Royalty paid by a taxpayer computed even on sales made to the Associated Enterprise is at arm’s length. Further, a taxpayer paying royalty to its Associated Enterprise can make additional payments for technical services rendered by personnel deputed by the Associated Enterprise.
Central Bank of India v. DCIT- In view of non-discrimination clause under the India-USA tax treaty, the non-resident should be given same treatment as given to resident’s taxpayers. Accordingly, the payment made to USA entities cannot be disallowed on account of non deduction of tax at source.
In a recent ruling, ITAT Mumbai held that no disallowance under section 14A of the Income-tax Act, 1961 is attracted in the case of a life insurance company. The Tribunal also held that disallowance of software expenses and of expenses incurred for increase in authorised share capital, is not attracted in view of the special provisions of section 44 of the Act read with the relevant rules in the First Schedule to the Act.
Article 26(3) of the India-USA DTAA protects the interest of non residents vis-a-vis residents. Article 26(3) provides that payment made to a non-resident will be deductible under the same conditions as if the payment were made to a resident. The exceptions provided in Article 26(3) are not applicable on facts. As per s. 40(a)(i), no disallowance can be made in respect of payments to residents on the ground of non-deduction of tax at source. Therefore, in view of Article 26(3), no disallowance can be made even in case of payments to non-residents even if the amount is found taxable in India in their hands. Herbal Life International 101 ITD 450 (Del) followed.
Recently in the case of Krung Thai Bank PCL v. Jt Director of Income-tax – International Taxation (ITA No. 3390/Mum/2009) (Mum), the Mumbai bench of the Income-tax Appellate Tribunal (the Tribunal) held that the provisions of Section 11 5JB of the Income-tax Act, 1961 (the Act) pertaining to Minimum Alternate Tax (MAT) would come into play only when the tax payer is required to prepare its profit and loss account in accordance with the provisions of Part II and III of Schedule VI of the Companies Act. Further, since banking companies are not required to prepare their financial statements as per Schedule VI to the Companies Act in view of the exemption set out under proviso to Section 211 (2) of the Companies Act, the tribunal held that the provisions of Section 11 5JB of the Act cannot be applied to a banking company.
It was the duty of the A.O. to bring on record sufficient evidences and material to prove that the documents filed by the assessee were bogus, false or fabricated and the long term capital gain shown by him was actually his income from undisclosed sources.
The moot question that arises for our consideration in the present case is whether, on the facts of the present case, the interest earned by the assessee on fixed deposit is assessable as profit of the business of undertaking for the purpose of computing the deduction available to the undertaking under section 10A of the Act.
Section 147 authorizes and permits the Assessing Officer to assess or reassess income chargeable to tax if he has reason to believe that income for assessment year has escaped assessment. It is also well settled that words reason to believe used in section 147 of the Act are stronger than the words is satisfied.
Compensation including interest on cancellation of contract not taxable in the absence of Permanent Establishment of the non-resident in India under India-UK tax treaty
A 3 Member Special Bench was constituted to decide whether the assessee was entitled to claim depreciation u/s 32 on intangible assets termed ‘Goodwill’. At the hearing, the assessee raised a preliminary objection that as the Judicial Member on the Special Bench has already taken a view about allowability of depreciation on goodwill in the case of Bharatbhai J. Vyas vs. ITO 97 ITD 248 (Ahd.) judicial discipline requires that this Special Bench should consist of persons who have not already taken a view.
