S. 92C provides the basis for determining the ALP in relation to international transactions. It does not either expressly or impliedly consider failure of the assessee’s customers to pay for the products sold to them by the assessee to be a relevant factor in determining the ALP. In the absence of any statutory provision or the transactions being colourable bad debts on account of purchasers refusing to pay for the goods purchased by them from the assessee can never be a relevant factor while determining the ALP of the transaction between the assessee and its principal. Once it is accepted that the ALP of the royalty is justified, there can be no reduction in the value thereof on account of the assessee’s customers failing to pay the assessee for the product purchased by them from the assessee. Absent a contract to the contrary, the vendor or licensor is not concerned with whether its purchaser /licensee recovers its price from its clients to which it has in turn sold /licensed such products. The two are distinct & unconnected transactions. The purchaser’s / licensee’s obligation to pay the consideration under its transaction with its vendor / licensor is not dependent upon its recovering the price of the products from its clients

In Azadi Bachao Andolan 263 ITR 706 (SC), it was held that McDowell cannot be read as laying down that every attempt at tax planning is illegitimate and must be ignored, or that every transaction or arrangement which is perfectly permissible under law, which has the effect of reducing the tax burden of the assessee, must be looked upon with disfavor. A citizen is free to act in a manner according to his requirements, his wishes in the manner of doing any trade, activity or planning his affairs with circumspection, within the framework of law, unless the same fall in the category of colourable device which may properly be called a device or a dubious method or a subterfuge clothed with apparent dignity. This was considered again in Vodafone International 341 ITR 1 (SC) and it was held that there is no conflict between McDowell and Azadi Bachao Andolan and reiterated that tax planning may be legitimate provided it is within the framework of law. On facts, the object of the scheme is to enable the Promoter to hold shares directly in the transferee company rather than indirectly and not to avoid any tax. There is nothing illegal or unlawful or dubious or colourful in the Scheme and the same is a perfectly legitimate scheme and permissible by law. Therefore, the objection that the scheme is a tax avoidance device stands rejected

On facts, the premium paid is capital in nature and cannot be treated as “advance rent” because (a) it was a precondition for securing possession and was a one-time consideration; (b) annual lease rent was payable separately; (c) there is no material to support the contention that the annual rent was depressed and does not reflect the market rent; (d) there is no material to support the argument that the amount of Rs. 2.53 crore paid over 23 years ago did not constitute the true and real consideration for creating an interest in the property; (e) the registration and stamp duty and charges were borne by the lessee; (f) the restrictions imposed on the lessee regarding transfer and user of the land were consistent with the nature of interest created, i.e. lease hold rights; (g) the tenure of the lease was quite substantial and virtually created ownership rights in favour of the lessee & (h) exclusive possession was handed over to the assessee at the time of creation of the lease (Panbari Tea Co 57 ITR 422 (SC) & Durga Das Khanna 72 ITR 796 (SC) followed; Madras Industrial Investment Corp 225 ITR 802 (SC) distinguished)

The third proviso to s. 254(2A) as amended by the FA 2008 w.e.f. 1.10.2008 provides that if the appeal is not decided within the period of 365 days, the order of stay shall stand vacated after the expiry of such period even if the delay in disposing of the appeal is not attributable to the assessee. The Tribunal which is a creature of the statute has to abide by these statutory provisions in letter and spirit. The third proviso to Finance Act 2008 makes it abundantly clear that the purpose of putting the outer limits is only for curtailing the period an order of stay can operate and to ensure that it has no effect after the period of 365 days from the date of initial order. An interpretation to enable or confer power on the Tribunal to extend a stay order beyond 365 days would be contrary to such statutory provision. While the argument that hardship & injustice will be caused to the assessee by being deprived of the stay even when he is not at fault is appreciated, one cannot ignore the language of the provision (Ronuk Industries 333 ITR 99 (Bom) dissented from)

The assessee had made a claim for 30% adhoc expenditure. This was withdrawn by the assessee when asked by the AO to substantiate. The reopening on the basis that the said adhoc expenditure constituted “unexplained expenditure” u/s 69 was based on the same material. There was no fresh tangible material before the AO to reach a reasonable belief that the income liable to tax has escaped assessment. It is a settled position of law that review under the garb of reassessment is not permissible

The words ‘if sold in open market’ in s. 7 assumes that there is an open market and the property can be sold in such a market. However, if there is a restriction on transfer of the property, the value of the property has to be reduced. On facts, as the land in question was declared surplus land under the ULCA, that had a depressing effect on the value of the asset and the valuation had to be made on the basis of assumption that the purchaser would be able to enjoy the property as the holder, but with restrictions and prohibitions contained in the ULCA. It is not open to the Revenue to assess the property on the basis of the market value, which normally could have fetched without any restriction or prohibition, but it ought to value the land on the basis of the restrictions and prohibitions contained in the ULCA

However, the amendment is violative of Article 14 of the Constitution of India because two assessees of the same class are placed on different footing. While some assessees whose export turnover is more than Rs.10 Crore and who have claimed deduction u/s. 80 HHC on DEPB / DFRC in their ROI and the assessments have become final are given the benefit of deduction without compliance of the conditions imposed by the Taxation Laws (Second Amendment) Act, 2005, assessees whose turnover is more than Rs.10 Crore, and who have claimed deduction u/s. 80 HHC on DEPB/DFRC and whose assessments are pending either before the AO or the appellate authority would be required to comply with those two conditions retrospectively. Two assessees of similar description having export turnover of more than Rs.10 Crore are discriminated inasmuch as the assessees whose assessments have become final is not required to comply with the two conditions and would avail deduction u/s. 80 HHC as against the assessees whose assessments are pending and who would be required to comply with the two conditions. A benefit based on pendency of proceedings of assessment and discrimination based thereon definitely violates Article 14 of the Constitution. In the matter of completion of assessment, the assessees have little role to pay. After the assessees have submitted their returns within the time fixed by law, if for any reason the AO delays in making the assessment, taking advantage of their own delay, the Revenue cannot deprive a class of the assessees of the benefit whereas other assessees of the same class whose assessment have already been completed would get the benefit

The appellate authorities have come to a finding of fact after examining the relevant material that the assessee is an investor in shares and not a trader. This finding of fact is not perverse. As held in Gopal Purohit 228 CTR (Bom) 582, there is no bar for an assessee to maintain two separate portfolios, one relating to investment in shares and another relating to business activities involving dealing in shares

S. 43B was inserted by the FA 1983 to prevent assessees from claiming a deduction for a provision for statutory liabilities without actually paying the same. Leave encashment is not a statutory liability as held in Bharat Earth Movers 245 ITR 428 (SC) and a deduction is allowable in respect of the accrued liability. To overcome the said decision, clause (f) was inserted in the year 2001 to allow deduction for leave encashment only on payment basis. In Exide Industries 292 ITR 470 (Cal), clause (f) of s. 43 B was held to be inconsistent with the object with which s. 43B was inserted and thereby was held to be unconstitutional. As the department has accepted the judgement of the Calcutta High Court and not filed an appeal to the Supreme Court, it is not open to the Revenue to challenge its correctness in the case of another assessee as held in Berger Paints 266 ITR 99 (SC)

It is well settled that an assessee is entitled to raise not merely additional legal submissions before the appellate authorities, but is also entitled to raise additional claims before them. The appellate authorities have the discretion whether or not to permit such additional claims to be raised. It cannot, however, be said that they have no jurisdiction to consider the same. That they may choose not to exercise their jurisdiction in a given case is another matter. The exercise of discretion is entirely different from the existence of jurisdiction. Goetze was confined to a case where the claim was made only before the AO and not before the appellate authorities. The Court did not lay down that a claim not made before the AO cannot be made before the appellate authorities. The jurisdiction of the appellate authorities to entertain such a claim has not been negated by the Supreme Court in this judgment. On facts, there was nothing to show that the claim entertained by the CIT (A)/ ITAT was improper