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...

ESOP Cross Charges Paid To Overseas Ultimate Holding Company Is Allowable Expenditure: ITAT Allows Deduction To HP

The Bangalore Bench of the Income Tax Appellate Tribunal (ITAT), while ruling in favour of the HP, held that employee stock option plan (ESOP) cross charges paid to overseas ultimate holding companies are an allowable expenditure.The two-member bench headed by N.V. Vasudevan (Vice President) and Chandra Poojari (Accountant Member) has observed that the ESOP expenditure incurred is a compensation/incentive to the employee and has a direct nexus with his/her employment. The compensation to the...

Cash Deposits Made Out Of Withdrawals For The Purpose Of Daughter's Marriage: ITAT Delete Addition

The Delhi Bench of the Income Tax Appellate Tribunal (ITAT) has held that the assessee had explained that deposits were made out of cash withdrawals made earlier for the purpose of her daughter's marriage.The bench of Saktijit Dey (Judicial Member) has observed that the explanation furnished by the assessee was believable when the Assessing Officer has not brought on record any contrary material to demonstrate that the assessee must have incurred more expenditure on her daughter's marriage than...

Distribution Fees Paid By Google India To Google Ireland, For Distribution Of AdWords Programme In India, Not 'Royalty' : ITAT

The Bangalore Bench of the Income Tax Appellate Tribunal (ITAT) has ruled that the distribution fees paid by Google India to Google Ireland under a Distribution Agreement, under which Google India was appointed as a distributor of AdWords programme to advertisers in India, is not in the nature of 'Royalty' under the India-Ireland DTAA. The Bench of George George K (Judicial Member) and Padmavathy S (Accountant Member) held that unless the non-resident, who is engaged in the sale of...

ITAT Deletes Fees Related To The Period Of Tax Deduction Prior To June 1, 2015

The Mumbai Bench of the Income Tax Appellate Tribunal (ITAT) has deleted the levy of late fees of INR 40,000 related to the period of the tax deduction prior to 01.06.2015.The two-member bench of Rahul Chaudhary (Judicial Member) and M. Balaganesh (Accountant Member) has relied on the decision of Karnataka in the case of Fatehraj Singhvi Vs. Union of India in which it was held that the notice under Section 200A of the Income Tax Act for computing late fee under Section 234E of the Income Tax...