There is no quarrel on the point that the assessee, being an insurance company is not required to prepare its accounts as per Parts II & III of Schedule VI of the Companies Act, 1956. Sub-section (2) of section 211 are required every profit and loss accounts of the Companies shall be prepared as per the requirement of Part II of Schedule VI.
In all foreign countries operation was carried out through assessee’s branches which was a permanent establishment situated outside India. Hence, the income attributable to these branches cannot be taxed in India. This issue has also been decided in favour of the assessee by Tribunal in assessee’s own case for assessment year 1997-98. Therefore, appeal filed by the department was to be dismissed.
It is not necessary for the assessee to show that any legitimate expenditure incurred by him was also incurred out of necessity. It is also not necessary for the assessee to show that any expenditure incurred by him for the purpose of business carried on by him has actually resulted in profit or income either in the same year or in any of the subsequent years.
Just because an AIR report was generated indicating the PAN No. of assessee, the onus does not shift completely to assessee. It is the responsibility of AO to examine complete details before asking for reconciliation and whether the transactions were indeed undertaken or not. The AIR report also does not contain any authentication but since it is generated by the Department, credit was given by AO and DRP about its authenticity.
It was held by the Third Member that section 147 applies both to section 143(1) as well as section 143(3) and, therefore, except to the extent that a reassessment notice issued u/s 148 in a case where the original assessment was made u/s 143(1) cannot be challenged on the ground of a mere change of opinion,
The profit margin from the international transaction with the A.E. has to be seen in relation to the uncontrolled transaction with the independent parties. What is to be compared is the international transactions of the assessee with its related parties and not for its entire transaction with non-related parties also. Therefore, ALP has to be seen only with regard to international transaction with A.Es and not on the entire turnover/sales.
For the purpose of Section 40(b)(v) read with Explanation there cannot be separate method of accounting for ascertaining net profit and/or book-profit. In other words, according to the said Explanation ‘book profit’ means the net profit as shown in the profit and loss account including income from other sources not the profit computed under the head profit and gains of business or profession.
Working given by the TPO shows that it is earning 7% commission, whereas as per the industry policy as decided by the AAAI the service on media agency earns commission of 2.5%. On that reason also, since it is an extreme case of earning 7% commission (in our view it is wrongly considered), on the principles that the extreme profit companies are to be excluded, this company cannot be considered as comparable for the purpose of arriving at the average mean.
When the bona fideof the transaction and the actual sale consideration received by the assessee has not been suspected, then for the purpose of computation of capital gains, the full value of consideration can not be substituted by market price or value of the capital asset as on the date of transfer.
Reverting to the facts of the instant case, it is seen that insofar as the second reason is concerned, the Assessing Officer initiated reassessment proceedings with a view to ‘examine’ whether the assessee had accumulated reserve. Obviously, the scope of section 147 cannot encompass such an action under which certain examination is to be conducted for forming a reason to believe as to the escapement of income.
