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Archive: 05 February 2012

Posts in 05 February 2012

Payment for shrink wrapped software/ off-the-shelf software amounts to ‘royalty’

February 5, 2012 2783 Views 0 comment Print

CIT v. Synopsys International Old Ltd(Karnataka High Court) – Payment for shrink wrapped software/off-the­ shelf software amounts to ‘royalty’ within the meaning of Section 9(1)(vi) of the Income-tax Act, 1961 as well as under Article 12 of the India-Ireland tax treaty.

Taxability of Income from Leasing of Hotel with amenities & maintenance services

February 5, 2012 10332 Views 0 comment Print

M/s. Kenton Leisure Services, P. Ltd. Vs. DCIT (ITAT Cochin) – It was held that lease rental income arising from agreements for letting on lease hostel premises along with provision and maintenance of various facilities and amenities would be taxable under the head ‘Income from Business’ as against ‘Income from House Property’.The characterisation of lease rental income as ‘Income from Business’ comes as a relief to taxpayers who lease out property along with provision of facilities / amenities. However, this issue is fact specific and it would be important for taxpayers to bear the above principles in mind while determining the taxability of such revenue streams.

Receipt of retention money by furnishing bank guarantee not chargeable to tax as it accrues only on a successful completion of a contract

February 5, 2012 4278 Views 0 comment Print

ADIT Vs. Ballast Nadam Dredging (ITAT Mumbai)- It was held that retention money withheld by the contractee pending completion of contract work does not accrue to the assessee/contractor in the year in which the amount is retained. We also observe that similar issue was also considered by ITAT in the case of Spirax Marshall Ltd (supra) wherein it was held that receipt of retention money against furnishing bank guarantee cannot partake character of income since it cannot be apportioned until guarantee period was over. The retention money may be received by the assessee; it cannot be apportioned until expiry of warranty period. We observe that the Hon’ble Allahabad High Court in the case of CIT vs. Yatindra and Co. (supra) held that an amount received by assessee against bank guarantee was not accrued to the assessee during the year as no absolute right to receive the amount at that stage vested.

Consideration for transfer of limited right to use the know-how taxed as royalty income

February 5, 2012 967 Views 0 comment Print

Atlas Copco AB of Sweden v. CIT (Bombay High Court) – It was held that Amount received by the taxpayer was on account of right to use the know-how for a specified period and there was no outright transfer of know-how. Therefore, amount received was royalty and taxable in India.

Business support services of advisory nature under a cost contribution agreement are consultancy services liable to tax withholding

February 5, 2012 3837 Views 0 comment Print

In Re Shell Technology India Private Limited (AAR)- It cannot be denied that the Applicant receives services in the form of general finance advice, Taxation advice, legal advice, advice on Information Technology, media advice, assistance in contract and procurement and assistance in Marketing. It is trite that these advisory services would be consultancy services if the element of expertise or special knowledge on the part of the consultant is established. In the facts of the case before us, SIPCL, the consultant in the present case, is in the business of providing advice and services to various Shell Operating companies.

Income-tax Authorities have no jurisdiction to tax payment made outside for supplies taking place outside the country

February 5, 2012 1376 Views 0 comment Print

In Re SEPCO III Electric Power Construction (AAR)- The applicant is a company incorporated under the laws of China on 26.3.2009. The applicant, among other things, is a supplier of equipments for Electric Power Projects. On 26.3.2009, the applicant entered into a contract with M/s Jhajjar Power Limited, for supplying of equipments for the Haryana Power Project.

Business income accruing or arising to the applicant can be taxed in India only in respect of such operations carried out in India – AAR

February 5, 2012 717 Views 0 comment Print

CTCI Overseas Corporation Ltd. In Re (AAR)- In the present case, though the applicant has a business connection in India, it has not carried out any part of the business relating to offshore supplies in India. Under the deeming provision of section 9(1) read with Explanation 1(a), any business income accruing or arising to the applicant can be taxed in India only in respect of such operations carried out in India.

Mandatory death penalty unconstitutional – Supreme Court

February 5, 2012 948 Views 0 comment Print

The Supreme Court has ruled that mandatory death penalty for an offender under the Arms Act was unconstitutional as it violated fundamental rights guaranteed to a citizen.A bench of Justices Asok Kumar Ganguly (since retd) and J S Khehar said Section 27(3) of the Arms Act, which imposed mandatory death penalty, was also “ultra vires and void” as it restricts the powers of the court in awarding sentences to an accused in such cases.

International Taxation – Witholding Tax Rates and provisions

February 5, 2012 2546 Views 0 comment Print

195. [(1)Any person responsible for paying to a non-resident, not being a company, or to a foreign company, any interest or any other sum chargeable under the provisions of this Act (not being income chargeable under the head “Salaries” shall, at the time of credit of such income to the account of the payee or at the time of payment thereof in cash or by the issue of a cheque or draft or by any other mode, whichever is earlier, deduct income-tax thereon at the rates in force :

Merely because appellant did not make debit of the CENVAT Credit and did not make proper entries in the ST-3 return, confirmation of service tax demand not justifiable

February 5, 2012 3717 Views 0 comment Print

In this case, the Service Tax demand has been confirmed on the ground that the service tax payable has not been debited in the CENVAT Credit account and it has not been reflected in the ST 3 return. In view of the fact that even in the cases of clandestine removal in Central Excise matters, while confirming the demand, the benefit of CENVAT Credit, subject to verification of records that proper documents are available and raw input/capital goods have been received, the benefit of CENVAT Credit is allowed.

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