Daily Archives: April 19, 2014


CCIT v Sarva Equity (P.) Ltd [IT APPEAL NOS. 322 TO 324 OF 2014 dtd 08.01.2014] – Karnataka HC Background: Assessee and Ittina Properties Private Limited are sister concerns. The assessee had taken an unsecured loan from Ittina of Rs.9,56,48,107. The AO  treated the loan as a deemed dividend under Section 2(22)(e).  The Directors and shareholders of both the companies, are members of one and the same family and they have substantial holding in M/s. Ittina and assessee company. The Appellate Authority reversed the order passed by the Assessing Officer holding that the respondent-assessee is not a shareholder of M/s. Ittina Properties Private Limited and in view thereof, not liable to pay taxes under Section 2(22)(e) of the Act. The order of the appellate authority has been confirmed by the Tribunal.

Indirect shareholding is not covered under the fiction of deemed dividend u/s 2(22)(e) – Karnataka ...


Nortel Networks India (P.) Ltd. v Addln CIT [ITA No 4765 (DELHI) OF 2011 & 427 (DELHI) OF 2013 dated 25.02.2014] – Delhi ITAT Background: Assessee entered into a service agreement for the provision of marketing and after sales support services on a cost plus mark-up basis. By this agreement, assessee provides marketing and after sales support services to AEs in relation to sale of telecommunication equipments, software and other IT products to customers in India. The assessee considered TNMM as the most appropriate method and has benchmarked the transaction taking Operating profit/ Operating cost (“OP/OC”) as PLI.  TPO though accepted assessee’s TNMM method as appropriate method for the ALP, however reworked the same by applying inapplicable comparables as under: In its transfer pricing analysis, the assessee has considered seven comparable companies, whose average unadjusted margin comes to 11.57%, TPO held two out of seven as not comparable. The Capital Trust Limited was held as not a comparable because of low revenue as and Cyber Media Events Limited because of related party transaction exceeding 25% and having diminishing revenue. DRP upheld TPOs order on the ground that the turnover of the comparable in the relevant segment is Rs. 25 Lakh and cannot be compared with the company whose revenue from business support services is more than Rs. 134 Crores. 

TP: Companies with lower turnover can also be considered if they are functionally comparable – ...