On the issue whether the activity of promoting micro finance services is a “charitable purpose” u/s 2(15), as per CBDT Circular No.11 of 2008 dated 19.12.2008, a wide range of objects for the welfare of economically and socially disadvantaged people are covered and entities which pursue these objects will be eligible for exemption even if they incidentally carry on a commercial activity, subject, however, to the conditions stipulated in s. 11(4A) or the seventh proviso to s.10(23C)

That s. 80-IA deduction has to be computed after deduction of the notional brought forward losses and depreciation of business even though they have been allowed set off against other income in earlier years is concluded by the ITAT Special Bench judgement in ACIT vs. Gold Mine Shares & Finance (P) Ltd 113 ITD 209 (SB) (Ahd) against the assessee. As regards the High Court judgements in Mewar Oil & General Mills 271 ITR 311 (Raj) (not followed by the Special Bench) & Velayudhaswamy Spinning Mills vs. ACIT 38 DTR 57 (Mad) (delivered after referring to the Special Bench), though a judgement of a non-jurisdictional High Court prevails over a judgement of the Special Bench, the former cannot be followed, even though it is the only High Court judgement on the point, if “rendered without having been informed about certain statutory provisions that are directly relevant“

The share transfer agreement merely refers to the sale of shares and the non-compete covenant and fixes the consideration at Rs. 90 & Rs. 15 respectively but does not refer to any “transfer of controlling interest”. The other circumstances (AoA etc) support the view that there was no transfer of controlling interest

The CUP method for determining the ALP is suitable when goods of a similar type are sold by independent enterprises. In an isolated transaction of sale of the PE as a ‘going concern’ to the AE, there are no similar comparable independent transactions available for comparison. In order to determine the ALP in the absence of other identical transactions, the valuation by a registered valuer is the most appropriate means under CUP method. However, as the valuation report filed by the assessee is not reliable, the only option is to adopt the value of the assets sold as per the company law or income-tax WDV. As the depreciation rates prescribed by company law are static, the WDV of the assets so arrived at will not be at par with the net present market value and, therefore, the valuation of the assets based on the book value is not justifiable. The only reasonable approach is to value the assets by applying the depreciation rates as provided by the income-tax Act for it is more dynamic and so schemed to bring in a notional charge on the profit and loss account to arrive at the actual income of an assessee keeping in view of the depletion of the assets

U/s 80-IA (8), the transfer of goods from an eligible business to a non-eligible business is required to be taken at “market value”. The tariff determined by MERC is based on the concepts of ‘clear profits’ and ‘reasonable return’ and does not reflect the “market value” of the electricity. While the ‘clear profits’ are determined by considering the streams of income, the ‘reasonable return’ is determined on the capital base. If the ‘clear profits’ are more than the ‘reasonable return’, the excess is considered while fixing tariffs for the subsequent year and the exercise of adjusting the gap between the reasonable return and clear profits is an on-going process. The tariff is either increased or reduced to adjust the gap between the two. Further, the tariff is fixed for both activities of generation and distribution of power and may not reflect the true rates with regard to only the activity of generation

CBDT Circular No.12 dated 23.8.2001 which provides that “the AO shall not make any adjustment to the arm’s length price determined by the taxpayer if such price is unto 5% less or unto 5% more than the price determined by the AO” was in the context of the proviso to s. 92C (2) inserted by FA 2001 w.e.f. AY 2002-03. Though the proviso provided for only arithmetical mean of the prices to be taken and did not provide for any concession, the Circular was issued considering practical difficulties. The said Proviso was amended by FA 2002 w.e.f AY 2002-03. The effect is that the Proviso in the context of which Circular No. 12 was issued never came into operation and so the Circular No. 12 became otiose and cannot be relied upon

U/s 149(1)(b) a notice u/s 148 cannot be issued after the issue of 6 years from the end of the AY. In Haryana Acrylic vs. CIT 308 ITR 38 it was held that a notice u/s 148 without the communication of the reasons there for is meaningless inasmuch as the AO is bound to furnish the reasons within a reasonable time. It was held that a case where the notice has been issued within the said period of six years but the reasons have not been furnished within that period is hit by the bar of limitation because the issuance of the notice and the communication and furnishing of reasons go hand-in-hand. The expression ‘within a reasonable period of time’ as used in GKN Driveshafts 259 ITR 19 (SC) cannot be stretched to such an extent that it extends even beyond the six years stipulated in s. 149

The TPO rejected the assessee’s contention with regard to inclusion of the three super-normal profit companies without any cogent reason. It is undisputed that the three companies have shown super-normal profits as compared to other comparables. Their exclusion from the list of comparable is quite correct. After excluding the three companies the arithmetic mean of the comparables falls within the +-5% range permitted by s.92(C)(2)

The fact that the international transactions are at ALP does not mean that no addition can be made on the funds kept by the assessee with the AE. If the assessee had received funds within the normal period, it could have earned interest on the same. The potential loss is a factor to be considered while evaluating the financial impact of the international transactions between the assessee and the AE. However, a reasonable period has to be provided as interest-free period

Under the Proviso to s. 92C(2) (pre-amendment w.e.f. 1.10.09) the option to the assessee to choose a price which may vary from the arithmetical mean by an amount not exceeding five per cent is available only where more than one price is determined and not where there is only one comparable instance (Sony India vs. DCIT 114 ITD 448 (Del) & DCIT vs. BASF India not followed. Perot System TSI (India) Ltd 130 TTJ 685 followed)