INSTRUCTIONS
Dedicated structure for delivery and monitoring of Tax Payer Services in the Income Tax Department - reg.
Transfer of unlisted shares by SEBI registered Category I & II Alternative Investment Funds - directions - regd.
CORRIGENDUM
F.No. 275/192/2016-IT(B)
Corrigendum to Circular No. 1/2017 dated 02.01.2017 on TDS under section 192 of Income-tax Act, 1961.
CASE LAWS
2017-TIOL-33-SC-IT
EMBASSY DEVELOPMENT CORPORATION Vs ACIT : SUPREME COURT OF INDIA (Dated: January 20, 2017)
Income tax - Section 43D
Keywords - borrowings from sister concern - sanction for residential project - commercial expidiency
The assessee preferred the present SLP challenging the decision of High Court, whereby it was held that "loan taken at higher rate of interest from a sister concern deserves to be disallowed, if the residential project for purpose of which such loan was taken, was not sanctioned by the competent authorities". The High Court in its impugned judgment had further observed that interest on loan & advances could not be claimed for deduction, in case the borrowed amount was neither invested for the purpose for which it was taken, nor established any commercial expidiency for the same.
After hearing the counsel, the Supreme Court grants leave to the assessee to defend its case.
Leave granted
2017-TIOL-32-SC-IT
TAMIL NADU TOURISM DEVELOPMENT CORPORATION LTD Vs DCIT: SUPREME COURT OF INDIA (Dated: January 20, 2017)
Income tax - franchisee fee - leasing out of property - business income.
The assessee preferred the present SLP challenging the decision of High Court, whereby it was held that the franchisee fee collected by the assessee i.e., the lessor of the property, from the lessees, would be in the nature of business income, since the assessee would continue to operate its business through those franchisees.
After hearing the counsel, the Supreme Court grants leave to the assessee to defend its case and directs for expedited hearing.
Leave granted
2017-TIOL-31-SC-IT
DCIT Vs SUNDARAM FINANCE LTD: SUPREME COURT OF INDIA (Dated: January 20, 2017)
Income tax - Sections 80M & 94.
Keywords - investment of short duration - absence of entry in books - colourable transaction.
The Revenue preferred the present SLP challenging the decision of High Court, whereby it was held that when the provision of section 94 itself came into effect from April 1, 2002, the AO was not justified in rejecting the investment made by assessee NBFC in shares of a foreign company, by applying the said provision. The High Court further held that when the assessee was entitled to benefit u/s 80M, the transaction of sale of shares by assessee within a short period of one day would not make such transaction a colourable one.
On appeal, the Supreme Court grants leave to the Revenue Department to defend their case and directs for expedited hearing.
Leave granted
2017-TIOL-170-HC-MAD-IT
CIT Vs VINZAS SOLUTIONS INDIA PVT LTD: MADRAS HIGH COURT (Dated: January 4, 2017)
The Assessee is a dealer of Computer Software. While doing assessment the Assessing Office made some disallowance u/s 40(a)(i) on the ground that the sum paid for purchase of software was royalty and no TDS was deducted on the same u/s 194J. The CIT(A) agreed with the AO but the Tribunal reversed the decision.
On appeal, the High Court held that,
Whether when the assessee is a mere reseller of computer software, the sum paid for purchase is to be construed as royalty - NO: HC
Whether the provisions of Sec 9(1)(vi) come into play only where a share of profit is reserved for the title-holder of the copyrighted software - YES: HC
Whether for a payment to qualify as royalty it is necessary that there is an element of exclusivity of rights in relation to the thing or product - YES: HC
++ the provisions under section 9(1)(vi) which defines the the term Royalty will be attracted only when there is a share of the product or profit reserved by the owner for permitting another to use the property and the share of the production or profit is paid by the owner. It cannot be applied to a situation of sale or purchase;
++ relying on the judgment in CIT Vs. Neyveli Lignite Corporation Ltd. the Bench noted that the term royalty normally connotes the payment made by a person who has exclusive right over a thing for allowing another to make use of that thing which may be either physical or intellectual property or thing. The exclusivity of the right in relation to the thing for which royalty is paid should be with the gurantor of that right. Mere passing of information concerning the design of a machine which is custom made to meet the requirement of a buyer does not by itself amount to transfer of any right of exclusive user, so as to render the payment made therefor being regarded as royalty.
Revenue's appeal dismissed
