Year: 2012

Archive for 2012


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DATE: May 19, 2012 (Date of publication)
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One Anand Parkash, FCA, addressed a letter dated 30.4.2012 to the High Court in which he set out the numerous problems being faced by the assesses across the Country owing to the faulty processing of the Income Tax Returns and non-grant of TDS credit & refunds. He claimed that because of the department’s fault, the assessees were being harassed. The High Court took judicial notice of the letter, converted it into a public interest writ petition and directed the CBDT to answer each of the allegations made in the letter. In addition, the Court demanded an answer to the following issues

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DATE: (Date of pronouncement)
DATE: May 18, 2012 (Date of publication)
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In CIT vs. Ranchi Club Ltd 247 ITR 209 (SC) it was held that the order of the AO in the assessment order to charge interest has to be specific and clear and the assessee must be made to know that the AO after applying his mind has ordered charging of interest. In Anjum M.H. Ghaswala 252 ITR 1 (SC), it was held, in the context of whether the Settlement Commission could waive interest, that the levy was mandatory and could not be waived. Subsequently, in Insilco Ltd 278 ITR 1 (SC), the Supreme Court remanded the matter to decide whether the law laid down in Ranchi Club had been changed by Anjum M.H. Ghaswala or not. Ranchi Club Ltd has not been expressly overruled nor has a different view been taken in Anjum M.H. Ghaswala‘s case. There is also no force in the department’s argument that even if assessment order or computation sheet does not provide for interest, since interest is mandatory, it can be charged in the demand notice which is signed by the AO. Even if a provision of law is mandatory and provides for charging of tax or interest, the view taken in Ranchi Club Ltd is that such charge by the AO should be specific and clear and assessee must be made to know that the AO has applied his mind and has ordered charging of interest. The mandatory nature of charging of interest and the actual charging of interest by application of mind and the mention of the proviso of law under which such interest is charged are two different things. Consequently, if the assessment order is silent, interest u/s 234A, 234B & 234C cannot be levied

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DATE: (Date of pronouncement)
DATE: May 17, 2012 (Date of publication)
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The contention of the Revenue that some expenditure, directly or indirectly, is always incurred for earning tax-free income cannot be accepted. The burden is on the AO to establish the nexus of the expenditure incurred with the earning of exempt income before making any disallowance u/s 14A (Hero Cycles 323 ITR 518 (P&H), Jindal Photo followed)

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DATE: May 17, 2012 (Date of publication)
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Ordinarily, it is not incumbent on the Tribunal to adjourn the case when a last opportunity had already been granted to the assessee. However, there may be number of circumstances where adjournment becomes necessary in the interest of justice. If Counsel for assessee had to go for some urgent work to Mumbai and an application for adjournment was moved in advance, then in the interest of justice, a short adjournment should have been granted. If number of opportunities had already been afforded to the Counsel for assessee, then adjournment could have been granted, on payment of cost. The Tribunal has not assigned any reason as to whether reason mentioned in the application for adjournment, constituted sufficient cause for adjournment or not. Even if a last opportunity is granted and case is fixed for hearing and sufficient cause is shown on the date fixed for hearing, then the case can be adjourned and it should be adjourned, in the interest of justice. Accordingly, the Tribunal committed an illegality in rejecting the application for adjournment and in deciding the appeal exparte. Appeal remitted to the Tribunal for decision on merits on payment of costs of Rs.21,000 by the assessee

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DATE: (Date of pronouncement)
DATE: May 16, 2012 (Date of publication)
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Under Article 7 of the DTAA, foreign PE profits may be taxed in India The assessee, an Indian PSU company, earned Rs. 10.68 crores from foreign projects in Oman etc. The assessee claimed that it had a “permanent establishment” (PE) …

Telecommunications Consultants India Ltd vs. ACIT (ITAT Delhi) Read More »

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DATE: (Date of pronouncement)
DATE: May 16, 2012 (Date of publication)
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The term “tax” is defined in s. 2(43) to mean income-tax chargeable under the provisions of this Act. S. 37(1) allows a deduction of all taxes and rates. Taxes levied in foreign countries whether on profits or gains or otherwise are deductible u/s 37(1) not hit by s. 40(a)(ii). It is also not application of income. The same view has been taken by ITAT Mumbai in South East Asia Shipping Co & Tata Sons Ltd and the department’s Reference Applications u/s 256(1) & 256(2) were rejected and the issue has reached finality

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DATE: (Date of pronouncement)
DATE: May 14, 2012 (Date of publication)
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Though s. 54EC requires the investment to be made within 6 months of the date of transfer, a technical interpretation cannot be adopted but it has to be interpreted having regard to the purpose and spirit of the section. In Circular No 791 dated 2.6.2000 the CBDT held in the context of capital gains arising u/s 45(2), that though the transfer arises in the year of conversion of a capital asset into stock-in-trade, the period of 6 months for investment u/s 54E has to be reckoned from the date of sale of the stock-in-trade. The CBDT appreciated the impossibility of the assessee being able to invest the amount in specified assets within six months from the date of transfer. This interpretation of the CBDT supports the assessee’s claim that where the consideration is received much after the date of transfer and it is not possible to invest the same within 6 months of the date of transfer, the period of 6 months must be reckoned from the date of receipt of consideration

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DATE: (Date of pronouncement)
DATE: May 14, 2012 (Date of publication)
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There is no force in the Revenue’s claim that the assessee was not required to make any payment to its AE for resolving warranty claims. The assessee has the right to enter into an arrangement according to which its business interests are protected. It is the prerogative of the assessee to decide the business expediency. Rule 10B(1)(a) does not authorize disallowance of any expendtture on the ground that it was not necessary or prudent for the assessee to have incurred the same or that in view of the expenditure was unremunerative or that in view of the continued losses suffered by the assessee in his business, he could have fared better had he not incurred such expenditure. However, the reasonableness of an expenditure has not been excluded from determination and the TPO has to determine the ALP of the transaction (CIT vs. EKL Appliances Ltd & Dresser Rand followed)

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DATE: (Date of pronouncement)
DATE: May 11, 2012 (Date of publication)
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There was a dispute whether in the earlier years, the gains were offered as business profits or as capital gains and the Tribunal had not given a clear finding. The Tribunal ought to examine the issue holistically keeping in mind the parameters/tests laid down in CIT vs. Rewashanker A. Kothari 283 ITR 338 (Guj) and CBDT’s Circular No.4/2007 dated 15th June 2007 on when income from transactions in securities should be treated as “business profits” and when as “capital gains”

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DATE: (Date of pronouncement)
DATE: May 11, 2012 (Date of publication)
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Article 12(5) of the DTAA defines “fees for technical services” to mean payments in consideration for the rendering of any technical or consultancy services “which make available technical knowledge, experience, etc or consist of the development and transfer of a technical pIan or technical design. To be said to “make available”, the service should be aimed at and result in transmitting technical knowledge etc so that the payer of the service could derive an enduring benefit and utilize the knowledge or know-how on his own in future without the aid of the service provider. In other words, to fit into terminology “making available”, the technical knowledge, skills” etc must remain with the person receiving the service even after the particular contract comes to an end. It is not enough that the services offered are the product of intense technological effort and a lot of technical knowledge and experience of the service provider has gone into it. The technical knowledge or skills of the provider should be imparted to and absorbed by the receiver so that the receiver can deploy similar technology or techniques in the future without depending upon the provider. On facts, while the Dutch company performed the surveys using substantial technical skills, it has not made available the technical expertise in respect of such collection or processing of data to the assessees, which the assessee can apply independently and without assistance and undertake such survey independently. Consequently, the consideration is not assessable as “fees for technical services” (AAR Rulings in Perfetti Van Melle Holding, Shell India & Areva T&D distinguished)