<DIRECT TAX LAWS>

n  Once assessee is carrying on a speculation business and profits and gains have arisen from that business during course of assessment year, the assessee is entitled to set off losses carried forward from a speculation business arising out of a previous assessment year - The expression “any speculation business” in Explanation to section 73 means a speculation business of assessee in respect of which profits & gains for assessment year in question have arisen and there is no justification to restrict content of that speculation business where profits have arisen by excluding a business involving actual delivery of shares - CIT v. Lokmat Newspapers Pvt. Ltd. [ITA (L) No. 3005 of 2009] [2010] 3 taxmann.com 4 (BOM.)

n  Section 43A read with Explanation 3 thereto would apply to roll over premium charges paid by an assessee in respect of foreign exchange forward contracts - It cannot be said that roll over premium charges paid in respect of foreign exchange have nothing to do with fluctuation in rate of exchange under section 43A as roll over charge stood paid to avoid increase or reduction in liability as a consequence of the change in the rate of exchange - ACIT v. Elecon Engineering Co. Ltd. [CIVIL APPEAL NOS. 2057 TO 2065 OF 2010] [2010] 3 taxmann.com 2 (SC)

n  For purpose of section 36(1)(vii) post 1-4-1989, it is enough if bad debt is written off as irrecoverable in accounts of assessee - When bad debt occurs, the bad debt account is debited and the customer's account is credited, thus, closing the account of the customer; in the case of Companies, the provision is deducted from Sundry Debtors - T. R. F. Ltd. v. CIT [Civil Appeal Nos. 5292 & 5293 of 2003] [2010] 1 taxmann.com 106 (SC)

n  An assessee does not have to develop the entire port in order to qualify for a deduction u/s 80-IA - The deduction under section 80-IA is available to an enterprise which (i) develops; or (ii) operates and maintains; or (iii) develops, maintains and operates an infrastructure facility; however, the commencement of the operation and maintenance of the infrastructure facility should be after 1-4-1995 - CIT v. ABG Heavy Industries Ltd. [ITA No. 1687,2121,2291,2663 of 2009 and 416 of 2010] [2010] 1 taxmann.com 104 (BOM.)

n  Reasons which are recorded by AO for reopening an assessment are the only reasons which can be considered when formation of belief is impugned - The reasons recorded while reopening the assessment cannot be allowed to grow with age and ingenuity, by devising new grounds in replies and affidavits not envisaged when the reasons for reopening an assessment were recorded - Prashant S. Joshi v. Income-tax Officer [WP No. 2287 of 2009 With WP No. 59 of 2010] [2010] 1 taxmann.com 103 (BOM.)

n  Loss making industrial undertaking would not come into the picture at all for purpose of computing deduction u/s 80-I - The loss of one industrial undertaking cannot be set off against the profit of another such industrial undertaking to arrive at a computation of the quantum of deduction that is to be allowed to the assessee under section 80-I(1) - CIT v. Sona Koyo Steering Systems Ltd. [ITA No. 1279/2008 and 194,416,761 and 788 of 2009] [2010] 1 taxmann.com 102 (DELHI)

n  Value of house under construction including investment on construction is not liable to wealth-tax - The incomplete building of the assessee neither falls within the definition of a building, as contemplated under section 2(ea) of the Wealth-tax Act, nor within the purview of ‘urban land’ as excluded by Explanation 1(b) thereto - CIT v. Smt. Neena Jain [WTA No. 17 to 20 of 2008] [2010] 1 taxmann.com 101 (PUNJ. & HAR.)

n  Reference in Article 13(3)(c) of Indo-Canada DTAA is to “any copyright” and it is not a reference to “any right” for purpose of terming a payment as ‘royalty’ - Before any payment could be termed as a ‘royalty’ under Article 13(3)(c), it would have to be either as consideration for the copyright or for the right to use a copyright in any of the four categories of works mentioned therein - Director of Income-tax v. Sahara India Financial Corpn. Ltd. [ITA No. 1064/2007] [2010] 1 taxmann.com 100 (NEW DELHI)

n  Commission paid for sale of SIM card, pre-paid or post-paid, is commission as envisaged under section 194H - Essence of post-paid and pre-paid services rendered by the Cellular company is the same and the relationship between the Cellular company and the customers is also the same, therefore, if post-paid scheme is subject to section 194H, it is quite unlikely that pre-paid system would be outside the purview of section 194H - CIT v. Idea Cellular Ltd. [ITA No. 146 of 2009 With ITA No. 784 of 2009] [2010] 1 taxmann.com 99 (DELHI)

n  Department has to analyse process of “duplication” of software undertaken by assessee to ascertain nature of royalty payment made to an American company - Depending upon the analysis of the process of “duplication” in the context of the contracts signed by the assessee with the American company, one has to find out whether the expense incurred is a revenue or a capital expenditure - CIT v. Mastek Ltd. [CIVIL APPEAL NO. 1667 OF 2010] [2010] 1 taxmann.com 95 (SC)

n  Any disclosure made subsequent to seizure of incriminating material cannot be called voluntary - Merely because assessee cooperated in deciphering the seized documents would not mean that the revenue authorities could not have deciphered the same without voluntary assistance of assessee - Shardadevi P. Jhunjhunwala v. CIT [W. P. No. 428 of 1996] [2010] 1 taxmann.com 92 (BOM.)

n  Validity of exercise of powers to re-open an assessment has to be decided with reference to reasons recorded while re-opening an assessment - Where the AO had no reason to believe that income had escaped assessment, reasons recorded while re-opening the assessment did not justify the exercise of the power u/s 148 - Purity Techtextile Pvt. Ltd. v. ACIT [W. P. No. 268 & 269 of 2010] [2010] 1 taxmann.com 90 (BOM.)

n  Interest is payable u/s 234B in case advance tax is not paid by stipulated dates and there is a default and plea of bona fide is totally alien - The plea of bona fide default in non-payment of advance tax would be totally alien to charging of interest u/s 234B for such default - CIT v. Insilco Ltd. [ITA No. 119 of 2002 & 247 of 2003] [2010] 1 taxmann.com 89 (DELHI)

n  Any expenditure incurred for construction of a hospital building for general public is expenditure incurred for charitable purposes - Advancement of any object of benefit to the public or a section of the public as distinguished from benefit to an individual or a group of individuals would be a charitable purpose - CIT v. Mool Chand Sharbati Devi Hospital Trust [ITR No. 15 of 1992] [2010] 1 taxmann.com 87 (ALL.)

n  If a company is a MAT Company, then be it a private limited company or a public limited company, for purposes of section 115J of 1961 Act, it has to prepare its profit and loss account in accordance with Parts II and III of Schedule VI to 1956 Act alone - By legislative incorporation, only Parts II and III of Schedule VI to 1956 Act have been incorporated legislatively into section 115J of the 1961 Act - Dynamic Orthopedics Pvt. Ltd. v. CIT [CIVIL APPEAL NO.8419 OF 2003] [2010] 1 taxmann.com 85 (SC)

n  Under Article 226 of Constitution, in a writ jurisdiction, High Court can consider whether there was material for issue of direction u/s 142(2A) and not sufficiency of material - Where the opportunity has been given to the assessee and there are proper reasons for forming the opinion that the nature of the account is complex, in the interest of revenue, special audit u/s 142(2A) is necessary - Purvanchal Vidhut Vitran Nigam Ltd. v. Union of India [Civil Misc. Writ Petition No. 71( Tax) of 2010] [2010] 1 taxmann.com 82 (ALL.)

n  Merely because there are surpluses in hands of an educational institution would not ipso facto lead to an inevitable conclusion that such an educational institution is existing for making profits and not solely for educational purposes - The interpretation put forth by the Chief Commissioner that there has to be reasonable profit only and then only an institution can be said to be not existing solely for the purposes of profit, is totally a misconception of law - Pinegrove International Charitable Trust v. Union of India [CWP No. 6031 of 2009] [2010] 1 taxmann.com 81 (PUNJ. & HAR.)

n  Interest could be levied u/s 234B(3) for the first time in reassessment completed under section 147 - The omission of the AO to levy interest under section 234B(3) in the first reassessment completed under section 147 which could have been rectified under section 154, does not bar the AO from levying interest under the very same provision, when the assessment was again revised a second time under section 147 - The South Indian Bank Ltd. v. CIT [ITA No. 1611 of 2009] [2010] 1 taxmann.com 77 (KER.)

n  Sale of stock exchange membership card of a defaulting member by Stock Exchange amounts to “transfer” within meaning of section 2(47) - The Tribunal was right in upholding the assessment for capital gain in the hands of defaulting member on sale of his membership card by Stock Exchange - CDR. P. J. Mathew v. ITO [ITA No. 1548 of 2009] [2010] 1 taxmann.com 75 (KER.)

n  Amount paid for compounding an offence can never be an amount in nature of expenditure which can qualify for deduction u/s 37(1) - The amount paid for compounding an offence is inevitably a penalty in terms of section 483 of the Karnataka Municipal Corporation Act, 1976 itself and the mere fact that it has been described as compounding fee cannot, in any way, alter the character of the payment which payment, is in the nature of penalty - Millennia Developers Pvt. Ltd. v. DCIT [ITA No. 810/2009] [2010] 1 taxmann.com 74 (KAR.) 

n  Assessee can get benefit of section 36(1)(va) if actual payment towards PF/ESI contributions is made before return is filed - Tribunal was correct in deleting the addition made by the Assessing Officer on the ground that the assessee had deposited employers’ as well as employees’ contribution towards PF/ESI after the due date, as prescribed under the relevant Act/Rules, but before date of filing return - CIT v. AIMIL Ltd. [ITA Nos. 1063 of 2006, 755,1214 and 1246 of 2008, 50, 78 and 204 of 2009] [2010] 1 taxmann.com 73 (DELHI) 

n  Interest earned by a co-operative credit society on surplus funds invested in short-term deposits with banks and in govt. securities cannot fall within meaning of expression “profits and gains of business” mentioned in section 80P(2) - The words “the whole of the amount of profits and gains of business” in section 80P(2)(a) emphasise that the income in respect of which deduction is sought must constitute the operational income and not the other income which accrues to the Society - The Totgars’ Cooperative Sale Society Ltd. v. Income tax Officer [CIVIL APPEAL NO. 1622 OF 2010] [2010] 1 taxmann.com 71 (SC) 

n  When assessee cannot be subjected to exercise of jurisdiction under section 263 - Where the Assessing Officer took a possible view, while passing an order of assessment, the Commissioner exceeded his jurisdiction in seeking recourse to his power under section 263 - Grasim Industries Ltd. v. CIT [ITR No. 113 of 1990] [2010] 1 taxmann.com 58 (BOM.)

n  No assessment under Chapter XIV-B can be made without issuing notice under section 143(2) - Where the assessing officer in repudiation of the return filed under section 158BC(a) proceeds to make an enquiry, he has necessarily to follow the provisions of section 142, sub-sections (2) and (3) of section 143 - ACIT v. Hotel Blue Moon [Civil Appeal No. 1198 of 2010] [2010] 1 taxmann.com 56 (SC)

n  Interest earned by an industrial undertaking on late payment received from customers is eligible for deduction u/s 80-IA - CIT v. Bharat Rasayan Ltd. [ITA No. 816 of 2007] [2010] 1 taxmann.com 54 (DELHI)

n  A petition under Article 226 of Constitution would be maintainable for questioning reopening of an assessment where pre-conditions for exercise of power have not been fulfilled - Recourse to the power under Section 147 cannot be sustained on a mere change of opinion where there is no failure of the assessee to disclose fully and truly, all material facts necessary for assessment - Bhavesh Developers v. Assessing Officer [Writ Petition No. 2508 0f 2009] [2010] 1 taxmann.com 50 (BOM.)

n  Assessee can approach Dispute Resolution Panel u/s 144C for filing all possible objections to report of TPO and draft order prepared by AO based on said report - Messe Dusseldorf India Pvt. Ltd. v. DCIT [WP(C) No. 14079/2009] [2010] 1 taxmann.com 45 (DELHI)

n  Distance of 2 kms. from municipal limits of city of Khanna for purpose of section 2(14)(iii) has to be taken in terms of approach by road and not as per straight line distance on a horizontal plane - If principle of measurement of distance is considered straight line distance on horizontal plane or as per crow’s flight then it would have no relationship with the statutory requirement of keeping in view the extent of urbanization - CIT v. Satinder Pal Singh [ITA No. 646 of 2009] [2010] 1 taxmann.com 43 (PUNJ. & HAR.)

n  Interest earned by an industrial undertaking on late payment received from customers against supply of goods is eligible for deduction u/s 80-IA - CIT v. Advance Detergents Ltd. [ITA No. 248/2008] [2010] 1 taxmann.com 42 (DELHI)

n  Merely because AO feels that he has failed to do what he ought to have done cannot be a valid ground for seeking initiation of re-assessment u/s 147/148 - Satnam Overseas Ltd. v. Addl. CIT [WP (C) no. 3210-11/2005, 1533-34/2005, 3208-9/2005 and 3220-21/2005] [2010] 1 taxmann.com 41 (PUNJ. & HAR.)

n  Where the company constructed the super structure on the land out of its own funds, the rents therefrom have to be assessed in the hands of the company and not the shareholders, even if the land was owned by the shareholders - CIT v. Monarch Citadel Pvt. Ltd. [ITA No. 1183 of 2006] [2010] 1 taxmann.com 40 (KAR.)

n  A judgement debtor is not entitled to withhold payment of amount due under a decree on pretext that it has to be deducted as tax at source - Madhusudan Shrikrishna v. Emkay Exports Execution [Application No. 187 of 2004, In Summary Suit No. 3835 of 2003] [2010] 1 taxmann.com 39 (BOM.)

n  Expenditure towards consultation charges for restructuring of company is an allowable deduction u/s 37(1) - CIT v. JCT [Electronics Ltd. ITA No. 676 of 2009] [2010] 1 taxmann.com 38 (PUNJ. & HAR.)

n  Texturising and twisting of partially oriented yarn (POY) by thermo mechanical process constitutes ‘manufacture’ in terms of section 80-IA - CIT v. Emptee Poly-Yarn Pvt. Ltd. [CIVIL APPEAL NO. 786 OF 2010] [2010] 1 taxmann.com 37 (SC)

n  Section 44AB does not show anywhere that in case assessee is carrying on many businesses, then to calculate turnover limit turnover of all businesses has to be clubbed - ACIT v. K. Satish Shetty [ITA No. 22/2007] [2010] 1 taxmann.com 34 (KAR.)

n  Difference on account of exchange rate fluctuation is liable to be allowed under section 80-IB - CIT v. Rachna Udhog [ITA No. 2394 of 2009] [2010] 1 taxmann.com 29 (BOM.)

n  After 1-4-1989, AO has power to re-open, provided there is ‘tangible material’ to come to the conclusion that there is escapement of income from assessment - CIT v. Kelvinator of India Ltd. [Civil Appeal Nos. 2009-2011 of 2003] [2010] 1 taxmann.com 27 (SC)

n  Processing of blank CDs, dedicating them to a specific use, constitutes a manufacture in terms of Section 80-IA(12)(b) read with Section 33B - If an operation/ process renders a commodity or article fit for use for which it is otherwise not fit, the operation/ process falls within the meaning of the word "manufacture" - CIT v. ORACLE SOFTWARE INDIA LTD. [C A NO. 235/2010 @ SLP(C) NO. 4719/2008 With C A No. 238/2010 @ SLP(C) No. 5143/2009, C A NO 239/201] [2010] 1 taxmann.com 21 (SC)

n  Provision for NPA in terms of RBI Directions 1998 does not constitute expense on the basis of which deduction could be claimed by NBFC u/s 36(1)(vii) - A provision for NPA debited to P&L Account under the 1998 Directions is only a notional expense and, therefore, there would be add back to that extent in the computation of total income under the IT Act - Southern Technologies Ltd. v. JCIT [Civil Appeal No. 1337/2003] [2010] 1 taxmann.com 20 (SC) 

n  One has to give weightage to diminution in value of original shares which takes places when a company decides to come out with Rights Offer - For determining whether the gains/loss of renunciation of right to subscribe is a short-term or long-term gains/loss, the crucial date is the date on which such right to subscribe for additional shares / debentures comes into existence and the date of renunciation [transfer] of such right - Navin Jindal v. ACIT [Civil Appeal No. 634 of 2006] [2010] 1 taxmann.com 19 (SC)

n  Directions of CIT to reopen a concluded assessment does not constitute an information within scope of section 147 - The assessing authority cannot act on the dictates of the Commissioner to reopen the concluded assessment - CIT v. Aslam Ulla Khan [ITA Nos. 448 to 451 of 2004] [2010] 1 Taxmann.com 18 (KAR.)-DL-HC 

n  Advance Against Depreciation (AAD) cannot be designated as a reserve - AAD is a timing difference, it is not a reserve, it is not carried though profit and loss account and that it is “income received in advance” subject to adjustment in future and, therefore, clause (b) of Explanation-I to Section 115JB is not applicable - National Hydroelectric Power Corpn. Ltd. v. CIT [CIVIL APPEAL NO. 6 OF 2010] [2010] 1 Taxmann.com 15 (SC)-DL-SC

n  Interest on loan taken for repayment of earlier loan taken for business purposes is not allowable u/s 24(1)(vi) - When the interest payable on the original loan is not allowable u/s 24(1)(vi), then the interest paid or payable on the second loan for repayment of original loan is also not allowable - K. S. Kamalakannan v. ACIT [ITA No. 588/Mds/2009] [2010] 3 taxmann.com 18 (CHENNAI - ITAT)

n  Depreciation : Requirement of second proviso to rule 5(1A) of IT Rules is satisfied if option is exercised before expiry of due date of filing of return of income u/s 139(1) of IT Act, 1961 - Before due date simply refers and means that not after the expiry of due date; if the requisite act is done before the last day expires then it will be simply said that before due date; when the time of filing the return is available to the assessee till the last moment of the due date then the whole of that day is available to the assessee and due date expires only when the last day is expired; as such the option exercised on the due date is nothing but before the due date as the same is not after the due date - K. K. S. K. Leather Processors (P.) Ltd. v. ITO [ITA No. 826 & 827/Mds./2009] [2010] 3 taxmann.com 17 (CHENNAI - ITAT)

n  Indo-US Treaty : Profits attributable to transaction of cargo, mail, etc. by aircrafts owned, chartered or leased by assessee cannot be taxed in India - The transportation of passengers, mails or cargo etc. by the assessee in the international traffic by the aircrafts as owner/charterer/lessee would fall within the scope of Article 8 of the Indo-US Tax Treaty and therefore, profits attributed to the same cannot be taxed in India; further, the profits from inland transportation directly connected with such transportation would also not be taxable in India - ADIT (Int’l Taxation) v. Federal Express Corporation, USA [ITA Nos. 4452, 4453 & 9482/2004] [2010] 3 taxmann.com 16 (MUM. - ITAT)

n  Demand raised by AO in assessment does not get vacated only on filing of application before Settlement Commission - ? Settlement Commission has jurisdiction over assessee only when it decides to proceed with the application and admits application under section 245D(1) ? In respect of demand raised in the assessment made before the admission of application for settlement under section 245D(1), the Assessing Officer is entitled to levy the interest under section 220(2) till the date of admission under section 245D(1) - ACIT v. Leonie M. Almeida [IT (SS) No. 256/M/2006] [2010] 3 taxmann.com 15 (MUM. - ITAT)

n  Credit to expenditure on improvement, while determining capital gains u/s 50C, can be given when there is evidence - Where expenses on improvement of a property are not declared to the income-tax Department or no other evidence is provided to support the claim, then the authorities would be justified in rejecting the same - Ramendra Vikram Singh v. ITO [ITA Nos. 76 to 79/Luc/08] [2010] 3 taxmann.com 13 (LUCKNOW - ITAT)

n  When notice is served through Courier extra caution is required; caution has to be necessarily in the form of proper identification of the person upon whom the notice is service - If notice is not sent through registered post but service through Courier is preferred, then a proper acknowledgment of service with identification that it is being served on the person named in the notice should be on record; when service of notice is challenged by the assessee, then evidence in the form of acknowledgment, certificate from the Courier and proper authorization to the Courier should be shown to the assessee so that no link in between is apparently missed - ACIT v. Ashiana Automobiles Pvt. Ltd. [ITA Nos. 176 & 177 (Pat.)/2008] [2010] 3 taxmann.com 12 (PAT. - ITAT)

n  Transfer Pricing: TNM method requires comparison of net profit margins and not operating margins of enterprises - Where the assessee adopted the CUP method for computing the ALP of the international transaction with its associated enterprise, the TPO as well as the AO committed an error by wrongly applying TNM method on the ground that the assessee did not give any comparables - Addl. CIT v. Tej Diam [ITA No. 5034/Mum/2007] [2010] 3 taxmann.com 11 (MUM. - ITAT)

n  Right of carry forward u/s 74(1) in respect of long term capital loss is not hit by provisions of section 70(3) - The case of the revenue that “the long term capital gain is income notwithstanding the fact that it is exempt under section 10(38)” is fallacious - G. K. Ramamurthy v. JCIT [ITA No. 1367/Mum/ 2009] [2010] 3 taxmann.com 8 (MUM. - ITAT)

n  Profit derived from contract works does not qualify for relief u/s 80-IB - The word ‘derived from’ in Section 80-IB must be understood as something which has direct or immediate nexus with the assessee’s industrial undertaking - Maruti Tubes (P.) Ltd. v. DCIT [ITA No. 500/Hyd/2009] [2010] 3 taxmann.com 7 (HYD. - ITAT)

n  Section 50C has no application for arriving at value of benefit u/s 2(24)(iv) - The valuation to be considered under section 50C cannot be taken as value for the purpose of section 2(24)(iv) - Ashok W. Phansalkar v. ITO [ITA No. 6373/Mum/2007] [2010] 3 taxmann.com 6 (MUM. - ITAT)

n  Section 35 refers to ‘capital expenditure’ and does not require any further requirement - Any expenditure of a capital nature on scientific research is allowable deduction u/s 35(1)(iv) read with section 35(2)(ia) - Ayushakti Ayurved Pvt. Ltd. v. ACIT [ITA No. 6541/M/20008] [2010] 3 taxmann.com 5 (MUM. - ITAT)

n  Housing Projects : Provisions of sub-section (10) are not governed by provisions of sub-section (2) of section 80-IB - The conditions prescribed in sub-section (2) are relevant only in the case of an industrial undertaking and wherever such conditions are required to be fulfilled by other types of businesses, such as a hotel or a multiplex theatre or a convention centre the legislature has expressly said so and sub-section (10) not having specifically provided for such conditions in case of an undertaking engaged in the development of housing projects, it is not possible to telescope the conditions mentioned in subsection (2) into the provisions of sub-section (10); sub-section (10) has to be interpreted on its own terms - G. V. Corporation v. ITO [ITA NO. 4512/Mum/2007] [2010] 1 taxmann.com 98 (MUM. - ITAT)

n  Assessing Officer cannot invoke provision of section 271(1)(c) on the basis of routine and general presumptions - Whether it be a case of only concealment or of only inaccuracy of particulars or both, the particulars of income so vitiated would be specific and definite and be known in the assessment proceedings by the ITO, who on being satisfied about each concealment or inaccuracy of particulars of income would be in a position to initiate the penalty proceedings on one or both of the grounds of default as may have been specifically and directly detected - ITO v. Oasis Securities Ltd. [ITA No. 846/M/2008] [2010] 1 taxmann.com 97 (MUM. - ITAT)

n  Penalty not leviable under section 272A(2)(c) for delay in filing of quarterly returns of TDS - The delay in filing the returns, even if they are characterized as negligence on the part of the assessee, can only be considered as a technical or venial breach of law for which penalty should not be levied automatically - Royal Metal Printers Pvt. Ltd. v. Add. CIT [ITA No. 6840/Mum/2008] [2010] 1 taxmann.com 96 (MUM. - ITAT)

n  Word ‘capital asset’ in section 2(14) does not necessarily mean that property, which assessee holds, must be his own - As per the definition of capital asset under section 2(14), any kind of property held by an assessee would come within the definition of ‘capital asset’; it is not possible to read the definition of ‘capital asset’ in a restrictive manner to mean that the property which the assessee owned by himself alone would come within the meaning of ‘capital asset’ - Asian PPG Industries Ltd. v. DCIT [ITA NO. 846/M/2008] [2010] 1 taxmann.com 94 (MUM. - ITAT)

n  Provisions of section 194C(1) is applicable to job work assigned by an event manager to others - The job awarded by the assessee to other parties in performance of duty as event manager has to be treated as a contractor and not a sub-contractor for purpose of section 194C(1) - EMC v. ITO [ITA NO. 2269 TO 2272/M/2007] [2010] 1 taxmann.com 93 (MUM. - ITAT)

n  Payments of transponder hire charges made by a resident company to two foreign companies are only “royalty” - Just because Satellite was owned by another company, would not change the colour of payment, which would remain a ‘royalty’ - Asianet Communications Ltd. v. DCIT [ITA No. 1657/Mds./2002] [2010] 1 taxmann.com 84 (CHENNAI - ITAT)

n  Assessee is liable for levy of concealment penalty for non-disclosure of interest income - When interest income itself is not disclosed, there is no question of holding that all the facts relating to the interest income and material to the computation of income was disclosed by the assessee - Prithvi Pal Bindra v. ACIT [ITA No. 4477 & 4478/Del/2009] [2010] 1 taxmann.com 83 (DELHI - ITAT)

n  Deferred revenue expenditure is essentially revenue in nature and decision to treat same as deferred revenue only represents a management decision taken in view of magnitude of expenditure involved - For the purpose of allowability of any expenditure under the Act , what is material is the classification between the capital and revenue and the same does not recognise any concept of deferred revenue expenditure - ACIT v. Core Healthcare Ltd. [ITA Nos. 573/Ahd/2003 and 1195/Ahd/2004] [2010] 1 taxmann.com 80 (AHD. - ITAT)

n  Section 80-1A(2) nowhere provides that first year of 10 consecutive assessment years should be always first year when assessee starts providing telecommunication services - Provisions of section 80-IA are beneficial provisions and these have to be construed in such a manner so as to advance the objects of the provisions and not to frustrate it; if the intention of the Legislature was that the first year of start of telecommunication services is the initial assessment year to claim deduction under section 80-IA, then the provision of option to the undertakings which had already started providing telecommunication services, would be meaningless - ACIT v. Vodafone Essar Gujarat Ltd. [ITA No. 1878/Ahd/2009] [2010] 1 taxmann.com 79 (AHD. - ITAT)

n  Payment made by an advertising agency to an accredited ad. agency for release of its advertisement materials in print media does not fall within ambit of section 194C(1) - When an advertising agency reimburses advertising charges to the accredited advertising agency for release of its advertisements in newspapers, provisions of section 194C have no role to play - Sands Advertising Communications Pvt. Ltd. v. DCIT (TDS) [ITA Nos. 790 t0 795/Bang/2009] [2010] 1 taxmann.com 78 (BANG. - ITAT)

n  No further adjustments in ALP are required when difference between ALP determined by assessee and by AO varies not more than 5 per cent - When the nature of transaction is such that the arm’s length price can be determined by applying only one of the most appropriate methods and it need not to be determined by applying 2 or more methods, in such a situation even the price determined by applying only one of the most appropriate methods will become the arithmetical mean price - Electrobug Technologies Ltd. v. ACIT [ITA No. 1898/Del/2009] [2010] 1 taxmann.com 76 (NEW DELHI - ITAT)

n  Commission payment to whole time working directors of a company is an allowable expenditure - Having regard to the provisions of the Companies Act, the remuneration can be paid to the directors by way of commission also - ACIT v. Bony Polymers (P.) Ltd. [ITA No. 867/Del/2008] [2010] 1 taxmann.com 70 (DELHI - ITAT)

n  Business losses of a non-eligible unit, whose income is not eligible for deduction under section 10A cannot be set off against the profits of the undertaking eligible for deduction under section 10A for purpose of determining the allowable deduction under section 10A - The deduction under section 10A is not an exemption but only a deduction under Chapter III of the Income-tax Act and the provisions of section 80AB of Chapter VIA would not be applicable to such deduction under section 10A, and also deduction under section 10A is undertaking specific - Scientific Atlanta India Technology Pvt. Ltd. v. ACIT [ITA Nos. 229/Mds/2007 & 362/Mds/ 2008] [2010] 1 taxmann.com 69 (CHENNAI - ITAT)

n  BBC worldwide has no business or PE in India, its Indian agent is remunerated on an arm’s length basis which extinguishes any further tax liability on it - Assessing Officer was not justified in assessing BBC Worldwide’s profits attributable to its agent in India @ 10 per cent of the gross revenue receipts from India - BBC Worldwide Ltd. v. DDIT (Int’l Taxation) [ITA No. 1188 (Del) 06] [2010] 1 taxmann.com 67 (DELHI - ITAT)

n  Bad debts written off cannot be factor to determine ALP of any international transaction - Where the ALP determined by the TPO and adopted by the AO in respect of international transaction was not as per the procedure prescribed by rule 10B, the same could not be sustained - CA ComputerAssociates Pvt. Ltd. v. DCIT [ITA Nos. 5420 & 5421/Mum/2006] [2010] 1 taxmann.com 68 (DELHI - ITAT)

n  Determination of PE where there exists a relation between a business of producing hybrid breeder seeds in USA by non-resident assessee-company which yield profits or gains and activity of providing result of research conducted by Branch Office in India which contributes directly or indirectly to earning of those profits or gains - Pioneer Overseas Corpn. v. Dy. ADIT (Int'l Taxation) [ITA Nos.1868, 1869, 1870, 1871 2289, 2290, 2291 & 2292/Del/2005] [2010] 1 taxmann.com 48 (DELHI - ITAT)

n  Taxability in one of Contracting States is not a sine qua non to avail Indo-UAE Tax treaty benefits in other Contracting State - Double non-taxation is also a fact of life, and tax sparings, which find place in several Indian tax treaties, are also a reality in international taxation; to enter or not to enter in a tax treaty which may leave scope for double non-taxation is a conscious decision of the respective Contracting State, but once such a tax treaty, as may leave scope for double non-taxation, is entered into, judicial forums have to interpret the provisions of tax treaty as they exist - Meera Bhatia v. ITO [ITA No. 1876/Mum/2006] [2010] 1 taxmann.com 52 (MUM. - ITAT)

n  RBI’s approval does not put a seal of approval on true character of a transaction from perspective of transfer pricing regulation - Lending or borrowing money between two associated enterprises come within the ambit of international transaction and whether the same is at arms length price has to be considered - Perot System TSI (India) Ltd. v. Dy. CIT [ITA Nos. 2320 to 2322/Del/2008] [2010] 1 taxmann.com 49 (DELHI)

n  A Co-operative Bank is entitled to deduction u/s 80P(2)(a)(i) on amount of interest received u/s 244A on refund of tax - The Maharashtra State Co-operative Bank Limited v. ACIT [ITA NO. 7108/Mum/2004] [2010] 1 taxmann.com 36 (MUM. - ITAT)(SB)

n  Income from even an isolated transaction of sale of land can be considered as business income of an assessee though not carrying on real estate business - Cherukuri Ramesh v. ACIT [ITA No. 491/Vizag/2008] [2010] 1 taxmann.com 33 (VISAKHAPATNAM - ITAT)

n  Where assessee is making investment as a development organization and not as an investor, it would be entitled to deduction u/s 80M on gross amount of dividend - DCIT v. Tamilnadu Industrial Development Corporation Ltd. [ITA NO. 1057 AND 1006/Mds/2003] [2010] 1 taxmann.com 30 (CHENNAI - ITAT)(TM)

n  No addition can be made or sustained simply on basis of statement recorded at time of survey/search - In order to make an addition on the basis of surrender during search or survey, it is sine qua non that there should be some other material to co-relate the undisclosed income with such statement - DCIT v. Premsons [ITA No. 4698/Mum/2006] [2010] 1 taxmann.com 28 (MUM. - ITAT)

n  Transfer pricing - A business organization with negative networth cannot be treated at par with a normal business organization for computation of ALP - DCIT v. Quark Systems Pvt. Ltd. [ITA No. 100/CHD/2009] [2010] 1 taxmann.com 23 (CHD. - ITAT)(SB)

n  If assessee is engaged in export of any customized electronic data, then, profit earned from such export would qualify for deduction u/s 10A - By whatever means the data is collected, once it is stored in an electronic form, it becomes a customized electronic data which can be exported to qualify for deduction u/s 10A - ITO v. Accurum India Pvt. Ltd. [ITA NO. 1736/MDS/2006] [2010] 1 Taxmann.com 17 (CHENNAI)(TM)-DL-ITAT 

n  When AO, who is both an adjudicator as well as an investigator, is acting in a quasi judicial capacity, it is his perception which counts and not that of CIT sitting in revisionary proceedings - It is not an error on the part of the AO not to conduct any enquiry into the accounts the way CIT wants it in exercise of his power under section 263 - SICAL Logistics Ltd. v. Additional CIT [ITA NO. 1280/MDS/2006] [2010] 1 Taxmann.com 16 (CHENNAI)(TM)-DL-ITAT 

n  Commissioner before granting approval u/s 80G is empowered to satisfy himself about fact that activities of applicant-trust are genuine and in consonance with its objects - Once the society during a period of almost 12 years has not carried out any activity, except purchasing land, to construct school/college building for imparting education, which was the main object of the society, the activities of the trust for granting approval under section 80G cannot be called genuine - Pearls Educational Institute v. CIT [ITA No. 355/Del./2009] [2010] 1 Taxmann.com 14 (DELHI)-DL-ITAT 

n  Unabsorbed depreciation/business loss in respect of eligible 10A unit is to be set off against profit of same eligible unit for purpose of determining amount of deduction available u/s 10A - Global Vantedge Pvt. Ltd. v. DCIT [ITA Nos. 2763 & 2764/Del/2009] [2010] 1 Taxmann.com 12 (DELHI)-DL-ITAT 

n  In case of transfer of an asset distributed by a company in liquidation, cost of acquisition of same has to be taken as cost to previous owner for purpose of computing capital gains thereon - ACIT v. T. R. Srinivasan [ITA No. 1388/Mds/1998] [2010] 1 Taxmann.com 10 (CHENNAI)-DL-ITAT 

n  Payment made by a member to its stock exchange for VSAT/Lease line/BOLT/Demat charges is not fee for technical services u/s194J - [2010] 1 Taxmann.com 9 (MUM.)-DL-ITAT - DCIT v. Angel Broking Ltd. [ITA No. 7031/Mum./08]

n  Whenever even a personal asset is transferred by a partner to a firm as his capital contribution, capital gains will arise - • When an asset is contributed by an assessee to a firm as its capital contribution, in which assessee becomes a partner, a transfer of capital asset takes place, and the amount recorded in the books of account of the firm as the value of land shall be deemed to be the full value of the consideration received or accruing as a result of the transfer of land, and the profits or gains arising from such transfer of a capital asset by a person to a firm in which he becomes or is a partner by way of capital contribution or otherwise, shall be chargeable to tax as his income of the previous year in which such transfer takes place. • Whatever may be the nature of asset initially held by a partner before the same is contributed by him as capital contribution to a partnership firm, it shall assume the character of capital asset at the time when it is contributed to a firm as capital contribution and any surplus arising therefrom is chargeable to tax as capital gain. • Surplus arising to a partner from transaction of contribution of land held by it to a firm as capital contribution shall be taxable u/s 45 - DLF Universal Ltd. v. DCIT [ITA Nos. 3622/Del/1995, 2546/Del/2001, 3233/Del/2001, 267 and 4986/Del/2003] [2010] 1 Taxmann.com 8 (DELHI)(SB)-DL-ITAT 

n  TDS liability of a builder for sub-contracting of main contract is 1% u/s 194C - A builder who has only sub-contracted various work to various parties cannot be considered as an assessee in default for deduction of 1 per cent tax at source from payments made to such sub-contractors as per section 194C(2). - [2010] 1 Taxmann.com 6 (COCH.)-DL-ITAT - Kent Constructions Pvt. Ltd. v. DCIT (TDS) [ITA Nos. 231 to 233/Coch/2009]

n  Statutory provision for levy of penalty u/s 271(1)(b) is not for mere technical non-compliance but for actual or habitual defaulters - If there is apparent impossibility of compliance or compliance could take naturally long time, then the Assessing Officer is expected to give adequate time to the assessees before he infers that they are tending to non-compliance and avoiding to furnish information for the purpose of inviting penalty u/s 271(1)(b). - [2010] 1 Taxmann.com 5 (AHD.)-DL-ITAT - Swarnaben M. Khanna v. DCIT [ITA Nos. 2822, 2834, 2826,2828,2830,2832 & 2833 /Ahd./2009]

n  Payment of royalty which is not liable for deduction of tax at source - TDS is not required to be deducted from royalty payment made for distribution and marketing of cinematographic films on DVD and VCD - [2010] 1 Taxmann.com 4 (MUM.)-DL-ITAT - Asiavision Home Entertainment Pvt. Ltd. v. ACIT [ITA No. 3300/Mum/07]

n  On basis of just an individual asstt. year, if one attempts to make out a case of concealment, without considering actual payments made in subsequent years, such attempt would always be premature - [2010] 1 Taxmann.com 3 (AHD.)-DL-ITAT - Surrel Enterprise Pvt. Ltd. v. ACIT [ITA No. 3876 & 3877/Ahd/2007]

n  Assessee is entitled for depreciation on assets of a closed unit which are part of block of assets - [2010] 1 Taxmann.com 2 (MUM.)-DL-ITAT - Swati Synthetics Ltd. v. ITO [ITA No. 1165/M/2006]

n  Bank interest is not eligible to be considered for purpose of sections 80-IB/80HHC - [2010] 1 Taxmann.com 1 (AHD.)-DL-ITAT - Arvind Fashions Ltd. v. ACIT [ITA No. 1037/Ahd//2005]