Thursday, December 26, 2013

ITAT accepts insurance value of cars instead of its WDV for wealth tax purposes

Where assessee-company owned several motor cars, 80 per cent of insurance value of motor cars to be accepted for wealth tax purpose instead of written down value of these cars.

Facts:

a) The assessee-company owned several motor cars and offered 80 per cent of the insurance value of the motor cars for wealth-tax purpose instead of their written down value;

b)
The Assessing Officer (‘AO’) held that the method used by the assessee was not acceptable because as per the Wealth-tax Act the valuation of the motor vehicles is based on the written down value, i.e., considering the wear and tear and usage of the same. Therefore, he, accordingly, made addition to the net wealth of assessee;

c) On appeal, the Commissioner of Wealth-tax (Appeals) upheld the order of AO. The aggrieved-assessee filed the instant appeal.

The Tribunal held in favour of assessee as under:

1) The value of motor cars shown in their insurance policies had to be taken as the basis for determining their market value;

2) However, as the insurance company would also take other things into consideration in arriving at a particular value for the purpose of insurance, market value of motor cars could be reasonably estimated at 80 per cent of their insurance value;

3)
Therefore, the AO was to be directed to take 80% insurance value of the cars shown by the assessee for wealth tax purpose. - Zee Entertainment Enterprises Ltd. v. Assistant Commissioner of Wealth-tax [2013] 40 taxmann.com 74 (Mumbai - Trib.)

Tuesday, December 24, 2013

Sec. 35ABB doesn’t deem sums paid on telecom licenses as capital exp., it is operative when exp. is of capital nature

The High Court held as under:

1) Section 35ABB does not stipulate or mandate that any expenditure for a right to operate telecommunication services or payment made for the said license as per the section is deemed to be a capital expenditure;

2) Section 35ABB is not a deeming provision but comes into operation and is effective when the expenditure itself is of a capital nature and is incurred for acquiring a right to operate telecommunication services or is made to obtain a license for the said services;

3)
It can be incurred before commencement of business or thereafter, but should be incurred during the previous year. Thus, section 35ABB by itself does not help in determining and deciding the question whether license fee paid under the New Telecom Policy, 1999 (NTP) or under the 1994 agreement, was/is capital or revenue in nature;

4) Variable payments made under the NTP on revenue-sharing basis were revenue expenditure deductible under section 37(1). The expenditure incurred towards license fee was partly revenue and partly capital in nature;

5)
License fee payable up to 31st July, 1999 to be treated as capital expenditure and license fee on revenue sharing basis after 1st August, 1999 to be treated as revenue expenditure. Capital expenditure qualifies for deduction as per section 35ABB of the Act – CIT v. Bharti Hexacom Ltd. [2013] 40 taxmann.com 40 (Delhi)

Monday, December 23, 2013

‘Bigg Boss’ not to withhold tax from sum paid to NR assisting in production of programme; AAR refers to Sec. 194C

Services rendered by NR for production of programmes for purpose of broadcasting and telecasting shall be specifically characterized as ‘work’ for the purpose of section 194C. Consequently, income therefrom would be treated as ‘business income’ and not as ‘Fees for Technical Service’.

Facts:

a) The applicant, Endemol India (P) Ltd. (EIPL) starting its operation with production of reality shows Bigg Boss and Fear Factor, was engaged in the business of providing and distributing television programmes. It produced a reality show (‘the show’) for which the shooting took place in Argentina.

b) For the purpose of that show it engaged Endemol Argentina SA (Endemol) for providing line production services in Argentina.

c) It approached the AAR to determine whether the amount paid to Endemol would constitute Fees for Technical Services or Royalty?

The Authority held in favour of the Applicant as under:

1) The Delhi High Court in the case of CIT v. Prasar Bharati (Broadcasting Corporation of India), [2007] 158 Taxman 470 (Delhi) held that broadcasting and telecasting including production of programmes for such broadcasting and telecasting do not fall under the provision of section 194J as they are specifically covered by definition of work in section 194C of the Act;

2) CBDT’s Circular No. 715, dated 08-08-1995 stated that payments made to advertising agencies for production of programmes, which are to be broadcasted / telecasted, would be subject to withholding tax under section 194C of the Act;

3) Since the payments made by the applicant to Endemol were for production of programmes for the purpose of broadcasting and telecasting, the services rendered by such non-resident would be specifically characterized as ‘work’ for the purpose of section 194C;

4) If the services were characterized as ‘contact work’ under section 194C of the Act, then the income received would be necessarily treated as business income. In absence of PE of non-resident in India, the income of the non-resident company was not taxable in India;

5) In that case it would not be appropriate to treat the item, i.e., services for production of programmes for telecasting as ‘Fees for Technical Services’ under the provision of section 9(1)(vii) of the Act  - Endemol India (P.) Ltd., In re [2013] 40 taxmann.com 340 (AAR - New Delhi)

Wednesday, December 18, 2013

Financial analysis of borrowers won’t be deemed as facilitation of loan agreement as per India-France treaty

Where role of assessee in facilitating foreign currency loan to its client is providing financial analysis of borrowers, general market conditions and regulatory environment, such nature of services will not fall under Para 4 of protocol between India and France.

Facts:

a) The assessee had facilitated foreign currency loan to its clients from head office outside India but did not show any income on the said transactions contending that services provided by assessee was limited to providing financial analysis of borrowers, general market conditions and regulatory environment and it has no role to play in decision of granting of loan;

b) The TPO did not accept the contention of the assessee and computed the arm's length charges being 25 per cent of the total amount comprising interest and fee received by the offshore branches of the bank and made an adjustment. On appeal, the CIT(A) reduced the adjustment from 25 per cent to 20 per cent.

The Tribunal held as under:

1) As per Para 4 of the India-France protocol if the role of the PE is only to facilitate the conclusion of foreign trade or loan agreement or mere signing thereof, then no profit shall be attributable to PE in terms of article 7(2) of the Indo-France DTAA;

2) The assessee provided the services regarding credibility analysis of clients, their capacity to repay the loan and risk involved in the loan transaction;

3) Therefore, the role of the assessee in providing such services were inevitable for taking the decision of providing loan and as such couldn’t be said to be a mere facilitation of conclusion of the loan agreement or signing thereof; Thus, Para 4 of the Protocol does not apply in the instant case;

4) Since the assessee has provided certain services for that arms length charges could be determined as per the provisions of transfer pricing regulation. The interest couldn’t be taken into account for attribution of income towards service charges/fees and, therefore, only the fee charged by the foreign branches could be taken into consideration for making adjustment under transfer pricing provisions;

5) As none of the parties have come out with the suitable comparables, the estimation made by the CIT (A) at the rate of 20 per cent was justified, however, the same would be only in respect of the fee and charges other than interest received by the foreign branches - Credit Lyonnais v. ADIT (International Taxation) [2013] 40 taxmann.com 87 (Mumbai - Trib.)

Quotation price isn’t analogous to actual price paid; former can’t be used for benchmarking under CUP method

Under CUP method, a quotation which hasn't fructified into a transaction can’t be used for benchmarking

The Tribunal held as under:

1) When the statute read with rules specifically provides that the ALP under the CUP method should be determined by considering 'the price charged or paid' in a comparable uncontrolled 'transaction', one fails to comprehend as to how any 'quotation' which has not fructified into a 'transaction' can be substituted with the actual price charged or paid in a transaction;

2)
As the law provides for considering the price charged or paid in a comparable uncontrolled transaction, there can be no scope for considering a quotation price in isolation which is not preceded with or succeeded by any actual transaction - Sinosteel India (P.) Ltd. Dy. CIT [2013] 40 taxmann.com 240 (Delhi - Trib.)

Monday, December 16, 2013

Routing of a legitimate expenditure through P&L Account isn't a precondition to allow such expenditure

Where claim of assessee regarding share trading and future options losses was substantiated by it by furnishing valid and statutorily accepted documents, merely debiting these items directly in capital account instead of in profit and loss account, could not be a ground to disregard legally acceptable claim of assessee.

Facts:

a) The Assessing Officer disallowed the assessee’s claim of share trading and F&O losses on the ground that these transactions were not routed through the profit and loss accounts;

b) On appeal, CIT (A) did not agree with the reasoning of the Assessing Officer and thus, deleted the said additions;

c) Further, the Tribunal concurred with the findings of the CIT (A) as far as future holding loss was concerned and held in favour of the assessee however, for share trading loss, it remanded the matter to

Assessing Officer.

The High Court held in favour of assessee as under:

1) The transactions would not cast any doubt and there was no dispute over the quantum of loss computed by the assessee and it had substantiated the entire transactions by furnishing otherwise valid and statutorily accepted documents;

2) The Apex Court in case of Kedarnath Jute Mfg. Co. Ltd. v. CIT [1971] 82 ITR 363 had held that "whether the assessee is entitled to a particular deduction or not will depend upon the provision of law relating thereto and not on the view which the assessee might take of his rights nor the existence or absence of entries in the books of account be decisive or conclusive in the said matter";

3) Thus, merely debiting these items directly in capital account instead of in P&L account and thus, not routing share trading account through audited account under section 44AB couldn’t be deemed as a valid ground to disregard overwhelming legally acceptable evidences to reject the claim of assessee;

4) In the instant case though the item, as rightly pointed out by both the authorities, could not have been debited directly in the capital account but in view of voluminous documents substantiating the claim of the assessee, there was no reason to interfere  - CIT v. Naishad I. Parikh [2013] 39 taxmann.com 191 (Gujarat)

Friday, December 13, 2013

Only drawer of cheque was liable under Negotiable Instrument Act even if cheque was issued from joint account

The Supreme Court held as under:

1) Considering the language used in section 138 of the Negotiable Instrument Act, 1881 (‘NI Act’) and taking note of background agreement pursuant to which a cheque was issued by more than one person, it was opined that it was only the drawer of the cheque who could be made liable for the penal action under the provisions of the NI Act;

2) Thus, under section 138 of the NI Act, it was only the drawer of the cheque who could be prosecuted. In the instant case, admittedly, the appellant was not a drawer of the cheque and she had not signed the same;

3) As per the provisions of the NI Act, in case of issuance of cheque from joint accounts, a joint account holder cannot be prosecuted, unless the cheque has been signed by each and every person who is a joint account holder. It couldn’t be said that the complainant had no remedy against the appellant, but certainly not under section 138;

4) Under these circumstances, the appeal deserved to be allowed and process in Criminal case pending before the Court of Metropolitan Magistrate deserved to be quashed accordingly, against the appellant - Mrs. Aparna A. Shah v. Sheth Developers (P.) Ltd. [2013] 40 taxmann.com 43 (SC)

Thursday, December 12, 2013

Interest on I-T refund not taxable at concessional rate of 10% as per Treaty if NR has PE in India

Interest earned by a non-resident on income-tax refund is not taxable in India at concessional rate of 10% as per India-France treaty if such non-resident has a PE in India

In the instant appeal, appellant had sought interpretation of Article 12 of India-France treaty. It contented that interest earned in India on income-tax refund was taxable at 10% as per Article 12(2) of treaty.

The High Court held as under:

1) Plain reading of Article 12 of treaty would make it absolutely clear that Paras 1 and 2 of Article 12 will apply, inter alia, when the recipient of interest does not have a permanent establishment in the country, where he has received interest;

2) There was no dispute that the respondent-assessee had a permanent place of business in India and it had paid tax in India on its income, except income from interest;

3) The interest earned in India on the refund of income-tax was, therefore, not covered by Paras 1 and 2 of Article 12 of the said Treaty. To that extent, the judgment of the Tribunal was to be set aside and, accordingly, the appeal was to be allowed – Director of Income-tax v. Pride Foramer SAS [2013] 40 taxmann.com 100 (Uttarakhand)

Wednesday, December 11, 2013

Revenue earned by eBay from its website won't be FTS; its Indian marketing agents won't form its agency PE

a) The assessee, incorporated in Switzerland, operated specific websites in India that provided an online platform for facilitating the purchase and sale of goods and services to users based in India;

b) For the purpose, the assessee had entered into marketing support agreements with eBay India and eBay motors,  for availing of certain support services in connection with its websites;

c) The Assessing officer concluded that the payments received by the assessee from operations of websites were mainly in the nature of FTS. Further, it also held that the assessee had a PE in India in the form of its entities namely, eBay India and eBay motors;

d) On appeal, the DRP upheld the order of AO. Aggrieved-assessee filed the instant appeal.

The Tribunal held in favour of assessee as under:

1) The modus operandi of the transactions undertaken through the websites made it clear that the fees accruing to assessee on successful completion of the transactions between the buyer and seller could not be described as FTS, as the assessee had no role to play in1) effecting sales and these were in nature of business profits;

2) The existence of PE as per Article 5 of India-Singapore DTAA (‘treaty’) is a must for bringing to charge any business profits as per Article 7 of treaty. The eBay India and eBay motors were dependent agents of assessee, as they were assisting it in carrying on business in India and if any of the conditions given in para 5 of Article 5 of treaty was satisfied, then they would constitute dependent agent PE of the assessee in India;

3) First condition provided in para 5 of treaty refer to that the dependent agent "has and habitually exercises in that State, an authority to negotiate and enter into contracts for or on behalf of the enterprise”. By performing the activities as narrated in the agreement, it was seen that eBay India had at no stage negotiated or entered into contract for or on behalf of the assessee;

4) Second condition provided in Article 5 of treaty refers to the dependent agent habitually maintaining a stock of goods for or on behalf of the enterprise. This condition was not satisfied as eBay India didn’t maintain any stock of goods for delivery for or on behalf of the assessee;

5) Third condition applies where the dependent agent manufactures or processes the goods or merchandize in that State for the enterprise.  Obviously, this clause was also not applicable because eBay Motors was not required to manufacture or process the goods or merchandise on behalf of the assessee;

6) Thus, the eBay India and eBay motors were dependent agents of assessee but they did not constitute dependent agent PE and, thus, profits earned by assessee could not be taxed as per Article 7 of treaty - eBay International AG v. Dy. DIT [2013] 40 taxmann.com 20 (Mumbai - Trib.)

Order of amalgamation doesn't transfer tenancy rights from transferor-company to transferee-company

The High Court held as under:

1) Where order of amalgamation wasn't served on landlord by the transferee-company and landlord continued to issue rent receipts in the name of (dissolved) transferor-company, though he accepted rent from transferee-company, yet no right of tenancy was created or transferred in favour of transferee-company;

2) Tenancy is a non-transferable object that can extend to others either by an explicit contract or by statute;

3) In the instant case, there was neither any statute to support transfer of tenancy on amalgamation nor any agreement executed between tenant (transferor-company) and landlord to deal with such an eventuality - Ambalal Sarabhai Enterprises Ltd. v. Rajeev Daga [2013] 40 taxmann.com 99 (Calcutta)

Thursday, December 5, 2013

Even info from CBI won't authorize search unless it is based on reasons given under sec. 132(1)

Search conducted in pursuance of authorization issued in absence of the eventualities mentioned in clauses (a) to (c) of sub-section (1) of section 132, couldn’t be deemed as valid search.

Facts:

a) On the basis of information given by CBI that undisclosed cash was being carried by assessee, search proceedings under section 132 were initiated by issuing warrant of authorization by the Director (Investigation);

b) Some alleged incriminating documents containing details of unexplained payments were found and seized. Thereafter, notice under section 153A was issued by the Assessing Officer;

c) The assessee filed his returns of income and the assessments were completed. On appeal, the assessee challenged the validity of assessments based on said search;

d) The CIT (A) held that the search was valid and the proceedings under section 153A were validly initiated by the Assessing Officer. Aggrieved-assessee filed the instant appeal.

The Tribunal held in favour of assessee as under:

1) From the provisions of section 132(1) it is clear that it contemplates existence of certain eventualities whereof the competent authority can authorize search;

2) In the instant case, there was no complete information in possession CBI about any bullion, jewellery, cash or any other document, which could reveal that the assessee was in possession of undisclosed assets or incriminating documents;

3) It appeared that the department had acted upon the information provided by the police department on 29-3-2007 and on the same day, the warrant of authorization was issued and the search was conducted, but nothing was brought on record to substantiate that any cash was found, although search was conducted on the information that undisclosed cash was being carried out by the assessee;

4) Thus, the authorization to conduct search based on reason under section 132(1) did not exist and search became invalid. Therefore, the assessment order based on the said search was not valid and had to be set aside - Parma Ram Bhakar v. Dy. CIT [2013] 39 taxmann.com 119 (Jodhpur - Trib.)

Tuesday, December 3, 2013

No depreciations to owner on assets given on lease if loan transaction was disguised as sale and lease back transaction

Assessee was not entitled to claim depreciation on asset which was purchased from Gujarat State Electricity Board and same was immediately leased back to it, since the transaction was a sham transaction

Facts:

a) The assessee had purchased energy meters of different makes for a consideration of Rs. 4.99 crores from Gujarat State Electricity Board [GEB] and these meters (assets) were then immediately leased back to GEB vide a lease agreement;

b) It accordingly claimed depreciation on the said meters under proviso to section 32(1). The Assessing Officer (‘AO’) disallowed the depreciation claim of assessee by holding that the alleged lease transaction was in reality a transaction of finance. On appeal, the CIT (A) upheld the order of AO.

The Tribunal held in favour of revenue as under:

1) The assessee’s contention that transaction was with a State Government and it would be highly improper to impute any collusiveness or colourable nature of the transaction without any concrete evidence was misconceived;

2) The facts on the file itself spoke that the transaction in question was a colourable device with the twin purposes of financing the GEB and at the same time making such an arrangement to enable the financer to claim depreciation on the assets and in lieu thereof to pay reduced rate of interest to the financer in proportion to the value of benefit availed by the financer, for which it otherwise was not entitled to;

3) A perusal of section 23 of the Indian Contract Act, 1872 reveals beyond doubt that even if the consideration or object of an agreement may not be expressly forbidden by law, but if it is of such a nature that, if permitted, it would defeat the provisions of law, the same will not be lawful;

4) It is always the goods or the assets itself which are the primary subject of a valid transfer, not the incidental benefits, which automatically pass on to the transferee with the transferred asset;

5) In the case in hand, only the incidental tax benefits were intended to be transferred without any intention to transfer the asset itself. Thus, whole of the effort had been made to transfer the right to claim depreciation on the assets to the assessee for the purpose of the Income-tax Act, but not the assets itself. Therefore, the Assessing Officer had rightly disallowed depreciation on electric meters - Hathway Investments (P.) Ltd. v. ACIT [2013] 38 taxmann.com 389 (Mumbai - Trib.)

Monday, December 2, 2013

Vodafone’s case: HC puts ball in DRP’s court to decide applicability of TP provisions on issue of shares

a) Assessee allotted shares to its foreign holding company (AE) at a  premium of Rs. 8,951 per share and received the amount against allotment of shares;

b) The AO referred this transaction to TPO for determining its ALP The TPO issued show cause notice to assessee;

c) The assessee contended that Chapter X doesn’t apply to issue of equity shares as no income arises from issue of equity shares and the transaction is a capital account transaction;

d) TPO rejected assessee’s contentions relying on retro amendment to section 92B made by the Finance Act,2012 by inserting Explanation(i)(c) and

(e) which brings capital financing transactions within the purview of international transactions and TP provisions of Chapter X;

e) The TPO determined ALP of shares and made TP adjustments of 1397.27 crores. The AO passed draft assessment order wherein he didn’t deal with assessee’s objections. Thus, the assessee filed the instant writ petition challenging AO’s draft assessment order.

The High Court disposed off the petition with following directions:

1) We were not inclined to set aside the draft assessment order of the AO or the order of the TPO and remand the matter to AO, because the AO has already filed an affidavit contesting the petition on merits and justifying the stand that the alleged shortfall in premium upon issue of shares was chargeable to tax under Chapter X.";

2) Thus, instead of remanding the matter to the AO to examine this question, the merits of this question must be considered by DRP;

3) The petitioner would submit before the DRP its preliminary objections to Draft Assessment Order and the TPO's order within two weeks by
raising jurisdictional issues;

4) The DRP would decide the issue of jurisdiction before considering issue of valuation raised by the petitioner in its objections filed before the DRP, of course subject to the additional grounds on jurisdiction being filed by the petitioner within two weeks;

5) The DRP would decide the issue of jurisdiction as a preliminary issue within two months from the date on which the petitioner filed its objections on the question of jurisdiction;

6) In case the decision of the DRP on the above preliminary issue was adverse to the petitioner, it would be open to the petitioner to challenge the order of the DRP on the preliminary issue in a writ petition if a case was made out at that stage that the decision of the DRP was patently illegal, notwithstanding the availability of alternative remedy of filing an appeal before the Income Tax Appellate Tribunal - Vodafone India Services (P.) Ltd. v. Union of India [2013] 39 taxmann.com 201 (Bombay)

Mother is natural guardian even during lifetime of father; clubbing provisions not unconstitutional

Sub-section (1A) of section 64, including clause (a) of the Explanation to said sub-section is constitutionally valid

Facts:

a) The assessing authority completed the assessment by clubbing the income of assessee’s two minor sons with her income as her income was greater than that of her husband;

b) The assessee contended that the provisions of clubbing the income of the minor child, infringed the right of equality as enshrined by article 14 of the Constitution of India and, thus, were ultra vires;

c) She further contended that clause (a) of the Explanation to section 64(1A), was violative of section 6 of the Hindu Minority and Guardianship Act, 1956, according to which the father is the natural guardian and after him the mother is the natural guardian. Thus, the assessee filed instant writ petition challenging the constitutional validity of section 64(1A).

The High Court dismissed the petition with following observations:

1) HC relied on following interpretation of SC in case of Githa Hariharan v. Reserve Bank of India [1999] 104 Taxman 220:

a) Under the Hindu law both mother and father are the natural guardians of the minor sons or daughters;

b) Gender equality is one of the basic principles of our Constitution and in the event the word 'after' is to be read to mean a disqualification of a mother to act as a guardian during the lifetime of the father, the same would definitely run counter to the basic requirement of the constitutional mandate and would lead to a differentiation between male and female;

c) The father by reason of a dominant personality cannot be ascribed to have a preferential right over the mother in the matter of guardianship, since both fall within the same category

2) Thus,  it cannot be said that the mother is not the natural guardian during the lifetime of the father or until he is disqualified from being the natural guardian;

3) When both mother and father are natural guardians, then adding the income of the minor child in the income of the parent, whose income is greater, can’t be said to be arbitrary, artificial or evasive of the object sought to be achieved;

4) Therefore, the constitutional validity of sub-section (1A) of section 64, including clause (a) of the Explanation to the said sub-section was to be upheld and the same were not violative of article 14 of the Constitution of India or section 6 of the Hindu Minority and the Guardianship Act -Anju Mehra v. Union of India [2013] 38 taxmann.com 383 (Punjab & Haryana)

Saturday, November 30, 2013

E-homes with pre-fitted gadgets akin to other residential units; their developer isn’t dominant player


E-homes with facilities like wifi, finger print security cannot be said to be different from other residential units

Facts:

a) The informant, allottee of e-homes, filed information alleging abuse of dominance by Opposite Party (‘OP’) for adopting anti-competitive practices for the allotment of their e-homes;

b) He alleged that the e-homes developed by OP were likely to attract buyers who wanted to buy homes pre-fitted with hi-tech gadgets like wifi, finger print security system, parkings lots, etc;

c) He also contended that the OP created the special category of e-homes and had acquired a 100% dominant status for being the only real estate developer to design and develop such e-homes in Delhi/NCR;

d) As a result of the dominance enjoyed by OP, it started demanding high premiums and forced allottees to sign an Allotment Agreement.

The Competition Commission held as under:

1) The argument of informant that 'the provision for services of e-home' was a distinct product having separate market for itself, does not seem to be convincing because the facilities being provided by the OP like prefitted hi-tech gadgets, i.e., wifi, finger print security system, parking lots, etc., could easily be installed in any house without much structural modifications and alterations;

2) Thus, e-homes in question couldn’t be deemed as different products from other residential flats;

3) There has been no information in the public domain to prove that the OP was a dominant real estate developer in the relevant market and it had been abusing its position of dominance;

4) As per the information in public domain, there were several upcoming residential projects in Delhi/NCR and OP was not the only real estate developer in the relevant geographical market;

5) Therefore, the OP did not, prima facie, appear to be a dominant player in the relevant market. In the absence of dominance of OP in the
relevant market, there was, prima facie, no reason for abuse of dominance in that market - Achyut P. Rao v. Designarch Infrastructure (P.) Ltd. [2013] 38 taxmann.com 380 (CCI)

Friday, November 29, 2013

E-homes with pre-fitted gadgets akin to other residential units; their developer isn’t dominant player

E-homes with facilities like wifi, finger print security cannot be said to be different from other residential units

Facts:

a) The informant, allottee of e-homes, filed information alleging abuse of dominance by Opposite Party (‘OP’) for adopting anti-competitive practices for the allotment of their e-homes;

b) He alleged that the e-homes developed by OP were likely to attract buyers who wanted to buy homes pre-fitted with hi-tech gadgets like wifi, finger print security system, parkings lots, etc;

c) He also contended that the OP created the special category of e-homes and had acquired a 100% dominant status for being the only real estate developer to design and develop such e-homes in Delhi/NCR;

d) As a result of the dominance enjoyed by OP, it started demanding high premiums and forced allottees to sign an Allotment Agreement.

The Competition Commission held as under:

1) The argument of informant that 'the provision for services of e-home' was a distinct product having separate market for itself, does not seem to be convincing because the facilities being provided by the OP like prefitted hi-tech gadgets, i.e., wifi, finger print security system, parking lots, etc., could easily be installed in any house without much structural modifications and alterations;

2) Thus, e-homes in question couldn’t be deemed as different products from other residential flats;

3) There has been no information in the public domain to prove that the OP was a dominant real estate developer in the relevant market and it had been abusing its position of dominance;

4) As per the information in public domain, there were several upcoming residential projects in Delhi/NCR and OP was not the only real estate developer in the relevant geographical market;

5)
Therefore, the OP did not, prima facie, appear to be a dominant player in the relevant market. In the absence of dominance of OP in the relevant market, there was, prima facie, no reason for abuse of dominance in that market - Achyut P. Rao v. Designarch Infrastructure (P.) Ltd. [2013] 38 taxmann.com 380 (CCI)

Revenue exempted from disclosing info obtained from Financial Intelligence Unit justifying search operations

Preparation of satisfaction note on information collected from Financial Intelligence Unit to be treated as unpublished document for which privilege under Evidence Act could be validly claimed.

Facts:


a) The assessee was a leading importer and exporter of bullion, platinum bars and other precious metals;

b)
The search and seizure operations under section 132 were carried out against assessee on basis of information received from Financial Intelligence Unit (‘FIU’) that heavy cash amounts were deposited in bank accounts of assessee and its sister concern on a regular basis;

c) The assessee filed writ challenging the search and seizure operations and claimed its right to examine satisfaction note to assail validity and bona fides of search and seizure operation;

d) On other hand, revenue filed an application claiming privilege of unpublished material in public interest under the Evidence Act

The High Court held in favour of revenue as under:

1) It couldn’t be denied that the FIU, reporting directly to the Finance Ministry, was responsible for receiving, processing, analyzing and disseminating information related to suspected financial transactions;

2) It was also responsible for coordinating with and strengthening the efforts of national and international agencies, investigation into it in pursuance of global efforts against money laundering, terrorist financing and related crimes;

3
) The preparation of the satisfaction note on such information could be treated as unpublished documents for which the revenue has validly claimed privilege under sections 123 and 124 of the Evidence Act;

4) A large amount of accounted black money is floating in the market which poses a serious threat to the national economy. The Government of India has adopted several methods to discouraging the parallel economy being run by unscrupulous persons;

5) The FIU is engaged in collecting such information against the money laundering, terrorist financing and related crimes. The sources and methods of the organization collecting and processing such sensitive information couldn’t be subjected to public scrutiny to jeopardize the interest of the organization and national interest.

6)
Thus, the application filed by the Income-tax department was to be allowed - M.D. Overseas Ltd. v. Director General of Income-tax [2013] 38 taxmann.com 433 (Allahabad)

Thursday, November 28, 2013

Assistance in financial and risk management is a ‘technical service’; FTS under India-US DTAA

Where assessee-company was making use of advice, input, experience and assistance rendered by US based company in its decision making process of financial and risk management, etc., services so rendered would be technical services under India-US DTAA.

Facts:   

a) The assessee-company, engaged in providing software development services to the customers in India, claimed deduction of payment made to US based company (‘foreign company’)  towards management services rendered by it;

b) In course of assessment, the Assessing Officer opined that the payment made by the assessee to foreign company would come within the ambit of consultancy fees and, therefore, the it was liable to deduct tax on these payments under section 195;

c) Since assessee failed to deduct tax at source, the Assessing Officer disallowed payments made by assessee by invoking provisions of section 40(a)(ia). Further, the CIT (A) confirmed said disallowance. The aggrieved-assessee filed the instant appeal.

The Tribunal held in favour of revenue as under:

1) The assessee was making use of the advice, input, experience and assistance rendered by the foreign company in its decision making process of financial and risk management, etc;

2) The foreign company was also giving training to the assessee's employees in making use of the inputs, experience, experimentation, assistance and advice rendered by them for taking a better possible decision in order to achieve the desired objectives;

3) Decision making process is a highly complicated and technical one, unless the assessee gets a technical input and advice from financial and risk management experts it may be difficult to select a right process for the growth of the company;

4) It was not the case of the assessee that in given set of facts/problem, the foreign company gave its solution or advice. The solution or decision was, admittedly, taken by the assessee on the basis of the advice/service rendered by the foreign company;

5) Therefore, the technical knowledge, experience, skill possessed by the foreign company with regard to financial and risk management was made available in the form of advice or service which was used by the assessee in the decision making process not only in management affairs but also in financial matters;

6) Therefore, such service rendered by the foreign company was technical in nature as per India-USA treaty - US Technology Resources (P.) Ltd. v.  ACIT [2013] 39 taxmann.com 23 (Cochin - Trib.)

No ‘royalty’ from sale of software, HC ignores amended Sec. 9 as DTAA more beneficial; Samsung’s case distinguished

Delhi High Court upheld the order of the Tribunal that amount received by the assessee under the license agreement for allowing the use of the software would not be royalty under the DTAA.

The Delhi High Court held as under:

1) What was transferred was neither the copyright in the software nor the use of the copyright in the software, but what was transferred was the right to use the copyrighted material or article which was distinguishable from the rights in a copyright;

2) It further held that the right that was transferred was not a right to use the copyright but was only limited to the right to use the copyrighted material and the same would  not give rise to any royalty income and would be business income;

3) The Delhi High Court expressed its disagreement with the decision of the High Court in the case of CIT v. Samsung Electronics Co. Ltd. [2011] 203 Taxman 477 (Kar.) that right to make a copy of  the software and storing the same in the hard disk of the designated computer and taking backup would amount to copyright work – DIT v. Infrasoft Ltd. [2013] 39 taxmann.com 88 (Delhi)

Sale of business in lieu of shares under an amalgamation scheme not a ‘slump sale’; in sync with Bharat Bijilee’s case

Where no monetary consideration was involved in transfer of manufacturing division along with all its assets and liabilities under amalgamation scheme, same could not be considered as slump sale under section 50B

Facts:

a) The assessee transferred its manufacturing division to NIL under a scheme of amalgamation as per which all the assets and liabilities of the assessee were vested in NIL;

b) The assessee in return received certain investments held by NIL besides allotment of equity shares to the shareholders of the assessee;

c) The Assessing Officer held that the transfer of the manufacturing division to NIL would tantamount to a 'slump sale' attracting liability of capital gains under section 50B;

d) On appeal, the CIT(A) deleted the order of Assessing Officer. The aggrieved revenue filed the instant appeal.

The Tribunal held in favour of assessee as under:

1) To qualify as slump sale two conditions have to be satisfied, viz., (A) there must be transfer of one or more undertakings as a result of sale, and (2) the sale should be for a lump sum consideration without values being assigned to the individual assets and liabilities;

2) In the instant case it was not disputed that there was no monetary consideration involved for transfer of the assets and liabilities of the manufacturing division to NIL, though there might have been transfer of an undertaking;

3) Since there was no monetary consideration involved in transferring the manufacturing division under scheme of amalgamation approved by the High Court, it couldn’t be considered to be a slump sale so as to attract the liability of the capital gain under section 50B – ITO v. Zinger Investments (P.) Ltd [2013] 38 taxmann.com 388 (Hyderabad - Trib.)

Monday, November 25, 2013

Cenvat credit was allowable to assessee even if supplier hadn’t discharged its duty

Requirement of taking "reasonable steps" does not mean that assessee is required to verify from department whether duty stands paid by supplier because that would be practically impossible and would lead to transactions getting delayed; therefore, assessee is entitled to credit even if supplier has not paid duty to department

In the instant case the assessee took deemed Modvat credit benefit under Notification No. 58/97-CE(NT) on basis of invoices issued by supplier of inputs, but on verification it was found that supplier had not paid duty. The Department opined that since rule 57A(6) required the assessee to take all reasonable steps to ensure that duty had been paid, no credit could be allowed if duty had not been paid on inputs supplied.

The Supreme Court held in favour of assessee as under:

1) In this case supplier of inputs had given declaration indicating that excise duty had been paid on said inputs. Fact that supplier had not discharged duty was a lapse on part of seller; it was different and not a condition or rather a precondition postulated in Notification;

2) When there was a prescribed procedure and that had been duly followed by the assessee, it could not be said that the assessee had not taken reasonable steps as prescribed in notification;

3) Due care and caution were taken by the assessee and it was not stated by Department what further care and caution could have been taken. Requirement of "reasonable care" does not mean verification from department whether duty stands paid by supplier because that would be travelling beyond notification and practically impossible and would lead to transactions getting delayed;

4) Thus, the Assessee was entitled to deemed credit under the Notification No. 58/97-CE(NT). -  Commissioner of Central Excise, Jalandhar v. Kay Kay Industries [2013] 38 taxmann.com 336 (SC)

Friday, November 22, 2013

Sum paid to NR to identify potential customers and to conduct market survey abroad held taxable as FTS

Payment made to a foreign company for marketing survey and identifying potential foreign customers for assessee's product was only for consultancy services and it was taxable in India as FTS

Facts:

a) The assessee engaged a foreign company ‘SR’ as marketing agent for South East Asian countries;

b) SR had to study the market situation in South East Asia for the products manufactured by the assessee and it had to market the products of the assessee in those countries;

c) The CIT(A) found that payment made to SR was consultancy charge, therefore, tax had to be deducted. Accordingly, it confirmed the disallowance made by the Assessing Officer. Aggrieved-assessee filed the instant appeal.   

The Tribunal held in favour of revenue as under:

1) The work of SR was to identify the potential customers and file a report regarding the market strategy and developmental studies;

2) The agreement did not enable SR to market the products of the assessee in South East Asian countries. The company SR only had to do survey and file a report so that the assessee could market its products after considering the report filed by the foreign party;

3) Therefore, the payment made to SR was only consultancy charge. It was not a case of marketing the products in the foreign country. The CIT
(A) had rightly confirmed the order of the Assessing Officer. Thus, the order of the lower authority holding assessee liable for TDS was to be confirmed - English Indian Clays Ltd. v. ACIT [2013] 39 taxmann.com 50 (Cochin - Trib.)

Tuesday, November 19, 2013

A blood bank isn’t analogous to a hospital or medical institution; not entitled to section 11 exemption

Assessee engaged in running a blood bank cannot be said to be engaged in providing medical facilities so as to be entitled to exemption under section 11

Facts:

1) The assessee, a company registered under section 12AA, had entered into transaction of sale of blood components (FFP) with its associated concern and during the year it had supplied FFP to said concern;

2) The Assessing Officer found that the assessee had supplied FFP to patients at higher price and had also charged service charges from patients which were not charged to the said concern;

3) The Assessing Officer was, thus, held that since the assessee had provided concessional benefit to its associated concern it was not eligible for deduction under section 11;

4) The CIT (A) upheld the order of Assessing Officer. Aggrieved-assessee filed the instant appeal.

The Tribunal held in favour of revenue as under:

1) As per section 13(6) a trust running an educational institution or a medical institution or a hospital shall not lose the benefit of exemption of any income other than the value of benefits of educational or medical facilities provided to the specified persons, solely on the ground that such benefits have been provided to specified persons;

2) This section covers, (i) only those trusts running an educational institution or a medical institution or a hospital, (ii) the benefit extends only in respect of educational or medical facilities and not any other facility;

3) In the instant case, it was an undisputed fact that assessee has entered into transactions with the related concerns;

4) Yet assessee couldn’t be said to be a hospital or medical institution as it was not engaged in dispensing medical facility though it was engaged in running a blood bank. Thus, assessee wasn’t entitled to relief under section 11 - Advance Transfusion Medicine Research Foundation v. ADIT (Exemption) [2013] 38 taxmann.com 360 (Ahmedabad - Trib.) 

Monday, November 18, 2013

An association of regional stock exchanges sets up to ensure secured trading and safety of funds gets trust registration

Where main object of assessee-trust was to protect investors by way of creating a fund, which was a public charitable fund set up to advance an object of general public utility, assessee became entitled to get registration under section 12AA

Facts:

a) The assessee-trust was formed by coming together of 23 regional Stock Exchanges of India to provide a common platform for trading in shares and securities;

b) Its main object was to protect investors by way of creating a fund, which could provide compensation to them in case of loss on account of default by any member of a participating recognized Stock Exchange;

c) The assessee made an application under section 12A for grant of registration which was rejected by competent authority. Aggrieved-assessee filed the instant appeal.

The Tribunal held in favour of assessee as under:

1) An object beneficial to a section of the public is an object of general public utility. To serve a charitable purpose, it is not necessary that the object leads to the benefit of the whole mankind or all persons in a particular Country or even State;

2) It would be sufficient if the intention is to benefit a section of the community, sufficiently defined and identifiable by some common quality of a public or impersonal nature;

3) What is to be seen is the intention to benefit a section of the public as distinguished from a specified individual or group;

4) Once it was decided that the assessee’s principal object was the advancement of an object of any general public utility, it would not be material if the income by way of contributions from the member stock exchanges was otherwise exempt under section 10(23EA) or not;

5) Thus, the fund created by assessee was a public charitable fund having been set up to advance an object of general public utility, assessee was entitled to get registration - Inter-connected Stock Exchange Investors Protection Fund ( ISE IPF) v. Director of Income-tax (Exemption) [2013] 38 taxmann.com 329 (Mumbai - Trib.)

Friday, November 15, 2013

Moisturex cream meant for curing skin is medicament; SC lays down principles to identity medicament products

'Moisturex' cream having medicinal ingredients and meant for curing of skin ailments/diseases is a medicament (duty 15%) and not cosmetic (duty 70%)

Facts:

The assessee was engaged in manufacture of product 'Moisturex', which it sought to classify as 'medicament', liable to duty at 15% under Heading 30.03. However, the Department classified product as cosmetics liable to duty @ 70% under Tariff Heading 33.04.

The Supreme Court held in favour of assessee as under:

1) For deciding whether a product is 'medicament' following principles are relevant :

a) Presence of pharmaceutical ingredients that have therapeutic or prophylactic or curative properties, is relevant and proportion of such ingredients is not decisive;

b) Even if a product is sold without a prescription of a medical practitioner or over/across counter, it may be 'medicament';

c) People who actually use such products must understand it to be 'medicament';

d) Its primary function has to be "cure" and not "care", i.e., it must be used mainly in curing or treating ailments or diseases.

2) Accordingly, 'Moisturex' cream having medicinal ingredients, though in small quantities, is not primarily intended for protection of skin but for curing of skin ailments/diseases, is a medicament (duty @15% : Tariff Heading 30.03) and not cosmetic (duty @70% : Tariff Heading 33.04) - Commissioner of Central Excise, Mumbai-IV v. Ciens Laboratories [2013] 38 taxmann.com 337 (SC)

Tuesday, November 12, 2013

Inevitable TDS obligation even if deduction for impugned exp. is not claimed

Assessee is liable to deduct tax at source on interest payments, even if it has not claimed same as deduction while computing its total income

Facts:

a) The assessee-company credited interest to its sister concern’s account without deducting tax under section 194A. The Assessing Officer treated assessee as an 'assessee-in-default' and levied interest on it under section 201(1A);

b) On appeal before the CIT (A), the assessee contended that it could not be treated as an 'assessee-in-default', when it had not claimed interest amount as expenditure. The CIT (A) dismissed the assessee's appeal. Aggrieved assessee filed the instant appeal.

The Tribunal held in favour of revenue as under:

1) Provisions of section 194A(1) provide that the person responsible to pay the interest is liable to deduct tax at source at the time of credit or payment, whichever is earlier. Since the section uses the term 'any income by way of interest', it should be viewed from the angle of the payee and not from the angle of the person making the payment;

2) The accounting or tax treatment given by the payer in respect of interest paid by him may not be relevant at all for the purposes of section 194A. So long as the interest amount constitutes "income" in the hands of recipient, the payer shall be liable to deduct tax at source on the interest amount so paid;

3) Thus, even if the payer had disallowed the expenditure under section 40(a)(ia) or did not claim the same as expenditure at all, he would still be liable to deduct tax at source under section 194A on the interest amount so paid, if the said payment was liable to TDS;

4) Further, the provisions of section 40(a)(ia) do not override the provisions of section 201. It provides only for deferment of the allowance and does not provide for absolute disallowance. Its objective appears to be to compel the assessee to deduct tax at source in order to claim the relevant expenditure as deduction;

5) Section 201 provides for treating an assessee as an assessee-in-default who has failed to deduct or pay the TDS amount. Its objective is only to compensate the Government for the failure of an assessee to deduct or pay the TDS amount;

6) Thus, the provisions of section 40(a)(ia) and section 201 operate on different objectives. Accordingly, the assessee was liable to deduct tax at source on interest payments, even if it had not claimed the same as deduction while computing its total income. The revenue was entitled to initiate proceedings under section 201 for such failure. Thus, the order of CIT(A) was to be upheld  - Agreenco Fibre Foam (P.) Ltd v. ITO(TDS) [2013] 38 taxmann.com 155 (Cochin - Trib.)

100% EOU carries on its business in India, its source of income is in India; technical service used by it is FTS

The Tribunal held as under:

1) Irrespective of the fact whether an India based business is one hundred per cent export oriented unit or not, it is still a business carried on in India, and it cannot, therefore, be covered by the first limb of exception envisaged in section 9(1)(vii)(b);

2) Even if entire products are sold outside India, the fact of such export by itself does not make business having been carried outside India;

3) Once the manufacturing facilities are outside India and the customers are also outside India, such a situation will indeed be covered by the exception visualized in section 9(1)(vii)(b), however, merely because the user of services was a one hundred per cent export unit, it couldn’t be said that the technical services were used "for the purpose of making or earning any income from any source outside India", and, accordingly, would be outside the ambit of fees for technical services under section 9(1)(vii) - Metro & Metro v. ACIT [2013] 39 taxmann.com 26 (Agra - Trib.)

Sec. 54EC exemptions allowable despite deeming fiction of sec. 50 treating capital gains as short-term ones

Where capital gain arose out of long-term capital asset and was invested in specified assets, exemption under section 54EC could not be denied due to deeming fiction created under section 50

The High Court held in favour of assessee as under:

1) There is nothing in Section 50 to suggest that the fiction created in it is not only restricted to Sections 48 and 49 but also applies to other provisions;

2) Section 50 makes it explicitly clear that the deemed fiction created in sub-sections (1) and (2) of Section 50 is restricted only to the mode of computation of capital gains contained in Sections 48 and 49;

3) It is well-established, in law, that a fiction created by the Legislature has to be confined to the purpose for which it is created. The fiction created under Section 50 is confined to the computation of capital gains only and cannot be extended beyond that;

4) Legal fiction created under section 50 is restricted to computation of capital gains; such deeming fiction cannot restrict application of section 54EC which allows exemption of capital gains, if assessee makes investment in the specified asset;

5) Exemption provided under section 54EC couldn’t be denied to the assessee due to deeming fiction created under section 50. Thus, the assessee couldn’t be charged to capital gains when short-term gains of long-term capital assets were invested in the areas specified under the law – CIT v. Aditya Medisales Ltd [2013] 38 taxmann.com 244 (Gujarat)

HC grants extra time to assessee for repatriation of forex realizing economic crisis in Russia

Due to disintegration of the USSR and economic crisis in Russia, the buyers were unable to remit payment within time and, therefore, assessee's application seeking extension of time to realize convertible foreign exchange in India was allowed

Facts:

a) The assessee, engaged in manufacture and export of certain goods, had exported almost 100 per cent of its produce to erstwhile Russia or USSR. For the purpose of taxation, it wanted to claim benefit of Section 80HHC in respect of profits derived from exports;

b) As per section 80HHC, to avail of the said benefit, the assessee was required to receive the sale proceeds in convertible foreign exchange within a period of six months from the end of the previous year;

c) During relevant period, on assessee’s failure to receive part of sale proceeds in convertible foreign exchange within stipulated period, it filed an application seeking extension of time to realize such proceeds;

d) The Commissioner rejected assessee's application.  Against said order, assessee filed the instant writ.

The High Court held as under:

1) The Commissioner had not rebutted or denied that assessee was factually correct when it had stated that due to economic crises, fall or depreciation in value of Russian currency payments were not being received by the Indian exporters from buyers in the USSR or countries which were earlier part of the USSR;

2) He had also not adverted to fact that RBI had realized said problem and had taken notice of unprecedented situation and hardships faced by exporters from India;

3) It was also undisputed fact that assessee had realized entire export proceeds before expiry of time-limit for completing assessment. Thus, the impugned order was to be set aside and assessee's application seeking extension of time was to be allowed - York Exports (P.) Ltd. v. CIT [2013] 38 taxmann.com 205 (Delhi)

Presumption as to valid service of notice holds good if same is not returned back to department

Where revenue dispatched notice under section 143(2), and the fact that notice was not received back raise a presumption of service under Section 27 of the General Clauses Act, 1897

Facts:

a) Notice under section 143(2) was claimed to have been issued by revenue under section 143(2);

b) The assessee raised an objection that notice was not served within 12 months from end of month in which return was furnished and, thus, it was null and void;

c) Despite this objection, revenue proceeded to finalized assessment. Thus, the dispute, in the present case, revolves around the issuance and service of notices issued under Section 143(2) of the Act.

The High Court held as under:

1) The averments in the reply, duly supported by copy of the notice and the fact that notice was not received back raised a presumption of service under Section 27 of the General Clauses Act, 1897;

2) The onus to rebut the presumption of service of notice sent by post, lies upon the petitioner;

3) The petitioner has failed to discharge this onus. Mere denial by the petitioner that notice was never received, was insufficient, to record a finding in favour of the petitioner;

4)  Thus, the instant petition was dismissed as there was no error in the impugned order or proceeding - Shahbad Cooperative Sugar Mills Ltd. v. Dy.CIT [2013] 38 taxmann.com 204 (Punjab & Haryana)

Thursday, November 7, 2013

Voluntary disclosures don’t absolve one from concealment penalty; plea as to ‘buy peace’ is irrelevant

Voluntary disclosure does not lead to assessee being free from mischief of penal proceedings under section 271(1)(c)
The Supreme Court held as under:

1) Explanation to section 271(1) raises a presumption of concealment, when a difference is noticed by the Assessing Officer, between reported and assessed income. The burden then shift on the assessee to show otherwise, by cogent and reliable evidence;

2) When the initial onus placed by the Explanation, has been discharged by assessee, the onus shifts on the revenue to show that the amount in question constituted the income and not otherwise;

3) The Assessing Officer shall not be carried away by the plea of the assessee like ‘voluntary disclosure’, ‘buy peace’, ‘avoid litigation’, ‘amicable settlement’, etc., to explain its conduct;

4) Assessee had only stated that he had surrendered the additional sum with a view to avoid litigation, buy peace and to channelize the energy and resources towards productive work and to make amicable settlement with the income-tax department. Statute does not recognize those types of defences under the Explanation 1 to section 271(1)(c);

5) It is trite law that the voluntary disclosure does not free the assessee from the mischief of penal proceedings under section 271(1)(c). The law does not provide that when an assessee makes a voluntary disclosure of his concealed income, he has to be absolved from penalty;

6) The surrender of income in this case was not voluntary in the sense that the offer of surrender was made in view of detection made by the Assessing Officer in the search conducted in the sister concern of the assessee;

7) The Assessing Officer had to satisfy whether the penalty proceedings were initiated or not during the course of the assessment proceedings and the Assessing Officer was not required to record his satisfaction in a particular manner or reduce it into writing. Thus, there was no illegality in action of department in initiating penalty proceedings - MAK Data (P.) Ltd. v. CIT (2013) 38 taxmann.com 448 (SC)

SC: Petitioner is stool pigeon of business houses anxious to remove SEBI’s Chairman; writ for his removal dismissed

Writ seeking removal of Mr. UK Sinha from the post of Chairman of SEBI dismissed
The Supreme Court held as under:

1) It couldn’t be said that deputation of Mr. UK Sinha (Mr. Sinha) as a Chairman of SEBI under rule 6(2)(ii) was approved in colourable exercise of power as he was on deputation with UTI AMC since the year 2005 and was in no way responsible for being set on deputation initially under rule 6(2)(iii) and subsequently under rule 6(2)(i);

2) He had no role to play in the grant of approval of deputation, once he had fully disclosed that he had been working as Joint Secretary, Banking;

3) UTI AMC was not a ‘Government company’ under section 617 of the Companies Act and it was for the shareholder to decide what process to follow and whom to appoint;

4) As per the consolidated guidelines, the deputation of Mr. Sinha was covered under rule 6(1)(i) of the IAS Cadre Rules and his recommendation and appointment were not vitiated by mala fide exercise of powers. The search-cum-selection committee, after scrutinizing qualification and experience of the short-listed candidates, unanimously placed his name on top of merit list;

5) He had no role to play in the whole procedure except for accepting the invitation of the search-cum-selection committee for interaction. His appointment was strictly in conformity with the procedure prescribed by service rules, i.e., rules 16 and 26 of the AIS (DCRB) Rules, 1958;

6) The petitioner had not placed on record any material to establish that any conspiracy was hatched to ensure the selection of Mr. Sinha. He had unjustifiably attacked the integrity of the entire selection process. He did not satisfy the test of utmost good faith which was required to maintain public interest litigation;

7) This was not a petition to protect the Fundamental Rights of any class of down trodden or deprived section of the population. It was more for the protection of the vested interests of some unidentified business lobbies;

8) The petitioner was a stool pigeon acting on the directions of the business houses like Sahara and Reliance. It is a well known fact that in recent times, SEBI has been active in pursuing a number of cause célèbre against some very powerful business houses;

9) Therefore, the anxiety of these business houses for the removal of the present Chairman of SEBI was not wholly unimaginable. There was no merit in this petition which was, accordingly, to be dismissed - Arun Kumar Agrawal v. Union of India [2013] 38 taxmann.com 300 (SC)

Wednesday, October 30, 2013

Converting a leasehold property into a freehold property improves title of asset; holding period reckoned from date of lease

Conversion of rights of lessee in property from leasehold right into freehold right only results in improvement of his or her rights over property and it would not have any effect on taxability of gain from such property, which is related to period over which property is held

Facts:

1) The assessee purchased a property on leasehold basis in year 1984. She got said property converted into freehold property in year 2004 and thereupon sold it. . The capital gain arising therefrom was declared by assessee as long-term capital gain (‘LTCG’);

2) The Assessing Officer held that since the property was acquired by converting the leasehold right into freehold right and was sold within three years, gain arising thereform was taxable as short-term capital gain.

3) On appeal, the CIT(A) held that capital gain arising from sale of such property was to be taxed as LTCG. Further, the Tribunal upheld the order of the CIT (A). The aggrieved revenue filed the instant appeal.

The High Court held in favour of assessee as under:

1) The difference between the 'short-term capital asset' and 'long-term capital asset' was the period over which the property had been held by the assessee and not the nature of title over the property;

2) The conversion of the rights of the lessee in the property from having leasehold right into freehold right was only by way of improvement of her rights over the property and it would not have any effect on the taxability of gain arising from such property, which was related to the period over which the property was held by assessee;

3) In the present case, the property was held by the assessee as a lessee since 1984, and the same was transferred on 31.3.2004, (i.e. after holding it for more than three years) after the leasehold rights were converted into freehold rights on the same property which was in her possession. Thus, gain arising from such property would be taxable as LTCG  -  CIT v. Smt. Rama Rani Kalia [2013] 38 taxmann.com 176 (Allahabad)

Assessee needn’t be unemployed while going abroad for a job; only stay in India would determine his residential status

Where status of assessee was a non-resident, fact that assessee was already employed before leaving India should not affect his residential status

Facts:

a) The assessee working in Whirlpool China filed his return of income and declared taxable income under the head 'salary'. During scrutiny assessment, he pleaded that he was out of India for 236 days and he was not liable to be taxed in India as he was non-resident during the relevant financial year;

b) The Assessing Officer did not accept the assessee's contention and made the assessment on ground that assessee was already employed in Whirlpool India prior to leaving India;

c) On appeal, the CIT (A) held that the assessee’s salary was not taxable in India. The aggrieved revenue filed the instant appeal.
The Tribunal held as in favour of assessee as under:

1) Section 6(1) read with the Explanation  provides that for an individual, who has left India for employment outside India, should be treated as resident of India only if he was in India during the relevant year for 182 days or more [Anurag Chaudhary, In re [2010] 190 Taxman 296 (AAR-New Delhi)];

2) A careful reading of such Explanation would show that the requirement of the Explanation is not leaving India for employment but it is leaving India for the purposes of employment outside India. For the purpose of the Explanation, an individual need not be an unemployed person who leaves India for employment outside India [British Gas India (P) Ltd. In re [2006] 155 Taxman 326 (AAR-New Delhi)]

3) During the relevant financial year, the assessee's stay in India was of less than 182 days and, thus,  his residential status was non-resident;

4) The assessee’s contention, that he was already employed in the Whirlpool India prior to the leaving India for working with Whirlpool China, would not affect his residential status. Therefore, the order of the CIT(A) stating that salary income of the assessee accrued and arose during his employment in China and was not taxable in India was to be upheld - ACIT v. Raj Jain [2013] 38 taxmann.com 133 (Delhi- Trib.) 

Monday, October 28, 2013

Buyer should withhold tax from sum paid to a non-resident co-owner to acquire a house property

Where assessee purchased a property jointly owned by co-owners, in view of fact that one of co-owners of property was a non-resident, assessee was required to deduct tax at source under section 195 to extent sale-consideration paid to said co-owner.

Facts:

a) The assessee purchased a property owned by two co-owners for a total consideration of 1.20 crores. One of the co-owner was a non-resident who had executed a General Power of Attorney in favour of other resident co-owner to execute sale agreement;

b) The AO opined that since one of co-owner was a non-resident, assessee was required to deduct tax at source under section 195 on entire sale consideration of Rs 1.20 crores. On assessee's failure to deduct tax at source, the AO treated the assessee as 'assessee-in-default';

c) On appeal, the CIT (A) held that assessee ought to have deducted tax at source on the share of the non-resident in the sales consideration. Aggrieved assessee filed the instant appeal.

The Tribunal held partly in favour of assessee as under:

1) To the extent the sum was paid to non-resident co-owner, the provisions of section 195 were attracted and the assessee ought to have deducted tax at source while making payments to her;

2) Thus, the assessee could be considered as an 'assessee-in-default' only to the extent of sum paid to the non-resident - R. Prakash v. ITO [2013] 38 TAXMANN.COM 123 (Bangalore –Trib.)

Friday, October 25, 2013

SC on Radia Tapes – unscrupulous elements have used corrupt means to secure favours from Govt. officers

1) The first report submitted by Supreme Court on Nira Radia Tapes has pointed out seventeen matters of criminality or irregularity. Out of these matters, following eight matters are prima facie indicative of Deep-rooted malaise in system exploited by private enterprises in connivance with Govt. officers and others:

a) Supply of low floor buses by Tata Motors to Govt. of TN;

b) Appointment of Chairman of Pipeline Advisory Committee;

c) Allotment of coal blocks to ADAG group;

d) Allotment of iron ore mines to Tata Steel, favours shown to RIL by DG Hydrocarbons;

e) Fudging in subscriber base by Reliance Communication;

f) Touts and middlemen in aviation sector;

g) Market manipulation; and

h) Hammering of stocks of Unitech.

2) The conversations between Ms. Nira Radia and her associates suggests that unscrupulous elements have used corrupt means to secure favours from Govt. officers who appear to have acted for extraneous considerations;

3) CBI directed to make an inquiry on these eight matters and to submit a report within 2 months. Report based on conversations related to corruption or malpractice in judiciary (item No. 8 of the first report) should be referred to Chief Justice of India for consideration and an appropriate action;

4) In its second report, the SC has categorized suspected calls into six categories dealing with corruption in raid/survey by IT officials, CA working as tout of ITO, etc. CBI directed to make an inquiry on these matters also and to submit a report within 2 months. Team appointed by SC to scrutinize remaining Nira Radia tapes - Ratan N. Tata v.  Union of India [2013] 38 taxmann.com 200 (SC)

Thursday, October 24, 2013

Urban land held as part of Industrial undertaking ceases to have its independent character for wealth tax purposes

Scope of section 2(ea) does not include 'urban land' but once land so held is part of industrial undertaking or factory, it ceases to have independent character as an urban land; it would be part of industrial undertaking

A. The revenue required the assessee to show cause as to why value of land, shown in the balance sheet won’t be to be included in his taxable wealth. The assessee explained that impugned land was not includible in taxable wealth as the same constituted integral part of factory;

B. The AO made addition of the value of impugned land in the net wealth of assessee by observing how could an assessee sell the land over which a factory building was situated or the land which was being used for business purposes;

C. The Commissioner of Wealth Tax (A) (CWT(A)) deleted the impugned addition. Aggrieved AO filed the instant appeal.

The Tribunal held in favour of assessee as under:

1) The scope of section 2(ea) does not include 'urban land' but once the land so held is part of the industrial undertaking or factory it ceases to have the independent character as an urban land. It would be part and parcel of the industrial undertaking or factory;

2) The mere fact that a part of land, which was held as factory, was sold by the assessee as a piece of land would not change the character of asset in the hands of the assessee;

3) There could be situations in which a part of factory land might be sold as 'land' but as long as it was a part of the factory, it couldn’t have any other character in the hands of the assessee than factory as such;

4) A vacant piece of land, even if it can be sold as 'land', as such, continues to be a business asset as long as vacant land is an integral part of factory. Therefore, the land sold was a part of the factory premises and order of CWT(A) was to be upheld – Dy.CIT v. HSIL Ltd. [2013] 38 taxmann.com 45 (Kolkata - Trib.)

‘Equipment’ includes Ship and charter fees thereof is ‘royalty’; HC refers to Sec. 43(3) to define word ‘equipment’

‘Equipment' includes ship, fee paid for use of ship to be considered as royalty under sec. 9(1)(vi). Meaning of the word ‘plant’ as defined under Sec. 43(3) would be relevant to determine meaning of the word ‘equipment’.

The aggrieved assessee appealed against order of Tribunal holding that the payment made for taking ship on time charter basis would constitute ‘royalty’ as defined under Section 9(1)(vi)(b) of the Income Tax Act (‘the I-T Act’). Assessee contended that the ship was not equipment and, consequently, there was no question of use or right to use of any equipment which could be construed as ‘royalty’.

The High Court held in favour of revenue as under:

1) The consideration paid for use of the industrial, commercial and scientific equipment is ‘royalty’ in view of clause (iva) of Explanation 2 to Section 9(1)(vi) of the I-T Act. The word ‘equipment’ is not defined under Section 9, however, the word ‘plant’ has been defined under Section 43(3). In view of Section 43(3), the word ‘plant’ is widely defined to include a ship;

2) In absence of any definition of ‘equipment’ under the I-T Act and considering the business of the foreign enterprise, the definition of ‘plant’, as including ‘ship’ would be appropriate for understanding the scope of the expression ‘equipment’;

3)  ‘Plant’ includes every tool, apparatus, equipment or machinery, not limited to machinery used in tool. Thus, with the inclusive definition of plant embracing within its fold so diverse a matter from a ship to a book, or medical equipment, every tool, apparatus, ‘plant’ includes all equipments used by an assessee for carrying on his business;

4) The word ‘equipment’ construed in the light of Section 9(1)(vi) extends the normal meaning of the word to cover even those specified categories of machinery or plant that would themselves not be construed within its plain and ordinary meaning. As rightly pointed out by the Revenue, the only limitation that one may read into the word ‘equipment’ would be that which is specifically excluded;

5) In context of Section 9(1)(vi)(b), the presence of the word ‘any’ preceding the word ‘equipment’, clearly points out the need for construing ‘equipment’ widely, so as to embrace every article employed by the employer for the purposes of his business. ‘Equipment’, by whatever name called either as an apparatus or as plant or machinery, so long as they are employed for the purposes of one’s income, the same shall stand covered by clause (iva) of Explanation 2;

6) Therefore, in absence of any word of limitation other than what was explicitly provided for, we do not find any legal necessity of reading a limitation on the word equipment. Thus, ship being a plant, an equipment with which the ship owner operates the business and commercially exploits it for earning the income from chartering of ship, the payment thereof would be clearly in nature of ‘royalty’ - Poompuhar Shipping Corporation Ltd. v.  ITO, International Taxation [2013] 38 taxmann.com 150 (Madras)

ITAT devises formula for claiming lease equalization charges – gap of annual lease charges and depreciation as per Income-tax Act

While allowing deduction on account of lease equalization charges, only difference between annual lease charge of leased assets and depreciation allowed on said leased asset under the Income-tax (‘I-T’) Act should be taken into consideration

The Tribunal held as under:

1) The concept of lease equalization charge could also be followed for the purpose of computing the total income under the I-T Act. However, the same has to be done with proper care and caution, otherwise it might result in absurdity and give misleading result;

2) In the instant case the relevant transactions were treated as finance lease transaction and, the depreciation allowed as per the rates prescribed in the I-T Act could be more than the depreciation claimed by the assessee at the rate prescribed under the Companies Act;

3) For example, the assessee might be entitled to claim depreciation at 100 per cent on the leased assets in the first year itself under the I-T Act whereas in the books of account, it might have claimed depreciation on the said leased assets under the Companies Act at the rate of 10 per cent;

4) In such a case if the annual leasing charge was equivalent to 30 per cent of the value of leased assets, the assessee would debit its profit
and loss account by lease equalization charges to the extent of 20 per cent of the value of asset as per the guidance note issued by the ICAI;

5) If the lease equalization charges so debited were to be allowed as deduction while computing the total income of the assessee under the I-T Act in addition to 100 per cent depreciation already allowed, the assessee would get the deduction of 120 per cent of the value of asset in the first year itself and the very purpose of adopting the concept of lease equalization would be defeated. This would result in absurdity and give misleading results;

6) It was, therefore, necessary that while allowing deduction on account of lease equalization charges for the purpose of computing total income under the I-T Act, the difference between the annual lease charge of the leased assets and depreciation allowed on the said leased asset under the I-T Act should be taken into consideration - Infrastructure Leasing & Financial Services Ltd v. Dy.CIT [2013] 38 taxmann.com 40 (Mumbai - Trib.)

Monday, October 21, 2013

Advance Ruling binding on both revenue and assessee; CBEC’s circular holding otherwise is invalid

Advance ruling is binding on Department as well as assessee; CBEC clarification holding contrary view and issued later in point of time, cannot annul advance ruling pronounced in favour of assessee

In the instant case the advance ruling was pronounced in assessee's favour, which was not challenged and became final. Later, on clarification being sought by some other person from CBEC, it issued a Circular holding a view contrary to order of Authority for Advance Ruling. The Department argued that view expressed in CBEC Circular was applicable to the assessee.

The High court held in favour of assessee with following observation:

1) In the instant case, the assessee himself had not sought any clarification from CBEC. A clarification sought for by some other person couldn’t bind the assessee for whom advance ruling was binding;

2) CBEC clarification, issued later in point of time, did not and could not have annulled advance ruling in view of provisions of section 96D(2) read with section 96E - Gras Impex (P.) Ltd. v. Commissioner of Commercial Taxes [2013] 38 taxmann.com 65 (Karnataka)

Friday, October 18, 2013

Worried over rising prices of CNG – Complain to Petroleum Regulatory Board rather than Competition Commission

Commission would not proceed with complaint regarding pricing of PNG when Petroleum & Natural Gas Regulatory Board was looking into grievances of consumers and pricing of CNG/PNG

Facts:

a) The complainant, a consumer of Piped Natural Gas (PNG) supplied by Indraprastha Gas Limited (‘IGL’), sent a complaint to the Chairman, MRTPC as regards price charged by IGL;

b) The complainant submitted that the respondent was exploiting its monopoly in the capital city of Delhi by not passing on the benefits of APM Gas to the domestic consumer and was charging a much higher rate than the Gujarat Gas and MG;

c) The complainant contended that the Commission should issue cease and desist order against the IGL from misusing its monopoly position and profiteering at the cost of its consumers and that the order should specify that IGL should start charging not more than Rs. 9.25 per scm for PNG.

The Competition Appellate Tribunal held as under:

1) The Commission doesn’t find it necessary to proceed with this matter particularly because the grievance of the consumers generally was being
looked into by the Petroleum & Natural Gas Regulatory Board (‘PNGRB’) who has taken up the exercise to decide and to enquire into the price structure of CNG/PNG by all the entities engaged in the business which would include the supplies made in Mumbai, Gujarat and Calcutta, etc.;

2) If the PNGRB was already doing that exercise, there would be no need for the Commission to go into the further state of affairs particularly in view of the absence of total evidence except the balance sheet of IGL suggesting that IGL had made some profits and statistics before the Commission;

3)  Thus, it was not deemed fit to proceed in the matter particularly in the absence of the evidence and also because a body like PNGRB with all the necessary statistics was enquiring into the matter – DG (I & R) v. Indraprastha Gas Service [2013] 38 taxmann.com 59 (CAT - New Delhi)

Thursday, October 17, 2013

In absence of an agreement, transfer of land by assessee to his AOP won’t be deemed as transfer

Where assessee contended that he formed an AOP and transferred a land to it, but no agreement between assessee and AOP was found, transaction would not amount to transfer

In the instant case, the assessee had an agricultural land which was declared as industrial estate. He and other landowners within that industrial estate formed an AOP and transferred this land to it. The CIT (A) held that the land stood transferred in terms of section 2(47) to AOP. He, therefore, directed the AO to assess capital gain on each member of the AOP on account of transfer of capital asset. On appeal, the Tribunal refused to interfere.  Aggrieved assessee filed the instant appeal.

The High Court held in favour of assessee as under:

1) For the purpose of income tax, a capital asset may be transferred to an AOP as is provided in section 2(47);

2) However, when the capital asset is an immovable property by reason of the provisions contained in the Transfer of Property Act, read with the Registration Act, transfer of an immovable property of the nature dealt with herein requires an instrument which is also required to be registered;

3) Thus, transfer will take effect in a situation as provided in section 53A of the Transfer of Property Act, namely, when there is an agreement to transfer and, in part performance thereof, the transferee is in possession of the immovable property agreed to be transferred;

4) In the instant case, there was no conveyance by the appellant in favour of AOP, nor there any agreement between them and AOP also didn’t contend that in pursuance of that agreement and in part performance thereof, it was in possession of the property in question. Therefore, the impugned transaction wouldn’t be deemed as transfer - Rajesh Kumar Agarwal v. ITO [2013] 37 taxmann.com 442 (Uttarakhand)

Wednesday, October 16, 2013

Payment of one time lease premium to acquire a leashold land isn’t subject to tax deduction under sec. 194-I


Where payment of lease premium was not made on periodical basis but it was one-time payment to acquire land with right to construct a commercial complex thereon, section 194-I had no application on deposit of such lease premium

In the instant case the Mumbai Development Authority offered certain land on lease to assessee for a period of 80 years for certain consideration comprising of lease premium. The assessee paid said premium in two installments. The AO held that the assessee was liable to deduct tax at source on lease premium under section 194-I.The CIT (A) held in favour of assessee. Aggrieved revenue filed the instant appeal.

The Tribunal held in favour of assessee as under:

1) In Durga Das Khanna v. CIT [1969] 72 ITR 796 (SC), the Supreme Court held that the onus was on the Revenue to demonstrate that premium has been camouflaged as advance rent and the AO, in the instant case has not brought on record any material to indicate that the rent has been suppressed and the premium has been inflated.

2) Thus, undoubtedly premium in relation to leased land was on capital account not liable to be classified as revenue outgoing;

3) Since the payment of lease premium was not to be made on periodical basis but it was one- time payment to acquire land with right to construct a commercial complex thereon, section 194-I was not applicable

4) Therefore, the impugned sum does not constitute advance rent, but it was to be classified as lease premium for capital expenditure not falling within the operative realm of section 194-I -  ITO v. Indian Newspapers Society [2013] 37 taxmann.com 401 (Delhi - Trib.)

Tuesday, October 15, 2013

No tax on FTS if service utilized for business carried abroad; upgradation of existing website is revenue exp.

In the instant case, two moot questions were raised before the ITAT which were as under:

A. Whether website development charges were deductible as revenue expenditure?

B. Liability of tax deduction on overseas commission

On first issue, it held in favour of assessee as under:

1) Commission paid to non-residents for services rendered outside India does not accrue or arise in India;

2) Hence, no TDS was deductible from such commission and such commission couldn’t be disallowed under section 40(a)(i);

3) Even if services rendered by the non-resident did fall within the definition of "fees for technical services, the commission paid would not
be taxable in India as clause(b) of section 9(1)(vii) would save the assessee.

On second issue, it held in favour of assessee as under:

1) Expenses incurred for upgradation of an existing website ought to be distinguished from expenses for development of a new website;

2) The former was revenue expenditure and the latter was capital expenditure, resulting in creation of an intangible asset;

3) Expenditure on upgradation of existing website was equivalent to maintenance of an existing asset. Thus, it was revenue expenditure - Mahindra Holidays & Resorts India Ltd. v. JCIT (LTU) [2013] 38 taxmann.com 207 (Chennai - Trib.)

Hollow rooms with basic amenities can’t be said to be an habitable house; not eligible for sec. 54F relief

Where house constructed by assessee was not found to be habitable, deduction under section 54F could not be allowed

In the instant case the assessee claimed deduction under section 54F on ground that she had purchased a house. When the AO carried enquiry, he found that there was no construction as mentioned in the sale deed. Instead, there was a small construction consisting of two rooms made of hollow bricks. Accordingly, the claim of deduction was disallowed by AO. Further, the CIT (A) upheld the order of the AO. Aggrieved assessee filed the instant appeal.

The Tribunal held in favour of revenue as under:

1) The assessee had not placed necessary evidence in support of his claim to show that the said construction was in habitable condition. A construction in inhabitable position couldn’t be equated with a residential house;

2)
If a person cannot live in premises, then such premises cannot be considered as a residential house. Investment in the construction would be complete as a house only when such house becomes habitable;

3) The evidence brought on record by the AO clearly shows that the property purchased by the assessee would not fall within the description of residential house. Thus, the claim of the assessee couldn’t be allowed under section 54F - Smt. Usharani Kalidindi v. ITO [2013] 37 taxmann.com 360 (Hyderabad - Trib.)

Monday, October 14, 2013

Share issue exp. remains a capital expenditure even if SEBI disapproves of issue of shares; no sec. 37(1) allowance

Share issue expenses cannot be allowed as revenue expenditure even when shares could not be issued due to non-approval by SEBI

In the instant case the assessee incurred expenditure for issuing shares. However, on account of non-clearance from the SEBI, shares could not be issued. It claimed deduction for share issue expenses as revenue expenditure by contending that since the expenditure did not yield any desired result, the character of the expenditure had to be decided on the basis of the result that would yield benefit in assessee's business. The AO and the CIT (A) disallowed such expenses. The Tribunal also affirmed the view of the AO. Aggrieved assessee filed the instant appeal.

The High Court held in favour of revenue as under:

1) The impugned expenses were incurred by the assessee for the purpose of widening its capital base. The assessee, admittedly, took steps to go
in for public issue and after incurring expenditure, just before the public issue, by reason of the orders from the SEBI, the assessee could not go in for public issue. Thus, the efforts were aborted;

2) There was no justifiable ground to accept the plea of the assessee that on account of the abortive efforts, the expenditure incurred would lose its character as capital expenditure for the purpose of allowing it as a revenue expenditure - Mascon Technical Services Ltd. v. CIT [2013] 37 taxmann.com 253 (Madras)

NR can claim benefit of first proviso to Sec. 48 along with Sec. 112 concessional rate; HC quashes Cairn India ruling

Proviso to section 112(1) doesn’t deny benefit of lower tax rate of 10% to a non-resident investor availing benefit of exchange rate neutralization under first proviso to section 48. It is incorrect to say that 10% rate under proviso to section 112(1) applies only where indexation benefit under 2nd proviso to section 48 applies and still assessee opts to not avail it.

The High Court held as under:

1) The proviso to Section 112(1) doesn’t state that an assessee, who had availed benefit of the first proviso to Section 48, was not entitled to benefit of lower rate of tax. The said benefit couldn’t be denied because the second proviso to Section 48 was not applicable;

2) The stipulation for taking advantage of the proviso to Section 112(1) is that the aggregate of long term capital gains to the extent it exceeds 10% of the amount of capital gains, should be before giving effect to the provisions of second proviso to Section 48.;

3) First proviso to Section 48 stipulates that on sale of the securities by the non-resident, the consideration received in Indian rupee should be reconverted into the same foreign currency;

4) For a non-resident who has utilized foreign currency for purchase of securities in Indian rupee, inflation in India was immaterial and inconsequential. He is most concerned with exchange rate fluctuation and his true and actual gain should take into account the exchange rate fluctuation;

5) The second proviso is applicable to all others including non-residents, who are not covered by the first proviso and they are entitled to benefit of cost of indexation which neutralize inflation;

6) It is a misnomer and wrong to state that inflation alone contributes and is the determinative factor in exchange rate fluctuation. Inflation by itself cannot be the sole or even a primary factor in exchange rate depreciation. These are several others complex factors and parameters which can affect the foreign exchange rate fluctuation.

7) The first and second proviso to section 48 cannot be equated as granting same relief or benefit. They operate independently and have different purpose and objective. Thus, it couldn’t be deemed that benefits under the first proviso and the second proviso to Section 48 are identical or serve the same purpose;

8) Thus, it was to be held that assessee was taxable at concessional rate of 10% as per proviso to section 112(1) - Cairn UK Holdings Ltd. v. DIT [2013] 38 taxmann.com 179 (Delhi)