In the light of the judgement of the Supreme Court in ONGC vs. CIDCO (2007) 7 SCC 39 and that of the Madras High Court in Tamilnadu Warehousing Corp Ltd vs. DCIT (2008) 15 DTR 67, even appeals involving State Government undertakings require approval of the Committee on Disputes. The appeal can be proceeded with only if the appellant is either able to obtain the requisite COD clearance or file satisfactory evidence to prove that a COD to deal with State – Centre disputes has not been formed.
Note: The judgement of the Special Bench in DCIT vs. Maharashtra State Road Transport Corporation 100 ITD 187 is no longer good law in view of the judgements referred to above.
Where the assessee floated a GDR issue and made payments to the foreign lead manager by way of management and underwriting commission etc and the AO took the view that the said payments was chargeable to tax in the hands of the recipient u/s 9 (1)(vii) as “fees for technical services” and that the assessee ought to have deducted tax thereon u/s 195 and on account of its failure to do so was liable to be treated as an “assessee in default” u/s 201 and the question arose whether the said order u/s 201, having been passed after the expiry of four years from the end of the relevant financial year, was barred by limitation, in the absence of any provision in the Act HELD:
(a) The argument that s. 201(1) (pre amendment by the FA 2008 w.r.e.f 1.6.2002) applies only where there is a failure to deposit the deducted tax and not where there is a failure to deduct tax and that it is only after the amendment that a failure to deduct tax is covered is not acceptable as the amendment is clarificatory of the legislative intent;
(b) Though s. 201 (1) does not impose any time limit for the initiation of proceedings or the passing of an order, a reasonable time limit would have to be read in as otherwise the authorities would have an indefinite period to take action and the sword of uncertainty would hang forever over an assessee;
Disqualification of Ex-Members practicing before CESTAT is constitutional
Where the assessee-airline supplied blank tickets to the travel agent, on terms that the same be sold at a minimum price and the difference between the said minimum price and the price at which the tickets were sold to the passenger was retained by the travel agent and the question arose whether the amount so retained by the agent was “commission” and whether the assessee was required to deduct tax thereon u/s 194-H of the Act, HELD, reversing the decision of the Tribunal:
(a) The relationship between the airline and the travel agent was that of a principal and agent as all the requirements of s. 182 of the Contract Act were fulfilled by the PSA. By the acts of the travel agent, a legal relationship was created between the airline and the passenger;
(b) The monies retained by the travel agent in the form of supplementary commission is not a “discount” because the travel agent never obtains proprietary rights to the tickets and has never paid a “price” for the same. Instead, the same is “commission” because it is received for services rendered on behalf of the assessee-airline and the airline ought to have deducted tax u/s 194-H;
The State Commission, Delhi, held that services rendered by a Lawyer would not come within the ambit of s. 2(1)(o) of the Consumer Protection Act, 1986, as the client executes the power of attorney authorizing the Counsel to do certain acts on his behalf and there is no term of contract as to the liability of the lawyer in case he fails to do any such act. The State Commission held that it is a unilateral contract executed by the client giving authority to the lawyer to appear and represent the matter on his behalf without any specific assurance or undertaking.
Where the assessee carrying on the mercantile system of accounting claimed that:
(i) The additional liability arising on account of fluctuation in the rate of exchange in respect of loans taken for revenue purposes was allowable as deduction u/s 37(1) in the year of fluctuation in the rate of exchange and not in the year of repayment of such loans; and
(ii) The actual cost of imported assets acquired in foreign currency is entitled to be adjusted u/s 43A (prior to the amendment by the FA 2002) on account of fluctuation in the rate of exchange at each balance sheet date, pending actual payment of the varied liability HELD approving the claim that:
(a) The term “expenditure” in s. 37 covers an amount which is a “loss” even though the said amount has not gone out from the pocket of the assessee. The “loss” suffered by the assessee on account of the exchange difference as on the date of the balance sheet is an item of expenditure u/s 37(1) ;
In admitting the appeal filed under section 260A against the judgement of the 5 Member Special Bench of the Tribunal in Aztec Software vs. ACIT 294 ITR (AT) 32 / 107 ITD 41, the High Court has granted stay of “the operation and all further proceedings” of the said judgement until further orders.
Where the assessee constructed a project in Pune in which the percentage of commercial area to the total area was 20.83% and the said project was approved by the Pune Municipal Corporation as a “New/ Residential + Commercial project” (and not as a “housing project”) and the question arose whether prior to the amendment of s. 80 IB (10) w.e.f. 1.4.2005 (which provides that the commercial area in a housing project should not exceed the lesser of 5% of the built up area or 2,000 sq ft), the assessee’s project was a “housing project” eligible for deduction u/s 80-IB (10), HELD:
(i) S. 80 IB (10) is aimed at promoting construction of housing projects so as to address the problem of shortage of dwelling units. It cannot be said that the object is to encourage house building activity per se, irrespective of whether these are dwelling or commercial units;
(ii) However, given that under the DC Rules (of Pune) there cannot be a pure residential project and it is incumbent on the developer to reserve a part of the plot for shopping, commercial use of area must be regarded as an integral part of a housing project and does not vitiate the character of a housing project;
Where the assessee, an Australian company, entered into an agreement with Reliance and it was agreed that the consideration thereof constituted “royalty” but the assessee claimed (i) that the said royalty was “effectively connected” with a permanent establishment (PE) and consequently assessable as business profits, (ii) that the portion of such “profits” as was not “attributable” to the PE was not assessable to tax in India and (iii) that even otherwise the royalty was not assessable to tax in view of Ishikawakima 288 ITR 408 (SC) where it was held that fees for technical services (and royalty) was not assessable to tax u/s 9(1)(vii) (9(1)(vi)) if it was not rendered and utilized in India, HELD:
(i) In order to be “effectively connected”, the PE should be engaged in the performance of royalty generating services. There must be a real and intimate connection and clear co-relation between the services giving rise to royalty and the PE. A connection between the PE and the contract is not enough;
Where the assessee-employer obtained expatriate-employees from a foreign company and the said employees, continuing to be employees of the foreign company, received salary and allowance in their home country in foreign currency and the question arose whether the assessee was obliged to deduct tax thereon at source u/s 192 and the High Court held that the assessee was not obliged to deduct tax at source on the ground that the payment was by the foreign company and not by the assessee, HELD, reversing the High Court that:
(i) Though the payment of salary to the expatriate was made by the foreign company outside India, the TDS provisions did apply as the Act had extra-territorial operation as there was a nexus between the said salary and the rendering of services in India;
(ii) U/s 9 (1) (ii), salary received abroad is deemed to arise in India if it is for services rendered in India. This charging provision has to be read with the machinery provision of s.192 and both are part of an integrated code;
(iii) S. 192 requires the employer to deduct tax after “estimating” the salary payable to the employee. The act of “estimation” is akin to computation of income. In making the estimate, s. 9 (1) (ii) has to be taken into account;
(iv) On facts, as it was found that the salary paid by the foreign company was for services in India the same was deemed to accrue in India u/s 9 (1) (ii) and the assessee ought to have deducted tax u/s 192 though it was not the payer