18 April 2017 |
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CASE LAWS
DCIT Vs MICROSOFT CORPORATION INDIA PVT LTD: SUPREME COURT OF INDIA (Dated: April 7, 2017) Income Tax - Sections 144C & 148 Keywords - Cost plus mark up - market development agreement - reassessment - service tax. The Assessee is a wholly-owned subsidiary of Microsoft Corporation, USA and its principal business includes providing marketing support services to its AEs. Assessee entered into a Market Development Agreement with Microsoft Singapore. The Assessee was entitled to remuneration on cost plus 15% mark up basis. The Assessee filed its return of income for the AY 2009-10. AO made a reference to the TPO to determine the ALP for international transactions. The TPO proposed an upward adjustment. The final assessment order u/s 143(3) r/w Section 144C was passed by the AO. The Assessee preferred an appeal against the said assessment order before the ITAT which is stated to be pending. In the meanwhile, the Commissioner of Service Tax raised a demand on account of service tax (including penalty) on the Assessee. Assessee preferred an appeal along with an application seeking waiver of pre-deposit before the CESTAT whereby CESTAT stayed the recovery of the disputed demand of service tax subject to the Petitioner making a deposit of Rs 70 crores. The Assessee made the deposit on November 30, 2009, that is, during the financial year 2009-10. The appeal preferred by the Assessee before the CESTAT was considered by a Division Bench but due to difference of opinion, it was referred to a Third Member, who held that the marketing support services rendered by the Assessee to Microsoft Singapore qualified as 'export of services' and was, thus, exempt from service tax. The sum of Rs.70 crores deposited by the Assessee was refunded. While the proceedings before the CESTAT were pending, the Assessee in its computation of income for AY 2010-11, claimed a deduction of Rs.70 crores which was paid during the relevant financial year. However, the same was disallowed. On 30th March, 2014, the AO issued the impugned notice u/s 148 for reassessing the income of the Assessee for AY 2009-10. On receipt of the notice, the Assessee requested for the reasons for issuance of notice which was provided to the Assessee. The Assessee filed its objections against the aforesaid reasons before the AO, which were disposed of by the impugned order dated January 21, 2015. The High Court held that AO had merely reproduced the reasons recorded for reopening the assessment and had failed to apply its mind to the submissions made by the Assessee. Accordingly the impugned notice was set aside. Held that, + delay condoned. Issue notice. Four weeks' time is granted to assessee for filing counter affidavit. SLP admitted; Notice issued PR CIT Vs SURESH NANDA: SUPREME COURT OF INDIA (Dated: April 17, 2017) Income Tax - Section 2(22)(e). Keywords - Deemed dividend - shareholder - security deposit. The assessee is a non-resident individual. The first question pertains to the interest from security deposit given to the assessee by the company in which he is a 61% shareholder – M/s. Crown Corporation Pvt. Ltd. The AO assessed the security deposit as a “deemed dividend” u/s 2(22)(e). The CIT(A) and the ITAT however directed its cancellation. Revenue preferred appeal to the High Court which dismissed the same. Held that, + Delay condoned. Issue notice. Revenue's SLP admitted |
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