INCOME TAX REGULATORY UPDATES AUGUST 2022

CBDT notifies procedures for allotment of PAN to an LLP incorporated by filing of Form FiLLip

Editorial Note : The CBDT has notified that the application for allotment of PAN will be filed in form FiLLip by a newly incorporated LLP with the MCA. After generation of LLP Identification Number, the MCA will forward the data in Form 49A to the Income-tax authority under its digital signature.

CBDT releases MLI synthesised text for India- Hungary DTAA

Editorial Note : The Central Board of Direct Taxes (CBDT) has released the synthesised text for India- Hungary DTAA., incorporating the changes made by the MLI on the basis of respective positions taken by both the countries. The MLI provisions that are applicable are included in boxes in the relevant provisions of convention.

NOTIFICATION NO. 86/2022/F. NO. 500/PF1/S10(23FE)/FT&TR-II, DATED 21-07-2022

CBDT notifies ‘CPPIB Credit Investments VI Inc’ for Sec. 10(23FE) exemption

Editorial Note : The Central Board of Direct Taxes (CBDT) has notified pension fund, namely, CPPIB Credit Investments VI Inc, for the purpose of exemption under section 10(23FE). The notified funds shall be eligible to claim exemption in respe ct of investment made in India on or before 31-03-2024 subject to prescribed conditions.

SECTION 9 OF THE INCOME-TAX ACT, 1961 – INCOME – DEEMED TO ACCRUE OR ARISE IN INDIA

Royalties/Fees for technical services – Telecom and transmission fee : Transponder charges paid by assessee to foreign entity for transponder facility was not in nature of ‘royalty’ and thus, not liable for withholding tax – ACIT (IT) v. Viacom 18 Media (P.) Ltd. – [2022] 140 taxmann.com 268 (Mumbai – Trib.)

SECTION 32 OF THE INCOME-TAX ACT, 1961 – DEPRECIATION – ADDITIONAL DEPRECIATION

Where tools, dies, jugs, etc. were used by assessee for its business of manufacturing switchgear products, thus, these tools etc. were not independent of plant and machinery but were parts of machinery, assessee was entitled to claim additional depreciation on such tools etc. – Efacec Switchgear India (P.) Ltd. v. ACIT – [2022] 140 taxmann.com 247 (Delhi – Trib.)

SECTION 92C OF THE INCOME-TAX ACT, 1961 – TRANSFER PRICING – COMPUTATION OF ARM’S LENGTH PRICE

Adjustments – Service fee : Where assessee paid service fee to AEs for availing intra-group services and TPO allowed service fee only to extent of cost and disallowed mark-up charged thereon by AE resulting in TP adjustment, in view of fact that TPO had accepted mark-up charges received by assessee on provision of similar services to AEs, disallowance of mark-up on receipt of services was not justified – Humboldt Wedag India (P.) Ltd. v. ACIT – [2022] 140 taxmann.com 270 (Delhi – Trib.)

Adjustments – Working capital adjustments : TPO should grant working capital adjustment for difference in levels between comparable companies and assessee while determining ALP of provision of marketing support related services to AE – Red Hat India (P.) Ltd. v. Deputy Commissioner of Income-tax – [2022] 140 taxmann.com 274 (Mumbai – Trib.)

Comparability factors – Segmental result : In absence of segmental information, a company engaged in diversified activities along with software development services cannot be selected as a comparable for a company purely into software development – Red Hat India (P.) Ltd. v. Deputy Commissioner of Income-tax – [2022] 140 taxmann.com 274 (Mumbai – Trib.)

SECTION 92CA OF THE INCOME-TAX ACT, 1961 – TRANSFER PRICING – REFERENCE TO TPO

Sub-section (3A) : Where reference by Assessing Officer to TPO was made on 27-8-2013 and time period within which section 143(3) order was to be passed as per section 153(1) was 31-3-2015, date by which order under section 92CA(3) was to be passed was on or before 28-1-2014, and thus order passed under section 92CA(3) on 30-1-2015 was barred by limitation and liable to be quashed – Deputy Commissioner of Income-tax v. Tata Power Solar Systems Ltd. – [2022] 140 taxmann.com 272 (Bangalore – Trib.)

SECTION 156 OF THE INCOME-TAX ACT, 1961 – NOTICE OF DEMAND

Maintainability of petition : Where as per assessment order under section 143(3), there was no tax liability against assessee but demand notice under section 156 was issued to assessee since question as to whether assessee was liable to pay tax as per assessment order could be gone into by Assessing Authority, who issued demand notice, assessee should withdraw appeal filed before Commissioner (Appeals) against assessment order and file an application under section 154 for rectification of assessment order – Madras High Court Cooperative Society Ltd. v. Additional/Joint/Deputy/Assistant Commissioner of Income-tax, Income-tax Officer, National e-Assessment Centre – [2022] 140 taxmann.com 269 (Madras)