TaxTMI 
TaxTMI 
2016 (11) TMI 1544
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....f valuation of closing stock of SIM cards as on 31.03.2009. 3. This assessee is a company providing cellular mobile telephonic services in Gujarat state. It declared SIM cards stock as on 31.03.2009 at nil value. The Assessing Officer sought to know reasons thereof. The assessee filed reply dated 05.02.2013 stating to have held its SIM cards for sale in ordinary course of business. It had issued significant quantities of SIM cards to customers for providing connection without charging any separate sale price during the year. It claimed the said SIM cards' value at Rs. nil till the same were activated at customers' end. The assessee stressed the point that its SIM cards in question were not in the nature of an independent product to be sold in open market. It followed cost or market price; whichever is lower formula to justify nil price in question in tune with not only Section 211(3A) r.w.s. 211(3C) of the Companies Act but also asserted to have prepared its books as per AS-2. 4. The case file indicates that the Assessing Officer rejected all these pleas. He observed in draft assessment that the assessee has itself valued 15,68,545 SIM cards carrying opening stock of Rs. 29mi....
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....sing stock should be same. It may be possible that market value of a product may be there in beginning of the year but may reduce to NIL by the year end. Thus, in absence of any reliable evidence by the AO, as per the decision of Hon'ble Gujarat High Court in the case of Voltamp Transformers, we accept assessee's contention that it .had rightly valued its SIM cards at Nil value, being their market value. Further, auditors have also not disputed valuation of SIM cards in the financial statements. Even otherwise, assessee is entitled to deduction under section 80IA of the Act in past and current years and hence, there is no impact on taxable income. In the light of above, objections of the assessee against the proposed upward adjustment are allowed. Therefore, we hereby direct the AO to delete the proposed addition of Rs. 4,02,03,570. As this ground is allowed on merits, we have not adjudicated alternative ground raised by the assessee." 6. We have heard rival contentions. It is clear by now that the instant issue arises between the parties qua closing stock valuation of assessee's SIM cards as on 31.03.2009. Its case as narrated in preceding paragraphs is that these SIM c....
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....nue. Ld. Departmental Representative does not point out any exception thereto in the impugned assessment year. This substantive ground accordingly fails. 9. The Revenue's next substantive ground (3b) avers that the Panel has erred in directing the Assessing Officer to apply Section 80IA's amended provision from A.Y.2000-01 thereby allowing the impugned deduction @ 100% of the profits of the relevant previous year. Shri Soparkar states herein as well that this tribunal's order in A.Y. 2006-07 (supra) adjudicates the very issue in assessee's favour. The same goes unrebutted at the Revenue's end. We accordingly decline this ground as well. 10. The Revenue's next substantive ground (3C) assails correctness of the DRP's directions to the assessing authority to allow Section 80IA deduction amounting to Rs. 94.7 million and Rs. 138.90 millions on account of sharing of passive infrastructure and Cell sites; respectively. The Assessing Officer's main reason for disallowing the corresponding claim was that neither the assessee is engaged in the business of leasing of assets nor sharing of cell sites. He held that the above incomes could not be treated to have been derived from an eligi....
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....come only. It quoted this tribunal's order in Radha Madhav Industries case ITA No.1935/Ahd/2007 holding identical profits u/s.41(1) as to has been derived from the eligible undertaking. The Assessing Officer opined that such a course of action would amount to double deduction as the very sum stood accepted as bad debts in earlier years and now these figures are sought to be included in Section 80IA deduction claim. 13. We come to DRP's findings now. Ld. Panel negates this double deduction reason after holding that assessee's bad debts claim in earlier assessment years would have reduced its eligible deduction therein. It further places reliance on the above Radha Madhav's case law (supra) to accept assessee's contentions leaving behind the Revenue aggrieved. 14. Heard both sides. There is hardly any quarrel that the assessee claimed these sums as bad debts (revenue receipts) in earlier assessment years. The same stood allowed. It thereafter received back these sums in the impugned assessment year in the nature of business income u/s.41(1) of the Act. A coordinate bench of the tribunal (supra) concludes in these facts that such an instance does not amount to double deduction c....
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.... that amount forfeited by BSNL and written off by the assessee is a business loss and is not an expenditure. Hence, as the said amount is not an expenditure, it cannot qualify as a prior period expenditure as contended by the AO. Further, as far as claiming deduction of business loss is concerned, the same is covered under provisions of section 28 of the Act. Hence, amount irrecoverable from BSNL being written off by the assessee in AY 2009-10 will constitute a business loss and as it has occurred in AY 2009-10, it is allowable as a deduction under provisions of section 28 of the Act in AY 2009-10. Even otherwise, assessee is entitled to deduction under section 80IA of the Act in past and current years and hence, there is no impact on taxable income. In light of the above, the objection raised by assessee is allowed and the AO is directed to delete the proposed addition of Rs. 66,00,000. As this ground is allowed in favour of the assessee, without prejudice ground has not been adjudicated." 18. Heard both sides. We have narrated in preceding paragraphs about assessee's payment made to BSNL for very much a business purpose which was forfeited thereby resulted in the impugned writ....
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....bove two roaming expenses. Ld. Panel approved the same. 21. We have heard rival submissions. We put up a specific query to Revenue as to whether there is any direct evidence pinpointing human intervention element in assessee's roaming facilities availed from its payees. No material is quoted in response to our query except page 71 of the assessment order. Meaning thereby that there is only an inference that the assessee must have paid for the impugned roaming charges involving human intervention component. This case file reveals that this tribunal's Kolkata bench in ITA No.1864/Kol/2012 Vodafone East Ltd. (assessee's sister concern) vs. ACIT decided on 15.09.2015 examines all fine points in case of identical roaming charges in cellular telephony parlance to conclude that the same are not liable for TDS deduction as follows: "4.10. We have heard the rival submissions and perused the materials available on record. It would be pertinent to note here that roaming services are provided by other telecom operators by using their existing telecom network/ infrastructure and no incremental investment is required to put up any additional network /infrastructure for provision of such ro....
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.... of technical experts in case of complex technical matters. 4.12. As per the directions of the Supreme Court in the case of CIT vs Bharti Cellular Ltd in 330 ITR 239 (SC), the TDS officer has been directed to obtain technical evidence from the experts in the telecom field with regard to the fact of existence of human intervention for the roaming services and accordingly the ACIT, Circle 51(1), New Delhi had recorded statement from Shri Tanay Krishna on 29.9.2010. The Learned AR has also filed prayer for receipt of additional evidence in terms of Rule 29 of ITAT Rules on 20.7.2015 containing the statements recorded from Shri Tanay Krishna on 29.9.2010 in the case of Vodafone Essar Mobile Services Ltd & cross examination by Vodafone Essar Mobile Services Ltd on 29.9.2010. This application under Rule 29 contains a prayer with reasons that these documents could not be filed before the lower authorities and that these documents are very crucial for the disposal of the case under appeal as the examination of the technical experts had taken place post the proceedings before the Assessing Officer and as per the directions of the Hon'ble Supreme Court, these statements were rec....
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....ll configuration/provisioning of system - in this the operator has to configure and make provision in data base as to how the calls will flow. This has to be done by a technically competent person. vi) Testing - it is exhaustive testing. The calls are tested on various modes (terminating, loading etc) on network portion. (a) Software by hardware testing - Stand alone testing (b) Interconnect testing - it is done to test if it is compatible with other hardware/software. This testing employs technically qualified professionals and tested as per the agreed plan between services provider and vendor. Question 5: In your expert opinion, does the system work automatically when network system of one cellular operator gets connected with the network system of other cellular operator? Ans. 5: When a calls get connected by one operator to other, per se it is an automatic connection, but there can be instances when there is a problem in the call connect which may require resolution through human intervention. Question 6: Hence there is no 100% automatic operation of this network. Can you explain what kind of human intervention is required? ....
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.... operators and not during actual carriage of the call by one operator for the other. Please confirm. Yes. Q.7. From perusal of your answers to various questions posed to you by the Tax Department, you have mentioned that services of a technical expert are required for inter-connect arrangements. Please confirm whether such services are required for provision of inter-connect services, i.e., carriage of calls from one network to another, or are primarily for fault detection and removal. Please refer to answer to Question 4 of this cross examination. Q.11. What is the extent of human involvement in provision of interconnect services. i.e., carriage of calls originating on network of one operator and termination the network of the other operator? We have answered in question no 5. Q.12. In answer to Question 21 of your Statement, you have stated that in cellular networks the level of human intervention is much higher and of sophisticated technical level. In this regard, do you agree that cellular networks are based on sophisticated technology and work on an automated mode? The human intervention as referred by you for network opera....
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....x should have been deducted at source under section 194] of the Act from the payments?" He submitted that in the case of Chhattisgarh State Electricity Board no appeal had been filed by the Revenue and the Revenue accepted the decision of the Tribunal which was followed by the Tribunal in the case of the present assessee as well. Merely drawing power and carrying power through transmission lines and transmission system would not amount to renting up equipment or its charge or rent". The Hon'ble Supreme Court has also shown us some direction in this behalf. While interpreting the expression "rent", the applicability of section 194-1 must be gathered from whether the wheeling and transmission charges draw its colour from the basic meaning of the expression "rent". It is seen from the decision of the Supreme Court in Singapore Airlines (supra) that the meaning of "rent" must be understood in the context in which they are used. In the present set of facts, it is not possible to equate the wheeling and transmission charges payable MSETCL with rent. On facts it is seen that the MERC order dated June 27, 2006, deals with MSEDCL's contentions, apropos the methodol....
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....ng and transmission charges of electricity, it cannot be interpreted to mean fees for the providing technical services. Under the open access system, it is the MSEDCL which will be availing of the said transmission facility. No "service" is being provided by the MSETCL or the State transmission utility. No doubt, MSEDCL, as transmission licensee is required to provide superintendence, maintenance and repairs to the system. However, no such service is rendered by the MSETCL to MSEDCL. MSETCL is obliged to maintain the system by value of operation of law under the Electricity Act. The MSEDCL accesses the State transmission utility and distributes electricity passing through the State transmission utility. Our views stand fortified by the very fact that the Revenue itself is confused and unsure as to the nature of the charge. The focus of the Revenue is only the requirement of deduction of tax whether under section 194-1 or section 194]. This approach is erroneous. The Revenue contends that the wheeling and transmission charges could be rent or fees for technical services but, in our view it is neither. Wheeling charges represent the charge for permitting use of the State transmission....
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...." 11. We find that the Power Purchase Agreement entered into by the assessee with NTPC, [copy placed before us at pages 15-27 of the paperbook), specifically provides that "power shall be made available by the NTPC at the busbars of the Station and it shall be obligation and responsibility of the CSEB to make the required arrangement for evacuation of power from such delivery points of NTPC". It is pursuant to these obligations that the assessee, along with other bulk power beneficiaries - namely M P State Electricity Board, Gujarat Electricity Board, Maharashtra State Electricity Board, Electricity Department - Government of Goa, Administration of Daman & Diu, and Electricity Department - Administration ofDadra and Nagar Haveli, has entered into a 'Bulk Power Transmission Agreement' with PGCIL. The preamble of this agreement, inter alia, notes that the PGCIL "is desirous to transmit energy from the Central Sector Power Station(s) to the Bulk Power Beneficiaries and that the said Bulk Power Beneficiaries are desirous of receiving the same through POWERGRID transmission system on mutually agreed terms and conditions". This agreement provides that "POWERGRID shall operate and....
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....4-1 of the Act. 12. Let us now take a look at the statutory provision with regard to tax withholding from rent payments, which is set out in Section 194-I of the Act, and analyze the same. Section 194-I provides as follows: Any person, not being an individual or a Hindu undivided family, who is responsible for paying to a resident any income by way of rent, shall, at the time of credit of such income to the account of the payee or at the time of payment thereof in cash or by the issue of a cheque or draft or by any other mode, whichever is earlier, deduct income-tax thereon at the rate of- (a) two per cent for the use of any machinery or plant or equipment; and (b) ten per cent for the use of any land or building (including factory building) or land appurtenant to a building (including factory building) or furniture or fittings: Provided that no deduction shall be made under this section where the amount of such income or, as the case may be, the aggregate of the amounts of such income credited or paid or likely to be credited or paid during the financial year by the aforesaid person to the account of, or to, the payee, does not exceed [one hundred eighty....
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.... any other agreement or arrangement "for the use of land, building, plant, machinery or equipment etc. As evident from a plain reading of the agreements under which impugned payments have been made, the payments have been made for the services of transmission of electricity and not the use of transmission wires per se. It is a significant fact that these transmission lines are not only being used for transmission of electricity to the assessee but also for transmission to electricity to various other entities. The transmission lines continue to be not only under control and possession of the PGCIL in legal terms, but, what is more important, these transmission lines are effectively in the control of PGCIL, without any involvement of the assessee in actual operations of the same. On these facts, in our humble understanding, the assessee has made the payments for transmission of electricity in which transmission lines have been used rather than for the use of transmission lines per se. The payments could be said to have been made for "the use of transmission lines" in a case in which the object of consideration for which payments are made was the use of transmission lines simplictor.....
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....omer entrusts to the assessee the work of achieving a certain desired result and that involves the use of goods belonging to the assessee and rendering of several other services and the goods used by the assessee to achieve the desired result continue to be in the effective and general control of the assessee, then, the transaction will not be a transfer of the right to use goods falling within the extended definition of "sale". Let me now clarify the position further, with an illustration which is a variation of the illustration used by the Andhra Pradesh High Court in the case of Rashtriya Ispat Nigam Ltd. v. CTO.[1990] 77 STC 182 (AP). Illustration (i) A customer engages a carrier (transport operator) to transport one consignment (a full lorry load) from place A to B, for an agreed consideration which is called freight charges or lorry hire. The carrier sends its lorry to the customer's depot, picks up the consignment and proceeds to the destination for delivery of the consignment The lorry is used exclusively for the customer's consignment from the time of loading, to the time of unloading at destination. Can it be said that right to use of th....
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....ture owned controlled and in physical possession of PGCIL can be said to have been made for 'the use of ' these transmission lines or other related infrastructure. Viewed in this perspective. Section 1941 has no application so far as the impugned payments for transmission of electricity is concerned. For this short reason alone the impugned demands must be held to unsustainable in law." 9. On due consideration the order of the coordinate bench in the assessee's own case in assessment year 2005-06, and 2006-07 as well as in the case Chhattisgarh State Electricity Board, we are of the view that ld. Commissioner of Income Tax (appeals) has appreciated the controversy in right prospective and no interference is called for. Therefore, ITA No. 3526,3528,3629,3530 are dismissed. The various decisions cited supra have held that there will be no TDS on transmission charges and the same analogy would apply with equal force in the case of transmission charges in telecom industry. 4.17. From the aforesaid statement recorded from technical experts pursuant to the directions of the Supreme Court in CIT vs Bharti Cellular Ltd ( 330 ITR 239) which ha....
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....rried out. Under section 194C each and every work/service is not covered, hence the nature of work done or service performed is required to be seen. Moreover, the term 'work' is defined in section 194C of the Act. The word 'work' in section 194C referred to and comprehends only the activities of workman. It is the physical force which has comprehended in the word 'work'. We have already held that the payment of roaming charges does not require any human intervention. Hence in the absence of human intervention, the services rendered in the context of the impugned issue does not fall under the definition of 'work' as defined in section 194C and hence the provisions of section 194C are not applicable to the impugned issue. 4.19. Let us now get into the applicability of provisions of section 1941 of the Act to the facts of the impugned issue. The term 'rent' is defined in section 1941 as below:- "For the purposes of this section, "rent" means any payment, by whatever name called, under any lease, sublease, tenancy or any other agreement or arrangement for the use of (either separately or together) any,- (a) land; or ....
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....mitted is not an electromagnetic wave but the signal through such means. The Supreme Court thereafter gave a more basic reason to hold that the electromagnetic waves cannot be considered as goods and it is this reason which is relevant for our purpose. It was held that a subscriber to a telephone service could not reasonably be taken to have intended to purchase or obtain any right to use electromagnetic waves or radio frequencies when a telephone connection is given. Nor does the subscriber intend to use any portion of the wiring, the cable, the satellite, the telephone exchange, etc. As far as the subscriber is concerned, no right to the use of any other goods, incorporeal or corporeal, is given to him or her with the telephone connection. In view of the above, we hold that the payment of roaming charges by the asesssee to other service provider cannot be considered as rent within the meaning of section 1941 of the Act. 4.20. Accordingly, we hold that the payment of roaming charges of Rs. 55,41,01,320/- does not fall under the ambit of TDS provisions either u/s 194C / 1941 or 194J of the Act and hence we have no hesitation in directing the Learned Assessing Offi....
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....es Limited and Voadfone South Limited, reported as Bharti Airtel Limited vs. DCIT [(2015) 372 ITR 33 (Kar)] wherein their Lordships have, inter alia, observed as follows: "62. In the appeals before us, the assessees sell prepaid cards/vouchers to the distributors. At the time of the assessee selling these pre-paid cards for a consideration to the distributor, the distributor does not earn any income. In fact, rather than earning income, distributors incur expenditure for the purchase of prepaid cards. Only after the resale of those prepaid cards, distributors would derive income. At the time of the assessee selling these pre-paid cards, he is not in possession of any income belonging to the distributor. Therefore, the question of any income accruing or arising to the distributor at the point of time of sale of prepaid card by the assessee to the distributor does not arise. The condition precedent for attracting Section 194H of the Act is that there should be an income payable by the assessee to the distributor. In other words the income accrued or belonging to the distributor should be in the hands of the assessees. Then out of that income, the assessee has to deduct income tax ....
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.... construction of Section 194H and keeping in mind the object with which Chapter XVII is introduced, the person paying should be in possession of an income which is chargeable to tax under the Act and which belongs to the payee. A statutory obligation is cast on the payer to deduct the tax at source and remit the same to the Department. If the payee is not in possession of the net income which is chargeable to tax, the question of payer deducting any tax does not arise. As held by the Apex Court in Bhavani Cotton Mills Limited's case, if a person is not liable for payment of tax at all, at any time, the collection of tax from him, with a possible contingency of refund at a later stage will not make the original levy valid. 64. In the case of Vodafone, it is necessary to look into the accounts before granting any relief to them as set out above. They have accounted the entire price of the prepaid card at Rs. 100/- in their books of accounts and showing the discount of Rs. 20/- to the dealer. Only if they are showing Rs. 80/- as the sale price and not reflecting in their accounts a credit of Rs. 20/- to the distributor, then there is no liability to deduct tax under Secti....
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....ber has no use or value for the Sim Card purchased by him from assessee's distributor. The position is same so far as Recharge coupons or E Topups are concerned which are only air time charges collected from the subscribers in advance. We have to necessarily hold that our findings based on the observations of the Supreme Court in BSNL's case (supra) in the context of sales tax in the case of BPL Cellular Ltd. (supra) squarely apply to the assessee which is nothing but the successor company which has taken over the business of BPL Cellular Ltd. in Kerala. So much so, there is no sale of any goods involved as claimed by the assessee and the entire charges collected by the assessee at the time of delivery of Sim Cards or Recharge coupons is only for rendering services to ultimate subscribers and the distributor is only the middleman arranging customers or subscribers for the assessee. The terms of distribution agreement clearly indicate that it is for the distributor to enroll the subscribers with proper identification and documentation which responsibility is entrusted by the assessee on the distributors under the agreement. It is pertinent to note that besides the discount g....
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.... namely, Sim Card or Recharge coupon. Distributor directly or indirectly gets customers for the assessee and Sim Cards are only used for giving connection to the customers procured by the distributor for the assessee. The assessee is accountable to the subscribers for failure to render prompt services pursuant to connections given by the distributor for the assessee. Therefore, the distributor acts on behalf of the assessee for procuring and retaining customers and, therefore, the discount given is nothing but commission within the meaning of Explanation (i) on which tax is deductible under Section 194H of the Act. The contention of the assessee that discount is not paid by the assessee to the distributor but is reduced from the price and so much so, deduction under Section 194H is not possible also does not apply because it was the duty of the assessee to deduct tax at source at the time of passing on the discount benefit to the distributors and the assessee could have given discount net of the tax amount or given full discount and recovered tax amount thereon from the distributors to remit the same in terms of Section 194H of the Act." 11. There is no, and there....
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.... Court, which is binding on the Tribunal in the State of Bombay (as it then was), it has to proceed on the footing that the law declared by the High Court, though of another State, is the final law of the land..............an authority like Tribunal has to respect the law laid down by the High Court, though of a different State, so long as there is no contrary decision on that issue by any other High Court........." 13. In the case of CIT Vs Shah Electrical Corporation [(1994) 207 ITR 350 (Guj)], vide judgment dated 23rd June 1993, Their Lordships had an occasion to consider the aforesaid views. It was in this context that Their Lordships have observed as follows: 3. What is contended by the learned advocate for the Revenue is that the Tribunal decided the appeal on 26th Oct., 1976. By that time, the Andhra Pradesh High Court had upheld the validity of s. 140A(3). He drew our attention to the judgment of the Andhra Pradesh High Court in Kashiram vs. ITO (1977) 107 ITR 825 (AP). From the report, it appears that the said judgment was delivered on 10th Dec., 1975. Therefore, the Tribunal was not right in proceeding on the basis that only the Madras High Cour....
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....nding on the subordinate courts and Tribunals, as articulated by Hon'ble Punjab & Haryana High Court in the case of CIT vs. Ved Prakash [(1989) 178 ITR 332 (P&H)] but then that was a case in the context of validity of a statutory provision, i.e. 140A(3), covered by the rider to the general proposition. This exception does not come into play in the present case as we are not, and we cannot be, dealing with the constitutional validity of a provision. Clearly, therefore, the views expressed by Hon'ble non jurisdictional High Court, in the absence of a direct decision on that issue by the Hon'ble jurisdictional High Court, deserve utmost respect and deference. 16. The difficulty, however, arises in the case in which Hon'ble non jurisdictional High Courts have expressed conflicting views and the subordinate courts and Tribunals do not have the benefit of guidance from Hon'ble jurisdictional High Court. 17. In our humble understanding of the legal position and of the propriety, it will be wholly inappropriate for us to choose views of one of the High Courts based on our perceptions about reasonableness of the respective viewpoints, as such an exercis....
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....at the rule of resolving ambiguities in favour of tax-payer does not apply to deductions, exemptions and exceptions which are allowable only when plainly authorised. This exception, laid down in Littman vs. Barron 1952(2) AIR 393 and followed by apex Court in Mangalore Chemicals & Fertilizers Ltd. vs. Dy. Commr. of CT (1992) Suppl. (1) SCC 21 and Novopan India Ltd. vs. CCE & C 1994 (73) ELT 769 (SC), has been summed up in the words of Lord Lohen, "in case of ambiguity, a taxing statute should be construed in favour of a taxpayer does not apply to a provision giving tax-payer relief in certain cases from a section clearly imposing liability". This exception has been also reiterated by Hon'ble Supreme Court in the case of Oil & Natural Gas Commission Vs CIT (Civil Appeal no. 730 of 2007, judgment dated 1st July 2015; reported in www.itatonline.org). However, in the present case, this exception has no application. The rule of resolving ambiguity in favour of the assessee does not also apply where the interpretation in favour of assessee will have to treat the provisions unconstitutional, as held in the matter of State of M.P. vs. Dadabhoy's New Chirmiry Ponri Hill Colliery Co.....
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....llow Hon'ble Karnataka High Court's judgment is simply this judgment is to be preferred over, in the light of settled legal principles set out above, other Hon'ble High Court judgments, because it is favourable to the assessee. With utmost respect and reverence to all the Hon'ble Courts, it is not for us to choose which decision is to be followed because of its merits because of what it has discussed or because of how it has distinguished other Hon'ble High Courts or because of its timing i.e. of its being latest. Even when a non-jurisdictional High Court distinguishes all other decisions of Hon'ble High Courts but holds a view unfavourable to the assessee, that decision cannot normally be preferred over a decision from another Hon'ble non jurisdictional High Court decision, of equal stature, in favour of the assessee. That is, as we understand, correct approach to the matter and that is the reason why we come to the same conclusion as the SMC did but for altogether different reasons. 23. We have also noted that material facts of the case and the terms of agreements with the distributors are the same as were before Hon'ble Karnataka High Cou....
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....t binding upon VWL (clause 17.1 of the Agreement). 5 'Channel Partner be liable to pay all the taxes such as sales tax, service tax applicable and payable in respect of the subject matter of this agreement and statutory increase in respect therof -Page 72. The distributor shall pay all licenses, fee, taxes, duties, sales tax, service tax and any other charges, assessments penalties whether statutory or otherwise levied by any authority in connection with the operation of distributor's office (Clause III(b) of Annexure III to agreement). 6 'After sale of products distributor/channel partner cannot return goods to the assessee for whatever reason'-Page 74. The assessee shall not be responsible for any post delivery defect in the service tickets. No request of refund of any money shall be entertained by the assessee in any circumstances (Clause e-Annexure I). 7 'Distributors are even prevented from making any representation to the retailers unless authorized by the assessee'. The distributor shall not make any promises or representations or give any warran....
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....e is not in possession of any income belonging to the distributor. Accordingly, the question of any income accruing or arising to the distributor at the point of time of sale of prepaid card by the assessee to the distributor does not arise. (e) In a situation in which the assessee has credited the sale proceeds at the transaction value (in contrast with the transaction being shown at face value and the difference between face value and the transaction value credited to the distributor), the tax deduction liability under section 194H does not arise. While learned counsel for the assessee has stated at the bar that the sale proceeds are credited at the transaction value, this aspect of the matter is to be verified by the Assessing Officer, and in case the sales is accounted for at the face value, to that extent, the tax withholding liability is to be sustained," Both the learned representatives are ad idem that neither the hon'ble apex court nor jurisdictional high court have decided the issue till date. We thus draw support from above extracted tribunal's decision and direct the Assessing Officer to finalize similar factual verification in the very terms reproduced here....
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....that herein as well that the DRP's findings under challenge rely on hon'ble Delhi high court's judgment 221 CTR 305 upholding tribunal' s order 120 TTJ 289 in its own case for A.Y. 1999-2000 concluding the impugned payments are in the nature of revenue expenditure only. We thus find no reason to adopt a different approach in the impugned assessment year. This substantive ground is also rejected. 27. The Revenue's next substantive ground pleads that the DRP has erred in law and on facts in deleting disallowance of Rs. 18,22,71,089/- made u/s.36(1)(iii) of the Act on account of capitalization of expenses relating to capital work in progress. We find that the DRP's directions under challenge elaborately discuss facts of the case along with Assessing Officer's findings and assessee's submissions as follows: "15. The eleventh ground of objection raised by the asseesee is that the AO has erred in making proportionate disallowance of interest expenses amounting to Rs. 18,22,71,089 claimed under section 36(1)(iii) of the Act, by placing reliance on Explanation 8 to section 43(1) of the Act. : 15.1 On this issue, in brief, the Assessing Officer has based his conclusion ....
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.... of actual cost of the asset as per section 43(1) of the Act and hence, cannot be capitalized. * The case laws relied upon by the AO deals with cases whereby interest free loans / advances were provided by the assessee to its group companies / sister concerns / subsidiaries and the assessee was unable to substantiate that the said loans / advances were provided out of own funds and not out of borrowed funds. However, in the instant case, as no interest free loans / advances were given to group companies, the decisions relied by AO are not applicable. Decision 15.3 We have carefully considered the facts of the case and contentions of the AO as incorporated, in the draft assessment order. We have also gone through the various oral and written submission made by the assessee's representative. The assessee has incurred interest expenditure during the year in respect of various ECB loans obtained for acquisition of capital assets. The assesse has acquired capital assets for its existing business and not for the purpose of extension of the business. Hence, proviso to section 36(1)(iii) of the Act cannot be invoked and deducibility of interest expenditure wo....
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....wise requires". Hence, Explanation 8 has no relevancy to Sect/on 36(1)(iii). It has relevancy to the aforementioned enumerated sections. Therefore, in our view Explanation 8 has no application to the facts of the present case.... Section 36(1)(iii) is attracted when the assessee borrows the capital for the purpose of his business. It does not matter whether the capital is borrowed in order to acquire a revenue asset or a capital asset, because of that the section requires is that the assessee must borrow the capital for the purpose of his business. ...." The above principles were subsequently followed by Hon'ble Supreme Court in the case of United Phosphorous Ltd. (299;lTR 9) and Vardhman Polytex Ltd v CIT (349 ITR 690). Hence, respectfully following the above judgments of Hon'ble, Supreme Court, we hold that interest expenditure incurred by the assessee on ECB used for acquisition of capital assets is eligible for deduction under section 36(1)(iii) of the Act. Accordingly, we direct the AO to delete the proposed addition of interest expenditure incurred by assessee. Hence, this ground of assessee is allowed." 28. Heard both sides. The Revenue strongly ....
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.... M/s. Serdia Pharmaceuticals India Pvt. Ltd. case 44 SOT 391 (Mumbai) to adopt CUP method (comparable uncontrolled price) in facts of the instant case. He thereafter was of the view that arms' length price for royalty payment for "Essar" brand as Rs. Nil and corresponding payment had to be restricted to 0.25% on gross sales as against 0.275% declared by the assessee. He adopted similar course of action for the later payee regarding "Vodafone" brand. The same resulted in the impugned upward adjustment of Rs. 3,17,53,917/-. We notice from the above TPO's order that he went by assessee's related parties royalty agreement transactions in proposing the impugned adjustment. The Dispute Resolution Panel reverses the same leaving the Revenue aggrieved. 31. We have heard rival contentions. Suffice to say, since the transfer pricing officer in the instant case has proceeded to propose the impugned upward adjustment on the basis of related party transactions after adopting CUP method instead of TNMM hereinabove, we find that a co-ordinate bench of this tribunal in ACIT vs. Bilag Industries Pvt. Ltd. ITA No. 1441 & 1670/Ahd/2006 and 343/Ahd/2012 quotes a catena of case law to disagree with ....
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....expressions used in all contemporary provisions. Sub-rule (a); as it was in the impugned assessment year defines an un-controlled transaction to mean a transaction other than that between two associate enterprises; whether resident or non-resident. We keep in mind the same and proceed further to Rule 10B prescribing arms length price for the purpose of section 92C(2) of the Act by using any of the six method as the most appropriate method as enumerated in clause (a) to (f); respectively in the given sequence in chapter 10 of the Act. The last clause (f) relevant for any other appropriate method hereinabove contains a specific rule 10AB. This is admittedly not germane to the issue before us. We find that only clause (a) to (e) hereinabove pertaining to 'CUP' and 'TNMM' methods are relevant for the instant adjudication. We find it a fit case to repeat that the assessee had employed TNMM method for charging @ cost + 55% markup i.e. an indirect method for declaring its ALP. The TPO adopted its direct sale price @ 161.2 US $ per kg for making the impugned upward adjustment. We do not find a single observation even in his order rejecting assessee's TNMM method before adopting....
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....it appropriate to observe at this stage that the impugned assessment year 2002-03 is the first full-fledged business of year after introduction of chapter X transfer pricing provision incorporated in the act. The TPO's order dated 10-03-2005 does not even issue a show cause notice disagreeing with assessee's TNMM method. He has rather proceeded to adopt CUP method(supra) again by ignoring the fundamental condition of applying the same. Same is the case with learned CIT(A) who has proceeded on revenue neutral implication without even taking into section 92(1) r.w.s. 92C and 92C(4) proviso along with rules discussed hereinabove at length. There is hardly any dispute that this chapter and the rules notified thereunder prescribe that an arms length price is not the price an assessee is charging or paying for being a party in the international transaction in question but it is the price i.e. to be paid or charged in such a comparable controlled transaction in comparison to a comparable un-controlled transaction. We repeat that the TPO has not kept in mind this fine distinction. We accordingly reverse his action on this sole legal principle. Needless to say, the CIT(A) has alread....