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2019 (3) TMI 1741 - AT - Income TaxRoyalty payment to the Associated Enterprises (AEs) - HELD THAT:- We find that the ITAT in assessee’s own case involving identical issue has deleted the addition made by the TPO [2018 (8) TMI 1943 - ITAT AHMEDABAD] as held that only stated rate is not decisive and effective rate has to be considered, and when the amount of royalty paid by the assessee is considered with exfactory sale value, without deducting various expenses, such as dealer commission, special commission, warranty etc., as has been noted by the learned CIT(A) at page no.4 of his order, then the effective rate worked out is only 2.3% on sale, as against 3% paid by oilier group entities. Addition on account of provisions for warranty - HELD THAT:- As decided in own case the assessee has satisfied the relevant conditions for claiming the impugned warranty provisions as deduction. We accordingly accept assessee’s substantive ground seeking to claim the impugned warranty provision qua both five years and one year (supra) as computed on scientific basis as per its forgoing experience. Deduction u/s 80IB(10) on account of Foreign Exchange Fluctuation gain in respect of its Jammu Unit - HELD THAT:- In the instant case, the assessee claimed that it had earned foreign exchange gain in connection with the raw-material imported and working capital borrowed in foreign currency and the Assessing Officer has not doubted this fact. Therefore, we can safely presume that assessee has earned foreign exchange gain from the activities carried out in connection with the business. The purchase of raw materials and working capital loan are an integral part and has direct nexus with the business. Therefore, any gain arising in the course of business are eligible for deduction u/s 80IB(10) It is also important to note that the assessee in the succeeding year has incurred a loss of ₹ 4,20,47,705/- which was accepted as a business loss by the Revenue. Therefore, we hold that the impugned gain is a business income and eligible for deduction u/s. 80IB(10) of the Act. In this regard, we find support and guidance from the judgment of Hon’ble Gujarat High Court in the case of Metrochem Industries Ltd. [2016 (7) TMI 1374 - GUJARAT HIGH COURT] Deduction u/s 80IB(4) in respect of Jammu Units - HELD THAT:- Excise duty refund has a live link with the business activities of the assessee. Therefore, we hold that the excise duty refund is eligible u/s. 80IB(4) - Assessee is eligible for deduction u/s 80IB(4) of the Act in respect of excise duty refund. Accordingly, we do not find any reason to interfere with the order of the Ld. CIT(A). There remains no ambiguity that the amount of excise duty is capital receipt not chargeable to tax. No reason to disturb the findings of the Ld. CIT(A), therefore the ground of appeal raised by the Revenue is dismissed, and the ground of appeal of the assessee in the application filed under Rule No. 27 of ITAT is allowed. Allow MAT credit u/s 115JAA of the Act as increased by the amount of surcharge and education cess - HELD THAT:- We note that the issue of MAT credit u/s. 115JAA of the Act has been settled by the judgment of Hon’ble Calcutta High Court in the case of Shree S.R.EI Infrastructure Finance [2016 (8) TMI 967 - CALCUTTA HIGH COURT] wherein it was held as Tribunal was right in confirming the set off of MAT Credit under section 115JAA brought forward from earlier years against tax on total income including surcharge and education cess instead of adjusting the same from tax on total income before charging such surcharge and education cess. Disallowance of royalty expenses is connected with the adjustment on account of transfer pricing under section 92CA(4) which has also been added in determining the income under section 115JB - HELD THAT:- upward adjustment on account of royalty payment has already been deleted by us in the Para No. 53 of this order. Therefore, in our considered view, there is no need to make any addition in the book profit under section 115JB of the Act. Hence the ground of appeal of the Revenue being consequential in nature is dismissed. No addition in the book profit under section 115JB of the Act on account of warranty expenses. No eligible for deduction u/s 80IB of the Act for the enhanced amount
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