Western India Regional Council of
The Institute of Chartered Accountants of India

Law Update Details

June 2019 CA. Bhavya Goyal, CA. Bhavesh Dedhia

Van Oord India Private Limited [TS-440-ITAT-2019(Mum)-TP]

Mumbai ITAT rules that TP-provisions [Chapter X] do not apply to income taxed under Tonnage Taxation Scheme (TTS) under Chapter XII-G of the IT Act, holds that TTS is a “separate code by itself in as much as it provides a self-contained changing provision as well as ‘method of computation of income in the chapter”;

ITAT observed that a tonnage tax company is liable to pay taxes even in a case where the financial statements reveal a loss on actual operations. Further, the income computed shall be deemed to be the income chargeable to tax under the head ‘Profit and gains of business or profession’, since all expenses, deduction, allowances or tax incentives are deemed to be allowed while computing the total income of a company as per TTS. Accordingly, ITAT held that “it is clear from the above that actual receipts/revenues earned and expenses incurred are not taken into consideration for the purpose of determining the tonnage income of the company.”

Itochu India Private Ltd [TS-428-HC-2019(DEL)-TP]

Delhi HC dismisses Tax department’s appeal against ITAT-order confirming TP-adjustment deletion for Indian subsidiary of Japanese Sogo Shosha entity in respect of business support services provided to AEs regarding sourcing of goods from India;

Upholds ITAT’s rejection of artificial enhancement of assessee’s cost base considering FOB value of goods sourced relying on Li & Fung HC ruling; HC also relies on Li & Fung ruling wherein co-ordinate bench set aside TPO’s approach for proposing an additional 5% mark-up on the free on board value of exports to third parties as the same would tantamount to application of TNMM in an erroneous manner; HC reiterates its position that including the FOB value of the AE’s contract in the operating cost in order to determine its margin is not sustainable in law; Accordingly, HC dismisses Revenue’s appeal holding that no substantial question of law arises in the present case.


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