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DATE: December 11, 2015 (Date of pronouncement)
DATE: December 11, 2015 (Date of publication)
AY: 2006-07
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CITATION:
Transfer Pricing: Important legal principles on whether an adjustment for Advertisement & Market Promotion (AMP) expenses can be made on the basis that there is an assumed “international transaction” with the AE because the advertisement expenditure of the Indian company is “excessive” explained

The transfer pricing adjustment is not expected to be made by deducing from the difference between the ‘excessive’ AMP expenditure incurred by the Assessee and the AMP expenditure of a comparable entity that an international transaction exists and then proceed to make the adjustment of the difference in order to determine the value of such AMP expenditure incurred for the AE. And, yet, that is what appears to have been done by the Revenue in the present case. It first arrived at the ‘bright line’ by comparing the AMP expenses incurred by MSIL with the average percentage of the AMP expenses incurred by the comparable entities. Since on applying the BLT, the AMP spend of MSIL was found ‘excessive’ the Revenue deduced the existence of an international transaction. It then added back the excess expenditure as the transfer pricing ‘adjustment’. This runs counter to legal position explained in CIT v. EKL Appliances Ltd. (2012) 345 ITR 241 (Del), which required a TPO “to examine the ‘international transaction’ as he actually finds the same.” In other words the very existence of an international transaction cannot be a matter for inference or surmise

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DATE: November 6, 2015 (Date of pronouncement)
DATE: December 3, 2015 (Date of publication)
AY: 2006-07
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CITATION:
S. 271(1)(c): A penalty notice u/s 274 which does not strike out the irrelevant portion & which does not specify whether the penalty is for “concealment” or for “furnishing inaccurate particulars” renders the penalty order void

The next argument that the show cause notice u/s.274 of the Act which is in a printed form does not strike out as to whether the penalty is sought to be levied on the for “furnishing inaccurate particulars of income” or “concealing particulars of such income”. On this aspect we find that in the show cause notice u/s.274 of the Act the AO has not struck out the irrelevant part. It is therefore not spelt out as to whether the penalty proceedings are sought to be levied for “furnishing inaccurate particulars of income” or “concealing particulars of such income”

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DATE: November 27, 2015 (Date of pronouncement)
DATE: December 3, 2015 (Date of publication)
AY: 2006-07
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CITATION:
Entire law on transfer pricing implications of (i) allowing excess credit to AE's on account of sale of goods and (ii) issue of corporate guarantee to AEs (after insertion of Explanation i(c) to s. 92B by FA 2012) explained

If the international transaction of exports of goods which has been benchmarked on TNMM basis is duly accepted by the TPO, making an adjustment for interest on excess credit allowed on sales to AEs will vitiate the picture, inasmuch as what has already been factored in the TNMM analysis, by taking operating profit figure which incorporate financial impact of the excess credit period allowed, will be adjusted again separately as well because the interest levy for late realization of debtors is inextricably connected with the sales and is also part of operating income. When such an interest is includible in operating income and the operating income itself has been accepted as reasonable under the TNMM, there cannot be an occasion to make adjustment for notional interest on delayed realization of debtors

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DATE: November 30, 2015 (Date of pronouncement)
DATE: December 3, 2015 (Date of publication)
AY: 2007-08
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CITATION:
S. 68 (bogus share capital): Despite statement of Mukesh C. Choksi & Jayesh Sampat admitting bogus share capital, addition cannot be made in assessee-company's hands

If the share application money is received by the assessee company from alleged bogus share holders who’s name are given to the AO then the department is free to proceed to reopen their individual assessments in accordance with law but it cannot be regarded as undisclosed income of assessee company

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DATE: November 24, 2015 (Date of pronouncement)
DATE: November 29, 2015 (Date of publication)
AY: -
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CITATION:
S. 3 of Indian Evidence Act: A "Compact Disc" (CD) is a "document" and is admissible as evidence

In view of the definition of ‘document’ in Evidence Act, and the law laid down by this Court, as discussed above, we hold that the compact disc is also a document. It is not necessary for the court to obtain admission or denial on a document under sub-section (1) to Section 294 CrPC personally from the accused or complainant or the witness. The endorsement of admission or denial made by the counsel for defence, on the document filed by the prosecution or on the application/report with which same is filed, is sufficient compliance of Section 294 CrPC

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DATE: November 27, 2015 (Date of pronouncement)
DATE: November 29, 2015 (Date of publication)
AY: 2007-08, 2008-09
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CITATION:
S. 68 (share capital): (i) It is a fallacy to assume that a company which has not commenced business has unaccounted money, (ii) Fact that investors have a common address is not relevant, (iii) Fact that shares were subsequently sold at reduced rate is not relevant

There is a basic fallacy in the submission of the Revenue about the precise role of the Assessee, Five Vision. The broad sweeping allegation made is that “the Assessee being a developer is charging on money which is taken in cash”. This, however, does not apply to the Assessee which appears to be involved in the construction of a shopping mall. In fact for the AYs in question, the Assessee had not commenced any business. The construction of the mall was not yet complete during the AYs in question. The profit and loss account of the Assessee for all the three AYs, which has been placed on record, shows that only revenue received was interest on the deposits with the bank. Assessee is, therefore, right in the contention that the basic presumption of the Revenue as far as the Assessee is concerned has no legs to stand. Correspondingly, the further allegation that such ‘on money’ was routed back to the mainstream in the form of capital has also to fail

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DATE: November 19, 2015 (Date of pronouncement)
DATE: November 29, 2015 (Date of publication)
AY: 2008-09
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CITATION:
S. 10B: Deemed Export Drawback, Customer claims, Freight subsidy & Interest on fixed deposit receipts (under lien for LC & bank guarantee) are all derived from the undertaking & are eligible for deduction

The Court fails to appreciate as to how the ITAT could have held that this transaction did not arise from the business of the export of goods. Even as regards freight subsidy, the Assessee’s contention was that it had received the subsidy in respect of the business carried on and the said subsidy was part of the profit of the business of the undertaking. If the ITAT was prepared to consider the deemed export draw back as eligible for deduction then there was no justification for excluding the freight subsidy

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DATE: October 31, 2015 (Date of pronouncement)
DATE: November 29, 2015 (Date of publication)
AY: -
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CITATION:
S. 254(1): The ITAT has no jurisdiction to grant a stay of prosecution proceedings as such proceedings are not directly & substantially flowing from the orders impugned before it

once it is accepted that proceedings for prosecution are independent of assessment and penalty, and the Tribunal is neither the appellate nor the revisional authority in a case where prosecution is launched, the mere fact that the decision in the appeal may have an impact on the prosecution, in our considered opinion, cannot be used to read into the expressions “pass such orders thereon as it thinks fit” or “any proceedings relating to an appeal”, a power in the Tribunal to direct that prosecution or a show cause notice shall be kept in abeyance. There is another aspect of the case, namely, if such a power, as has been canvassed by the assessee, were available to the Tribunal, prosecution would have to await the final outcome of proceedings up to the Supreme Court

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DATE: November 17, 2015 (Date of pronouncement)
DATE: November 27, 2015 (Date of publication)
AY: 2005-06
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CITATION:
S. 32/ 43(6): Even assets installed in a discontinued business are eligible for depreciation as part of 'block of assets'

Once the concept of block of assets was brought into effect from assessment year 1989-90 onwards then the aggregate of written down value of all the assets in the block at the beginning of the previous year along with additions made to the assets in the subject Assessment Year depreciation is allowable. The individual asset loses its identity for purposes of depreciation and the user test is to be satisfied at the time the purchased Machinery becomes a part of the block of assets for the first time

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DATE: August 31, 2015 (Date of pronouncement)
DATE: November 27, 2015 (Date of publication)
AY: 2009-10
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CITATION:
S. 11/ 12AA: Mere non-intimation of amendments to trust deed cannot ipso facto result in cancellation of registration if there is no change in tone and tenor of objects

Mere non-intimation of the amendments in the Trust Deed to the Department cannot ipso-facto lead to cancellation of registration because the statutory requirement of cancellation of registration contained in section 12AA(3) of the Act prescribe that the cancellation of registration cannot be effectuated unless a case is made out that the new objects do not fit-in with the existing objects (i.e. new objects are ‘non-charitable’ in nature) or that the activities are in-genuine

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