As Colin Davie was not a performer, his income was not covered under Article 18 of the DTAA but was covered by Article 7 and as the services were rendered outside India and there was no PE, the same was not assessable to tax in India. Even under the Act, by virtue of Carborandum Co 108 ITR 335 (SC), Circular No. 17 of 1953 dated 17.7.1953 & Circular No.786 dated 7.2.2000, commission paid to agents for services rendered outside India is not chargeable to tax in India and there is no obligation to deduct tax u/s 195

Prior to the concept of dematerialisation, a valid pledge of shares could be created by delivery of the shares to the pawnee either physically or constructively. With respect to demateriaized shares, though s.12 of the DP Act provides for the manner of creating a pledge, this is not the only method. Dematerialized shares continue to be “goods” and the law laid down in the Companies Act and the Sale of Goods Act for deciding whether a sale of shares has taken place or not will continue to govern

The argument of the revenue on the basis of Gee Vee Enterprises 99 ITR 375 (Del) that non-making of inquiry by the AO is sufficient to justify action u/s 263 is not acceptable in view of the later decision in Vikas Polymers (Del) where it was held that the fact that the AO has not applied his mind to the issue may mean that the order is erroneous but it does not necessarily mean that the order is also prejudicial to the interests of the revenue. The CIT should apply his mind to the information provided by the assessee in the course of the revisional proceedings and record a finding instead of simply remanding the matter to the AO for examination

The second requirement of s. 41(1) is also not satisfied because in paying the NPV of the sales-tax liability, the assessee has paid the equivalent of the Future Value of the sum. As the sum of Rs. 3,37,13,393 is the NPV of the future sum of Rs.7,52,01,378 and its payment discharges the full liability, there is no remission or cessation of liability by the State Govt. It is a simple case of collecting the amount at net present value which is due later on (principles of s. 63 of the Contract Act applied)

The argument of the revenue that the abnormal debt-equity ratio attracts the “Thin Capitalization Rule” and that the “debt” should be characterized as “equity” for purposes of considering whether interest is deductible is not acceptable. Several countries have detailed “thin capitalization rules” (e.g. Belgium). However, there are no such rules in India though the DTC 2010 has proposed this vide s. 123(1)(f). In the absence of specific “thin capitalization” rules, it is not open to the revenue to characterize debt as equity and disallow the interest (principles in Azadi Bachao Andolan 263 ITR 706 (SC) followed)

The income received for supply of software is assessable as “royalty” under s. 9(1)(vi) as a copyright subsists in a computer programme and it is also a literary as also a scientific work. A computer programme is also a patent, invention or process. As end-users have made payment for transfer of rights (including the granting of a license) in respect of copyright, patent, invention, process, literary or scientific work, the payment would be in the nature of royalty

Article 26(3) of the India-USA DTAA protects the interest of non residents vis-a-vis residents. Article 26(3) provides that payment made to a non-resident will be deductible under the same conditions as if the payment were made to a resident. The exceptions provided in Article 26(3) are not applicable on facts. As per s. 40(a)(i), no disallowance can be made in respect of payments to residents on the ground of non-deduction of tax at source. Therefore, in view of Article 26(3), no disallowance can be made even in case of payments to non-residents even if the amount is found taxable in India in their hands. Herbal Life International 101 ITD 450(Del) followed

In the interest of judicial discipline, a Member who has taken a view should not be party to a Special Bench

S. 115 JB can only come into play when the assessee is required to prepare its profit and loss account in accordance with the provisions of Parts II and III of Schedule VI to the Companies Act. The starting point of computation of minimum alternate tax u/s 115 JB is the result shown by such a profit and loss account. In the case of banking companies, however, the provisions of Schedule VI are not applicable in view of exemption set out under proviso to S. 211 (2) of the Companies Act. The final accounts of banking companies are required to be prepared in accordance with the provisions of the Banking Regulation Act. Consequently, s. 115 JB cannot be applied to a banking company