01 January 0001

Direct Tax Amicus: August 2018

by Sanmati Raonka

Deemed Associated Enterprises - Interplay between Sections 92A(1) and 92A(2)

Section 92 of the Income-tax Act, 1961 provides that any income arising from an international transaction shall be computed, having regard to the arm’s length price. The article in this issue of Direct Tax Amicus deals with the question as to whether sub-sections (1) and (2) of Section 92A are to be read together conjunctively or these sections operate independent of each other. Tracing the legislative history, and the judicial precedents, it states that satisfaction of any of the conditions mentioned in 92A(2) will not by itself result in the enterprises being regarded as AE. Further, relying on Article 9 of OECD and UN Model conventions it can be stated that even if relationship of AE exists on the basis of application of any of the clauses of Section 92A(2) of the Act, unless there is actual participation in control, capital or management by enterprise into another, the transacting enterprises cannot be regarded as AE....


Ratio decidendi

  • Transfer pricing - Functional comparability for computing Arms’ Length Price under TNMM – Delhi High Court
  • Resident company when not agent of holding non-resident company under Income Tax Section 163 – Madras High Court
  • Deductions of employee’s contribution towards EPF when cannot be claimed – Kerala High Court
  • Interest income received on mobilisation advance to contractors is ‘capital receipt’ – Kerala High Court
  • Section 10A exemption – FT (D&R) Act does not have overriding effect on Income Tax Act – Kerala High Court
  • Expenditure in education of director’s son not a deductible expenditure when not incurred exclusively for purposes of business – Bombay High Court
  • Area based benefit u/s 80-1C to a unit in Himachal Pradesh – Substantial expansion after 5 years, effect – Supreme Court
  • Simultaneous deduction under section 80IA and 80HHC permissible – Bombay High Court
  • Payment received towards reimbursement of salary for seconded employees is not Fees for Technical Services – ITAT Mumbai
  • Cost incurred on capital work-in-progress can be treated as ‘cost of acquisition’, when plant and machinery is sold along with capital work-in-progress – ITAT Kolkata
  • Share of loss from a firm will not be allowed as a deduction in computing book profit under section 115JB – ITAT Chennai


News Nuggets

  • Draft notification for electronic process for obtaining certificate for lower or NIL tax withholding or lower collection of tax
  • Return for AY 2018-19 can be filed without linking Aadhar with PAN


August, 2018/Issue-48 August, 2018/Issue-48

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