ITR'S TRIBUNAL TAX REPORTS (ITR (TRIB))
Business expenditure --Disallowance--Payments in cash--Expenditure on labour charges for land development--No evidence to establish genuineness of labourers--Assessee failing to produce vouchers for payment to supervisor and not showing veracity of payment to labourers--Disallowance justified--Income-tax Act, 1961, s. 40A(3)-- Metalcity Constructions Kovai P. Ltd. v. ITO (Chennai) . . . 424
----Foreign nationals working in India at managerial positions for purpose of business--Assessee bearing cost of their return journey to home countries--Assessee debiting expenditure under head legal and professional expenditure--Allowable--Income-tax Act, 1961, s. 37-- Sumitomo Corporation India P. Ltd. v. Deputy CIT (Delhi) . . . 385
Charitable purposes --Registration--Advancement of object of general public utility--Mention of charitable objects in memorandum of association does not render assessee a charitable institution--Assessee charging fee in addition to Government fee--Not qualified to be treated as charitable institution--Income-tax Act, 1961, ss. 2(15), 12A(a)-- Sukhmani Society for Citizen Services v. Commissioner of Income-tax (No. 2) (Amritsar) . . . 458
----Registration--Object of society to provide services to common people--Charging huge fees from public in addition to prescribed fee of Punjab Government--No charitable purpose involved--Application for registration to be rejected--Income-tax Act, 1961, s. 12AA-- Sukhmani Society for Citizen Services v. Commissioner of Income-tax (No. 1) (Amritsar) . . . 443
Depreciation --Rate of depreciation--Computer peripherals--Depreciation allowable at rate of 60 per cent.--Precedent-- Sojitz India P. Ltd. v. Deputy CIT (Delhi) . . . 474
Income-tax --General principles--Res judicata--Not applicable to taxation-- Sumitomo Corporation India P. Ltd. v. Deputy CIT (Delhi) . . . 385
Industrial undertaking --Special deduction--Industries not eligible for deduction listed in Schedule XIII--Expansion of flour mill--Listed in Part B of Schedule XIII--Assessee not entitled to deduction--Income-tax Act, 1961, s. 80-IC-- Pooja Industries v. ITO (Chandigarh) . . . 433
International transactions --Arm’s length price--Determination--Necessity of detailed factual study of business model, FAR analysis and economic conditions--Transactional net margin method--Commission earned by assessee from its associated enterprises--Commission and trading transactions not comparable--Difference in risk profile of indent and trade transactions--Applying gross profit margin earned from trading transaction with non-associated enterprises on value of goods on which commission earned--Not proper--Service provider functioning as facilitator not exposed to risk--“Costs†not FOB value of goods--Assessee using network and intangibles of its associated enterprise--Performance of low risk activity of facilitator--No human intangibles created--Income-tax Act, 1961, ss. 92C(1), 92CA(3), 92D--Income-tax Rules, 1962, r. 10D-- Sojitz India P. Ltd. v. Deputy CIT (Delhi) . . . 474
----Arm’s length price--Determination--Two types of transactions, indent transactions earning commission and trading transactions--Nature of transactions different--Indent transactions with associated enterprise to be benchmarked with indent commission transactions with non-associated enterprises--Mere difference in turnover not sufficient for treating two transactions as not comparable--Commission percentage in associated enterprise segment to be compared with commission percentage in non-associated enterprise segment--Income-tax Act, 1961, s. 92C-- Sumitomo Corporation India P. Ltd. v. Deputy CIT (Delhi) . . . 385
----Arm’s length price--Interest paid to non-resident--Determination of arm’s length rate of interest--Transfer Pricing Officer computing interest at arm’s length rate with associated enterprises as against determined by assessee and adding difference as transfer pricing adjustment--Matter remanded for fresh assessment after providing opportunity to assessee--Income-tax Act, 1961-- JP Morgan Chase Bank v. Assistant Director of Income-tax (International Taxation) (Mumbai) . . . 428
Precedent --Principles decided in judgment--To be considered in context of facts-- Sojitz India P. Ltd. v. Deputy CIT (Delhi) . . . 474
S. 2(15) --Charitable purposes--Registration--Advancement of object of general public utility--Mention of charitable objects in memorandum of association does not render assessee a charitable institution--Assessee charging fee in addition to Government fee--Not qualified to be treated as charitable institution-- Sukhmani Society for Citizen Services v. Commissioner of Income-tax (No. 2) (Amritsar) . . . 458
S. 12A(a) --Charitable purposes--Registration--Advancement of object of general public utility--Mention of charitable objects in memorandum of association does not render assessee a charitable institution--Assessee charging fee in addition to Government fee--Not qualified to be treated as charitable institution-- Sukhmani Society for Citizen Services v. Commissioner of Income-tax (No. 2) (Amritsar) . . . 458
S. 12AA --Charitable purposes--Registration--Object of society to provide services to common people--Charging huge fees from public in addition to prescribed fee of Punjab Government--No charitable purpose involved--Application for registration to be rejected-- Sukhmani Society for Citizen Services v. Commissioner of Income-tax (No. 1) (Amritsar) . . . 443
S. 37 --Business expenditure--Foreign nationals working in India at managerial positions for purpose of business--Assessee bearing cost of their return journey to home countries--Assessee debiting expenditure under head legal and professional expenditure--Allowable-- Sumitomo Corporation India P. Ltd. v. Deputy CIT (Delhi) . . . 385
S. 40A(3) --Business expenditure--Disallowance--Payments in cash--Expenditure on labour charges for land development--No evidence to establish genuineness of labourers--Assessee failing to produce vouchers for payment to supervisor and not showing veracity of payment to labourers--Disallowance justified-- Metalcity Constructions Kovai P. Ltd. v. ITO (Chennai) . . . 424
S. 80-IC --Industrial undertaking--Special deduction--Industries not eligible for deduction listed in Schedule XIII--Expansion of flour mill--Listed in Part B of Schedule XIII--Assessee not entitled to deduction-- Pooja Industries v. ITO (Chandigarh) . . . 433
S. 92C --International transactions--Arm’s length price--Determination--Two types of transactions, indent transactions earning commission and trading transactions--Nature of transactions different--Indent transactions with associated enterprise to be benchmarked with indent commission transactions with non-associated enterprises--Mere difference in turnover not sufficient for treating two transactions as not comparable--Commission percentage in associated enterprise segment to be compared with commission percentage in non-associated enterprise segment-- Sumitomo Corporation India P. Ltd. v. Deputy CIT (Delhi) . . . 385
S. 92C(1) --International transactions--Arm’s length price--Determination--Necessity of detailed factual study of business model, FAR analysis and economic conditions--Transactional net margin method--Commission earned by assessee from its associated enterprises--Commission and trading transactions not comparable--Difference in risk profile of indent and trade transactions--Applying gross profit margin earned from trading transaction with non-associated enterprises on value of goods on which commission earned--Not proper--Service provider functioning as facilitator not exposed to risk--“Costs†not FOB value of goods--Assessee using network and intangibles of its associated enterprise--Performance of low risk activity of facilitator--No human intangibles created-- Sojitz India P. Ltd. v. Deputy CIT (Delhi) . . . 474
S. 92CA(3) --International transactions--Arm’s length price--Determination--Necessity of detailed factual study of business model, FAR analysis and economic conditions--Transactional net margin method--Commission earned by assessee from its associated enterprises--Commission and trading transactions not comparable--Difference in risk profile of indent and trade transactions--Applying gross profit margin earned from trading transaction with non-associated enterprises on value of goods on which commission earned--Not proper--Service provider functioning as facilitator not exposed to risk--“Costs†not FOB value of goods--Assessee using network and intangibles of its associated enterprise--Performance of low risk activity of facilitator--No human intangibles created-- Sojitz India P. Ltd. v. Deputy CIT (Delhi) . . . 474
S. 92D --International transactions--Arm’s length price--Determination--Necessity of detailed factual study of business model, FAR analysis and economic conditions--Transactional net margin method--Commission earned by assessee from its associated enterprises--Commission and trading transactions not comparable--Difference in risk profile of indent and trade transactions--Applying gross profit margin earned from trading transaction with non-associated enterprises on value of goods on which commission earned--Not proper--Service provider functioning as facilitator not exposed to risk--“Costs†not FOB value of goods--Assessee using network and intangibles of its associated enterprise--Performance of low risk activity of facilitator--No human intangibles created-- Sojitz India P. Ltd. v. Deputy CIT (Delhi) . . . 474
R. 10D --International transactions--Arm’s length price--Determination--Necessity of detailed factual study of business model, FAR analysis and economic conditions--Transactional net margin method--Commission earned by assessee from its associated enterprises--Commission and trading transactions not comparable--Difference in risk profile of indent and trade transactions--Applying gross profit margin earned from trading transaction with non-associated enterprises on value of goods on which commission earned--Not proper--Service provider functioning as facilitator not exposed to risk--“Costs†not FOB value of goods--Assessee using network and intangibles of its associated enterprise--Performance of low risk activity of facilitator--No human intangibles created-- Sojitz India P. Ltd. v. Deputy CIT (Delhi) . . . 474
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