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Month: February 2017

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COURT:
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DATE: February 13, 2017 (Date of pronouncement)
DATE: February 22, 2017 (Date of publication)
AY: 2011-12
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CITATION:
S. 206AA does not have an overriding effect over the other provisions of the Act. By virtue of s. 90(2), the provisions of the Treaty override s. 206AA to the extent they are beneficial to the assessee. Consequently, the payer cannot be held liable to deduct tax at higher of the rates prescribed in s. 206AA in case of payments made to non-resident persons in spite of their failure to furnish the PAN

In view of the above discussion, we are of the view that the provisions of section 206AA of the Act will not have a overriding effect for all other provisions of the Act and the provisions of the Treaty to the extent they are beneficial to the assessee will override sect ion 206AA by virtue of section 90(2). In our opinion, the assessee therefore cannot be held liable to deduct tax at higher of the rates prescribed in section 206AA in case of payments made to non-resident persons having taxable income in India in spite of their failure to furnish the Permanent Account Numbers

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DATE: February 13, 2017 (Date of pronouncement)
DATE: February 20, 2017 (Date of publication)
AY: -
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CITATION:
The Commissioner and his officials are playing a blame game. To cover up their lapses and deficiencies, they turned around and blamed their Advocates .. We are sorry to say that this is not what was expected from the Commissioner of Service Tax. If the officers are unaware of legal procedures, then, they have to be in touch with their Advocates and periodically. They cannot expect that the Advocate himself comes to their office and apprise them as to what further has to be done after the filing of an Appeal

While filing a cryptic affidavit in support, initially we had observed that the Commissioner and his officials are playing a blame game. To cover up their lapses and deficiencies, they turned around and blamed their Advocates. They are of the opinion that their Advocates ought to inform them and at every stage of the matter, particularly as to which office objections have to be complied with or are to be removed. If no such communication is made by the Advocates, then the Commissioner feels that he and his officers are not at fault. We are sorry to say that this is not what was expected from the Commissioner of Service Tax. If the officers are unaware of legal procedures, then, they have to be in touch with their Advocates and periodically. They cannot expect that the Advocate himself comes to their office and apprise them as to what further has to be done after the filing of an Appeal

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DATE: February 1, 2017 (Date of pronouncement)
DATE: February 20, 2017 (Date of publication)
AY: 2008-09
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CITATION:
S. 164: The explanation to s. 164 cannot be read for determinability of the shares of the beneficiary with the quantum on the date when the Trust deed is executed. The real test is whether shares are determinable even when even or after the Trust is formed or may be in future when the Trust is in existence

By no interpretative process the explanation to Section 164 of the Act, which is pressed in service can be read for determinability of the shares of the beneficiary with the quantum on the date when the Trust deed is executed and the second reason is that the real test is the determinability of the shares of the beneficiary and is not dependent upon the date on which the trust deed was executed if one is to connect the same with the quantum. The real test is whether shares are determinable even when even or after the Trust is formed or may be in future when the Trust is in existence

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DATE: February 8, 2017 (Date of pronouncement)
DATE: February 20, 2017 (Date of publication)
AY: 2010-11
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CITATION:
Entire law on Permanent Establishment, Force of Attraction principle, taxability of software embedded in hardware as royalty, make available of technical services etc explained (all important judgements referred)

Some provide for taxing profits/income from all transactions whether they are attributable to PE or not or whether they are of the same kind of transactions carried on by the PE or not, which is referred to as “Full Force of Attraction” principle. As to which principle is applicable in a given case depends on the clauses of the convention between two countries. Article 7(1) of the DTAA between India and Netherlands provides for taxing profits of the enterprise in the other state only to the extent they are attributable to the PE in the other state, adopting “No Force of Attraction” principle

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DATE: February 7, 2017 (Date of pronouncement)
DATE: February 15, 2017 (Date of publication)
AY: 2006-07
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CITATION:
S. 143(2)/ 292BB: The issue of a notice u/s 143(2) bearing the wrong (old) address of the assessee does not amount to a valid service of the notice u/s 282 r.w.s. 27 of the General Clauses Act. The non-service of a notice u/s 143(2) before the expiry of 12 months from the end of the month in which the return was filed renders the assessment void. As the assessee objected to the same before completion of proceedings, the assessment order is not saved by s. 292BB

It is undisputed position before us that the notice under Section 143(2) of the Act which was handed over to the post office on 30th November, 2007 was incorrectly addressed i.e. it was addressed to the assessee’s old office at Nariman Point, Mumbai. In terms of Section 282 of the Act as existing in 2007 a notice may be served on the person named therein either by post or as if it were a summons issued by the Court under the Code of Civil Procedure. Section 27 of the General Clauses Act provides that where any Central Act requires a document to be served by post where the expression “serve” or “given” or “sent” shall be deemed to have been effected by properly addressing, prepaying and posting. In such cases, unless the contrary is proved which would be deemed to have been served at the time when the letter would be delivered in the ordinary course of post to the addressee. In this case admittedly the envelope containing the notice was wrongly addressed. Thus the presumption under Section 27 of the General Clauses Act cannot be invoked

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DATE: February 7, 2017 (Date of pronouncement)
DATE: February 15, 2017 (Date of publication)
AY: 2007-08
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CITATION:
S. 153C: The requirement that the documents found during search should “belong” to the assessee is a condition precedent and a jurisdictional issue. The non-satisfaction of the condition renders the entire proceedings null and void. The fact that the searched person and the assessee are alleged to be “hand in glove” is irrelevant

The grievance of the Revenue as submitted by Mr.Kotangale is a submission made on the basis of suspicion and not on the basis of any evidence on record which would indicate that the respondent – assessee and persons searched were all part of the same group. Be that as it may, the requirement of Section 153C of the Act cannot be ignored at the alter of suspicion. The Revenue has to strictly comply with Section 153C of the Act. We are of the view that non satisfaction of the condition precedent viz. the seized document must belong to the respondent – assessee is a jurisdictional issue and non satisfaction thereof would make the entire proceedings taken thereunder null and void. The issue of Section 69C of the Act can only arise for consideration if the proceedings under Section 153C of the Act are upheld

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DATE: February 10, 2017 (Date of pronouncement)
DATE: February 15, 2017 (Date of publication)
AY: 2008-09
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CITATION:
S. 14A Rule 8D: No disallowance with respect to exempt income can be made if the securities are held as stock-in-trade. CBDT Circular No. 5/2014 dated 11.02.2014 referred

The Tribunal found that the assessee does not have any investment and all the shares are held as stock in trade as is evident from the orders of the lower authorities. On those facts the Tribuanl held:- “Once, the assessee has kept the shares as stock in trade, the rule 8D of the Rules will not apply.” In view of the clear finding of fact regarding the exempt income claimed treated to be business income and the shares held by the assessee having been treated as stock in trade, we do not find the case involves a substantial question of law

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DATE: January 31, 2017 (Date of pronouncement)
DATE: February 8, 2017 (Date of publication)
AY: 2009-10
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CITATION:
S. 80-IB(10): The profits of an undertaking eligible for deduction cannot be treated as "inflated" in the absence of material on record to show that there is an arrangement between the eligible unit and the non-eligible unit to generate more than ordinary profits for the eligible unit. The mere fact that there are common customers of both the units does not by itself indicate transfer of profits to the eligible unit

We note the fact that the CIT(A) has rendered a finding that there is nothing on record to indicate that there is any arrangement between the Appellant’s Jammu unit and his wife’s unit at Valsad to generate more than ordinary profits or any transfer of goods and/or services inter se, below the market price, resulting in inflated profits to the Appellant’s Jammu unit. Even before us, nothing has been shown by the Revenue that there is any business transacted between Appellant’s unit at Jammu and his wife’s unit at Valsad which resulted in inflating the profits being earned by the Appellant or that there is any transaction between them. The Tribunal has without considering the validity of the above finding of CIT(A), adopted the test of common customers of both the Appellant’s Jammu unit and his wife’s unit at Valsad, to conclude that profits of the Appellants, are inflated. Common customers by itself in the absence of some arrangement between the parties does not indicate transfer of profits to Appellant’s Jammu unit

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DATE: February 1, 2017 (Date of pronouncement)
DATE: February 8, 2017 (Date of publication)
AY: -
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CITATION:
S. 254(2): Plea that the appeal was mistakenly withdrawn on the advice of Counsel and that the same should be restored should be backed by evidence. If the assessee voluntarily withdraws the appeal, he cannot seek restoration on the ground that the withdrawal was an apparent mistake

At the very outset we must point out that it is the petitioner’s case that he acted on the advise of the Counsel in withdrawing the appeal. However, this submission of the petitioner is without there being anything on record from the Advocate concerned that he advised the petitioner to withdraw his appeal. Further the communication dated 23rd April, 2010 addressed to the Tribunal for withdrawal of the appeal was by the petitioner himself and in that communication he does not mention that the appeal is being withdrawn on account of legal advise. In fact it is an unconditional withdrawal of the appeal

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COUNSEL:
DATE: January 31, 2017 (Date of pronouncement)
DATE: February 8, 2017 (Date of publication)
AY: 2010-11
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CITATION:
S. 69C Bogus Purchases: Purchases cannot be treated as bogus merely on the basis of the statements and affidavits filed by the alleged vendors before the sales-tax department. The said statements cannot be relied upon without cross-examination of the parties. The fact that the parties did not respond to the s. 133(6) notices is not relevant if the assessee filed copies of purchase invoices, extracts of stock ledger showing entry/exit of materials, copies of bank statements to evidence that payments for these purchases were made through normal banking channels, etc to establish genuineness of the aforesaid purchases

Mere reliance by the AO on information obtained from the Sales Department or on statements/affidavits of the 12 parties before the Sales Tax Department or that these parties did not respond to notices issued under section 133(6) of the Act, would not in itself suffice to treat the purchases as bogus and make the addition under section 69C of the Act. If the AO doubted the genuineness of the said purchases, it was incumbent upon him to cause further inquiries in the matter in order to ascertain the genuineness or otherwise of these transactions. Without causing any further enquiries to be made in respect of the said purchases, the AO cannot make the addition under section 69C of the Act by merely relying on information obtained from the Sales Tax Department, the statements/ affidavits of third parties, without the assessee being afforded any opportunity of cross examination of those persons for non-response to information called for under section 133(6) of the Act

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