“Taxsutra Database”, a true Income-tax research tool, is an archive of over 111510+ Income Tax Rulings reported across ITR, CTR, Taxman, DTR, ITD, TTJ, and ITR (Trib) and also includes recent ‘unreported handpicked rulings of SC, HC & ITAT’. It is a completely integrated service with the following features:
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We are glad to present to you the 229th edition of ‘Taxsutra Database Bulletin’, where we keep you updated with current trends in the tax arena!
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Expert Column
The Finance Bill, 2021 received its Presidential assent on March 28, 2021. It has undergone more than 100+ amendments before being passed by the Parliament.
In this context, Nitish Ranjan and Richa Bakiwala (Manager – Taxation at Manohar Chowdhry & Associates), discuss some of the significant amendments to the original bill. Discussing the amendments brought in with respect to taxation of income arising from reconstitution of firm/AOI/BOI, the authors highlight that the intention behind substituting 45(4) and inserting new sub-section 4A and deeming provision u/s 9B is to overcome the decisions of the Courts wherein it was held that the distribution, division or allotment of assets of the partnership is nothing but a mutual adjustment of rights between the partners. The authors also touch upon the slew of measures taken to further encourage IFSCs such as incentivizing aircraft leasing u/s 10(4F), facilitating relocation of foreign funds to IFSC u/s 10(23FF), setting up of investment divisions in IFSC by Offshore banking units u/s 10(4D) and Sec. 115AD, taxing income from GDRs as provided by Sec. 115ACA, and regulating Category-I and Category-II AIFs. The authors also comment on topic of amendment in slump sale and opine “While one need to wait for the Government to prescribe the manner for arriving at the fair market value of the capital assets, the amendment would lead to a higher tax liability in cases where transfer of division or undertaking is made at lower than its fair market value.” The authors also touch upon amendments to definition of liable to tax, disallowance of self-generated goodwill, etc, deeming provision u/s 9B, etc.
Click here to read Article titled, “Key Amendments to the Finance Act, 2021”
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Key Takeaways from Handpicked Rulings
1) HC: Omission to disclose material facts attracts jurisdiction u/s 148; Upholds reassessment - HC upholds reassessment proceedings initiated on assessee-company for AY 2003-04; Revenue initiated reassessment proceedings u/s 148 on the ground that assessee had failed to disclose material facts w.r.t. non-compete fees to its associate companies under 2 agreements and claimed as revenue expenditure; Observes that the valuation in the Agreement has not been clearly explained by the assessee; Further notes that when detailed questionnaire was issued by Revenue u/s 143(2), the assessee did not make full disclosure in respect of ..............Click here to read and download HC judgment
2) HC: Dismisses writ petition filed to circumvent time-barred procedure of appeal - HC dismisses the writ for AY 2009-10 by assessee, holds that Court cannot assume a role of an appellate court and examine the veracity and legality of an order of assessment on merits; The Revenue passed order u/s 144 without issuing any notice/ affording an opportunity to assessee and raised the demand; Assessee, being unaware of remedy of appeal, filed revision petition, which was rejected since assessee did not appear for hearing due to reasons beyond his control. Assessee was filed a writ petition which was disposed and assessee was directed to appear before Revenue; Subsequently, the revision petition was rejected.............Click here to read and download HC order
3) ITAT: Attributes 15% of revenue earned in India to Spanish co’s PE, Deletes Revenue’s 75% attribution - ITAT deletes Revenue’s 75% profit attribution to Spanish Company’s PE in India and holds that 15% profit attribution is sufficient for AYs 2013-14 to 2016-17; Assessee, tax resident in Spain, developed computer systems for travel agencies and Airlines for managing reservations and ticketing; Revenue contended that computers installed in the premise of Indian subscribers constitute fixed place PE and Amadeus India constitutes DAPE of assessee and accordingly, attributed 75% of income earned in India to the PE. ITAT observes that ................Click here to read and download ITAT order
4) HC: Decision on application for registration u/s 12A to be made within 6 months - HC declares the petitioner as a duly registered society under Section 12A owing to failure on the part of Commissioner to decide the application u/s 12A afresh in light of ITAT’s directions within 6 months; HC observes that assessee’s application for registration u/s 12A was rejected by the Commissioner and on appeal against the same, ITAT set aside the order of the Commissioner through order dated July 8, 2007 and issued directions for deciding the issue on merits, resulting in the revival of application for seeking registration u/s 12A......... Click here to read and download HC judgment
Note: SC in [TS-5051-SC-2016-O]clarifies Allahabad-HC ruling; Deemed registration u/s 12AA effective after 6 months period
5) HC: Sets aside CIT(A)’s order rejecting stay petition without disclosing reasons - HC allows assessee’s writ petition against CIT(A)’s order rejecting assessee’s stay application without disclosing any reasons; Assessee contended that the impugned order rejecting the stay petition is suffering from total non-application of mind in as much as it is not disclosing any reason for rejection of the request for a stay to the assessment order. HC observes that CIT(A) had not disclosed any reasons for the denial of stay ...............Click here to read and download HC order
6) HC: Sets aside reassessment order on account of change of opinion, Deletes disallowance u/s 40(a)(i) - HC allows writ petition challenging reassessment order on account of change of opinion and deletes disallowance u/s 40(a)(i) for AY 2004-05 & 05-06 on payments made to non-residents without deducting tax at source; Assessee made payments to non-resident owners of the ship/liners under the Bare Boat Charter Cum Demise (BBCD), Voyage Charter and Time Charter without deducting tax at source u/s 195, which was disallowed by Revenue, u/s 40(a)(i) on amount paid towards BBCD hire charges to M/s. Dolphin Maritime, Cyprus only; Subsequently, assessment for both the years were reopened and payments made to other companies were also disallowed u/s.40(a)(i). On filing a writ petition against the reassessment order HC observes that .............. Click here to read and download HC Judgment
7) HC: ITAT’s rejection of application u/s 254(2) not order appealable u/s 260A - HC holds that rejection of application u/s 254(2) is not order appealable u/s 260A and requires invocation of writ jurisdiction; Assessee’s challenge against ITAT’s rejection of application for rectification u/s 254(2) was rejected on the ground that there is an alternate remedy of appeal as provided under Section 260A; HC observes that the main issues in the appeal were: (i) whether there could be an appeal filed under Section 260A against the rejection of an application under Section 254(2)and(ii) whether the ground raised is a mistake, which could be rectified under Section 254(2)......... Click here to read and download HC Judgment
Note: HC in [TS-5292-HC-2020(BOMBAY)-O] HC dismisses Writ, impose cost of Rs. 10,000/- on the petitioner. Notes that not only was there no mistake apparent from the record but in the garb of the Misc. Application, petitioner had sought for review of the final order passed by the ITAT and for re-hearing of the appeal which is not permissible in law.
8) HC: Grants depreciation at 10% on roads developed and maintained by TN Industrial Dev. Corpn - HC holds that roads developed and maintained by the assessee are eligible for depreciation at 10% by considering the roads as ‘buildings’; Assessee, a JV between Tamil Nadu Industrial Development Corporation Limited and Tidel Park, claimed depreciation on roads, which have been developed and maintained by it pursuant to the agreement entered into with the State Government..........Click here to read and download HC Judgment
Note: SC in [TS-5485-SC-2018-O]dismissed revenue SLP against HC [TS-6879-HC-2017(Rajasthan)-O] where the Court went by the common parlance to construe the meaning of "road" and held it as a place where public has access to and held that development of road includes construction of toll booth, right to collect fee, right to restrict access to people etc.
9) HC: Grants deduction of internet expense from Export turnover and Total turnover; Follows SC ruling in HCL Tech - HC dismisses Revenue’s appeal and grants exclusion of internet expenditure from both Export turnover and Total turnover for the purpose of computation of deduction u/s 10A; HC relied on co-ordinate bench ruling, which in turn followed SC ruling in HCL Technologies Ltd. where deductions on freight, telecommunication, and insurance attributed to the delivery of computer software u/s 10A was allowed from both Export turnover and Total turnover ............... Click here to read and download HC order
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In this context, Nitish Ranjan and Richa Bakiwala (Manager – Taxation at Manohar Chowdhry & Associates), discuss some of the significant amendments to the original bill. Discussing the amendments brought in with respect to taxation of income arising from reconstitution of firm/AOI/BOI, the authors highlight that the intention behind substituting 45(4) and inserting new sub-section 4A and deeming provision u/s 9B is to overcome the decisions of the Courts wherein it was held that the distribution, division or allotment of assets of the partnership is nothing but a mutual adjustment of rights between the partners. The authors also touch upon the slew of measures taken to further encourage IFSCs such as incentivizing aircraft leasing u/s 10(4F), facilitating relocation of foreign funds to IFSC u/s 10(23FF), setting up of investment divisions in IFSC by Offshore banking units u/s 10(4D) and Sec. 115AD, taxing income from GDRs as provided by Sec. 115ACA, and regulating Category-I and Category-II AIFs. The authors also comment on topic of amendment in slump sale and opine “While one need to wait for the Government to prescribe the manner for arriving at the fair market value of the capital assets, the amendment would lead to a higher tax liability in cases where transfer of division or undertaking is made at lower than its fair market value.” The authors also touch upon amendments to definition of liable to tax, disallowance of self-generated goodwill, etc, deeming provision u/s 9B, etc.
