Foreign​​ Collaboration Contracts / Royalty / TF

Toshoku Ltd. (S C)

It could not be said that the making of the entries in the books of Indian concern amounted to receipt, actual or constructive, by the non-resident in India. They could not, therefore, be charged to tax on the basis of receipt of income, actual or constructive, in the taxable territories.

Standard Triumph Motor Co. Ltd. (S C)

The credit entry of the royalty to the account of the appellant in the books of the Indian company amounted to receipt of​​ the royalty by the appellant and it was accordingly taxable. The method of accounting adopted by the non-resident was irrelevant.

T.I. and M. Sales Ltd. (SC)

Indian company was canvassing orders for non-resident company. The Indian company do not have authority to accept offers on behalf of non-resident. The contracts entered into, delivery made and prices received were outside India. Held that there is no business connection. The Indian company is not assessable as agent of non-resident.​​ 

Performing Right Society Ltd. (SC)

Royalties received from the Government of India under the agreement for broadcasting from the stations of All India Radio accrued in India.

In Re Millennium IT Software Ltd (AAR)

S. 9(1)(vi) & Article 12 define the term “royalty” to​​ include any payment for the use of, or the right to use, a “copyright” of scientific work. Software programmes are a “copyright” and are protected under the Copyright Act, 1957. As the software programme is a “copyright”, any payment received for transferring the right to use it is “royalty” as defined in the Act. The argument that there is a distinction between a “copyright” and a “copyrighted article” is not acceptable because there is no such distinction made either in the Income-tax Act or the Copyright​​ Act. The use of software involves the use of the copyright; the software cannot be divorced from the copyright itself. Accordingly, even a fee for the use of a “copyrighted article” is assessable as “royalty”. (Microsoft/Gracemac 42 SOT 550 (Del) followed; Dassault Systems 322 ITR 125 (AAR) not followed; Tata Consultancy 271 ITR 401 (SC) distinguished)

Wavin (India) Ltd. (SC)

The technical information given to the Indian company was "non-exclusive" and "non-transferable". In other words, this was not an out and out sale of technical know-how. The assessee was merely given a non-exclusive and non-transferable right of user of the technical information. The expenditure was deductible.

Hitachi Zosen Corporation (Mum)(AT)

While computing total income for purpose of section 115A, provisions of section 70 could not be ignored and loss from one source of income set off against income from another source under same head of income. Therefore, where assessee foreign​​ company gained profit from ONGC contract while suffered loss from SPIC contract, loss would have to be set off against profit for calculating income by way of fees for technical services.

Google India (P.) Ltd. (Banglore AT)

In the case of, Google India​​ (P.) Ltd. v. ACIT [2017] 86 taxmann.com 237 (Bengaluru - Trib), Google-Ireland gave non-exclusive distribution rights of 'Adwods Programs' to the assesse, Google-India. Under this arrangement, the assesse had been provided with access to IPR, Google Brand​​ features, secret process embedded in Adwords Programme as tool of trade for generation of income.

It was held by the ITAT that the activities of assessee would fall within the ambit of 'Royalty' as mentioned in Income-tax Act & under DTAA. Therefore, Payment made by assessee to Google-Ireland was royalty chargeable to tax in India.

Lottery Winning

Mrs. Roshan D. Nariman (Mum) (AT)

Assessee received Premium Savings Bond in London as a gift from her cousin, a British citizen, who had purchased it in​​ assessee's name in. It had fetched prize in draw subsequently which amount was credited in assessee's account on. Held that such amount is winning as contemplated under section 115BB.​​ 

Barendra Prasad Roy ​​ (SC)

Business connection​​ will also include the professional connection.

The word "business" is one of wide import and it means an activity carried on continuously and systematically by a person by the application of his labor or skill with a view to earning an income. The Courts are of the view that in the context in which the expression "business connection" is used in section 9(1) of the Act, there is no warrant for giving a restricted meaning to it excluding "professional connections" from its scope.

In the case of Barendra Prasad Ray v. ITO, the contention of the appellants was that a professional connection cannot amount to a business connection attracting section 9(1) of the Act. The Court held that the word "business" is one of wide import and it means an activity carried on​​ continuously and systematically by a person by the application of his labour or skill with a view to earning an income. The judges were of the view that in the context in which the expression "business connection" is used in section 9(1) of the Act, there​​ is no warrant for giving a restricted meaning to it excluding "professional connections" from its scope.

R.D. Aggarwal and Co (SC)

The expression 'business connection' limits no precise definition. The import and connotation of this expression has been explained by the Supreme Court in their judgment in C.I.T. v. R.D. Aggarwal and Co .which still holds good. Although the question whether a non-resident has a 'business connection' in India from or through which income, profits or gains can be said to accrue​​ or arise to him within the meaning of section 9 of the Income-tax Act, 1961, has to be determined on the facts of each case but its definitely has given some relief so as do away with the prevalent confusion regarding the term business connection. Generally confusion prevailed in a situation where few transactions of purchases of raw materials took place in India and the manufacture and sale of goods took place outside India, the profits arose from such sales were considered to have arisen out of a business connection in India which was a wrong practice .Later the case of CIT v. Fried Krupp Industries has made the concept even more clear by hinting at “continuity of business” which is essential so as to establish business connections. Therefore the term business connection has been rationalized with the help of the judicial interpretation and been successful to a larger extent in resolving various complications related to transaction and unlike few years back

Fried Krupp Industries (SC)

Mere purchase abroad​​ and use in India is not ‘continuing business’ - The term ‘business connection’ postulates a continuity of business relationship between the foreigner and the Indian. There is no question of continuing business relation when a person purchase the machinery​​ or other goods abroad and uses them in India and earns profit as it was held in CIT v. Fried Krupp Industries .In this case the court looked into the question whether principal to principal transaction amounts to any business connection.

Principal to​​ Principal (P2P) transactions are not business connections.

Tata Chemicals Ltd (Bom)

The Supreme Court referred and approved the decision of the Bombay High Court in CIT v. Tata Chemicals Ltd. , wherein it had been held that in order to rope in the income​​ of a non-resident, under the deeming provision, it must be shown by the department that some of the operations were carried out in India in respect of which the income was sought, to be assessed. Therefore the court declared that in respect of principal to​​ principal transaction there is no question of any business connection

Hazoora Singh (P&H)

Income in the hands of the agent of NRI will also include the income of NRI from the undisclosed source.

Premier Automobiles ​​ (SC)

Liability to make the payment of​​ advance tax is also on the agent of NRI and it does not violate the article of equality of constitution of India. Liability of pay advance tax is on all the person including the agent of NRI.

R Lines Ltd. ​​ (AT) (Mumbai)

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Who is an agent of non resident​​ and under what circumstances. Person accepting status of agent of non-resident on his own or as a result of action initiated by assessing officer. Such person can only be an agent.​​ 

Assessment confined to incomes which are deemed to accrue or arise in India under section 9(1) and not all incomes of non-resident. Reassessment against agent of Mauritian shipping company’s global incomes in India is not possible under section 160(1)(i)

Provision requiring notice not to be issued beyond two years from end of relevant assessment year is applicable to person who suo motu accepts status of agent of non-resident.

UAE Exchange Centre (AAR)

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The liaison office was engaged in downloading information regarding remittances through electronic media and transfer of amounts from the UAE to various places in India for a commission, by getting cheques printed by it in India and sending them to the addresses of beneficiaries in India according to instructions received. Since this service itself was understood as business in​​ view of the continuity of such service, the liaison office was to be treated as permanent establishment. There is a business connection.

Dun And Bradstreet Espana S.A., (AAR)

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Payment to a non-resident for information, which is downloaded for Indian​​ customers' use, is not technical fee, because the information, that is paid for, is in the nature of business information and not technology. It is an incident of e-commerce between two independent parties, so that the resident cannot be branded as a branch or sales outlet of the non-resident, so as to constitute a permanent establishment in India, the income being essentially from business.

Cargo Community Network Pte. Ltd. ​​ (Authority for Advance Ruling) ​​ 

Providing access to internet based air cargo portal outside India. Indian subscribers paying fees for access and use of portal for booking cargo with airlines, training subscribers and help connected therewith, such fees arise in India. Fees are royalties and fees for technical services taxable in India. Subject to tax deduction at source.

Speciality Magazines P. Ltd., (AAR)

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The applicant, an Indian company, was an advertisement concessionaire, of a non-resident company registered in the UK, which was carrying on the business of publishing magazines from London. As advertisement concessionaire the applicant got 15 per cent. commission on the gross value of the invoices raised outside India directly from Indian advertisers. Held that there is no business connection and Indian company could not be regarded as agent of non resident.

Jay Shree Tea And Industries Ltd., (AAR)

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The applicant, a resident company, had taken a loan of US $ 34,00,000 from R of Singapore. Interest on the same was paid by resident company. Held that interest is taxable in India. However there is no business connection between the resident and non resident.​​ 

Rajiv Malhotra, ​​ (Authority For Advance Ruling)​​ ​​ 

The commission income out of exhibition organized in India would, therefore, be taxable in India, as income arising from a​​ “source of income” in India.

ABC Ltd., ​​ (Authority For Advance Ruling)​​ ​​ 

Where the Indian company is permitted to download information from its data base relating to world-wide business information reports for a consideration, the income of the non-resident in such cases is income from business. But such income can not be taxed in India since there was no permanent establishment in India.

Sedo Forex International Drill Inc (Supreme Court Of India)

Where a non-resident enjoys his off-period drawing the salary for such period from the Indian employer, the law as understood thus far was, that the salary for the off-period would be treated on par with the salary for on-period, provided that during the break period they are the employees of the assessee.

LS Cable Limited vs. DIT (AAR)

The clauses in the offshore supply contract agreement regarding the transfer of ownership, the payment mechanism in the form of letter of credit which ensures the credit of the amount in foreign currency to the applicant’s foreign bank account on receipt of shipment advice and insurance clause establish that the transaction of sale and the title took place outside Indian Territory. The ownership and property in goods passed outside India. The transit risk borne by the applicant till the goods reach the site in India is not necessarily inconsistent with the sale of goods taking place outside India. The parties may decide between them as to when the title of the goods should pass. As the consideration for the sale portion is separately specified, it can well be separated from the whole. (Ishikwajima Harima 288 ITR 410 (SC) & Hyosung Corporation314 ITR 343 (AAR) followed; Ansaldo Energia SPA 310 ITR 237 (Mad) distinguished)

In Re Cairn U.K. Holdings Ltd (AAR)

The expression “before giving effect to the 2nd proviso to s. 48‟ in the Proviso to s. 112(1) pre-supposes the existence of a case where computation of long-term capital gains could be made in accordance with the formula contained in the 2nd​​ proviso in s. 48. It means that the asset must be one qualified for indexation under the second proviso to s. 48. There is no justification in not giving effect to the words used in the proviso. As the 2nd proviso to s. 48 is not applicable to non-residents, occasion to apply the proviso to s. 112(1) does not arise. A non-resident foreign company cannot claim the double benefit of protection against rupee value fluctuation as well as indexation. Timken 294 ITR 513 (AAR) not followed; BASF AG 293 ITR (AT) 1​​ followed

In Re The Timken Company (AAR)

Though s. 2(17) defines a “company” to include a “foreign company”, the context of the definition has to be seen. Income, which does not have a source in India, cannot be made part of the book profits. The annual accounts, including the P&L Account, cannot be prepared as per s.115JB(2) in respect of the world income and laid before the company at its AGM in accordance with s. 210 of the Companies Act. The speech of the Finance Minister and the Memorandum explaining​​ the provision also become out of sync if the meaning of “company” appearing in s. 115JB is adopted as ‘foreign company”. Any other meaning would take away force and life from the true intent of the makers of the Act. The contention of the department that there is no demarcation between a ‘domestic company’ and a ‘foreign company’ while applying s. 115JB is not acceptable. As the applicant did not have a place of business in India and was not required to prepare its accounts under s. 594 r.w.s. 591 of the Companies Act, it could not have prepared its accounts in accordance with the the companies Act.

Alstom Transport SA vs. DIT (AAR)

In Re Roxar Maximum Reservoir Performance WLL (AAR)

Though in Ishikawajima–Harima 288 ITR 408​​ (SC), Hyundai Heavy Industries291 ITR 482 (SC) & Hyosung Corp 341 ITR 18 (AAR), it was held that that a composite contract was capable of being dissected and it was open to the assessee to raise the contention that parts of the contract should be treated separately for the purpose of deciding whether income from the performance of that part of the contract arose onshore or offshore and that part of the income attributable to offshore transaction cannot be taxed in India, this is no longer good law in view of the larger bench decision in Vodafone International Holdings where it was held that the transaction has to be looked at as a whole and not by adopting a dissecting approach. The basic principle in interpretation of a contract is to read it as a whole and​​ to construe all its terms in the context of the object sought to be achieved. Reading parts of the contract as imposing distinct obligations is not the proper way to understand a composite contract.

Samsung Electronics Co. Ltd. (Bangalore) (AT)

Where the​​ payment is for the sale of rights / goods. It can not be termed as on account of royalty. Generally understood is that royalty is for the use of the rights and not for the sale of rights.

Sutron Corporation, (AAR)

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It was inferable that service was​​ rendered by internal arrangement between the applicant with such other concerns constituting division of work and sharing of the profits as between them. However, the AAR made it clear that only such part of the income of the non-resident as arising on sale of equipment, installation and service agreement will be deemed to accrue or arise in India.

​​ Sriram Bearings Ltd. (SC)

Where the foreign collaboration agreement is in two parts, one for sale of trade secrets and the other for technical assistance, the​​ agreement had to be read disjunctively and that the income relating to sale of trade secrets cannot be taxed in India.

Southern Switch Gear Ltd. (SC)

The disallowance of a part of the technical fees and royalty paid as capital expenditure was upheld by the Supreme Court on the ground that the collaboration agreement provided for technical aid even for setting up the factory and not merely for the right to sell the products.

In Re Aramex International Logistics Pvt Ltd (AAR)

A “permanent​​ establishment” is something which enables a non-resident to carry on a part of its whole business in a particular country. The Aramex group could not have done business in India without a presence in India. This presence in India can be achieved through an​​ independent entity or through a subsidiary. If the entity is an independent & uncontrolled entity, then there is no PE if the requirements in Article 5(2) of the DTAC are not satisfied. However, if a 100% subsidiary is created for the purpose of attending​​ to the business of the group, the subsidiary must be taken to be a PE of the group in India applying common sense

In Re Booz & Company (Australia) Pvt. Ltd (AAR)

As regards a “permanent establishment”, various factors have to be taken into account to decide a Fixed place PE which inter alia includes a right of disposal over the premises. No strait jacket formula applicable to all cases can be laid down. Generally the establishment must belong to the Employer and involve an element of ownership, management and authority over the establishment. In other words the taxpayer must have the element of ownership, management and authority over the establishment. As regards a “business connection”, the essential features may be summed up as follows: (a) a real and​​ intimate relation must exist between the trading activities carried on outside India by a non-resident and the activities within India; (b) such relation shall contribute, directly or indirectly, to the earning of income by the non-resident in his business; (c) a course of dealing or continuity of relationship and not a mere isolated or stray nexus between the business of the non-resident outside India and the activity in India, would furnish a strong indication of ‘business connection’ in India.

ABN Amro​​ Bank NV (Calcutta Bench)

A non-resident is taxable on income attributable to a permanent establishment, if any, in respect of his business income. A branch may constitute a permanent establishment, so that the income attributable to such permanent​​ establishment is taxable.

Morgan Stanley & Co. Inc., (Authority For Advance Ruling)

The ruling of the AAR is to some extent inconclusive as regards the non-resident’s liability, when it held that it would depend upon the nature of service rendered by the​​ employees deputed to India and the inference of permanent establishment in India, which would also depend upon such fact.

In Re WorleyParsons Services Pty. Ltd (AAR)

Where the assessee, an Australian company, entered into an agreement with Reliance and it was agreed that the consideration thereof constituted “royalty” but the assessee claimed (i) that the said royalty was “effectively connected” with a permanent​​ establishment (PE) and consequently assessable as business profits, (ii) that the portion of such “profits” as was not “attributable” to the PE was not assessable to tax in India and (iii) that even otherwise the royalty was not assessable to tax in view of Ishikawakima 288 ITR 408 (SC) where it was held that fees for technical services (and royalty) was not assessable to tax u/s 9(1)(vii) (9(1)(vi)) if it was not rendered and utilized in India, HELD: In order to be “effectively connected”, the PE should be engaged in the performance of royalty generating services. There must be a real and intimate connection and clear co-relation between the services giving rise to royalty and the PE. A connection between the PE and the contract is not enough.

Formula One World Championship Ltd. (Del)

In the case of Formula One World Championship Ltd. v. CIT [2017] 80 taxmann.com 347, the Supreme Court upheld the Delhi High Court's decision​​ that F-1 Race Circuit, which was owned by Jaypee Sports, shall be deemed as PE of assesse (a UK based Co.) in India. In the instant case, the assesse granted the rights to Jaypee to host and promote Formula F-1 Race at latter's motor racing circuit. The assesse had full access & control over the circuit and it could also dictate as to who can access the place. Further, organising any other event at this place was not permitted. Therefore, the Apex Court held that circuit shall constitute the PE of Assesse in India.

E-Funds IT Solution Inc (SC)

In the case of ADIT v. E-Funds IT Solution Inc [2017] 86 taxmann.com 240, the Supreme Court held that if an Indian subsidiary company only renders support services to enable the foreign company to render services to its clients abroad, this outsourcing work to India by foreign company would not give rise to its fixed place PE in India.

Type 1 (4 Mark Type)

Scope of Royalty and Technical Fees where there is composite​​ contract of supply of machinery and its maintainence.

Type 2 (6 Mark Type)

NR computation of capital gains of shares and debentures. Prov 1 to 48.

Type 3 (10 Mark Type)

Tax liability of Non Resident with special rate income of Royalty income. With or without operating Branch in India. (44DA is applicable)

With or without Interest income on foreign currency bonds.

With or without capital gains income as adjustment.

Type 4 (6 Mark Type)

Where payment to non resident is net of tax, as per the terms of contract. Its TDS application also.

Type 5 (6 Mark Type)

TDS for non resident when DTAA concessional rate of tax is applicable.

Type 6 (6 Mark Type)

TDS for non resident when PAN is not available.

Type 7 (6 Mark Type)

Tax liability of Non resident and Non​​ citizen sports person / entertainer.

or any other special rates of taxes for non residents.

Type 8 (10 Mark Type)

Non resident Indian (NRI) chapter XIIA full computation with capital gains computation as per Prov 1 to 48. With the double tax liablity calculation since chapter XIIA is optional.

Type 9 (10 Mark Type)

Foreign company tax liability calculation where there is​​ 

Royalty income​​ 

Other income

And 80G deduction.

In Re Cummins Limited (AAR)

Managerial services rendered by a​​ UK Co to an Indian Co, even if technical in nature, is not assessable as “fees for technical services” under Article 13 of India-UK DTAA if it does not “make available” any skill, technical know-how etc

In Re Tiong Woon Project & Contracting (Pte) Limited​​ (AAR)

An installation project which does not last more than 183 days in a fiscal year is not a "Permanent Establishment" and the business profits are taxable only in Singapore under Article 7(1) of the India-Singapore DTAA

In Re Cummins Limited (AAR)

Managerial services rendered by a UK Co to an Indian Co, even if technical in nature, is not assessable as “fees for technical services” under Article 13 of India-UK DTAA if it does not “make available” any skill, technical know-how etc

In Re Dow AgroSciences Agricultural Products Ltd (AAR)

Transfer of shares of an Indian Co by a Mauritius entity to a Singapore entity due to group reorganization is not a scheme for avoidance of tax. The capital gains are exempt under India-Mauritius DTAA. Treaty shopping is​​ permissible. A ROI u/s 139(1) need not be filed if income is exempt from tax

In Re E*Trade Mauritius Ltd (AAR)

The effect of Azadi Bachao Andolan is that there is no “legal taboo” against ‘treaty shopping’. Treaty shopping and the underlying objective​​ of tax avoidance/mitigation are not equated to a colourable device. If a resident of a third country, in order to take advantage of a tax treaty sets up a conduit entity, the legal transactions entered into by that conduit entity cannot be declared invalid. The motive behind setting up such conduit companies is not material to judge the legality or validity of the transactions. The principle that “every man is entitled to order his affairs so that the tax is less than it otherwise would be” is applicable though a colourable device adopted through dishonest methods can be looked into in judging a legal transaction from the tax angle. Tax avoidance is not objectionable if it is within the framework of law and not prohibited by law. However, a transaction which​​ is ‘sham’ in the sense that “the documents are not bona fide in order to intend to be acted upon but are only used as a cloak to conceal a different transaction” stands on a different footing.

Anapharm Inc vs. DIT (AAR)

In order to consider the meaning​​ of the term “make available” in Article 12 of the India-Canada DTAA, one can have regard to the India-USA DTAA. The term requires that the service provider should also make his technical knowledge, experience, skill, know-how etc., known to the recipient​​ of the service so as to equip him to independently perform the technical function himself in future, without the help of the service provider. In other words, payment of consideration would be regarded as ‘fee for technical / included services’ only if the​​ twin test of rendering services and making technical knowledge available at the same time is satisfied.

Small Business Corp vs. DIT (AAR)

For purposes of Article 20 of the India-Korea DTAA, a Government undertaking with corporate status cannot be equated to the Government. Even if the Articles of Incorporation make it clear that the Government has pervasive control over the undertaking, it still cannot be treated to be a wing or an integral part of the Government. However, the fundamental requirement of​​ Article 20(1)(a) is that the remuneration should be paid by the Contracting State. Even if it is paid out of funds allocated by the Government to the undertaking specifically towards personnel expenses, the requirement of Article 20(1) is satisfied. It is​​ as good as payment by the State itself. The expression “payment by a Contracting State” cannot be given a rigid or literal interpretation so as to cover the payments made directly by Government or a department of the Government. Even if the payment is made​​ out of State’s funds set apart for that purpose, the requirement of Section 20(1)(a) will be attracted and the Indian income-tax cannot be levied in such a case.

Type 1 (6 Mark Type)

Elimination of DTAA when​​ there is No DTAA with country from which resident is deriving income.

(Indian and That country both is showing income in compuation)

Type 2 (9 Mark Type)

Indian – Income

Foreign – Loss (not allowed as set off in that country)

Type 3 (10 Mark Type)

Indian​​ – Income

Foreign – Income (But exempt in that country, but taxable in India and eligible for some VIA deductions.)

Type 4 (9 Mark Type)

Where India and foreign country is having DTAA signed up.

Indian – Income

Foreign – Income (as per DTAA not taxable in​​ other country but included for rate purposes)

Type 5 (6 Mark Type)

Where India and foreign country is having DTAA signed up.

Indian – Income

Foreign – Income (taxable in other country but eligible for Full credit of taxes)

Type 6 (6 Mark Type)

Where​​ India and foreign country is having DTAA signed up.

Indian – Income

Foreign – Income (taxable in other country but eligible for special rebate as per average rate of taxes.)

Sony India P. Ltd. (Delhi High Court) ​​ 

Instructions of board​​ regarding reference to transfer pricing officer is valid. Instruction that cases where international transactions exceed Rs. 5 crore to be taken up for scrutiny is not discriminatory.​​ 

Shilpa Shetty vs. ACIT (ITAT Mumbai)

We are of the view that since chapter 10 pre-supposes the existence of “income” and lays down machinery provison to compute ALP of such income, if it arises from an „International transaction‟. Section 92 is not an independent charging section to bring in a new head of income or to charge tax on income which is otherwise not chargeable under the Act. Accordingly, since no income had accrued to or received by the assessee u/s 5, no notional income can be brought to tax u/s 92 of the Act

Mitchell Drilling India Private Limited vs. DCIT (ITAT Delhi)

Transfer Pricing: The "international transaction" as defined in s. 92F(v) has to be a genuine transaction. Transfer pricing provisions do not apply to non-genuine or sham transactions

CIT v. Thyssen Krupp (Bombay High Court)

Transfer Pricing: An​​ adjustment with respect to transfer pricing has to be confined to transactions with Associated Enterprises and cannot be made with respect to transactions with unrelated third parties

Calance Software Pvt. Ltd vs. DCIT (ITAT Delhi)

Transfer Pricing:​​ CBDT's Instruction No. 3/2003 is binding on the AO. Consequently, the ALP of international transactions where the quantum is less than Rs. 5 crore has to be determined by the AO and cannot be referred to the TPO. If such reference is made, it is invalid and the extended time for completing the assessment is not available to the AO. The assessment is void as it is time-barred

In Re Dana Corporation (AAR)

No capital gains in a business reorganization if consideration not determinable. Transfer pricing law does not apply if there is no income

CIT vs. Aurionpro Solutions Ltd (Bombay High Court)

Advances were made to the company situated abroad. The LIBOR rate naturally will be considered to determine the Arms Length interest, the same would be reasonable and​​ proper in applying the commercial principle. The Tribunal has directed the appropriate rate would be LIBOR plus 2% instead of LIBOR plus 3% applied by the TPO

CIT vs. Aurionpro Solutions Ltd (Bombay High Court)

Transfer Pricing ALP of foreign advances: If the advances are made to a AE situated abroad, the LIBOR rate has to considered to determine the Arms Length interest and not the interest rate in India (SBI PLR). This would be reasonable and proper in applying commercial principles

Thomas Cook (India)​​ Limited vs. ACIT (ITAT Mumbai)

Transfer Pricing: Corporate Guarantees are not comparable to Bank Guarantees & so the commission of 3% charged by Banks is not a benchmark to evaluate the ALP of a corporate guarantee but it has to taken at 0.5%. ITAT decisions which upheld the 3% rate cannot be followed as they are contrary to Everest Kanto 378 ITR 57 (Bom)

Pr CIT vs. M/s Veer Gems (Gujarat High Court)

S. 92A Transfer Pricing: The mere fact that an enterprise has de facto​​ participation in the capital, management or control over the other enterprise does not make the two enterprises "associated enterprises" so as to subject their transactions to the rigors of transfer pricing law

Orchid Pharma Limited vs. DCIT (ITAT Chennai)

Transfer Pricing - Meaning of “Associated Enterprises”: The fact that an enterprise can “influence prices and other conditions relating to sale” does not make it an “associated enterprise” of the assessee if it does not participate in the (a) capital, (b) management, or (c) control of the assessee and thus does not fulfil the basic rule u/s 92A(1). S. 92A(2)(i) has to be read with s. 92(A)(1). Even if the conditions of s. 92A(2)(i) are fulfilled, these enterprise cannot be treated as ‘associated enterprise’ if the requirements of s. 92A(1) are not fulfilled

Geoconsult GmbH vs. DIT (AAR)

Where the applicant had entered into a joint venture with two Indian companies for providing consultancy services for the development of tunnels and the question was whether the JV constitutes an ‘Association of Persons.

Pr CIT vs. Amphenol Interconnect India P. Ltd (Bombay High Court)

Transfer Pricing: The Comparable Uncontrolled Price (CUP) method is not the Most Appropriate Method for​​ determining the Arm's Length Price (ALP) in respect of the transactions of (sales of goods and sales commission) with Associated Enterprises (AEs) if there are geographical differences, volume differences, timing differences, risk differences and functional differences. If it is not shown that the selection of TNMM as the Most Appropriate Method is perverse, the same cannot be challenged

Zee Entertainment Enterprises Ltd vs. ACIT (ITAT Mumbai)

The Transfer Pricing Officer has selected RPM as most appropriate method for determining the arm’s length price of the transaction of sale of programmes and film rights to ATL in contrast to the TNM method selected by the assessee. The first controversy is as to whether the Transfer Pricing Officer was justified in selecting the RPM as most appropriate method. Section 92(1) of the Act provides that the arm’s length price in relation to the international transaction shall be determined by any of the methods prescribed therein, being the most appropriate method. Notably, the phraseology of section 92C(1) of the Act makes it clear that the selection of the most appropriate method is to be made “having regard to the nature of transaction or class of transaction or class of associated persons or functions performed by such​​ persons or such other relevant factors………………..”. Further, Rule 10B of the Rules enumerates the various methods to determine the arm’s length price of an international transaction and for the present purpose, what is relevant is clause(b) of Rule 10B(1) of​​ the Rules, which prescribes the manner in which the RPM is to be effectuated

CIT vs. Tata Power Solar Systems Ltd (Bombay High Court)

Transfer Pricing: A party is not barred in law from withdrawing from its list of comparables a company found to have​​ been included on account of mistake of fact. The Transfer Pricing Mechanism requires comparability analysis to be done between like companies and controlled and uncontrolled transactions by carrying out of FAR analysis. The assessee's submission in arriving at the ALP is not final. It is for the TPO to examine and find out the companies listed as comparables which are in fact comparable

Avenues Asia Advisors Pvt Ltd vs. DCIT (Delhi High Court)

Transfer Pricing: Steps to be undertaken in identification of​​ comparable transactions/entities while fixing the ALP and the margin explained. Though the TNMM method allows broad flexibility tolerance in the selection of comparables, broad functionality is not sufficient to find the comparable entity. There must be similarity with the controlled transaction

In so far as identifying comparable transactions/entities is concerned, the same would not differ irrespective of the transfer pricing method adopted. In other words, the comparable transactions/entities must be selected on the basis of similarity with the controlled transaction entity. Comparability of controlled and uncontrolled transactions has to be judged, inter alia, with reference to comparability factors as indicated under rule 10B(2) of the Income Tax Rules,​​ 1962. Comparability analysis by the transactional net margin method may be less sensitive to certain dissimilarities between the tested party and the comparables. However, that cannot be the consideration for diluting the standards of selecting comparable​​ transactions/entities. A higher product and functional similarity would strengthen the efficacy of the method in ascertaining a reliable arm’s length price. Therefore, as far as possible, the comparables must be selected keeping in view the comparability​​ factors as specified. Wide deviations in profit level indicator must trigger further investigations/analysis

Fresenius Kabi India Private Limited vs. DCIT (ITAT Pune)

Transfer Pricing: In the case of an assessee engaged in distribution activity there is​​ no value addition to the product in question even if the selling and marketing expenses are borne by the assessee. Accordingly, the Resale Price Method is the most appropriate method for bench marking the transaction and determining whether it is at arms'​​ length. The TPO is not entitled to thrust TNMM to evaluate the transaction

Pr CIT vs. Amphenol Interconnect India P. Ltd (Bombay High Court)

Transfer Pricing: The Comparable Uncontrolled Price (CUP) method is not the Most Appropriate Method for​​ determining the Arm's Length Price (ALP) in respect of the transactions of (sales of goods and sales commission) with Associated Enterprises (AEs) if there are geographical​​ differences, volume differences, timing differences, risk differences and functional differences. If it is not shown that the selection of TNMM as the Most Appropriate Method is perverse, the same cannot be challenged

CIT vs. Pentair Water India Pvt. Ltd (Bombay High Court)

Transfer Pricing: Companies with large turnover like Infosys &​​ Wipro are not comparable to companies with smaller turnover and should be excluded from the list of comparables

Cotton Naturals (I) Pvt. Ltd vs. DCIT (ITAT Delhi)

 CUP is the most appropriate method for ascertaining the arms length price of an international transaction of lending money. Where the transaction is of lending money in foreign currency to its foreign subsidiaries, the comparable transactions have to be of foreign currency lent by unrelated parties. 

Aithent Technologies Pvt Ltd vs. ITO (ITAT Delhi)

The assessee was required to comply with the transfer pricing provisions of s. 92 to 92F with respect to the transaction of interest-free loan to its subsidiary. The CUP method is the most appropriate method in order to ascertain the ALP of such​​ international transaction by taking into account prices at which similar transactions with other unrelated parties have been entered into. For that purpose, an assessment of the credit quality of the borrower and estimation of a credit rating, evaluation of the terms of the loan e.g period of loan, amount, currency, interest rate basis, and additional inputs such as convertibility and finally estimation of arm’s length terms for the loan based upon the key comparability factors and internal and/or external​​ comparable transactions are relevant. None of these inputs have anything to do with the costs; they only refer to prevailing prices in similar unrelated transactions instead of adopting the prices at which the transactions have been actually entered in such cases, the hypothetical arms length prices, at which these associated enterprises, but for their relationship, would have entered into the same transaction, are taken into account. Whether the funds are advanced out of interest bearing funds or interest​​ free advances or are commercially expedient for the assessee or not, is wholly irrelevant in this context. As the transaction is of lending money, in foreign currency, to its foreign subsidiary, the comparable transaction should also be of foreign currency​​ lending by unrelated parties (Perot Systems 130 TTJ 685 (Del) followed).

Alpha Nipon Innovatives Ltd vs. DCIT (Gujarat High Court)

Transfer Pricing: As per CBDT's Instruction No.3/2016 dated 10.03.2016, the AO is required​​ to give an opportunity to the assessee to show cause why the reference should not be made to the TPO and thereafter pass a speaking order while making a reference to the TPO. The failure to do so renders the reference void

Hyundai Rotem Company vs. ACIT​​ (ITAT Delhi)

Transfer Pricing: The TPO is required to be consistent in matters relating to selection of comparables. If a comparable has been included or rejected in an earlier year, he is not entitled to take a different view in a later year if there is​​ no change in circumstances

CIT vs. Tata Power Solar Systems Ltd (Bombay High Court)

Transfer Pricing: A party is not barred in law from withdrawing from its list of comparables a company found to have been included on account of mistake of fact. The Transfer Pricing Mechanism requires comparability analysis to be done between like companies and controlled and uncontrolled transactions by carrying out of FAR analysis. The assessee's submission in arriving at the ALP is not final. It is for the TPO to examine and find out the companies listed as comparables which are in fact comparable

Eaton Fluid Power Limited vs. ACIT (ITAT Pune)

Transfer Pricing: Entire law on whether the TPO can sit in judgement over the business model of the assessee and determine the​​ ALP of the transactions with AEs at Nil explained in the context of judgements in Kodak India 288 CTR 46 (Bom), Lever India Exports 292 CTR 393 (Bom), Cushman and Wakefield 233 TAXMAN 250 (Del), R.A.K. Ceramics 293 CTR 361 (AP) & Delloite Consulting 137 ITD 21 (Mum)

Mehsana District Co-operative vs. DCIT (Gujarat High Court)

S. 92CB Transfer Pricing Safe Harbour Rules: If the assessee has exercised the safe harbour option under Rule 10THD(1) & the AO has not passed any order under rule​​ 10THD(4) declaring the exercising of option to be invalid, the option is treated as valid. Thereafter, the Transfer Pricing regime does not apply & the AO has no authority to make any reference to the TPO to ascertain the arm's length price of the assessee's specified domestic transactions. CBDT's circular dated 10.3.2006 could not have and does not lay down anything to the contrary

Essilor India Pvt.Ltd vs. DCIT (ITAT Bangalore)

Transfer​​ Pricing: The existence of an "international transaction" w.r.t. AMP Expenditure cannot be assumed. The onus is on the TPO to prove such transaction. There is no machinery provision to ascertain the price to promote the AE's brand values. The AMP Expenditure should be treated as operating cost to apply TNMM and determine ALP of transactions with AE

CIT vs. Whirlpool of India Ltd (Delhi High Court)

Transfer pricing of AMP Expenditure: the onus is on the Revenue to demonstrate by tangible material that there​​ is an international transaction involving AMP expenses between the Indian Co and the AE. In the absence of that first step, the question of determining the ALP of such a transaction does not arise. In the absence of a machinery provision it is hazardous for any TPO to proceed to determine the ALP of such a transaction since Bright Line Test has been negatived as a valid method of determining the existence of an international transaction and thereafter its ALP

Maruti Suzuki India Limited vs. CIT (Delhi High Court)

Transfer Pricing: Important legal principles on whether an adjustment for Advertisement & Market Promotion (AMP) expenses can be made on the basis that there is an assumed “international transaction” with the AE because the advertisement expenditure of the Indian company is “excessive” explained

LÓreal India Private Limited vs. DCIT (ITAT Mumbai)

Transfer pricing of AMP Expenditure: In the case of a manufacturer operating in a competitive industry, high AMP expenditure cannot be assumed to have​​ been incurred for the benefit of the brand owner. The TPO has to prove that the real intention of the assessee in incurring AMP expenses was to benefit the AEs and not to promote its own business. Also, if the assessee has reported high turnover & profits​​ & offered to tax, the basic ingredient required to invoke s. 92 that there is transfer of profit from India remains unproved. In the absence of the AO/ TPO showing that there is a formal/ informal agreement to share the AMP expenditure, the adjustment cannot be made. The matter cannot be remanded to the AO/ TPO for reconsideration

Hyundai Motor India Limited vs. DCIT (ITAT Chennai)

Transfer Pricing AMP Adjustment: Entire law on whether the advertisement expenditure incurred by the Indian AE towards brand​​ of a foreign company can be treated as an “international transaction” and whether a notional adjustment can be made in the hands of the Indian AE towards compensation receivable from the foreign AE for “deemed brand development” explained

Type 1 (10 Mark Type)

Compuation of TP income where unit is eligible for 10AA exemption.

Type 2 (10 Mark Type)

Computation based on methods of ALP.

Type 3 (10 Mark Type)

Multiple ALP available and more then 6 (or​​ less then 6) comparable prices are available. Statistical method of arriving at ALP / average method with tolerance level.

Type 4 (6 Mark Type)

Interest payment to AE restriction

Type 5 (6 Mark Type)

Transaction with unit in notified jurisdictional area​​ and TP computation.

Type 6 (3 Mark Type)

Transaction with unit in notified jurisdictional area and TDS application.

Type 7 (6 Mark Type)

Choosing of Most appropriate method of ALP and then applying it.

Type 8 (6 Mark Type)

Safe Harbour Rules based​​ computation.

Type 9 (6 Mark Type)

Transfer pricing income and penalty computation.

Type 10 (3 Mark Type)

Tranfer pricing documentation and its penalties.

Type 11 (4 Mark Type)

Transfer pricing and specified domestic transaction computation.

Monte Harris (AAR)

• For the purpose of applicant’s status be NRI it must not be considered as on the date of application but must be considered as per the financial year that was preceding the year in which the application was made since residential​​ status is in respect of the a year

• AAR has power to reject the application if it is pending before income tax authority, such case pending before the income tax authority must be considered as on the date of the application and not with respect to any future date.

• The maintainability of the application cannot be made to depend on the pendency of the issue before the income-tax authorities on varying date. Hence the word is “already pending” shall be interpreted to mean already pending at the time of the application and not concerning future date as held by the Authority in Monte Harris (supra)

In Re. (AAR)

If there is prima facie point that application is made for the avoidance of tax than it can be rejected at any point of time of the procedure.

Hyosung​​ Corporation vs. AAR (Delhi High Court)

S. 143(2)/ 245R(2): A notice u/s 143(2)(ii) cannot be issued in a routine, casual or mechanical manner but after forming an opinion that it is "necessary or expedient" to do so. A S. 143(2) notice in the standard form is not a bar u/s 245R(2) for admission of an AAR application for advance ruling

In Re Orient Green Power Pte. Ltd (AAR)

U/s 82 of the Companies Act, shares in a company is moveable property transferable in the manner provided by its Articles of Association. The applicant has not shown the gift was authorized by its Articles. It is difficult to imagine the Articles of Association of a company providing for gifting away of the assets in the form of shares in another company by what is attempted to be described as oral gift. A “gift” by one company to another company of shares in a public company appears to be strange, unless it be one which has been set up for some purpose. The revenue’s contention that the purpose of the gift is to avoid tax and s. 56(2)(viia) is not far-fetched. Also, s. 47(i) & (iii) appear to apply to gifts by individuals and HUFs and not by companies. The Authority has the right & the duty to consider the reality of the transaction and genuineness of the transaction, in addition to its​​ validity. When such transactions are entered into involving substantial assets the applicant has to prove to the hilt the factum, genuineness and validity of the transaction, the right to enter into the transaction and the bona fides of the transaction. To​​ postulate that a corporation can give away its assets free to another even orally can only be aiding dubious attempts at avoidance of tax payable under the Act. The AO is in a batter position to make a proper enquiry into the question of the genuineness and validity of the transaction. Hence, a ruling is declined

Nuclear Power Corporation of India Ltd In Re (AAR)

The argument that the pendency of the question in the case of the recipient cannot bar the application in the case of the payer is not acceptable because an “advance ruling” is a determination in relation to a “transaction”. A “transaction” always involves the payer and payee. It is not possible to separate an applicant from a transaction while he is seeking a Ruling, since the Ruling relates to​​ a transaction undertaken by him or to be undertaken by him. A ruling also cannot be divorced from a transaction. The question posed before the income-tax authorities in the case of the recipient and before the AAR in the case of the payer is the same, namely, whether the income is assessable to tax. Consequently, the bar in s. 245R(2) applies and the payer’s application is not maintainable. The contrary view taken by the AAR in Airports Authority of India In re 168 Taxman 158 is not correct (Foster (AAR No.​​ 975 of 2009) followed)

The applicant sought an advance ruling on the obligation to deduct tax at source on payments made to a non-resident entity. The non-resident entity was already taxed in India. The Applicant urged that the ruling sought was to​​ determine the obligation to deduct tax at source, and the non-resident assessed to tax is of no consequences. The Authority held that it is not possible to separate an applicant from a transaction since the decision relates to a transaction undertaken or proposed to be undertaken. The ruling is not only applicant specific, but, also transaction specific. The non-resident already being assessed to tax the application was not allowed.

In Re Groupe Industrial Marcel Dassault (AAR)

On facts, the French​​ company’s (ShanH) only asset were the shares in the Indian company & it had no other business. When its shares were sold, what really passes were the underlying assets and the control of the Indian company. A gain was generated by the transaction. If the transaction is accepted at face value, control over Indian assets and business can pass from hand to hand without incurring any liability to tax in India. Such transactions have to be treated as ineffectual. It is not necessary to ignore the existence of ShanH to come to a conclusion that what is put up is a facade in the context of the tax law and would amount to a scheme for avoidance of tax

Shirishkumar Kulkarni., In re 288 ITR 530 (AAR)

The applicant sought the determination of the Authority on whether​​ the withdrawal from the individual retirement account set up abroad or on his death the distribution to his beneficiary would be exempt from tax in India. The Authority dismissed the application, as withdrawing of once own money was neither generating any​​ income nor undertaking any transaction with a person in India.

Y Ltd., In re 221 ITR 172(AAR)

The Applicant sought an advance ruling relating to the liability to interest under section 234B and 234C that accrues on account of the transaction (capital gains on the sale of shares and debentures). The Authority held on facts that the there was a direct nexus between the transaction and charging of the interest. Therefore, the application was to be allowed. 

Hindustan Powerplus Ltd., In re  267 ITR 685 (AAR)

The applicant filed an advance ruling to determine the liability to tax under the Act on the remuneration received by a resident employee outside India. The Authority rejected the application as the advance ruling has to be in relation to the tax liability of a non-resident and not a resident.

Connecteurs Cinch, S.A., In re 268 ITR 29 (AAR)

The Authority ruled that the entitlement to tax exemption under section 10A of the Act in the hands of the Indian subsidiary would not be any consequence of a​​ transaction undertaken or proposed to be made by the non-resident applicant hence the application was not allowed.

Trade Circle Enterprises LLC., In re 361 ITR 673(AAR)

The Applicant a non-resident was to form a consortium involving a proposed subsidiary​​ company along with another Indian company. The consortium was to claim deduction under section 80IA of the Act. The Authority did not follow the ruling in the case of Umicore Finance (supra) as there was no transaction between the Indian company and the applicant. The issues raised were for determining the tax liability arising in the Indian entity hence the application was dismissed.

If the facts permit, some of the decision above may require reconsideration post the introduction of the Notification No. 3014 dated 28/11/2014 under section 245N(a)(iia) of the Act, permitting applications from residents whose tax liability arising out of one or more transaction is valuing Rs 100 crores or more.

Instrumentarium Corpn., In Re 272 ITR 499(AAR) 

Section 245R(2)(ii) of the Act, bars question raised relating to the determination of the fair market value. In the case of Instrumentarium Corpn., In Re 272 ITR 499(AAR) the Authority has taken the view that benchmarking of the transaction as arm’s length price is also​​ the determination of fair market value.

ABC International Inc. USA, In re 241 CTR 289

Mahindra BT Investment Co (Mauritius) Ltd v/s Director of Income Tax 359 ITR 485

In the case ABC International Inc. USA, In re 241 CTR 289, the Authority held that it has powers to determine whether the transaction is designed for the avoidance of tax not only at the admission stage but also at the final hearing.

The Bombay High Court in the case Mahindra BT Investment Co (Mauritius) Ltd v/s Director of Income Tax 359 ITR​​ 485 held that the authority could exercise its discretion not to give a ruling only in the case where the fraud and/or illegality are ex facie evident, or the fraud or the illegality has been established in some proceedings. Such a discretion shall not be​​ exercised on a mere suspicion.

Canoro Resources Ltd., In re (AAR) 313 ITR 2 (AAR)

The Authority held that the applicant has, prima facie, given a convincing explanation for restructuring its business. The revenue cannot complain when a taxpayer resorts​​ to a legal method available to him to plan his tax liability, as a result, would be more beneficial to the taxpayer. The decision may require reconsideration post the introduction of the Section 245N(iv) of the Act dealing with impermissible avoidance arrangement.

Royal Bank of Canada, In re 323 ITR 380 (AAR) 

Hypothetical question, not to be entertained

For the Authority to consider an application the full facts, documentation, and relevant issues in deciding the ruling shall be placed on the record. Where the relevant factual information is not available or incomplete, the Authority can dismiss the application. In the case of Royal Bank of Canada, In re 323 ITR 380 (AAR) the applicant sought an advance ruling on a proposed activity of purchase and sale of​​ equity shares.  The Authority held that no doubt that the advance ruling can be in respect of a proposed transaction. However, where the determination is base on certain crucial facts, the actual pattern of dealings or the modus operandi of the transaction, were not known, it would not be appropriate to undertake the task of giving a formal ruling on a hypothetical basis.  In another case, Ms Meenu Sahi Mamik., In re 287 ITR 514 (AAR)theAuthority held that the basic facts dealing with the nature of the business nor the agreement were placed on the record. Dismissing the application as being as premature and not maintainable as the question raised could not be answered hypothetically.

Columbia Sportswear Company (SC)

In the case of Columbia Sportswear Company the Hon’ble Supreme Court held that the ruling issued are binding upon the parties in respect of the transaction sought and for others, the decision will hold persuasive value on principles of law. In the case of  Prudential Assurance Co Ltd v/s Director of Income Tax (International Tax) 324 ITR 381  (Bom) the Assessing Officer passed an order following the ruling in the Petitioner case. The Commissioner issued a notice under section 263, seeking to set aside the order on the ground of subsequent decision of the Authority.  The Hon’ble High Court held that the commissioner had manifestly exceeded his jurisdiction and the notice is contrary to section 245S of the Act. The Commissioner cannot rely upon the subsequent ruling while ignoring the clear mandate​​ provided by the statutory provision. In another case before the Bombay High Court Director of Income-tax (International Taxation) v. Dun & Bradstreet Information Services India (P.) Ltd. 338 ITR 95 wherein the court held the assessee not liable to deduct tax at source, by following the decision of the Authority on similar facts in the same subject matter.

Onmobile Global Ltd v/s Chairman, Authority for Advance Ruling (Income -Tax)

The Authority has powers to dismiss the application ex parte on merits (Rule​​ 17 of the Procedural Rules). The aggrieved party can apply for the recall within 15 days of the receipt of the order by presenting sufficient cause for non-appearance. The Authority may set aside the ex parte order after providing an opportunity to be heard.  In the case of  Onmobile Global Ltd v/s Chairman, Authority for Advance Ruling (Income -Tax) 279 CTR 518 the Karnataka High Court held that Rule 17 allows the Authority to dismiss an application ex parte only on merits for non-appearances. Further, the court held that the application could not be rejected as the notice of hearing was never within the knowledge of the applicant.

Acers Computer International Ltd., 189 CTR 498 (AAR)

 when the issues raised have become of academic interest the Authority can decline to pronounce the ruling.

Type 1 (4 Mark Type)

Where one persons ruling is sought to be used by another person, scope of binding force.

Type 2 (4 Mark Type)

Where payer of money is applicant​​ and matter is pending with respect to payees application on same transaction. Scope of compulsory rejection.

Type 3 (4 Mark Type)

Scope of pending and compulsory rejection, in situation where notice of 143(2) has been issued to applicant before the filing​​ of application.

Type 4 (4 Mark Type)

When application is sought for GAAR related matters by non-notified resident.

Gosalia Shipping P. Ltd. (SC)

A non-resident company, had entered into a charter-party with the owners​​ of a ship on a time charter. The ship called at an Indian port where it was loaded with the company's own goods and the ship left for Canada. The company paid hire charges to the owners of the ship and since it loaded the ship with the company's own goods,​​ the company received nothing on account of carriage of the goods. No tax was, therefore, exigible under section 172(2).

Pestonji Bhicajee (Guj)

​​ 

"Dead freight" is not freight, that is, a payment made on account of carriage of goods, but it is in reality​​ damages for breach of contract. Therefore, any payment made on account of "dead freight" cannot be treated as payment on account of carriage of goods in a ship.

Czechoslovak Ocean Shipping International Joint Stock Co. (Cal)

​​ 

The case of a non-resident​​ who receives or is deemed to have received in India income in any year or on whose behalf such income is received from whatever source derived, is covered by section 5(2) of the Act and if freight for the carriage of goods to India includes any amount chargeable to tax as income, such income is certainly received in India and is chargeable under section 5(2).

Circular 09 of 2001

The payment of tax under section 172(3) / (4) is at par with advance tax instalments. Hence, in case of a regular assessment under section 172(7) the assessee is entitled to refund, as well as interest on such refund.

Circular 723

The provisions of section 172 are to apply, notwithstanding anything contained in the other provisions of the Act. Therefore, in such cases, the provisions of sections 194C and 195 relating to tax deduction at source are not applicable.​​ 

O.N.G.C. (Uttaranchal High Court)

​​ 

Where presumptive income is the mandate of law, the computation of income under the head business in the​​ normal course is not possible. It was so held in CIT v. O. N. G. C. [2003] 264 ITR 340 (Uttaranchal), where the High Court, in the context of income from prospecting, extraction or production of mineral oil of a non-resident, held that the income is bound​​ to be assessed under section 44BB on a presumptive basis and that it was not open to the Assessing Officer to resort to the provision for adding the tax borne by the contractee as a perquisite under section 28(iv). ​​ 

ONGC (Uttaranchal High Court) ​​ 

The​​ concept of multiple stage grossing up of income is not applicable to the deemed profits derived by a non-resident under section 44BB

ARB Inc (Delhi Bench) (AT) ​​ 

It was incidentally pointed out that GAIL itself does not have an oil well, so that the assessee, which facilitates its activity could not be engaged in extraction or production of mineral oil within the meaning of section 44BB. GAIL itself was not producing natural gas, but only producing liquefied petroleum and other products, which are commercially different from natural gas. Thus 44BB is not applicable.

Sedco Forex International Inc. (Uttarkhand High Court) ​​ 

Non-resident and exploration of mineral oils. Mobilisation charges received. No nexus with actual amount incurred by non-resident for transportation of drilling units of rigs to specified drilling locations in India. Not reimbursement of expenditure so includible.​​ 

B. J. Services Co. (Uttarkhand High Court)

Presumptive tax--amount received on account of supply of spare parts. Covered​​ under section 44BB.

Halliburton Offshore Services Inc. (Uttarkhand High Court) ​​ 

Non-resident prospecting, extraction or production of mineral oils. Reimbursement of freight and transportation charges includible in income.​​ 

Type 1 (10 Mark Type)

Where assessee is NR individual operating ships and section 172 as well as 44B is applicable and computation of tax liability.

Type 2 (6 Mark Type)

Non resident in business of operation of shipping or aircraft.​​ Its presumptive income computation and application of MAT for foreign companies.

Type 3 (7 Mark Type)

Non resident income grossing up concept with respect to oil exploration business and receiving NET of tax payments.

Type 4 (4 Mark Type)

Any income of​​ NR resident in special rates of Taxes, receiving Net of tax payment and its TDS application.

Type 5 (6 Mark Type)

Any income of NR resident in special rates of Taxes, receiving Net of tax payment and its TDS application. But where DTAA rates are also​​ applicable and its TDS application.

Type 6 (6 Mark Type)

Non resident senior citizen tax liability calculations.

With 80D deduction in copuation.

With LTCG also part of income and un-used basic exemption limit.

Type 7 (4 Mark Type)

TDS application when​​ payment is made to resident foreign company.