Transfer Pricing: Comparables with more than 25% RPTs have to be excluded. There are no fetters on the assessee's right to claim that a comparable included by him should be excluded
(i) The principal question about the exclusion of companies with more than 25% RPTs from the list of comparables on account of these becoming controlled transactions, has been fairly decided by various benches of the Tribunal. It has been held by the Delhi Bench of the Tribunal in Agilent Technologies International Pvt. Ltd. Vs. ACIT (2013) 36 CCH 187 (Del) (Trib.) that a potential comparable having more than 25% of the related party transactions is to be ignored. Similar view has been taken in Actis Advisors Pvt. Ltd. Vs. DCIT (2012) 20 ITR (Trib.) 138 (Del). Recently, the same view has been reiterated in Nokia India Pvt. Ltd. Vs. DCIT (2013)-TIL-224-ITAT-DEL-TP. In view of the above decisions, we do not find any infirmity in the reasoning given by the ld. CIT(A) for the exclusion of companies on the basis of related party transactions of more than 25%.
(ii) A comparable included by the assessee can be claimed to be excluded. Just like a situation in which the assessee chooses a company as comparable which can be excluded by the TPO on finding it as incomparable, there can be no fetters on the assessee requesting for the exclusion of a company originally considered by it as comparable by inadvertence. After all, it is for the TPO to examine and evaluate such contention and decide about its comparability on merits. To foreclose the raising of such a contention by the assessee for further appraisal at the TPO's end, is impermissible. The Special Bench of the Tribunal in the case of DCIT vs. Quark Systems Pvt. Ld. (2010) 132 TTJ (Chd) (SB) has allowed the assessee to claim exclusion of certain companies from the list of comparables, which were inadvertently included by it in its Transfer pricing study.
Advisory for conducting scrutiny assessment proceedings in Jammu and Kashmir
BY SPEED POST
F.No.226/303/2014/ITA.II
Government of India
Ministry of Finance
Department of Revenue
Central Board of Direct Taxes
New Delhi, the November, 2014
To
The Chief Commissioner of Income-tax, Amritsar
Madam.
Subject:- Advisory for conducting scrutiny assessment proceedings in the State of Jammu and Kashmir, in the aftermath of Floods – regarding.
It has come to the notice of the Board that due to recent devastation caused by the floods in the State of Jammu & Kashmir, the income-tax assessees of that State are facing difficulties in ensuring compliance either with the requirements under ongoing scrutiny assessment proceedings or with respect to notices u/s 143(2) of the Income Tax Act, 1961 ('Act') issued recently.
2 In such cases, where an assessee under scrutiny claims that he is unable to make certain compliances due to destruction of records, documents and books of accounts etc. in the floods, the Assessing Officer may ascertain from the district administration whether the area in which the business premises of the assessee concerned is located and where the books of accounts, documents etc. are claimed to had been kept was affected by the recent floods or not. If the difficulties conveyed by the assessees are found to be genuine and beyond his control making him unable to produce books of accounts etc., the pending assessments may be completed on the basis of materials available on record. The Assessing Officers are further advised to keep in mind the following points while finalizing assessments in such cases:-
i) In cases of non-production of books of accounts, documents, records etc. requisitioned u/s 143(2) / 142(1) of the Act, the Assessing Officer, even if invoking the provisions of section 144 of the Act, should avoid framing a high pitched assessment containing frivolous additions merely on account of non-production of relevant books of accounts, documents or records;
ii) Third party verifications. if necessary, should generally be made in cases where such third party is located outside the affected areas. Taking recourse to special audit u/s 142(2A) and conducting surveys u/s 133A of the Act should only be done in cases with substantial merit and with prior approval of CIT concerned;
iii) If a particular case has been completed under scrutiny during earlier years, the records concerned could be perused to understand the trend in business activity. If it is possible to draw any reasonable and convincing inference, the same may be utilized while finalizing the pending scrutiny assessment:
iv) Post-assessment action on recovery of outstanding demand should be decided by the Assessing Officer on a case to case basis and after taking into consideration the assessee's financial condition in the aftermath of floods;
v) The Income-tax Authorities should expeditiously take all necessary steps with adequate sensitivity to resolve grievances and difficulties faced by the tax payers.
4. The above may be brought to the notice of all concerned for compliance. Affected tax payers may also be informed suitably through a Press Note to be issued by the CCIT, Amritsar.
Yours faithfully.
(Riche Rastogi) Under Secretary (ITA,I1)
Whether if loan is taken from friend and repayment of same is made in cash within same FY, it can be assumed that such loan is for business exigency and not of undisclosed income - YES: HC
ASSESSEE sold certain land to these companies. AO concluded the gain on sale of lands as business income while the claim of the assessee was that it being sale/transfer of agricultural land, is not a capital asset within the meaning of Section 2(14)(iii) and is not liable to tax. AO also rejected the books of accounts by invoking provisions of section 145(3) and applied higher gross profit rate after rejecting the trading accounts.
The issues before the Bench are - issues before the Bench are - Whether lawyers holding Vakalats on behalf of their clients are under legal duty to attend the Courts/Tribunals irrespective of strike or boycott and thus, there is no reason to interfere in the order passed by the ITAT deciding the appeal ex-parte as alleged; Whether when the land sold is already converted from agricultural land to non-agricultural, it cannot be treated as agricultural land and tax will be computed on sale of the same; Whether when there was regularity of transaction with intention to make income and even within a short span of time, the lands were transferred on substantial gains, the gain arising on the same is business income and Whether assessee has introduced and recorded bogus purchases and verification of opening stock/closing stock were not open for verification in the books of accounts, books of account were rightly rejected. And the verdict goes against the assessee.
THE Tax Administration Reform Commission (TARC) has submitted its Third Report to the Government.
The Commission notes that:
1. In the last ten years, direct tax collection has increased by more than 700 per cent (from Rs.69,198 crore to Rs.5,58,965 crore), but the number of taxpayers has grown by only about 35 per cent.2. The total number of taxpayers in the lowest income slab, (i.e. up to Rs.5 lakh) comprises 98.30 per cent of total taxpayers, from whom 10.1 per cent of the tax revenues are collected. The highest slab of above Rs.20 lakh comprises a meagre 0.38 per cent of total taxpayers, contributing 63 per cent of tax revenues.3. In FY2008-09, the numbers of corporate taxpayers in the Rs.0-100-crore slab was 463,507 and those above Rs.500-crore slab numbered just 186 taxpayers. This suggests that the income tax base in revenue terms is very narrow and adversely affects tax buoyancy.4. India has a low taxpayer base even as a percentage of the total population. With a population of over 120 crore, only 17 crore have a PAN and of these, about 3.6 crore file income tax returns. Only 3.3 per cent of the population pays tax, which is very low compared to 39 per cent in Singapore, 46 per cent in the USA, and 75 per cent in New Zealand.
Widen the Tax base: The Commission notes:
1. Even though widening the tax base has been one of the key action plan areas for the last several years, achievement has fallen short of targets. There, therefore, is an urgent need to enlarge the tax base as well as taxpayer base (which is not commensurate with the growth in income and wealth seen over the years) through both policy as well as enforcement action by bringing into the tax net high net worth assessees and potential tax payers.2. Even after allowing for agriculture households, dependent family members, and other relevant criteria, the tax base should be far larger than it is at present. It is possible to increase the number of income tax taxpayers from the present 3.5 crore to at least 6 crore. Assuming a family size of 5, there are 24 crore families in India. Assuming, further, that 30 per cent of the households earn only subsistence wages and another 20 per cent are below the income tax threshold, there will be 12 crore potential taxpayers. If one-half of this is assumed to derive income from agriculture, there will be 60 million or 6 crore potential taxpayers.3. There is, thus, significant scope to increase the tax payer base and a lot of this increase will need to come from both increasing the tax base and ensuring true income disclosures. Widening the tax base raises equity, because if all persons liable to pay tax are brought on tax records, the burden on existing taxpayers can be brought down.4. The overall level of compliance improves when a large number of persons who are legally required to file returns, do so. It also encourages others to comply with their legal obligation to pay their taxes dutifully
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