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25.05.2018 - Voice of CA presents - Latest Updates
Friday, May 25, 2018


  I. Headlines Today:   

  1. Govt Mulls New Category to Tax Hi-tech Items  (Click for detail)
  2. Taxman disallows AMP deductions sought by MNCs  (Click for detail)
  3. Two Held for Fraud Under GST Act in Delhi  (Click for detail)
  4. 27 States or UTs have implemented e-way bill system for intra-State movement of goods till May 25, 2018  (Click for detail)

II. A Useful Presentation:

1.  Income from Other Sources and Allied Issues
     Under Section 56 of the Income Tax Act, 1961

      (Please click here)

(Contribution by CA. Sanjay K. Agarwal, Founder - Voice of CA; and contributor is available at Email-id: )

  III. Direct Taxes Case Law: 

1.  Vipul Motors Pvt. Ltd.  Vs. ACIT, I.T.A. No. 5217-18/Del/2013, Date of Pronouncement: 23.05.2018, ITAT - Delhi

Whether notice issued u/s 148 is valid if assessment or reassessment proceedings are pending on the same subject matter with the higher authority.

Held:- No

Brief Facts
The assessee filed its return of income for AY 2003-04 on 21.11.2003 declaring income of Rs.54,15,681. Notice u/s 153A was issued consequent to search and seizure operation carried on 01.06.2006 asking for details of loan received from M/S KVF Securities Pvt. Ltd. The Ld.AO completed the assessment by making addition of principal amount of loan Rs.1200,000 u/s 68 and interest paid on the loan Rs 15,534. On appeal by assessee, the Ld. CIT(A) reversed the order stating that no addition can be made in absence of any incriminating material found during the course of search. Thereafter Dept. filed appeal before Hon’ble ITAT which restored the mater to Ld. CIT(A) for de novo re-adjudication of the appeal. Meanwhile department initiated reassessment proceedings u/s 148 and made same addition of Rs.12,00,000 u/s 68 and interest paid on the loan of Rs 15,534. The assessee filed an appeal before the Ld.CIT(A) which was dismissed. Being aggrieved the assessee has filed an appeal before Hon’ble ITAT.

The Hon’ble ITAT held that it is a settled law that if an assessment is pending either by way of original assessment or re-assessment proceedings, the assessing officer cannot issue a notice u/s 148. Since in the present case the subject matter of proceedings u/s 153A, which are still pending, is same as in proceedings u/s 148, the reassessment proceedings suffer from basic defect of the re-assessment notice being illegal. Therefore, the re-assessment proceedings cannot be sustained.
The appeal was held in favour of the assessee and against the revenue.

Cases Referred: -
1.    Nilofer Hameed vs. ITO 235 ITR 161.
2.    CIT vs. Sanjay Kumar Garg in ITA Nos. 92 to 96/2012.
3.    Smt. Pushpa Rajawati vs. CIT in ITA no. 205/2015.

(Please click here for judgment)

2.  Brown Forman Worldwide LLC Vs. DDIT (Int. Taxation), I.T.A. Nos. 433 & 6139/Del/2012, Date of Pronouncement: 11.05.2018. ITAT - Delhi

Whether functionally dissimilar companies be chosen as comparables for determination of arm length price for an international transaction.

Held:- No

Brief Facts
The assessee is an Indian branch of Brown Forman Worldwide LLC (Head Office) engaged in providing Marketing support services and other similar auxiliary sale, support/assistance services to its Head office. The assessee reported an international transaction of ‘Provision of marketing support services’ with transacted value of Rs.6,43,25,676/- in Form No.3CEB. The assessee had chosen Transaction Net Margin Method (TNMM) with the Profit level indicator (PLI) of Operating Profit/Total Cost. The Ld. AO made reference to Ld. Transfer Pricing Officer (TPO) for determination of arm’s length price (ALP) of the international transaction. Eleven comparables, given by assessee whose average margin were less than that of assessee were rejected by Ld. TPO and 14 new comparables were chosen by Ld. TPO of which two were excluded on appeal to Dispute Resolution Tribunal by the assessee. The AO re-worked out the fresh PLI of comparables at 22.45% and made addition of Rs.1,06,56,851/.

Not satisfied with the type of comparables chosen by TPO the assessee has filed an appeal before Hon’ble ITAT.

The Hon’ble ITAT held that before choosing the fresh comparables or rejecting the comparables given by assessee, it is a sine qua non that authority should study the functional profile of the assessee which is rendering market services on ‘cost plus basis’. As regards the issue of comparables, the Hon’ble ITAT has specifically rejected a comparable whose model was ‘commission’ basis clarifying that there is substantial difference between ‘Commission” model and “cost plus basis” model. Other comparable were also rejected on similar grounds as regards different nature of activities. The impugned order on the issue of addition towards transfer pricing adjustment was set aside and the matter was remitted to the file of AO/TPO for a fresh determination of the ALP.

(Please click here for judgment)

Golden Rules:

  "If your vision is for year plant wheat,
if your vision is for 10 years plant trees.
But if your vision is for a lifetime plant relations" 


Thanks & Regards


Voice of CA 

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