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August 2019

Direct Tax Amicus: June 2019


ALP of Depreciable Capital Asset purchased from an associated enterprise – To compute or not compute
by Sriram Vijayaraghavan


The article in present issue of Direct Tax Amicus discusses relevant questions pertaining to ALP of depreciable capital asset purchased from an associated enterprise, in the light of ITAT judgment in Honda Motorcycles & Scooters India (P) Ltd v. ACIT. In the said judgement it was held that if there is an international transaction in capital field not giving rise to any income in itself then, no adjustment can be made for the difference between the declared value and the ALP of such international transaction. However, it was also held that computation of ALP is necessary because of the impact of such a transaction on the revenue offshoots and that depreciation must be based on the ALP of such assets. According to the author, ALP computation becomes relevant only where the actual cost is determined based on real cost to the assessee. The obligation to determine ALP in the case of purchase of depreciable capital asset arises only when depreciation is claimed. However, this will not relieve the person from his or her obligation to maintain information as stipulated in section 92D to maintain information in respect of such international transaction. The article also deliberates on the question as to what happens if the depreciable capital asset so purchased in the international transaction is sold or transferred later…

Notification and Circular

  • Online submission of statement of deduction of tax
  • Clarification on allowability of set off of losses against certain deemed income

Ratio decidendi

  • Tax is not leviable when there is no ‘real income’ or ‘right to receive’ the payment – Bombay High Court
  • Payments for lounge premises is not rent; Amount retained by a bank/credit card agency is not commission – Bombay High Court
  • ‘Referral Fees’ paid to a US concern is not taxable under domestic Act or Indo-US DTAA – ITAT Mumbai
  • TDS not applicable on service-tax component of insurance commission to agents – Bombay High Court
  • Income accrues in the year in which it is received and cannot be deferred over the period of time as agreed in the contract - ITAT Chennai

June, 2019/Issue-57 June, 2019/Issue-57

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