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Month: March 2013

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DATE: March 11, 2013 (Date of publication)
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Explanation 2 to s. 9(1)(vii) defines the expression “fees for technical services” to mean “any consideration for the rendering of any managerial, technical or consultancy services”. The word “technical” is preceded by the word “managerial” and succeeded by the word “consultancy”. Applying the principle of noscitur a sociis, as the words “managerial and consultancy” have a definite involvement of a human element, the word “technical” has to be construed in the same sense involving direct human involvement. If services are provided using an equipment or sophisticated machine or standard facility, it cannot be characterized as “technical services” so as to fall within s. 9(1)(vii) (Bharati Cellular Ltd 319 ITR 258 (Del) & Skycell Communications 251 ITR 53 (Mad) followed; fact that Bharati Cellular has been set aside by the SC in Bharat Cellular Ltd 330 ITR 239 (SC) does not affect this principle)

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DATE: March 5, 2013 (Date of publication)
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No s. 271(1)(c) penalty if income not offered due to “inadvertent mistake“

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DATE: March 4, 2013 (Date of publication)
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A family partition which results in an adjustment of shares and of the respective rights in the family properties is not a “transfer” in the eyes of law. When there is no transfer of asset, there is no capital gain and consequently there is no liability to pay tax on capital gains. In a family partition, a situation arises where an item of property is not capable of physical partition or is such that, if divided, it will lose its intrinsic worth. In such a case, with a view to ensure an equitable partition, the item is allotted to one party and he is asked to pay compensation in money value to the other party. This amount is called “owelty”. As the amount of compensation is only to equalize the inequalities in the partition it is nothing but a share in the immovable property itself (though paid in cash) and cannot be treated as income liable to capital gain. If such amount is to be treated as income liable to tax, inequalities would set in as the share of the recipient will diminish to the extent of tax. On facts, the payment of Rs.24 crores to Group A is to equalize the inequalities in partition of assets. The amount so paid is immovable property and is not income liable to tax (T.S.Swaminatha Odayar vs. Official Receiver AIR 1957 SC 577, CIT vs. A. L. Ramanathan 245 ITR 494 (Mad), CIT vs. Kay Arr Enterprises 299 ITR 348, CIT vs. R. Nagaraja Rao 207 Taxmann 74 (Kar) & Ziauddin Ahmed vs. CIT 102 ITR 253 (Gau), Parvathi Amma Vs. Makki Amma AIR 1962 Kerala 85 reviewed)

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