Subscribe To Our Free Newsletter:

Vodafone Judgement: Guide To Law Laid Down By The Supreme Court

Edditorial Board

Vodafone Judgement: Guide To Law Laid Down By The Supreme Court

Editorial Board

In Vodafone International Holdings B.V. vs. UOI the Supreme Court has laid down several important and far-reaching principles of law on tax planning vs. tax avoidance, interpretation of s. 9, applicability of s. 163, TDS obligations u/s 195, etc. Our expert editorial team has carefully analyzed the entire judgement and identified all the core principles therein.

Core Principles of Law laid down by the Supreme Court in Vodafone International Holdings B.V. vs. UOI

(A) Tax planning vs. Tax Evasion:

 

vodafone judgement

(1) The cardinal principle is that if a document or transaction is genuine, the court cannot go behind it to some supposed underlying substance. A document or a transaction cannot be looked at isolated from the context to which it properly belonged. It is the task of the Court to ascertain the legal nature of the transaction and while doing so it has to look at the entire transaction as a whole and not to adopt a dissecting approach. This is the “Look At” principle. The Revenue cannot start with the question as to whether the transaction was a tax deferment/saving device but that the Revenue should apply the “look at” test to ascertain its true legal nature. Genuine strategic planning had not been abandoned and it cannot be said that all tax planning is illegal/ illegitimate/ impermissible. Tax planning may be legitimate provided it is within the framework of law. However, a colourable device cannot be a part of tax planning. There is no conflict between McDowell 154 ITR 148 (SC) and Azadi Bachao Andolan 263 ITR 706 (SC).

Read more ›

Posted in Articles

Taxation of Real Estate Development Contracts: Ready Reckoner of Case Laws

Dr. K. Shivaram & Rahul Hakani, Advocates

Tax on Real Estate Development Contracts: Important Case Laws

Dr. K. Shivaram & Rahul Hakani, Advocates

The authors have compiled a list of the most-important judgements on the taxation of real estate development contracts. The article will prove invaluable to busy professionals who like having access to important case laws at their finger tips

(1)Housing Projects – [S. 80IB(10)]

(i) CBDT Circular F. No. 205/3/2000/ITA II dt. 4-5-2001. CBDT has clarified that “any project which has been approved by a local authority as housing project should be considered as adequate for purpose of Section 80IB(10)”.

(ii) CIT vs. Brahma Associates (2011) 333 ITR 289 (Bom.). Section 80IB(10) allows deduction to the entire project approved by the local authority and not to a part of the project, if the conditions set out in section 80IB(10) are satisfied, then deduction is allowable on the entire project approved by the local authority and there is no question of allowing deduction to a part of the project

Read more ›

Posted in Articles

The Verdict in Reuters’ Case on ‘Dependent PE’ Is Not Correct

Shri. K. C. Singhal

The Verdict in Reuters’ Case on ‘Dependent PE’ Is Not Correct

Shri. K. C. Singhal, Advocate

In Reuters, the Tribunal held that a dependent agent would be a “Permanent Establishment” even if it did not have the power to conclude contracts on behalf of the enterprise. The author, a former Vice-President of the Tribunal & now a practicing advocate, argues that this verdict is not correct

The decision of the tribunal (ITAT) in the case of Reuters Limited Construction House involving the issue of dependent PE under Indo-UK treaty – requires reconsideration.

Though the above decision is not yet reported, the relevant facts and the ratio laid down therein have been clearly stated by the Tribunal in its order u/s 254(2) of I T Act 1961 (the Act) which is reported as 48 SOT 246 (Mum).

Read more ›

Posted in Articles

Analysis of three important judgements (June to October 2011)

Shri. Anant Pai

Analysis of three important judgements (June 2011 to October 2011)

CA Anant N. Pai

No practitioner can afford to be unaware of latest judgements & whether experts view the judgement as being right or wrong. Towards that end, the author has agreed to take time out of his busy schedule to make an analysis of landmark judgements every quarter. In this part, the author has identified three landmark judgements analyzed them with a critical eye and identified their strengths & shortcomings.

Slump Sale – Whether breaking up of price permissible:-

1.1 The decision of the Calcutta High Court in the case of Kwality Ice Creams {I} Ltd [2011] 336 ITR 100 {Cal} may provide fodder for interesting appraisal by the readers. In this case, the assessee, an ice cream manufacturer, transferred its marketing undertaking for a price of Rs. 3 crores. There is nothing in the decision to suggest that the price of Rs. 3 crores was a composite price for transfer of individual assets of the marketing undertaking sold. On the contrary, from the facts of the case, it appears that the price was paid for a slump sale of the marketing undertaking as a whole. The decision related to Assessment Year 1996-97 i.e. before the slump sale provisions of section 50B were brought on the statute book.

Read more ›

Posted in Articles

Taxing International Transactions By Lifting The Corporate Veil

Adhitya Srinivasan & Vipul Agrawal

Adhitya Srinivasan & Vipul Agrawal

The recent judgements in Vodafone, Richter Holdings & Aditya Birla have reignited the debate on the extent to which international transactions can be taxed by lifting the corporate veil. The authors have researched the entire law on the subject in different countries and explained the position in India with specific reference to the General Anti Avoidance Rule in the Direct Tax Code. The valuable research will enable assessees to properly structure their transactions and steer clear of the pitfalls that their peers have encountered

I. Introduction

The concept of a Company as a business structure is founded on the premise that it has a legal personality that is separate and distinct from that of its owners. Consequently, the legal framework pertaining to a company’s operations and obligations acknowledges separate legal existence as a key feature of the company structure. Lifting or piercing the veil of corporate personality means that the company is no longer viewed as a distinct entity. On the other hand, the company is seen as being no different from the persons who own the shareholding of the company. The initial trend among common law jurisdictions was that the veil of corporate personality should not be lifted under normal circumstances. With the passage of time and the growing complexity of transactions and the laws which govern them, the Courts have become more agreeable to piercing the corporate veil. This trend has been particularly strong in the case of tax matters.

Read more ›

Posted in Articles

Is Income From Software Taxable As “Royalty”?

Shri. Mihir Naniwadekar, Advocate

Is Income From Software Taxable As “Royalty”?

Shri. Mihir Naniwadekar, Advocate

The law on taxation of income from user of computer software has been dogged with unending controversy. In Microsoft/ Gracemac, it was held that the income was assessable as “royalty” while a diametrically opposite view was taken in TII Team. The author has analyzed the entire law on the subject and explains why the law laid down in TII Team is the correct law on the subject

The controversy over the interpretation of the term ‘royalty’ has come to the fore in light of two judgments of the Hon’ble Income Tax Appellate Tribunal in the past year, (1) the common judgment of the Hon’ble Delhi ‘H’ Bench (dated 26th October, 2010) in a set of cases (Gracemac v. ADIT, ITA Nos. 1331-1336/Del/2008, Microsoft Corporation v. ADIT, ITA Nos. 1392/Del/2005, Microsoft Regional Sales Corporation v. ADIT, ITA Nos. 1393-1395/Del/2005, the common judgment is hereinafter referred to as ‘Gracemac); and (2) the judgment of the Hon’ble Mumbai ‘E’ Bench (dated 26th August, 2011) (ADIT v. TII Team Telecom International, ITA Nos. 3939/Mum/2010, hereinafter referred to as ‘TII Team’). The controversy – brewing now for quite some time – is essentially this: under what circumstances can the payment received for (what is loosely termed as) supply of software/rights in software be taxed as ‘royalty’ under Section 9 of the Income Tax Act, 1961, and under various Double Tax Avoidance Agreements.

Read more ›

Posted in Articles

The Law of TDS u/s 194C: Controversies & Solutions

Shri. K. C. Singhal

The Law of TDS u/s 194C: Controversies & Solutions

Shri. K. C. Singhal, Advocate

Non-compliance with s. 194C has draconian consequences for the assessee. Sadly, due to numerous legislative amendments, CBDT circulars and conflicting court rulings, the law is not very intelligible. The author, a former Vice-President of the Tribunal, uses his unique experience as Judge & Lawyer to explain the entire law in a simple & straightforward manner

History
This section was introduced in the year 1972 and subsequently amended from time to time. The scope of the said provision has been explained by CBDT from time to time through various circulars bearing Nos. 86 dated May 29, 1972, 93 dated 26.9.1972, 558 dated 28.3.1990, 681 dated 8.3.1994, 714 dated 3.8.1995, 723 dated 19.9.1995, , 715 dated 8.8.1995 and 13 dated 13.12 2006. This section has also been substituted by Finance (No 2) Act 2009.
Salient features
This section provides that tax is to be deducted at source against payments made to contractors/subcontractors. The followings are the salient features of the section as it stands today:

Read more ›

Posted in Articles

Anna Hazare’s one little finger is enough …..

Shri. Anant Pai

Anna Hazare’s one little finger is enough …..

CA Anant N. Pai

The author, while complimenting Anna Hazare for his crusade against corruption and expressing unconditional support, questions whether going on a fast is the only way to get the Government to listen to popular demand. A progressive society like ours should develop better methods to determine public opinion says the author

You do not require a magic wand to combat corruption. One little finger raised by Anna Hazare is enough. The seventy four year old Gandhian showed the nation how purity of thought integrated in to right action can bring down a tyrant government to its heels.

The State machinery put this man in jail and ended up self locking themselves by their own misdoings. They did not want to give him public space to hold his peaceful rally for more than three days and set a cap for 5000 campaigners. And now, they are hastily cleaning a public ground themselves to make it fit for his rally for fifteen days without any limit set for the participants.

Read more ›

Posted in Articles

S. 50B & Capital Gains On Slump Transactions: A Comprehensive Analysis

Shri. Ankit Agrawal

S. 50B & Capital Gains On Slump Transactions: A Comprehensive Analysis

CA Ankit B. Agrawal

The author has conducted a deep and careful study of the law relating to taxation of slump sales u/s 50B. He makes out a compelling case to argue that s.50B is confined to a “sale” and does not extend to other slump transactions like an “exchange” or a “court transfer”. The author contends that despite s. 50B, non-sale slump transactions cannot be made chargeable to tax

Mark Twain once said: “Evolution is the law of policies: Darwin said it, Socrates endorsed it, Cuvier proved it and established it for all time in his paper on ”The Survival of the Fittest”. These are illustrious names, this is a mighty doctrine: nothing can ever remove it from its firm base, nothing dissolve it, but evolution.” Mark Twain in substance said that ‘even the most settled things in this world may get unsettled later’. The things which are held today as absolute may become relative in future, like the belief that earth is flat got changed later or that atom is the most basic unit of matter got changed after the discovery that even it has further components.

This is even so true in the area of Law, especially, the Income Tax Law. On number of occasions, the most settled legal positions have been unsettled either by retrospective amendments by the Legislature to nullify the decisions of Courts or by the Courts themselves by reversing the law laid down in the earlier decisions. Certain examples where the settled positions have been changed by the Courts are:

Read more ›

Posted in Articles

Forget Tax Planning; Get Ready For GAAR in Direct Tax Code 2010

Shri. Gautam Ahuja

Forget Tax Planning; Get Ready For GAAR in Direct Tax Code 2010

Gautam Ahuja, Student, ILS Law College, Pune

The entire law on tax avoidance and tax evasion is set to undergo a radical change with the advent of GAAR in the Direct Tax Code 2010. The author has not only conducted meticulous research on the prevailing law and the proposed law, but also examined the position in other developed countries. The research work will help tax professionals come to terms with the impending change

I. INTRODUCTION

The new Direct Tax Code1 (hereafter DTC) is all set to replace the Income-tax Act, 1961 with effect from 1st April, 2012, the basic objective behind its enactment being simplification of the language so as to enable better comprehension thereby reducing the number of law suits. Significant among the provisions that it introduces are the provisions aimed at tackling the problem of tax avoidance since this has been resulting in a major loss of revenue for the government. Certain legislative amendments2 had been made earlier to counter this particular problem but did not prove very effective since the tax payers found sophisticated methods to get passed them thereby necessitating further changes.

Read more ›

Posted in Articles

Newsletter


If you are a tax professional, you must sign up for our free newsletter. Why? Because we keep you informed about the latest developments in the world of tax. We focus only on the most important must-read judgements & articles that will impact your day-to-day professional work. You can see a chronological listing of all our postings on twitter & facebook


IMPORTANT: After signing up & clicking on the confirmation mail, send a test/ blank mail to editor@itatonline.info. Why? Because it is the easiest way to add our email address to your address/ contacts book and ensure that our Newsletter does not get sent to the Spam/ Junk folder


Email



Unsubscribe