CASE LAWS

2016-TII-70-ITAT-MUM-INTL

KPMG Vs ACIT: MUMBAI ITAT (Dated: March 18, 2016)

Income Tax - Sections 40(a)(i), 143(3), 195 & 197 - India-UK, India-USA & India-Chaina DTAAs - Articles 4, 12, 13, 14 & 15.

Keywords: professional fees - fees for technical services - TDS - fixed basis/establishment - 'make available' - technical plan - transfer of know how - PE - retrospective amendment.

Whether in the context of FTS, it is mandatory that technical knowledge should be 'made available' to the recipient of services and the said recipient should be free to use it in its own right - YES: ITAT

Whether in case an assessee has no PE or fixed basis regularly available in India for performing professional nature activities, such services can be considered as 'made available' as per the DTAA provisions with regard to FTS - NO: ITAT

Whether if it is known that a retrospective amendment may legally change the determination of tax liability in the hands of recipient with the retrospective effect, the same can also create an obligation upon the payer to deduct tax at source, that too with retrospective effect - NO: ITAT

Whether if professional services were provided in China by a team consisting of accountants & lawyers, such services specifically fall under Article 14 of the DTAA, and in the absence of their being any PE or any stay of the persons in India, the payment made by the assessee can be made taxable in India - NO: ITAT

Assessee's appeal partly allowed

2016-TII-130-ITAT-BANG-TP

LOGICA PVT LTD Vs DCIT: BANGALORE ITAT (Dated: March 18, 2016)

Income tax - ALP - AE - capital expenditure - credit of TDS - export turnover - software licenses & total turnover.

Whether an entity owning significant intangible and having huge revenues from software products can be compared to a software developer - NO: ITAT

Whether the consequences of working capital adjustment on a comparable’s profit margin can be a reason for its exclusion, where such an adjustment is arrived at in the manner prescribed by law - NO: ITAT

Whether the expenses incurred for procuring software licenses are revenue in nature, in case the nature of software procured is such that it becomes obsolete in a very short span of time and there is no enduring benefit derived by assessee from such software - YES: ITAT

Case remanded

2016-TII-129-ITAT-BANG-TP

SUBEX LTD Vs DCIT: BANGALORE ITAT (Dated: March 18, 2016)

Income Tax - Sections 10AA, 35D, 37(1), 40(a)(ia), 43A, 80HHC, 143(3), 144C, 201(1) & (1A).

Keywords - Loans to AE - bank rate - BB rating - interest - ALP determination - bond rate - foreign exchange fluctuations - operating costs - depreciation.

Whether in case an assessee has received interest on loans given to its AE, AO did not followed DRP instructions, in such case details furnished by the assessee with reference to average rates based on Loan Connnector database should be examined and if they are found to be less than rate charged by assessee, no adjustment can be warranted on account of interest - YES: ITAT

Whether When the DRP has directed AO to treat the foreign exchange fluctuation as an operational cost revenue or cost, is it possible for an AO to consider the same as a speculative loss - NO: ITAT

Whether in case of failure to deduct tax, any adjustment is possible u/s 43(6) towards the cost of assets which are capitalised, as provisions of Section 40(a)(ia), cannot be extended to the disallowance of depreciation which is allowable u/s. 32 - NO: ITAT

Assessee's appeal partly allowed