NEWS
DIRECT TAX
1. CBDT prescribes ‘Other Electronics Modes’ for the purpose of electronic payments & receipts.
[Ref: NOTIFICATION NO. 8/2020 [G.S.R. 56(E)/ F.NO.370142/14/2019-TPL], DATED 29-1-2020]
2. CBDT notifies ‘Institute of Pesticide Formulation Technology’ for the purpose of sec. 35 deduction.
[Ref: NOTIFICATION NO. S.O. 389(E) [NO. 7/2020/F. NO. 203/02/2019(ITA-II)], DATED 28-1-2020]
3. CBDT proposes new Form 15E for making application to determine ‘sum chargeable to tax’ u/s 195.
[Ref: OFFICE MEMORANDUM F. NO. 340142/24/2019-TPL, DATED 31-12-2019]
4. notifies Form ITR 1 and ITR 4 for Assessment Year 2020-21.
[Ref: Notification No. 01/2020/F. No. 370142/32/2019-TPL]
5. CBDT condones delay of up to 365 days in filing of audit report & income accumulation of trust for AY 2018-19.
[Ref: CIRCULAR NO. 2/2020 [F. NO. 197/55/2018-ITA-I], DATED 3-1-2020]
6. CBDT eases eligibility conditions for filing ITR-1 & ITR-4 for AY 2020-21.
[Ref: PRESS RELEASE, DATED 9-1-2020]
7. CBDT releases MLI synthesised text for India-Poland, India-Ireland & India-UK tax treaties
[Ref: www.incometaxindia.gov.in]
8. CBDT further extends due date for linking of Aadhaar with PAN till March 31, 2020
[Ref: NOTIFICATION S.O. 4708(E) [NO.107/2019 [F.NO.225/75/2019-ITA.II), DATED 30-12-2019]
9. ‘Debit card powered by RuPay’ and ‘UPI’ notified as prescribed mode of payments for the purpose of section 269SU.
[Ref: NOTIFICATION NO. 105/2019 [G.S.R.960(E), (F.NO.370142/35/2019-TPL)], DATED 30-12-2019]
10. Penalty for not providing facility to accept digital payment as per 269SU to be levied from 01-02-2020.
[Ref: CIRCULAR NO. 32/2019 [F.NO.370142/35/2019-TPL], DATED 30-12-2019]
11. Constituent Company to furnish info of international group irrespective of international transaction; Rule 10DA amended
[Ref: www.incometaxindia.gov.in]
OECD
[Ref:-https://www.oecd.org]
1. OECD releases consultation document on the review of Country-by-Country Reporting and invites public input (BEPS Action 13).
2. International community renews commitment to multilateral efforts to address tax challenges from digitalization of the economy.
3. Togo joins international efforts against tax evasion and avoidance.
4. North Macedonia signs landmark agreement to strengthen its tax treaties.
5. OECD and IOTA join forces in promoting stronger tax systems.
6. Viet Nam and Palau join the Global Forum on Tax Transparency.
7. Saudi Arabia deposits its instrument of ratification for the Multilateral BEPS Convention.
8. Cyprus deposits its instrument of ratification for the Multilateral BEPS Convention.
9. Qatar deposits its instrument of ratification for the Multilateral BEPS Convention.
10. Liechtenstein deposits its instrument of ratification for the Multilateral BEPS Convention
11. Brazil identifies a clear pathway for aligning its transfer pricing framework with the OECD standard.
12. Honduras and Montenegro joins the Inclusive Framework on BEPS.
13. OECD releases peer review reports on dispute resolution for Brazil; Bulgaria; China; Hong Kong, China; Indonesia; Russia and Saudi Arabia
Benin, Bosnia and Herzegovina, Cabo Verde,
14. Mongolia and Oman join the most powerful multilateral instrument against offshore tax evasion and avoidance
15. Kenya and Oman sign landmark agreement to strengthen their tax treaties
16. OECD releases guidance on the spontaneous exchange by no or only nominal tax jurisdictions
17. Bosnia and Herzegovina signs landmark agreement to strengthen its tax treaties
18. Jordan signs landmark agreement to strengthen its tax treaties
19. Albania joins the Inclusive Framework on BEPS.
20. Ecuador and Serbia deposit instruments of ratification for the multilateral Convention on Mutual Administrative Assistance in Tax Matters.
21. Canada and Switzerland deposit their instruments of ratification for the Multilateral BEPS Convention.
22. Guinea, Namibia and Honduras join the fight against tax evasion.
23. OECD releases first stage 2 monitoring reports for BEPS Action 14 on improving tax dispute resolution mechanisms.
24. Namibia joins the Inclusive Framework on BEPS.
DOMESTIC TAX CASE LAWS
SUPREME COURT
1. Where High Court upheld Tribunal’s decision of deleting penalty in case of assessee under section 271(i)(c) on basis of order passed in case of sister concern of assessee, SLP filed against said order was to be dismissed. [Pr. CIT v Synbiotics Ltd. [2020] 113 taxmann.com 153 (SC)]
2. Where High Court upheld Tribunal’s order allowing assessee’s claim for depreciation on goodwill, SLP filed against said order was to be dismissed. [Pr. CIT v Zydus Wellness Ltd. [2020] 113 taxmann.com 154 (SC)]
3. Where High Court upheld Tribunal’s order allowing assessee’s claim for carry forward of loss by taking a view that assessee had not sought to gain any unfair advantage in matter by filing return in old Form, SLP filed against said order was to be dismissed. [CIT v Zila Sahkari Bank (P.) Ltd. [2020] 113 taxmann.com 165 (SC)]
4. Where High Court upheld Tribunal’s order holding that section 32 covered certain intangible assets for depreciation and, thus, claim raised by assessee being a plausible claim, mere fact that same was withdrawn during subsequent search proceedings would not give rise to penalty under section 271(1)(C) SLP filed against said order was to be dismissed. [Pr. CIT v Financial Technologies India Ltd. [2020] 113 taxmann.com 152 (SC)]
5. Benami transactions are forbidden by reason of section 3; no action lies, nor can any defense in a suit be taken, based on any benami transaction in terms of section 4 and onus of establishing that a transaction is benami is upon one who asserts it. [Fair Communication & Consultants v Surendra Kerdile [2020] 113 taxmann.com 377 (SC)]
6. Where High Court upheld Tribunal’s order holding that since assessee had revised her return showing capital gain arising from sale of land prior to issue of notice under section 153C and, thus, penalty could not be imposed under sec. 271(1)(c), SLP filed against said order was to be dismissed. [Pr. CIT v Prabhjot Kaur Chhabra [2020] 113 taxmann.com 141 (SC)]
7. SLP dismissed against High Court ruling that Principal Commissioner/Commissioner (DR) could not be given opportunity of hearing at time of consideration of application for settlement at stage of admission under section 245D(2C). [Income Tax Settlement Commission v Akshar Developers [2020] 113 taxmann.com 164 (SC)]
8. Where during pendency of appellate proceedings, a stay order was passed subject to assessee’s depositing 15 per cent of outstanding tax demand which was confirmed by High Court, SLP filed against said order was to be dismissed. [Karmvir Builders v Pr. CIT [2020] 113 taxmann.com 139 (SC)]
9. Where High Court decided issue relating to applicability of second proviso to section 40(a)(ia) to assessment year 2010-11 against revenue, SLP filed against said order was to be granted. [Pr. CIT v Noida Software Technology Park Ltd. [2020] 113 taxmann.com 145 (SC)]
10. Where High Court upheld Tribunal’s order holding that in absence of any evidence on record showing that funds of assessee trust were being utilised for private purposes, Assessing Officer was not justified in refusing to grant approval under section 80G(5)(vi), SLP filed against said order was to be dismissed. [CIT (exp) v Seth Vinod Kumar Somani Charitable Trust [2020] 113 taxmann.com 143 (SC)]
11. There is no reason to deny payment of interest under section 244A to deductor who had deducted tax at source and deposited same with Treasury and, thus, appellant would be entitled to interest on amount refunded by Department. [Universal Cables Ltd. v CIT [2020] 113 taxmann.com 353 (SC)]
12. Where High Court upheld Tribunal’s order allowing assessee’s application for stay of demand during pendency of appellate proceedings, SLP filed against said order was to be dismissed. [CIT v MSD Pharmaceuticals (P.) Ltd. [2020] 113 taxmann.com 137 (SC)]
13. SLP dismissed against High Court ruling that when expenditure incurred in foreign currency on account of telecommunication expenses is excluded from export turnover, said expenditure has to be excluded from total turnover also for purpose of computation of deduction under section 10B. [CIT v Mphasis Ltd. [2020] 113 taxmann.com 74 (SC)]
14. Where High Court upheld Tribunal’s order holding that assessee had followed an accepted method of valuation of shares and, thus, addition made by Assessing Officer in said respect was not sustainable, SLP filed against order of High Court was to be dismissed. [Pr. CIT v Microfilm Capital (P.) Ltd. [2020] 113 taxmann.com 89 (SC)]
15. Where High Court allowed assessee’s claim for deduction of expenditure incurred on fertility improvement amongst milk animals on ground that said expenditure was general in nature and aimed at improving practices for better fertility amongst milk animals, SLP filed against said order was to be dismissed. [Pr. CIT v Gujarat Co. Op. Milk Marketing Federation Ltd. [2020] 113 taxmann.com 85 (SC)]
16. Where High Court upheld Tribunal’s order holding that since assessee had withdrawn huge amount of cash from his bank account on different dates source of which she failed to explain, and, thus, an addition was to be made under section 69A, SLP filed against said order was to be dismissed. [Shashi Garg v Pr. CIT [2020] 113 taxmann.com 93 (SC)]
17. Where High Court finding that Gold Dore Bars, which had been seized were stock-in-trade of assessee and had been imported as raw materials, directed that said goods could be released to assessee after proper verification, SLP filed against order of High Court was to be dismissed. [Dy. DIT v Kundan Care Products Ltd. [2020] 113 taxmann.com 91 (SC)]
18. SLP dismissed against High Court ruling that where assessee allotted shares to a company in settlement of pre-existing liability of assessee to said company, since no cash was involved in transaction of said allotment of shares, conversion of these liabilities into share capital and share premium could not be treated as unexplained cash credits under section 68. [ITO v V.R. Global Energy (P.) Ltd. [2020] 113 taxmann.com 31 (SC)]
19. Where High Court upheld Tribunal’s order holding that assessee’s claim for exemption under section 10(38) could not be allowed because share transactions were bogus as company ‘C’ whose shares were allegedly purchased was a penny stock, SLP filed against said order was to be dismissed. [Suman Poddar v ITO [2019] 112 taxmann.com 330 (SC)]
20. SLP dismissed against High Court ruling that disallowance under section 14A cannot exceed exempt income of relevant year. [Pr. CIT v Caraf Builders & Constructions (P.) Ltd. [2019] 112 taxmann.com 322 (SC)]
21. Where High Court held that Tribunal had erred in taking view that assessee was entitled to deduction under section 80HHC on total income after excluding deduction available under section 80-IB, SLP filed against said order was to be dismissed. [Asst. CIT v IPCA Laboratories Ltd. [2019] 112 taxmann.com 332 (SC)]
22. SLP dismissed against High Court ruling that once genuineness, creditworthiness and identity of investors are established, no addition could be made as cash credit on ground that shares were issued at excess premium. [Pr. CIT v Bharat Securities (P.) Ltd. [2020] 113 taxmann.com 32 (SC)]
23. Where High Court upheld Tribunal’s order holding that assessee had satisfied all conditions stipulated in provisions of section 80-IB(10) and, therefore, it would be eligible to claim deduction, SLP filed against said order was to be dismissed. [Pr. CIT v Kewal Real Estate Developers (P.) Ltd. [2020] 113 taxmann.com 50 (SC)]
24. Where High Court upheld Tribunal’s order holding that in absence of any failure on part of assessee to disclose fully and trully all material facts at time of assesment, reassessment proceedings could not be initiated after expiry of four years from end of relevant year, SLP filed against said order was to be dismissed. [Pr. CIT v L&T Ltd [2020] 113 taxmann.com 48 (SC)]
25. SLP dismissed against High Court ruling that where assessee allotted shares to a company in settlement of pre-existing liability of assessee to said company, since no cash was involved in transaction of said allotment of shares, conversion of these liabilities into share capital and share premium could not be treated as unexplained cash credits under section 68. [ITO v V.R. Global Energy (P.) Ltd. [2020] 113 com 31 (SC)]
HIGH COURT
1. Where during pendency of writ proceedings against order passed by AO raising demand of tax deducted at source from assessee’s salary income, assessee made repeated request by way of rectification application before Assessing Officer but said application was not disposed of, it was appropriate to direct Assessing Officer to consider rectification application filed by assessee and pass orders on same on merits and in accordance with law. [Sankaranarayanan Rajshekar v. Dy. CIT [2020] 113 taxmann.com 331 (Madras)]
2. Loss on revaluation of trading stock of Interest Rate Swaps (IRS) on market to market basis is only notional loss/revaluation and is not allowable as deduction. [Federal Bank Ltd. v Dy. CIT [2020] 113 taxmann.com 333 (Kerala)]
3. Benefit under sections 11 and 12 would be available to assessee from assessment year following financial year in which application for registration under section 12A was given and not from any previous year. [CIT (Exp) v. Shiv Kumar Sumitra Devi Smarak Shikshan Sansthan [2020] 113 taxmann.com 334 (Allahabad)]
4. Where assessee preferred an appeal before Tribunal against additions made to its income on account of royalty issue, Transfer pricing and attribution along with stay application under section 220 seeking for stay of recovery proceedings, since Tribunal remanded issues related to transfer pricing and attribution to TPO, no arbitrariness or perversity was found in interim order of Tribunal considering only demand related to royalty issue while quantifying sum to be paid by assessee as a condition for grant of stay of demand. [Jt. CIT v Google India (P.) Ltd. [2020] 113 taxmann.com 236 (Karnataka)]
5. High Court slams Tax Dept. for conducting search actions solely relying info received from investigation wing. [Khem Chand Mukim v Pr. CIT [2020] 113 taxmann.com 529 (Delhi)]
6. Adjudication on merits of case by Tribunal is essential for High Court to hear an appeal and Tribunal could not have dismissed same solely on account of non-appearance of a party. In absence of party, Tribunal should proceed to decide matter on merits and it cannot defeat rights of parties on its whims and fancies or by procedural wrangles and uncertainties. [Golden Times Services (P.) Ltd. v Dy. CIT [2020] 113 taxmann.com 524 (Delhi)]
7. Where assessee sold a land during relevant assessment year and as per MOU part of sale consideration was payable by purchaser on completion of assessee’s obligation under MOU, assessee having not met conditions of MOU during relevant year such amount was not taxable in relevant assessment year. [Pr. CIT v Rohan Projects [2020] 113 taxmann.com 339 (Bombay)]
8. Where AO rejected assessee’s claim for deduction under section 54B in respect of capital gain arising from sale of agricultural land on ground that purchaser of land was a builder and, thus, said piece of land was not agricultural land, since view taken by Assessing officer while rejecting assessee’s claim was not in consonance with requirements made under section 54B, impugned order passed by him was to be set aside. [S. Sundaramurthy v Pr. CIT [2020] 113 taxmann.com 341 (Madras)]
9. Where there was dispute relating to taxability of transaction of buy back of shares from shareholders by assessee-company in terms of section 115-O, Single Judge while directing assessee to file an appeal before Commissioner (Appeals) under section 246A, was not justified in entering into merits of case so far as taxability under section 115-O was concerned. [Cognizant Technology Solutions India (P.) Ltd. v Dy. CIT [2020] 113 taxmann.com 232 (Madras)]
10. For block assessment of undisclosed income also, provisions of sections 142, 143(2) and 143(3) are applicable; no assessment can be made without issuing notice under section 143(2). [CIT v Fomento Finance and Investment (P.) Ltd. [2020] 113 taxmann.com 237 (Bombay)]
11. Where assessee entered into an agreement to let out a premises with various amenities, and for maintainance and upkeeping of said premises since assessee did not involve any kind of recurring, systematic and organized business activity and, moreover, in respect of maintenance and upkeeping of let out premises, it appointed only one person, Assessing Officer was justified in treating rental income assessable as ‘income from house property’ and services receipts as ‘income from other sources’. [Meeraj Estate & Developers v CIT [2020] 113 taxmann.com 231 (Allahabad)]
12. Where assessee entered into an MoU with State Government wherein assessee agreed to construct houses to rehabilitate flood victims, since assessee incurred this expenditure not only as a social responsibility but also keeping in mind goodwill and benefit it would yield in long run in earning profit, impugned expenditure would be in realm of ‘business expenditure’ allowable under section 37(1). [Kanhaiyalal Dudheria v Jt. CIT [2020] 113 taxmann.com 217 (Karnataka)]
13. Where pursuant to issuance of notice under section 148, High Court passed a stay order restraining revenue to pass final assessment order till disposal of petition filed by assessee, it did not mean that continuation of reassessment proceedings in meantime would be contrary to statute and, thus, assessee’s plea that Assessing Officer could not recommence assessment proceedings by issuing notice under section 143(2), deserved to be rejected. [Devendra Kumar Singh v Asst. CIT [2020] 113 taxmann.com 118 (Delhi)]
14. Where relief claimed in petition is to direct department to accept return of income of applicant for assessment year 2017-18 furnished electronically under section 139(1) and to declare that section 139AA violates article 21 of Constitution of India, since on question as to whether Aadhaar Act was rightly introduced as a ‘Money Bill’, Supreme Court vide in case of Rojer Mathew v. South Indian Bank Ltd. has referred issue for consideration by a Larger Bench and therefore, validity of Aadhaar Act has not attained finality, with a view to balance equities, the High Court ordered that PAN of applicant shall not be declared inoperative and applicant would not be in default in any proceedings only for reason that permanent account number is not linked with Aadhaar or Aadhaar number is not quoted and applicant shall not be subjected to proviso to sub-section (2) of section 139AA till judgment of Supreme Court in Rojer Mathew v. South Indian Bank Ltd. [2019] 111 taxmann.com 208 is delivered and available. [Bandish Saurabh Soparkar v UOI [2020] 113 taxmann.com 416 (Gujarat)]
15. Where order passed under section 201 against assessee which was an important element in deciding tax deduction rates in certificate issued under section 197, did not survive, DCIT (TDS) was directed to undertake fresh exercise to decide rate of income tax to be deducted. [TLG India (P.) Ltd. v Dy. CIT [2020] 113 taxmann.com 158 (Bombay)]
16. Where pursuant to addition made to income of assessee a penalty under section 271(1)(c) was imposed and assessee filed an appeal against such penalty before Commissioner (Appeals), since revenue had recovered huge amount of penalty by way of adjustment from refund payable to assessee, assessee was to be granted stay against further recovery of penalty amount till final disposal of appeal by Commissioner (Appeals). [Vodafone India Services P. Ltd. v UOI [2020] 113 taxmann.com 120 (Gujarat)]
17. Amount paid by assessee to cable operators for channel placement fee was subject to deduction of tax at source under section 194C and not under section 194J. [Pr. CIT v Star Entertainment Media (P.) Ltd. [2020] 113 taxmann.com 160 (Bombay)]
18. Where assessee, engaged in real estate business, failed to bring on record evidence showing that she had refunded amount received in advance from a trust on account of her failure to hand over a piece of land free from encumbrances and, thus, assessee’s claim for deduction under section 37(1) in respect of said payment was rejected by authorities below, no substantial question of law arose from said order. [Smt. Rajkumari Suniel Mutha v ITO [2020] 113 taxmann.com 159 (Bombay)]
19. Where assessee while filling its return of income had entered incorrect figures under certain heads of income and expenditure and, thus, filed a rectification return which was rejected, revision application under section 264 filed by assessee within one year from date of rejection of its rectification return was certainly maintainable, more particularly, when Principal Commissioner had found that assessee had committed such error inadvertently. [Sharp Tools v Pr. CIT [2020] 113 taxmann.com 63 (Madras)]
20. Where assessee at time of obtaining new loan, had to pay certain ‘front end fee’ to bank, since said amount constituted interest inability of assessee spread over a period of time, assessee was entitled to amortise same under section 35D. [CIT v Kesoram Industries Ltd. [2019] 112 taxmann.com 356 (Calcutta)]
21. Where amount received by assessee via pay orders in its bank account did not belong to him and assessee was only a conduit through whom amounts were floated and said amount was added to income of its beneficiary, no addition under section 69A could be made to income of assessee. [CIT v Anoop Jain [2019] 112 taxmann.com 355 (Delhi)]
22. Where assessee purchased commercial property in December 2008, but occupancy certificate of same was given in May 2009, and in meantime, assessee had leased out property with effect from 1-4-2009, between 1-1-2009 to 31-3-2009, property was not legally occupiable and not occupied and assessee could not be made liable to tax on notional rental income for that period. [Sharan Hospitality (P.) Ltd. v Dy. CIT [2019] 112 taxmann.com 372 (Bombay)]
23. Where land purchased by assessee was different from that mentioned in seized document and department could not prove understatement of sale consideration, addition made under section 69B on account of undisclosed investment in respect of purchase of land was not justified. [Pr. CIT v Kulwinder Singh [2019] 112 taxmann.com 382 (Punjab & Haryana)]
24. Addition of undisclosed income can be made where sale consideration of asset is under accounted; no such addition can be made where purchase consideration is under accounted. [Pr. CIT v Virender Kumar Bhatia [2019] 112 taxmann.com 379 (Delhi)]
25. Where Assessing Officer issued detailed questionnaire, in reply to which records were filed, but Assessing Officer did not apply his mind nor did he conduct an enquiry while accepting claim of assessee although he recorded in note-sheet that reply filed by appellant was not satifactory and did not explain all facts, assessment order was to be revised. [Nagal Garment Industries (P.) Ltd. v CIT [2020] 113 taxmann.com 4 (Madhya Pradesh)]
INCOME TAX APPELLATE TRIBUNAL
1. Where in respect of share application money received, assessee-company brought on record sufficient evidence in form of bank account particulars, PAN, ITRs and financials of share applicants so as to prove genuineness of those transactions, in such circumstances, impugned addition under section 68 could not be sustained merely on account of non-production of directors of company without bringing any other contrary material on record. [ITO v. Commitment Financial Services (P.) Ltd. [2020] 113 taxmann.com 565 (Delhi – Trib.)]
2. In view of changing time and widening horizon of knowledge and rapid change in method of teaching, multifaceted activities in form of handbook/literature published together with activities like holding conferences on industrial safety programmes, public talks, seminars, workshops, etc. on ongoing basis to inculcate industrial safety measures would also be bracketed in league of ‘educational activities’. [Gujarat Safety Council v ITO [2020] 113 taxmann.com 234 (Ahmedabad – Trib.)]
3. 263 revision justified as firm can’t claim deduction of interest & remuneration in best judgment assessment. [Saroj Print Arts v Pr. CIT [2020] 113 taxmann.com 264 (Mumbai – Trib.)]
4. MODVAT credit does not have any impact on profit of assessee and, thus, unutilised MODVAT credit could not be added to value of closing stock under section 145A. [Mahindra & Mahindra Ltd. v Dy. CIT [2020] 113 taxmann.com 230 (Mumbai – Trib.)]
5. Where depositors give Form No. 15G/15H to assessee-bank, law empowers assessee to make payment of interest without deduction of tax at source even though assessee has not furnished those Forms to Commissioner because requirement of filing of Form 15G and 15H with prescribed authority viz., Commissioner, is only procedural and that cannot result in a disallowance under section 40a(ia). [Jt. CIT v Karnataka Vikas Grameena Bank [2020] 113 taxmann.com 530 (Bangalore – Trib.)]
6. Once transfer of case of assessee was ordered under section 127, Assessing Officer who was vested with jurisdiction by virtue of direction or order issued under sub-section (1) or (2) of section 120 and section 124, stood divested of same and, in such a case, notice issued under section 143(2) by said Assessing Officer after date of transfer, was to be regarded as invalid notice and, consequently, assessment framed under section 143(3) pursuant to notice so issued would be void ab initio. [Rungta Irrigation Ltd. v Asst. CIT [2020] 113 taxmann.com 330 (Kolkata – Trib.)]
7. Where an application filed under section 7 of Insolvency and Bankruptcy Code, 2016, against assessee-company had been admitted and moratorium under section 14 of 2016 code, had been declared, appeal filed by revenue against assessee under provisions of Act, could not be allowed to be continued during course of moratorium period. [Shamken Multifab Ltd. v Dy. CIT [2020] 113 taxmann.com 329 (Delhi – Trib.)]
8. Proviso to section 50C inserted by FA, 2018 with effect from 1-4-2019 is applicable with retro effect. [Chandra Prakash Jhunjhunwala v Dy. CIT [2020] 113 taxmann.com 246 (Kolkata – Trib.)]
9. Where assessee, a small trader in medicine falling under section 44AD, offered income on presumptive taxation basis, provision of section 69A could not be applied to make addition in respect of undisclosed cash credits found in assessee’s bank account. [Thomas Eapen v ITO [2020] 113 taxmann.com 268 (Cochin – Trib.)]
10. In view of definition as mentioned in section 2(47)(vi), transaction of perpetual lease agreement by which assessee took possession of property for unlimited period, has to be construed as purchase of property within meaning of section 54F. [N. Ramaswamy v ITO [2020] 113 taxmann.com 289 (Chennai – Trib.)]
11. Where assessee firm had availed loan from its partner under a bona fide belief that provisions of section 269SS were not applicable in relation to transaction between firm and partners, assessee would be protected by provisions of section 273B and no penalty would be levied upon it under section 271D. [Surendra Engg. Corpn. v Jt. CIT [2020] 113 taxmann.com 290 (Mumbai – Trib.)]
12. Registration granted to an association under section 12AA is required to be continued till nature of its activities change; registration cannot be cancelled on mere fact that assessee-trust earned commercial lease rent exceeding Rs. 25 lakhs. [Orissa Olympic Association v CIT (exp) [2020] 113 taxmann.com 235 (Cuttack – Trib.)]
13. Where assessee explained that amount deposited in bank account was received as gift from his father who had sold agricultural land, since revenue authorities had not doubted veracity of sale deed brought on record by assessee’s father, source of cash deposited in bank was duly explained and, thus, impugned addition made under section 68 was to be deleted. [Kuldeep Singh v ITO [2020] 113 taxmann.com 265 (Chandigarh – Trib.)]
14. Assessee-trust would be entitled for deduction under section 24 in computation of income from house property. [Shantaram Bhat Charitable Trust v CIT [2020] 113 taxmann.com 262 (Mumbai – Trib.)]
15. Where assessee company incurred expenditure by way of receiving lesser payment from buyers of coal because of supplied coal containing high moisture and low calorific value, merely because assessee categorised such expenditure as penalty levied for not complying to terms of contract with buyers, it could not be said that such expenditure was incurred for infraction of law so as to attract provisions under Explanation 1 to section 37 (1) and same was an allowable deduction. [Dy. CIT v Mahavir Multitrade (P.) Ltd. [2020] 113 taxmann.com 261 (Delhi – Trib.)]
16. Where a proprietor transfer his business to a private company and receives money as well as shares of such company as consideration then such transaction shall be regarded as ‘transfer’ and for the purposes of computation of capital gain, the value of the assets taken over by the company should be considered as the full value of consideration. However, in the instant case, since cost of acquisition and full value of consideration received on sale were same figure, no capital gains had accrued or were received by assessee. Thus, addition under head capital gains was to be deleted. [Ravi Jalan v ITO [2020] 113 taxmann.com 414 (Kolkata – Trib.)]
17. Where wife of assessee started business of Futures and Options (F&O) by having some contribution from assessee in shape of gifts and incurred loss, entire amount of loss resulting from said business of F&O with gifts received from assessee was liable to be clubbed in hands of assessee in terms of Explanation 3 read in conjunction with section 64(1)(iv). Therefore, assessee was entitled to club full loss from business of F&O in his personal income. [Uday Gopal Bhaskarwar v Asst. CIT [2020] 113 taxmann.com 378 (Pune – Trib.)]
18. 5% variation introduced by sec. 43CA couldn’t apply retrospectively. [Welfare Properties (P.) Ltd. v Dy. CIT [2020] 113 taxmann.com 156 (Mumbai – Trib.)]
19. Deeming fiction of sec. 50C won’t apply where leasehold right in land was transferred. [Ritz Suppliers (P.) Ltd. v ITO [2020] 113 taxmann.com 349 (Kolkata – Trib.)]
20. ALV computed on basis of valuation report of Municipal Authorities couldn’t be rejected without valid reason. [Sanjay Brahmdev Kapoor v Asst CIT [2020] 113 taxmann.com 320 (Mumbai – Trib.)]
21. Assessee was not eligible for higher rate of depreciation at rate of 30 per cent on vehicles used by it in business of promotional activities in rural markets of India. [Rural Communication and Marketing (P.) Ltd. v Dy. CIT [2020] 113 taxmann.com 121 (Delhi – Trib.)]
22. Performance bonus does not form part of ‘salary’ as defined in clause (h) of Rule 2A purpose of computing exemption under section 10(13A). Thus, assessee would be entitled to house rent allowance to extent of excess of rent paid over 10 per cent of salary. [Sudip Rungta v Dy. CIT [2020] 113 taxmann.com 295 (Kolkata – Trib.)]
23. Where assessee trust had invested its surplus fund in chit fund during preceding assessment year, it was a clear case of violation of provisions of section 11(5), hence, assessee-trust was not entitled for exemption under section 11. [Asst. DIT v Sree Gokulam Educational and Medical Trust [2020] 113 taxmann.com 64 (Chennai – Trib.)]
24. Cash payment made by trust couldn’t be considered as payment made towards non-specified purposes. [Sri Srinivasa Educational & Charitable Trust v Asst CIT [2020] 113 taxmann.com 65 (Bangalore – Trib.)]
25. Pitch and substance of each contract entered by NR Co. to be evaluated before examine applicability of sec. 44BB. [Maritime Vanguard Pte. Ltd. v Asst. CIT [2019] 112 taxmann.com 390 (Mumbai – Trib.)]
26. Conversion of CCPSS as per FMV and in accordance with shareholder agreement can’t be treated as a sham transaction. [Dy. CIT v Brand Marketing (India) (P.) Ltd. [2020] 113 taxmann.com 15 (Mumbai – Trib.)]
27. No obligation is cast upon assessee/Indian company to deduct tax at source at time of making of payment towards demurrage charges to a non-resident shipping company, as latters income was liable to be brought to tax under section 44B and consequently under section 172. [Deepak Fertilizers & Petrochemicals Corpn. Ltd. v Pr. CIT [2019] 112 taxmann.com 315 (Mumbai – Trib.)]
28. In terms of Rule 37BA(3)(i) benefit of TDS is to be given for assessment year for which corresponding income is assessable, therefore, where assessee raised invoice on ‘A’ in March 2011, benefit of TDS had to be allowed in assessment year 2011-12 even though tax on invoice amount was deposited by ‘A’ in April 2011. [Mahesh Software Systems (P.) Ltd. v Asst. CIT [2019] 112 taxmann.com 354 (Pune – Trib.)]
29. Where assessee borrowed funds and utilised them for lending money to various parties, interest paid by assessee on money borrowed was to be allowed under section 57(iii) even if it did not earn interest income on money lent by it. [Akash Goyal v Asst. CIT [2020] 113 taxmann.com 10 (Agra – Trib.)]
30. Where assessee, engaged in business of real estate development, sold bare flats and made provision for expenses to be incurred to complete such sold out flats, since assessee had duly filed relevant documents such as architect’s certificate, site engineer architect’s estimation so as to prove that assessee had incurred such expenses on sold out flats, no revision to be made so as to disallow such provision considering same as unascertained liability. [Khetawat Properties Ltd. v Pr. CIT [2020] 113 taxmann.com 8 (Kolkata – Trib.)]
31. 11 exemption couldn’t be disallowed just because ‘JSCA’ received sum from BCCI on account of IPL subvention. [Jharkhand State Cricket Association v Dy. CIT [2019] 112 taxmann.com 320 (Ranchi-Trib.)]
32. Profit on sale of industrial park is eligible for sec. 80-IA deduction. [ETT Ltd. v CIT [2019] 112 taxmann.com 321 (Delhi – Trib.)]
33. Where assessee received a consideration for assignment of know how relating to scientific, medical and technical documents relating to manufacture of an oncology product under development, since cost of acquisition of know-how under development being a self-generated asset was not ascertainable, consideration for transfer thereof could not be brought to tax under head ‘capital gains’. [Bharat Serums and Vaccines Ltd. v Asst. CIT [2019] 112 taxmann.com 316 (Mumbai – Trib.)]
34. In absence of any material on record showing that notice was tendered either to assessee or its duly appointed agent, service by resorting to affixture was a premature decision on part of Assessing Officer. [K.P. ColdStorage v ITO [2020] 113 taxmann.com 7 (Agra – Trib.)]
35. Where assessee had received property from his brothers on account of Family Settlement and Release Deed was also executed in which it was nowhere recorded that assessee paid any consideration to his other three brothers, there being no commercial transaction, provisions of section 56(2)(vii)(b) were not attracted. [Govind Kumar, Khemka v ACIT [2020] 113 taxmann.com 5 (Delhi – Trib.)]
INTERNATIONAL TAXATION
1. Where assessee, a PE of German Company, filed instant petition challenging validity of show couse notice seeking to tax entire income earned by its parent German company in India in its hand, in view of fact that so many factual disputes, went to root of matter, viz., nature of activities carried on by assessee, existed between parties which could not be decided in writ proceedings, instant petition was to be disposed of with a direction to assessee to file its objections before DRP. [EOS GmbH-India Branch v Dy. CIT [2020] 113 taxmann.com 328 (Madras-HC)]
2. The question of existence of permanent establishment (PE) of a non-resident assessee, which requires a detailed enquiry is not envisaged at the stage of deciding the application for issuance of certificate under section 197. However, the full fledged investigation in said regard can be done by the Assessing Officer during the course of assessment proceedings. [National Petroleum Construction Co. v Dy. CIT [2019] 112 taxmann.com 364 (Delhi-HC)]
3. Where assessee, a U.S based company, earned income from providing cloud services including cloud hosting and other supporting and ancillary services to Indian customers, since there was no leasing of any equipment by assessee and customers were not having physical control or possession over servers and right to operate and manage this infrastructure/servers vested solely with assessee, said income earned by assessee was not royalty or fees for technical services within meaning of section 9(1)(vi) or section 9(1)(vii). [Rackspace, US Inc v Dy. CIT [2020] 113 taxmann.com 382 (Mumbai – Trib.)]
4. Where assessee, a Cyprus based company, was awarded a contract in relation to development of gas fields located offshore in East Coast of India, in view of fact that its construction activities in India continued for a period of six months only, it could be concluded that assessee did not have PE in India in terms of acticle 5(a)(g) of India – Cyprus DTAA. [Bellsea Ltd. v Dy. DIT [2020] 113 taxmann.com 344 (Delhi – Trib.)]
5. Where assessee company incorporated in Singapore had appointed an agent in India to render port agent services on assessee’s behalf and Assessing Officer passed an order under section 172(4) holding that freight charges/receipts received for such services in India by assessee was taxable in India, since Assessing Officer had passed this order without passing any draft order under section 172(2) as per scheme of section 144C, matter was to be remanded. [ISS Shipping India (P.) Ltd. v Dy. CIT [2020] 113 taxmann.com 119 (Rajkot – Trib.)]
6. As per article 11(1) of India-Mauritius Tax Treaty, interest income can be brought to tax only on fulfilment of twin conditions of accrual as well as actual receipt. [Gurgaon Investment Ltd. v Dy. DIT [2020] 113 taxmann.com 79 (Mumbai – Trib.)]
7. Where assessee-company, incorporated in Mauritius, was engaged in business of shipping and it claimed income from shipping activities taking support of Article 8 of DTAA entered into between India and Mauritius, since effective management of assessee was neither in Mauritius nor in India but in a third country, it was not entitled for benefit claimed by it. [ARC Line (Mauritius) v Dy. CIT [2019] 112 taxmann.com 95 (Mumbai – Trib.)]
8. Where taxability of gain on account of transaction in foreign exchange is very well expressly dealt with in provision of article 7 or article 14 of Indo – Spain tax treaty, article 23 has no application. [Jt. CIT v Merrill Lynch Capital Market Espana SA SV [2019] 112 taxmann.com 119 (Mumbai – Trib.)]
9. Where assessee, an Italy based company, supplied microwave transmission equipments to Indian companies whereas activities of installation, commissioning and maintenance of those equipments were carried out by assessee’s sister concern in India under independent contracts and income from those activities were duly offered to tax, said sister concern could not be regarded as assessee’s PE in India in terms of article 5 of India-Italy DTAA. [Siemens Mobile Communications SPA v Dy. CIT [2019] 112 taxmann.com 219 (Delhi – Trib.)]
10. Where assessee, being shipping agent of its foreign based AE, paid software maintenance charges to said AE for use of software for its own business purpose and not for use of, or right to use, any copyright of software, it would not constitute royalties under Article 13 of DTAA, therefore, there was no requirement on part of assessee to deduct tax at source. [CMA CGM Agencies India (P.) Ltd. v Dy. CIT [2020] 113 taxmann.com 61 (Pune – Trib.)]
11. Where assessee, engaged in business of e-publishing, outsourced its work to various companies located abroad, in view of fact that services rendered by non-resident such as copy editing, indexing and doing proof reading required only knowledge in language and it did not require to have necessary expertise in subject matter of text, it could be concluded that services rendered by non-residents were not technical in nature and, as a result, amount paid for said services was not taxable in India. [Dy. CIT v Integra Software Services (P.) Ltd. [2020] 113 taxmann.com 9 (Chennai – Trib.)]
TRANSFER PRICING CASE LAWS
1. Transfer pricing adjustment cannot be done at entity level but has only to be done in respect of international transactions of assessee with its Associated Enterprises (AE). [Pr. CIT v Visteon Engineering Centre (India) (P.) Ltd. [2020] 113 taxmann.com 161 (Bombay-HC)]
2. Where assessee had not opted for e-proceeding facility, but had chosen to have its assessment proceedings continued in manual mode, receipt of draft assessment order in manual mode had to be seen as date of service of draft assessment order. [FCI Oen Connectors Ltd. v Dy. CIT [2019] 112 taxmann.com 160 (Kerala-HC)]
3. Transfer pricing adjustment qua transaction of advancing loan by assessee an Indian company to its New York based AE was to be determined at US LIBOR plus 170 basis point. [Aithent Technologies (P.) Ltd. v. Asst CIT [2020] 113 taxmann.com 277 (Delhi – Trib.)]
4. A company providing professional technical consultancy assistance to banks and to entrepreneurs, and company engaged in providing online portal activities such as employment website, matrimonial website, were to be excluded from list of comparables of assessee providing marketing support services being functionally dissimilar. [Rolls Royce India (P.) Ltd. v Asst. CIT [2020] 113 taxmann.com 392 (Delhi – Trib.)]
5. Where assessee imported active pharmaceutical ingredient from its AEs for manufacturing finished formulations to be sold in India, as long as appropriate comparables could be found in Indian market, CUP method was most appropriate method. [Fulford (India) Ltd. v Asst. CIT [2020] 113 taxmann.com 286 (Mumbai – Trib.)]
6. Where assessee chose two foreign AEs as tested parties to benchmark international transactions of import of raw materials in its truck manufacturing segment, TPO was justified in rejecting said AEs in absence of any verifiable data for computation of ALP. [Eaton Industrial Systems (P.) Ltd. v Dy. CIT [2020] 113 taxmann.com 267 (Pune – Trib.)]
7. A company having wide fluctuations in its margins profit over years was to be excluded from list of comparables. [Micro Focus Software India (P.) Ltd. v Asst. CIT [2020] 113 taxmann.com 244 (Bengaluru – Trib)]
8. Where with regard to services provided by employees of assessee to foreign AEs, certain employees of assessee rendered liaisoning and co-ordination services at group level as a mere incidental activity, same need not be considered as a separate international transaction warranting any benchmarking. [Addl. DIT v Hongkong and Shanghai Banking Corporation Ltd [2020] 113 taxmann.com 245 (Mumbai – Trib.)]
9. Where assessee-company was running its business with no working capital risk since more than 94 per cent of sales made by it were to related parties whereas comparable companies who primarily catered to domestic market were having working capital risk, under such circumstances, if at all any working capital adjustment had to be made, then it had to be a positive adjustment and there could not be any negative working capital adjustment. [Ocap Chassis Parts (P.) Ltd. v Asst CIT [2020] 113 taxmann.com 278 (Delhi – Trib.)]
10. TPO is barred from benchmarking ‘specified domestic transactions’ when Assessing Officer makes a reference to him for benchmarking international transactions. [P. N. Gadgil Jewellers (P.) Ltd. v Asst. CIT [2020] 113 taxmann.com 354 (Pune – Trib.)]
11. TPO couldn’t compare margins of the controlled transaction with segmental profitability of trading segment of AE. Where in terms of royalty agreement, assessee charged royalty on manufacturing sales of AE in respect of other markets only and not for local Gulf market, TPO was not justified in making addition to royalty income on basis of ‘entire manufacturing sales’ of AE. [Zodiac Clothing Company Ltd. v Asst. CIT [2020] 113 taxmann.com 315 (Mumbai – Trib.)]
12. ITAT deleted ad-hoc additions made by DRP without following any method or adopting benchmarking analysis while determining ALP. [Hathway Cable & Datacom Ltd. v Dy. CIT [2020] 113 taxmann.com 299 (Mumbai – Trib.)]
13. Where assessee consistently applied TNM Method for determining ALP of its transaction of export of chemical additives, TPO was not justified in changing said method to CUP method without bringing on record any cogent reasons. [Lubrizol India (P.) Ltd v Addl. CIT [2020] 113 taxmann.com 3 (Mumbai – Trib.)]
14. Since Additional Commissioner was an authorised office by CBDT to perform all or any of functions of Assessing Officer specified under section 92C, assessment order passed by Additional Commissioner under section 92CA(3) is valid. [Dy. CIT v BBC Worldwide (India) (P.) Ltd. [2019] 112 taxmann.com 380 (Delhi – Trib.)]
15. Where assessee did not carry any working capital risk as its entire funding needs was provided by its AE, there was no need for making any negative working capital adjustment. [iPass India (P.) Ltd. v ITO [2019] 112 taxmann.com 351 (Bangalore – Trib.)]
16. Where assessee was engaged in business of providing design engineering services and ITES Services to its AEs and TPO re-characterized entire services into ITE services without assigning any reasons and, further, assessee also did not furnish complete segmental details while carrying out its TP study, matter was to be restored to file of TPO/AO since there were lapses from both sides. [Ingersoll Rand (India) Ltd. v Asst. CIT [2019] 112 taxmann.com 343 (Bangalore – Trib.)]
17. Where assessee company imported life saving medical devices from its AE, since sufficient information relating to gross margin in uncontrolled transaction was not available so as to benchmark transaction under RPM, TNMM was to be adopted as MAM. [Dy. CIT v India Medtronic (P.) Ltd. [2019] 112 taxmann.com 318 (Mumbai – Trib.)]
18. Where assessee, incurred AMP expenditure to sale goods in India which were imported from its AE, since no material was brought on record by revenue to suggest that there was any agreement between assessee and its AE to incur AMP expenditure for promoting brand of AE, impugned AMP expenditure would not come within purview of international transaction as per section 92B. [Dy. CIT v India Medtronic (P.) Ltd. [2019] 112 taxmann.com 318 (Mumbai – Trib.)]
19. Where TPO directed to adopt Profit Split Method (PSM) without properly examining expenses incurred by AE vis-a-vis assessee and all other aspects, on an ad-hoc basis for determining income, said issue was to be remitted to Assessing Officer/TPO for fresh examination. [Bengal Tiger Line India (P.) Ltd. v Dy. CIT [2019] 112 taxmann.com 314 (Chennai – Trib.)
20. Where transaction of interest paid to unrelated parties was available on record and average effective rate of interest paid to unrelated parties was not in dispute, then internal CUP should be preferred as against external CUP as most appropriate method for determination of ALP. [Uttam Bharat Electricals (P.) Ltd. v Dy. CIT [2019] 112 taxmann.com 305 (Jaipur – Trib.)
21. A company offering range of data management services to financial sector was a good comparable to assessee providing non-binding investment advisory services. [Eight Roads Investments (P.) Ltd. v ACIT [2019] 112 taxmann.com 342 (Mumbai – Trib.)]
22. Where Annual Report of a company did not contain full details as regards its functionality, said company couldn’t be taken as comparable. Also, Where annual reports of companies were not available in public domain and, hence, TPO gathered information by serving notice under section 133(6), since said information was not confronted to assessee, issue of comparability of these companies were to be restored to TPO. [Motherson Sumi Infotech & Design Ltd v Asst CIT [2019] 112 taxmann.com 300 (Delhi – Trib.)]
23. Where assessee was availing intra-group services from its Associated Enterprise for providing seamless services to its customers, since Tribunal in preceding assessment year held TNMM as most appropriate method to be applied for benchmarking of said services, same order was to be followed in current assessment year as well. [AT & T Global Network Services (India) (P.) Ltd. v ACIT [2019] 112 taxmann.com 260 (Delhi – Trib.)]
24. Unless a company declares loss consistently for three consecutive assessment years, it cannot be excluded from list of comparables on ground that it was persistent loss making company. [Star International Movies Ltd. v Dy. DIT [2019] 112 taxmann.com 258 (Mumbai – Trib.)]
25. In so far as determination of ALP under machinery of computation under methods as given in Rule 10B is concerned, term ‘transaction’ also includes a plural of transactions – However, caveat is that in order to be covered within term ‘transaction’ under Rule 10A(d), it is sine qua non that such number of transactions must be closely linked. If they are not closely linked transactions, then there can be no aggregation for determination of ALP under IT Rules. [Knorr Bremse Systems for Commercial Vehicles India (P.) Ltd. v Dy. CIT [2019] 112 taxmann.com 289 (Pune – Trib.)]
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Disclaimer: Above said information are taken from publically available resources and believed to be accurate.
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