Direct Tax Rulings Impacted / Overruled / Confirmed by Finance Bill 2020

DIRECT TAX RULINGS IMPACTED / OVERRULED / CONFIRMED BY FINANCE BILL
2020
Finance Bill, 2020 has proposed over 100 amendments to the existing
Income-tax Act. The Bill proposes some amendments, which could
impact quite a few Court and Tribunal decisions. Taxsutra Editorial
Team has compiled a list of case-laws that are likely to be impacted/
overruled/confirmed if the amendments take effect.
Sr. Amendment Proposed Relevant Case laws

No.
1. Clarity on Stay of demand by ITAT Impacted
It is proposed to provide that ITAT may
grant stay under Sec 254(2A) first LG Electronics India Pvt Ltd [TS-406-SC-2018]
proviso subject to the condition that
the assessee deposits not less than SC had clarified that CBDT's office memorandum
20% of the amount of tax, interest, fee, ('OM') dated July 31, 2017 regarding stay of demand
penalty, or any other sum payable does not interfere with AO's power to grant stay on
under the provisions of this Act, or deposit of a lesser amount, pursuant to Revenue's
furnishes security of equal amount in appeal challenging Delhi HC judgment in LG
respect thereof Electronics India Pvt. Ltd.'s ('assessee') case; SC had
given credence to Additional Solicitor General
This amendment will take effect from Vikramjit Banerjee's submission before it that the said
1st April, 2020. administrative Circular of the CBDT will not operate as
a 'fetter' on the Commissioner, since it is a quasi
judicial authority; Disposing off Revenue's appeal, SC
clarified that “in all cases…it will be open to the
authorities, on the facts of individual cases, to grant
deposit orders of a lesser amount than 20%, pending
appeal.”
Samms Juke Box [TS-576-HC-2018(MAD)]
HC rules that CBDT instruction doesn't oust AO's

discretion in stay matters; HC allows assessee's writ,
sets aside order passed by AO directing assessee to
pay 20% of outstanding demand in view of CBDT
Office Memorandum of July 2017.
Flipkart India Private Limited [TS-97-HC-2017(KAR)]
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Karnataka HC had allowed Flipkart's writ and set-
aside AO's as well as Pr. CIT's orders refusing to stay
collection of demand for AYs 2014-15 & 2015-16 and
directing assessee to deposit approx 26 Cr
representing 15% of total disputed demand; HC had
rejected Revenue’s stand that assessee was required
to deposit 15% of the disputed demand in terms of
CBDT circular dated February 29, 2016, which had
superseded the Circular Instruction no.1914 of 1993 in
toto, as it was later in time.
Kalaignar TV Private Limited. [TS-405-HC-

2018(MAD)]
Madras HC had set aside CIT's order directing

Kaliagnar TV ('assessee') to pay 20% demand as a
condition precedent for staying demand of approx. Rs.
90 cr for AYs 2009-10 and 2010-11, arising out of Sec.
68 addition in relation to the 2G matter; HC noted that
such direction was given by CIT / AO relying on CBDT
Instruction No.1914 read with the Office
Memorandums of February, 2016 and July, 2017
Jagdish Gandabhai Shah [TS-171-HC-2017(GUJ)]
Gujarat HC allowed assessee-individual's writ, and set-

aside AO's as well as Pr. CIT's orders rejecting
assessee's stay of demand petition; AO had rejected
assessee's stay application on the ground that
assessee was required to make a pre-deposit of 15%
of the disputed demand for considering his stay
application on merits in view of CBDT instruction
dated February 29, 2016, even Pr. CIT rejected the
stay application mainly considering AO's order. HC
clarified that clause-4 of the modified instruction only
provides that the AO may/shall grant stay of demand
till disposal of first appeal on payment of 15% of the
disputed demand, unless assessee's case falls in the
category mentioned in para 4 [B] therein which covers
both the situations ie. required payment (for grant of
stay) is either less than 15% or more than 15%
Turner General Entertainment Networks India Pvt.
Ltd [TS-48-HC-2019(DEL)]
Delhi HC had held that AO has to apply its mind and

decide the Stay Application on merits without seeking
any pre-deposit for consideration of Application; The
assessee had requested for stay of demand and the
AO had rejected the Stay Application on failure of
assessee to deposit 20% of the demand as a pre-
condition, for consideration of the application for
exemption/stay of demand. HC held that “the
concerned authorities and tax officials have to apply
their mind to decide an application for stay of
demand. This does not, however, mean that any
particular AO in a given case has to impose a per se
condition that pending consideration of the
application for stay of demand certain minimum
amount has to be deposited.”
2. Extension of stay granted by ITAT for Impacted
up to 365 days
Also proposes to substitute Sec Carrier Air Conditioning and Refrigeration Limited
254(2A) second proviso to provide that [TS-284-HC-2016(P & H)]
no extension of stay shall be granted
by ITAT, where such appeal is not so HC had upheld ITAT's power to grant stay beyond 365
disposed of within the said period of days and ruled that “wherever the appeal could not
stay as specified in the order of stay. be decided by the Tribunal due to pressure of
However, on an application made by pendency of cases and the delay in disposal of the
the assessee, a further stay can be appeal is not attributable to the assessee in any
granted, if the delay in not disposing of manner, the interim protection can continue beyond
the appeal is not attributable to the 365 days in deserving cases”
assessee and the assessee has
deposited not less than 20% of the SC has admitted Revenue’s SLP against above HC
amount of tax, interest, fee, penalty, or ruling challenging ITAT's power to grant stay beyond
any other sum payable under the 365 days.
provisions of this Act, or furnish
security of equal amount in respect
thereof. The total stay granted by ITAT Pepsi Foods Pvt Ltd [TS-281-HC-2015(DEL)]
cannot exceed 365 days.
HC had ruled that where delay in disposing appeal is
This amendment will take effect from not attributable to the assessee, Tribunal has power
1st April, 2020. to grant extension of stay beyond 365 days in
deserving cases; Delhi HC had striken down
amendment made by Finance Act, 2008 to Sec
254(2A) restricting Tribunal's power to extend the
stay beyond 365 days, even if there is no fault of
taxpayer; HC said insertion of the expression - 'even if
the delay in disposing of the appeal is not attributable
to the assessee' violates the non-discrimination clause
of Article 14 of the Constitution of India.
Qualcomm Incorporated [TS-784-ITAT-2012(DEL)]
Delhi ITAT grants stay of demand to Qualcomm

beyond 365 days as delay in disposal of appeal not
attributable to assessee. Delhi Bench of ITAT relied on
SB ruling in Tata Communications Ltd. vs. ACIT [(2011)
130 ITD 19 (SB)(Mum)] and Mumbai HC Ruling in CIT
vs. Ronuk Industries Ltd [ (2011) 333 ITR 99 (Bom)],
wherein it was held that "where the delay in the
disposal of pending appeal is not attributable to the
assessee, the Tribunal has power to extend the stay
beyond a period of 365 days even after the
amendment of the third proviso to section 254(2A)
w.e.f 1st October, 2008.” Delhi ITAT acknowledged
the the contrary Karnataka HC ruling in Ecom Gill
Coffee Trading Pvt. Ltd (supra). However, following
the SB ruling in Narang Overseas Private Limited vs
ACIT [(2007) 295 ITR 22], ITAT observed that in case of
cleavage of opinion amongst different High Courts and
there being no jurisdictional HC ruling, then the view
favourable to the assessee had to be adopted.
Vodafone Mobile Services Ltd. [TS-286-ITAT-

2017(Bang)]
Bangalore ITAT grants further extension of stay of

demand to Vodafone Mobile for a period of 6 months
or till appeal disposal, whichever is earlier, subject to
the condition that parties shall not take adjournment
without any valid reason for AYs 2012-13 & 2013-14;
Rejects Revenue's contention that Tribunal does not
have the power to extend stay beyond 365 days as it
is bound by powers conferred by Sec 254(2A), even if
delay is not attributable to assessee; Follows Delhi HC
ruling in Pepsi Foods (which had attained finality post
Revenue's SLP disposal by SC), rejects Revenue's
reliance on jurisdictional HC ruling in Ecom Gill Coffee
observing that constitutional validity or the vires of
3rd proviso to Section 254(2A) was not tested in this
case
3. Increase in safe harbour limit of 5% Confirmed
under section 50C/43CA/56 to 10%
It is now proposed to increase the safe John Fowler India Pvt. Ltd. [TS-6184-ITAT-
harbour from 5% to 10%. 2017(Mumbai)-O]
This amendment will take effect from ITAT deleted the addition made u/s. 50C, ruled that
1st April, 2021 and will, accordingly, since the difference between valuation adopted by
apply in relation to the assessment Stamp Valuation Authority and declared by assessee
year 2021-22 and subsequent was less than 10%, AO must adopt the valuation of
assessment years. sale consideration as declared by the assessee.
Similarly, Pune ITAT in Rahul Constructions [TS-5028-

ITAT-2010(Pune)-O] and Jaipur ITAT in Sita Bai Khetan
[TS-6042-ITAT-2016(JAIPUR)-O] had considering the
fact that valuation is always a matter of estimation
where some degree of difference is bound to occur,
ruled that where difference between Valuation by
Stamp Valuation and the declared sale consideration
is less than 10%, addition u/s 50C should not be made.
4. Rationalizing the definition of royalty Overruled/Impacted
[Sec. 9(1)(vi) amendment]
It is proposed to amend the definition K.Bhagyalakshmi [TS-647-HC-2013(MAD)]
of royalty so as not to exclude Madras HC held that consideration for transfer of film
consideration for the sale, distribution rights, valid for 99 years, not 'royalty' but a 'sale'; HC
or exhibition of cinematographic films analysed the provisions of Sec. 9(1)(vi) and observed
from its meaning. that consideration for sale, distribution, exhibition of
cinematograph films fell within the exclusion part of
This amendment will take effect from clause of royalty, i.e. clause (v) to Expl (2) to Section
1st April, 2021 and will, accordingly, 9(1); HC held that Copyright in cinematographic film
apply in relation to the AY 2021-22 and subsists for 60 years under Copy Right Act & hence a
subsequent AYs 99 year right could only be regarded as sale.
Warner Brother Pictures Inc [TS-787-ITAT-

2011(Mum)]
Mumbai ITAT held that consideration received by non-
resident assessee from Indian company, for granting
exclusive rights of distribution of cinematographic
films, not taxable as royalty u/s 9(1)(vi) or Article 12(2)
of Indo-US DTAA; Consideration not taxable as
business income either, in absence of a PE in India.
Eylex Films Pvt Ltd [TS-6147-ITAT-

2019(AHMEDABAD)-O]
Ahmedabad ITAT noted that assessee was in the
exhibition of films procured from distributors on
revenue sharing basis and held that "The Revenue
shared by the assessee with the distributor to exhibit
the cinematographic film is outside the scope of
expression ‘royalty’ under Clause (v) to Explanation 2
to Section 9(1)(vi) of the Act referred to under the
provisions of Section 194J of the Act. Therefore, such
payment to distributor does not call for deduction of
TDS"
5. Amendment in the definition of Confirmed

“work” u/s. 194C
It is proposed to amend the definition Nova Nordisk Pharma India Limited [TS-29-HC-
of “work” under section 194C to 2012(KAR)]
provide that in a contract
manufacturing, the raw material Karnataka HC held that payment by Nova Nordisk
provided by the assessee or its Pharma India to Torrent India for manufacturing on
associate shall fall within the purview exclusive basis based on raw material provided by
of the ‘work’ under section 194C. Group company attracts TDS u/s 194C; Transaction in
Associate is proposed to be defined to the nature of works contract and not contract for sale;
mean a person who is placed similarly HC considered real nature of transaction based on
in relation to the customer as is the conjoint reading of interlinked agreements between
person placed in relation to the parties and held that CBDT circular No. 681 dated
assessee under the provisions 8.3.1994 was not applicable.
contained in clause (b) of sub-section
(2) of section 40A of the Act.
This amendment will take effect from

1st April, 2020
6. Expands scope of Sec 194A to interest Impacted
paid by large co-operative society
Provides that a co-operative society Bagalkot District Central Co-operative Bank [TS-392-
referred to in Sec 194A(3)(v)/(viia) shall ITAT-2014(Bang)]
be liable to deduct income-tax if: Co-operative society engaged in banking business not
- Total sales, gross receipts or turnover liable to deduct tax at source on interest payment on
of the co-operative society exceeds member deposits, despite payment exceeding Rs.
Rs.50cr during the financial year 10,000, in light of Sec. 194A(3)(v); Sec. 194A(3)(v)
immediately preceding the financial [which exempts co-operative society from TDS on
year in which the interest is credited or interest payment] carves out an exception to Sec.
paid; and 194A(3)(i)(b) [which mandates TDS by co-operative
- The amount of interest, or the society carrying banking business on interest
aggregate of the amount of such payment], and thus, it is not possible to exclude co-
interest, credited or paid, or is likely to operative society engaged in the business of banking
be credited or paid, during the financial from purview of 'co-operative society' u/s 194A(3)(v)
year is more than Rs.50,000 in case of
payee being a senior citizen and
Rs.40,000, in any other case
This amendment will take effect from

1st April, 2020
7. Amendment to Sec.144C – Reference Impacted
to Dispute Resolution Panel
It is proposed to amend Sec 144C to Regen Renewable Energy Generation Global Limited
include cases, where the AO proposes [TS-36-ITAT-2020(CHNY)]
to make any variation which is
prejudicial to the interest of the Chennai ITAT had set aside AO's/ DRP's observation
assessee, within the ambit of sectionwith regard to beneficial ownership of assessee's [a
144C Cyprus entity] royalty income, holding that “DRP has
exceeded its jurisdiction in making such an
This amendment will take effect from observation..” when there was no variation in the
1st April, 2020. international transactions.
Mausmi SA Investments LLC [TS-204-ITAT-

2019(Mum)]
Mumbai ITAT quashed AO's assessment order

invoking Sec.144C during AY 2014-15 absent any
variation in the income or loss returned, which is
prejudicial to the interests of the assessee. Further,
ITAT noted that in the instant case the AO did not
change the interest income returned by the assessee,
therefore, there was no variation of income returned.
ITAT had rejected Revenue's contention that the
expression “variation in the income or loss returned
which is prejudicial to the interest of such assessee”
used in Sec.144C(1) shall include the variation in tax
also.
Mosbacher India LLC [TS-637-ITAT-2016(CHNY)]
Chennai ITAT had held DRP-route inapplicable absent

income-variation and that change in tax-rate was
irrelevant. ITAT upheld AO's action of directly issuing
the assessment order u/s 143(3) without issuing a
draft assessment order u/s 144C despite assessee
being an 'eligible assessee' (i.e. a foreign company) u/s
144C as no variation vis-a-vis income returned by the
assessee was proposed by the AO.
8. Amendment to Sec.144C – Reference Maquet Holdings B.V. & Co. KG [TS-205-ITAT-
to Dispute Resolution Panel 2019(Mum)]
It is proposed to amend Sec 144C to
expand the scope of the said section by
Mumbai ITAT held foreign LLP as not “eligible
defining eligible assessee as a non- assessee” u/s 144C(15)(b), allowed assessee's
resident not being a company, or a additional ground. ITAT found that assessee [limited
foreign company liability partnership incorporated in Germany] cannot
be termed as an “eligible assessee” u/s 144C(15)(b)
This amendment will take effect from and therefore quashed draft & final assessment order
1st April, 2020. passed by AO for AY 2013-14.
Mitsui Marubeni Corporation [TS-85-ITAT-2017(DEL)]
Delhi ITAT had held AOP of Japanese MNCs not

'foreign company' and hence, doesn't qualify as
'eligible assessee' u/s 144C(15). ITAT had quashed
draft as well as final assessment order passed by AO
for AY 2007-08 in case of Mitsui Marubeni ('assessee',
an AOP), not being 'eligible assessee' as defined u/s.
144C(15).
ESPN STAR SPORTS MAURITIUS SNC ET COMPAGNIE

[TS-164-HC-2016(DEL)]
Delhi HC had quashed draft as well as final assessment

orders passed by AO confirming TP adjustment for AY
2010-11 in respect of two ESPN entities (partnership
firms established in Mauritius), not being 'eligible
assessees' as defined u/s 144C. HC stated this was an
instance of blatant disregard by AO of the DRP's order
which had accepted assessees' plea that neither of
them were 'eligible assessees' us/ 144(15)(b)(ii), as
neither was a 'foreign company', and no variation or
TP adjustment arose as a consequence of TPO's order
9. Reduction in rate of TDS on fees for Relevant Rulings
technical services (other than
professional services) Times Global Broadcasting Co. Ltd [TS-115-SC-2019]
A large number of litigations arise on
the issue of short deduction of tax SC dismissed Revenue's SLP challenging Bombay HC
treating assessee in default, on certain order in case of a Broadcasting co. [assessee]; HC had
payments, where the assessee deducts relied on its co-ordinate bench ruling in UTV
tax @ 2% u/s. 194C, while the tax Entertainment Television Ltd. [TS-523-HC-
officers claim that tax should have 2017(BOM)] and had dismissed Revenue's appeal
been deducted @ 10% 194J. against ITAT order holding that the placement fees /
Therefore, to reduce litigation, it is carriage fees paid to cable operators / MSO / DTH
proposed to reduce the rate for TDS Operators are payments for work contract covered
u/s. 194J in case of fees for technical u/s 194C and not FTS u/s 194J.
services (other than professional
services) to 2% from existing 10%. The Media World Wide Pvt. Ltd [TS-7-HC-2020(CAL)]
TDS rate in other cases u/s. 194J would
remain the same i.e., at 10%. Calcutta HC had held that payments made by
assessee-company [engaged in the business of media
This amendment will take effect from broadcasting & telecasting] to multi-system operators
1st April, 2020. on account of Up-linking charges and down-linking
charges, Bandwidth and Air Time charges was not FTS
attracting TDS u/s.194J for AY 2010-11. Accepting
assessee's argument, HC explicated that “The
definition of 'work' u/s. 194C is inclusive and
specifically includes broadcasting and
telecasting....therefore, Section 194C would apply to
the facts of this case.”
Bombardier Transportation India Pvt. Ltd. [TS-622-

ITAT-2017(Ahd)]
Ahmedabad ITAT had held that payment for

information technology (IT) related services rendered
to assessee-company (manufacturer of rail coaches)
by vendor company (CSCIPL) during AYs 2008-09 to
2014-15 should be treated as fees for technical
services ('FTS') attracting TDS u/s 194J & not annual
maintenance contract simplicitor attracting TDS u/s
194C, and ruled that it was not the medium of
contract or payment but the nature of services
rendered by the payee which was the crucial factor to
determine whether or not they amount to technical or
professional services.
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Direct Tax Rulings Impacted / Overruled / Confirmed by Finance Bill 2020

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DIRECT TAX RULINGS IMPACTED / OVERRULED / CONFIRMED BY FINANCE BILL

Sr. Amendment Proposed Relevant Case laws

Samms Juke Box [TS-576-HC-2018(MAD)]

HC rules that CBDT instruction doesn't oust AO's

Flipkart India Private Limited [TS-97-HC-2017(KAR)]

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Kalaignar TV Private Limited. [TS-405-HC-

Madras HC had set aside CIT's order directing

Jagdish Gandabhai Shah [TS-171-HC-2017(GUJ)]

Gujarat HC allowed assessee-individual's writ, and set-

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Delhi HC had held that AO has to apply its mind and

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Qualcomm Incorporated [TS-784-ITAT-2012(DEL)]

Delhi ITAT grants stay of demand to Qualcomm

Vodafone Mobile Services Ltd. [TS-286-ITAT-

Bangalore ITAT grants further extension of stay of

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Similarly, Pune ITAT in Rahul Constructions [TS-5028-

Warner Brother Pictures Inc [TS-787-ITAT-

Eylex Films Pvt Ltd [TS-6147-ITAT-

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5. Amendment in the definition of Confirmed

This amendment will take effect from

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This amendment will take effect from

Mausmi SA Investments LLC [TS-204-ITAT-

Mumbai ITAT quashed AO's assessment order

Mosbacher India LLC [TS-637-ITAT-2016(CHNY)]

Chennai ITAT had held DRP-route inapplicable absent

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Mitsui Marubeni Corporation [TS-85-ITAT-2017(DEL)]

Delhi ITAT had held AOP of Japanese MNCs not

ESPN STAR SPORTS MAURITIUS SNC ET COMPAGNIE

Delhi HC had quashed draft as well as final assessment

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Bombardier Transportation India Pvt. Ltd. [TS-622-

Ahmedabad ITAT had held that payment for

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