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ITO vs. Intertoll ICS India Private Limited (ITAT Mumbai)

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DATE: May 25, 2016 (Date of pronouncement)
DATE: May 30, 2016 (Date of publication)
AY: 2003-04
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CITATION:
Transfer Pricing: Arbitrary action of the AO in treating the payment by the assessee to the AE as "excessive/ unreasonable" deplored. Whims and fancies of an AO cannot decide tax liability of an assessee. Either the AO was ignorant of the TP provisions or he was adamant to make the disallowance at any cost. Either way, his action cannot be endorsed

It is said that rights and duties are two sides of the same coin. In other words, rights demand that a person using his rights should also observe his duties. In taxation matters discretionary powers have been given to the AO’s but they are expected to use the power in a fair and just manner. State as an institution can levy and collect only due taxes from its subjects. So, if the AOs determine the tax liability in an unfair manner and if the demand is not of the DUE taxes appellate authorities are expected to allow relief to the assessee. He very well knew that the assessee had objected to the ad hoc disallowance and rejection of the CUP method. But, he stuck to his guns while submitting the remand report and supported the estimated disallowance. His approach goes against the very basis of the TP provisions. Either he was ignorant of the TP provisions or he was adamant to make the disallowance at any cost. But, his action cannot be endorsed. Why was the transaction entered in to by the AE with MIT Hungary could not be a basis for arriving at ALP was never discussed by the AO. The assessee has discharged his burden of proof. After that onus had shifted to the assessee and in our opinion he has failed miserably to prove that his action of making disallowance was supported by any logical argument or scientific basis. Whims and fancies of an AO cannot decide tax liability of an assessee

Posted in All Judgements, Tribunal

Bayer CropScience Limited vs. ACIT (ITAT Mumbai)

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DATE: May 25, 2016 (Date of pronouncement)
DATE: May 30, 2016 (Date of publication)
AY: 2006-07
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CITATION:
S. 37(1): (i) Product Trial expenses of a new product is revenue in nature as it does not provide the assessee with any enduring benefit, (ii) Compensation paid to supplier to ensure goodwill and continued relationship is revenue expenditure

For allowing / disallowing any expenditure under Section 37 of the Act, the basic thing to be seen as to whether the expenditure was incurred for furtherance of business interest of the Assessee or not. It is a fact that in this case because of the expenditure incurred no new assets came into existence. The expenditure was incurred considering the old relation with the supplier and to avoid future business complications. If an assessee makes payment which is compensatory nature, it has to be allowed. In this case, the payment was made in pursuance of an agreement and that was of compensatory nature i.e.it was not penal, hence it was to be allowed

Posted in All Judgements, Tribunal

Ashwani Kumar Arora vs. ACIT (ITAT Delhi)

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DATE: May 19, 2016 (Date of pronouncement)
DATE: May 28, 2016 (Date of publication)
AY: 2008-09
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CITATION:
S. 271(1)(c) vs. 271AAA: Levy of penalty u/s 271(1)(c) on income disclosed in a search instead of u/s 271AAA is not sustainable

The penalty in this case, if at all leviable, it should have been levied under section 271AAA (1) and not u/s 271(1)(c) as has categorically been provided in sub-section (3) of section 271AAA. Intention of the legislative in incorporating the provisions contained u/s 271AA effective during the period 1st June, 2007 to 1st July, 2012 is to provide general amnesty in search and seizure cases, and the case of the assessee undisputedly falls u/s 271AAA and cannot be dealt with u/s 271(1)(c) by any stretch of imagination even

Posted in All Judgements, Tribunal

Ujagar Holdings Pvt. Ltd vs. ITO (ITAT Delhi)

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DATE: May 16, 2016 (Date of pronouncement)
DATE: May 28, 2016 (Date of publication)
AY: 2006-07
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CITATION:
S. 147: Non-furnishing by the AO of reasons recorded for reopening the assessment results in violation of the law laid down in GKN Driveshaft 259 ITR 19 (SC) & renders the reopening void

Despite repeated letters requesting to provide copy of the reasons recorded or the grounds on which the assessment was reopened, no such reasons were provided to the assessee. We find that the DR could not substantiate whether any reasons were provided by the Assessing Officer to the assessee and merely relying on the fact that general practice was followed in Department of supplying reasons, it cannot be presumed that reasons were supplied in the case of the assessee. The Assessing Officer has not complied with the direction of the Hon’ble Supreme Court in the case of GKN Driveshaft (India) limited Vs. CIT (2003) 259 ITR 19 (SC) providing reasons for reassessment within a reasonable time, and therefore respectfully following the decisions cited above, the reassessment completed by the Assessing Officer under section 147 of the Act cannot be sustained in the case of the assessee and quashed

Posted in All Judgements, Tribunal

Fiduciary Shares & Stock P. Ltd vs. ACIT (ITAT Mumbai)

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DATE: May 13, 2016 (Date of pronouncement)
DATE: May 26, 2016 (Date of publication)
AY: 2009-10
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CITATION:
The amendment to Explanation to s. 73 by Finance (No. 2) Act, 2014 w.e.f. 01.04.2015 is clarificatory in nature and operates retrospectively from 01.04.1977, being the date the Explanation to s. 73 was placed on the statute. Therefore, the loss incurred in share trading business by companies whose principal business is trading in shares will not be treated as speculation loss but as normal business loss and the same can be adjusted against income from business or other sources

The insertion of the amendment in the Explanation to section 73 of the Act by the Finance (No. 2) Act, 2014, in our view, is curative and classificatory in nature. If the amendment is applied prospectively from A.Y. 2015-16, a piquant situation would arise that an assessee who has earned profit from purchase and sale of shares in A.Y. 2015-16 would be treated as normal business profit and not speculation business profit in view of the exception carried out by the amendment in Explanation to section 73 of the Act. In these circumstances, speculation business loss incurred by trading in shares in earlier years will not be allowed to be set off against such profit from purchase and sale of shares to such companies in A.Y. 2015-16. For this reason also, the amendment inserted to Explanation to section 73 of the Act by Finance (No. 2) Act, 2014 is to be applied retrospectively from the date of the insertion to Explanation to section 73 of the Act

Posted in All Judgements, Tribunal

DDIT vs. Reliance Industries Ltd (ITAT Mumbai)

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DATE: May 18, 2016 (Date of pronouncement)
DATE: May 26, 2016 (Date of publication)
AY: -
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CITATION:
(i) Purchase of a license to use shelf/shrink-wrapped software is purchase of a “product” and not a “copyright”, (ii) The retrospective insertion of Explanation 4 to s. 9(1)(vi) to include “software” in the definition of “royalty” does not apply to DTAAs, (iii) In view of the conflict of views amongst the High Courts, the view in favour of the assessee should be followed, (iv) An obligation to deduct TDS u/s 195 cannot be imposed by the retrospective insertion of Explanation 4 to s. 9(1)(vi), (v) As payments for software were not “royalty” at the time of payment, the assessee cannot be held to be in default for not deducting TDS

The assessee cannot be said to have paid the consideration for use of or the right to use copyright but has simply purchased the copyrighted work embedded in the CD- ROM which can be said to be sale of “good” by the owner. The consideration paid by the assessee thus as per the clauses of DTAA cannot be said to be royalty and the same will be outside the scope of the definition of “royalty” as provided in DTAA and would be taxable as business income of the recipient. The assessee is entitled to the fair use of the work/product including making copies for temporary purpose for protection against damage or loss even without a license provided by the owner in this respect and the same would not constitute infringement of any copyright of the owner of the work even as per the provisions of section 52 of the Copyright Act,1957

Posted in All Judgements, Tribunal

Rajat Saurabh Chatterji vs. ACIT (ITAT Delhi)

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DATE: May 20, 2016 (Date of pronouncement)
DATE: May 26, 2016 (Date of publication)
AY: 2007-08
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CITATION:
S. 147/ 148/ 153C: A case where the AO detects incriminating material in search has to be processed only u/s 153C and not u/s 147. A notice u/s 148 to assess such undisclosed income is void ab initio

Reassessment was initiated on the basis of incriminating material found in search of third party and the validity of the same was challenged by the assessee before the Learned CIT(Appeals) and the Learned CIT(Appeals) vitiated the proceedings. The same was questioned by the Revenue before the ITAT and the ITAT after discussing the cases of the parties and the relevant provisions in details has come to the conclusion that in the above situation, provisions of sec. 153C were applicable which excludes the application of sections 147 and 148 of the Act. The ITAT held the notice issued under sec. 148 and proceedings under sec. 147 as illegal and void ab initio. It was held that Assessing Officer having not followed procedure under sec. 153C, reassessment order was rightly quashed by the CIT(Appeals)

Posted in All Judgements, Tribunal

Gujarat Pipavav Port Limited vs. ITO (ITAT Mumbai)

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DATE: March 23, 2016 (Date of pronouncement)
DATE: May 26, 2016 (Date of publication)
AY: 2008-09
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CITATION:
Installation services provided by a foreign enterprise which are inextricably connected to the sale of goods are not assessable as "fees for technical services" or as "business profits" under the DTAA

Though service of installation is covered by the FTS clause as well as Installation PE clause of the India China treaty and though the installation contract (including period of after sales service) exceeded 183 days, the income from installation activity was neither taxable as FTS nor as business income since (i) the service of installation was inextricably connected to sale of goods, the same could not be treated as FIS or FTS (ii) specific installation PE clause in India China Treaty will override General FTS clause (iii) the aforesaid threshold limit of 183 days would have to be applied to the actual period of installation (which was less than 183 days) and not the contractual period

Posted in All Judgements, Tribunal

DCIT vs. Alstom Projects Ltd (ITAT Mumbai)

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DATE: October 28, 2015 (Date of pronouncement)
DATE: May 26, 2016 (Date of publication)
AY: 2007-08 & 2008-09
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CITATION:
(i) Important law laid down on applicability of transfer pricing provisions to non-AEs, Law on (ii) deductibility of unpaid service-tax u/s 43B and (iii) carry forward of losses of amalgamating company u/s 72A and Rule 9C explained

Disallowance of unpaid service tax could not be made under section 43B where the assessee did not claim the same in its Profit and Loss account. Where the assessee fulfilled all the conditions prescribed under Section 72A read with Rule 9C, the AO could not deny the claim of carry forward of losses pertaining to the amalgamating company

Posted in All Judgements, Tribunal

Arvind Asmal Mehta vs. ITO (ITAT Mumbai)

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DATE: February 29, 2016 (Date of pronouncement)
DATE: May 21, 2016 (Date of publication)
AY: 2009-10
FILE: Click here to view full post with file download link
CITATION:
Bogus purchase and sale of shares: Law explained as to on whom the onus is to show that the purchase and sale of shares are bogus and the circumstances required to be proved by the AO

The purchase of shares in the immediately preceding year was accepted by the Department in an order u/s 147 r.w.s 143(3) of the Act. The shares were evidenced by entries in the demat statement and consideration was received through banking channel. There was no clinching material to say that the impugned transaction was bogus. Also, the statement recorded during the search on M/s Alliance Intermediaries & Network Pvt. Ltd. does not contain any infirmity qua the impugned transaction. Therefore, the addition as income from undisclosed income was liable to be deleted

Posted in All Judgements, Tribunal

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