Messages

Dear all

The Delhi HC in CIT vs NHK Japan Broadcasting Corpn. 291 ITR 331 has
said that that Citizens Tax paid by the employer out of the salary of
the employee is a diverison of tax.

On reading the case it seems that the Citizens Tax is very similar to
the Professional Tax paid by us. So can we also claim that it is a
diversion of income and hence no tax is to be paid on it.

bhavesh savla

It seems that there is an unreported judgment of the Mumbai ITAT in the case of Meena Khera on this issue which is favourable to the assessee.

does anybody please have a bare copy of the case?

My Views on Ishikawajma Harima


The Sc has basically not disputed the finding of facts of the AAR. It merely mentions the fact that the Contract is a turnkey one and a composite one but the consideration is not.

Clause 1 of Article 7 of the DTAA:
·   The profits of an enterprise of a Contacting State shall be taxable only in that Contracting State unless the enterprise carries on business in the other contracting State through a permanent establishment situated therein.
·   If the enterprise carries on business as aforesaid, the profits of the enterprise may be taxed in that other Contracting State but only so much of them as is directly or indirectly attributable to that permanent establishment."

Going by the plain words I agree that the Offshore Supply is to be judged under Article 7 because the applicant had a PE in India. However what needs to be examined is that whether the profits are attributable to the PE.

The SC says that the PE was never involved in the transaction because it took place overseas. However that is not the way to look at it. The SC has never considered if the PE was involved in getting the order placed with Ishikawajma. If yes then definitely the profits can be attributable to the PE and the Income may be taxable in India.

Distinction between PE and ' Business Connection'

The SC says that the PE can't be equated to a Business Connection since the former is for the purposes of the DTAA and latter is for the purpose of the Income Tax Act. If one looks at the issue plainly without any complications then the PE in itself is a Business Connection. And yes I am in complete agreement with you that the term 'Business Connection' includes a PE but not vice-versa i.e. there could be a Business Connection without a PE. However if you look at the definition of PE in the DTAA then it virtually includes everything in Business Connection.

Now to determine the taxability under the Act it has to be again proved that the Income was attributable to the Business Connection.

Having established that the PE is a Business Connection now whether the profits can be attributable to the PE i.e. Business Connection is a question of Fact and the SC should have reverted back to the AAR.

Hi all

Suppose a transfer of a Capital Asset takes place by way of will from
Mr.X to Mr.Y in FY 2002-03. X had purchase it originally in FY 1995-
96. Mr.Y sells it in FY 2005-06. Can Mr.Y get the benefit of
indexation from FY 1995-96 or it will be from FY 2002-03.

Two Contradicting judgments

Pushpa Sofat 81 ITD 1 Chandigarh ITAT Assessee Favouring
Kishore Kanugo 290 ITR 298 Mumbai ITAT Revenue Favouring

Explantion to Section 48 says that it will be from the first year held
by the Assessee. Literally it means from FY 2002-03. However the
legislature has provided that the holding perid should include that of
the previous owner also.

The Mumbai ITAT judgment defeats the very purpose of the Indexation
i.e. to counter the effects of Indexation.

Law should be interpretated in such a way that it makes a clause
meaningful and not meaningless.