Category: Tribunal

Archive for the ‘Tribunal’ Category


HITT Holland Institute of Traffic Technology B.V. vs. DDIT (ITAT Kolkata)

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DATE: February 8, 2017 (Date of pronouncement)
DATE: February 20, 2017 (Date of publication)
AY: 2010-11
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CITATION:
Entire law on Permanent Establishment, Force of Attraction principle, taxability of software embedded in hardware as royalty, make available of technical services etc explained (all important judgements referred)

Some provide for taxing profits/income from all transactions whether they are attributable to PE or not or whether they are of the same kind of transactions carried on by the PE or not, which is referred to as “Full Force of Attraction” principle. As to which principle is applicable in a given case depends on the clauses of the convention between two countries. Article 7(1) of the DTAA between India and Netherlands provides for taxing profits of the enterprise in the other state only to the extent they are attributable to the PE in the other state, adopting “No Force of Attraction” principle

Posted in All Judgements, Tribunal

ACIT vs. Mahesh K. Shah (ITAT Mumbai)

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DATE: January 31, 2017 (Date of pronouncement)
DATE: February 8, 2017 (Date of publication)
AY: 2010-11
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CITATION:
S. 69C Bogus Purchases: Purchases cannot be treated as bogus merely on the basis of the statements and affidavits filed by the alleged vendors before the sales-tax department. The said statements cannot be relied upon without cross-examination of the parties. The fact that the parties did not respond to the s. 133(6) notices is not relevant if the assessee filed copies of purchase invoices, extracts of stock ledger showing entry/exit of materials, copies of bank statements to evidence that payments for these purchases were made through normal banking channels, etc to establish genuineness of the aforesaid purchases

Mere reliance by the AO on information obtained from the Sales Department or on statements/affidavits of the 12 parties before the Sales Tax Department or that these parties did not respond to notices issued under section 133(6) of the Act, would not in itself suffice to treat the purchases as bogus and make the addition under section 69C of the Act. If the AO doubted the genuineness of the said purchases, it was incumbent upon him to cause further inquiries in the matter in order to ascertain the genuineness or otherwise of these transactions. Without causing any further enquiries to be made in respect of the said purchases, the AO cannot make the addition under section 69C of the Act by merely relying on information obtained from the Sales Tax Department, the statements/ affidavits of third parties, without the assessee being afforded any opportunity of cross examination of those persons for non-response to information called for under section 133(6) of the Act

Posted in All Judgements, Tribunal

Orchid Pharma Limited vs. DCIT (ITAT Chennai)

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DATE: November 30, 2016 (Date of pronouncement)
DATE: February 6, 2017 (Date of publication)
AY: 2011-12
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CITATION:
Transfer Pricing - Meaning of “Associated Enterprises”: The fact that an enterprise can “influence prices and other conditions relating to sale” does not make it an “associated enterprise” of the assessee if it does not participate in the (a) capital, (b) management, or (c) control of the assessee and thus does not fulfil the basic rule u/s 92A(1). S. 92A(2)(i) has to be read with s. 92(A)(1). Even if the conditions of s. 92A(2)(i) are fulfilled, these enterprise cannot be treated as ‘associated enterprise’ if the requirements of s. 92A(1) are not fulfilled

The definition of ‘associated enterprise’, as the above academic analysis shows, has two approaches- wider approach and narrow approach. A narrow approach to the concept of associated enterprises takes into account only “de jure” association i.e. though formal participation in the capital or participation in the management. A wider approach to the concept of ‘associated enterprises’ takes into account not only the de jure relationships but also de facto control, in the absence of participation in capital or participation in management, through other modes of control such as commercial relationships in which one has dominant influence over the other. This wider concept is clearly discernible from the principles underlying approach to the definition of ‘associated enterprises’ in the tax treaties and has also been adopted by the transfer pricing legislation in India in an unambiguous manner. There is no other justification in the Indian transfer pricing legislation, except the participation in capital of an enterprise, management of an enterprise or control of an enterprise, which can lead to the relationship between enterprise being treated as ‘associated enterprises’. What essentially follows is that clause (i) of Section 92A(2) has, at its conceptual foundation, de facto control by one of the enterprise over the other enterprise, on account of commercial relationship of its buying the products, either on his own or through any nominated entities, from such other enterprise and in a situation in which it can influence the prices and other related conditions. The wordings of clause (i), however, do not reflect this position in an unambiguous manner inasmuch as it does not set out a threshold of activity, giving de facto control to the other enterprise engaged in such commercial activity, in percentage terms or otherwise- as is set out in clause (g) and (h) or, for that purpose, in all other operative clauses of Section 92A(2)

Posted in All Judgements, Tribunal

Kumari Kumar Advani vs. ACIT (ITAT Mumbai)

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DATE: July 13, 2016 (Date of pronouncement)
DATE: February 3, 2017 (Date of publication)
AY: 2012-13
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CITATION:
S. 234C: Though levy of interest for deferment of advance-tax is mandatory and cause & justification for the deferment are irrelevant, the same is not leviable if the income was not predictable and the assessee could not have anticipated its receipt e.g. the receipt of a gift

The liability to pay advance tax enshrined under the Act is based on the principle of ‘pay as you earn’, as has been aptly noted by the Delhi High Court in the case of Bill and Peggy Marketing India Pvt. Ltd. vs. ACIT, 350 ITR 465 (Del). Section 234C of the Act prescribes that the advance tax is payable in installments on the dates falling within financial year itself. Any failure or shortfall in payment of such installments attracts interest under section 234C of the Act. In the present case, the assessee has been charged interest under section 234C of the Act primarily on the ground that the requisite installments were not paid on the specified dates of 15/9/2011 and 15/12/2011. The assessee resists the levy on the ground that the income which has prompted the Revenue to levy interest was not received by the assessee on such specified dates, but it was received on 17/12/2011. Ostensibly, the income in question is by way of gifts received, which has been received by the assessee after the date of instalments due on 15/9/2011 and 15/12/2011. Quite clearly, assessee could not have anticipated the receipt or accrual of such income before the event, and such event has taken place after the due dates of instalments

Posted in All Judgements, Tribunal

GE Energy Parts Inc vs. ADIT (ITAT Delhi)

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DATE: January 27, 2017 (Date of pronouncement)
DATE: January 31, 2017 (Date of publication)
AY: 2001-02
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CITATION:
Permanent Establishment: Entire law explained on whether the deputation of personnel by a foreign company to assist the Indian subsidiaries in negotiations, marketing etc leads to a “fixed place PE” or a “Dependant Agent PE” under Article 5 of the DTAA and if so, the manner in which the profits of the foreign company are attributable to operations in India

The expats of GEII and employees of GEIIPL were appointed to act as agent of multiple GE overseas enterprises. It is nobody’s case that they were otherwise acting as agents of independent status working for other third parties in India. This proves that expats and employees of GEEIPL acted as agents of dependent status in the first place itself. Although, the number of GE overseas entities looked after by each of them is more than one, but the fact that such entities were in one of the three broader ITA No.671/Del/2011 160 lines of businesses of GE group, makes them agents of dependent status per se

Posted in All Judgements, Tribunal

ITO vs. Dilip B. Desai HUF (ITAT Kolkata)

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DATE: January 27, 2017 (Date of pronouncement)
DATE: January 30, 2017 (Date of publication)
AY: 2006-07, 2009-10
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CITATION:
S. 10(38): If the AO has accepted the claim for exemption for long-term capital gains and conceded that the assessee is an "investor", he cannot change his stand and treat the assessee as a "trader" in respect of the claim of short-term capital gains alone

The AO having accepted the claim of exemption u/s 10(38) of the Act for long term capital gains of the assessee had conceded the claim of assessee to be an investor and the AO cannot take a different stand by treating the assessee as a trader in respect of short term capital gains alone

Posted in All Judgements, Tribunal

Kiran Navin Doshi vs. ITO (ITAT Mumbai)

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DATE: January 18, 2017 (Date of pronouncement)
DATE: January 30, 2017 (Date of publication)
AY: 2009-10
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CITATION:
Bogus purchases: As a direct one to one relationship/nexus between the purchases and sales has not been established by the assessee, the purchases have to be treated as bogus and 12% of the purchase cost is assessable as profits (law on the subject noted)

It is also a settled legal proposition that if no evidence is given by
the party on whom the burden is cast, the issue must be found
against him. Therefore, onus is always on a person who asserts a
proposition or fact, which is not self evident, The onus, as a
determining factor of the whole case can only arise if the Tribunal,
which is vested with the authority to determine, finally all questions
of fact, finds the evidence pro & con, so evenly balanced that it can
come to no conclusion, then, the onus will determine the matter

Posted in All Judgements, Tribunal

Geo Connect Ltd vs. DCIT (ITAT Delhi)

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DATE: January 17, 2017 (Date of pronouncement)
DATE: January 30, 2017 (Date of publication)
AY: 2002-03, 2003-04
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CITATION:
S. 9(1)(i)/ 9(1)(vi)/ 9(1)(vii)/ 40(a)(i): Law on whether payment by the assessee to non-resident parties for “call transmission services through dedicated bandwidth” is assessable as income accruing in India, royalty or fees for technical services and whether a disallowance can be made for failure to deduct TDS explained

In the instant case also, the undersea cable for providing dedicated bandwidth to the assessee was installed beyond the territory of India and no operations were carried out by the non-resident party M/s Kick Communication in India. It was responsible for restoring connectivity and Managing faults in connectivity etc in respect of data transmitted through undersea cable only. Similarly, the operations carried out by M/s. IGTL Solutions are also in USA and not in India. Since operations by both the non-resident parties are carried out beyond the territory of India, we thus hold that section 9(1)(i) is of the Act is not attracted in case of above two non-resident parties

Posted in All Judgements, Tribunal

ACIT vs. Sachin R. Tendulkar (ITAT Mumbai)

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DATE: January 25, 2017 (Date of pronouncement)
DATE: January 28, 2017 (Date of publication)
AY: 2010-11, 2011-12
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CITATION:
Entire law explained on whether gains from sale of shares held in a Portfolio Management Scheme (PMS) should be assessed as "capital gains" or as "business profits" in the context of CBDT Circular No. 4/7 dated 15.06.2007 and Circular No. 6 of 2016 dated 29.02.2016

While drafting the provisions the legislature did not make any water tight rule for determination of nature of income arising from purchase and sale of shares to be assessed under the head of capital gains or business income. It has been left upon the wisdom of the assessee and facts and circumstances of the case. Under these circumstances, if assessee has chosen a particular course after deciding all the pros and cons of both the options available to it and if the choice has been exercised in a bonafide manner, the Board has advised as discussed above that the AO does not have liberty under the law to thrust his opinion upon the assessee, so long as the assessee follows his choice on consistent basis

Posted in All Judgements, Tribunal

ACIT vs. Veer Gems (ITAT Ahmedabad)

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DATE: January 3, 2017 (Date of pronouncement)
DATE: January 20, 2017 (Date of publication)
AY: 2008-09
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CITATION:
S. 92A Transfer Pricing: Important law explained on meaning of expression "associated enterprise". The mere fact that an enterprise has de facto participation in the capital, management or control over the other enterprise does not make the two enterprises "associated enterprises" so as to subject their transactions to the rigors of transfer pricing law

If a form of participation in management, capital or control is not recognized by Section 92A(2), even if it ends up in de facto or even de jure participation in management, capital or control by one of the enterprise in the other enterprise, it does not result in the related enterprises being treated as ‘associated enterprises’. Section 92A(1) and (2), in that sense, are required to be read together, even though Section 92A(2) does provide several deeming fictions which prima facie stretch the basic rule in Section 92A(1) quite considerably on the basis of, what appears to be, manner of participation in “control” of the other enterprise. What is thus clear that as long as the provisions of one of the clauses in Section 92A(2) are not satisfied, even if an enterprise has a de facto participation capital, management or control over the other enterprises, the two enterprises cannot be said to be associated enterprises

Posted in All Judgements, Tribunal