Arithmetic Mean of ALPs to be determined even if actual price exceeds one of the ALPs determined by TP method

CIT V. MENTOR GRAPHICS (NOIDA) (P.) LTD. (Delhi High Court)

 Proviso to section 92C(2) requiring calculation of arithmetical mean of multiple ALPs (more than 1 ALP) determined as per Most Appropriate Method doesn’t become inapplicable where one of the ALPs determined as per Most Appropriate Method is less than the price indicated by assessee.

In the instant case the most appropriate method, as accepted by both, the assessee and revenue, was the Transactional Net Margin Method. The dispute that arose was with regard to the following observation of the Tribunal:

Where one of the prices determined by the most appropriate method is less than the price as indicated by the assessee. Then there would be no need to adopt the process of taking the arithmetical mean of all the prices arrived at through the employment of the most appropriate method.

The High Court held as under:

• When more than one price is thrown up by the most appropriate method, the statute requires that the arm's length price shall be taken to be the arithmetical mean of such prices. This is the plain and simple meaning of the proviso to section 92C(2) of the said Act; 
• The Tribunal was wrong in holding that if one profit level indicator of a comparable, out of a set of comparables, was lower than the profit level indicator of the taxpayer, then the transaction reported by the taxpayer was at an arm's length price; 
• The proviso to section 92C(2) is explicit in that where more than one price is determined by most appropriate method, the arm's length price would be taken to be the arithmetical mean of such prices.

Variable Cost

A cost of labor, material or overhead that changes according to the change in the volume of production units. Combined with fixed costs, variable costs make up the total cost of production. While the total variable cost changes with increased production, the total fixed costs stays the same.

Assessee can claim both sections 54 and 54F deductions for investment in one house, ITAT rules

VENKATA RAMANA UMAREDDY V. DY.CIT (Hyderabad - Trib.)

 Section 54 and section 54F are independent provisions and assessee can claim exemption under both sections for investment in same house

In the instant case, during the relevant financial year, the assessee had earned long-term capital gain (LTCG) out of transfer of two distinct and separate assets - one being a plot of land and the other a house property. He claimed that the entire LTCG arising from the sale of the two assets was invested in purchase of the new residential house and, hence, he was entitled to avail of exemption under sections 54 and 54F. The Assessing Officer rejected such claim by holding that for claiming exemption under sections 54 and 54F the assessee had to invest in two houses. Further, the CIT(A) upheld the order of AO. Aggrieved assessee filed the instant appeal.

The Tribunal held in favour of assessee as under:

1. Sections 54 and 54F are independent of each other and operate in respect of LTCG arising out of transfer of distinct and separate long-term capital assets. However, both the sections allow exemption only on purchase or construction of a new residential house; 
2. The only reasoning on which the lower authorities had rejected assessee's claim of exemption under section 54 was that the assessee couldn’t claim exemption under both the sections towards investment in a single house. According to the lower authorities, for claiming exemption under sections 54 and 54F the assessee had to invest in two houses. Such an interpretation of the provisions was totally misconceived and misplaced; 
3. There was also no specific bar either under section 54 or 54F of the Act prohibiting allowance of exemption under both the sections in case the conditions of the provisions were fulfilled; 
4. Since long-term capital gain arose from sale of two distinct and separate assets, viz., residential house and plot of land and the assessee had invested the entire capital gain in purchase of a new residential house, he was entitled to claim exemption both under sections 54 and 54F.

Sec. 73(3) doesn’t contemplate issuance of Show Cause Notice, except where assessee doesn’t pay Service Tax even after demand

VSE Stock Services Ltd. v. Commissioner of Central Excise (Ahmedabad - CESTAT)

On receipt of intimation under section 73(3), if there is short-payment by assessee, then, instead of issuing show-cause notice straight away, department must send a letter asking assessee to pay such amount

During the periods from April, 2007 to July, 2007 and November to December, 2007, the assessee had utilized Cenvat Credit of certain amount for payment of Service Tax in respect of stock broker service provided by it. It was found that this credit was not admissible to the assessee since it was availed after end of the month and as soon as it was pointed out, the assessee paid the amount with interest. Nonetheless, on verification, it was found that there was a short payment of certain amount and this was pointed out by way of issuing show-cause notice. In the impugned order, penalty of Rs.5000/- was imposed under section 77.

The Tribunal set aside the penalty with the following observations.

• As per section 73(3), read with proviso thereto on receipt of intimation under section 73(3), if there was short-payment, then, instead of issuing show-cause notice straight away, department should have sent a letter asking assessee to pay such amount; 
• Further, when the assessee had discharged short-paid service tax along with interest, show-cause notice should have been dropped; 
• Hence, penalty under section 77 could not have been imposed, which was set aside accordingly.

Bill of exchange

An unconditional order issued by a person or business which directs the recipient to pay a fixed sum of money to a third party at a future date. The future date may be either fixed or negotiable. A bill of exchange must be in writing and signed and dated. Also called draft.

Consumer

An individual who buys products or services for personal use and not for manufacture or resale. A consumer is someone who can make the decision whether or not to purchase an item at the store, and someone who can be influenced by marketing and advertisements. Any time someone goes to a store and purchases a toy, shirt, beverage, or anything else, they are making that decision as a consumer.

Asset Securitisation

Securitisation is a process of transformation of illiquid asset into security which may be traded later in the open market. It is the process of transformation of the assets of a lending institution into negotiable instruments. The term ‘securitisation’ refers to both switching away from bank intermediation to direct financing via capital market and/or money market, and the transformation of a pr eviously illiquid asset like automobile loans, mortgage loans, trade receivables, etc. into marketable instruments.
 

This is a method of recycling of funds . It is beneficial to financial intermediaries, as it helps in enhancing lending funds. Future receivables, EMIs and annuities are pooled together and transferred to an special purpose vehicle (SPV). These receivables of the future are shifted to mutual funds and bigger financial institutions. This process is similar to that of commercial banks seeking refinance with NABARD, IDBI, etc.