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DATE: May 15, 2015 (Date of pronouncement)
DATE: May 26, 2015 (Date of publication)
AY: 2009-10
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S. 192 vs/ 194-J: Tests to determine whether there is an employer-employee relationship explained

Determination of the vexed questions as to whether a contract is a contract of service or contract for service and whether the employees concerned are employees of the contractors has never been an easy task. No decision of this Court has laid down any hard-and-fast rule nor is it possible to do so. The question in each case has to be answered having regard to the fact involved therein. No single test – be it control test, be it organisation or any other test – has been held to be the determinative factor for determining the jural relationship of employer and employee

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DATE: May 19, 2015 (Date of pronouncement)
DATE: May 19, 2015 (Date of publication)
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S. 254(2A): The Third Proviso which restricts the power of the ITAT to grant stay beyond 365 days “even if the delay in disposing of the appeal is not attributable to the assessee” is arbitrary, unreasonable and discriminatory. It is struck down as violative of Article 14. The ITAT has the power to extend stay even beyond 365 days

While it could be argued that the condition that the stay order could be extended beyond a period of 180 days only if the delay in disposing of the appeal was not attributable to the assessee was a reasonable condition on the power of the Tribunal to the grant an order of stay, it can, by no stretch of imagination, be argued that where the assessee is not responsible for the delay in the disposal of the appeal, yet the Tribunal has no power to extend the stay beyond the period of 365 days. The intention of the legislature, which has been made explicit by insertion of the words – ‘even if the delay in disposing of the appeal is not attributable to the assessee’– renders the right of appeal granted to the assessee by the statute to be illusory for no fault on the part of the assessee. The stay, which was available to him prior to the 365 days having passed, is snatched away simply because the Tribunal has, for whatever reason, not attributable to the assessee, been unable to dispose of the appeal

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DATE: May 15, 2015 (Date of pronouncement)
DATE: May 19, 2015 (Date of publication)
AY: -
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S. 80-IB(10): Restriction on extent of commercial area in “housing project” imposed w.e.f. 1.4.2005 does not apply to housing projects approved before 1.4.2005 even though completed after 1.4.2005

Can it be said that in order to avail the benefit in the assessment years after 1.4.2005, balconies should be removed though these were permitted earlier? Holding so would lead to absurd results as one cannot expect an assessee to comply with a condition that was not a part of the statute when the housing project was approved. The only way to resolve the issue would be to hold that clause (d) is to be treated as inextricably linked with the approval and construction of the housing project and an assessee cannot be called upon to comply with the said condition when it was not in contemplation either of the assessee or even the Legislature, when the housing project was accorded approval by the local authorities

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DATE: May 15, 2015 (Date of pronouncement)
DATE: May 19, 2015 (Date of publication)
AY: 1991-92
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S. 32: The assessee has the right to disclaim depreciation in its entirety. However, it cannot claim depreciation for the current year and disclaim unabsorbed depreciation

Once the unabsorbed carried forward depreciation has become a part of the depreciation of the current year, it is not open to the assessee to bifurcate the two again and exercising its choice to claim the depreciation of the current year under Section 32(1) of the Act and take a position that since unabsorbed depreciation of the previous years is not claimed, it cannot be thrusted upon the assessee. The position would have been different if the assessee had not claimed any depreciation at all. However, once the depreciation is claimed and while giving deductions the depreciation is to be set off against the profits of the current year prior to the unabsorbed carried forward investment allowance, it is the entire depreciation, namely, the depreciation of the current year as well as the unabsorbed carried forward depreciation, which is to be taken into account as by virtue of the fiction created under Section 32(2) of the Act

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DATE: May 13, 2015 (Date of pronouncement)
DATE: May 19, 2015 (Date of publication)
AY: 2004-05 to 2009-10
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S. 132: While the revenue has to record reasons to show that “satisfaction” for the search was proper and the same is justiciable, the assessee is not entitled (till the start of the assessment proceedings) to inspect the documents or the reasons as it would be counter-productive and confer an unfair advantage on the assessee

The finding of the High Court that as the satisfaction recorded is justiciable, the documents pertaining to such satisfaction can be allowed to be inspected by the assessee is plainly incorrect. The necessity of recording of reasons, despite the amendment of Rule 112 (2) with effect from 1st October, 1975, has been repeatedly stressed upon by this Court so as to ensure accountability and responsibility in the decision making process. The necessity of recording of reasons also acts as a cushion in the event of a legal challenge being made to the satisfaction reached. Reasons enable a proper judicial assessment of the decision taken by the Revenue. However, the above, by itself, would not confer in the assessee a right of inspection of the documents or to a communication of the reasons for the belief at the stage of issuing of the authorization. Any such view would be counter productive of the entire exercise contemplated by Section 132 of the Act. It is only at the stage of commencement of the assessment proceedings after completion of the search and seizure, if any, that the requisite material may have to be disclosed to the assessee

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DATE: May 7, 2015 (Date of pronouncement)
DATE: May 19, 2015 (Date of publication)
AY: 1990-91
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S. 43B: "Vend fee" paid by the assessee to the Government, even if of the nature of "privilege fee" falls within the expression "fee by whatever name called"

A reading of Section 43B after it was substituted by the Finance Act, 1988 with effect from 01.04.1989 shows that sub clause (a) in Section 43B has been considerably widened by the amendment by the addition of the words “by whatever name called”. It is clear, therefore, that to attract this section any sum that is payable whether it is called tax, duty, cess or fee or called by some other name, becomes a deduction allowable under the said Section provided that in the previous year, relevant to the assessment year, such sum should be actually paid by the assessee

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DATE: May 8, 2015 (Date of pronouncement)
DATE: May 9, 2015 (Date of publication)
AY: -
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S. 194-I/ 194-J: Meaning of expression "rent" and "fees for technical services" explained in the context of transmission & wheeling charges paid by electricity company

The expression rent would also entail an element of possession. In each of the instances contemplated by the explanation to Section 194-I, we see in them an element of possession, be it land, building (including factory building), land appertaining to a building, plant, equipment, furniture or fittings. The person using it has some degree of possessory control, at least momentarily, although it cannot entrust the user title to the subject matter of the charge. Even the mere right to “use” is vested with an element of possessory control over the subject matter

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DATE: April 29, 2015 (Date of pronouncement)
DATE: May 9, 2015 (Date of publication)
AY: 2001-02, 2004-05, 2005-06
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Indian agent of foreign company cannot be regarded as "Dependent Agent Permanent Establishment" if agent has no power to conclude contracts. If the agent is remunerated at arms' length basis, no further profit can be attributed to the foreign company. It is doubtful whether retrospective amendment to s. 9(i)(vi) can apply the DTAA. However, question is left open

The Indo-Mauritius DTAA requires that the first enterprise in the first mentioned State has and habitually exercised in that State an authority to conclude contracts in the name of the enterprise unless his activities are limited to the purchase of goods or merchandise for the enterprise is a condition which is not satisfied. Therefore, this is not a case of B4U India being an agent with an independent status. The findings of the Supreme Court judgment in Morgan Stanley & Co. that there is no need for attribution of further profits to the permanent establishment of the foreign company where the transaction between the two is at arm’s length but this was only provided that the associate enterprise was remunerated at arm’s length basis taking into account all the risk taking functions of the multinational enterprise. Thus, assuming B4U India is a dependent agent of the assessee in India it has been remunerated at arm’s length price and, therefore, no profits can be attributed to the assessee

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DATE: April 29, 2015 (Date of pronouncement)
DATE: May 9, 2015 (Date of publication)
AY: 2001-02
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CITATION:
S. 9(1)(vii)/ Article 13(4): Amount paid by Indian entities as “share of cost” of utilizing automated telecommunications system is not assessable as “fees for technical services” if there is not profit element in it

utilization of the Maersk Net Communication system was an automated software based communication system which did not require the assessee to render any technical services. It was merely a cost sharing arrangement between the assessee and its agents to efficiently conduct its shipping business. The Maersk Net used by the agents of the assessee entailed certain costs reimbursement to the assessee. It was part of the shipping business and could not be captured under any other provisions of the Income Tax Act except under DTAA

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DATE: April 21, 2015 (Date of pronouncement)
DATE: May 7, 2015 (Date of publication)
AY: 2008-09
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S. 153A: No addition can be made in respect of an unabated assessment which has become final if no incriminating material is found during the search. An ICD is an "infrastructural facility" for s. 80-IA(4)

Once it is held that the assessment has attained finality, then the AO while passing the independent assessment order under Section 153A read with Section 143 (3) of the I.T. Act could not have disturbed the assessment / reassessment order which has attained finality, unless the materials gathered in the course of the proceedings under Section 153A of the Income-tax Act establish that the reliefs granted under the finalised assessment/ reassessment were contrary to the facts unearthed during the course of 153A proceedings

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