Tax LawBeat
“Your Daily Tax Law Newsletter highlighting Income Tax, Direct Tax & International Tax Law Cases” of eminence.
Income Tax Cases
M/S Uber India Systems Pvt Ltd. v. Joint Commissioner of Income Tax, Mumbai (ITA Nos 5862 & 5863/Mum/2018)- March 04,2021
Mumbai ITAT answering in favour of the taxpayer, held that Uber India acting as mere support service provider on behalf of its foreign principal, cannot be held as person responsible for payment for Sec 194C, when cash is directly paid by User to Driver-Partner. Further, when Uber India cannot be held as a person responsible for payment when cash is directly paid by the User to the Driver-Partner, then how it could be treated as a person responsible for payment when the User decides to make payments through digital means.
M/S Texcity Software Park Ltd, Rep by Its Director Mr AP Ramachandran v. The Principal Commissioner of Income Tax-1, Coimbatore & Another (WP No 19994 of 2018 & WMP No 23400 of 2018)- February 01,2021
Madras High Court answering in favour of the Department, held that interest paid out of the borrowed capital cannot be allowed to be written off as business expenditure. Further, scope of revision u/s 264 cannot be used as a substitute to get over an assessment order without filing an appeal.
Designarch Infrastructure Pvt Ltd. v. Income Tax Officer, New Delhi (ITA No 8199/Del/2019)- October 21,2020
Delhi ITAT answering in favour of Assessee held that when AO after issuing notice u/s 148, accepts assessee’s contention and holds that income which has initially formed reason to believe escaped assessment, has as a matter of fact not escaped assessment, it is not open to him to independently assess some other income.
International Tax Cases
Dana India Pvt Ltd v. Deputy Commissioner of Income Tax, Pune (ITA No. 473/Pun/2018)- February 25,2021
Pune ITAT partly answering in favour of the taxpayer, held that when depreciation was used for Manufacturing activity, which international transaction was benchmarked by TPO, then depreciation on the same will warrant inclusion in operating costs. Further, prior period expenses cannot be construed as operating costs relating to international transactions, unless there is any direct or indirect relation with the same.
International Air Transport Association (Canada) v. Assistant Commissioner of Income Tax, Mumbai & Vice Versa (ITA No 587/Mum/2016 and ITA No 946/Mum/2016)- January 08,2021
Mumbai ITAT while remanding the matter, held that in absence of any finding that transactions between non-resident taxpayer and ATC's are not at arm's length, ATC's being independent agents within the meaning of Treaty provisions cannot be held to be DAPE of taxpayer in India.
Further, when a non-resident entity is carrying on its business in India through ATC's which are independent organizations doing their business of providing training to students, then de hors any finding that transactions between non-resident and ATC's are not made under arm's length conditions, cannot be held to have PE in India.
Further, when consideration received by non-resident taxpayers is towards a simpliciter sale of training material/books, then the same cannot be brought within the definition of 'royalty' under treaty provisions.
Further, compilation of instructions for safe transport of dangerous goods as laid down by ICAO, cannot be stamped as "information concerning technical, industrial, commercial or scientific experience" and hence consideration cannot be taxed as 'royalty'.
Further, when the customers by obtaining an advertising space in the website or publications/manuals in no way get vested with any right to commercially exploit the brand or logo, then consideration received for providing such advertising space would fall beyond the meaning of the term 'royalty'.
Engineering Analysis Centre of Excellence Pvt Ltd. v. Commissioner of Income Tax & Another (Civil Appeal Nos 8733-8734 of 2018)- March 02,2021
The Supreme Court Larger Bench while answering in favour of the taxpayer, held that the amount paid by Indian end-users of software, to non-resident software manufacturers, as consideration for use or resale of such software, does not amount to royalty. Hence, such consideration does not attract provisions of Sec 195.
Indirect Tax Cases
Westinghouse Saxby Farmer Ltd v. Commissioner of Central Excise, Calcutta (Civil Appeal No 37 of 2009)- March 08,202
Supreme Court Larger Bench while answering in favour of taxpayer, held that the show cause-cum-demand notices issued by the Excise Department on various dates during the period 1995-1998 were not barred by time u/s 11A of the Central Excise Act, 1944, in the absence of any fraud, collusion, willful misstatement or suppression of facts, especially since the classification list submitted by the taxpayer have been approved on Aug 27, 1993.
M/S Canon India Pvt Ltd v. Commissioner of Customs ( Civil Appeal No 1827, 1875, 1832 & 3213 of 2018)- March 09,2021
The Supreme Court Larger Bench while answering in favour of the taxpayer, held that the nature of the power conferred by Section 28 (4) of Customs Act to recover duties which have escaped assessment is in the nature of an administrative review of an act. The section must, therefore, be construed as conferring the power of such review on the same officer or his successor or any other officer who has been assigned the function of assessment.
Further, the re-assessment and recovery of duties i.e. contemplated by Section 28(4) is by the same authority and not by any superior authority such as Appellate or Revisional Authority. It is, therefore, clear that the Additional Director General of DRI was not “the" proper officer to exercise the power u/s 28(4) and the initiation of the recovery proceedings is without any jurisdiction.
M/S CE Chem Pharmaceuticals Pvt Ltd, Bengaluru (Advance Ruling No KAR ADRG 07/2021)- February 26, 2021
AAR, Karnataka held that alcohol-based hand sanitizers, as the name itself suggests is to sanitize the hands and disinfect them and hence cannot be covered under Medicaments. Therefore, Isopropyl rubbing alcohol IP and Chlorhexidine Gluconate & Isopropyl Alcohol solution merit classification under Chapter Heading 3808 & attract 18 % GST, in terms of entry no. 87 of Schedule III of Notification No. 01/2017 - Central Tax (Rate) dated June 28, 2017.