residential property--Shortfall in amount invested due to wrong advice by counsel--No concealment of income--Penalty cannot be imposed --Income-tax Act, 1961, ss. 54, 271(1)(c)-- Majorjit Singh v. Asst. CIT (Chandigarh) . . . 183

----Failure to respond to notice under section 143(1) and (2)--Bona fide belief that income was non-taxable--Not reasonable explanation--Penalty imposable--Income-tax Act, 1961, s. 271(1)(b)-- Thangamani Vinodhagan v. Asst. CIT (Chennai) . . . 230

Rectification of mistakes --Depreciation--Withdrawal of deprecation on ground of non-user--Question debatable--Depreciation cannot be withdrawn in rectification proceedings--Income-tax Act, 1961, ss. 32, 154-- Thangamani Vinodhagan v. Asst. CIT (Chennai) . . . 230

Revision --Commissioner--Reassessment--
Financial charges paid on funds borrowed for purchase of property--Part of closing stock--No finding that Assessing Officer applied his mind to facts of case--Direction to Assessing Officer to examine issue--Proper--Income-tax Act, 1961, s. 263-- Devi Developers P. Ltd. v. CIT (Delhi) . . . 187

Transfer pricing --Depreciation--Method of computing depreciation--No difference in result as a result of applying any of methods--Income-tax Act, 1961, s. 92C-- Lason India P. Ltd. v. Asst. CIT (Chennai) . . . 203

----Draft assessment order incorporating proposals of Transfer Pricing Officer--Draft assessment order erroneously termed final order--Assessing Officer has power to issue corrigendum to correct error--Income-tax Act, 1961, s. 144C-- Lason India P. Ltd. v. Asst. CIT (Chennai) . . . 203

Unexplained expenditure --Addition based on statement of director recorded by Central excise authorities--Addition not supported by evidence--Addition not justified --Additions under section 69C set aside by Tribunal in assessment year 2004-05--No new facts in assessment year 2008-09--Addition not valid--Income-tax Act, 1961, s. 69C -- ITO v. Arora Alloys Ltd. (Chandigarh) . . . 133

SECTIONWISE INDEX TO CASES REPORTED IN THIS PART

Income-tax Act, 1961 :

S. 2(1) --Agricultural income--Rose plants grown in green house--Mother plants grown in agricultural land using human labour --Income from rose flowers exempt as agricultural income--Circular No. 1, dated 27-3-2009-- Deputy CIT v. Best Roses Biotech P. Ltd. (Ahmedabad) . . . 211

S. 10(1) --Agricultural income--Fact of ownership of agricultural land not disputed--Claim for deduction of expenses for agriculture allowed--No evidence that agricultural operations were not performed--Income was agricultural-- Thangamani Vinodhagan v. Asst. CIT (Chennai) . . . 230

----Agricultural income--Rose plants grown in green house--Mother plants grown in agricultural land using human labour --Income from rose flowers exempt as agricultural income--Circular No. 1, dated 27-3-2009-- Deputy CIT v. Best Roses Biotech P. Ltd. (Ahmedabad) . . . 211

S. 14A --Income--Computation of income--Disallowance of expenditure relating to non-taxable income from firm--Borrowed amount invested as capital of firm--Interest relating to share of profit to be disallowed-- Asst. CIT v. Vinay Singal (Chandigarh) . . . 146

S. 28(va) --Heads of income--Capital gains or business income--Proprietary concern of assessee taken over by company as going concern--Consideration for transfer is taxable as long-term capital gains--Assessee employed by company on salary and other terms of employment--Not a case of compensation for not engaging in similar business-- Asst. CIT v. Sangeeta Wij (Smt.) (Delhi) . . . 162

S. 32 --Rectification of mistakes--Depreciation--Withdrawal of deprecation on ground of non-user--Question debatable--Depreciation cannot be withdrawn in rectification proceedings-- Thangamani Vinodhagan v. Asst. CIT (Chennai) . . . 230

S. 37, Expln .-- Business expenditure--Expenditure for purpose prohibited by law--Assessee exporting rice to Iraq under oil for food programme of United Nations--Paying commission to company for services in connection with export from procurement to final realisation of proceeds--Report by U. N. committee probing irregularities that company to which assessee paid commission was front company for Iraqi regime and payment used as kickback--Payment to Iraqi regime by agent not under assessee’s control--No denial that services rendered--No material to show assessee knew and was part of scheme to pay kickbacks to Iraqi regime--Payment deductible-- Deputy CIT v. Rajrani Exports P. Ltd. (Kolkata) . . . 239

S. 50B --Heads of income--Capital gains or business income--Proprietary concern of assessee taken over by company as going concern--Consideration for transfer is taxable as long-term capital gains--Assessee employed by company on salary and other terms of employment--Not a case of compensation for not engaging in similar business-- Asst. CIT v. Sangeeta Wij (Smt.) (Delhi) . . . 162

S. 54 --Penalty--Concealment of income--Capital gains--Claim for exemption--Investment of net consideration in residential property--Shortfall in amount invested due to wrong advice by counsel--No concealment of income--Penalty cannot be imposed-- Majorjit Singh v. Asst. CIT (Chandigarh) . . . 183

S. 68 --Cash credits--Amounts repaid by debtors--Debtors not denying transaction--Amount not includible in assessee’s total income--Amount claimed to be advanced by sister--No evidence of such advance--Amount includible in total income of assessee-- Thangamani Vinodhagan v. Asst. CIT (Chennai) . . . 230

S. 69C --Unexplained expenditure--Addition based on statement of director recorded by Central excise authorities--Addition not supported by evidence--Addition not justified--Additions under section 69C set aside by Tribunal in assessment year 2004-05--No new facts in assessment year 2008-09--Addition not valid-- ITO v. Arora Alloys Ltd. (Chandigarh) . . . 133

S. 92C --Transfer pricing--Depreciation--Method of computing depreciation--No difference in result as a result of applying any of methods-- Lason India P. Ltd. v. Asst. CIT (Chennai) . . . 203

S. 115JB --Company--Book profits--Computation--Minimum alternate tax--Deduction from net profit on account of foreign exchange fluctuation--No adjustment available except as provided in Explanation --Reduction of amount while computing book profit--Not permissible-- City Gold Media Ltd. v. ITO (Ahmedabad) . . . 192

S. 144C --Transfer pricing--Draft assessment order incorporating proposals of Transfer Pricing Officer--Draft assessment order erroneously termed final order--Assessing Officer has power to issue corrigendum to correct error-- Lason India P. Ltd. v. Asst. CIT (Chennai) . . . 203

S. 154 --Rectification of mistakes--Depreciation--Withdrawal of deprecation on ground of non-user--Question debatable--Depreciation cannot be withdrawn in rectification proceedings-- Thangamani Vinodhagan v. Asst. CIT (Chennai) . . . 230

S. 195 --Deduction of tax at source--Payment to non-resident--Failure to deduct tax at source--No assessment proceedings against non-resident for four years--Assessee cannot be treated as assessee in default under section 201-- Crompton Creaves Ltd. v. Deputy CIT (Mumbai) . . . 151

S. 201 --Deduction of tax at source--Payment to non-resident--Failure to deduct tax at source--No assessment proceedings against non-resident for four years--Assessee cannot be treated as assessee in default under section 201-- Crompton Creaves Ltd. v. Deputy CIT (Mumbai) . . . 151

S. 263 --Revision--Commissioner--Reassessment--Financial charges paid on funds borrowed for purchase of property--Part of closing stock--No finding that Assessing Officer applied his mind to facts of case--Direction to Assessing Officer to examine issue--Proper-- Devi Developers P. Ltd. v. CIT (Delhi) . . . 187

S. 271(1)(b) --Penalty--Failure to respond to notice under section 143(1) and (2)--Bona fide belief that income was non-taxable--Not reasonable explanation--Penalty imposable-- Thangamani Vinodhagan v. Asst. CIT (Chennai) . . . 230

S. 271(1)(c) --Penalty--Concealment of income--Capital gains--Claim for exemption--Investment of net consideration in residential property--Shortfall in amount invested due to wrong advice by counsel--No concealment of income--Penalty cannot be imposed-- Majorjit Singh v. Asst. CIT (Chandigarh) . . . 183

ITR (Trib) HIGHLIGHTS (Online edition)

APPELLATE TRIBUNAL ORDERS

-->  Where non-resident not having PE in India, payment to non-resident outside India of advertisement expenditure in foreign currency not liable to tax : Sandoz P. Ltd. v. Addl. CIT (Mumbai) p. 100

-->  Interest on borrowed capital allowable as business expenditure : Sandoz P. Ltd. v. Addl. CIT (Mumbai) p. 100

-->  Method of accounting : Where closing stock increased on account of unutilised Modvat credit, corresponding opening stock of that year should also be increased : Sandoz P. Ltd. v. Addl. CIT (Mumbai) p. 100


    PRINT EDITION


    APPELLATE TRIBUNAL ORDERS

-->  Where non-resident company engaging consultants on retainership basis for its projects in India, such persons not eligible for retirement or superannuation or gratuity benefits, FBT not attracted : Joshi Technologies International Inc. v. Asst. DIT (International Taxation) (Ahd) p. 170

-->  Companies which have suffered merger or demerger, impacting financial results, those having supernormal profit, those functionally dissimilar, those acting as intermediary having outsourced their activity, those whose directors involved in fraud, those whose turnover exceeding Rs.200 crores not to be treated as comparables : Capital IQ Information Systems (India) P. Ltd. v. Dy. CIT (International Taxation) (Hyd.) p. 185

-->  International transactions : ALP : Foreign exchange fluctuation cannot be excluded in reckoning operating margin : Capital IQ Information Systems (India) P. Ltd. v. Dy. CIT (International Taxation) (Hyd.) p. 185

-->  Charitable purpose : Where building belonging to society and benefit going to society not managing trustee, no violation of section 13 : Shri Amol Chand Varshney Sewa Sansthan v. Addl. CIT (Agra) p. 211

-->  Exemption : Contributions to Lions Club : Lions Club is a social club, not social organisation to undertake social work as envisaged in study curriculum, exemption not allowable u/s. 10(23C)(iiiab) : Ganapathy Educational Trust v. Asst. DIT (Exemption) (Chennai) p. 231

-->  International transactions : Payment of royalty and technical fee to AE pursuant to deemed approval by RBI under automatic approval scheme, ALP cannot be computed at nil : ThyssenKrupp Industries India P. Ltd. v. Addl. CIT (Mumbai) p. 243

-->  Search and seizure : Matters finalised in proceedings following income-tax survey not to be considered in block assessment : Heatshrink Technologies Ltd. v. Asst. CIT (Mumbai) p. 269

-->  Search and seizure : Losses of block period from unaccounted transactions can be set off : Heatshrink Technologies Ltd. v. Asst. CIT (Mumbai) p. 269

High courts can't reappraise evidence: SC

 

High courts can't reappraise evidence: SC


High courts cannot reappraise evidence to determine whether a criminal charge is made out or not, as the power is vested only with the trial court, the Supreme Court has ruled.

A bench of justices Swatanter Kumar and Ranjana Prakash Desai said it is for the trial court to decide whether prima facie the case is made out for framing of the charges and the high courts cannot interfere with such decisions.

"The high court has in its revisional jurisdiction appraised the evidence which it could not have done. It is the trial court which has to decide whether evidence on record is sufficient to make out a prima facie case against the accused so as to frame charge against him.

"Pertinently, even the trial court cannot conduct roving and fishing inquiry into the evidence. It has only to consider whether evidence collected by the prosecution discloses prima facie case against the accused or not," the apex court said.

It passed the ruling while upholding the appeal filed by one Ashish Chadha challenging a Himachal Pradesh High Court judgement setting aside the criminal charges framed by the special court, Chamba against former MLA Asha Kumari and her husband Brijender Singh.

Though the special court had framed charges of criminal conspiracy, cheating and grabbing of government land, against the accused, the high court set aside the charges framed and also transferred the trial to the special court, Kangra on an application moved by the the ex-legislator.

The apex court said such a transfer has a demoralising effect on the trial courts as it can be done only in cases where there is concrete material that the trial cannot be held in a fair and free manner.

The apex court regretted that the high court interfered in the matter and formed a prima facie opinion by going through the entries in the records and virtually acquitted the accused.

"The high court unnecessarily observed that the charge is vague. It overstepped its revisional jurisdiction. In our opinion, whether revenue entries concerned are genuine or not will also have to be decided by the trial court after perusing the evidence led by the parties," the bench said.

According to the apex court, a prima facie opinion of the high court in such a strongly worded language is likely to influence the trial court.

"By expressing opinion on merits of the case, the high court almost decided the matter in favour of respondent no. 1 thus frustrating the remand and virtually acquitting respondent no. 1.

"The high court, therefore, should not have transferred the case to the special judge, Kangra. Needless to say that such transfers ordered merely on the say-so of a party have a demoralising effect on the trial courts.

"Unless a very strong case based on concrete material is made out, such transfers should not be ordered," the apex court said, while restoring the trial judge's order framing the charges.

However, the court said the trial shall not be influenced by any of the observations made by it in the present case.

ITR (TRIB) Volume 17 : Part 1

ITR'S TRIBUNAL TAX REPORTS (ITR (TRIB))
Volume 17 : Part 1 (Issue dated : 9-07-2012)

SUBJECT INDEX TO CASES REPORTED IN THIS PART

Advance tax --Interest--Tax deducted at source to be taken into account--Matter remanded for recomputation--Income-tax Act, 1961, ss. 234A, 234B-- Van Oord ACZ Marine Contractors BV v. Assistant Director of Income-tax (International Taxation) (Chennai) . . . 103

Capital gains --Exemption--Investment of consideration in specified bonds within six months of transfer--Receipt of consideration in subsequent years and investment within six months of receipt--Exemption allowable--Income-tax Act, 1961, s. 54EC-- Mahesh Nemichandra Ganeshwade v. ITO (Pune) . . . 116

----Exemption--Investment of proceeds in agricultural land--No material to show land was put to other use--That assessee had ventured into real estate business--Not ground to infer land would be put to non-agricultural use--Exemption not to be denied --Income-tax Act, 1961, s. 54B-- Mahesh Nemichandra Ganeshwade v. ITO (Pune) . . . 116

----Transfer--Date of transfer--Agreement between assessee and builders for development of land--Agreement registered in later year--Transfer took place on date of agreement--Income-tax Act, 1961, ss. 2(47), 45(3)-- Mahesh Nemichandra Ganeshwade v. ITO (Pune) . . . 116

Depreciation --Rate of depreciation--Computer accessories--To be allowed at 60 per cent.--Income-tax Act, 1961-- Cushman and Wakefield India P. Ltd. v. Asst. CIT (Delhi) . . . 48

Interest on excess refund --Provision not applicable for assessment year 2003-04--Income-tax Act, 1961, s. 234D-- Van Oord ACZ Marine Contractors BV v. Assistant Director of Income-tax (International Taxation) (Chennai) . . . 103

International transactions --Arm’s length price--Determination--Transfer pricing study--Transactional net margin method --Rejection of comparables selected by assessee without mentioning how they were not functionally comparable and without considering assessee’s objections--Selection by Transfer Pricing Officer of companies not engaged in similar business--Companies selected by him not functionally comparable--Arm’s length price determined by assessee not liable to adjustment--Income-tax Act, 1961, s. 92C--Income-tax Rules, 1962, r. 10B(2)-- Carlyle India Advisors P. Ltd. v. Asst. CIT (Mumbai) . . . 24

----Arm’s length price--Expenditure cannot be disallowed merely because in opinion of Transfer Pricing Officer it was unnecessary--Amended formula brought for first time before Tribunal--Reasonableness to be determined by authorities below--Matter remanded--Income-tax Act, 1961, s. 92CA-- Ericsson India Private Ltd. v. Deputy CIT (Delhi) . . . 79

----Arm’s length price--Reimbursement of expenses to associate enterprises--Addition on ground that services not intra-group services and no remuneration paid--Assessee furnishing details of expenses paid of work done--Addition to be deleted--Income-tax Act, 1961, s. 92CA-- Cushman and Wakefield India P. Ltd. v. Asst. CIT (Delhi) . . . 48

----Transfer pricing--Arm’s length price--Referral fee--Reference to Transfer Pricing Officer--Finding of Transfer Pricing Officer that transaction at arm’s length price--Assessing Officer has no jurisdiction to re-determine and make addition--Income-tax Act, 1961, s. 92CA(4)--CBDT Circular No. 3 dated 12-3-2008-- Cushman and Wakefield India P. Ltd. v. Asst. CIT (Delhi) . . . 48

Non-resident --Taxability in India--Non-resident awarded contract but assigning it to Indian subsidiary--Subsidiary lacking technical expertise and resources and non-resident providing co-ordinating and facilitating services--Payments by Indian subsidiary corresponding to invoices--Cost allocation not explained--Element of profit not ruled out--Non-resident taxable on payments as fees for technical services--Income-tax Act, 1961, s. 9(1)(vii)--Double Taxation Avoidance Agreement between India and the Netherlands, arts. 5, 12(5)(b)-- Van Oord ACZ Marine Contractors BV v. Assistant Director of Income-tax (International Taxation) (Chennai) . . . 103

Reassessment --Income escaping assessment--Original assessment done by mere processing of intimation--Facts cumbersome and complicated--Reopening of assessment proper--Income-tax Act, 1961, ss. 143(1), 147, 148-- Van Oord ACZ Marine Contractors BV v. Assistant Director of Income-tax (International Taxation) (Chennai) . . . 103

Search and seizure --Block assessment--Limitation--Date from which reckoned--“Last of panchnamas†, meaning of--Last of panchnamas in respect of any of warrants of authorisation not necessarily in respect of last warrant of authorisation--Requirements of panchnama--Panchnama not recording any search or statement but mere formality for lifting prohibitory order--Not panchnama from which time limit of assessment to be reckoned--Income-tax Act, 1961, s. 158BE, Expln. 2 -- CIT (Asst.) v. Shree Ram Lime Products Ltd. [SB] (Jodhpur) . . . 1

SECTIONWISE INDEX TO CASES REPORTED IN THIS PART

Double Taxation Avoidance Agreement between India and the Netherlands :

Art. 5 --Non-resident--Taxability in India--Non-resident awarded contract but assigning it to Indian subsidiary--Subsidiary lacking technical expertise and resources and non-resident providing co-ordinating and facilitating services--Payments by Indian subsidiary corresponding to invoices--Cost allocation not explained--Element of profit not ruled out--Non-resident taxable on payments as fees for technical services-- Van Oord ACZ Marine Contractors BV v. Assistant Director of Income-tax (International Taxation) (Chennai) . . . 103

Art. 12(5)(b) --Non-resident--Taxability in India--Non-resident awarded contract but assigning it to Indian subsidiary--Subsidiary lacking technical expertise and resources and non-resident providing co-ordinating and facilitating services--Payments by Indian subsidiary corresponding to invoices--Cost allocation not explained--Element of profit not ruled out--Non-resident taxable on payments as fees for technical services-- Van Oord ACZ Marine Contractors BV v. Assistant Director of Income-tax (International Taxation) (Chennai) . . . 103

Income-tax Act, 1961 :

S. 2(47) --Capital gains--Transfer--Date of transfer--Agreement between assessee and builders for development of land--Agreement registered in later year--Transfer took place on date of agreement-- Mahesh Nemichandra Ganeshwade v. ITO (Pune) . . . 116

S. 9(1)(vii) --Non-resident--Taxability in India--Non-resident awarded contract but assigning it to Indian subsidiary--Subsidiary lacking technical expertise and resources and non-resident providing co-ordinating and facilitating services--Payments by Indian subsidiary corresponding to invoices--Cost allocation not explained--Element of profit not ruled out--Non-resident taxable on payments as fees for technical services-- Van Oord ACZ Marine Contractors BV v. Assistant Director of Income-tax (International Taxation) (Chennai) . . . 103

S. 45(3) --Capital gains--Transfer--Date of transfer--Agreement between assessee and builders for development of land--Agreement registered in later year--Transfer took place on date of agreement-- Mahesh Nemichandra Ganeshwade v. ITO (Pune) . . . 116

S. 54B --Capital gains--Exemption--Investment of proceeds in agricultural land--No material to show land was put to other use--That assessee had ventured into real estate business--Not ground to infer land would be put to non-agricultural use--Exemption not to be denied-- Mahesh Nemichandra Ganeshwade v. ITO (Pune) . . . 116

S. 54EC --Capital gains--Exemption--Investment of consideration in specified bonds within six months of transfer--Receipt of consideration in subsequent years and investment within six months of receipt--Exemption allowable-- Mahesh Nemichandra Ganeshwade v. ITO (Pune) . . . 116

S. 92C --International transactions--Arm’s length price--Determination--Transfer pricing study--Transactional net margin method --Rejection of comparables selected by assessee without mentioning how they were not functionally comparable and without considering assessee’s objections--Selection by Transfer Pricing Officer of companies not engaged in similar business--Companies selected by him not functionally comparable--Arm’s length price determined by assessee not liable to adjustment-- Carlyle India Advisors P. Ltd. v. Asst. CIT (Mumbai) . . . 24

S. 92CA --International transactions--Arm’s length price--Expenditure cannot be disallowed merely because in opinion of Transfer Pricing Officer it was unnecessary--Amended formula brought for first time before Tribunal--Reasonableness to be determined by authorities below--Matter remanded-- Ericsson India Private Ltd. v. Deputy CIT (Delhi) . . . 79

----International transactions--Arm’s length price--Reimbursement of expenses to associate enterprises--Addition on ground that services not intra-group services and no remuneration paid--Assessee furnishing details of expenses paid of work done--Addition to be deleted-- Cushman and Wakefield India P. Ltd. v. Asst. CIT (Delhi) . . . 48

S. 92CA(4) --International transactions--Transfer pricing--Arm’s length price--Referral fee--Reference to Transfer Pricing Officer--Finding of Transfer Pricing Officer that transaction at arm’s length price--Assessing Officer has no jurisdiction to re-determine and make addition--CBDT Circular No. 3 dated 12-3-2008-- Cushman and Wakefield India P. Ltd. v. Asst. CIT (Delhi) . . . 48

S. 143(1) --Reassessment--Income escaping assessment--Original assessment done by mere processing of intimation--Facts cumbersome and complicated--Reopening of assessment proper-- Van Oord ACZ Marine Contractors BV v. Assistant Director of Income-tax (International Taxation) (Chennai) . . . 103

S. 147 --Reassessment--Income escaping assessment--Original assessment done by mere processing of intimation--Facts cumbersome and complicated--Reopening of assessment proper-- Van Oord ACZ Marine Contractors BV v. Assistant Director of Income-tax (International Taxation) (Chennai) . . . 103

S. 148 --Reassessment--Income escaping assessment--Original assessment done by mere processing of intimation--Facts cumbersome and complicated--Reopening of assessment proper-- Van Oord ACZ Marine Contractors BV v. Assistant Director of Income-tax (International Taxation) (Chennai) . . . 103

S. 158BE, Expln. 2 --Search and seizure--Block assessment--Limitation--Date from which reckoned--“Last of panchnamas†, meaning of--Last of panchnamas in respect of any of warrants of authorisation not necessarily in respect of last warrant of authorisation--Requirements of panchnama--Panchnama not recording any search or statement but mere formality for lifting prohibitory order--Not panchnama from which time limit of assessment to be reckoned-- Asst. CIT v. Shree Ram Lime Products Ltd. [SB] (Jodhpur) . . . 1

S. 234A --Advance tax--Interest--Tax deducted at source to be taken into account--Matter remanded for recomputation-- Van Oord ACZ Marine Contractors BV v. Assistant Director of Income-tax (International Taxation) (Chennai) . . . 103

S. 234B --Advance tax--Interest--Tax deducted at source to be taken into account--Matter remanded for recomputation-- Van Oord ACZ Marine Contractors BV v. Assistant Director of Income-tax (International Taxation) (Chennai) . . . 103

S. 234D --Interest on excess refund--Provision not applicable for assessment year 2003-04-- Van Oord ACZ Marine Contractors BV v. Assistant Director of Income-tax (International Taxation) (Chennai) . . . 103

Income-tax Rules, 1962 :

R. 10B(2) --International transactions--Arm’s length price--Determination--Transfer pricing study--Transactional net margin method --Rejection of comparables selected by assessee without mentioning how they were not functionally comparable and without considering assessee’s objections--Selection by Transfer Pricing Officer of companies not engaged in similar business--Companies selected by him not functionally comparable--Arm’s length price determined by assessee not liable to adjustment-- Carlyle India Advisors P. Ltd. v. Asst. CIT (Mumbai) . . . 24

INCOME-TAX (FOURTH AMENDMENT) RULES, 2013 - INSERTION OF RULES 6AAD & 6AAE AND F

INCOME-TAX (FOURTH AMENDMENT) RULES, 2013 - INSERTION OF RULES 6AAD & 6AAE AND FORM NOS.3C-O & 3CP

NOTIFICATION NO. 38/2013[F.NO.142/30/2012-SO(TPL)]/SO 1393(E), DATED 30-5-2013

In exercise of the powers conferred by section 295 read with sub-section (1) of section 35CCC of the Income-tax Act, 1961 (43 of 1961), the Central Board of Direct Taxes hereby makes the following rules further to amend the Income-tax Rules, 1962, namely:-
1. (1) These rules may be called the Income-tax (Fourth Amendment) Rules, 2013.
(2) They shall come into force on the date of their publication in the Official Gazette.
2. In the Income-tax Rules, 1962, (hereinafter referred to as the "said rules"), after rule 6AAC, the following rules shall be inserted, namely:-
"6AAD. Guidelines for approval of agricultural extension project under section 35CCC.
(1) The agricultural extension project shall be considered for notification if it fulfils all of the following conditions namely:-
(i) the project shall be undertaken by an assessee for training, education and guidance of farmers;
(ii) the project shall have prior approval of the Ministry of Agriculture, Government of India; and
(iii) the expenditure (not being expenditure in the nature of cost of any land or building) exceeding an amount of twenty-five lakh rupees is expected to be incurred for the project.
(2) An assessee, before undertaking any agricultural extension project, shall make an application for notification of such project under sub-section (1) of section 35CCC, in duplicate, in Form No. 3C-O, to the Commissioner of Income-tax or the Director of Income-tax, as the case may be, having jurisdiction over the assessee.
(3) The assessee shall also send a copy of the application in Form No.3C-O to the Member (IT), Central Board of Direct Taxes (hereinafter referred to as the CBDT) accompanied by the acknowledgement receipt, as evidence of having furnished the application form in duplicate, in the office of the Commissioner of Income-tax or the Director of Income-tax, as the case may be, having jurisdiction over the case.
(4) The application shall be accompanied by the following, namely :--
(a) a detailed note on the agricultural extension project to be undertaken by the assessee;
(b) details of the expenditure expected to be incurred on the project and expected date of completion of the project; and
(c) a letter approving the project and specifying the amount of expenditure expected to be incurred on the project from the Ministry of Agriculture, Government of India.
(5) If any defect is noticed in the application referred to in sub-rule (2) or if any relevant document is not attached thereto, the Commissioner of Income-tax or the Director of Income-tax, as the case may be, shall, before the expiry of one month from the date of receipt of the application in his office, intimate the defect to the applicant for its rectification.
(6) The applicant shall remove the defect within a period of fifteen days from the date of such intimation or within such further period which, on an application made in this behalf, as may be extended by the Commissioner of Income-tax or the Director of Income-tax, as the case may be, so however, that the total period for removal of defect does not exceed thirty days, and if the applicant fails to remove the defect within such period so allowed, the Commissioner of Income-tax or the Director of Income-tax, as the case may be, shall send his recommendation for treating the application as invalid to the CBDT.
(7) On receipt of recommendation of the Commissioner of Income-tax or the Director of Income-tax, as the case may be, under sub-rule (6), the CBDT, if satisfied, may pass an order treating the application as invalid.
(8) If the application form is complete in all respects, the Commissioner of Income-tax or the Director of Income-tax, as the case may be, may make such inquiry or call for such documents from the assessee as he may consider necessary for satisfying himself regarding the genuineness of the current and proposed activities of the assessee, and send his recommendation to the CBDT for grant of approval or rejection of the application before the expiry of the period of two months to be reckoned from the end of the month in which the application form complete in all respects was received in his office.
(9) The CBDT may, before notifying an agricultural extension project under section 35CCC, call for such documents from the assessee, as it considers necessary, and may also get any inquiry made for verification of the genuineness of the activities of the assessee.
(10) The CBDT may, within a period of three months from the end of the month in which it receives the report referred to in sub-rule (8) from the Commissioner of Income-tax or the Director of Income-tax, as the case may be, under sub-section (1) of section 35CCC, issue a notification in Form No. 3CP to be published in the Official Gazette specifying the agricultural extension project subject to conditions mentioned in rule 6AAE or such other conditions, as it may deem fit, to be effective for such period not exceeding three assessment years or pass an order rejecting the application.
(11) If the CBDT is satisfied with the activities of the agricultural extension project during the period of notification, it may notify the said project for a further period.
(12) A copy of the notification issued under sub-rule (10) or sub-rule (11) shall be sent to the applicant, Ministry of Agriculture, Government of India, the Commissioner of Income-tax or the Director of Income-tax, as the case may be, the Department of Agriculture of the concerned State, and the Agricultural Technology Management Agency (ATMA) of the concerned District(s).
(13) The CBDT may rescind the notification issued under sub-rule (10) or sub-rule (11) at any time, if it is satisfied that the assessee has ceased its activities or its activities are not genuine or are not being carried out in accordance with all or any of the relevant provisions of the Act or this rule or rule 6AAE or are not being carried out in accordance with all or any of the conditions subject to which the notification was issued.
(14) An order treating the application as invalid or rejecting or rescinding the notification shall not be passed unless the assessee has been given an opportunity of being heard in the matter.
(15) A copy of any order invalidating or rejecting the application or rescinding the notification shall be sent to the applicant, Ministry of Agriculture, Government of India, the Commissioner of Income-tax or the Director of Income-tax, as the case may be, the Department of Agriculture of the concerned State, and the Agricultural Technology Management Agency (ATMA) of the concerned District(s).
6AAE. Conditions subject to which an agricultural extension project is to be notified under section 35CCC.
(1) The assessee undertaking agricultural extension project shall maintain separate books of account of the agricultural extension project notified under sub-section(1) of section 35CCC, and get such books of account audited by an accountant as defined in the Explanation below sub-section (2) of section 288.
(2) The audit report referred to in sub-rule (1) shall include the comments of the auditor on the true and fair view of the books of account maintained for agricultural extension project, the genuineness of the activities of the agricultural extension project and fulfillment of the conditions specified in the relevant provisions of the Act or the rules or the conditions mentioned in the notification issued under sub-rule (10) or sub-rule (11) of rule 6AAD.
(3) The assessee shall not accept an amount exceeding the amount as approved in the notification from the beneficiary under the eligible agricultural extension project for training, education, guidance or any material distributed for the purposes of such training, education or guidance.
(4) The assessee shall not get any direct or indirect benefit from the notified agricultural extension project except the deduction of the eligible expenditure in accordance with the provisions of section 35 CCC of the Act, rule 6AAD and this rule.
(5) All expenses (not being expenditure in the nature of cost of any land or building), as reduced by the amount received from beneficiary, if any, incurred wholly and exclusively for undertaking an eligible agricultural extension project shall be eligible for deduction under section 35CCC :
Provided that any expenditure incurred on the agricultural extension project which is reimbursed or reimbursable to the assessee by any person, whether directly or indirectly, shall not be eligible for deduction under section 35CCC.
(6) The assessee shall, on or before the due date of furnishing the return of income under sub-section (1) of section 139, furnish the following to the Commissioner of Income-tax or the Director of Income-tax, as the case may be, namely:—
(a) the audited statement of accounts of the agricultural extension projects for the previous year along with the audit report and amount of deduction claimed under sub-section (1) of section 35CCC;
(b) a note on the agricultural extension project undertaken by it during the previous year and the programme of agricultural extension project to be undertaken during the current year and the financial allocation for such programme; and
(c) a certificate from the Ministry of Agriculture, Government of India, regarding the genuineness of the agricultural extension project undertaken by the assessee during the previous year.
(7) If the Commissioner of Income-tax or the Director of Income-tax, as the case may be, is satisfied that the,---
(a) assessee has not maintained separate books of account for the agricultural extension project or has not got such books of account audited by an accountant in accordance with sub-rule (1);
(b) assessee has not furnished the documents referred to in sub-rule (6);
(c) assessee has ceased to carry out activities of agricultural extension project;
(d) activities of agricultural extension project of the assessee are not genuine; or
(e) activities of the agricultural extension project are not being carried out in accordance with the relevant provisions of the Act or the rules or the conditions subject to which the notification was issued,
he may, after making appropriate inquires, furnish a report on the circumstances referred to in clause (a) to (e) to the CBDT for appropriate action as per the provisions of sub-rule (13) of rule 6AAD.".
3. In Appendix-II of the said rules, after Form No. 3CN, the following forms shall be inserted, namely:-
"FORM NO. 3C-O
[See rule 6AAD]
Application form for approval under sub-section (1) of section 35CCC of the Income-tax Act, 1961
1. (i) Name and address of the applicant.
(ii) Address of the principal place of business/ registered office of the assessee.
(iii) PAN of the assessee.
(iv) Date of incorporation of the company/ partnership firm/proprietary concern.
(v) Enclose a copy of the Memorandum, Articles of Association.
(vi) If the agricultural extension project of the company was notified earlier under sub-section(1) of section 35CCC, mention the notification number and date of the latest notification and furnish a copy of the same.
(vii) Nature of business
(viii) If notification issued under sub-section(1) of section 35CCC was rescinded in the past, mention reasons on account of which the notification was rescinded.
[Enclose a copy of the Order(s) rescinding notification(s)].
(ix) Date from which notification of agricultural extension project is requested for.
(x) Expected date of completion of project.
2. Purpose of the agricultural extension project(Give a brief write up on the requirement of agricultural extension project indicating the objectives of the project, stages of implementation, expected results and usefulness of the Project.)
3. Details of expenses (other than land or building) expected to be incurred for agricultural extension project.
4. Amount, if any, proposed to be charged from each beneficiary of agricultural extension project.
5. Agricultural extension projects undertaken by the applicant:
(i) agricultural extension projects undertaken by the assessee during last five years, if any along with their current status.
(ii) Details of agricultural extension projects which have been taken up in past and which are underway on the date of filing of application.
6. Whether the agricultural extension project approved by Ministry of Agriculture, Government of India.
(Enclose a copy of letter obtained from the Ministry of Agriculture, Government of India)
7. Details of Return of Income filed for the last three Assessment years:
Assessment Year Turnover/Gross receipts Total Income Tax Payable as per return Tax Paid Assessed Income Details

8. Enclose copy of audited annual accounts of the assessee/accounts of the assessee for the last three years.
9. Whether any Penalty under Section 271(1)(c) was levied on the assessee during the last five years and details thereof.
10. Whether any tax demand is outstanding on the date of filing application.
Certified that the above information is true to the best of my knowledge and belief.
Place Signature
Date Designation
Full Address
FORM NO.3CP
[See rule 6AAD]
Form for notification of agricultural extension project under sub-section (1) of section 35CCC of the Income-tax Act, 1961
1. Name, address and PAN of the applicant
2. Title of the agricultural extension project
3. Purpose of the agricultural extension project
4. Reference No. and date of the application
5. Date of commencement of the agricultural extension project
6. Duration of the agricultural extension project in months
7. Assessment year(s) for which the agricultural extension project is being notified (not exceeding three years)
8. Total expenses likely to be incurred for the agricultural extension project (other than cost of land or building)
9. Amount, if any, to be charged from each beneficiary of agricultural extension project
10. Conditions, if any, subject to which agricultural extension project is notified.
Place : (Signature)
Date : (Name and Designation)
Copy to :
(1) the applicant.
(2) Ministry of Agriculture, Government of India.
(3) Commissioner of Income-tax / Director of Income-tax.
(4) The Department of Agriculture of the concerned State.
(5) The Agricultural Technology Management Agency (ATMA) of the concerned District(s).".

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