Banknotes Pre-2005 series - FAQ's

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1. What are the pre-2005 series banknotes?

The RBI issued Mahatma Gandhi series (MG series) 2005 banknotes in the denomination of ` 10, ` 20, ` 50, ` 100, ` 500 and ` 1000. These notes contain some additional / new security features as compared to the 1996 MG series. All banknotes issued before the 2005 MG series are called as pre-2005 series banknotes.

Whether when excise duty liability is that of contract manufacturers, same can be taken over by assessee as matter of commercial expediency and can also be treated as revenue expenditure - NO: ITAT

THE issues before the Bench are - Whether when the Revenue has allowed the expenditure incurred on import of mould utilised by contract manufacturers against payment of rent, any change in the treatment of such expenditure is required in the subsequent year when there is no change either in law or in facts and Whether when the excise duty and interest payments liabilities are that of the contract manufacturers, the same can be taken over by the assessee as a matter of commercial expediency and can also be treated as revenue expenditure. And the verdict partly goes in favour of the Revenue.

ITAT hauls up AO & DRP for “blatantly frivolous & unsustainable” additions. Suggests that accountability mechanism be set up to put a check on AO. Rationale for existence of ineffective DRP questioned

Bharti Airtel Limited vs. ACIT (ITAT Delhi)

Pursuant to a scheme of arrangement the assessee transferred its telecom infrastructure assets to Bharti Infratel Ltd for Nil consideration with the result that the WDV of the said assets amounting to Rs. 5,739 crore was written off by debiting the P&L A/c. A corresponding amount was credited to the P&L A/c from the ‘business restructuring reserve’ with the result that there was no net debit to the P&L A/c. The AO & DRP noted that there was no effect on the P&L

Transfer Pricing: A transaction (such as a corporate guarantee) which has no bearing on profits, incomes, losses or assets of the enterprise is not an ‘international transaction’ u/s 92B(1) and not subject to transfer pricing

Bharti Airtel Limited vs. ACIT (ITAT Delhi)

(iii) When an assessee extends assistance to the AE, which does not cost anything to the assessee and particularly for which the assessee could not have realized money by giving it to someone else during the course of its normal business, such an assistance or accommodation does not have any bearing on its profits, income, losses or assets, and, therefore, it is outside the ambit of international transaction u/s 92B (1)

Transfer Pricing: After TPO determines the AMP expenditure incurred for benefit of AE, balance is deemed to be incurred for assessee’s business & is automatically allowable u/s 37(1)

Whirlpool of India Ltd vs. DCIT (ITAT Delhi)

The avowed object of the TP adjustment on account of AMP expenses is to first find out and attribute the amount spent by the assessee towards promotion of its foreign AE’s brand/logo etc and then make addition for such amount with appropriate mark-up. By this exercise, the total AMP expenses get segregated into two classes, viz., one benefiting the assessee’s business and two, benefiting the foreign AE by way of promotion of the brand. Whereas the first amount is deductible in full subject to the regular provisions, the

A charitable and religious trust which does not benefit any specific religious community is not hit by s. 13(1)(b) & is eligible to claim exemption u/s 11

CIT vs. M/s Dawoodi Bohara Jamat (Supreme Court)

The assessee filed an application for registration before the CIT for registration u/s 12A/ 12AA to avail exemption u/s 11. The CIT held that though the assessee was a charitable trust, since its object and purpose was confined only to a particular religious community (Dawoodi Bohra), the bar in s. 13(1)(b) was attracted. On appeal, the Tribunal held that as the objects of the trust are wholly religious in nature, the provisions of s. 13(1)(b) which are

TDS on Provision for Expenses

One of the most disputed arguments between assessee and income tax department is that whether payments made towards specified expenditure attracts disqualification u/s 40(a) (ia) and applicability of this section to provisions made at the year end and its implications.  Following are the views expressed by the author in this respect.

Rs. 10 Lakhs G.T. Income Taxpayee can save Income Tax upto Rs. 25000/- or 50% of Saving in RGES Scheme.

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From Asstt. Year 2013-14 a new Section added in Income Tax i.e. 80CCG. This section provide Tax Benefit to Taxpayee Investors upto Rs. 25000/- or Max. 50% of saving amount in Rajiv Gandhi Equity Saving Scheme-2012. This scheme is applicable for those assessee who is resident individual and his gross Total Income does not exceed upto 10/- per annum.

TDS on Salary Income for Financial Year 2013-14

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This is to inform that the CBDT has issued a detailed circular in the context of Tax Deduction at Source on Salary Income vide Circular 8 of 2013 dated October 10, 2013.

The Circular, inter alia, provides guidelines on the following:

You are advised to refer to Section 200(3) of the Act, read with Rule 31A, which reads as follows:

• Computation of Income in context of salaried employees
• The manner of deduction of tax at source, including the rates of TDS
• Due dates for deposit of Tax Deducted at Source
• Due dates for filing of Tax Deducted at Source
• Issuance of Form 16 to the employees

S. 220: After rejecting stay application AO must give reasonable time before taking steps for coercive recovery

Sony India Pvt. Ltd vs. ACIT (Delhi High Court)

Having said that this is a case in which technically no fault could be found with the assessing officer, we feel that there was there was an element of impropriety in his action in issuing the garnishee order under section 226(3) on 17.2.2014, the very day on which he rejected the stay application filed by the petitioner under section 220(3). It is expected of him, having rejected the stay application, to wait for a reasonable period before he takes coercive steps to recover the amounts since the petitioner, faced with an order rejecting the stay application, may need some time to make arrangements to pay the entire tax demand or come up with proposals for paying the same in instalments. That opportunity was not afforded by the assessing officer in the

S. 147: Court can examine existence but not adequacy of reasons. AO is only required to provide material on which he relies to reopen the assessment

Acorus Unitech Wireless Pvt. Ltd vs. ACIT (Delhi High Court)

(ii) The law only requires that the information or material on which the AO records his or her satisfaction is communicated to the asseseee, without mandating the disclosure of any specific document. While the 2G Spectrum Report has not been supplied in this case on grounds of confidentiality, the reasons recorded have been communicated and do provide – independent of the 2G Report– details of the new and tangible information that support the AO’s opinion. These facts are capable of justifying the satisfaction recorded on their own terms, as discussed above. In this context, there is no legal proposition that mandates the disclosure of any additional document. This is not the say that the AO may in all cases refuse to disclose documents relied upon by him on account of confidentiality, but rather, that fact must be judged on the basis of whether other tangible and specific information is available so as to justify the conclusion irrespective of the contents of the document sought to be kept confidential.

S. 142(2A): AO need not examine books of account before directing special audit. Q whether accounts are “complex” has to decided by AO & Court can interfere sparingly

AT&T Communication Services India (P) Ltd vs. CIT (Delhi High Court)

(ii) The question whether the accounts and the related documents and records available with the A.O. present complexity is essentially to be decided by the A.O. and in this area the power of the court to intrude should necessarily be used sparingly. It is the A.O. who has to complete the assessment. It is he who has to understand and appreciate the accounts. If he finds that the accounts are complex, the court normally will not interfere under Article 226. The power of the court to control the discretion of the A.O. in this field is limited only to examine whether his discretion to refer the accounts for special audit was exercised objectively

Delhi Tribunal rules on transfer pricing aspects of intra group financing transactions (Bharti Airtel)

The Delhi Income-tax Appellate Tribunal (Tribunal), in a ruling in the case of M/s. Bharti Airtel Limited (Taxpayer) has adjudicated on transfer pricing (TP) issues arising from the issuance of a corporate guarantee, loans to associated enterprise (AEs) and contribution to share capital. The Taxpayer, an Indian company, provided a guarantee to a third party bank on behalf of its foreign subsidiary for which the Taxpayer did not charge a fee. The Taxpayer contended as it did not incur any costs in providing the guarantee, there was no requirement for it to charge a fee to the subsidiary under the transfer pricing provisions. During audit proceedings, the Transfer Pricing Officer (TPO) imputed an arm’s length guarantee fee by applying the Comparable Uncontrolled Price (CUP) method and considered the commission charged by independent banks as a benchmark. The Tribunal, considering the facts of the case, held that the corporate guarantee provided by the Taxpayer, which does not involve cost to the Taxpayer, does not have a bearing on profits, incomes, losses or assets of the Taxpayer and hence the transaction does not fall within the definition of “international transaction” as provided in the Indian Tax Law (ITL). The Tribunal accordingly ruled that under the facts of the case, transfer pricing provisions do not apply to the provision of the guarantee and therefore the TP adjustment imputing an arm’s length guarantee fee is not warranted.

SB of Mumbai Tribunal rules on approach to selection of comparable data (Maersk Global)

Tax Alert which summarizes a recent decision of the Special Bench of the Mumbai Income-tax Appellate Tribunal (SB) in the case of Maersk Global Centres (India) Private Limited [Taxpayer] for financial year ended 31 March 2008 reported in TS-74-ITAT-2014 (Mum)-TP. The Taxpayer is a provider of information technology enabled services (ITeS) such as transaction processing, data entry and information technology (IT) services such as process support/ optimization and technical support services to its Associated Enterprises (AEs). The Taxpayer’s transfer pricing (TP) documentation supported that its international transactions were at arm’s length using the Transactional Net Margin Method (TNMM). The Transfer Pricing Officer (TPO) rejected the TP documentation and made an adjustment by treating the activities of the Taxpayer to be in the nature of Knowledge Process Outsourcing (KPO) services instead of Business Process Outsourcing (BPO) services.

Mumbai ITAT rules on taxability of allotment of “additional shares” to existing shareholders under the Gift Tax provision (Sudhir Menon HUF)

Tax alert which summarizes a recent ruling of the Mumbai Income Tax Appellate Authority (ITAT) in the case of Sudhir Menon [HUF] (Taxpayer) on whether allotment of “additional” shares, on the basis of existing shareholding and at a value less than the fair value, results in taxation under the Gift Tax provision of the Indian Tax Law (ITL).

Whether when assessee fails to prove that its income was below taxable threshold, AO can make estimation on basis of average of income declared in preceding and in succeeding AYs - YES: ITAT

THE issue before the Bench is - Whether when assessee fails to prove that its income was below taxable threshold, the AO can make estimation on the basis of average of income declared in the preceding and in the succeeding AYs. And the answer is YES.

Facts of the case

Few Points on Rule 10 of Transfer Pricing.

In India a new transfer pricing regime has been introduced this year by the Finance Act 2001. Earlier a limited provision (Section 92) existed in the Income tax Act, which provided for making adjustment to the income of a resident taxpayer from a transaction with a non resident if the Assessing Officer was of the view that the income from such a transaction was understated in the hands of the resident due to the close connection between the two. No other rules or obligations about maintenance of documents about such

Can a Foreign Citizen be a Director of the Indian Company?

Directors of companies have official duties and legal responsibilities relating to company administration. He leads, manages, or supervises an organization, program, or project appointed. Directors act on the basis of resolutions made at director’s meetings, and derive their powers from the corporate legislation and from the company’s articles of association.

To be a Director of the Indian Company there are no statutory limitations as to nationality or residence, etc. Thus a foreign citizen can also be a director of the Indian Company. It would be likely to include these in a

CBDT clarification on export of computer software in relation to Sec 10A, 10AA, 10B

CBDT INSTRUCTION NO 3/2014, Dated: March 14, 2014

Issues relating to export of computer software- Direct tax benefits- Clarification-reg

A clarificatory Circular No. 01/2013 dated 17.01.2013 was issued by CBDT to address various contentious issues leading to tax disputes in cases of entities engaged in export of computer software which are availing tax-benefits under sections 10A, 10AA and 10B of the Income-tax Act, 1961.

2. Thereafter, Instruction No.17/2013 was issued on 19.11.2013 to the field authorities advising them to follow the aforesaid Circular in letter and spirit so that the cases which are covered by the above instruction

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