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ITAT RULINGS 2010

AIT-2010-514-ITAT
M/s Asia Today Ltd. Vs. ADIT (International Taxation), Mumbai

in accordance with the provisions of clause (b) of section 244A(1) interest is payable on excess payment of self assessment tax. - if the refund is out of any tax, other than advance tax or tax deducted at source or penalty, interest shall be payable for the period starting from the date of payment of such tax or penalty and ending on the date of grant of the refund.

AIT-2010-515-ITAT
BBC Worldwide Limited Vs. ADIT (
Directorate of International Taxation), New Delhi.

whether- (i) the ld. CIT(Appeals) was right in holding that the assessee had the business connection and the Permanent Establishment (PE) in India; (ii) he was right in attributing profit to the PE as determined by him; (iii) he was right in taxing interest income @ 20% on gross basis against the rate of 15% prescribed under the relevant tax avoidance treaty; and (iv) he was right in charging interest u/s 234B on assessed income and not on the returned income?

AIT-2010-522-ITAT
M/s Frick India Limited Vs. DCIT, New Delhi.

there was a composite agreement titled as “intellectual property license and non compete agreement” vide which several valuable rights including the right to use the trademark, technical know-how including right to export to 30 countries have been granted over a long period of ten years to the assessee, which gave rise to a benefit of enduring nature. However, the AO has allowed the same as revenue expenditure without application of mind and without keeping in view the stand taken in earlier years by the AO which was also confirmed by the CIT(A) on the very same facts.

AIT-2010-525-ITAT
Shri Mukesh D.Ambani Vs. Jt. Commissioner of Income-Tax, Mumbai

there was no transfer of 50 crores shares of RIC of the face value of Re.1/- by RCIL to Mukesh Ambani on 31.3.2004 when the Demat Account of the Assessee held with the Depository Participant, HDFC Bank Ltd., the Client’s ID of the Assessee being 42646206 and Depository ID No. being IN300476 was credited with 50 Crores shares of face value of Re.1/- of RIC from the Demat account of RCIL bearing  ID No. 10011366 with the Depository Participant Reliance Capital Ltd. by way of sale and that the said transfer was only by way of delivery of possession of shares as security for repayment of a loan availed by RCIL from the Assessee.

AIT-2010-526-ITAT
Lucent Technologies GRL LLC Vs. ADIT Tax (International Taxation), Mumbai

The assessee is a non-resident company incorporated in the U.S., engaged in the business of providing software in relation to telecom project for wireless telephony networks. During the years under consideration, the assessee had supplied / sold standard software to Reliance Infocom Limited in India for the wireless reliance network. Pursuant to the order passed by the A.O. in response to the application made by the Reliance under section 195 of the Act, Reliance deducted taxes @ 15% as per rates prescribed in the D.T.A.A. between India and U.S.A. CIT(A) passed an order concluding that the payments for the sale of software were only for supply of copyrighted and do not amount to royalty within the meaning of section 9(1)(vi) of the Act or Article 12(3) of the D.T.A.A. It was  held that the A.O. had wrongly held the said payments as royalty and the addition was accordingly deleted.

AIT-2010-529-ITAT
M/s. Wizcraft International Entertainment Pvt. Ltd. Vs. ADIT (International Taxation), Mumbai

commission income of agent is not liable to tax in India and consequently there was no obligation on the part of the appellant to deduct tax at source at the time of making payment. - reimbursement of expenses are not chargeable to tax and therefore there was no obligation to deduct tax at source.

AIT-2010-531-ITAT
Mehta Brothers Vs. ITO, New Delhi

Since, in the present case, the jurisdiction over the assessee was lying with ITO, Delhi, he should have issued a fresh notice u/s 148 of the Act after receiving the information from ITO, Jammu instead of proceeding directly to complete the assessment by issuing notice u/s 143(2) on 30.8.2007. Since the notice u/s 148 issued by ITO, Jammu is without jurisdiction inasmuch as ITO, Jammu had no jurisdiction to assess the present assessee, the very assessment completed by the AO, New Delhi, on the basis of the notice issued u/s 148 by the AO, Jammu would invariably be without jurisdiction inasmuch as no valid proceedings u/s 148 has been issued by the AO, Delhi having jurisdiction over the present assessee. Therefore, on this legal ground, assessment made by the AO, New Delhi, is void ab initio and without jurisdiction. We, therefore, cancel the assessment.

AIT-2010-532-ITAT
Tata Sons Limited Vs. DCIT, Mumbai

Where is the question of refund of taxes paid abroad when FTD (i.e., foreign tax credit), in view of specific provisions to that effect in the DTAAs, cannot even exceed the Indian income tax liability? It is not the tax payment abroad which is the material figure for the purpose of computing Indian income tax liability, but it is the admissible foreign tax credit in respect of the same which affects such an Indian income tax liability. The FTD in respect of income tax paid in the US cannot exceed the Indian income tax liability in respect of the income on which income tax is paid in US.

AIT-2010-533-ITAT
Lubrizol Corporation USA Vs. ADIT (International Taxation), Mumbai

We are of the considered view that Hon’ble Supreme Court’s observations in Dunlop’s case cannot be interpreted to mean that this Tribunal is denuded of the powers to grant stay until case for financial stringency is successfully made out by the applicant. However, we see no conflict in holding this view as also adhering to the settled principles governing grant of stay which lay down that financial constraints of the applicant are important, even if not sole of qualifying, consideration in entertaining a stay application, besides considerations like existence of strong prima facie case, balance of convenience and possibilities of Revenue’s rights of recovery being prejudiced by waiting till the outcome of appeals.

AIT-2010-536-ITAT
M/s. Merchant Shipping Services Pvt. Ltd. Vs. ACIT (TDS), Mumbai.

Service Tax: Whether the payment made to NSICT for the movement of containers can be covered u/s.194J? The assessee deducted tax at source u/s.194C on the payments made to NSICT at the rate of 2.05%. As against that the Assessing Officer has held that such payments are covered u/s.194J, on which tax was deductible at the rate of 5.05%. - the payments made by the assessee to NSCIT are covered u/s 194C and there is no scope for applying the provisions of section 194J. The natural corollary is that the assessee rightly made deduction of tax at source at the applicable rate.

AIT-2010-537-ITAT
M/s Panasonic India Pvt. Ltd. Vs. ITO, New Delhi

the advertisement reimbursement would definitely form a part of the operating profits of the assessee and would have to be taken into account for purposes of transfer pricing analysis. - in view of the correct analysis and working as given above on the comparison between the assessee and the comparables and by correcting the two errors committed by the TPO and CIT(A) and confining the financials to one year only and not to multiple years for the trading functioning of assessee, the PLI of the assessee comes to 8.43% and that of the comparables 3.58%. As the PLI of the assessee is higher of the two, the international trading transactions entered into by the assessee are held to be at arm’s length price as per transfer pricing regulations in India. Accordingly the addition made by the TPO and upheld by CIT(A) amounting to Rs.1,23,48,509/- is ordered to be deleted.

AIT-2010-542-ITAT
MSM Satellite (Singapore) P. Ltd. Vs. DDIT(International Taxation), Mumbai

the deduction of tax is not voluntarily on the part of the assessee but as a result of the order passed by the AO u/s 195 of the Act . Therefore, it is not a case of cancellation of contract and non accrual of income in the hands of the non-resident subsequent to the deduction of tax by the assessee on its own. Therefore, none of these circular would help the case of the revenue in the peculiar facts and circumstances of the case of the assessee in hand.

AIT-2010-543-ITAT
M/s. SMK Shares & Stock Broking Pvt. Ltd. Vs. DCIT, Mumbai

There is no dispute on facts particularly with regard to income returned as “Short Term Capital Gains” to the extent of Rs. 10,00,000 being out of opening investment. By now, the issue that a person can be both “Investor’ as well as “Trader” in shares is no more res integra.

AIT-2010-544-ITAT
Alstom Limited Vs. ITO (International Taxation), Chennai

the assessee-company had made various payments to its holding company M/s. Alstom Holdings, France but no deductions of tax at source were made. - there is justification for the assessee’s conviction at the time of payment that no tax was deductible at source. It was neither a composite payment. The payment could not be held as made for technical services, as argued by the Revenue. Neither it is a case of royalty. Therefore, we find that the assessee was not bound to deduct tax at source for the disputed payment and therefore, as rightly held by the C.I.T.(Appeals), there was no justification to pass the orders under sec.201(1) and 201(1A)

AIT-2010-548-ITAT
M/s M D Shukla Shares and Securities P Ltd. Vs. ITO, Mumbai

the turnover charges and clearing house charges are not for providing the technical services by the stock exchange but are the charges levied by the stock exchange on its members for the purposes of providing facilities. No TDS was required to be deducted.

AIT-2010-549-ITAT
M/s Zylog Systems Limited Vs. ITO, Chennai

Special Bench: the expenses incurred in foreign currency on computer software development onsite at the client’s place outside India is not to be excluded from export turnover for computing deduction u/s 10B of IT Act.

AIT-2010-551-ITAT
M/s. HSBC Electronic Data Processing India Pvt. Ltd. Vs. DCIT, Hyderabad

income from project management services and the electricity rebate is directly connected with the industrial unit and accordingly, the same should be characterized as income from business.  Considering the totality of facts and the circumstances of the case, both the incomes are to be considered under the head ‘business income’ and there is no valid reason to the AO for taxing the same under the head ‘income from other sources’.  It is pertinent to note that the eligibility for deduction under section 10A of the Act is nothing to do with the taxation of income under the head ‘income from business’. Even if the income is not eligible for deduction under section 10A of the Act, it can still be taxed as business income. business loss of 10A units should be set off against the business profits of non 10A units

AIT-2010-561-ITAT
A M Todd Co. India Pvt. Ltd. Vs. ITO, Mumbai
exchange loss whatsoever suffered by the assessee on account of fluctuation in rate of foreign exchange on the date of balance sheet is allowable as business loss u/s 37(1) if the said loss on trading receipt or trading liability.
AIT-2010-570-ITAT
M/s. Procter & Gamble Home Products Ltd. Vs. JCIT, Mumbai

the assessee had paid a sum of Rs.2 crores to M/s. Procter & Gamble India Ltd (PGI) towards technical know how fees in assessment year 1994-95. The assessee had amortized the expenditure over a period of six years and claimed deduction of Rs.33,33,333/- being 1/6th of the payment during the year.

AIT-2010-573-ITAT
Mr. Nehal V. Shah Vs. ACIT, Mumbai

Assessee has carried out only 31 purchase transactions and 25 sale transactions which cannot be said to be a great volume of transactions. Further, assessee was holding shares worth Rs. 11.56 crores at the end of the year and market value of the same was about Rs.17.69 crores. If assessee was a trader, he would have definitely realised this huge profit of almost Rs. 6 crores immediately and not carried out the stock to the next year. Assessee has also not borrowed any money and he already occupied full time business for garments through the firm M/s. Zen Clothing.

AIT-2010-585-ITAT
GAP International Sourcing India Pvt. Ltd. Vs. DCIT, New Delhi

the directions of the DRP are too laconic to be left uncommented. The directions given by the DRP almost tantamounts to supervising the Assessing Officer’s draft order and in that sense it can be equated that appellate jurisdiction being exercised. We find that Hon’ble Apex Court in the case M/s Sahara India (Farms) Vs. CIT & Anr. has held that even “an administrative order has to be consistent with the rules of natural justice”

AIT-2010-591-ITAT
M/s. Hapag Lloyd Container Linie GmbH Vs. ADIT (International Taxation)
, Mumbai

the interest on income-tax refund is includible under Article 11 of DTAA and the authorities below were justified in repelling the contention of the assessee for its inclusion in Article 8(3) of DTAA between India and Germany. Resultantly such interest on income-tax refund is chargeable to tax in the hands of the non-resident assessee as the same is arising in India.

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