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II. Direct Taxes Case Laws:
1. Rockland
Hotels Ltd. Vs. Income Tax Settlement Commission Principal Bench,
W.P.(C) 3557/2014, Date of Order: 20.10.2015, High Court of Delhi
Question
of law involved is as to, who qualifies as a related party in terms of
clauses (a)(v) and (a)(vi)(B) of the Explanation to sub-section (1) to
section 245C.
Applying
the parameters of clauses (a)(v) and (a)(vi), only if a director of the
petitioner companies has a substantial interest in the specified person
(company), then, the petitioner companies, their directors and
relatives of their directors qualify as related parties. The Petitioner
companies would not qualify as a related party merely because any
relative of one of its directors has a substantial interest in the
specified person. Further, the petitioner companies would qualify as a
related party, if a specified person (company) or any of its directors
or any relative of any of its directors have a substantial interest in
the petitioner companies. Beneficial owner of the share as referred to
in Explanation (b)(A) refers to shares held in a company by a person
either in his own name or in the name of other, persons. A corporate
entity is a separate legal entity. Merely because a director of the
specified person holds shares in a company which in turn holds shares in
the Petitioner would not make the director the beneficial holder of the
shares of the Petitioner and thus qualify the petitioner as a related
party. We do not find any infirmity with the reasoning of the Settlement
Commission. Since the conditions of Explanation (a)(vi)(B) are not
satisfied, these writ petitions are thus liable to be dismissed.
(Please click here for judgment)
2. Principal
Commissioner of Income Tax Vs. Universal Precision Screws, I.T.A. No.
392/2015, Date of Order: 06.10.2015, High Court of Delhi
Assessee
is a 100% EOU, claiming deduction u/s 10B, whether AO is right in
interpreting that interest from FDRs was not income derived from the
undertaking, and including the exchange rate difference in the domestic
sales and treating the scrap sale as part of the domestic sale.
The
Supreme Court in CIT v. Punjab Stainless Steel Industries (2014) 364 ITR
144 (SC) sale of scrap is not includable in the total turnover since
the Assessee was not engaged in the business of scrap. Consequently, the
impugned orders of the CIT (A) and the AO treating the scrap amount as
part of the domestic turnover was set aside. the Bombay High Court in
CIT v. Gem Plus Jewellery India Ltd. (2011) 330 ITR 175 (Bom.) which
held that foreign exchange fluctuations realized within the stipulated
period forms part of the sale proceeds and is directly related to the
export activates. It was, accordingly, held that this should be treated
as income derived from export activities, as such the foreign exchange
fluctuation has to be considered as part of the export turnover.
In the
present case, the Assessee has stated that the interest on FDRs was
received on “margin kept in the bank for utilization of letter of credit
and bank guarantee limits”. In those circumstances, the decision of the
ITAT that such interest bears the requisite characteristic of business
income and has nexus to the business activities of the Assessee cannot
be faulted. In other words, interest earned on the FDRs would form part
of the “profits of the business of the undertaking” for the purposes of
computation of the profits derived from export by applying formula under
Section 10B(4) of the Act.
(Please click here for judgment)
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