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DATE: August 24, 2016 (Date of pronouncement)
DATE: November 8, 2016 (Date of publication)
AY: 2008-09
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CITATION:
Article 5 DTAA: Law explained as to when a "power of attorney" holder of a non-resident can constitute a "dependent agent", "fixed place of business" and a "permanent establishment" under Article 5 of the DTAA. The fact that the physical presence of the non-resident in India is nominal is irrelevant

While business constitutes continuous activity in organized manner it is often a question of fact & law. “Place of business” usually means a premises of the enterprise used for carrying on the business, whether or not exclusively used for business. The residence of the country Manager was held to be a fixed place of business as the same was used as an office address in Sutron Corporation In re 268 ITR 156 AAR. Similarly an office space of 3 x 6 metres in Motorola Inc & Ors 95 ITD 269 (Del). To constitute a PE, the business must be located at a single place for a reasonable length of time. The activity need not be permanent, endless or without interruptions. It may not be out of place to mention that functions performed by Sri V. Subramanian or the Indian subsidiary could not be classified as preparatory or auxiliary in character. The facts strongly indicate towards Sri V. Subramanian constituting a dependent agent / PE for reasons brought on record by the AO and as discussed in foregoing paragraphs. There were no presence of a number of principals who exercised legal and or economic control over the agent Sri V. Subramanian. The principal i.e. the assessee has failed to demonstrate this aspect when confronted by the AO. The principal i.e. the assessee was relying on the special skills and knowledge of the agent Sri V. Subramanian the Managing Director of the Indian entity by the same name and rendering similar functions. Sri V. Subramanian was acting exclusively or almost exclusively for and on behalf of the assessee during the currency of the contracts in question. To that extent it was not in furtherance of his ordinary course of business. Finally the refuge taken of Article 5(2)(j) on the short period of contracts and the interregnum does not offer any solace to the assessee either. The assessee has not demonstrated it was a mere passing, transient or casual presence for its activity in India

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DATE: September 2, 2016 (Date of pronouncement)
DATE: November 7, 2016 (Date of publication)
AY: -
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CITATION:
S. 279(2) Compounding of offenses: The fact that the assessee has been convicted of an offense does not mean that the application for compounding of the offense is not maintainable. Under the guidelines, the competent authority has to examine the merits of the case and decide whether there is a case for compounding. There are no fetters on the powers of the competent authority under the guidelines. An appeal filed against a conviction is a "proceeding" for s. 279(2).

The power of compounding is exercisable when proceedings are pending. In the case on hand, the sentence imposed on the petitioner has been suspended by the Appellate Court and the appeal is still pending. Therefore, it has to be seen as to whether that conviction by the Criminal Court should be the only reason for rejecting the petitioner’s application for compounding the offence. Clause 4.4 of the guidelines states that cases not to be compounded. It commences with a non obstante clause stating that notwithstanding anything contained in the guidelines, the category of cases mentioned in clauses (a) to (g) should normally not be compounded. Thus, the guidelines does not specifically place an embargo on the competent authority to consider the application for compounding merely on the ground when the assessee has been convicted by a court of law

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DATE: September 30, 2016 (Date of pronouncement)
DATE: November 7, 2016 (Date of publication)
AY: 2002-03 to 2007-08
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CITATION:
S. 153C: An order u/s 153C passed without obtaining the approval of the JCIT u/s 153D is without jurisdiction and void in view of Calcutta Knitwears 362 ITR 673 (SC) and CBDT Circular No. 24/15 dated 31.12.2015

The guidelines of the Hon’ble Supreme Court as referred to in para 2 above, with regard to recording of satisfaction note may be brought to the notice of all for strict compliance. It is further clarified that even if the AO of the searched person and the “other person” is one and the same then also he is required to record his satisfaction as has been held by the Courts. In view of the above, filing of appeals on the issue of recording of satisfaction note should also be decided in the light of the above judgment. Accordingly, the Board hereby directs that pending litigation with regard to recording of satisfaction note under section 158BD/153C should be withdrawn/not pressed if it does not meet the guidelines laid down by the Apex Court.

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DATE: December 5, 2015 (Date of pronouncement)
DATE: November 1, 2016 (Date of publication)
AY: 2009-10
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CITATION:
S. 10A/10B: After the change in scheme from “exemption” to “deduction” w.e.f. 01.04.2001, brought forward unabsorbed loss & depreciation of other 10B units and non-10B units are not liable for set off against the current year's profit of the 10B unit. The contrary law laid down in Himatasingike Seide 156 Taxman 151 (Kar), as approved by the Supreme Court, deals with the law pre 01.04.2001 when s. 10A/10B provided for an “exemption” and not a “deduction”

We find that the decision of the Karnataka High Court in Himatasingike Seide Ltd. (supra) which was undisturbed by the Apex Court was in respect of Assessment Year 1994-95. Thus it dealt with the provisions of Section 10B of the Act as existing prior to 1 April 2001 which was admittedly different from Section 10B as in force during Assessment Year 2009-10 involved in this appeal. Section 10B of the Act as existing prior to 1 April 2001 provided for an exemption in respect of profits and gains derived from export by 100% Export Oriented Undertakings and now it provides for deduction of profits and gains derived from a 100% Exported Oriented Units

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DATE: October 5, 2016 (Date of pronouncement)
DATE: November 1, 2016 (Date of publication)
AY: 1997-98
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CITATION:
S. 147: Even if the claim for s. 80-IA deduction is contrary to Pandian Chemicals 262 ITR 278 (SC) and Liberty India 317 ITR 218 (SC), the assessment cannot be reopened (beyond 4 years) in the absence of tangible material. The reasons recorded for the reopening cannot be improved or supplemented later

The rationale furnished by the revenue in its counter affidavit and reiterated in the court during the hearing was that a component of income which was otherwise inadmissible but escaped the notice of the AO, because of the ratio in Liberty India and Pandian (supra) is unpersuasive. Besides, the lack of any reference to objective material, cannot in any way improve the case of the revenue – much less its reference to otherwise binding judgments that could have been the basis of a valid revision by the revenue under Section 264. It goes without saying that statutory orders containing reasons are to be judged on the basis of what is apparent and not what is explained later, as the validity of those orders does not improve with time or on account of better explanations furnished in the course of legal proceedings (refer M.S. Gill and Anr. vs. Chief Election Commissioner AIR 1978 SC 581)

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DATE: September 22, 2016 (Date of pronouncement)
DATE: November 1, 2016 (Date of publication)
AY: 2008-09
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CITATION:
S. 45/48: In valuing the shares of a privately held co, the “enterprise valuation” has to be taken by valuing even the assets held by subsidiaries of the Company. It is common for the sellers to charge a “controlling premium” for the sale of the shares. Such transfers to enable restructuring and re-aligning the shareholding pattern are genuine and bona fide. The alleged excess consideration for the sale of the shares cannot be treated as “unexplained income”

The exit from the closely held company BEC Industrial Investment Company Private limited with its subsidiaries could in commercial parlance definitely command premium in addition to the normal price based on NAV as first of all the valuation of the subsidiary would get embedded in the price of share of BEC Industrial Investment company Private Limited and that valuation has to be done based on present value of enterprise and not necessarily the book value as represented by financial statements and also controlling premium is embedded in the price for the shares paid by acquiring shareholders to the selling shareholder group to vest/strengthen their control in the BEC Industrial Investment Private Limited which shall get embedded in mutually agreed negotiated price between the buyer and the seller

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DATE: September 14, 2016 (Date of pronouncement)
DATE: October 21, 2016 (Date of publication)
AY: -
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Attitude of the Revenue in not returning seized assets despite assessee having succeeded in appeal is clearly arbitrary and shows an attitude of undue harassment to the assessee in the garb of public Revenue. Interest of public revenue does not authorize Revenue Authorities to work without any authority and create or cause all kinds of harassment to innocent people on the pretext of statutory authority

Aforesaid attitude on the part of respondents is clearly arbitrary and shows an attitude of undue harassment to petitioner in the garb of public Revenue. Interest of public revenue does not authorize Revenue Authorities to work without any authority and create or cause all kinds of harassment to innocent people on the pretext of statutory authority, Revenue Authorities cannot claim liberty/privilege so as to deprive an individual, his property and that too in a manner, which has been found quite unreasonable and wholly without jurisdiction

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DATE: September 23, 2016 (Date of pronouncement)
DATE: October 21, 2016 (Date of publication)
AY: 2013-14
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CITATION:
S. 234E: Entire law on whether fee for late filing of TDS returns can be levied prior to 01.06.2015 and whether the intimation issued u/s 200A is appealable explained

It is clear that the prescribed authority has been vested with the power to charge fees under section 234E of the Act only with regard to levy of fees by the substitution made by Finance (No.2) Act, 2015 w.e.f. 01.06.2015. Once the power has been given, under which any levy has to be imposed upon tax payer, then such power comes into effect from the date of substitution and cannot be applied retrospectively. The said exercise of power has been provided by the statute to be from 01.06.2015 and hence, is to be applied prospectively. There is no merit in the claim of Revenue that even without insertion of clause (c) under section 200A(1) of the Act, it was incumbent upon the assessee to pay fees, in case there is default in furnishing the statement of tax deducted at source. Admittedly, the onus was upon the assessee to prepare statements and deliver the same within prescribed time before the prescribed authority, but the power to collect the fees by the prescribed authority vested in such authority only by way of substitution of clause (c) to section 200A(1) of the Act by the Finance Act, 2015 w.e.f. 01.06.2015. Prior to said substation, the Assessing Officer had no authority to charge the fees under section 234E of the Act while issuing intimation under section 200A of the Act. Before exercising the authority of charging any sum from any deductor or the assessee, the prescribed authority should have necessary power vested in it and before vesting of such power, no order can be passed by the prescribed authority in charging of such fees under section 234E of the Act, while exercising jurisdiction under section 200A of the Act. Thus, in the absence of enabling provisions, under which the prescribed authority is empowered to charge the fees, the Assessing Officer while processing the returns filed by the deductor in respect of tax deducted at source can raise the demand on account of taxes, if any, not deposited and charge interest. However, prior to 01.06.2015, the Assessing Officer does not have the power to charge fees under section 234E of the Act while processing TDS returns. In the absence of enabling provisions, levy of fees could not be effected in the course of intimation issued under section 200A of the Act prior to 01.06.2015

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DATE: October 18, 2016 (Date of pronouncement)
DATE: October 20, 2016 (Date of publication)
AY: -
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S. 50B: Important law explained on what constitutes a "slump sale" and whether capital gains on liquidation of a firm are chargeable to tax

The assessees, however, are attempting the wriggle out from payment of capital gain tax on the ground that it was a “slump sale” within the meaning of Section 2(42C) of the Act and there was no mechanism at that time as to how the capital gain is to be computed in such circumstances, which was provided for the first time by Section 50B of the Act with effect from April 01, 2000. However, this argument fails in view of the fact that the assets were put to sale after their valuation. There was a specific and separate valuation for land as well as building and also machinery. Such valuation has to be treated as that of a partnership firm which had already stood dissolved

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DATE: October 15, 2016 (Date of pronouncement)
DATE: October 19, 2016 (Date of publication)
AY: 2015-16
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CITATION:
S. 143(1D): AO cannot rely on Instruction No.1/2015 dated 13.01.2015 to withhold refunds as the same has been struck down by the Delhi High Court in Tata Teleservices & the same is binding on all AOs across the Country. Action of the AO in not giving reasons for not processing the refund application is “most disturbing” and stating that he will wait till the last date is “preposterous”. Action of the AO suggests that it is not enough that the deity (Act) is pleased but the priest (AO) must also be pleased

The action of the officer on the ground urged seems to be in complete variance with the higher echelons of administration of the tax administration being an assessee friendly regime. In fact, the CBDT has itself issued Instruction No.7/2012, dated 1st August, 2002 wherein they have specifically directed the officers of the Revenue to process all returns in which refunds are payable expeditiously. Similarly, as late as in 2014 in the Citizen’s Charter issued by the Income Tax Department in its vision statement states that the Department aspires to issue refunds along with interest under Section 143(1) of the Act within 6 months from date of electronically filing the returns. In this case, the return was filed on 29th November, 2015, yet there is no reason why the Assessing Officer has not processed the refund and taken a decision to grant or not grant a refund under Section 143(1D) of the Act. This attitude on the part of the Assessing Officer leaves us with a feeling (not based on any evidence) that the Officers of the Revenue seem to believe that it is not enough for the assessee to please the deity (Income Tax Act) but the assessee must also please the priest (Income Tax Officer) before getting what is due to him under the Act. The officers of the State must ensure that their conduct does not give rise to the above feeling even remotely

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