INCOME TAX REPORTS (ITR)--PRINT AND ONLINE EDITION
Constitution --Jurisdiction--Questions of law--Jurisdiction to decide only with High Courts-- Madras Bar Association v. Union of India . . . 42
Constitution of India --Basic structure--Judicial review--Is integral part of basic structure--Westminster model--Parliament--Power to enact legislation to vest adjudicatory functions of High Court in alternative tribunal--Not violative of “basic structure†of Constitution--Parliament must ensure new Tribunal conforms to salient characteristics and standards of court sought to be substituted--Failure to do so--Violative of “basic structure†of Constitution--Constitution of India, arts. 225, 226, 227, 323B--National Tax Tribunal Act, 2005, ss. 5, 6, 7, 8, 13-- Madras Bar Association v. Union of India . . . 42
National Tax Tribunal --Company secretaries and chartered accountants--Not eligible to represent party to appeal in Tribunal--Section 13 invalid--National Tax Tribunal Act, 2005, s. 13-- Madras Bar Association v. Union of India . . . 42
National Tax Tribunal Act, 2005 --Provision for appointment by select committee consisting of majority of Government officials--Provision for limited tenure and reappointment of members--Provision for appointment of accountant members or technical members of Appellate Tribunal to Tax Tribunal--Provision for Central Government deciding on Benches and seats of Benches--Independence of judiciary affected--Affect basic structure of Constitution--Act invalid--Constitution of India, arts. 226, 227--National Tax Tribunal Act, 2005, ss. 5, 6, 7, 8-- Madras Bar Association v. Union of India . . . 42
Income --Definition--Normal meaning not to include capital receipts unless specified--Amounts received on issue of share capital including premium--On capital account--No express legislation to bring amounts received, accrued or arising on capital account transactions to tax--Income-tax Act, 1961, s. 2(24)-- Vodafone India Services Pvt. Ltd. v. Union of India (Bom) . . . 1
Income from other sources --Condition precedent for charge--Income must arise--Amounts received from non-resident for issue of shares not brought within scope--Income-tax Act, 1961, ss. 2(24)(xvi), 56(2)(viib)-- Vodafone India Services Pvt. Ltd. v. Union of India (Bom) . . . 1
International transactions --Arm’s length price--Determination--Assessee filing Form 3CEB out of abundant caution but objecting to jurisdiction of Department to apply Chapter X--Court directing objection to be decided--Department not entitled to claim that filing of Form 3CEB by assessee gave it jurisdiction--Income-tax Act, 1961, s. 92(1)-- Vodafone India Services Pvt. Ltd. v. Union of India (Bom) . . . 1
----Provisions for determination of arm’s length price--Machinery provisions--Subject to income arising from international transaction between associated enterprises within meaning of charging provisions--Assessee, an Indian subsidiary of non-resident holding company--Issuing shares at premium to holding company--Capital receipts received by assessee on issue and alleged short-fall between fair market price of shares and issue price cannot be considered income on basis of supposed intent of Legislature--That if arm’s length price were received, assessee would be able to invest it and earn income--Mere surmise--Cannot be basis of taxation--Income-tax Act, 1961, s. 92B, Expln. -- Vodafone India Services Pvt. Ltd. v. Union of India (Bom) . . . 1
Interpretation of taxing statutes --Strict construction--Provision to be read as a whole--Rejecting words to achieve predetermined objective not permissible-- Vodafone India Services Pvt. Ltd. v. Union of India (Bom) . . . 1
Art. 225 --Constitution of India--Basic structure--Judicial review--Is integral part of basic structure--Westminster model--Parliament--Power to enact legislation to vest adjudicatory functions of High Court in alternative tribunal--Not violative of “basic structure†of Constitution--Parliament must ensure new Tribunal conforms to salient characteristics and standards of court sought to be substituted--Failure to do so--Violative of “basic structure†of Constitution-- Madras Bar Association v. Union of India (SC). . . 42
Art. 226 --Constitution of India--Basic structure--Judicial review--Is integral part of basic structure--Westminster model--Parliament--Power to enact legislation to vest adjudicatory functions of High Court in alternative tribunal--Not violative of “basic structure†of Constitution--Parliament must ensure new Tribunal conforms to salient characteristics and standards of court sought to be substituted--Failure to do so--Violative of “basic structure†of Constitution-- Madras Bar Association v. Union of India (SC). . . 42
----National Tax Tribunal Act, 2005--Provision for appointment by select committee consisting of majority of Government officials--Provision for limited tenure and reappointment of members--Provision for appointment of accountant members or technical members of Appellate Tribunal to Tax Tribunal--Provision for Central Government deciding on Benches and seats of Benches--Independence of judiciary affected--Affect basic structure of Constitution--Act invalid-- Madras Bar Association v. Union of India (SC). . . 42
Art. 227 --Constitution of India--Basic structure--Judicial review--Is integral part of basic structure--Westminster model--Parliament--Power to enact legislation to vest adjudicatory functions of High Court in alternative tribunal--Not violative of “basic structure†of Constitution--Parliament must ensure new Tribunal conforms to salient characteristics and standards of court sought to be substituted--Failure to do so--Violative of “basic structure†of Constitution-- Madras Bar Association v. Union of India (SC). . . 42
----National Tax Tribunal Act, 2005--Provision for appointment by select committee consisting of majority of Government officials--Provision for limited tenure and reappointment of members--Provision for appointment of accountant members or technical members of Appellate Tribunal to Tax Tribunal--Provision for Central Government deciding on Benches and seats of Benches--Independence of judiciary affected--Affect basic structure of Constitution--Act invalid-- Madras Bar Association v. Union of India (SC). . . 42
Art. 323B --Constitution of India--Basic structure--Judicial review--Is integral part of basic structure--Westminster model--Parliament--Power to enact legislation to vest adjudicatory functions of High Court in alternative tribunal--Not violative of “basic structure†of Constitution--Parliament must ensure new Tribunal conforms to salient characteristics and standards of court sought to be substituted--Failure to do so--Violative of “basic structure†of Constitution-- Madras Bar Association v. Union of India (SC). . . 42
S. 2(24) --Income--Definition--Normal meaning not to include capital receipts unless specified--Amounts received on issue of share capital including premium--On capital account--No express legislation to bring amounts received, accrued or arising on capital account transactions to tax-- Vodafone India Services Pvt. Ltd. v. Union of India (Bom) . . . 1
S. 2(24)(xvi) --Income from other sources--Condition precedent for charge--Income must arise--Amounts received from non-resident for issue of shares not brought within scope-- Vodafone India Services Pvt. Ltd. v. Union of India (Bom) . . . 1
S. 56(2)(viib) --Income from other sources--Condition precedent for charge--Income must arise--Amounts received from non-resident for issue of shares not brought within scope-- Vodafone India Services Pvt. Ltd. v. Union of India (Bom) . . . 1
S. 92(1) --International transactions--Arm’s length price--Determination--Assessee filing Form 3CEB out of abundant caution but objecting to jurisdiction of Department to apply Chapter X--Court directing objection to be decided--Department not entitled to claim that filing of Form 3CEB by assessee gave it jurisdiction-- Vodafone India Services Pvt. Ltd. v. Union of India (Bom) . . . 1
S. 92B, Expln. --International transactions--Provisions for determination of arm’s length price--Machinery provisions--Subject to income arising from international transaction between associated enterprises within meaning of charging provisions--Assessee, an Indian subsidiary of non-resident holding company--Issuing shares at premium to holding company--Capital receipts received by assessee on issue and alleged short-fall between fair market price of shares and issue price cannot be considered income on basis of supposed intent of Legislature--That if arm’s length price were received, assessee would be able to invest it and earn income--Mere surmise--Cannot be basis of taxation-- Vodafone India Services Pvt. Ltd. v. Union of India (Bom) . . . 1
S. 5 --Constitution of India--Basic structure--Judicial review--Is integral part of basic structure--Westminster model--Parliament--Power to enact legislation to vest adjudicatory functions of High Court in alternative tribunal--Not violative of “basic structure†of Constitution--Parliament must ensure new Tribunal conforms to salient characteristics and standards of court sought to be substituted--Failure to do so--Violative of “basic structure†of Constitution-- Madras Bar Association v. Union of India (SC). . . 42
----National Tax Tribunal Act, 2005--Provision for appointment by select committee consisting of majority of Government officials--Provision for limited tenure and reappointment of members--Provision for appointment of accountant members or technical members of Appellate Tribunal to Tax Tribunal--Provision for Central Government deciding on Benches and seats of Benches--Independence of judiciary affected--Affect basic structure of Constitution--Act invalid-- Madras Bar Association v. Union of India (SC). . . 42
S. 6 --Constitution of India--Basic structure--Judicial review--Is integral part of basic structure--Westminster model--Parliament--Power to enact legislation to vest adjudicatory functions of High Court in alternative tribunal--Not violative of “basic structure†of Constitution--Parliament must ensure new Tribunal conforms to salient characteristics and standards of court sought to be substituted--Failure to do so--Violative of “basic structure†of Constitution-- Madras Bar Association v. Union of India (SC). . . 42
----National Tax Tribunal Act, 2005--Provision for appointment by select committee consisting of majority of Government officials--Provision for limited tenure and reappointment of members--Provision for appointment of accountant members or technical members of Appellate Tribunal to Tax Tribunal--Provision for Central Government deciding on Benches and seats of Benches--Independence of judiciary affected--Affect basic structure of Constitution--Act invalid-- Madras Bar Association v. Union of India (SC). . . 42
S. 7 --Constitution of India--Basic structure--Judicial review--Is integral part of basic structure--Westminster model--Parliament--Power to enact legislation to vest adjudicatory functions of High Court in alternative tribunal--Not violative of “basic structure†of Constitution--Parliament must ensure new Tribunal conforms to salient characteristics and standards of court sought to be substituted--Failure to do so--Violative of “basic structure†of Constitution-- Madras Bar Association v. Union of India (SC). . . 42
----National Tax Tribunal Act, 2005--Provision for appointment by select committee consisting of majority of Government officials--Provision for limited tenure and reappointment of members--Provision for appointment of accountant members or technical members of Appellate Tribunal to Tax Tribunal--Provision for Central Government deciding on Benches and seats of Benches--Independence of judiciary affected--Affect basic structure of Constitution--Act invalid-- Madras Bar Association v. Union of India (SC). . . 42
S. 8 --Constitution of India--Basic structure--Judicial review--Is integral part of basic structure--Westminster model--Parliament--Power to enact legislation to vest adjudicatory functions of High Court in alternative tribunal--Not violative of “basic structure†of Constitution--Parliament must ensure new Tribunal conforms to salient characteristics and standards of court sought to be substituted--Failure to do so--Violative of “basic structure†of Constitution-- Madras Bar Association v. Union of India (SC). . . 42
----National Tax Tribunal Act, 2005--Provision for appointment by select committee consisting of majority of Government officials--Provision for limited tenure and reappointment of members--Provision for appointment of accountant members or technical members of Appellate Tribunal to Tax Tribunal--Provision for Central Government deciding on Benches and seats of Benches--Independence of judiciary affected--Affect basic structure of Constitution--Act invalid-- Madras Bar Association v. Union of India (SC). . . 42
S. 13 --Constitution of India--Basic structure--Judicial review--Is integral part of basic structure--Westminster model--Parliament--Power to enact legislation to vest adjudicatory functions of High Court in alternative tribunal--Not violative of “basic structure†of Constitution--Parliament must ensure new Tribunal conforms to salient characteristics and standards of court sought to be substituted--Failure to do so--Violative of “basic structure†of Constitution-- Madras Bar Association v. Union of India (SC). . . 42
----National Tax Tribunal--Company secretaries and chartered accountants--Not eligible to represent party to appeal in Tribunal--Section 13 invalid-- Madras Bar Association v. Union of India (SC). . . 42
ITR'S TRIBUNAL TAX REPORTS (ITR (TRIB))--PRINT AND ONLINE EDITION
Accounting --Valuation of closing stock--Value of inventory must include amount of excise duty--Duty to be included not only in value of closing stock but also in opening stock--Order set aside and matter remanded--Income-tax Act, 1961, s. 145A-- Petro Araldite P. Ltd. v. Deputy CIT (Mumbai) . . . 394
Business expenditure --Payment to associated enterprises towards management service charges--Failure by assessee to prove that services availed of from its associated enterprises and that payment at arm’s length price--No opportunity provided to assessee by Transfer Pricing Officer--Matter remanded for decision afresh giving assessee opportunity of being heard-- Petro Araldite P. Ltd. v. Deputy CIT (Mumbai) . . . 394
International transactions --Arm’s length price--Determination--Transactional net margin method--Assessee manufacturing speciality chemicals--Selection of comparables--Functionally different companies to be excluded from comparables--Comparables which had suffered events like merger or demerger to be excluded--Income-tax Act, 1961-- Petro Araldite P. Ltd. v. Deputy CIT (Mumbai) . . . 394
----Arm’s length price--Determination--Transactional net margin method--Assessee providing software services and information technology enabled services to its associated enterprises--Selection of comparables--Software product companies not comparable with companies rendering software services--Matter remanded--High turnover companies and functionally different companies to be excluded--Matter remanded to Transfer Pricing Officer of include comparables for decision afresh after consider decision of Special Bench--Comparables which had suffered merger or demerger to be excluded--Application for CBDT notification--Products and services notified in category of information technology enabled services to be included in comparables--Outsourcing of routine non-discretionary functions, call centre, data entry, claim processing to other parties are common features of information technology enabled service industry--Comparables to be included--CBDT Notification No. 890 dated September 26, 2000-- Agilent Technologies International P. Ltd. v. Asst.CIT (Delhi) . . . 363
Bad debt --Foreign debt written off--Income from export declared in earlier year but proceeds not received--Assessee fulfilling all conditions required under section 36(1)(vii) read with section 36(2)--Reserve Bank of India directives cannot override statutory provisions--Disallowance cannot be made for want of Reserve Bank of India approval--Income-tax Act, 1961, ss. 36(1)(vii), (2), 37(1)-- Deputy CIT v. Big Bags International P. Ltd. (Bangalore) . . . 459
Business expenditure --Assessee contributing equipment to Government laboratories to avoid inordinate delay in getting results--Expenses incurred neither for purpose of business nor for earning goodwill--Expenditure not allowable--Income-tax Act, 1961, s. 37-- Kerala State Beverage (M and M) Corporation Ltd. v. Asst. CIT (Cochin) . . . 481
----Disallowance--Payments liable to deduction of tax at source--Amendment of section 40(a)(ia), by Finance Act, 2010 with retrospective effect from April 1, 2005--Assessee depositing tax deducted at source for 2009-10 on or before due date for filing return of income under section 139(1)--Expenditure allowable--Income-tax Act, 1961, ss. 40(a)(ia), 139(1)-- Deputy CIT v. Big Bags International P. Ltd. (Bangalore) . . . 459
----Disallowance--Payments liable to deduction of tax at source--Payment to non-resident--Commission paid to non-resident agents for services rendered outside India--No permanent establishment in India--Commission not chargeable to tax in India--No deduction of tax required to be made--Disallowance not attracted--Income-tax Act, 1961, ss. 40(a)(ia), 195(1)-- Deputy CIT v. Transformers and Electricals Kerala Ltd. (Cochin) . . . 440
----Surcharge on sales tax and turnover tax--Assessee following mercantile system of accounting--Expenditure allowable--Income-tax Act, 1961, s. 37-- Kerala State Beverage (M and M) Corporation Ltd. v. Asst. CIT (Cochin) . . . 481
Capital or revenue expenditure --Expenditure incurred to expand existing steel plant--Capital in nature--Income-tax Act, 1961-- Essar Steel Ltd. v. Addl. CIT (Mumbai) . . . 432
----Expenditure on trial run on cold rolling mill--Expenditure incurred before setting up of plant and machinery--Capital in nature--Income-tax Act, 1961-- Essar Steel Ltd. v. Addl. CIT (Mumbai) . . . 432
Deduction of tax at source --Interest--Failure to deduct tax at source--Site restoration fund account--Not in nature of time deposit--Assessee not liable to deduct tax at source on payments of interest thereon--Income-tax Act, 1961, ss. 33ABA, 194A, 201(1A)-- Deputy CIT (TDS) v. State Bank of India (Delhi) . . . 410
----Payment to contractors--Provisions of section 194C not applicable where payments do not exceed Rs. 20,000--Assessee not to be held as “assessee in default†if payee declared income and paid tax thereon--Assessing Officer to verify whether payee paid tax in respect of payments exceeding threshold limit--Income-tax Act, 1961, ss. 194C, 201, 201A-- Municipal Commissioner, Mahabubnagar Municipality v. Deputy CIT (Hyd) . . . 493
Interest-tax --Penalty--Concealment of chargeable interest or furnishing inaccurate particulars--Interest on call money and bill discounting claimed not chargeable to interest-tax--Disallowance of claim--Not a case of furnishing of inaccurate particulars or concealment of chargeable interest--Penalty to be deleted--Interest-tax Act, 1974, s. 13(1)(c)-- Asst. CIT v. Oriental Insurance Co. Ltd. (Delhi) . . . 474
International transactions --Arm’s length price--Determination--Transactional net margin method--Information technology enabled back office services--Selection of comparables--High turnover companies and functionally different companies to be excluded--Comparables which had suffered events like merger or demerger to be excluded--Matter remanded--Income-tax Act, 1961-- Berkadia Services India P. Ltd. v. Deputy CIT (Hyd) . . . 446
----Arm’s length price--Determination--Transactional net margin method--Software development services--Selection of comparables--Turnover filter--Advertisement, marketing and distribution expenses less than 3 per cent. of sales to be included--Related party transactions--Companies with revenues from related party transactions less than 25 per cent. of total income can be taken as comparable--Functionally similar companies to be included--High turnover companies and functionally different companies to be excluded--Software product companies not comparable with companies rendering software services--Comparables which had suffered merger or demerger to be excluded--Matter remanded for Assessing Officer to determine inclusion or exclusion of comparables--Income-tax Act, 1961-- Toluna India P. Ltd. v. Asst. CIT (Delhi) . . . 388
Reassessment --Condition precedent--No new tangible material to reopen assessment--Issuance of notice in absence of new material bad in law--Income-tax Act, 1961, ss. 147, 148-- Asst. CIT (OSD) v. Lincoln Pharmaceuticals Ltd. (Ahd) . . . 498
S. 33ABA --Deduction of tax at source--Interest--Failure to deduct tax at source--Site restoration fund account--Not in nature of time deposit--Assessee not liable to deduct tax at source on payments of interest thereon-- Deputy CIT (TDS) v. State Bank of India (Delhi) . . . 410
S. 36(1)(vii) --Bad debt--Foreign debt written off--Income from export declared in earlier year but proceeds not received--Assessee fulfilling all conditions required under section 36(1)(vii) read with section 36(2)--Reserve Bank of India directives cannot override statutory provisions--Disallowance cannot be made for want of Reserve Bank of India approval-- Deputy CIT v. Big Bags International P. Ltd. (Bangalore) . . . 459
S. 36(2) --Bad debt--Foreign debt written off--Income from export declared in earlier year but proceeds not received--Assessee fulfilling all conditions required under section 36(1)(vii) read with section 36(2)--Reserve Bank of India directives cannot override statutory provisions--Disallowance cannot be made for want of Reserve Bank of India approval-- Deputy CIT v. Big Bags International P. Ltd. (Bangalore) . . . 459
S. 37 --Business expenditure--Assessee contributing equipment to Government laboratories to avoid inordinate delay in getting results--Expenses incurred neither for purpose of business nor for earning goodwill--Expenditure not allowable-- Kerala State Beverage (M and M) Corporation Ltd. v. Asst. CIT (Cochin) . . . 481
----Business expenditure--Surcharge on sales tax and turnover tax--Assessee following mercantile system of accounting--Expenditure allowable-- Kerala State Beverage (M and M) Corporation Ltd. v. Asst. CIT (Cochin) . . . 481
S. 37(1) --Bad debt--Foreign debt written off--Income from export declared in earlier year but proceeds not received--Assessee fulfilling all conditions required under section 36(1)(vii) read with section 36(2)--Reserve Bank of India directives cannot override statutory provisions--Disallowance cannot be made for want of Reserve Bank of India approval-- Deputy CIT v. Big Bags International P. Ltd. (Bangalore) . . . 459
S. 40(a)(ia) --Business expenditure--Disallowance--Payments liable to deduction of tax at source--Amendment of section 40(a)(ia), by Finance Act, 2010 with retrospective effect from April 1, 2005--Assessee depositing tax deducted at source for 2009-10 on or before due date for filing return of income under section 139(1)--Expenditure allowable-- Deputy CIT v. Big Bags International P. Ltd. (Bangalore) . . . 459
----Business expenditure--Disallowance--Payments liable to deduction of tax at source--Payment to non-resident--Commission paid to non-resident agents for services rendered outside India--No permanent establishment in India--Commission not chargeable to tax in India--No deduction of tax required to be made--Disallowance not attracted-- Deputy CIT v. Transformers and Electricals Kerala Ltd. (Cochin) . . . 440
S. 139(1) --Business expenditure--Disallowance--Payments liable to deduction of tax at source--Amendment of section 40(a)(ia), by Finance Act, 2010 with retrospective effect from April 1, 2005--Assessee depositing tax deducted at source for 2009-10 on or before due date for filing return of income under section 139(1)--Expenditure allowable-- Deputy CIT v. Big Bags International P. Ltd. (Bangalore) . . . 459
S. 147 --Reassessment--Condition precedent--No new tangible material to reopen assessment--Issuance of notice in absence of new material bad in law-- Asst. CIT (OSD) v. Lincoln Pharmaceuticals Ltd. (Ahd) . . . 498
S. 148 --Reassessment--Condition precedent--No new tangible material to reopen assessment--Issuance of notice in absence of new material bad in law-- Asst. CIT (OSD) v. Lincoln Pharmaceuticals Ltd. (Ahd) . . . 498
S. 194A --Deduction of tax at source--Interest--Failure to deduct tax at source--Site restoration fund account--Not in nature of time deposit--Assessee not liable to deduct tax at source on payments of interest thereon-- Deputy CIT (TDS) v. State Bank of India (Delhi) . . . 410
S. 194C --Deduction of tax at source--Payment to contractors--Provisions of section 194C not applicable where payments do not exceed Rs. 20,000--Assessee not to be held as “assessee in default†if payee declared income and paid tax thereon--Assessing Officer to verify whether payee paid tax in respect of payments exceeding threshold limit-- Municipal Commissioner, Mahabubnagar Municipality v. Deputy CIT (Hyd) . . . 493
S. 195(1) --Business expenditure--Disallowance--Payments liable to deduction of tax at source--Payment to non-resident--Commission paid to non-resident agents for services rendered outside India--No permanent establishment in India--Commission not chargeable to tax in India--No deduction of tax required to be made--Disallowance not attracted-- Deputy CIT v. Transformers and Electricals Kerala Ltd. (Cochin) . . . 440
S. 201 --Deduction of tax at source--Payment to contractors--Provisions of section 194C not applicable where payments do not exceed Rs. 20,000--Assessee not to be held as “assessee in default†if payee declared income and paid tax thereon--Assessing Officer to verify whether payee paid tax in respect of payments exceeding threshold limit-- Municipal Commissioner, Mahabubnagar Municipality v. Deputy CIT (Hyd) . . . 493
S. 201(1A )--Deduction of tax at source--Interest--Failure to deduct tax at source--Site restoration fund account--Not in nature of time deposit--Assessee not liable to deduct tax at source on payments of interest thereon-- Deputy CIT (TDS) v. State Bank of India (Delhi) . . . 410
S. 201A --Deduction of tax at source--Payment to contractors--Provisions of section 194C not applicable where payments do not exceed Rs. 20,000--Assessee not to be held as “assessee in default†if payee declared income and paid tax thereon--Assessing Officer to verify whether payee paid tax in respect of payments exceeding threshold limit-- Municipal Commissioner, Mahabubnagar Municipality v. Deputy CIT (Hyd) . . . 493
S. 13(1)(c) --Interest-tax--Penalty--Concealment of chargeable interest or furnishing inaccurate particulars--Interest on call money and bill discounting claimed not chargeable to interest-tax--Disallowance of claim--Not a case of furnishing of inaccurate particulars or concealment of chargeable interest--Penalty to be deleted-- Asst. CIT v. Oriental Insurance Co. Ltd . (Delhi) . . . 474
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