D.O. LETTER

F.No.285/23/2013-IT(Inv.V)/595

CBDT calls for expediting filing of prosecution & disposal of compounding cases

CASE LAWS

2017-TIOL-117-SC-IT

CIT Vs ML OUTSOURCING SERVICES PVT LTD: SUPREME COURT OF INDIA (Dated: March 6, 2017)

Income tax - Sections 10A & 119.

Keyword - employment agency - human resource service - IT-enabled Service - delegated legislation - customised data - recruitment service.

The Revenue preferred the present SLP challenging the judgment, whereby the High Court had held that the expression 'human resource' also included the process of acquiring and recruiting employees, and hence the assessee providing HR Services to foreign clients would be entitled to Sec 10A benefits.

On appeal, the Supreme Court grants leave to the Revenue to defend their case against M/s ML Outsourcing Services Pvt. Ltd.

Leave granted

2017-TIOL-464-HC-AHM-IT

PR CIT Vs KALPATARU POWER TRANSMISSION LTD: GUJARAT HIGH COURT (Dated: March 2, 2017)

Income tax - accrued receipts - transfer of carbon receipts - income

The AO while assessing the income of assessee, made additions of Rs.5,78,28,058/- on the ground that carbon receipt receivable/ accrued to the assessee under the year under consideration was a capital receipt. On appeal, the CIT(A) directed to delete the aforesaid addition of Rs.5,78,28,058/- by observing that as there was no transfer / sale of the carbon receipts during the year under consideration and therefore, the same could not be included in the year consideration. On further appeal, the Tribunal confirmed the order passed by CIT(A) by specifically observing that as the carbon receipts were neither sold / transferred during the year under consideration and therefore, the same could not be included in the income of assessee.

On appeal, the HC held that,

Whether the carbon receipts if neither sold nor transferred in favour of foreign companies in the year under consideration, can be included as income of assessee in the year under consideration - NO: HC

++ it is seen that AO has made additions on the ground that the amount was receivable and/or can be said to have been accrued in the year under consideration and therefore, the same is required to be included in the income of assessee. However, CIT(A) as well as Tribunal have held that the carbon receipts were neither sold nor transferred by the assessee during the year under consideration and therefore, the same cannot be said to have been included in the income of assessee in the year under consideration. As such whether when the amount can be said to have been accrued and/or is required to be included in the income of the assessee and in which year, is now not res integra in view of the decision of the Supreme Court in the case of Commissioner of Income Tax vs. Excel Industries Limited, wherein the question was whether advance license benefit and the Duty Entitlement Pass Book (DEPB) benefits were taxable in the year in which the same were actually utilized by the assessee or in the year of receipts. While considering the aforesaid question, the Supreme Court has observed that: "....whether the income accrued to the assessee is real or hypothetical; whether there is a corresponding liability of the other party to pass on the benefits of duty free import to the assessee even without any imports having been made; and the probability or improbability of realisation of the benefits by the assessee considered from a realistic and practical point of view (the assessee may not have made imports), it is quite clear that in fact no real income but only hypothetical income had accrued to the assessee and Section 28(iv) would be inapplicable to the facts and circumstances of the case....";

++ therefore, applying the aforesaid law laid down by the Supreme Court to the facts of the case on hand, it cannot be said that the CIT(A) as well as the Tribunal have committed any error in deleting the addition of Rs.5,78,28,058/- and holding that as neither the carbon receipts were sold and/or transferred in favour of foreign companies in the year under consideration, the same cannot be included as receipt / income in the year under consideration.

Revenue's appeal dismissed