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24.06.2011 - Recent Updates as on 24.06.2011
Friday, June 24, 2011

 

1.  SAMI LABS LTD Vs. DEPUTY COMMISSIONER OF INCOME TAX, ITA No.417/Bang/2010, Assessment Year: 2004-2005, DATED: 25TH FEBRUARY 2011 ITAT – Banglore

Whether expenses incurred on cultivation for adequate and steady supply of medicinal plant are allowable even though there is no agricultural activities done by an assessee directly.

There is force in the contention of the assessee that it had not generated any agricultural income out of this venture and as a matter of fact, the assessee had not engaged any agricultural activity, but, for cultivation of coleus plants to facilitate its business and due to commercial expediency, it had incurred cultivation expenses to the tune of Rs.90.64 lakhs; in this connection, the concept of Circular No.6/2007 of the Board is very much applicable to the facts of the issue on hand;the assessee had to incur cultivation expenses to ensure adequate and steady supply of coleus plants from the farmers which were an essential input for the continuous processing in research and development activities of the assessee. Thus, these expenses incurred by the assessee for a commercial expediency and were wholly and exclusively for the purpose of its business. In essence, the authorities below were not justified in disallowing the cultivation expenses of Rs 90.64 lakhs claimed by the assessee.

(Please click here for judgment)

  

2.  Exxon Mobil Company India P. Ltd. Vs. Dy. Commissioner of Income Tax, ITA No. 8311/Mum./2010, Assessment Year : 2006-07, DATED: 10TH JUNE 2011 ITAT – Mumbai

The Tribunal had to consider the following transfer pricing issues: (i) Whether if two distinct services are rendered to the AE and mark-up is received for one and not for the other, the aggregate position can be considered for determining ALP, (ii) whether multi-year data can be considered, (iii) whether if loss making comparables are rejected, high profit making comparables should also be rejected? HELD by the Tribunal:

(i) The assessee rendered three services to its AE and while it received a mark-up for “application of technical development services” and “promoting the licensing of technology”, it did not receive any mark-up for “application research”. The argument that the three activities should be aggregated to determine the ALP is not acceptable because the entire benefit of the “application research” was retained by the AE and not shared with the assessee and so there was no justification for not compensating the assessee;

(ii) Under Rule-10B(4), only the data relating to the financial year can be taken and as an exception, the data of two years prior to the financial year may be taken but only if such data reveals facts which could have influenced the determination of transfer pricing. If the assessee wants to consider previous year’s data, the burden is on it to demonstrate that the previous year’s data contained certain facts which would influence the determination of transfer pricing. In the absence of that, there is no scope for considering data other than that of the current year;

(iii) While in principle, it is correct that if loss making units are excluded, abnormal profit making units should also be excluded, on facts, the TPO had rightly rejected the loss making companies as not being comparable. In principle, neither loss making units nor high profit making units can be eliminated from the comparables unless, there are specific reasons for eliminating the same which is other than the general reason that a comparable has incurred loss or has made abnormal profits.

(Please click here for judgment)

  

 What's New
  1. Income Tax Notification No. 36/2011 - Exemption to specified Persons from Req. of Furnishing A Return of IT Under Sec.139(1) For AY-11-12  (Click for detail)

  2. Income Tax Notification No. 35/2011 – Cost Inflation Index for FY 2011-12  (Click for detail)

  3. 12 Cases of Wrong E-Filing Detected - MCA Directs Regional Directors to Initiate Inquiry Against Those Practicing Professionals Who Certified the Particulars Furnished by Listed Companies  (Click for detail)

  4. RBI/2010-11/578 - Public Provident Fund (PPF) Scheme -1968 - Clarification Payment of interest in respect of PPF HUF Accounts  (Click for detail)

     

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