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DATE: July 29, 2019 (Date of pronouncement)
DATE: August 3, 2019 (Date of publication)
AY: -
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S. 197/ Rule 28AA TDS: An order u/s 197 is quasi-judicial & must be supported by valid & cogent reasoning. It has to be based on objective criteria and relevant material. On facts, there is arbitrariness and non-application of mind at various levels which vitiates the certificate. The reasons do not conform to the requirement of s. 197 r. w. Rule 28 AA. The settled legal position is that orders passed by a statutory authority under "dictation" of a superior officer or anyone else is bad in law

The Court accordingly finds that in the present case the impugned withholding certificate which directs TDS to be deducted at 5% on the payments made by the Indian entities to the Petitioner is unsustainable in law, inasmuch as it is not based on valid reasons and is contrary to the legal requirement spelt out in Section 197(1) of the Act read with Rule 28AA of the Rules. The impugned certificate is hereby quashed

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DATE: March 25, 2019 (Date of pronouncement)
DATE: April 6, 2019 (Date of publication)
AY: 2009-10
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S. 194H TDS: Payment gateway charges paid to a bank for swiping credit cards are in the nature of fees for banking services and not "commission" or "brokerage". Accordingly, no TDS is deductible from the said charges u/s 194H and no disallowance u/s 40(a)(ia) can be made (JDS Apparels 370 ITR 454 (Del) followed)

The bank in question is not concerned with buying or selling of goods or even with the reason and cause as to why the card was swiped. It is not bothered or concerned with the quality, price, nature, quantum etc. of the goods bought/sold. The bank merely provides banking services in the form of payment and subsequently collects the payment. The amount punched in the swiping machine is credited to the account of the retailer by the acquiring bank, i.e. HDFC in this case, after retaining a small portion of the same as their charges. The banking services cannot be covered and treated as services rendered by an agent for the principal during the course of buying or selling of goods as the banker does not render any service in the nature of agency.

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DATE: November 8, 2017 (Date of pronouncement)
DATE: November 11, 2017 (Date of publication)
AY: -
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CITATION:
S. 145(2) ICDS: S. 145 (2) has to be read down to restrict power of the Central Government to notify ICDS that do not seek to override binding judicial precedents or provisions of the Act. If s. 145 (2) is not so read down it would be ultra vires the Act and Article 141 read with Article 144 and 265 of the Constitution. The ICDS which overrule the provisions of the Act, the Rules thereunder and the judicial precedents applicable thereto, are struck down as ultra vires the Act. To that extent, Notification Nos. 87 and 88 dated 29.09.2016 and Circular No. 10 of 2017 issued by the CBDT are also held to be ultra vires the Act and struck down as such

Section 145 (2), as amended, has to be read down to restrict power of the Central Government to notify ICDS that do not seek to override binding judicial precedents or provisions of the Act. The power to enact a validation law is an essential legislative power that can be exercised, in the context of the Act, only by the Parliament and not by the executive. If Section 145 (2) of the Act as amended is not so read down it would be ultra vires the Act and Article 141 read with Article 144 and 265 of the Constitution. The ICDS is not meant to overrule the provisions of the Act, the Rules thereunder and the judicial precedents applicable thereto as they stand. ICDS I which does away with the concept of ‘prudence’ is contrary to the Act and binding judicial precedents and is therefore unsustainable in law.

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DATE: September 18, 2017 (Date of pronouncement)
DATE: October 3, 2017 (Date of publication)
AY: 2009-10
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CITATION:
Transfer Pricing: Steps to be undertaken in identification of comparable transactions/entities while fixing the ALP and the margin explained. Though the TNMM method allows broad flexibility tolerance in the selection of comparables, broad functionality is not sufficient to find the comparable entity. There must be similarity with the controlled transaction

In so far as identifying comparable transactions/entities is concerned, the same would not differ irrespective of the transfer pricing method adopted. In other words, the comparable transactions/entities must be selected on the basis of similarity with the controlled transaction entity. Comparability of controlled and uncontrolled transactions has to be judged, inter alia, with reference to comparability factors as indicated under rule 10B(2) of the Income Tax Rules, 1962. Comparability analysis by the transactional net margin method may be less sensitive to certain dissimilarities between the tested party and the comparables. However, that cannot be the consideration for diluting the standards of selecting comparable transactions/entities. A higher product and functional similarity would strengthen the efficacy of the method in ascertaining a reliable arm’s length price. Therefore, as far as possible, the comparables must be selected keeping in view the comparability factors as specified. Wide deviations in profit level indicator must trigger further investigations/analysis

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DATE: September 25, 2017 (Date of pronouncement)
DATE: October 3, 2017 (Date of publication)
AY: 2007-08
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CITATION:
Transfer Pricing: A giant risk taking company like Infosys Technologies with huge significant intangibles and having huge assets leading to the exorbitant turnover is not comparable with a captive unit which is subject to minimum/ limited risk. The fact that the functional profile of Infosys is similar to that of the assessee is irrelevant

When we examine the profile of the assessee company vis-à-vis Infosys Technologies Limited in the light of the judgment in CIT vs. Agnity India Technologies Pvt. Ltd. (supra), there is no comparability for benchmarking the international transactions for the reasons inter alia that Infosys Technologies Limited is a giant risk taking company whereas, on the other hand, the assessee is a captive unit of its parent company and prone to minimum/ limited risk; that the Infosys Technologies Limited is having huge significant intangibles and having huge assets leading to the exorbitant turnover; that it is not in dispute that functional profile of assessee company and CIT vs. Agnity India Technologies Pvt. Ltd. is similar

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DATE: September 25, 2017 (Date of pronouncement)
DATE: September 29, 2017 (Date of publication)
AY: 2008-09
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CITATION:
S. 147/ 148: Despite numerous judgements on the reopening of assessments, the Revenue authorities are repeating the same errors. Accordingly, Guidelines are laid down and the Revenue is directed to adhere to them

Before parting with the case, the Court would like to observe that on a routine basis, a large number of writ petitions are filed challenging the reopening of assessments by the Revenue under Sections 147 and 148 of the Act and despite numerous judgments on this issue, the same errors are repeated by the concerned Revenue authorities. In this background, the Court would like the Revenue to adhere to the following guidelines in matters of reopening of assessments

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DATE: September 6, 2017 (Date of pronouncement)
DATE: September 25, 2017 (Date of publication)
AY: 2002-03
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CITATION:
Search assessment u/s 153C: Proceedings u/s 153C of the Act can be initiated against a person only if the seized materials "belongs" to that person. It is not sufficient for the Revenue to urge that the seized document "pertains" to the person. Sinhgad Technical Education Society [2017] 84 Taxmann.com 290 (SC) followed

The recent decision of the Supreme Court in Commissioner of Income Tax, Pune v. Sinhgad Technical Education Society [2017] 84 taxmann.com 290 (SC) settles the legal position in favour of the Assessees. The Supreme Court, while affirming the judgment of the Bombay High Court, approved the decision of the Gujarat High Court in Kamleshbhai Dharamshibhai Patel v. Commissioner of Income Tax-III, (2013) 263 CTR (Guj) 362 that a document seized ‘should belong to a person other than the person referred to in Section 153A of the Act’. It has been categorically observed by the Supreme Court that the above position of law laid down by the Gujarat High Court is correct. Consequently, this Court rejects the contention of the learned counsel for the Revenue that even prior to 1st June 2015 at the stage of initiation of proceedings under Section 153C of the Act, it is sufficient if the seized document ‘pertained to’ the other person and it is not necessary to show that the seized material ‘belonged to’ the other person

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DATE: September 5, 2017 (Date of pronouncement)
DATE: September 15, 2017 (Date of publication)
AY: 2011-12
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CITATION:
S. 263 Revision: For the purposes of exercising jurisdiction u/s 263, the conclusion of the CIT that the order of the AO is erroneous and prejudicial to the interests of the Revenue has to be preceded by some minimal inquiry. If the PCIT is of the view that the AO did not undertake any inquiry, it becomes incumbent on the PCIT to conduct such inquiry. The second option available u/s 263 (1) of sending the entire matter back to the AO for a fresh assessment can be exercised by the PCIT only after he undertakes an inquiry himself and not otherwise

For the purposes of exercising jurisdiction under Section 263 of the Act, the conclusion that the order of the AO is erroneous and prejudicial to the interests of the Revenue has to be preceded by some minimal inquiry. In fact, if the PCIT is of the view that the AO did not undertake any inquiry, it becomes incumbent on the PCIT to conduct such inquiry. All that PCIT has done in the impugned order is to refer to the Circular of the CBDT and conclude that “in the case of the Assessee company, the AO was duty bound to calculate and allow depreciation on the BOT in conformity of the CBDT Circular 9/2014 but the AO failed to do so. Therefore, the order of the AO is erroneous insofar as prejudicial to the interest of revenue”

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DATE: August 21, 2017 (Date of pronouncement)
DATE: September 4, 2017 (Date of publication)
AY: 2008-09 to 2011-12
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CITATION:
S. 263: Lack of inquiry vs. Inadequate inquiry: Revision on the ground that the AO did not conduct a detailed inquiry on account of paucity of time is unfair to the assessee and invalid (Amitabh Bachhan 384 ITR 200 (SC) & Maithan International 375 ITR 123 (Cal) distinguished

Where the Assessee has in fact furnished the details that are available with him along with explanation to the queries raised by the AO, to permit the exercise of the revisionary jurisdiction only on the ground that the AO did not have sufficient time to verify the details furnished would be unfair to the Assessee. The PCIT must be satisfied, after application of his mind, that the order of the AO was erroneous with respect to the material made available to him. No such application of mind by the PCIT is evident from the impugned order

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DATE: August 30, 2017 (Date of pronouncement)
DATE: September 2, 2017 (Date of publication)
AY: 2005-06
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CITATION:
S. 115JB: As Insurance companies are required to prepare accounts as per the Insurance Act and not as per Schedule VI to the Companies Act, s. 115JB does not apply. Insurance companies are not taxed on commercial profits but on profits as computed under the Insurance Act. Accordingly, income earned on sale/redemption of investments is not chargeable to tax

The different benches of the ITAT have, in other cases, consistently held that during the period when Rule 5(b) was not operational the profit on sale of investments made by general insurance companies cannot be brought to tax. In Bajaj Allianz General Insurance Co. Ltd. v. Additional Commissioner of Income Tax (2010) 130 TTJ (Pune) 398, the ITAT addressed the specific question of whether a logical conclusion could be drawn that an income that is not taxed in terms of Rule 5(b) could, even after such amendment was deleted, be taxed in the hands of the insurance company. It was held that income which was earlier taxable under one specific clause could not be brought to tax after the deletion of such clause

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