When the assessee is prevented from deducting tax u/s 195, the question of his not performing the obligation under law does not arise and thus he cannot be held a defaulter. The assessee cannot be held to be an assessee in default in terms of section 201 and 201(1A) of the Act. This is a case of impossibility of performance and the assessee is released from the obligation and hence the assessee is not an assessee in default.
Recently, the Delhi bench of the Income-tax Appellate Tribunal in the case of M/s Panasonic India Pvt Ltd Vs. Income Tax Office, has upheld the aggregation of transactions where the Functions, Assets &; Risks underlying those transactions are similar. The Tribunal also concluded that reimbursement of advertisement expenses received by a Distributor from its Associated Enterprise (AE) must be treated as operating income for computing profitability of the taxpayer under the Transactional Net Margin Method (TNMM) method.
Recently, the Mumbai bench of the Income-tax Appellate Tribunal (the Tribunal) in the case of ACIT v. Monitor India Pvt. Ltd [2010-TII-138-ITAT-MUM-INTL] (Judgment date – 8 October 2010, Assessment Year 1999-2000).held that the taxpayer is under no obligation to approach the Assessing Officer and is entitled to remit monies abroad without deduction of tax at source if it is of the opinion that the remittance was wholly exempt from Indian taxes.
Recently, the Delhi bench of the Income-tax Appellate Tribunal (the Tribunal) in the case of Rolls Royce Industrial Power Ltd. v. ACIT [2010-TII-139-ITAT-DEL-INTL] (Judgement date 5 October 2010 Assessment Years 1998-99 to 2004-05) held that consideration paid to a foreign company for performance of a works contract of operating and maintaining a power plant cannot be considered as Fees for Technical Services (FTS) both under the Income-tax Act, 1961 (the Act) as well as under India-UK tax treaty (tax treaty). Further, the Tribunal held that the taxing of a foreign company i.e. the taxpayer in a manner which is more burdensome vis-a-vis an Indian company doing identical business in India would lead to discrimination. Accordingly the taxpayer is entitled to protection of Article 26 of the tax treaty and should not be subjected to tax on gross basis, but on net basis. The Tribunal also held that for a correct and harmonious interpretation disallowance under section 44D of the Act would not apply wherever Article 7 of the tax treaty is being applied.
Recently, the Mumbai bench of the Income-tax Appellate Tribunal (the Tribunal) in the case of ADIT v. Solid Works Corporation [2010-TII-130-ITAT-MUM-INTL] Judgment date 1 April 2010, Assessment Year 2005-06) held that payment received by the taxpayer for sale of shrink wrapped software is not in the nature of royalty within the meaning of Article 12(3) of the India-USA tax treaty (tax treaty).
Recently, the Delhi bench of the Income-tax Appellate Tribunal (the Tribunal) in the case of Technip Italy Spa v. ACIT (2010-TII-133-ITAT-DEL-INTL) after applying the decision of the Supreme Court in the case of Ishikawajima-Harima Heavy Industries Ltd. v. DIT [2007] 288 ITR 408 (SC) held that the income from offshore supply of equipment on a Cost Insurance Freight (CIF) basis under a composite contract is not taxable in India.
Deduction u/s.10B cannot be disallowed on ground of excess profits when the international transactions are held to be at arm’s length. The Chennai Bench of Income Tax Appellate Tribunal in the case of M/s Tweezerman India Private Limited Vs ACIT [2010-TII-45-ITAT-MAD-TP] has held that deduction of eligible profits under Section 10B cannot be disallowed on ground of excess profits where the international transactions have been held to be at arm’s length by the Transfer Pricing Officer.
TAX is payable on import of all software , even if the sale does not involve exercise of copyright, according to a Delhi tax tribunal order in a case relating to Microsoft . While the order, passed on October 28, is significant in terms of the liability to withold tax from payments made while importing software, the Delhi Income-Tax Appellate Order (ITAT) attracted the attention of tax professionals on account of its observation that questioned the sanctity of tax treaties.
The matter is heard behind the back of the assessee or his advocate which, ultimately, leads to unsustainable order. It generates litigation either in the same Court by way of rectification application or in the higher Court. In order to avoid this situation, it is desirable to direct the appellant or parties to the appeal to amend cause title of the appeal memo in the event of change of address followed by amendment in column 10 of Form No.36; instead of permitting the parties to enter into the correspondence with the registry of the Tribunal.
(a)Expenses incurred in foreign currency on onsite computer software development at the client’s place outside India should be excluded from export turnover; and (b)Export proceeds utilized outside India for expenses relating to exports should be excluded from export turnover as a non-qualifying export turnover.
