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DATE: April 29, 2016 (Date of pronouncement)
DATE: May 7, 2016 (Date of publication)
AY: 2008-09
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CITATION:
Transfer Pricing: Corporate Guarantees are not comparable to Bank Guarantees & so the commission of 3% charged by Banks is not a benchmark to evaluate the ALP of a corporate guarantee but it has to taken at 0.5%. ITAT decisions which upheld the 3% rate cannot be followed as they are contrary to Everest Kanto 378 ITR 57 (Bom)

Instances of commercial banks providing guarantees could not be compared to instances of issuance of corporate guarantee. When commercial banks issue bank guarantees, the same is quite distinct in character, than the situation where a corporate issues guarantee to the effect that, if a subsidiary associated enterprise does not repay a loan, the same would be made good by such corporate. It is quite clear that the manner in which the Transfer Pricing Officer has proceeded to determine the arm’s length rate based on the probable rate being charged by the commercial banks is not justified. In this view of the matter, we are unable to approve 3% rate of guarantee commission fee determined as arm’s length rate by the income-tax authorities. In the alternative, the addition that is required to be sustained is the position canvassed by the assessee before the Transfer Pricing Officer i.e. adoption of 0.50% as arm’s length rate for the purpose of determining the arm’s length income on account of guarantee commission fee in the present case

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DATE: March 16, 2016 (Date of pronouncement)
DATE: April 13, 2016 (Date of publication)
AY: 2010-11
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CITATION:
S. 50C does not apply to transfer of leasehold rights in land

Section 50C of the Act provides that if the consideration received or accruing is less than the value adopted or assessed or assessable by the stamp valuation authority of the State Government for such transfer then the value so adopted or assessed or assessable shall be deemed to be the full value of consideration and the capital gains will be computed accordingly. The phraseology of section 50C of the Act clearly provides that it would apply only to “a capital asset, being land or building or both”. The moot question before us is as to whether such expression would cover the transfer of a capital asset being leasehold rights in land or building. There cannot be a dispute to the proposition that the expression land by itself cannot include within its fold leasehold right in land also. Of-course, leasehold right in land is also a capital asset and we find no fault with this stand of the Revenue. So however, every kind of a ‘capital asset’ is not covered within the scope of section 50C of the Act for the purposes of ascertaining the full value of consideration. Infact, the heading of section itself provides that it is “Special provision for full value of consideration in certain cases”. Therefore, there is a significance to the expression “a capital asset, being land or building or both” contained in section 50C of the Act. The significance is that only capital asset being land or building or both are covered within the scope of section 50C of the Act, and not all kinds of capital assets

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Posted on by ajaysingh.legal@gmail.com — No Comments ↓
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DATE: March 23, 2016 (Date of pronouncement)
DATE: April 1, 2016 (Date of publication)
AY: 2004-05
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CITATION:
S. 263 revision cannot be initiated to conduct roving inquiries whether share application money share premium constitute undisclosed income

The scope of interference u/s 263 is not to set aside merely unfavaourable orders and bring to tax some more money to the treasury nor is the section meant to get at sheer escapement of revenue which is taken care of by other provisions in the Act. Power under Section 263 cannot be exercised for starting fishing and roving enquiries. In the garb of exercising power
under Section 263, the Commissioner cannot initiate proceedings with a view to
starting fishing and roving enquires in matters or orders which are already concluded

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DATE: February 29, 2016 (Date of pronouncement)
DATE: March 7, 2016 (Date of publication)
AY: 2005-06
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CITATION:
Entire law on difference between premium (salami) paid to acquire a lease and rent paid to use a lease explained in the context of whether a lease results in a transfer u.s 2(47)

By its nature the salami being a non-recurring payment -made by a tenant to the landlord at the inception of the grant of the lease has a/ways been regarded as a receipt of a capital nature in the hands of the landlord. The finding that had been recorded by the Tribunal was that this payment was made to the assessee by the tenants for getting them accepted as tenants. In other words, it was by way of a premium or salami that these payments were received by the assessee as a consideration for granting monthly tenancies to the tenants. Obviously, it was a non-recurring payment made by the tenants to the assessee for the purpose of getting the monthly tenancy. Every payment by way of a salami or a premium need not necessarily be held to be of a capital nature or on capital account, but since prima facie that is the nature of such payment it is for the department to establish facts which would go to show that such payment was in the – nature of income and not on capital account

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DATE: December 23, 2015 (Date of pronouncement)
DATE: February 6, 2016 (Date of publication)
AY: 2010-11
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CITATION:
S. 37(1): While receiving of gifts by doctors is prohibited by MCI Guidelines, the giving of such gifts by Pharma companies is not prohibited by any law. CBDT Circular dated 01.08.2012 is prospective

Receiving of gifts by doctors was prohibited by MCI guidelines, giving of the same by manufacturer is not prohibited under any law for the time being in force. Giving small gifts bearing company logo to doctors does not tantamount to giving gifts to doctors but it is regarded as advertising expenses. As regards sponsoring doctors for conferences and extending hospitality, pharmaceuticals companies have been sponsoring practicing doctors to attend prestigious conferences so that they gather contemporary knowledge about management of certain illness/disease and learn about newer therapies. We found that the disallowance was made by the AO by relying on the CBDT Circular dated 01.08.2012 onwards. However, the Circular was not applicable because it was introduced w.e.f.01.08.2012. i.e. assessment year 2013-2014, whereas the relevant assessment year under consideration is 2010-2011 and 2011-2012

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DATE: December 31, 2016 (Date of pronouncement)
DATE: February 6, 2016 (Date of publication)
AY: 2005-06 to 2009-10
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CITATION:
S. 153A: Law on whether an assessment made u/s 143(1) can be said to have abated & whether an assessment u/s 153A can be made in the absence of incriminating material explained

Although Section 153 A does not say that additions should be strictly made on the basis of evidence found in the course of the search, or other post-search material or information available with the AO which can be related to the evidence found, it does not mean that the assessment “can be arbitrary or made without any relevance or nexus with the seized material. Obviously an assessment has to be made under this Section only on the basis of seized material

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DATE: January 1, 2016 (Date of pronouncement)
DATE: January 13, 2016 (Date of publication)
AY: 2009-10
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CITATION:
Bogus Sales/ Purchases: Addition solely on the basis of information received from the sales-tax department is not sustainable. Suspicion of the highest degree cannot take the place of evidence

AO had made the addition as one of the supplier was declared a hawala dealer by the VAT Department. We agree that it was a good starting point for making further investigation and take it to logical end. But, he left the job at initial point itself. Suspicion of highest degree cannot take place of evidence. He could have called for the details of the bank accounts of the suppliers to find out as whether there was any immediate cash withdrawal from their account. We find that no such exercise was done

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