This document provides a summary of tax updates and circulars from the CBDT and cases from various courts in India for the month of January 2019. Some key points include: 1. The CBDT issued guidance on TDS on salary and withdrew a circular on applicability of section 56(2)(viia). 2. The notification provided a simplified procedure for startups to get approval under section 56(2)(viib). 3. Various cases related to reopening of assessments, capital gains, exemption under section 11, and transfer pricing adjustments were decided by the High Courts and Tribunals. 4. International tax updates from the OECD included several countries joining the inclusive framework on BEPS

1. TAX UPDATES – JANUARY ‘19 ROUND UP
BY CA. REETIKA G AGARWAL
NEWS
1. CBDT issued a comprehensive circular providing
guidance on TDS on salary
[Ref:-Circular No. 01/2019[F.NO. 275/192/2018-
IT(B)], Dated 01-01-2019]
2. CBDT withdraws Circular no. 10/2018 Dated 31-12-
2018 on applicability of Section 56(2)(viia) of the
Income Tax Act, 1961
[Ref:-Circular No. 02/2019[F.NO. 173/616/2018-
ITA-I], Dated 04-01-2019]
3. Simplified Procedure to Startup - Approval for the
purposes of Section 56(2)(viib) of the Income Tax Act
1961
[Ref:-Notification NO. G.S.R. 34(E) [F.NO.
5(4)/2018-SI], Dated 16-1-2019]
4. CBDT clarified prosecution notice issued only in case
of TDS default amounting more than Rs 5 Lakhs.
[Ref:-Press Release, Dated 21-1-2019]
5. CBDT notifies new Centralized Verification Scheme
for issue of notice and processing of information u/s
133C of the Income Tax Act 1961
[Ref:-Notification No. S.O. 550 (E) [NO.5/2019
(F.NO.370142/22/2017-TPL)], DATED 30-1-2019]
6. CBDT redefines income-tax authority for purpose of
section 133C of the Income Tax Act 1961
[Ref:-Notification No. G.S.R. 76(E) [NO.4/2019
(F.NO.370142/22/2017-TPL)], DATED 30-1-2019]
7. Official assignee is required to compute tax and file
ITR in status of ‘artificial juridical person’: CBDT
[Ref:-CIRCULAR NO. 4/2019
[F.NO.225/472/2018/ITA.II], DATED 28-1-2019]
8. Extending the due date for furnishing of report
under section 286 (4) of the Income-tax Act, 1961 –
Circular 9/2018 dated 26.12.2018
[Ref:www.incometaxindia.gov.in/news/circular_9_
2018.pdf]
9. Exception from online filing of application under
section 197 and 206C (9) in the cases of NRIs and
resident applicants-Press release dated 24.12.2018
[Ref:https://www.incometaxindia.gov.in/Lists/Pres
s%20Releases/Attachments/741/Exception_online_
filing_application_under_section_197]
OECD
10. OECD and the Netherlands discuss developments in
international tax co-operation.
[Ref:-http://www.oecd.org/tax/oecd-and-the-
netherlands-discuss-developments-in-
international-tax-cooperation.htm
11. The Cook Islands joins the Inclusive Framework on
BEPS.
[Ref:-www.oecd.org/tax/beps/inclusive-
framework-on-beps-composition.pdf]
12. Papua New Guinea signs the Multilateral BEPS
Convention-24.01.2019
[Ref:-http://www.oecd.org/tax/treaties/beps-
mli-signatories-and-parties.pdf
13. The Faroe Islands and Greenland join the Inclusive
Framework on BEPS-18.01.2019
[Ref:-www.oecd.org/tax/beps/inclusive-
framework-on-beps-composition.pdf
14. OECD, SARS and National Treasury continue
partnership to strengthen tax co-operation.
[Ref:-http://www.oecd.org/tax/oecd-sars-and-
national-treasury-continue-partnership-to-
strengthen-tax-co-operation.htm
15. Belize signs landmark agreement to strengthen its
tax treaties and Monaco deposits its instrument of
ratification for the Multilateral BEPS Convention.
[Ref:-http://www.oecd.org/tax/belize-signs-
landmark-agreement-to-strengthen-its-tax-
treaties-monaco-deposits-its-instrument-of-
ratification.htm

2. TAX UPDATES – JANUARY ‘19 ROUND UP
BY CA. REETIKA G AGARWAL
DOMESTIC TAX CASE LAWS
16. Where High Court upheld Tribunal's order deleting
addition made by Assessing Officer under section
69A on ground that there was no reliable or
independent evidence to come to conclusion that
assessee had accepted on-money for sale of
constructed properties, SLP filed against decision of
High Court was to be dismissed. [Pr. CIT v Nishant
Construction (P.) Ltd. [2019] 101 taxmann.com 180
(SC)]
17. Where High Court upheld Tribunal's order that rent
paid by assessee-trust to a trustee for using land and
building was not excessive and, thus, exemption
could not be denied to assessee under section 11 by
invoking provisions of section 13(1)(c), SLP filed
against said order was to be dismissed. [CIT v
Bholaram Educational Society [2019] 101
taxmann.com 193 (SC)]
18. Delay in filing appeal to be condoned if identical
issues were pending in earlier assessment years.
[Anil Kumar Nehru v Asst. CIT [2019] 101
taxmann.com 191 (SC)]
19. ITAT had power to consider application for recall of
an order if appeal was decided ex-parte. [Dr. Gopal
Dass Agarwal v CIT [2019] 101 taxmann.com 187
(Allahabad-HC)]
20. Sec. 80G renewal couldn't be rejected on ground
that income of trust wasn't utilized for charitable
purposes. [D.R. Ranka Charitable Trust v DIT [2019]
101 taxmann.com 124 (Karnataka-HC)]
21. Constitutional validity of section 10(34) and section
115BBDA is challenged on ground that section
115BBDA does not have any 'base', and it makes
hostile discrimination between a resident assessee
and a non-resident assessee, as provision only
applies to a resident assessee. The High Court
quashed the writ observing that the proviso to
section 10(34) gives primacy to section 115BBDA
over section 10(34) and that clause (a) of sub-section
(1) of section 115BBDA is clear and categoric as it
stipulates that dividend income upto Rs. 10 lacs is
not to be charged to tax @ 10% under section
115BBDA. Dividend income of less than Rs. 10 lacs
continues to remain exempt under section 10(34).
The High Court further observed that non-residents
are liable to pay tax in the country of their residence.
Taxation regime applicable to non-residents need
not be identical to that applicable to residents.
[Rajan Bhatia v CBDT [2019] 101 taxmann.com 328
(Delhi-HC)]
22. Where purchase of property was delayed due to
void compulsory acquisition by Appropriate IT
Authority, date of purchase would relate back to
original agreement, and not to date of execution of
sale deed and benefit of cost indexation was to be
provided from said date. [Amarjeet Thapar v ITO
[2019] 101 taxmann.com 221 (Bombay-HC)]
23. Where in case of assessee-company having
registered office at Mumbai and a branch office at
Indore, ITO, Indore, issued a notice under section
143(2), in view of fact that assessee was filing e-
returns from inception in Indore and, moreover, it
had accepted jurisdiction of Assessing Officer at
Indore in earlier assessment years, objection raised
by assessee that jurisdiction in its case lay in State of
Maharashtra, was rightly rejected by Chief
Commissioner. [Frolic Reality (P.) Ltd v CCIT [2019]
101 taxmann.com 311 (Madhya Pradesh-HC)]
24. Where during pendency of assessee's appeal before
Tribunal, his stay petition was dismissed and
thereupon AO initiated prosecution proceedings
under section 276C for non-payment of determined
tax, in view of fact that assessee was agitating his
case before Tribunal, which was final fact-finding
body, there was no necessity to launch prosecution
hurriedly because law of limitation under section
468 Cr. P.C. for criminal prosecution was excluded by
Economic Offences (Inapplicability of Limitation) Act,
1974. [Sayarmull Surana v ITO [2019] 101
taxmann.com 228 (Madras-HC)]
25. Where notice seeking to reopen assessment was
issued in name of deceased assessee, since she could
not have participated in reassessment proceedings,
provisions of section 292BB were not applicable to
assessee's case and as a consequence, impugned
reassessment proceedings deserved to be quashed.
[Rajender Kumar Sehgal v ITO [2019] 101
taxmann.com 233 (Delhi-HC)]
26. No disallowance under section 40A(3) could be
made where taxable income of assessee was
computed by applying gross profit rate. [Pr. CIT v
Jadau Jewellers & Manufactures (P.) Ltd. [2019] 101
taxmann.com 217 (Rajasthan-HC)]

3. TAX UPDATES – JANUARY ‘19 ROUND UP
BY CA. REETIKA G AGARWAL
27. HC quashes initiation of reassessment on Bharti
Infratel as it made full disclosure of demerger deal.
[Bharti Infratel Ltd. v Dy. CIT [2019] 101
taxmann.com 285 (Delhi-HC)]
28. Where Assessing Officer did not adjudicate objection
raised by assessee as to assumption of jurisdiction
under section 148 on ground that it was not feasible
to pass speaking order on objections and passed
impugned order of assessment, assessment order
and consequent actions would be illegal. [Raninder
Singh v CIT [2019] 101 taxmann.com 210 (Punjab &
Haryana-HC)]
29. Where assessee filed a revision petition raising claim
for deduction of employees contribution to PF which
was erroneously not claimed in return of income, in
view of fact that all payments towards employee's
contribution to PF had been made before due date
of filing of return, Commissioner was not justified in
refusing to entertain assessee's claim on merits.
[Geekay Security Services (P.) Ltd. v Dy. CIT [2019]
101 taxmann.com 192 (Bombay-HC)]
30. Where assessee-University conducted examinations
through various colleges affiliated to it, in absence of
any material to establish that affiliated
colleges/centres were rendering services of
professional or technical nature in matter of
conducting University's examination, Tribunal did
not commit any error in holding that tax was not
deductable on such reimbursement of expenses
incurred by colleges/centres under section 194J. [Pr.
CIT v M.P. Biscuits (P.) Ltd. [2019] 101 taxmann.com
189 (Allahabad-HC)]
31. Where no claim under section 54F was ever made
and no facts relating to such issue had been pleaded,
proved or established before any of authorities
below, such claim could not be entertained in appeal
before High Court under section 260A. [Gurdeep
Singh v Pr. CIT [2019] 101 taxmann.com 257
(Punjab & Haryana-HC)]
32. Reopening of assessment not based on satisfaction
of Assessing Officer but on audit objection regarding
disallowance under section 14A could not be
sustained. [Adani Infrastructure & Developers (P.)
Ltd. v Asst CIT [2019] 101 taxmann.com 256 (Gujarat-
HC)]
33. CBDT in its circular No.471 dated 15-10-1986 has
clarified that when an assessee purchases a flat to be
constructed by Delhi Development Authority (D.D.A.)
for which allotment letter is issued, date of such
allotment would be relevant date for purpose of
capital gain tax as date of acquisition. Further, it has
been clarified by circular dated 16-12-1993 that if
terms of schemes of allotment and construction of
flats/houses by cooperative societies or other
institutions are similar to those mentioned in Board's
Circular No.471, dated 15-10-1986; such cases may
also be treated as cases of construction for purposes
of sections 54 and 54F. [Pr. CIT v Vembu
Vaidyanathan [2019] 101 taxmann.com 436
(Bombay-HC)]
34. Proceedings initiated on basis of notice issued under
section 147/148 relying on judgment which had
been overruled on date on which notice was issued
were to be set aside being a serious misconduct on
part of Assessing Officer. [Aravali Kshetriya Gramin
Bank v Asst. CIT [2019] 101 taxmann.com 235
(Rajasthan-HC)]
35. Where assessee was engaged in business of
providing telecom services to both prepaid and
postpaid subscribers, unutilized amount on prepaid
card at end of year was to be treated as advance in
balance-sheet and recognized as a revenue receipt in
subsequent year, when talk time was actually used
or was exhausted. [CIT v Shyam Telelink Ltd. [2019]
101 taxmann.com 218 (Delhi-HC)]
36. Where funds of assessee-trust were utilized for
purchase of car in name of its trustee, there was
violation of section 13(2)(b), read with section 13(3);
however, denial of exemption under section 11
should be limited only to amount which was
diverted in violation of section 13(2)(b). [CIT v
Audyogik Shikshan Mandal [2019] 101
taxmann.com 247 (Bombay-HC)]
37. Assessee, an authorised franchise of BSNL, operating
telephone exchange and providing basic
telecommunication services to its customers in
pursuance of agreement entered into with BSNL was
entitled to deduction under section 80-IA(4)(ii).
[Sabdhagiri Telecom v ITO [2019] 101 taxmann.com
245 (Madras-HC)]
38. Where jantri value/circle rate of land was not higher
than sale price agreed by assessee with purchaser,

4. TAX UPDATES – JANUARY ‘19 ROUND UP
BY CA. REETIKA G AGARWAL
deeming provisions of section 50C could not be
invoked. [Dy. CIT v Nimish Kalyanbhai Vasa [2019]
101 taxmann.com 250 (Ahmedabad - Trib.)]
39. ITAT allows Sec. 54F relief on purchase of semi-
finished apartment. [Dr. Kushagra Kataria v Dy. CIT
[2019] 101 taxmann.com 359 (Delhi - Trib.)]
40. Where AO made addition to assessee's income
under section 69A in respect of unaccounted
receipts reflected in loose papers seized in course of
search, in view of fact that assessee could not earn
gross receipts without incurrence of expenditure, it
was only net profit embedded in unaccounted
receipts which deserved to be added to his taxable
income. [Dy. CIT v Mehul T. Desai [2019] 101
taxmann.com 234 (Surat-Trib.)]
TRANSFER PRICING CASE LAWS
41. Where assessee filed instant petition raising a plea
that in terms of sub-section (2A) of section 92CA,
jurisdiction of TPO to examine any transaction which
came to his notice during course of proceedings
though not referred to him under sub-section (1),
was confined to an international transaction only,
AO was to be prevented from passing any order until
aforesaid issue was decided by court. [Times Global
Broadcasting Company Ltd. v UOI [2019] 101
taxmann.com 51 (Bombay-HC)]
42. ALP of management services unit charges paid to AE
not to be taken as nil if services weren't duplicitous
in nature. [B.G. India Energy Solutions (P.) Ltd. v Dy.
CIT [2019] 101 taxmann.com 360 (Delhi - Trib.)]
43. Where assessee paid certain amount to AE in order
to enter into a business transaction on its behalf, it
being not a case of financing AE, impugned addition
of notional interest could not be made to assessee's
ALP. [Pr. CIT v KSS Ltd. [2019] 101 taxmann.com 357
(Bombay-HC)]
44. Giving a credit period was an integral part of
transaction of rendering of software development
services by assessee to its AE and, therefore, there
could be no separate determination of ALP of
international transaction of realization of sale
proceeds with extended credit period as it was only
incidental to transaction of sale. [Sunquest
Information Systems India (P.) Ltd. v Dy. CIT [2019]
101 taxmann.com 315 (Bangalore - Trib.)]
45. Where Indian entity had been remunerated at arm's
length price, then no further attribution of profit
could be made. [ESS Advertising (Mauritius) SNC et
Compagnie v Dy.CIT [2019] 101 taxmann.com 312
(Delhi - Trib.)]
46. Ad-hoc determination of arms length price by TPO
under section 92 de-hors section 92C(1) would not
be sustainable. [CLSA India (P.) Ltd. v Dy. CIT [2019]
101 taxmann.com 388 (Mumbai - Trib.)]
47. Where TPO made addition of notional interest to
ALP in respect of delay in realisation of payment
from AE, in view of fact that in terms of agreement,
there was no condition to charge any interest for
delayed payments by AEs, impugned addition
deserved to be set aside. [Metlife Global Operations
Support Center (P.) Ltd. v ITO [2019] 101
taxmann.com 249 (Delhi - Trib.)]
INTERNATIONAL TAXATION CASE LAWS
48. Where in terms of collaboration agreement entered
into with HMCL Japan, lump sum payment as well as
royalty paid by assessee to HMCL for giving licence
and technical assistance in order to manufacture and
sale of automobiles were regarded as capital
expenditure, assessee would be entitled to claim
depreciation thereon. [Honda Siel Cars India Ltd. v
CIT [2019] 101 taxmann.com 222 (SC)]
49. Where assessee had paid commission to non-
resident foreign agents who were carrying out
activities outside India and non-resident agents did
not have any permanent establishment in India, said
payment was neither taxable, nor could be treated
as FTS. [Dy. CIT v Mc Fills Enterprise (P.) Ltd. [2019]
101 taxmann.com 212 (Ahmedabad - Trib.)]
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