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Income Tax - Case Laws
Showing 321 to 340 of 771 Records
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2013 (11) TMI 966 - ITAT AGRA
Leather testing charges – paid to non-resident - Tax not deducted at source - Held that:- Following Channel Guide India Ltd. v. ACIT [2012 (9) TMI 95 - ITAT MUMBAI] – The law cannot cast the burden of performing the impossible task of performing tax withholding obligations with retrospective effect, and, accordingly, the disallowance under section 40(a)(i) cannot be made in a situation in which taxability is confirmed only as a result of retrospective amendment of law - The amount paid to the foreign enterprise was not taxable in India in the light of the legal position at that point of time - It became taxable in India only as a result of the retrospective amendment in Section 9(1), the said payment cannot be disallowed by invoking section 40(a)(i) - It is only as a result of the amendment in Section 9(1), by the virtue of Finance Act 2010, that amount can be said to be taxable in India - Even though the amendment is said to be merely clarifiactory in nature – Following the case of Ishikwajima Harima Heavy Industries Ltd. v. DIT [2007 (1) TMI 91 - SUPREME COURT] and in view of the fact that services were rendered outside India even if utilized in India, the impugned leather testing fees was not taxable in India - The disallowance under Section 40(a)(i) cannot be invoked on the facts of this case – Decided in favour of assessee.
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2013 (11) TMI 965 - ITAT AHMEDABAD
Provision for bad debts or trading loss – held that:- claim of bad debts which is a provision made in the books of account not allowed - Regarding claim of trading loss, . If a bad debt cannot be allowed as a deduction on the general commercial principles, then how a trading loss could be allowed, specially when could not be supported by specific evidences. If the assessee wanted to claim bad debt as a trading loss then it was accepted to place on record the supporting evidences. It is worth to quote an observation of the A.O - Decided against the assessee.
Deduction u/s 80HHC - Held that:- In the present case there was no export turnover of the impugned amount of bad-debt so no question to consider the same for the deduction u/s 80HHC - The assessee was asked to furnish the computation of deduction u/s 80HHC but at all stages of proceedings the assessee had not furnished the same - The four ingredients for allowance of deduction u/s 80HHC have not been fulfilled in the present case - The sales should have been shown in either year under consideration or past years and over which on the profit the assessee ought to have got the benefit of deduction u/s 80HHC – Deduction not permissible – Decided against assessee.
Penalty u/s 271(1)(c) – Held that:- The assessee had not appeared before the Revenue Authorities - In the light of the order now pronounced by department pertaining to the quantum addition, the assessee deserves right to explain his case pertaining to the concealment of penalty to learned CIT(A) – The issue was restored for fresh decision.
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2013 (11) TMI 964 - ITAT DELHI
Addition u/s 68 – Share application money received - Held that:- Following CIT vs. Lovely Export [2006 (11) TMI 121 - DELHI HIGH COURT] - If the identity of the shareholders have been established, even if there is a case of bogus share capital, it cannot be added in the hands of the company unless any adverse evidence is not on record. In the instant case the appellant has provided evidence in the form of PAN, ROC details, copy of IT return filed and copy of confirmation and affidavit to establish the genuineness of the transaction – Following Fair Finvest Ltd [2012 (12) TMI 170 - DELHI HIGH COURT] - Where the complete particulars of the share applicants such as their names and addresses, income tax file numbers, their creditworthiness, share application forms and share holders' register, share transfer register etc. are furnished to the Assessing Officer and the Assessing Officer has not conducted any enquiry into the same or has no material in his possession to show that those particulars are false and cannot be acted upon - No addition can be made in the hands of the company under sec.68.
In this case - Except asking the assessee to produce the directors 8 days prior to framing the assessment no inquiry what-so-ever has been initiated by assessing officer - Neither any summons u/s 131, notice u/s 133(6) or any cross inquiry of the investors whose entire income-tax record was furnished by the assessee was ever conducted by the assessing officer - There is no reference to any issuance of summons u/s 131 or notice u/s 133(6). In the absence of any inquiry or any adverse report based thereof, the plethora evidence furnished by the assessee cannot be brushed aside in a summary manner – Decided against Revenue.
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2013 (11) TMI 963 - ITAT DELHI
Provision for leave salary – Held that:- SC has stayed the decision of CIT Vs. Exide Industries Ltd [2007 (6) TMI 175 - CALCUTTA High Court] wherein it was held that, the amendment to section 43B by way of insertion of clause (f), as unconstitutional. - The deduction u/s 43B(f) cannot be allowed on the making of a mere provision unless the amount is actually paid - The assessee has admittedly not made the payment of the amount – Deduction cannot be allowed – Decided against assessee.
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2013 (11) TMI 962 - ITAT MUMBAI
Disallowance u/s.14A – Held that:- Following CIT vs. Reliance Industries Ltd. [2009 (4) TMI 516 - Bombay High Court] - The onus to establish that the indirect expenditure has no bearing on the income not forming part of the total income is squarely on the assessee, failing which Rule 8D will apply subject to the expenditure actually incurred and claimed would follow – The issue was restored for fresh decision.
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2013 (11) TMI 961 - ITAT MUMBAI
Disallowance u/s 40A(2)(b) – Interest paid to sister concerns - Held that:- Outside parties had also supplied goods and services to assessee to whom no interest had been paid for delayed payments - Payments of interest to sister concerns is apparently excessive compared to market value - CIT(A) has however allowed relief on the ground that interest payment made have been inbuilt into the price charged by the sister concerns - Prices charged by the sister concerns were not favourable to the assessee compared to other parties - The order of CIT(A) giving relief cannot be upheld - This aspect requires fresh consideration at the level of AO as the same had not been examined either by AO or by CIT(A) – The issue was restored for fresh consideration.
Addition u/s 68 – Loan taken - Held that:- Necessary details and evidence in support of the transactions had been filed before CIT(A) which had also been sent to the AO for verification and report - The assessee has filed confirmation from the party along with PAN No. of the party which have been placed on record - The assessee has also filed copy of ledger account in the books of the assessee as well as copy of the assessee's account in the books of the other party - Copy of the bank account in which these transactions were recorded had also been filed along with reconciliation statement - The loan taken by the assessee was as per hire purchase agreement, copy of which had also been filed - The assessee had discharged the burden of explaining the transactions satisfactorily with support of documentary evidences – Decided against Revenue.
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2013 (11) TMI 960 - ITAT MUMBAI
Cash found during search – rejection of books of accounts - Held that:- The assessee has not produced books of accounts before AO and CIT(A) – Following CIT v. Devi Prasad Vishwanath Prasad [1968 (8) TMI 5 - SUPREME Court] - An assessment by estimating income would not preclude an addition on account of unexplained credit u/s.68 of the Act - There is no question of estimating income upon rejection of books of account as the same were never produced before the A.O. - The income being assessed without reference to, and in disregard of, the assessee's book results – The issue was restored for fresh decision.
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2013 (11) TMI 940 - ITAT MUMBAI
Assessment u/s 153A - Name not appearing on warrant or authorization (WOA) - search being authorized in the name of more than one person - Held that:- even assessment in the hands of the person/s other than whose names stand mentioned in the WOA, as for example AOP comprising some such persons, can also be validly made if material as to its undisclosed income is found in the search, thus initiated. That is, in case of mis-match between the person/s in respect of whom search is initiated and in respect of whom assets/income is (also) found. The law is comprehensive and contemplates such a situation, prescribing a separate procedure for such cases per section 153C. - Decided against the assessee.
Decision of Allahabad High Court in the case of Vandana Verma (2009 (10) TMI 52 - ALLAHABAD HIGH COURT) dismissed wherein it was held that a WOA in joint names of different individuals can lead to a valid assessment/s u/s.153A only in the hands of the AOP or Body of Individuals (BOI) comprising them.
Deduction u/s 54F - investment in specified bonds u/s.54EC having been found to be within the prescribed time limit of six months of the date of transfer. The denial of deduction u/s.54F is for the reason that the investment in the residential flat at Pune was made by the assessee only on 15.12.2006. Though the assessee could do so; the limit for the same being two years from the date of transfer, i.e., 26.11.2005, he had to, in terms of section 54F(4), deposit the sum not appropriated toward such investment in the capital gains account scheme with a specified bank or institution by the due date of filing the return of income u/s.139(1) for the relevant year. That having admittedly not being done, the assessee could not validly claim deduction u/s.54F. The facts and circumstances of the case being undisputed, we find the Revenue’s basis for denial of deduction u/s.54F, are completely valid - Decided against assessee.
Unexplained income u/s 68 - Held that:- the explanation with regard to that nature and source of credit being satisfactory or not, keeping the entirety of the facts and circumstances of the case into account, is to be drawn. The decisions cited by the assessee have been with reference to the one of positive inference. It is the cumulative effect of all the facts and circumstances of the case on the basis of which the decision as to the capacity or genuineness being established is to be taken. In the present circumstances, we have no hesitation in stating that both the capacity and the genuineness of the impugned credit have not been proved by the assessee, so that no infirmity as to non-satisfaction therewith of the A.O., since confirmed by the ld. CIT(A), supporting his order with a host of case law, has been found by us. We, it would be noticed, have also not referred to the decisions referred to by the first appellate authority, and for the same reason; the law, as summarily explained hereinabove, being trite, with the said decisions being, therefore, cases of application of those principles, on which there is no doubt or dispute, nor possibly could be. The treatment of the impugned credit as the assessee’s unexplained income u/s.68 of the Act is, accordingly, upheld - Decided against assessee.
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2013 (11) TMI 939 - ITAT MUMBAI
Method of accounting u/s 145A - account for purchase, sale and stock - inclusive of duty or exclusive of duty - Deduction u/s 43B - Held that:- the assessee values its inventories as well as its revenue at inclusive of duties, also excluding the credits (as e.g. modvat) in relation thereto. As such, the total actual cost, as incurred, and revenue, as accrued, stands factored into the valuation of the trading parameters, as required by section 145A. However, the assessee, on being questioned in its respect, states of following exclusive method, i.e., just the opposite, claiming that the same nevertheless would have no impact on the quantum of trading income. Why did the assessee state so when its accounts state otherwise, and which in any case, being the mandate of law, has to be observed, if only in the computation of income under the Act?
Further, even otherwise; it claiming the difference in method of valuation as of no moment, i.e., of both the inclusive and exclusive methods leading to the same result and, thus, inconsequential, it could demonstrate the same by working out the valuation on both - net and gross - basis. The assessee, however, and inexplicably, does not do so.
The fallacy in the A.O.'s working, as it would appear to us, is that while he includes the incidence of duty on the opening and closing stock of goods, he does not do so qua purchases and sales. It is only where the cost is incurred that the same would stand to form part of the operating statement, and qualify for being recognised as a part of cost of goods unsold as at the year-end, i.e., the closing stock by definition. It is this adding of the tax/duty cost to the value of the closing stock without making a corresponding allowance for the same in the trading account that would lead to a distorted picture and a profit figure inconsistent with the actual profit earned/accrued. Section 145A does not purport to yield a notional, but only actual profit, by prescribing inclusion of all cost elements, including tax and duty, where and to the extent attracted/ incurred, in the valuation process. This is, thus, akin to an accounting policy, statutorily prescribed, for uniform application by all assessees. - matter remanded back for re-computation.
Deduction u/s 43B - Held that:- if section 43B is considered to have an overriding effect, it would again be to no moment. This is as where the duty is paid during the relevant year (or by the due date of furnishing the return of income) the mandate of section 43B is satisfied; the same tax/duty would stand to be allowed. And where not paid by that date, it cannot be said to have been 'incurred' due to the overriding effect of section 43B (r.w.s 43(2)). That being the case, neither would it stand to be reckoned as cost nor, consequently, liable for inclusion in the valuation of the purchases, irrespective of the method of accounting being followed. - matter remanded back for verification of facts. - Decided in favor of assessee.
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2013 (11) TMI 938 - ITAT MUMBAI
Addition on account of suppression of income – nature of the documents found during the survey - evidentiary value of statement recorded u/s 133A - Held that:- The entries, neatly made, one for each date, for different dates, in a chronological order, by a partner managing the affairs of the firm (i.e., for most part), cannot be a scrawl, without any meaning. - Besides, the assessee's 'explanation', leaves one in no manner of any doubt in this respect. This is as each of the three versions by the assessee in explaining these entries are only in terms of money. - documents are not dumb documents. - high court in the case of Surendra M. Khandhar v. Asstt. CIT [2009 (1) TMI 83 - BOMBAY HIGH COURT], wherein the hon'ble court has clarified that the document found during survey is, unless successfully rebutted by the assessee, presumed to be true.
Addition is confirmed as reasonable, meriting confirmation; the assessee having itself disclosed an excess of around 6% on even the expenses recoverable from its clients - The statement u/s.133A is by itself of no evidentiary value, and it is validity, if so, would only be with reference thereto, i.e., to the extent it explains or corroborates and/or supports the material/evidence found – consideration is given to the assessee's argument of netting the amount written on the right side, so that its nature could only be a different, i.e., representing out-lays, only to find the same as not acceptable. This is for the reason that it is not possible that such expenditure is incurred only on few (sixteen) days in a year, or even more importantly, not in the regular course - Further-more, the assessee surprisingly does not receive any amount on the said dates, so that it may represent an either or situation. Rather, the expenditure would not only be incurred on the basis of which the amount stands received, but also, where it is not so, there being as afore-noted a time gap between the entries in each row, so that there is no expenditure on all but 16 days during the relevant previous year – Decided in favor of Revenue.
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2013 (11) TMI 937 - ITAT MUMBAI
Penalty u/s 271(1)(c) - Capitalisation of the cost of machinery - Disallowance of depreciation - Held that:- The computation of total income given in the assessment order, shows that this amount was allowed as depreciation on the travelling expenses of Rs. 1,46,308/- capitalised by the A.O. and although submission to this effect was made by the assessee before the ld. CIT(A), it appears that no finding whatsoever has been given by the ld. CIT(A) on this aspect. In our opinion, there was thus no justification in imposing the penalty in respect of the amount of Rs. 36,577/- which did not represent any addition made to the total income of the assessee. - Decided in favor of assessee.
Machinery was used for 182 days making the assessee entitled for depreciation at full rate. The claim of the assessee for depreciation at full rate thus was a bonafide claim and although the assessee accepted the disallowance made by the A.O. on this issue by restricting to only half, we are of the view that no penalty u/s 271(1)(c) of the Act in respect of addition of Rs. 55,375/- could be imposed. - decided in favor of assessee.
Penalty due to claim of additional depreciation - Held that:- Provisions of section 32(1)(iia) are very plain and clear which provide that additional depreciation is allowable in the case of any new machinery or plant which has been acquired and installed after 31st March, 2005. The proviso to section 32(1)(iia) makes it further clear that no deduction on account of additional depreciation shall be allowed in respect of any machinery or plant which, before its installation by the assessee, was used either within or outside India by any other person. In the present case, additional depreciation u/s 32(1)(iia) was claimed by the assessee on the old machinery which was already used by other person and this relevant fact was not disclosed by the assessee in any form in the return of income filed for the year under consideration. The same was revealed as a result of survey followed by scrutiny assessment done by the A.O. and when it was confronted by the A.O. to the assessee, the later had no option but to surrender its claim for additional depreciation - Therefore, penalty is confirmed on this issue to the extent additional depreciation claimed - Decided against the asssessee.
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2013 (11) TMI 936 - ITAT HYDERABAD
Capital gains - transfer u/s 2(47) - Assessee entered into JDA agreement - As per the agreement, the assessee is entitled for 50% of built up area - Whether provisions of section 2(47)(v) can be invoked for exchange of the property for consideration in kind i.e., to receive 50% of the built up area - Held that:- owners have entered into an agreement for development of the property and certain rights were assigned to the developer who in turn had made the substantial payment and consequently entered into the property and thereafter the transferee has taken steps in relation to construction of the building, then it is to be considered as transfer u/s. 2(47)(v) of the I.T. Act. The fact that the legal ownership continued with the owners to be transferred to the developer at a future distant date really does not affect the applicability of s. 2(47)(v) as per the reasons assigned hereinabove. The transferee was undisputedly willing to perform its part of the contract, in this circumstance we have to hold that there is transfer u/s. 2(47)(v) of the Act. Thus, the possession and control of the property is already vested with the transferee and the impugned development agreement has not been duly cancelled and it is still in operation, it has to be decided that there is a transfer u/s. 2(47)(v) of the Act. Entering into the property and handing over of the possession was instantaneous thus entire conspectus of the case has attracted the provision of S. 45 of the Act on fulfilment of conditions laid down in section 53A of the Transfer of Property Act.
Capital gain would be taxable in the year in which such transactions are entered into even if the transfer of the immovable property is not effective or complete under the general law. The assessee entered into an agreement with the builder/developer for development of the impugned land and construction of flats thereon. Also, the assessee signed a delivery note dated 7.3.2005 in favour of the builder/ developer and gave possession of the property to the builder/developer. Further, the assessee acted on the impugned agreement by accepting from the builder/developer payments by cheques on different dates in the financial year 2004-05. In view of the facts and circumstances discussed above, all the conditions of sub-cl. (v) of s. 2(47) are satisfied in this case and therefore, it has to be inferred that a 'transfer' did take place within the meaning of s. 2(47)(v) - Decided against assessee.
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2013 (11) TMI 935 - ITAT MUMBAI
Disallowance of expenditure u/s 37(1) - Expenditure for erection of scaffolding - Nature of expenditure - business expediency or otherwise - Assessee was given rights to display advertisement by means of mounting a banner on the scaffolding erected for carrying out the repairs of the building - Held that:- As seen from the documents placed on record the Municipal Corporation of Greater Mumbai has permitted to display the temporary advertisement on the outer direct wall of Heera Panna Coop.Housing Society vide approval dated 27.04.2005 for which the advertising fee was to be paid of more than Rs.3,75,360. So, it cannot be accepted that assessee has permitted the said Deesha only for an amount of Rs.1.00 lakh when the fee paid/ payble to BMC was much more.
As seen from the documents if such amount was towards contributing for maintenance of the building/scaffolding advertisement as contended, the actual payment of the amount spent goes beyond the period of permitted advertisement period. The said services so charged are general in nature, which does not require such receipt/ reimbursement - it cannot be stated that maintenance or cleaning of walls by application of primer coat was the responsibility of M/s Deesha for advertisement so displayed. The affairs are so arranged that the cost to be incurred by the society for their regular maintenance was borne by the said company and receipts were bifurcated into two agreements - scaffolding and the painting expenditure is part of the maintenance of the building and no way connected with the advertisement provided to M/s Deesha. The security watch and ward etc, as claimed by assessee is part of its regular activity of the society and just because an agreement was entered into by arranging the affairs in such a manner, the claim of expenditure which has no relevance for earning the advertisement amounts. This cannot be allowed under section 37(1) or section 57. Moreover as seen from the above, painting expenditure itself was spent over a period of two years, whereas the advertisement was only for a period of two months - Decided against assessee.
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2013 (11) TMI 934 - ITAT MUMBAI
Disallowance of extra ordinary expenses - Payment under VRS scheme - Held that:- payments made under the Voluntary Retirement Scheme was the expenditure incurred by the assessee to save expenses and it was not referable to any income yielding asset. It was held that the said expenditure thus should be allowed in its entirety in the year in which it was incurred and the same could not be spread over a number of years. It was also held that the expenditure incurred by the assessee relating to Voluntary Retirement Scheme as well as on account of gratuity was revenue expenditure and the same was allowable as deduction in the year in which it was actually incurred - Following decision of Commissioner of Income-tax v. Bhor Industries Ltd. [2003 (2) TMI 20 - BOMBAY High Court] - Decided against Revenue.
Disallowance of interest - Loan taken for new factory - Held that:- loans had been obtained for the purpose of assessee’s business and the fact that the particular portion of the business for which the loans were obtained had been transferred or closed down did not alter the fact that the loans, when obtained had been for the purpose of the assessee’s business - CIT(A) was fully justified in allowing the claim of the assessee on interest paid on capital borrowed for the purpose of new glass factory set up by the assessee at Jambusar in Gujarat which was nothing but expansion of the assessee’s existing business - Following decision of Veecumsees v. Commissioner of Income-tax [1996 (4) TMI 6 - SUPREME Court] - Decided against Revenue.
Disallowance of expenditure - Closure of factory - Held that:- Thane unit was closed by the assessee as a business necessity arising out of statutory compulsion. As further found by him, the business carried on in the said unit was not discontinued but shifted to other places. Having taken note of these facts, the ld. CIT(A) held that the ratio of the decision of Hon’ble Supreme Court in the case of K. Ravindranathan Nair (2000 (11) TMI 3 - SUPREME Court) was clearly applicable to the facts of the assessee’s case and accordingly he directed the A.O. to allow the deduction claimed by the assessee on account of expenses pertaining to the closed Thane factory u/s 37(1) of the Act. At the time of hearing, the ld. D.R. has not been able to bring anything on record to controvert or rebut the finding of fact recorded by the ld. CIT(A) on this issue - Decided against Revenue.
Computation of profit u/s. 115JA – Held that:- P&L Account prepared by the assessee for the purpose of 115JA of the Act has been duly certified by the Chartered Accountant. There is no complaint that the same is not in accordance with provisions of part II & Part II of Schedule VI of the Companies Act 1956. As rightly pointed out by the assessee the only restriction in 115JA(2) is regarding the depreciation which has to be in conformity with the method adopted under Companies Act. There is however, departure in section 115JB(2) of the Act which provides that the accounting policies and accounting standards adopted while preparing P&L Account for section 115JB of the Act should correspond to the one adopted for the purpose of Companies Act 1956 - Decided against Revenue.
Assessee provided funds for establishing drinking water facilities to the residents in the vicinity of the refinery and also provided aid to the school run for the benefit of the children of those local residents - Monies spent for bringing drinking water as also for establishing or improving the school meant for the residents of the locality in which the business is situated cannot be regarded as being wholly outside the ambit of the business concerns of the assessee, especially where the undertaking owned by the assessee is one which is to some extent a polluting industry – such expenditure are allowable.
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2013 (11) TMI 933 - ITAT MUMBAI
Reassessment of proceedings - Notice u/s 148 - Whether there are enquiries conducted by the AO into the issue of nature of business activities of the assessee for the year under consideration - Held that:- Assessee submitted various details regarding to the commencement of the business relating to the paid-up capitals, expenditure incurred, income earned, services rendered etc in respect of the rest of the questions in the questionnaire. Assessee does not have any fresh or tangible material which works out as a “livewire” to the AO to form an opinion or create a reason to believe that there is concealment of income. It is also obvious from the written reasons mentioned by the AO that the basis for re-opening is essentially the product of the “perusal of the assessment records”. Therefore, issue of notice u/s 148, under the circumstances and the details mentioned above, is not proper and not in tune with the settled position in law relating to the provisions of section 148 of the Act - Decided in favour of assessee.
Setup and commencement of the business activity - Development of airport infrastructure activity - Held that:- Feasibility reports both financial and economic viability is not yet obtained, preparation of development plans is not yet complete, mandatory Environmental Impact Study under Environment Protection Act, 1986 by SICOM is not yet complete and 100MW captive power plant is also at preliminary stages. Thus, the assessee has not completed the stages, which are considered elementary to start the business - Aassessee is yet to obtain the environmental clearance under the Environment Protection Act and favourable feasibility reports – On financial and technical fronts, assessee has yet to obtain the approved plans of development, therefore, the business of the development of airport infrastructure cannot be declared “set up” in this year under consideration. Acquiring of land with a stroke of pen of the Government of Maharashtra cannot be attributed to the business activity of the assessee. What has happened in this year in substance is mere appointment of SICOM, YASHADA, M/s Scott Wilson Kirkpatric India Pvt Ltd, other consultants for various other purposes, which constitutes stages prior to the “set up” of the business of the assessee. Therefore, in our opinion, the conclusions of the CIT(A) that the main business is not commenced in the year under consideration does not call for any interference.
Reopening of assessment, for AY 2005-06, is bad in law though the interest receipts are chargeable to tax under section 56 of the Act, since the business of the assessee cannot be stated to have commenced in the year under consideration but in the ultimate analysis the appeal filed by the assessee has to be treated as allowed. - Decided in favor of assessee.
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2013 (11) TMI 932 - ITAT MUMBAI
Deduction u/s 80M - Discrimination with foreign bank - DTAA with France - Held that:- Assessee cannot claim a deduction under section 80M without fulfilling the conditions as required under the said section. Assessee before us admittedly does not fulfill the conditions prescribed under section 80M and therefore, cannot claim deduction under section 80M - Since there is only one direct decision given by a Coordinate Bench interpreting the non discrimination clause in the case of foreign Bank in the case of Credit Llyonnais (2004 (2) TMI 279 - ITAT BOMBAY-J) and as there is no other contradictory decision under the same DTAA, we are of the view that the Coordinate Bench decision has to be followed.
Even when there is a diversion of views by the different Benches on same issue, then the decision which laid down the principles more elaborately and logically after considering the latest statutory provisions as applicable has to be followed - reduction of tax rate way back in 1976 itself is after withdrawing the deduction under section 80M specifically to the foreign companies and further allowance of deduction as contested by assessee would result in a reverse discrimination of the Indian company vis-à-vis tax rate of foreign company, in our view does not come under the definition of non discrimination. We are not convinced with the contention of assessee with reference to the reduction rate under section 80M - no reason to constitute a Special Bench on this issue when there is no other contradictory order analyzing the Indo-French DTAA particularly invoking non- discrimination clause while taxing dividends under section 115A at a reduced rate - Decided against assessee.
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2013 (11) TMI 931 - ITAT AGRA
Unexplained income - Bogus entries in books of accounts - Receipt of gift not disclosed - CIT upheld disallowance - Held that:- assessees did not take the plea that even if the explanation is not acceptable the material and attending circumstances available on record do not justify the sum found credited in the books to be treated as a receipt of an income nature. The burden in this regard was on the assessees. No such attempt has been made before any authority - A.O. issued summon under section 133(6) of the Act to the donor Shri Sanjeev Goyal but he did not comply to that summon. Before the CIT(A), the A.O. contended that on sending notice under section 133(6) to the donor it was returned back un-served with the remarks of Postal Authority that nobody of the name of Shri Sanjeev Goyal lives on that address. The assessee expressed his inability to produce the donor. Under the circumstances, the A.O. has discharged his onus but the assessee failed in this regard, therefore, the contention of the ld. Authorised Representative is rejected.
During the hearing, the ld. Authorised Representative referred a copy of gift deed. A question was asked that in the gift deed it is stated that the gift was given out of love and affection, therefore, what evidences have been filed by the assessee. The ld. Authorised Representative failed to point out any material or evidence in this regard that the gift was given out of love and affection. Apart from the above, I find that the CIT(A) has given his finding that there is no relationship between the donor and donee assessee. There is no occasion for giving of gift. The donor is neither produced by the assessee for examination, nor is traceable at the given address by the A.O. to verify the correctness of the gift deed and affidavit purported to have been issued by him, which is only a photocopy as filed by the assessee. During the assessment proceeding, creditworthiness of donor as well as the genuineness of the gift is not established. The CIT(A) held that, this amount is correctly added by the A.O. in the income of the assessee holding it his unaccounted money under the garb of bogus gift entry and therefore, he confirmed the addition of ₹ 1,00,000/- made in the assessment order.
As regards to addition of ₹ 2,000/- on account of commission paid for obtaining the entry of gift, the CIT(A) held that since he has confirmed the decision of the A.O. holding receipt of ₹ 1,00,000/- in the hands of the assessee as unexplained gift being his unaccounted money, the CIT(A) found that the A.O. has made this addition because he found that the gift of ₹ 1,00,000/- shown by the assessee was not a real gift but a receipt of money in the form of income and such entries are given by the entry giver only after charging of some commission. The CIT (A) held that that the amount of ₹ 1,00,000/- received by the appellant is not a real gift and it is an entry of bogus gift, now the question arises whether such entry would be given by someone without charging any commission. As per human conduct and common market practice of giving of entry, it is not possible to take entry without paying commission - Following decision of Brij Mohan Agarwal Versus Assistant Commissioner Of Income-Tax And Another [2004 (4) TMI 61 - ALLAHABAD High Court] and Commissioner of Income-Tax Versus P. Mohanakala [2007 (5) TMI 192 - SUPREME Court] - Decided against assessee.
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2013 (11) TMI 930 - ITAT MUMBAI
Transfer pricing adjustment - Determination of arm's length price - Rejection of comparables - Held that:- assessee is claiming sales to AEs at ₹ 322.58 crore and similar is the position regarding other components of operating costs including purchases. In such figures of purchases and sales from/to the AEs, not only the transactions with AEs but also certain transactions with Non-AEs stand included. Figure of purchases from AEs also includes purchases from Non-AEs where such purchases were used for sales to AEs. Similarly figure of sales to AEs also includes the figure of sales to Non-AEs where purchases from AEs were used for sales to Non-AEs. This shows that the figures of AE purchases and AE sales considered by the assessee for working out operating profit margin at 6.54% in respect of AEs also include Non-AE transactions. Such a course of action followed by the assessee to determine the profit margin from transactions with the AEs has absolutely no sanction of law. It rather defies and runs contrary to the very definition of 'international transactions' and the mandate of rule 10B(l)(e). Approving the course of action adopted by the assessee for calculating profit margin in respect of AE and Non-AE segments would require rewriting of the relevant provisions as discussed supra. By considering some transactions with Non-AEs also as a part of the AE segment, the computation of the operating profit margin in respect of AE transactions at 6.54% has completely lost its significance. Once the figure of OP/OC margin at 6.54% is itself incorrect, there can be no question of comparing it with that of Non-AE segment at 4.20%, which again stands distorted because of the exclusion of certain purchases and sales from/to Non-AEs from this segment eventually finding their way into the AE segment.
Related party transactions in this case are admittedly a little more than 20% but less than 25%. On page 11 of the order passed by the TPO, it can be seen that he adopted filter of related party transactions at 25%. - a case can be taken as uncontrolled if its related parties transactions do not exceed 25% of the total revenue. - the assessee suo motu included this case in the list of. comparables in its transfer pricing study when made on multiple year data (with average profit margin of 3.37%). However when the TPO required the assessee to furnish data of the comparable cases only for the relevant year, the assessee found this case as incomparable because of a higher entity level/segmental OP/TC ratio for the relevant year. The manifest reason for the assessee's exclusion of this case is not far to seek. We, therefore, accept the filter of 25% as applied by the TPO and admit this case for inclusion in the list of comparable cases.
Now it has been mandated through the Finance Act, 2012 w.r.e.f. 1.4.2002 that plus minus 5% is not a standard deduction. It is significant to note that when the AO passed the impugned order on 25.09.2012, such amendment had already come into force. The consequences would have been different if the AO had allowed standard deduction of +-5% and the Revenue had orally challenged the grant of such standard deduction contrary to the provisions of law, without there being any legal recourse available to file appeal against the order of the AO u/s 143(3) read with section 144C(13) at the relevant point of time. The case before us is that the AO did not grant such standard deduction and we are required to ascertain as to whether or not his action is sustainable in law. As has been noticed above that the law as on the date as also retrospectively applicable to the relevant assessment year is against the granting of such standard deduction, we see no reason to hold that the assessee be allowed +-5% standard deduction in contravention of the legal provisions. This benefit of up to 5% can be allowed only if the variation between the price charged/paid in respect of international transaction and ALP determined by taking the results of comparable cases does not exceed 5%. In case such variation is more than 5%, then no such benefit of 5% can be allowed on standard basis - Decided in favour of assessee.
Disallowance of royalty - Held that:- assessee entered into collaboration agreement with its AE for payment of 2% of contract value for manufacturing, drawing and engineering services and 5% of the selling price as royalty. The assessee applied to the RBI seeking approval in respect of payment of royalty and technical fee through Central Bank of India. A copy of letter addressed by the Central Bank of India to the RBI dated 26.03.2008 is available on page 240 of the paper book. Through this letter, the Central Bank of India forwarded relevant documents along with a copy of the agreement. The RBI vide its letter dated 21.04.2008 requested Central Bank of India to consider the assessee's case in accordance with its AP(DIR Series) No.76 dated 24.02.2007. It is in pursuance to the deemed approval by RBI under the automatic approval scheme that the assessee made payment of royalty and technical fee to its AE. It is relevant to note that such payment has been approved or deemed to have been approved by the RBI. When a payment is made after obtaining due approval from the RBI, how its ALP can be computed at Rs. Nil, is anybody's guess. The fact of approval of the payment by the RBI has been succinctly recorded by the TPO in his order as well. He still chose to propose adjustment in respect of full payment. In our considered opinion, when the rate of royalty payment and fee for drawings etc. has been approved or deemed to have been approved by the RBI, then such payment has to be considered at ALP - Decided in favour of assessee.
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2013 (11) TMI 929 - ITAT BANGALORE
Notice u/s 148 - Deduction u/s 80IA - set off of losses - Held that:- the losses suffered by the assessee in two eligible units be reduced from the income of the other eligible unit before granting the deduction under section 80-IA - Decision in earlier case [2012 (11) TMI 507 - ITAT BANGALORE] of the the assessee followed - Decided against Revenue.
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2013 (11) TMI 928 - ITAT MUMBAI
Transfer pricing adjustment - Investment advisory fees - Held that:- The assessee had selected 4 comparables including CRISIL (advisory segment) which gave mean margin of 15.27% which was comparable to the margin of 15% in case of the assessee. The TPO however rejected three comparables other than CRISIL on the ground that these were not comparable and in case of CRISIL adopted both advisory and research segment for the purpose of comparison. The TPO also selected three more comparables, after conducting a further search on the basis of 'investment advisory fees' and identified three comparables i.e. Sundaram BNP Paribas Asset Management Ltd., Deutche Asset Management Ltd. and Urban Infrastructure Venture Capital The mean margin of the four comparables selected by TPO was 57.06% and on this basis the TPO recommended TP adjustment of ₹ 5,33,46,732/-. On objections filed by the assessee, the DRP-II found that the three comparables other than CRISIL selected by TPO had substantial related party transactions in each case and therefore these were not comparable. DRP-II however agreed with the TPO to consider both the advisory and research segment of CRISIL for the purpose of comparison and also agreed on Future Capital Holding Ltd. as a comparable. He also directed the TPO to allow depreciation in case of CRISIL. The new margin computed by DRP in case of Future Capital Holding Ltd. (investment advisory segment) and in case of CRISIL (advisory and research segments) came to 20.56% and 33.3% respectively.
CRISIL has substantial revenue from research i.e. ₹ 116.4 crores compared to advisory revenue of only ₹ 8.76 crores. The rating revenue is also high at 130 crores. The annual report of CRISIL for the year 2007 shows that it is India's leading independent and integrated research house which meets the business research requirements of more than 600 domestic and integrated clients having unparalleled width and breadth spanning the entire economy. It has penetration rate of more than 90% in the banking segment and has collaborated with S&P in selling data and information products in India. It has a head count of 1750. In contrast, the research done by the assessee is limited to the advisory work done for only one client and it has only 18 employees out of which there are only four analysts and one trainee engaged in research. Therefore research division of CRISIL in our view is not comparable to the limited research done by the assessee. However it is also true that the assessee is also doing some research as part of its advisory duties. Therefore, results of advisory segment of CRISIL alone could not be comparable to that of the assessee which has both advisory and research functions. Further, in the absence of adequate information, it is not possible to estimate as to how much of the research revenue is related to the advisory segment. In such a situation, in our view, it will be appropriate to exclude CRISIL as a comparable. We are thus, left with only one comparable i.e., Future Capital holding Ltd. (advisory segment) which is acceptable to both the parties.
It is possible to compute arm's length price on the basis of even one comparable but in such a case the assessee will not be entitled to benefit of 5% range as per the provisio to section 92C(2). This view is supported by the decision of Delhi Bench of the Tribunal in the case of Haworth (India) (P.) Ltd. v. Deputy Commissioner of Income-tax [2013 (8) TMI 421 - ITAT DELHI] - AO is directed to compute the arm's length price on the basis of income of the comparable Future Capital holding Ltd. (advisory segment), without giving the benefit of 5% range - Decided partly in favour of assessee.
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