This Digest of case laws is prepared by KSA Legal and AIFTP from judgements reported in BCAJ, CTR, DTR, ITD, ITR, ITR (Trib), Chamber's Journal, SOT, Taxman, TTJ, BCAJ, ACAJ, www.itatonline.org and other journals
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S. 271(1)(c) : Penalty – Concealment –Estimate of income- sale of land along with building – agreement silent on consideration towards super structure – estimate made by assessee – such estimate increased by the AO and finally stood reduced to another amount by ITAT – Held, no penalty on such additions based on estimates.

Eagle Theatres v. ACIT (2018) 65 ITR 3 (Delhi)(Trib.)

S 271AAB : Penalty – Search cases – commodity profits – sum entered in the other documents maintained in normal course and retrieved during search – Held, not undisclosed income – Held, no penalty can be levied.

Dy. CIT v. Subhas Chandra Agarwala and Sons (HUF) (2018) 65 ITR 18 (Kol.)(Trib.)

S. 153A : Assessment – Search or requisition -Disallowance of commission expenses paid to overseas agent- in respect of completed assessments-No addition can be made which is not based on any incriminating material found in the course of search.

Dy. CIT v. Sopariwala Exports (2018) 63 ITR 658 (Mum.)(Trib.)

S. 147 : Reassessment –Scientific research expenditure – original assessment completed after considering all facts – reassessment based on subsequent amendments applicable to subsequent years – Held, no new tangible material – Held, reassessment bad in law. [S. 35(2AB)]

Efftronics Systems P. Ltd. v. Dy. CIT (2018) 63 ITR 25 (SN) (Visakha.)(Trib.)

S.147: Reassessment-After the expiry of four years- Concluded assessment reopened after four years on the basis of assessment of subsequent years – Held, no failure on the part of the assessee to disclose fully and truly all material facts – Held, reassessment not valid.

Dy. CIT v. Wind World (India) Limited (2018) 63 ITR 599 (Mum.)(Trib.)

S. 115JB : Book profit –Provision for bad and doubtful debts – Assessee made a provision for bad and doubtful debts – It was maintaining a separate provision account – Certain bad debts were written off in such account – Provision amount lesser than the bad debts written off – Held, assessee eligible for higher deduction – Held, therefore, provision amount cannot be termed as unascertained liability and has to be allowed – Held, tribunal cannot direct AO to allow greater deduction-Prior period expose cannot be added while computing book profits-Provision for leave encashment ascertained liability and therefore, cannot be added to book profit-Provision for non-moving and obsolete stock not a provision and also not debited to P&L account and therefore, cannot be added to book profit- Provision for fringe benefit tax not similar to provision for income tax and that fringe benefit was a liability of the employer therefore, cannot be added to book profit.[S. 36(1)(vii), 36(1)(viia)]

Dy. CIT v. Southern Power Distribution Company of Andhra Pradesh Ltd. (2018) 170 ITD 1/ 166 DTR 1 / 64 ITR 257 / 193 TTJ 657 (TM) (Hyd.)(Trib.)

S. 115JB : Book profit–Amount debited under P&L a/c towards debenture redemption reserve fund is a known liability and therefore, cannot be added to the book profit.

Dy. CIT v. Usha Martin Ltd. (2018) 66 ITR 18 ( SN)(Ranchi)(Trib.)

S. 92C : Transfer pricing – Arms’ length price – operating profit – liabilities and doubtful debt written back as well as design income and services income form part of operating profit for computing operation profit while calculating OP/OC ratio.

Dy. CIT v. Tetra Pak India (P) Ltd. (2018) 191 TTJ 48 (UO)( (Pune) Trib.)

S. 92C : Transfer pricing – Arm’s length price –Jurisdiction of TPO and AO – Held, TPO required to simply determined to the ALP irrespective of the benefits accruing to the assessee – Held, TPO cannot determine the ALP at Nil on the ground that no benefit accrued to the assessee -Held, AO to decide on deductibility of expense u/s 37(1) – Matter set aside. [ S.37(1)]

Dy. CIT v. Vodafone Essar Digilink Ltd. (2018) 193 TTJ 150 / 64 ITR 392/ 170 ITD 430/ 166 DTR 233 (Delhi)(Trib.)

S. 90 : Double taxation relief – Permanent Establishment – Assessee, a US company entered into a master franchise agreement with an Indian company for franchise of Dominos Pizza Stores – It provided certain store/consulting services to the Indian Company – Indian company paid store opening fees – assessee was entitled to charge 3 per cent of sales of store of Indian Company and further 3 per cent on sale of their sub-franchise store –Held, profit/loss from the business of Indian company and sub-franchisee belong to them – Held, none of the conditions or clauses of Permanent Establishment ,Article 5 were attracted and therefore, the Indian company did not constitute PE of the assessee in India-DTAA-India- USA.[Art.5 ]

CIT(IT) v. Dominos Pizza International Franchising Inc. (2018) 171 ITD 321/ 193 TTJ 963/ 166 DTR 201 (Mum.)(Trib.)