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DATE: July 14, 2011 (Date of publication)
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The CIT(A)’s view that the gains could be treated as either STCG or business profits depending on whether they had been held for a period of 30 days or shorter is not proper because the holding period is only one of the several criteria that has to be applied to determine whether the transaction is on trading or investment account. The principles that have to be applied are (a) the intention of the assessee at the time of purchase, (b) whether borrowed funds were used, (c) the frequency of purchase and sales, (d) the treatment in the books etc. No single criteria is conclusive and an overall view has to be taken (Associated Industrial Development 82 ITR 586 (SC) & Holck Larsen 160 ITR 67 (SC) followed)

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DATE: July 12, 2011 (Date of publication)
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The issues as to (i) whether the word “contractor” is synonymous with “developer” within the meaning of s. 80-IA(4)(i) and (ii) whether the condition in clause (c) is applicable to a developer who is not carrying on the business of operating and maintaining the infrastructural facilities are covered by the judgement in ABG Heavy Industries 322 ITR 323 (Bom). There, it was held that the department’s contention that since the assessee was not “operating and maintaining the facility”, he was not eligible for s. 80-IA(4) deduction was wrong because a harmonious reading of s. 80-IA(4) led to the conclusion that the deduction was available to an assessee who (i) develops or (ii) operates and maintains or (iii) develops, operates and maintains the infrastructure facility. The 2001 amendment made it clear that the three conditions of development, operation and maintainence were not intended to be cumulative in nature. The result is that even a contractor who merely develops but does not operate or maintain the infrastructure facility is eligible for s. 80-IA(4) deduction (B.T.Patil & Sons Belgaum vs. ACIT 126 TTJ 577 (Mum) impliedly held not good law)

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DATE: July 8, 2011 (Date of publication)
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U/s 92B(1), the apportionment of cost is permissible only where there exists a “mutual agreement or arrangement” between two or more Associated Enterprises for apportionment of cost incurred in connection with a benefit, service or facility provided to any one or more of such Enterprises. In the absence of such an agreement to share the costs incurred on the McKinsey study, the costs cannot be apportioned. The bare allegation that the AE’s had received “specific and identifiable benefits” is not sufficient to justify apportionment. Further, even assuming that the AEs were liable to compensate the assessee, the TPO ought to have determined the ALP of such “international transaction” after taking into consideration all the rights obtained and obligations incurred by the two entities, including the advantages obtained by the AEs. He ought to have identified comparables and recorded a finding that the consultancy charges were higher than what a similarly situated and comparable independent domestic entity would have incurred. In the absence of such exercise, the adjustment cannot be upheld

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DATE: July 8, 2011 (Date of publication)
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While the Finance (No.2) Act, 2009 provides that the substituted Proviso shall come into effect on 1.10.2009 and applies in respect of AY 2009-10 & subsequent years, the Explanatory Notes to the Finance (No.2) Act, 2009 issued vide Circular No.5/2010 dated 3.6.2010 incorrectly states that the amendment comes into effect on 1.4.2009. In the Corrigendum, it is stated that the amendment shall apply to proceedings pending before the TPO on or after 1.10.2009. It is difficult to accept the argument of the Department that retrospective or prospective applicability of a provision should be decided in the manner explained by the CBDT. A procedural provision resulting in creating a new disability or which imposes a new duty in respect of transactions already completed cannot be applied retrospectively. As the amended Proviso brings about a substantial change in the relief available to an assessee, it cannot be treated as being retrospective in nature. Kuber Tobacco Products 117 ITD 273 (Del) (SB) & Ekta Promoters 113 ITD 719 (Del) (SB) followed

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DATE: July 7, 2011 (Date of publication)
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ERP Software Package Allowable As Revenue Expenditure The assessee, engaged in manufacturing of telecommunication and power cable accessories and trading in oil retracing system and other products, incurred expenditure of Rs. 23 lakhs on purchase of “Enterprises Resources Planning (ERP) …

CIT vs. Raychem RPG Ltd (Bombay High Court) Read More »

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DATE: July 6, 2011 (Date of publication)
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he rule against bias or interest is based on three maxims (i) No man shall be a judge in his own cause; (ii) Justice should not only be done, but manifestly and undoubtedly be seen to be done; and (iii) Judges, like Caesar’s wife should be above suspicion. The first requirement of natural justice is that the Judge should be impartial and neutral and must be free from bias. To decide whether there is “bias”, the “real likelihood test” has to be adopted. In each case, the Court has to consider whether a fair minded and informed person, having considered all the facts would reasonably apprehend that the Judge would not act impartially. To put it differently, the test would be whether a reasonably intelligent man fully apprised of all the facts would have a serious apprehension of bias. In deciding the question of bias one has to take into consideration human probabilities and ordinary course of human conduct

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DATE: July 5, 2011 (Date of publication)
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The law laid down in CIT vs. Shambhu Investment 249 ITR 7 (Cal) approved in 263 ITR 143 (SC) is that merely because income is attached to immovable property cannot be the sole factor for assessment of such income as income from property. What has to be seen is the primary object of the assessee while exploiting the property. If the main intention is to let out the property, the income is assessable as “income from house property” while if the main intention is to exploit the immovable property by way of complex commercial activities, the income is assessable as business income {Sultan Brothers 51 ITR 353 (SC) explained as not being in conflict with Shambhu Investments 263 ITR 143 (SC)}

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DATE: July 5, 2011 (Date of publication)
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While the order passed by the Single Judge is justified and the show-cause notice does not call for interference, in view of the judgement of the Supreme Court in Vodafone International vs. UOI 221 CTR 617, the interest of the assessee is safeguarded by directing that the AO shall record a finding on the preliminary issue relating to jurisdictional fact (as to whether the overseas transaction attracts Indian tax at all). If the assessee is aggrieved by the finding, it is entitled to challenge the same by a Writ Petition

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DATE: July 5, 2011 (Date of publication)
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Pursuant to a Writ Petition alleging inaction by the Government on the unearthing of unaccounted money, the Supreme Court set up a High Level Committee to act as a Special Investigation Team to supervise the investigation by the Government into black money. In the course of the ruling, the Court considered the impact of the Double taxation Avoidance Agreements, the Vienna Convention and the judgement in UOI vs. Azadi Bachao Andolan 263 ITR 706 (SC). The Court strongly disapproved of the stand taken by the Government (click here) that the names of the tax evaders was a “secret” and could not be revealed under the India-Germany DTAA

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DATE: (Date of pronouncement)
DATE: July 4, 2011 (Date of publication)
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This Court categorically held (in the earlier judgement – attached) that even if there is no period of limitation prescribed u/s153 (3)(ii) to give effect to s. 263 orders, the AO is required to pass the order within a “reasonable period”. Non-specification of period of limitation does not mean that the AO can wait for indefinite period before passing the consequential order. On facts, the period of 3 years & 8 Months that had elapsed since the passing of the s. 263 order was “certainly much beyond the reasonable period that can be allowed to the AO to pass the consequential order“. As the s. 263 order was rightly held to be infructuous, the effect order passed thereafter is not valid