Motif India Infotech (P.) Ltd. v ACIT [IT APPEAL NO. 3043 (AHD.) OF 2010 dated 25.03.2014] – Ahmedabad ITAT Background: Assessee is an offshore business process outsourcing service provider whereby it renders data support services. Before the Transfer Pricing Officer (“TPO”), the assessee submitted that Transfer Pricing Laws are not applicable to the assessee as its income was exempt under section 10A. The assessee relied on the decision of the Bangalore Tribunal in the case of Philips Software Centre (P.) Ltd. v. Asstt. CIT [2008] 26 SOT 226. TPO did not accept the contention of the assessee stating that proviso to section 92C clearly provides that no deduction u/s 10A or section 10AA or sec 10B or Chapter VI A shall be allowed in respect of the amount of income by which total income of the assessee is enhanced after computation of ALP. TPO held that The TPO held that the assessee had disclosed its profit derived from the said business at the rate 17.89%, whereas on the basis of some comparable cases TPO determined the same at 34.26%.
Monthly Archives: May 2014
OXFORD UNIVERSITY PRESS (AAR No.1110 of 2011) Background The assessee (applicant) is engaged in publishing, printing and reprinting of educational books for schools, Universities, Professional and other educational institutions or scholarly books. The applicant has appointed Ms Geetha Kumararaja, a resident of Colombo, Sri Lanka as a marketing executive that involves promotion of sale of books published by the applicant. The question before the AAR was whether the remuneration received by Ms Geetha was chargeable to tax in India and consequently, whether the payment should be subjected to tax deduction under the income tax Act.
Sales promotion and marketing activity cannot be construed as ‘fees for technical service’ – AAR
RADIALS INTERNATIONAL v ACIT ITA No.485/2012 dated 25.04.2014 (Delhi HC) Background: Assessee is a partnership firm, engaged in the business of providing technical, marketing and maintenance services. Assessee offered the profit on sale of shares lying in PMS as capital gains. The AO held that since the motive of the transactions was the earning of profit and not a dividend, where the holding period was ranging from a few days to a few months, it was concluded that the income was business income earned by way of adventure in the nature of trade. Commissioner of Income Tax (Appeals) held that the intention at the time of purchase and sale, the magnitude and frequency of transactions has to be seen to test whether the sum of gain made “was a mere enhancement of value by realizing a security” or a “gain made in operation of business in carrying out a scheme for profit-making”. It was concluded that the shares were not in the nature of property which yielded any income or personal enjoyment to the owner, by virtue solely of its ownership. Thus, the intention was concluded to be profit-making, and the gains were found to be business income.