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Year: 2009

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COURT:
CORAM:
SECTION(S):
GENRE:
CATCH WORDS:
COUNSEL:
DATE: (Date of pronouncement)
DATE: April 2, 2009 (Date of publication)
AY:
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CITATION:

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;

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COURT:
CORAM:
SECTION(S):
GENRE:
CATCH WORDS:
COUNSEL:
DATE: (Date of pronouncement)
DATE: April 1, 2009 (Date of publication)
AY:
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CITATION:

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

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COURT:
CORAM:
SECTION(S):
GENRE:
CATCH WORDS:
COUNSEL:
DATE: (Date of pronouncement)
DATE: March 31, 2009 (Date of publication)
AY:
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CITATION:

Held, affirming the majority view of the Special Bench in DCIT vs. Oman International Bank 100 ITD 285 that:

 

(i) Though the Circulars issued by the CBDT are not binding on the court as held in CCE vs. Ratan Melting & Wire Industries 231 ELT 22 (S.C.), it is binding on the authorities and while it is for the Court to read the section in its proper context, while so reading the Court will bear in mind the circular issued by the CBDT. Circulars are sometimes issued to obviate difficulties in the operation of the provisions and these are aspects which Courts do bear in mind while considering the Circulars. Accordingly, Circulars have to be taken into account.

 

(ii) The decision of an assessee to treat a debt as a bad debt in his books has to be a business or commercial decision and not whimsical or fanciful and must be based on material that the debt is not recoverable. The decision must be bona fide;

 

(iii) Post amendment of s. 36 (1)(vii) & 36 (2), the burden is not on the assessee to show the debt is “bad”. In order to disallow, the AO must show that the decision of the assessee was not bona fide.

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COURT:
CORAM:
SECTION(S):
GENRE:
CATCH WORDS:
COUNSEL:
DATE: (Date of pronouncement)
DATE: March 30, 2009 (Date of publication)
AY:
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CITATION:

Where s. 35G of the Central Excise Act (= 260A of the I. T. Act) provided a time limit of 180 days for filing an appeal and there was no provision for condoning delay by showing sufficient cause after the prescribed period, there was complete exclusion of section 5 of the Limitation Act and the High Court had no power to condone the delay after expiry of the prescribed period. Even otherwise, the legislature had provided sufficient time for filing a reference to the High Court which was more than the period prescribed for an appeal and revision.

 

Note: The judgement of the Full Bench of the Bombay High Court in CCE vs. Shree Rubber Plast is impliedly overruled.

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COURT:
CORAM:
SECTION(S):
GENRE:
CATCH WORDS:
COUNSEL:
DATE: (Date of pronouncement)
DATE: March 29, 2009 (Date of publication)
AY:
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CITATION:

Where the question arose whether in respect of an appeal admitted u/s 260A, the High Court has power to grant stay of recovery of outstanding demand, HELD:

 

(i) S. 260A provides that the provisions of the Code of Civil Procedure relating to appeals to the High Court shall apply;

 

(ii) Rules 5 (1) and 5 (3) of Order 41 of the Code of Civil Procedure authorize the Court to grant stay provided it is satisfied:

 

(a) that substantial loss may result to the party applying for stay of execution unless the order is made;

 

(b) that the application has been made without unreasonable delay; and

 

(c) that security has been given by the applicant for the due performance of such decree or order as may ultimately be binding upon him.

 

(iii) On facts, as these conditions were satisfied, the assessee was entitled to stay subject to conditions.

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COURT:
CORAM:
SECTION(S):
GENRE:
CATCH WORDS:
COUNSEL:
DATE: (Date of pronouncement)
DATE: March 27, 2009 (Date of publication)
AY:
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CITATION:

Where the question arose whether the Explanation to s. 73 (which deems the loss from trading in shares by a company to be speculation loss) can be confined only to cases where there is manipulation and whether the loss arising on valuation of closing stock of shares is also covered, HELD:

 

(i) Though the Circular of the CBDT supports the interpretation that the object of the Expl. to s. 73 is to curb manipulation of group companies’ shares, the scope of the Expl. extends to all companies carrying on business in shares;

 

(ii) Though the Expl. refers to purchase and sale of shares and not to losses suffered on account of valuation, it applies to valuation losses as well as there is no difference between trading losses and valuation losses.

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COURT:
CORAM:
SECTION(S):
GENRE:
CATCH WORDS:
COUNSEL:
DATE: (Date of pronouncement)
DATE: March 26, 2009 (Date of publication)
AY:
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CITATION:

The judgement of the Supreme Court in Dharmendra Textiles Processors which holds that penalty u/s.271(I)(c) is a civil liability and that “willful concealment” and “mens rea” are not essential ingredients for imposing penalty cannot be read to mean that in all cases where addition is confirmed, penalty shall mechanically follow. In order to attract s. 271 (1) (c), there must be “concealment” – the fact that the same is willful or unintentional is irrelevant.

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COURT:
CORAM:
SECTION(S):
GENRE:
CATCH WORDS:
COUNSEL:
DATE: (Date of pronouncement)
DATE: March 18, 2009 (Date of publication)
AY:
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CITATION:

Where the assessee made a VDIS declaration in which diamonds were disclosed and he later claimed that the moneys received by him were the sale proceeds of the said diamonds which could not be taxed but the AO held that the sale was fictitious as the second purchaser to whom the diamonds were stated to have been sold by the first purchaser was not traceable, HELD

 

In view of the fact that the diamonds formed a part of the declaration which was accepted by the department and the consideration was received from the purchaser by cheque and recorded in the books of accounts, the assessee had proved the possession of the diamonds at the time of declaration and the sale thereof could not be disbelieved merely because there was doubt about the second sale.

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COURT:
CORAM:
SECTION(S):
GENRE:
CATCH WORDS:
COUNSEL:
DATE: (Date of pronouncement)
DATE: March 18, 2009 (Date of publication)
AY:
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CITATION:

Where the assessee transferred rights in feature films by way of lease outside India and the question arose whether films constituted “goods or merchandise” for purposes of s. 80HHC, HELD

 

Today the difference between goods and services is getting blurred with globalization and cross-border
Transactions and with technological advancement one has to change one’s thinking regarding concepts like goods, merchandise and articles. The telecast “rights” certainly fall in the category of articles of trade and commerce, hence, merchandise and are eligible u/s 80HHC.

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COURT:
CORAM:
SECTION(S):
GENRE:
CATCH WORDS:
COUNSEL:
DATE: (Date of pronouncement)
DATE: March 16, 2009 (Date of publication)
AY:
FILE: Click here to view full post with file download link
CITATION:

Where the assessee suo motu filed returns as “agent” of a non-resident but no assessment was made and after the expiry of two years from the end of the assessment year a notice under section 148 of the Act seeking to assess the income and the question arose whether the said notice was barred by limitation u/s 149 (3), HELD:

 

(i) Ss 160 to 166 are machinery and enabling provisions and give the department the option to either assess the non-resident or his agent;

 

(ii) U/ss 160 to 166, agents are of two types: (1) agents who admit their liability as agents of a non-resident either expressly or impliedly. In such cases, there is no obligation to give a hearing or even to pass an order treating them as an agent u/s 163. (2) Agents u/ss 160(1)(i) or 163(1) who deny their liability to be agents of the non-resident. In such cases, an opportunity of a hearing and a formal order is require to be passed. Whether a person falls in one or the other category depends on the facts of the case;

 

(iii) S. 149 (3) applies only in a case where a person is “treated as an agent” of a non-resident u/s 163 i.e. persons disputing their liability as agent. It does not apply to persons who have voluntarily treated themselves as an agent of the non-resident.

 

(iv) On facts, as the assessee had treated himself as the “agent”, it was not necessary for authorities in this case to provide any opportunity of being heard to the assessee as regards his liability to be treated as an agent under the Act. The time limit prescribed in s. 149 (3) was also not applicable.

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