Payments to non-resident for his translation services shall not be deemed as 'fees for technical services'

Translation services involving translation of text from one language to another were not technical services and, therefore, payment made by assessee to non-resident translators would not fall within scope of 'fees for technical services’.

Facts:

a)The assessee-company was engaged in the business of providing translation services through Web. During assessment, the AO noted that assessee had not deducted tax at source in respect of payments made to overseas translators.

b)The A.O. held that translation services were technical in nature and the assessee was liable to deduct tax at source on impugned payments. He, accordingly, disallowed such payments made to non-resident translators.

c)On appeal, the CIT(A) upheld the findings of the AO and confirmed the disallowance made under Section 40(a)(i). The aggrieved assessee filed the instant appeal.

The Tribunal held in favour of assessee as under:

1)In the instant case, the assessee was getting the translation of the text from one language to another. The only requirement for translation was the proficiency of the translators in both the languages, i.e., the language from which the text was to be translated and the language in which text was to be translated.

2)The translator was not contributing anything more to the text, which was to be translated. He was not supposed to explain or elaborate upon the meaning of the text. Apart from the knowledge of the language, the translator was not expected to have the knowledge of applied science or the craft or the techniques in respect of the text, which was to be translated.

3)A bare perusal of Explanation 2 to Section 9(1)(vii), which explains "fees for technical service" and the dictionary meaning of the word "technical" made it clear that translation services were not technical services. Therefore, the payment made by the assessee to the non-resident translators would not fall within the scope of "fees for technical services”. Thus, the disallowance made under Section 40(a)(i) was to be deleted. - COSMIC GLOBAL LTD. V. ASSTT. CIT [2014] 48 taxmann.com 365 (Chennai - Trib.)

Income generated from sale of carbon credits won't be eligible for sec. 80-IA relief

Even though income on sale of Certified Emission Reduction/carbon credit would form part of profits and gains of business, yet it cannot be treated as profit 'derived from' industrial undertaking and, therefore, assessee would not be entitled to deduction under section 80-IA in respect of said income.

Facts:

a)The assessee received certain amount from sale of carbon credit issued by United Nations Framework Convention on Climate Change under Kyoto Protocol, generated in the gas turbine unit.

b)The assessee claimed that the income earned on sale of carbon credit was directly and inextricably linked to generation of power, therefore, the assessee was entitled to relief under section 80-IA.

c)The Assessing Officer and the DRP found that the income was not derived from eligible business, consequently, they held that the assessee was not eligible for deduction under section 80-IA. The aggrieved-assessee filed the instant appeal.

The Tribunal held in favour of revenue as under:

1)The income on sale of carbon credit was attributable to the business of the assessee. Since the carbon credit was conferred on the assessee under the scheme promoted by United Nations Framework Convention on climate change under Kyoto Protocol.

2)But it was not the direct source of income from the industrial undertaking of the assessee. At best, it could be said that it had a nexus with the business of the assessee or was attributable to the business of the assessee.

3)Therefore, the income on sale of carbon credit would form part of the profits and gains of business. However, it could not be treated as profit 'derived from' the industrial undertaking. Thus, the assessee was not entitled to deduction under section 80-IA.- APOLLO TYRES LTD. V. ASSTT. CIT [2014] 47 taxmann.com 416 (Cochin - Trib.)

CCI imposes Rs 2,500 crore penalty on Car Cos for indulging in unfair trade practices in spare part markets

Competition Commission of India imposed Rs 2,500 crore penalty on Car Companies for indulging in practices resulting in denial of market access to independent repairers.

Facts:

a)The informant approached the Commission alleging anti-competitive conduct by Car manufactures (i.e., opposite parties). It was alleged that opposite parties abused their dominance by restricting the supply of genuine spare parts of automobiles.

b)The informant pleads before the commission to hold an enquiry against opposite parties. The Competition Commission of India held as under:

1)Each ‘original equipment manufacturer’ (OEM) was a 100 per cent dominant entity in aftermarket for its genuine spare parts and correspondingly for repair services for its brand of automobiles.

2)In most cases, the owners of various brands of automobiles are completely dependent on authorized dealer’s network of OEMs and they are not in a position to exercise option of availing services of independent repairers.

3)OEMs used their dominance in relevant market of supply of spare part to protect other relevant market namely after sales services and maintenance thereby violating section 4(2)(e) of Competition Act, 2002 (‘the Act’).

4)OEM’s have contravened provisions of sections 3 and 4 of the Act. They had to allow Original Equipment Suppliers to sell spare parts in open market without any restriction, including on prices.

5)The opposite parties may develop and operate appropriate systems for training of independent repairer/garages, and also facilitate easy availability of diagnostic tools.

6)Thus, penalty of around Rs 25,00 crore was imposed on opposite parties (computed as percentage of total turnover of respective opposite parties in India) – SHAMSHER KATARIA V. HONDA SIEL CARS INDIA LTD. [2014] 48 TAXMANN.COM 300 (CCI)

Revenue could recover excise dues of lessor by detaining excisable goods belonging to lessee

Section 11 of Central Excise Act read with section 142 of Customs Act empower authorities to attach/detain excisable goods belonging to defaulting-assessee including transferee/lessee/buyer of its business.

Facts:

a)The assessee (lessor), engaged in manufacture of tea, had failed to pay certain excise dues. The assessee leased out tea garden/factory to two petitioners (lessees). Department attached and detained goods (tea) to recover excise dues from lessor.

b)The lessees argued that duty was already on tea owned by them and, therefore, such tea could not be detained for recovery of dues of lessor.

c)The assessee further argued that only Commissioner could issue order of attachment/detention and not Deputy Commissioner.

The High Court held in favour of revenue as under:

1)Officers who signed attachment/detention orders were 'Central Excise Officer' under section 2(b) ibid and were empowered to issue impugned orders.

2)Moreover, once provisions relating to detention/attachment contained in Customs Act were made applicable for recovery of dues under Central Excise Act, all provisions of Central Excise Act including section 2(b) would apply for recovery.

3)Furthermore, section 11 read with section 142 empower authorities to raise demand and also to issue attachment/detention orders to detain goods belonging to defaulting assessee including his transferee who stepped into his shoes to carry on business either by purchasing said business or otherwise. Hence, impugned demands/orders were valid. – BOGIDHOLA TEA & TRADING CO. (P.) LTD. V. UOI [2014] 47 taxmann.com 221 (Gauhati)

Mere admission before SetCom couldn’t be sole ground to confirm demand in adjudication proceedings

Whatever assessee admitted while submitting settlement application could not be deemed as its accepting liability; if application or proceedings before Settlement Commission (SetCom) failed, Central Excise Officer had to adjudicate the case in entirety.

Facts:

a)The assessee admitted clandestine removal of goods before SetCom but it sent the case back to adjudicating authority.

b)The adjudicating authority had confirmed clandestine removal of goods based on admission of assessee before SetCom.

c)Thus, the issue that arose before the High Court was: Whether revenue was required to establish clandestine removal, despite the same having been admitted by assessee before SetCom?

The High Court held in favour of assessee as under:

1)Even in view of section 32L(2) of Central Excise Act, 1944 whatever had been admitted by assessee while submitting settlement application under section 32E(1), straightway, couldn’t be said to be admission on behalf of assessee accepting clandestine removal of goods.

2)If the contention on behalf of the department had been accepted, in that case there would be no question of further adjudication by the Central Excise Officer. 3)Once application or proceedings before SetCom failed, the Central Excise Officer was required to adjudicate the case in entirety. Thus, adjudication was required and mere reliance on admission before Settlement Commission was not sufficient. Hence, department's contention was to be rejected – COMMISSIONER V. MARUTI FABRICS [2014] 47 taxmann.com 298 (Gujarat)

Extending benefits to hospitals only with NABH accreditation wasn’t abuse of dominance by Director General of Health Services

Where opposite party-DGHS was not directly engaged in any economic and commercial activities and different rates of empanelment fees prescribed by it for hospitals under ‘National Accreditation Board for Hospitals and Healthcare Providers’ (NABH) were not anti-competitive, there was no abuse of dominant position by DGHS.

Facts:

a)The informant alleged that opposite party-The Director General of Health Services (DGHS) was abusing its dominance for empanelment of private hospitals for purpose of healthcare and medical services to Central Government Health Scheme (CGHS) beneficiaries.

b)Further, it was alleged that DGHS had colluded with other opposite parties to give benefit to a selected hospitals having NABH accreditation and reimburse them with payments at higher rates compared to other hospitals without NABH accreditation

The Competition Commission of India held as under:

1)Since the DGHS’s role was limited to control and regulate heath care system in country and was not directly engaged in any economic and commercial activities, it could not be covered in definition of enterprise.

2)The different rates prescribed by DGHS for NABH accredited hospitals could not be considered as anti-competitive in any manner; rather it would act as an incentive to non-accredited hospitals to secure such accreditation and provide quality health care services, which would ultimately benefit patients.

3)Since informant had not submitted any cogent evidence stating existence of any agreement in any manner between opposite parties, the provisions of section 3 of the Competition Act, 2002 could not be invoked. – DR. BISWANATH PRASAD SINGH V. DIRECTOR GENERAL OF HEALTH SERVICES [2014] 47 taxmann.com 373 (CCI)

Tippers purchased for letting out purposes couldn’t be deemed as part of plant & machinery; depreciable at 40%

Facts:

a)The assessee claimed depreciation at 40 per cent on tippers. However, the Assessing Officer (‘AO’) held that tippers were part of block of plant and machinery and, thus, the assessee was eligible for depreciation at 25 per cent only.

b)On appeal, the CIT(A) directed the AO to allow depreciation at 40 per cent. The aggrieved revenue filed the instant appeal.

The Tribunal held in favour of assessee as under:

1)It was noticed that the assessee was not carrying out any construction activity, therefore, it could not be said that the tippers were part of block of plant and machinery or construction equipment forming part of plant and machinery.

2)It was also not in dispute that the tippers were given on hire to a company from which the assessee received hire charges. The tippers were registered as vehicles with the registration authority, therefore, these were road transport vehicles and given on hire.

3)Thus, they were eligible for depreciation at 40 per cent instead of at 25 per cent allowed by the AO. – Asstt. CIT v. Ashok Doshi [2014] 47 taxmann.com 390 (Jodhpur - Trib.)

Exp. on issue of FCCBs were allowable as holders had no compulsion but an option to convert them into equity shares

Expenses on issue of Foreign Currency Convertible Bonds (FCCBs) couldn’t be disallowed just because they were issued with an option to convert them into equity shares within a period of one month.

Facts

a)Assessee issued Foreign Currency Convertible Bonds (FCCBs) with an option to convert them into equity shares within a period of one month from the date of issue of such bonds.

b)Assessing Officer (AO) allowed assessee's claim for deduction of expenditure incurred on issue of FCCBs. The CIT disallowed assessee’s claim by revising the order of AO.

c)Further, the Tribunal set aside the order of CIT. Revenue contended that once the FCCBs were capable of being converted, then, the expenditure incurred in relation thereto, could not be said to be revenue expenditure and, therefore, the expenditure ought to have been classified as capital expenditure. The Aggrieved revenue filed the instant appeal.

The High Court held in favour of assessee as under-

1)The conclusion reached by the AO was that the conversion of FCCBs was not automatic. Thus, the CIT could not have concluded on same material that the FCCBs, in real sense, were equity shares right from the beginning and that the conversion of bonds was only a routine technical compliance as per the Regulations and guidelines.

2)The Tribunal was justified in setting aside the revisional order of CIT as conversion of FCCBs into equity shares was not automatic as conversion was not permissible unless option for the same was exercised by the holder of FCCBs.

3)Thus, a possible view taken by AO could not be termed as prejudicial to the interest of the revenue. Therefore, Commissioner was not justified in exercising his powers under section 263. -CIT vs. Tata Teleservices (Mah) Ltd. [2014] 47 taxmann.com 238 (Bombay)

Relinquishment of right to purchase a property in lieu of a sum was ‘transfer’; to be taxed as capital gain

Consideration received from relinquishment of right to purchase a property to be taxed as capital gain and not as income of other sources as relinquishment of right over a capital asset amounts to transfer under section 2(47).

Facts:

a)The assessee entered into an agreement to purchase a plot. As per the terms of agreement of sale, assessee paid certain sum as advance to the vendor with the understanding to pay the balance at the time of registration.

b)Since the vendor did not act upon the agreement of sale, the assessee filed a suit for specific performance, which ultimately resulted in compromise. A Memorandum of Understanding (‘MOU’) was entered into between the assessee and the land owner in terms of which assessee gave up his claim over property against consideration of Rs. 1.50 crore (including the advance of Rs. 25 lakhs paid by the assessee at the time of agreement of sale).

c)The assessee disclosed said amount as sale consideration received by him for transfer of plot and computed long term capital gain which was accepted by the Assessing Officer (AO)

. d)The CIT revised the order of AO with an opinion that amount received by the assessee from the land owner being a windfall gain, should have been assessed as income from other sources and not as long-term capital gain. Aggrieved assessee filed the instant appeal.

The Tribunal held in favour of assessee as under:

1)Relinquishing or extinguishing one's right over a capital asset amounts to transfer as per section 2(47) of the Income-tax Act. Therefore, when the assessee, as per terms of the MOU, gave up his claim over the property against consideration, certainly it could be interpreted that the assessee had relinquished or extinguished his right over the property.

2)Thus, there was 'transfer' of capital asset within the purview of section 2(47) attracting capital gain.

3)The assessment order passed by AO could not be considered to be erroneous and prejudicial to the interests of revenue, only because the Commissioner considered the receipts as windfall gain and in his opinion such receipt had to be assessed as income from other sources -P. Ramgopal Varma vs. ACIT [2014] 47 taxmann.com 334 (Hyderabad - Trib.)

SAT: Failure to make disclosure under Insider Trading norms attracts penalty, irrespective of mitigating factors

Irrespective of mitigating factors such as disproportionate gain or unfair advantage derived or any loss caused to investors, failure to make timely disclosures under regulation 13 SEBI (Prevention of Insider Trading) Regulations, 1992 would attract penalty

FACTS:

a)The appellant-company had become part of the promoter group of 'INCL' and on account of acquiring control of 'INCL' was obliged to file disclosures under regulation 13(2A) , read with regulation 13(6) of the SEBI (Prevention of Insider Trading) Regulations, 1992.

b)The appellant-company was imposed with penalty for not making disclosures within stipulated time period under regulation 13(2A) of the SEBI (Prevention of Insider Trading) Regulations, 1992.

c)On appeal to the Securities Appellate Tribunal

On appeal, The Securities Appellate Tribunal held as under:

1)An obligation to make disclosure under said regulation is not restricted to cases where there is disproportionate gain or unfair advantage and where loss is caused to investors as a result of failure to make disclosures.

2)Since Explanation to regulation 13 of the Securities and Exchange Board of India (Prevention of Insider Trading) Regulations, 1992 does not deal with disclosure requirements, argument of appellant-company that there was confusion regarding disclosure requirements contemplated in said regulations as compared to Takeover Regulations did not merit consideration.

3)Therefore, penalty imposed after consideration of mitigating factors could not be said to be arbitrary or unreasonably excessive and, thus, order passed by Assessing Officer could not be interfered with. – IndiaNivesh Capitals Ltd. vs. Securities and Exchange Board of India [2014] 47 taxmann.com 339 (SAT - Mumbai)

Institutions providing event management courses without awarding any diploma not entitled to sec. 12AA registration

Institutions conducting classes in event management were not entitled to Section 12AA registration as such courses do not result in conferment of any degree or diploma; such activity would not fall within the meaning of education under Sec. 2(15).

Facts:

a)The assessee-institution was formed with an object to establish and administer schools, colleges, etc.

b)In furtherance of its objects, it established an institution for teaching event management course. It filed an application seeking registration under section 12AA.

c)The CIT held that activity carried on by assessee would not fall within meaning of education as mentioned in section 2(15) and rejected assessee's claim for registration. The aggrieved assessee filed the instant appeal.

The Tribunal held in favour of revenue as under:

1)The Supreme Court in case of Sole Trustee, Loka Shikshana Trust v. CIT [1975] 101 ITR 234 held that the acquisition of all kinds of knowledge would not fall within the definition of education as provided under Section 2(15) and the acquisition of knowledge should be through a normal schooling to be regarded as education.

2)Thus, it was a well-settled principle that there had to be a systematic instruction to the students by way of normal schooling to be regarded as education. Mere conducting of event management classes might provide some kind of knowledge to the students; but that acquisition of knowledge would not fall within the meaning of 'education' as provided in section 2(15).

3)In the instant case, the assessee was conducting classes in event management but the government or any governmental bodies did not recognize the institution run by the assessee.

4)Therefore, the teaching courses conducted by the assessee would not result in conferment of any degree or diploma and remained unrecognised. Thus, the assessee was not eligible for registration under section 12AA. – IMPRESSARIO EDUCATIONAL TRUST V. CIT [2014] 47 taxmann.com 259 (Cochin - Trib.)

No liability of bank to withhold tax from cap gains remitted to a non-resident when it was merely acting as broker

Where assessee-bank was only acting as an authorized dealer to brokers of foreign residents in transferring funds in respect of share transactions, which resulted in gains, it was not liable to withhold tax under section 195.

Facts:

a)Individuals (residents of UAE) carried out transactions in shares through brokers and earned short-term capital gains. The assessee-bank made remittances on behalf of brokers in respect of these gains without deduction of tax.

b)According to the AO, the assessee-bank (in capacity as remitter) was to deduct tax at source before making overseas payments under section 195. Subsequently, the AO held that the assessee-bank was a defaulter under section 201 and was liable to pay interest under section 201(1A). On appeal, the CIT(A) reversed the order of AO.

On appeal, the Tribunal held in favour of assessee as under:

1)The ITAT Mumbai Bench in the case of Hongkong & Shanghai Banking Corpn. Ltd.,v. Jt. CIT [2009] 29 SOT 17 had held that capital gains arising to the NRIs residing in UAE were short term capital gains and the bank, which was acting as an authorized dealer, was not liable to deduct tax. Consequently, the AO was not justified in treating the assessee as a defaulter under section 201;

2)In the instant case, the non-residents had earned short-term capital gains and the assessee-bank was only acting as an authorized dealer in transferring the funds on behalf of the broker.

3)Thus, following the order of ITAT Mumbai bench (Supra) it was to be held that assessee-bank was not a person responsible for paying tax within the meaning of section 204 and, therefore, it was not liable to deduct tax at source under section 195. Therefore, assessee-bank could not be treated as a defaulter within the meaning of section 201. – ITO(IT)(TDS) V. ABU DHABI COMMERCIAL BANK [2014] 47 taxmann.com 263 (Mumbai - Trib.)

Salary income declared after search proceedings would be deemed as undisclosed even if tax was deducted there from

Where return was filed by assessee after block assessment proceedings were initiated by the AO, the intention of assessee was not to disclose income and, therefore, same was required to be treated as an undisclosed income as per section 158B(b).

Facts:

The issue that arose for consideration of the High Court was:

Whether non-disclosure of the salary income (by not filing the return of income) on which the tax was deducted at source, could be treated as "undisclosed income" within the meaning thereof in Section 158B(b)?

The High Court held in favour of revenue as under:

1)The Supreme Court in Asstt. CIT v. A.R. Enterprises [2013] 29 taxmann.com 50 held that since the tax to be deducted at source is also computed on the estimated income of an assessee, such deduction cannot result in the disclosure of the total income for the relevant assessment year'.

2)The assessee filed the return declaring the income only when the block assessment proceedings were initiated by the AO. It indicated that there was no intention on the part of assessee to disclose the income.

3)Therefore, the salary income was required to be treated as undisclosed income within the meaning thereof in section 158B(b). The Tribunal had materially erred in not treating the income earned by way of salary as 'undisclosed income'. – ASSTT. CIT V. MINOOBHAI D. IRANI [2014] 47 taxmann.com 289 (Gujarat)

No transfer under sec. 2(47) if share in inherited property was transferred pursuant to Court decree

Amount received by assessee pursuant to a Court decree in lieu of her share in self acquired property of father who died intestate, could not be said to result in 'transfer' attracting provisions of section 2(47).

Facts:

a)The Father (‘B’) of assessee (daughter) died intestate leaving behind four sons and six daughters including the assessee. After expiry of 'B', assessee along with other sisters filed a suit for partition of self acquired property of their father.

b)The Court duly recognized the suit compromised between the parties. In terms of memorandum of compromise, the daughters agreed to receive their 1/10th share in property, i.e., a sum of Rs. 87.50 lakhs each from their brothers.

c)The assessee's brothers subsequently entered into a joint development agreement of property. In terms of said agreement, the developer directly paid amount of Rs. 87.50 lakh each to daughters including assessee herein. The daughters thereupon executed a release deed of disputed property in favour of their brothers.

d)The assessee had not offered to tax the impugned sum on the ground that there was no transfer of any capital asset. The AO made additions on the ground that the said transaction was to be deemed as transfer under section 2(47). The CIT (A) confirmed the order of AO. The aggrieved assessee filed instant appeal.

The Tribunal held in favour of assessee as under:

1)In the instant case, on death of 'B', their children became entitled to 1/10th share each over the property by way of intestate succession. Since a physical division of each of the 1/10th share was not possible, sons took the property and daughters took money equivalent to their share over the property.

2)The sum received by the assessee was thus traceable to the realization of her rights as legal heir on intestate succession and not to any sale, relinquishment or extinguishment of right to property. It was, thus, clear that the release deed was executed by daughters (in favour of their brothers) only to confer better title over the property. That document did not create, extinguish or modify the rights over the property either of the sons or the daughters.

3)The sum of Rs.87.50 lakhs was paid only through Court and not at the time of registration of the deed of release. The document of release was between the daughters and sons. The developer was not a party to the document. The developer was also not a party to the suit for partition.

4)Therefore, the conclusions of the revenue authorities that there was a conveyance of the share of the daughters in favour of the developer was contrary to the written and registered document and could not be sustained. Thus, revenue authorities were not justified in taxing the impugned amount as capital gains in the hands of the assessee. – SMT. T. GAYATHRI V. ITO [2014] 47 taxmann.com 190 (Bangalore - Trib.)

ITAT follows AS-10 to include one-time vehicle tax in cost of vehicle treating it as capital expenditure

Facts:

The issue that arose in the instant appeal was:

Whether one time vehicle tax paid by the assessee was includible in cost of vehicles, (eligible to depreciation) or, was in nature of revenue expenditure, deductible under Section 37(1)?

The Tribunal held in favour of revenue as under:

1)Section 43(1) defines the term 'actual cost' as under: "Actual cost" means the actual cost of the assets to the assessee, reduced by that portion of the cost thereof, if any, as has been met directly or indirectly by any other person or authority.

2)The definition emphasizes on the elements, which would not form a part thereof, so that the principles of commercial accounting would apply in determining the actual cost. Even otherwise, it was a trite law that in the absence of a statutory definition or mandate, the accounting prescription would prevail.

3)It is only where the law specifically provides for a particular course of action, inconsistent with the accounting mandate, that the same shall prevail and override the latter, viz., section 43B.

4)Para 20 of ‘Accounting Standard-10 - Accounting for Fixed Assets’ required that the cost of a fixed asset would comprise of its purchase price and any attributable cost of bringing the asset to its working condition for its intended use.

5)One-time tax for the lifetime of "all motor cars and omnibuses used or kept for use" in the State of Maharashtra was a tax for user, active or passive, of the motor vehicle in the territory of Maharashtra. Therefore, payment of tax, only enabled the vehicle being put to its intended use; in fact, represented a condition thereof, and would form part of its cost. - M. DINSHAW & CO. (P.) LTD. V. DY. CIT [2014] 48 taxmann.com 190 (Mumbai - Trib.)

CCI approved of proposed combination of retailers as their share was not significant in retailer’s market

Where in proposed combination of retail businesses in India shares of parties to combination were insignificant as compared to overall retail market, proposed combination was not likely to have appreciable adverse effect on competition in India and, therefore, same was to be approved

Facts:

a)The Tesco Overseas Investments Limited (‘TOIL’)gave notice to Commission relating to proposed acquisition of 50 per cent of issued and paid-up equity share capital of Trent Hypermarket Limited (‘THL’).

b)The proposed combination related to retail business in India which comprised both organized and un-organized retailing.

c)It was found that some of large players who had been operating in organized retail market in India were Reliance Retail, Future Retail, Spencer's retail, Bharti Retail, Aditya Birla's 'More', Shoppers Stop, etc.

d)Additionally, due to increased internet penetration and changing lifestyles, Indian retail market had also witnessed a surge in online retailers which had widened the choice for consumers.

e)‘THL’ operated only 16 retail stores across various locations in India. Its total revenue was insignificant as compared to size of overall retail market as well as organized retail market in India.

The Competition Commission of India held as under:

1)It was observed that while ‘THL’ was engaged in business of multi-format retail trading in India, including hypermarkets, supermarkets and smaller convenience stores, ‘TOIL’ was not present in retail market in India and, therefore, there was no horizontal overlap between business activities of ‘THL’ and ‘TOIL’ in retail market in India.

2)On facts, combination was not likely to have appreciable adverse effect on competition in India and, therefore, same was to be approved– Tesco Overseas Investments Ltd., In re [2014] 47 taxmann.com 261 (CCI)

Conducting educational diploma courses and management programmes was an educational activity under sec. 2(15)

Facts:

a)The assessee, a public charitable trust, was having objects of continuing education, training and research on various facets of management and related areas.

b)It claimed exemption under section 11. The Assessing Officer (‘AO’) held that activities of assessee would fall within scope of 'advancement of any other object of general public utility’ and the assessee would not be entitled to exemption under Section 11 as its aggregate receipts exceeded the limit specified under second proviso to Section 2(15).

c)The CIT(A) confirmed the said order. Further, the Tribunal reversed the order of CIT(A). The aggrieved revenue filed the instant appeal.

The High Court held in favour of assessee as under:

1)The revenue had denied the exemption under section 11 mainly on the ground that the case of the assessee would fall under the fourth limb of the definition of 'charitable purpose' i.e. 'advancement of any other object of general public utility'.

2)The activities of the assessee such as continuing education diploma, certificate programmes; management development programmes, public seminars, workshops and conferences, etc., were educational activities. 3)Second proviso to section 2(15) would not apply in respect of relief to the poor; education or medical relief. Thus, where the purpose of a trust or institution was relief of the poor; education or medical relief, it would constitute 'charitable purpose' even if it incidentally involved the carrying on of the commercial activities.

4)In the instant case, as the activities of assessee would fall within realm of education which was a 'charitable' purpose as per section 2(15). The assessee was entitled to exemption under section 11. – DIT(Exemption) v. Ahmedabad Management Association [2014] 47 taxmann.com 162 (Gujarat)

Undue delay in filing of appeal was not condonable when assessee was working with professional advice of CA

Delay in filing appeal not acceptable when it was found that assessee was acting on professional advice of Chartered Accountant.

Facts:

a)The Commissioner invoked the revsional jurisdiction directing the Assessing Officer to redo the assessment, and, accordingly, the Assessing Officer (‘AO’) passed an order under section 143(3). The assessee filed an appeal before the CIT(A), which was dismissed.

b)The assessee submitted that it was not in his knowledge that an appeal laid against the order under Section 263, and it was only when he approached an Advocate, it came to his knowledge that appeal was not filed.

c)The assessee prayed that since the delay was neither intentional nor deliberate, but was for valid reasons, it might be condoned.

The Tribunal held in favour of revenue as under:

1)The assessee had filed the appeal against the consequential order passed by the AO and a Chartered Accountant represented it.

2)It was clear that the assessee was acting on the professional advice of the Chartered Accountant. Therefore, it could not be accepted that the assessee was unaware of the legal remedy available to it.

3)However, the assessee had filed the present appeal, nearly more than a year after the filing of the original appeal. Thus, the assessee had not satisfactorily explained the delay in the filing of the appeal against the order under section 263.

4)It proved that the assessee had not been vigilant enough in pursuing its legal remedies. Therefore, the delay in the filing of the appeal could not be condoned and, consequently, the appeal was to be dismissed as time-barred. - PIONEER E BIZZ. (P.) LTD. V. DY./ACIT [2014] 46 taxmann.com 456 (Hyderabad - Trib.)

Payment of commission with RBI’s approval for export to Iraq under ‘Food and Oil programme’ isn’t prohibited

Where Assessing Officer disallowed assessee's claim for commission paid to intermediary companies in respect of export made to Iraq under 'Food for Oil Programme' run by United Nations, in view of fact that said payment was duly approved by RBI, impugned disallowance deserved to be deleted.

Facts

a)The assessee-firm made exports to Iraq under the 'Food for Oil Programme' run by the United Nations. It paid commission to various intermediaries in connection with export and such payments were made through agency of Reserve Bank of India.

b)The Assessing Officer (‘AO’) relied upon report of Volcker Committee wherein it was noticed that oil companies/traders paid premium to intermediaries above the United Nations' official rate, and such premium was used by the intermediaries to pay to the beneficiary or entity who was designated to receive the funds.

c)He further held that Iraq having initiated its policy of collecting illicit surcharge on every barrel of oil sold under the programme, under the caption "after sales services". Such payments had to be treated as prohibited in view of Explanation to section 37(1).

d)Merely by taking note of the Volcker Committee report the AO held that 10 per cent of the commission had to be disallowed, which was confirmed by the CIT(A). The aggrieved-assessee filed the instant appeal.

The Tribunal held in favour of assessee as under:-

1)It was rightly pointed out by the assessee that the United Nation’s sanction was with reference to payment made to Iraqi Government by suppliers and not the payment made to intermediaries.

2)The commission paid by the assessee to third party was duly approved by the Reserve Bank of India.

3)The Volcker Commission report had discussed about the utilisation of money by the recipient of the commission, whereas in the instant case there was no finding at all by the tax authorities that the third party had rendered any services and the commission paid to it was diverted to the Government of Iraq.

4)Thus, the disallowance made by the AO was not in accordance with law and the commission paid to third parties was not prohibited in terms of Explanation to Section 37(1). - AIR PAC EXPORTS V. ASSISTANT CIT [2014] 47 taxmann.com 58 (Mumbai - Trib.)

Gymkhana Club providing sports and other facilities only to its members could not be treated as a charitable trust

Where assessee-club was involved in providing sports activities accompanied by facilities like liquor bar, playing cards, restaurant, marriage hall, catering services, etc. to a certain group of persons, i.e., members of club, activities of assessee-club would not fall in definition of charitable purpose.

Facts:

a)The assessee-trust, claiming to be a charitable trust, filed its return of income declaring total income at nil. The Assessing Officer (‘AO’) noticed that, though the assessee-trust had been granted registration under section 12A, yet, the activities of the assessee-trust were not charitable activities.

b)He, therefore, held that the assessee was not entitled to exemption under section 11. He, accordingly, taxed the assessee's receipts. On appeal, the CIT(A) observed that the assessee-trust had been conferred the benefit of exemption under section 11 up to assessment year 2008-09.

c)The sports and other activities carried out by the assessee-trust would partake the character of general public utility which term was included in the definition of charitable purpose as defined under section 2(15). He, therefore, held that the assessee-trust was eligible for exemption under section 11. The aggrieved-revenue filed the instant appeal.

The Tribunal held in favour of revenue as under:

1)The assessee had been involved in providing sports and recreational facilities to its members only. The AO had given a categorical finding that, though the membership of the club was open to public yet it had been restricted in many ways. Even the membership was offered on payment of very high premium.

2)High class premium services, such as facility of liquor bar, playing cards, restaurant, marriage hall, catering services, etc., were provided to the members, which could not be said to constitute any charitable activity.

3)Members who constituted high class, influential and rich persons could obtain services, that too on payment of high premium. However, the assessee-trust was also offering the facility of sports to its members that by itself could not partake the character of charitable activity.

4)It was not the case of the assessee-trust that such sports activities had resulted into any benefit to the public at large or any section of the society. The sports activities accompanied by facilities like liquor bar, playing cards, restaurant, marriage hall, catering services, etc., were limited to a certain group of persons.

5)There was no element of charity involved in such activities rather the activities of the club were meant for leisure and pleasure of the members of the club and the membership had been restricted to certain individuals. Thus, there was no infirmity in the order of the AO in holding that the activities of the assessee-trust would not fall in the definition of charitable purpose as defined under section 2(15). – ADIT(E) V. NAVI MUMBAI MERCHANTS GYMKHANA [2014] 47 taxmann.com 53 (Mumbai - Trib.)

Payment made to foreign co. to conduct navigation studies at Indian port won’t satisfy ‘make available’ clause; no FTS

Payment made by assessee to foreign company for navigation studies at Indian port to determine pre-existing conditions could not taken as fee for technical services as per Article 13 of India-UK DTAA.

Facts:

a)The assessee had entered into an agreement with a foreign company (Wallingford) for morphological studies, sedimentation assessment, navigation and mooring assessment in respect of a port.

b)The assessee did not deduct tax on payments made for said studies as it was of the view that said fee was not in the nature of ‘fee for technical services’ (FTS). However, the Assessing Officer opined that services provided by Wallingford were in nature of FTS.

c)On appeal, the CIT(A) reversed the order of Assessing Officer and held that the assessee would not be liable to withholding tax under section 195(1). The aggrieved-revenue filed the instant appeal.

The Tribunal held in favour of assessee as under:

1)Article 13 of India-UK DTAA provides that 'FTS' arising in a contract State and paid to a resident of other contracting State may be taxed in that other State if it is made available to the recipient.

2)In the case of Mahindra & Mahindra Ltd. v. Dy. CIT [2010] 122 ITD 216 (Mum.) (SB), the meaning of expression 'make available' had been analyzed by discussing decision of Intertek Testing Services India (P.) Ltd. In re [2008] 175 Taxman 375 (AAR - New Delhi) wherein it was held that the service had to be aimed at and results in transmitting the technical knowledge, etc., so that the receiver of service could derive an enduring benefit and utilize the knowledge or know-how in future on his own without the aid of the service provider.

3)It was undisputed that assessee was supposed to receive only a report on pre-existing condition in relation to port. There was a clause of confidentiality in the agreement, which provided that the report so prepared by Wallingford would not be transferable by the assessee.

4)The agreement further provided that the assessee couldn’t not use the know-how in performing services for any other client in future. Even the assessee was not entitled to sub-license any of the rights granted in the report.

5)Thus, in the instant case, the fees for technical services was not paid for making available the technical knowledge, experience and know-how to the assessee. Therefore, the payment made by the assessee was out of the ambit of the provisions of section 195. The view taken by CIT(A) was to be affirmed. – ITO (INTERNATIONAL TAXATION) V. ADANI PORT INFRASTRUCTURE (P.) LTD [2014] 47 taxmann.com 17 (Ahmedabad - Trib.)