AUGUST '19 ROUNDUP OF KEY TAX UPDATES

TAX UPDATES –AUGUST ‘19 ROUND UP
CA. REETIKA G AGARWAL
1
NEWS
INTERNATIONAL
1. Australian Taxation Office publishes important
guidance on cross-border tax measures
[Ref:
https://www.internationaltaxreview.com/arti
cle/b1gts5qlf50m77/australia-australian-
taxation-office-publishes-important-guidance-
on-cross-border-tax-measures]
2. Singapore, Turkmenistan sign comprehensive
tax treaty
[Ref: https://mnetax.com/singapore-
turkmenistan-sign-comprehensive-tax-treaty-
35497]
3. Zimbabwe proposes amendments to thin
capitalization rules.
[Ref: https://mnetax.com/zimbabwe-
proposes-amendments-to-thin-capitalization-
rules-35462]
4. Bulgarian mandatory transfer pricing
documentation rules enacted
[Ref: https://mnetax.com/bulgarian-
mandatory-transfer-pricing-documentation-
rules-enacted-35437]
5. USA and Curacao negotiating country-by-
country reporting exchange agreement.
[Ref: https://mnetax.com/us-and-curacao-
negotiating-country-by-country-reporting-
exchange-agreement-35327]
6. Switzerland to exchange financial account
information with 33 more countries for tax
purposes
[Ref: https://mnetax.com/switzerland-to-
exchange-financial-account-information-with-
33-more-countries-for-tax-purposes-35367]
7. Israeli tax authorities issue updated transfer
pricing declaration Form 1385
[Ref: https://mnetax.com/israeli-tax-
authorities-issue-updated-transfer-pricing-
declaration-form-1385-35299]
8. Australia publishes synthesized text of tax
treaties with France, Finland, Malta as altered
by MLI
[Ref: https://mnetax.com/australia-publishes-
synthesized-text-of-tax-treaties-with-france-
finland-malta-as-altered-by-mli-35286]
9. MLI amendments to Singapore-Luxembourg tax
treaty enter into effect
[Ref: https://mnetax.com/mli-amendments-
to-singapore-luxembourg-tax-treaty-enter-
into-effect-treaty-35237]
10. UAE country-by-country reporting rules
published
[Ref: https://mnetax.com/uae-country-by-
country-reporting-rules-published-35202]
OECD
11. Canada and Switzerland deposit their
instruments of ratification for the Multilateral
BEPS Convention
[Ref:-https://www.oecd.org]
12. Guinea, Namibia and Honduras join the fight
against tax evasion
13. Namibia joins the Inclusive Framework on BEPS.
14. Albania joins the Inclusive Framework on BEPS.
15. Saudi Arabia Joins OECD Multinational Tax
Reporting Regime
*******

2
INDIA
1. CBDT vide Circular No 22/2019 dated
30.08.2019 releases consolidated circulars/
clarifications in order to ease the compliance
activities of startup companies.
[Ref:
https://www.incometaxindia.gov.in/Lists/Pres
s%20Releases/Attachments/795/PressRelease
_Consolidated_Circular_ease_compliance_Star
t_ups_2_9_19.pdf]
2. CBDT constitutes Start-up Cell for redressal of
grievances related to Start-ups.
[Ref:
s%20Releases/Attachments/794/Press-
Release-CBDT-constitutes-Start-up-Cell-for-
redressal-of-grievances-related-to-Start-ups-
dated-30-08-2019.pdf]
3. CBDT clarifies that section 194N came into
effect from 1st
September, 2019; hence, TDS will
not be deducted on cash withdrawal prior to 1st
September, 2019.
[Ref:
Release-Clarification-on-applicability-of-TDS-
on-cash-withdrawals-dated-30-08-2019.pdf]
4. Government withdraws enhanced surcharge on
tax payable on transfer of certain assets.
[Ref:
Release-Government-withdraws-enhanced-
surcharge-on-tax-payable-dated-24-08-
2019.pdf]
5. Monetary limits for filing of appeals by Income
Tax Department further enhanced by CBDT vide
Circular No. 17/2019 dated 08.08.2019.
[Ref:
release-Monetary-limits-for-filing-of-appeals-
by-Income-Tax-Department-dated-08-08-
2019.pdf]
6. India notifies amended DTAA with Spain.
[Ref:
https://www.incometaxindia.gov.in/communi
cations/notification/notification58_2019.pdf]
7. Finmin notified the provisions of multilateral
convention to implement tax treaty related
measures to prevent base erosion and profit
shifting along with India’s Position
[Ref:
https://www.incometaxindia.gov.in/communi
cations/notification/notification57_2019.pdf]
8. CBDT has amended Rule 114 to facilitate
interchangeability of PAN with Aadhaar.
[Ref: NOTIFICATION G.S.R. NO. 614(E) [NO.
59/2019 (F.NO. 370142/13/2019-TPL)], DATED
30-8-2019]
9. ‘Farm-in’ exp. incurred by Oil Exploration &
Production Co’s is ‘intangible asset’; eligible for
depreciation.
[Ref: CIRCULAR NO. 20/2019 [F.NO.
225/34/2019-ITA.II], DATED 19-8-2019]
10. Quoting of ‘DIN’ in all departmental
communications is mandatory w.e.f. October 1,
2019.
[Ref: CIRCULAR NO. 19/ 2019 [F.NO.
225/95/2019-ITA.II], DATED 14-8-2019]
11. Time limit for processing of ITRs filed with
refund claims up to AY 2017-18 extended till 31-
12-2019.
[Ref: ORDER F.NO.225/194/2019/ITA-II, DATED
5-8-2019]
*******

3
DOMESTIC TAX CASE LAWS
SUPREME COURT
1. SLP dismissed against ruling that it was always
open to Assessing Officer to scrutinize material
supporting books of account or entries in books
of account before accepting same for purpose
of assessment, and, therefore, Assessing Officer
was justified in accepting two entries relating to
profits and disregarding other two entries
concerning losses. [Mathur Marketing (P.) Ltd.
v CIT [2019] 108 taxmann.com 118 (SC)]
2. Where High Court upheld Tribunal's order
holding that even though liability recorded in
books of account by way of journal entries i.e.
crediting amount of party to whom monies
payable and debiting account of a party from
whom monies were receivable in books of
account was in contravention of provisions of
section 269T, yet in that case penalty was not
leviable for reason that transaction was bona
fide and was not to evade taxes, SLP filed
against said decision was to be granted. [Pr. CIT
v Shakti Foundation [2019] 107 taxmann.com
460 (SC)]
3. Where High Court held that imposition of
interest was justified under sections 234B and
234C, save and except on income which arose
from retrospective operation of any statute,
decision, etc., because in those type of cases,
assessee was unable to know and assess his
income and pay advance tax; SLP filed against
said order of High Court was to be granted. [Pr.
CIT v Haldia Petrochemicals Ltd. [2019] 107
taxmann.com 435 (SC)]
4. Where HC upheld Tribunal's order holding that
profit arising to assessee trust from sales of
shares was to be treated as capital gain exempt
from tax under section 10(38) having regard to
fact that shares in question were settled by
settler of trust who kept those shares for over
two years, SLP filed against order of High Court
was to be dismissed. [Pr. CIT v Vernan (P.) Trust
[2019] 107 taxmann.com 433 (SC)]
5. Where High Court upheld Tribunal's order
holding that since assessee leased out its hotel
to another concern by charging one per cent of
total revenue and, thus, amount so received
was taxable as business income, SLP filed
against said order was to be dismissed. [CIT v
Plaza Hotels (P.) Ltd. [2019] 107 taxmann.com
288 (SC)]
6. Where High Court by impugned order held that
in absence of any addition made on basis of
reasons recorded, no other addition could be
made in course of reassessment proceedings,
SLP filed against impugned order was to be
granted. [DIT v Black & Veatch Prichard, Inc.
[2019] 107 taxmann.com 290 (SC)]
7. According to section 292BB, if assessee had
participated in proceedings, by way of legal
fiction, notice under section 143(2) would be
deemed to be valid even if there be infractions
as detailed in said section. Scope of provision is
to make service of notice having certain
infirmities to be proper and valid if there was
requisite participation on part of assessee.
However, section does not save complete
absence of notice. For section 292BB to apply,
notice must have emanated from department.
It is only infirmities in manner of service of
notice that section seeks to cure. Section is not
intended to cure complete absence of notice
itself and thus, issue of notice under section
143(2) for completion of regular assessment is a
statutory requirement as per provisions of Act
and non-issuance thereof is not a curable
defect. [CIT v Laxman Das Khandelwal [2019]
108 taxmann.com 183 (SC)]
*********

4
HIGH COURT
1. Where assessee did not inherit anything from
his father and, moreover, he had nothing to do
with his father's bank account, having regard to
provisions of section 159, impugned assessment
order passed under section 144, read with
section 147 on ground that there were huge
deposits in said account in relevant year prior to
death of his father, was not sustainable. [C.
Naveen Kumar v ITO [2019] 108 taxmann.com
219 (Madras)]
2. Where Tribunal concluded in case of persons
against whom search was made that
transaction of sale of property in question was
taxable in hands of assessee, non-recording of
reasons independently by Assessing Authority
of searched person, could not be said to be fatal
for initiating proceedings under section 158BD
against assessee. [Smt. V. Vijayalakshmi v Dy.
CIT [2019] 107 taxmann.com 450 (Madras)]
3. Commissioner is not authorized under section
12AA(3) to cancel registration of charitable
trust retrospectively. Where assessee
educational trust acquired a TV channel for
educational training in journalism and mass
communication as it was offering courses for
graduation and post-graduation in mass
communication and journalism, said investment
in TV channel would be considered to be in
consonance with objects of trust. [Indian
Medical Trust v Pr. CIT [2019] 108
taxmann.com 93 (Rajasthan)]
4. Sec. 54F relief available on purchase of two
adjacent flats if same was converted into single
unit. [Pr. CIT v Abhijit Bhandari [2019] 108
taxmann.com 120 (Madras)]
5. Where assessee made contribution to State
Government towards construction of a bridge
which would be used by assessee for
transportation of its goods, since bridge was not
owned by assessee and assessee, by spending
for construction of new bridge, had not
acquired any property or right of permanent
character, amount paid by assessee was to be
treated as revenue expenditure. [CIT v
Salgaocar Mining Industries (P.) Ltd. [2019] 108
taxmann.com 116 (Bombay)]
6. Additions made to assessee's income as
unexplained investment under section 69 on
basis of statement of one SKL, being findings of
fact based on agreement of purchase of land, it
could not be said that authorities committed an
error in relying upon statements of SKL. [Vijay
Jain v CIT [2019] 107 taxmann.com 313
(Madhya Pradesh)]
7. Where assessee had purchased shares out of
his own funds and held them for over
seventeen months against locking period of one
year before sale and in earlier years, Assessing
Officer had accepted sale consideration from
sale of shares to be capital gain, profit on sale of
shares by assessee was to be treated as long
term capital gain and not business income. [Pr.
CIT v Hiren M. Shah [2019] 107 taxmann.com
182 (Bombay)]
8. Where demand against assessee under section
115-QA was an integral part of impugned
assessment order, question regarding
interpretation of section 115-QA could
definitely have been gone into by Commissioner
(Appeals). Hence, High Court declines to
entertain writ petition under article 226 of
Constitution against impugned demand raised
by revenue by way of impugned assessment
order under section 115-QA against assessee.
However, assessee is to be granted an
opportunity to file an appeal under section 246-
A before Commissioner (Appeals) to challenge
impugned assessment order only insofar as it
creates a demand under section 115 QA.
[Genpact India (P.) Ltd. v Dy. CIT [2019] 108
taxmann.com 340 (Delhi)]
9. Once an order has been passed under section
245D by Settlement Commission, assessment
for year stands concluded and Assessing Officer
thereafter has no jurisdiction to reopen
assessment. [Komalkant Faikirchand Sharma v
Dy. CIT [2019] 108 taxmann.com 50 (Gujarat)]

5
10. Once assessee had paid reassessed tax along
with interest under sections 234A, 234B and
234C after reassessment order was passed,
assessee could claim waiver of such interest
only if case of assessee could be brought within
scope of notification issued by Central Board of
Direct Taxes vide F. No. 400/234/95-IT(B), dated
23-5-1996. [Tushin T.Mehta v Chief CIT [2019]
108 taxmann.com 257 (Madras)]
11. Where petitioners-real estate developer
deducted tax at source but failed to credit same
to account of Central Government as per
provisions of Chapter XVII-B within prescribed
time, they could not escape from rigour of
section 276B in absence of reasonable cause for
said failure in terms of section 278AA. [Golden
Gate Properties Ltd. v ITO-TDS [2019] 107
taxmann.com 302 (Karnataka)]
12. Assessee, engaged in business of manufacturing
and exporting honey, was eligible to claim
deduction under section 80-IB(11A) in relation
to benefits received under Vishesh Krishi and
Gram Udyog Yojana (VKGUY). [Pioneer Foods &
Agro Industries v ITO [2019] 107 taxmann.com
364 (Bombay)]
13. Proviso to section 80-IA(4) does not require
direct agreement between assessee and
specified authority i.e. Central Government or
State Government or Local Authority, for
availing of benefit under section 80-IA. [CIT v
Chettinad Lignite Transport Services (P.) Ltd.
[2019] 107 taxmann.com 362 (Madras)]
14. Interest awarded in motor accident claim cases
from date of Claim Petition till passing of award
or in case of Appeal, till judgment of High Court
in such Appeal, would not be exigible to tax, not
being an income. On any interest paid to him
post judgment, tax had to be collected as
income from other sources. [Rupesh
Rashmikant Shah v UOI [2019] 108
taxmann.com 181 (Bombay)]
15. Revenue having recovered approximately 38
per cent of disputed tax amount during
pendency of appeals and no special
circumstances pointed out to permit revenue to
carry out full recoveries, revenue would not be
permitted to carry out any further recoveries
pending appeals. [Vodafone India Ltd. v CIT
[2019] 107 taxmann.com 304 (Bombay)]
16. Where pursuant to search proceedings,
assessee filed return declaring certain
undisclosed income in respect of amount
borrowed and, thereupon, he filed an
application under section 245C wherein lower
amount was declared as undisclosed income, in
view of fact that assessee failed to prove that
loan entries were genuine and his statement
recorded in course of search proceedings was
under coercion, he did not approach Settlement
Commission with clean hands and, thus,
impugned order passed under section 245D(1)
allowing assessee's application to be proceeded
with, was to be set aside. [Pr. CIT v Om Prakash
Jakhotia [2019] 107 taxmann.com 283 (Delhi)]
17. Where assessee filed writ petition challenging
notice under section 153A and assessment
order had been passed after filing of writ, since
assessee had an alternate and efficacious
remedy of filing appeal before CIT (Appeals),
assessee should challenge said order before CIT
(Appeals). [Rajendra v ITO [2019] 107
taxmann.com 178 (Karnataka)]
18. Nomination charges paid by assessee, engaged
in quarrying granite blocks from mines, to State
Government for allotment of land for quarrying
of granite, could not be equated with terms
'tax, duty cess or fees' under section 43B(a).
[Tamil Nadu Minerals Ltd. v Jt. CIT [2019] 107
taxmann.com 214 (Madras)]
19. Where a sum received by assessee-company to
undertook a joint venture for development of IT
Park was returned as deal could not be
materialised, since assessee furnished complete
statement of bank account reflecting debits and
credits on account of money received and
returned by it and issue about amount in
question was dealt with by Assessing Officer

6
during original scrutiny assessment, reopening
notice treating said amount received by
assessee as an unexplained investment was
unjustified. [Best Cybercity (India) (P.) Ltd. v
ITO [2019] 107 taxmann.com 215 (Delhi)]
20. Where a partner of assessee firm, during
search, specifically admitted in statements
recorded under section 132(4) that money
receipt on account of gift from NRI was actually
firm's own undisclosed income routed back to
other partner's accounts through an alleged NRI
gift, Commissioner (Appeals) was justified in
making additions in hands of assessee firm in
respect of such money. [Swathi Enterprises v
Dy. CIT [2019] 107 taxmann.com 216 (Madras)]
21. Where assessee had filed a writ petition
challenging an order of attachment passed by
Tax Recovery Officer under section 222
attaching a property for failure to pay dues by
one 'N' and stated that above property
belonged to him, writ petition was rejected as
'not maintainable' and assessee was directed to
file a claim before Tax Recovery Officer in terms
of rule 11 of Second Schedule, who would
investigate same in accordance with law.
[Nilesh Popatlal Patel v TRO [2019] 107
taxmann.com 301 (Gujarat)]
*********
INCOME TAX APPELLATE TRIBUNAL
1. Where assessee's oil wells had come into
existence after earth digging through rigs,
assessee was held to have used its oil rigs,
equipments and tools for bringing into
existence the new oil well / eligible undertaking
than having formed the same through the old
plant and machinery, thus, there was no
violation of the legislative condition of use of
old machinery for formation of the undertaking
/oil wells as mentioned under section 80-IB(2).
[Asstt. CIT v Oil India Ltd. [2019] 108
taxmann.com 588 (Gauhati - Trib.)]
2. Interest income taxable under head 'other
sources' if advancing of loans wasn't part of
business of assessee. [Global Entropolis (Vizag)
(P.) Ltd. v Asstt. CIT [2019] 108 taxmann.com
220 (Bangalore - Trib.)]
3. Where assessee had claimed credit for tax
deducted at source on interest income from
bank, yet it had not declared corresponding
interest income to tax, in view of fact that
assessee was regularly following marcantile
system of accounting, interest income in
question was liable to be taxed in assessment
year in question itself and, thus, impugned
addition made by Assessing Officer was to be
confirmed. [Dy. CIT v Delhi Tourism
Transportation Corporation Ltd. [2019] 107
taxmann.com 306 (Delhi - Trib.)]
4. Where Commissioner (Appeals) passed an
assessment order against assessee, however,
assessee contended that impugned order being
passed after 3 to 4 months from conclusion of
hearing was null and void, in view of facts that
contention of assessee about late passing of
impugned order was unfounded and, further,
monthly D.O. report had revealed that said
order was passed in month of conclusion of
final hearing itself, though dispatched late
impugned assessment order passed by
Commissioner (Appeals) was to be upheld. [Anil
Kisanlal Marda v ITO [2019] 108 taxmann.com
55 (Pune - Trib.)]

7
5. No penalty if assessee was in bona fide belief
that purchase of new property was within time
limit. [ITO v Kantilal G. Kotecha [2019] 108
taxmann.com 119 (Mumbai - Trib.)]
6. Where assessee's claim for set off of loss
incurred on trading of castor oil against its other
incomes was rejected, in view of fact that
parties with whom business transactions of
castor oil were entered into, were sister
concerns and directly under influence of
assessee, revenue authorities rightly concluded
that transactions of purchase and sale of castor
oil were sham and, thus, assessee's claim for set
off of loss incurred in those transactions could
not be allowed. [RPK Warehousing (P.) Ltd. v
ITO [2019] 108 taxmann.com 128 (Ahmedabad
- Trib.)]
7. Where AO made addition to assessee's income
under section 68 in respect of amount
deposited in bank, in view of fact that assessee
had withdrawn those funds from his bank
account four months ago for purchase of a
property and, since, transaction relating to
purchase of said property did not materialse, he
re-deposited funds in question in his bank
account, impugned addition was to be deleted.
[Baljit Singh v ITO [2019] 108 taxmann.com
123 (Chandigarh - Trib.)]
8. Where assessee had purchased a land prior to
date of transfer of his agricultural land,
Commissioner was justified in disallowing
exemption under section 54B. [Paras Chinubhai
Jani v Pr. CIT [2019] 107 taxmann.com 217
(Ahmedabad - Trib.)]
9. Activity of selling various small properties
acquired from sale of land couldn't be treated
as business activity. [Munish Singla v Addl. CIT
[2019] 107 taxmann.com 176 (Chandigarh -
Trib.)]
10. Where capital gain arises from sale of
residential house, assessee is eligible to claim
deduction under section 54 and that being case,
restrictions imposed under proviso to section
54F (1) will not apply to assessee. [Asst. CIT v
Jai Kumar Gupta (HUF) [2019] 107
11. In terms of section 8 of Companies Act, 2013,
Corporate Social Responsibility (CSR) activities
are public charitable activities per se and,
therefore, assessee-company formed with
object of complying with requirement of
corporate social responsibility of its parent
company was eligible for registration under
section 12AA. [Escorts Skill Development v CIT
[2019] 108 taxmann.com 53 (Delhi - Trib.)]
12. In terms of AS-11, both gains and loss on
account of exchange rate fluctuations on
reporting date are to be accounted for while
computing income chargeable to tax. [Tata
Consultancy Services Ltd. v CIT [2019] 108
13. Assessee, engaged in organising horse races,
was not liable to deduct tax at source under
section 194B while making payment of 'stake
money' to owner of horses who won races
organised by assessee. [Royal Western India
Turf Club Ltd. v ACIT TDS [2019] 108
14. In terms of section 249(4)(a), stipulation as to
payment of tax ante filing of first appeal is only
directory and not mandatory and, therefore,
where appeal is filed without payment of tax
but subsequently required amount of tax is
paid, appeal shall be admitted on making
payment of tax and taken up for hearing on
merits. [Annapoorneshwari Investment v Dy.
CIT [2019] 107 taxmann.com 417 (Bangalore -
Trib.)]
15. Where assessee-company purchased
Compulsory Convertible Debentures (CCDs)
from its subsidiary company and sold them to
its holding company which had resulted in short
term capital loss, in view of fact that
documentary evidences for purchase and sale
of CCDs were not doubted by revenue and
independent Chartered Accountant had

8
determined fair market value of CCDs,
transactions of sale of CCDs to related concern
could not be construed as a colourable device
to set off huge profits earned during year.
[Essar Teleholdings Ltd. v Asstt. CIT [2019] 107
16. Where an educational institution carries on
activity of education primarily for educating
persons, mere fact that it makes surplus cannot
lead to conclusion that it ceases to exist solely
for educational purposes. [Sanatam Dharam
Educational Charitable Society v CIT (Exmp)
[2019] 107 taxmann.com 365 (Amritsar - Trib.)]
17. Assessee, engaged in manufacturing of tea, is
not eligible to claim deduction under section
80-IC(2) in respect of sale of black tea
manufactured from green tea leaf purchased
from outside market. [Bisseswarlall Mannalal &
Sons v Dy. CIT [2019] 107 taxmann.com 359
(Kolkata - Trib.)]
18. Where assessee-car manufacturer made
payment to its dealers in lieu of service coupons
against which customers availed free service
from dealers, TDS was to be deducted under
section 194C. [Mahindra & Mahindra Ltd. v Dy.
CIT [2019] 107 taxmann.com 134 (Mumbai -
Trib.)]
19. Where assessee, engaged in construction and
development of housing project, claimed
deduction of interest paid on money borrowed
for acquiring land as stock-in-trade, in terms of
AS-16, interest cost so incurred would be
required to be accumulated as part of project
cost and same could not be allowed as
deduction in year of incurrence itself. [ITO v
Khatu Shyam Builders [2019] 107
taxmann.com 315 (Jaipur - Trib.)]
20. Where Applicant Company returned an amount
received from a company towards supply of
ceramic tiles on finding out that said company
was not genuine and it was involved in money
laundering activity, applicant could not be held
to be a beneficial owner of amount in question.
[Iscon Ceramic (P.) Ltd. v Initiating Officer
[2019] 107 taxmann.com 420 (PBPTA – AT)]
21. If tax is deducted based on a bona fide estimate
or if there is no observation that estimate is not
honest or fair, deductor cannot be held to be
assessee-in-default under section 201(1). [ITO v
Mahatma Gandhi University [2019] 107
taxmann.com 186 (Cochin - Trib.)]
**********

9
TRANSFER PRICING CASE LAWS
1. Apex has affirmed the decision taken by Hon'ble
High Court and ITAT in favor of assessee and
held that Where addition was made to income
of the assessee on account of guarantee
commission chargeable to its Associate
Enterprises, benchmark fixed by Ld. TPO at 3
per cent was not correct. For computing ALP of
guarantee commission, comparison cannot be
made between guarantees issued by
commercial banks as against a corporate
guarantee issued by holding company for
benefit of its AE. [CIT v Glenmark
Pharmaceuticals Ltd. [2019]
107 taxmann.com 445 (SC)]
2. CBDT's Instruction No.3/2003 dated 20-5-2003
had mandated that wherever aggregate value
of international transaction exceeds Rs. 5
crores, case should be pricked up for scrutiny
and reference under section 92CA be made to
TPO. If there are more than one transaction
with an AE or there are transactions with more
than one associated enterprises, aggregate
value of which exceeds Rs. 5 crores,
transactions should be referred to TPO. [Pr. CIT
v S.G. Asia Holdings (India) (P.) Ltd. [2019] 108
taxmann.com 213 (SC)]
3. Where details of international transactions
entered into by assessee with its AEs were
specifically made available, Tribunal was
justified in directing Assessing Officer to restrict
determination of ALP to transactions with AE
only rather than on entire turnover of company.
[CIT v. Phoenix Mecano (India) (P.) Ltd [2019]
108 taxmann.com 124 (Bombay-HC)]
4. Transfer pricing regulations do not apply to
assessee a Tonnage Tax Company to extent of
operations carried out through operating
qualifying ships where income is taxed under
Tonnage Tax Scheme. [Van Oord India (P.) Ltd.
v Asstt. CIT [2019] 107 taxmann.com 303
(Mumbai - Trib.)]
5. Where assessee-advertising agency availed
different intra-group services from its foreign
AEs, ALP cannot be determined by TPO in
respect of said services on adhoc/estimation
basis without applying any method prescribed
under section 92C(1). [Lintas India (P.) Ltd. v
Dy. CIT [2019] 107 taxmann.com 426 (Mumbai
- Trib.)]
6. Where Commissioner (Appeals) had not
properly considered objection of assessee on a
number of comparables and passed a non-
speaking order in respect of exclusion and
inclusion of such comparables, issue to be re-
examined. [Comverse Network Systems India
(P.) Ltd. v Asstt. CIT [2019] 107 taxmann.com
425 (Delhi - Trib.)]
*********

10
INTERNATIONAL TAXATION CASE LAWS
1. Re-assessment notice issued on a Swiss
Company on basis that investment by said
company in shares of its subsidiary amounted
to 'income' which had escaped assessment was
to be set aside as share purchase was a 'capital
account' transaction and could not be treated
as income. [Nestle SA v Asstt. CIT [2019] 108
taxmann.com 237 (Delhi-HC)]
2. Where assessee, permanent establishment of
Japanese company, was assessed as not being a
domestic company and tax rate of 65 per cent
was imposed on assessee, since clause 24(2) of
DTAA agreement between Indian and Japan
provides that a permanent establishment of an
entity of one country in other country shall not
be subjected to less favorable terms than an
assessee carrying on similar activities in other
country, assessee was liable to pay tax at same
rate as Indian companies carrying on same
activities were liable to for relevant assessment
year. The effect of the legal fiction envisaged in
article 24(2) of the agreement is that for
purpose of applying appropriate tax rate,
permanent establishment of entity had to be
regarded as a domestic company. Therefore, HC
set-aside ITAT’s order justifying levy of 65% tax
rate on PE of Japanese Co. in India. [Bank of
Tokyo Mitsubishi Ltd. v CIT [2019] 108
taxmann.com 242 (Calcutta)]
3. Where assessee a US based company had
entered into a global agreement with its group
entities (affiliates), including its Indian
subsidiary for provision of support activities in
area of supply chain, human resources,
strategic planning and marketing, finance and
information systems and from nature and
duration of contract it was evident that services
had been utilized by Indian Company as well
and concept of make available which requires
that fruits of services should remain available to
service recipients in some concrete shape such
as technical knowledge, experience, skills etc.
was met, cost reimbursements received by
assessee towards providing support services to
its group affiliates would be taxable as FTS both
Income Tax Act and under tax treaty as well. [H.
J. Heinz Co. v Asstt. DIT [2019] 108
taxmann.com 473 (Delhi - Trib.)]
4. Where assessee - Dutch company had entered
into two agreements with its Indian subsidiary,
namely, License Agreement granting rights to
use software owned by it and Service
Agreement to provide executive search
services, since executive search fee earned by
assessee in terms of Service Agreement was
independent of royalty earned in terms of
License Agreement, same was not taxable in
India as FTS or royalty under article 12(5)(a) of
DTAA. [Spencer Stuart International BV v Dy.
CIT (Intl. Tax.) [2019] 108 taxmann.com 47
(Mumbai - Trib.)]
5. Payments towards reimbursement of expenses
towards travel and stay, video conferencing
charges, insurance, and other miscellaneous
expenses, received by assessee-Netherland
based company from its Indian subsidiary,
would not constitute FTS as per article 12 of
India Netherland DTAA. [Spencer Stuart
International BV v Dy. CIT (Intl. Tax.) [2019]
108 taxmann.com 47 (Mumbai - Trib.)]
6. Where scientific services were rendered by two
Swiss scientists to assessee-company, these
were covered under Article 14 which deals with
independent personal activities and no tax was
required to be deducted at source from said
payments. [Poddar Pigments Ltd. v Asstt. CIT
[2019] 107 taxmann.com 422 (Delhi - Trib.)]
7. Where referral fees was received by foreign
concern for introducing clients to assessee-
Indian company, providing international real
estate advisory and management services, since
referral services were rendered entirely outside
India, it would not fall within scope of 'total
income' of said foreign concern as per section
5(2). Referral fees paid by assessee-Indian
company for availing referral services which
were rendered by foreign concern entirely in
USA would constitute business profits of foreign
company under Article 7 of India-USA DTAA; in

11
absence of PE in India, it was not taxable in
India. [Knight Frank (India) (P.) Ltd. v Asstt. CIT
[2019] 107 taxmann.com 363 (Mumbai - Trib.)]
8. Where payment made to foreign buyer was not
income within meaning of Article VII of DTAA to
be taxable in India, question of deduction of tax
at source did not arise and consequently no
addition was warranted under section 40(a)(i).
[3F Industries Ltd. v Asstt. CIT [2019] 108
taxmann.com 79 (Visakhapatnam - Trib.)]
********
Disclaimer: Above said information are taken
from publically available resources and believed
to be accurate.

AUGUST '19 ROUNDUP OF KEY TAX UPDATES

Recommended

Recommended

More Related Content

What's hot

What's hot (20)

Similar to AUGUST '19 ROUNDUP OF KEY TAX UPDATES

Similar to AUGUST '19 ROUNDUP OF KEY TAX UPDATES (20)

More from Reetika G Agarwal

More from Reetika G Agarwal (13)

Recently uploaded

Recently uploaded (20)

AUGUST '19 ROUNDUP OF KEY TAX UPDATES