Imp Verdicts On Bogus Capital Gains And Permanent Establishment

Pr. CIT vs. Jatin Investment Pvt. Ltd (Delhi High Court)

1. 68 Bogus capital gains: A transaction cannot be treated as fraudulent if the assessee has furnished documentary proof and proved the identity of the purchasers and no discrepancy is found. The AO has to exercise his powers u/s 131 & 133(6) to verify the genuineness of the claim and cannot proceed on surmises

Whether sale of SIM cards or recharge coupons at discounted rate to distributors, is ‘commission’ and hence liable to TDS u/s 194H – NO: ITAT

THE issue is – Whether sale of SIM cards/recharge coupons at discounted rate to distributors, is to be treated as ‘commission’ liable to TDS u/s 194H. NO is the verdict.

HC: Rejects Nil ALP-determination for advertisement expenses reimbursement; Sec 37 disallowance beyond TPO’s jurisdiction

Bombay HC dismisses Revenue’s appeal against deletion of TP-adjustment on reimbursement of 20% of advertisement expenditure incurred by assessee’s AE in respect of new products; Assessee (engaged in manufacturing and export of cosmetic and toiletry products) had benchmarked the export activity considering the reimbursement as part of operating costs, however, TPO determined ALP of advertising expenditure at Nil even though he accepted assessee’s TNMM methodology and comparable selection; HC notes that sharing of expenditure with AE was a strategy to develop assessee’s business which can result in improving brand image and higher profit due to higher sales; Rules that “it is not part of the TPO jurisdiction to consider whether or not the expenditure which has been incurred by the respondent assessee passed the test of Section 37 and or genuineness of the expenditure…the jurisdiction of the TPO is specific and limited i.e to determine the ALP of an International transaction”; Holds that as neither the most appropriate method nor the choice of comparable has been disputed by TPO, adhoc disallowance of expenditure cannot be allowed and thus, concludes that no substantial question of law arose for its determination:HC

TAXBYMANISH – Case laws Refresher.

Given below is the summary of few  recent case laws for your refresher.

 

Section 14A	Income–Expenditure incurred in relation to exempt income which does not form part of total income–Assessing Officer not recording satisfaction as to correctness of claim or otherwise having regard to accounts of assessee–Disallowance without assuming jurisdiction–To be deleted	Addl. CIT v. Mumbai International Airport P. Ltd. (Mumbai)
Provision of Expenses.	Business expenditure–Disallowance–Payments liable for deduction of tax at source–Provision for expenses–No verification of nature of expenses, position of crystallisation of expenses, availability of particulars of payees, etc.–Nothing to show full compliance with tax deduction at source provisions–Commissioner (Appeals) to verify factual position	Addl. CIT v. Mumbai International Airport P. Ltd. (Mumbai)
TP – Selection of Method	Transactional net margin method–Transfer Pricing Officer accepting transactional net margin method as most appropriate–Not open to Transfer Pricing Officer to subject only one element to entirely different method-	Magneti Marelli Power Train India P. Ltd. v. Deputy CIT
ESOP	Business expenditure–Employees stock option scheme–Discount on issues of option allowable–Assessing Officer to work out deduction accordingly	Dr. Reddy’s Laboratories Ltd. v. Addl. CIT
PE	Business expenditure–Disallowance–Payments liable to deduction of tax at source–Assessee providing final results to Indian clients using highly sophisticated bio-analytical know-how without providing any access whatsoever to clients to such know-how–Fee received by assessee is business income and not fee for technical service, fee for included services or royalty–Assessee having no permanent establishment in India–No need to deduct tax at source	Dr. Reddy’s Laboratories Ltd. v. Addl. CIT

Four Imp Verdicts On Core Issues Of Capital Gains, STCG vs. Biz Profits, Bogus Purchases And FTS/ Royalty TDS

Balakrishnan vs. UOI (Supreme Court)

1. 10(37) Capital Gains: Meaning of “compulsory acquisition” under the Land Acquisition Act, 1894 explained. The fact that the assessee entered into a settlement with the Collector regarding the compensation amount does not mean that the acquisition was not “compulsory” if the prescribed procedure was followed. Info Park Kerala vs. ACIT (2008) 4 KLT 782 overruled

Upholds PE-constitution for 24 GE Group entities, considers expats job description/appraisal reports

Delhi ITAT upholds Revenue’s claim for constitution of fixed place PE as well as dependent agent PE for 24 GE group entities in a batch of 139 appeals taking GE Energy Parts Inc. (‘assessee’, a US based group co.) as the lead case, upholds reassessment; Pursuant to survey conducted at Liaison Office (‘LO’) premises in India of GEIOC (one of the overseas

Tax Due Date – February 2017

 

Sr No	Due Date	Related to	Compliance to be made
1	04.02.2017	SEZ Compliances	Monthly Exemption Details
2	06.02.2017	Service Tax	Payment of Service Tax for the Month of January 2017
3	07.02.2017	TDS/TCS (Income Tax)	· Deposit TDS for payments of Salary, Interest, Commission or Brokerage, Rent, Professional fee, payment to Contractors, etc. during the month of January 2017. · Deposit TDS from Salaries deducted during the month of January 2017 • Deposit TCS for collections made under section 206C including sale of scrap during the month of January 2017, if any
4	20.02.2017	VAT	Payment of VAT & filing of monthly return for the month of January 2017 (TN, KAR & TEL).

Supreme Court To Probe ITAT VPs Non-Appointments

1. 45/48: The AO is not bound to accept the consideration stated in the sale deed. In a case where property is sold between arm’s length parties at a gross undervaluation, the onus is on the assessee to explain and if there is no explanation, the AO is entitled to draw an inference. The presumption against the value being understated (not undervalued) is greater where parties are connected or related. However, if the AO does not allege that the assessee received more consideration than is stated in the sale deed, he cannot made an addition to the stated consideration (George Henderson 66 ITR 622 (SC) & Gillanders Arbuthnot 87 ITR 407 (SC) explained)

7 more jurisdictions including Mauritius sign the Multilateral Competent Authority Agreement for CbCR

7 more jurisdictions viz. Gabon, Hungary, Indonesia, Lithuania, Malta, Mauritius and the Russian Federation sign Multilateral Competent Authority Agreement for Country-by-Country Reporting (CbC MCAA) enabling bilateral and automatic sharing of CbCR; This brings the total number of signatories to CbC MCAA to 57;  Lithuania and Hungary joined the Agreement in October and December 2016 respectively while remaining 5 jurisdictions signed the agreement during meeting of inclusive framework on BEPS held on 26-27 January, 2017

High Court Irked At Delay By ITAT In Passing Orders

Otters Club vs. DIT (E) (Bombay High Court)

1. 254(1)/ Rule 34(5)(c): The Tribunal is mandated to pass orders within 90 days of the hearing. Delay is not justified on the ground that ‘administrative clearance’ was obtained. The aggrieved party is entitled to seek recall of such an order