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DATE: February 5, 2016 (Date of pronouncement)
DATE: March 3, 2016 (Date of publication)
AY: 2009-10, 2010-11
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CITATION:
Transfer Pricing: The existence of an "international transaction" w.r.t. AMP Expenditure cannot be assumed. The onus is on the TPO to prove such transaction. There is no machinery provision to ascertain the price to promote the AE's brand values. The AMP Expenditure should be treated as operating cost to apply TNMM and determine ALP of transactions with AE

The operating profit cost to the total operating cost was adopted as Profit Level Indicator which means that the AMP expenditure was not considered as a part of the operating cost. This goes to show that the AMP expenditure was not subsumed in the operating profitability of the assessee-company. Therefore, in order to determine the ALP of international transaction with its AE, it is sine qua non that the AMP expenditure should be considered as a part of the operating cost

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DATE: March 1, 2016 (Date of pronouncement)
DATE: March 2, 2016 (Date of publication)
AY: 1991-92
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CITATION:
S. 40(a)(iii): Salaries paid to expatriate employees overseas on which tax was paid in accordance with CBDT Circular dated 685 dated 17/20.06.1994 and Circular 686 dated 12.8.94 is permissible as a deduction even though the tax is not paid within the time limit but is paid subsequently

An absence of a provision similar to the proviso to sub-clause (i) of clause (a) of Section 40 of the Act cannot be read as to disentitle an Assessee to claim a deduction even though it has complied with the condition under sub-clause (iii) of clause (a) of Section 40 of the Act. A plain reading of proviso to sub-clause (i) of clause (a) of Section 40 of the Act indicates that where an Assessee has not deducted or paid the tax at source in terms of Chapter XVII B in respect of any sum as specified under sub-clause (i) of clause (a) of Section 40 of the Act, the Assessee can, nonetheless, claim a deduction in the year in which the assessee deposits the tax. This benefit is not available to an assessee in respect of payments chargeable under the head “Salaries” which fall within sub-clause (iii) of clause (a) of Section 40 and not sub-clause (i) of clause (a) of Section 40 of the Act. Thus, an assessee would not be entitled to claim deduction on account of salaries if it fails to deduct or pay the amount under Chapter XVII B of the Act. In cases where such assessee deposits the amount in a subsequent year, the Assessee would still not be able to claim the deduction in the year in which such tax is deposited; his claim for deduction can be considered only in respect of the year to which such expense relates. Therefore, in cases where the assessments stand concluded, the Assessee would lose the benefit of deduction for the expenses incurred on account of its failure to have deposited the tax at source. Thus, concededly, in the present case the Assessee has lost its right to claim a deduction for a period of six years – AY 1985-86 to AY 1990-91- even though the Assessee has paid the TDS on the expenses pertaining to said period

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DATE: February 26, 2016 (Date of pronouncement)
DATE: March 2, 2016 (Date of publication)
AY: -
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S. 44AB/ 271B: Belief that a mutual association like a club is not liable for tax audit is a bona fide one and constitutes reasonable cause u/s 273B

Under the general law relating to mutual concerns, the surplus accruing to a mutual concern cannot be regarded as income, profits or gains for the purpose of the Act (s.4), and where the contributors are to receive back a part of their own contributions, the complete identity between the contributors and recipients negatives the idea of any profit, for no man can make profit out of himself. Therefore, a mutual concern can carry on an activity with its members, though the surplus arising from such activity is not taxable income or profit. The principle of mutuality has also been accepted in the case of a voluntary organization, which receives contributions from its members. The assessee’s contention that Section 44AB of the Act is not applicable to a club being a mutual concern is supported by several judgements

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DATE: February 18, 2016 (Date of pronouncement)
DATE: March 1, 2016 (Date of publication)
AY: -
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S. 80HHC: Sale proceeds of scrap cannot be included in total turnover

The issue in these appeals pertains to the question whether the proceeds generated from the sale of scrap would be included in the total turnover. In the recent decision of this Court in Commissioner of Income Tax Vs. Punjab Stainless Steel Industries & Ors. reported in [2014] 364 ITR 144 (SC) it has been held that sale proceeds generated from the sale of scrap would not be included in the total turnover for the purpose of deduction under Section 80HHC of the Income Tax Act, 1961

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DATE: February 16, 2016 (Date of pronouncement)
DATE: March 1, 2016 (Date of publication)
AY: 2007-08
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CITATION:
No s. 40(a)(ia) disallowance for short-deduction TDS default (i.e. deduction u/s 194H instead of u/s 194H)

An identical question regarding Section 40(a)(ia) of the Act was considered by the Calcutta High Court in S. K. Tekriwal [2014] 361ITR 432 (Cal) and the findings given by the Calcutta High Court has been followed by the Tribunal. Similarly, as regards the binding nature of the CBDT, the Tribunal has followed the Judgment of the Apex Court in HAL (supra). In view of both the decisions cited supra, no substantial questions of law arises for our determination in this appeal

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DATE: February 23, 2016 (Date of pronouncement)
DATE: March 1, 2016 (Date of publication)
AY: -
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S. 2(15): In order to constitute a “charitable purpose”, the object need not be to benefit of the whole of mankind or of persons in a Country or State. Even benefit to only a section of the public is sufficient. To ascertain the true nature/purpose of the Trust, the objectives have to be considered as a whole and not in isolation

Section 2[15] of the Act contemplates ‘charitable purpose’. ‘Charitable purpose’ includes relief of the poor, education, medical relief and the advancement of any other object of general public utility. The phrase ‘any other object of general public utility’ if, examined in the light of the Judgment in the case of AHMEDABAD RANA CASTE ASSOCIATION [supra], it is not necessary that the object should be to benefit of the whole of mankind or of persons in a Country or State. If it is distinguished from a specified individual and if it is to the benefit of section of the public, it has to be construed as charitable purpose

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DATE: February 12, 2016 (Date of pronouncement)
DATE: February 28, 2016 (Date of publication)
AY: 2011-12
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S. 206AA: S. 90(2) overrides s. 206AA and so the assessee is required to deduct TDS as per the DTAA and not as per s. 206AA. The issue is debatable and so cannot be rectified by the AO u/s 200A

Where the tax has been deducted on the strength of the beneficial provisions of section DTAAs, the provisions of section 206AA of the Act cannot be invoked by the Assessing Officer to insist on the tax deduction @ 20%, having regard to the overriding nature of the provisions of section 90(2) of the Act. Section 206AA of the Act does not override the provisions of section 90(2) of the Act and in the payments made to non-residents, the assessee correctly applied the rate of tax prescribed under the DTAAs and not as per section 206AA of the Act because the provisions of the DTAAs was more beneficial

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DATE: January 12, 2016 (Date of pronouncement)
DATE: February 28, 2016 (Date of publication)
AY: 2009-10
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CITATION:
S. 14A/ Rule 8D: The disallowance of expenditure cannot exceed the amount of tax-free dividend

The income from dividend had been shown at Rs. 1,11,564/- whereas disallowance under Section 14A read with Rule 8D of the Rules worked out by the Assessing Officer came to Rs. 4,09,675/-. Thus, the Assessing Officer disallowed the entire tax exempt income which is not permissible as per settled position of law. The window for disallowance is indicated in section 14A, and is only to the extent of disallowing expenditure “incurred by the assessee in relation to the tax exempt income”. The disallowance under section 14A read with Rule 8D as worked out by the Assessing officer is not in accordance with law and as such working is not sustainable

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DATE: February 5, 2016 (Date of pronouncement)
DATE: February 28, 2016 (Date of publication)
AY: -
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S. 201(3): The amendment to s. 201(3) by FA 2014 to extend the time limit for passing s. 201 orders is prospective and does not apply to cases which are already time-barred. A show-cause notice involving a pure point of law can be challenged in a Writ Petition

An accrued right to plead a time barred which is acquired after the lapse of the statutory period is in every sense a right even though it arises under an Act which is procedural. It is a right which is not to be taken away by conferring on the statute a retrospective operation unless such a construction is unavoidable. while amending section 201 by Finance Act, 2014, it has been specifically mentioned that the same shall be applicable w.e.f. 1/10/2014 and even considering the fact that proceedings for F.Y. 2007-08 and 2008-09 had become time barred and/or for the aforesaid financial years, limitation under section 201(3)(i) of the Act had already expired on 31/3/2011 and 31/3/2012, respectively, much prior to the amendment in section 201 as amended by Finance Act, 2014 and therefore, as such a right has been accrued in favour of the assessee

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DATE: February 9, 2016 (Date of pronouncement)
DATE: February 23, 2016 (Date of publication)
AY: 2006-07
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S. 271(1)(c): Penalty is not leviable on income declared during survey and offered in return. Law laid down in Mak Data 358 ITR 593 (SC) is distinguishable on facts and not universally applicable. A mere change of head of income does not attract penalty

The reliance by the Revenue upon the decision of the Apex Court in Mak Data P. Ltd 358 ITR 593 (SC) to contend that the justification of having deleted and accepted the amount of Rs.1.62 Crores as business income, to buy peace is not available. We find that the facts in that case are completely distinguishable and the observations made therein would not be universally applicable. In that case, a sum of Rs.40.74 lakhs had never been disclosed to the Revenue. During the course of survey, the assessee therein had surrendered that amount with a covering letter that this surrender has been made to avoid litigation and buy peace with the Revenue. In the aforesaid circumstances, the Apex Court held that the words like “to avoid litigation and buy peace” is not sufficient explanation of an assessee’s conduct. It held that the assessee had to offer an explanation for the concealment of income and/or furnishing of inaccurate particulars of income by leading cogent and reliable evidence. The Apex Court further records that in the facts of the case before it the surrender of income was not voluntary but was made only on the account of detection by the Assessing Officer during the course of survey. Further, the Apex Court also records the fact that the survey was conducted more than 10 months before the assessee filed its return of income

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