Category Archives: Services

Post No. - 3

Section 35 R & D Expenditure

The H P High Court in CIT v. Enginneering Innovation Ltd. (2009) 178TAX237 held that any methodical or systematic investigation based on science into the study of any materials and sources is a scientific research so that in this case the dismantling of the imported coffee machine with a view to decipher how the said machine functions and also with a view to develop a new model of machine suitable for Indian conditions is held as R &D activity entitling the assessee 100% deduction of expenditure on import of coffee machine.
But in this case one would wonder how this activity would have had a relationship to the business of the assessee of manufacture and sale of precision sheet metal components. There was no reference in this regard in the decision so that the revenue may like to get insight into this for appropriate further action.

Post No. - 2

AAR ruling – taken as precedent by Bombay High Court in the common scale of facts

Ordinarily advance ruling by AAR does not have the force of precedent and it carries only persuasive value. However in DIT (International Taxation) v. Dun & Bradstreet Information Services India P. Ltd. (2011) 338ITR95 the Bombay High Court held that advance ruling even though is not binding in nature yet the same can be followed in a situation where the facts are identical.

In this case while the issue related to TDS application in the context of a transaction for import of business information reports the Court noted a favorable decision of advance ruling on the same subject in assessee’s very case. In the absence of any claim of revenue for any variation in facts the Court dismissed the appeal.

The decision by the Bombay High Court would assume greater relevance in points of dispute before the Tribunal which is the highest fact finding authority under the law. In a show of example the Mumbai bench in Deputy Director of Income-tax (International Taxation) v. Pipeline Engineering GmbH (India Branch Office) (2009) 318ITR AT 210 held that there cannot be any dispute to the legal position that the Rulings given by the Authority for Advance Rulings is not a binding precedent but that does not mean that the Tribunal cannot concur with the reasoning given by the said authority.

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