Limitation period for assessment restarted once stay order was vacated even if it wasn't communicated to department
IT : In terms of provisions of Explanation 1(ii) to section 153, period of limitation for assessment can be stayed only by an order or injunction of any Court and as soon as said order or injunction of Court is vacated, period of limitation shall re-start even though order vacating injunction is not communicated to department
HC upheld reassessment on sec. 69A additions as search initiated by AO had revealed bogus loan transaction
IT : Where subsequent to completion of assessment, Assessing Officer, on basis of search carried out in case of another person, came to know that loan transactions of assessee with a finance company were bogus as said company was engaged in providing accommodation entries, it being a fresh information, he was justified in initiating reassessment proceeding in case of assessee
ALLAHABAD, JULY 09, 2014: THE issue before the Bench is - Whether when assessee files estimate of income showing NIL advance tax liability on basis of loss returns of previous years it attracts penal provisions of Sec 273(2)(c). NO, says the High Court.
Facts of the case
The appellant is a Public Limited Company, engaged in the manufacture and sale of synthetics yarn & cement. It was following calender year, as the accounting period. For the AY 1982-83, assessee had closed its accounts on 31.12.1981. The assessee was supposed to submit the estimate u/s 209A for the purposes of payment of advance tax on 15.6.1981, 15.9.1981 and 15.12.1981. The assessee had filed an estimate on 9.6.1981 showing the advance tax liability at nil. According to the assessee, since the business condition of the calendar year did not improve, it was not considered necessary to revise the estimate under sub-section (4) of Section 209A, at the time when the subsequent installments become due for payment, by 15th September and 15th December, 1981.
For the assessment year 1982-83, the appellant filed return disclosing loss of Rs.565 lakhs comprising of current year's loss of Rs.184 Lakhs carried forward loss of Rs.206 lakhs for the assessment year 1980-81 and Rs. 230 Lakhs for the assessment year 1981-82.
For the assessment year 1980-81, by the assessment order dated 24.8.1983, the return loss was converted into profit of Rs.313.86 lakhs. For the assessment year 1981-82, the assessment was made on 27.9.1984 on an income of Rs.608.54 lakhs as against the disclosed loss of Rs.436.45 lakhs. For the assessment year 1982-83, the assessing authority has passed the assessment order on 29.5.1985 on an income of Rs.15,28,83,600/-. The income was finally determined vide order dated 11.5.1990 after the decision of the Tribunal at Rs. 1,65,82,800/-.
A notice under Section 273 was issued on the ground that the appellant failed to furnish the estimate of advance tax as required under sub-section (4) of Section 209A of the Act. The appellant filed reply to the show cause notice. However, the assessing authority has not accepted the reply of the appellant and vide order dated 25.10.1990 levied the penalty at Rs.16,00,000/-.
Being aggrieved by the penalty order, assessee filed an appeal before CIT(A), who had dismissed the same. On further appeal, Tribunal had allowed the appeal in part and confirmed the levy of penalty and had reduced the quantum of penalty from Rs.16,00,000/- to Rs.5,50,000/-.
On appeal, the HC held that,
++ admittedly, in the present case, the appellant had filed an estimate of income on 9.6.1981 showing the advance tax liability at nil. The estimate has not been further revised in the months of September and December, 1981. The question for consideration is whether there was a reasonable cause in not revising the estimate in the months of September and December, 1981. In case if there was a reasonable cause, the penalty is not leviable. We are of the view that there was a reasonable cause in not revising the estimate under sub-section (4) of Section 209A of the Act. The return for the assessment year 1980-81 was filed on 30.7.1980 disclosing loss of Rs.205.74 lakhs. The return for the assessment year 1981-82 was filed on 30.6.1981, showing loss of Rs.436.45 lakhs. The details of both the returns were available in the months of June, September and December, 1981. The assessment orders for the aforesaid two assessment years have been passed on 24.8.1983 and 27.9.1984, respectively, after June, 1981, September, 1981 and December, 1981. It is the case of the appellant that on the same method of calculation of loss and income, there was loss in the year, under consideration, also, and there was no improvement in the position in the months of September and December, 1981 and, therefore, the estimate could not be revised. We are of the view that there is no reason to disbelieve such explanation;
++ in the case of Commissioner of Income Tax vs. Sulphur Refinery Pvt. Ltd., the Bombay High Court has held that on the day when the assessee was liable to furnish the estimate there was accumulated loss available with the assessee even though ultimately the assessment was made on profit. In case if the estimate has not been revised and the advance tax has not been paid it falls within the purview of reasonable cause and the penalty under Section 273 (2) (c) is not leviable;
++ in the case of Commissioner of Income Tax vs. Birla Cotton Spinning & Weaving Mills Ltd., the Culcatta High Court has held that burden of proving that an estimate of advance tax submitted by the assessee was false or inaccurate to his knowledge is on the Revenue. The knowledge that the estimate is untrue or one which the assessee believes to be untrue must be at the point of time when he submitted the estimate. The mens rea of the mental element must be adjudged with reference to the facts and circumstances appearing at the time when the estimate was submitted. Mens rea of the assessee at the time when he made the estimate could not be adjudged by his subsequent conduct in returning a larger income in the return than what was estimated for the purpose of payment of advance tax. The evidence, whether negative or positive, small or large, may show that an honest and fair estimate was made by the the assessee and there was no conscious or deliberate furnishing of untrue estimate. The Calcutta High Court has relied upon the various decisions of other High Courts while arriving to the aforesaid conclusion;
++ in the present case, as stated above, on the day when the assessee was obliged to revise the return, the appellant had a bonafide belief of loss inasmuch as the details of the returns for the assessment years 1980-81 and 1981-82 were available. For both the assessment years, the returns of loss were filed, thus, it can be reasonably inferred that the appellant acted bonafidely in not revising the estimate under Section 209A (4). In the result, the appeal is allowed. The aforesaid questions of law are answered in favour of the assessee and against the revenue. The penalty imposed under Section 273(2)(c) of the Act is set aside.
IT: Where there was an incidental observation on year of income taxability, it could not be taken as a 'finding' or 'direction' enabling reassessment under section 150
■■■
[2014] 46 taxmann.com 8 (Mumbai - Trib.)
IN THE ITAT MUMBAI BENCH 'D'
Anil Suri
v.
Income-tax Officer, 11(1) (3) Mumbai*
RAJENDRA, ACCOUNTANT MEMBER
AND DR. S.T.M. PAVALAN, JUDICIAL MEMBER
AND DR. S.T.M. PAVALAN, JUDICIAL MEMBER
IT APPEAL NO. 1640 (MUM.) OF 2010
[ASSESSMENT YEAR 2000-01]
[ASSESSMENT YEAR 2000-01]
APRIL 16, 2014
Section 150, read with section 147 of the Income-tax Act, 1961 - Income escaping assessment - In pursuance of an order on appeal, etc. (Incidental observation) - Assessment year 2000-01 - Whether incidental observation of Tribunal in appeal proceedings for assessment year 2002-03 that capital gains should have been taxed in assessment year 2000-01 could not be basis for reopening assessment for assessment year 2000-01 under section 150 by holding it as 'finding or direction' - Held, yes [Para 2.3.2] [In favour of assessee]
FACTS
| ■ | It was observed by the Tribunal in appeal proceedings for assessment year 2002-03 that the assessee one 'A' had received consideration in part and granted developer the right to enter the plot to carry out construction work of additional built up area. | |
| ■ | Accordingly, the Tribunal was of the view that by virtue of deeming provisions of section 45(1), capital gains was to be brought to tax for assessment year 2000-01 and not assessment year 2002-03. | |
| ■ | On the basis of the above observation, Assesssing Officer issued a notice under section 148 read with section 150, seeking to reopen the assessment for assessment year 2000-01. In response to the notice, assessee filed his return of income declaring total income of Rs. 35 lakhs with remarks 'filed under protest.' The assessee also filed objections to reasons recorded for issuing section 148 notices which was rejected by Assessing Officer. According to the assessee, the Tribunal's order for assessment year 2002-03 had not given any finding or direction enabling Assessing Officer to seek recourse to section 150 for reopening assessment beyond six years. | |
| ■ | Commissioner (Appeals) confirmed action of the Assessing Officer and held that recourse by the Assessing Officer to provisions of section 150 read with section 148 for reopening the assessment was valid. | |
| ■ | On appeal to the Tribunal the assessee contended that that the order of the Tribunal for assessment year 2002-03 did not record any finding or direction to the effect of reopening and hence the reopening of the assessment beyond six years was bad in law and same was to be quashed. |
HELD
| ■ | It is pertinent to mention that the decision of the Tribunal on the basis of which the assessment for year under consideration reopened is related to the assessment year 2002-03. The observation of the Tribunal for the purpose of deleting the addition in respect of the assessment year 2002-03 cannot be treated to be a 'finding' for reopening the assessment year 2001-02 as the appeal for said assessment year has not been before the Tribunal for adjudication. The observation of the Tribunal that 'the case of the assessee is to be brought to tax for assessment year 2000-01 and not assessment year 2002-03 as done by the Assessing Officer' is incidental for holding the addition made in the year 2002-03 is not justifiable and the same cannot be the basis for having recourse to section 150 by holding it as 'finding or direction'. | |
| ■ | Section 150(1) is an exception which brings within its ambit only such cases where reopening of the proceedings may be necessary to comply with an order of the higher authority. Since the observation of the Tribunal that 'the case of the assessee is to be brought to tax for assessment year 2000-01', does not require compliance by the authorities below so far as the assessment year 2000-01 is concerned, taking recourse to section 150 by holding the same as 'finding' of the Tribunal is not legally tenable. Therefore, the Commissioner(Appeals) is not justified in confirming the validity of the notice issued under section 148(1) and hence the impugned notice, the consequent reopening proceedings and the reassessment order stand quashed.[Para 2.3.2] | |
| ■ | In the result, the appeal filed by the assessee is treated as allowed.[Para 5] |
CASES REFERRED TO
ITO v. Murlidhar Bhagwan Das [1964] 52 ITR 335 (SC) (para 2.2), Sunil Malik v. Asstt. CIT [2009] 123 TTJ 208 (Delhi) (para 2.2), Smt.Neelam Gupta v. ITO [2007] 110 TTJ 714 (Luck.) (para 2.2), Rakesh N. Dutt v. Asstt. CIT [2009] 311 ITR 247 (para 2.2), CIT v. Green World Corporation [2009] 314 ITR 81/181 Taxman 111 (SC) (para 2.2) and Parveen Kumari v. CIT [1999] 237 ITR 339 (Punj. & Har.) (para 2.2).
Dr. K. Shivram for the Appellant. Sanjeev Jain for the Respondent.
ORDER
DR. S.T.M. Pavalan, Judicial Member - This appeal by the Assessee is directed against the order of the Ld.CIT(A)-3, Mumbai dated 11.01.2010 for the Assessment Year 2000-01.
2. In Grounds No. 1, 2 & 3, the assessee has agitated the decision of the Ld.CIT(A) in confirming the reopening of the assessment u/s 148 as a valid one.
2.1 Briefly stated, the Tribunal, vide its order dated 28.03.2011 in the assessee's case in ITA No. 7482/Mum/2005 for Assessment Year 2002-03 observed that since the assessee received consideration in part and the granted developer the right to enter the plot to carry out construction work of additional built up area on 09.02.2000 itself, by virtue of deeming provisions of section 45(1), the capital gain was to be brought to tax for assessment year 2000-01 and the not in the year 2002-03. On this basis of the said observation of the Tribunal, the AO issued the notice to the assessee on 24.08.2007 u/s 148 read with section 150 and the same was served on the assessee on 27.08.2007 along with copy of the reasons for initiating proceedings u/s 147 of the Income Tax Act. In response, the assessee filed a return of income on 27.09.2007 declaring a total income at Rs.35,32,927/- with remarks 'filed under protest'. The assessee also filed the objections to reasons recorded for issue of notice u/s 148 which were rejected by the AO by his letter dated 15.11.2007. According to the assessee, the order of the Tribunal aforementioned had not given any finding or direction enabling the AO to seek recourse to section 150 for reopening beyond six years. On appeal, the Ld.CIT(A) had confirmed the action of the AO and held that recourse by the AO to provisions of section 150 read with section 148 for reopening the assessment was valid. Aggrieved by the impugned decision, the assessee has raised these grounds in the appeal before us.
2.2 Before us, the learned counsel for the assessee has stated that the order of the Tribunal dated 28.03.2007 does not record any finding or direction to the effect of reopening and the hence the reopening of the assessment beyond six years is bad- in-law and the same is to be quashed. In this connection, the learned counsel has relied on the decision of the Hon'ble Apex Court in the case of ITO v. Murlidhar Bhagwan Das [1964] 52 ITR 335 (SC), the decisions of Tribunal in the cases of Sunil Malik v. Asstt. CIT[2009] 123 TTJ 208 (Delhi) and Smt.Neelam Gupta v. ITO [2007] 110 TTJ 714, the decision of the Bombay High Court in the case of Rakesh N. Dutt v. Asstt. CIT [2009] 311 ITR 247 and the decision of the Hon'ble Apex Court CIT v. Green World Corpn. [2009] 314 ITR 81/181 Taxman 111 (SC) to support the proposition that the observation of the Tribunal in the assessee's case for the Assessment Year 2002-03 is neither a finding nor a direction as regards the AY 2000-01 is concerned for the purpose of section 150 of the Act. On the other hand, the Ld.DR has relied on the decision of the Punjab & Haryana High Court of in the case of Parveen Kumari v. CIT [1999] 237 ITR 339 to support case of the revenue.
2.3 We have heard both the sides and perused the material on these grounds of appeal. It is pertinent to mention that the assessee, in ITA No. 7482/Mum/2005 for the AY 2002-03, has disputed the assessment of long term capital gain amounting to Rs.1,35,50,000/-. While adjudicating the said appeal of the assessee, the Tribunal, vide its order dated 28.03.2007 has deleted the impugned addition made/confirmed by the AO/CIT(A). The Tribunal, in para 4 of the said order, has observed as follows:
'In this case the dispute essentially pertains to the year of assessability of capital gains arising to the assessee on transfer of a part of this proprietary rights over the building known as "Rita" in Khar (W)….. From a bare reading of the provisions of Section 45(1) it is apparent to us that it is the year in which transfer took place that is relevant and the year in which the value of consideration is received by the transferor is not relevant.'
In para 6 of the said order, the Tribunal has further observed as follows:
"We therefore hold that transfer of capital asset took place on 09.02.2000 and therefore, by virtue of deeming provisions of Section 45(1) the capital gains in the case of the assessee is to be brought to tax for assessment year 2000-01 and not assessment 2002-03 as done by the assessing officer."
As regards the reopening of the assessment beyond six years, section 150(1) of the Act permits reopening of the assessment beyond six years in order to give effect to any 'finding or direction' of the appellate authority. Now, the only issue to be decided on these grounds is whether the above said observation of the Tribunal can be treated to be a 'finding or direction' for the purposes of section 150(1) of the Act.
2.3.1 In the case of Murlidhar Bhagwan Das (supra), the Hon'ble Apex Court has held that the word 'finding' can be only that which is necessary for the disposal of an appeal in respect of an assessment of a particular year and has further been held that the appellate authority may incidentally find that the income belongs to another year, but that is not finding for the disposal of an appeal in respect of the assessment year in question. Similarly, the 'direction' has been construed to mean a direction which the appellate or revisional authority as the case may be is empowered to give under the sections mentioned therein. The Tribunal in the case of Smt. Neelam Gupta (supra) quashed the notice u/s 148 by holding that the observation made by the Ld.CIT(A) to the effect that the AO is however free to take action in assessment year 1997-98 could not be construed as a direction to the AO to initiate reassessment proceedings for assessment year 1997-98 and therefore, the said notice u/s 148 for the assessment year 1997 issued on 16th November, 2004 is time barred. Moreover, in the case of Green World Corpn. (supra), the Hon'ble Apex Court has held that the provisions of section 150, although appears to be of a very vide amplitude, but would not mean that recourse to the reopening of the proceedings in terms of 147 and 148 can be initiated at any point of time whatsoever. Such proceeding can be initiated only within the period of limitation prescribed as contained in section 149. Section 150(1) is an exception to the aforementioned provisions. It brings within its ambit only such cases where reopening of the proceedings may be necessary to comply with an order of the higher authority. For the said purpose, the records of the proceedings must be before the appropriate authority. It must examine the records of the proceedings. If there is no proceeding before it or if the assessment year in question is also not a matter which would fall for consideration before the higher authority, section 150 will have no application. It is also pertinent to mention that the Tribunal does not have power to give any finding or direction in respect of another year/period which is not before the authority as held by the various judicial forums. The Hon'ble Bombay High Court in the case of Smt.Sabita Bhagwandas Shah v. ITO [1996] 59 ITR 652, while interpreting the sections 31, 34 (1) & (2) of the Income Tax Act 1922, (corresponding to the provisions of sections 148, 153 and 253 of 1961 Act) has held that 'finding' means the finding necessary for giving relief in respect of the assessment year in question and the proviso to section 34(3) of the 1922 Act does not save time prescribed under section 34(1) in respect of escaped assessment of any year other than that which has been the subject matter of appeal or revision. The said decision of the jurisdictional High Court has been rendered after considering the decision of the Hon'ble Apex Court in the case of Murlidhar Bhagwan Das (supra).
2.3.2 After considering the legal position aforementioned, it is pertinent to mention that the decision of the Tribunal on the basis of which the assessment for year under consideration reopened is related to the assessment year 2002-03. The observation of the Tribunal for the purpose of deleting the addition in respect of the assessment year 2002-03 cannot be treated to be a 'finding' for reopening the AY 2001-02 as the appeal for said assessment year has not been before the Tribunal for adjudication. The observation of the Tribunal that 'the case of the assessee is to be brought to tax for assessment year 2000-01 and not assessment 2002-03 as done by the assessing officer' is incidental for holding the addition made in the year 2002-03 is not justifiable and the same cannot be the basis for having recourse to section 150 of the Act by holding it as 'finding or direction'. Section 150(1) is an exception which brings within its ambit only such cases where reopening of the proceedings may be necessary to comply with an order of the higher authority. Since the observation of the Tribunal that 'the case of the assessee is to be brought to tax for assessment year 2000-01', does not require compliance by the authorities below so far as the assessment year 2000-01 is concerned, taking recourse to section 150 of the Act by holding the same as 'finding' of the Tribunal is not legally tenable. The Hon'ble Bombay High Court in the case of Rakesh N. Dutt (supra) has held that once section 150 of the Act is not applicable to the case of the assessee, the reopening of the assessment beyond the period of six years from the end of the relevant assessment year would be time barred. In view of the aforementioned discussion, we do not find force in the arguments of the Ld.DR by placing reliance on the decision of the Punjab & Haryana High Court in the case of Parveen Kumari (supra). Therefore, we are of the considered view that the Ld.CIT(A) is not justified in confirming the validity of the notice issued u/s 148(1) and hence the impugned notice, the consequent reopening proceedings and the reassessment order stand quashed. Resultantly, Grounds no. 1 to 3 are allowed.
3. In Grounds No. 4 to 6, the assessee has agitated the action of the Ld.CIT(A) in confirming the adoption of the value of the two flats based on DVO's report by the AO for the purpose of calculating the capital gains. In view of the fact that the said issue arises out of the reopening of the assessment/reassessment order which has been quashed in the adjudication of the preceding grounds of appeal, the adjudication of the issue raised in Grounds No 4, 5 & 6 is not required.
4. In Ground No. 7, the assessee has agitated the action of the levying of interest u/s 234A, 234B and 234C of the Act which is also consequential and the same also does not require any adjudication.
5. In the result, the appeal filed by the Assessee is treated as allowed.
JYOTI*In favour of assessee.
Regards,
Pawan Singla , LLB
M. No. 9825829075Reimbursement of demurrage charges to be excluded from shipping profits while applying sec. 44B
IT: Section 44B could not be invoked in case of demurrage charges reimbursed by assessee to non-resident for import of crude oil
Moving Home? Consider QROPS to Save Tax on Your Pension
People leave their home countries for greener pastures and other reasons such as career growth, international exposure, lifestyle improvement etc. There are those who stay back in the host country and make it their home while others move back after a long stay. Nostalgia draws many such wanderers back to their people in their homeland. But, there is one particular question that daunts these homebound drifters which revolves around wrapping-up their finances in the other country.
There is a fear that their savings will be taxed heavily by their host country when they try moving them to their home country. To help these overseas workers, Indian government launched Mahatma Gandhi Pravasi Suraksha Yojna (MGPSY) in 2012 to facilitate seamless transfer of pension funds to India, without having to undergo a hefty tax slap on same by the host country (or the non-resident country).
Who can avail?
The scheme can be availed by Indian workers aged between 18-50 years and having a work permit or employment contract and a 'Emigration Clearance required' stamp on the their passports.
The scheme also referred to as Qualifying Recognised Overseas Pension Scheme or QROPS guarantee significant tax benefits overseas Indian workers, especially those in the UK. This pension scheme is HM Revenue and Customs (HMRC) compliant. This means the pension fund of a UK-based Indian worker will not incur undue charges, when transferred to QROPS. HMRC is the tax authority of UK that governs pension funds there.
QROPS primarily aids those Indians who have built up a pension fund in UK but plan to permanently emigrate to India with the intention to retire there.
Benefits of transferring your pension fund kitty to QROPS
- Settle whatever you have in a UK pension fund as tax efficiently as possible when immigrating to India
- Get paid in the currency of your choice to limit currency fluctuation related losses
- In case of the death of pension fund holder, the money can be transferred to relatives
Pension schemes apply to HMRC to become QROPS. A list of qualified QROPS (if opted by the scheme) is available on the HMRC website. Several Indian banks offer related pension schemes that are offered along with attractive benefits.
About HDFC Life
HDFC Life, one of India's leading private life insurance companies promoted by HDFC Ltd. & Standard Life Ltd., offers a range of individual and group insurance solutions. HDFC Life's product portfolio comprises solutions, which meet various customer needs such as Protection, Pension, Savings, Investment and Health. HDFC Life also offers various HMRC approved QROPS Plans.
Video Tutorial on Transfer Pricing (Working Capital Adjustment)
Nilesh Patel – CPA (USA), IRS (Former)
Under the Indian Transfer Pricing Regulations (Sec. 92 to Sec. 92F and Sec. 94A of the I.T. Act 1961; and Rules 10A to 10TG of the I.T. Rules 1962) the transactions of intra-group transfers of goods, services, assets, and capital – between related parties and associated enterprises –must be at Arm's Length Price. The Arm's Length Priceis the price at which comparable independent enterprises operating in the open market undertake comparable transactions.Information about such price, the price at which comparable independent enterprises undertake comparable transactions, however, is rarely available. So six different Transfer Pricing methods have been prescribed under the Indian Transfer Pricing Regulations: Comparable Uncontrolled Price (CUP), Resale Price Method (RPM), CPM (Cost Plus Method), PSM (Profit Split Method), TNMM (Transactional Net Margin Method) and the Other Method.
In practice we often have to derive Arm's Length Price by applying TNMM, because limited data of independent enterprises is available in public domain. Under TNMM we compare Operating Profit Margin (OPM) of independent enterprises with the OPM of the Taxpayer. For example, if the Taxpayer is a pharma manufacturer then we will search for other similar pharma manufacturers, and compare the Taxpayer's OPM with the OPM of those other pharma manufacturers.
But are the OPMs of two pharma manufacturers really comparable? No two pharma manufacturers will perform identical functions, employ identical assets and bear identical risks (FAR profile). There will be some difference in functions performed, assets employed and risks borne by the two pharma manufacturers, or, for that matter,by any two business enterprises. Such difference adversely affects the reliability of the results of comparison of OPM of two business enterprises. And that could lead to erroneous computation of the Arm's Length Price – for reliable results the comparison of OPMs should be between enterprises that have comparable FAR profiles.
For example, a Software Development Services Provider who performs more value-adding functions and bears higher risks, as compared to the Taxpayer (another Software Development Services Provider), will generally earn higher levels of OPM than the Taxpayer. So, the Arm's Length Price, computed on basis of comparison between the OPMs of these two service providers, will be unreliable. Why? Because the effect of difference in FAR profile of two enterprises creeps into the comparison. As already stated, the comparison of OPM should be made between enterprises who have similar FAR profile.
How do we rectify the situation? Is there a remedy? How do we ensure a reliable comparison between the Taxpayer and the independent enterprises?
To make a reliable comparison we will have to remove the effect – on OPM – of the difference in the FAR profiles of the Taxpayer and independent enterprises. How do we do that? We make suitable economic adjustments. And one of the most important economic adjustmentsthat we can make is Working Capital Adjustment.
What is Working Capital Adjustment? What is its relevance in determining the Arm's Length Price?Do the I.T. Act 1961 or the I.T. Rules 1962 permit us to make Working Capital Adjustment?In what way can a Working Capital Adjustment help us in our Transfer Pricing assignments? How do we make Working Capital Adjustment in real Transfer Pricing cases?
Answers to these questions are explored in this Video Tutorial. The Tutorial shows you how to make Working Capital Adjustment in real Transfer Pricing cases. It explains – with simple examples – the economic concept underlying Working Capital Adjustment. It tells you about the observations made by ICAI Guidance Note on Transfer Pricing Audit, OECD Transfer Pricing Guidelines and UN Transfer Pricing Manual,on Working Capital Adjustment. The Tutorial also discusses relevant ITAT decisions. In the end it takes you through a full-fledged example of computation of Working Capital Adjustment.
For your convenience the entire Video Tutorial is divided in five parts.
Below are the Topics covered in each Part:
Part I – Introduction. The concept of Working Capital Adjustment is introduced. The need for Working Capital Adjustment is established.
Part II – Discussion of the economic rationale for Working Capital Adjustment. What exactly Working Capital Adjustment is? What is the need for making Working Capital Adjustment? All this is explained through a simple example.
Part III – The mechanism of making Working Capital Adjustment. How to actually make Working Capital Adjustment in real Transfer Pricing cases. This is illustrated by a numerical example.
Part VI – Legal and Regulatory support for Working Capital Adjustment.
a) What are the relevant provisions of the I.T. Act 1961 and I.T. Rues 1962?
b)What do following Guidelines tell us about Working Capital Adjustment?
- ICAI Guidance Note on Report under Sec. 92E
- OECD Transfer Pricing Guidelines
- UN Practice Manual on Transfer Pricing
c) ITAT decisions on Working Capital Adjustment
Part V – Full-fledged Example based on OECD Transfer Pricing Guidelines and UN Practice Manual on Transfer Pricing, showing how to actually compute and make Working Capital Adjustment in real cases. The Tutorial closes with a brief discussion of different types of adjustments, other than Working Capital Adjustment.
After watching this Video Tutorial you will be able to make and claim Working Capital Adjustment in your Transfer Pricing assignments. Also, you will be able to defend such claim before the Transfer Pricing Officer.
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