S. 92C: Transfer pricing-Arm’s length price-Avoidance of tax-International transaction-Specified domestic transaction-Loan to associated enterprise in Bahrain-Benchmarking using US/European data inappropriate-Bahrain Central Bank’s prime lending rate reflects arm’s length rate-Upward adjustment unsustainable-Business expenditure-Disallowance-Payment for product certification services-Not fees for technical services-No tax deductible at source-Disallowance deleted.-Withholding liability arises only when income taxable in recipient’s hands-Royalty payable only on activation by end-user-Provision for royalty rightly allowed. [S.9(1)(vii) 40(a)(ia(195 R.10B]

S. 271D : Penalty-Acceptance of loans/deposits otherwise than by crossed cheque-Assessee claiming bank account used by others for demand drafts towards liquor licence applications-Affidavits of depositors stereotyped, not clarifying position at time of repayment-Matter remanded for fresh verification. [S. 269SS, 269T, 271E]

S. 263: Commissioner-Revision of orders prejudicial to revenue–Assessing Officer failing to consider applicability of minimum alternate tax provisions to assessee-company-Incorrect assumption of facts and incorrect application of law-Revision justified-Book profits-Exclusion from minimum alternate tax-No specific exemption for company under voluntary liquidation-Provisions of company law regarding preparation of accounts not relevant-ITR-6 pro forma recognising liquidation cannot override the Act-Section 115JB clearly applicable-Provisions of minimum alternate tax clearly applicable-Revision justified-Assessee-company undergoing voluntary liquidation citing impossibility of preparing statement of profit and loss-Held, profits and losses determinable under any system of accounts followed, enabling computation of minimum alternate tax.[S.115JB, Companies Act , 1956 , S. 551 , Companies Act , 2013, S. 348]

S. 263: Commissioner-Revision of orders prejudicial to revenue–Notice and order issued in name of erstwhile company but mentioning factum of amalgamation in cause title-Not invalid-Nothing to establish that issues on which revision exercised were examined by Assessing Officer during assessment-Duty cast on Assessing Officer to examine issues not performed-Order of Principal Commissioner setting aside assessment order-Proper. [S. 14A, 40(a)(i), 143(3)]

S. 9(1)(i): Income deemed to accrue or arise in India-Business connection-Non-resident-Permanent establishment-Assessee acquiring group in May 2016, falling in financial year relevant to assessment year 2017-18-No transaction or business connection between assessee and Indian entity during relevant assessment year 2016-17, prior to date of acquisition-Indian entity not associated enterprise at relevant time-No agency permanent establishment-Assessment of attributed profits quashed-DTAA-India-USA. [art. 5(4)]

S. 143(2) : Assessment –Notice-Limitation-To be reckoned from date of filing of original return and not from date of curing of defects-Return filed under section 139(1) within time-Defect notice under section 139(9) subsequently cured-Notice under section 143(2) issued beyond time-limit reckoned from date of original return-Assessment without jurisdiction-Quashed. [S. 139(1), 139(9)]

S. 195: Deduction of tax at source-Payment to non-resident-Liability to deduct tax only if income of non-resident chargeable to tax in India-Standard software licences-End-user licence agreements not transferring copyright-Payments not royalty-Provisions of domestic law not applicable when Double Taxation Avoidance Agreement more beneficial to assessee-No obligation to deduct tax at source-DTAA-India-UK. [S. 9(1)(vi), 90(2), 201(1), 201(1A), Art. 13]

S. 92C: Transfer pricing-Arm’s length price-Avoidance of tax-International transaction-Comparable companies-Related party transactions filter-Companies having 99 per cent. and 100 per cent. related party transactions-To be excluded from final set of comparables–Assessing Officer obligated to compute income in conformity with arm’s length price determined by Transfer Pricing Officer-Assessing Officer changing cost allocation methodology from headcount ratio to salary expense ratio, partly disallowing support services cost-Not proper-Depreciation on intangible assets being customer contracts and assembled workforce-Allowable-Deduction of tax at source-Credit for-Assessing Officer directed to verify and grant credit for tax deducted at source, advance tax and self-assessment tax.[S. 32(1)(ii), 92B , 92CA(3), 92 CA(4)]

S.145: Method of accounting-Project-completion method-Real estate developer-Sale proceeds recognised only upon obtaining completion certificate and handing over possession, not during year under consideration-No sales effected or possession handed over during relevant year-Ad hoc addition based on registration of sale deeds not justified-Allocation of common expenses among group companies based on business volume accepted by Department in earlier years-Project-completion method regularly followed-No discrepancy pointed out in audited accounts-Ad hoc disallowance not justified. [S. 43CA ,143(3)]

S. 56 :Income from other sources-Income-Search and seizure-Fraudulent Income-tax refunds obtained through bogus challans-Income invested in shares and deposits-Assessee having tangible control and dominion over funds-Taxable on accrual, not merely on receipt-Recovery or repayment in subsequent years cannot negate taxability in year of accrual-Deduction for recovery/repayment not allowable under section 57-Fraudulent income taxable under “Income from other sources-Offences and prosecution-Execution of false challans with intent to defraud Income-tax Department-Revenue authorities directed to take deterrent action permitted by law. [S.2(24), 57, 132, 277 ,Indian Penal Code, 1860, S. 177, 193, 196, 199]