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06.12.2016 - Voice of CA presents - Updates
Tuesday, December 6, 2016

I. Headlines Today    

  1. CBDT Press Release: Verification of High Value Suspicious Declarations made under the IDS 2016  (Click for detail)
  2. CBDT Notification: Procedure for the purposes of furnishing and verification of Form 26A for removing of default of Short Deduction and/or Non Deduction of Tax at Source  (Click for detail)
  3. Govt panel on audit firms gets more time to submit report  (Click for detail)
  4. Govt aims at Rs.1.3-lakh cr disclosure from IDS-II  (Click for detail)
  5. Make e-payments if contract exceeds Rs 5,000: Finance Ministry to govt departments  (Click for detail)
  6. Traders can get enrolled under GST provisions at govt camps  (Click for detail)
  7. Monetary Policy preview: Will the RBI cut interest rates tomorrow  (Click for detail)
  8. Govt doesn’t have the numbers to pass GST: Kerala finance minister  (Click for detail)
II.  Direct Taxes Case Laws: 

1.  CIT Vs. M/s Bagmane Developers, I.T.A. No. 157/2011, Date of Order: 03/11/2016, High Court of Karnataka

Whether the assessee will lose the right of claiming or will be debarred from being allowed the deduction, if the assessee fails to give appropriate treatment in the books of accounts under some misapprehension or mistake?

Held: No

Brief Facts:
The assessee had acquired a vast land measuring to the extent of 52 acres in C.V. Raman Nagar from Raja Bagmane in 1996. During the year 2000 the assessee intended to set up STPI for which acquired the approval of the Union Govt. in July 2002 and STPI came into being on subject property. The assessee had no further intention of exploitation on the said piece of land and the same was sold. Further the contention of the assessee was that the surplus arising out of sale of the above piece of land was erroneously offered as ‘business income’ in its original returns of income filed u/s 139(1) for AY 2002-03, 2003-04, 2004-05, 2005-06 and the property of land was shown as ‘stock-in-trade/ inventory’ in the books of accounts.

There were search proceedings in the respect of the assessee in the month of September 2006 and, thereafter, during the month of January 2007 filed revised returns, and claimed the difference out of the sale of property as ‘capital gain’. During assessment proceedings, the contention of the AO was that the sale of property could only be termed as ‘business income’ and ultimately based on the same, concluded the assessment proceedings. The order of AO was upheld by CIT(A). However, the ITAT accepted the contentions of the assessee. Aggrieved by which, the revenue appealed before the High Court.

It could be seen that the subject property was acquired by the assessee with a sole intention of investment only and setting up of a unit for the software companies. To implement its intention of STPI unit, it had set in motion way back in 2000 itself. It could also be seen from the sequence of events that the sale of a piece of land from the vast holding of total area of 52 acers was merely a coincident which cannot, by any stretch of imagination, be construed or categorised as a regular feature (business) of the assessee. Further, it is held that “the assessee is entitled to a particular deduction or not will depend on the provision of law relating thereto and not on the view which the assessee might take of his rights nor can the existence or absence of entries in the books of account be decisive or conclusive in the matter.”
The appeal of revenue is denied.

(Please click here for judgment)


2.  DDIT Vs. Virage Logic International, I.T.A. No. 1108/2007, Date of Judgment: 09.11.2016, High Court of Delhi

Whether the new software developed by the branch office in India and then transmitted to the head office situated outside India on arm’s length price will amount to export sale under Section 10A?


Brief Facts:
The assessee is engaged in the business of software development and has established a branch office in India at Noida and New Delhi for development of software for export. It had received approval for setting up of 100% Export Oriented Unit (EOU) under the Software Technology Park (STP) Scheme of the Central Government for the development of computer software and the software so developed by it is electronically transmitted to its head office which is located abroad. As per the terms of agreement, the head office pays all direct and indirect cost for the development of software with the mark up of 15% of such process. It also received remittances from the head office towards the export/ transmission of such software and furnished the relevant clarification which was accepted by the STPI authorities.

The assessee filed a return seeking exemption under Section 10A of the Income Tax Act, 1961 for A.Y. 2002-03. AO contended that assessee’s claim was unacceptable that it had sold software to the head office as both were the part of the same entity and head office had reimbursed the cost only with a nominal mark up. The AO relied on the Explanation 2 to Section 80HHC which states that at where goods and merchandise are transferred by a unit to a branch office, warehouse or other establishment situated outside India, and thereafter sold, such transfer shall be deemed to be export and therefore absence of any such explanation in Section 10A was an adverse circumstance. The order of AO was upheld by CIT(A). However, the ITAT accepted the contentions of the assessee. Aggrieved by which, the revenue appealed before the High Court.

It was held that the transmission of computer software from an Indian entity to its head office on the basis of an arm’s length price determined for export entitled the assessee to exemption under Section 10A. Also, mere omission of a provision akin to Section 80HHC Explanation (2) or the omission to make a provision of a similar kind to Section 10A does not rule out the possibility of treatment of transmission of software from the branch office to the head office as an export. The absence of a “deemed export” provision in Section 10A similar to the one in Section 80HHC does not logically undercut the amplitude of the expression “transfer of goods” under Section 80-IA(8) – which is now part of Section 10A. Such an interpretation would defeat Section 10A(7) entirely.
Therefore, the contention of the assessee is accepted by the court.

(Please click here for judgment)

III. A Useful Article:

1.  Meaning and Scope of ‘Supply’ – Comparative view under Revised Model GST Law vis-à-vis Earlier Model GST Law

(Please click here for detail)

(Contribution by CA. Bimal Jain and contributor is available at eMail-id: 

 Golden Rules:

  "Hurt anyone with the weapon of truth but
never satisfy anyone by the power of lie"


  Thanks & Regards


Voice of CA 

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