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]

S. 37(1) : Business expenditure-Capital or revenue expenditure-Brand relaunch expenses spread over three years-Activity not enlarging profit-making apparatus nor new line of business-Substantially revenue expenditure though benefit accruing over years-Not capital merely because benefit flows over more than one year-No enduring advantage in capital field-Expenditure allowable-Disallowance of expenditure relating to exempt income-No exempt income earned during year-Explanation introduced by Finance Act, 2022 prospective, not applicable-No disallowance called for-Accrual of liability-Expenditure disallowed as prior period expenses-Ascertained and crystallised during the year-No deduction claimed in earlier years-Allowable in year of crystallisation-Deduction only on actual payment-Delayed payment of employees’ contribution to provident fund and employees’ State insurance-Not allowable. Payments to foreign agencies for services rendered abroad-Payees having no permanent establishment in India-Payments not taxable in hands of non-residents under Double Taxation Avoidance Agreements-Cannot be disallowed for failure to deduct tax at source. Commissioner (Appeals) directing Assessing Officer to reconcile difference between interest receipts and bad debts-Mere directions for verification-No interference called for. [S. 2(24)(x), 9(1)(vii), 14A , 40(a)(i) , 43B , 250 , 254(1)]

S. 36(1)(iii) : Interest on borrowed capital-Interest-free loans given to related concerns-Nexus between borrowed funds and loans advanced not established-Presumption that funds advanced first out of interest-free funds available-Disallowance not justified.

S. 40(a)(i): Amounts not deductible-Deduction at source-Non-resident –Fees for technical services or royalty-Simple rendering of services not sufficient, technical know-how must be “made available”-Services of Singapore and Hong Kong companies utilised to deliver services to clients in Vietnam-Services rendered outside India for income from source outside India-Not taxable in India-Disallowance unjustified-Reimbursement of salary expenses to foreign companies-No income element-Not chargeable to tax in India-No obligation to deduct tax at source-Disallowance deleted-Payments for management and consulting support services rendered and utilised outside India-Exclusionary provision applies-Not taxable in India-Disallowance deleted-Royalty-Payments for use of trademarks and training materials of foreign universities utilised for business outside India-Exclusionary provision applies-Not taxable in India-Disallowance deleted-“Make available” clause-Payments to foreign institutions for training, accreditation and consultancy services-No technical knowledge, experience or skill made available-Not fees for technical services-Not taxable in India-Disallowance unsustainable-Independent personal services-Payment to non-resident individual professional for services rendered abroad-No fixed base or stay exceeding 90 days in India-Income taxable only in country of residence-Not chargeable to tax in India-No obligation to deduct tax at source-Disallowance deleted-DTAA-India-UK , USA. [S. 9(1)(vi), 9(1)(vii)(b) 195, Art. 12 , 15]

S. 9(1)(i): Income deemed to accrue or arise in India-Business connection-Non-resident-Permanent establishment-Service permanent establishment-Employees required to be physically present and furnish services in India exceeding 90 days (or 30 days for related enterprises) in a fiscal year-Services furnished only for 44 days after excluding vacation, business development and common days-No service permanent establishment-Business profits not taxable in India.-Virtual service permanent establishment-Concept not provided under Double Taxation Avoidance Agreement or officially endorsed in India-Requirement of physical rendition of service alone to be applied-Return-Delay in filing-Interest-Assessee contending return filed within extended due date-Matter remanded for verification-Interest-Advance tax-Income received after deduction of tax at source-Levy of interest for failure to pay advance tax not called for-Income-Accrual-Amounts appearing in Form 26AS cannot automatically be treated as income-Assessing Officer to verify and grant corresponding credit of tax deducted at source if payments not actually received. DTAA-India-Singapore. [S. 4, 5 , 234A , 234B Art. 5(6) , Form No 26AS]

S. 263: Commissioner-Revision of orders prejudicial to revenue–Real estate business-Change in method of accounting from percentage-of-completion to completed-contract method-Change revenue-neutral, following Accounting Standards, verified by auditors and accepted in subsequent years-No loss to exchequer-Principal Commissioner’s directions to reconsider financial expenses, depreciation, current liabilities, deduction under section 80-IAB, house property income, loans and advances to related parties, etc.-Matters already examined by Assessing Officer-No indication of how order erroneous-Revision amounting to fishing and roving enquiries-Assessment order not prejudicial to Revenue-Revision quashed. [S. 2(22)(e), 80-IAB, 145]

S. 80P : Co-operative societies –Interest income from fixed deposits with scheduled banks, personal loans to employees and house building loans not attributable to business of providing credit facilities to members-Deduction rightly denied-Commission, miscellaneous and sundry receipts not attributable to business of providing credit facilities-Deduction rightly denied. Income-Method of accounting-Overdue interest on non-performing assets-Income recognition-Matter remanded to exclude interest only if supported by statutory guidelines or accounting standards-Assessment-Income from other sources-Expenses against interest income-No further expenses allowable beyond those already claimed in computation of income-Disallowance confirmed Principles of natural justice-Alleged lack of opportunity before Commissioner (Appeals)-Appellate order passed after considering submissions-No violation was found.[S.4, 80P(2)(a)(1), 80P(2(d) 143(3), 250]

S. 9(1)(ii) : Income deemed to accrue or arise in India-Salaries-
Non-resident-Salary income-Services rendered outside India while on deputation from Indian company-Assessee non-resident in India and tax resident of Australia-Salary received in India for employment exercised in Australia-Australian tax return accepted as evidence of residency-Tax residency certificate filed at appellate stage accepted-Exemption allowable-Scope of total income-Salary received in India for services rendered abroad-Not taxable in India when employment exercised outside India-DTAA-India-Australia. [S. 9(1)(ii), 15, 90, Art 15]