Salary paid by overseas HO to expatriate employees working exclusively for Indian branch is fully deductible
September 23, 2014[2014] 49 taxmann.com 441 (Delhi - Trib.)
IT/ILT : Where assessee, a bank incorporated in Japan, paid salaries abroad to its expatriates working in Indian branch constituting PE, in view of fact that said expenditure had been incurred wholly and exclusively for Indian branch and, no part of those expenses could be allocated to any other branch by head office, provisions of section 44C did not apply to said expenditure and thus, assessee's claim for deduction of salary expenses was to be allowed
IT/ILT : Where PE of assessee received interest on deposits kept with HO, it was opined that once interest received by PE was deemed to be income of PE and there was no bar in India-Japan treaty on its taxability, then it could not be excluded from computation of income earned by PE
IT/ILT : MAT provisions are applicable only to domestic companies and not to foreign companies
IT/ILT : Where assessee-bank claimed that provisions of section 115JB were not applicable to its case, in view of provisions of section 90(2), assessee's claim for lower impostion of tax in terms of article 7(3) of India-Japan DTAA had to be accepted because provisions of section 115JB are subordinate to section 90(2) and have no overriding effect on said section
ITR'S TRIBUNAL TAX REPORTS (ITR (TRIB))--PRINT AND ONLINE EDITION
Co-operative society --Special deduction under section 80P(2)(a)(i)--Credit facilities to associate members--Term “member†includes “associate memberâ€--Assessee entitled to deduction--Income-tax Act, 1961, s. 80P(2)(a)(i)-- S -6608 Narasingapuram PACB Ltd. v. ITO (Chennai) . . . 246
Penalty --Concealment of income--Refund of redemption fine paid to Customs Department pursuant to order of Tribunal--Appeal of Customs Department pending before High Court--Matter not attaining finality--Refund not taxable--Not a case of concealment of income and furnishing of inaccurate particulars--Penalty deleted--Income-tax Act, 1961, s. 271(1)(c)-- Viraj Impex P. Ltd. v. Asst. CIT (Mumbai) . . . 250
Business expenditure --Amortisation of preliminary expenses--Assessee executing infrastructure projects on build-operate-transfer basis--Assessee building road and collecting toll tax--Assets owned by State Government and used for public purpose--Claim to deduction of expenditure on basis of terms and condition of contract and estimated toll receipts during toll period of respective project--Entitled to be amortised on matching principle of accountancy--Income-tax Act, 1961, s. 35D-- Asst. CIT v. TCI Infrastructure Finance Ltd. (Jaipur) . . . 628
Business income or income from house property --Lease of building--No business activity--Rental income assessable under income from house property--Depreciation not allowable--Income-tax Act, 1961-- Amalgam Foods Ltd. v. Deputy CIT (Cochin) . . . 691
Capital gains --Deduction under section 54B--Sale of agricultural land in joint names of assessee and his son and purchase of new land in assessee’s son’s name--Assessee entitled to deduction--Income-tax Act, 1961, s. 54B-- Bant Singh v. ITO (Chandigarh) . . . 679
Capital or revenue expenditure --Software expenses--Expenditure on upgrading software--Revenue expenditure--Income-tax Act, 1961-- Deputy CIT v. Madras Engineering Industries P. Ltd. (Chennai) . . . 703
Deduction of tax at source --Assessee hiring tankers on contract--Forms 15-I and 15-J filed before prescribed authority and in time--Disallowance not permissible under section 40(a)(ia)--Income-tax Act, 1961, s. 40(a)(ia)-- Deputy CIT v. Vikas Sharma (Chandigarh) . . . 617
----Co-operative bank--Failure by assessee to deduct tax on payment of interest to depositors--Declarations in Forms 15G and 15H filed depositors--ITO cannot reject declarations filed before Commissioner--Quantum of amount not remitted to Government not mentioned--Matter remanded--Income-tax Act, 1961, ss. 194A, 197A(1A), 201(1), (1A)-- Ernakulam District Co-op. Bank Ltd. v. ITO (Cochin) . . . 662
----Payment towards transmission of electricity--Not fees for technical services--Section 194J not applicable--Income-tax Act, 1961, s. 194J-- Deputy CIT v. Delhi Transco Ltd. (Delhi) . . . 669
Depreciation --Lease of plant and machinery with building--Assessing Officer failing to examine whether assessee carried manufacturing activity--Matter remanded to Assessing Officer--Income-tax Act, 1961, s. 32-- Amalgam Foods Ltd. v. Deputy CIT (Cochin) . . . 691
Exemption --Export--Gains due to fluctuation of foreign exchange rates--Excluded from both export as well as total turnover--Income-tax Act, 1961, s. 10AA-- Deputy CIT v. Madras Engineering Industries P. Ltd. (Chennai) . . . 703
----Export--Travelling expenses and communication charges--Travel expenses and communication charges to be excluded both from export as well as total turnover--Income-tax Act, 1961, s. 10B-- Asst. CIT v. Triad Software P. Ltd. (Chennai) . . . 605
Export --Exemption--Telecommunication, insurance and expenses incurred in foreign exchange to be excluded from export turnover and total turnover--Income-tax Act, 1961, s. 10A-- Asst. CIT v. Think Soft Global Services P. Ltd. (Chennai) . . . 633
Income --Accrual--Interest--Non-banking financial company--Mercantile system of accounting--Borrower-companies having substantial assets--Interest not illusory--Failure by assessee to show that loan became non-performing asset--Prudential norms not applicable--Interest accrued to assessee and assessable--Income-tax Act, 1961, s. 5-- ITO v. Tradelink Securities Ltd. (Kolkata) . . . 641
----Disallowance of expenditure in relation to exempt income--Assessee not claiming expenditure in its profit and loss account--Onus on Assessing Officer to prove that out of expenditure incurred under various heads sums in question related to earning of exempt income--Provisions of rule 8D should not be applied in mechanical way--Income-tax Act, 1961, s. 14A--Income-tax Rules, 1962, r. 8D-- Asst. CIT v. Iqbal M. Chagala (Mumbai) . . . 636
Income from undisclosed sources --Cash deposit--Assessee declaring professional receipts--Approval of cash flow statement by Tribunal--Addition to be deleted--Income-tax Act, 1961-- Dr. Binoy Kumar Singh (HUF) v. Asst. CIT (Patna) . . . 717
----Rent--Commissioner (Appeals) estimating floor-wise rent taking rent received from bank as basis--Other flats let for residential purposes--Estimation on basis of rent received on commercial basis not justified--No evidence to show assessee collected higher rent than that declared--Addition to be deleted--Income-tax Act, 1961-- Dr. Binoy Kumar Singh (HUF) v. Asst. CIT (Patna) . . . 717
Industrial undertaking --Special deduction under section 80-IA--Commissioner (Appeals) allowing deduction following decision of Tribunal--That Department challenged decision of Tribunal before High Court not ground to disallow deduction--Income-tax Act, 1961, s. 80-IA(4)-- Asst. CIT v. JWC Logistics Park P. Ltd. (Pune) . . . 598
International transactions --Arm’s length price--Advertisement, marketing and promotion leading to brand building--Business promotion expenses to be treated as directly connected with sales--Only advertisement expenses liable to be considered for purpose of advertisement, marketing and promotion leading to brand building--Transfer Pricing Officer to pass consequential order after verification--Matter remanded--Income-tax Act, 1961-- Panasonic Sales and Services (I) Company Ltd. v. Asst. CIT (Chennai) . . . 683
----Arm’s length price--Determination--Purchase of goods from associated enterprises for sale in domestic market--Cash discounts in nature of incentives for early payments for sales made by assessee--Cash discount, outward freight and storage charges to be treated as selling and distribution expenses and not to be reduced from selling price--Income-tax Act, 1961-- Panasonic Sales and Services (I) Company Ltd. v. Asst. CIT (Chennai) . . . 683
----Arm’s length price--Determination--Transactional net margin method--Failure by Department to provide list of comparables considered for determination of arm’s length price--Objections before Department with respect to business activities of comparables not addressed--Failure of natural justice--Order set aside and matter remanded--Income-tax Act, 1961, s. 92CA(3)-- OKS Prepress Services P. Ltd. v. ITO (Chennai) . . . 648
----Arm’s length price--Determination--Transactional net margin method--Software development services--Selection of comparables--Functionally different companies to be excluded from comparables--Income-tax Act, 1961, s. 92CA-- Open Solutions Software Services P. Ltd. v. ITO (Delhi) . . . 609
Loss --Business loss--Foreign currency loan--Failure of Assessing Officer to examine whether assessee repaid loan or loan outstanding--Matter remanded--Income-tax Act, 1961, s. 43A-- Deputy CIT v. Madras Engineering Industries P. Ltd. (Chennai) . . . 703
Penalty --Concealment of income--Additions deleted by Tribunal--No penalty imposable under section 271(1)(c)--Income-tax Act, 1961, s. 271(1)(c)-- Deputy CIT v. Delhi Transco Ltd. (Delhi) . . . 669
----Limitation--Repayment of loan otherwise than by bank draft or cheque--Penalty to be levied by Joint Commissioner, but Assessing Officer in first instance to be satisfied of contravention and refer matter--Period of limitation to be counted from date of initiation of penalty proceedings by Assessing Officer not date of notice by Joint Commissioner--Penalty proceedings barred by limitation--Income-tax Act, 1961, ss. 269T, 271E, 275(1)(c)-- ITO v. Dinesh Jain (Delhi) . . . 709
----Repayment of loan otherwise than by cheque or bank draft--Assessee assigning loan by way of journal entry to his wife--Only a substitution of one debtor by another debtor--No actual repayment of loan--No violation of section 269T--Assessee not liable to be penalised--Income-tax Act, 1961, ss. 269T, 271E-- ITO v. Dinesh Jain (Delhi) . . . 709
Precedent --Appellate Tribunal--Order of Special Bench--Binding--Pendency of appeal before High Court not to affect binding nature-- Asst. CIT v. Triad Software P. Ltd. (Chennai) . . . 605
Reassessment --Notice--Reopening of assessment on identical facts as original assessment--Not permissible--Income-tax Act, 1961, ss. 147, 148-- Deputy CIT v. Vikas Sharma (Chandigarh) . . . 617
----Notice--Validity--Conversion of firm to company--Notice issued in name of firm after conversion--Not relevant that Assessing Officer aware of dissolution of firm--Issue of notice in name of dead person void--Income-tax Act, 1961, s. 148-- Asst. CIT v. DLF Cyber City Developers Ltd. (Delhi) . . . 696
Unexplained investment --Cost of construction of property--Assessing Officer not recording reasons for making reference to Departmental Valuation Officer--No evidence found in search with regard to undisclosed investment in construction--Report of registered valuer submitted by assessee not to be rejected--Addition not justified--Income-tax Act, 1961, s. 69-- Dr. Binoy Kumar Singh (HUF) v. Asst. CIT (Patna) . . . 717
Valuation of stock --Closing stock--Same material mentioned in profit and loss account in consumption and in sale--No difference between figures of consumption of raw material and sales on calculation--All invoices containing inputs sold as such without processing, entitling assessee to claim Cenvat credit--Failure by Assessing Officer to find discrepancy in documents filed by assessee--Addition on basis of conjectures and surmises to be deleted--Income-tax Act, 1961-- Deputy CIT v. Bry Air (Asia) P. Ltd. (Delhi) . . . 654
S. 5 --Income--Accrual--Interest--Non-banking financial company--Mercantile system of accounting--Borrower-companies having substantial assets--Interest not illusory--Failure by assessee to show that loan became non-performing asset--Prudential norms not applicable--Interest accrued to assessee and assessable-- ITO v. Tradelink Securities Ltd. (Kolkata) . . . 641
S. 10A --Export--Exemption--Telecommunication, insurance and expenses incurred in foreign exchange to be excluded from export turnover and total turnover-- Asst. CIT v. Think Soft Global Services P. Ltd. (Chennai) . . . 633
S. 10AA --Exemption--Export--Gains due to fluctuation of foreign exchange rates--Excluded from both export as well as total turnover-- Deputy CIT v. Madras Engineering Industries P. Ltd. (Chennai) . . . 703
S. 10B --Exemption--Export--Travelling expenses and communication charges--Travel expenses and communication charges to be excluded both from export as well as total turnover-- Asst. CIT v. Triad Software P. Ltd. (Chennai) . . . 605
S. 14A --Income--Disallowance of expenditure in relation to exempt income--Assessee not claiming expenditure in its profit and loss account--Onus on Assessing Officer to prove that out of expenditure incurred under various heads sums in question related to earning of exempt income--Provisions of rule 8D should not be applied in mechanical way-- Asst. CIT v. Iqbal M. Chagala (Mumbai) . . . 636
S. 32 --Depreciation--Lease of plant and machinery with building--Assessing Officer failing to examine whether assessee carried manufacturing activity--Matter remanded to Assessing Officer-- Amalgam Foods Ltd. v. Deputy CIT (Cochin) . . . 691
S. 35D --Business expenditure--Amortisation of preliminary expenses--Assessee executing infrastructure projects on build-operate- transfer basis--Assessee building road and collecting toll tax--Assets owned by State Government and used for public purpose--Claim to deduction of expenditure on basis of terms and condition of contract and estimated toll receipts during toll period of respective project--Entitled to be amortised on matching principle of accountancy-- Asst. CIT v. TCI Infrastructure Finance Ltd. (Jaipur) . . . 628
S. 40(a)(ia) --Deduction of tax at source--Assessee hiring tankers on contract--Forms 15-I and 15-J filed before prescribed authority and in time--Disallowance not permissible under section 40(a)(ia)-- Deputy CIT v. Vikas Sharma (Chandigarh) . . . 617
S. 43A --Loss--Business loss--Foreign currency loan--Failure of Assessing Officer to examine whether assessee repaid loan or loan outstanding--Matter remanded-- Deputy CIT v. Madras Engineering Industries P. Ltd. (Chennai) . . . 703
S. 54B --Capital gains--Deduction under section 54B--Sale of agricultural land in joint names of assessee and his son and purchase of new land in assessee’s son’s name--Assessee entitled to deduction-- Bant Singh v. ITO (Chandigarh) . . . 679
S. 69 --Unexplained investment--Cost of construction of property--Assessing Officer not recording reasons for making reference to Departmental Valuation Officer--No evidence found in search with regard to undisclosed investment in construction--Report of registered valuer submitted by assessee not to be rejected--Addition not justified-- Dr. Binoy Kumar Singh (HUF) v. Asst. CIT (Patna) . . . 717
S. 80-IA(4) --Industrial undertaking--Special deduction under section 80-IA--Commissioner (Appeals) allowing deduction following decision of Tribunal--That Department challenged decision of Tribunal before High Court not ground to disallow deduction-- Asst. CIT v. JWC Logistics Park P. Ltd. (Pune) . . . 598
S. 92CA --International transactions--Arm’s length price--Determination--Transactional net margin method--Software development services--Selection of comparables--Functionally different companies to be excluded from comparables-- Open Solutions Software Services P. Ltd. v. ITO (Delhi) . . . 609
S. 92CA(3) --International transactions--Arm’s length price--Determination--Transactional net margin method--Failure by Department to provide list of comparables considered for determination of arm’s length price--Objections before Department with respect to business activities of comparables not addressed--Failure of natural justice--Order set aside and matter remanded-- OKS Prepress Services P. Ltd. v. ITO (Chennai) . . . 648
S. 147 --Reassessment--Notice--Reopening of assessment on identical facts as original assessment--Not permissible-- Deputy CIT v. Vikas Sharma (Chandigarh) . . . 617
S. 148 --Reassessment--Notice--Reopening of assessment on identical facts as original assessment--Not permissible-- Deputy CIT v. Vikas Sharma (Chandigarh) . . . 617
----Reassessment--Notice--Validity--Conversion of firm to company--Notice issued in name of firm after conversion--Not relevant that Assessing Officer aware of dissolution of firm--Issue of notice in name of dead person void-- Asst. CIT v. DLF Cyber City Developers Ltd. (Delhi) . . . 696
S. 194A --Deduction of tax at source--Co-operative bank--Failure by assessee to deduct tax on payment of interest to depositors--Declarations in Forms 15G and 15H filed depositors--ITO cannot reject declarations filed before Commissioner--Quantum of amount not remitted to Government not mentioned--Matter remanded-- Ernakulam District Co-op. Bank Ltd. v. ITO (Cochin) . . . 662
S. 194J --Deduction of tax at source--Payment towards transmission of electricity--Not fees for technical services--Section 194J not applicable-- Deputy CIT v. Delhi Transco Ltd. (Delhi) . . . 669
S. 197A(1A) --Deduction of tax at source--Co-operative bank--Failure by assessee to deduct tax on payment of interest to depositors--Declarations in Forms 15G and 15H filed depositors--ITO cannot reject declarations filed before Commissioner--Quantum of amount not remitted to Government not mentioned--Matter remanded-- Ernakulam District Co-op. Bank Ltd. v. ITO (Cochin) . . . 662
S. 201(1) --Deduction of tax at source--Co-operative bank--Failure by assessee to deduct tax on payment of interest to depositors--Declarations in Forms 15G and 15H filed depositors--ITO cannot reject declarations filed before Commissioner--Quantum of amount not remitted to Government not mentioned--Matter remanded-- Ernakulam District Co-op. Bank Ltd. v. ITO (Cochin) . . . 662
S. 201(1A) --Deduction of tax at source--Co-operative bank--Failure by assessee to deduct tax on payment of interest to depositors--Declarations in Forms 15G and 15H filed depositors--ITO cannot reject declarations filed before Commissioner--Quantum of amount not remitted to Government not mentioned--Matter remanded-- Ernakulam District Co-op. Bank Ltd. v. ITO (Cochin) . . . 662
S. 269T --Penalty--Limitation--Repayment of loan otherwise than by bank draft or cheque--Penalty to be levied by Joint Commissioner, but Assessing Officer in first instance to be satisfied of contravention and refer matter--Period of limitation to be counted from date of initiation of penalty proceedings by Assessing Officer not date of notice by Joint Commissioner--Penalty proceedings barred by limitation-- ITO v. Dinesh Jain (Delhi) . . . 709
----Penalty--Repayment of loan otherwise than by cheque or bank draft--Assessee assigning loan by way of journal entry to his wife--Only a substitution of one debtor by another debtor--No actual repayment of loan--No violation of section 269T--Assessee not liable to be penalised-- ITO v. Dinesh Jain (Delhi) . . . 709
S. 271(1)(c) --Penalty--Concealment of income--Additions deleted by Tribunal--No penalty imposable under section 271(1)(c)-- Deputy CIT v. Delhi Transco Ltd. (Delhi) . . . 669
S. 271E --Penalty--Limitation--Repayment of loan otherwise than by bank draft or cheque--Penalty to be levied by Joint Commissioner, but Assessing Officer in first instance to be satisfied of contravention and refer matter--Period of limitation to be counted from date of initiation of penalty proceedings by Assessing Officer not date of notice by Joint Commissioner--Penalty proceedings barred by limitation-- ITO v. Dinesh Jain (Delhi) . . . 709
----Penalty--Repayment of loan otherwise than by cheque or bank draft--Assessee assigning loan by way of journal entry to his wife--Only a substitution of one debtor by another debtor--No actual repayment of loan--No violation of section 269T--Assessee not liable to be penalised-- ITO v. Dinesh Jain (Delhi) . . . 709
S. 275(1)(c) --Penalty--Limitation--Repayment of loan otherwise than by bank draft or cheque--Penalty to be levied by Joint Commissioner, but Assessing Officer in first instance to be satisfied of contravention and refer matter--Period of limitation to be counted from date of initiation of penalty proceedings by Assessing Officer not date of notice by Joint Commissioner--Penalty proceedings barred by limitation-- ITO v. Dinesh Jain (Delhi) . . . 709
R. 8D --Income--Disallowance of expenditure in relation to exempt income--Assessee not claiming expenditure in its profit and loss account--Onus on Assessing Officer to prove that out of expenditure incurred under various heads sums in question related to earning of exempt income--Provisions of rule 8D should not be applied in mechanical way-- Asst. CIT v. Iqbal M. Chagala (Mumbai) . . . 636
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