Delhi bench of the Income-tax Appellate Tribunal (the Tribunal), in the case of DCIT v. Select Holiday Resorts Pvt. Ltd. (ITA Nos. 1184 & 2460/Del/2008) (Judgment Date: 23 December 2010, Assessment Years: 2004-05 & 2005-06) held that where a parent company merged with its subsidiary, the benefit of brought forward and set off of losses under Section 79 of the Income-tax Act, 1961 (the Act) claimed by the amalgamated company, cannot be disallowed on the grounds that there was a change in the shareholding of more than 51 percent of the share capital of the subsidiary company since there was no change in control and management of amalgamated company pre and post merger.
National Engineering Industries Ltd. (the taxpayer) had entered into a License & Technical Assistance agreement with Brenco Inc., USA on 19th August, 2002 which expired on 25th June, 2007. Under the agreement the taxpayer was required to pay a certain amount as royalty to Brenco Inc.
The Delhi bench of the Income Tax Appellate Tribunal (Tribunal) recently pronounced its ruling in the case of Airtech Private Limited (Appeal no. ITA 3591 Del )/2010) on documentation aspect of transfer pricing (TP). The Tribunal held that contemporaneous TP Documentation was to be maintained by the taxpayer annually as the transaction was separate and was influenced by changing market dynamics.
The Hyderabad Bench of the Income-Tax Appellate Tribunal [the Tribunal] has in the case of M/S Convergys Information Management (India) (F) Ltd. v. DCIT [ITA no. 299/Hl/2009] , held that in a cost plus arrangement expenses incurred post the date of entering into agreement has to be marked up, as no customer would pay mark up before entering into agreement.
Though currently dividend income is exempt, the above decision lays down a principle that brought forward business loss can be set off against other sources of income which are in the nature of business income, though chargeable to tax under another head of income. Similar position has also been affirmed by the Mumbai Tribunal2 wherein it was held that brought forward business losses can be set off against the capital gains arising from a business or profession, though chargeable to tax under any other head of income.
It is mandatory for the AO to issue notice u/s 143 (2). The issuance and service of notice u/s 143 (2) is mandatory and not procedural. If the notice is not served within the prescribed period, the assessment order is invalid
under the DTAA agreement, the receipt of bare boat rentals i.e. rent for use of or payment for use of equipment is not brought to tax as royalty consequent to the amendment. Thus though under domestic law, the charging section treats the receipts as royalty, under the treaty, royalty cannot be brought to tax in view of the amendments.(Para 18)
Where total debt debited in the account of the client is inclusive of brokerage then brokerage being part of the total debt having been taken into account in computing the income, would satisfy the provisions of sec. 36(2) and therefore, when assessee writes off such debt then he would be entitled for deduction u/s. 36(1)(vii).
If books of account are found to be correct and complete in all respect and no defect is pointed out therein and cost of construction of building is recorded therein, then the addition on account of difference in cost of construction cannot be made even if a report is obtained within the meaning of section 142A from the DVO.
Merely because the liabilities are outstanding for last many years, it cannot be inferred that the said liabilities have ceased to exist. It is also a fact that the assessee has not written off the outstanding liabilities in the books of account and the outstanding liabilities are still in existence would prove that the assessee acknowledged his liabilities as per the books of account. Section 41(1) of the IT Act is attracted when there is cessation or remission of a trading liability.
