Imp SC Verdict On Stay Of Demand

PCIT vs. LG Electronics India Pvt Ltd (Supreme Court)

S. 220(6): CBDT's OMs dated 29.02.2016 & 31.07.2017 by which AO's have been directed to grant stay of disputed demand on payment of 20%/ 15% does not fetter the power of the AO & CIT to grant stay on payment of amounts lesser than 15%/ 20%. The AO/ CIT have to deal with the prima facie merits and give reasons for rejection of the stay application 

Having heard Shri Vikramjit Banerjee, learned ASG appearing on behalf of the appellant, and giving credence to the fact that he has argued before us that the administrative Circular will not operate as a fetter on the Commissioner since it is a quasi judicial authority, we only need to clarify that in all cases like the present, it will be open to the authorities, on the facts of individual cases, to grant deposit orders of a lesser amount than 20%, pending appeal

ITAT : Ahmedabad ITAT suo-moto identifies and disposes around 750 cases with low tax effect

Ahmedabad ITAT suo-moto identifies 697 cases with low tax effect and disposes off the same, pursuant to CBDT circular dated  July 11, 2018 directing withdrawal of Dept. appeals before ITAT where tax effect is lower than Rs. 20 lakh; Considering summary disposal of 697 appeals at Ahmedabad bench and 184 at Rajkot bench, ITAT knocks off  around 750 non tax effect appeals through video-conferencing.:ITAT 

HC : Copy of Madras HC ruling granting interim relief by allowing manual return filing

Madras HC grants interim relief to petitioners by allowing them to file income-tax return for AY 2018-2019 manually  without an Aadhaar number, however, holds that “These returns will have to be filed on or before ....the last date for filing the returns.”, directs AO to deal with such returns in same manner as done in other cases of electronic filing; Cites similar orders passed by 5 different High Courts including recent Bombay HC in Hussain Indorewala and Ors. granting interim relief after considering the SC judgements in Binoy Viswam and Justice K.S. Puttaswamy; Acknowledges that despite CBDT order of June 30th extending PAN-Aadhaar linking deadline to March 31, 2019, “there is no change made in the software, resulting in inability of assistance to upload their tax return electronically without the Aadhaar Number, or its Enrollment ID number as the case may be.”; In view of hardships faced by petitioners, HC opines that “no prejudice would be caused to the respondents (Revenue) by permitting the petitioners to file income-tax returns for AY 2018-2019 manually. After all it is nothing but a temporary arrangement.”; However, considering that the subsequent decision in Binoy Viswam is been reserved,  HC clarifies that the present orders are passed subject to the orders to be passed by the Apex Court; Further clarifies that “In the event of the Apex Court upholding the validity of Section 139AA …, the petitioners shall file their returns once again by linking their Aadhaar number or Aadhaar Enrollment ID with the PAN Card.”; Posts the matters for further hearing after the decision is rendered by the Apex Court on the larger issue.:HC 

Imp CBDT Directive Reg TDS Certificates + Three Imp Verdicts On Core Issues

PCIT vs. Starflex Sealing India Pvt. Ltd (Bombay High Court)

S. 260A: We are pained at this attitude on the part of the State to obtain orders of admission on pure questions of law by not pointing out that an identical question was considered by this Court earlier and dismissed by speaking order. Revenue has not carried out the assurance which was made earlier. Revenue should give proper explanation why assurance given earlier is not being followed. It is time responsibility is fixed and the casual approach of the Revenue in prosecuting its appeals is stopped 

We are pained at this attitude on the part of the State to obtain orders of admission on pure questions of law by not pointing out that an identical question was considered by this Court earlier and dismissed by speaking order. We would expect a proper response from the Revenue and explanation as to why assurance given to us earlier that consistent view would be taken by the Revenue is not being followed. It is time, responsibility is fixed and the casual approach of the Revenue in prosecuting its appeals is stopped. We would also request the Additional Solicitor General to assist us on the next date 

Navneet Agarwal vs. ITO (ITAT Kolkata)

Bogus Capital Gains From Penny Stocks: In order to treat the capital gains from penny stocks as bogus, the Dept has to show that there is a scam and that the assessee is part of the scam. The chain of events and the live link of the assesee's action giving her involvement in the scam should be established. The Dept cannot rely on alleged modus operandi & human behavior and disregard the evidence produced by the assessee. All imp judgements referred

The issue for consideration before us is whether, in such cases, the legal evidence produced by the assessee has to guide our decision in the matter or the general observations based on statements, probabilities, human behavior and discovery of the modus operandi adopted in earning alleged bogus LTCG and STCG, that have surfaced during investigations, should guide the authorities in arriving at a conclusion as to whether the claim in genuine or not. An alleged scam might have taken place on LTCG etc. But it has to be established in each case, by the party alleging so, that this assessee in question was part of this scam. The chain of events and the live link of the assesee’s action giving her involvement in the scam should be established  

ITO vs. Raj Kumar Parashar (ITAT Jaipur)

S. 50C/ 54F: If the assessee has invested the entire sale consideration in new house property, the capital gains are exempt u/s 54F. The AO cannot apply s. 50C and treat the stamp duty valuation as the consideration and assess the difference between the stamp duty valuation and the actual valuation to capital gains (All judgements considered)

The consideration as determined under section 50C based on the stamp duty authority valuation is not a consideration which has been received by or has accrued to the assessee. Rather, it is a value which has been deemed as full value of consideration for the limited purposes of determining the income chargeable as capital gains under section 48 of the Act. Therefore, in the instant case, the provisions of section 54F(1)(a) are complied with by the assessee and the assessee shall be eligible for deduction in respect of the whole of the capital gains so computed under section 45 read with section 48 and section 50C of the Act

AAR : Transportation under EPC contract for solar plant, taxable as composite 'works contract' supply

AAR holds that transportation charges received by applicant as part of Engineering, Procurement and Construction (EPC) contract for setting up of solar power plant, would be liable to GST as ‘works contract’ u/s 2(119) of CGST Act; Rejects applicant’s claim that since he is fully responsible for loading, transportation, delivery to the project site and unloading of equipment as well as required to bear transit insurance cost, there exists a standalone contract for transportation of equipment for which separate consideration is received; Observes that clauses of proposed draft agreement cannot be read in isolation or out of context, it is necessary to read the contract as a whole to ascertain the true / correct nature of transaction; Remarks, “As such this agreement for Engineering Procurement and Construction of Solar Power plant constitutes composite supply in the nature of Works Contract”; Resultantly, rejects applicant’s contention that since he is not GTA inasmuch as he is not issuing any consignment note, no tax is payable on transportation by road services by virtue of Notification No. 12/2017-Central Tax (Rate); Further states that intent of operationalizing Solar Power Plant, though as roof top mounted, is to set it up as an immovable property which involves civil work; In this regard, refers to SC decisions in T.T.G. Industries Ltd. and Solid and Correct Engineering Works and observes, “the intent of the person at the time of erecting and operationalizing a structure / plant is to be seen and if the intent is to establish it as an immovable property at the time of setting up, then it is to be treated as an immovable property even if later on due to some exigency it is required to be dismantled or removed” : Maharashtra AAR

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ITAT : Allows Sec. 89 relief on arrears of superannuation fund contribution, ‘salary’ includes ‘perquisites’

Agra ITAT allows Sec. 89 relief to assessee-employee with respect to arrears received in lieu of employer's contribution to an approved superannuation fund [taxable as perquisite u/s. 17(2)(vii)] during AY 2014-15; Rejects Revenue’s stand that the payments made by employer was perquisites u/s. 17(2), which cannot qualify for relief u/s. 89(1) as it covers salary arrears and arrears for profit in lieu of salary u/s. 17(3) only; Observes that Sec. 17(1)(iv) defines ‘salary’ to inter alia include perquisites, hence relief u/s 89 is available qua perquisites also; Likewise, clarifies that though Rule 21A talks of income by ways of salary, it does pertain to perquisite as well:ITAT 

SAT: Calls upon CBDT to clarify regarding STT on stock derivatives

SAT disposes of appeal challenging Circular issued by the National Stock Exchange of India Limited (‘NSE’), dated July 17, 2018, which inter alia prescribes collection of Securities Transaction Tax (‘STT’) on physical settlement of stock derivatives; Notes that (i) NSE had issued the circular, pursuant to SEBI’s circular on “Review of framework for stocks in Derivatives segment” and (ii) accordingly, 46 scrips were identified for compulsory physical settlement, after the expiry of the ongoing cycle of derivatives contracts; Accepts Appellant’s submission that NSE’s caveat about waiting for clarification from the Central Board of Direct Taxes (‘CBDT’) over ambiguity w.r.t. STT rate to be levied, is impractical, as clients require clarity on the STT to be paid, and that given the uncertainty, there could be severe repercussions on the securities market (particularly in the derivatives segment); Rejects NSE’s contentions regarding specification of the STT rate in Finance Act and its substantiation on the caveat; Opines that “the circular does generate considerable ambiguity… given the ambiguity the circular has generated and the potential adverse effect it would have on the securities market it is in the interest of justice for CBDT to consider the matter on top priority..”:SAT 

Govt. notifies exemption and rationalizes rates, accommodation service taxable basis 'transaction value'

Govt. notifies refund of unutilized credit on account of inverted duty structure in respect of certain specified woven fabrics of silk, cotton, wool w.e.f. August 2018 while balance of unutilized input tax credit (ITC) lying as on July 31, 2018 shall lapse; Notifies exemption in respect of sanitary napkins, coir pith compost and rakhi (other than that of precious or semi-precious material of Chapter 71); Further extends exemption to service of old age homes run by Government or an entity registered u/s 12AA of Income-tax Act to its residents aged above 60 years, work of installation and commissioning undertaken by DISCOMS/electricity distribution companies, service of warehousing of minor forest produce, and administrative fees collected by National Pension System Trust; Exempts GST on import of services by Foreign Diplomatic Missions/ UN & other International Organizations & services supplied by an establishment of a person in India to its establishment outside India treated as establishments of distinct persons provided place of supply is outside taxable territory of India; Notifies rate of 5% in respect of e-books, ethyl alcohol supplied to Oil Marketing Companies for blending with petrol, mats, handmade carpets, hand embroidered articles, while handbags, jewellery box, carved wood products, handmade imitation jewellery, hand paintings drawings and pastels, bamboo flooring and brass kerosene pressure stove taxable at 12%; Further, notifies rate of 12% with full ITC under forward charge for composite supply of multimodal transportation and 18% on paints and varnishes, lithium Ion batteries, vaccum cleaners, bamboo flooring, brass kerosene pressure stove, washing machine, & refrigerator; Rationalizes entry prescribing reduced GST rate on composite supply of works contract for Govt. or local authorities, prescribing that ‘business’ shall not include any activity or transaction undertaken by Central or State Government or local authority as public authorities; GST payable under 'reverse charge' by buying banks/ NBFCs in respect of services provided by individual Direct Selling Agents (DSAs) other than corporate or partnership firm, further notifies that rate of tax on accommodation service shall be based on transaction value instead of declared tariff; Rationalizes entry levying 5% GST on composite supply of food and drinks in restaurant, mess, canteen, eating joints to various institutions on contractual basis by providing that scope of outdoor catering shall be restricted to supplies which are event based and occasional in nature: Finance Ministry Notifications 

HC : Confirms Sec 68 addition for gift from father-in-law despite receipt through banking channels

Andhra Pradesh and Telangana HC confirms ITAT order to uphold Sec 68 addition for gifts received by assessee-invidual from his father-in-law for AY 2005-06, rejects assessee's reliance on co-ordinate bench ruling in context of gift received by assessee from his maternal aunt; Clarifies that “this is not a case where we can import the principle 'what is sauce for the goose is sauce for the gander'", also points out that gift from maternal aunt which was held non-taxable in view of Sec 56(2)(v), was received after the amendment to Sec. 56(2) unlike gift from father in law which was received prior, refuses to apply spirit of said amendment to grant relief; Also rejects assessee’s contention that genuineness of gift cannot be questioned when the identity of the donor is established, payment is through banking channels and a letter of confirmation is also available, clarifies that these three facts could establish the truth of the transaction, but not genuineness, states that "If somebody has made payment to someone else, a statement regarding the same will be true. But the payment need not be genuine."; Takes note of Revenue's contention that undisclosed income earned by the assessee could have been used for round tripping and routed through father-in-law to bring it back as gift, also rejects assessee’s contention that he had no source of income, observing that assessee was a director of real estate company and therefore, raid was carried out at his premises:HC 

28th GST Council meeting | Notifications Issued

In furtherance to our below mail on the update of proposed changes in the last GST council meeting held on 21^st July 2018.  

We are sharing you with the list of notifications released regarding the proposed changes. Please note that these notifications / rate changes are effective from today.

Summarized here below the list of notifications which got released along with brief contents of the same –

Notification No. under CGST Rate	Notification No. under IGST Rate	Content of the notification
13/2018-Central Tax (Rate) ,dt. 26-07-2018	14/2018-Integrated Tax (Rate) ,dt. 26-07-2018	Seeks to notify rates on various services such as - - on multimodal transportation - @12% - Supply of e-book under heading 4901 - @5% and restricting the scope of outdoor catering services along with GST to be charged on  value of supply instead of declared tariff.
14/2018-Central Tax (Rate) ,dt. 26-07-2018	15/2018-Integrated Tax (Rate) ,dt. 26-07-2018	Seeks to exempt certain services under GST, such as - Services supplied by an establishment of a person in India to any establishment of that person outside India, which are treated as establishments of distinct persons- provided the place of Supply of the services is outside India.
15/2018-Central Tax (Rate) ,dt. 26-07-2018	16/2018-Integrated Tax (Rate) ,dt. 26-07-2018	Seeks to specify services supplied by individual Direct Selling Agents (DSAs) to banks/ non-banking financial company (NBFCs) to be taxed under Reverse Charge Mechanism (RCM).
16/2018-Central Tax (Rate) ,dt. 26-07-2018	17/2018-Integrated Tax (Rate) ,dt. 26-07-2018	Seeks to notify that services by way of any activity in relation to a function entrusted to a municipality under Article 243W shall be treated neither as a supply of good nor a service.
17/2018-Central Tax (Rate) ,dt. 26-07-2018	18/2018-Integrated Tax (Rate) ,dt. 26-07-2018	Seeks to insert an explanation in the service rate notification under serial no 3. of construction services by excluding activity or transaction undertaken by the Central Government, a State Government or any local authority in which they are engaged as public authorities.
18/2018-Central Tax (Rate) ,dt. 26-07-2018	19/2018-Integrated Tax (Rate) ,dt. 26-07-2018	Changes in the rate of goods by amending the rate notification under CGST and IGST
19/2018-Central Tax (Rate) ,dt. 26-07-2018	20/2018-Integrated Tax (Rate) ,dt. 26-07-2018	seeks to make additions by way of exempting certain goods under GST
20/2018-Central Tax (Rate) ,dt. 26-07-2018	21/2018-Integrated Tax (Rate) ,dt. 26-07-2018	Seeks to allow refund of unutilized ITC for textile industries on supplies received on of after 1st August 2018; ITC balance accumulated till 31st July 2018 shall lapse.
21/2018-Central Tax (Rate) ,dt. 26-07-2018	22/2018-Integrated Tax (Rate) ,dt. 26-07-2018	Seeks to prescribe concessional GST rate on specified handicraft items

Hope you find the above useful. Please feel free to revert for any clarifications

SC : Overrules HC, no 'Entertainment Tax' on live musical concert/program receipts

SC reverses HC, grants exemption from ‘entertainment tax’ on gate receipts from live musical concert/program under Gujarat Entertainment Tax Act, 1977 (Act); Notes that Section 3A was brought in year 1998 whereby Schedule III specified list of entertainments outside ambit of charging Section 3 and first item of said Schedule read as, “All kinds of musical programmes including musical nights and opera”; Perusing speech of Finance Minister which led to incorporation of Section 3A, elucidates that, “all kinds of musical programmes, without any qualification, have been sought to be taken out of the purview of the charging section”; Consequently, HC’s denial of exemption to assessee on the ground that musical concert organized was not for purposes of promotion of educational, cultural or charitable purposes activities as required u/s 29 but for commercial purposes, is untenable when form of entertainment is included in Schedule III; Remarks that, “If a form of entertainment is not taxable under Section 3A of the Act we do not see how the requirement of exemption and necessity to conform to the requirement of exemption can apply to a non-taxable form of entertainment”  : SC

ITAT : Due diligence fee for raising equity to meet working-capital requirement, revenue expenditure

Mumbai ITAT allows deduction for professional fees / merchant banking fees paid to PwC and other financial advisors for conducting financial and legal due diligence during AY 2008-09, observes that the very purpose of the expenditure was to raise funds to meet working capital requirements; Rejects Revenue’s stand that since the funds were raised through issue of rights shares, the payment incurred in connection therewith was capital in nature being incurred for the purpose of raising equity; Observes that the expenditure was incurred to get the due diligence conducted since assessee was embarking on a major expansion plan, also observes that increasing number of sales orders resulted in increased working capital requirements; Acknowledges that availing of the said professional services to get the relevant reports for presentation to bankers was a prerequisite for the major fund raising exercise; Since the expenditure was incurred to raise funds to meet working capital requirements, which is an integral part of any business activity, ITAT holds the expenditure as revenue in nature.:ITAT 

HC : Upholds proportionate input service credit reversal by auto-dealer on 'trading activity' pre-2011

HC dismisses assessee’s appeal against CESTAT order which upheld reversal of proportionate credit by automobile dealer on input service attributable to trading activity pre-2011 in terms of CENVAT Credit Rules, 2004 (CCR); Assessee contended that, CCR were amended from April 1, 2011 to provide that exempted services include 'trading' and formula was given, hence, trading cannot be considered as ‘exempt service’ prior to said date; Observes, absent any provision to cover situations where an assessee is providing a taxable service and undertaking another activity which is neither a service nor manufacture, the only correct legal position is to segregate quantum of input service attributable to trading activity and exclude the same from the input credit records, which may be done once in a quarter/six months; Rejecting assessee’s argument that there was no mechanism to reverse credit once taken, challenge to method of calculation and invocation of extended limitation period, states that, assessee was well aware of ‘service tax liability’ and ‘eligible service tax inputs’ and that claim was excessive and unjustified; Remarks further that, “lack of any method in the rules in such cases, would only mean that a reasonable and logical principle should be applied, not concededly that what should and could not be claimed as input credit, ….ought to be “left alone” because of the composite nature of the assessee’s business”  : Delhi HC

CBDT must create platform enabling assessees to opt out from mandatory requirement of linking PAN with Aadhar number: HC

THE ISSUE AT HAND BEFORE THE BENCH IS - Whether an assessee can be exempted from the need to link the PAN number with the Aadhar registration number, till a mechanism enabling assessee to opt out from such mandatory requirement is created. YES IS THE ANSWER.   

Process of filling mushroom powders into empty gelatine capsules amounts to manufacture: HC

THE issue is - Whether process of filling mushroom powders into the empty gelatine capsules amounts to manufacture. And the verdict is YES.   

If AO fails to carry out enquiry qua confession made during search pertaining to bogus entries of share capital for assessee, which is basis for initiating re- assessment, then CIT is correct in exercising power u/s 263: ITAT

THE ISSUE IS - Whether since AO fails to carry out enquiry qua the confession made by person during search for providing bogus entries of share capital to assessee, which in fact is base of initiating re assessment proceedings, the CIT is correct in exercising power u/s 263 as re assessment order is erroneous and prejudicial to the interests of the Revenue. YES IS THE VERDICT.   

HC : Weighs favourable 2G judgment vis-a-vis 'illustrative' CBDT instruction, directs re-consideration of Kalaignar TV's stay-plea

Madras HC sets aside CIT’s order directing Kaliagnar TV (‘assessee’) to pay 20% demand as a condition precedent for staying demand of approx. Rs. 90 cr for AYs 2009-10 and 2010-11, arising out of Sec. 68 addition in relation to the 2G matter; HC notes that such direction was given by CIT / AO relying on CBDT Instruction No.1914 read with the Office Memorandums of February, 2016 and July, 2017; Accepts assessee’s stand that in view of pendency of appeals, the collection of disputed demands arising out of unduly high pitched assessments should be stayed till the appeals are heard and disposed of in terms of CBDT Instruction 96 of 1969; Firstly, HC notes that while CIT had held that the assessment orders cannot be treated as high pitched, he had not given any reason as to why in his opinion, the assessment is not high pitched; Next, HC rejects Revenue’s stand that Instruction no. 96 was superseded by subsequent Instruction no. 1914 of 1993, cites Delhi HC ruling in Taneja Developers & Infrastracture Ltd. to hold that Instruction No.96 is still in force and it binds the AOs; Further remarks that the prima facie effect of the Special Court’s judgment (wherein the accused persons including assessee have been acquitted) was required to be considered by the CIT while examining the prayer for stay, especially since the Assessee's consistent case has been that the income tax proceedings is a mirror image of the proceedings initiated by the CBI.; On Revenue’s stand that no such situation is contemplated to be considered for stay under CBDT Instruction No.1914, HC clarifies that the instruction issued by the Board are illustrative and not exhaustive; Lastly, HC makes it clear that this Court has not rendered any finding on merits, directs assessee to file a stay petition before CIT(A) who shall pass order on stay petition on merits after affording hearing opportunity to assessee.:HC 

SC : CBDT circular can't curtail CIT's 'quasi-judicial' authority to grant lesser deposit relief

SC clarifies that CBDT’s office memorandum (‘OM’) dated July 31, 2017 regarding stay of demand does not interfere with AO’s power to grant stay on deposit of a lesser amount, pursuant to Revenue’s appeal challenging Delhi HC judgment in LG Electronics India Pvt. Ltd.’s (‘assessee’) case; SC gives credence to Additional Solicitor General Vikramjit Banerjee's submission before it that the said administrative Circular of the CBDT will not operate as a 'fetter' on the Commissioner, since it is a quasi judicial authority; Disposing off Revenue’s appeal, SC clarifies that “in all cases…it will be open to the authorities, on the facts of individual cases, to grant deposit orders of a lesser amount than 20%, pending appeal.”:SC 

SC : NDTV challenges Delhi HC order upholding reassessment for Rs 400 cr introduced at UK-subsidiary level

SC to decide on NDTV's (assessee) SLP against Delhi HC order upholding re-opening of assessment for AY 2008-09;  HC had upheld reassessment beyond 4 years where AO had alleged that Rs. 405.09 cr introduced into the books of assessee’s UK subsidiary (‘NNPLC’)  during relevant AY in the form of Step Up Coupon Bonds pertained to assessee’s unaccounted money;  HC had noted that Revenue has relied on DRP directions for AY 2009-10 (wherein the DRP treated investment in NNPLC as sham transactions and directed lifting of corporate veil) as well as the tax evasion petition (filed by shareholders of NDTV raising issues of tax evasion by NDTV by raising funds of Rs.1100 crore through NNPLC) to form the belief that the transaction of raising of funds through Step Up Coupon Bonds by NNPLC was a bogus transaction; SC lists matter on July 26th stating that Revenue's counsel "will look into whether the U.K. Government has sent a communication to his client, and if so what the content of that communication is so that we may ultimately decide the matter on merits without prejudice to Mr. Mehta’s client’s rights" 

SC to consider dutiability of cut-away HR coils as manufacturing 'scrap' / independent goods

SC issues notice to Revenue in appeal against Delhi CESTAT decision which confirmed excise duty demand on HR coils that were cut away during manufacture of MS spirally welded pipes; While affirming the adjudication order, CESTAT had rejected assessee’s claim that slitting of HR coils was a separate process which did not amount to manufacture; Appreciating the process of manufacture of spirally welded pipes, CESTAT had noted that cutting away of uneven edge of HR coils could not be considered as independent process inasmuch as it was process carried out by way of preparation in continuous process leading to finished product, viz. pipes; There was no dispute that pieces of HR coils which were cut away were nothing but scrap, it had to be considered as emerging in the manufacture of finished product only and therefore, the same was liable to excise duty; CESTAT had also rejected assessee’s claim of benefit under Notification No. 89/95-CE which exempted waste and scrap arising in course of manufacture of exempted goods, observing that while assessee claimed exemption under Notification No. 6/2006-CE to clear pipes, it also cleared goods on payment of excise duty : SC  

ITAT : Upholds FTS taxability; 'Make available' condition inapplicable as services linked to royalty

Delhi ITAT upholds taxation  of consideration for providing SAP/CAD software related support as FTS under Article 13(4)(a), being ancillary and subsidiary to the enjoyment of the right / property for which royalty was received by assessee (a UK co., JCBE), clarifies that ‘make available’ clause under Article 13(4)(c) is not applicable; ITAT notes that in earlier years, assessee had entered into bilateral agreement under which it used to receive royalty from JCB India (Indian subsidiary) for licensing the technology with an exclusive right to manufacture and market, however, during relevant AY, assessee entered into a Tripartite Agreement whereby the technology was sub-licensed by assessee to JCB investments, and the royalty paid by JCB India was routed through JCB Investments; Thus noting that entire royalty amount was passed on to assessee through JCB Investments less 0.5%, ITAT holds JCB Investments as a pass through entity, remarks that  "Substance will rule over form", observes that except for this routing of royalty through JCB Investments, all the terms and conditions of the agreement between the assessee and JCB India including secondment of assessee's employee to JCB India for rendering of services; Rejects assessee’s stand that co-ordinate bench ruling holding JCB India a Service PE of assessee cannot be applied in present facts, observes that there is no difference in the facts and circumstances except for the tripartite vs. bilateral arrangement; Further follows co-ordinate bench ruling to hold that royalty was not effectively connected to PE in India, therefore, cannot be considered under Article 13(6), but should be taxed as royalty / FTS under Article 13 itself:ITAT 

ITAT : Protocol part & parcel of DTAA; Directs AO to examine MFN relief availability

Delhi ITAT sets aside AO’s order applying tax rate @20% u/s 115A on FTS received by Ericsson Telephone Corporation India (assessee, a Swedish company) during AY 2000-01 from its AEs in India for installation and maintenance of mobile network systems, remits matter back to AO to decide the issue afresh in light of the Protocol amending India-Sweden DTAA; Notes that AO had arrived at the taxability by simply following the AAR in assessee’s own case rendered in 1996 which was based on un-amended DTAA however, takes note of Protocol amending India-Sweden DTAA subsequently in 1997; Considering the revised DTAA, ITAT rules that AO should examine assessee’s argument that in view of the Most Favored Nation (‘MFN’) clause in the Protocol, a beneficial FTS article appearing in DTAA with a third country (i.e. Finland) should be read into the DTAA with Sweden; Rejects Revenue’s preliminary argument that Protocol will have no application as it can be resorted only if there is some dispute on the terms of the DTAA, remarks that, “A Protocol to the DTAA is …to be considered as its part and parcel. …If a particular benefit is being conferred, expanded or reduced by the Protocol, which is absent in the DTAA, then the provisions of the Protocol shall apply pro tanto.”; Thus, holds that a Protocol cannot be viewed as a document independent of the DTAA and has to be considered as its addendum.:ITAT