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DATE: October 23, 2017 (Date of pronouncement)
DATE: October 28, 2017 (Date of publication)
AY: 2007-08 to 2012-13
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CITATION:
Royalty u/s 9(1)(vi) & Article 12: The Google Adwords advertisement module is not merely an agreement to provide advertisement space but is an agreement for facilitating the display and publishing of an advertisement to the targeted customer using Google's patented algorithm, tools and software. Google Adwords uses data regarding the age, gender, region, language, taste habits, food habits, etc of the customer so as to maximize the impression and conversion to the ads of the advertisers. Consequently, the payments to Google Ireland are taxable as "royalty" and the assessee ought to have deducted TDS thereon u/s 195

If we look into the advertisement module of Adword program stated herein above, then we will come to an irresistible conclusion that it is not merely an agreement to provide the advertisement space but is an agreement for facilitating the display and publishing of an advertisement to the targeted customer. If we look into the submission made by the learned AR, it is clear that the advertiser, selects some key words and on the basis of key words, the advertisement is displayed on the website or along with the search result as and when the customer selects the key words relatable to the advertisement. The module as suggested does not merely work by providing the space in the Google search engine, but it works only with the help of various patented tools and software. As we have analyzed detailed functioning of Adword program, it is clear that with the help of the search tool/software / data base, the Google is able to identify the targeted consumer/person as per the requirement of the advertiser

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DATE: October 9, 2017 (Date of pronouncement)
DATE: October 28, 2017 (Date of publication)
AY: 2003-04
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CITATION:
S. 254(2) Limitation period: The amendment to s. 254(2) to curtail the limitation period for filing rectification applications to six months from four years is prospective and applicable to appeal orders passed after 01/06/2016 and not the orders passed prior to 01/06/2016. The contrary view in Lavanya Land (Mum ITAT) is not good law in view of K. Ravindranathan Nair (SC)

We found that Tribunal in the case of Lavanya Land Private Limited vide order dated 25/04/2017 have held that since miscellaneous application was filed beyond a period of six months from the date of the order of the Tribunal which was sought to be rectified, the miscellaneous application was barred by limitation. We observe that while rendering the decision, the Co-ordinate Bench has not considered the decision of Hon’ble Supreme Court in the case of K. Ravindranathan Nair (Supra) where Hon’ble Supreme Court observed that right to appeal is vested in the litigant at the commencement of Lis and therefore, such vested right cannot be taken away and cannot be impaired or made more stringent by any subsequent legislation unless the subsequent legislation said so either expressly or by necessary intendment. An intention in interfere or impair a vested right cannot be presumed unless such intention be clearly manifested by the express words or by necessary implication

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DATE: September 1, 2017 (Date of pronouncement)
DATE: October 28, 2017 (Date of publication)
AY: 2005-06, 2006-07
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CITATION:
S. 271(1)(c)/ 292BB: "concealment of particulars of income" and "furnishing of inaccurate particulars of income" referred to in s. 271(1)(c) denote two different connotations. It is imperative for the AO to make the assessee aware in the notice issued u/s 274 r.w.s. 271(1)(c) as to which of the two limbs are being put-up against him. The failure to do so is fatal to the penalty proceedings. The argument that the assessee was made aware of the specific charge during the proceedings is of no avail. S. 292BB does not save the penalty proceedings from being declared void

Notably, Sec. 292BB of the Act has been inserted w.e.f. 01.04.2008 and is understood basically as a rule of evidence. The implication of Sec. 292BB of the Act is that once the assessee appears in any proceedings or has co-operated in any inquiry relating to assessment or reassessment, it shall be deemed that any notice under any provisions of the Act that is required to be served has been duly served upon him in accordance with the provisions of the Act and under these circumstances, assessee would be precluded from objecting that a notice that was required to be served under the Act was either not served upon him or was not served in time or was served in an improper manner. In our considered opinion, the provisions of Sec. 292BB of the Act have no relevance in the context of the impugned examination of the efficacy of the notice issued by the Assessing Officer u/s 274 r.w.s. 271(1)(c) of the Act. Notably, the issue before us is not about the service of notice but as to whether the contents of the notice issued meets with the requirements of law. Therefore, the said argument of the ld. CIT-DR is also rejected

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DATE: October 24, 2017 (Date of pronouncement)
DATE: October 25, 2017 (Date of publication)
AY: -
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CITATION:
Permanent Establishment (PE) under Article 5 of DTAA: Entire law on concept of “fixed place of business”, “service PE” and “agency PE” explained. The fact that there is close association and dependence between the US company and the Indian companies is irrelevant. The functions performed, assets used and risk assumed, is not a proper and appropriate test to determine whether there is a location PE

The Income Tax Act, in particular Section 90 thereof, does not speak of the concept of a PE. This is a creation only of the DTAA. By virtue of Article 7(1) of the DTAA, the business income of companies which are incorporated in the US will be taxable only in the US, unless it is found that they were PEs in India, in which event their business income, to the extent to which it is attributable to such PEs, would be taxable in India. Article 5 of the DTAA set out hereinabove provides for three distinct types of PEs with which we are concerned in the present case: fixed place of business PE under Articles 5(1) and 5(2)(a) to 5(2)(k); service PE under Article 5(2)(l) and agency PE under Article 5(4). Specific and detailed criteria are set out in the aforesaid provisions in order to fulfill the conditions of these PEs existing in India. The burden of proving the fact that a foreign assessee has a PE in India and must, therefore, suffer tax from the business generated from such PE is initially on the Revenue

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DATE: October 5, 2017 (Date of pronouncement)
DATE: October 20, 2017 (Date of publication)
AY: -
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CITATION:
S. 2(22)(e): Any payment by a closely-held company by way of advance or loan to a concern in which a substantial shareholder is a member holding a substantial interest is deemed to be “dividend” on the presumption that the loans or advances would ultimately be made available to the shareholders of the company giving the loan or advance. However, the legal fiction in s. 2(22)(e) does not extend to, or broaden the concept of, a “shareholder”

U/s 2(22)(e), any payment by a closely-held company by way of advance or loan to a concern in which a substantial shareholder is a member holding a substantial interest is deemed to be “dividend” on the presumption that the loans or advances would ultimately be made available to the shareholders of the company giving the loan or advance. The legal fiction in s. 2(22)(e) enlarges the definition of dividend but does not extend to, or broaden the concept of, a “shareholder”. As the assessee was not a shareholder of the paying company, the “dividend” was not assessable in its hands

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DATE: October 13, 2017 (Date of pronouncement)
DATE: October 20, 2017 (Date of publication)
AY: 1970-71, 1971-72, 1972-73, 1973-74, 1974-75
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CITATION:
Entire law on the valuation of immovable properties under the 'rent capitalisation' method versus the 'land and building' method explained in the context of s. 7(2) of the Wealth-tax Act, 1957. Also, law on taking the view in favour of the assessee if two reasonable constructions of a statute are possible explained

It is true that subsection (2) of Section 7 begins with non obstante clause which enables the Wealth Tax Officer to determine the net value of the assets of the business as a whole instead of determining separately the value of each asset held by the assessee in such business. The language of subsection (2) which provides overriding power to the Wealth Tax Officer to adopt and determining the net value of the business having regard to the balance sheet of such business. The enabling power has been given to Wealth Tax Officer to override the normal rule of valuation of the properties that is the value which it may fetch in open market, Wealth Tax Officer can adopt in a case where he may think it fit to adopt such methodology. The appellants’ submission is that the provision of Section 7(2)(a) is a stand alone provision and is to be applied in all cases where assessee is carrying on a business. We do not agree with the above submission

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DATE: October 9, 2017 (Date of pronouncement)
DATE: October 14, 2017 (Date of publication)
AY: 1997-98 to 2000-01
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CITATION:
S. 80-IA contains substantive and procedural provisions for computation of special deduction. Any device adopted to reduce or inflate the profits of eligible business has to be rejected. The claim for 100% deduction, without taking into consideration depreciation, is anathema to the scheme u/s 80-IA of the Act which is linked to profits. If the contention of the assessees is accepted, it would allow them to inflate the profits linked incentives provided u/s 80-IA of the Act which cannot be permitted

It may be stated at the cost of the repetition that judgment in Mahendra Mills was rendered while construing the provisions of Section 32 of the Act, as it existed at the relevant time, whereas we are concerned with the provisions of Chapter VI-A of the Act. Marked distinction between the two Chapters, as already held by this Court in the judgments noted above, is that not only Section 80-IA is a code by itself, it contains the provision for special deduction which is linked to profits. In contrast, Chapter IV of the Act, which allows depreciation under Section 32 of the Act is linked to investment. This Court has also made it clear that Section 80-IA of the Act not only contains substantive but procedural provisions for computation of special deduction. Thus, any device adopted to reduce or inflate the profits of eligible business has to be rejected. The assessees/appellants want 100% deduction, without taking into consideration depreciation which they want to utilise in the subsequent years. This would be anathema to the scheme under Section 80-IA of the Act which is linked to profits and if the contention of the assessees is accepted, it would allow them to inflate the profits linked incentives provided under Section 80-IA of the Act which cannot be permitted

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DATE: October 9, 2017 (Date of pronouncement)
DATE: October 14, 2017 (Date of publication)
AY: 2010-11
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CITATION:
S. 254(2) Limitation period: The amendment to s. 254(2) w.e.f. 01.06.2016 to curtail the period available to file rectification applications from four years to six months cannot apply to appellate orders passed prior to that date because that would take away a vested right

The reason for the said principle is not far to seek. Though periods of limitation, being procedural law, are to be applied retrospectively, yet if a shorter period of limitation is provided by a later amendment to a statute, such period would render the vested right of action contained in the statute nugatory as such right of action would now become time barred under the amended provision

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DATE: October 3, 2017 (Date of pronouncement)
DATE: October 7, 2017 (Date of publication)
AY: -
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CITATION:
S. 153A search assessment: Supreme Court stays operation of the judgement of the Delhi High Court in Dayawanti Gupta vs. CIT 390 ITR 496 (Del). The High Court dealt with the issue whether an assessment u/s 153A can be made even if no incriminating material has been found during s. 132 search proceedings

In Dayawanti Gupta vs. CIT 390 ITR 496 (Del), the assessee argued before the Delhi High Court that since no incriminating material was found during or pursuant to the search, additions, made on the basis of block assessment, were unsustainable inasmuch as they revisited finally settled assessments. It was submitted that for completing a block assessment, founded on search proceedings and notice under Section 153A, the assessing officer has to base the order on fresh materials found during the search, in the form of books of accounts, articles seized, or other similar materials. In this case, the revenue could not substantiate its plea that the assesses had concealed their income, because nothing suspect which could result in an addition to the income assessed during the previous years was in fact seized or taken into custody. Therefore, the four assessments for the block period in question had to be set aside

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DATE: October 4, 2017 (Date of pronouncement)
DATE: October 6, 2017 (Date of publication)
AY: -
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CITATION:
S. 2(47)/ 45: Entire law on whether a joint development agreement entered into by an owner of land with a developer constitutes a "transfer" u/s 2(47) and whether the same gives rise to capital gains chargeable to tax u/s 45 and 48 of the Income-tax Act explained in the context of the provisions of the Transfer of Property Act, Registration Act and real income theory

If an agreement, like the JDA in the present case, is not registered, then it shall have no effect in law for the purposes of Section 53A. In short, there is no agreement in the eyes of law which can be enforced under Section 53A of the Transfer of Property Act. This being the case, we are of the view that the High Court was right in stating that in order to qualify as a “transfer” of a capital asset under Section 2(47)(v) of the Act, there must be a “contract” which can be enforced in law under Section 53A of the Transfer of Property Act. A reading of Section 17(1A) and Section 49 of the Registration Act shows that in the eyes of law, there is no contract which can be taken cognizance of, for the purpose specified in Section 53A. The ITAT was not correct in referring to the expression “of the nature referred to in Section 53A” in Section 2(47)(v) in order to arrive at the opposite conclusion. This expression was used by the legislature ever since sub-section (v) was inserted by the Finance Act of 1987 w.e.f. 01.04.1988. All that is meant by this expression is to refer to the ingredients of applicability of Section 53A to the contracts mentioned therein. It is only where the contract contains all the six features mentioned in Shrimant Shamrao Suryavanshi (supra), that the Section applies, and this is what is meant by the expression “of the nature referred to in Section 53A”. This expression cannot be stretched to refer to an amendment that was made years later in 2001, so as to then say that though registration of a contract is required by the Amendment Act of 2001, yet the aforesaid expression “of the nature referred to in Section 53A” would somehow refer only to the nature of contract mentioned in Section 53A, which would then in turn not require registration. As has been stated above, there is no contract in the eye of law in force under Section 53A after 2001 unless the said contract is registered. This being the case, and it being clear that the said JDA was never registered, since the JDA has no efficacy in the eye of law, obviously no “transfer” can be said to have taken place under the aforesaid document

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