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DATE: April 25, 2019 (Date of pronouncement)
DATE: June 27, 2019 (Date of publication)
AY: 2003-04
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CITATION:
S. 92C/ Rule 10B: If the TPO is not satisfied with the assessee's method of benchmarking royalty payments, he should independently benchmark the ALP by adopting any one of the prescribed methods. He cannot determine The ALP at nil on an ad-hoc basis. TNMM is the most appropriate method for determining the ALP of royalty and not the CUP method. If an authority like the RBI or Commerce Ministry has approved the rate of royalty, it carries persuasive value that the rate is at ALP

The Transfer Pricing Officer has not proceeded to benchmark the payment of royalty by applying any of the prescribed methods provided under the statute. Without assigning any reason, the Transfer Pricing Officer has determined the arm’s length price of the royalty payment at nil. Prima-facie, it appears, the determination of arm’s length price of royalty payment at nil by the Transfer Pricing Officer is completely on ad-hoc basis without following the due process of law as provided under the statute

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DATE: February 19, 2019 (Date of pronouncement)
DATE: June 26, 2019 (Date of publication)
AY: -
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S. 254: Surprised that how, after so much of case laws on the issue and amendment of Rule 24 itself, the ld Members of the Tribunal, even now commit the folly of dismissing appeals for want of prosecution and for default of appearance on the part of the assessees. Dismissal of appeal for want of prosecution is not only illegal but also entails further litigation by compelling the assessee to move for setting aside the ex parte order. Tribunals should not shirk their responsibility to decide the cases on merits. Copy of this judgment may be sent to the President of the ITAT & Law Secretary in Ministry of Law and Justice so that the same may be brought to the notice of all Members of the ITAT and new appointees in at the time of their recruitment itself. The President may also get it circulated to all existing Members of the ITAT so that such orders resulting in serious miscarriage of justice should not be repeated by any Member of the Tribunal

We reiterate that the fact finding Tribunals should not shirk their responsibility to decide the cases on merits because the view and reasons given by such Tribunals are important for the Constitutional Higher Courts to look into while deciding the substantial questions of law under Section 260-A of the Act arising from Tribunal’s orders. Obviously, such cryptic orders, not touching the merits of the case, would not give any rise to any substantial question of law for consideration by the High Courts under Section 260-A of the Act. The Assessee’s valuable rights of getting the issues decided on merits by the final fact finding body viz., the Tribunal cannot be given a short shrift in the aforesaid manner. A legal and binding responsibility, therefore, lies upon the Tribunal to decide the appeal on merits irrespective of the appearance of the Assessee or his counsel before it or not

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DATE: April 22, 2019 (Date of pronouncement)
DATE: June 26, 2019 (Date of publication)
AY: 2006-07
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CITATION:
S. 6, 68, 69: Law explained on (i) when an Indian citizen or person of Indian origin can be said to have come on "visit to India" so as to qualify as a "Non Resident" u/s 6(6) r.w. CBDT Circular No. 7 of 2003 & (ii) whether amount found deposited in a foreign bank is taxable in India u/s 68 & 69 if the assessee is a "Not Ordinary Resident"

In that view of the matter, clause (a) of Section 6(1) would not apply. It is true that in absence of clause (b) of Explanation 1 below Section 6(1) of the Act, the assessee would have fulfilled the requirements of clause (c) of Section 6(1). However, as per the explanation, if the assessee comes to a visit in India, the requirement of stay in India in the previous year would be 182 days and not 60 days as contained in clause (c). These facts would demonstrate that the assessee had migrated to a foreign country where he had set up his business interest. He pursued his higher education abroad, engaged himself in various business activities and continued to live there with his family. His whatever travels to India, would be in the nature of visits, unless contrary brought on record

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DATE: April 30, 2019 (Date of pronouncement)
DATE: June 24, 2019 (Date of publication)
AY: 2008-09
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CITATION:
Speculation Loss: Law on when an amendment can be said to be clarificatory/ retrospective explained. The amendment to the Explanation to s. 73 by the Finance (No 2) Act 2014 with effect from 1 April 2015 is not clarificatory or retrospective. Consequently, loss occurred to the assessee as a result of its activity of trading in shares (a loss arising from the business of speculation) is not capable of being set off against the profits which it had earned against the business of futures and options since the latter did not constitute profits and gains of a speculative business

The amendment which was brought by Parliament to the Explanation to Section 73 by the Finance (No 2) Act 2014 was with effect from 1 April 2015. In its legislative wisdom, the Parliament amended Section 43(5) with effect from 1 April 2006 in relation to the business of trading in derivatives, Parliament brought about a specific amendment in the Explanation to Section 73, insofar as trading in shares is concerned, with effect from 1 April 2015. The latter amendment was intended to take effect from the date stipulated by Parliament and we see no reason to hold either that it was clarificatory or that the intent of Parliament was to give it retrospective effect. 31 The consequence is that in A.Y. 2008-2009, the loss which occurred to the assessee as a result of its activity of trading in shares (a loss arising from the business of speculation) was not capable of being set off against the profits which it had earned against the business of futures and options since the latter did not constitute profits and gains of a speculative business

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DATE: June 18, 2019 (Date of pronouncement)
DATE: June 24, 2019 (Date of publication)
AY: -
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CITATION:
S. 40A(9): The provision is not meant to hit genuine expenditure by an employer for the welfare and the benefit of the employees. Even contributions to unapproved and unrecognized funds have to be allowed as a deduction if they are genuine in nature

The very purpose of insertion of sub-section (9) of section 40A thus was to restrict the claim of expenditure by the employers towards contribution to funds, trust, association of persons etc. which was wholly discretionary and did not impose any restriction or condition for expanding such funds which had possibility of misdirecting or misuse of such funds after the employer claimed benefit of deduction thereof. In plain terms, this provision was not meant to hit genuine expenditure by an employer for the welfare and the benefit of the employees

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DATE: February 20, 2019 (Date of pronouncement)
DATE: June 22, 2019 (Date of publication)
AY: -
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CITATION:
Entire law explained on (i) whether a litigant is bound by concessions of fact and law made by his Counsel/ Authorized representative during the hearing, (ii) tests to find out whether contract labourers are direct employees or not, (iii) meaning of "control and supervision", (iv) meaning of "master-servant" relationship & (v) when the findings in a judgement can be said to be "perverse" and such that no reasonable person could possibly arrive at

There can be no doubt that admission of a party is a relevant material. But can the statement made by the learned counsel of a party across the Bar be treated as admission of the party? Having regard to the requirements of Section 18 of the Evidence Act, on the facts of this case, in our view, the aforementioned statement of the counsel for the respondent cannot be accepted as an admission so as to bind the respondent. Equally, where a question is a mixed question of fact and law, a concession made by a lawyer or his authorised representative at the stage of arguments cannot preclude the party for whom such person appears from re-agitating the point in appeal

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DATE: June 12, 2019 (Date of pronouncement)
DATE: June 22, 2019 (Date of publication)
AY: 2015-16
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S. 68 Bogus Capital Gains from Penny Stocks: The allegation that the Co is a penny stock co whose share price has been artificially rigged by promoters/brokers/operators to create non-genuine LTCG is not sufficient. The AO has failed to bring on record any evidence to prove that the transactions carried out by the assessee were not genuine or that the documents were not authentic. No specific enquiry or investigation was conducted in the case of the assessee and/or his broker either by the INV Wing or by the AO during the course of assessment proceedings. The penny stock was also not subject to any action from SEBI (Udit Kalra 176 DTR 249 (Del) distinguished, Fair Invest Ltd 357 ITR 146 (Del) followed)

These facts clearly demonstrate that the assessee is a habitual investor and being a qualified professional [Chartered Accountant], is well aware of market trends of shares in the stock market. The entire assessment has been framed by the Assessing Officer without conducting any enquiry from the relevant parties or independent source or evidence but has merely relied upon the statements recorded by the INV Wing as well as information received from the INV Wing. It is apparent from the assessment order that the Assessing Officer has not conducted any independent and separate enquiry in this case of the assessee. Even the statement recorded by the INV Wing has not been got confirmed or corroborated by the person during the assessment proceedings

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DATE: June 11, 2019 (Date of pronouncement)
DATE: June 20, 2019 (Date of publication)
AY: -
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CITATION:
S. 32(1)(ii) Depreciation on Intangible asset: Rights acquired under a non-compete agreement gives enduring benefit & protects the assessee's business against competition. The expression "or any other business or commercial rights of similar nature" used in Explanation 3 to sub-section 32(1)(ii) is wide enough to include non-compete rights (Ferromatice Milacron India 99 TM.com 154 (Guj) followed)

The legislature thus did not intend to provide for depreciation only in respect of the specified intangible assets but also to other categories of intangible assets which may not be possible to exhaustively enumerate. It was concluded that the assessee who had acquired commercial rights to sell products under the trade name and through the network created by the seller for sale in India were entitled to deprecation

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DATE: June 14, 2019 (Date of pronouncement)
DATE: June 20, 2019 (Date of publication)
AY: 2009-10
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S. 56(2)(vii)(c): The assessee's purchase of shares of NDTV Ltd at Rs 4 per share from RRPR Holdings Pvt Ltd when the market price of the share was Rs 140 is a benefit taxable u/s 56 (2)( vii). The argument that as it is a transaction between closely related parties, there is no motive of tax evasion & s. 56 (2) does not apply is not acceptable. The assessee has failed to explain by credible evidence any reason of buying shares of the company at Rs. 4 per share when the quoted price was Rs. 140 & so the assessee cannot say that there was no motive of tax evasion. Even otherwise, s. 56 (2) deems such differences/receipts as income

Where an individual or after 1 st day of October 2009, receives any property other than immovable property for a consideration, which is less than the aggregate fair market value of the property by an amount exceeding INR 50,000/- , the aggregate of fair market value of such property as exceeds such consideration is chargeable to tax under the head income from other sources. The impugned asset that has been transferred in this transaction in shares, which is covered under the definition of property as per clause (d) of the second proviso to the above section. Further fair market value of such transaction is also required to be determined under section 11 UA of the income tax rules according to which the fair market value in respect of a court in shares are the quoted price on the recognized stock exchange. Therefore the impugned transaction satisfied all the ingredients of the provisions of section 56 (2) (vii) of the act

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DATE: June 18, 2019 (Date of pronouncement)
DATE: June 19, 2019 (Date of publication)
AY: 2010-11
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CITATION:
Bogus F&O Loss: Unusual & sudden spurt in client code modifications undertaken by brokers was with an intention to evade taxes. In large number of client code modifications, there are no similarity between wrong code and correct code and secondly there are repetitive client code modifications. Thus, client code modifications are tainted with collusive action and manipulations & shall go out of the protection granted by the circulars of NSE/SEBI (Rakesh Gupta 405 ITR 213 (P&H) & Ninja Securities followed)

It came to notice of the Revenue that in FY 2009-10 many brokers had misused this facility of client code modifications to artificially create profits/losses which were passed on various clients/ beneficiaries with a view to defraud revenue. These brokers also benefitted by charging commission incomes for arranging these fictitious losses/profits for clients/beneficiaries. This also led to invocation of provisions of Section 131(1A) of the 1961 Act by Revenue against these brokers wherein these brokers admitted to be engaged in manipulations vide client code modifications in trade entered through stock exchanges wherein fictitious losses/profits were created which were passed on clients/beneficiaries to defraud Revenue. These brokers surrendered income by way of brokerage income earned by them on these fictitious profits/losses passed on to various clients/beneficiaries

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