To
All Chief Commissioner of Income Tax, and Commissioner of Income Tax
Sub.: Assigning serial numbers to applications filed u/s 154 of the Act and disposal thereof as per directions of the Hon'ble Delhi High Court and as per Instructions of CBDT.
Sir,
As your honour is well aware the Hon'ble Delhi High Court vide its order dated 14.03.2013 in a Writ Petition had issued 7 mandamuses to the Department , inter-alia, regarding maintenance of rectification register and disposal of applications filed under section 154 of the Act within a period of 4 / 6 months. It was specifically directed by the Hon'ble High Court that every Assessing Officer will maintain rectification register and on receipt of the application will issue a serial number with acknowledgement to the applicant and the application shall be entered in the register. The application so received shall be disposed of within a period of 4 / 6 months in terms of affidavit filed by the Department before the Hon'ble High Court though as per the Citizens Charter the application was to be disposed of within a period of 2 months. Since then CBDT has also issued Instruction No. 03/13 dated 05.07.2013 directing that all the applications received under section 154 of the Act shall be entered in the computer system either through Aaykar Sewa Kendra or by the Assessing Officers and the applications shall be disposed of within a period of 2 months.
It is being seen in practice that applications when filed by the assesses with the Assessing Officers are not being assigned any serial number. Rectification register is also not being maintained by the Assessing Officers. Applications filed are also not being disposed of by the Assessing Officers as per the directions of the Hon'ble High Court and in terms of Instructions of CBDT.
In view of above, we humbly request your honour to kindly look into the matter immediately and ensure that each of the Assessing Officers comply with the Mandamus of Hon'ble Delhi High Court in regard to assigning of serial number to applications filed u/s 154 of the Act and disposal thereof within the specified time limit. Instructions of CBDT dated 05.07.2013 also needs to be complied with. We hope your goodself will take the necessary action in this regard.
ITR'S TRIBUNAL TAX REPORTS (ITR (TRIB)) -- PRINT AND ONLINE EDITION
Advance tax --Interest--Payment not liable to deduction of tax at source--Liability to advance tax and hence to interest--Income-tax Act, 1961, ss. 234B, 234D-- Convergys Customer Management Group Inc. v. Assistant Director of Income-tax, International Taxation (Delhi) . . . 443
Appeal to Appellate Tribunal --Appealable orders--Maintainability of appeal--Appeal not maintainable unless specifically provided for under section 253--Section 271FA providing for penalty for failure to furnish annual information return not mentioned--Appeal from order levying penalty under section 271FA not maintainable--Income-tax Act, 1961, ss. 253, 271FA-- Sub-Registrar Office, Meppayur v. Director of Income-tax (Intelligence) (Cochin) . . . 341
Appeal to Commissioner (Appeals) --Order passed by Assessing Officer under section 154 resulting in refund--Failure to grant interest--Cannot be agitated in appeal to Commissioner (Appeals) against order under section 143(3)--Income-tax Act, 1961, ss. 143(3), 154, 244A-- Assistant CIT v. IOT Infrastructure and Energy Services Ltd. (Mumbai) . . . 406
Business expenditure --Club expenses--Allowable-- Assistant CIT v. IOT Infrastructure and Energy Services Ltd. (Mumbai) . . . 406
----Disallowance--Deduction of commission under sales promotion expenses--Finding by Assessing Officer that claim of expenditure amounted to double deduction--No evidence on record to show double claim of expenses--No infirmity in Commissioner (Appeals)’s order--Income-tax Act, 1961-- Assistant CIT v. Caravan Travels (Kolkata) . . . 373
----Disallowance--Payments subject to deduction of tax at source--Amendment permitting deduction where tax deducted at source remitted before due date for filing return--Amendment retrospective--Income-tax Act, 1961, ss. 40(a)(ia), 194C-- S. S. Warad v. Additional CIT (Bangalore) . . . 358
----Expenditure incurred in earlier years towards premium and “right to way†and other charges in respect of leasehold land--Whether can be amortised over lease period--Whether proportionate deduction allowable--Income-tax Act, 1961, s. 37-- Assistant CIT v. IOT Infrastructure and Energy Services Ltd. (Mumbai) . . . 406
Capital gains --Short-term capital gains--Computation of capital gains--Depreciable assets--Sale of factory premises and purchase of apartment--Asset would fall under same block if used for business purpose and depreciation allowable for premises if used as office premises--Matter remanded for verification whether asset used as office premises--Income-tax Act, 1961, ss. 2(11), 50(1)(iii)-- Avin Pumps P. Ltd. v. Joint CIT (Mumbai) . . . 345
Capital or revenue expenditure --Provision for warranty claims--To be quantified based on past data--Data showing negligible liability--Disallowance of provision at 5 per cent. and allowance to extent of 0.2 per cent.--Proper--Book profits--Liability to extent of 0.2 per cent. alone to be treated as ascertained--Income-tax Act, 1961, s. 115JB-- Assistant CIT v. IOT Infrastructure and Energy Services Ltd. (Mumbai) . . . 406
Charitable purposes --Exemption--Hospital--Assessee earning interest from fixed deposits--Directly incidental to main activities of trust--Exemption allowable--Income-tax Act, 1961, s. 11-- Deputy CIT v. Nehru Prasutika Asptal Samiti (Agra) . . . 376
----Registration of trusts--Donation to charitable institution--Approval of institution--Factors to be considered--Only genuineness of objects to be tested--Receipt of donations or whether charitable activities commenced, not relevant--Income-tax Act, 1961, ss. 12AA, 80G-- Babu Ram Education Society v. CIT (Agra) . . . 351
Deduction of tax at source --Payments to contractors--Transport contracts--Contention of assessee that it merely took trucks on hire and truck owners not sub-contractors and payments to them not subject to deduction of tax at source--Matter remanded for consideration of facts afresh--Income-tax Act, 1961, s. 194C-- S. S. Warad v. Additional CIT (Bangalore) . . . 358
Export --Exemption--Assessee manufacturing and exporting granite monumental slabs--Whether eligible for exemption in respect of trading profits--Finding by Commissioner (Appeals) that if trading receipts included, assessee could set up token production and start free trading--Not applicable to facts of case--Assessee entitled to exemption--Income-tax Act, 1961, s. 10B-- GTP Granites Ltd. v. Assistant CIT (Chennai) . . . 369
Hospital --Exemption--Assessee running maternity hospital--Not treatment of illness envisaged by section 10(23C)(iiiae)--Does not satisfy ingredients of section 10(23C)(iiiae)--Exemption not allowable--Income-tax Act, 1961, s. 10(23C)(iiiae)-- Deputy CIT v. Nehru Prasutika Asptal Samiti (Agra) . . . 376
Income --Accrual of income--Civil construction--Method of accounting--Percentage completion method--Consistently followed and accepted--Mobilisation and other advances received by assessee according to progress billing for work done--Revenue from contract recognised by percentage completion method--Advances adjusted on such completion--Amount representing advances shown by assessee as “amount due to customerâ€--Not income of assessee at point of receipt-- Assistant CIT v. IOT Infrastructure and Energy Services Ltd. (Mumbai) . . . 406
----Expenditure relating to exempt income--Dividend income and income from mutual funds--Rule 8D applicable from assessment year 2008-09--Disallowance for earlier years to be made on reasonable basis--Disallowance at same percentage of total expenses as exempt income bears to total income--Availability of assessee’s own funds for making investment in shares and mutual funds--No utilisation of borrowed funds to make investment--Disallowance out of interest not called for--Disallowance of other expenses--Expenses offered by assessee to be adjusted from disallowance worked out applying rule 8D--Income-tax Act, 1961, s. 14A--Income-tax Rules, 1962, r. 8D-- Assistant CIT v. IOT Infrastructure and Energy Services Ltd. (Mumbai) . . . 406
International transactions --Arm’s length price--Associated enterprise--Definition--Managing director of German company director in Indian company--Transactions of export sales and purchase of raw material--Whether prices and other conditions relating to transactions influenced by other enterprise--Matter remanded--Income-tax Act, 1961, s. 92A(2)(e), (i), (m)-- ITO v. Alumeco India Extrusion Ltd. (Hyderabad) . . . 381
----Arm’s length price--Determination--Adjustments to be restricted to international transactions and not to entire turnover of assessee-- ITO v. Alumeco India Extrusion Ltd. (Hyderabad) . . . 381
----Arm’s length price--Determination--Cost plus method--Multiple comparable prices providing range of prices to be addressed by ± 5 per cent. range--Proviso to section 92C(2) would apply only if there is more than one comparable price--Income-tax Act, 1961, s. 92C(2)-- ITO v. Alumeco India Extrusion Ltd. (Hyderabad) . . . 381
----Arm’s length price--Most appropriate method--Assessee having reasonably significant sales to non-associated enterprises--Internal domestic transactions similar to export transactions--Internal cost plus method more appropriate than external transactional net margin method--Incorrect allocation of costs no reason for rejecting cost plus method--Transfer Pricing Officer’s reasons for rejection of assessee’s internal cost plus method and adoption of external transactional net margin method not tenable--Assessee a sick company--Erroneous to compare it cursorily using external transactional net margin method--Income-tax Act, 1961, s. 92CA-- ITO v. Alumeco India Extrusion Ltd. (Hyderabad) . . . 381
Non-resident --Permanent establishment--Employees of assessee frequently visiting premises of Indian subsidiary to provide supervision, direction and control over operations--Fixed place of business--Computation of profits attributable to permanent establishment--To be made by transfer pricing principles--Attributing entire receipts of assessee without allowing cost incurred to earn revenue outside India--Not proper--Estimation of profits attributable to permanent establishment by counting worldwide number of employees and dividing it by assessee’s global revenue--Not proper--Income-tax Act, 1961, s. 44C--Double Taxation Avoidance Agreement between India and the U. S. A., arts. 5, 7(4), 12-- Convergys Customer Management Group Inc. v. Assistant Director of Income-tax, International Taxation (Delhi) . . . 443
----Royalty--Payment to telecommunications service providers in U. S. A. for leased undersea cables--Part of cost in connection with India link reimbursed by Indian subsidiary--No transfer of right to use--Reimbursement of expenses not taxable in hands of assessee--Not royalty--Double Taxation Avoidance Agreement between India and the U. S. A., art. 12-- Convergys Customer Management Group Inc. v. Assistant Director of Income-tax, International Taxation (Delhi) . . . 443
----Royalty--Purchase of software--Copyrighted article--No acquisition of copyright in software--Payment in nature of reimbursement of expenses--Not taxable in hands of non-resident--Income-tax Act, 1961, s. 9(1), Expln., (vi)-- Convergys Customer Management Group Inc. v. Assistant Director of Income-tax, International Taxation (Delhi) . . . 443
Precedent --High Court--Special leave petition from decision of High Court pending--Decision to be followed until reversed-- Assistant CIT v. IOT Infrastructure and Energy Services Ltd. (Mumbai) . . . 406
Arts. 5, 7(4), 12 --Non-resident--Permanent establishment--Employees of assessee frequently visiting premises of Indian subsidiary to provide supervision, direction and control over operations--Fixed place of business--Computation of profits attributable to permanent establishment--To be made by transfer pricing principles--Attributing entire receipts of assessee without allowing cost incurred to earn revenue outside India--Not proper--Estimation of profits attributable to permanent establishment by counting worldwide number of employees and dividing it by assessee’s global revenue--Not proper-- Convergys Customer Management Group Inc. v. Assistant Director of Income-tax, International Taxation (Delhi) . . . 443
Art. 12 --Non-resident--Royalty--Payment to telecommunications service providers in U. S. A. for leased undersea cables--Part of cost in connection with India link reimbursed by Indian subsidiary--No transfer of right to use--Reimbursement of expenses not taxable in hands of assessee--Not royalty-- Convergys Customer Management Group Inc. v. Assistant Director of Income-tax, International Taxation (Delhi) . . . 443
S. 2(11) --Capital gains--Short-term capital gains--Computation of capital gains--Depreciable assets--Sale of factory premises and purchase of apartment--Asset would fall under same block if used for business purpose and depreciation allowable for premises if used as office premises--Matter remanded for verification whether asset used as office premises-- Avin Pumps P. Ltd. v. Joint CIT (Mumbai) . . . 345
S. 9(1), Expln., (vi) --Non-resident--Royalty--Purchase of software--Copyrighted article--No acquisition of copyright in software--Payment in nature of reimbursement of expenses--Not taxable in hands of non-resident-- Convergys Customer Management Group Inc. v. Assistant Director of Income-tax, International Taxation (Delhi) . . . 443
S. 10B --Export--Exemption--Assessee manufacturing and exporting granite monumental slabs--Whether eligible for exemption in respect of trading profits--Finding by Commissioner (Appeals) that if trading receipts included, assessee could set up token production and start free trading--Not applicable to facts of case--Assessee entitled to exemption-- GTP Granites Ltd. v. Assistant CIT (Chennai) . . . 369
S. 10(23C)(iiiae) --Hospital--Exemption--Assessee running maternity hospital--Not treatment of illness envisaged by section 10(23C)(iiiae)--Does not satisfy ingredients of section 10(23C)(iiiae)--Exemption not allowable-- Deputy CIT v. Nehru Prasutika Asptal Samiti (Agra) . . . 376
S. 11 --Charitable purposes--Exemption--Hospital--Assessee earning interest from fixed deposits--Directly incidental to main activities of trust--Exemption allowable-- Deputy CIT v. Nehru Prasutika Asptal Samiti (Agra) . . . 376
S. 12AA --Charitable purposes--Registration of trusts--Donation to charitable institution--Approval of institution--Factors to be considered--Only genuineness of objects to be tested--Receipt of donations or whether charitable activities commenced, not relevant-- Babu Ram Education Society v. CIT (Agra) . . . 351
S. 14A --Income--Expenditure relating to exempt income--Dividend income and income from mutual funds--Rule 8D applicable from assessment year 2008-09--Disallowance for earlier years to be made on reasonable basis--Disallowance at same percentage of total expenses as exempt income bears to total income--Availability of assessee’s own funds for making investment in shares and mutual funds--No utilisation of borrowed funds to make investment--Disallowance out of interest not called for--Disallowance of other expenses--Expenses offered by assessee to be adjusted from disallowance worked out applying rule 8D-- Assistant CIT v. IOT Infrastructure and Energy Services Ltd. (Mumbai) . . . 406
S. 37 --Business expenditure--Expenditure incurred in earlier years towards premium and “right to way†and other charges in respect of leasehold land--Whether can be amortised over lease period--Whether proportionate deduction allowable-- Assistant CIT v. IOT Infrastructure and Energy Services Ltd. (Mumbai) . . . 406
S. 40(a)(ia) --Business expenditure--Disallowance--Payments subject to deduction of tax at source--Amendment permitting deduction where tax deducted at source remitted before due date for filing return--Amendment retrospective-- S. S. Warad v. Additional CIT (Bangalore) . . . 358
S. 44C --Non-resident--Permanent establishment--Employees of assessee frequently visiting premises of Indian subsidiary to provide supervision, direction and control over operations--Fixed place of business--Computation of profits attributable to permanent establishment--To be made by transfer pricing principles--Attributing entire receipts of assessee without allowing cost incurred to earn revenue outside India--Not proper--Estimation of profits attributable to permanent establishment by counting worldwide number of employees and dividing it by assessee’s global revenue--Not proper-- Convergys Customer Management Group Inc. v. Assistant Director of Income-tax, International Taxation (Delhi) . . . 443
S. 50(1)(iii) --Capital gains--Short-term capital gains--Computation of capital gains--Depreciable assets--Sale of factory premises and purchase of apartment--Asset would fall under same block if used for business purpose and depreciation allowable for premises if used as office premises--Matter remanded for verification whether asset used as office premises-- Avin Pumps P. Ltd. v. Joint CIT (Mumbai) . . . 345
S. 80G --Charitable purposes--Registration of trusts--Donation to charitable institution--Approval of institution--Factors to be considered--Only genuineness of objects to be tested--Receipt of donations or whether charitable activities commenced, not relevant-- Babu Ram Education Society v. CIT (Agra) . . . 351
S. 92A(2)(e), (i), (m) --International transactions--Arm’s length price--Associated enterprise--Definition--Managing director of German company director in Indian company--Transactions of export sales and purchase of raw material--Whether prices and other conditions relating to transactions influenced by other enterprise--Matter remanded-- ITO v. Alumeco India Extrusion Ltd. (Hyderabad) . . . 381
S. 92C(2) --International transactions--Arm’s length price--Determination--Cost plus method--Multiple comparable prices providing range of prices to be addressed by ± 5 per cent. range--Proviso to section 92C(2) would apply only if there is more than one comparable price-- ITO v. Alumeco India Extrusion Ltd. (Hyderabad) . . . 381
S. 92CA --International transactions--Arm’s length price--Most appropriate method--Assessee having reasonably significant sales to non-associated enterprises--Internal domestic transactions similar to export transactions--Internal cost plus method more appropriate than external transactional net margin method--Incorrect allocation of costs no reason for rejecting cost plus method--Transfer Pricing Officer’s reasons for rejection of assessee’s internal cost plus method and adoption of external transactional net margin method not tenable--Assessee a sick company--Erroneous to compare it cursorily using external transactional net margin method-- ITO v. Alumeco India Extrusion Ltd. (Hyderabad) . . . 381
S. 115JB --Capital or revenue expenditure--Provision for warranty claims--To be quantified based on past data--Data showing negligible liability--Disallowance of provision at 5 per cent. and allowance to extent of 0.2 per cent.--Proper--Book profits--Liability to extent of 0.2 per cent. alone to be treated as ascertained-- Assistant CIT v. IOT Infrastructure and Energy Services Ltd. (Mumbai) . . . 406
S. 143(3) --Appeal to Commissioner (Appeals)--Order passed by Assessing Officer under section 154 resulting in refund--Failure to grant interest--Cannot be agitated in appeal to Commissioner (Appeals) against order under section 143(3)-- Assistant CIT v. IOT Infrastructure and Energy Services Ltd. (Mumbai) . . . 406
S. 154 --Appeal to Commissioner (Appeals)--Order passed by Assessing Officer under section 154 resulting in refund--Failure to grant interest--Cannot be agitated in appeal to Commissioner (Appeals) against order under section 143(3)-- Assistant CIT v. IOT Infrastructure and Energy Services Ltd. (Mumbai) . . . 406
S. 194C --Business expenditure--Disallowance--Payments subject to deduction of tax at source--Amendment permitting deduction where tax deducted at source remitted before due date for filing return--Amendment retrospective-- S. S. Warad v. Additional CIT (Bangalore) . . . 358
----Deduction of tax at source--Payments to contractors--Transport contracts--Contention of assessee that it merely took trucks on hire and truck owners not sub-contractors and payments to them not subject to deduction of tax at source--Matter remanded for consideration of facts afresh-- S. S. Warad v. Additional CIT (Bangalore) . . . 358
S. 234B --Advance tax--Interest--Payment not liable to deduction of tax at source--Liability to advance tax and hence to interest-- Convergys Customer Management Group Inc. v. Assistant Director of Income-tax, International Taxation (Delhi) . . . 443
S. 234D --Advance tax--Interest--Payment not liable to deduction of tax at source--Liability to advance tax and hence to interest-- Convergys Customer Management Group Inc. v. Assistant Director of Income-tax, International Taxation (Delhi) . . . 443
S. 244A --Appeal to Commissioner (Appeals)--Order passed by Assessing Officer under section 154 resulting in refund--Failure to grant interest--Cannot be agitated in appeal to Commissioner (Appeals) against order under section 143(3)-- Assistant CIT v. IOT Infrastructure and Energy Services Ltd. (Mumbai) . . . 406
S. 253 --Appeal to Appellate Tribunal--Appealable orders--Maintainability of appeal--Appeal not maintainable unless specifically provided for under section 253--Section 271FA providing for penalty for failure to furnish annual information return not mentioned--Appeal from order levying penalty under section 271FA not maintainable-- Sub-Registrar Office, Meppayur v. Director of Income-tax (Intelligence) (Cochin) . . . 341
S. 271FA --Appeal to Appellate Tribunal--Appealable orders--Maintainability of appeal--Appeal not maintainable unless specifically provided for under section 253--Section 271FA providing for penalty for failure to furnish annual information return not mentioned--Appeal from order levying penalty under section 271FA not maintainable-- Sub-Registrar Office, Meppayur v. Director of Income-tax (Intelligence) (Cochin) . . . 341
R. 8D --Income--Expenditure relating to exempt income--Dividend income and income from mutual funds--Rule 8D applicable from assessment year 2008-09--Disallowance for earlier years to be made on reasonable basis--Disallowance at same percentage of total expenses as exempt income bears to total income--Availability of assessee’s own funds for making investment in shares and mutual funds--No utilisation of borrowed funds to make investment--Disallowance out of interest not called for--Disallowance of other expenses--Expenses offered by assessee to be adjusted from disallowance worked out applying rule 8D-- Assistant CIT v. IOT Infrastructure and Energy Services Ltd. (Mumbai) . . . 406
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