Year: 2011

Archive for 2011


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DATE: (Date of pronouncement)
DATE: February 2, 2011 (Date of publication)
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U/s 80-IA (8), the transfer of goods from an eligible business to a non-eligible business is required to be taken at “market value”. The tariff determined by MERC is based on the concepts of ‘clear profits’ and ‘reasonable return’ and does not reflect the “market value” of the electricity. While the ‘clear profits’ are determined by considering the streams of income, the ‘reasonable return’ is determined on the capital base. If the ‘clear profits’ are more than the ‘reasonable return’, the excess is considered while fixing tariffs for the subsequent year and the exercise of adjusting the gap between the reasonable return and clear profits is an on-going process. The tariff is either increased or reduced to adjust the gap between the two. Further, the tariff is fixed for both activities of generation and distribution of power and may not reflect the true rates with regard to only the activity of generation

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DATE: (Date of pronouncement)
DATE: February 2, 2011 (Date of publication)
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No income accrues u/s 9(1)(i), 9(1)(vi) or 9(1)(vii) from use of satellite outside India to beam TV signals to India even if bulk of revenue arises due to viewers in India

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DATE: (Date of pronouncement)
DATE: February 1, 2011 (Date of publication)
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CBDT Circular No.12 dated 23.8.2001 which provides that “the AO shall not make any adjustment to the arm’s length price determined by the taxpayer if such price is unto 5% less or unto 5% more than the price determined by the AO” was in the context of the proviso to s. 92C (2) inserted by FA 2001 w.e.f. AY 2002-03. Though the proviso provided for only arithmetical mean of the prices to be taken and did not provide for any concession, the Circular was issued considering practical difficulties. The said Proviso was amended by FA 2002 w.e.f AY 2002-03. The effect is that the Proviso in the context of which Circular No. 12 was issued never came into operation and so the Circular No. 12 became otiose and cannot be relied upon

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DATE: (Date of pronouncement)
DATE: January 27, 2011 (Date of publication)
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U/s 149(1)(b) a notice u/s 148 cannot be issued after the issue of 6 years from the end of the AY. In Haryana Acrylic vs. CIT 308 ITR 38 it was held that a notice u/s 148 without the communication of the reasons there for is meaningless inasmuch as the AO is bound to furnish the reasons within a reasonable time. It was held that a case where the notice has been issued within the said period of six years but the reasons have not been furnished within that period is hit by the bar of limitation because the issuance of the notice and the communication and furnishing of reasons go hand-in-hand. The expression ‘within a reasonable period of time’ as used in GKN Driveshafts 259 ITR 19 (SC) cannot be stretched to such an extent that it extends even beyond the six years stipulated in s. 149

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DATE: (Date of pronouncement)
DATE: January 26, 2011 (Date of publication)
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Administrative expenditure relatable to the earning of tax-free income cannot be disallowed u/s 14A in the absence of a precise formula for proportionate disallowance until Rule 8D came into force

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DATE: (Date of pronouncement)
DATE: January 24, 2011 (Date of publication)
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The TPO rejected the assessee’s contention with regard to inclusion of the three super-normal profit companies without any cogent reason. It is undisputed that the three companies have shown super-normal profits as compared to other comparables. Their exclusion from the list of comparable is quite correct. After excluding the three companies the arithmetic mean of the comparables falls within the +-5% range permitted by s.92(C)(2)

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DATE: (Date of pronouncement)
DATE: January 23, 2011 (Date of publication)
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High Court has power to review its judgement u/s 260A

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DATE: (Date of pronouncement)
DATE: January 17, 2011 (Date of publication)
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On merits, s. 32(1)(ii) allows depreciation in respect of know-how, patent, copyrights, trademarks, licences, franchises or any other business or commercial rights of similar nature. The term “commercial rights” are such rights which are obtained for effectively carrying on business and commerce. “Commerce” is a wide term which encompasses many a facet. Accordingly, any right obtained for carrying on business with effectiveness comes within the sweep of meaning of “intangible asset”. Goodwill, being the positive reputation built by a person over a period of time is of “similar nature” as the other items enumerated in the definition of “intangible assets

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DATE: (Date of pronouncement)
DATE: January 16, 2011 (Date of publication)
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Pursuant to the insertion of the concept of “block of assets” w.e.f. 1.04.1988, depreciation is allowable on the WDV of the “block of assets” and individual assets lose their identity upon introduction into the block. The department’s argument that user of each and every asset is essential is not acceptable because it would mean that the assessee has to maintain the details of each asset separately and this would frustrate the very purpose for which the amendment was brought about. The Revenue is not put to any loss by adopting such method because when the asset is sold, it results in taxable STCG

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DATE: (Date of pronouncement)
DATE: January 14, 2011 (Date of publication)
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The fact that the international transactions are at ALP does not mean that no addition can be made on the funds kept by the assessee with the AE. If the assessee had received funds within the normal period, it could have earned interest on the same. The potential loss is a factor to be considered while evaluating the financial impact of the international transactions between the assessee and the AE. However, a reasonable period has to be provided as interest-free period