DCIT v Gulshan Investment Co Ltd. (I.T.A. No.: 666/ Kol. / 2012 dtd March 11, 2013) (Kolkata ITAT) The assessee is engaged in the business of share trading. During the course of assessment proceedings, the AO noticed that while the assesse has earned dividend income of Rs 18,91,556, the assessee has not made any disallowance under section 14A in respect of “expenses relatable to the above exempt income”. The AO also noticed that the assessee had paid interest of Rs 10,34,315. The assessee contended that disallowance under section 14A of the Income Tax Act, read with rule 8D of the Income Tax Rules, is not applicable in the case of the assessee since the shares were kept as stock in trade. However, the AO did not accept the contentions of the assessee and computed the disallowance under Rule 8D by applying 0.5% of the average stock-in-trade.
Yearly Archives: 2013
CLSA Ltd v ITO (Intl Taxation) [ITA No. 2010 (MUM.) OF 2008 dtd 18.01.2013] (Mum ITAT) Background: Assessee is a Company incorporated in Hongkong and belongs to the CLSA Group of companies. During the year, CLSA India (CLSAI) paid an amount of Rs. 7,73,58,162 to the assessee-company as “Referral Fees”. Before the AO, it was explained that it has business relationship with various financial institutions outside India which required services of a broker in relation to the investment activities carried out by such Institution in Indian capital market. It was submitted that the assessee referred such overseas institutional clients to CLSAI acting as India stock broker for which it received referral fees from CLSAI. The AO held that the fees was in the nature of fees for technical services received by the assessee and the same, therefore, was chargeable to tax in its hands in India.
Referral fees is equivalent to export commission & therefore, cannot be regarded as FTS – ...
The Union Budget for 2013-14 was presented by the Finance Minister in the Parliament on 28th February 2013. The Finance Minister stated in his speech that the underlying theme of this year’s tax proposals is “clarity in tax laws, a stable tax regime, a non-adversarial tax administration, a fair mechanism for dispute resolution, and an independent judiciary.” Most of the direct tax proposals in the Finance Bill, 2013 are effective from the financial year commencing on 1 April 2013, unless otherwise specified. Please click here to refer to the key Direct tax proposals made in the Budget 2013-14
Budget 2013: An Analysis of Key Direct Tax Proposals
CIT v Gita Duggal ITA No. 1237/2011 (Del HC) dtd 21.02.2013 Background: Assessee was the owner of property in New Delhi comprising of the basement, ground floor, first floor and second floor. On 08.05.2006 she entered into a collaboration agreement with a developer for redeveloping the property. According to its terms, the assessee being desirous of getting the property redeveloped/reconstructed and not being possessed of sufficient finance and lacking in experience in construction, approached the builder to develop the property for and on behalf of the owner at the cost of the builder. The builder was to demolish the existing structure on the plot of land and develop, construct, and/or put up a building consisting of basement, ground floor, first floor, second floor and third floor with terrace at its own costs and expenses. In addition to the cost of construction incurred by the builder on development of the property, a further payment of Rs. four crores was payable to the assessee as consideration against the rights of the assessee. The builder was to get the third floor.
“A” residential house u/s 54/54F includes “a” residential building comprising of several flats – Del ...
Welspun Zucchi Textiles Ltd. v ACIT [ITA No 6539 (MUM.) OF 2009 & 898 (Mum.) of 2010] dtd 11.1.2013 Background: During the year under consideration, the assessee company had exported bathrobes to its associated enterprises in Italy. The said transactions were benchmarked by the assessee using CUP method as the most appropriate method. In order to determine the arms length price of these transactions, a reference was made by the AO to the TPO u/s 92CA(1) of the Act. Before the TPO, the assessee submitted the comparative chart of sales to AEs and non AEs. It was submitted that out of the total bathrobes exported to non AEs, about 95% bathrobes were exported to Wallmart USA at an average unit price of US Dollars 6.42 while the average unit price of export made by the assessee to its AEs in Italy was US Dollars 8.80. It was contended that since the price charged to AEs was more than the price charged to non AEs, the international transactions with AEs involving export of bathrobes should be considered at arms length.
CUP method fails where there are differences in location, market size and product prices sold ...
Export Credit Guarantee Corporation of India Ltd v Addln CIT Writ Petition No. 502 of 2012 (order dtd January 10/11, 2013) – Bombay HC Background: Assessee filed a return of income for AY 2006-07 on 28 November 2006 in which it offered income computed at Rs. 385.25 crores to tax under Section 44. An order of assessment was made on 17 November 2008 under Section 143(3) by which the total income was determined at Rs.386.08 crores after making certain disallowances. A notice was issued on 24 March 2011 to the assessee seeking to reopen the assessment. The assessee by a letter dated 18 November 2011 objected to the notice proposing to reopen the assessment for A.Y. 2006-07. The Assessing Officer by his order dated 22 November 2011 disposed of the objections.
Full disclosure in the return of income does not preempt the AO from reassessment – ...
Siemens Limited v CIT(A) IT APPEAL NO. 4356 (MUM.) OF 2010 Dtd 12.02.2013 – Mumbai ITAT Background: Assessee hired “Pehla Testing Laboratory” (PTL) of Germany for carrying out “type tests” of the circuit breakers manufactured by assessee in order to establish that the design and the product meets the requirement of the International Standards. Pehala Lab is accredited by National Accreditation Board for Testing & Calibration Laboratories (NABL) Germany, which carries out various kinds of tests for circuit breakers and other electronic devices to prove that the designs of the equipment meets the requirements of the international standards. This is a standard service provided by the Laboratory, which is done automatically by machines. It was submitted by the assessee during the course of assessment proceedings that the payment was purely for standard facility provided by the Laboratory which is done automatically by the machines without any human intervention. Further, the payment is in the nature of business income of PTL and since it does not have any Permanent Establishment in India, the same is not taxable in India as per the DTAA. However, the AO rejected the assessee’s contentions on the ground that the type of the services provided by the Pehla Lab is of highly technical in nature covered by section 9(1)(vii).
Services provided by machines without human intervention cannot be construed as FTS – Mum ITAT
P.T. McKinsey Indonesia v DDIT IT APPEAL NO. 7625 (MUM.) OF 2010 (dtd 16.1.2013) (Mum ITAT) Background: Assessee, a foreign company, engaged in the business of providing Strategic Consultancy Services filed its return of income on 27-10-2007 declaring NIL income. During the assessment proceedings, AO found that assessee had claimed to have received a sum of Rs. 23.41 Lakhs under the head ‘Business Receipts’. AO held that the payments received by the assessee were in the nature of consideration received for rendering of technical and consultancy services so as to make available technical knowledge, skill, know how, experience or process and thus was in the nature of fees for included services as covered by Article 12 of the DTAA between India and Indonesia’.
Provision of data is not Royalty & the same cannot be taxed as ‘Other Income’ ...
India Capital Markets (P) Ltd v DCIT IT Appeal No. 2948 (Mum.) of 2010 dtd December 12, 2012 (Mum ITAT) Background: Assessee is a share broker and the main source of income is generated through brokerage. During the year, the assessee has purchased entire clientele business of M/s. Ashmavir Financial Consultants Pvt. Ltd. (AFC) by assigning all clients to the assessee for a consideration of Rs. 2.50 crores . Assessee booked these expenses as purchase of goodwill and has claimed 25% of depreciation amounting to Rs. 62,50,000 thereon. After considering the provisions of section 32, AO was of the opinion that in the said provision, it is apparently clear that goodwill as such does not find any reference and accordingly, disallowed the claim of depreciation on account of goodwill at Rs. 62,50,000.