Deemed dividend under section 2(22)(e)-Money advanced to shareholder for specific purpose-Where the company advanced certain sum to a shareholder for a specific purpose then the amount so advanced cannot be treated as deemed dividend under section 2(22)(e)
Chennai Bench of Income-tax Appellate Tribunal in the case of Frontier Offshore Exploration (India) Ltd. v DCIT ITA No. 200/Mds/2009, held that where payment to a non-resident is covered under the special regime of section 44BB, withholding of appropriate tax by the payer through the application of the special regime and without approaching the Assessing Officer will not lead to any violation of withholding tax provisions. Accordingly, expenses cannot be disallowed for short withholding of taxes.
Frontier Offshore Exploration (India) Limited v. DCIT This decision strengthens the position that special provisions supersede the general provision of the Act for the purpose of withholding tax. It also acknowledges the view that the assessee may withhold tax by suo moto applying the special regime under the provisions of section 44BB.
No requirement to approach the Tax Officer for nil withholding certificate under section 195(2) where the non-resident is not liable to tax and further no disallowance can be made under section 40(a)(i) of the Income-tax Act, 1961 In a recent decision, the Chennai Bench of the Income-tax Appellate Tribunal in the case of VA Tech Wabag Ltd. v. ACIT [2010-TII-109-ITAT-MAD-INTL] held that in a case where the payment for services was not taxable in India under the provisions of a Double Tax Avoidance Agreement (“the tax treaty”), there was no requirement for applying to the tax officer for a nil withholding certificate under section 195(2) of the Income-tax Act, 1961 (“the Act”). It was also held that as section 195 of the Act was not applicable, the amount paid for services could not be disallowed under section 40(a)(i) of the Act.
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.
(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.
Loss of a unit not eligible for any tax holiday cannot be set off against profits of the eligible unit for the purpose of computing deduction
The assessee, a time-share company having resorts at tourist places granted membership for a period of 33/25 years on payment of certain amount. During the currency of the membership, the member had the right to holiday for one week in a year at the place of his choice from amongst the resorts of the assessee. The membership fee was received either in lump sum or in installments to the prospective member.
This Tax Alert summarizes a recent ruling of the Special Bench of the Chennai Income Tax Appellate Tribunal (SB) [ITA Nos. 2412 to 2416/Mds/2005] in the case of M/s Mahindra Holidays & Resorts (India) Ltd. (Taxpayer) on the issue of taxability, under the Income Tax Law (ITL), of timeshare membership fee received upfront by the Taxpayer in the initial year of enrolment of a member.
The Special Bench of the Tribunal, departing from the Karnataka High Court’s decision in the case of Samsung Electronics, rules that withholding tax obligation on payer applies on payments to nonresidents only if there is income chargeable to tax in India. Further obtaining CA’s certificate is an alternative procedure for lower or nil withholding cases.
