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Income Tax - Case Laws
Showing 221 to 240 of 662 Records
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2012 (12) TMI 789
Deduction u/s 80-IA - Diagnostic Centre - an industrial undertaking - assessee established a new MRI unit - ITAT allowed the claim - Held that:- A joint reading of Section 80IA and Section 33B states the first condition spelt out in sub-section (2) (iii) is that the industrial undertaking “manufactures or produces any article or thing”, the second condition is that the “article or thing” should not be listed in the Eleventh schedule. The third aspect is that Section 33-B contains a somewhat wider definition of “industrial undertaking”, it posits that the unit should be an “undertaking which is mainly engaged in the business of generation or distribution of electricity or any other form of power or in the construction of ships or in the manufacture or processing of goods or in mining”.
As decided in Insight Diagnostic and Oncological Research Institute P. Ltd. v. DCIT [2003 (4) TMI 79 - BOMBAY HIGH COURT] the CT scan machine as installed in a diagnostic centre is not an industrial undertaking for the purpose of business manufacture. In this connection, one must read the expression “industrial undertaking” in the context of the Income Tax Act and not in the context of the Industrial Disputes Act and, if so read, it is clear that the activity should be of production of any article or thing and any activity which primarily concerns production of any article or thing would fall in the category of industrial undertaking…… - the report of patients coming from the CT scan machine did not amount to manufacture or production of article or thing and therefore, one of the basic tests laid down in CIT v Shaan Finance Pvt. Ltd (1998 (3) TMI 8 - SUPREME COURT) is not satisfied
The unit or undertaking must engage in production of an article or thing – be it in the context of Section 32A or Section 10 (15). Such consideration is equally important and relevant for applicability of Section 80-IA by virtue of Sub-section (2) (iii) of that provision. What emerges from all these decisions, and the relevant provisions – i.e. Sections 80-IA and 33-B that the unit or activity is deemed an industrial undertaking, if it is involved in production of goods or articles - as in the present case there is no change of the article, the intention of the service provider is not to produce the article – the film is the medium in which what is recorded is made available for interpretation by the physician or doctor. If it can be more conveniently given in a pen drive or even over the internet, the question of production of goods or article would not arise - in favour of the revenue
While the benefit which might flow to the general public if diagnostic facilities are deemed industrial undertakings is undeniable, as it would probably result in lower cost of diagnosis of diseases and conditions, yet that result cannot be achieved by doing violence to the statute, in the guise of interpretation. The remedy (to this perceived mischief) is clearly elsewhere.
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2012 (12) TMI 788
Rectification of mistake - the decision on the issue of profit attributable to the PE of the assessee in India has been decided by the Tribunal ignoring or overlooking Article 7(3) of India UK DTAA - Held that:- The controversy involved in relation to the issue was correctly understood by the Tribunal and even the reasons given by the CIT(Appeals) to give relief to the assessee on the said issue were identified by the Tribunal. One of the reasons so given by the CIT(A) as identified by the Tribunal was based on Article 7 of the India-UK treaty and the said Article including para 3 thereof was not only reproduced by the CIT(Appeals) in paragraph No. 6.5 of his impugned order but the same was also discussed and dealt with by him in paragraph No. 6.12 of the said order before giving relief to the assessee relying on the same.
As clearly mentioned by the Tribunal in paragraph No. 141 of its order, the legal position applicable to the issue was carefully considered by it which obviously included Article 7(3) of the India-UK treaty relied upon by the CIT(Appeals) and after taking the same into consideration, it was held by the Tribunal that the provisions of Article 7(1) in India-UK treaty included the same results as sought to be achieved by Article 7(1)(c) of the UN Model Convention. Accordingly, relying on the UN Model Convention commentary on this issue, a considered view was taken by the Tribunal that the connotation of "profits indirectly attributable to permanent establishments" did extend to incorporation of the force of attraction rule being embedded in Article 7(1). Keeping in view this text and context of the order of the Tribunal, it cannot be said that the Tribunal has ignored or overlooked Article 7(3) of India-UK treaty while rendering its decision on this issue and that there is any mistake apparent from record in the order of the Tribunal on account of non-consideration of the said article as alleged by the assessee.
Contention raised on behalf of the assessee that the scope of Article 7(1)(c) of U.N. Model Convention is limited to activities carried on in India only, it is observed that the Tribunal has taken a considered view on interpretation of the said Article that the entire profit relating to services rendered by the assessee whether rendered in India or outside India, in respect of Indian Project is taxable in India and it is not permissible to review the decision of the Tribunal in the guise of rectification u/s 254(2) - The decision in the present case, thus has been rendered by the Tribunal on its own facts and by applying the provisions of different Treaty. Thus it cannot be straightway inferred that the same is contrary to the decision of the Hon'ble Supreme Court in the case of Ishikawajima-harima Heavy Industries Ltd. (2007 (1) TMI 91 - SUPREME COURT ) giving rise to a mistake apparent from record - Miss application dismissed.
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2012 (12) TMI 787
Installation expenditure - Revenue v/s Capital - Held that:- This Court recalls the judgment of the Supreme Court in Challapalli Sugars Ltd. v. CIT [1974 (10) TMI 3 - SUPREME COURT] that whether an expenditure necessary to bring an asset into existence and to put it in working condition was capital or revenue - The test “all expenditure necessary to bring such aspects into existence and to put them in a working condition” is a determinative test for installation and other charges needed to effectuate the working condition of the leased equipment. In this case clearly the authorities have applied the test and held the expenditure in question (Rs.1,35,05,869/-) to be properly falling in the capital field. No reason to differ with them - in favour of the revenue.
Software expenses - Revenue v/s Capital - Held that:- The Tribunal had the benefit of considering all the documents which included the lease agreement with Bharti Telenet and the license agreement dated 11.11.1996 whereby the assessee secured license to exploit the software, provided it procured hardware as per agreed specification and also complied with order by the lessor UB Vest. The software as well as hardware were made an integral part of the arrangement. The software apparently caters to the hardware. In this case, it is necessary for the kind of software to cater to diverse activities such as billing regarding user and analyzing such like activities to promote speed and efficiency. That the parties chose to have a composite arrangement is one factor which the Tribunal was entitled to take into consideration. The Tribunal in our opinion correctly held that the test to discern whether the expenditure incurred by the assessee in this regard was capital or revenue did not in any manner differ from the content or character which were applicable while considering issue No.1 - no reason to differ from the Tribunal - in favour of the revenue.
Write off as bad debt as a business loss - Held that:- As held by Tribunal MOA & AOA shows sufficiently the intention of the assessee to pursue certain main objects. The frequency of the activity is sought to be highlighted as giving rise to a continuous and organized activity. As held by AO the main activity of the assessee company was the business of promoting, establishing telecom services. By no stretch of imagination can it be said that the assessee was engaged in the business of money lending. Since the business of the assessee was not that of money lending, it cannot be said that the sum in question represents money lent in the ordinary course of the business of money lending carried on by the assessee. Therefore, the claim of the assessee did not fall within the parameters of provisions of section 36(1)(vii) r.w.s. 36(2). The sum in question should be allowed as a deduction as a business loss cannot also be accepted, since the sum in question was not incurred as expenditure in the ordinary course of business of the assessee - as decided in Tuticorin Alkali Chemicals & Fertilizers Ltd. v. CIT [1997 (7) TMI 4 - SUPREME COURT] inter-corporate deposit was not a trade debt or part of any money-lending business - no error in the findings by the Tribunal on this - in favour of Revenue.
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2012 (12) TMI 786
Assessment in case of search or requisition - Notice u/s 153A - assessee contested on no material which would implicate in the earning of any undisclosed income was unearthed during the search - Held that:- There exists sufficient and relevant material which could form the basis of the satisfaction note and the reason to believe that the petitioner has earned income which was not disclosed to the income tax authorities.
Section 153A was introduced by the Finance Act, 2003 w. e. f. 01.06.2003 and it provides for assessment in the case of search or requisition. It is mandatory for the assessing officer, whenever there is a search under section 132, to issue notice to the person searched requiring him to furnish the returns of income for the six assessment years immediately preceding the assessment year relevant to the previous year in which the search was conducted. There is an Explanation to the section which provides that all other provisions of the Income Tax Act shall apply to the assessment made under this section, which means that the provisions of section 142, 143, etc. are applicable and these provisions ensure that reasonable opportunity is afforded to the petitioner to put forth his case. Therefore, unable to accept the contention of the petitioner that he would be put to harassment because of the notices issued under section 153A. The section is couched in mandatory language which implies that once there is a search, the assessing officer has no option but to call upon the assessee to file the returns of the income for the earlier six assessment years.
It is not merely the undisclosed income that will be brought to tax in such assessments, but the total income of the assessee, including both the income earlier disclosed and income found consequent to the search, would be brought to tax. There is also a time limit for completion of the assessment under section 153A which is prescribed in section 153B. In these circumstances the petitioner's contention that he would be put through unnecessary harassment is a non-starter. He has to face the assessment proceedings and participate in them, in case he has evidence or material to show that he has not earned any income which is not disclosed to the income tax authorities or to rebut the material gathered during the search, it is perfectly open to him to do so - while a certain degree of hardship which would occur to any assessee whose premises are searched, that does not afford it any higher right or confer greater remedies, or expand the scope of a limited jurisdiction under Article 226. The present petition is therefore speculative, and misconceived - writ dismissed - costs quantified at Rs.75,000/- payable to the Prime Minister‟s relief fund to be paid by assessee.
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2012 (12) TMI 785
Re opening of assessment - whether a pre-condition for issuance of notice u/s 147/ 148 are satisfied ? - Royalty or Technical Fee received - India USA DTAA - Held that:- The declaration of law by the Supreme Court in Calcutta Discount Co. v. ITO, (1960 (11) TMI 8 - SUPREME COURT) applies squarely to the facts in this case it was held by the Supreme Court that the duty of the assessee to make full disclosure extends to primary facts. Once that is done, it is the AO's duty to draw the conclusion and inference flowing from the disclosure so made.
The assessment record reveals that the Master licensing agreement (MLA) had been placed on the record of the AO in the very first instance when the assessment was completed under section 143(3). Thereafter the reassessment proceedings were initiated in November, 2003 and completed in March, 2005; for those proceedings too what drove the Revenue to issue notice and reopen the proceedings was the master licensing agreement and the nature of "royalty income". The assessing officer in that instance consciously after going through the material concluded that the rate of taxation was 15% in the reassessment proceedings. The scope was the same as in the original proceeding and in the first reassessment proceedings i.e. the taxability of the royalty income under section 44D - the assessment record reveals that the MLA had been placed on the record of the assessing officer in the very first instance when the assessment was completed under section 143(3). Thereafter the reassessment proceedings were initiated in November, 2003 and completed in March, 2005, for those proceedings too what drove the Revenue to issue notice and reopen the proceedings was the master licensing agreement and the nature of "royalty income". AO in that instance consciously after going through the material concluded that the rate of taxation was 15% in the reassessment proceedings. The scope was the same as in the original proceeding and in the first reassessment proceedings i.e. the taxability of the royalty income under section 44D - the conclusions drawn by the CIT (Appeals) and ITAT cannot be faulted in law. The substantial question of law is answered in favour of the assessee.
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2012 (12) TMI 784
Re opening of assessment - assessee contested against non furnishing of “reasons to believe” - Held that:- The decision in G.K.N Driveshafts (India) Ltd. Versus ITO And Others (2002 (11) TMI 7 - SUPREME COURT) gives an indication that the requirement of passing the speaking order would provide an opportunity to the assessed to challenge the same by way of a writ petition under Article 226. To afford the assessee an opportunity to put before the tax authorities his point of view, before the reassessment proceedings are completed
The basic requirement of the statute is the recording of the “reasons to believe” under Section 147. That done, all the Supreme Court opined was about the necessity of providing reasons for issuance of notice under Section 147, if the same are sought, to afford a reasonable and fair opportunity to the assessee to file his objections, and dispose of the same by a speaking order. The rest has been left to the Court's concern to be dealt within individual cases. Having regard to the facts and circumstances, this Court is of the opinion that even the question whether the petitioner was afforded a reasonable opportunity could be gone into by the CIT( Appeals) before whom the appeal is pending. It is open to the assessee to urge the question of denial of opportunity along with the other issues on merits. All rights and contentions are expressly reserved.
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2012 (12) TMI 783
Deduction u/s 80IB – Denial of Profit from DEPB - gross sale v/s net sales - Held that:- This issue is no more res integra in view of the judgment of M/s Liberty India Versus Commissioner of Income Tax [2009 (8) TMI 63 - SUPREME COURT] wherin held that deduction u/s 80-IB cannot be allowed on the amount of DEPB and duty drawback credited to the profit and loss account - the case of M/s Topman Exports Versus Commissioner of Income Tax, Mumbai [2012 (2) TMI 100 - SUPREME COURT OF INDIA] relied upon by assessee is not applicable to the fact situation prevailing in these grounds - against assessee.
Exclusion of interest on fixed deposits from eligible profits for the purposes of deduction u/s 80-IB and 80HHC - Held that:- As decided in Pandian Chemicals Ltd. v. CIT [2003 (4) TMI 3 - SUPREME COURT] interest income does not qualify for deduction u/s 80-HH as it cannot be characterized as having been derived from industrial undertaking in the language of section 80-IB also, similar expression - Rs.derived from’- has been employed which is there in section 80-HH. As the interest on fixed deposits from bank cannot be held to be Rs.derived from’ eligible undertaking, in our considered opinion, the same cannot qualify for deduction u/s 80-IB. As the interest income in the present circumstances as 'Business income’, it will merit inclusion at the first instance and thereafter 90% of the net interest is to be allowed as per the mandate of the Hon’ble Supreme Court in the case of ACG Associated Capsules Pvt. Ltd. v. CIT [2012(2) TMI 101 - SUPREME COURT OF INDIA] - direct the AO to reduce 90% of the net interest income after verifying the amount liable to be deducted from the gross interest receipt
Deduction u/s 80-IB - Exchange fluctuation gain – Held that:- Assessee was held to be eligible for deduction in respect of foreign exchange gain relying on CIT v. United Riceland Ltd. []. No contrary judgment has been brought to notice - ground of appeal allowed.
Deduction u/s 80HHC on processing charges and Scrap sales – Held that:- As decided in CIT v. Dresser Rand India Pvt. Ltd. [2010 (4) TMI 153 - BOMBAY HIGH COURT] following the judgment in the case of K.Ravindranathan Nair [2007 (11) TMI 10 - SUPREME COURT OF INDIA] the amount of processing charges are not eligible for deduction u/s 80HHC but deserves to succeed insofar as the question of deduction u/s 80-IB on the amount of processing charges is concerned - the assessee to be eligible for deduction u/s 80HHC / 80-IB on the amount of scrap sales.
Deduction u/s 80HHC on DEPB license - Held that:- As per M/s Topman Exports Versus Commissioner of Income Tax, Mumbai [2012 (2) TMI 100 - SUPREME COURT OF INDIA] the assessee cannot be denied deduction u/s 80HHC on DEPB licenseb - in favour of assessee.
Addition in respect of MODVAT Credit – Held that:- Amount of tax, duty, cess etc. is liable to be included in the value of purchases, sales, opening and closing stock. It is not appropriate to include the closing Modvat in the figure of closing stock without modifying the figures of purchases, sales and opening stock as confirmed in CIT Versus MAHALAXMI GLASS WORKS P. LTD. [2009 (4) TMI 182 - BOMBAY HIGH COURT]- restore the matter to the file of A.O. for deciding it afresh in accordance with the afore-noted judgements and the provisions of section 145A - These grounds are, therefore, allowed.
Disallowance on account of life membership fee of N.S.C.I. – Held that:- The issue raised in this ground is fairly settled in assessee’s favour in view of the binding precedents of the Hon’ble High Court in the case of Otis Elevator v. CIT [1991 (4) TMI 53 - BOMBAY HIGH COURT] on the point - in favour of assessee.
Deduction u/s 80HHC - Rate difference, Discount received and Sundry expenses written off – Held that:- Assessee could not produce any material on record to indicate the details of such amounts. Also in the appeal of the assessee as well as Revenue, the third item has been mentioned as “Sundry expenses written off”. It is obvious that the Rs.write off’ of any amount is always debited to the Profit and loss account and hence there can be no question of any deduction on such amount. Be that as it may, the availability of deduction u/s 80-IB / 80HHC cannot be adjudicated in respect of these three amounts unless their nature is clearly put forth - set aside the impugned order and remit the matter back to AO for deciding this issue afresh.
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2012 (12) TMI 782
Delayed PF Payments u/s 43B – Following the decision of court in case of [CIT vs Cranes Ltd, 2007 (10) TMI 386 - BOMBAY HIGH COURT] if payment have been made during the financial year or before filing of return amount in question has to be allowed - matter should be remitted back to the file of the AO to verify the claim made by the assessee.
Disallowance on gifts and presentation – Held that:- Although expenditure incurred was wholly and exclusively for carrying out business but expenditure without evidence were not allowable - FAA has power coterminous with AO, but then his duties are same as that of the AO. Any adverse inference has to be confronted to the assessee before deciding an issue against the assessee - matter should be restored back to the file of the AO for fresh adjudication.
Disallowance of Commission – Held that:- Though assessee has claimed that necessary evidences were produced, yet from the order of the AO, it is clear that factum of rendering of service was not established. FAA has doubted the genuineness of the papers, but did not afford an opportunity to the assessee to rebut his conclusions. As FAA should have confronted the assessee with his above findings & as the AO had no occasion to go through the paper, so, in the interest of justice,the matter remitted back to the file of the AO.
Disallowance of Bad Debts – Held that:- Once assessee writes off the bad debts in his Books of Accounts he has to prove nothing - as decided in T.R.F. LTD. Versus COMMISSIONER OF INCOME-TAX [2010 (2) TMI 211 - SUPREME COURT] it is enough if the bad debt is written off as irrecoverable in the accounts of the assessee - Appeal of the assessee stands partly Allowed.
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2012 (12) TMI 781
Applicability of sec 50 C on transfer of Leasehold Rights – Held that:- From the plain reading of the language of Section 50C (1), it is clear that value of land or building or both adopted or assessed or assessable by the Stamp Valuation Authority shall, for the purpose of Section 48, deemed to be full value of consideration accruing as a result of such a transfer. Section 50C(1) is of a deeming provision and it extends only to land or building or both. Such a deeming provision has been incorporated to substitute the value adopted by the Stamp Valuation Authority in place of consideration received or accruing as a result of transfer. The deeming provisions as contemplated in Section 50C however does not extend to lease rights in a land - Thus, respectfully following the decisions Atul G. Puranik Versus ITO [2011 (5) TMI 576 - ITAT, MUMBAI] & DCIT Vs. Tejinder Singh [2012 (3) TMI 47 - ITAT, KOLKATA] provision of Section 50C would not be applicable on the transfer of lease hold rights on the land.
Thus going through the material placed on record like copy of agreement dated 5-11-1974 between MIDC and the assessee and the agreement dated 16-10-2006 between the appellant and Karamtara Engineering (P) Ltd. and also the valuation adopted by the Stamp valuation authority, it can be fairly concluded that it is a transfer of leasehold rights therefore, the finding given by the CIT(A) for non applicability of Sec 50C are confirmed - appeal filed by the department dismissed.
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2012 (12) TMI 780
Sale and Purchase of Shares – Business Income vs Capital Gain - Held that:- Appellant has earned business income on non delivery based transactions for A.Y.2004-2005 but that does not mean that income earned on sale of shares held as investment can be taxed as business income in the subsequent years. The appellant has made clear distinction between delivery based and non delivery based transactions and admitted income accordingly and except for A.Y.2004-2005, the appellant did not indulge in any non delivery based share transactions. Thus even shares purchased as investment had to be sold within a short time depending on the market conditions. Thus, the sale of shares was only with a view to protect the amount invested by the appellant which would not convert the investment into stock-in trade.
It is found from the balance sheet filed that the appellant held shares as investment and after transferring the shares in the name of the appellant the shares were sold as evidenced by the demat account and the STT was paid at a higher rate application to the investor and stand of the A.O. is no longer valid in the light of the decision of CIT Versus Gopal Purohit [2010 (1) TMI 7 - BOMBAY HIGH COURT] - in favour of assessee.
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2012 (12) TMI 779
Depreciation on fixed assets utilized for the charitable purpose – Society registered u/s 12A – Held that:- Following the decision of court in case of DIRECTOR OF INCOME TAX VERSUS VISHWA JAGRITI MISSION [2012 (4) TMI 289 - DELHI HIGH COURT ] having regard to the consensus of judicial opinion on the precise question it is held that claim of depreciation on fixed assets utilized for the charitable purposes has to be allowed while arriving at the income available for application to charitable and religious purposes, since the income of the society should be computed on the basis of commercial principles – no infirmity in the order passed by CIT(A), affirm the order of CIT(A) and dismiss the appeal filed by the revenue - Appeal of Revenue dismissed.
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2012 (12) TMI 778
Additions u/s 40A(3) - assessee had shown 19.27% Gross Profit (GP), AO fixed the GP at 26.52%. FAA reduced it to 25% - Held that:- Additional residential accommodations granted to the tenants upto 10% and assumed for commercial premises that additional area would be 20%. It is a fact that the rates for commercial premises on ground floor command higher rates than the residential flat on ground floor. The very fact that the stamp duty rate at the relevant time was Rs.9830/- per sq ft against the residential premises rate of Rs.4660/- per sq ft also substantiates the contention of the appellant - it is established by the appellant that the premises held by Mrs. Chandrika Shah was a commercial premise as certified by the Government agency. Also appellant stated that if the commercial area originally held is converted into residential area based on the rate prevailing in that area, the space allocable to Mrs. Chandrika Shah would be higher than the area considered by the AO. Considering all the above and considering the fact that the net profit is estimated at 25% of the sales
As it is a matter of estimation and that also in a search and seizure related matter & assessee has admitted that expenses outside the books were incurred opined here that 2% reduction in the formula adopted by the FAA will meet the end of justice. AO is directed to recalculate the income of the assessee @ 23% of the cost of the sales (sales minus profit).
Section 40 A(3) disallowance - As in a matter where income is determined on estimate basis, there is no need to make further additions including additions made u/s. 40A. Upholding the order of the FAA, in this regard, the appeals filed by the Revenue dismissed.
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2012 (12) TMI 777
Undisclosed capital gains - assessment order passed by AO u/s 153A/153C - Held that:- Admittedly no search operation was conducted at the premises of the assessee and no document was recovered from the premises of the assessee CIT(A) has not decided this issue despite a specific ground raised by the assessee and the observation of CIT(A) that the constitutional validity of provisions of Section 153A/153C was challenged and any ground of appeal challenging the constitutional validity of the forming the provisions.
CIT(A) has not decided this issue of his jurisdiction and validity of assessment despite the fact that of specific ground had been raised by the assessee. In interest of justice remit back this matter to CIT(A) to decide afresh after providing reasonable opportunity of being heard to assessee - in favour of assessee allowed for statistical purposes.
Disallowance of Depreciation,Levy of Interest u/s 234A, 234B,234C,234D and Penalty U/S 271(1)(c) - Held that:- As main issues are remitted back to the file of CIT(A) for fresh adjudication hence, the inter-connected issue is remitted back to the file of CIT(A) for fresh adjudication - in favour of assessee allowed for statistical purposes.
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2012 (12) TMI 776
Sale of Software – Royalty – failure to deduct tax u/s. 195 - assessee in default u/s. 201(1) - Held that:- Analysis of the DTAA, Income Tax Act, Copyright Act that the payment would constitute 'royalty' within the meaning of Article 12(3) of the DTAA and even as per the provisions of 9(1)(vi) as the definition of 'royalty' under clause 9(1)(vi) is broader than the definition of 'royalty' under the DTAA as the right that is transferred in the present case is the transfer of copyright including the right to make copy of software for internal business, and payment made in that regard would constitute 'royalty' for imparting of any information concerning technical, industrial, commercial or scientific knowledge, experience or skill as per clause (iv) of Explanation 2 to Section 9(1)(vi).
In view of the provisions of Section 90 agreements with foreign countries DTAA would override the provisions of the Act. Once it is held that payment made by the respondents to the non-resident Companies would amount to 'royalty' within the meaning of Article 12 of the DTAA with the respective country, it is clear that the payment made by the respondents to the non-resident supplier would amount to royalty, thus it is clear that there is obligation on the part of the respondents to deduct tax at source under Section 195 - the facts of the present case are similar to the facts involved in M/s. Samsung Electronics Co. Ltd. v. DCIT (International Taxation) [2012 (8) TMI 112 - ITAT BANGALORE] therefore respectfully following the said order appeals of the assessee dismissed - against assessee.
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2012 (12) TMI 775
Revisionary powers used by CIT(A) - order of the A.O. was erroneous – Capital Gain - Held that:- The observations of CIT clearly indicate that he invoked the doctrine of lifting the veil. The doctrine of substance or form is generally applicable to the assessment proceedings and not the revisionary proceedings. Further, the AO, has considered the issue in question, applied his mind and did not invoke the provisions of Section 45(4).
In the present case, pertaining to capital gains on leasehold property rights the said transaction has been duly considered by the AO, as is evident from the questionnaire issued and reply submitted by the assessee. Further, the assessee has filed documentary evidence, indicating, the date of transaction, as well as the date of retirement of the said partner. Right in leasehold property in question has already been sold much before the date of retirement & had nothing to do with retirement of partner & do not fall with in the purview of Distribution of assets. It is well settled proposition that, where AO has taken legally permissible view, CIT cannot acquire revisional jurisdiction u/s 263 merely because another view is possible - appeal of assessee is allowed.
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2012 (12) TMI 774
Disallowance of Expenses - non discharge on SCN - Held that:- The production of books of account and vouchers was not obligatory on the appellant for want of issue and service of notice u/s 143(2). Assessee has failed to produce copy of PAN and also failed to obtain information regarding service of notice sent through Speed Post from Postal Authority. Under the circumstances where the Department in reply to RTI application of the assessee it was clearly stated that the assessee may obtain information from Post Office that on whom this notice was served. These facts clearly show that the assessee has failed to discharge its onus and also failed to rebut the presumptions regarding service of notice. Contrary to this, Revenue has reasonably discharged its onus as per the facts noted above based on which the notice under section 143(2)was sent by Speed Post on the address which is the address in accordance with section 282 - order of CIT(A) is, therefore, set aside and the order of Assessing Officer is restored on the issue.
Set aside the finding of CIT(A) in respect of non-issuance of notice under section 143(2) and quashed the assessment, therefore, the CIT(A) is required to give finding after recording complete facts on merit of the case - appeal of the Revenue is allowed and allowed for Statistical purposes.
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2012 (12) TMI 763
Re opening of assessment - BAH India as an agent of the USA entity - fees for technical services - Held that:- Although the amount payable by BAH India to the USA entity was debited by BAH India to the profit & loss account and was also claimed as expenses, no RBI approval was obtained for remitting the said amount in foreign exchange as required by relevant provisions of Foreign Exchange Regulation Act during the year under consideration.
As claimed the said amount did not constitute income of the year under consideration for want of the RBI approval as no income chargeable to tax in India could be said to have accrued in the absence of the required approval from RBI reliance placed on the decision of in the case of Kirloskar Tractors Ltd. (1998 (2) TMI 117 - BOMBAY HIGH COURT) wherein held that the approval of RBI having been received in the subsequent years and the relevant amounts also having remitted during those years, liability could be said to accrue or arise in such subsequent years though the same pertained to the earlier years. Reliance has also been placed on another decision of Hon'ble Bombay High Court in the case of Dorr-Oliver (India) Ltd. v. CIT [1998 (1) TMI 42 - BOMBAY HIGH COURT] wherein it was held that collaboration agreement being subject to Government approval, deduction of sum paid as compensation and fees under collaboration agreement was allowable only upto the date till the agreement enjoyed approval by Government of India and not for any subsequent year.
Thus the judicial pronouncements discussed above clearly support the stand of the assessee that income on account of the amount payable by BAH India to the USA entity could be said to have accrued to the said entity only on receipt of the required approval from RBI and there being no such approval received during the year under consideration, the same could not be taxed as income in that year. The decision of the Hon'ble Supreme Court in the case of LIC v. Escorts Ltd. (1985 (12) TMI 289 - SUPREME COURT OF INDIA) thus was rendered in a different context and in a different set of facts and the same cannot support the stand of the Revenue in the present case - delete the additions made on this count by the AO - in favour of assessee.
Method of accounting - royalty and fees for technical services - Held that:- Keeping in view the language so employed in the case of Seamens Aktiengesellschaft (2012 (12) TMI 737 - BOMBAY HIGH COURT) & CSC Technology Singapore Pte. Ltd. (2012 (4) TMI 189 - ITAT DELHI) considering the relevant provisions of DTAA between India and Germany royalty and fees for technical services should be reckoned for taxation only when it is actually received by the assessee and not otherwise - royalty/FTS which had accrued as income to a foreign company, could not be taxed in the source country (being India) unless this amount had been received by the foreign company - thus the amount payable by BAH India to the USA entity could not be brought to tax in India during the year under consideration as fees for technical services as per the relevant provisions of the DTAAs since the same had not been paid to the said entity - in favour of assessee.
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2012 (12) TMI 762
Unexplained income u/s 68 - CIT(A) deleted the addition - Held that:- An assessee’s duty to establish that the amounts which the AO proposes to add back, u/s 68 are properly sourced, does not cease by merely furnishing the names, addresses and PAN particulars, or relying on entries in a Registrar of Companies website. One must remember that in all such cases, more often than not, the company is a private one, and share applicants are known to it, since they are issued on private placement, or even request basis. If the assessee has access to the share applicant’s PAN particulars, or bank account statement, surely its relationship is closer than arm’s length. Its request to such concerns to participate in income tax proceedings, would, viewed from a pragmatic perspective, be quite strong, because the next possible step for the tax administrators could well be reopening of such investor’s proceedings.
That apart, the concept of “shifting onus” does not mean that once certain facts are provided, the assesse’s duties are over. If on verification, or during proceedings, the AO cannot contact the share applicants, or that the information becomes unverifiable, or there are further doubts in the pursuit of such details, the onus shifts back to the assessee. At that stage, if it falters, the consequence may well be an addition under Section 68.
As decided in A. Govindarajulu Mudaliar v CIT, (1958 (9) TMI 3 - SUPREME COURT) whether a receipt is to be treated as income or not, must depend very largely on the facts and circumstances of each case. There is ample authority for the position that where an assessee fails to prove satisfactorily the source and nature of certain amount of cash received during the accounting year, the Income-tax Officer is entitled to draw the inference that the receipt are of an assessable nature - Having regard to the totality of facts and circumstances, particularly the remand report, which was not considered by the CIT (A) and the ITAT in its proper perspective, this Court is of the opinion that the question of law requires to be answered in favour of the revenue.
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2012 (12) TMI 761
Non deduction of TDS - shooting of films held outside India - payments made in foreign exchange to overseas services providers - application u/s 195(2) - India - U.K. DTAA - Held that:- This issue is squarely covered in favour of the assessee by the decision of in the case of GE India Technology Centre P. Ltd. v. CIT [2010 (9) TMI 7 - SUPREME COURT OF INDIA] wherein held that if the relevant payment does not contain the element of income taxable in India, the payer cannot be made liable to make an application u/s 195(2).
Merely because some managerial skill is required to render the services, it would not make the services to be managerial services as envisaged in Explanation 2 to section 9(1)(vii). Keeping in view the nature of services rendered by the overseas service providers to the assessee the said services cannot be treated as technical services within the meaning given in Explanation 2 to section 9(1)(vii).
As in agreement with the CIT(Appeal's) that the said services rendered outside India by the overseas service providers in connection with making logistic arrangement are in the nature of commercial services and the amount received by them from the assessee for such services constitutes their business profit which is not chargeable to tax in India in the absence of any PE in India of the said service providers. The requirement of knowledge of local laws on the part of the service providers to render the services such as obtaining the permissions for shooting from the local authorities or for arranging insurance of the crew members and shooting equipments would not change the basic nature of the services which otherwise are commercial services. The assessee, therefore, was not liable to deduct tax at source from the said payments and the AO was not justified in treating the assessee as in default u/s 201 - in favour of assessee.
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2012 (12) TMI 760
Deduction under section 80IA - CIT(A) deleted the additions on account of disallowances u/s 153A - infrastructure projects where the assessee is merely a work contractor or developer - Held that:- According to sub-clause (a), clause (i) of sub-section (4) of section 80-IA, the word 'it' denotes the enterprise carrying on the business. The word 'it' cannot be related to the infrastructure facility, particularly in view of the fact that infrastructure facility includes Rail system, Highway project, Water treatment system, Irrigation project, a Port, an Airport or an Inland port which cannot be owned by any one. Even otherwise, the word 'it' is used to denote an enterprise. Therefore, there is no requirement that the assessee should have been the owner of the infrastructure facility.
The assessee utilizes its funds, its expertise, its employees and takes the responsibility of developing the infrastructure facility. The losses suffered either by the Government or the people in the process of such development would be that of the assessee. The assessee hands over the developed infrastructure facility to the Government on completion of the development. Thereafter, the assessee has to undertake maintenance of the said infrastructure for a period of 12 to 24 months. During this period, if any damages are occurred, it shall be the responsibility of the assessee. Further, during this period, the entire infrastructure shall have to be maintained by the assessee alone without hindrance to the regular traffic. Therefore, it is clear that from an undeveloped area, infrastructure is developed and handed over to the Government and as explained by the CBDT vide its Circular, dated 18-5-2010, such activity is eligible for deduction under section 80-IA(4). This cannot be considered as a mere works contract but has to be considered as a development of infrastructure facility. Therefore, the assessee is a developer and not a works contractor as presumed by the revenue. The circular issued by the Board clearly indicate that the assessee is eligible for deduction under section 80-IA(4). The department is not correct in holding that the assessee is a mere contractor of the work and not a developer.
Nothing either on facts or in law, which distinguishes, the already existing position as on the date of search and in the proceedings under section 153A read with 143(3), which substantiates the denial. Accept for the interpretation, as made out by the AO, there is nothing, which could substantiate the disallowance. In the entire proceedings upto the hearing before us, the department has not even said that there was either no agreement between the assessee and the state government or there is any change in the agreement entered into by the assessee and the government department. In fact the DPB filed by the department there are letters exchanged, written by the assessee and various government departments, which indicate that the assessee was awarded the job, wherein the assessee had placed the bank guarantee for ₹ 2,61,62,400, against the tendered cost. This proves beyond doubt that the assessee, itself was doing the development of infrastructure facility, on behalf of the government, besides placing its own funds at risk and peril - thus no disallowance u/s 80IA(4)warranted - in favour of assessee.
Deduction u/s 80IA on the amounts written back under section 41(1) - Held that:- It is not the case of the department that these liabilities were non business. When the liabilities which have been written back/offered to tax by the assessee pertains to the business, then it has to be added back as a business income. CIT(A) has also taken note of the fact that the assessee was having two types of projects, i.e., which qualify for deduction under section 80IA and which do not qualify. But here, in the instant case, we are concerned with domestic projects, and the ceased liabilities are emanating from the normal course of business of the assessee. Hence the liabilities written back would be added to the claim of deduction under section 80IA. Since the assessee also has non-80IA projects and it has been accepted by the assessee that these written back liabilities would also pertain to non 80IA projects, in these circumstances, the assessee and the CIT(A) were very reasonable in allocating the income offered under section 132(4) on account of cessation of liabilities under section 41(1) in proportion of the turnover of 80IA project and non 80IA projects - no reason to deviate from the finding reached by the CIT(A) to direct the AO to add the proportion of offered amount of ₹ 1.95 crores to the income eligible for deduction under section 80IA for assessment year 2005-06.
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