Research Team

1. S. 2(47): Capital gains – Transfer – there was no transfer as per section 2(47)(v) giving rise to any capital gain in the hands of the assessee, reopening notice was not justified.

   A reopening notice was issued on the ground that capital gains income had arisen to the assessee on the transfer of development rights in its land to a developer, however, the assessee had merely received a license to permit construction on land to such developer but not given any possession in the land as contemplated u/s. 53A of T.P. Act, 1882, there was no transfer as per section 2(47)(v) giving rise to any capital gain in the hands of the assessee, reopening notice was not justified. (r.w.s.147 and 148)Dy. CIT v. Bharat Jayantilal Patel [2024] 296 Taxman 247 (SC)

2. S. 9: Income Deemed to accrue or arise in India (Royalties/Fee for technical services – Software) – payment made towards the supply of software was not taxable in India as a royalty. 

   The company is China-based and is engaged in supplying telecom types of equipment to various customers in India. AO held that income arising out of the supply of software was to be treated as royalty and taxed under section 9. The High Court held that since the supply of software was embedded in the supply of telecom equipment resulting in the sale of a copyrighted article, the transaction was to be treated in nature as the supply of articles or goods, and thus, payment made towards the supply of software was not taxable in India as royalty. The Supreme Court affirmed the view of the High Court. Review petition of department dismissed. (r.w. article 12 of DTAA between India and China)CIT (IT) v. ZTE Corporation (2024) 296 Taxman 571 (SC)

3. S. 9(1)(vii): Income deemed to accrue or arise in India – Fees for technical services Deduction of tax at source – Payment to non-resident – Foreign company had not rendered technical services to Indian company – Amount remitted not taxable – Not liable to deduct tax at source – SLP of Revenue is dismissed – DTAA-India – United States of America. [S. 195, 201(1), 201(IA), Art. 12(4), Art. 32] 

   Dismissing the SLP of the Revenue the wherein the High Court held that the U.S. Company did not have any permanent establishment in India. The assessee had made payments to the U. S. Company. The scope of the work was to generate customer leads using customer database, market research, analysis, and online research data and rightly held that the service provider had not made available any technical knowledge, experience, know-how, process, or development and transfer technical plan or technical design. The services were utilized in the U.S.A., and the payments made by the assessee were not taxable in India. Hence, Tax was not deductible at source on such payment.CIT v. Ad2pro Media Solutions (P.) Ltd. (2024) 296 Taxman 569( SC) Editorial : Refer, CIT v. Ad2pro Media Solutions (P.) Ltd. [2023] 148 taxmann.com 226/455 ITR 648 (Karn.)(HC)

4. S. 44BB: Mineral oil, the business of exploration – service tax collected by the assessee in the course of services, service tax amount not includible in gross receipt.

   Held that held that service tax collected by the assessee in the course of the provision of services and facilities in connection with or supply of plant and machinery on hire, in the prospecting for, or extraction or production of mineral oils in India is not to be included in the amount paid or payable for the purpose of computation of the “presumptive taxable income” of the assessee u/s. 44BB of the Income-tax Act, 1961.CIT v. Transocean Offshore International Ventures Ltd. [2023] 459 ITR 609 (SC)/ (2024) 296 Taxman 570 (SC)

5. S. 44BB: Mineral oil, the business of exploration – reimbursement of service tax ought not to be included in the aggregate of amounts specified in clauses (a) and (b) of s. 44BB(2).

   Held that reimbursement of service tax ought not to be included in the aggregate of amounts specified in clauses (a) and (b) of section 44BB(2), as it is not an amount received by the assessee on account of services provided by them in prospecting, extraction or production of mineral oils.CIT v. Vantage International Management Co. 296 Taxman 160 (SC)

6. S. 68: Cash credits – Opportunity to cross examination was not given – Produced affidavit of lenders and notice issued was complied with – High Court affirmed the order of Tribunal deleting the addition – SLP dismissed. [S. 131, 133(6)] SLP dismissed in a case where the assessee was not given an opportunity to cross-examine the persons whose statements were recorded during the investigation based on which additions were made in the hands of the assessee under S. 68 of the Act. Revenue had recorded statement of director of a lender who confirmed transaction of loan and even assessee produced affidavits and notices issued by revenue under sections 131 and 133(6) which were duly complied with by its creditors. It was further noted that there was no link found in documents and financial statements of companies concerned .Tribunal held that since assessee was not granted an opportunity to cross-examine person whose statements were recorded during investigation, additions made by Assessing Officer on basis of such investigation which was not privy to assessee were to be deleted. High Court upheld order passed by Tribunal.PCIT v. Hadoti Punj Vikas Ltd (2024) 296 Taxman 248 (SC) Editorial: Pr. CIT v. Oriental Power Cables Ltd. [2022] 143 taxmann.com 370 (Raj.) (HC)
7. S. 80IB(10) : Housing projects – Built up area less than 1000 sq.ft – Deduction claimed on basis of approved plans of BMC, occupancy certificate issued by BMC – High Court affirmed the order of Tribunal – SLP of Revenue is dismissed. [Art. 136] Assessee developed a residential project and thus claimed deduction in terms of section 80-IB(10). Assessing Officer denied claim on ground that some of flats constructed in Tower ‘A’ of its housing project had exceeded area of 1000 sq.ft. as envisaged under section 80- IB(10). However, it was found that assessee was claiming deduction on basis of approved plans of BMC, occupancy certificate issued by BMC, possession letters and agreements for sale of flats entered into with individual buyers. As per approved plans of BMC all flats in ‘A’ wing of building were having built up area of less than 1000 sq.ft. and as per possession certificate issued to buyers of flats, buyers had been given possession separately for each of individual flats. There was no evidence on record to indicate that assessee had combined two or more flats. Completion certificate was issued by competent authority, which could not have been issued if there was any violation of approved plans by municipal authorities. High Court held that benefit of deduction under section 80-IB(10) could not be denied. SLP filed by revenue against said impugned order of High Court is dismissed. (AY. 2009-10)PCIT v. Vardhan Builders (2023) 155 taxmann.com 391/ (2024) 296 Taxman 1 (SC) Editorial : Pr. CIT v. Vardhan Builders (2023) 291 Taxman 450/456 ITR 310 (Bom.) (HC) 

8. S. 234B: Interest – Advance tax – Non-resident – Tax was deducted at source on payments made by the payer to it, no question of payment of advance tax by assessee, it would not be permissible for revenue to charge any interest u/s.234B.

   The Assessee based in China was engaged in the supply of telecom equipment and had a permanent establishment in India. The AO computed taxable income by attributing some percentage of sale consideration as profits to PE and interest u/s. 234B for failure to pay advance tax was levied. However, the High Court held that since the assessee was a non- resident company, the entire tax was to be deducted at source on payments made by the payer to it, and hence no question of payment of advance tax by the assessee. The Supreme Court dismissed the SLP against said order. The review petition by the department was also dismissed. CIT (IT) v. ZTE Corporation (2024) 296 Taxman 571 (SC)