| 2017-TII-INSTANT-ALL-478 | 04 August 2017 |
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NOTIFICATION CBDT notifies 121 countries & specified territories under Section 9A relating to activities not constituting business connection in India CBDT notifies certain conditions u/s 9A not to apply to FPIs registered with SEBI CASE LAWS NDTV LTD Vs DCIT: DELHI HIGH COURT (Dated: August 1, 2017) Income tax - Sections 69A, 143(3), 221(1) Keywords - immidiate demand - appeal effect order - remanded matter The Assessee i.e., NDTV, preferred the present petition challenging the order order passed by the AO calling upon the Assessee to deposit 'immediately' a sum of Rs. 4,28,93,32,540/- being the tax payable with reference to one of the issues that arose from the return filed by the Assessee for A.Y 2009-10. The counsel for Assessee pointed out that the impugned order was purportedly an 'appeal effect order' passed consequent to the order of ITAT dated 14th July, 2017 - 2017-TII-282-ITAT-DEL-TP for AY 2009-10. He further pointed that three of the four major issues that arose for consideration were remanded by the ITAT to the TPO for re-determination. He submitted that there could not be a truncated ‘appeal effect order’ only with reference to one issue on which the ITAT had decided against the Assessee, i.e. the issue arising out of an addition made by AO in the original assessment u/s 69A. Explaining the reason for the Assessee directly approaching this Court in a writ petition against the impugned order by which the AO has proceeded to raise a demand on only one of the four issues, the counsel pointed out that if an appeal were to be preferred against the said order before the CIT(A), the Assessee would in all probability be required to deposit the entire demanded amount thus causing undue hardship to the Assessee. The attention of this Court was drawn to the consequential show cause notice issued by the AO to the Assessee u/s 221(1), whereby the AO had stated that three tax demands raised against the Assessee were found to be 'not paid in time'. It was submitted that with the Assessee being subjected to such coercive action, wherein the order raising the demand and the SCN for penalty proceedings have been issued on the same date, it was constrained to invoke the writ jurisdiction of this Court. On appeal, the HC held that, Whether coercive steps can be initiated against Assessee for his failure to pay the demand raised by Department through an 'appeal effect order', if the 'SCN covering demand' and 'appeal effect order' were dispatched same day - NO: HC ++ this Court notices that the SCN and the impugned ‘appeal effect order’ both dated 26th July 2017 were despatched on the same day. The demand of Rs. 4,28,93,32,540 for AY 2009-10 was in fact quantified only by the ‘appeal effect order’ passed on that very day. That sum could not therefore be said to have not been paid as of that date when clearly the appeal effect order was being despatched together with the SCN. When asked about this, Revenue's counsel stated that the Income Tax Department will not give effect to the said SCN insofar as it proposes to initiate penalty proceedings against the Assessee for alleged failure to pay the demand raised by the impugned ‘appeal effect order’ pertaining to AY 2009-10. The said statement is taken on record. The Court is satisfied, at the present stage, that there is a prima facie case in favour of the Assessee for passing an ad interim order to the effect that no coercive steps should be taken against the Assessee until further orders. The balance of convenience in passing such an interim order is in the circumstances also in favour of the Assessee. Given the amount demanded from the Assessee by the impugned ‘appeal effect order’, and the requirement that it should be paid ‘immediately now’, the Assessee would be subjected to hardship and prejudice if such an interim order is not passed. For the aforementioned reasons, it is directed that till the next date of hearing no coercive steps shall be taken against the Assessee. Case deferred BALLARPUR INDUSTRIES LTD Vs CIT: BOMBAY HIGH COURT (Dated: August 1, 2017) Income Tax - Section 80HHC - India-Malaysia DTAA. Keywords - AS 11 - foreign exchange fluctuation - mercantile system of accounting - export turnover. The Assessee-Company derived its income from manufacturing and sale of paper, stationery, glass, caustic soda, salt etc. besides income by way of royalty and interest from a joint venture Company viz. M/s. JG Containers (Malaysia) Sdn. Bhd., Malaysia. The Assessee had received royalty and interest which were accounted for in the earlier years on accrual basis. Though the Malaysian Company remitted the same in foreign currency but due to the difference in exchange rate, the assessee received more than what it had earlier accounted for in its books in terms of Indian Rupees. There was no change in the income in terms of Malaysian Currency. The AO allowed the royalty & interest credited in the accounts on accrual basis as income exempt from tax in view of the provisions of the DTAA with Malaysia. However, the AO declined to accept the claim of the Assessee that the differential amount arising on account of exchange fluctuation on remittance of royalty & interest pertaining to the earlier years had retained its original nature as royalty and interest and accordingly should not be exempt from tax. On appeal, the CIT(A) and the Tribunal concurred with the view of the AO. On appeal, the HC held that, Whether if income earned abroad is not brought to India immediately and may result in gain or loss due to foreign exchange fluctuation at the time of receipt, such gain or loss is to be treated as taxable income under a separate head - YES: HC ++ the income has been earned in Malaysia on account of royalty and interest but the same is retained there and not brought repatriated to India immediately on the same accruing to the assessee. This leads to a gain/loss in foreign exchange valuation. This gain/loss on account of foreign exchange variation would not bear the character of income on account of royalty and interest earned in Malaysia. This is so as the gain/loss on account of foreign exchange variation is not a part of royalty and interest nor is it any accretion to it. In this case, it is the generation of further income which is taxable in the subject assessment year when the variation in foreign exchange has resulted in further income in India to the assessee; ++ the assessee has overlooked the fact that although the Revenue would in cash system of accounting record the income only on receipt of the same, yet for the purposes of taxation it would split the amount received from Malaysia on account of royalty and interest in the year in which it arose/accrued at the rate prevailing then as one head of income and the income gained on account of exchange rate variation due to passage of time at the time of conversion as the other head of income. The Revenue would bring to tax the later gain arising on account of exchange rate variation to tax as income arising from a different source. The amount attributable to royalty and interest received from Malaysia on the basis of foreign exchange rate existing on the last date of the Accounting year in which this income would be receivable by the assessee as a different head of receipt excluded from tax. Thus, we do not accept the submission made on behalf of the assessee as the source of receipt is different and two fold; Whether for the lack of specific provisions in the Act, any gain or loss arising out of fluctuation in the foreign exchange earned as exports proceeds is not to be included in the export turnover - YES: HC ++ for the lack of specific provisions in the Act, receipt of foreign exchange on sale proceeds of exports beyond the end of the previous year relevant to the Assessment year resulting in gain or loss would not be considered to be a part of export turnover, but an income arising on separate transaction i.e. arising due to variation in foreign exchange rates and would not be included as part of export turnover. Assessee's appeal dismissed |
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