Indian subsidiary won’t form PE of foreign parent Co even if latter has right to audit subsidiary

Facts:

a) Adobe Systems Incorporated (“assessee”) is a company incorporated outside India having a wholly owned subsidiary in India (Adobe India).

b) Adobe India provides software related Research and Development (R&D) and is paid on cost plus basis in terms of an agreement entered into between the Assessee and Adobe India.

c) Assessee claimed that such income received from Adobe India was not assessable in India as assessee did not have any business operations in India, thus he did not file return in India.

d) Assessing O􀁹icer (AO) issued notice under section 148 on observation that as per the agreement between assessee and Adobe India, it was obliged to audit the facilities of Adobe India for maintenance of the requisite standards. Therefore, it had a Service PE in India in terms of Article 5(2)(l) of the Indo-US DTAA and was liable to file return of income and pay taxes in India.

Parking charges collected on vacant land were taxable even if developer was following project completion method

Where assessee-developer was following project completion method for payment of taxes, parking charges collected by him on vacant land had nothing to do with the completion of his project; he was obliged to pay on parking charges in year of receipt of parking charges.

Facts:

a)The assessee, being a builder and developer was following project completion method for purposes of paying taxes.

b)He had generated income in assessment year 2000-01 on account of parking charges collected on the vacant land. Since assessee had not filed his return of income of AY 2000-01, a notice under section 148 was issued and income received from parking charges was assessed to tax.

c)On appeal, the CIT (A) set-aside the order of AO on the ground that the amount earned by assessee by exploiting vacant land was an amount relatable to costs of the project and therefore, was taxable in subsequent years. Further the Tribunal set aside the order of the CIT(A)

d)Consequently, AO charged interest u/s 234A and 234B in respect of default in payment of advance tax for the assessment year 2000-01. CIT (A) and Tribunal upheld AO action of AO. The aggrieved-assessee filed the instant appeal before High Court.

The High Court held in favour of revenue as under :

1)The non-filing of return of income by assessee was on the ground that the income earned on parking charges would have to be returned when the project would be completed. This was not accepted as the amount received on account of parking charges was not a part of any project. Thus parking charges was brought to tax in Assessment Year 2000-01.

2)It had been held by the Tribunal that the amount received on parking charges had nothing to do with the appellant's project and was assessable to tax in Assessment Year 2000-01. This has been accepted by the assessee. Thus, the assessee was obliged to pay advance tax and non-payment of the same would carry with it the further burden on interest under Section 234B of the Act.

3)Therefore, the AO was right in charging interest in respect of default in payment of advance tax for the assessment year 2000-01. - SUDHIR G. BORGAONKAR V. ACIT - (2015) 56 taxmann.com 188 (Bombay)

Petitioner couldn't ask for transfer of case for his convenience to participate in proceedings, says High Court

Facts:

a)Petitioner was residing with her husband at Tanjore till 2008, after which they moved to Chennai. Petitioner's husband as well as the petitioner were Income-tax assessee and the petitioner's husband died on 29-3-2013, leaving behind two sons and a daughter as his legal heirs.

b)The Income-tax Officer (‘ITO’) issued notices to the petitioner and her two sons under section 148, calling upon them to produce the accounts and documents pertaining to the estate of her husband.

c)Pursuant to the notice, the petitioner had sought for transfer of the files from Tanjore to Chennai.

d)The assessee submitted that merely because notices were issued at Tanjore and statement of the petitioner's son was recorded at Tanjore, it could not be a ground to compel the petitioner to travel from Chennai to Tanjore on each occasion for participating in the assessment proceedings.

The High Court held in favour of revenue as under:

1)On a reading of the provisions of section 127, it was seen that the object for which such provision was enacted is for the purpose of administrative convenience. The said provision does not empower the Assessing Officer to transfer a case from his jurisdiction to that of another and even when the Director General or the Chief Commissioner or the Commissioner exercising such power, can transfer any case after recording his reasons for doing so.

2)For the purpose of recording reasons, it is obvious that the Commissioner has to consider the circumstances involved in each case.

3)When the transactions have taken place within the jurisdiction of the ITO and the transaction pertained to the immovable property, the petitioners could not insist that the files should be transferred from Tanjore to Chennai solely on the ground that it would be convenient for the first petitioner to partake in the assessment proceedings.

4)The ITO after considering the representation of petitioner, called for a report from the Assessing Officer and the contentions raised by the representative of the petitioner was considered and reasoned order had been passed.

5)Thus, the impugned order being a reasoned order and nothing has been placed before Court to show that the impugned order was either ex facie perverse or vitiated by any patent error. In the impugned order reasons have been assigned for rejecting the request for transfer, which was based on the records. Therefore, Court was not inclined to interfere with the discretion exercised by the ITO in refusing to transfer the case from Tanjore to Chennai. - D.V. MERCY V. ITO [2014] 52 taxmann.com 519 (Madras)

HC agrees to keep confidentiality of 2G spectrum report; non-disclosure to assessee won’t vitiate reassessment

The High Court held as under:

1)  The law only requires that the information on which the AO records his or her satisfaction that income has escaped assessment, is communicated to the assessee, without mandating the disclosure of any specific document;

2)  Where the reasons recorded had been communicated and it provided (independent of the 2G Report referred to in the reasons) details of the new and tangible information that support the AO's opinion, non-supply of 2G Spectrum report prepared by DIT(Inv) to the assessee on the grounds of confidentiality would not vitiate the proceedings initiated under section 147;

3)  There is no legal proposition that mandates the disclosure of any additional document. However, the AO could not, in all cases, refuse to disclose documents relied upon by him on account of confidentiality;

4)  The principle denying privilege or confidentiality would operate when no material is provided in addition to the mere assertion of the subjective satisfaction of the AO;

5)  Even then, the claim for privilege may still prevail in that the Court may consider the manner in which the documents were to be inspected, but such question did not arise in the instant case, where concrete and specific details (which supported the belief under section 147/148) were communicated to the assessee;

6)   Thus, the non-disclosure of the 2G Spectrum Report did not affect the impugned notice. - Acorus Unitech Wireless (P.) Ltd. v. ACIT [2014] 43 taxmann.com 62 (Delhi)