Month: December 2012

Archive for December, 2012


Essar Steel Limited vs. ACIT (ITAT Mumbai)

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DATE: December 28, 2012 (Date of publication)
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The issue whether the TPO’s order could be revised by the CIT or by the DIT is not considered as it does not arise in the present case though as the CIT has no administrative jurisdiction over the TPO, he could not have revised the s. 92CA(3) order passed by the TPO. There seems to be no clarity about the authority competent to modify the TPO’s order in case it is is prejudicial to the interests of the revenue. The CIT cannot exercise jurisdiction over the TPO as the TPO functions separately under the DIT (TP). The DIT should have initiated the s. 263 proceedings himself instead of sending a proposal to the CIT for revising the TPO’s order though the question would also arise whether the DIT can revise an order which he himself has approved as per the Board’s Circular

Posted in All Judgements, Tribunal

Trilogy E-Business Software India vs. DCIT (ITAT Bangalore)

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DATE: (Date of pronouncement)
DATE: December 27, 2012 (Date of publication)
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CITATION:

U/s 92C & Rule 10B(2), there is no bar to considering companies with either abnormal profits or abnormal losses as comparable to the tested party, as long as they are functionally comparable. This issue does not arise in the OECD guidelines and the US TP regulations because they advocate the quartile method for determining ALP under which companies that fall in the extreme quartiles get excluded and only those that fall in the middle quartiles are reckoned for comparability. Cases of either abnormal profits or losses (referred to as outliners) get automatically excluded. However, Indian regulations specifically deviate from OECD guidelines and provide Arithmetic Mean method for determining ALP. In the arithmetic mean method, all companies that are in the sample are considered, without exception and the average of all the companies is considered as the ALP. Hence, while the general rule that companies with abnormal profits should be excluded may be in tune with the OECD guidelines, it is not in tune with Indian TP regulations. However, if there are specific reasons for abnormal profits or losses or other general reasons as to why they should not be regarded as comparables, then they can be excluded for comparability. It is for the Assessee to demonstrate existence of abnormal factors. On facts, as the assessee has not shown any factors for abnormal profits, no comparable can be excluded for that reason (contra view in Quark Systems & Sap Labs noted)

Posted in All Judgements, Tribunal

Ingram Micro (India) Exports Pvt. Ltd vs. DDIT (ITAT Mumbai)

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DATE: (Date of pronouncement)
DATE: December 25, 2012 (Date of publication)
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U/s 153A & 153C, proceedings can be initiated only after the AO comes to the satisfaction that the seized material pertains to a person other than the searched party and comes to the conclusion that proceedings are required to be initiated in the other party’s case. In Manish Maheshwari 289 ITR 341 (SC), it was held in the context of s. 158 BD that the recording of satisfaction by the AO that any undisclosed income belongs to any person, other than the person searched, is a “condition precedent” and that a notice issued without recording satisfaction and application of mind was a nullity. This principle has been applied to s. 153C in SSP Aviation 207 Taxman 260 (Delhi) & P. Satyanarayana (ITAT Chennai). On facts, as the Department was not able to produce any material to show that the AO assessing the searched party had reached the satisfaction that any income belonged to the assessee, the assessment had to be annulled

Posted in All Judgements, Tribunal

CIT vs. N. R. Portfolio Pvt. Ltd (Delhi High Court)

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DATE: (Date of pronouncement)
DATE: December 24, 2012 (Date of publication)
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CITATION:

Though in previous decisions (Lovely Exports) it was held that the assessee cannot be faulted if the share applicants do not respond to summons and that the Revenue authorities have the wherewithal to compel anyone to attend legal proceedings, this is merely one aspect. An assessee’s duty to establish the source of the funds does not cease by merely furnishing the names, addresses and PAN particulars, or relying on entries in the Registrar of Companies website. The company is usually a private one and the share applicants are known to it since the shares are issued on private placement basis. If the assessee has access to the share applicant’s PAN or bank account statement, the relationship is closer than arm’s length. Its request to such concerns to participate in income tax proceedings, would, from a pragmatic perspective, be quite strong. Also, the concept of “shifting onus” does not mean that once certain facts are provided, the assessee’s duties are over. If on verification, the AO cannot contact the share applicants, or the information becomes unverifiable, the onus shifts back to the assessee. At that stage, if it falters, the consequence may well be an addition u/s 68 (A. Govindarajulu Mudaliar 34 ITR 807 followed)

Posted in All Judgements, High Court

Vivek Jairazbhoy vs. DCIT (ITAT Bangalore)

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DATE: (Date of pronouncement)
DATE: December 21, 2012 (Date of publication)
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CITATION:

In Aspi Ginwala (ITAT Ahmedabad) it was held that the Proviso to s. 54EC merely restricted the investment that can be made in one FY to Rs. 50 Lkahs but it did not restrict the exemption to Rs.50 lakhs. However, a contrary view was taken in Raj Kumar Jain & Sons (ITAT Jaipur) that the exemption u/s 54EC had to be restricted to Rs.50 lakhs. However, Circular no.3/2008 dated 12.3.2008 issued by the CBDT makes it clear that the Proviso only intended to restrict the investment in a particular financial year and did not intend to restrict the maximum amount of exemption permissible u/s 54EC. The fact that the Proviso uses the words “in a financial year” fortifies this interpretation. Accordingly, it has to be held that the assessee is entitled to total deduction of Rs. 1 crores in respect of the investment of Rs. 50 lakhs made in each financial year

Posted in All Judgements, Tribunal

Shantikumar D Majithia vs. DCIT (ITAT Mumbai)

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DATE: (Date of pronouncement)
DATE: December 19, 2012 (Date of publication)
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CITATION:

U/s 2(22)(a), any distribution by a company of accumulated profits, whether capitalized or not, constitutes “dividend” if such distribution entails the release by the company to its shareholders of all or any part of the assets. As the assessee received the occupancy rights to the flat in perpetuity and could transfer them, it effectively meant that he had full ownership over the flat. Accordingly, the value of the flats was assessable as deemed dividend u/s 2(22)(a)

Posted in All Judgements, Tribunal

WNS North America Inc vs. ADIT (ITAT Mumbai)

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DATE: (Date of pronouncement)
DATE: December 18, 2012 (Date of publication)
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CITATION:

A retrospective amendment to the Act has no bearing on the DTAA because s. 90(2) makes it clear that the provisions of the Act shall apply only to the extent that it is favourable to the assessee. While a retrospective amendment will alter the provisions of the Act, it will not per se have the effect of automatically altering the analogous provision of the Treaty. Further, though the DTAA provides that the laws in force in India shall govern the taxation of income, this is subject to the exception that there is nothing to the contrary in the DTAA. Similarly, under Article 3(2), as the term “royalty” is defined in Article 12, the definition in s. 9(1)(vi) will have no application

Posted in All Judgements, Tribunal

Ethio Plastics Pvt. Ltd vs. DCIT (ITAT Ahmedabad)

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DATE: (Date of pronouncement)
DATE: December 14, 2012 (Date of publication)
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CITATION:

As the assessee is engaged in the business of dealing in shares and the shares were held as stock-in-trade, the intention of the assessee was not to earn dividend income. As the dividend received was incidental to the business of sale of shares, no notional expenditure could be disallowed by invoking s. 14A (CCI Ltd 71 DTR 141 (Kar) & Apoorva Patni (ITAT Pune) (included in file) followed

Posted in All Judgements, Tribunal

Woodland Associates Pvt. Ltd vs. ITO (ITAT Mumbai)

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DATE: (Date of pronouncement)
DATE: December 13, 2012 (Date of publication)
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FILE: Click here to view full post with file download link
CITATION:

As regards the determination of ALV in respect of income assessable as house property, it has been held by the Third Member in Baker Technical Services 126 TTJ 455 (Mum)(TM) that the ALV in respect of property which is not covered by the Rent Control Act has to be determined on the basis of the market rent. The municipal rateable value determined under the municipal law is not binding on the AO if he is able to show that the said rateable value does not represent the correct fair rent. In Reclamation Reality, the view of the Third Member in Baker Technical Services was not followed on the ground that it was contrary to the judgement of the Bombay High Court in M. V. Sonavala 177 ITR 246 and it was held that the municipal ratable value has to be considered as the ALV. The decision of the Third Member has the same binding force as that of the Special Bench and was required to be followed by the Division Bench in Reclamation Reality. It wrongly relied on M.V. Sonavala, which was a case dealing with property covered under the Rent Control Act. Also, the issue as to whether, if the Municipal Rateable Value does not give the correct fair rent, should still be taken as the ALV for properties not covered under the Rent Control Act was not an issue in M. V. Sonavala. This aspect has been considered in Baker Technical Services & Moni Kumar Subba 333 ITR 38 (Del) (FB) and it was held that if the municipal rateable value was not the fair rent, it was not binding on the AO

Posted in All Judgements, Tribunal

Sardar Sarovar Narmada Nigam Ltd vs. ACIT (ITAT Ahmedabad Special Bench)

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DATE: (Date of pronouncement)
DATE: December 12, 2012 (Date of publication)
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FILE: Click here to view full post with file download link
CITATION:

U/s 3, the previous year for a business newly set up is the period beginning with the date of “setting up” of the business. Till the business is “set up”, all expenses have to be capitalized. There is a clear distinction between a “commencement of a business” and “setting up a business”. A business can be said to have been “set up” when it is ready to commence the business for which it has been established. An assessee can be said to have set up its business from the date when one of the categories of its business is started and it is not necessary that all the categories of its business activities must start either simultaneously or that the last stage must start before it can be said that the business was set up. The test to be applied is as to when a businessman would regard a business as being commenced and the approach must be from a commonsense point of view (Western India Vegetable Products 26 ITR 151 (Bom), Ramaraju Surgical Cotton Mills Ltd 63 ITR 478 (SC) & Sarabhai Management Corp 102 ITR 25 (Guj) followed)

Posted in All Judgements, Tribunal
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