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DATE: July 11, 2017 (Date of pronouncement)
DATE: December 4, 2017 (Date of publication)
AY: -
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CITATION:
S. 194H, 201(1): An obligation to deduct TDS u/s 194H arises only if the relationship is that of "principal and agent" and if a "payment" is made. As the relationship between the assessee and the distributor was that of "principal to principal" and as the "discount" did not amount to a "payment", there was no liability to deduct TDS

Taking into account the provisions of Section 182 of the Contract Act and the arrangement which has been entered into between the company and the distributor and taking into account the provisions of Section 194H, the Tribunal while considering the evidence on record, in our considered opinion, has misdirected itself in considering the case from an angle other than the angle which was required to be considered by the Tribunal under the Income Tax Act. The Tribunal has travelled beyond the provisions of Section 194H where the condition precedent is that the payment is to be made by the assessee and thereafter he is to make payment. In spite of our specific query to the counsel for the department, it was not pointed out that any amount was paid by the assessee company. It was only the arrangement by which the amount which was to be received was reduced and no amount was paid as commission

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DATE: November 8, 2017 (Date of pronouncement)
DATE: November 11, 2017 (Date of publication)
AY: 2010-11
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CITATION:
S. 263 Revision: The failure to issue notice on any particular issue does not vitiate the exercise of power u/s 263, as long as the assessee is heard and given opportunity. The lack of opportunity at the revisional stage does not vitiate the entire order, or the proceedings. It is a curable defect. The CIT has power to consider all aspects which were the subject matter of the AO’s order, if in his opinion, they are erroneous, despite the assessee’s appeal on that or some other aspect

It is in the context of the above position that this Court has repeatedly held that unlike the power of reopening an assessment under Section 147 of the Act, the power of revision under Section 263 is not contingent on the giving of a notice to show cause. In fact, Section 263 has been understood not to require any specific show cause notice to be served on the assessee. Rather, what is required under the said provision is an opportunity of hearing to the assessee. The two requirements are different; the first would comprehend a prior notice detailing the specific grounds on which revision of the assessment order is tentatively being proposed

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DATE: October 30, 2017 (Date of pronouncement)
DATE: November 1, 2017 (Date of publication)
AY: -
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CITATION:
S. 44BB: Amounts received as “mobilisation fee” on account of provision of services and facilities in connection with the extraction etc. of mineral oil in India attracts s. 44BB and have to be assessed as business profits. S. 44BB has to be read in conjunction with ss. 5 and 9 of the Act. Ss. 5 and 9 cannot be read in isolation. The argument that the mobilisation fee is “reimbursement of expenses” and so not assessable as income is not acceptable because it is a fixed amount paid which may be less or more than the expenses incurred. Incurring of expenses, therefore, would be immaterial. Also, the contract was indivisible

Section 44BB starts with non-obstante clause, and the formula contained therein for computation of income is to be applied irrespective of the provisions of Sections 28 to 41 and Sections 43 and 43A of the Act. It is not in dispute that assessees were assessed under the said provision which is applicable in the instant case. For assessment under this provision, a sum equal to 10% of the aggregate of the amounts specified in sub-section (2) shall be deemed to be the profits and gains of such business chargeable to tax under the head ‘profits and gains of the business or profession’. Sub-section (2) mentions two kinds of amounts which shall be deemed as profits and gains of the business chargeable to tax in India. Sub-clause (a) thereof relates to amount paid or payable to the assessee or any person on his behalf on account of provision of services and facilities in connection with, or supply of plant and machinery on hire used, or to be used in the prospecting for, or extraction or production of, mineral oils in India. Thus, all amounts pertaining to the aforesaid activity which are received on account of provisions of services and facilities in connection with the said facility are treated as profits and gains of the business.

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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 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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DATE: August 23, 2017 (Date of pronouncement)
DATE: August 24, 2017 (Date of publication)
AY: 2008-09
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CITATION:
S. 14A/ Rule 8D: Entire law explained on what constitutes proper recording of satisfaction by the AO, scope of disallowance of interest expenses under Rule 8D(2)(i), admin expenses under Rule 8D(2)(iii), need for nexus between borrowed funds and tax-free investments and power of the ITAT to remand to the AO

In order to disallow this expense the AO had to first record, on examining the accounts, that he was not satisfied with the correctness of the Assessee’s claim of Rs. 3 lakhs being the administrative expenses. This was mandatorily necessitated by Section 14 A (2) of the Act read with Rule 8D (1) (a) of the Rules. Consequently on the aspect of administrative expenses being disallowed, since there was a failure by the AO to comply with the mandatory requirement of Section 14 A (2) of the Act read with Rule 8D (1) (a) of the Rules and record his satisfaction as required thereunder, the question of applying Rule 8D (2) (iii) of the Rules did not arise

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DATE: July 13, 2017 (Date of pronouncement)
DATE: July 17, 2017 (Date of publication)
AY: 1995-96
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CITATION:
Whether subsidy is a capital receipt or a revenue receipt: If the recipient has the flexibility of using it for any purpose and is not confined to using it for capital purposes, it means that the policy makers envision greater profitability as an incentive for investors to expand units. Such subsidy is revenue in nature and is taxable as profits

How a state frames its policy to achieve its objectives and attain larger developmental goals depends upon the experience, vision and genius of its representatives. Therefore, to say that the indication of the limit of subsidy as the capital expended, means that it replenished the capital expenditure and therefore, the subsidy is capital, would not be justified. The specific provision for capital subsidy in the main scheme and the lack of such a subsidy in the supplementary scheme (of 1991) meant that the recipient, i.e. the assessee had the flexibility of using it for any purpose. Unlike in Commissioner of Income Tax v. Ponni Sugars & Chemicals [2008] 306 ITR 392 (SC), the absence of any condition towards capital utilization meant that the policy makers envisioned greater profitability as an incentive for investors to expand units, for rapid industrialization of the state, ensuring greater employment. Clearly, the subsidy was revenue in nature

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DATE: June 16, 2017 (Date of pronouncement)
DATE: June 22, 2017 (Date of publication)
AY: 2008-09
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CITATION:
S. 14A/ Rule 8D: (i) The computation under clause (f) of Explanation 1 to section 115JB(2) is to be made without resorting to the computation as contemplated u/s 14A read with Rule 8D of the Income tax Rules 1962, (ii) Only those investments are to be considered for computing the average value of investment which yielded exempt income during the year

(i) The computation under clause (f) of Explanation 1 to section 115JB(2) is to be made without resorting to the computation as contemplated u/s 14A read with Rule 8D of the Income tax Rules 1962. (ii) Only those investments are to be considered for computing the average value of investment which yielded exempt income during the year.

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DATE: January 17, 2017 (Date of pronouncement)
DATE: January 30, 2017 (Date of publication)
AY: 2002-03, 2003-04
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CITATION:
S. 9(1)(i)/ 9(1)(vi)/ 9(1)(vii)/ 40(a)(i): Law on whether payment by the assessee to non-resident parties for “call transmission services through dedicated bandwidth” is assessable as income accruing in India, royalty or fees for technical services and whether a disallowance can be made for failure to deduct TDS explained

In the instant case also, the undersea cable for providing dedicated bandwidth to the assessee was installed beyond the territory of India and no operations were carried out by the non-resident party M/s Kick Communication in India. It was responsible for restoring connectivity and Managing faults in connectivity etc in respect of data transmitted through undersea cable only. Similarly, the operations carried out by M/s. IGTL Solutions are also in USA and not in India. Since operations by both the non-resident parties are carried out beyond the territory of India, we thus hold that section 9(1)(i) is of the Act is not attracted in case of above two non-resident parties

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