In pursuance of the consultations of the collegium of the I.T.A.T consisting of the President and two senior-most Vice Presidents, the following Members of the Income-tax Appellate Tribunal have been transferred, in public interest, in the same capacity, to the Bench(es) of the Income-tax Appellate Tribunal as shown against their names, with effect from the forenoon of 05.04.2010

We wish all Hon’ble Members good luck in their new postings.

The Bombay High Court has directed that appeals involving the following issues should be grouped and placed for hearing at an early date:

80HHC AND 80IA(9)

Whether for purposes of section 80 HHC, “profits of business” have to be arrived at after reducing the deduction under section 80 IB?

Housing projects- s 80IB(10)

Whether for a housing project approved before 31st March 2005, there was no stipulation as to the shopping complex area in the project even though section 80 IB(10), prior to 1st April 2005 referred only to residential units and not to shops and the amendment including sub clause (d) in respect of shops and commercial establishments was introduced in the said section w.e.f 1st April 2005 and not with retrospective effect?

Depreciation on lease and Finance s.32

What is the distinction between finance lease and operating lease?

The High Court has requested all advocates to furnish a list of matters falling with one of three groups as soon as possible so as to facilitate grouping. For more information, please contact manager (at) itatonline.org.

Explanation (baa) to s. 80HHC provides that 90% of interest, rent etc has to be reduced from the “Profits & gains” for purposes of s. 80HHC. In Lalsons Enterprises 89 ITD 25, the Special Bench of the Tribunal held that in computing the said interest, rent etc, the assessee was permitted to net off the interest receipt against the interest expenditure (having a nexus with the receipt) and only the balance could be reduced. This view was affirmed by the Delhi High Court in Shri Ram Honda Power Equipment 289 ITR 475 (Delhi).

In an oral judgement delivered today (19th March 2010) in CIT vs. Asian Star Co Ltd ITA No. 200 OF 2009 and other cases, the Bombay High Court has dissented from the judgement of the Delhi High Court and held that the language of Expl. (baa) to s. 80HHC did not permit such netting off. It held that the Special Bench had traversed the limits of interpretation and virtually legislated in giving the deduction. It held that merely because s. 80HHC was an incentive provision was no ground for giving more deduction that what the statute permitted. It held that for purposes of Expl. (baa) to s. 80HHC, 90% of gross interest has to be reduced from business profits.

The question whether contract manufacturing agreements are subject to s. 194C has been decided by the Bombay High Court in Glenmark Pharmaceuticals Ltd ITA No. 2256 of 2009 and other matters in favour of the assessees.

In an oral judgement pronounced today 12th March 2010, the Court held that while “works contracts” were subject to TDS under section 194C, “sales contracts” were not.

It upheld the arguments of the pharmaceutical companies that the contract manufacturing agreements entered into by them with other manufacturers amounted to a “sales contract” which was not liable to TDS u/s 194C.