Tuesday, October 16, 2012

Imp case laws for CA Final - Direct Taxes - Nov 2012

Case Law # 1: Case law on assessment proceedings [743 page Aug 16th to 31st, 2012 – CPT]

The AO needs to record reasons before issuance of notice U/S 148 for the purpose of Re-Assessment or Income escaping assessment U/S 147. Thus, framing of reasons after issue of notice U/S 148 is as bad as a Challan before jumping a red light.

[Dadanbai B.Bachani Vs ITO] [2012] [22 Taxmann.com 308] [Mumbai – Trib]

Case Law # 2: Case law on Capital Gains [773 page Aug 16th to 31st, 2012 – CPT]

For the purpose of Sec 54, the capital gains can be invested before the due date for filing belated return. Also, where advance is given to a builder towards purchase of a flat, period of 3 years is available from the date of transfer for investing in the new flat as it will be treated as construction of a flat rather than purchase of a flat.

[Kishore H.Galaiya Vs ITO] [2012] [24 Taxmann.com 11] [Mumbai – Trib]; [CIT Vs Jagriti Aggarwal (2011) (15 Taxmann.com 146)] [Punjab and Haryana H.C]

Case Law # 3: Case law on Sec 14A [752page Aug 16th to 31st, 2012 – CPT]

Generally, expenditure relating to exempt income is not allowed as per the provisions of Sec 14A.

However, where the shares were bought by the assessee as stock in trade, and the dividend income arose to the assessee on account of unsold shares, brokerage paid at the time of purchase of the aforesaid shares cannot be disallowed as the investment was not made for earning dividends. [CCI Ltd Vs JCIT] [2012] [20 Taxmann.com 196]

Case Law # 4: Case law on AAR [733 page Aug 16th to 31st, 2012 – CPT] [157 Page Sep 16th to 30th, 2012 CPT]

Authority for Advance Rulings will not entertain an application if there is any pending proceeding.

In the recent case of “Netapp B.V. Vs AAR” [2012] [24 Taxmann.com] [174] [Delhi], it was held that once the assessee files return of income, the AAR loses its jurisdiction as it will be treated as a pending proceeding.

Case law # 5: Case law on bad debts in the case of banks [656 Page Aug 1st to 15th, 2012 – CPT]

The Apex Court clarified the scope of Sec 36(1)(vii) and Sec 36(1)(viia) which deals with bad debts and provision for bad debts respectively.

How to write off bad debts relating to rural advances?

Bad debts relating to rural advances needs to be first adjusted against the provision for bad debts account. There after the balance bad debts are to be written off to profit and loss account.

How to write off bad debts relating to urban advances?

In this case, the banks can write off directly the bad debts relating to urban advances to the profit and loss account as urban advances are not controlled by the provisions of Sec 36(1)(viia).

[Catholic Syrian Bank Ltd Vs CIT] [2012] [18 Taxmann.com 282] [Supreme Court]

Case law # 6: Case law on Charitable Trusts [670 Page Aug 1st to 15th, 2012 – CPT]

The trusts registered U/S 12A needs to apply 85% of their income towards charitable purpose so as to get the benefit of Sec 11.

i.e In layman’s terms, the trust needs to apply 85% of their income. Now, can such trust source foreign goods and services and claim that it applied its income towards charitable purposes? The Delhi High Court says “No”. Thus, a trust registered U/S 12A cannot source foreign goods and services to claim the benefit of Sec 11. [DIT (Exemptions) Vs National Association of Software and Services Companies] [2012] [21Taxmann.com 213]

Case law # 7: Case law on ESOPs [684 Page Aug 1st to 15th, 2012 – CPT]:

The assessee company passed a resolution to issue equity shares free of cost to its employees as sweat equity. Shares were to be issued with lock in period of five years. No allotment is done during the relevant previous year.

However, the fair value of shares allotted was debited to “Employee Benefits Account” [P&L item] with corresponding credit to “Shares Outstanding Account” [B/S item].  The AO denied the same as it amounted to contingent liability.

The Chandigarh Tribunal held that the same was not a contingent liability merely because there was a lock in period of five years under which if any employee left before the expiry of five years, the shares which were allotted to him would vest with the company. Hence, the same is allowed as an expense.

[Addl CIT Vs Spray Engineering Devices Ltd] [2012] [23 Taxmann.com 267] [Chattisgarh – Trib]

Similar ruling was given by the Madras High Court in the case of “CIT Vs PVP Ventures Ltd” [2012] [23 Taxmann.com 286] where it held that ESOP expenses shall be allowed if the scheme is recognized in compliance with SEBI norms.

Readers may please note that the facts of “Ranbaxy Laboratories Ltd Vs ACIT” [2010] [39 SOT 17] [Delhi] were different. In that case as the liability was contingent in nature, the same was disallowed.




Case law # 8: Case law on 54F [687 Page Aug 1st to 15th, 2012 – CPT]:

The assessee owned a property jointly along with her husband. The assessee entered into a developing agreement for the joint development of 8 apartments in another property owned by the assessee. As per the terms of the development agreement, she transferred the plot of land to the builder and received in exchange 4 residential apartments and Rs 10 lakhs. She claimed Sec 54F exemption as she sold plot of land and acquired residential house. The department denied the exemption as she owned more than one house as on the date of transfer.

The Madras High Court held that Sec 54F exemption shall be denied only if multiple houses are under “EXCLUSIVE OWNERSHIP” of the assessee. In the instant case, as on the date of transfer, she owned a joint property but she is not the exclusive owner of a residential house as on the date of transfer. Hence, Sec 54F exemption is allowed.

[Dr.Smt.P.K.Vasanthi Rangarajan Vs CIT] [2012] [23 Taxmann.com 299] [Madras]

Case law # 9: Case law on Lease premium [688 Page Aug 1st to 15th, 2012 – CPT]:

In “Krishak  Bharati Co-Operative Vs DCIT” [2012] [23 Taxmann.com 265] [Delhi HC], the High Court Held that lease premium amortization is not deductible. Further the court held that merely because the assessee had claimed the pro-rata lease premium as expenditure for 15 years, the same cannot be allowed by adherence to the rule of consistency which is leading to anomalous results.

Case law # 10: Case law on Brought Forward Losses [691 Page Aug 1st to 15th, 2012 – CPT]:

The assessee was carrying on the business of sale and purchase of properties and also earning rental and other income. By virtue of the specific provisions of the Act, the rental income is offered under IHP even though he was a dealer in properties. During a year, the assessee incurred losses in his real estate business (IHP Losses). He wants to set off the same against the subsequent year income from other business. The AO denied the same by arguing that the IHP Losses of earlier years can be set off only against the current year IHP Incomes but not against the business incomes.  The HC rejected the claim of the AO and held that the set off is allowable as both represent business incomes / business losses even though assessable under different heads by virtue of specific provisions of the Act.

[Lavish Apartment (P) Ltd Vs ACIT] [2012] [23 Taxmann.com 414] [Delhi HC]

Case law # 11: Case law on Sec 194J [693 Page Aug 1st to 15th, 2012 – CPT]:

Supply of news by agencies to a news paper company is professional service and invites Sec 194J but not Sec 194C.

[ACIT Vs Ushodaya Enterprises P Ltd] [2012] [23 Taxmann.com 258] [Hyderabad – Trib]


Case law # 12: Case law on Depreciation [695 Page Aug 1st to 15th, 2012 – CPT]:

“Approach Road to Factory” is treated as a part of Factory Building and hence eligible for depreciation under the category “Factory Buildings”. [CIT Vs Sunshine Glass Indus (P) Ltd] [2012] [23 Taxmann.com 336] [Rajasthan High Court]

Case law # 13: Case law on Royalty [176 Page Sep 16th to 30th , 2012 – CPT]:

Sec 9(1)(vi) has been retrospectively amended by the Finance Act, 2012 to cover “Software” as “Royalty”. Earlier in several decisions, the courts held that “Software” is a copyrighted article but not copyright itself. But the Finance Act, 2012 retrospectively amended the definition of royalty to cover software also.

Though, Sec 9 is amended, other sections dealing with ROYALTY were not amended. Hence, the TDS provisions [Sec 40(a)(ia)] are not applicable. Hence, the department cannot disallow the same even if the necessary TDS is not done on such types of payments to residents. [Sonata Information Technology Limited Vs DCIT] [2012] [25 Taxmann.com 125] [Mumbai – Trib]

Similarly, Article 12 of DTAAs dealing with “Royalty” are not yet amended and hence the assessee can claim the benefit of DTAA provisions. [DIT Vs Nokia Networks OY] [2012] [25 Taxmann.com 225] [Delhi – High Court]

Case law # 14: Case law on Scientific Research [178 Page Sep 16th to 30th , 2012 – CPT]:

Even if scientific research does not have desired result, amount incurred thereon gets deduction U/S 35. It is so because, the words used are “SCIENTIFIC RESEARCH” but not “Scientific Invention.” [Dy DIT Vs Mastek Ltd] [2012] [25 Taxamnn.com 133] [Gujarat High Court]

Case law # 15: Case law on MAT Credit [179 Page Sep 16th to 30th , 2012 – CPT]:

MAT does not include surcharge and education cess and hence, credit for the same is not allowable.

“Richa Global Exports P Ltd Vs ACIT” [2012] [25 Taxmann.com 1] [Delhi – Tribunal]

Case law # 16: Case law on Contingent Deposits in leasing transactions [182 Page Sep 16th to 30th , 2012 – CPT]:

In “Sundaram Finance Ltd Vs ACIT [2012] [25 Taxmann.com 247] [SC]”, the assessee was engaged in the business of hire purchase financing, equipment leasing and allied activities. During the relevant previous year, it collected certain sums as “CONTINGENT DEPOSITS” from the customers with a view to protect itself from sales tax liability. The sales tax liability was in dispute with the sales tax authorities and matters were pending before the High Court. These deposits were not offered as income by the assessee.

The Apex Court held that in taxing a receipt, the true legal character of the transaction is to be determined. In the instant case, as the assessee utilized them in their business rather than depositing in a separate interest bearing bank account, the same amounts to business receipts and hence, were liable to be taxed U/S 28 as business income.

Case law # 17: Case law on Know How [185 Page Sep 16th to 30th , 2012 – CPT]:

The assessee was a manufacturer of mining equipments and it entered into technical assistance agreement with an American company for acquiring technical know-how. Consideration under the said agreement was to be paid in instalments. The assessee paid the first installment and later on the agreement was cancelled and the technical know-how was not transferred to the assessee. Now the assessee claimed the first installment U/S 37. The Apex court held that once Sec 35AB comes into picture, the deduction is to be claimed only under that section but not U/S 37. Hence, technical know-how is to be claimed only U/S 35AB even if the agreement is cancelled at a later stage. “Drilcos (India) P Ltd Vs CIT” [2012] [25 Taxmann.com 228] [SC]”

Case law # 18: Case law on Appeals [187 Page Sep 16th to 30th , 2012 – CPT]:

Once the assessee files an appeal U/S 246A with the CIT (A), the same cannot be withdrawn even if the department did not have any objection to such withdrawal. “M.Loganathan Vs ITO” [2012 – 25 Taxmann.com 174] [Madras HC]

Case law # 19: Case law on 54EC [537 Page July 16th to 31st , 2012 – CPT]:

As per the provisions of Sec 54EC, one can claim exemption of capital gains U/S 54EC, if he invests the sale proceeds in notified bonds within 6 months. The Kolkatta Tribunal held that the said period of 6 months is to be reckoned from the date of receipt of consideration but not from the date of transfer. Further, where the consideration is received in installments, the time limit is to be counted from the date of receipt of each such installment.[Chanchal Kumar Sircar Vs ITO] [2012 - 18 Taxmann.com 304]

Case law # 20: Case law on filing additional claims other wise than by way of revised return [587 Page July 16th to 31st , 2012 – CPT]:

As per the Apex Court’s judgment in the case of Goetze India Ltd, the assessee can file any additional claims only through revised returns but not through any other method. The Mumbai High Court in a recent case explained the scope of the above said decision with regard to appeals. It was held that the additional claims can be made before the appellate authorities otherwise than through revised returns also [i.e Even though the AO is not empowered to allow additional claim based on a letter requesting him to do so, but the appellate authorities are entitled to act based on such letters.]

“CIT Vs Pruthvi Brokers and Shareholders (p) ltd” [2012] [23 Taxmann.com 23] [Mumbai HC]



Case law # 21: Case law on sister company transactions [591 Page July 16th to 31st , 2012 – CPT]:

Where the assessee bought the shares at a high price and sold the same to its sister concern at a low price, the resulting capital losses shall not be allowed as deduction unless there is any genuine material explaining the same. These types of losses are neither allowed as “Capital Losses” nor allowed as “Revenue Losses” and hence, they will be ignored under the provisions of the Income Tax Act.

[Premier Synthetic Industries Vs ITO] [2012 – 22 Taxmann.com 333] [Madras High Court]

Case law # 21: Case law on TDS U/S 194C [595 Page July 16th to 31st , 2012 – CPT]:

 Air freight paid to agent of foreign airlines does not attract TDS U/S 194C as the agents has acted merely as agents of the respective airlines and accepted freight payment not in their own account.

Similarly, TDS U/S 195 is not attracted as the foreign airlines concerned has no primary liability to pay tax. Thus, there cannot be any vicarious liability of assessee U/S 195 to deduct TDS from sums in which income element is absent.

[Taj Leather Works Vs ACIT] [2012] [23 Taxmann.com 58] [Kolkatta – Tribunal]

Case law # 22: Case law on TDS [488 Page July 1st to 15th, 2012 – CPT]:

U/S 206AA, where PAN is not furnished TDS is required to be done at 20% or such higher rate as the case may be. However, where the income of the depositors is below the taxable limit, the banks should not insist on PAN for opening accounts. Also, the banks should not deduct TDS at 20% in such cases where PAN is not furnished.

[Smt A.Kowsalya Bai Vs UOI] [2012 – 22 Taxmann.com 157] [Karnataka – High Court]

Case law # 23: Case law on 54F [489 Page July 1st to 15th, 2012 – CPT]:

Deduction U/S 54F cannot be denied even if the new property has been acquired by the assessee in his wife’s name. However, in such cases, clubbing provisions U/S 27 read with Sec 22 will be applicable and income derived from such property is assessable in the hands of the assessee.

[S.Krishna Kumar Vs ACIT] [2012 – 22 Taxmann.com 200] [Chennai – Tribunal]

Case law # 24: Case law on Sec 40a(ia) [253 Page June 1st to 15th, 2012 – CPT]:

In “Merilyn Shipping & Transports Vs ACIT” [2012] [20 Taxmann.com 244] [Visakhapatnam – Tribunal SB], the Tribunal interpreted the literal meaning of the expression contained in Sec 40a(ia) and held that disallowance of expenditure for non-deduction of tax at source will apply only in respect of expenditures which are shown as outstanding and payable at the end of the year. It held that in respect of expenditures which have been paid without TDS during the year, the provisions of Sec 40a(ia) will not apply.

Case law # 25: Case law on Sec 147 [270 Page June 1st to 15th, 2012 – CPT]:

Where a completed assessment is re-opened U/S 147 based on a statement recorded U/S 131, it was held that opening of assessment U/S 147 was justified. Thus, assessment can be re-opened on the basis of statement recorded U/S 131.

[Money Growth Investments and Consultants Private Limited] [2012] [21 Taxmann.com 438] [Delhi – High Court]

Case law # 26: Case law on Period of Holding for the purposes of capital gains [273 Page June 1st to 15th, 2012 – CPT]:

While counting the period of holding, the date of acquisition as well as the date of transfer are to be included. Hence, if the assessee purchases a capital asset as on 15th June 2011, it will be treated as Long Term Capital Asset, if the same is transferred on 15th June 2014 as the period of 3 years expires on 14th June 2014. [Bharti Gupta Ramola Vs CIT] [2012] [20 Taxmann.com 762 – Delhi HC]

Case law # 27: Case law on TDS U/S 194C [175 Page May 16th to 31st, 2012 – CPT]:

It was held in the case of “CIT Vs Career Launcher India Ltd” [2012] [20 Taxmann.com 637] [Delhi], TDS U/S 194C is not attracted for franchise arrangement for coaching classes. It is so because, the contract envisaged U/S 194C would be one under which one person merely renders certain services to other person for consideration. On the other hand, in the case of franchise agreements, sums are paid towards use of a person’s trade name or goodwill or know-how. Hence, TDS U/S 194C is not applicable in those cases.

Case law # 28: Case law on Sec 50 [178 Page May 16th to 31st, 2012 – CPT]:

Sec 50 would be applicable only if the depreciation was claimed. Where the assessee bought plant and machinery and he never claimed depreciation, then capital gains arising there from would be long term in nature if the asset was held for more than 36 months prior to the date of transfer.

[CIT Vs Santosh Structural & Alloys Ltd] [2012 – 20 Taxmann.com 501] [Punj & Har – High Court]

Case law # 29: Case law on Cost of assets [181 Page May 16th to 31st, 2012 – CPT]: and [54th Page of Sep 1st to 15th, 2012]:

Where the assessee had acquired asset with borrowed capital, and later when the borrowed amount was waived, the same needs to be reduced from the cost of acquisition for the purposes of depreciation. [Steel Authority of India Limited Vs CIT] [2012 – 20 Taxmann.com 198] [Delhi-High Court].



Case law # 30: Case law on Sec 23(2) [780 Page April 16th to 30th, 2012 – CPT]:

We know that value of one Self Occupied Property is nil for an individual. Can this benefit be claimed by the HUF? The Gujarat High Court held “Yes”.

[CIT Vs Hariprasad Bhojnagarwala] [2012] [20 Taxmann.com 316]

Case law # 31: Case law on Sec 194-I [801 Page April 16th to 30th, 2012 – CPT]:

TDS U/S 194-I will be attracted only if the control and possession of the asset is given to the payer. “Use of Asset” is different from “Assets given for use.” Sec 194-I covers the cases where “Assets given for use”.

Thus, where the assessee purchased power and uses the transmission lines and equipment of another, the charges paid for using transmission lines is not subjected to TDS U/S 194-I as control and possession over these transmission lines were never given to the payer but the payer is simply allowed to use the assets along with other users. On a similar analogy, where a bus operator collects charges from different schools for transporting children of several schools without the bus being at the disposal of any one school, TDS U/S 194-I is not warranted.

[Chattisgarh State Electricity Board Vs ITO] [2012] [18 Taxmann.com 150] [Mum-Tribunal]

Case law # 32: Case law on “Assessee in default” [803 Page April 16th to 30th, 2012 – CPT]:

Where TDS is not done by the payer but the recipient of the income has paid taxes on the same, the payer cannot be treated as assessee in default and hence tax cannot be recovered from him. However, the payer is liable to pay interest for delay in remittance of TDS and penalty for non-recovery of TDS even in these cases. [Chattisgarh State Electricity Board Vs ITO] [2012] [18 Taxmann.com 150] [Mum-Tribunal] [Hindustan Coca Cola Beverages (p) ltd Vs CIT] [2007] [163 Taxman 355]

Case law # 33: Case law on “Depreciation” [808 Page April 16th to 30th, 2012 – CPT]:

In the case of finance lease, the lessee can claim depreciation as he is the real owner. On the other hand, if the assets are given under operating lease, the lessor can continue to claim depreciation.

[Indus Ind Bank Ltd Vs Addl CIT] [2012] [19 Taxmann.com 173] [Mumbai – Tribunal] [SB]

Case law # 34: Case law on “Penalty” [814 Page April 16th to 30th, 2012 – CPT]:

Where the return filed by the assessee was processed U/S 143(1)(a) without levying penalty U/S 271B for non-filing audit report, the same (penalty) cannot be levied during the re-assessment proceedings. [Jasbir Singh Vs CIT] [2012][20 Taxmann.com 202] [Punjab & Haryana HC]

Case law # 35: Case law on “Re-Assessment” [673 Page April 1st to 15th, 2012 – CPT]:

Re-opening of closed assessment cannot be made merely on the basis of objections raised by revenue audit party U/S 147. As per the provisions of Sec 147, it is only the AO’s opinion with respect to income escaping assessment which is relevant for the purposes of re-opening of an assessment.

[Cadila Health Care Ltd Vs ACIT (OSD)] [Civil Appl No. 15566 of 2011] [Gujarat HC]

Case law # 36: Case law on Sec 54F [673 Page April 1st to 15th, 2012 – CPT]:

It is held that Sec 54F is a beneficial provision for promoting construction of residential houses, and therefore, it has to be construed liberally for achieving purpose for which it was incorporated in statute.

Once it is demonstrated that consideration received on transfer of capital asset has been invested either in purchase or in construction of a residential house, even though, these transactions are not complete in all respects as required under law, same would not disentitle the assessee from benefit of exemption U/S 54F.

[CIT Vs Sambandam Uday Kumar] [2012] [19 Taxmann.com 17] [Karnataka – HC]

Case law # 37: Case law on Sec 194C [673 Page April 1st to 15th, 2012 – CPT]:

Production of motion films or cinematographic films would fall within the meaning of expression “WORK” as contemplated in Sec 194C and hence liable for TDS. Thus, where the assessee agreed to produce a film in Hindi under title “Tango Charlie”, TDS would be attracted on the same U/S 194C. [Nitin M.Panchamiya Vs ACIT] [2012] [19 Taxmann.com 200] [Mumbai – Tribunal].

Case law # 38: Case law on Slump sale [627 Page March 16th to 31st, 2012 – CPT]:

Negative net worth will increase the capital gains under slump sale. The assessee company transferred its entire power transmission business to another company for Rs 143 Crores and there was a negative networth of Rs 157 Crores as per Sec 50B. (i.e Liabilities exceeded assets by Rs 157 Crores]. In such a case, the capital gains would be Rs 143 Crores + Rs 157 Crores. And hence, the assessee is liable to pay capital gains on Rs 300 Crores.

[Dy CIT Vs Summit Securities Ltd] [2012] [19 Taxmann.com 102] [Mumbai – Trib] [SB]

Case law # 39: Case law on 269SS [628 Page March 16th to 31st, 2012 – CPT]:

Where the assessee who was in financial crisis received cash in several installments (Each being less than Rs 20,000] from its sister concern, the same cannot be held as “Loan U/S 269SS” and hence penalty could not be levied. [CIT Vs Bangalore Leather & Leather Crafts Ltd] [2012] [19 Taxmann.com 21] [Karnataka – High Court]


Case law # 40: Case law on Capital Gains [629 Page March 16th to 31st, 2012 – CPT]:

Where the assessee sold a cinema hall and it paid certain sums to a tenant, who was running a canteen in the said cinema hall for vacating the said premises, the Delhi HC held that the same is allowed as deduction while computing capital gains. [CIT Vs Eagle Theatres] [2012] [19 Taxmann.com 7] [Delhi HC]

Case law # 41: Case law on Sec 22 [474 Page March 1st to 15th, 2012 – CPT]:

Owner and occupier should be same to get exemption from tax U/S 22. Thus, where an individual who was a joint owner of a house property gave the same on lease to a firm in which he was a partner, he cannot claim exemption given U/S 22. Hence, he is liable to offer the rental income to tax.  [Prodip Kumar Bothra Vs CIT] [2012] [18 Taxmann.com 177] [Kol – HC]

Case law # 42: Case law on Interest [343 Page Feb 16th to 29th, 2012 – CPT]:

Interest on housing loan is allowed as deduction U/S 24(b) even if the loan is not taken from a bank or financial institution. However, for deduction U/S 80-C in respect of repayment of principal amount, it is necessary that loan is repayable to a bank or financial institution.

Case law # 43: Case law on Interest [371 Page Feb 16th to 29th, 2012 – CPT]:

Gift received on the occasion of own marriage is exempt U/S 56 and not the gift received on the marriage of one’s child. [Rajinder Mohan Lal Vs DCIT] [2012] [18 Taxmann.com 91] [Chandigarh – Trib]

Case law # 44: Case law on Trusts [372 Page Feb 16th to 29th, 2012 – CPT]:

In “CIT Vs Sri Durga Nimishambha Trust” [2012] [18 Taxmann.com 173] [Karnataka], it was held that corpus fund cannot be taxed even if the same was misused by the trust. It is so because, corpus fund cannot be treated as income. The only option available to the department is to approach the Central Government for withdrawal of recognition granted to the trust U/S 12A.

Case law # 44: Case law on Refunds [295 Page Feb 1st to 15th, 2012 – CPT]:

The department cannot adjust tax refunds of one year with tax dues of another year without following prescribed procedure. [i.e Advance intimation is to be given to the assessee of the fact of adjusting the same. Also, opportunity is to be given to the assessee.] [Genpact India Vs ACIT] [2012 – 17 Taxmann.com 145] [Delhi – HC]

Case law # 45: Case law on Sec 148 [300 Page Feb 1st to 15th, 2012 – CPT]:

In “CIT Vs SPL’s Siddhartha Ltd” [2012] [17 Taxmann.com 138], it was held that notice U/S 148 is invalid if approval is taken from CIT instead of designated authority of JCIT.  



Case law # 46: Case law on MAT [124 Page Jan 16th to 31st, 2012 – CPT]:

Where a foreign company does not have any presence in India, it is not liable to the provisions of MAT. However, where the foreign company is having any PE (Permanent Establishment) in India, MAT provisions are applicable as the said PE is required to prepare financial statements as per the provisions of Indian Companies Act. [Timken Company, Re – AAR – 2010 – 193 Taxman 20 – New Delhi].

On a similar reasoning, the Mumbai HC held that MAT provisions are not applicable to Electricity companies as they were not preparing the financials under the provisions of the Companies Act. However, this judgment is nullified by the retrospective amendment made by the Finance Act, 2012.  [Krung Thai Bank PCL Vs JDIT] [Intl Taxation – 2011 – 16 Taxmann.com 239]

Case law # 46: Case law on Capex Vs Revex [158 Page Jan 16th to 31st, 2012 – CPT]:

Payment of non-compete fees amounted to capital expenditure and hence the same will not be allowed as deduction. [Pitney Bowes India P Ltd Vs CIT] [2012] [17 Taxmann.com116] [Delhi – HC]

Case law # 47A: Case law on Remuneration to partners [162 Page Jan 16th to 31st, 2012 – CPT]:

Payment of remuneration to partners cannot be allowed, if it has been left to be determined by partners at the end of the accounting period. [Sood Bhandari & Co Vs CBDT] [2012] [17 Taxmann.com 99] [Punj & Haryana – HC]

Case law # 47B: Case law on Royalty - SOFTWARE [7th Page Jan 1st to 15th, 2012 – CPT]:

Payment for using the software for internal business purposes by downloading it on a hard disk and making backup copies would be regarded as royalty and hence, TDS deduction would be required. Thus, payments made towards license acquired for making copies of a shrink wrapped software are royalties and hence liable for TDS. [CIT Vs Samsung Electronics Company Ltd] [2011] [16 Taxmann.com 141] [Karnataka – HC]

Case law # 48: Case law on Royalty – Software [40th Page Jan 1st to 15th, 2012 – CPT]:

Payment received by the non-resident assessee towards title and GSM System of which software was an inseparable part incapable of independent use would be a payment in accordance with contract for supply of goods. Hence, where software is an integral part of hardware which is not separable from the hardware, the same is not royalty and hence the provisions of TDS are not applicable. [DIT Vs Ericsson A.B. 2011 – 16 Taxmann.com 371] [Delhi – HC]



Case law # 49: Case law on AAR’s rulings [48th Page Sep 1st to 15th, 2012 – CPT]:

Generally AAR’s rulings cannot be questioned before courts except under exceptional circumstances under Articles 227 and 136 of the Constitution. In a recent case, the Apex Court held that a writ is to be filed before the HC before an SLP is filed to the Supreme Court.

[Columbia Sports Company] [48th Page Volume 25 - Sep 1st to 15th, 2012 – CPT]

Case law # 50: Case law on Goodwill [72 Page Sep 1st to 15th, 2012 – CPT]:

Goodwill arising on amalgamation is eligible for depreciation. [CIT Vs Smifs Securities Ltd] [2012] [24 Taxmann.com 222] [SC]

Case law # 51: Case law on Addl Depn [73 Page Sep 1st to 15th, 2012 – CPT]:

Additional depreciation is a statutory allowance. It cannot be limited to 50% by condition of usage of asset for 180 days. [DCIT Vs Cosmo Films Ltd] [2012] [24 Taxmann.com 189] [Delhi – Tribunal]

Case law # 52: Case law on Parking Charges [80 Page Sep 1st to 15th, 2012 – CPT]:

No TDS U/S 194-I for parking and landing charges paid by airlines. Contrary Judgment is given by the Madras High Court with that of the Delhi High Court.

[CIT Vs Singapore Airlines Ltd] [2012] [24 Taxmann.com 200] [Madras – HC]



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