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DATE: December 15, 2017 (Date of pronouncement)
DATE: January 4, 2017 (Date of publication)
AY: 2011-12
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CITATION:
S. 5/ 9: Salary received by a non-resident for services rendered abroad accrues outside India and is not chargeable to tax in India. The source of the receipt is not relevant. The CIT has wide powers u/s 264 and has to exercise them in favour of the assessee in terms of CBDT Circular No. 14 (XL-35) dated 11.04.1955

The relevant test to be applied to decide whether the income accrued to a non-resident in India or outside is concerned, is to find the place where the services were rendered, in order to consider where the income accrued. The source of the income was not relevant for the purposes of ascertaining whether the income had accrued in India or outside India. The question whether the petitioner has rendered services in India or not is a question of fact

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DATE: November 18, 2016 (Date of pronouncement)
DATE: November 26, 2016 (Date of publication)
AY: -
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CITATION:
Taxability of software license fees as royalty: Non-consideration of the verdict of the Tribunal in Solid Works Corporation (51 SOT 34) and misreading of the Delhi High Court's verdict in Ericsson AB constitutes a mistake apparent from the record u/s 254(2) and the orders have to be recalled

In the instant appeals, the Tribunal admittedly did not consider the decision rendered by co-ordinate bench in the case of Solid Works Corporation (supra), even though it was relied upon by the assessees herein. The assessees have contended that the non-consideration of the decision of co-ordinate bench, when it was specifically relied upon by the assessee would result in a mistake apparent from record and would warrant recall of the order. In support of this contention, the assessees have placed their reliance on the decision rendered by Hon’ble Supreme Court in the case of Honda Siel Power Products Ltd (supra), wherein the Hon’ble Apex Court has held that the Tribunal was justified in exercising its power u/s 254(2) when it was pointed out to the Tribunal that the judgement of co-ordinate bench was placed before the Tribunal when the original order came to be passed but it had committed a mistake in not considering the material which was already on record

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Posted on by Ankul Goyal
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DATE: May 4, 2016 (Date of pronouncement)
DATE: May 5, 2016 (Date of publication)
AY: 2003-04, 2004-05 and 2005-06
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CITATION:
Important principles laid down whether profits arising from off-shore supply of goods can be taxed in India on basis that (a) the goods continued in the possession of seller till acceptance of the goods by buyer in India, (b) the seller had a liaison office in India, (c) the seller had a wholly-owned subsidiary in India which negotiated contacts with the buyer, (d) installation, commissioning etc services were provided in India etc

The controversy whether the Assessee has a PE in India is interlinked to the finding that Nortel India had discharged some of the obligations of the Assessee under the Equipment Contract. Whilst, the Income Tax Authorities have held that the contracts entered into with Reliance – the Equipment Contact, Software Contract and Services Contract – are essentially a part of the singular turnkey contract, the Assessee contends to the contrary. Further, the Income Tax Authorities have held that a part of the Equipment Contract assigned to the Assessee was, in fact, performed by Nortel India. This too, is stoutly disputed by the Assessee. The question whether the Assessee has a PE in India is clearly interlinked with the issue whether Nortel India or Nortel LO had performed any of the functions or discharged any of the obligations assumed by the Assessee. Assessee argued that agreement for supply of hardware (Equipment Contract) could have been directly executed between Reliance and the Assessee but owing to relaince’s insistence on an Indian company being responsible for the entire works, agreements were executed between Nortel India and Reliance, with Nortel Canada as a surety.

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DATE: February 11, 2016 (Date of pronouncement)
DATE: February 17, 2016 (Date of publication)
AY: 2011-12
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CITATION:
A Power of Attorney executed by the Head Office in favour of the Liaison Office in India does not create a Permanent Establishment if the powers are specific to the liaison office and are not unfettered powers to enable to Liaison Office to act on behalf of the enterprise

The sole basis on which the AO as well as the DRP came to a conclusion that the assessee had a P.E. in India is the clauses in power of attorney executed by the head office in favour of its employee in the L.O. in India. Reliance was also placed on the permission granted by the RBI to the assessee for setting up the L.O. A plain reading of the clauses in the power of attorney takes us to a conclusion that the powers given therein are L.O. specific. The AO’s conclusion that the power of attorney granted unfettered powers to its L.O. employee, to do all or any acts for and on behalf of the assessee, is incorrect. In our view the finding of the AO that the power of attorney is an open ended document, which is clearly outside the scope of initial permission granted by the RBI is also perverse. No doubt the AO can investigate, call for evidences and come to a conclusion where any income earning activity has been carried out by the L.O. so as to construe it as fixed P.E. but, in our view it is beyond the jurisdiction of the AO to adjudicate and conclude that the assessee has filed false declarations before the RBI. At best, he can bring his findings to the notice of the RBI which may consider the same in accordance with law. The RBI has not found any violation of conditions laid down by it while permitting the assessee to have an L.O. In such circumstances, no adverse inference can be drawn

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DATE: September 3, 2015 (Date of pronouncement)
DATE: October 27, 2015 (Date of publication)
AY: -
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CITATION:
A liaison office of a foreign co which identifies a manufacturer in India, negotiates the price, helps in choosing raw material to be used, ensures compliance with quality and gets material tested is not a ‘permanent establishment’ under Article 5 of India-USA DTAA

If the petitioner has to purchase goods for the purpose of export, an obligation is cast on the petitioner to see that the goods, which are purchased in India for export outside India is acceptable to the customer outside India. To carry on that business effectively, the aforesaid steps are to be taken by the seller i.e., the petitioner. Otherwise, the goods, which are purchased in India may not find a customer outside India and therefore, the authority was not justified in recording a finding that those acts amounts to involvement in all the activities connected with the business except the actual sale of the products outside the country. In our considered information, all those acts are necessary to be performed by the petitioner – assessee before export of goods

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DATE: May 27, 2015 (Date of pronouncement)
DATE: May 29, 2015 (Date of publication)
AY: -
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CITATION:
S. 9: Retrospective amendments seeking to tax income of non-residents does not affect the “source rule”. The amendment makes no any difference to the non-taxability of payments made to foreign companies if the income accrues abroad

While no doubt, the explanation is deemed to be clarificatory and for a good measure retrospective at that, nevertheless there is nothing in its wording which overrides the exclusion of payments made under Section 9(1)(vii)(b). The Supreme Court clarified this in GVK Industries Ltd. v. ITO 371 ITR 453 Thus, it is evident that the “source” rule, i.e the purpose of the expenditure incurred, i.e for earning the income from a source in India, is applicable

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DATE: October 31, 2014 (Date of pronouncement)
DATE: November 3, 2014 (Date of publication)
AY: 2003-04
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(i) As the work done by the branch in India required high technical and managerial skill, it is not preparatory and auxiliary work of a back office but constitutes a permanent establishment (ii) Attribution of profits under Rule 10B(2) on the basis of the H.O's profits in the absence of data on uncontrolled transactions is proper, (iii) As risks were shared by the H.O. and the PE, 50% 50% of the profits determined as per rule 10 are attributable to operations carried out by the PE in India

(i) The benefit of the ratio of first part of Morgan Stanley and Co. Inc. (2007) 292 ITR 416 (SC) is not available for the assessee as on careful examination of activities and modus operandi of the assessee, we have …

Consulting Engineering Corporation vs. JDIT (ITAT Delhi) Read More »

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DATE: April 30, 2014 (Date of pronouncement)
DATE: November 3, 2014 (Date of publication)
AY: 2006-07
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CITATION:
S. 195: Reimbursement of share of costs towards administrative and management support services in connection with technology updates etc is not taxable

The assessee company is a member of the international organization of Ernst & Yound and its several associate concerns worldwide. Ernst & Young Global Services LLP and Ernst Young UK LLP provide administrative and management support services in connection with …

DCIT vs. Ernst & Young Pvt. Ltd (ITAT Kolkata) Read More »

Posted on by editor
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DATE: September 9, 2014 (Date of pronouncement)
DATE: October 6, 2014 (Date of publication)
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An Attitudal change in Judges is required. It is high time for us to change our mind set and see whether this new technology can help us to increase the speed and also we have to take into account the convenience of the parties

In the said judgment, the Supreme Court has reproduced valuable observations of Justice Bhagwati in the case of National Textile Workers’ Union vs. P.R. Ramakrishnan at page 256 as follows: “We cannot allow the dead hand of the past to …

Suvarna Rahul Musale vs. Rahul Prabhakar Musale (Bombay High Court) Read More »