DOMESTIC TAX CASE LAWS

SUPREME COURT

1. Where High Court upheld Tribunal’s order setting aside addition made by AO under section 153A on ground that said addition was not based on any incriminating material found during course of search, SLP filed against said order was to be dismissed due to low tax effect.

[Pr. CIT v Bluebird Software (P.) Ltd. [2020] 119 taxmann.com 348 (SC)]

2. Where Assessing Officer initiated reassessment on ground that during assessment under section 143(3) loss on sale of stores was wrongly allowed as business loss, but Tribunal set aside reassessment holding it to be change of opinion and Tribunal’s order was upheld by High Court, SLP against High Court’s order was to be dismissed.

[Pr. CIT v Atul Ltd. [2020] 119 taxmann.com 287 (SC) (SC)]

Young man near wall with text Income Tax3. Where core business of assessee corporation was to receive funds from Central Government and then advance same loans and grants to co-operative societies, merely because grants benefited a third party, it would not render disbursement as application of income and not expenditure and thus, expenditure incurred in course of and for purpose of business would be an allowable deduction under section 37(1).

[National Co-operative Development Corporation v CIT [2020] 119 taxmann.com 137 (SC)]

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 HIGH COURT

1. Where assessee was not a regular investor in shares and had invested only in high risk stocks of obscure companies with no business activity or asset which were identified as ‘Penny Stocks’, Assessing Officer had correctly concluded that assessee had entered into a pre-arranged sham transaction so as to convert unaccounted money into accounted money in guise of capital loss; alleged short term capital loss was rightly disallowed.

[Sanjay Kaul v Pr. CIT [2020] 119 taxmann.com 470 (Delhi)]

2. Where assessee during assessment submitted that it had transferred equity shares of ZEE to its related entity at nil consideration to consolidate onshore media assets including shares of listed companies and requested to treat said transfer as gift not liable to tax under section 45 and Assessing Officer passed assessment order accepting said claim but after more than four years, section 148 notice was issued to assessee on basis of CIT(A)’s decision in case of group entity that said transfer was nothing but colourable device, since communication between assessee and Assessing Officer clearly demonstrate that assessee had disclosed all primary facts regarding said transfer during assessment, it was a clear case of change of opinion and, thus, section 148 notice would no longer survive.

[Asian Satellite Broadcast (P.) Ltd. v ITO [2020] 119 taxmann.com 481 (Bombay)]

 3. Sum paid to BMC for increasing floor space index is not a commercial right and should be added in cost of building.

[Pr. CIT v Hotels Ltd. [2020] 119 taxmann.com 487 (Bombay)]

4. Where assessee paid subscription or membership fee to club on behalf of its employees, said amount was to be allowed as deduction under section 37(1).

[CIT v Apollo Tyres Ltd. [2020] 119 taxmann.com 336 (Kerala)]

5. Where assessee claimed exemption under section 10A in respect of its new unit, since assessee was engaged in site development of software program and programs were delivered at premise of client at work site in foreign country and activities of assessee finally culminated at work site of clients outside India and there was no need for full fledged infrastructure facility in India, thus, industrial undertaking of assessee was independent of all undertakings which it already possessed, assessee was to be allowed exemption under section 10A on its new unit.

[CIT v L & T Valdel Engineering (P.) Ltd. [2020] 119 taxmann.com 443 (Karnataka)]

6. Where assessee gave up its claim of deduction under section 35(1)on account of scientific expenses paid to a research association as admittedly conditions required for claiming such expenditure under said section was not satisfied by assessee, since there was no dispute that said expenditure was incurred in ordinary course of business, Tribunal was right in allowing alternate claim of assessee toward scientific expenses under section 35(1) as revenue expenditure under section 37(1).

[Pr. CIT v HSI Automative Ltd. [2020] 119 taxmann.com 445 (Madras)]

7. In terms of section 14A, only expenditure, which was proved to be incurred in relation to earning of tax free income, could be disallowed and such provision could not be extended to disallow expenditure, which was assumed to have been incurred for earning tax free income. To apply provisions of section 14A, Assessing Officer should have recorded a finding as to how sub-section (1) of section 14A would stand attracted. In absence of any such finding, disallowance made was not justifiable.

[CIT v Celebrity Fashion Ltd. [2020] 119 taxmann.com 426 (Madras)] 

8. Where assessee-company claimed that no expenditure was incurred to earn exempt income and section 14A disallowance was not called for, but it could not substantiate that fact before lower authorities and it was found that there was substantial increase in investment and value of assets of assessee, Assessing Officer was justified in making disallowance under section 14A read with rule 8D.

[Polaris Consulting and Services Ltd. v Pr. CIT [2020] 119 taxmann.com 387 (Madras)]

9. Where Income-tax Officer treated cash deposited by assessee in saving bank account during demonetization period as unexplained money of assessee but there was no explanation for source and nature of cash deposited and assessee filed writ petition which was dismissed by Single Judge holding that assessee should file statutory appeal before appellate authority, since Act provides effective and sufficient forum for any aggrieved party to work out their remedy, writ appeal filed by assessee against order passed by Single Judge was liable to be dismissed.

[Narasimman Padmavathy v ITO [2020] 119 taxmann.com 330 (Madras)]

10. Where assessee-trust engaged in running educational institutions, earned income from letting out of community hall, Kalyana Mandapam and Gnanvapi and utilized surplus income from letting out for objects of trust i.e. running educational institution and providing medical relief to poor, assessee-trust is entitled to exemption under section 11.

[Sri Ram Samaj v Jt. DIT [2020] 119 taxmann.com 334 (Madras)]

11. Where assessee-bank offered to tax entire interest receipt from money advanced as credit without claiming any exemption under section 10(15) as details were not fully collected and when said details were received from other branches, same were submitted during assessment but AO denied said exemption to assessee and, it approached Commissioner (Appeals) who gave direction to Assessing Officer to allow exemption which was allowed accordingly, issuance of section 148 notice to disallow said exemption after 4 years of completion of assessment was without jurisdiction and illegal, particularly when assessee bank had made full and true disclosure.

[State Bank of India v Vineet Agrawal [2020] 119 taxmann.com 322 (Bombay)]

12. Where Assessing Officer held that expenditure incurred by assessee-company, engaged in business of computer software development and services, in foreign currency on traveling, professional charges and on-site service charges which were for development of software at client’s site outside India was not to be excluded from export turnover for purpose of deduction under section 10A, since view taken by Assessing Officer was a plausible view and same could not said to be erroneous, invocation of section 263 against said order was unjustified.

[CIT v Aztec Software Technology Ltd. [2020] 119 taxmann.com 318 (Karnataka)]

13. Where in notice issued under section 271(1)(c) there was no mention that assessee had concealed income or furnished inaccurate particulars of income, order imposing penalty under section 271(1)(c) was to be quashed.

[Kaveri Associates v ACIT [2020] 119 taxmann.com 310 (Karnataka)]

14. Where assessee had entered into agreement with a company for conversion work on job work basis and paid conversion charges in cash as bank account of said company could not be operated because of order of attachment passed by ESI department, assessee was entitled to exemption under rule 6DD in respect of payment made in cash and thus, no disallowance under section 40A(3) was called for.

[Pr. CIT v Sumukha Synthetics [2020] 119 taxmann.com 234 (Madras)]

15. Where assessee had not offered income at first instance but only after search under section 132 offered additional income and subsequently filed settlement application, and Settlement Commission granted waiver of interest, but subsequently, rectified order rejecting waiver of interest and directed that interest under section 234B shall be charged up to date of order under section 245D(4), in view of decision of Supreme Court that Settlement Commission cannot re-open its concluded proceedings by invoking section 154 so as to levy interest under section 234B in view of section 245-I, subsequent order passed by Settlement Commission based on subsequent legal position on issue, was remanded back to Settlement Commission.

[CIT v M.A. Jacob & Company [2020] 119 taxmann.com 232 (Madras)]

16. Sum paid to employees which was duly recorded in ‘Register of wages of person employed’ couldn’t be questioned.

[New Woodlands Hotel (P.) Ltd. v ACIT [2020] 119 taxmann.com 202 (Madras)]

17. Where assessee engaged in generation of power prayed for deletion of impugned additions made under normal provisions of Act as well as under section 115JB on ground that receipts from sale of power to Tamilnadu Generation and Distribution Corporation had been subjected to tax in subsequent year, Assessing Officer was to be directed to reopen assessments from years 2010-11 to 2014-15 on this issue alone and examine whether assessee had paid taxes on these receipts, which addition had been sustained in impugned assessment year 2009-10 and after affording an opportunity to assessee, redo assessment only on this aspect.

[PPN Power Generating Company (P.) Ltd. v CIT [2020] 119 taxmann.com 198 (Madras)]

18. Transfer of assessee’s non-transmission and distribution business in exchange of issuance and allotment of equity shares under a scheme of arrangement approved by High Court is not a slump sale exigible to capital gain tax under section 50 as transfer pursuant to approval of scheme of arrangement is not a contractual transfer but a statutorily approved transfer and cannot be brought within definition of word ‘sale’.

[Areva T & D (I) Ltd. v CIT [2020] 119 taxmann.com 171 (Madras)]

19. SetCom can’t declare application invalid citing non-disclosure of full & true income if issue needs to be settled.

[DY. CIT v Hitachi Power Europe GmbH [2020] 119 taxmann.com 173 (Madras)]

20. Where money had been seized by police from a person and deposited in criminal court, appropriate remedy open to Income Tax Officer was to apply under section 226(4) for payment of money towards tax and other amounts due and not to issue any command to Court demanding release of cash.

[UOI v Hashir [2020] 118 taxmann.com 511 (Kerala)]

21. Where, though cause of action was available to petitioner at earlier point of time, to claim interest at rate of 9 per cent on FDs kept with bank, after date of maturity till date of transfer of amount, petitioner not having claimed same in earlier writ petition, petitioner was estopped from filing second writ petition on same cause of action Bank also could not be said to have unlawfully enriched itself by withholding petitioner’s FDs amount, as it had paid applicable rate of 4 per cent interest from date of maturity till date of payment.

[Sri Nandhanam Educational & Social Welfare Trust v Reserve Bank of India [2020] 119 taxmann.com 133 (Madras)]

22. Where section 263 order was no more in existence, order passed by Assessing Authority in accordance with directions issued by Commissioner under section 263 would be in fructuous.

[CIT v India Heritage Foundation [2020] 118 taxmann.com 512 (Karnataka)]

23. Interest paid to creditor deductible from FDs interest as it was made out of surplus arose from restructuring process.

[Best Trading & Agencies Ltd. v DY. CIT [2020] 119 taxmann.com 129 (Karnataka)]

24. As per section 249(4) unless and until assessee has paid income tax due on income returned by him, no appeal under Chapter XX will be admitted and Statute neither gives any discretion to appellate authority to entertain an appeal nor extend time for paying self assessment tax, except in respect of cases falling under section 249(4)(b) in terms of proviso under said section.

[Pesco Beam Environmental Solutions (P.) Ltd. v Dy. CIT [2020] 119 taxmann.com 123 (Madras)]

25. Where Tribunal while remitting back issue of section 14A disallowance had directed Assessing Officer to consider assessee’s own fund, i.e., capital and reserves as available for investment, which yields exempted income and thereafter to apply formula in rule 8D and also exclude investments in subsidiaries, Tribunal, having chosen to remand matter to Assessing Officer for a fresh consideration, could have avoided qualifying remand especially when questions of law are being raised by both revenue as well as assessee and, thus, matter be remanded for a fresh consideration to Assessing Officer.

[CIT v Thiru Arooran Sugar Ltd. [2020] 119 taxmann.com 126 (Madras)]

26. Interest on delayed refund becomes part of principle amount and, thus, delayed interest includes interest for not refunding principle amount as well as interest on delayed refund.

[Pr. CIT v Solan District Truck Operators Transport Co-op. Society [2020] 119 taxmann.com 100 (Himachal Pradesh)]

27.A question cannot be said to be pending under clause (i) of proviso to section 245R(2) upon issuance of a mere notice under section 143(2) especially when it has been issued in a standard pre-printed format and questions raised before Authority for Advance Ruling do not appear to be forming subject matter of said notice.

[CIT v Authority For Advance Ruling [2020] 119 taxmann.com 80 (Delhi)]

28. Where assessee company was a 100 percent Export Oriented Unit (EOU), engaged in business of assembling and exporting valves, management fee earned by assessee in nature of export services which was incidental to business of export of valves would partake character of profit and gain.

[CIT v Oliver Valves India (P.) Ltd. [2020] 118 taxmann.com 548 (Madras)]

29. Where assessee filed an instant writ petition seeking a direction to revenue to remove technical glitches and enable TRACES portal so that assessee could file its refund application for excess tax deduction at source (TDS) deposited by it, since in impugned case scrutiny and verification of TDS amount paid had to be manually done according to established procedure, assessee was to be directed to follow said procedure forthwith and once assesee follow aforesaid procedure, revenue was to be directed to decide assessee’s request within thereafter.

[Clean Wind Power Kurnool (P.) Ltd. v Dy. CIT [2020] 119 taxmann.com 64 (Delhi)]

30. Where assessee sold a plot of land and received sale consideration in three instalments and during relevant assessment year, assessee offered to tax only amount of consideration which was received during previous year, since assessee had declared full facts and sale agreement at first instance and assessee had never suppressed any material fact from revenue, no penalty under section 271(1)(c) could be levied upon assessee for not furnishing entire sale consideration received by it on sale of plot of land during relevant assessment year.

[Omprakash T. Mehta v ITO [2020] 118 taxmann.com 551 (Bombay)]

31. Amendment brought in sub-section (2) of section 115BBE by Finance Act, 2016, whereby set off of losses against income referred to in section 68 was denied, would be effective from 1-4-2017.

[Shree Karthik Papers Ltd. v Dy. CIT [2020] 118 taxmann.com 467 (Madras)]

32. Where assessee-contractor made payment to sub-contractors for project of road laying in power plant and, assessing authority disallowed entire payment as all sub-contractors were not produced upon issuance of summons, since most of contractors had furnished their statements along with return of income except two sub-contractors and assessee to buy peace and avoid litigation offered 10 per cent of total expenditure incurred towards sub-contractors, no further disallowance was called for.

[CIT v SPL Infrastructure (P.) Ltd. [2020] 118 taxmann.com 498 (Madras)]

33. Having regard to the overall scheme of the chapter XVII and particularly, by reading Section 194N along with Section 201 of the Act, it can be safely concluded that if the sum received by the assessee will not be an income at his hands, then, the question of deduction under Section 194N of the Act will not arise.

[Tirunelveli District Central Co-operative Bank Ltd. v Jt. CIT [2020] 119 taxmann.com 21 (Madras)]

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INCOME TAX APPELLATE TRIBUNAL

1. Where assessee-trust, set up to address national issues relating to real estate sector, earned revenue from activities of holding conventions, exhibitions etc., since activities that were carried out by assessee were with sole intent of attaining object for which trust was established, activities of assessee would not be hit by exclusion carved out in definition of ‘charitable purpose’ in section 2(15) and as such, assessee was eligible for exemption under section.

[Confederation of Real Estate Developers Association of India. v ACIT [2020] 119 taxmann.com 491 (Mumbai – Trib.)]

2. RTC couldn’t be considered as conclusive evidence to prove that assessee’s land was agricultural land.

[Smt. G Vijay Padma v ITO [2020] 119 taxmann.com 441 (Bangalore – Trib.)]

3. Where assessee firm utilised its interest bearing funds for overdrawing of capital by its partner, rate of interest received by assessee firm from its partner, which was in excess as in comparison to rate on which funds were raised/borrowed by firm from third parties, same was liable to be assessed as income of assessee firm from “other sources“.

[Siroya Developers v ITO [2020] 119 taxmann.com 440 (Mumbai – Trib.)]

4. Where assessee co-operative bank made payment of interest to HUF and unregistered firms, since both of these entities were ‘members’ of assessee admitted by way of an application made by them to bank and then passing a resolution to extent of their admission as members of bank in its board of directors meeting, no deduction of tax at source was to be made under section 194A on such payments of interest.

[Nilkanth Urban Co-operative Bank Ltd. v CIT [2020] 119 taxmann.com 369 (Pune – Trib.)]

 5. Where assessee, engaged in business of providing DTH services, sold set top Box (STB) & hardware and recharge coupon vouchers to distributors at a discounted rate and also provided also provided certain discount/bonus or credits to customers/subscribers for taking subscription directly from company’s website, discount so offered could not be considered as commission and, hence, not liable for deduction of tax at source under provisions of section 194H.

[Tata Sky Ltd. v Pr. CIT [2020] 119 taxmann.com 424 (Mumbai – Trib.)]

6. For invoking provisions of section 2(22)(e), there must be a payment by way of advance or loan, hence, where this vital aspect was missing in case of assessee as neither there was any payment nor company made any advance or loan to assessee, thus debit balance worked out by assessee company will not fall within ambit of provisions of section 2(22)(e) and thus are not applicable in case of assessee.

[Dy. CIT v Veena Goyal [2020] 119 taxmann.com 362 (Jaipur – Trib.)]

7. Once there was a violation of section 13(1)(c) or section 13(1)(d) by a trust registered under section 12AA, then entire income of trust was not chargeable to tax at maximum marginal rate (MMR) and its only that part of income which had violated said sections would suffer MMR as per proviso to section 164(2).

[Dy. CIT v Central Academy Jodhpur Education Society [2020] 119 taxmann.com 355 (Jaipur – Trib.)]

 8. Where assessee council was a statuary authority established under Rajasthan Nursing Council Act, 1964 to provide for registration of nurses, midwives, health visitors and auxiliary nurse-midwives in State, activities of assessee were qualified activities of general public utility and, thus, fall under charitable activities as defined under section 2(15) and it was to be granted registration section 12AA.

[Rajasthan Nursing Council v CIT (Exemption) [2020] 119 taxmann.com 354 (Jaipur – Trib.)]

9. Name appearing in purchase deed won’t establish assessee as owner of residential house for computing sec. 54F relief.

[Anil Dev v Dy. CIT [2020] 119 taxmann.com 328 (Bangalore – Trib.)]

10. Where assessee was denied benefit of deduction under section 54F on ground that assessee owned more than one residential houses, other than new asset on date of transfer of original asset, since properties were in fact not residential houses owned by it and assessee had only given lease of vacant land and obtained rent for land and not for any building, and thus, assessee did not own more than one residential house, other than new asset on date of transfer of original asset, deduction u/s. 54F should be allowed to assessee.

[Dr. Devika Gunasheela v Jt. CIT [2020] 119 taxmann.com 275 (Bangalore – Trib.)]

11. Depreciation is a statutory deduction and not an outgoing expenditure, therefore, section 40(a)(i) does not apply to such a deduction.

[Dy. CIT v State Street Services (India) (P.) Ltd. [2020] 119 taxmann.com 276 (Bangalore – Trib.)]

12. Where all requisite conditions for allowance of interest are fulfilled, it is not open to revenue to make a part disallowance, unless there is a positive finding recorded that a part of amount borrowed is not used for purpose of business.

[Balji Electrical Insulators (P.) Ltd. v Dy. CIT [2020] 119 taxmann.com 266 (Ahmedabad – Trib.)]

13. Assessee-trust set up by Asset Reconstruction Co. (India) in pursuance to SARFAESI Act and RBI Guidelines for purpose of liquidating/recovering NPAs acquired from banks Assessing Officer had held that assessee was an Association of Persons (AOP) and not a trust and brought to tax entire surplus in income and expenditure account.

[ITO v Scheme A1 of ARCIL CPS 002 XI Trust [2020] 119 taxmann.com 216 (Mumbai – Trib.)]

14. No sec. 69A additions if assessee had sufficient fund from past years incomes for making investment.

[Ram Prasad Meena v ITO [2020] 119 taxmann.com 217 (Jaipur – Trib.)]

15. Where Commissioner (Exemption) denied benefits under section 80G to assessee company, registered under section 12AA, for reason that assessee failed to produce any evidence about having incurred any expenditure in its financial statements towards charitable object of company, since when Commissioner (Exemption) rejected assessee’s application under section 80G, profit and loss account of assessee showing expenditure incurred by assessee on charitable activities was not prepared and same were prepared a little later, matter was to be remanded.

[Jhalana Wildlife Research Foundation v CIT (Exemption) [2020] 119 taxmann.com 210 (Pune – Trib.)]

16. Where assessee employer failed to deposit an amount towards employee contribution on account of ESI with concerned department on or before due date prescribed in law and Assessing Officer by invoking provisions of section 36(1)(va) read with section 2(24)(x) made addition of aforesaid amount to income of assessee, impugned addition made to income of assessee was justified.

[Morakhia Copper and Alloys (P.) Ltd. v ACIT [2020] 119 taxmann.com 214 (Ahmedabad – Trib.)]

17. For availing exemption u/s 11 etc., an assessee needs to separately pass the test u/s 115BBC subject to the exceptions If a particular receipt turns out to be anonymous donations, the same gets caught within the mischief of section 115BBC and hence mars the exemption of income to that extent notwithstanding that the assessee applied 85% of such anonymous donations for the objects of the trust Section 13(7) clearly provides that nothing contained in section 11 or section 12 shall operate so as to exclude from the total income of the previous year of the person in receipt thereof, any anonymous donation referred to in section 115BBC on which tax is payable in accordance with the provisions of that section.

[Shriram Bahuuddeshiya Sevabhavi Sanstha v ITO [2020] 119 taxmann.com 203 (Pune – Trib.)]

18. Where assessee sold a residential house and claimed deduction under section 48 on account of commission paid to agent in respect of such sale, since preparation of documents being sale deed, purchase of stamp duty and other documents and formalities required assistance and help of a well versed person who have experience of such work, Assessing Officer was to be directed to allow 2 per cent of sale consideration as expenditure on account of commission paid to real estate agent by assessee.

[Fozia Khan v ITO [2020] 119 taxmann.com 187 (Jaipur – Trib.)]

19. Provisions of section 50C could not be applicable to sale of development rights in respect of buildings.

[Network Construction Company v CIT [2020] 119 taxmann.com 186 (Mumbai – Trib.)]

20. Change of method for valuing stock is valid if method was as per AS prescribed by ICAI.

[ACIT v Thiagarajar Mills Ltd. [2020] 119 taxmann.com 140 (Chennai – Trib.)]

21. Assessee sold land/property, but capital gain on same had not been disclosed in return of income Assessee took a stand that property was an agricultural land and therefore was not a capital asset and capital gain on sale of agricultural land was not exigible to tax.

[Jairam G Kimmane v Dy. CIT [2020] 119 taxmann.com 99 (Bangalore – Trib.)]

22. Department could not keep search action in abeyance for a long period of almost one year from date of last authorization more so, when after a period of one year nothing was searched but only prohibitory order passed one year back was converted into deemed seizure.

[Narang International Hotels (P.) Ltd. v Dy. CIT [2020] 118 taxmann.com 454 (Mumbai – Trib.)]

23. Interest paid on borrowed funds which were used for acquisition of land which was an inventory was allowable under section 36(1)(iii).

[Dy. CIT v Cornerstone Property Investment (P.) Ltd. [2020] 118 taxmann.com 541 (Bangalore – Trib.)]

24. As per proviso to section 50C, with effect from 1-4-2003, stamp duty value of property on date of execution of agreement to sell should be adopted instead of value on date of execution of sale deed, for determination of capital gains.

[A.V.V.N. Prasad Reddy v ITO [2020] 118 taxmann.com 537 (Visakhapatnam – Trib.)]

25. Where assessee, a non-profit entity, was awarded a contract of construction of a museum by RBI, since assessee was to execute work as directed by RBI as a contractor in lieu of money, actual work not being charitable in nature, asessee was not eligible for section 11 benefit.

[Creative Museum Designers v ITO [2020] 118 taxmann.com 464 (Kolkata – Trib.)]

26. Where Assessing Officer denied assessee’s claim of deduction under section 80P for reason that assessee was essentially doing business of banking and disbursement of agricultural loans by it was only minuscule as per narration in loan extracts in audit reports, since narration in loan extracts in audit reports by itself may not be conclusive to prove whether loan was agricultural or non-agricultural, Assessing Officer was to be directed to examine afresh nature of each loan disbursement.

[Pattambi Service Co-operative Bank Ltd. v ITO [2020] 118 taxmann.com 523 (Cochin – Trib.)]

27. There is no provision in section 115BBD to eliminate dividend income received from specified foreign company before setting off of loss.

[Tata Motors Ltd. v Dy. CIT [2020] 118 taxmann.com 427 (Mumbai – Trib.)]

28. In order to get deduction under section 80-IB(10) after completion of project, completion certificate has to be obtained from concerned authority i.e. Municipal Corporation.

[Dy. CIT v Shewale & Sons [2020] 118 taxmann.com 426 (Pune – Trib.)]

29. Where assessee did not deduct TDS on amount paid on account of shipment charges to a company during year under consideration, Assessing Officer had rightly made disallowance under section 40(a)(ia) of 30 per cent of said expense.

[Amit Yadav RZ152 v ITO [2020] 118 taxmann.com 538 (Delhi – Trib.)]

30. 10% embargo on payment of interest wasn’t applicable if refund arising due to self-assessment tax before 01-06-2016.

[Maruti Suzuki India Ltd. v CIT [2020] 119 taxmann.com 40 (Delhi – Trib.)]

31. Where assessee challenged disallowance made under section 36(1)(iii) on ground that it had surplus interest free funds available in form of capital contribution of partners for making investment in non-business purposes, in view of fact that once assessee paid interest on capital contributed by partners, it no more remained interest free fund, notwithstanding definition of interest under section 2(28A) read in juxtaposition to section 40 (b), plea raised by assessee was to be rejected.

[Devi Construction Company v Dy. CIT [2020] 118 taxmann.com 361 (Pune – Trib.)]

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 INTERNATIONAL TAXATION CASE LAWS

1. Where issue relating to section 90 of Income-tax Act read with Double Taxation Avoidance Agreement between India and USA had not been raised before Assessing Officer or before Commissioner (Appeals) or before Tribunal, but for first time assessee had raised issue before this Court and said issue had also been raised in substantial questions of law, occasion to deal with said issue in this tax case Appeal did not arise.

[Growing Opportunity Finance (India) (P.) Ltd. v Pr. CIT [2020] 119 taxmann.com 386 (Madras-HC)]

2. Sum paid to NR for quality check couldn’t be held as FTS as it requires no technical knowledge.

[DIT v Jeans Knit (P.) Ltd. [2020] 119 taxmann.com 305 (Karnataka)]

3. Matter referred to Larger Bench to examine connotations of expression ‘paid’ appearing in article 11 as in various decisions of Tribunal, there was no discussion about connotations of expression ‘paid’ and these decisions simply proceed on basis that since expression ‘paid’ is used in article 11(1) of India Cyprus tax treaty, taxability of interest can only be on cash basis.

[Ampacet Cyprus Ltd. v Dy. CIT [2020] 119 taxmann.com 277 (Mumbai – Trib.)]

 4. Amount received by assessee, a US based company, from sale of copyrighted software products/licences was in nature of business income which in absence of assessee’s PE of India, could not be brought to tax said amount was not as ‘royalty’ under article 12 of India-USA DTAA.

[Digite Inc v ADIT [2020] 119 taxmann.com 339 (Delhi – Trib.)] 

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TRANSFER PRICING CASE LAWS

1. Where Transfer Pricing Officer (TPO) finding that royalty paid by assessee-company to its holding company was higher than average royalty paid by four comparable companies made additions to income of assessee and assessee filed an instant writ petition against same, since statutory remedies were available in system, assessee ought to have approached Tribunal before approaching this Court, thus, instant writ petition could not be entertained.

[Hyundai Motor India Ltd. v Dy. CIT [2020] 119 taxmann.com 302 (Madras-HC)]

2. Where assessee, engaged in manufacturing of chemicals, had sold said products to AE and non-AE and applied TNMM to benchmark said transaction but TPO relying upon internal CUP made addition to assessee’s ALP in respect of various products sold to AE, since intra AE transactions were fundamentally different character in economic circumstances and contractual terms and these cannot be compared with the independent transactions entered into by assessee, TNMM applied by assessee was correct method and application of CUP method was not justified.

[Pr. CIT v Gulbrandsen Chemicals (P.) Ltd. [2020] 119 taxmann.com 52 (Gujarat)]

3. Where assessee was engaged in providing ITES and revenue sought inclusion of company engaged in medical transcription services falling under ITES, however, at same time revenue sought exclusion of another company also engaged in medical transcription services, revenue’s approach to TP study being not uniform, issue of comparability of company sought for inclusion was to be set aside to TPO for afresh consideration.

[DY. CIT v State Street Services (India) (P.) Ltd. [2020] 119 taxmann.com 276 (Bangalore – Trib.)]

4. Where assessee obtained approval for marketing its products, however, exported finished goods to AEs located in respective countries which in turn marketed goods and assessee had not collected any amount over and above selling price either from domestic customers or from non-AEs, it could not be said that AEs had exploited product registration/license obtained by assessee from various Governments and accordingly royalty TP-adjustment was to be deleted.

[Himalaya Drug Company v ACIT [2020] 119 taxmann.com 421 (Bangalore – Trib.)]

5. Where assessee-company, engaged in distribution of consumer durable products of its A.E. in India, purchased finished goods from its AE which owned intangible rights containing brand name in respect of said goods, the A.O. made addition on account of alleged international transaction resulting from AMP expenses incurred by assessee by applying bright line test, since Bright line test as applied by TPO was not appropriate, said transaction be benchmarked by applying RPM and adjustment be made accordingly.

[Haier Appliances India (P.) Ltd. v Dy. CIT [2020] 119 taxmann.com 428 (Delhi – Trib.)]

6. Where TPO determined ALP of intra-group services being availed by assessee from its AEs on an ad-hoc basis without applying any of prescribed methods as per section 92C(1), since TPO did not follow mandate of section 92C in determining ALP, matter was to be restored to file of Assessing Officer/TPO for determination of ALP of said international transactions by method prescribed under section 92C(1), read with Rule 10AB and 10B of Income-tax Rules, 1962.

[CLSA India (P.) Ltd. v Dy. CIT [2020] 119 taxmann.com 327 (Mumbai – Trib.)]

 7. ALP of management service couldn’t be taken as NIL if assessee achieved huge sales volume with aid of said service.

[B.G. India Energy Solutions (P.) Ltd. v Dy. CIT [2020] 119 taxmann.com 319 (Delhi – Trib.)]

8. Where assessee was rendering software development services to AE, a company having related party transactions in excess of 15 percent could not be accepted as comparable.

[Microchip Technology (India) (P.) Ltd. v ACIT [2020] 119 taxmann.com 309 (Bangalore – Trib.)]

9. Comparability of a case has to be considered on year to year basis and, therefore, merely because a case has been held to be comparable for one year cannot per se be considered as comparable for succeeding year as well Whether a particular company is a comparable or not is an exercise which has to be carried out every year in case of an assessee considering facts of that specific year.

[Elcome Technologies (P.) Ltd. v Dy. CIT [2020] 119 taxmann.com 233 (Mumbai – Trib.)]

10. Where inclusion of a company in comparable list was not challenged by assessee before DRP, comparability of said company was to be restored to TPO/Assessing Officer for consideration afresh.

[EF Information Systems (P.) Ltd. v Dy. CIT [2020] 119 taxmann.com 152 (Bangalore – Trib.)]

11. Where assessee-company entered into international transaction with its AE and in course of such transactions had paid freight expenses and CUP method was adopted to benchmark said transaction, since said method was accepted in earlier years, in absence of any change in facts and circumstances, TPO could not make addition to assessee’s ALP by applying TNMM during relevant year.

[Dy. CIT v Agility Logistics (P.) Ltd. [2020] 119 taxmann.com 141 (Mumbai – Trib.)]

12. Where MAP resolution was passed on 29-1-2018, i.e., much after order passed by Assessing Officer/TPO/DRP making protective adjustment for assessment year 2013-14,on account of business restructuring that had take place in assessment year 2010-11, issue was to be restored to file of Assessing Officer/TPO for deciding issue afresh in light of MAP resolution.

[BT Global Communications India (P.) Ltd. v Addl. CIT [2020] 119 taxmann.com 120 (Delhi – Trib.)]

 13. Where assessee was adopting uniform policy for not charging interest on export receivables from both AEs as well as non-AEs, no addition to assessee’s ALP on account of notional interest in respect of delay in export receivables from AEs was warranted.

[S. Vinodkumar Diamonds (P.) Ltd. v Dy. CIT [2020] 118 taxmann.com 317 (Mumbai – Trib.)]

14. Liability for payment of R&D Cess is that of assessee and, thus, same should not be covered within contractual payment of royalty or as income of foreign company while determining ALP of royalty payment made to AE.

[Dy. CIT v Landis+ Gyr Ltd. [2020] 118 taxmann.com 293 (Kolkata – Trib.)]

15. Where TPO made certain adjustment to assessee’s ALP in respect of AMP expenses incurred by taking a view that same resulted in brand building of AE, in absence of any agreement between assessee and AE obliging assessee to incur AMP expenses on behalf of AE, no international transaction could be said to have taken place and, thus, impugned adjustment was to be set aside.

[Colgate – Palmolive (India) Ltd. v Addl. CIT [2020] 118 taxmann.com 399 (Mumbai – Trib.)]

INCOME TAX DUE DATES – OCTOBER MONTH 2020

[Source: www.incometaxindia.gov.in]

Date Nature of Compliance
07th Deposit of tax deducted/collected for the month of September, 2020.
07th Deposit of TDS for the period July 2020 to September 2020
15th Furnishing of Form 24G by an office of the Government where TDS/TCS for the month of September, 2020 has been paid without the production of a challan
15th Issue of TDS Certificate for tax deducted under Section 194IA, 194-IB and 194M in August, 2020
15th Quarterly statement in respect of foreign remittances (to be furnished by authorized dealers) in Form No. 15CC for quarter ending September, 2020
15th Quarterly statement of TCS deposited for the quarter ending September 30, 2020​
15th ​Upload declarations received from recipients in Form No. 15G/15H during the quarter ending September, 2020​
15th Furnishing statement in Form no. 3BB by a stock exchange in respect of transactions in which client codes been modified after registering in the system for the month of September, 2020​
30th Furnishing of challan-cum-statement in respect of tax deducted under 194IA, 194-IB and 194M in the month of September, 2020
30th Quarterly TCS certificate for the quarter ending September 30, 2020​
31st ​Intimation by a designated constituent entity, resident in India, of an international group in Form no. 3CEAB for the accounting year 2019-20.​
31st Quarterly statement of TDS deposited for the quarter ending September 30, 2020​
31st Furnishing of Annual audited accounts for each approved programmes under section 35(2AA)
31st Quarterly return of non-deduction of tax at source by a banking company from interest on time deposit in respect of the quarter ending September 30, 2020​
31st Due date for filing of ITR for the assessment year 2020-21 if the assessee (not having any international or specified domestic transaction) is
(a) corporate-assessee or(b) non-corporate assessee (whose books of account are required to be audited) or(c) partner of a firm whose accounts are required to be audited).Due date for filing of return has been extended from October 31, 2020 to November 30, 2020 vides the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020.
31st Audit report under section 44AB for the assessment year 2020-21 in the case of an assessee who is also required to submit a report pertaining to international or specified domestic transactions under section 92E
31st ​​Report to be furnished in Form 3CEB in respect of ITs and SDTs​
31st Due date for e-filing of report (in Form No. 3CEJ) by an eligible investment fund in respect of arm’s length price of the remuneration paid to the fund manager (if the assessee is required to submit return of income on October 31, 2020).

Note: The report is required to be furnished by the due date of furnishing ITR under section 139(1). Due date for submission of return of income for the Assessment Year 2020-21 has extended from October 31, 2020 to November 30, 2020 vide the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020.

31st Due date for filing of audit report under section 44AB for the assessment year 2020-21 in the case of a corporate-assessee or non-corporate assessee

The due date for filing of audit report for the assessment year 2020-21 has been extended from September 30, 2020 to October 31, 2020 vide the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020.

31st Statement by scientific research association, university, college or other association or Indian scientific research company as required by rules 5D, 5E and 5F (if due date of submission of return of income is October 31, 2020)

Note: The statement is required to be furnished by the due date of furnishing the return of income under section 139(1). The due date for submission of return of income for the Assessment Year 2020-21 has extended from October 31, 2020 to November 30, 2020 vide the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020.

31st Application in Form 9A for exercising the option available under Explanation to section 11(1) to apply income of previous year in the next year or in future (if the assessee is required to submit return of income on October 31, 2020)

Note: The application is required to be furnished by the due date of furnishing the return of income under section 139(1). The due date for submission of return of income for the Assessment Year 2020-21 has extended from October 31, 2020 to November 30, 2020 vide the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020.

31st Statement in Form no. 10 to be furnished to accumulate income for future application under section 10(21) or 11(1) (if the assessee is required to submit return of income on October 31, 2020)

Note: The statement is required to be furnished by the due date of furnishing the return of income under section 139(1). The due date for submission of return of income for the Assessment Year 2020-21 has extended from October 31, 2020 to November 30, 2020 vide the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020.

31st Due date for claiming foreign tax credit, upload statement of foreign income offered for tax for the previous year 2019-20 and of foreign tax deducted or paid on such income in Form no. 67. (if due date of submission of return of income is October 31, 2020)

Note: The statement is required to be furnished by the due date of furnishing the return of income under section 139(1). The due date for submission of return of income for the Assessment Year 2020-21 has extended from October 31, 2020 to November 30, 2020 vide the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020.

31st Submit copy of audit of accounts to the Secretary, Department of Scientific and Industrial Research in case company is eligible for weighted deduction under section 35(2AB) [if company does not have any international/specified domestic transaction]

Note: The report is required to be furnished by the due date of furnishing the return of income under section 139(1). The due date for submission of return of income for the Assessment Year 2020-21 has extended from October 31, 2020 to November 30, 2020 vide the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020.

DIRECT TAX: NOTIFICATIONS, CIRCULARS AND PRESS RELEASES

F. No. 225/150/2020-ITA-II CBDT further extends due date for filing of ITR for Assessment year 2019-20 to 30-11-2020
F. No. 225/126/2020-ITA-II CBDT extends time limit for compulsory selection of returns for complete scrutiny to 31-10-2020
ORDER F. NO. 225/155/2020/ITA.II, DATED 29-9-2020 CBDT authorizes Income-tax authorities to upload information relating to GST return in Form 26AS
CIRCULAR NO. 17 OF 2020 [F. No.370133/22/2020-TPL], DATED 29-9-2020 No adjustment for discount/GST while calculating threshold limit u/s 206C(1H)
PRESS RELEASE, DATED 26-9-2020 Scrip wise reporting in ITR is required only if LTCGs are eligible for grandfathering
NOTIFICATION S.O. 3309 (E) [NO. 81/2020/F.NO.279/MISC./66/2014-SO-ITJ (PT.)], DATED 25-9-2020 CBDT sets up NFAC & RFACs under Faceless Appeal Scheme, 2020
Notification No. 79/2020, F. No.187/2/2019-ITA-I CBDT authorizes ACIT/DCIT (NeAC) as prescribed authority to issue scrutiny notice w.e.f. 13-08-2020
NOTIFICATION S.O. 3296(E) [NO. 76/2020/F.NO.370142/33/2020-TPL], DATED 25-9-2020 CBDT notifies Faceless Appeal Scheme, 2020 applicable w.e.f. September 25, 2020
NOTIFICATION G.S.R. 574(E) [NO. 75/2020/F. NO. 370142/8/2020-TPL], DATED 22-9-2020 CBDT allows ‘insurer’ to make application for grant of non-deduction of tax certificate u/s 195(3)

 

NOTIFICATION S.O. 3122(E) [NO. 74/2020/F. No. 178/42/2017-ITA-I], DATED 11-9-2020 CBDT notifies ‘L&T Infra Debt Fund’ for the purpose of section 10(47) exemption
NOTIFICATION S.O. 2947(E) [NO. 71/ 2020/F. NO. 225/136/2020-ITA.II], DATED 31-8-2020 CBDT notifies ‘Scheduled Commercial Banks’ u/s 138 for sharing of information
PRESS RELEASE, DATED 2-9-2020 Tax Dept. releases functionality for ‘Scheduled Commercial Banks’ to check ITR filing status of PAN in bulk mode
PRESS RELEASE, DATED 25-9-2020 Govt. to study Vodafone’s arbitration case reward and take decision on further course of action
CIRCULAR F. NO. 225/126/2020/ITA-II, DATED 17-9-2020 CBDT lays down criteria on compulsory selection of ITRs for scrutiny during FY 2020-21
NEWS UN proposes change in definition of royalties to include ‘Software payments’
NOTIFICATION S.O. 3088(E) [NO. 73/2020/F. NO. 300196/36/2017-ITA-I], DATED 10-9-2020 ‘District Mineral Foundation Trust’ notified for the purpose of section 10(46) exemption

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Disclaimer: Above said information are taken from publically available resources and believed to be accurate.

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