Tax Cases Weekly Round-Up: 6 November to 12 November 2022

Delhi High CourtExpenses Towards Advertisement, Brokerage And Commission, Incurred By A Real Estate Developer; Deductible As Revenue Expenditure: Delhi High Court Case Title: Commissioner of Income Tax versus Somnath Buildtech Pvt. Ltd. Citation: 2022 LiveLaw (Del) 1048 The Delhi High Court has ruled that advertisement expenses, Software Developing Charges, and expenses towards brokerage and commission, incurred by a real estate developer, are in the nature of general ...

Reliance Industrial Holdings and Biomatrix Not Associated Enterprises, No income Escaped : ITAT

The Mumbai Bench of the Income Tax Appellate Tribunal (ITAT) has held that Reliance Industrial Holdings and Biomatrix were associated enterprises, and, therefore, it could not be said that any income on account of Arm's Length Pricing (ALP) has escaped assessment.The two-member bench headed by Pramod Kumar (Vice President) and Sandeep S. Karhail (Judicial Member) has quashed the reassessment proceedings and observed that the AO's recorded reasons for reopening the assessment were unsustainable...

Liability To Deduct TDS Under Section 201 of Income Tax Act Is A Vicarious Liability, Which Ends With Discharge Of Principal Liability Of Recipient Of Income: ITAT

The Mumbai bench of the Income Tax Appellate Tribunal (ITAT) has ruled that the liability to deduct tax at source (TDS) under Section 201 read with Section 195 of the Income Tax Act, 1961, is a vicarious liability of the payer of an income and thus, the liability to deduct TDS ceases to exist when the primary liability of the recipient of income is already discharged. The Bench of Pramod Kumar (Vice President) and Amit Shukla (Judicial Member) held that the provisions of Section 201 of...

Assessee Proved Creditworthiness Of Loan Transactions: ITAT Deletes Addition

The Kolkata Bench of the Income Tax Appellate Tribunal (ITAT) has deleted the addition as the assessee proved the creditworthiness of loan transactions.The two-member bench of Sanjay Garg (Judicial Member) and Rajesh Kumar (Accountant Member) has observed that where all the evidence were filed by the assessee proving the identity and creditworthiness of the loan transactions, the fact that summons issued were returned unserved or no one complied with them is of little significance to prove the...

Software Development Expenses For Rendering Services To Clients Is Revenue Expense: ITAT

The Mumbai Bench of the Income Tax Appellate Tribunal (ITAT) has held that the software development expenses for rendering services to clients are revenue expenses.The two-member bench of Vikas Awasthy (Judicial Member) and Gagan Goyal (Accountant Member) has observed that the expenditure has been incurred in the regular course of business of the assessee and for earning revenue and profits, hence the expenditure is on the revenue account.The assessee/appellant is in the business of process...

Payment Made To Non-Resident Marketing Partners for Sale Services is FTS: ITAT

The Chennai Bench of the Income Tax Appellate Tribunal (ITAT) has held that payment made by the assessee to non-resident marketing partners for providing pre and post-sale services related to software solutions is in the nature of fees for technical services (FTS).The two-member bench of V. Durga Rao (Judicial Member) and G. Manjunatha (Accountant Member) has observed that since the assessee has failed to deduct TDS when payments are made to non-residents, the CIT(A) has rightly disallowed...

ITAT Restricts Addition To Estimated Profit Of 30% Of Cash Deposits Made During Demonetisation Period

The Chennai Bench of the Income Tax Appellate Tribunal (ITAT) has directed the AO to estimate a 30% net profit on total cash deposits made during the demonetization period and deleted the balance additions made under Section 69A of the Income Tax Act.The two-member bench of V. Durga Rao (Judicial Member) and G. Manjunatha (Accountant Member) observed that neither the assessee proved its arguments for the cash deposits nor the AO reached the conclusion that the explanation offered by the assessee...

Tax Cases Weekly Round-Up: 30 October To 5 November 2022

Supreme CourtIndustrial Townships Are "Local Areas" For Entry Tax Levy By States Though They Are Excluded From Municipalities : Supreme Court Case Title: OCL India Limited vs State of Orissa Citation: 2022 LiveLaw (SC) 911 The Supreme Court upheld States' power to impose entry tax from Industrial Township/Areas. The bench of CJI UU Lalit, Justices S. Ravindra Bhat and J B Pardiwala held that industrial townships are 'local area' for the purposes of entry tax. Delhi High...

Sale Of Scrap By Trader, Not Engaged In Any Manufacturing Activity, Will Also Attract TCS: ITAT

The Ahmedabad Bench of the Income Tax Appellate Tribunal (ITAT) has ruled that sale of scrap by a trader, who is not engaged in any manufacturing activity from which the scrap arose, will also attract TCS. The Bench of Judicial Member Suchitra Kamble, after referring to the Circular No. 18, dated 21.05.2012, issued by the CBDT, held that for the applicability of TCS on sale of scrap, there is no requirement that the goods from which the scrap arose should be produced or manufactured by...

No Tax Implications On Business Profits Earned On Reinsurance Business In Absence Of Fixed Place PE in India: ITAT

The Mumbai Bench of the Income Tax Appellate Tribunal (ITAT) has held that there are no tax implications on business profits earned on account of the reinsurance business in the absence of a fixed place permanent establishment (PE) in India.The two-member bench headed by Pramod Kumar (Vice President) and Anikesh Banerjee (Judicial Member) has observed that the existence of the dependent agent permanent establishment (DAPE) is wholly tax-neutral in India. The business profits earned by the...

Existence Of Dependent Agent Permanent Establishment (DAPE) Is Of No Tax Consequence, If Agent Is Paid Arm's Length Remuneration: ITAT

The Mumbai bench of the Income Tax Appellate Tribunal (ITAT)has ruled that the business profits embedded in the reinsurance premium received by a non-resident reinsurance company, is not taxable in India if the company has no permanent establishment (PE) in India which is at its disposal.The bench of Pramod Kumar (Vice President) and Anikesh Banerjee (Judicial Member) held that unless it is shown that an agent has not been paid an arm's length remuneration by the assessee, the...

ITAT Suggests Government To Work-Out Mechanism To Ensure Tax Recovery From ARCs/Banks On sale Of Security Assets

The Mumbai Bench of the Income Tax Appellate Tribunal (ITAT) has suggested the government work out a mechanism to ensure tax recovery from Asset Reconstruction Companies (ARCs)/banks on the sale of security assets."It is time that the Government seriously considers protecting its legitimate interests by ensuring some mechanism to ensure that the tax liability on the capital gains is duly recovered from the borrower whose property is sold, and when it is not possible to do so on account of the...