NEWS
DIRECT TAX
1. CBDT advised banks to refund charges collected on electronic transactions carried over modes prescribed u/s 269SU.
[Ref: Circular 16/2020 dated 30.08.2020]
2. CBDT notifies conditions to be satisfied by pension fund to become eligible for exemption u/s 10(23FE).
[Ref: Notification No. 67/2020/ F. No. 370142/28/2020-TPL]
3. CBDT issues guidelines for implementation of Faceless Assessment Scheme, 2019
[Ref: F. No. 173/165/2020-ITA-I dated 14.08.2020]
4. CBDT amends jurisdiction of income-tax authorities under section 120
[Ref: NOTIFICATION NO. S.O. 2757 [NO. 65/2020/F.NO. 187/3/2020-ITA-I], DATED 13-8-2020]
5. Officers of Investigation & Central Charges of Income-tax Dept. are directed to make electronic communication
[Ref: CIRCULAR NO. F. NO. 414/29/2020-IT(INV.I), DATED 11-8-2020]
6. ‘E-Assessment’ now ‘Faceless Assessment’.
[Ref: NOTIFICATION S.O. 2745 (E) [NO. 60 / 2020/F.NO. 370149/154/2019-TPL], DATED 13-8-2020]
7. CBDT issues Mutual Agreement Procedure (MAP) Guidance following OECD recommendations
[Ref: CIRCULAR NO. F.NO. 500/09/2016-APA-I, DATED 7-8-2020]
DOMESTIC TAX CASE LAWS
SUPREME COURT
1. Supreme Court affirms ruling of Punjab and Haryana High Court holding that capital gains arising out of land acquisition compensation were chargeable to income-tax under section 45 for previous year.
[Raj Pal Singh v CIT [2020] 118 taxmann.com 508 (SC)]
2. Notice issued and accepted by respondents in SLP against impugned order of High Court holding that when order under section 245D came to be passed, respondents were not assessees as contemplated under Black Money Act; accordingly, provisions thereof did not apply to them and, therefore, undisclosed foreign income and assets of respondents had rightly been assessed under Income-tax Act.
[Pr. CIT v Income Tax Settlement Commission [2020] 118 taxmann.com 197 (SC)]
3. SLP granted against High Court ruling that prior to assessment year 2011-12, there was no provision which required revenue to disallow deduction of loss on sale of investment made by general insurance companies, hence same could not have been disallowed.
[CIT v United India Insurance Co. [2020] 117 taxmann.com 849 (SC)]
4. SLP dismissed against High Court ruling that where gain from sale of shares by assessee was exempt from tax in terms of section 10(38), mere non-disclosure of such gain on sale of shares in return of income would not mean that capital gain from sale of shares had escaped assessment.
[Asst. CIT v Swastic Safe Deposit and Investments Ltd. [2020] 118 taxmann.com 94 (SC)]
5. SLP dismissed as withdrawn against High Court ruling that where Assessing Officer made addition to assessee’s income on ground that there was mismatch between assessee’s consumption of raw material and output of various drugs manufactured by assessee, in view of fact that finding of Assessing Officer was based on detailed appreciation of evidence on record, impugned addition was to be confirmed.
[Paras Organics (P.) Ltd. v Addl. CIT [2020] 118 taxmann.com 93 (SC)]
6. SLP dismissed against High Court ruling that where Assessing Officer made addition to assessee’s income in respect of unexplained capital gain on transfer of shares on basis of documents seized during course of search of another person, since Assessing Officer failed to show nexus on basis of cogent material between documents seized and assessee, impugned addition was to be deleted.
[Pr. CIT v Himanshu Chandulal Patel [2020] 118 taxmann.com 92 (SC)]
HIGH COURT
1. Where Settlement Commission had rejected application of petitioner for assessment years (AY) 2011-12 to 2017-18 as ‘invalid’, on ground that there was short payment of tax, since there were computational differences that could well be reason for remittances falling short of required amounts and differences were quite insignificant in context of entirety of payment made, in interests of justice, petitioner’s case should be considered on merits by Commission.
[Krishna Venkata Ramana Shetty v ITSC [2020] 118 taxmann.com 424 (Madras)]
2. Where Assessing Officer denied deduction under section 80-IB on ground that area of two plots situated in two different streets, which assessee had considered as single project, constituted an area of less than 1 acre each when considered individually, but Tribunal had allowed deduction holding that it was done as a composite project at proposed site no substantial question of law arose for consideration.
[CIT v Smt. A. Jagadeeswari [2020] 118 taxmann.com 369 (Madras)]
3. Where information was received by Assessing Officer to effect that eight parties from whom purchases were allegedly made by assessee engaged in job work of dying of fabrics were alleged hawala dealers who had issued bogus bills and he treated aforesaid amount as bogus purchases, since without purchase of materials, it was not possible for assessee to complete job work of dying and entire purchases could not be added as bogus but profit element embedded in such transaction had to be added to total income of assessee.
[Pr. CIT v Jakharia Fabric (P.) Ltd [2020] 118 taxmann.com 406 (Bombay)]
4. Where notices issued under section 148 had been challenged in writ petition on ground that assumption of jurisdiction under section 147 by ITO was ab initio void, since notices under section 148 had culminated into an order of assessment which could be assailed before appellate authority, said writ petition need not be entertained.
[Kasautii v CIT [2020] 118 taxmann.com 407 (Jharkhand)]
5. Interest which accrues on funds not required immediately by assessee-co-operative society for its business purpose and which have been only invested in specified securities as ‘investment’ cannot be said to be attributable either to activity mentioned in section 80P(2)(a)(i) or in section 80P(2)(a)(iii).
[Pr. CIT v Electro Urban Co-operative Credit Society Ltd. [2020] 118 taxmann.com 310 (Calcutta)]
6. Where assessee trust formed for running educational institution, incurred expenses for awareness on agriculture, medical camps etc., said expenses could be regarded as part of educational activity and, thus, assessee’s claim for exemption of income under section 10(23C)(vi) was to be allowed.
[Kamaraj Educational Trust v CCIT [2020] 118 taxmann.com 273 (Madras)]
7. In case of assessee, a SEZ, while computing deduction under section 10AA, expenses incurred in foreign currency not meant for rendering any services outside India, could not be excluded from ‘export turnover’.
8. Where assessee challenged validity of assessment on ground that its name had been stuck off from Register of Companies before passing of assessment order, in view of fact that assessee voluntarily participated in assessment proceedings and did not bring aforesaid fact to notice of Assessing Officer, plea raised by assessee was to be rejected.
[CIT v Tarachanthini Services (P.) Ltd. [2020] 118 taxmann.com 252 (Madras)]
9. Where Assessing Officer rejected assessee’s claim for deduction under section 36(1)(iii) on ground that assessee had given interest free loan to its holding company, in view of fact that, assessee failed to prove that said loan was given for commercial purpose i.e. construction of residential project in joint venture with holding company, impugned disallowance was to be confirmed.
[Hansa Estates (P.) Ltd. v Asst. CIT [2020] 118 taxmann.com 244 (Madras)]
10. Where Assessing Officer having regard to volume of investment in shares and quantum of dividend income earned thereon, invoked provisions of Rule 8D of 1962 Rules, read with section 14A and enhanced amount of disallowance for earning exempt income, disallowance so made was to be confirmed.
[FLSmidth (P.) Ltd. v Dy. CIT [2020] 118 taxmann.com 272 (Madras)]
11. Merely because liability had remained outstanding for more than three years and same was not written back in profit and loss account, application of provisions of section 41(1) could not be made to consider such liability as income for year under consideration without there being any remission or cessation of liability.
[Pr. CIT v Adani Agro (P.) Ltd. [2020] 118 taxmann.com 307 (Gujarat)]
12. In order to claim benefit of set-off of losses under section 72A, condition of filing Form No. 62 is only directory and non-compliance thereof would not disentitle assessee to claim carry forward losses to be set off against profits of company.
[Pr. CIT v Lotte India Corporation Ltd. [2020] 118 taxmann.com 225 (Madras)]
13. When assessee gets shares of amalgamated company in lieu of shares of amalgamating company, a ‘transfer’ does take place within meaning of section 2(47).
[CIT v Nalwa Investment Ltd. [2020] 118 taxmann.com 278 (Delhi)]
14. Where assessee developed software technology park and gave certain properties in said park on lease to different software companies, rental income earned by assessee from leased out properties was liable to tax as ‘business income’.
[Pr. CIT v Khivraj Motors (P.) Ltd. [2020] 118 taxmann.com 224 (Madras)]
15. Process of sieving carried out by assessee in its SEZ unit in order to separate dust particles from raw material such as silicon, sand and waste before reselling same as semi finished product in market amounted to ‘manufacturing’ and, thus, assessee was eligible to claim exemption under section 10AA.
[CIT v Vetrivel Minerals [2020] 118 taxmann.com 172 (Madras)]
16. Where assessee had failed to produce any material to authenticate his contention that cash deposits in his account were on account of sales being made by him from Kirana business, tax authorities were justified in making addition of unexplained cash entries in bank account in hands of assessee.
[Ravinder Kumar v ITO [2020] 118 taxmann.com 166 (Delhi)]
17. Where assessee’s claim for exemption of profit under section 47(v) in respect of sale of land to holding company was rejected on ground that certain shares of assessee company were held by nominees of holding company, in view of fact that nominees had no individual rights in said shares and those shares were held by them merely on behalf of holding company, impugned order rejecting assessee’s claim was to be set aside.
[CIT v Shardlow India Ltd. [2020] 118 taxmann.com 115 (Madras)]
18. Where in block assessment proceedings Tribunal finding that assessee had already disclosed contrived loss by making necessary entries in its books of account, allowed assessee’s claim for deduction of same, order so passed did not require any interference.
[CIT v Naman Associates [2020] 118 taxmann.com 165 (Gujarat)]
19. Where assessee received certain amount from subsidiary company as advance towards security for providing corporate guarantee, it could not be brought to tax as deemed dividend under section 2(22)(e).
[CIT v Accel Limited [2020] 118 taxmann.com 103 (Madras)]
20. Where Tribunal, without assigning any reasons, concluded that properties exchanged between assessee and his brother in terms of settlement deed did not attract provisions of section 2(47), matter was to be remanded back for disposal afresh.
[Pr. CIT v S. Yogarathnam [2020] 118 taxmann.com 54 (Madras)]
21. Where there was no co-relation between unexplained cash receipts and unexplained investment of assessee-broker unearthed during course of search, assessee was not entitled to claim set-off of said income against unexplained investment made.
[CIT v Manojbhai Bhupatrai Vadodaria [2020] 118 taxmann.com 109 (Gujarat)]
22. Where assessee raised a plea that while remanding matter to assessing authority, Tribunal had given certain directions and its views about exchange fluctuations to be treated as speculative loss or business loss and, therefore, it was not an open remand which was likely to prejudice case of assessee, Assessing Officer was to be directed to pass fresh orders, uninfluenced by any observations made by Tribunal.
[Capricorn Food Products India Ltd. v Asst CIT [2020] 118 taxmann.com 68 (Madras)]
23. Repeated adjournments for orders or for pronouncement of judgment where arguments have been heard and orders have been reserved would not be permissible even during lockdown.
[DALBIR SINGH v SATISH CHAND [2020] 118 taxmann.com 36 (Delhi)]
24. Withholding of refund under section 241A, pursuant to notice under section 143(2), without recording justifiable reasons is not justified.
[Cooner Institute of Health Care & Research Centre (P.) Ltd. v ITO [2020] 118 taxmann.com 69 (Delhi)]
25. Where assessee, running a hotel, incurred certain expenses on renovation and repair of hotel rooms, same was to be allowed as deduction under section 37(1).
[Pandian Hotels Ltd. v Dy. CIT [2020] 118 taxmann.com 76 (Madras)]
26. Where Assessing Officer initiated reassessment proceedings on ground that assessee had raised excess claim of depreciation in respect of water supply and drainage system, in view of fact that said reason for reopening of assessment was subject matter of proceedings under section 143(3) and thereupon proceedings under section 263, once again, for very same reason, power under section 147 could not be invoked and, thus, impugned reassessment proceedings were to be set aside.
[CIT v Neyveli Lignite Corporation Ltd. [2020] 117 taxmann.com 847 (Madras)]
27. Where assessee had requested for stay on demand for recovery of tax under section 220 contending that prepaid taxes lying with revenue were higher as compared to 20 per cent of disputed demand and interim stay was granted, but it was found that assessee mislead High Court in preliminary hearing of petition which led to passing of interim order, writ petition was to be dismissed with cost.
[Indus Towers Ltd. v Asst. CIT [2020] 117 taxmann.com 966 (Delhi)]
28. Amount of stale demand drafts not claimed by customers and which had become barred by limitation could not be treated as income of bank.
[CIT v City Union Bank Ltd. [2020] 118 taxmann.com 96 (Madras)]
29. In absence of a statutory provision, a duty cannot be cast upon legal representatives to intimate factum of death of assessee to department and, thus, where Assessing Officer issued a notice to assessee under section 148 after his death and, in such a case, it could not have been validly served upon assessee, said notice being invalid, was to be quashed.
[Savita Kapila v Asst CIT [2020] 118 taxmann.com 46 (Delhi)]
30. Where during search conducted upon a partner of assessee-firm, Assessing Officer clearly recorded satisfaction that document found contained details with regard to sales, gross profit and net profit of assessee-firm and, further, said partner had recorded statement on oath that he had received his share profit from assessee firm, no return of income was filed by assessee, section 158BD notice issued against assessee-firm was justified.
[Sri Venkatesha Bottles v Asst. CIT [2020] 118 taxmann.com 91 (Karnataka)]
31. In existence of an alternative and efficacious remedy, it would be improper for a writ court to exercise its jurisdiction and, thus, question as to whether notice issued under section 147 is justified or not is a question of fact and as questions of fact cannot be gone into by a writ court, it would necessarily have to be considered by concerned authorities.
[Telekom Malaysia Berhad v UOI [2020] 118 taxmann.com 87 (Karnataka)]
32. Where assessee had been granted stay of 80 per cent disputed demand subject to payment of 20 per cent demand, in view of fact that there had been attachment of bank account, attachment already resorted to would be limited to 20 per cent of demand.
[Monarch v ITO [2020] 118 taxmann.com 88 (Karnataka)]
33. Where assessee invested sale proceeds of old asset in new property before due date of filing belated return and took possession within three years, she was entitled to exemption under section 54F though she had not invested sale proceeds in Capital Gain Account Scheme before due date of filing of return under section 139(1).
[CIT v Smt. Umayal Annamalai [2020] 118 taxmann.com 80 (Madras)]
INCOME TAX APPELLATE TRIBUNAL
1. Where assessee earned interest income from fixed deposit (FD) receipts with bank which were made by assessee in course of its trading business of import for purpose of re-export, for obtaining letter of credit for its purchases, same was to be assessed as business income.
[Zaveri & Co. (P.) Ltd v Dy. CIT [2020] 118 taxmann.com 429 (Ahmedabad – ITAT)]
2. Addition made on estimation basis under section 44AD without rejecting books of account is unjustified. Where assessee’s turnover exceeded Rs. one crore but it failed to get accounts audited under section 44AB, in such a case, Assessing Officer could make addition to assessee’s income on estimation basis under section 44AD only after rejecting books of account and thereafter passing a best judgment assessment order under section 144.
[Sayqul Islam v ITO [2020] 118 taxmann.com 347 (Gauhati – Trib.)]
3. Whether once borrowing made through debentures and utilized for business had been established through agreements and correspondences and no contrary evidence had been placed, then claim of loss could not be rejected.
[Shivsagar Builders (P.) Ltd. v Asst. CIT [2020] 118 taxmann.com 349 (Delhi – Trib.)]
4. Where assessee company claimed expenditure in respect of professional charges paid for investment advisory services and interest expenditure paid towards capital borrowed, since assessee was not carrying on any business during year and, thus, said professional fees was not paid in course of business activity and, further, interest expenditure was also not with respect to capital borrowed by assessee for purpose of business, such professional fees and interest paid could not be allowed.
[Quippo Telecom Infrastructure (P.) Ltd. v Asst. CIT [2020] 118 taxmann.com 345 (Delhi – Trib.)]
5. Expenditure incurred by assessee on implementation of software for smooth functioning of business, was to be allowed as deduction under section 37(1).
[Triveni Engineering & Industries Ltd. v Addl CIT [2020] 118 taxmann.com 301 (Delhi – Trib.)]
6. Where assessee challenged addition of long term capital gain arising from sale of land on ground that agrrement to sell said land was cancelled subsequently by executing a cancellation deed, in view of fact that possession of land was never handed over by assessee to third party, on said count alone, provisions of section 2(47)(v), read with section 53A of Transfer of Property Act, 1882, would not be applicable and, thus, impugned addition was to be deleted.
[Futura Polyster Ltd. v ITO [2020] 118 taxmann.com 243 (Mumbai – Trib.)]
7. Where in course of reassessment proceedings, Assessing Officer disallowed business counseling charges paid to two companies, in view of fact that those companies were not traceable and their presence, infrastructure and nature of services rendered by them were also not proved at all, impugned disallowance was to be confirmed.
[Jaee Vishwas Joshi v Asst. CIT [2020] 118 taxmann.com 291 (Mumbai – Trib.)]
8. As far as deduction under section 80P(2)(d) is concerned, said provision does not make any distinction in regard to source of investment by co-operative society and, thus, in such a case, revenue is not required to look to nature of investment whether it is from surplus funds or otherwise.
[Mantola Co-operative Thrift & Credit Society Ltd. v ITO [2020] 118 taxmann.com 276 (Delhi – Trib.)]
9. Commissioner (Appeals) could not confirm penalty order passed under section 271AAA merely on ground that written submissions filed against said order did not bear signature of assessee.
[Keshavlal Devkaranbhai Patel v Asst CIT [2020] 118 taxmann.com 223 (Rajkot – Trib.)]
10. Where in respect of sale of property by assessee, Assessing Officer made addition to taxable income by invoking provisions of section 50C, in view of fact that valuation of property sold on basis of stamp duty valuation as on date of registration had been determined without referring matter to DVO, impugned addition made by Assessing Officer was to be deleted.
[Ramesh Govindbhai Patel v ITO [2020] 118 taxmann.com 201 (Ahmedabad – Trib.)]
11. Where in respect of relevant year, Asseessing Officer disallowed interest payments under section 40(a)(ia) without verifying as to whether assessee was to be treated as assessee in default or not, in view of second proviso to section 40(a)(ia) coming into effect from 01-04-2012 by Finance Act, 2012, impugned disallowance was to be deleted and, matter was to be remanded back for disposal afresh.
[BBR Projects (P.) Ltd. v ITO [2020] 118 taxmann.com 133 (Hyderabad – Trib.)]
12. Expenses wholly and exclusively incurred by a pharmaceutical company in normal course of its business towards gifts as product reminders, travel facilities of doctors, conference of doctors or similar freebies to medical practitioners or their professional associations would not be hit by Explanation 1 to section 37(1).
[Medley Pharmaceuticals Ltd. v Pr. CIT [2020] 118 taxmann.com 44 (Mumbai – Trib.)]
13. Where assessee had substantially complied with provisions of section 54(1) by purchasing new house property within prescribed time period, a mere non-compliance of procedural requirement under section 54(2) i.e. some delay in depositing amount in CGAS, could not stand in way of assessee in getting benefit under section 54.
[ITO v Smt. Rekha Shetty [2020] 118 taxmann.com 10 (Chennai – Trib.)]
14. If directors, in terms of Board resolution, were entitled to receive commission for rendering services to company and if it was in terms of employment on basis of which they had been rendering services, then such remuneration/commission would be part and parcel of salary.
[Dy. CIT v Abro Technologies (P.) Ltd. [2020] 118 taxmann.com 65 (Delhi – Trib.)]
15. Where placement charges were paid by assessee to cable operators/MSOs for placing signals on a preferred band, it was a part of work of broadcasting and telecasting covered by sub-clause (b) of clause (iv) of explanation to section 194C.
[Star India (P.) Ltd. v Asst. CIT [2020] 117 taxmann.com 988 (Mumbai – Trib.)]
16. Where pursuant to scheme of amalgamation as approved by High Court, a company was merged with assessee company and amalgamating company was not in existence at time of conduct of assessment proceedings as well as on date of passing Assessment Order, Assessment Order passed in name of amalgamating company being void ab initio was to be set aside.
[Genpact India (P.) Ltd. v Dy. CIT [2020] 118 taxmann.com 40 (Delhi – Trib.)]
17. Where appellant, Bar Council of India was engaged in safeguarding rights, privileges and interest of advocates, thus, its dominant purpose being of advancement of general public utility, it would be entitled for registration under section 12AA and consequent exemption under section 80-G.
[Bar Council of Delhi v CIT [2020] 117 taxmann.com 980 (Delhi – Trib.)]
18. Agricultural land purchased by assessee was not governed by provisions of section 56(2)(vii)(b) since said land was not capital asset as per section 2(14) and hence, no addition could be made in hands of assessee.
[Mubarak Gafur Korabu v ITO [2020] 117 taxmann.com 828 (Pune – Trib.)]
19. Where assessee was in business of commodity derivatives and revenue had also accepted income from transactions of assessee as business income and not as income from speculation for all earlier years, if owing to suspension of operations by NSEL, assessee could not recover amounts from brokers which were advanced for purchase of commodities; such loss was allowable under section 28.
[Chowdry Associates v Asst. CIT [2020] 117 taxmann.com 840 (Delhi – Trib.)]
20. Provisions of section 43CB prescribing percentage completion method for determining profits and gains of a construction company are to be applied mandatorily with effect from 01-04-2017 i.e. assessment year 2017-18 onwards and, therefore, assessment completed in case of assessee, a construction company, on basis of project completion method in relevant assessment year could not be declared as invalid on aforesaid ground.
[Hi-tech Estates & Promoters (P.) Ltd. v Pr. CIT [2020] 117 taxmann.com 965 (Cuttack – Trib.)]
21. In case of public limited company, issue of shares to Qualified Institution Buyers ( QIB) would be regarded as issue of shares to ‘public’ and, thus, expenses incurred on said issue would be eligible for deduction under section 35D.
[Yes Bank Ltd. v Dy. CIT [2020] 117 taxmann.com 974 (Mumbai – Trib.)]
22. Where assessee claimed legal and professional charges in respect of huge project sold in earlier assessment year, a part of said expenses was bound to spill over to next year and, thus, assessee’s claim for deduction in relevant year could not be rejected on ground of prior period expenses.
[Supreme Build Cap (P.) Ltd. v Asst. CIT [2020] 117 taxmann.com 848 (Delhi – Trib.)]
23. Only probability and likelihood to find error in assessment order is not permitted under section 263, Commissioner ought to find out specific error in assessment order.
[Abdul Hamid v ITO [2020] 117 taxmann.com 986 (Gauhati – Trib.)]
24. Where claim of additional depreciation on goodwill subsequent to amalgamation was not made in return of income, there was no restriction in entertaining a fresh claim of deduction during assessment.
[Banc Tec TPS India (P.) Ltd. v Asst. CIT [2020] 117 taxmann.com 979 (Mumbai – Trib.)]
INTERNATIONAL TAXATION CASE LAWS
1. Where Taxpayer was a citizen of United Kingdom and holder of a working holiday visa under subclass 417 and earned ‘working holiday taxable income’ in Australia, she had been rightly assessed to tax in accordance with rates set out in Pt. III of Sch. 7 of Income Tax Rates Act, 1986.
[Addy v Commissioner of Taxation [2020] 118 taxmann.com 267 (FC-Australia)]
2. Where Canadian Bank advanced huge loan to a Canadian companywhich sold its interest in a oil field to UK company in exchange of various sums including an entitlement to future contingent royalty payments and to repay Bank, it formally assigned to Bank its rights to future payments from UK company, bank’s rights amounted to “immovable property” under UK/Canada double tax treaty Article 6(2)thus, royalty payments made by UK company would be taxable in UK.
[Royal Bank of Canada v Commissioners [2020] 118 taxmann.com 77 (UKFTT)]
3. Where assessee, a resident company, entered into agreement with a UK based company to produce, complete and deliver a feature film on payment of certain agreed consideration, in view of fact that said agreement was entered into between assessee and non-resident company on Principal to Principal basis and, assessee did not participate in management, control and capital of said company, provisions of article 10 of India-UK DTAA would not apply and, thus, amount remitted to UK based company was not taxable in India.
[Next Gen Films (P.) Ltd. v ITO [2020] 118 taxmann.com 314 (Mumbai – Trib.)]
4. Where assessee, a Denmark based company, received certain amount from its Indian group concern towards reimbursement of cost for rendering administrative services, amount so received was not taxable in India as ‘fee for technical services’ under article 13 of India-Denmark DTAA.
[Damco International A/S v Dy. CIT [2020] 118 taxmann.com 37 (Mumbai – Trib.)]
5. Where assessee received management fee from Indian company to support it in carrying on business efficiently and in line with business model, policies and best practices and these services did not make available any technical knowledge, skill, know-how or processes to Indian company, such fees would not be fees for technical services.
[Edenred (P). Ltd. v Dy. DIT [2020] 118 taxmann.com 2 (Mumbai – Trib.)]
TRANSFER PRICING CASE LAWS
1. Where remand order passed by Tribunal specifically directed Assessing Officer to carryout working capital adjustment regarding artificial cap and to re-examine as to whether two comparables would pass through all filters applied by TPO, since there was a limited remand of matter for judicious consideration afresh, mandatory procedure prescribed under section 144C to extent of such remand ought to have been followed.
[Wipro GE Healthcare (P.) Ltd. v Dy. CIT [2020] 118 taxmann.com 302 (Karnataka)]
2. Where assessee made payment of certain expenditure incurred abroad in foreign currency without deducting tax at source and, thus, said expenditure was disallowed by TPO, in view of fact that a major part of said expenses was towards reimbursement of expenses incurred by AEs outside India and, thus, tax was not required to be deducted on same, impugned disallowance was to be deleted.
[Dy. CIT v Exxon Mobil Lubricants (P.) Ltd. [2020] 118 taxmann.com 51 (Delhi – Trib.)]
3. Data to be used for comparison should be data relating to same financial year in which international transaction were entered by tested party.
[Firemenich Aromatics (I) (P) Ltd. v Asst CIT [2020] 118 taxmann.com 3 (Mumbai – Trib.)]
4. Where TPO made adjustments to assessee’s ALP in respect of various payments made to AE such as payment of licensing fee for time and billing software, payment of regional administration cost allocation and payment of information technology cost allocation etc. without following any of methods prescribed under section 92C, impugned adjustments deserved to be set aside.
[Boston Consulting Group (I) (P) Ltd. v Asst CIT [2020] 118 taxmann.com 352 (Mumbai-Trib.)]
5. Where assessee paid discount to various affiliates of overseas AEs in India in respect of sale of software testing services in terms of MOU entered into with AEs, Assessing Officer could not disallow entire payments so made without examining those terms of MOU available before him at time of assessment.
6. Where in respect of software development services rendered to AE, assessee entered into Advance Pricing Agreement (APA) with CBDT, in such a case, when undisputedly there was no change in FAR of assessee in year under assessment vis-à-vis years covered under APA and, consolidated margin computed as per APA at 19.26 per cent was much more than consolidated margin agreed upon between assessee and CBDT for years covered under APA at 16.60 per cent, impugned transfer pricing adjustment made by TPO by applying transfer pricing principles was to be set aside.
[FIS Global Business Solutions India (P) Ltd. v Dy. CIT [2020] 118 taxmann.com 221 (Delhi-Trib.)]
7. In view of fact that amendment to sub-section(2) to section 92B would be applicable from 01-04-2015, TPO could not treat loan transactions entered into between assessee and its group entities located in India as ‘deemed international transactions’ in assessment year in question.
[Regus Business Centre (P) Ltd. v ITO [2020] 118 taxmann.com 203 (Mumbai-Trib.)]
8. Where due to natural calamity assessee could not file Form No. 35A signed by concerned director but filed a scanned copy of same signed by director residing in other country before DRP with a bonafide intention to meet deadline for filing its objections against draft assessment order, impugned order rejecting Form No.35A was to be quashed.
[Rivendell PE LLD v Asst. CIT [2020] 118 taxmann.com 204 (Mumbai-Trib.)]
9. Following order passed by Co-ordinate Bench of Tribunal in assessee’s own case relating to earlier assessment year, TNMM was to be applied for determining ALP of international transactions relating to export of chemical additives to AEs.
[Lubrizol India (P.) Ltd. v Asst CIT [2020] 118 taxmann.com 138 (Mumbai – Trib.)]
10. Commercial expediency of loan is wholly irrelevant in ascertaining ALP of interest on said loan advanced to AE.
[Laqshya Media Ltd. v Dy. CIT [2020] 118 taxmann.com 52 (Mumbai – Trib.)]
11. In absence of any material on record showing that incurring of AMP expenses on behalf of AE was a separate international transaction, impugned addition made to assessee’s ALP in said regard was to be deleted.
[Casio India Company (P.) Ltd. v Asst. CIT [2020] 118 taxmann.com 162 (Delhi – Trib.)]
12. Where there was delay in realization of sales proceeds from AEs of 138 days as compared to average delay of 146 days from non-AEs, since no interest was charged from non-AEs, adjustment on account of notional interest for delay in realization of sales made to AEs was not warranted.
[Dania Oro Jewellery (P.) Ltd. v Dy. CIT [2020] 118 taxmann.com 14 (Mumbai – Trib.)]
13. Where assessee, acting as agent for advertising as well as for overseas media companies and carried all channel subscription business., paid certain amount towards brand license and claimed depreciation, in view of fact that said fee had been approved by RBI, therefore no disallowance of expenses could be made.
[Star India (P.) Ltd. v Asst. CIT [2020] 117 taxmann.com 988 (Mumbai – Trib.)]
14. Company having super normal profits or highly unstable margins should not be ideally considered as good comparable.
[Banc Tec TPS India (P.) Ltd. v Asst CIT [2020] 117 taxmann.com 979 (Mumbai – Trib.)]
15. Following order passed by Co-ordinate Bench of Tribunal in assessee’s own case in earlier assessment year, arm’s length rate of guarantee commission was to be charged at rate of 0.50 percent in respect of corporate guarantee provided by assessee on behalf of its AEs abroad.
[Dy. CIT v Piramal Enterprises Ltd. [2020] 117 taxmann.com 970 (Mumbai – Trib.)]
16. Where Assessing Officer made a reference to determine ALP of international transaction entered into by assessee on ground there was transfer pricing addition of more than Rs. 10 crores in earlier year, since there was no transfer pricing adjustment of more than 10 crores in earlier year, Assessing Officers reference to TPO was in contravention to Instruction No. 3 of 2016 and such reference was to be declared as invalid.
[Sava Healthcare Ltd. v Dy. CIT [2020] 118 taxmann.com 90 (Pune – Trib.)]
17. Merely because a comparable was not selected during previous and subsequent year, it was not necessary that same could not be accepted during relevant year.
[Roche Diagnostics India (P.) Ltd. v Asst. CIT [2020] 118 taxmann.com 89 (Mumbai – Trib.)]
18. Where services were received from AE in form of platform to conduct e-auction by assessee and, there was not an iota of material on record showing that said services were duplicative in nature, ALP of technical fee paid for availing of said services could not be determined as nil.
[Ariba India (P.) Ltd. v Dy. CIT [2020] 117 taxmann.com 935 (Delhi – Trib.)]
19. having RPT at 43.18% was to be excluded from list of comparables if TPO applied RPT filer of 20%.
[Atlas Healthcare Software India (P.) Ltd. v ACIT [2020] 117 taxmann.com 839 (Kolkata – Trib.)]
20. Where outstanding receivable from associated enterprise was more than shareholders funds available with assessee implying that total profit earned by assessee was enjoyed by its associated enterprise out of India fully, TPO could not be faulted in considering overdue outstanding receivable from its associated enterprise as a separate international transaction and making addition on account of arm’s length price.
[Techbooks International (P.) Ltd. v Asst CIT [2020] 117 taxmann.com 851 (Delhi – Trib.)]
Disclaimer: Above said information are taken from publically available resources and believed to be accurate.
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