digest of important judgments on transfer pricing...

1Digest Of Important Judgments on Transfer Pricing, International Tax and Domestic Tax – Novto Dec 2015

Digest Of Important Judgments on Transfer Pricing, International Tax and Domestic Tax

(November to December 2015) By Sunil Moti Lala, Advocate

Transfer Pricing – Page 3 International Tax – Page 20 Domestic Tax – Page 22

International transaction -Case 1

Permanent Establishment -Cases 117 to 118

Income - Cases 130 to 137

Most Appropriate Method Royalty and Fees forTechnical services – Cases119 to 120

Income from House Property –Case 138

– Comparable UncontrolledPrice Method – Cases 2 to 4

Reimbursement of expenses– Case 121

Business Income – Cases 139to 143

– Resale Price Method –Cases 5 to 7

Withholding tax – Cases 122to 124

Deductions/ Disallowances

– Transactional Net MarginMethod - Cases 8 to 10

Others – Cases 125 to 129 – Section 32 – Cases 144 to 145

Comparability – Inter andIntra Industry

– Section 35 – Case 146

– Investment AdvisoryServices - Cases 11 to 12

– Section 36 – Cases 147 to 148

– ITES Sector - Cases 13 to23

– Section 37(1) – Cases 149 to158

– Research Services – Case24

– Section 14A – Cases 159 to161

– Support Services - Cases 25to 38

– Section 40(a)(ia) – Case 162

– Others - Cases 39 to 40 – Section 43B – Cases 163 to165

– Filters - Cases 41 to 44 – Section 10A / 10B – Cases 166to 168

Computation / Calculations /Adjustments – Cases 45 to64

– Chapter VIA – Cases 169 to178

Specific Transactions Capital Gains – Cases 179 to188

– Advertisement, Marketingand Promotion - Cases 65 to68

Income from Other Sources –Case 189

– Issue of shares – Cases 69to 70

Assessment / Re-assessment /Revision / Search Proceedings

– Loan / Corporate Guarantee- Cases 71 to 79

– Assessment – Cases 190 to192

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– Reimbursement ofexpenses- Cases 80 to 83

– Re-assessment – Cases 193 to201

– Royalty / Management fees- Cases 84 to 89

– Revision – Cases 202 to 206

Assessment – Cases 90 to108

– Search – Cases 207 to 213

Penalty – Cases 109 to 110 Withholding tax – Cases 214 to218

Others – Cases 111 to 116 Others

– Appeals – Cases 219 to 220

– Carry forward of losses –Cases 221 to 222

– Cash Credits – Cases 223 to227

– Charitable Institutions – Cases228 to 229

– Deemed Dividend – Cases 230to 231

– Interest – Case 232

– Method of accounting – Case233

– Minimum Alternate Tax –Cases 234 to 236

– Penalty – Cases 237 to 243

– Refund– Cases 244 to 245

– Set Off – Cases 246 to 247

– Stay – Cases 248 to 249

– Transfer – Case 250

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I. Transfer Pricing

a. International transactions

1. The Tribunal held that interest on delayed realization of sales proceeds from AE is not a separateinternational transaction but an integral part of sale made to the AE. It held that early or laterealization of sale proceeds was only incidental to the transaction of sale and accordingly deleted thenotional interest addition made by the TPO.Avnet India Pvt Ltd v DCIT [IT(TP)A No.757(Bang.)/2011] – TS-629-ITAT-2015 (Bang) - TP

b. Most Appropriate Method

Comparable Uncontrolled Price Method

2. The Tribunal held that internal CUP was not the most appropriate method for benchmarking theimport of electro-optic components from AEs as the assessee failed to establish that the purchasesmade from AE as well as non-AEs were in respect of identical products and in the absence of suchsimilarity CUP method could not be applied. Accordingly it held the TNMM to be the most appropriatemethod.Alpha ITL Electro Optics Pvt Ltd v DCIT (IT(TP)A No.249/Bang/2015) – TS-601-ITAT-2015(Bang) - TP

3. The Court held that the CUP method was the most appropriate method for benchmarking the residualprofits shared between the assessee, a freight forwarding service provider, and its AE, which weresplit in the ratio of 50:50. It upheld the finding of the Tribunal that in the business line of the assessee,the business model of sharing residual profits in equal ratio was a standard practice and thereforeno different from a third party scenario.Pr CIT v Toll Global Forwarding India Pvt Ltd (ITA 374/2015 & ITA 396/2015) – TS-598-HC-2015(Del) - TP

4. The Tribunal rejected the CUP method used by the assessee for benchmarking the sale of train setsto its German AE, wherein it used the price at which the German AE in-turn sold the train sets toDelhi Metro Rail Corporation (‘DMRC’) at the same price, on the ground that the transaction betweenthe assessee and the German AE and the transaction between the AE and DMRC were on totallydifferent footing as the buyer and sellers in both sets of transactions were in different geographicalmarkets and operating at different levels viz. one was selling to an international buyer while the otherwas selling to a local market and that the assessee failed to justify with documentary evidence,comparability on the issue of quality of the product, contractual terms, level of market, geographicalmarket of the respective transactions, date of transaction and foreign currency receipt. Accordingly,it held that the TNMM method was correctly adopted as the most appropriate method by the TPO.Bombardier Transportation India Pvt Ltd v DCIT (I.T.A .No.-1626/Del/2015) – TS-520-ITAT-2015(Del) - TP

Resale Price Method

5. The Tribunal held that where the assessee was an independent distributor having all the risks, thenthe Resale Price Method would be the most appropriate method for benchmarking the import offinished goods from its AE for resale in India.Roca Bathroom Products Pvt Ltd v JCIT (ITA No.586/Mds/2014 & ITA No.610/Mds/2015) – TS-634-ITAT-2015 (CHNY) - TP

6. The Court upheld the decision of the Tribunal and held that the Resale Price Method was the mostappropriate method for determining the ALP of the transactions undertaken by the assessee as theassessee was a trader who purchased goods from its AE and sold them to independent third partieswithout any value addition.CIT v Luxottica India Eyewear Pvt Ltd (ITA 852 / 2015) – TS-532-HC-2015 (Del) -TP

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7. The Tribunal, considering the fact that the assessee, engaged in the importing of high end toys fromits AE and selling them to third parties, had incurred 65 percent of its total operating costs on AMPexpenses and that there was a huge gap between the Gross Profit and Net Profit rates of theassessee during the year under review, held that the assessee could not be considered as a meredistributor and therefore the RPM method would not be the most appropriate method. Accordingly,it remanded the file to the TPO for fresh adjudication.Mattel Toys (India) Pvt Ltd v ITO (ITA No.6391/M/2011) – TS-518-ITAT-2015 (Mum) - TP

Transactional Net Margin Method

8. The Tribunal held that internal comparables were to be preferred to external comparables andtherefore held that internal TNMM was more appropriate than external TNMM. It further held thatthe geographical differences were not relevant where the FOB price was considered.Inslico Ltd v DCIT (I.T.A .Nos. 4880 /Del/2013) – TS-623-ITAT-2015 (Del) - TP

9. The Tribunal held that TNMM and not the CUP method was the most appropriate method fordetermining arm’s length price of the overseas sales of glass mosaic products manufactured by theassessee to its AEs. It held that the DRP and TPO were incorrect in considering sales to residentaffiliate companies as CUP as the definition of uncontrolled transactions in Rule 10 specificallyprovided for transactions with Non-AEs. Accordingly, the logic of the DRP stating that since thecompanies were domestic affiliates, there was no motive for tax avoidance and therefore they couldbe considered as comparable was dismissed by the Tribunal.Gemstone Glass Pvt Ltd v JCIT (I.T.A. No.: 3223/Ahd/11 and 2858/Ahd/12) –TS-510-ITAT-2015(Ahd) - TP

10. The Tribunal held that where the assessee had rendered similar services to both AEs and Non-AEs,internal comparable companies were to be considered as opposed to external comparables.E4E Business Solutions India Pvt Ltd v DCIT [IT(TP)A No.324(B)/2015] – TS-542-ITAT-2015(Bang)-TP

c. Comparability – Inter and Intra Industry

Investment Advisory Services11. The Tribunal held that companies engaged in the merchant banking business were not functionally

comparable with the assessee rendering investment advisory services as there was a hugedifference between the functions involving different risks and remuneration. It also excluded acomparable on the ground that the related party transactions exceeded 50 percent.General Atlantic Pvt Ltd v DCIT (I.TA No.1019/Mum/2014) – TS-544-ITAT-2015(Mum) – TP

12. The Tribunal held that the assessee, engaged investment advisory services for investment in Indianequities and strategic investments could not be compared to companies engaged in assetmanagement services, companies engaged in debt resolution and debt syndication, companiesmaking investments out of its own funds, companies engaged in investment banking & corporateadvisory services, companies engaged in merchant banking, mergers and acquisitions andcompanies engaged in the business of agency and retail distribution.Goldman Sachs (India) Securities Ltd v DCIT (I.TA No. 222/Mum/2014) – TS-589-ITAT-2015(Mum) - TP

ITES Sector

13. The Court held that Cosmic Global could not be compared with the assessee who was engaged inthe provision of ITES Services as Cosmic Global’s major activity comprised of translation serviceswhich were dissimilar with the assessee’s activity and that it outsourced a substantial part of itsservice therefore having a different business model. Further it excluded Accentia Technologies Ltdas a comparable in view of the fact that there was a merger of this company with another entity.Pr CIT v Xchanging Technology Services India Pvt Ltd (ITA No 813 / 2015) – TS-555-HC-2015(Del) - TP

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14. The Tribunal held that the following companies could not be considered as comparable to theassessee who was engaged in the provision of software development services to its AE: Companies having significant intangible value, owning IPRs (patents) and revenue from software

products segment. Giant companies, assuming all risks which led to higher profits. Companies, whose services segment comprised of software consultancy, engineering services,

web development and web hosting in addition to software development for which no segmentalinformation was available.

Companies engaged in development of software and software products and also providingtraining facilities.

Companies providing outsourced product development services along with software developmentservices without segmentation of the results into software services and product development.

Companies having related party transactions in excess of 15 percent. Companies engaged in providing complex services. Companies engaged in clinical research and manufacture of bio-products Companies having abnormal profits due to amalgamation with another company Companies providing Geospatial Information Systems therefore being functionally different.DCIT v Ikanos Communication India Pvt Ltd [I.T(IT).A No.137/Bang/2015] – TS-548-ITAT-2015(Bang) –TPInfineon Technologies India Pvt Ltd v ACIT [I.T. (T.P) A. No.1670/Bang/2012] – TS-549-ITAT-2015 (Bang) – TPUnisys India Pvt Ltd v DCIT [IT(TP)A No.67/Bang/2015] – TS-512-ITAT-2015 (Bang) –TPSoftware AG Bangalore Technologies Pvt Ltd v ITO (ITA No.1264/PN/2013) – TS-539-ITAT-2015-(Pun)TPDCIT v Synopsis India Pvt Ltd [I.T(TP).A No.1107/Bang/2011] – TS-504-ITAT-2015 (Bang) –TPACIT v Hyundai Motors India Engineering Pvt Ltd (ITA No 1743 / Hyd / 2014 and ITA No 1917 /Hyd / 2014) – TS-554-ITAT-2015 (Hyd) –TPLionbridge Technologies Pvt Ltd v ITO [I.T.A. No. 668/Mum/2014 and I.T.A. No.1375/Mum/2014] – TS-557-ITAT-2015 (Mum) - TP

15. The Tribunal held that companies that were market leaders enjoying economies of scale and diversecustomer base along with significant brand value, companies who have undergone extra-ordinaryevents having impact on profitability and companies engaged in high end services involvingspecialized knowledge could not be compared with the ITES Segment of the assesee. However, itheld that companies could not be rejected merely on the basis of abnormal profits.Unisys India Pvt Ltd v DCIT [IT(TP)A No.67/Bang/2015] – TS-512-ITAT-2015 (Bang) -TP

16. The Tribunal held that companies cannot be excluded as comparable merely on the turnover filterwithout analyzing their functionality. Additionally, it excluded companies having extra-ordinaryevents such as amalgamation or acquisition of another company and companies providing softwaredevelopment services as opposed to BPO services provided by the assessee.M/s Rampgreen Solutions Pvt Ltd v DCIT (ITA no. 1066/Del/2015) – TS-538-ITAT-2015 (Del) -TP

17. The Tribunal held that companies engaged in product development were not comparable with theassessee who was engaged in the business of provision of software development services to itsparent company. Further, it excluded companies having turnover in excess of Rs. 200 crore.M/s Infineon Technologies India Pvt Ltd v ACIT [IT (TP)A No 1670 / Bang / 2012)] – TS-549-ITAT-2015 (Bang) –TP

18. The Tribunal held that the assessee, engaged in the provision of software development, consultancyservices and IT enabled services could not be compared with companies providing call centerservices and companies outsourcing a large portion of its business.DCIT v Genesis Integrating Systems (India) Pvt Ltd [IT(IT)A No.869(B)/2013] – TS-637-ITAT-2015 (Bang) - TP

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19. The Tribunal held that the assessee, engaged in providing IT Enabled Services such as back officeservices, web enabled services, email support etc exclusively to its AE could not be compared to thefollowing: Companies failing the filter of export sales to total sales of 25 percent as the geographical

markets in which parties entering into transactions operate is an important factor influencingprice of the transaction

Companies having huge turnovers and large economies of scale, catering to different industriesas opposed to the assessee whose business profile was quite limited

Companies providing data analytics knowledge process outsourcing servicesActis Global Services Pvt Ltd v ITO (ITA No. 30/Del/2015) – TS-611-ITAT-2015 (Del) – TP

20. The Tribunal held that the assessee, engaged in software development services and marketingsupport services could not be compared to companies having related party transactions to salesgreater than 15 percent, companies having turnover in excess of Rs. 200 crore and companieshaving drastic variation in its profit margins.Support.com India Pvt Ltd v ITO (IT(TP)A No. 1340/Bang/2010) – TS-609-ITAT-2015 (Bang) -TP

21. The Tribunal held that companies outsourcing a major portion of its activitites (75 percent of totalcost) could not be compared with the assessee, engaged in electronic publishing services and dataconversion services as they operated completely different business models.Further, it held that the Revenue could not be aggrieved by the AO / TPOs action in considering acompany as comparable and that even Rule 27 of the ITAT Rules could not be invoked. It statedthat though the Revenue had the right to file cross appeals against the adverse decision of theCIT(A), it had no right to file appeal against the view taken by the AO / TPO himself which was notdisturbed in the first appeal.ACIT v Tech Books Electronics Pvt Ltd (ITA No.6081/Del/2012) – TS-606-ITAT-2015 (Del) - TP

22. The Tribunal held that the assessee engaged in providing software development services to its AEcould not be compared to companies engaged in development of software products, companiesowning intellectual property and brand value, companies for which segmental data is unavailable,companies failing the Related Party transaction filter.Intoto Software India Pvt Ltd v ITO (ITA.No.1810/Hyd/2012) – TS-635-ITAT-2015 (Hyd) – TPStarnet Networks (India) Pvt Ltd v ACIT (ITA No. 1684/PN/2011) – TS-636-ITAT-2015 (Pun) - TP

23. The Tribunal held that the assessee, engaged in the provision of ITES services such as customizedbusiness research support was not comparable with Coral Hub Ltd as it outsourced majority of itsfunctions while the assessee carried out most functions in-house. It further held that Eclerx Serviceswas functionally different as it was a KPO providing complete business solutions and the assesseemerely provided primary data for various field of activities.Copal Research India Pvt Ltd v ITO (ITA no. 1713/Del/2014) – TS-597-ITAT-2015 (Del) - TP

Research Services

24. The Tribunal held that the issue of capping the upper turnover filter had been decided in favour ofthe assessee in the case of 24/7 Customer.com Pvt Ltd v DCIT and therefore excluded companieshaving turnover over Rs.1,000 crores. Further it held that companies engaged in softwaredevelopment and ITES were not comparable with the assessee who was engaged in the businessof research, design and development of application solutions. Further, companies having extra-ordinary events such as mergers and acquisitions during the year were also excluded as comparable.AMD Research & Development Centre India Pvt Ltd v DCIT (ITA No. 275/Hyd/2015 & ITA No.242/Hyd/2015) – TS-563-ITAT-2015 (Hyd) - TP

Support Services

25. The Tribunal held that companies providing variety of operations such as marketing of equipmentrelating to banking and postal offices and whose after sales support service was only an insignificantcomponent of the revenue were not comparable with the assessee’s marketing support services.

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DCIT v Parametric Technology (India) Pvt Ltd [I.T. (T.P) A. No.145/Bang/2015] – TS-514-ITAT-2015 (Bang) – TP (the rest of the issues and comparables were remitted back)

26. The Tribunal held that companies which have undergone amalgamation during the year under reviewor companies having outsourced major of its activities cannot be compared to the assessee who wasengaged in providing tele-servicing and transaction processing support to its AEs.American Express India Pvt Ltd v DCIT (ITA No.3532/Del/2014) – TS-517-ITAT-2015 (Del) - TP

27. The Tribunal held that the assessee engaged in providing Clinical Study Management & MonitoringSupport Services and outsourcing its research activities could not be comparable to companiescarrying on in-house research, companies having substantial related party transactions, companieshaving two streams of revenue viz. contract research fees and sale of compounds, but not havingsegmental break-up.Pfizer Limited v ACIT ( ITA no.3729/Mum./2008) – TS-561-ITAT-2015 (Mum) TP

28. The Tribunal held that the assessee, a company providing technical support services to its AEsoutside India could not be compared to the following companies: Companies earning abnormally high profits as compared to the preceding and succeeding years

and which were functionally different since it outsourced its work resulting in a lower employeecost to turnover percentage as compared to the assessee.

Companies which were functionally different and incurring losses in the current and precedingyears

Companies engaged in providing outsourced product development services and in sale ofproducts.

Schlumberger Global Support Centre Ltd v DDIT (ITA No.86/PN/2013) – TS-528-ITAT-2015(Pun) - TP

29. The Tribunal held that the assesee, engaged in providing technical support services to its AEs couldnot be compared to Cosmic Global Ltd, as it had faced wide fluctuation in its margin as compared to earlier years

which was opposed to its normal business trend. Additionally, unlike the assessee, the companyoutsourced a substantial part of its activities.

Allsec Technologies as it was engaged in the business of data verification, processing of orderstelemarketing, monitoring of quality of calls etc which was different from the functions of theassessee.

R Systems International Ltd as it was engaged in product development and sale of products.

Gaddomajra Cooperative Labour & Construction Society v ITO - (2015) 45 CCH 0168 Chd Trib

30. The Tribunal held that the assessee engaged in the business of providing customer relationshipservices and BPO services could not be compared to the following companies: Companies having undergone extra-ordinary events during the year Companies providing engineering design services, data analytics and operation management

which were KPO services Companies outsourcing most of its work Companies functionally dissimilar being established market leaders, having huge brand value and

economies of scale.E4e Business Solutions India Pvt Ltd v DCIT (I.T. (T.P.) A. No.1765/Bang/2013) – TS-541-ITAT-2015 (Bang) – TP

31. The Tribunal held that the assessee, engaged in providing end to end BPO services could not becompared with the following companies: Companies engaged in the diversified activity of medical transcription, medical coding, billing,

receivable management as these were different from the service of contract center provided bythe assessee

Companies providing high-end services involving decision making analysis, requiring thoughtprocess and evaluation of various factors

Companies undergoing extra-ordinary development such as amalgamation

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Companies engaged in the providing consultancy services, translation services and accountsBPO and companies outsourcing its services.

E4e Business Solutions India Pvt Ltd v DCIT [IT(TP)A No 1845 / Bang / 2013 & IT(TP)A No 1777/ Bang / 2013) – TS-632-ITAT-2015 (Bang) - TP

32. The Tribunal held that the assessee, engaged in providing marketing support services to its AE couldnot be compared to companies imparting high end technical services and companies impartingconsultancy in an entirely different field.It held that if a particular segment was performing a specific function, then for determining the ALPonly those comparables having close similarity with the functional segment under considerationshould be selected.Rolls Royce India Pvt Ltd v DCIT (ITA no. 1310/Del/2015) – TS-616-ITAT-2015 (Del) - TP

33. The Tribunal held that since the activities performed by the assessee viz. providing emergencyassistance and support services were not performed by any comparable companies, companieshaving a broad comparative functional profile of undertaking support services in other fields were tobe taken as comparable.Further, it held that Government owned companies should not be included as comparable as profitmotive was not a relevant consideration for those companies.International SOS Services India Pvt Ltd v DCIT (I.T.A .No. 1631/Del/2014) – TS-620-ITAT-2015(Del) – TP

34. The Tribunal held that the assessee, engaged in providing engineering support services to its AEscould not be compared with companies engaged in comprehensive green field related services,Government companies as profit motive might not be a relevant consideration, companies engagedin the surface transport business (developer, operator and facilitator of surface transportinfrastructure projects from conceptualization to operation), companies engaged in providingengineering consultancy services and companies having service income to sales ratio of less than75 percent.Bechtel India Pvt Ltd v DCIT (I.T.A. No.1477 /Del/2015) – TS-602-ITAT-2015 (Del) – TPBechtel India Pvt Ltd v DCIT (I.T.A. No.1476 /Del/2015) – TS-607-ITAT-2015 (Del) - TP

35. The Tribunal held that the assessee, engaged in providing back office services relating to accountspayable processing and HR to its AEs could not be compared to the following companies: Companies whose financial results arise out of amalgamation Companies providing KPO Services Companies failing the employee cost filter Companies having super normal profit and functionally incomparable Companies providing geospatial services in land based technologies Companies having a different scale of operations owing to the brand value of its parent

company.Flextronics Technologies (India) Pvt Ltd v DCIT (IT(TP)A No.1559/Bang/2012) – TS-600-ITAT-2015 (Bang) - TP

36. The Tribunal held that the assessee, engaged in the business of providing marketing supportservices and business support services in relation to re-insurance, underwriting and actuarialactivities was not comparable with companies engaged in providing event management services.ACIT v RGA Services India Pvt Ltd (I.T.A. No.22/Mum/2015) – TS-580-ITAT-2015 (Mum) - TP

37. The Tribunal held that the assessee, engaged in providing business support services to its AE wascomparable with companies engaged in providing technical assistance and human resources andcompanies providing management services functionally comparable to the assessee.Further, it held that companies providing payroll processing outsourcing services were notcomparable to the assessee.Eli Lilly & Co (India) Pvt Ltd v ACIT (ITA No 788 / Del / 2015) – TS-573-ITAT-2015 (Del) – TP

38. The Tribunal held that the assessee, engaged in providing support services such as administrativesupport in providing demos for products, helping distributors get orders, tracking logistics etc couldnot be compared to a company engaged in the business of hiring and chartering ships / maritimevessels earning revenue in the form of charter hire charges.

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Emerson Electric Company (India) Pvt Ltd v DCIT (ITA No.7613/Mum/2012) – TS-625-ITAT-2015(Mum)

Others

39. The Tribunal held that companies providing services in the nature of product report preparation,technical and economic studies, feasibility studies, skill development, project managementconsulting etc, companies providing Procurement Review of multilaterally funded projects across theglobe and companies undertaking Registrar and Transfer agent activities, records managementactivities and payroll and trust fund activities could not be compared to the assessee who wasengaged in identifying customers, understanding their requirements and forwarding the same to itsAE along with assisting in finalization of the sale of products.Trend Micro India Pvt Ltd v DCIT (ITA No.1585/Del/2015) – TS-556-ITAT-2015 (Del)

40. The Tribunal held the assessee, engaged in the purchase of electro-optics components andmanufacture, assembling and testing of opto-electronic equipment could not be compared tocompanies engaged in manufacture of cardio vascular equipment and devices, companies engagedin the manufacture of high precision special purpose motors for surgical and dental instruments,companies engaged in the manufacture of electronic equipment, companies engaged in manufactureof fuse holders, reed relays, switches and key boards and companies engaged in the manufactureof storage optical media.Further, it held that a difference in fixed assets between the assessee and its comparable does notadversely affect the interest of the assessee but would reduce the operating margin of thecomparable companies and that the cost of fixed assets alone was not a determining factor forcomparability if the corresponding turnover was also higher.Alpha ITL Electro Optics Pvt Ltd v DCIT (IT(TP)A No.249/Bang/2015) – TS-601-ITAT-2015(Bang) - TP

Filters

41. The Court held that the turnover filter was a relevant factor for comparability and upheld the order ofthe Tribunal excluding companies having turnover substantially higher (23 times, 65 times) than thatof the assessee i.e. Rs. 11 croresCIT v Pentair Water India Pvt Ltd (Tax Appeal No 18 of 2015) – TS-566-HC-2015 (Bom)

42. The Tribunal held that the value of debtors and creditors were to be excluded while computing RPTto sales ratio.Schlumberger Global Support Centre Ltd v DDIT (ITA No.86/PN/2013) – TS-528-ITAT-2015(Pun) – TP

43. The Tribunal held that companies having ratio of Related Party to Sales transactions in excess of 15percent, turnover in excess of Rs.200 crore (assessee’s turnover was approximately Rs. 31 crore)and companies functionally incomparable could not be considered for benchmarking the ALP of theinternational transactions undertaken by the assessee.VeriSign Services India Pvt Ltd v DCIT [IT(TP)A No.1404(B)/2010] – TS-617-ITAT-2015 (Bang)- TP

44. The Tribunal held that as per Rule 10B(4) of the Income-tax Rules, 1962, it is a mandatoryrequirement to use the data of the financial year in which the international transaction took place andthe exception provided for in the said Rule was for allowing the use of data for the two precedingyear only if it was established that the data reveals facts which could have an influence ondetermination of transfer price.Emerson Electric Company (India) Pvt Ltd v DCIT (ITA No.7613/Mum/2012) – TS-625-ITAT-2015(Mum)

d. Computation / Calculations / Adjustments

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45. The Tribunal held that foreign exchange gains / losses pertaining to sale are revenue in nature andthus to be treated as part of operating income / loss.Further, it held that for the purposes of providing working capital adjustment the interest rate to beapplied should be the US currency rate and not the Prime Lending rate as the assessee received allof its business income in US dollars.M/s Rampgreen Solutions Pvt Ltd v DCIT (ITA no. 1066/Del/2015) – TS-538-ITAT-2015 (Del) -TP

46. The Tribunal held that the adjustment arising out of TP analysis was to be confined to theinternational transactions undertaken with the AEs alone and not in relation to Non-AE transactions.Accordingly, the Tribunal directed the TPO to consider the segment submitted by the assessee withrespect to the transactions with AEs.Vistcon Engineering Center (India) Pvt Ltd v ACIT (ITA No 358 / PN / 2013) – TS-527-ITAT-2015(Pun) - TP

47. The Tribunal held that the transfer pricing adjustment was to be made only in respect of transactionsentered into with AEs and not on any Non-AE transactions despite the fact that the assessee carriedout benchmarking at an entity level.DCIT v Alstom Projects India Ltd (ITA No.5335/M/2014, ITA No.5487/M/2014 & ITANo.2143/M/2014) – TS-522-ITAT-2015 (Mum)-TP

48. The Tribunal held that for the purposes of benchmarking the ALP of purchase of goods by theassessee from its AE the value of unsold stock / closing stock could not be considered relying on thedecision of St Jude Medical India Pvt Ltd v DCIT (ITA No 1626/Hyd/2010).Signity India Pvt Ltd v DCIT (ITA No 7464 / Mum / 2014) - TS-562-ITAT-2015 (Mum) - TP

49. The Tribunal held that for the purposes of computing the operating profit of the distribution segmentand the agency service segment, the indirect expenses common to both functions were to beallocated on the basis of gross margin of distribution and commission income and not on the basisof sales as allocation on the basis of sales would amount to providing equal weightage in terms offunctions performed, assets utilized and risk assumed to both functions whereas the agency servicefunction involved lesser functions and utilization of assets and risks.Corning SA, India Branch Office v DDIT ( ITA No.1129/Del./2014) – TS-547-ITAT-2015 (Del) - TP

50. The Tribunal accepted the contention of the assessee that since the depreciation adopted by it wason the higher side since the estimated life of the assets were shorter (3 and 5 years), it led to a highercost compared to other comparable companies, lowering its operating margin as compared tocomparable companies and therefore it should have been excluded from the variable cost of all thecomparable companies as well as the assessee.AMD Research & Development Centre India Pvt Ltd v DCIT (ITA No. 275/Hyd/2015 & ITA No.242/Hyd/2015) – TS-563-ITAT-2015 (Hyd) - TP

51. The Tribunal held that costs incurred by the assessee such as booking of hotels, airfare, transportexpenses in the course of providing tour services to foreign tourists, were expenses incurred in itscapacity of a principal and not as an agent of its Foreign AE and therefore were to be included in theoperating cost while computing PLI and could not be treated as pass-through costs (costs incurredon behalf of the AE for which subsequent reimbursement was to be claimed).DCIT v Fritidsresor Tours & Travels India Pvt Ltd (ITA No.1480/Del/2011) – TS-530-ITAT-2015(Del) -TP

52. The Court held that provision for stock obsolesce was to be considered as non-operating as it wasabnormal and extra-ordinary in nature. Further, dealing with the contention of the Revenue that theprovision was claimed year after year, the Court observed that the question for determination wasnot whether the assessee was claiming the provision as a one-time measure but was whether it wasgaining any undue advantage and using the provision as a measure of avoiding tax.CIT v Federal Mogul Automative Products (India) Pvt Ltd (ITA 848/2015) – TS-531-HC-2015(Del) - TP

53. The Tribunal held that the depreciation adjustment on account of under-utilization of assets andcapacity claimed by the assessee was incorrect as the reasons for under-utilization such as difficulty

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in procuring raw materials, shortage of power etc were adverse business environment faced by allcompetitors and that depreciation on fixed assets need not be directly proportionate to utilization ofmachinery. It held that the assessee was attempting to have a lesser charge of depreciation in theguise of under-utilization of capacity.Further, it held that since the assessee did not have debtors and was wholly funded by an advanceform its AE against supplies, it was essential to make a working capital adjustment to bring paritywith the results of comparable companies.Indigra Exports Pvt Ltd v DCIT (I.T(TP).A No.309/Bang/2015) – TS-529-ITAT-2015 (Bang) - TP

54. The Tribunal held that the assessee was entitled to a working capital adjustment since it wasproviding services to its AEs on a cash basis and therefore worked on lower prices for its servicesas opposed to a company who allowed its customers to pay at a later date. Therefore, it upheld theorder of the CIT(A) and allowed a working capital adjustment on the basis of average credit / debitperiod for the year and commercial rates of interest.ACIT v Software AG (India) Pvt Ltd (ITA No.1264/PN/2013) – TS-539-ITAT-2015 (Pun) - TP

55. The Tribunal held that for the purpose of computing and granting adjustment for underutilization ofcapacity, the optimum capacity had to be considered as opposed to the total installed capacity asdone by the assessee. It held that manufacturing companies could not always operate at full capacityand therefore the optimum capacity at which comparable companies operated was to be comparedwith the capacity utilization of the assessee to determine the under-utilization.Further it held that the capacity utilization was to be granted to the extent of fixed costs and not theentire non-operating costs of the assessee.Biesse Manufacturing Co Pvt Ltd v ACIT [I.T.(T.P.)A. No.97/Bang/2015] – TS-533-ITAT-2015(Bang) -TP

56. The Tribunal held that for the purpose of benchmarking selling prices of exports made by theassessee to its AEs using the CUP method, the assessee could use the portfolio approach of theproducts rather than considering single products since all the products fell in the category ofinsecticides and were supplementary to each other.Godrej Sara Lee Ltd v ACIT (ITA No. 1251/MUM/2014) – TS-565-ITAT-2015 (Mum) – TP

57. The Tribunal held that apportioning the payment of product development expenses paid to the AEon the basis of estimated sales was not a prescribed method for determination of ALP under Rule10B of the Rules and accordingly remitted the issue back to the file of the AO / TPO.Autoneum Nittoku Sound Proof Products India Pvt Ltd v ACIT (I.T.A.No.1425/Mds. /2014) – TS-608-ITAT-2015 (CHNY) - TP

58. The Tribunal deleted the TP adjustment made on sale of CDs made by the assessee to its AEs inthe US by allowing assessee’s claim for adjustment on account of differences in geographicalmarkets of USA and Europe (sales to third parties) while applying the CUP method. It held that hedistributor in the US had to incur higher expenses as the products were sold through shopping malls/ super markets which followed the just in time approach requiring rent costs and frequent stockcontrol. However, it rejected the claim of the assessee for adjusting prices by reducing selling anddistribution expenses incurred by the AE in the US since expenses incurred by the AE to developmarket for the assessee’s products had no relevance for comparability adjustments.Moser Baer India Ltd v DCIT (ITA No 882 / Del / 2008) – TS-624-ITAT-2015 (Del) - TP

59. The Court held that TP adjustments are only mandated in respect of international transactions andnot transactions entered into by the assessee with independent unrelated third parties as there is noissue of avoidance requiring adjustment in valuation in respect of transactions entered into withindependent third parties. It held that adjustment on Non-AE transaction would increase the profit ina manner which was beyond the scope and ambit of Chapter X of the Act.CIT v Thyssen Krupp Industries India Pvt Ltd (INCOME TAX APPEAL NO. 2201 OF 2013) – TS-590-HC-2015 (Bom) – TPCIT v Ratilal Becharlal & Sons (INCOME TAX APPEAL NO. 1906 OF 2013) – TS-610-HC-2015(Bom)Maine Global Enterprises Pvt Ltd v ACIT (ITA No.5969/Mum/2012 & ITA No.5889/Mum/2012) –TS-630-ITAT-2015 (Mum) - TP

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60. The Tribunal held that foreign exchange gains / losses arising as a consequence of realization ofconsideration in the course of business operation for rendering software development / end to endBPO services were to be considered as operating in nature while computing the Profit Level Indicator.DCIT v Guhring India Pvt Ltd [IT(TP)A No 217 / Bang / 2015] – TS-571-ITAT-2015 (Bang) – TPE4e Business Solutions India Pvt Ltd v DCIT [IT(TP)A No 1845 / Bang / 2013 & IT(TP)A No 1777/ Bang / 2013) – TS-632-ITAT-2015 (Bang) - TP

61. The Tribunal, relying on the earlier year’s order in the case of the assessee held that the provisionof agency services could not be aggregated with the distribution segment as the transactions werenot closely linked.Further, it held that the common expenses of the assessee were to be apportioned to the agencysegment on the basis of the gross profit ratio and not in the ratio of sales.Corning SAS India Branch Office v DDIT (I.T.A .No.-3236/Del/2014) – TS-592-ITAT-2015 (Del) -TP

62. The Tribunal held that since the services received by the assessee were part of a composite, intrinsicagreement it was incorrect to split the same and hold some services to be at arm’s length price. Itheld that the principle of aggregation seeks to combine all closely linked transactions wherein ALPcan be determined for a number of transactions taken together. It observed that there was a directnexus between the revenue earned and the majority intra-group services received and therefore itwould be incorrect to analyze the intra-group service as a single element of cost in isolation.Avery Dennison (India) Pvt Ltd v ACIT (I.T.A .No. 4869/Del/2014) – TS-619-ITAT-2015 (Del) - TP

63. The Tribunal held that the foreign exchange gains / losses related to the sale price of export (tradingreceipt) were to be considered as operating income / loss in the case of the tested party as well asthe comparable companies.Rolls Royce India Pvt Ltd v DCIT (ITA no. 1310/Del/2015) – TS-616-ITAT-2015 (Del) - TP

64. The Tribunal held that provision written back should be treated as operating income and provisioncreated during the year should be treated as operating expense. Further, it held that only currentyears financial information of comparable companies was to be used for comparability analysis.ACIT v Conexant Systems Pvt Ltd (ITA no. 4359/Del/2009 & C.O. No. 37/Del/2010) – TS-567-ITAT-2015 (Del) - TP

e. Specific Transactions

Advertisement, Marketing and Promotion

65. Noting that the assessee was a manufacturer, the Tribunal remanded the issue of AMP adjustmentto the AO / TPO for fresh determination in accordance with the High Court ruling in the case of SonyEricsson. It noted that the High Court ruling distinguished between a limited risk distributor and amanufacturer and since the assessee was a manufacturer, its activities were to be bifurcated into theprime manufacturing activities and the AMP activities. It also held that TNMM was not the mostappropriate method for determination of ALP on AMP expenses in the case of a manufacturer andalso observed that in case the Cost Plus method was being used, selling expenses were to beexcluded from the total AMP expenses.Glaxo Smithkline Consumer Healthcare Ltd v JCIT (ITA No.290/Chd/2014) – TS-535-ITAT-2015(Chandi) – TP

66. The Court held that every AMP spent by an Indian entity which happens to use the brand of a foreignAE could not be presumed to involve an international transaction as it is not one of the deemedinternational transactions under section 92B of the Act. It held that as per the provisions of ChapterX, the TP adjustment envisaged is a price adjustment and not a quantitative adjustment by firstdetermining whether the AMP spent by the assessee was excessive and subsequently deeming theexcess AMP as an international transaction.Maruti Suzuki India Ltd v CIT – [2015] 64 taxmann.com 140 (Del)Honda Siel Power Products Ltd v DCIT (ITA No 346 / 2015) – TS-627-HC-2015 (Del) – TPBausch & Lomb Eyecare (India) Pvt Ltd v ACIT (ITA No 643 / 2015) – TS-626-HC-2015 (Del) -TP

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67. The Court held that since the Revenue was unable to demonstrate with tangible material that therewas an international transaction involving AMP expenses between the assessee and its AE, thequestion of determining ALP did not arise. It held that merely because the AE had financial interestin the assessee it could not be presumed that the AMP expenses incurred by the asessee was onbehalf of the AE. It held that even though Section 92B read with Section 92F included arrangement,understanding or actions in concert within the ambit of international transaction there has to betangible evidence to show that the parties acted in concert. It further held that the clauses of tradename license agreement do not indicate that the assessee was under obligation to incur AMPexpenses for building the brand of its AE and accordingly dismissed the appeal of the Revenue.Whirpool of India Ltd v DCIT (ITA 610/2014, ITA 228/2015 & CM No.5751/2015) – TS-622-HC-2015 (Del) - TP

68. The Tribunal held that selling expenses incurred for making sales not leading to brand promotion inany manner are distinct from expenses and should not be included in the base amount for computingALP of AMP expenses.Discovery Communications India v DCIT – [2015] 64 taxmann.com 120 (Del – Trib)

Issue of shares

69. The Tribunal relying on the case of the High Court in Vodafone India Services (368 ITR 1) and ShellIndia Markets (369 ITR 516) and CBDT Instruction No 2 / 2015 held that amount received by theassessee from its AE towards share premium in connection with subscription of share capital doesnot give rise to any income under the Act and therefore Chapter X of the Act would not apply.Supergems (India) Pvt Ltd v ACIT ( I.T.A. No. 789/M/2013) – TS-511-ITAT-2015 (Mum) - TP

70. Relying on the decision of the High Court in the case of Vodafone (368 ITR 1) and Shell (369 ITR516), the Tribunal held that the issue of shares to foreign AEs was outside the scope of TP provisionsas it fell in the capital field and dismissed the appeal of the Revenue.M/s Solvay Specialties India Pvt Ltd v DCIT (ITA No 1702/M/2014, I.T.A. No. 630/M/2015,C.O.104/M/2015 & C.O. No.41/M/2015) – TS-534-ITAT-2015 (Mum) - TP

Loan / Corporate Guarantee

71. The Tribunal held that for the purposes of benchmarking interest on loan granted to an AE situatedin Singapore, the interest rates in Singapore and not the SBI Prime Lending Rate were to beconsidered.The Tribunal, relying on the decision of the High Court in the case of Everest Kanto Cylinders, heldthat the rate for benchmarking guarantee commission was 0.5 percent as opposed to the 4.12percent arrived at by the TPO.Cox and Kings Ltd v DCIT (I.T.A. No. 1354/M/2014 & I.T.A. No. 7770/M/2014) – TS-540-ITAT-2015 (Mum) - TP

72. The Tribunal held that where for majority transactions there was no delay in realization of debts, theinterest could not be imputed for the few delays in realization since neither the assessee nor the TPOhad given any comparable instance as to whether an unrelated party would have charged interest insuch a situation. Accordingly, the Tribunal held that for the transactions in which the delay inrealization was more than 180 days, the interest to be charged should be on the basis of LIBOR +1.5 percent relying on the decision in the case of Dania Oro Jewellery Pvt Ltd v ITO (43 taxmann.com190).Golawala Diamonds v ACIT (ITA No 518 / Mum / 2014) – TS-543-ITAT-2015 (Mum) - TP

73. The Tribunal held that interest on loans given by the assessee to overseas subsidiaries situated inHong Kong and Singapore should be benchmarked considering the LIBOR of the respective countrywhere the loan is consumed. It further held that since the loan was not used for uniform periods, theLIBOR rate for an average of 6 months was to be considered and applying the uniform average of12 months LIBOR on all loans was not valid.Arshiya International Limited v DCIT ( I.T.A. No. 659/M/2013)- TS-519-ITAT-2015 (Mum) - TP

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74. The Tribunal deleted the adjustment made by the TPO on account of excess credit period allowedby the assessee to its AE as opposed to its non-AE customers on the ground that the goods sold tothe AEs were semi-finished goods and therefore the period of credit on semi-finished goods couldnot be compared to the period of credit allowed for finished goods. It further held that where interestis includible in operating income which has been accepted as reasonable under TNMM, there is nooccasion to make adjustment for notional interest and that the delay in realization of debts, resultingin a continuing debit balance is not a standalone international transaction per se, but is a result of aninternational transaction.The Tribunal held that the issuance of corporate guarantee was in the nature of shareholder activitiesand thus could not be included within the ambit of services under section 92B of the Act and thatthere could be activities which benefit group entities but were not necessarily services as there is noexpress reference to the ‘benefit test’ in the main definition of the international transaction under theAct. Further it held that even if the corporate guarantee was to be treated as service, it would haveto be re-characterised to bring it into tune with commercial reality as no independent enterprise wouldprovide corporate guarantee without a security as in the instant case. Relying on the decision ofBharti Airtel it held that in the absence of bearing on profits, income, losses or assets, the guaranteewas outside the ambit of international transactions.Micro Ink Ltd v ACIT (ITA No 2873 / Ahd / 10) – TS-568-ITAT-2015(Ahd) – TP

75. The Tribunal adopted LIBOR for determining the ALP of the interest on loan given by the assesseeto its AE for the purpose of acquiring another company viz. CII Carbon LLC.With regard to corporate guarantee provided by the assessee, the Tribunal, noting the decision ofthe Court in the case of Everest Kento remitted the file back to the TPO as in the instant case nocorporate guarantee commission was charged by the assessee whereas in the said decisioncorporate guarantee commission had been charged.Rain Commodities v ACIT (ITA No. 157/Hyd/2014) – TS-594-ITAT-2015 (Hyd) – TP

76. Observing that the account payables were more than the account receivables from the AE, theTribunal held that the charging of notional interest did not arise and remitted the issue back to thefile of the DRP to give clear findings on the issue.Satyam Venture Engg Services Pvt Ltd v ACIT (ITA Nos. 431 & 432/Hyd/2015) – TS-581-ITAT-2015 (Hyd) - TP

77. The Tribunal applied EURIBOR + 0.8 percent as the arm’s length price of the notional interest onloan granted by the assessee to its AE as opposed to the SBI PLR.With respect to the addition of 0.8 percent margin, it held that it was necessary to add such marginas only banks and other large financial institutions dealing with each other are able to obtain loansat mere EURIBOR and that retail borrowers would be charged an additional margin / premium overand above EURIBOR.Tata Autocomp Systems Ltd v ACIT (ITA No. 774/M/2014) – TS-582-ITAT-2015 (Mum)

78. The Tribunal deleted the addition made by the TPO on account of notional interest on outstandingdebt receivable from its AEs which were due for a period exceeding six months. It held thatadjustment could not be made on a hypothetical and notional basis until there was material on recordthat there was an actual under charging of real income.Ingersoll Rand (India) Ltd v DCIT [IT(TP)A No 228 / Bang / 2015] – TS-572-ITAT-2015 (Bang) –TP

79. The Tribunal held that if the receivables (AE receivable) were outstanding for a period of 6 monthsno separate addition on account of notional interest was required.tActis Global Services Pvt Ltd v ITO (ITA No. 30/Del/2015) – TS-611-ITAT-2015 (Del) – TP

Reimbursement of expenses

80. The Tribunal held that where the assessee failed to provide documentary evidence of services suchas invoices or confirmation from the parties and benefit received, the TPO was correct in determiningthe ALP of the intra-group services at Nil as for the purposes of transfer pricing AEs transacting with

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each other must replicate the dynamics of market forces and substantiate the benefit derived fromsuch transactions.Bombardier Transportation India Pvt Ltd v DCIT (I.T.A .No.-1626/Del/2015) – TS-520-ITAT-2015(Del) - TP

81. The Tribunal held that where the assessee had produced all relevant details as well as the evidencein support of the claim that the AE had rendered the services as per the agreement between theparties, the TPO was incorrect in determining the ALP of intra-group services at Nil on the basis thatthe intra-group services did not result in increase of profit margin and that intra-group services to theextent of cost of services should have been allowed.DCIT v Essentra India Pvt Ltd (IT(TP)A No.68/Bang/2011) – TS-537-ITAT-2015 (Bang) –TP

82. The Tribunal held that since the assessee did not bring any cogent material on record to substantiatethe incurrence of expenditure wholly and exclusively for business purposes, the expenditure wasclearly disallowable and the ALP was held to be Nil.Godrej Sara Lee Ltd v ACIT (ITA No. 1251/MUM/2014) – TS-565-ITAT-2015 (Mum) – TP

83. The Tribunal relying on the earlier year’s decision in the case of the assessee, allowed payment forintra-group services rendered by the AE to the extent of cost of services (not including the mark-uppaid). The TPO had determined the ALP of the entire payment at Nil on the ground that the intra-group service did not result in an increase in the profit margin of the assessee.Essentra India Pvt Ltd v DCIT [IT(TP)A No 1308 / Bang / 2011] – TS-574-ITAT-2015 (Bang) - TP

Royalty / Management fees

84. The Court dismissed the Revenue’s appeal against the order of the Tribunal wherein the ALP ofroyalty was accepted at 3 percent. It held that the Revenue’s reliance on Clause III of Press NoteNo 9 (2000) series, stating that royalty was to be paid at 2 percent for exports and 1 percent ofdomestic sales on use of trademarks and brand name of the foreign collaborator, was incorrect asthe given case was covered by Clause IV of the said Press Note which provided for 8 percent onexports and 5 percent on domestic sales in case of payment by a wholly owned subsidiary and theroyalty paid by the assessee ranged between 2.5 percent to 4 percent. Further, it upheld the findingsof the Tribunal that the said payment was approved by the FIPB and that royalty paid by comparablecompanies was at 10 percent as opposed to the 2.5 to 4 percent paid by the assessee.CIT v SGS India Pvt Ltd (ITA No 1807 of 2013) – TS-529-HC-2015 (Bom)

85. The Court rejected the reasoning of the Tribunal and TPO in determining the ALP of the fees paidby the assessee for professional management and SAP consultancy services at Nil on the groundthat the assessee was unable to substantiate that the payment for services increased profits. It heldthat profit earned by the assessee could be for reasons other than those relating to internationaltransactions and that mere profitability did not indicate that the transaction was at arms length. Itfurther observed that while profit may reflect upon the genuineness of the assessee’s claim, it is notdeterminative of the same.Knorr Bremse India Pvt Ltd v ACIT (INCOME TAX APPEAL No.182 of 2013) – TS-558-HC-2015(P&H)-TP

86. The Tribunal held that the foreign exchange loss incurred by the AE on account of foreign exchangeloan taken by it, charged to the assessee, could not be treated as management fee as it could notbe considered as services provided to the assessee and accordingly determined the ALP of suchportion of management fee as Nil. For the balance management fee (after excluding foreignexchange fluctuation loss), the Tribunal held that since the fact of rendering of services by the AEhad been accepted by the Revenue, in the absence of a comparable the TPO was incorrect indetermining the ALP as Nil and accordingly allowed the payment of such management fee.DQ Entertainment (International) Ltd v ACIT (I.T.A. No. 62/HYD/2013) – TS-524-ITAT-2015(Hyd)– TP

87. The Tribunal upheld the order of the CIT(A) deleting the addition made by the TPO by way ofrestricting royalty paid to its AE on software duplication and sub-licensing activity to 30 percent ofactual sales. It observed that the assessee changed the basis for royalty payment from 30 percentof Indian Published Price to 56 percent of actual sales revenue (owing to the new liberalized foreign

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exchange control policy) and that the assessee had clearly demonstrated that the effective royaltypay out was less than the earlier years payout. Further, it noted that the assessee’s profit marginwas more than that of comparables and that the royalty payment was made exclusively for thepurpose of business.ACIT v Oracle India Pvt Ltd (ITA no. 1432/Del/2011) – TS-605-ITAT-2015 (Del) - TP

88. The Tribunal, relying on the approval granted by the RBI and earlier year’s order in the case of theassessee allowed royalty payment at 5 percent of domestic sales and 1 percent of export sales.DCIT v Gulf Oil Corporation Ltd (ITA No. 11/Hyd/2014) – TS-576-ITAT-2015 (Hyd) - TP

89. The Tribunal allowed the management fees paid by the assessee to its AE for services in the areasof Administration, Finance, Treasury etc which were used by the assessee to undertake its businessoperations in India. The management fee was allocated to the group concerns on a scientific basis(head count, annualized sales) by the AE who was a Centralized service provider. Relying on thedecision of the Tribunal in Dresser Rand India Pvt Ltd and the fact that the assessee had furnishedevidences to substantiate the said fee, it allowed the payment of management fee.Ingersoll Rand (India) Ltd v DCIT [IT(TP)A No 228 / Bang / 2015] – TS-572-ITAT-2015 (Bang) -TP

f. Assessment

90. The Tribunal held that it is the statutory duty of the AO / CIT to analyze the transfer pricingtransactions independently before making reference / granting approval of reference to the TPO aftera proper application of mind to all facts and forming a prima facie opinion / belief.It was further held that CBDT Instruction 3 / 2003 detracting the AO / CIT from the aforesaid obligationwas in violation of the provisions of the Act and that necessary hearing was to be given to theassessee in accordance with the principles of natural justice before making reference to the AO inlight of the amendment made to Section 92CA.Further it was held that TP adjustment could not be made in cases where the assessee enjoys benefitunder section 10A / 80HHE of the Act or where the tax rate in the country of the AE was higher thanthe Indian rate, as tax avoidance or manipulation of prices of shifting of profits was not possible.DCIT v Tata Consultancy Services (ITA No.7513/M/2010 & C.O. No.216/M/2010) – TS-521-ITAT-2015 (Mum) - TP

91. The Tribunal observed that the assessment proceedings had been continued in the name of GEMedical Systems Pvt Ltd (assessee) rather than in the name of Wipro GE Healthcare (into which theassessee had merged) and therefore cancelled the assessment order passed in the hands of GEwhich was non-existent on the date of the assessment order. It held that any order made on a non-existent entity is a nullity and invalid.GE Medical Systems India Pvt Ltd v DCIT [I.T.(T.P.) A. No.328/Bang/2015] – TS-546-ITAT-2015(Bang) - TP

92. The Tribunal held that where the working capital adjustment claimed by the assessee was notexamined by the AO and rejected by the TPO, the CIT(A) was not authorized to proceed with deletingthe addition made by the TPO by granting working capital adjustment without entertaining additionalevidence and without calling for a remand report from the AO. When the working capital adjustmentwas demonstrated before the TPO (a quasi-judicial authority) the AO and CIT(A) were legally boundto address the issue.ACIT v BT (India) Pvt Ltd (ITA No 1496 / Del / 2012) – TS-553-ITAT-2015 (Del) - TP

93. The Tribunal held that the CIT(A) merely directing the TPO to apply the functionality test withoutrendering any finding as to which comparables were functionally dissimilar would tantamount tosetting aside the matter which was beyond the mandate of section 251(1)(a) of the Act.E4e Business Solutions India Pvt Ltd v DCIT (I.T. (T.P.) A. No.1765/Bang/2013) – TS-541-ITAT-2015 (Bang) - TP

94. The Tribunal held that the direction of the CIT(A) to verify the availability of financials of comparablesfor the previous year did not limit the power of the AO / TPO to consider comparability on theiryardsticks and therefore the direction could not be held to be unfair.

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DCIT v Vmoksha Technologies Pvt Ltd [IT(TP)A No 1053 / Bang / 2013] – TS-545-ITAT-2015(Bang) - TP

95. The Court directed the CIT(A) to dispose of the assessee’s appeal as expeditiously as possible inlight of the fact that the AO failed to furnish to the assessee the draft assessment order consequentto the TPO order but had issued a letter rejecting the stay applied for by the assessee. It held that itwas incumbent for the AO to have considered this aspect of the matter before rejecting the stay ofdemand pending hearing of appeal. It further directed the Revenue not to take any consequentialsteps for recovery of demand pursuant to the letter issued by DCIT.Vodafone East Limited v DCIT (W.P. No. 682 of 2015) – TS-515-HC-2015 (Cal) - TP

96. The Court granted stay of remaining demand to the assessee pending the disposal of appeal as itdeemed the case of the assessee to be a fit case for stay in light of the facts viz. the AO had passeda conditional order under section 220(6) of the Act directing the assessee to pay Rs. 5 crores out ofRs. 10 crores but also mentioned that if the appeal was not disposed of by September 30, 2015 itwould review the stay order. As the appeal had not been disposed of and the assessee had alreadypaid Rs. 5 crore, the Court granted stay till disposal.Jyothy Laboratories Ltd v DCIT (Writ Petition No.3145 of 2013) - TS-451-HC-2015(MAD)-TP

97. The Tribunal held that the Revenue could not argue for the exclusion of comparable companiesselected by the AO / TPO itself as it would mean that the AO / TPO is challenging the correctness ofhis own decision through the DR before the Tribunal which is illogical. It further noted that theDepartment was entitled to file appeal or cross objection against the assessment order passed inpursuance of the direction of the DRP to the extent it was aggrieved against such direction. Furtherdistinction was made between the powers of the Tribunal under section 254 of the Act wherein theTribunal is empowered to direct the AO / TPO to re-consider the correctness of companies includedby him in the list of comparables but in no case could the DR argue against the inclusion.Trend Micro India Pvt Ltd v DCIT (ITA No.1585/Del/2015) – TS-556-ITAT-2015 (Del)

98. The Tribunal held that assessment order passed by the AO in set aside proceedings was void abinitio as the AO did not pass any draft assessment order, did not ask assessee to file objectionsbefore the DRP but simply framed the assessment based on comments of the TPO to whomreference was made failing to follow procedure under section 144C of the Act. It rejected the standof the Revenue that the said procedure was only applicable to original assessment proceedings.Headstrong Services (India) Pvt Ltd v DCIT (ITA No 5409 / Del / 2014) – TS-526-ITAT-2015 (Del)- TP

99. The Tribunal held that merely because the assessee, at the initial stage, while preparing its transferpricing study, rejected the Resale Price Method and selected TNMM as the most appropriate method,it could not be precluded from making a plea at a later stage that RPM is the most appropriate methodfor determination of ALP. It observed that the selection of the most appropriate method was a purelylegal issue and could be entertained by it in the form of an additional ground.Pfizer Limited v ACIT ( ITA no.3729/Mum./2008) – TS-561-ITAT-2015 (Mum) TP

100. The Tribunal held that if the AO disallowed payment of salary to a person under section 40A(2)(b) ofthe Act on account of it being too high then the same would have to be adjusted in receipts of theassessee as well as the assessee had recovered the salary cost with a mark-up from its AE.XL India Business Services Pvt Ltd v ITO (I.T.A .No.-1427/Del/2014) – TS-591-ITAT-2015 (Del)- TP

101. The Court set aside the assessment order passed by the AO as the same was passed withoutreferring the matter to the TPO and the AO had not passed a draft assessment order. It held thatsince the provisions of the Act make it very clear that under Section 92CA of the Act the only optionis to place the matter to the TPO, it was necessary for the matter to be placed before the TPO.Carrier Race Technologies Pvt Ltd v ITO (Writ Petition No: 13442 of 2015) – TS-583-HC-2015(Mad) - TP

102. The Tribunal held the AO could not vary the margins as computed by the TPO in his order, becauseonce reference was made by the AO under section 92CA(1), then in view of the provisions of92CA(4), the AO was required to compute the total income in conformity with the ALP determined

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by the TPO. Therefore, absent direction from the DRP altering the ALP determined by the TPO, theAO cannot alter the same.Copal Research India Pvt Ltd v ITO (ITA no. 1713/Del/2014) – TS-597-ITAT-2015 (Del) - TP

103. The Tribunal held that the final order passed by the AO under section 143(3) read with section144C(13) of the Act was bad in law ab initio and not sustainable as it was passed beyond 30 daysfrom the end of the month in which the DRP issued its directions.IHG IT Services (India) Pvt Ltd v DCIT (ITA No. 1019/Del./2015) – TS-599-ITAT-2015 (Del) - TP

104. The Tribunal set aside the order of the DRP on the ground that it was laconic and non-speaking asit did not deal with the objections raised and the submissions made by the assessee. Accordingly, itdirected the DRP to pass a speaking order dealing with the objections.Lexmark International (India) Pvt Ltd v DCIT (I.T.A. No. 1967/KOL/ 2010) – TS-603-ITAT-2015(Kol) - TP

105. The Tribunal granted stay to the extent of balance tax payable (60 percent) as the assessee had aprima facie good case considering that relying on the Delhi High Court decision in Sony Ericsson,most of the issues were decided in favour of the assessee and that the TPO had accepted the ALPof the international transaction in the immediately succeeding assessment year without any changein facts and circumstances.Page Industries Ltd v DCIT [IT(TP) No.1 63/Bang/2015] – TS-613-ITAT-2015 (Bang) - TP

106. The Tribunal held that the margin determined for 96 percent of the assessee’s ITES transactionswith its US AE entities under MAP proceedings should be applied to the remaining 4 percent oftransactions with Non-US AE entities since the facts and nature of the transactions were the sameand neither was there any distinction made between the US and Non-US entities by the assessee inits annual report and nor by the Revenue authorities.JP Morgan Services Pvt Ltd v DCIT (ITA NO.8987/Mum/2010 & ITA NO.7822/Mum/2011) – TS-578-ITAT-2015 (Mum) - TP

107. The Court held that the power to grant stay was only to be exercised when a strong and sound primafacie case was made out by the assessee or where the entire purpose of the appeal would befrustrated by allowing the recovery proceedings to continue during the pendency of appeal. TheCourt observed that the assessee had already been allowed to pay the outstanding demand onaccount of AMP adjustment in four instalments and no prejudice had been demonstrated to becaused to the assessee and there was no error in the order of the CIT(A). The Court thereforedismissed the petition seeking stay for balance demand.M/s Perfetti Van Melle India Pvt Ltd v DCIT (CWP No.21769 of 2015) – TS-585-HC-2015 (P&H) -TP

108. The Tribunal dismissed the assessee’s appeal as infructuous since the assessee had accepted theresolution reached under MAP proceedings between the Indian and US authorities in respect of TPadjustments for the relevant year.Ocwen Financials Solution Pvt Ltd v DCIT [IT(TP)A 1318 / Bang / 2011] – TS-570-ITAT-2015(Bang) - TP

g. Penalty

109. The Tribunal deleted penalty under section 271G of the Act imposed by the TPO for non-maintenance of information and TP documentation under section 92D in relation to investment madeby the assessee in its AE situated outside India. It held that investment in share capital of subsidiariesoutside India was not in the nature of international transaction and therefore there was norequirement to maintain TP documentation for the said transaction and accordingly section 271Gwas inapplicable as there was no contravention of section 92D on the part of the assessee.ACIT v Hill County Properties Limited (I.T.A. No. 420/HYD/2015) – TS-551-ITAT-2015 (Hyd) -TP

110. The Tribunal deleted penalty by holding that the determination of arm’s length price was a matter ofestimate and merely because it was possible to arrive at two different estimates, it could not be heldthat the lower of the two estimates is based on inaccurate particulars. Further it held that where

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there was no lack of due diligence on the part of the assessee in determining ALP i.e where theconditions precedent for invoking Explanation 7 to section 271(1)(c) of the Act was not fulfilled,penalty could be levied.Babcock & Brown India Pvt Ltd v DCIT (ITA No. 2214/MUM/2015) – TS-564-ITAT-2015 (Mum)

h. Others

111. The Tribunal held that the TPO was only required to determine the ALP of an international transactionfor services and not to decide if such services exist or if benefits accrued to the assessee andthereafter it was for the AO was to decide the deductibility of the amount under section 37(1) of theAct.Avon Beauty Products India Pvt Ltd v ACIT (ITA No.5739/Del/2011) – TS-522-ITAT-2015 (Del) -TP

112. The Court held that merely because the purchase of items and the acceptance of services was acomponent leading to the manufacture of the final product sold or final service provided by theassessee it does not imply that the initial purchases were not independent transaction for the sale ofgoods or provision of services and therefore the assessee would have to provide that they were allprovided under one composite agreement which constitutes an international transaction, if it wishedto benchmark the transactions on an aggregate basis.Knorr Bremse India Pvt Ltd v ACIT (INCOME TAX APPEAL No.182 of 2013) – TS-558-HC-2015(P&H)-TP

113. The Court held that where the assignment of option rights including the call option in favour of a thirdparty had not taken place, mere intention to assign the said rights could not be considered as atransfer under section 2(47) of the Act and therefore the threshold requirement of existence of atransaction including international transaction was not satisfied. It held that mere receipt of incidentalbenefits would not be sufficient to attract transfer pricing provisions. Since there was no transfer ofasset, there was no income arising out of the transaction and therefore transfer pricing provisionswould not apply. Further, it held that the Tribunals attempt to get over the binding judgment of theApex Court could not be sustained.Vodafone India Services Pvt Ltd v CIT (INCOME TAX APPEAL NO. 82 OF 2015) – TS-621-HC-2015 (BOM)

114. The Tribunal held that the corporate service fee paid by the assessee to its AE for services in thearea production, sales, market information, etc were at arm’s length price since the assessee derivedbenefits from it. Following the earlier years order, it held that corporate service fee paid in respectof financial services was to be reduced by 50 percent of the benefit derived from such services fordetermining ALP, due to the substantial increase in benefits received on account of such services.DSM Sinochem Pharmaceuticals India Pvt Ltd v DCIT (ITA No 438 / Chd / 2015) – TS-604-ITAT-2015 (Chandi) – TP

115. The Tribunal held that the transaction of export of pet chips and guar gum by the assessee to its AEwas at arm’s length price since the assessee sold the goods to the AE at the same price at which itwas purchased from the local market and the AE in turn sold the commodities to customers at thesame price at which they were bought from the assessee and the only loss incurred by the assesseewas on account of foreign exchange fluctuations.Pepsico India Housing Pvt Ltd v ACIT (ITA No. 834/Del/2010) – TS-631-ITAT-2015 (Del) - TP

116. The Court held that the Tribunal was incorrect in rejecting reliance on the decision in the case ofFrost & Sullivan, which was prima facie identical to the case of the assessee, without pointing outdetailed distinctions as to why the decision was not to be relied upon.Garnter India Research and Advisory Services Pvt Ltd v ACIT (INCOME TAX APPEAL NO.2089 OF 2013) – TS-584-HC-2015 (Bom) – TP

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II. International Tax

a. Permanent Establishment

117. The Tribunal held that the transfer of advertising airtime by the assessee to its agent in India was nota purchase / sale of goods as it could not be consumed by the buyer agent without the assistancefrom the assessee. Accordingly it held that the agent could not be considered as sellingadvertisement airtime independent of the assessee and therefore could not be considered asindependent. Further, since the agent exercised the authority to conclude contracts on behalf of theassessee, the Tribunal held that it was a dependent agent of the assessee under the India –USDTAA and therefore profits attributable to the PE were taxable in India.NGC Network Asia LLC v JDIT(IT) – [2015] 64 taxmann.com 289 (Mum – Trib)

118. The Tribunal held that the assessee was not liable to pay in India for transferring money to India forits American clients even if it appointed agents in India to provide the services and set up a liaisonoffice to interact with such agents as the agents / liaison office did not constitute a permanentestablishment as per the India –US DTAA which was examined by the Tribunal:Fixed Place PE: The assessee did not have a fixed place PE as it did not have its own outlet in IndiaLiaison Office as PE: The liaison office was engaged in activities which were preparatory or auxiliaryin nature and therefore could not be considered as a PE in India.Dependent Agent PE: The agents appointed were acting in the ordinary course of their businessand their activities were not wholly or almost devoted to the assessee.Software PE: The software belonged to the assessee and was merely used by the agents withoutparting of the copyright. Further, even if the software was to be considered as an installation, it wouldnot be used for exploration or exploitation of natural resources and therefore could not be treated asa PE.DDIT v Western Union Financial Services Inc – [2015] 64 taxmann.com 230 (Del Trib)

b. Royalty / Fees for technical services

119. The Tribunal, following the decision of the Court in Centrica India Offshore Pvt Ltd [TS-237_HC-2014(Del)], held that payment made by the assessee to a Hong Kong based company for secondment ofemployees was taxable as FTS as the employees were rendering managerial and highly expertservices to the assessee for and on behalf of the Hong Kong company. Further it held that TDS wasdeductible on the gross amount paid irrespective of the profit element of the payment and accordinglyheld the assessee to be an assessee in default under section 201 of the Act.Food World Supermarkets Ltd v DDIT (ITA Nos.1356 & 1357/Bang/2013) – TS-629-ITAT-2015(Bang)

120. The Tribunal held that consideration received by the assessee for providing deliverables in the formof best practice manuals, guidelines, newsletters developed by the assessee did not constitute feesfor technical services absent the ‘make available of technology’. It held that the fact that deliverableswere interlinked with certain technical services did not alter their basic character. Further it notedthat the India-Netherlands Treaty had the Most Favoured Nation clause, which provides for theextension of like benefits provided to other OECD countries and therefore considering the presenceof the ‘make available’ clause in the India-USA treaty held that it was to be applied to the India-Netherlands treaty as well.Shell Global Solutions International BV v ITO (I.T.A. No.: 1283/Ahd/2010) – TS-678-ITAT-2015(Ahd)

c. Reimbursement of expenses

121. The Tribunal held that the payment made on account of webhosting charges and marketing expensesby the assessee for services rendered outside India was in the nature of re-imbursement of expensesand was not subject to withholding since the services were rendered outside India and since therewas no PE in India the same were not taxable. Further the said payments were not in the nature ofroyalty or fees for technical services.DCIT v Matrimony Com Pvt Ltd – (2015) 45 CCH 0227 Chen Trib

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d. Withholding tax

122. Relying on the case of the Court in Orient Goa Pvt Ltd [(2010) 325 ITR 554 (Bom)], the Tribunal heldthat failure to deduct tax under section 195 of the Act on payment of freight charges would attractdisallowance under section 40(a)(i) of the Act unless the assessee had obtained certificate undersection 195(2) of the Act and rejected the assessee’s stand that 40(a)(i) disallowance was to berestricted only to amount remaining payable at the year end.Elve Corporation v ACIT (I.T.A. Nos. 4108/Mum/2012 & 6279/Mum/2012) – TS-665-ITAT-2015(Mum)

123. The AAR held that unless payment made attracted tax under the Act, there would be no liability todeduct tax under section 195 of the Act. Penalty ordered by the US Court could never attract anytax under the provisions of the Act and therefore no tax was to be deducted on such payment.Satyam Computer Services Ltd v In Re – (2015) 94 CCH 0118 IAAR

124. The Tribunal held that interest on tax refund was not covered under the definition of interest underArticle 12(4) of the India-Italy DTAA and therefore the lower authorities were justified in imposingTDS under section 195 of the Act on the said interest.Ansaldo Energia SPA v DDIT (/ITA Nos. 1496 to 1498/Mds/2014) – TS-686-ITAT-2015 (Chny)

e. Others

125. The Tribunal granted the assesse relief under section 90 of the Act for taxes paid in a foreign countrywhile computing the tax liability as per MAT provision under section 115JB of the Act. It held thatonce taxable income was determined under normal provisions of the Act or as per Section 115JB ofthe Act, subsequent set off / rebate is governed by the normal provisions of the Act. It also held thatthere was no provision of the Act debarring granting of credit for tax paid abroad in case income iscomputed under section 115JB of the Act.DCIT v Subex Technology Ltd (ITA No 913(B) / 2013) – TS-644-ITAT-2015 (Bang)

126. The Tribunal held that the assessee was not liable to deduct tax at source under section 195 of theAct on payment for land to a non-resident seller by invoking the non-discrimination clause underArticle 26 of the India-US DTAA. It held that since there was no provision in the Act requiring aresident to deduct tax at source from sale proceeds of land payable to any other resident, theassessee could not be burdened with the requirement of TDS in case of payment to non-resident.ITO v Santur Developers Pvt Ltd (ITA no. 1532/Del/2011) – TS-724-ITAT-2015 (Del)

127. The Court, relying on the decision of the Apex Court in CIT v Toshoku Ltd (125 ITR 525), held thatcommission earned by a non-resident agent who carried on business of selling Indian goods outsideIndia could not be said to be deemed income which had accrued or arisen in India.CIT v Gujarat Reclaim & Rubber Products Ltd – (2015) 94 CCH 0148 Mum HC

128. The Court held that section 44BBA could not be applied to bring to tax assessee’s income onpresumptive basis when assessee had incurred losses during the year. However, it held that theassessee had to produce books of accounts to substantiate that it had incurred losses or that itsassesseable income was less than its presumptive income.DIT v Royal Jordanian Airlines (ITA 159/2002) – TS-709-HC-2015 (Del)

129. The Court held that journey of a vessel between two ports is international traffic under Article 8 ofthe India – Singapore DTAA if the same was part of a larger journey between two foreign ports andthat it was only when a ship or aircraft was operating solely between places in one contracting statethat the transport was excluded from the scope of international traffic.CIT v Taurus Shipping Services – [2015] 64 taxmann.com 64 (Guj)

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III. Domestic Tax

a. Income

130. The Tribunal held that merely because Modvat Credit was an irreversible credit available tomanufacturers upon purchase of duty paid raw material it would not amount to income liable to betaxed under the Act.Aditya Birla Nuvo v DCIT – (2015) 45 CCH 0222 Mum Trib

131. The Court held that receipt was to be recorded as income in the books of the assessee, a real-estatedeveloper, only when a conveyance deed was executed or possession was delivered. Further, sincethe advance received by the assessee was in respect of a project that never took off and a part ofthe advance was returned in the following year since the transaction fell through, the said advancecould not be treated as income.Paras Buildtech India Pvt Ltd v CIT – (2015) 94 CHH 0093 Del HC

132. The Tribunal held that amount received by the assessee for not providing benefit of his skills to anyother person in India was a capital receipt and accordingly not taxable. It held that since the assesseewas not an employee of the payer but was involved in managing its affairs the sum received wouldnot be taxable as profits in lieu of salary under section 17(3) of the Act. Further, it held that the sumwas not in the nature of non-compete fee as well as the payment made was not for not competingwith the payer and that Section 28(va) taxes amounts received in relation to business and notprofession whereas the assessee was providing professional services.Satya Kant Khosla v ITO (ITA No. 882/Del/2015) – TS-664-ITAT-2015(Del)

133. The Tribunal held that the upfront premium received by the assessee for leasing out port land tocompanies for 30 years on Build Operate Transfer basis was taxable on receipt basis and not on ayear on year basis as there was no corresponding liability or obligation to be discharged by theassessee after the receipt of upfront premium.New Mangalore Port Trust v ACIT (ITA No.1299/Bang/2013) – TS-674-ITAT-2015 (Bang)

134. The Court held that where there was no factual basis to claim that the assessee was receiving moneyfrom its Joint Venture companies and on the other hand remitting a larger amount to its parentcompany, it could not be held that the assessee was depressing its income.Pr CIT v McDonalds India Pvt Ltd – (2015) 94 CCH 0085 Del HC

135. The Apex Court held that interest earned on share application money by the assessee was taxableonly post allotment of shares and not on receipt of application money. It noted that as per Section73 of the Companies Act, the assessee was required to keep the application money in a separatebank account and no part of the money including interest could be utilized until allotment wascompleted.CIT v Henkel Spic India Ltd – (2015) 64 taxmann.com 405 (SC)

136. The Tribunal held that merely because the assessee recognized exchange gain on restatement offoreign currency loan in its books of accounts in compliance with AS 11, it would not automaticallytake the character of income for income tax purposes as entries in books of accounts were notdeterminative of whether the assessee had earned any income or suffered any loss.ITO v UMT Investments Ltd – (2016) 176 TTJ 0053 (Kol)

137. The Court held that where on account pf pendency of appeals arising from proceedings under section31(2) of the Land Acquisition Act, the right of the assessee to receive impugned sums was stillunclear and therefore the question of bringing to tax enhanced compensation had to await finaloutcome of pending proceedings.CIT v Suman Dhamija – TS-697-HC-2015 (Del)

b. Income from House Property

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138. The Tribunal held that where a copy of sanction letter was available on record which showed thatthe loan was granted for renovation / reconstruction purposes, the assessee was entitled to deductionunder section 24(b) of the Act.ITO v Mac Overseas Pvt Ltd – (2015) 45 CCH 0269 Del Trib

c. Business Income

139. The Apex Court upheld the order of the High Court wherein it was held that if the basis for arriving atthe valuation of stock is changed by the AO without correspondingly changing the valuation of theopening stock then it results in charging income on a distorted figure which is not permissible in law.CIT v Motor Industries – TS-671-SC-2015

140. The Tribunal held that where the foreign exchange losses incurred by the assessee on account ofF&O transactions was recorded on settlement date and was not a marked to market loss, the AOwas incorrect in disallowing the same on the ground that it was a notional loss. Further, it upheld theorder of the CIT(A) that Board’s Instruction No. 3/2010, applied by the AO in disallowing the loss,was not applicable to F&O transactions undertaken by the assessee.ITO v Samir Jasuja – (2015) 45 CCH 0246 Del Trib

141. The Tribunal held that the loss on revaluation of stock of equity shares could not be allowed as adeduction since the assessee did not engage in the regular activity of purchase or sale of shares ofany other company during the year under consideration or in the previous or succeeding years. Merefact that the shares were purchased out of borrowed funds was not a determinative factor to treatthe shares as stock in trade. It held that the facts of the case indicated that the assessee intendedto hold the shares as investment.DCIT v Robus Marketing Services Ltd – (2015) 45 CCH 0231 Mum Trib

142. The Apex Court held that in the absence of cessation in the hands of the assessee, the differencebetween the deferred sales tax liability and its settlement payment at Net Present Value was nottaxable under section 41(1) of the Act.CIT v SI Group India Ltd (Civil Appeal No 10873 of 2011) – TS-703-SC-2015

143. The Court held that consideration received in the form of money and residential flat upon enteringinto an agreement with a builder was not business income. It rejected the contention of the Revenuethat since the assessee exploited land owned by her to be used for construction of building, theactivity was an adventure in the nature of trade.Raj Dulari Bhasin v CIT (ITA 11/2004) – TS-738-HC-2015 (Del)

d. Deductions

Section 32

144. The Tribunal held that crop compensation paid by the assessee to the land owners for the purposeof compensating them for the damage to crops suffered while laying down pipelines could not beadded to the cost of land because even after acquiring the land the assessee could have waited tillthe crop was harvested by the land owner for which no compensation would have been payable.Accordingly, it held that the compensation should have been added to the cost of the pipeline andhence depreciation was allowable on such compensation.Gujarat State Petronet Ltd v ACIT – (2015) 45 CCH 0301 Ahd Trib

145. The Court held that a radio programme is a “thing” as the dictionary meaning of the word “thing”envisages the possibility of it being intangible in nature. It held that when a radio programme ismade, there comes into existence a thing which can be transmitted and sold by making copies whichwould imply manufacture. Accordingly, the Court held that the assessee could have said to haveused plant and machinery for the manufacture of an article or thing, satisfying the requirements ofsection 32(1)(iia) of the Act.CIT v Radio Today Broadcasting Ltd – [2015] 64 taxmann.com 164 (Del)

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Section 35

146. The Tribunal allowed deduction for expenditure incurred by the assessee on raw-materials, salaries/ wages for the purpose of designing products holding it to be revenue in nature. It dismissed theRevenue’s plea that the expenditure led to enduring benefit to the assessee and held that even if theexpenditure was of enduring benefit it was to be allowed as long as it was not incurred in the capitalfield.DCIT v Autoline Industries Ltd (ITA No.1711/PN/2012) – TS-690-ITAT-2015 (Pun)

Section 36

147. The Apex Court allowed the assessee deduction under section 36(1)(iii) of the interest on loanborrowed from the bank by setting aside the order of the High Court wherein it was disallowed as theassessee had advanced interest free loan to its subsidiary company and a loan to its director at 10percent wherein the loan taken from the bank was at 18 percent. It held that the advance to thesubsidiary company was imperative in view of the undertaking given to the financial institutions bythe assessee that it would provide additional margin to the subsidiary to meet working capital forcash losses suffered. It was also noted that when the assessee off loaded its shareholding in thesubsidiary company, the loan was returned with interest which was offered to tax. In so far the loanto directors was concerned, the Apex Court noted that the advances were made out of assessee’ssurplus funds. Once it was established that there was nexus between the expenditure and purposeof business, the revenue cannot claim to put itself in the arm chair of the businessman or in theposition of the board and to determine how much is reasonable expenditure.Hero Cycles Pvt Ltd v CIT (CIVIL APPEAL NO. 514 OF 2008) – TS-670-SC-2015

148. The Tribunal held that where the assessee had sufficient funds of its own which was substantiatedby the statement of funds generated during the year, out of which it granted an interest free loan toits Group company, the Revenue was incorrect in disallowing the interest paid on loan acquired bythe assessee from its banker on the ground that the loan was utilized for providing onward interestfree loans loan to its Group companies and therefore not for business purposes. Relying on variousdecisions, it also held that the assessee was free to utilize its own funds in the manner it desired.JCT Limited v JCIT – (2015) 45 CCH 0289 Kol Trib

Section 37(1)

149. The Tribunal held that discount on premium of shares issued to employee to compensate them, fortheir services is a part of remuneration and cannot be held to be a short capital receipt or capitalexpenditure and therefore the expenses on account of employees stock option scheme was to betreated as employee cost and considered as revenue in nature.Tata Consultancy Services Ltd v ACIT – (2015) 45 CCH 0202 Mum Trib

150. The Apex Court dismissed the SLP filed by the Revenue and upheld the decision of the High Courtwherein it was held that expenses incurred for buy back for shares were to be treated as revenueexpenses and thus allowable, as the consequence of buy back of shares is that the capital base ofthe company is reduced and the capital structure goes down which is not of any enduring benefit soas to bring the expenditure incurred as a capital expenditure. It held that where there was no flow offund or increase in the capital employed, the expenditure incurred would be revenue expenditure.Accordingly, the reliance placed by the Revenue on Brooke Bond India Ltd v CIT (TS-15-SC-1997)was dismissed.CIT v Motor Industries – TS-671-SC-2015

151. The Tribunal held that expenses incurred in connection with issue of bonus shares were to be allowedas revenue expenditure as the issue of bonus shares did not involve an inflow of fresh funds orincrease in capital employed and therefore the company had not acquired a benefit or advantage ofenduring nature.Aditya Birla Nuvo v DCIT – (2015) 45 CCH 0222 Mum Trib

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152. The Tribunal allowed deduction under section 37(1) of the Act for expenditure incurred on freesamples given by the assessee to doctors and medical practitioners as they were distributed inpursuance to their requests and not as gifts therefore not attracting CBDT Circular No 5 / 2012disallowing free samples given as gifts / freebies.Eli Lilly & Co (India) Pvt ltd v ACIT (ITA No.788/Del./2015) – TS-680-ITAT-2015 (Del)

153. The Court held that expenditure incurred on renovation of hotel rooms, conference halls etc were tobe considered as revenue expenditure and therefore allowed the assessee the deduction. Relyingon the decision of the Apex Court in Empire Jute Ltd (124 ITR 1)(SC), it held that expenditure incurredfor obtaining an advantage of enduring benefit could be considered as revenue if the nature of theadvantage merely facilitated the trading operation of the assessee or enabled more efficient conductof business.CIT v Cama Hotels Ltd – (2015) 235 TAXMAN 0206 (Guj)

154. The Court held that expenditure incurred on stamp duty for acquiring leasehold land for 30 years wasrevenue in nature as the stamp duty was paid for the purposes of carrying on assessee’s business.Further, the Court pointed out that the Revenue had accepted CIT(A)’s finding that the expenditureon stamp duty could be considered as deferred revenue expenditure and also relied on the ApexCourt ruling in the case of Taparia Tools Ltd (TS-134-SC-2015) wherein it was held that there wasno concept of deferred revenue expenditure unless specifically provided for in the Act.CIT v Reliance Industrial Infrastructure Ltd (INCOME TAX APPEAL NO. 3611 OF 2010) – TS-704-HC-2015 (Bom)

155. The Tribunal held that the commission paid by the assessee to its directors could not be disallowedon the ground that it was dividend paid in the garb of commission considering that the commissionwas only paid to 3 out of 6 directors and the sub-contracts executed by the assessee could not havebeen carried out without the efforts of the directors. The payment could not be presumed to be amode of tax avoidance.Arihantam Infraprojects Pvt Ltd v JCIT (ITA No.2201/PN/2012) – TS-685-ITAT-2015 (Pun)

156. The Tribunal held that in the absence of basic details to substantiate the claim of reimbursement ofexpenses, the amount so claimed was to be added to the income of the assessee.Further it held that merely because an expenditure has been incurred by the assessee it does notentitle him to the claim without discharging his onus of establishing that the expenditure has beenincurred for business purposes.In relation to expenditure on application software incurred by the assessee, the Tribunal, relying onthe decision of the High Court in the case of CIT v Lubrizol India ltd (37 taxmann.com 294 (Bom) andthe order of the Tribunal in the case of the assessee for earlier years, held that since the license wasfor a limited period and had to be renewed from time to time it was to be treated as revenue in nature.Sandvik Asia Pvt Ltd v JCIT – (2015) 45 CCH 0311 Pune Trib

157. The Tribunal held that the basis adopted by the AO for disallowing expenses incurred by theassessee by deeming them to be capital in nature viz. increase in capital work in progress and ahigher capital work in progress as compared to revenue, were not sustainable since the assesseehad shown bifurcation of each type of expenditure along with minute details as to the application ofexpenditure and that no specific defect in the books of accounts had been pointed out by the AO.However, considering the size of the assessee’s business as well as the impossibility of bifurcatingeach and every expense and the increase in capital work in progress, the Tribunal sustaineddisallowance at 1 percent of total employee cost and 1 percent of administrative and other expenses.Gujarat State Petronet Ltd v ACIT – (2015) 45 CCH 0301 Ahd Trib

158. The Tribunal held that interest on delay in payment of Sales Tax was allowable as a deduction undersection 37(1) of the Act as it was compensatory in nature and nowhere in the form of penalty.ACIT v Jamkash Vehicleades Pvt Ltd – (2015) 45 CCH 0322 Asr Trib

Section 14A

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159. The Tribunal held that Rule 8D of the Income-tax Rules, 1962 could not be applied retrospectively toassessment years 2006-07 and 2007-08 as it was applicable from AY 2008-09 only.Tata Consultancy Services Ltd v ACIT – (2015) 45 CCH 0202 Mum TribAditya Birla Nuvo v DCIT – (2015) 45 CCH 0222 Mum Trib

160. The Court upheld the Tribunals order wherein it was held that no disallowance under section 14A ofthe Act could be made for interest expenditure under Rule 8D(2)(ii) absent common interestexpenditure. It held that the intention of Rule 8D(ii) was to allocate common interest expenses andtherefore interest directly attributable to tax exempt income as well as interest directly relatable totaxable income was to be excluded. Since no portion of interest survived after excluding theaforesaid interest, the Court held that no disallowance under Rule 8D(ii) could be made.Pr CIT v Bharti Overseas Pvt Ltd (ITA 802 / 2015) – TS-729-HC-2015 (Del)

161. The Tribunal held that for an AO to invoke Rule 8D, he must place on record that he is not satisfiedwith the correctness of claim of expenditure made by the assessee. Further, it held that since therewas no exempt income earned during the year, the disallowance under section 14A was notsustainable.Gujarat State Petronet Ltd v ACIT – (2015) 45 CCH 0301 Ahd Trib

Section 40(a)(ia)

162. The Tribunal deleted the disallowance made under section 40(a)(ia) on account of non deduction oftax on provision made for expenses. Relying on the earlier years order in the case of the assesseeit held that deduction of tax at source could only be effected when the payee was known and thereforein the absence of the ascertainment of the payee no tax could be deducted at source.Aditya Birla Nuvo v DCIT – (2015) 45 CCH 0222 Mum Trib

Section 43B

163. Relying on the decisions Bharat Earth Movers (254 ITR 428) and Metal Box (73 ITR 53), the Tribunaldeleted the disallowance made under section 43B of the Act on provision for pension liability madeby the assessee on the basis of the observations made in the judgments i.e. the incurrence of liabilityshould be certain irrespective of the fact that it may be discharged on a future uncertain date. Sincethe pension liability of the assessee was crystalized the Tribunal ruled in its favour.Aditya Birla Nuvo v DCIT – (2015) 45 CCH 0222 Mum Trib

164. The Tribunal held that since the assessee paid the entire amount of excise duty provided for prior tothe due date of filing return of income, a portion of excise duty paid could not be disallowed on theground that it pertained to obsolete stock which was scrapped in a future assessment year. It heldthat as per section 43B the deduction was to be allowed in the year of payment.Sandvik Asia Pvt Ltd v JCIT – (2015) 45 CCH 0311 Pune Trib

165. The Tribunal held that since the assessee deposited the funds in the Employers and EmployeesProvident Fund account prior to the date of filing return as stipulated under the proviso to section43B of the Act no addition could be made even though the same was deposited post the due datesin the respective Acts.ACIT v Jamkash Vehicleades Pvt Ltd – (2015) 45 CCH 0322 Asr Trib

Section 10A / B

166. The Tribunal held that income enhanced pursuant to disallowance of expenditure under section40(a)(ia) was to be considered as eligible profits of the undertaking while computing deduction undersection 10B of the Act. It noted section 92C(4) which specifically provided that no deduction undersection 10A / 10AA / 10B of the Act would be allowed on income enhanced pursuant to a transferpricing adjustment and held that in the absence of such provision in section 10B, the benefit couldnot be denied.It further held that deduction under section 10B was to be allowed before set off of brought forwardlosses and unabsorbed depreciation relating to earlier years.

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ACIT v Precision Camshafts Limited (ITA No.70/PN/2012)– TS-649-ITAT-2015 (Pun)

167. The Tribunal held section 10A of the Act is a deduction provision and not an exemption provisionafter the amendment (wef AY 2001-02) and therefore losses from a section 10A unit was to beadjusted against the taxable profits of the other units after deduction under section 10A has beenallowed in respect of each eligible unit.Tata Consultancy Services Ltd v ACIT – (2015) 45 CCH 0202 Mum Trib

168. The Tribunal held that the assessee could not be denied deduction under section 10B of the Act asit was performing BPO services and had acquired approval from the Software Technology Parks ofIndia which comes under the Ministry of Communication & Information Technology and was acompetent authority.Quality BPO Services Pvt Ltd v ACIT – (2015) 45 CCH 0187 Ahd Trib

Chapter VIA

169. The Tribunal held that where the assessee had submitted adequate evidence to prove that it wasengaged in the manufacture of goods (such as an SSI certificate which was given aftercommencement of production, registration under the Central Excise Act, Sales tax Act etc, books ofaccount which supported claim of manufacture of goods as well as an undertaking of the assesseethat it was not split up or reconstructed), the AO / CIT(A) were incorrect in denying deduction undersection 80IB of the Act, inferring that the assessee was not engaged in the manufacture of goods onthe ground that the supplier from whom the assessee had purchased machinery to carry onmanufacture, denied supplying the machinery to the assessee.Hemant Kumar Godara v ACIT – (2015) 45 CCH 0233 Mum Trib

170. The Court held that income earned by the assessee from export incentives, customer claims, freightsubsidiary and interest on fixed deposits were eligible for deduction under section 10B of the Act. Itdismissed the revenue’s argument that section 80A(4) of the Act clarified that income having directnexus with the business activities was eligible for deduction as the said section merely ensures thatunits claiming section 10B benefit were not further allowed to claim relief under section 80IA / IB andnot to deny benefit under section 10B.Riviera Home Furnishing v ACIT – TS-668-HC-2015 (Del)

171. The Tribunal held that while computing the profits for the purpose of deduction under section 80IB ofthe Act, the loss incurred by the assessee in any other eligible industrial undertaking could not beset off against the profits of a particular industry that would qualify for deduction.DCIT v Bengal Ambuja Housing Development Ltd – (2015) 45 CCH 0232 Kol Trib

172. The Tribunal allowed the assessee (engaged in the telecom business) exemption under section80IA(2A) on extra-ordinary income of license fee, reimbursement and provisions written back. Itdismissed the contention of the revenue that 80IA(2A) stipulated exemption on receipts from eligiblebusiness as the condition of ‘derived from; was not applicable to the telecom business.Bharat Sanchar Nigam Ltd v DCIT (I.T.A .No.-3304/Del/2010 & I.T.A .No.-3386/Del/2010) – TS-737-ITAT-2015 (Del)

173. The Tribunal held that head office expenses not attributable to eligible units were not to be reducedfrom the claim of deduction under section 80IA / 80IB of the Act.Aditya Birla Nuvo v DCIT – (2015) 45 CCH 0222 Mum Trib

174. The Tribunal held that in computing gross total income of the assessee, same had to be determinedafter adjusting losses and that if gross total income of the assessee so determined turns out to beNil, then the assessee would not be entitled for deduction.DCIT v Precision Electronics Ltd – (2015) 45 CCH 0313 Del Trib

175. The Tribunal held that the assessee was entitled to claim deduction under section 10B from the AYin which it commences business and not when the plant and machinery is first put to use.Additionally, it held that he assessee was entitled to set off losses of EOU units against the otherbusiness income if any assessed in the hands of the assessee and could be carried forward tosucceeding years to be adjusted as per the provisions of the Act.Sandvik Asia Pvt Ltd v JCIT – (2015) 45 CCH 0311 Pune Trib

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176. The Court denied deduction under section 80IB(10) of the Act to the assessee (a builder) since theproject completion certificate was issued by the local authority beyond the cut-off date provided forin the said section vide amendment in Finance Act 2004. It rejected assessee’s stand that theamendment was prospective and therefore the time frame was not applicable and held that thecompliance required in the provision was not incapable, unreasonable, harsh or absurd.CIT v Global Reality (I.T.A.No.40/2012) – TS-692-HC-2015 (MP)

177. The Tribunal held that profit earned out of squaring off future contracts was on account of hedgingagainst raw material price fluctuations which stemmed from the activity of the Jammu unit of theassessee engaged in manufacturing of Menthol Products and accordingly, the said profits wereeligible for deduction under section 80IB of the Act.Jindal Drugs Ltd v ACIT (ITA NO 2592/Mum/2008) – TS-705-ITAT-2015 (Mum)

178. The Tribunal held that where the assessee had authored a book on income-tax problems in questionanswer format, the said book was a literary work in terms of section 80QQB of the Act as it was ona complex issue which required intellect and knowledge and therefore the royalty received on thesame would be entitled for a deduction.Dilip Loyalka v ACIT – [2015] 64 taxmann.com 121 (Kol – Trib)

e. Capital Gains

179. The Tribunal held that where the assessee, a dermatologist, had not borrowed funds but used herown capital and interest free funds from her father to purchase shares and held major shares formore than one year, the gains declared by the assessee were to be assessed as long term capitalgains under the head Income from Capital gains and not as business income. Further, consideringthat the assessee was a dermatologist and did not hire any staff for carrying out activity of purchaseand sale of shares, the Tribunal held that trading of shares was not its main activity.Amrita Pankaj Talwar v ACIT – (2015) 45 CCH 0180 Mum Trib

180. The Tribunal held that surplus arising on transfer of booking rights in office premises in a technologypark was to be considered as Income from Other Sources and not long term capital gains as meremaking of payment by the assessee to the builder prior to sanction of the building plan cannot saidto have yielded a vested right to get a property considering that there was no property in place andno definite process for creating the said property had been initiated. Further it held that at the timeof making the advance, the assessee was aware that office premises could be used only for ITactivities while the assessee was not into the IT business indicating that there was no intention tobuy the premises.S Narendrakumar & Co v DCIT (ITA No 7080 / Mum / 2012) – TS-650-ITAT-2015 (Mum)

181. The Tribunal held that the creation of goodwill and distribution of the amount among retiring partnersdid not attract capital gains under section 45(4) of the Act as none of the conditions provided thereinwere satisfied. It held that creation of goodwill was merely a mode of making the payment to theretiring partners without any impact on the capital assets.Electroplast Engineers v ACIT – (2015) 45 CCH 0189 Mum Trib

182. The Tribunal held that merely because the assessee offered to tax rental income on property giftedto his wife, via a registered gift deed, as per the clubbing provisions, it could not be held that theassessee was actually the owner of the property and accordingly the contention of the AO that theassessee violated the provisions of section 54 of the Act by owning more than one residentialproperty on the date of transfer of the original asset was incorrect.ITO v Samir Jasuja – (2015) 45 CCH 0246 Del Trib

183. The Tribunal held that investment in new property would be construed from the date of makingadvance payment towards booking the property and not the date of the agreement for the newproperty. Accordingly, it allowed the assessee the benefit of exemption under section 54F Act.Smt Rathan B Shetty v ACIT (ITA. No. 253/Mum/2013) – TS-656-ITAT-2015 (Mum)

184. The Apex Court upheld the order of the Court where it was held that booking rights in a flat was tobe treated as acquired upon the execution of the buyers agreement with the builder and not on the

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date of booking confirmation letter for provisional allotment as the book confirmation letter specificallystated that no right to provisional allotment accrued till the agreement was signed.Gulshan Malik v CIT – TS-625-SC-2015

185. The Tribunal held that since the assessee had assigned specific consideration for the tea estatealong with the standing trees and listed out and assigned value to every movable property transferredto the buyer and since the sale agreement did not include liabilities, investments and deposits, thetransfer could not be considered as a slump sale irrespective of the fact that the assessee sold thetea estate as a going concern. It held that going concern was a functional qualification fordetermining slump sale but was not sufficient enough to decide the exact legal character of thetransaction and accordingly deleted the capital gains addition made by the revenue.DCIT v Tongani Tea Co Ltd (I.T.A No. 1233/Kol/2008)– TS-647-ITAT-2015 (Kol)

186. The Tribunal held that the assessee could not be labelled as a dealer in shares and thus incomederived therefrom could not be treated as business income since the assesse regularly showedinvestments in shares at purchase value taking them as investments and did not claim deduction ofSecurities Transaction Tax paid on the deals. Accordingly, the income arising therefrom was treatedas Capital Gains.ACIT v KS Gupta & Sons – (2015) 45 CCH 0284 Del Trib

187. The Court held that the transfer of intangible assets such as a trademark or brand name associatedwith business could not lead to taxable income from capital gains. Further, it observed that in theinstant case, what stood extinguished as a result of termination of the Joint Venture Agreement wasa bundle of rights of the assessee including such business rights. It held that the transfer of intangibleassets described under the JVA could not be held to fall within the ambit of capital assets providedfor in section 55(2) of the Act and therefore their cost of acquisition could not have be deemed to be‘Nil’.CIT v HCL Infosystems Ltd – (2015) 94 CCH 0155 Del HC

188. The Tribunal held that when both flats purchased by the assessee were joined and used as a singleunit it had to be considered as a single residential house for the purpose of section 54F of the Act.It further held that cost of the new asset shall not be reduced by the deduction allowed under section54F of the Act for the purpose of computing deduction under section 54F of the Act.Dinanath Badrinath Chhabra v ITO – (2015) 45 CCH 0299 Mum Trib

f. Income from Other Sources

189. The Tribunal upheld the order of the CIT(A), treating amounts received by the assessee forconfirming a sale deed as taxable under the head “Income from Other Sources”. It rejected thecontention of the assessee that the amount was not taxable as it was a capital receipt and proceededto tax the receipt under section 56(2)(vii) since the amount was received from a non-relative withoutany consideration.Maheshkumar R Patel v ITO (ITA No.1932, 1933 & 1934 /Ahd/2015) – TS-684-ITAT-2015 (Ahd)

g. Assessment / Re-assessment / Revision / Search Proceedings

Assessment

190. The Court held that omission to file certified copy of the re-constituted partnership deed along withthe return, which was filed during assessment proceedings, would not attract disallowance of interest,commission, remuneration etc paid to partners under section 185 of the Act. The Court further heldthat according to section 139(4) of the Act, an assessee was permitted to file its return any timebefore the expiry of 1 year from the end of the relevant assessment year or before the completion ofassessment, whichever was earlier, and therefore the assessee could have filed its return along withthe reconstituted partnership deed validly without attracting any disallowance under section 184 andfurther held that section 185 read with section 184 was emphatic but not mandatory. It further notedthat the AO had refused to treat the return as defective so as to enable the assessee to cure thedefect under section 139(9) of the Act.CIT v SR Batliboi & Associates (ITA No 190 of 2009) – TS-645-HC-2015 (Cal)

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191. The Court set aside the order of the Tribunal dismissing Revenues appeal as the tax effect involvedwas less than the prevailing monetary limit prescribed by the CBDT instruction as the appeal filedinvolved a substantial question of law. Reliance was placed on the decision of the Apex Court inSurya Herbal Ltd wherein it was held that the High Court can ignore CBDT circulars and proceed todecide statutory appeals on merits where substantial question of law was involved.CIT v South Travancore Distilleries & Allied Products (ITA.No. 153 of 2001) – TS-682-HC-2015(Ker)

192. The Tribunal gave effect to CBDT Circular No 21 / 2015 dated December 10, 2015 on no appeals tobe filed below the revised tax effect of Rs. 10 lakhs and consequently dismissed a batch of appealsas not maintainable as any pending appeal below the revised limit would amount to a legal nullity. Italso specified that the dismissal was without prejudice to the rights of the revenue authorities to raisethe same issue as and when the tax effect crosses the threshold limit.DCIT v Soma Textiles & Industries Ltd (ITA No 302 / Ahd / 2014) – TS-711-ITAT-2015 (Ahd)

Reassessments

193. The Tribunal held that where the assessee submitted his claim during the assessment proceedingsvide a revised return and the AO raised queries pertaining to such claim, the assessee cannot beheld guilty of failure to disclose all material facts necessary for assessment and therefore held theinitiation of reassessment proceedings as invalid.ACIT v Mussoorie Dehradun Development Authority – (2015) 45 CCH 0225 Del Trib

194. The Court held that reassessment order could not be passed under section 147 of the Act withoutcompliance with mandatory requirement of issuing a notice under section 143(2) of the Act to theassessee and accordingly held that the reassessment orders were legally unsustainable.Pr CIT v Silver Line & ANR – (2015) 94 CCH 0077 Del HC

195. The Tribunal deleted the addition made by the AO pursuant to reassessment proceedings on theground that the assessee had consumed a higher percentage of raw materials (ingots) as comparedto the reporting made to the Excise Department as the reporting to the Excise Department did notinclude details of non-excisable goods and the final profit figures matched irrespective of thediscrepancy in consumption. Accordingly, in the absence of any evidence or material on record thereasoning adopted by the AO was unsustainable and the addition made (difference between ingotsconsumed and reported) was deleted.Vishwakarma Ispat Ltd v ACIT – (2015) 45 CCH 0279 Chd Trib

196. The Court held that since the AO had specifically raised queries and obtained responses in relationto the share transactions of the assessee post which no addition was made, initiating re-assessmentin regard to the said transactions amounted to a change of opinion and therefore the reassessmentwas invalid.Further, it held that since the re-assessment proceedings were initiated after a period of 4 years fromthe end of the relevant assessment year it was a pre-condition of there being a failure on part of theassessee to fully and truly disclose all material particulars and since there was no such allegationmade by the AO on the assessee, the reassessment proceedings were invalid.Shri Parasram Industries Pvt Ltd v ITO – (2015) 94 CCH 0152 Del HC

197. The Court quashed reassessment order under section 147 of the Act pursuant to reassessmentproceedings initiated after a lapse of 4 years as it amounted to change of opinion. It held that wherethe reopening of assessment could not stand on the strength of the reasons recorded under section148(2), the Revenue could not seek to justify the reopening by finding some other point or other postfacto after the reopening. Further it held that true and full disclosure contemplated in the first provisoto section 147 refers to ‘all material facts’ and not to a legal provision.PVP Ventures Ltd v ACIT (W.A.Nos. 1171 and 1172 of 2015) – TS-712-HC-2015 (MAD)

198. The Court held that re-assessment initiated on the basis of an office note prepared by the AO inrelation to gifts received by the assessee from non-resident donors which was subject matter ofreference to the Foreign Tax Division, was invalid as no information was received from the ForeignTax Division about the donations and therefore the reassessment was a mere change of opinion.

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Kulbhushan Khosla v CIT (ITA 33/2004) – TS-731-HC-2015 (Del)

199. The Tribunal quashed reassessment proceedings initiated by the AO as they were time barred undersection 153 of the Act. It held that the benefit of extended limitation in terms of Explanation 1(iii) ofSection 153 of the Act, pertaining to the exclusion of time period commencing from the date on whichthe AO directed audit of account under section 142(2A) till the last date on which the assessee wasrequired to furnish the report, was not available to the AO since the time limit for the furnishing of thespecial audit report was extended by the AO suo motu without any application from the assessee.PHI Seeds Ltd v DCIT – TS-720-ITAT-2015 (Del)

200. The Court held that the reason for re-opening assessment proceedings cited by the AO viz. that thedirector of the assessee company was the person who floated the company, the shares of whichwere purchased by the assessee and valued at a loss, was invalid as it did not constitute tangiblematerial for forming reasons to believe that income had escaped assessment since the value of theclosing stock (shares) had been computed on the basis of the quotation in the stock exchange.Further it noted that the assessee had consistently followed the said method of valuation and thatthe reason to believe should have been predicated on tangible material or information and bear directnexus to the material on which it is based, which was not fulfilled in the instant case.CIT v Vishisth Shay Vyapar Ltd – (2015) 94 CCH 0108 Del HC

201. The Tribunal held that the re-assessment proceedings initiated on the basis of the allegation that theassessee made bogus purchases were not sustainable in light of the decision in the case of UniqueMetal Industries v ITO (ITA No 1372 / Del / 2015). Further, and in any event, it held that the additionmade by the CIT(A) viz. 20 percent of the alleged bogus purchases on the basis of section 40A(3)was unsustainable as it was not a correct determination of real income and that section 40A(3) wasmeant for cash purchases only and could not be applied in the instant case.Kishan Lal Gambhit & Sons v ITO – (2015) 45 CCH 0278 Del Trib

Revision

202. The Tribunal held that if an inquiry was made by the AO during assessment proceedings, theobjection of the CIT that the inquiry was inadequate was not acceptable considering that the AO hadafter examining records and details submitted by the assessee allowed the claim on being satisfiedby the explanation of the assessee. Further, it held that the order of the AO maybe brief or crypticbut that was not sufficient reason to brand the assessment order as erroneous and prejudicial to theinterests of the revenue.CIT v Sunil Aggarwal – (2015) 94 CCH 074 Del HC

203. The Tribunal held that failure of the AO to give a logical conclusion to the enquiry conducted by himduring assessment proceedings empowers the CIT to revise the assessment order passed by himby holding that the enquiry conducted by the AO could not be construed as a proper enquiry. It wasfurther held that law does not require service of notice under section 263 strictly as per the terms insection 282 of the Act as long as the assessee was given an opportunity of being heard.Mayfair Commotrade Pvt Ltd v CIT – (2015) 45 CCH 0197 Kol TribKhushi Conbuild Pvt Ltd v CIT – (2015) 45 CCH 0177 Kol TribSambhav Commodities Pvt lTd v CIT – (2015) 45 CCH 0182 Kol TribRising Tracom Pvt Ltd v CIT – (2015) 45 CCH 0201 Kol TribTara Vinimay Pvt Ltd v CIT – (2015) 45 CCH 0188 Kol Trib

204. The Tribunal held that failure of the AO to give a logical conclusion to the enquiry conducted by himgives power to the CIT to revise such assessment, by holding that the enquiry conducted by the AOin such cases could not be construed as a proper enquiry.Billbody Vyapaar Pvt Ltd v ITO – (2015) 45 CCH 0184 Kol TribEsteem Tradecom Pvt Ltd v CIT – (2015) 45 CCH 0196 Kol Trib

205. The Tribunal held that when the AO had taken one of two views permissible in law and whichCommissioner did not agree with and which resulted in a loss of revenue, it could not be treated as

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erroneous order prejudicial to interest of revenue, unless view taken by AO was completelyunsustainable in law.Nathpa Jhakri Joint Venture v ACIT – (2015) 45 CCH 0339 (Mum Trib)

206. The Tribunal held that assessment order passed under section 143(3) read with section 153C of theAct post the approval of the Additional CIT under section 153D of the Act, could not be subject torevision under section 263 of the Act.Trinity Infra Ventures Ltd v DCIT – (2015) 45 CCH 0290 Hyd Trib

Search

207. The Court upheld the order of the ITAT and CIT(A) wherein it was held that section 69C of the Actwas applicable only where there is some expenditure and the assessee was unable to explain thesource from which such expenditure has been incurred and since the assessee had accounted forall the purchases made in cash in its books of accounts, the source of expenditure could not beconsidered as unexplained. Further it relied on the decision of CIT v RRJ Securities Ltd [(2015) 94CCH 0069 Del HC], wherein it was held that merely because valuable article or document belongingto the assessee was seized from possession of person search under section 132 of the Act, it wouldnot mean that concluded assessments of the assessee were to be reopened under section 153C ofthe Act.CIT v Refam Management Services Pvt Ltd – (2015) 94 CCH 0079 Del HC

208. The Tribunal held that the addition made by the AO based on the admission of the assessee wasnot sustainable as the admission was made under pressure and mistaken belief and wassubsequently retracted as the assessee had reconciled the alleged difference in stock. Therefore,in the absence of some corroborative evidence found in support of such admission, the addition wasto be deleted.Additionally, with respect to the addition made by the AO under section 69C pursuant to transactionsnoted in a diary found during the search proceedings, the Tribunal held that since the AO himselfhas stated that the transactions dealt with the trading activities of the assessee it could not representunexplained investments under section 69C. Further, since the assessee had not discharged anypresumption and the authorities had not furnished any evidence, the Tribunal inferred that the entriesin the diaries were not reflected in the books of accounts and accordingly made an addition of thegross profit on the quantum of the transactions.Tribhovandas Bhimji Zaveri (Delhi) Pvt Ltd v ACIT – (2015) 45 CCH 0183 Mum Trib

209. The Court held that merely because the material seized from the assessee’s Chartered Accountantrelated to the assessee it could not be considered as belonging to the assessee who wasn’t searchedand therefore the concluded assessments of the assessee could not be mechanically re-openedunder section 153C of the Act. Further, it held that the limitation period of 6 years contained in theSecond Proviso to Section 153C was to be reckoned from the date of recording satisfaction and notfrom the date on which search was conducted.CIT v RRJ Securities Ltd – TS-624-HC-2015 (Del)

210. The Tribunal held that the main requirement for initiation of action and issuance of notice undersection 153C of the Act, is that the AO of the other person was mandatorily required to record thatthe documents belong to such person and he has jurisdiction to assess such person. Further it heldthat the expression ‘belong to’ should not be confused with the expression ‘relates to’ or ‘refers to’.Accordingly, in the absence of such record made by the AO, it quashed the notice and declared itvoid ab initio.ACIT v Amrapali Grand – (2015) 45 CCH 0224 Del Trib

211. The Tribunal held that in the absence of any incriminating material found during the course of searchand the assessment proceedings having not been abated at the time of search, the AO has nojurisdiction to make addition under section 153A of the Act.DCIT v Times Finvest & Commerce Ltd – (2015) 45 CCH 0324 Chd Trib

212. The Court held that when satisfaction note had not been recorded by the AO of the searched person,then initiation of search proceedings under section 153C of the Act were invalid.Pr CIT v Flucky Leasing & Finance Pvt Ltd – (2015) 94 CCH 0145 Del HC

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Super Malls Pvt Ltd v DCIT – (2015) 45 CCH 0330 Del Trib

213. The Court held that even in cases where the AO of the person searched and the assessee who issought to be assessed under section 153C of the Act is the same, the AO was still required to recordhis satisfaction that the assets / documents seized belong to the assessee.Pr CIT v Nikki Drugs & Chemicals Pvt Ltd – [2015] 64 taxmann.com 309 (Del)

h. Withholding tax

214. The Court held that under the provisions of Section 10(15A) of the Act, payments made for acquisitionof aircrafts or an aircraft engine on lease were exempt from taxation and that the amendment insertedon April 1, 1996 excluded payments made for providing spares, facilities or services in connectionwith the operation of leased aircraft from the exemption provided under section 10(15A) of the Act.It held that supplemental rent paid by the assessee did not fall under the exclusion to 10(15A) of theAct and therefore the assessee was not liable to deduct tax at source on such payments.Jet Lite (India) Ltd v CIT – [2015] 63 taxmann.com 62 (Delhi)

215. The Tribunal held that the amount paid by the assessee to a credit company towards ‘authority toguarantee’ whereby assessee agreed to share percentage of losses suffered by the credit companywhile extending credit to the assessee’s customers did not amount to commission under section194H as there was no service rendered by the credit company to the assessee and the agent toprincipal relationship was absent. Accordingly, it held that sections 201(1) and 201(1A) were nottriggered.John Deere India Pvt Ltd v CIT(A) (ITA Nos.390 to 392/PN/2014)– TS-648-ITAT-2015(Pun)

216. The Tribunal held that as per section 4 of the Act it was the recipient of interest who was liable to paytax and that the TDS provisions made it easier to facilitate collection of tax and therefore unless itcould be shown that the due tax could not be recovered from the recipient of interest, the payer couldnot be treated as an assessee in default.RBL Bank Ltd v ITO (TDS) – (2015) 45 CCH 0244 Panaji Trib

217. The Tribunal held that the amendment to section 201 of the Act vide Finance Act, 2009 inserting timelimits therein was curative in nature and that since the section 201 proceedings were pending at thetime of the insertion of new provisions, the amended provision would be applicable to the assessee.Further, it noted the subsequent amendment in the section vide Finance Act, 2010 which wasapplicable to residents and therefore distinguished the reliance placed by the assessee on theSpecial Bench decision of Mahindra and Mahindra which was applicable to non-residents.Vodafone Digilink Ltd v ITO (ITA No. 75 to 80/JP/2013) – TS-726-ITAT-2015 (JPR)

218. The Court observed that prior to April 1, 2010 there was no limitation period for initiating action onTDS default and accordingly held that it was well settled that where there was no period of limitationprescribed for taking action under any provision of law, the same should be taken within a reasonableperiod which would depend on the facts of the case and provisions of the relevant Act. In the givencase, the period of 4 years was held as reasonable for initiating action under section 201 of the Act.CIT v Bharat Hotels Ltd – [2015] 64 taxmann.com 325 (Kar)

i. Others

Appeals

219. The Tribunal allowed the additional grounds of appeal raised by the assessee relying on thejudgments in the case of National Thermal Power Co Ltd v CIT (1998) 229 ITR 383 (SC), PV Doshiv CIT (1978) 113 ITR 22 (Guj) and Ramilaben Ratilal Shah v CIT (2006) 152 Taxman 37 (Guj)wherein it was held that legal issues could be raised at any stage before the Tribunal. However, itset aside the order of the CIT(A) and restored the additional ground to his file for determination inaccordance with law.JK Paper Ltd v CIT – (2015) 45 CCH 0325 Ahd Trib

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220. The Tribunal rejected the appeal filed by the revenue as it was not accompanied by the prescribedfee and therefore in contravention of section 253 of the Act. It held that Tribunals can exercisediscretion to accept the memorandum of appeal even if the same was deficient in enclosures but notwhen the appeal was not accompanied by the prescribed fee.ACIT v DE Shaw India Software Pvt Ltd – [2015] 64 taxmann.com 95 (Hyd – Trib)

Carry forward of losses

221. The Court held that for the purpose of section 72A(2)(a)(i) of the Act, the term commencement ofbusiness would be different from engaged in business. It held that a party engages in business fromthe day it gets involved in setting up of the business and therefore it would be incorrect to say that aparty is engaged in business only from the date on which it commences production. Since thebusiness had been set up for more than 3 years, the Court allowed the carry forward postamalgamation.CIT v KBD Sugars & Distilleries Ltd – TS-630-HC-2015 (Kar)

222. The Tribunal held that where the demerger satisfied all conditions under section 2(19AA) of the Act,the assessee company was eligible to carry forward losses and unabsorbed depreciation undersection 72A(4) of the Act. The Tribunal held that the reasoning adopted by the AO in deeming thedemerger as non-compliant with section 2(19AA) of the Act viz. transfer of properties andinvestments to other entities via the same SPA, did not impact the conditions in section 2(19AA) ofthe Act and therefore the benefit of carry forward could not be denied.DCIT v Maana Sugar Ltd – (2015) 45 CCH 0286 Del Trib

Cash Credits

223. The Tribunal held that the assessee failed to substantiate the source of Rs. 20 lakhs deposited in itsbank account which was claimed to be receipts from family partition arrangement and thereforeconfirmed the addition made by the AO under section 68 of the Act since the explanation offered bythe AO was not satisfactory.Minalben Dipakbhai Mehta v ITO – (2015) 45 CCH 0178 Ahd Trib

224. The Tribunal held that where the assessee had filed all details such PAN, election card, receiptsdetails of creditors in relation to the unsecured loan received by it, but the CIT(A) failed to considerthe same, the matter was to be remanded for fresh adjudication and the assessee was to be affordedfull opportunity of being heard.Golden Time Services Pvt Ltd v DCIT – (2015) 45 CCH 0175 Del Trib

225. The Tribunal held that section 68 of the Act only seeks to tax cash credits where the source of receiptswas not established. In the case of the assessee, the source of receipts was duly established andtherefore could not be taxed as there was no provision in statute to tax amount, the source of whichhas been explained.Likewise, with respect to expenditure / investments, it held that only when the source of expenditure/ investment was not established could it be brought to tax under section 69C of the Act.DCIT v Sanjeev Nanda – (2015) 45 CCH 0287 Del Trib

226. The Court upheld the order of the Tribunal wherein it was held that the addition under section 68 ofthe Act could only be made where the assessee failed to offer an explanation for credit in its book orthe explanation was unsatisfactory. Where the assessee established the identity of source of fundsas well as creditworthiness along with the explanation of the transaction leading to the credit entries,the onus to provide reasons for doubting the explanation would lie with the AO.Pr CIT v Matchless Glass Services Pvt Ltd – (2015) 94 CCH 0151 Del HC

227. The Court held that as per section 68 of the Act, the assessee is liable to disclose only the sourcefrom where he has himself received credit and it is not the burden of the assessee to show the sourceof his creditor nor is it the burden of the assessee to prove the credit-worthiness of the source of thesub-creditors.

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CIT v Shiv Dhooti Pearls & Investment Ltd – [2015] 64 taxmann.com 329 (Del)

Charitable Institution

228. The Court held that the mere fact that the assessee was making profit did not indicate that it wascarrying on an activity solely for the purpose of making profit and that it ceased to be for educationalpurposes.Manas Sewa Samiti & Ors v CCIT – (2015) 94 CCH 0081 All HC

229. The Tribunal held that trusts are allowed to accumulate funds for creating long term assets to carryout its main objects but they must specify clearly as to why they were accumulating huge funds.Presentation Social Service Centre v DDIT – (2015) 45 CCH 0198 Hyd Trib

Deemed Dividend

230. The Tribunal held that exempt capital gains was not to be included while computing accumulatedprofits under section 2(22)(e). Since the assessee had only negative accumulated profits after theexclusion of exempted capital gains the provisions of section 2(22)(e) were not attracted.Further, it held that section 2(22)(e) of the Act would apply only to the shareholders of the company.Manoj Murarka v ACIT (I.T.A No. 1703/Kol/2014 & I.T.A No. 2140/Kol/2010) – TS-669-ITAT-2015(Kol)

231. The Tribunal held that gratuitous loans and advances given by a company to classes of shareholderswould come within the purview of section 2(22) but not to cases where loan or advance was given inreturn to an advantage conferred upon the company by such shareholder. It further held that deemeddividend could only be assessed in the hands of the person who was a shareholder of the lendercompany and not in the hands of the person other than the shareholder.DCIT v Machino Techno (Sales) Pvt Ltd – (2015) 45 CCH 0199 Kol Trib

Interest

232. The Apex Court held that the right to charge overdue interest on discounted Bills of Exchange is not“interest” under the Interest Tax Act as it does not arise on account of delay in repayment of any loanor advance and section 2(7) of the Interest Tax Act refers only to interest arising directly from a loanor advance. The right of the assessee arises on account of default in the payment of amounts dueunder a discounted bill of exchange and not loan or advance.State Bank of Patiala v CIT – (2015) 94 CCH 0076 ISCC

Method of accounting

233. The Tribunal held that the inclusive method prescribed under section 145A of the Act could not beapplied selectively to closing stock without applying it to opening stock, purchases and sales as itwould lead to distortion of income chargeable to tax.Further, it observed that section 145A of the Act was introduced during the MODVAT scheme whichallowed credit on specific inputs used in in manufacture of final output and in the light the advent ofCENVAT credit and the decision of the Apex Court in Eicher Motor wherein CENVAT credit is allowedwithout one to one correlation, held that section 145A of the Act required realignment with the presentindirect tax regime.Sunshield Chemicals Pvt Ltd v ITO – [2015] 64 taxmann.com 161 (Mum – Trib)

Minimum Alternate Tax

234. The Tribunal held that remission of liability of one time settlement credit to P&L account formed partof book profits under section 115JB and could not be excluded on the basis that it was capital innature, as once the P&L account was prepared as per Schedule VI of the Companies Act, then noexclusion or inclusion of any item except as provided under section 115JB of the Act could be made.It distinguished the ruling of Shivalik Venture Pvt Ltd (TS-469-ITAT-2015 (Mum)) relied on by theassessee, as in the said ruling the income of capital nature was disclosed in the notes to accountand not in the P&L account, which was not so in the instant case.B&B Infotech Ltd v ITO (ITA No 726 / Bang / 2014) – TS-643-ITAT-2015 (Bang)

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235. The Apex Court dismissed the SLP filed by the Revenue and upheld the order of the High Courtwherein it was held that once the assessee had incurred expenditure and arrived at the profits, merelybecause the P&L account prepared for the shareholders show the expenditure as deferred, theassessee could not be denied the benefit of the entire expenditure. It allowed the claim further notingthat there was no intention to avoid tax.CIT v Karnataka Soaps and Detergents Ltd (SPL No 19860 / 2015 and 19909 / 2015) – TS-655-SC-2015

236. The Tribunal held that the MAT provisions do not apply to the assessee (UCO Bank), a nationalizedbank as it did not qualify as a ‘company’ under section 3 and consequently section 211 of theCompanies Act, 1956 therefore falling outside the purview of Explanation 3 to Section 115JB of theAct. It also noted that the assessee was declaring dividends to shareholders and paying hugeincome tax under the Act.UCO Bank v DCIT (I.T.A No. 1768/Kol/2009) – TS-687-ITAT-2015 (Kol)

Penalty

237. The Apex Court held that where pursuant to the directions issued by the CIT(A), the AO passed afresh assessment order wherein no satisfaction was recorded for initiating penalty proceedings undersection 271E, the penalty order passed under the said section was to be set aside.CIT v Jai Laxmi Rice Mills Ambala City – [2015] 64 taxmann.com 75 (SC)

238. The Tribunal held that no penalty was to be levied under section 271(1)(c) of the Act on part of thecommission paid by the assessee, disallowed by the AO, based on the lacuna that the agreementwas entered into on stamp paper dated July 8, 2012 and the agreement was made effective fromNovember 24, 2001 as the rest of the commission was duly allowed and there was no mensrea ofconcealing the particulars of income for such a meagre sum. Further, it noted that the assessee hadfurnished all particulars of his income and expenditure.Power Build Ltd v ACIT – (2015) 45 CCH 0191 Ahd Trib

239. The Court held that period of limitation prescribed under section 275 of the Act lays down that thepenalty order must be passed within 6 months of the end of the month in which the appellate orderis received and could not be extended merely because the assessee filed an application undersection 254 of the Act. Since the penalty order was passed on January 31, 2002 and the order ofthe Tribunal order was received by the CIT on June 28, 1999, the Court held that the penalty orderwas time barred and accordingly deleted the penalty.CIt v KM Sugar Mills Ltd (2015) 94 CCH 0146 All HC

240. The Tribunal held that when the quantum on which penalty levied was deleted, penalty would notsurvive notwithstanding that the present appeal was filed after a delay of 2379 days. It observed thatthe Revenue did not point out as to how the assessee has taken advantage of not filing the appealin time.Rama Multi Tech Ltd v ACIT – (2015) 45 CCH 0327 Ahd Trib

241. The Court held that making mere claims that were not sustainable in law shall not amount tofurnishing inaccurate particulars regarding the income of the assessee and accordingly penalty undersection 271(1)(c) of the Act could not be levied.CIT v Euro Footwear Ltd – (2015) 94 CCH 0128 All HC

242. The Court held that once the assessee explained that the mistake was due to an error of itsaccountant and not mala fide, the AO was not justified in imposing penalty under section 271(1)(c)of the Act.Pr CIT v HV Williams & Company – (2015) 94 CCH 0124 Kol HC

243. The Court held that where the assessee filed a revised return before the issuance of notice undersection 148 of the Act, there was no issue of concealment of income or finishing of inaccurateparticulars and therefore upheld the order of the Tribunal setting aside the penalty imposed undersection 271(1)(c) of the Act.CIT v Arun Kumar Khetwat – (2015) 94 CCH 0154 Kol HC

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Refund

244. The Tribunal held that once it was found that income covered by the return filed by the assessee wasnot taxable and tax was paid by the assessee, the refund of such tax was a must.Vaibhavi Discretionary Family Trust & Ors v ITO & Ors – (2015) 45 CCH 0179 Mum Trib

245. The Court allowed the assessee’s writ petition and quashed the order of the CBDT dismissingassessee’s refund claim under section 119(2) with respect to condonation of delay in filing return ofincome. It held that since the Act allows for filing of returns and refund claim within a period of oneyear from the end of the assessment year and there was a delay of only one day on part of theassessee, the order of the CBDT rejecting the application was erroneous to the extent that it wasbased on observation that there was a delay of 17 months.Cosme Matias Menezes v CIT (WRIT PETITION NOS. 225 AND 505 OF 2011) – TS-691-HC-2015(Bom)

Set-off

246. The Tribunal held that as per section 32(2) of the Act, the assessee was entitled to set off unabsorbeddepreciation against the income computed under the head ‘long term capital gain’.Sunshield Chemicals Pvt Ltd v ITO – (2015) 45 CCH 0320 Mum Trib

247. The Tribunal allowed the assessee set off of losses from derivative trading transactions against itsother income earned. It noted that apart from the losses, assessee only earned dividend and interestincome falling under income from other sources and therefore Explanation to Section 73 of the Act,deeming losses as speculative was not applicable as the assessee’s case fell under the exceptionprescribed viz. gross total income mainly consisting of income from other sources or house property).AK Capital Markets Ltd v DCIT (ITA No. 6859/Del/2014) – TS-694-ITAT-2015 (Del)

Stay

248. The Court quashed the order of the AO under section 220 of the Act directing the assessee to pay50 percent of outstanding demand since the assessment was high pitched in light of CBDT InstructionNo 95/1969 (14 times returned income) and the assessee’s appeal was pending before CIT(A). Itdismissed the Revenue’s contention that CBDT Instruction No 95 / 1969 was superseded byInstruction no 1914 of 1993 by placing reliance on Valvoline Cummins Ltd v DCIT (2008) 307 ITR103 (Del).N Jegatheesan v DCIT – (2015) 64 taxmann.com 339 (Mad)

249. The Court held that the Tribunal is not empowered to grant stay against launch of prosecutionproceedings under section 276(1) of the Act. It held that the powers of the Tribunal in relation tointerim orders were confined to matters pending before the Tribunal and at best to matters intrinsicallylinked to matters pending before the Tribunal and that it could not be extended to matters over whichthe Tribunal has no jurisdiction even though the matters may incidentally be affected by the outcomeof the appeal. Therefore it held that a prayer for stay of prosecution of a show casue notice wouldhave to be made by resort to other remedies and only after the notice and replies thereon reach aconclusion.Pr CIT v ITAT (Civil Writ Petition No.15239 of 2015) – TS-679-HC-2015 (P&H)

Transfer

250. The Apex Court held that collaboration agreement for land development would be covered under theambit of transfer under section 269UA of the Act. It rejected assessee’s contention that since thecollaboration agreement does not purport transfer of land, section 269UA had no application.Observing that possessory rights were granted to the assessee to construct buildings on the land, Itheld that transfer was defined to include within its scope agreement which have the effect oftransferring all the important rights in land for future considerations.Unitech Ltd v UOI – TS-639-SC-2015

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