The State Commission, Delhi, held that services rendered by a Lawyer would not come within the ambit of s. 2(1)(o) of the Consumer Protection Act, 1986, as the client executes the power of attorney authorizing the Counsel to do certain acts on his behalf and there is no term of contract as to the liability of the lawyer in case he fails to do any such act. The State Commission held that it is a unilateral contract executed by the client giving authority to the lawyer to appear and represent the matter on his behalf without any specific assurance or undertaking.
Where the assessee carrying on the mercantile system of accounting claimed that:
(i) The additional liability arising on account of fluctuation in the rate of exchange in respect of loans taken for revenue purposes was allowable as deduction u/s 37(1) in the year of fluctuation in the rate of exchange and not in the year of repayment of such loans; and
(ii) The actual cost of imported assets acquired in foreign currency is entitled to be adjusted u/s 43A (prior to the amendment by the FA 2002) on account of fluctuation in the rate of exchange at each balance sheet date, pending actual payment of the varied liability HELD approving the claim that:
(a) The term “expenditure” in s. 37 covers an amount which is a “loss” even though the said amount has not gone out from the pocket of the assessee. The “loss” suffered by the assessee on account of the exchange difference as on the date of the balance sheet is an item of expenditure u/s 37(1) ;
In admitting the appeal filed under section 260A against the judgement of the 5 Member Special Bench of the Tribunal in Aztec Software vs. ACIT 294 ITR (AT) 32 / 107 ITD 41, the High Court has granted stay of “the operation and all further proceedings” of the said judgement until further orders.
Where the assessee constructed a project in Pune in which the percentage of commercial area to the total area was 20.83% and the said project was approved by the Pune Municipal Corporation as a “New/ Residential + Commercial project” (and not as a “housing project”) and the question arose whether prior to the amendment of s. 80 IB (10) w.e.f. 1.4.2005 (which provides that the commercial area in a housing project should not exceed the lesser of 5% of the built up area or 2,000 sq ft), the assessee’s project was a “housing project” eligible for deduction u/s 80-IB (10), HELD:
(i) S. 80 IB (10) is aimed at promoting construction of housing projects so as to address the problem of shortage of dwelling units. It cannot be said that the object is to encourage house building activity per se, irrespective of whether these are dwelling or commercial units;
(ii) However, given that under the DC Rules (of Pune) there cannot be a pure residential project and it is incumbent on the developer to reserve a part of the plot for shopping, commercial use of area must be regarded as an integral part of a housing project and does not vitiate the character of a housing project;
Where the assessee, an Australian company, entered into an agreement with Reliance and it was agreed that the consideration thereof constituted “royalty” but the assessee claimed (i) that the said royalty was “effectively connected” with a permanent establishment (PE) and consequently assessable as business profits, (ii) that the portion of such “profits” as was not “attributable” to the PE was not assessable to tax in India and (iii) that even otherwise the royalty was not assessable to tax in view of Ishikawakima 288 ITR 408 (SC) where it was held that fees for technical services (and royalty) was not assessable to tax u/s 9(1)(vii) (9(1)(vi)) if it was not rendered and utilized in India, HELD:
(i) In order to be “effectively connected”, the PE should be engaged in the performance of royalty generating services. There must be a real and intimate connection and clear co-relation between the services giving rise to royalty and the PE. A connection between the PE and the contract is not enough;
Where the assessee-employer obtained expatriate-employees from a foreign company and the said employees, continuing to be employees of the foreign company, received salary and allowance in their home country in foreign currency and the question arose whether the assessee was obliged to deduct tax thereon at source u/s 192 and the High Court held that the assessee was not obliged to deduct tax at source on the ground that the payment was by the foreign company and not by the assessee, HELD, reversing the High Court that:
(i) Though the payment of salary to the expatriate was made by the foreign company outside India, the TDS provisions did apply as the Act had extra-territorial operation as there was a nexus between the said salary and the rendering of services in India;
(ii) U/s 9 (1) (ii), salary received abroad is deemed to arise in India if it is for services rendered in India. This charging provision has to be read with the machinery provision of s.192 and both are part of an integrated code;
(iii) S. 192 requires the employer to deduct tax after “estimating” the salary payable to the employee. The act of “estimation” is akin to computation of income. In making the estimate, s. 9 (1) (ii) has to be taken into account;
(iv) On facts, as it was found that the salary paid by the foreign company was for services in India the same was deemed to accrue in India u/s 9 (1) (ii) and the assessee ought to have deducted tax u/s 192 though it was not the payer
Held, affirming the majority view of the Special Bench in DCIT vs. Oman International Bank 100 ITD 285 that:
(i) Though the Circulars issued by the CBDT are not binding on the court as held in CCE vs. Ratan Melting & Wire Industries 231 ELT 22 (S.C.), it is binding on the authorities and while it is for the Court to read the section in its proper context, while so reading the Court will bear in mind the circular issued by the CBDT. Circulars are sometimes issued to obviate difficulties in the operation of the provisions and these are aspects which Courts do bear in mind while considering the Circulars. Accordingly, Circulars have to be taken into account.
(ii) The decision of an assessee to treat a debt as a bad debt in his books has to be a business or commercial decision and not whimsical or fanciful and must be based on material that the debt is not recoverable. The decision must be bona fide;
(iii) Post amendment of s. 36 (1)(vii) & 36 (2), the burden is not on the assessee to show the debt is “bad”. In order to disallow, the AO must show that the decision of the assessee was not bona fide.
Where s. 35G of the Central Excise Act (= 260A of the I. T. Act) provided a time limit of 180 days for filing an appeal and there was no provision for condoning delay by showing sufficient cause after the prescribed period, there was complete exclusion of section 5 of the Limitation Act and the High Court had no power to condone the delay after expiry of the prescribed period. Even otherwise, the legislature had provided sufficient time for filing a reference to the High Court which was more than the period prescribed for an appeal and revision.
Note: The judgement of the Full Bench of the Bombay High Court in CCE vs. Shree Rubber Plast is impliedly overruled.
Where the question arose whether in respect of an appeal admitted u/s 260A, the High Court has power to grant stay of recovery of outstanding demand, HELD:
(i) S. 260A provides that the provisions of the Code of Civil Procedure relating to appeals to the High Court shall apply;
(ii) Rules 5 (1) and 5 (3) of Order 41 of the Code of Civil Procedure authorize the Court to grant stay provided it is satisfied:
(a) that substantial loss may result to the party applying for stay of execution unless the order is made;
(b) that the application has been made without unreasonable delay; and
(c) that security has been given by the applicant for the due performance of such decree or order as may ultimately be binding upon him.
(iii) On facts, as these conditions were satisfied, the assessee was entitled to stay subject to conditions.
Where the question arose whether the Explanation to s. 73 (which deems the loss from trading in shares by a company to be speculation loss) can be confined only to cases where there is manipulation and whether the loss arising on valuation of closing stock of shares is also covered, HELD:
(i) Though the Circular of the CBDT supports the interpretation that the object of the Expl. to s. 73 is to curb manipulation of group companies’ shares, the scope of the Expl. extends to all companies carrying on business in shares;
(ii) Though the Expl. refers to purchase and sale of shares and not to losses suffered on account of valuation, it applies to valuation losses as well as there is no difference between trading losses and valuation losses.