(1)Housing Projects – [S. 80IB(10)]

(i) CBDT Circular F. No. 205/3/2000/ITA II dt. 4-5-2001. CBDT has clarified that “any project which has been approved by a local authority as housing project should be considered as adequate for purpose of Section 80IB(10)”.

(ii) CIT vs. Brahma Associates (2011) 333 ITR 289 (Bom.). Section 80IB(10) allows deduction to the entire project approved by the local authority and not to a part of the project, if the conditions set out in section 80IB(10) are satisfied, then deduction is allowable on the entire project approved by the local authority and there is no question of allowing deduction to a part of the project

The decision of the tribunal (ITAT) in the case of Reuters Limited Construction House involving the issue of dependent PE under Indo-UK treaty – requires reconsideration.

Though the above decision is not yet reported, the relevant facts and the ratio laid down therein have been clearly stated by the Tribunal in its order u/s 254(2) of I T Act 1961 (the Act) which is reported as 48 SOT 246 (Mum).

Slump Sale – Whether breaking up of price permissible:-

1.1 The decision of the Calcutta High Court in the case of Kwality Ice Creams {I} Ltd [2011] 336 ITR 100 {Cal} may provide fodder for interesting appraisal by the readers. In this case, the assessee, an ice cream manufacturer, transferred its marketing undertaking for a price of Rs. 3 crores. There is nothing in the decision to suggest that the price of Rs. 3 crores was a composite price for transfer of individual assets of the marketing undertaking sold. On the contrary, from the facts of the case, it appears that the price was paid for a slump sale of the marketing undertaking as a whole. The decision related to Assessment Year 1996-97 i.e. before the slump sale provisions of section 50B were brought on the statute book.

I. Introduction

The concept of a Company as a business structure is founded on the premise that it has a legal personality that is separate and distinct from that of its owners. Consequently, the legal framework pertaining to a company’s operations and obligations acknowledges separate legal existence as a key feature of the company structure. Lifting or piercing the veil of corporate personality means that the company is no longer viewed as a distinct entity. On the other hand, the company is seen as being no different from the persons who own the shareholding of the company. The initial trend among common law jurisdictions was that the veil of corporate personality should not be lifted under normal circumstances. With the passage of time and the growing complexity of transactions and the laws which govern them, the Courts have become more agreeable to piercing the corporate veil. This trend has been particularly strong in the case of tax matters.

The controversy over the interpretation of the term ‘royalty’ has come to the fore in light of two judgments of the Hon’ble Income Tax Appellate Tribunal in the past year, (1) the common judgment of the Hon’ble Delhi ‘H’ Bench (dated 26th October, 2010) in a set of cases (Gracemac v. ADIT, ITA Nos. 1331-1336/Del/2008, Microsoft Corporation v. ADIT, ITA Nos. 1392/Del/2005, Microsoft Regional Sales Corporation v. ADIT, ITA Nos. 1393-1395/Del/2005, the common judgment is hereinafter referred to as ‘Gracemac’); and (2) the judgment of the Hon’ble Mumbai ‘E’ Bench (dated 26th August, 2011) (ADIT v. TII Team Telecom International, ITA Nos. 3939/Mum/2010, hereinafter referred to as ‘TII Team’). The controversy – brewing now for quite some time – is essentially this: under what circumstances can the payment received for (what is loosely termed as) supply of software/rights in software be taxed as ‘royalty’ under Section 9 of the Income Tax Act, 1961, and under various Double Tax Avoidance Agreements.

History
This section was introduced in the year 1972 and subsequently amended from time to time. The scope of the said provision has been explained by CBDT from time to time through various circulars bearing Nos. 86 dated May 29, 1972, 93 dated 26.9.1972, 558 dated 28.3.1990, 681 dated 8.3.1994, 714 dated 3.8.1995, 723 dated 19.9.1995, , 715 dated 8.8.1995 and 13 dated 13.12 2006. This section has also been substituted by Finance (No 2) Act 2009.
Salient features
This section provides that tax is to be deducted at source against payments made to contractors/subcontractors. The followings are the salient features of the section as it stands today:

You do not require a magic wand to combat corruption. One little finger raised by Anna Hazare is enough. The seventy four year old Gandhian showed the nation how purity of thought integrated in to right action can bring down a tyrant government to its heels.

The State machinery put this man in jail and ended up self locking themselves by their own misdoings. They did not want to give him public space to hold his peaceful rally for more than three days and set a cap for 5000 campaigners. And now, they are hastily cleaning a public ground themselves to make it fit for his rally for fifteen days without any limit set for the participants.

Mark Twain once said: “Evolution is the law of policies: Darwin said it, Socrates endorsed it, Cuvier proved it and established it for all time in his paper on ”The Survival of the Fittest”. These are illustrious names, this is a mighty doctrine: nothing can ever remove it from its firm base, nothing dissolve it, but evolution.” Mark Twain in substance said that ‘even the most settled things in this world may get unsettled later’. The things which are held today as absolute may become relative in future, like the belief that earth is flat got changed later or that atom is the most basic unit of matter got changed after the discovery that even it has further components.

This is even so true in the area of Law, especially, the Income Tax Law. On number of occasions, the most settled legal positions have been unsettled either by retrospective amendments by the Legislature to nullify the decisions of Courts or by the Courts themselves by reversing the law laid down in the earlier decisions. Certain examples where the settled positions have been changed by the Courts are:

I. INTRODUCTION

The new Direct Tax Code1 (hereafter DTC) is all set to replace the Income-tax Act, 1961 with effect from 1st April, 2012, the basic objective behind its enactment being simplification of the language so as to enable better comprehension thereby reducing the number of law suits. Significant among the provisions that it introduces are the provisions aimed at tackling the problem of tax avoidance since this has been resulting in a major loss of revenue for the government. Certain legislative amendments2 had been made earlier to counter this particular problem but did not prove very effective since the tax payers found sophisticated methods to get passed them thereby necessitating further changes.

1. Re-assessment u\s 147:- Jurisdiction and its scope.

The decision of the Bombay High Court in the case of CIT vs. Jet Airways {I} Ltd. reported in [2011] 331 ITR 236 {Bom} presents an interesting authority on the subject of the scope of jurisdiction of an Assessing Officer to re-assess income believed to have escaped assessment.
The generally known line of thinking is that once an Assessing Officer has ‘reasons to believe’ that income of an assessee has escaped assessment, he can re-open the assessment by issue of a notice u\s 148.  In short, the formation of such belief is the founding material on basis of which he assumes jurisdiction to re-open the assessment. If these reasons do not exist, then the jurisdiction of the Assessing Officer becomes questionable and the Court can intervene to quash the re-assessment proceedings as ill founded.