Four Important Verdicts Of The ITAT On Highly Debatable Issues

Pradeep Kumar Chowdhry vs. DCIT (ITAT Hyderabad)

S. 54F: Amount paid to builder for house is equivalent to amount spent by assessee for construction. Fact that only advance is given and construction is delayed beyond 3 years does not deprive assessee of exemption

A flat which is newly constructed by a builder on behalf of the assessee is in no way different from a house constructed. Section 54F being a beneficial provision has to be interpreted so as to give the benefit of residential unit viz., flat instead of house in the present state of affairs. Even if only advance is given the benefit still will be available for exemption u/s. 54F

 

Cummins India Limited vs. ACIT (ITAT Pune)

Transfer Pricing: Closely linked international transactions can be aggregated to determine the ALP

On a combined reading of Rule 10A(d) and 10B of the Rules, a number of transactions can be aggregated and construed as a single ‘transaction’ for the purposes of determining the ALP, provided of course that such transactions are ‘closely linked’

 

Varroc Engineering Pvt. Ltd vs. ACIT (ITAT Pune)

Transfer Pricing: ALP of interest on funds advanced to AEs has to computed on LIBOR and not as per domestic Prime Lending Rate (PLR)

While benchmarking the international transactions what has to be seen is the comparison between related transactions i.e. where the assessee has advanced money to its associated enterprises and charged interest then the said transaction is to be compared with a transaction as to what rate the assessee would have charged, if it had extended the loan to the third party in foreign country. Once there is a transaction between the assessee and its associated enterprises in foreign currency, then the transaction would have to be looked upon by applying the commercial principles with regard to the international transactions. In that case, the international rates fixed being LIBOR+ rates would have an application and the domestic prime lending rates would not be applicable

 

The A. P. Mahesh Coop. Urban Bank Ltd vs. DCIT (ITAT Hyderabad)

Distinction between 'diversion of income by over-riding title' and 'application of income' explained. Contribution of 1% of net profit to the Cooperative Education Fund maintained by National Cooperative Union is an application of income

Diversion of income has multi-facets. Diversion arises where income is applied in a particular manner under statutory or contractual obligation or under the provisions of a document under which the company is constituted viz., memorandum of article of association or a firm has come into existence. In these circumstances, the principle that has emerged is that if a person has alienated or assigned the source of his income so that it is no longer remains his income, he cannot be taxed upon the income arising after the assignment of the source. In such event, it is not income of the assessee at all