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COURT:
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DATE: May 25, 2016 (Date of pronouncement)
DATE: May 30, 2016 (Date of publication)
AY: 2003-04
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CITATION:
Transfer Pricing: Arbitrary action of the AO in treating the payment by the assessee to the AE as "excessive/ unreasonable" deplored. Whims and fancies of an AO cannot decide tax liability of an assessee. Either the AO was ignorant of the TP provisions or he was adamant to make the disallowance at any cost. Either way, his action cannot be endorsed

It is said that rights and duties are two sides of the same coin. In other words, rights demand that a person using his rights should also observe his duties. In taxation matters discretionary powers have been given to the AO’s but they are expected to use the power in a fair and just manner. State as an institution can levy and collect only due taxes from its subjects. So, if the AOs determine the tax liability in an unfair manner and if the demand is not of the DUE taxes appellate authorities are expected to allow relief to the assessee. He very well knew that the assessee had objected to the ad hoc disallowance and rejection of the CUP method. But, he stuck to his guns while submitting the remand report and supported the estimated disallowance. His approach goes against the very basis of the TP provisions. Either he was ignorant of the TP provisions or he was adamant to make the disallowance at any cost. But, his action cannot be endorsed. Why was the transaction entered in to by the AE with MIT Hungary could not be a basis for arriving at ALP was never discussed by the AO. The assessee has discharged his burden of proof. After that onus had shifted to the assessee and in our opinion he has failed miserably to prove that his action of making disallowance was supported by any logical argument or scientific basis. Whims and fancies of an AO cannot decide tax liability of an assessee

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DATE: March 23, 2016 (Date of pronouncement)
DATE: May 26, 2016 (Date of publication)
AY: 2008-09
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CITATION:
Installation services provided by a foreign enterprise which are inextricably connected to the sale of goods are not assessable as "fees for technical services" or as "business profits" under the DTAA

Though service of installation is covered by the FTS clause as well as Installation PE clause of the India China treaty and though the installation contract (including period of after sales service) exceeded 183 days, the income from installation activity was neither taxable as FTS nor as business income since (i) the service of installation was inextricably connected to sale of goods, the same could not be treated as FIS or FTS (ii) specific installation PE clause in India China Treaty will override General FTS clause (iii) the aforesaid threshold limit of 183 days would have to be applied to the actual period of installation (which was less than 183 days) and not the contractual period

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Posted on by itatbar
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DATE: October 28, 2015 (Date of pronouncement)
DATE: May 26, 2016 (Date of publication)
AY: 2007-08 & 2008-09
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CITATION:
(i) Important law laid down on applicability of transfer pricing provisions to non-AEs, Law on (ii) deductibility of unpaid service-tax u/s 43B and (iii) carry forward of losses of amalgamating company u/s 72A and Rule 9C explained

Disallowance of unpaid service tax could not be made under section 43B where the assessee did not claim the same in its Profit and Loss account. Where the assessee fulfilled all the conditions prescribed under Section 72A read with Rule 9C, the AO could not deny the claim of carry forward of losses pertaining to the amalgamating company

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Posted on by itatbar
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DATE: February 29, 2016 (Date of pronouncement)
DATE: May 21, 2016 (Date of publication)
AY: 2009-10
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CITATION:
Bogus purchase and sale of shares: Law explained as to on whom the onus is to show that the purchase and sale of shares are bogus and the circumstances required to be proved by the AO

The purchase of shares in the immediately preceding year was accepted by the Department in an order u/s 147 r.w.s 143(3) of the Act. The shares were evidenced by entries in the demat statement and consideration was received through banking channel. There was no clinching material to say that the impugned transaction was bogus. Also, the statement recorded during the search on M/s Alliance Intermediaries & Network Pvt. Ltd. does not contain any infirmity qua the impugned transaction. Therefore, the addition as income from undisclosed income was liable to be deleted

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Posted on by itatbar
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DATE: March 18, 2016 (Date of pronouncement)
DATE: May 20, 2016 (Date of publication)
AY: 2002-03
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CITATION:
A liberal view must be taken in matters of condonation of delay. A delay of 2191 days caused by an employee leaving the services of the assessee and not handing over papers to the assessee deserves to be condoned

In every case of delay, there can be some lapses on the part of the litigant concern. That alone is not enough to turn down the plea and to shut the doors against him, unless and until, it makes a mala-fide or a dilatory statutory, the court must show utmost consideration to such litigant. In matters concerning the filing of appeals, in exercise of the statutory right, a refusal to condone the delay can result in a meritorious matter being thrown out at the threshold, which may lead to miscarriage of justice. Since the employee who was earlier handling the tax matters of the assessee company, while leaving the job of the assessee company, did not handover the relevant papers either to the assessee or to the next person, a fact which caused the delay, the delay was liable to be condoned by taking a lenient view

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Posted on by itatbar
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DATE: March 18, 2016 (Date of pronouncement)
DATE: April 13, 2016 (Date of publication)
AY: 2012-2013
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CITATION:
S. 14A/ Rule 8D: No disallowance can be made on shares held as stock-in-trade

The Commissioner of Income Tax (Appeals) has erred in not following the order of Tribunal in asessee’s own case. The Co-ordinate Bench of the Tribunal had rejected the appeal of Department for assessment year 2010-11 on identical set of facts. The Commissioner of Income Tax (Appeals) should have maintained ‘Judicial Propriety’ in following the order of Appellate Authority. As of now we restrain ourselves from commenting on the judicial indiscipline committed by the Commissioner of Income Tax (Appeals) and expect that he shall be more careful in future in honouring the orders of the higher Appellate Authorities

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Posted on by itatbar
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DATE: February 19, 2016 (Date of pronouncement)
DATE: April 13, 2016 (Date of publication)
AY: 2010-11 & 2011-12
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CITATION:
S. 263: As issue of whether TDS should bee u/s 194C or 194H is subject to two views, revision is not possible

In the original assessment proceedings, the AO had analysed the payment in detail and then concluded that the provisions of sec. 194C are applicable. Also, not two but three views were possible viz. (i) TDS u/s 194H which was discussed by the AO in original order; (ii) TDS u/s 194C which was upheld by AO; and (iii) sec. 194A now sought to be taken by CIT. Since three views were possible, revision was not permissible. Furthermore, even on merits, it was held that view of the CIT was not correct because there was no money borrowed or debt incurred, and hence, payment made to NCL was not “income by way of interest”

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Posted on by itatbar
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DATE: March 16, 2016 (Date of pronouncement)
DATE: April 13, 2016 (Date of publication)
AY: 2001-02, 2002-03
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CITATION:
S. 147: If the AO objects to the audit objection, he cannot have reason to believe that income has escaped assessment and is not entitled to reopen the assessment

One of the key sources of dispute is the existing arrangement for follow up on audit objections by Internal Audit Party and the Revenue Audit Party. In terms of the existing arrangement, the AO is required to take corrective steps following audit objections. The corrective measures take the form of rectification or reassessment (by reopening the case under section 147 or revision by the Principal Commissioner or Commissioner under section 263). In the case of rectification, these are general in the nature of correction for arithmetical errors and other mistakes which are apparent from the record. The problem arises when the AO seeks to take corrective measures by invoking the provisions of section 147 or 263 of the Income tax Act. Since the audit object ions are based on mater ial on record and there is no occasion for new mater ial to be brought on record in the course of audit, any reopening of assessment or review by the Pr incipal Commissioner constitutes “change of opinion” in the eyes of the law. This being so, the corrective measure under section 147 or section 263 of the Income tax Act is held to be invalid by Courts.

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Posted on by itatbar
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DATE: March 16, 2016 (Date of pronouncement)
DATE: April 13, 2016 (Date of publication)
AY: 2009-10
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CITATION:
S. 43(5), Explanation to s. 73: Where the assessee is a dealer in shares, the entire business of share trading and derivatives should be treated as a composite business and aggregated before applying Explanation to
s. 73

Where the assessee is a dealer in shares, the entire business consists in sale purchase of shares, then, it should be treated as composite business. Also, assessee’s stand of treating the whole business as composite business has always been accepted by the revenue in earlier as well as subsequent years. Accordingly, whole of assessee’s business was treated as speculative and loss of current year was allowed to be set off against profits of the current year

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Posted on by itatbar
COURT: ,
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DATE: May 8, 2015 (Date of pronouncement)
DATE: April 10, 2016 (Date of publication)
AY: 2005-06
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CITATION:
S. 48: Interest on borrowed money utilized for acquiring shares can be capitalized as cost of acquisition

Interest payable on moneys borrowed for acquisition of shares should be added to the cost of acquisition of shares for the purpose of computing capital gains (Macintosh Finance Estates Ltd vs. ACIT (2007) 12 S0T 324 (Mum) (Trib) not followed, CIT vs. Trishul Investments Ltd (2008) 305 ITR 434 (Mad) (HC) followed)

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