CONSOLIDATED DIGEST OF CASE LAWS (JANUARY...

Consolidated Digest of Case Laws (January 2017 to December 2017) http://itatonline.org

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CONSOLIDATED DIGEST OF CASE LAWS (JANUARY 2017 TO DECEMBER 2017) (Journals Referred: ACAJ /AIR/AIFTPJ/ BCAJ / BLR / IT Review//Comp Cas/CTR / CCH/DTR /E.L.T./GSTR/ ITD / ITR / ITR (Trib) /JT/ SOT /SCC / TTJ /Tax LR /Taxman / Tax World/ VST/ www.itatonline.org) Compiled by Research team of KSA LEGAL CHAMBERS and AIFTP Journal committee S. 2 (1A) : Agricultural income – Income derived from customers for services of plantations, rock gardening etc. for taking care of its plants, is not agricultural income. [ S. 2 (1A) (b) (ii), 2 (1A) (b) (iii), 10 (1) ] Dismissing the appeal of the assesse the Court held that; Income derived from customers for services of plantations, rock gardening etc. for taking care of its plants, was not agricultural income. (AY. 1998-99 1999-2000) Forest Development Corporation of Maharashtra Ltd. v. Addl. CIT (2017) 399 ITR 467/250 Taxman 41 /156 DTR 201/300 CTR 517 (Bom.) (HC) S. 2 (12A) : Books of accounts - Entries in loose papers/sheets are irrelevant and inadmissible as evidence - Offences and prosecution - Settlement commission. [S. 132, 143 (3), 245D, Evidence Act, S.34] Entries in loose papers/sheets are irrelevant and inadmissible as evidence. Such loose papers are not “books of account” and the entries therein are not sufficient to charge a person with liability. Even if books of account are regularly kept in the ordinary course of business, the entries therein shall not alone be sufficient evidence to charge any person with liability. It is incumbent upon the person relying upon those entries to prove that they are in accordance with facts. Finding of Settlement Commission disregarding such evidence as in admissible and unreliable . The materials in question were not good enough to constitute offences to direct the registration of a first information report and investigation therein. (C.B.I. v. V.C. Shukla (1998)3 SCC 410 (SC) followed) Common Cause (A Registered Society) v. UOI (2017) 394 ITR 220 /245 Taxamn 214 (SC) S. 2 (14) (iii) : Capital asset – Agricultural land - Distance between the agricultural land and nearest Municipality had to be measured to ascertain whether the land is an agricultural land or not. [S. 2 (14)] The High Court held that the distance between the agricultural land and nearest Municipality had to be measured to ascertain whether the land is an agricultural land or not and that in between agricultural land and nearest municipality, if there was mountain, or lake or private lands or government properties, and in such other cases, where public had no access to reach municipality and if there was alternative public road route, distance had to be measured only through access road and not in straight line or horizontal plane and that land sold was agricultural land and situated at distance of more than 8 km from nearest Avadi Municipality and therefore profit on sale of such land was not liable to tax. (AY 2009-10) CIT v. Shakunthala Rangarajan (Smt.) (2017) 147 DTR 220 (Mad.) (HC)


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S. 2 (14) (iii) : Capital asset-Agricultural land-Sale of agricultural land to non – agriculturist cannot be the ground to deny the exemption - Capital gains cannot be chargeable to tax.[S. 45, Goa, Daman and Diu Land Revenue Code, 1968, S. 2 (1), 105] Allowing the appeal of the assessee, the Tribunal held that, there is no bar under Goa, Daman and Diu Land Revenue Code, 1968 that an agriculturist and /or one who possesses agricultural land cannot transfer such land to any party who is not agriculturist . On facts there is sufficient support that that land was used as agricultural land and the assesse was using the produce for personal purposes . An entry in the record of rights and certified entry in the register of mutation shall be presumed to be true until the contrary is proved or new entry is lawfully substituted therefore. Accordingly property in question cannot be treated as capital asset as contemplated under section 2 (14) (iii) and capital gains are not chargeable to tax. (AY.2007 - 08) Shankar Dalal & Ors v. CIT (2017) 294 CTR 107 /150 DTR 197 /247 Taxman 170 (Bom.) (HC) S. 2 (14) (iii) : Capital asset-Agricultural land-Land situate at specified distance from municipal limits-Report of Inspector of Survey and Land Records more reliable than that of Income-tax Department Valuer-Gains on sale of land not assessable as capital gains - No substantial question of law. [S. 45, 260A]. Dismissing the appeal of the revenue the Court held that; the Revenue Department and survey authorities were competent to measure the land and issue appropriate certificates, and these could not be ignored by the Assessing Officer, by relying on the report of the investigation wing. In such matters, it would be appropriate, to take the assistance of the survey authorities to arrive at the conclusion. On the facts and circumstances of the case, in the matter giving weightage to the evidence adduced in this regard, report of the Departmental Inspector vis-a-vis certificates of the Revenue authorities, produced before the Assessing Officer, the latter ought to be given weightage and accepted, unless the contrary was proved. The Tribunal was justified in holding that the land was agricultural. No substantial question of law arose from the order of the Tribunal. (AY.2008-2009) CIT v. K.R.N Prabhakaran (HUF) (2016) 73 taxmann.com 305/(2017) 393 ITR 175/155 DTR 80 (Mad.) (HC) S. 2 (14) (iii) : Capital asset - Agricultural land - Sale of agricultural land neither assessable as capital gains or business income [ S. 28 (1), 45 ] The Tribunal held that the nature of the land as being agricultural is established and the assessee has sold the land as agricultural land. Therefore, the transaction of purchase and sale of land cannot be said to be and adventure in the nature of trade. The profit on sale of lands is neither assessable as business income nor as capital gains. The Tribunal upheld the order of CIT (A) and dismissed the appeal filed by revenue. Being the facts similar in both the appeals, both are dismissed. Distance of land sold was 44 Kms. from local municipal corporation and 11 Kms from Panchayat Samiti (AY. 2011-12)

ITO v. Jagdish Chandra Paliwal (2017) 188 TTJ 1 (Jd) (UO) (Trib.)

ITO v. Bhanwarlal Paliwal (2017) 188 TTJ 1 (Jd) (UO) (Trib.)

S.2 (14) (iii) : Capital asset - Agricultural land – Mere conversion of land by the purchasers into non-agricultural would not make, land considered as non-agricultural not liable to be assessed as capital gains. [S. 45]


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Allowing the appeal of the assessee, Tribunal held that merely because purchasers converted land to non-agricultural and it remained uncultivated for long time, would not make it as non-agricultural at time of selling of land. Land sold could not be treated as a capital asset hence not liable to be as capital gains . (AY. 2010 – 2011) Mohit Suresh Harchandrai v. ACIT (2017) 164 ITD 1 (Mum) (Trib.) S. 2 (22) (e) : Deemed dividend-The HUF is the beneficial shareholder. Even if it is assumed that the Karta is the registered shareholder and not the HUF, as per Explanation 3 to S. 2 (22), any payment to a concern (i.e. the HUF) in which the shareholder (i.e. the Karta) has a substantial interest is also covered. The Supreme Court had to consider the following question of law : “Whether in view of the settled principle that HUF cannot be a registered shareholder in a company and hence could not have been both registered and beneficial shareholder, loan/advances received by HUF could be deemed as dividend within the meaning of Section 2 (22) (e) of the Income Tax Act, 1961 especially in view of the term “concern” as defined in the Section itself?” HELD by the Supreme Court dismissing the appeal; the Court held that; even if we presume that it is not a registered shareholder in lending company loan received by HUF is liable to be taxable as deemed dividend if karta shareholder has substantial interest in HUF. (AY. 2006-07) Gopal and Sons (HUF) v. CIT (2017) 391 ITR 1 /145 DTR 289 /245 Taxman 48/291 CTR 321 (SC) Editorial : Decision of Calcutta High Court in Gopal and sons (HUF) v. CIT (2017) 391 ITR 1 in affirmed. S. 2 (22) (e) : Deemed dividend - Any payment by a closely-held company by way of advance or loan to a concern in which a substantial shareholder is a member holding a substantial interest is deemed to be “dividend” on the presumption that the loans or advances would ultimately be made available to the shareholders of the company giving the loan or advance. However, the legal fiction in s. 2 (22) (e) does not extend to, or broaden the concept of, a “shareholder” Dismissing the appeal of the revenue, the Court held that; Any payment by a closely-held company by way of advance or loan to a concern in which a substantial shareholder is a member holding a substantial interest is deemed to be “dividend” on the presumption that the loans or advances would ultimately be made available to the shareholders of the company giving the loan or advance. However, the legal fiction in s. 2 (22) (e) does not extend to, or broaden the concept of, a “shareholder”. (CA.No 3961 of 2013 dt .5 - 10 - 2017) CIT v. Madhur Housing and Development Co (2018) 401 ITR 152/163 DTR 519 /301 CTR 524 (SC) Editorial : Order in CIT v. Ankitech (P) Ltd (2011) 242 CTR 129/57 DTR 345 (Delhi) (HC) is affirmed . In National Travel Services v.CIT (2018) 300 CTR 582/162 DTR 201 (SC), the judgement in Ankitech has been doubted and the matter has been referred to a larger Bench S. 2 (22) (e) : Deemed dividend – Common share holders - Addition if any can be made in the hands of share holders and not in the hands of the assesse. Dismissing the appeal of the revenue, the Court held that; Addition if any can be made in the hands of share holders and not in the hands of the assesse. (AY. 2003-04, 2004-05, 2006-07) PCIT v. Rungta Properties (P.) Ltd. (2017) 249 Taxman 18 /(2018) 162 DTR 64/403 ITR 234 (Cal.) (HC)


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S. 2 (22) (e) : Deemed dividend - Loan from company which held shares in company in which assessee was a shareholder —Assessee was not a share holder hence was not assessable as deemed dividend. Dismissing the appeal of the revenue the Court held that; the assessee was not the shareholder of the lender company and therefore, the advance received by the assessee from Jupitar Capital Pvt Ltd was not assessable as deemed dividend in his hands. (AY. 2008 - 09) PCIT v. Rajeev Chandrashekar (2017) 397 ITR 263 (Karn) (HC) S. 2 (22) (e) : Deemed dividend—Share application money received by companies from other companies—Additions cannot be made as deemed dividend. Dismissing the appeal of the revenue, the Court held that; the sums received as share application money by companies from companies in both of which the assessee had beneficial interest were not loans and advances for the purposes of invoking section 2 (22) (e) of the Act (AY. 2002-03 to 2007 - 08) CIT v. Vikas Oberoi (2017) 396 ITR 215 (Bom.) (HC) Editorial : SLP is granted to the revenue CIT v. Vikas Oberoi (2017) 393 ITR 74 (St.) S. 2 (22) (e) : Deemed dividend—Share application money—Assessee having beneficial interest both in receiver and payer companies, sums cannot be treated as loans or advances. Dismissing the appeal of the revenue the Court held that; the Appellate Tribunal was justified in holding that the sums received as share application money by companies from companies in both of which the assessee had beneficial interest were not loans or advances for the purposes of section 2 (22) (e) of the Act. The concurrent findings of the appellate authorities were based on evidence. (AY.2006 - 07) CIT v. Vikas Oberoi (2017) 394 ITR 505 (Bom.) (HC) Editorial : SLP is granted to the revenueCIT v. Vikas Oberoi (2017) 393 ITR 100 (St.) S. 2 (22) (e) : Deemed dividend-Company is not shareholder of company which gave loan hence loan is not assessable as deemed dividend. Dismissing the appeal of the revenue the Court held that; Company is not shareholder of company which gave loan hence loan is not assessable as deemed dividend. (AY. 2005 - 06) CIT v. Mahavir Inductomelt P. Ltd. (2017) 394 ITR 50/(2018) 162 DTR 209 (Guj.) (HC) S. 2 (22) (e) : Deemed dividend – Loan to a share holder unless he is substantial share holder addition cannot be made. Dismissing the appeal of the revenue the Court held that; it is only when payments are made by a company by way of advance or loan to a shareholder or payment to a concern in which shareholder is a member or partner and in which he has substantial interest, said amount of loan would be regarded as deemed dividend within meaning of section 2 (22) (e) of the Act. (AY 2003-04). CIT v.Namdhari Seeds (2017) 79 taxmann.com 107 (Karn.) (HC) Editorial : SLP is granted to the revenue; CIT v. Namdhari Seeds (2017) 246 Taxman 61 (SC) S. 2 (22) (e) : Deemed dividend - Salary received in advance cannot be considered as deemed divided merely because it was not offered to tax in that year. The Assessee, an individual, was the director and employee of a company in which he held 16.60% of share capital. He received an advance salary from the company for medical treatment of his son-in-law. This was taxed u/s 2 (22) (e) of the Act by the AO, which was deleted by the CIT (A). The Tribunal dismissed departmental appeal and held that merely because salary received in advance was not offered to tax in that year by the Assessee could not be a basis to


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hold that the advance salary would partake the character of a deemed dividend u/s 2 (22) (e). (ITA No. 799/Kol/2015 dt. 25.08.2017) (AY. 2009-10) DCIT v. Navin Chand Suchanti (2017) 58 ITR 71 (SN) 71 (Kol) (Trib) S. 2 (22) (e) : Deemed dividend-Substantial interest - Movement of funds in both ways on need basis – Addition cannot be made as deemed dividend

Allowing the appeal of the assessee the Tribunal held that; though the assessee was holding substantial interest in two companies, in view of fact that there was movement of funds in said companies in both ways on need basis, amount in question could not be regarded as deemed dividend. (AY. 2010-11)

Ravindra R Fotedar. v. ACIT (2017) 167 ITD 100/(2018) 192 TTJ 938 /165 DTR 162 (Mum) (Trib.)

S. 2 (22) (e) : Deemed dividend-Money Lending Substantial part of business of Company - Substantial does not mean Major - Finding that company received substantial part of its Income by way of Interest - Falls within Exception - Loan not to be treated as deemed dividend. Tribunal held that; The Commissioner (Appeals) had found that the company had been receiving interest from year to year regularly which was a substantial amount and also a substantial part of the business. He relied on the decision of the Bombay High Court wherein it was held that the expression "substantial part" did not connote an idea of being the "major part" or the part that constitutes majority of the whole. The Legislature had deliberately used the word "substantial" instead of using the word "major" and did not specify any percentage of business or profit to be coming under the lending business of the lending the money for the purpose of clause (ii) of section 2 (22) (e). (AY. 2009-10)

ACIT v. G.D. Goenka Pvt Ltd (2017) 59 ITR 109 (SN) (Delhi) (Trib)

S. 2 (22) (e) : Deemed dividend – Transfer by book entries cannot be considered as cash payment hence addition cannot be as deemed dividend .

Dismissing the appeal of the revenue the Tribunal held that; Transfer by book entries cannot be considered as cash payment hence addition cannot be as deemed dividend . (AY. 2010-11)

ACIT v. Siddharth Gupta. (2017) 165 ITD 369 (Delhi) (Trib.)

S. 2 (22) (e) : Deemed dividend – Advance in the course of business, cannot be assessed as deemed dividend. Advance of loan in the course of business of the company cannot be assessed as deemed dividend. (AY. 2010 – 2011) Sarat Chand Bhavaraju v. ITO (2017) 164 ITD 562 /156 DTR 48 /188 TTJ 485 (Visakh) (Trib.) S.2 (22) (e) : Deemed dividend – Assessee was not a shareholder in lender company, loan taken by any partner cannot be taxed as deemed dividend. Dismissing the appeal of the revenue, the Tribunal held that; since assessee was not shareholder in lender company loan cannot be taxed in hands of assessee as deemed dividend. (AY. 2009-10) DCIT v. Siroya Developers (2017) 162 ITD 718 (Mum.) (Trib.)


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S. 2 (22) (d) : Deemed dividend – Buyback of shares - Payment made to its holding company for buy back of shares Prior to 1-6-2013 can not be treated as dividend .[ S.115QA, Companies Act ,S.77A ] Tribunal held that transaction of buy back of shares could not be classified as dividend as per provisions of S. 2 (22) when exclusion sub-clause (iv) of S. 2 (22) specifically excluded such a payment on purchase of its own shares from a shareholder in accordance with provisions of S.77A of Companies Act from definition of 'dividend'. Since S. 115QA was introduced in statute by Finance Act, 2013 with effect from 1-6-2013, payment made by assessee on account of purchase of its own shares prior to 1-6-2013 could not be termed as dividend as per provisions of S. 15QA. (AY. 2011 – 2012) Fidelity Business Services India (P.) Ltd. v. ACIT (2017) 164 ITD 270 (Bang) (Trib.) S. 2 (24) : Income – Promotions - Appearances of promotion was never took place, hence no income accrured to the assesse. [S. 2 (24) (iv)] Allowing the appeal of the assessee the Tribunal held that, appearances of promotion was never took place, hence no income accrued to the assessee. Tribunal also held that, the revenue had not been able to point out as to how the assessee became entitled to earning of professional income. (AY. 2009-10, 2010-11) Shah Rukh Khan v. ACIT (2017) 164 ITD 18 / 185 TTJ 289 (Mum.) (Trib.) S. 2 (47) (v) : Transfer-Development agreement - If the entire consideration is not received by the assessee and physical possession of the property is not parted with, there is no transfer - Investment made with in six months of transfer, was held to be eligible for benefit of S. 54EC. [ S. 45, 54EC ] Dismissing the appeal of the revenue, the Court held that; immovable property can be regarded to have been transferred on the date of execution of the Development Agreement and irrevocable General Power of Attorney only if the terms indicate that complete control is given to the developer. If the entire consideration is not received by the assessee and physical possession of the property is not parted with, there is no transfer u/s 2 (47) (v). Investment made with in six months of transfer, was held to be eligible for benefit of S. 54EC. . (ITA No. 139 of 2015, dt. 20.11.2017) (AY.2008-09) CIT v. Dr. Arvind S. Phake (2018) 401 ITR 96/164 DTR 77/301 CTR 650 (Bom) (HC) S. 2 (29A) : Long-term capital asset - The period of holding shall be computed from the date when the specific flat is earmarked and allotted by the builder in favour of the Assessee and not from the date of registration of flat.[ S.2 (42A,) 45 ] Tribunal held that; The period of holding shall be computed from the date when the specific flat is earmarked and allotted by the builder in favour of the Assessee and not from the date of registration of flat. (AY. 2010-11) ACIT v. Yogesh Agencies & Investments Pvt. Ltd. (2017) 58 ITR 83 (SN) (Mum) (Trib.) S. 4 : Charge of income-tax – Entertainment subsidy – Capital or revenue - A subsidy granted by the Govt to achieve the objects of acceleration of industrial development and generation of employment is capital in nature and not revenue. [ S. 28 (i) ] Dismissing the appeal of the revenue the Court held that; A subsidy granted by the Govt to achieve the objects of acceleration of industrial development and generation of employment is capital in nature and not revenue. The fact that the incentives are not available unless and until commercial production has started, and that the incentives are not given to the assessee expressly for the purpose of purchasing capital assets or for the purpose of purchasing machinery is


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irrelevant. The object has to be seen and not the form in which it is granted. (CA. NOS. 6513-6514 OF 2012, dt. 07.12.2017) CIT v. Chaphalkar Brothers Pune (2018) 400 ITR 279/ 300 CTR 113/161 DTR 41 /252 Taxman 360 (SC) Editorail : Decision in CIT v. Chaphalkar Brothers (2013) 351 ITR 309 (Bom) (HC) is affirmed S. 4 : Charge of income-tax – Subsidy – Capital or revenue - Judgement of Delhi High Court in CIT v. Bhushan Steels And Strips was stayed . [ S.28 (1), 56 ] Supreme Court stays judgement of the Delhi High Court in CIT vs. Bhushan Steels And Strips which held that if the recipient has the flexibility of using it for any purpose and is not confined to using it for capital purposes, the subsidy is revenue in nature and is taxable as profits. Court held that ,issue notice. In the meantime, the operation of the impugned judgment shall remain stayed. (SLP No. 30728-30732/2017, dt. 20.11.2017) Bhushan Steeel v. CIT (SC); www.itatonline.org S. 4 : Charge of income-tax – Hindu law – Burden is on the member to establish the property is his individual and not ancestral presumption continues to operate in family . Court held that; as per settled principle of Hindu law that there lies a legal presumption that every Hindu family is joint in food, worship and estate and in absence of any proof of division, such legal presumption continues to operate in family. burden lies upon member who after admitting existence of jointness in family properties asserts his claim that some properties out of entire lot of ancestral properties are his self-acquired property. On facts the appellants failed to adduce any kind of documentary evidence to prove their self-acquisition of properties nor were they able to prove source of its acquisition, order of High Court declaring property as joint property of family was upheld . Adiveppa v. Bhimappa (2017) 250 Taxman 476/160 DTR 401 /(2018) 300 CTR 124 (SC) S. 4 : Charge of income-tax – Capital or revenue receipt-Sales tax subsidy – Matter was remanded to High Court for consideration. [S. 28 (i)] Allowing the appeal of the revenue, the matter was remanded to the High Court and admit the appeal and decide it on the merits. CIT v. Reliance Industries Ltd (2004) 88 ITD 273 (Bom.) (SB) (Trib.) CIT v. Nitco Tiles Ltd. (2017) 395 ITR 519/247 Taxman 308/155 DTR 145/297 CTR 1 (SC) S. 4 : Charge of income – tax - Capital or revenue - Subvention received by assessee from parent company at time when assessee making losses, payment to protect capital investment was held to be not revenue receipt. [S.2 (24), 28 (i)] On the question whether the subvention received by the assessee-company from its parent company in Germany in a situation where the assessee-company was making losses had to be treated as a capital or revenue receipt : Held, that the voluntary payments made by the parent company to its loss making Indian company could be understood to be payments made in order to protect the capital investment of the assessee-company. The payments made to the assessee-company by the parent company for the assessment years in question could not be held to be revenue receipts. (AY. 1999-2000, 2000-2001, 2001-2002) Siemens Pub. Communication Network Ltd v. CIT (2017) 390 ITR 1 /291 CTR 22/244 Taxman 188 (SC)


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S. 4 : Charge of income-tax – Subsidy - Grant or subsidy was forwarded by the Government of India to help the assessee in its revival by making payment to employees towards voluntary retirement scheme. [ S. 2 (24), 2 (25) ] Allowing the appeal of the assesse the Court held that; the grant or subsidy was forwarded by the Government of India to help the assessee in its revival by making payment to employees towards voluntary retirement scheme. It was a voluntary remittance fund by the Government of India to the assessee. The Department failed to show anything so as to bring “grant” or “subsidy” it within any particular clause of section 2 (24) of the Act. The amount of grant received by the assessee from the Government of India could not be treated as “income”. The payment to employees towards voluntary retirement scheme was to be allowed. (AY. 2002-03, 2003 - 04) Scooters India Ltd v. CIT (2017) 399 ITR 559 (All) (HC) Editorial : The Supreme Court has dismissed special leave petition filed by the Department against this judgment. S. 4 : Charge of income-tax – Diversion of income by overriding title – Company formed for purpose of procuring tender and not for execution work, receipt cannot be treated as income of assesse. [ S. 2 (24] ] Allowing the appeal the Court held that; Company was formed for purpose of procuring tender and not for execution work, receipt cannot be treated as income of assesse as there was diversion of income at the source itself and therefore, there was diversion of income by overriding title. The receipt of amount of Rs. 12,09,55,137 could not be treated as income of the assessee and it was diversion of income by overriding title. Soma TRG Joint Venture v. CIT (2017) 398 ITR 425/159 DTR 297 /299 CTR 420 (J&K) (HC) S. 4 : Charge of income-tax - Receiving 95 per cent. of payments against invoices after deduction of commission of 5 per cent, assess is liable to pay tax only on actual received .[ S.37 (1) ] Dismissing the appeal of the revenue, the Court held that; the assesse Received only 95 per cent. of payments against invoices after deduction of commission of 5 per cent, hence the assess is liable to pay tax only on actual received . (AY. 1997-98, 1998-99) CIT v. Olam Exports (India) Ltd. (2017) 398 ITR 397 (Ker) (HC) S. 4 : Charge of income-tax - Gain or loss on account of fluctuation in exchange rate is neither in nature of royalty nor interest hence liable to tax-Receipt of foreign exchange on sale proceeds of exports beyond the end of the previous year relevant to the assessment year resulting in gain or loss would not be considered to be a part of export turnover, but an income that arose on a separate transaction - DTAA - India – Malaysia . [S. 80HHC,90, Art 12, 13 ] On reference the Court held that; Gain or loss on account of fluctuation in exchange rate is neither in nature of royalty nor interest hence liable to tax . In the absence of any such specific definition as insection 80HHC, receipt of foreign exchange on sale proceeds of exports beyond the end of the previous year relevant to the assessment year resulting in gain or loss would not be considered to be a part of export turnover, but an income that arose on a separate transaction, i.e., that arose due to variation in foreign exchange rates and would not be included as part of the export turnover. (AY. 1991-92)


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Ballarpur Industries . Ltd v. CIT (No.1) (2017) 398 ITR 134 /(2018) 301 DTR 106 /162 DTR 264 (Bom) (HC) S. 4 : Charge of income-tax - Capital or revenue - Subsidy — Government allowing assessee to retain sales tax collected by it up to a particular limit and there was no conditions attached to utilisation of amount therefore the subsidy is assessable as revenue in nature . Court held that; the specific provision for capital subsidy in the main scheme and the lack of such a subsidy in the supplementary scheme (of 1991) meant that the recipient, i.e., the assessee had the flexibility of using it for any purpose. The absence of any condition towards capital utilisation meant that the policy makers envisioned greater profitability as an incentive for investors to expand units, for rapid industrialisation of the State, ensuring greater employment. Clearly, the subsidy was revenue in nature (AY. 1995 - 96) CIT v. Bhushan Steels and Strips Ltd. (2017) 398 ITR 216 /156 DTR 49 /299 CTR 474 (Delhi) (HC) CIT v. Vardhaman Industries Ltd (2017) 398 ITR 216 /156 DTR 49 /299 CTR 474 (Delhi) (HC) S. 4 : Charge of income-tax - Mmaintenance charges collected from allottees of low cost housing scheme is part of income of assessee . Issue of ground rent matter was remanded to the Assessing Officer . . Allowing the appeal of the revenue the Court held that; for the assessment year 2007-08, the court had ruled that the maintenance charges collected by the assessee were part of its income and the assessee had not challenged the decision in the Supreme Court. There was no reason for the court to take a different view in the matter without any change in the circumstances in the present assessment year. Therefore, the maintenance charges were to be treated as income of the assessee. As regards ,the issue of treatment of ground rent was not examined in depth with reference to the accounts of the assessee either by the Assessing Officer or the Commissioner (Appeals) or even the Tribunal. The issue was to be remanded to the file of the Assessing Officer for re-determination in accordance with law after examining the accounts of the assessee. (AY. 2008 - 09) PCIT v. Delhi State Industrial Infrastructure Development Corp. Ltd. (2017) 398 ITR 96 /250 Taxman 194 (Delhi) (HC) S.4 : Charge of income-tax - Capital or revenue – Sales tax subsidy for expansion and diversification of existing unit is help to be capital receipt . Dismissing the appeal of the revenue the Court held that; the character of the subsidy in the hands of the recipient whether revenue or capital will have to be determined having regard to the purpose for which the subsidy is given. The source of fund is quite immaterial. Where a subsidy though computed in terms of sales tax deferment or waiver, in essence was meant for capital outlay expended by the assessee for setting up the unit in the case of a new industrial unit and for expansion and diversification of an existing unit, it would be a capital receipt. (AY.2004 – 05) CIT v. Nirma Ltd. (2017) 397 ITR 49 (Guj) (HC) Editorial : SLP is granted to the revenue, CIT v. Nirma Ltd. (2017) 396 ITR 71 (St) S. 4 : Charge of income-tax – Capital or revenue - Sales tax subsidy is held to be capital in nature.


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Allowing the petition the Court held that; the Scheme, it appeared that the Scheme was oriented towards and was subservient to the investment in fixed capital assets. The sales tax incentive was envisaged only as an alternative to the cash disbursement and by its very nature, was to be available only after production had commenced. Thus, in effect, the subsidy in the form of sales tax incentive was not given to the assessee for assisting it in carrying out the business operations but, to encourage the setting up of industries in the backward area. The amount representing sales tax incentive was a capital receipt. Garden Silk Mills Ltd. v.CIT (2017) 394 ITR 192 (Guj.) (HC) S. 4 : Charge of income-tax – Accrual-Carbon receipts were neither sold and/or transferred during the year cannot be included as income. [S. 5] Dismissing the appeal of the revenue, the Court held that; neither CIT (A) nor Tribunal be said to have committed any error in deleting the addition made by the AO as the carbon credits were neither sold nor transferred in favour of foreign companies in the year under consideration. No substantial question of law arises. (AY.2009-10) PCIT v. Kalpataru Power Transmission Ltd. (2017) 293 CTR 484 /148 DTR 257 (Guj.) (HC) S. 4 : Charge of income-tax-Accrued interest on non-performing assets is not assessable. [S. 145] Dismissing the appeal of the revenue, the Court held that; Accrued interest on non-performing assets is not assessable. (AY. 2007-08) CIT v. Raddi Sahakara Bank Niyamitha (2017) 395 ITR 652 (Karn.) (HC) S. 4 : Charge of income-tax-Interest on non-performing assets cannot be recognised on accrual basis, assessee is bound by Reserve Bank of India guidelines. [S. 43D, 119, 145, Reserve Bank of India Act, 1934, s. 45Q, Non-banking companies prudential norms (Reserve Bank) directions, 1998 ] Dismissing the appeal of the revenue, the Court held that; Interest on non-performing assets cannot be recognised on accrual basis, assessee is bound by reserve bank of India guidelines. Therefore, notwithstanding the provisions of section 43D of the Act,since the provisions of the Section 43 Q of Reserve Bank of India Act, 1934 Act had an overriding effect vis a vis income recognisation principles in the Companies Act, 1956, the Assessing Officer is bound to follow the direction of the Reserve Bank of India as far as income reognisation was concerned. (AY. 2010-11) PCIT v. Shri Mahila Sewa Sahakari Bank Ltd. (2017) 395 ITR 324 (Guj) (HC) S. 4 : Charge of income-tax – Accrual-Carbon receipts were neither sold and/or transferred during the year cannot be included as income [ S. 5 ] Dismissing the appeal of the revenue, the Court held that; neither CIT (A) nor Tribunal be said to have committed any error in deleting the addition made by the AO as the carbon credits were neither sold nor transferred in favour of foreign companies in the year under consideration. No substantial question of law arises . (AY.2009-10) PCIT v. Kalpataru Power Transmission Ltd. (2017) 293 CTR 484/148 DTR 257 (Guj.) (HC) S. 4 : Charge of income-tax-Interest on interim compensation received pending final disposal by the High Court is chargeable to tax . [S. 145, CPC, S. 144] Dismissing the appeal of the assessee the Court held that; Interest on interim compensation received pending final disposal by the High Court is income is chargeable to tax . The fact that the assessee may have to return the compensation and interest on the principle of restitution as


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provided under S. 144 of the Civil Procedure Code is not relevant because restitution is not a certainty. (ITA No. 17 of 2011, dt. 01.08.2017) (AY. 1998-99 to 2001-02) Premlata Purshottam Paldiwal (Smt.) v. CIT (2017) 157 DTR 145 (Bom) (HC) S. 4 : Charge of income-tax – Capital or revenue-Non-compete fees-Receipt of non-compete fees is capital receipt and not assessable as capital gains.[S. 28 (iv), 45, 55 (2)] Dismissing the appeals of the revenue the Court held that ;the amount received as non-compete fees by the assessee could only be treated as capital receipt and was not liable to tax. The Appellate Tribunal was right in holding that, (a) the provisions of section 28 (iv) of the Income-tax Act, 1961 were not applicable in the case of the assessee, and (b) the amount of non-compete fees received by the assessee was not taxable as capital gains under section 45 read with section 55 (2). CIT v. Anjum G. Balakhia (2017) 393 ITR 320 (Guj) (HC) Editorial : SLP of revenue was dismissed, CIT v. Anjum G. Balakhia (2017) 391 ITR 345 (St.) S.4 : Charge of income-tax – Capital or revenue-Profits from sale of carbon credits capital in nature. Dismissing the appeal of the revenue, the Court held that , profits from sale of "carbon credits" are capital in nature and would not form part of chargeable income under the Income-tax Act. PCIT v. L.H. Sugar Factory P. Ltd. (2017) 392 ITR 568 (All.) (HC) Editorial : SLP is granted to the revenue, PCIT v. L.H. Sugar Factory P. Ltd. (2017) 392 ITR 43 (St.)Ed.] S. 4 : Charge of income-tax – Capital or revenue Transport subsidy to stimulate industrial activity in backward region was held to be capital receipt. [S.2 (24)] Held the transport subsidy received by the assessee was intended to stimulate industrial activity in the backward region, to generate employment opportunities and bring about developments in the North Eastern States and it was not meant to provide higher profit for the entrepreneur. It was intended to encourage investment in difficult and far flung States and the sum received as subsidy could not be treated as a revenue receipt. (AY. 2001-2002) Shiv Shakti Flour Mills P. Ltd. v. CIT (2017) 390 ITR 346 /291 CTR 221/77 taxmann.com 115 /145 DTR 18 (Gauhati) (HC) S. 4 : Charge of income-tax - Land purchased for company by its director-Sale of land cannot be assessed in the hands of director. Dismissing the appeal of the revenue, the Court held that; the assessee being a director executed title deeds for and on behalf of the company and the beneficial owner for all practical purposes was the limited company which had even paid due taxes later on at the time when the property was sold. The amount was not assessable in the hands of the assesse. (AY. 2009-2010) CIT v. Atma Ram Gupta (Individual) (2017) 392 ITR 12 (Raj) (HC) S.4 : Charge of income-tax – Capital or revenue - Refundable security deposit received by club cannot be assessed as revenue receipt . Dismissing the appeals of the revenue the Court held that; merely because the security deposit was not kept apart or subsequently the amount of security deposit was utilised by the club for other purposes such as construction and providing other amenities at the club, it would not lose the character of "deposit". The amount was not assessable as a revenue receipt. (AY. 2008-2009 to 2012-2013) PCIT v.Gulmohar Green Golf and Country Club Ltd. (2017) 392 ITR 60168 /292 CTR 206/77 taxmann.com (Guj) (HC)


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S.4 : Charge of income-tax – Co-operative society - Amounts transferred to Distribution Pool Fund Account not assessable in hands of co-operative society.[S.2 (24), 2 (31), 80P] The Government of India appointed a Salt Expert Committee to study salt manufacturing activity in different parts of the country. The society was formed to save individual salt manufacturers from extinction in terms of the advice tendered by the Salt Expert Committee. The very fact that the bye-laws permitted the society to recover the "manufacturing expenses" and "other dues" from its members was sufficient indication that the ownership of the salt to the extent of the respective share of each individual member continued to remain with the respective member himself. This inference was fortified by clause 80 of the bye-laws, which permits the members to raise loans on the "security" of their proportional interest in the "agar" and "salt produced". AO brought to tax the amounts transferred to distribution pool fund account. The addition was deleted in appeal . On appeal by the revenue, dismissing the appeal the Court held that; logically the amount transferred to the "Distribution Pool Fund Account" could not be brought within the umbrella of Chapter XVI. Hence, it was not taxable in the hands of the society. (AY. 2006-2007) CIT v. Nagarbail Salt-Owners Co-op. Society Ltd. (2017) 390 ITR 415/291 CTR 287 /145 DTR 166 (Karn.) (HC) S.4 : Charge of income tax-Capital or revenue-Statutory authority-Funds received from State Government for infrastructure development in State-Interest thereon capital receipt - Incentive subsidy for distribution of subsidies to industrialists was not chargeable to tax. [S. 2 (24),5] Dismissing the appeal of the revenue, the Court held that ,funds received from State Government for infrastructure development in State-Interest thereon capital receipt. Incentive subsidy for distribution of subsidies to industrialists was not chargeable to tax. (AY. 2005-2006) ACIT v. Bihar Industrial Area Development Authority (2017) 390 ITR 475 (Patna) (HC) S. 4 : Charge of income-tax – Capital or revenue – Club-Security deposit as entrance fee ,which were refundable after 25 years is capital receipt.[S.28 (i)] Dismissing the appeal of the revenue, the Court held that; where the assessee club enrolled members on payment of security deposit as entrance fees which were refundable after 25 years & such receipt is utilized for purpose of club’s construction & other amenities – Such deposit is to be considered as ‘Capital receipt’. Relied on Siddheshwar Sahakari Sakhar Karkhana Ltd. v. CIT [2004] 270 ITR 1 (SC). (AY.2008-09, 2011-12, 2012-13) PCIT v. Gulmohar Green Golf & Country Club Ltd. (2017) 146 DTR 217 (Guj HC) S.4 : Charge of income-tax – Capital or revenue – Compensation received for loss of rental income was held to be capital receipts . [ S.28 (i) ] Dismissing the appeal of the revenue, the Court held that, Compensation received from K. Raheja Universal Construction Pvt. Ltd ,for loss of rental income was held to be capital receipts . (ITA No. 4776/Mum/2014, dt. 01.11.2017) (AY. 2010-11) DCIT v. Yogen D. Sanghavi (Mum) (Trib); www.itatonline.org S. 4 : Charge of income-tax - Sale of CER certificate was held to be capital receipts. The Tribunal held that receipts from sale of carbon emission reduction certificate are capital in nature, therefore cannot be taxed. (AY. 2006-07 to 2009-10, 2011-12 to 2013-14) Rajasthan State Mines & Minerals Ltd. v. ACIT (2017) 188 TTJ 137 (Jp) (Trib.) S. 4 : Charge of income-tax - Difference between income as report in form 26AS and income reflected in the books of accounts-Matter remanded. [S. 145]


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The Tribunal held that the assessee has not offer any satisfactory explanation for its inability to reconcile the difference between the income reported in form 26AS and the income reflected in books of account, one more opportunity is granted to the assessee to reconcile the said difference and accordingly this issue is restored back to the AO for de novo determination on merits. (AY. 2010-11) Hi-Tech Engineers v. ITO (2017)164 ITD 94/155 DTR 334 /188 TTJ 453 (Mum.) (Trib.) S. 4 : Charge of income-tax – Cash system - Advance payment - Advance received from clients cannot be taxed as income in year of receipt itself .[ S.145 ] Allowing the appeal of the assessee the Tribunal held that; assessee-law firm, following cash system of accounting, received certain advance payments from its clients for making payment of fees to Senior Advocates to appear on behalf of them before High Courts and Supreme Court, since said amount was received by assessee in fiduciary capacity to discharge certain obligations while representing case of its clients before various courts, same could not be brought to tax as assessee's income in year of receipt itself (AY. 2010-11) Associated Law Advisers. v. ITO (2017) 167 ITD 695 (Delhi) (Trib.)

S.4 : Charge of income-tax – Interest received on enhanced compensation was not liable to be taxed as income from other sources [S. 56, Land Acquisition Act, 1894, S. 28, 34 ] Interest received on enhanced compensation was not liable to be taxed as income from other sources, as the interest on enhanced compensation would be calculated under section 28 of Land Acquisition Act and not under section 34 of said Act . Followed CIT v. Ghanshayam HUF (2009) 315 ITR 1 (SC) (AY. 2008 - 09) DCIT v. Dinesh Sharma. (2017) 165 ITD 684 (Delhi) (Trib.) S. 4. Charge of income-tax – Mutuality - A club whose membership is also open to the persons from the public and whose management is looked after by officials of HUDA is eligible to claim the benefits of mutuality. Dismissing the appeal of the revenue, the Tribunal held that; there can not be said to be straight jacket formula to say that in every a mutual concern the members must be entitled to a share in the surplus. Since the affairs of the assessee trust are controlled by the serving officers of HUDA, hence it has to pass through greater scrutiny as the chances of it crossing the thin line between the mutuality and commerciality are very high. However, at this stage, so far the Assessment Years under consideration are concerned, the revenue could not point out the taint of commerciality in the contribution, management and application of the surplus collected through contributions and subscriptions from the members and for price of the facilities availed by its members, hence, the same cannot be said to be taxable income of the society. (ITA No. 1084/Chd/2009, dt. 26.09.2017) (AY. 2006-07) ITO v. Gyamkhana Club (Chd.) (Trib), www.itatonline.org S.4 : Charge of income-tax – Capital or revenue - Interest earned on fixed deposits – Funds received from Reserve Bank of India to meet the capital expenditure for setting up the project – Funds temporarily placed in fixed deposits with banks – Interest earned on such deposits should be reduced from the capital cost of the project and not chargeable to tax - Interest cannot be assessed as income from other sources . [ S.56 ] The Tribunal held that the interest earned on fixed deposits was not an investments made subsequent to the setting up of the project but was unutilized income parked in fixed deposits for


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a temporary period and there was an inextricable link between the interest earned on the grants and the original grant made by the State Government to set up the project. Relying upon the decisions of the Apex Court in the case of CIT v. Karnal Co-operative Sugar Mills Ltd. [2000] 243 ITR 2 (SC), CIT v. Karnataka Power Corporation [2001] 247 ITR 268 (SC) and CIT v. Bokaro Steel Ltd. [1999] 236 ITR 315 (SC),the Tribunal held that The interest earnedshould only go to reduce the capital cost of the project to be set up by the assessee andwas not to be brought to tax, as the interest was earned on capital account. (AY. 2011-12) ITO .v. Bank Note Paper Mill India P. Ltd. (2017) 56 ITR 266 (Bang) (Trib.) S.4 : Charge of income-tax – Capital or revenue - Accrual - Arbitration award received on account of escalation damage and delays in completing the project will be a capital receipt. Dispute regarding the contract and amount awarded on arbitration. The issue relating to damages and interest still sub judice and hence cannot be taxed till the proceedings attain finality. [ S.5, 145 ] Dismissing the appeal of the revenue, the Tribunal held that; only receipt on which assessment was completedwas the receipt of award during the year and there was no other income. The assesseewas out of the contract due to dispute with the Delhi Development Authority. Therefore,the damages so received were for loss of business and not merely loss of profit and werecapital in nature. The issue relating to the damages and interest being still sub judice these sumscould not be brought to tax in the year under consideration. The finding of the AO in this respect that if the assessee failed in appeal by the judgment of the High Courtthen the sums would be deducted from its income was not justified. (AY. 2007-08). ACIT .v. Jagat Ram Trehan and Sons (2017) 56 ITR 286 (Delhi) (Trib.) S. 4 : Charge of income Capital or revenue – Interest subsidy received under Technology up gradation fund Scheme is capital receipt. The Tribunal held that interest subsidy received under Technology upgradation Fund Scheme is a capital receipt. Receipt of subsidy under the West Bengal Incentive Scheme, 2000 is a capital receipt not chargeable to tax. (AY. 2007-08) Dy. CIT v. Gloster Jute Mills Ltd. (2017) 185 TTJ 339/159 DTR 33 (Kol.) (Trib.) S. 4 : Charge of income tax – Merely because HUF of assessee had not filed return of income, AO cannot assess the capital gain in the hands of individual. [S. 45] A property had been jointly held by all family members and did not belong to assessee in his individual status. Conveyance deed was executed jointly by all co-owners. Merely because HUF of assessee had not filed return of income, AO cannot assess the capital gains in hands of assessee in his Individual capacity. (AY. 2009 – 2010) Ashwin C. Jariwala v. ITO (2017) 164 ITD 255 (Mum) (Trib.) S. 4 : Charge of income-tax – Capital or revenue-Gains due to fluctuation in foreign exchange - Source of funds for capital expenditure hence capital receipt. Tribunal held that entire gain due to fluctuation in foreign exchange when source of funds is for capital expenditure, is a capital receipt. (AY. 2008-2009) ACIT v. L. S. Cable India P. Ltd. (2017) 55 ITR 232 (Delhi) (Trib.) S. 4 : Charge of income-tax-Method of accounting - stock in trade - Development of property-Income in respect of transfer of immovable property recognised only when risks, rewards and ownership of property transferred to buyer. Matching principle - Accounting Standard-9. [S. 2 (47), 5, 145] The assessee was engaged in the business of development of property. The Assessing Officer held that the revenue should be recognised at every stage of receipt of sale consideration which


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was up held by the CIT (A).On appeal allowing the appeal the Tribunal held that; provision relating to deemed transfer as in case of capital assets not applicable to transactions of stock-in-trade. Income in respect of transfer of immovable property recognised only when risks, rewards and ownership of property transferred to buyer. Matching required to be done on accrual basis in respect of income offered to tax. Matter remanded. (AY. 2007-2008) S. K. Properties v. ITO (2017) 53 ITR 607 (Bang.) (Trib.) S. 4 : Charge of income-tax – Accrual - Mercantile system of accounting— Retention money not to be taken into account in computing profits. [S. 5, 145] Certain percentage of contract price retained by customers to be paid on satisfactory performance of contract. Assessee had no right to claim any part of retention money till verification of satisfactory execution of contract therefore retention money not to be taken into account in computing profits. (AY.2003-2004 to 2011-2012) Electrosteel Castings Ltd. v. DCIT (2017) 53 ITR 5 (Kol.) (Trib.) S. 4 : Charge of income-tax-Capital or revenue-Share warrants-Receipt of advance amount was forfeited on account of non-payment was a capital receipt. Advance received against Share warrants were forfeited on account of non-payment was a capital receipt. (AY.. 2003-2004 to 2011-2012) Electrosteel Castings Ltd. v. DCIT (2017)53 ITR 5 (Kol) (Trib) S. 4 : Charge of income-tax - Capital or revenue-Receipts from sale of carbon credits is capital receipt. Receipts from sale of carbon credits are capital receipt. (AY.2003-2004 to 2011-2012) Electrosteel Castings Ltd. v. DCIT (2017)53 ITR 5 (Kol) (Trib.) S. 4 : Charge of income-tax - Capital or revenue-Sales tax remission scheme is capital receipt - Subsidy cannot be reduced from actual cost for the purpose of depreciation [S. 32]. Subsidy received as per sales tax remission scheme is capital receipt. The amount is receivable only after commencement of production would not alter character of subsidy. The referable to cost of fixed assets cannot be the ground from reducing subsidy from actual cost for purposes of depreciation. (AY. 2003-2004 to 2011-2012) Electrosteel Castings Ltd. v. DCIT (2017)53 ITR 5 (Kol) (Trib) S.4 : Charge of income-tax-Accrual-Banking company - Interest on non-performing assets cannot be assessed on accrual basis. [S.5, 145] Dismissing the appeal of the assesse, the Tribunal held that; Interest on non-performing assets cannot be assessed on accrual basis. (AY.2009-2010, 2010-2011) ACIT v. Tambaram Co-op. Urban Bank Ltd. (2017) 53 ITR 1 (Chennai) (Trib.) S.4 : Charge of income-tax – Amount not be taxed in hands of assessee merely because offered to tax [S.119, Constitution of India, Art. 265] Amount not be taxed in hands of assessee merely because offered to tax . Office memorandum to Ministry of Civil Aviation is no authority in law which cannot be basis to hold an amount taxable. (AY.2008-09) Add.CIT v. Mumbai International Airport P. Ltd. (2017) 53 ITR 169 /148 DTR 201 (Mum.) (Trib.) S.4 : Charge of income-tax-Diversion of income by overriding title - Passenger service fee-security component- - Surplus to be mandatorily transferred to account of Airports Authority of India. Amount held in fiduciary capacity which is not taxable. [S.2 (24), 5]


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Passenger service fee and security component, surplus to be mandatorily transferred to account of Airports Authority of India. Amount held in fiduciary capacity therefore not taxable. (AY.2008-09) Addl CIT v. Mumbai International Airport P. Ltd. (2017) 53 ITR 169 (Mum.) (Trib.) S. 5 : Scope of total income – Classification of asset from current to fixed and consequent valuation of such asset at market value does not give rise to income Assessee had a plot of land at Lucknow which was being disclosed in the past as current assets. Book value of the plot was quite less than the market value. Assessee re-characterised the asset as fixed asset and showed it at market value and created a revaluation account in the books. Dismissing the appeal of the revenue the Court held that conversion of asset from current to fixed and consequent valuation of the asset at market value does not give rise to any income in the hands of the assessee. CIT v. M.I. Builders (P.) Ltd. (2017) 248 Taxman 37 (All.) (HC) S. 5 : Scope of total income - Salary paid to seafarer for rendering services outside India is not chargeable to tax in India [ S. 5 (2) (a) ] On the question whether the income earned by way of salary which became due and had accrued to the assessee, a non-resident seafarer, for services rendered outside India, and which was not chargeable to tax in India on “due” or “accrual” basis, could be said to be chargeable to tax on “receipt” basis merely because the foreign employers, on the instructions of the assessee, had remitted a part of the amount of salary to the assessee’s non-resident external bank account in India; Allowing the appeal the Court held that; the Assessing Officer was wrong in adding the income earned by way of salary which had become due and had accrued to the assessee, a non-resident, for the services rendered outside India to the income chargeable to tax of the assessee for the relevant assessment year. The interpretation given to section 5 (2) (b) could beapplied to section 5 (2) (a) . The Circular No. 13 of 2017 dated April 11, 2017 was clarificatory in nature and was applicable for construing the provision for the relevant assessment year (AY. 2010-11) Sumana Bandyopadhyay (Smt.) v. Dy. DIT (IT) (2017) 396 ITR 406 (Cal.) (HC) S. 5 : Scope of total income – Sub-contract - Amount received for work shared proportionate to work was shown separately, hence Amount received by other person cannot be added to his income - Income cannot be assessed as joint venture. [S.4] Dismissing the appeal of the revenue, the Court held that; there was enough material to show that the amount received from the contract was directly shared by the assessee and “B”. When after receipt of the contract amount, the shares were identified and taken by both the parties of the joint venture, it could not be treated as a sub-contract. There was no material brought by the Revenue to show that there was any contract entered into by the assessee to assign the work to “B” as sub-contractor. Further, when the respective share was received by the assessee, it had been shown as the income by the assessee in the return of income. When the assessee had not claimed any amount towards expenditure pertaining to the contract amount which had been received by the assessee, there would not be any scope for disallowing any amount towards expenditure. (AY.2005-2006, 2006-2007, 2007-2008) CIT v. G. Balraj. (2017) 390 ITR 50 (Karn) (HC) S. 5 : Scope of total income – Salary received by a non-resident for services rendered abroad for a period of 286 days, accrues outside India and hence, was not chargeable to tax in India. [S. 6,9,264] A Writ Petition was filed before the HC challenging the order passed u/s. 264 and 143 (1), contending that salary received was not taxable in India as the services were rendered outside


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India and CIT ought to have completed the assessment rather than remanding the assessment to AO. Allowing the Writ, the HC observed that income would not be taxed in India solely on the basis that such income was received or deemed to be received in India but also, on whether the income was accrued in India or outside India. The place of accrual of the income, i.e, the place where the services have been rendered, becomes material in determining whether the income was accrued in India or outside India. In present case, undisputedly, the petitioner had received income/salary for rendition of services outside India for a period of 286 days, and therefore has to be treated as accrued outside India and not chargeable to tax in India. (AY. 2011-12) Utanka Roy v. DIT (IT) (2017) 390 ITR 109 /291 CTR 501 /146 DTR 27 (Cal.) (HC) S. 5 : Scope of total income-Non-resident-Permanent establishment-Assessee deciding venue and participating teams bound to it to compete in racing in terms agreed with assessee-Proof of assessee carrying on business in India for duration of race within meaning of expression under article 5 (1) of DTAA – DTAA - India-United Kingdom.[Art. 5 (1), 13 195] The assessee was a United Kingdom tax resident company. Consequent to agreements entered into between the FIA (an international motor sports events regulating association), FOAM (the asset management company, and the assessee, FOAM licensed all commercial rights in the FIA formula one world championship to the assessee for a 100 year term. Court held that; the entire event, i.e., the FIA championship in the circuit was organised and controlled by the assessee. The assessee’s participation and the undertakings given to it by each of these actors, who were responsible for the event as a whole, brought out its central and dominant role. The conceptualisation of the event and the right to include it in any particular circuit was that of the assessee; it decided the venue and the participating teams were bound to it to compete in the race in the terms agreed with the assessee. All these, unequivocally, showed that the assessee carried on business in India for the duration of the race (and for two weeks before the race and a week thereafter). Every right which it possessed was monetised; the US$40 million which was paid was only a part of that commercial exploitation by the assessee. Thus the assessee carried on business in India within the meaning of the expression under article 5 (1) of the Double Taxation Avoidance Agreement between India and the United Kingdom (DTAA). The assesse was held to be liable to deduct tax at source. CIT v. Formula One World Championship Ltd. (2017) 390 ITR 199 /291 CTR 24/145 DTR 33 (Delhi) (HC) Jaiprakash Associated Ltd v. CIT (2017) 390 ITR 199 /291 CTR 24/145 DTR 33 (Delhi) (HC) S.5 : Scope of total income – Suppliers showed recovered amount from assessee as advance – Tax collected from customers shown as advance - Amount collected not to be taxed as no real income accrued. [S.147] The amount received from customers is because of recovery made of tax, by coal companies from the assessee, which is shown as advance in the books of account. The assessee has also paid this amount to coal companies, who in turn was showing it as advances in their books of account. If revenue wants to tax this amount in the hands of the assessee, then, the assessee should be allowed deduction on account of taxes paid to coal companies. This being so, there was no real income in the hands of the assessee. (AY. 2008-09) ACIT v. M.P. Laghu Udyog Nigam Ltd. (2017) 165 ITD 446 (Indore) (Trib.) S.5 : Scope of total income - Direct credit of salary for services rendered outside India into NRE bank account was held to be not taxable in India Allowing the appeal of the assessee the Tribunal held that; Direct credit of salary for services rendered outside India into NRE bank account was held to be not taxable in India . (AY. 2011-2012)


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Shyamal Gopal Chattopadhyay v. DIT (2017) 165 ITD 437/189 TTJ 327/156 DTR 297 (Kol) (Trib.)

S. 5 : Scope of total income – Accrual - Seafarer - Services were rendered outside India on a foreign ship salary receipts shall not include in income as same was credited in NRE account maintained in Indian Bank. Allowing the appeal of the assessee, the Tribunal held that; salary accrued to a non-resident for services rendered outside India on a foreign ship shall not be include in total income, as the salary has been credited in NRE account maintained with an Indian Bank by seafarer. (AY . 2012 – 2013) Asim Kumar Bera v. DIT (2017) 166 ITD 592 (Kol.) (Trib.) S. 5 : Scope of total income – Marine engineer - Salary accrued outside India just because foreign employer directly credited salary to NRE account ,same could not be brought to tax in India Allowing the appeal of the assessee the Tribunal held that just because foreign employer directly credited salary for services rendered outside India into NRE bank account of non-resident seafarer in India, same could not be brought to tax in India. (AY.2011-12) Tarun Kumar Sarkar v. DIT (2017) 166 ITD 125 (Kol) (Trib.) S. 5 : Scope of total income – Grossing up of income-tax withheld in USA (Federal and State Tax) should not be added back to quantify income taxable in India - DTAA-India - USA [ S. 90, 198, Art 25 ] Allowing the appeal of the assessee the Tribunal held that ;for clause (c) of S.5 (1), grossing up of income is not required and only net income after TDS is to be taxed in India but for granting the benefit of Federal tax withheld in USA, the same has to be quantified as per article 25 of Indo US DTAA. (AY. 2011-12) Sunil Shinde v. ACIT (2017) 166 ITD 597 (Bang.) (Trib.) S. 5 : Scope of total income - Service rendered outside India, amount credited by Foreign employer directly into NRE bank account of non-resident seafarer in India was held to be not liable to be taxed in India . Allowing the appeal of the assessee the Tribunal held that; where foreign employer directly credited salary for services rendered outside India into NRE bank account of non-resident seafarer in India, same could not be brought to tax in India . (AY. 2012-13) Arnab Bose v. DCIT 166 ITD 404 (Kol) (Trib.) S.5 : Scope of total income-When income accrues or arises or was deemed to accrue or arise to assessee during previous year, it was to be taxed in that year. [S. 5 (1) (b) ] Dismissing the appeal of the assessee the Tribunal held that; assessee itself had admitted that there was error in the treatment given to the amount in question, that in the books of account especially in the balance sheet, the sum was shown as liability in the books of accounts in the year when the alleged liability had arisen, that the assessee claimed that there was dispute, that no evidence was produced before the revenue authorities about the alleged dispute, that even before court, no document was furnished to prove that the assessee had some dispute about the receipt. Even if, for sake of argument existence of dispute is accepted then, it was for Rs. 14 lakhs only. For such a small sum out of Rs. 3.14 crore, the assessee did not show the income during the year


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under consideration. Court agreed with the FAA that same income cannot be taxed twice. So, there should not be any addition of the impugned amount in any other year. It was further held that when income accrues or arises or was deemed to accrue or arise to assessee during previous year, it was to be taxed in that year. As per provisions of section 5 (1) (b), when income accrues or arises or was deemed to accrue or arise to assessee during previous year, it was to be taxed in that year as a result the appeal was decided against assessee. (AY .2007-08) Yash Raj Films (P) Ltd. v. ACIT (2017) 49 CCH 253 /184 TTJ 741 /149 DTR 57 (Mum.) (Trib.) S. 5 : Scope of total income-Accrual – Developer-Income could be recognized only in year in which conveyance deed was registered. [S.2 (47), 4, 145, AS, 9] Assessee recognized revenue only in the year in which registration of conveyance deed of plots sold took place however, the AO estimated income under mercantile system of deriving income on yearly basis. On appeal CIT (A) confirmed he addition . Tribunal held that; As per the accounting standard 9 the recognition of income also lays down that the income in respect of transfer of immovable property can be recognized only when the risks, rewards and ownership of the property is transferred to the buyer. On these observations the ITAT had remanded back to the AO with a direction that the income in respect of sale of plots can be recognized only in the year in which conveyance deed executed is registered in favour of the buyers and to allow the development expenditure incurred as expenditure. (AY. 2007 - 08) S.K. Properties v. ITO (2017) 162 ITD 419 /53 ITR 607 (Bang.) (Trib.) S. 6 (1) : Residence in India – Individual – Resident – Not resident-Period of stay in India-Assessee was in India for a period of 171 days in the financial year 2004-2005 and would be classified as a non-resident as per provisions of Explanation (b) to section 6 (1) and hence the amount remitted from outside India by him would not be liable to tax in India. [S. 6 (1) (a) (b)] Dismissing the appeal of the revenue, the Tribunal held that; Relaxation of period of 60 days as per section 6 (1) (a) to 182 days when employment is taken outside India as per clause (a) of Explanation 1 is applicable only "in relation to that year" i.e. the year in which employment is taken outside India. Thereafter, for subsequent years, the residential status has to be seen as per the provisions of clause (b) to Explanation 1-Assessee being a non-resident as per the aforesaid provision is not liable to tax on the amount remitted from outside India. Economic or legal relationship with India is not relevant (AY.2005-2006) ADIT v. Sudhir Choudhrie (2017) 55 ITR 681 (Delhi) (Trib.) ADIT v. Bhanu Choudhrie (2017) 55 ITR 681 (Delhi) (Trib.) ADIT v. Dhruv Choudhrie (2017) 55 ITR 681 (Delhi) (Trib.) S. 9 (1) (i) : Income deemed to accrue or arise in India - Business connection – Formula One Grand Prix of India' event constitute business income, liable to deduct tax at source - DTAA - India – UK. [S. 195, Art., 5, 13] Dismissing the appeal of the assessee the Court held that; Formula One Grand Prix of India' event constitute business income, liable to deduct tax at source .High Court rightly concluded that based on exclusive nature of access and period for which it was accessed it could be concluded that circuit constituted a fixed place PE of assessee in India. Formula One World Championship Ltd. v. CIT (IT) (2017) 248 Taxman 192 (SC) S. 9 (1) (i) : Income deemed to accrue or arise in India - Permanent Establishment (PE) - “fixed place of business”, “service PE” and “agency PE” - The fact that there is close association and dependence between the US company and the Indian companies is


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irrelevant. The functions performed, assets used and risk assumed, is not a proper and appropriate test to determine whether there is a location PE - DTAA - India - USA [ Art. 5, 6, 7, 26 ] Dismissing the appeal of the revenue the Court held that; The fact that there is close association and dependence between the US company and the Indian companies is irrelevant. The functions performed, assets used and risk assumed, is not a proper and appropriate test to determine whether there is a location PE . (AY. 2001-02 to 2007 - 08) ADIT v. E - Funds IT Solution Inc (2017) 399 ITR 34/298 CTR 505/158 DTR 337 /251 Taxman 280 (SC) Editorial : Decision in DIT v. E - Funds IT Solution Inc (2014) 364 ITR 256 (Delhi) (HC) is affirmed S. 9 (1) (i) : Income deemed to accrue or arise in India - Business connection – Formula One Grand Prix of India' event constitute business income, liable to deduct tax at source - DTAA - India – UK. [S. 195, Art., 5, 13] Formula One World Championship Limited (‘FOWC’) and Jaypee Sports International Limited (‘Jaypee’) filed applications before the Authority for Advance Ruling (AAR). FOWC had entered into a ‘Race Promotion Contract’ (RPC) dated September 13, 2011 with Jaypee, granting Jaypee the right to host, stage and promote the Formula One Grand Prix of India event for a consideration of US$ 40 million. Some other agreements were also entered into between FOWC and Jaypee as well as group companies of FOWC and Jaypee. In the applications filed by FOWC and Jaypee before the AAR, advance ruling of AAR was solicited on two main questions/queries : (i) whether the payment of consideration receivable by FOWC in terms of the said RPC from Jaypee was or was not royalty as defined in Article 13 of the ‘Double Taxation Avoidance Agreement’ (DTAA) entered into between the Government of United Kingdom and the Republic of India?; and (ii) whether FOWC was having any ‘Permanent Establishment’ (PE) in India in terms of Article 5 of DTAA? (iii) whether any part of the consideration received or receivable by FOWC from Jaypee outside India was subject to tax at source under Section 195 of the Indian Income Tax Act, 1961 (hereinafter after referred to as the ‘Act’). The AAR answered the first question holding that the consideration paid or payable by Jaypee to FOWC amounted to ‘Royalty’ under the DTAA. Second question was answered in favour of FOWC holding that it did not have any PE in India. As far as the question of subjecting the payments to tax at source under Section 195 of the Act is concerned, AAR ruled that since the amount received/receivable by FOWC was income in the nature of Royalty and it was liable to pay tax there on to the Income Tax Department in India, it was incumbent upon Jaypee to deduct the tax at source on the payments made to FOWC. FOWC and Jaypee challenged the ruling on the first issue by filing writ petitions in the High Court contending that the payment would not constitute Royalty under Article 13 of the DTAA. Revenue also filed the writ petition challenging the answer of the AAR on the second issue by taking the stand that FOWC had PE in India in terms of Article 5 of the DTAA and, therefore, tax was payable accordingly. The High Court reversed the findings of the AAR on both the issues. Whereas it has held that the amount paid/payable under RPC by Jaypee to FOWC would not be treated as Royalty, as per the High Court FOWC had the PE in India and, therefore, taxable in India. While deciding this question, the High Court has not accepted the plea of the Revenue that it was not a dependent PE. The High Court has also held, as the sequitur, that Jaypee is bound to make appropriate deductions from the amount payable to FOWC under Section 195 of the Act.


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All three parties filed appeals before the Supreme Court. As per FOWC and Jaypee, no tax is payable in India on the consideration paid under RPC as it is neither Royalty nor FOWC has any PE in India. It is pertinent to mention that the Revenue has not challenged the findings of the High Court that the amount paid under RPC does not constitute royalty. Therefore, that aspect of the matter has attained finality. The main question in the appeals therefore pertained to PE. After analysing various case laws on the subjects, the court held that; We are of the opinion that the test laid down by the Andhra Pradesh High Court in Visakhapatnam Port Trust case fully stands satisfied. Not only the Buddh International Circuit is a fixed place where the commercial/economic activity of conducting F-1 Championship was carried out, one could clearly discern that it was a virtual projection of the foreign enterprise, namely, Formula-1 (i.e. FOWC) on the soil of this country. It is already noted above that as per Philip Baker27, a PE must have three characteristics : stability, productivity and dependence. All characteristics are present in this case. Fixed place of business in the form of physical location, i.e. Buddh International Circuit, was at the disposal of FOWC through which it conducted business. Aesthetics of law and taxation jurisprudence leave no doubt in our mind that taxable event has taken place in India and non-resident FOWC is liable to pay tax in India on the income it has earned on this soil. As regards deduction of tax at source, the Court observed that; Jaypee was bound to make appropriate deductions from the amounts paid under Section 195 of the Act. In view of the foregoing, the appeals preferred by the FOWC and Jaypee are dismissed, subject to observations as made above. Formula One World Championship Limited v. CIT (2017) 394 ITR 80 /150 DTR 305/247 Taxman 153/295 CTR 12 (SC) Jaiprakash Associates Ltd v CIT (2017) 394 ITR 80/150 DTR 305 /295 CTR 12 (SC) S. 9 (1) (i) : Income deemed to accrue or arise in India - Business connection – Liaison office – Income attributable to liaison office was held to be not assessable in India - DTAA - India – Japan [S. 44BB, Art, 5 ] Dismissing the appeal of the revenue the Court held that; Income attributable to liaison office was held to be not assessable in India. Having treated the project offices as separate taxable units and having offered the profits therefrom to tax under section 44BBB, the project offices could not also be treated as permanent establishments for the purpose of the Double Taxation Avoidance Agreement. The Tribunal was right in holding that the offices of the assessee and its activities during the assessment years in question could not be regarded as its permanent establishment in India and the income directly or indirectly attributable to the offices was not taxable in India during the assessment years 1994-95 and 1995-96 (AY. 1994 - 95, 1995 - 96) DIT v. Mitsui and Co. Ltd. (2017) 399 ITR 505/156 DTR 291 (Delhi) (HC) S.9 (1) (1) : Income deemed to accrue or arise in India - Capital gains - Arbitration - Multiple foreign corporate entities of same group cannot bring multiple arbitration proceedings under multiple investment protection treaties against a host State in relation to same investment, same economic harm and same measures especially when reliefs sought are same - DTAA-India - UK [ S.195, Art, 5 ] Arbitration proceedings against retrospective tax imposed by Finance Act, 2012 brought by Vodafone Group, UK under the Indo-UK BIPA (Bilateral Investment and Promotion Agreement) are liable to be stayed when on same issue an arbitration proceeding brought by Vodafone International Holdings BV is pending - Multiple foreign corporate entities of same group cannot bring multiple arbitration proceedings under multiple investment protection treaties against a host State in relation to same investment, same economic harm and same measures especially when reliefs sought are same UOI v. Vodafone Group PLC United Kingdom. (2017) 250 Taxman 217 (Delhi) (HC)


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S. 9 (1) (i) : Income deemed to accrue or arise in India – Capital gains - Capital gain on sale of shares of Indian Company by a resident of Mauritius was held to be not taxable in India - DTAA - India – Mauritius [S. 9, 45, 90, 245 (R), Art.13 ] It was held by the High Court upholding the decision of the AAR that the long term capital gain arising on sale of shares of TIL, an Indian Company, by the assessee, a resident of Mauritius is not taxable in India as, the same can be taxed only in Mauritius and not in India and that the sale of shares is genuine and that the AAR had rightly held that the arrangement is not for the purpose of avoidance of tax in India. Therefore ,capital gain on sale of shares of Indian Company by a resident of Mauritius was held to be not taxable in India . CIT (IT) v. JSH (Mauritius) Ltd (2017) 84 taxmann.com 37 /297 CTR 275/155 DTR 321 (Bom) (HC) S. 9 (1) (i) : Income deemed to accrue or arise in India - Business connection – Capital gains - Stay of Arbitration proceedings - Multiple foreign corporate entities of same group cannot bring multiple arbitration proceedings under multiple investment protection treaties against a host State in relation to same investment, when reliefs sought are the same – DTAA-India – UK [ S. 195, 201 (1), 201 (IA ] Allowing the petition the Court held that; arbitration proceedings against retrospective tax imposed by Finance Act, 2012 brought by Vodafone Group, UK under the Indo-UK BIPA (Bilateral Investment and Promotion Agreement) are liable to be stayed when on same issue an arbitration proceeding brought by Vodafone International Holdings BV is pending . Multiple foreign corporate entities of same group cannot bring multiple arbitration proceedings under multiple investment protection treaties against a host State in relation to same investment, same economic harm and same measures especially when reliefs sought are same . Court also held that, defendant, their servants, agents, attorneys, assigns are restrained from taking any action in furtherance of the notice of dispute and the notice of arbitration and from initiating arbitration proceedings under India-UK Bilateral Investment Protection Agreement or continuing with it as regards the dispute mentioned by the defendants. UOI v. Vodafone Group PLC United Kingdom (2017) 250 Taxman 217 (Delhi) (HC) S. 9 (1) (i) : Income deemed to accrue or arise in India - Business connection – Sale of shares was held to be not liable to capital gains tax - DTAA - India – Nether lands – Singapore [ S. 2 (47), 269UA (d), Art .13 (1), 11 (1) ] Dismissing the appeal of the revenue the Court held that; since assessee-company did not sell immovable property or any rights in immovable property in which shareholders enjoyed ownership as contemplated in section 269UA (d), article 13 (1) was not applicable and, therefore, assessee company was entitled to exemption from taxation of its capitals gains in India. (AY. 2005-06) DIT (IT) v. Vanenberg Facilities BV (2017) 249 Taxman 175 /297 CTR 291 /155 DTR 153 (AP) (HC) S. 9 (1) (i) : Income deemed to accrue or arise in India - Business connection - AO satisfied with income attributable under article 9 of India-Denmark DTAA in respect of 141 ships out of 145 ships – revenue cannot bring income of these 4 ships to tax in India under section 9. Where activity carried out by 4 ships had nexus with operation of 141 ships operating in international traffic, which were given benefit under article 9 of India-Denmark DTAA, revenue could not bring income of 4 ships alone to tax in India under section 9 of the Act. DIT v. A.P.Moller Maersk A/S (2016) 76 taxmann.com 143 (Bom) (HC)


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Editorial : SLP of revenue is dismissed, DIT v. A.P. Moller Maersk A/S (2017) 248 Taxman 83 (SC), followed DIT v. A.P.Moller Maersk A/S (2017) 392 ITR 186 (SC) S.9 (1) (i) : Income deemed to accrue or arise in India - Royalty— Payment for software not royalty hence not taxable in India as royalty, but business income, DTAA - India – China [S.9 (1) (vi), Art. 12, Copyright Act, 1957, S. 14.] Dismissing theof the revenue the Court held that; the software supplied was not independent, but necessary for the hardware supplied by it, under the contract. The assessee also provided upgrades for the software. The supplies made (of the software) enabled the use of the hardware sold. It was not disputed that without the software, use of the hardware was not possible. The mere fact that separate invoicing was done for purchase and other transactions did not imply that it was royalty payment. In such cases, the nomenclature (of licence or some other fee) was indeterminate of the true nature. Nor was the circumstance that updates of the software were routinely given to the assessee's customers. These facts did not detract from the nature of the transaction, which was supply of software, in the nature of articles or goods. The payments for software did not constitute royalty. CIT (IT) v. ZTE Corporation (2017) 392 ITR 80 /245 Taxman 252/293 CTR 94 /147 DTR 121 (Delhi) (HC) S.9 (1) (i) : Income deemed to accrue or arise in India - International; Airlines Technical Pool (IATP)-Reciprocity in service rendered and received from pool members-Amount received from pool not taxable in India. DTAA India – Germany - Netherland. [Art. 8] Dismissing the appeal of the revenue, the Court held that; the assessees participated in the International Airlines Technical Pool and earned certain revenues from such activities and also incurred expenditure. There was clear reciprocity as to the extension of services; membership was premised upon each participating member being able to provide facilities for which it was formed. As there was reciprocity in the rendering and availing of services, there was clearly participation in the Pool; in terms of the two Double Taxation Avoidance Agreements (between India and Germany and between India and the Netherlands) the profits from such participation were not taxable in India. DIT v. KLM Royal Dutch Airlines (2017) 392 ITR 218/245 Taxman 341/292 CTR 121 /147 DTR 1 (Delhi) (HC) DIT v. Lufthansa German Airlines (2017) 392 ITR 218/245 Taxman 341/292 CTR 121 /147 DTR1 (Delhi) (HC) S. 9 (1) (i) : Income deemed to accrue or arise in India – Capital gains - Investment income of assessee was held to be not taxable in India as per article 14 (6) of Indo-Spain tax treaty, and that gain on forex transaction entered in to hedge investment in securities was capital gains and not taxable in India - DTAA-India – Spain [ Art 14 (5), 14 (6) ] Dismissing the appeal of the revenue, the Tribunal held that; when the Spanish company, had invested in some Indian companies which were in business of developing properties in India and it was not holding any property, directly or indirectly, provisions of article 14 (5) of DTAA between India and Spain being applicable for properties held by a Spanish company, said transaction could not be taxed in India. As investment income of assessee was not taxable in India as per article 14 (6) of Indo-Spain tax treaty, and that gain on forex transaction entered in to hedge investment in securities was capital gains and not taxable in India. (AY. 2007 - 08 to 2009 - 10) ADIT (IT) v. Merril Lynch Capital Market Espana S.A.S.V. (2017) 167 ITD 194 (Mum) (Trib.)


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S. 9 (1) (i) : Income deemed to accrue or arise in India - Business connection – Stay of employee in India was only 90 days there was no permanent establishment in India – Absence of exact work done by service engineers receipts cannot be assessed as royalty or Fees for technical services - DTAA-India – Saudi Arabia [. Art, 5 (3) (b), 22 ] Allowing the appeal of the assessee the Tribunal held that; where stay of assessee company's employee in India was only 90 days, it being less than 182 days as required under article 5 (3) (b) of India-Saudi Arabia DTAA, there was no permanent establishment in India of assessee company in India. Tribunal also held that; in absence of exact details of work done by service engineers of assessee in India, receipts of assessee could not be treated as royalty or Fees for technical services . (AY. 2010-11)

Electrical Material Center Co. Ltd. v. DIT (IT) (2017) 167 ITD 248 (Bang) (Trib)

S. 9 (1) (i) : Income deemed to accrue or arise in India - Business connection – Expenditure was incurred over all maintenance of Air Craft ,outside India and as there is no permanent establishment in India the payment was held to be not taxable hence not liable to deduct tax at source - Art 7, OECD Model Convention - DTAA - India – Germany [ Art 12 ] Allowing the expenditure incurred over all maintenance of Air Craft ,outside India and as there is no permanent establishment in India the payment was held to be not taxable hence not liable to deduct tax at source. (AY. 2012-13)

DHL Air Ltd. v. DCIT (2017) 167 ITD 258/(2018) 191 TTJ 884 /163 DTR 140 (Mum) (Trib.)

S. 9 (1) (i) : Income deemed to accrue or arise in India - Business connection – Part of the profits earned from offshore supply of said equipments relatable to the operations carried out in India was liable to tax in India - DTAA-India – China . [ DTAA . Art . 5 ] Since the assessee, a China based company had a supervisory PE in India from which it was supervising erection, installation and commissioning activities of equipments, a part of the profits earned from offshore supply of said equipments relatable to the operations carried out in India was liable to tax in India. (AY. 2007-08 to 2013-14). Shanghai Electric Group Co. Ltd. v. DCIT (2017) 190 TTJ 11/ 84 taxmann.com 44 (Delhi) (Trib.) S.9 (1) (i) : Income deemed to accrue or arise in India - Business connection - Entire activity of business to an Indian company was outside India hence the income was held to be not taxable in India - DTAA - India - Germany [ Art. 5] Allowing the appeal of the assessee the Tribunal held that ;since entire activity of designing, manufacturing and delivery of equipment was made outside India and payment was also made outside India, Permanent establishment of assessee had no role to play in any of above activities, therefore business income of assessee was not taxable in India. (AY. 2009 – 2010)


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Caterpillar Global Mining Europe GmbH v. ACIT (IT) (2017) 166 ITD 282 (Hyd) (Trib.) S. 9 (1) (i) : Income deemed to accrue or arise in India - Business connection - Failure to bring on record copy of agreement matter was remanded to AO - DTAA-India - USA [ Art. 12 ] Allowing the appeal of the revenue the Tribunal held that; in absence of agreement entered into between the assessee and non-resident, it is not possible to conclude as to whether the payment made by the assessee was for commission purpose or the services offered to the assessee were consultancy and technical in nature and moreover, the non-resident has Permanent Establishment in India or not. Since, assessee failed to bring on record agreement entered into with non-resident entities. Matter remanded back fresh disposal (AY. 2008-09 ,2013-14) ACIT v. Changepond Technologies (P.) Ltd. (2017) 166 ITD 266 (Chennai) (Trib.) S. 9 (1) (i) : Income deemed to accrue or arise in India - – Permanent Establishment – Two projects cannot be combined to determine PE as they are not connected each other-DTAA - India-UAE [ Art.5 ] Dismissing the appeal of the revenue the Tribunal held that; actual period of two projects cannot be combined as they were unconnected works, hence the income was held to be not taxable as there is no PE in India . (AY.2009-10) ACIT v. Valentine Maritime (Gulf) LLC. (2017) 166 ITD 1 (Mum) (Trib.) S.9 (1) (i) : Income deemed to accrue or arise in India-Income from immobile property – Income is being taxed in India credit for tax to be deductible has to be given – DTAA-India – UAE. [S.90,Art,6]

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