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DATE: December 8, 2014 (Date of pronouncement)
DATE: January 9, 2015 (Date of publication)
AY: 2008-09
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CITATION:
S. 43B/ 36(1)(va): High Court verdict in Hindustan Organics Chemicals 270 CTR 478 (Bom) decides that employees' contribution to PF is eligible for s. 43B even though that was not the issue before it. It also does not refer to any judicial precedents. Also, the Q framed by the dept and its representation before the High Court leaves much to be desired. However, the judgement is binding and has to be followed

However, again, it cannot be denied that per the said decision, which is judicially binding on us, the hon’ble court has abundantly clarified that the deduction in respect of the employee’s contribution (to the employee welfare funds) in the hands of the assessee-employer is governed by the provision of section 43B, so that where deposited by the due date of the filing of the return for the relevant year, shall be valid in terms of the amended s.43B, i.e., by Finance Act 2003, with effect from 01.04.2004, which amendment stands held by the apex court in Alom Extrusions Ltd. (supra) to the retrospective, so that it shall apply even to years prior to A.Y.2004-05. The hon’ble court, we note, does not discuss nor refer to any judicial precedents. The question of law framed by the Department, as well as its representation before the hon’ble court, leaves much to be desired. That, however, would not in any manner detract from or dilute its binding nature on us as a subordinate forum

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DATE: December 31, 2014 (Date of pronouncement)
DATE: January 8, 2015 (Date of publication)
AY: 2009-10
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CITATION:
S. 54F: Amount paid to builder for house is equivalent to amount spent by assessee for construction. Fact that only advance is given and construction is delayed beyond 3 years does not deprive assessee of exemption

A flat which is newly constructed by a builder on behalf of the assessee is in no way different from a house constructed. Section 54F being a beneficial provision has to be interpreted so as to give the benefit of residential unit viz., flat instead of house in the present state of affairs. Even if only advance is given the benefit still will be available for exemption u/s. 54F

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DATE: December 31, 2014 (Date of pronouncement)
DATE: January 8, 2015 (Date of publication)
AY: 2005-06
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CITATION:
Transfer Pricing: Closely linked international transactions can be aggregated to determine the ALP

On a combined reading of Rule 10A(d) and 10B of the Rules, a number of transactions can be aggregated and construed as a single ‘transaction’ for the purposes of determining the ALP, provided of course that such transactions are ‘closely linked’

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DATE: December 30, 2014 (Date of pronouncement)
DATE: January 8, 2015 (Date of publication)
AY: 2008-09
FILE: Click here to view full post with file download link
CITATION:
Transfer Pricing: ALP of interest on funds advanced to AEs has to computed on LIBOR and not as per domestic Prime Lending Rate (PLR)

While benchmarking the international transactions what has to be seen is the comparison between related transactions i.e. where the assessee has advanced money to its associated enterprises and charged interest then the said transaction is to be compared with a transaction as to what rate the assessee would have charged, if it had extended the loan to the third party in foreign country. Once there is a transaction between the assessee and its associated enterprises in foreign currency, then the transaction would have to be looked upon by applying the commercial principles with regard to the international transactions. In that case, the international rates fixed being LIBOR+ rates would have an application and the domestic prime lending rates would not be applicable

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DATE: December 31, 2014 (Date of pronouncement)
DATE: January 8, 2015 (Date of publication)
AY: 2010-11
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CITATION:
Distinction between 'diversion of income by over-riding title' and 'application of income' explained. Contribution of 1% of net profit to the Cooperative Education Fund maintained by National Cooperative Union is an application of income

Diversion of income has multi-facets. Diversion arises where income is applied in a particular manner under statutory or contractual obligation or under the provisions of a document under which the company is constituted viz., memorandum of article of association or a firm has come into existence. In these circumstances, the principle that has emerged is that if a person has alienated or assigned the source of his income so that it is no longer remains his income, he cannot be taxed upon the income arising after the assignment of the source. In such event, it is not income of the assessee at all

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DATE: January 1, 2015 (Date of pronouncement)
DATE: January 7, 2015 (Date of publication)
AY: 2004-05
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CITATION:
S. 271(1)(c): If the High Court admits the appeal u/s 260A, it means that the issue is debatable and penalty cannot survive

When the Hon’ble jurisdictional High Court has admitted substantial question of law on the addition, it becomes apparent that the addition so made has become debatable. The penalty was imposed on the basis of addition so made, therefore, when the addition on the basis of which the penalty was imposed has become doubtful/debatable, therefore, penalty imposed u/s 271(1)(c) of the Act cannot survive

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DATE: December 31, 2014 (Date of pronouncement)
DATE: January 7, 2015 (Date of publication)
AY: 2009-10
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CITATION:
(i) S. 40(a)(ia) disallowance cannot be made if the assessee has not claimed a deduction. (ii) S. 80-IB(10) deduction cannot be denied on the ground that the completion certificate has not been issued by the Municipality if the assessee has completed construction before the due date

Explanation (ii) to section 80IB(10)(a) of the Act prescribes that the date of completion of construction of the housing project shall be taken to be the date on which the completion certificate in respect of such housing project is issued by the local authority

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DATE: December 31, 2014 (Date of pronouncement)
DATE: January 7, 2015 (Date of publication)
AY: -
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CITATION:
S. 12AA/80G(5): CIT, while granting registration or renewal, can only look at the nature of activities and is not concerned with violation of s. 11(5) or s. 13

While granting the exemption or renewal of exemption under section 80G(5) of the Act, the role of CIT is limited to look into the nature of activities being carried on by the institution or fund and the violation if any, of the provisions of section 13 of the Act and its various subsections are to be looked into by the Assessing Officer while deciding the issue of grant of deduction under sections 11 and 12 of the Act

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DATE: December 31, 2014 (Date of pronouncement)
DATE: January 7, 2015 (Date of publication)
AY: 2006-07
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CITATION:
Transfer Pricing: Comparables have to be excluded by the turnover filter without a FAR analysis being required to be conducted. The AO cannot rely on information obtained u/s 133(6)

Turnover is an important filter which has to be adopted for determination of the ALP. The FAR analysis would not alter the turnover of the company. The TPO has drawn conclusions on the basis of information obtained by issue of notice u/s.133(6) of the Act. This information which was not available in public domain could not have been used by the TPO

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DATE: December 31, 2014 (Date of pronouncement)
DATE: January 1, 2015 (Date of publication)
AY: 2003-04 to 2006-07
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CITATION:
Transfer pricing: To apply the "Cost Plus Method", there must be a “comparable uncontrolled transaction”. The fact that the same product is sold by the assessee to its AEs as well as to third parties does not mean that the two sets of transactions are comparable if the business model, marketing, sales promotion etc is different

The fundamental input for application of CPM method, next only to ascertainment of historical costs, is ascertainment of the normal mark-up of profit over aggregate of such direct costs and indirect costs in respect of same or similar property or services in a “comparable uncontrolled transaction” or, of course, a number of such “comparable uncontrolled transactions”. When compared with CUP method, as against the “price” of a comparable uncontrolled transaction, one has to find out “normal mark up of profit” in a comparable uncontrolled transaction. Whether it is “price” or “normal mark up of profit”, the starting point of both these exercises in the CUP and the CPM is finding a “comparable uncontrolled transaction”. In order for such comparisons to be useful, the economically relevant characteristics of the situations being compared must be sufficiently comparable. It is only elementary, as is also noted in the OECD Transfer Pricing Guidelines, that “to be comparable means that none of the differences (if any) between the situations being compared could materially affect the condition being examined in the methodology (e.g. price or margin), or that reasonably accurate adjustments can be made to eliminate the effect of any such differences”

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